Mobico Group Plc · LSE:MCG
Mobico — National Express Group — FY2017 Earnings Presentation
55 slides from Mobico's earnings presentation, 2018
Slide 1: Investor presentation Spring/Summer 2018
Investor presentation Spring/Summer 2018 Includes Full Year financial results to 31 December 2017
Slide 2: Cautionary statement
Cautionary statement This Review is intended to focus on matters which are relevant to the interests of shareholders in the Company. The purpose of the Review is to assist shareholders in assessing the strategies adopted and performance delivered by the Company and the potential for those strategies
Slide 3: Contents
Contents o Investment case, business model & strategic priorities o Our markets o Financial results 2017 o Business review 2017 o Strategic review 2017 o Appendix 3
Slide 4: Investment case, business model & strategic priorities
Investment case, business model & strategic priorities 4
Slide 5: Investment case: Diversity is our strength
Investment case Diversity is our strength… International diversified transport company with strong cash flow supporting multiple growth opportunities & an attractive dividend yield o Leading international public transport operator with best in class margins o Internationally diversified portfolio wi
Slide 6: Business model: internationally diversified portfolio
Business model Internationally diversified & balanced portfolio What we do Where & what we operate Student Transportation (North America school bus) Revenue £770m (2016: £710m) Urban Bus (UK bus, North America transit, ALSA urban bus) Revenue £670m (2016: £600m) Regional/long haul coach (ALSA region
Slide 7: Strategic priorities
Strategic priorities Driving our business forward through our three strategic priorities Growing our Delivering business through Deployment of operational acquisitions & technology excellence market diversification We aim to be the safest, most We utilise technology to raise We continue to look to g
Slide 8: Our strategy is delivering
Our strategy is delivering Industry-leading To reinvest in Delivering strong margins Converting to growing the & sustainable converting to strong free cash business & revenue growth record profits flow return to shareholders o Generated £750m o Built a $300m o 3 year revenue o 3 year operating of FC
Slide 9: Delivering on our strategy: track record of profitable growth
Delivering on our strategy Strong track record of profitable growth Focus on operational excellence is delivering sustainable & growing returns Revenue (£m) Free Cash Flow (£m) ROCE (%) 2094 2321 1745 138.6 146.4 11.9 11.9 111 11.7 2015 2015 2016 2016 2017 2017 2015 2016 2017 2015 2016 2017 Normalis
Slide 10: Our markets
Our markets 10
Slide 11: Attractive markets with opportunity for growth
Our markets Attractive markets with opportunity for growth ALSA North UK bus Rail UK coach Spain, Morocco & America Regional Bus Germany Scheduled Coach Switzerland £4.8bn market €9bn £300m market School Bus & Transit Bus & Coach (excluding London) regional & urban 60% share $24bn school bus €3.9bn
Slide 12: ALSA – Spain, Morocco & Switzerland
Our markets ALSA – Spain, Morocco & Switzerland Market size • €3.9bn in Spain Features • Regulated & highly segmented market with 3 levels of Government regulation; national, regional & urban • Each concession is exclusive to the operator Competition • Intercity competition from state-backed rail &
Slide 13: Our markets: North America
Our markets North America Market size • $24bn School Bus – c.1/3 outsourced, $25bn Transit c.1/3 outsourced Features • Fragmented school bus market with top 4 players accounting for nearly 50% • Low barriers to entry but hard to get scale • Local relationships are key Competition • Bigger players -
Slide 14: Our markets: UK bus
Our markets UK bus Market size • £4.8bn Features • Primarily de-regulated with low barriers to entry Competition • National & local bus operators, car & rail • Top 5 players – Stagecoach, FirstGroup, Go-Ahead, Arriva, National Express Growth drivers • Increasing passenger volumes through modal shift
