Mobico Group Plc · LSE:MCG
Mobico — National Express Group — Investor Day (October 2021)
84 slides from Mobico's investor day presentation, Oct 18, 2021
Slide 1: Capital Markets Day
Capital Markets Day 18th October 2021
Slide 2: Part 1 Introduction and Overview
Part 1 Introduction and Overview Ignacio Garat Group Chief Executive 2
Slide 3: An attractive investment case
An attractive investment case 1 2 3 4 5 6 We benefit from We have five We are the We are uniquely We are taking We have a long-term, compelling, best-in-class diversified and environmental track record of structural growth hard-to-replicate operator balanced leadership delivering strong opportunitie
Slide 4: Video: The case for Modal Shift
Video: The case for Modal Shift Add image as background for video link - to be supplied by NX Please see our website at https://www.nationalexpressgroup.com/CMD21 for our case study video 4 on Modal Shift
Slide 5: Agenda for the day
Agenda for the day London time Part 1 Introduction 14:00 Part 2 The Evolve Strategy 14:05 Part 3 Divisional Overviews 14:45 Part 4 Financial Framework 15:25 Part 5 Summary and Close 15:40 Part 6 Q&A 15:45 Close 16:15 5
Slide 6: Only UK listed internationally diversified, multi-modal transport provider
National Express is the only UK listed internationally diversified, multi-modal transport provider Geographically 22% well balanced 41% Internationally revenues 6% diversified North America ALSA 31% German Rail UK 31 % High proportion of revenue is 38% contracted Multi-modal Contracted 62% Passenger
Slide 7: The Group at a glance
The Group at a glance 51,000 employees 11 countries 939 million annual passenger journeys ½ billion annual car journeys avoided 50 cities 32,000 vehicles operated Note: these numbers represent the pre-pandemic figures 7
Slide 8: An industry-leading team
An industry-leading team Presenting today Ignacio Garat Chris Davies Francisco Iglesias (Paco) Gary Waits Tom Stables Group CEO Group CFO ALSA CEO North America CEO UK & Germany CEO Kevin Gale Alison Forster Karen Myers Jennifer Myram Dorothy Capers Debbie O’Shea James Stamp Group Operations Group S
Slide 9: Part 2 The Evolve Strategy
Part 2 The Evolve Strategy Ignacio Garat Group Chief Executive 9
Slide 10: An exciting time to be in public transport
An exciting time to be in public transport • Favourable demographics • Public transport supports social mobility • Pent-up demand for travel • Government support is better than ever • Modal shift is key to decarbonisation UK Prime Minister, Boris Johnson, at the National Express Coventry depot to la
Slide 11: Business Review – The strategic review process
Business Review – The strategic review process Where? World’s premier • Where we operate: in which geographies operator and cities to be considered the world’s leading operator What? Products customers • What products we offer in our selected markets want How? Clear • A clear set of outcomes: what i
Slide 12: Business Review – The strategic review process
Business Review – The strategic review process Near term pipeline of £1.5bn bidding opportunities in existing footprint £1.5bn shortlist UK&G 790 150 £4bn North shortlist of revenue ALSA America city targets opportunities Note: the £1.5bn pipeline of opportunities represents annualised revenue 12
Slide 13: The strategy: vision and purpose
The strategy We have a clear vision and purpose, which drives everything we do… 13
Slide 14: The strategy: five customer propositions
The strategy …We deliver this through five customer propositions… 14
Slide 15: The strategy: enabled by technology
The strategy …Which are enabled by focused application of technology… 15
Slide 16: The strategy: superior outcomes
The strategy …To deliver superior outcomes for all our stakeholders 16
Slide 17: The strategy
national express The world’s premier shared mobility operator Purpose: To lead the modal shift from cars to mass transit Fill the Transit GaP 2 3 ie 7) fo] iS o é
Slide 18: Five compelling, hard-to-replicate propositions
The strategy We have five compelling, hard-to-replicate propositions Reinvigorate Multi-Modal Operational Fill the Consolidate & Public Transport Expansion Transformation Transit Gap Compound Grow use of public Build more modal capability Application of our best-in-class Encouraging modal shift away
Slide 19: Reinvigorate Public Transport
The strategy Reinvigorate Public Transport Reinvigorate Public Transport is… Agadir rebuilding confidence in the public • Commenced urban bus services in 2010 transport system by offering high-quality • Passengers increased six-fold operations that passengers want to use from 8m to 48m • Accident ra
Slide 20: Reinvigorate Public Transport
The strategy Reinvigorate Public Transport Add image as background for video link - to be supplied by NX 20
Slide 21: Multi-Modal Expansion
The strategy Multi-Modal Expansion Multi-Modal Expansion is… expanding the breadth of our product offering, based on global know-how and local relationships • There are opportunities to “land and expand” as we enter new cities • We have already implemented this in cities such as Birmingham, Chicago,
Slide 22: Operational Transformation
