Mobico Group Plc · LSE:MCG
Mobico — National Express Group — Investor Presentation (2017)
55 slides from Mobico's investor presentation, May 17, 2017
Slide 1: Spring 2017
Spring 2017 Includes Full Year financial results to 31 December 2016
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 and business model o Our markets o Strategic focus and areas for growth o Divisional highlights – Full year 2016 o Financial results – Full year 2016 o Appendix 3
Slide 4: Investment case and Business model
Investment case Business model 4
Slide 5: Our diversity is our strength
Investment case Our diversity is our strength… … helping to deliver sustainable, long-term shareholder value o Best in class public transport operator with differentiated proposition: o Well balanced & diversified portfolio with over 2/3’s of earnings from overseas o Strong recurring revenue streams
Slide 6: Using operational excellence to serve our customers
Business model Using operational excellence… …to serve our customers … and create profit and cash, generating long-term shareholder value 6
Slide 7: Differentiating through diversification
Business model Differentiating through diversification Balanced portfolio with attractive geographic & modal exposure National Express o Diversified portfolio with leading positions in Group Revenue £2.1bn many of our markets Diversified revenue stream (1) o Lower geographical and regulatory exposur
Slide 8: Delivering on our strategy: strong track record on improving returns
Delivering on our strategy Strong track record on improving returns Focus on operational excellence is delivering sustainable & growing returns Free Cash Flow* ROCE* £m % 11.9 11.7 164.8 138.6 111 10.7 2014 2015 2016 2014 2015 2016 Dividend per share Earnings per share* p p 27.3 12.28 23.4 18.9 11.3
Slide 9: Our markets
th Our markets
Slide 10: Attractive markets with opportunity for growth
Our markets Attractive markets with opportunity for growth Spain & North UK Bus Rail UK Morocco America Regional Bus Germany Coach Bus & Coach School Bus £4.8bn Scheduled & Transit market €9bn Coach €3.7bn market $24bn (excluding regional & £300m market London) urban market 30% market share 13% mark
Slide 11: Our markets: Spain & Morocco
Our markets Spain & Morocco Market size • €3.7bn 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 & low cost airlines • Concessio
Slide 12: 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 SB 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 - access t
Slide 13: 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 14: 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 15: Our markets: Rail
Our markets Rail Market size • Germany €9bn regional and urban market Features • Liberalising German market with DB needing to exit 40% of market share • Over 30 contracts coming up for bid in the next 3 years • Franchise sizes smaller than UK ~€20m to €100m rev p.a.– lower risk Competition • Domest
Slide 16: Strategic focus and growth opportunities
Strategic focus and growth opportunities
Slide 17: Strategic focus
Strategic focus Clear strategy with 4 strategic priorities 1. Delivering operational excellence 2. Deployment of technology throughout our business 3. Growing our business through Insert targeted bolt-on acquisitions photo 4. Diversification into complementary markets 17
Slide 18: Delivering operational excellence
Delivering operational excellence Striving for best in class performance Driving strong passenger growth with 921m passengers… Great value fares driving underlying passenger growth of 3% o UK Coach record > 75,000 passengers in 1 day as part of excellent Christmas performance o Spain & Morocco seein
Slide 19: Deploying technology: Digitalisation
Deploying technology Digitalisation Raising standards & driving efficiencies, generating sales, margin & cash Making life easier for our customers through new mobile apps & websites – aspiration of ‘one click’ transactions o Providing enhanced journey planners, personalised travel information, easie
Slide 20: Deploying our cash
Deploying our cash Driving growth through targeted bolt-on acquisitions… o 11 acquisitions in 2016 in our core markets, all earnings accretive within the first 12 months (5 acquisitions in 2015) o Strong track record with these acquisitions delivering a high level of return in both profit & cash, wi
Slide 21: International development
International development Growth from further diversification Building on our success in Germany & Bahrain… Bahrain – now carrying 12m passengers a year o Successful launch of Go Card smartcard with 45% of passenger journeys now transacted this way German Rail carrying 20m passengers in its first ye
Slide 22: UK Bus: Pursuing passenger growth
UK Bus Pursuing passenger growth Positive findings from early actions… Passengers responding to price cuts demonstrating high elasticity o Early results from Dudley trial promising o Second trial planned Demand for more granular pricing o Sensitive approach reflecting local travel patterns New conta