Slide 15: Our markets: UK coach
Our markets UK coach Market size • £300m Features • Highly de-regulated • Operators able to compete flexibly on selected routes Competition • Selective competition from rail, large bus operators & localised services • Main competitor is Megabus (Stagecoach) but on limited number of routes Growth dri
Slide 16: Our markets: Rail
Our markets Rail Market size • Germany €9bn regional & urban market Features • Liberalising German market with DB needing to exit 40% of market share • Strong pipeline of contracts coming up for tender • Franchise sizes smaller than UK ~€20m to €100m revenue p.a.– lower risk Competition • Domestic &
Slide 17: Financial highlights 2017
Financial highlights 2017 17
Slide 18: 2017 Key highlights
2017 Key highlights Strong financial results accelerating growth Strong revenue Record profits Converted to Reinvested cash and returned growth o Revenue up 6.1% at o PBT up 11.7% at o Generated £146m of o Invested in 9 bolt-on constant FX constant FX free cash acquisitions o Robust organic o Operat
Slide 19: 2017 Financial highlights
2017 Financial highlights Strong performance for the year Change in Continuing operations £m 2017 *2016 Change Constant FX Revenue 2,321.2 2,093.7 +10.9% +6.1% Group normalised operating profit 241.5 217.5 +11.0% +6.0% Group normalised PBT 200.0 168.6 +18.6% +11.7% Normalised EPS 29.1p 26.3p +10.6%
Slide 20: Revenue: growth driven organically & by acquisitions
Revenue Growth driven organically & by acquisitions £m 79 54 94 2,321 2,094 2,188 2016 Revenue FX Underlying Growth Acquisitions 2017 Revenue o Strong revenue increase, up 6.1% in constant currency o Organic growth of 2.5% boosted by acquisitions in North America & Spain o Positive impact from curre
Slide 21: Operating profit: strong growth at constant currency
Operating profit Strong growth at constant currency £m 11 (7) (3) 24 5 (41) 25 10 242 228 218 2016 FX Underlying Growth Acquisitions Terrorism Cost inflation Cost Fuel Other 2017 efficiencies o Operating profit up 6.0% on a constant currency basis o Strong organic growth in our overseas businesses b
Slide 22: Divisional summary
Divisional summary Strong performance with growth across all our businesses Revenue (YOY change*) Operating profit Op profit FY 2017 Change Margin £79m ALSA €108.3m €4.6m 14.3% ALSA +3.6% £562m £664m North America +10.1% North America $121.6m $7.5m 9.3% UK +0.6% UK £70.9m £3.6m 12.6% German Rail +20
Slide 23: Income statement
Income statement Strong double digit PBT growth £m FY 2017 FY 2016* Change Operating profit 241.5 217.5 +11.0% Share of results of associates & JVs (3.5) 1.1 £(4.6)m Net finance costs (38.0) (50.0) £12.0m Profit before tax 200.0 168.6 +18.6% Tax (ETR 24%) (48.0) (31.4) Profit after tax 152.0 137.2 +
Slide 24: Superior cash and returns: free cash flow of £146m
Superior cash and returns Strong free cash flow of £146m £m Operating cash flow FY 2017 FY 2016 Operating Profit % EBITDA 377.0 344.6 ALSA 92% Working capital 4.8 (3.1) Net maintenance capex (165.2) (134.7) North America 84% Pension deficit (5.0) (5.5) Operating cashflow 211.6 201.3 UK 78% Tax/inter
Slide 25: Investing for future growth & returning to shareholders
Superior cash and returns Investing for future growth & returning to shareholders £m FY 2017 FY 2016 Cash flow available for growth & dividends 146.4 138.6 Net growth capital expenditure (13.2) (27.0) Net inflow from discontinued operations 27.5 - Acquisitions (101.5) (88.8) Dividends (64.7) (58.9)
Slide 26: Growth: acquisitions in 2017
Growth Acquisitions in 2017 9 acquisitions in the year generating good returns o Combined consideration of £128m at 6x EBITDA: £53m paid in 2017, £75m deferred consideration in future years o 3 in North America: o A para-transit operator in Chicago, providing entry into the largest para-transit mark
Slide 27: Balance sheet: gearing reduced to 2.3x