The strategy Operational Transformation Route planning technology used on our paratransit vehicles in the US and UK Operational Transformation is… driving growth by delivering transport solutions more efficiently than our competitors through processes enabled by technology • Operations playbook - th
Slide 23: Operational Transformation
The strategy Operational Transformation Add image as background for video link - to be supplied by NX 23
Slide 24: Fill the Transit Gap
The strategy Fill the Transit Gap Fill the Transit Gap is… Corporate shuttle services that helping businesses and cities transition enable employees to use their commute time from the private car in places that are not productively well served by existing public mass transit • $2 billion US corporat
Slide 25: Consolidate & Compound
The strategy Consolidate & Compound Consolidate & Compound is… the consolidation of fragmented markets to bring the benefits of scale and consistent service • US School Bus: acquire ‘bolt ons’ at attractive multiples, drive c.15% returns • Spain: consolidate regional and urban services from initial
Slide 26: Digitally enabled
The strategy Digitally enabled DriveCam safety technology Reviewing DriveCam footage deployed on one of our vehicles showing driver behaviour 26
Slide 27: Digitally enabled: Two examples
The strategy Digitally enabled: Two examples The safest The most reliable Speeding Network control optimisation technology software to 2% driver cost linking data cut costs, savings and telematics grow revenue to give us and improve real-time the customer information to experience monitor and improv
Slide 28: Superior outcomes for all our stakeholders
The strategy Superior outcomes for all our stakeholders 28
Slide 29: Lead the industry in safety
The strategy We will lead the industry in safety by continually driving down accidents KPI: FWI* *FWI – Fatalities Weighted Index 29 * Fatalities weighted index
Slide 30: Outcomes: The safest
The strategy Outcomes: The safest 10-year Group FWI progression Lytx Risk Score* 30 6 25 Industry average National Express 5 Lytx Risk Score Metric 20 4 15 3 10 2 5 1 0 0 30 * This is a risk score produced by Lytx, the providers of DriveCam. The National Express score represents the UK Bus business
Slide 31: Outcomes: The safest
The strategy Outcomes: The safest Add image as background for video link - to be supplied by NX 31
Slide 32: Lead the industry in reliability
The strategy We will lead the industry in reliability by striving for ever increasing levels of punctuality, and driving down cancelled services and lost miles KPI: OTP* and lost miles *OTP – On-Tme Performance 32 * On-time performance
Slide 33: The most reliable
The strategy The most reliable A typical split of how customers award quality marks in assessing bids: 6% 7% Safest 16% Environmental leadership Most reliable 10% Most satisfied customers Employer of choice 4% 57% Other 33
Slide 34: Lead the transition to zero emission vehicles
The strategy We will lead the transition to zero emission vehicles KPI: Vehicle emissions 34
Slide 35: The environmental leader
The strategy The environmental leader Zero emission fleet targets New New New New Spain UK Spain North UK Bus Bus Coach Morocco Coach America 2030 2035 2035 2040 2040 2040 Scope 1 and 2 emissions net zero target 2040 35
Slide 36: Customers rate us the highest in the industry
The strategy Our customers will rate us the highest in the industry KPI: Net promoter score 36
Slide 37: The most satisfied customers
The strategy The most satisfied customers Satisfied customers drive loyalty, retention and better financial returns School Bus customers rating 5 out of 5 ALSA net promoter score 50 70% 60% 50% Best passenger 40 30 40% 30% 55% 65% 66% transport company 20 46% 20% 10% in Spain* 10 0% 2018 2019 2020 2
Slide 38: Embed a high performance culture
The strategy We will embed a high performance culture that attracts and retains the best people KPI: Engagement score 38
Slide 39: The strategy
national express The world’s premier shared mobility operator Purpose: To lead the modal shift from cars to mass transit Fill the Transit GaP 2 3 ie 7) fo] iS o é
Slide 40: Proposed combination with Stagecoach – Accelerating our strategy
Proposed combination with Stagecoach – Accelerating our strategy • Generates significant additional capacity to accelerate growth investment in ALSA and North America • Creating a stronger platform in an increasingly ‘bus- friendly’ UK market ahead of £3bn National Bus Strategy • Exciting opportunit
Slide 41: Part 3 Divisional Overviews
Part 3 Divisional Overviews Francisco Iglesias ALSA CEO Gary Waits North America CEO Tom Stables UK & Germany CEO 41
Slide 42: Part 3a ALSA Overview
Part 3a ALSA Overview Francisco Iglesias ALSA CEO 42
Slide 43: ALSA – Overview of our operations and markets
ALSA – Overview of our operations and markets Add image as background for video link - to be supplied by NX 43
Slide 44: ALSA – Examples of our customer propositions
ALSA – Examples of our customer propositions Example: Casablanca Example: Madrid See “Reinvigorating Public Transport” video Example: Bilbao 44