Slide 23: Delivering our strategy: Outlook for 2017 & beyond
Delivering our strategy Outlook for 2017 & beyond Diverse portfolio & strong cash flows generating growth… Spanish concession renewals - €0-3m 2018 Full year benefit of acquisitions transacted in 2016 Fuel benefits – 2017 £6m, 2018 c.£20m Lower interest costs - £9m FX - £11m at current rates M&A, pr
Slide 24: Divisional highlights
Divisional highlights Full year 2016
Slide 25: North America
North America Strong bid season & growth from acquisitions Delivering operational excellence Generating superior cash & returns o Strong bid season in 2016/17 - 97% contract renewal 2016 *2015 o Average price increase +3.7% across portfolio, 7% on re-bid contracts Revenue $1,189.0m $1,040.6 o Acquis
Slide 26: Spain and Morocco
Spain and Morocco Record passenger numbers & acquisitions Delivering operational excellence Generating superior cash & returns o Strong performance with passenger growth of 6% 2016 2015 o RM driving growth in both revenue & passenger journeys, delivering 1% incremental revenue growth Revenue €731.2m
Slide 27: UK Coach
UK Coach Robust performance - new RMS starting to deliver Delivering operational excellence Generating superior cash & returns o Core revenue growth of 1.9%, impacted by terrorist 2016 2015 attacks & increased competition from rail o RM increasing yields & coach occupancy, revenue + Revenue £282.8m
Slide 28: UK Bus
UK Bus Robust performance in a challenging market Delivering operational excellence Generating superior cash & returns o Robust revenue growth, commercial revenue +2% 2016 2015 o Progressing our Alliance with TfWM* with industry leading initiatives e.g. contactless pay & m-ticketing Revenue £286.8m
Slide 29: Rail
Rail Good progress in Germany Delivering operational excellence Generating superior cash & returns o Significant passenger growth in c2c, +6.7%, well ahead 2016 2015 of average for London & SE of +0.3% Revenue* €75.0m €3.3m o New timetable introduced in Dec 2015, with new carriages from autumn 2016
Slide 30: Financial highlights
Financial highlights Full year 2016
Slide 31: 2016 Key highlights
2016 Key highlights Delivering significant growth in profit and cash Strong performance from our diverse portfolio of businesses o Group normalised PBT of £170m, up 14.6%, normalised EPS of 27.3p, up 16.7% o Statutory profit at a record high of £120m, up 10% and doubling over 2 years o Particularly
Slide 32: 2016 Financial Highlights
2016 Financial Highlights Strong performance in the continuing business Continuing operations £m 2016 2015* Change Revenue 2,103.7 1,753.8 +20.0% Group normalised operating profit 219.0 191.8 +14.2% Group statutory operating profit 185.2 166.1 +11.5% Group normalised PBT 170.1 148.4 +14.6% Group sta
Slide 33: Revenue from continuing operations
Revenue from continuing operations Strong organic growth boosted by acquisitions 2015 FX 2015 Organic Acquisitions German Rail Weather 2016 Revenue Constant Growth Revenue currency o Strong revenue growth, up 10.6% in constant currency o Acquisitions and first time contribution from German Rail, tog
Slide 34: Operating profit from continuing operations
Operating profit from continuing operations Strong performance, particularly overseas Revenue Normalised operating profit FY 2016 OPM % FY 2015 OPM % Spain & Morocco €103.7m 14.2 €98.5m 14.2 North America $113.9m 9.6 $101.8m 9.8 UK Bus £35.5m 12.4 £37.5m 13.1 UK Coach £33.3m 11.8 £32.3m 11.5 German
Slide 35: Normalised operating profit
Normalised operating profit Strong performance boosted by acquisitions & FX £m 2015 FX 2015 operating Growth Acquisitions Cost inflation Cost Insurance 2016 Operating profit at efficiencies Operating profit constant profit currency o FY 2016 operating profit up 4.8% on a constant currency basis, up
Slide 36: Superior cash and returns: Strong cash flow
Superior cash and returns Strong cash flow with £139m of FCF £m Operating cash flow FY 2016 FY 2015 Operating Profit % EBITDA 344.6 298.1 Spain & Morocco 106% Working capital (3.1) (11.8) North America 117% Replacement capex (134.7) (111.7) UK Bus 23% Pension deficit (5.5) (9.7) UK Coach 109% Operat
Slide 37: Superior cash and returns: Investing for future growth
Superior cash and returns Focusing on investing for future growth £m FY 2016 FY 2015 Free cash flow 138.6 111.0 UK rail franchise exit outflow (1.0) (2.5) Exceptional cash (4.9) (10.0) Cash flow available for growth & dividends 132.7 98.5 Net growth capital expenditure (27.0) (36.4) Acquisitions & d
Slide 38: Growth capital expenditure
Growth Growth capital expenditure Growth capital expenditure o Investment made in new or nascent parts of the business to drive enhanced profit growth o Total spend of £27.0m (2015: £36.4m) o New fleet in Morocco to support extension of network o Investment in infrastructure & technology to meet our
