Mobico Group Plc · LSE:MCG
Mobico — National Express Group — H1 2019 Earnings Presentation
62 slides from Mobico's earnings presentation, August 2019
Slide 1: Summer-autumn 2019 Investor presentation
Summer- autumn 2019 Investor presentation Includes Half Year financial results to 30 June 2019
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 half year 2019 o Business review half year 2019 o Strategic review half year 2019 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 Sources of revenue Student Transportation (North America school bus) Revenue £775m (2017: £770m) o USA £982m 40% o Spain £684m 27% o UK £577m 24% Urban Bus (UK bus, North America transit, ALSA urban bu
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 over o Built a $0.5bn o 5 year revenue o 5 year operating £785m
Slide 9: Capital allocation
Capital allocation Sustainable compounding growth £500m + EBITDA Less £200m - £250m CAPEX Less c.£100m tax, interest & working cap £150m-£200m FCF Invest in the Manage gearing Return to business (2.5x 2.0x) shareholders at at 15% ROIC 2.0x cover 9
Slide 10: Delivering on our strategy
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 (%) 2321 2451 198.6 12.4 2094 1745 138.6 146.4 11.9 11.9 111 11.7 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 20
Slide 11: Key financial and valuation metrics
Key financial and valuation metrics Attractive valuation for a company with stable & growing revenues, strong cash generation & compounding growth 2018 Operating IG debt rating: EV/EBITDA* 2018 Dividend margin Moodys Baa2 7.1x 14.86p 10.5% Generated Fitch BBB- over £785m of FCF over last Up 48.6% 5
Slide 12: Our markets
Our markets 12
Slide 13: 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 £350m market School Bus & Transit Bus & Coach (excluding London) regional & urban 60% share $24bn school bus €4bn ma
Slide 14: ALSA – Spain, Morocco & Switzerland
Our markets ALSA – Spain, Morocco & Switzerland Market size • €4bn 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 & lo
Slide 15: 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 16: 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 17: Our markets: UK coach
Our markets UK coach Market size • £350m 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 18: 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 19: Financial highlights Half year 2019
Financial highlights Half year 2019 19
Slide 20: 2019 Half year key highlights
2019 Half year key highlights Continuing to deliver strong financial results Strong revenue Record profits Converted to Reinvested & cash returned growth o Revenue up 7.8% at o Record H1 statutory o Generated £96m of o Invested in 4 constant FX PBT of £88.4m (up free cash acquisitions 10.4%) o Robus
Slide 21: 2019 Financial highlights
2019 Financial highlights Strong start to the year Change in Continuing operations £m 2019 2018 Change Constant FX Revenue 1,334.5 1,207.7 +10.5% +7.8% Group normalised operating profit 139.3 118.7 +17.4% +14.7% Group normalised PBT 114.6 100.7 +13.8% +10.7% Normalised EPS 16.9p 15.0p +12.7% Statuto
Slide 22: Revenue
Revenue Strong growth from both organic & recent acquisitions £m 44 54 29 1,335 1,208 1,237 HY 2018 Revenue FX HY 2018 at Organic growth 2019 Acquisitions HY 2019 Revenue constant FX o Strong revenue increase, up 7.8% in constant currency o Organic growth of 4.3% supplemented with acquisitions in No
Slide 23: Divisional summary
Divisional summary Revenue & margin up across all businesses Revenue (YOY change*) Operating profit Op profit HY 2019 Change* margin £36m ALSA €54.8m €6.2m 12.4% £285m ALSA +11.7% £386m North America +8.2% North America $83.3m $7.1m 10.3% UK +4.2% German Rail +5.4%** UK £36.6m £5.0m 12.8% £628m Othe
Slide 24: Operating profit
Operating profit Strong organic growth £m (4) 4 (14) 10 22 2 139 119 121 HY 2018 FX HY 2018 at Growth 2019 Driver wage Cost Fuel HY 2019 constant FX Acquisitions inflation efficiencies o Operating profit up 14.7% on a constant currency basis o Operating margin up 60 bps – underlying up 40 bps exclud
Slide 25: Income statement
Income statement Double digit growth £m H1 2019 H1 2018 Change Operating profit 139.3 118.7 +17.4% Share of results of associates & JVs 0.3 0.3 - Net finance costs (25.0) (18.3) (£6.7m) Profit before tax 114.6 100.7 +13.8% Tax (ETR 23%) (25.9) (22.4) (£3.5m) Profit after tax 88.7 78.3 +13.3% EPS 16.