Balance sheet Gearing reduced to 2.3x Gearing Ratios 2017 2016 Covenant Ratings Grade Outlook Net debt/EBITDA 2.3x 2.5x <3.5x Moodys Baa3 Positive Interest cover 10.2x 7.0x >3.5x Fitch BBB- Stable o Gearing reduced to 2.3x o Improved interest cover o Remain committed to a robust financial strategy:
Slide 28: Balance sheet: increased liquidity & interest savings
Balance sheet Increased liquidity & interest savings Strong debt maturity profile o £858m cash & committed headroom* o Funding out to 2023 (average 3.6 years) 222 544 o £12m reduction in interest costs in 400 2017 225 157 o Debut Eurobond further diversifies & 11 18 43 29 90 7 reduces cost 2018 2019
Slide 29: Guidance 2018
Guidance 2018 o Net maintenance capital expenditure of 1.1x to 1.2x depreciation – 2018 target c.£170-180m o Growth capex of c. £15-20m o Effective normalised tax rate in the low 20s % range, normalised cash tax rate <15% o Lower fuel costs – c. £20m in 2018 o Free cash flow generation broadly in li
Slide 30: Business review 2017
Business review 2017 30
Slide 31: North America
North America Record year with robust organic growth boosted by acquisitions Delivering operational excellence Generating superior cash & returns o Good bid season for 2017/18 - strong contract retention of 96% 2017 2016 o Average price increase of over 2% across portfolio 3% on our contracts up for
Slide 32: ALSA
ALSA RMS driving strong long-haul performance Delivering operational excellence Generating superior cash & returns o 6m more passengers this year 2017 2016 o Particularly strong performance in Spanish long-haul, up 3.9% o RMS driving revenue, volume & yield Revenue €757.4m €731.2m o Strong growth in
Slide 33: UK
UK Management actions driving positive second half trajectory Delivering operational excellence Generating superior cash & returns o Robust performance with revenue growth accelerating in H2 2017 2016 o Management actions delivering: o Passenger & revenue growth through RMS & launch of LFZs Revenue
Slide 34: German Rail
German Rail Delivering first profit Delivering operational excellence Generating superior cash & returns o Strong growth in revenue, up 20.4%, reflecting full revenue recognition 2017 2016 with catch up from 2016, including latest passenger count data o Post settlement, RME is a profitable contract
Slide 35: Strategic review 2017
Strategic review 2017
Slide 36: Introduction: our strategy is working
Our strategy is working: a differentiated business Introduction 1. Management action in 2017 delivered across an internationally diverse portfolio: o Strong growth in the US o Strong organic growth in Spain o Return to growth in the UK 2. Benefits of investment in technology, innovation & safety ref
Slide 37: Repositioning the business for growth
Repositioning the business for growth o Significant repositioning of our operations over the last 5 years o Exited high risk UK rail SERVICE PRICE Maximising o Focus on growing urban markets around the world value o E.g. in 2017 we grew in London, New York, Chicago, Madrid & Geneva RELATIONSHIPS o N
Slide 38: North America: strong growth
North America Strong growth Key highlights o Transit business grew by 60% to around $300m annualised o Three acquisitions including Chicago & New York o 5% driver wage inflation hurt margins but beginning to recover through bid season: o 2018 started well o Technology helping us to transform our bus
Slide 39: ALSA: strong underlying growth in Spain
ALSA Strong underlying growth in Spain Key highlights Organic revenue growth in Spain o Excellent performance – strong economy & self-help o Overall passenger growth of 2.1%; 3.9% revenue growth in Long Haul o RMS helped drive growth & yield: o Seat utilisation improved by 2% o Revenue per mile up 2
Slide 40: UK Bus: return to growth in H2
UK Bus: return to growth in H2; positive trajectory into 2018 LFL commercial revenue & passenger growth in West Mids Key highlights 0.7% o 6 LFZs introduced in 2017, covering 28% of commercial network: 0.3% o In LFZs passengers up 4%; revenue up 1.5% o Contactless & m-ticketing rolling out fast: H1
Slide 41: UK Coach: recovered from terrorism