Slide 39: Growth: M&A acquisitions in the year
Growth M&A 11 acquisitions in the year o Combined consideration of £122m at 6x EBITDA o 8 in North America: o 5 school bus businesses, 2 of which include transit operations o 2 shuttle, private hire and paratransit businesses o Strategic acquisition of Ecolane, a planning and scheduling software pro
Slide 40: Foreign currency effects
Foreign currency effects Effect of fluctuations on profit and debt NEX currency profile o £17m positive PBT impact in 2016 o Hedging achieved by matching local currency debt to EBITDA o Further Sterling profit gains anticipated in 2017, hedged by increased debt FY rates versus £ 2016 2015 Effect of
Slide 41: Sustainable capital efficiency is driving better returns
Superior cash and returns Sustainable capital efficiency is driving better returns Group ROCE % Spain, UK & NA School Bus average fleet age 2016 2015 11.9% 11.7% o Group ROCE +20bps to 11.9% o Ongoing focus on careful targeting of capital investment & more efficient deployment of assets o Discipline
Slide 42: Balance sheet
Balance sheet Rise in net debt reflects investment in growth & FX Gearing Ratios 2016 2015 Covenant Ratings Grade Outlook Net debt/EBITDA 2.5x 2.5x <3.5x Moodys Baa3 Stable Interest cover 7.0x 6.6x >3.5x Fitch BBB- Stable o Net debt increased to £878m, up £133m reflecting £116m investment in acquisi
Slide 43: Balance sheet: Successful refinancing on bond
Balance sheet Successful refinancing on bond Strong debt maturity profile o £400m 7 year 2.5% bond issued in November 2016 replacing £350m Jan 2017 6.25% bond o Additional liquidity - £96m complementary to RCF o Significant interest saving in 2017 through to 2023 *Available cash and undrawn committe
Slide 44: Guidance
Guidance 2017 o Net capital expenditure of 1.1x to 1.2x depreciation – 2017 target c. £160m-£170m o Effective tax rate of c.25% cash tax remaining relatively stable o Bid costs of c.£7-10m in 2017: German Rail & International opportunities o Progressive dividend policy targeting medium-term div. cov
Slide 45: Appendix
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Slide 46: 2016 Underlying revenue growth
2016 Underlying revenue growth Network LFL Yield Volume Revenue Efficiency* growth Spain Transport Spain 2% 5% 7% (3%) 4% Transport Morocco - 6% 6% (3%) 3% Non-passenger (8)% Total1 6% North America1 14% UK Bus Commercial 3% (1)% 2% (1%) 1% Concession/other (4)% Total 0% UK Coach Core NE network - 2
Slide 47: Full year Summary divisional figures
Full year Summary divisional figures German 2016 (£m) Spain N America UK Bus UK Coach Rail Revenue 597.3 877.2 286.8 282.8 61.3 Depreciation 36 66 17 3 - Capex 46 71 32 - 5 Vehicle age (years) 7.6 7.8 8.0 n/a n/a Normalised op. profit 84.7 84.0 35.5 33.3 (1.5) Driver wages(1) 28% 48% 38% 8% 6% Fuel(
Slide 48: UK Bus – operating profit bridge
UK Bus – operating profit bridge Bus Revenue 2016 2015 Organic Cost Cost Fuel 2016 Operating growth inflation efficiencies Operating profit profit 48
Slide 49: UK Coach
UK Coach Coach Revenue 2016 2015 Growth/ Eurolines Cost Cost 2016 Operating new routes inflation efficiencies Operating profit profit 49
Slide 50: Spain & Morocco – operating profit bridge
Spain & Morocco – operating profit bridge Spain & Morocco Revenue 2016 2015 Organic M&A Cost Cost Fuel 2016 Operating growth inflation efficiencies Operating profit profit 50
Slide 51: North America – operating profit bridge
North America – operating profit bridge North America Revenue 2016 ($9m) 2015 FX Op profit Growth M&A Acquisition Fuel Cost Cost Weather Insurance 2016 Op profit at constant costs inflation efficiencies Op profit currency 51
Slide 52: Risk management: Fuel risk largely fixed until 2018
Risk management Fuel risk largely fixed until 2018 Fuel Hedging 2017 2018 2019 % hedged* 100% 89% 50% Price per litre 42.6p 33p 33p o Future year on year savings locked in (2016: 45.4p) o Contracted revenue policy: o Extend cover for a minimum of 2 years o Longer hedging considered, subject to marke
Slide 53: Risk management: Triennial actuarial valuations in progress
Risk management Triennial actuarial valuations in progress Pensions £m (IAS19) *Liabilities net of Member share Surplus /(Deficit) Surplus /(Deficit) Profit /(charge) Profit /(charge) £m 31 Dec 2016 31 Dec 2015 FY 2016 FY 2015 UK Bus (128.5) (60.4) (3.4) (3.8) PLC 44.5 34.9 - (0.2) o Currently in ne
Slide 54: Pipeline of opportunities remains exciting
Pipeline of opportunities remains exciting North America German Rail International Target market $25bn Transit, c.1/3 outsourced €10bn annual revenues in Selected geography $24bn School Bus c.1/3 regional rail market Bus, coach & rail outsourced DB main operator Liberalisation trend Contracts $5-100
Slide 55: National Express Group PLC
National Express Group PLC 55
National Express Group — Investor Presentation (2017) on 6ix