Slide 26: Superior cash and returns
Superior cash and returns Nearly £100m of free cash in first half £m H1 2019 H1 2018 FY 2018 EBITDA 243.0 188.6 402.1 Working capital (40.3) (22.2) (17.5) Maintenance capex (76.7) (59.1) (123.9) Pension deficit payments (3.7) (3.7) (7.4) Operational cash flow 122.3 103.6 253.3 Tax/interest (26.7) (1
Slide 27: Investing for growth & delivering returns to shareholders
Superior cash and returns Investing for growth & delivering returns to shareholders £m H1 2019 H1 2018 FY 2018 Cash flow available for growth & dividends 95.6 85.2 198.6 Net growth capital expenditure (13.6) (4.2) (5.8) Net (outflow)/inflow from discontinued operations (1.2) 1.2 0.4 Acquisitions (13
Slide 28: Underlying net debt
Underlying net debt Impact of IFRS 16 & acquisitions £m 210 9 136 1276 14 (96) 52 951 930 Net debt 31 Dec Free Cash Flow Growth Capex Dividends Other, incl FX Organic net debt M&A IFRS 16* Net debt 30 Jun 2018 30 Jun 2019 2019 *On transition to IFRS 16 o IFRS 16 transitional adjustment added 0.2x to
Slide 29: Growth: Acquisitions in 2019
Growth Acquisitions in 2019 4 acquisitions in the first half of the year o Combined total net consideration of £128.8m of which £5.6m is deferred consideration; options to purchase the remaining 40% of WeDriveU valued at £105m o Targeting businesses that complement &/or have the ability to expand/gr
Slide 30: Financial strength
Financial strength Liquidity extended well beyond Brexit Extended debt maturity profile Robust financial strategy o Strong commitment to investment grade Bridge-to-bond facility 224 88 rating o Gearing & interest cover well within 225 400 495 covenants 163 201 o Net debt/EBITDA <3.5x 95 30 38 2019 2
Slide 31: Guidance
Guidance 2019 o Net maintenance capital expenditure of around 1.1x – c.£220m o Effective normalised tax rate in the low 20s %, normalised cash tax rate <15% o LFL fuel costs £6m higher o Full year free cash flow of at least £160m o Dividend cover of at least 2.0x Group normalised earnings o IFRS 16:
Slide 32: Business review Half year 2019
Business review Half year 2019
Slide 33: North America
North America Another record half year with disciplined school bidding season Delivering operational excellence Generating superior cash & returns o Disciplined bid season for 2019/20 2019 2018 o Average price increase of around 3.9% across portfolio and 5.9% on our contracts up for bid & renewal Re
Slide 34: ALSA
ALSA Another record half year with strong organic growth Delivering operational excellence Generating superior cash & returns o Increasingly sophisticated RMS driving revenue, volume & yield 2019 2018 o Record passengers, up 8m, +4.8% o Growth across each segment & ancillary revenues up 17% Revenue
Slide 35: UK
UK Strong first half, particularly in coach Delivering operational excellence Generating superior cash & returns o Strong growth in core coach – revenue up 4.7% & passengers up 3.7% 2019 2018 o RMS & targeted marketing campaigns driving occupancy, up 4.7% o Retained key airport contracts at Stansted
Slide 36: German Rail
German Rail Positive underlying performance Delivering operational excellence Generating superior cash & returns o Underlying revenue growth of 5.4% 2019 2018 o Successful mobilisation of 1st service under the RRX contract – started in June Revenue €40.7m €43.7m o 2nd service to start in December 20
Slide 37: Strategic review Half year 2019
Strategic review Half year 2019
Slide 38: School bus
School bus Disciplined approach & focus on service driving margin opportunity o Margin up 10 bps Customer satisfaction: • 9% profit growth despite bad weather o Trajectory of highly satisfied o Disciplined bid season customers gone from 1/3 to 1/2 • Rate increases of 3.9% > driver wage inflation of
