Mobico Group Plc ((GB:MCG)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Mobico Group Plc painted a mixed picture for investors. While the company reported strong revenue growth, particularly driven by ALSA and new contract opportunities, significant challenges remain. These include a decline in profit, high debt levels, and operational issues in divisions like WeDriveU and German Rail.
Revenue Growth
The earnings call highlighted a notable increase in group revenue, which rose by GBP 86 million to reach GBP 1.3 billion, marking a 7% increase compared to the previous year. This growth was primarily fueled by strong performances in ALSA and WeDriveU, showcasing the company’s ability to expand its revenue base despite facing operational challenges.
ALSA Performance
ALSA emerged as a standout performer, delivering an underlying profit growth of approximately 10%. Passenger figures in Spain grew by an impressive 11.5%, underscoring ALSA’s robust market position and operational efficiency in the region.
New Contracts and Opportunities
Mobico is actively pursuing new opportunities, with ALSA bidding for a significant 10-year asset-light contract in Saudi Arabia valued at over EUR 500 million. This contract is part of a broader EUR 75 billion global investment, indicating the company’s strategic focus on expanding its international footprint.
Cost Reduction Strategy
To address profitability concerns, Mobico is implementing a cost reduction strategy aimed at simplifying the business and strengthening the balance sheet. This approach is crucial for improving the company’s financial health and ensuring sustainable growth.
Profit Decline
Despite revenue growth, Mobico reported a decrease in adjusted operating profit by GBP 8.7 million compared to last year. This decline was attributed to operational challenges in WeDriveU and underperformance in other divisions, highlighting areas that require immediate attention.
High Debt Levels
The company’s financial stability is under scrutiny as net debt and covenant gearing increased to 3x. This situation underscores the need for tighter control over capital expenditures and working capital to manage debt effectively.
Operational Challenges in WeDriveU
WeDriveU faced significant operational challenges, particularly in the Washington-based paratransit contract, which reduced its profit by $13 million compared to the previous year. Addressing these issues is critical for restoring profitability in this division.
German Rail Losses
The German Rail division continues to grapple with onerous contracts, leading to a provision for expected cash losses of GBP 170 million. This ongoing challenge necessitates strategic interventions to mitigate future losses and improve the division’s performance.
Forward-Looking Guidance
Looking ahead, Mobico provided guidance for the second half of 2025, maintaining its full-year profit guidance of £180 million to £195 million. The company plans to focus on cost control, operational efficiency, and debt reduction to achieve these targets. Additionally, efforts are underway to simplify the business structure and integrate U.K. Coach operations with ALSA to create a pan-European coach powerhouse. In Germany, discussions are progressing to address past contract losses, while in the U.K., a recent fare increase in the bus sector is expected to boost operating profit.
In conclusion, Mobico Group Plc’s earnings call reflected a mixed sentiment, balancing strong revenue growth with significant operational and financial challenges. The company’s strategic focus on cost reduction, operational efficiency, and new contract opportunities will be pivotal in navigating these challenges and achieving its financial targets.