UK Coach: recovered from terrorism to grow revenue, passengers & profit Coach core quarterly revenue growth Key highlights o Passenger growth driven through a combination of fare reductions & new services o RMS helped drive a 2% improvement in seat utilisation o Further network optimisation & fares
Slide 42: German Rail: a year of delivery
German Rail A year of delivery Key highlights o Growth in revenue & profit boosted by clarification of revenue position (& recognised in 2017) o Contract profitable from first year o Expect margins to return to industry norms with profit in 2018 expected c.2% o Passenger growth of 0.5% in 2017 even
Slide 43: Delivering our strategy
Delivering our strategy o Benefits of internationally diverse portfolio together with decisive management actions Strong profit growth, PBT up 19%, EPS up 11% Cash generation is strong: expect 2018 to be broadly the same as 2017 Dividend up 10% o De-risked for UK rail o Outlook for Spanish con
Slide 44: Appendix
Appendix 44
Slide 45: Full year summary divisional figures
Full year Summary divisional figures 2017 (£m) ALSA N America UK German Rail Revenue 663.5 1,017.2 561.5 79.0 Depreciation 39 74 22 - Capex 48 99 28 2 Vehicle age (years) 7.9 8.3 8.7* n/a Normalised op. profit 94.9 94.3 70.9 5.2 Driver wages(1) 29% 49% 24% 5% Fuel(1) 13% 5% 6%† 7% 1 As a percentage
Slide 46: Change to segmental disclosure
Change to segmental disclosure UK 2017 2016 Revenue £m 561.5 557.9 o Restructuring of UK management Operating profit £m 70.9 67.3 structure post the strategic exit Operating margin 12.6% 12.1% from UK rail o Aligning external reporting with UK Bus 2017 2016 Revenue £m (external) 273.8 275.1 internal
Slide 47: North America – operating profit bridge
North America – operating profit bridge North America Revenue 2017 $13m ($2m) ($21m) $10m ($5m) $15m ($2m) $114m $122m 2016 Growth M&A Operating Cost Cost M&A Weather 2017 days inflation efficiencies incentives 47
Slide 48: ALSA – operating profit bridge
ALSA – operating profit bridge ALSA Revenue 2017 €2m €9m (€13m) €6m €104m €108m Cost Cost 2016 Growth M&A 2017 inflation efficiencies 48
Slide 49: UK – operating profit bridge
UK – operating profit bridge UK Revenue 2017 £3m £3m (£7m) £4m 5% 10% £12m 6% (£11m) £71m £67m 79% 2016 Growth/ Property Terrorism Cost Cost Fuel 2017 new routes disposal inflation efficiencies Passenger Contract Concession Other 49
Slide 50: UK Bus – operating profit bridge
UK Bus – operating profit bridge Bus Revenue 2017 2% (£1m) £3m 21% (£6m) £7m 2% £37m £34m 75% 2016 Organic Cost Cost Fuel 2017 growth inflation efficiencies Passenger Contract Concession Other 50
Slide 51: UK Coach – operating profit bridge
UK Coach – operating profit bridge Coach Revenue 2017 £3m (£7m) £4m 7% £1m 11% (£5m) £5m £33m £34m 82% Growth/ Cost Cost Fuel 2017 Passenger Contract Other 2016 Property Terrorism new routes disposal inflation efficiencies 51
Slide 52: Risk management: fuel risk largely fixed until 2019
Risk management Fuel risk largely fixed until 2019 Fuel hedging 2017 2018 2019 2020 % hedged* 100% 100% 75% 42% Price per litre 44.4p 34.3p 33.8p 32.9p o Significant fuel savings expected and secured for 2018 * Of addressable volume (c.225 million litres) 52
Slide 53: Foreign currency effects
Foreign currency effects Effect of fluctuations on profit and debt Effect of a 1% weakening of £ USD EUR o Translational impact from movements in USD, Operating profit (£m) 1.0 1.0 EUR, CAD EBITDA (£m) 1.7 1.4 o Hedging achieved by matching local currency debt to EBITDA Debt (4.2) (3.6) Average rate
Slide 54: Risk management: pension deficit plan
Risk management Pension deficit plan in place through to 2020 Pensions £m (IAS19) 754 718 680 692 679 677 679 623 Assets Liabilities Asset Ceiling Surplus/Deficit (12) (15) (13) (13) (88) (95) 2014 2015 2016 2017 Surplus /(Deficit) Surplus /(Deficit) Profit /(charge) Profit /(charge) £m 31 Dec 2017
Slide 55: National Express Group PLC
National Express Group PLC
National Express Group — FY2017 Earnings Presentation on 6ix