Slide 39: Transit: growth trajectory & opportunity
Transit Growth trajectory & opportunity - market overview Transit has the opportunity to double in size over the coming years Paratransit - $7bn market $m Annualised revenue* o New technology makes transportation more accessible 600 o Demand is projected to increase: move from traditional vehicles t
Slide 40: WeDriveU: a decade of partnering with top brands
WeDriveU A decade of partnering with the world’s top brands Silicon Valley Seattle Portland San Francisco Los Angeles Los Angeles Austin Silicon Valley Silicon Valley Silicon Valley Silicon Valley Seattle 2010 2013 2014 2015 2016 2017 2018 2019 Silicon Valley Seattle Austin Austin Silicon Valley Sil
Slide 41: Agile, asset-light, high margin business model
Agile, asset-light, high margin business model RESIDENTIAL BUS SERVICE o Typical corporate shuttle contract 3-5 years Passengers are picked up close to o Ability to extend term residence and are driven to work. o To date, 100% contract retention o Two contract types INTRA-/INTER-CAMPUS o Driver Only
Slide 42: Synergies on adapting WeDriveU model to National Express footprint
Synergies on adapting WeDriveU model to National Express footprint Vancouver Vancouver Edinburgh Montreal Ottowa Dublin Hamburg Amsterdam Berlin London Detroit Pittsburgh Brussels Baltimore Frankfurt Herndon Paris Munich Zurich Geneva Atlanta Charleston Madrid New Orleans National Express (America)
Slide 43: Potential for significant revenue growth over next 5 years
Potential for significant revenue growth over next 5 years $5.2B U.S. market Opportunity to grow corporate & enter university & hospital markets $1.7B, 33% $2.0B, 38% $185M $140M $91M $56M $1.5B, 29% 2016 2017 2018 2019 2023 *2019 projected annualised revenue 43
Slide 44: Technology update
Technology update Delivering now; prepared for the future o Our focus: using technology to improve service & drive efficiency SAFETY • We are wary of the hype o A clear roadmap to embrace and adopt OPERATIONS emerging technology • Complemented by Innovation Hubs in NEW FUELS + Birmingham, Madrid & C
Slide 45: Safety and operations
Safety and operations Saving lives, changing behaviors, delivering efficiency Done Doing Dividend • Smart Cameras • Real time feedback on • Cost of Safety £100m driving style p.a. • Risk Profiling • Predicting risk • 14% saving YTD in • Speed monitoring preventative costs • Driver aids • Digital win
Slide 46: New fuels and growth
New fuels and growth Preparing for the future, delivering growth now Done Doing Dividend • EV’s in each BU • Depot redesign: Perry • Spend £350m on Barr maintenance + fuel • Only purchased EV’s in + West Midlands this year • Maintenance • Substantial savings in - optimisation medium/long term • RPO
Slide 47: ALSA: consistent growth, increasing opportunities
ALSA Consistent growth; increasing opportunities with diversified portfolio 5 year revenue growth 5 year EBIT growth o Strong & consistent growth record €m €m • 4 year CAGRs: EBIT 6.4%, revenue 6.0% • €1bn annualised revenue business in 2020 o Around €1bn revenue secured in the period including Bilb
Slide 48: UK: organic growth through sophisticated pricing
UK Organic growth through sophisticated pricing o Organic commercial growth Accessible Transport Group o Core coach revenue up 4.7% and pax up 3.7% • Awarded BCC home-to-school contract in July • RMS further enhanced with machine learning, RPA & AI • In process of acquiring business o UK bus commerc
Slide 49: Positive outlook
