National Express owner Mobico in the red as finance chief departs

There is a lot to worry about in Mobico’s (MCG) full-year results. Adjusted operating profit fell by 15 per cent to £169mn in 2023 as a result of cost inflation, a reduction in Covid subsidies and profit problems in Germany. The post-pandemic bounce-back is officially over, it seems.

The statutory figures were significantly worse, with the bus company banking an operating loss of £21.4mn. Restructuring costs and driver shortages in North America dragged things down, but the main adjusting item was a £99.2mn onerous contract provision in the German rail business. The latter was also responsible for the unsettling delay to Mobico’s full-year results.

The group has now rolled out a series of cost-cutting measures, but plenty of problems remain. Chief financial officer (CFO) James Stamp is stepping down, to be replaced by interim CFO Helen Cowing, who is not joining the board. 

Mobico is also very highly levered, with net debt/Ebitda sitting at three times, meaning dividends have been suspended again. The potential sale of the North America school bus business continues to rumble on, which could improve the balance sheet. However, analysts have warned that a quick sale is likely to deliver poor value. 

Adjusted profits from the North American business collapsed by 60 per cent to £27.1mn in 2023 and it was loss-making in statutory terms. It was a similar story in the UK and Germany, with only Spanish subsidiary Alsa showing obvious improvement.

Revenue in the first quarter of 2024 was up by 3.5 per cent, with Alsa continuing to do well. Adjusted operating profit for the year is expected to come in at £185mn-£205mn, which would also mark an improvement on 2023. However, there is a lot of operational uncertainty at the moment and Mobico’s balance sheet is increasingly stretched. Sell.

Last IC View: Hold, 97p, 27 Jul 2023