Positive outlook o Currently trading ahead of expectations • Strong organic growth driven by sophisticated pricing o North America: school bus discipline & improved control targeting margin growth • Transit revenue growing fast, targeting $1bn • Excited by WeDriveU acquisition o Spanish concession r
Slide 50: Appendix
Appendix 50
Slide 51: Full year summary divisional figures
Full year Summary divisional figures 2018 (£m) ALSA N America UK German Rail Revenue 745.1 1,060.8 577.0 67.8 Depreciation 44 69 20 1 Capex 46 72 5 5 Vehicle age (years) 7.7 8.2 8.9* n/a Normalised op. profit 105.3 96.9 79.9 3.0 Driver wages(1) 28% 51% 24% 6% Fuel(1) 11% 4% 6%† 8% 1 As a percentage
Slide 52: ALSA – operating profit bridge
ALSA – operating profit bridge ALSA Revenue HY 2019 €m 5% 9% 1% (6) 15 (3) 25% 55 60% 49 Driver wage Fuel H1 2019 Passenger Contract H1 2018 Growth inflation Grants/subsidies Private hire Other 52
Slide 53: North America – operating profit bridge
North America – operating profit bridge North America Revenue HY 2019 $m (3) 5 (1) (9) 8 7 83 76 H1 2018 Growth Acquisitions Driver wage Fuel Cost Weather H1 2019 inflation efficiencies 53
Slide 54: UK – operating profit bridge
UK – operating profit bridge UK Revenue HY 2019 £m 3% 4% 5% 1 1 3 10% 37 32 78% Partnership H1 2018 Growth renewals & Other H1 2019 Glastonbury Contract Passenger Concession Private hire Other 54
Slide 55: ALSA: increasing opportunities with diversified portfolio
ALSA Increasing opportunities with diversified portfolio Increasingly diversified business • Acquisitions of new & complementary businesses expanding presence in urban & regional markets • Entering new markets e.g. Switzerland, cruise services, minicabs, new cities in Morocco, Puerto Rico pilot Madr
Slide 56: Balance sheet: gearing at 2.5x post IFRS 16 impact
Balance sheet Gearing at 2.5x post IFRS 16 impact Gearing Ratios HY 2019 Dec 2018 Covenant Ratings Grade Outlook Net debt/EBITDA 2.5x 2.3x <3.5x1 Moodys Baa2 Stable Interest cover 11.0x 10.5x >3.5x Fitch BBB- Stable o Gearing increased to 2.5x after absorbing impact of IFRS 16 & significant acquisit
Slide 57: Underlying performance: IFRS 16 impact
Underlying performance IFRS 16 impact £m Reported IFRS impact Old GAAP 2018 EBITDA 243.0 29.1 213.9 188.6 Operating profit 139.3 2.7 136.6 118.7 Interest (25.0) (3.4) (21.6) (18.3) PBT 114.6 (0.7) 115.3 100.7 Operating margin % 10.4% +20bps 10.2% 9.8% ROCE % 12.2% (0.8%) 13.0% 12.2% Net debt (1,276.
Slide 58: Risk management: fuel risk largely fixed until 2020
Risk management Fuel risk largely fixed until 2020 Fuel hedging 2018 2019 2020 2021 % hedged* 100% 100% 79% 41% Price per litre 35.5p 37.7p 36.5p 38.0p o LFL fuel headwinds of around £6m in 2019 * Of addressable volume (c.250 million litres) 58
Slide 59: 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) 0.7 0.5 EUR, CAD EBITDA (£m) 1.2 0.8 o Hedging achieved by matching local currency debt to EBITDA Debt (2.9) (2.1) H1 average r
Slide 60: Risk management: managing pension deficit
Risk management Managing pension deficit Pensions £m (IAS19) 754 718 711 679 623 671 554 586 Assets Liabilities Surplus/(Defict) (88) (117) (95) (125) 2016 2017 2018 H1 2019 Surplus /(Deficit) Surplus /(Deficit) Profit /(charge) Profit /(charge) £m H1 2019 31 Dec 2018 H1 2019 H1 2018 UK Bus (134.6)
Slide 61: Strong environmental credentials
Strong environmental credentials Taking cars off the road, easing congestion, reducing emissions o Public transport key to tackling climate change & provision of clean transport o Each coach takes up to a mile of traffic off the road o Each bus takes up to 75 cars off the road – reducing congestion
Slide 62: National Express Group PLC
National Express Group PLC
National Express Group — H1 2019 Earnings Presentation on 6ix