Slide 45: ALSA – Reinvigorating Public Transport: Bilbao
ALSA – Reinvigorating Public Transport: Bilbao Before 39 days lost • Service interruptions, frequent strikes through • Poor relations with unions and employees strikes • Unhappy customers between • Poor reliability and maintenance 2008-2012 715 • Weak relationships with accidents in the local author
Slide 46: ALSA Reinvigorating Public Transport: Bilbao
ALSA Reinvigorating Public Transport: Bilbao After • Safety significantly improved – 69% reduction in at-fault accidents • Significantly improved union and employee relationships – No strikes for 6 years • Quality of service significantly improved – Urban Transport company of the year • Strong relat
Slide 47: ALSA – Multi-Modal Expansion: Madrid
ALSA – Multi-Modal Expansion: Madrid National Expansion Started Express in Long operating acquires Haul and Madrid City ALSA Urban bus Tours Entry into 2005 Taxi and Car 2007 Further 2011 Transfer expansion B2B & B2C market with of Urban ALSACab bus and Uber Airport Corporate Expansion 2015 Autonomo
Slide 48: ALSA – Future growth prospects: Spain
ALSA – Future growth prospects: Spain • Government policy to meet decarbonisation and clean air targets driving demand and modal shift Regional • Continued diversification of Spanish business €1.7bn • Increase penetration of Urban and Regional markets: greater mix of revenue market size protected co
Slide 49: ALSA – Future growth prospects: Morocco and International
ALSA – Future growth prospects: Morocco and International Morocco • Further urban gross contract opportunities • Opportunities within our existing contracts • Entry into the €300m intercity coach market International • Expanding in our existing markets – Switzerland and Portugal • Over £100m pipelin
Slide 50: Part 3b North America Overview
Part 3b North America Overview Gary Waits North America CEO 50
Slide 51: North America – Overview of our operations and markets
North America – Overview of our operations and markets Add image as background for video link - to be supplied by NX 51
Slide 52: North America – Examples of our customer propositions
North America – Examples of our customer propositions Example: Chicago Example: Shuttle Example: Driving Excellence See “Operational Transformation” video 52
Slide 53: North America – Multi-Modal Expansion: Chicago
North America – Multi-Modal Expansion: Chicago • Acquisition of CDT in 2017 • Rapidly expanded from core paratransit to: – Student transportation – Charter and field trips • Expanded presence winning further paratransit contracts • Harnessing efficiencies through shared depots, maintenance facilitie
Slide 54: North America – Fill the Transit Gap: Shuttle
North America – Fill the Transit Gap: Shuttle • Acquired WeDriveU in 2019 Residential bus service Passengers are picked up close to • Transporting employees and students residence and are driven to work to large and growing campuses where public transport provision is poor Intra-/inter-campus servic
Slide 55: North America – Future growth prospects: School Bus
North America – Future Breakdown of US school bus market growth prospects: School Bus Insourced Outsourced 34%v Over £300m annual revenue from upcoming organic and inorganic opportunities in a large 66% and fragmented market • Consolidation of smaller operators as the industry continues to professio
Slide 56: North America – Future growth prospects: Transit
North America – Future Outsourced paratransit market growth prospects: Transit Current market By 2030 Size* Significant organic growth opportunities v in a large and growing market $3.5bn $5.1bn CAGR 4.2% • Our sweet spot is Paratransit • Ageing US demographic supports growth – * Addressable market
Slide 57: North America – Future growth prospects: Shuttle
North America – Future growth prospects: Shuttle Current By 2030 Attractive underlying growth markets – market size* significant opportunities to fill the transit gap • Growing with existing customers who are Corporate expanding rapidly $1.9bn $2.9bn • Geographic expansion with our customers CAGR 4.
Slide 58: Part 3c UK & Germany Overview
Part 3c UK & Germany Overview Tom Stables UK & Germany CEO 58
Slide 59: UK & Germany – Overview of our operations and markets
UK & Germany – Overview of our operations and markets Add image as background for video link - to be supplied by NX 59
Slide 60: UK & Germany – Examples of our customer propositions
UK & Germany – Examples of our customer propositions Example: West Midlands See “Reinvigorating Public Transport” video Example: NETS Example: NEAT 60
Slide 61: UK & Germany – Operational Transformation: NEAT
UK & Germany – Operational Transformation: NEAT • Rapid improvement in service through digitalised processes: – Data driven routing driving efficiency – Real-time performance information, journey tracking and logging – Safety technology reduced costs of claims • Improved quality of service and contr
Slide 62: UK & Germany – Consolidate & Compound: NETS
UK & Germany – Consolidate & Compound: NETS Lucketts Travel Stewarts Coaches Clarkes of London Coach hire and holidays Coach hire and holidays Coach hire and commuter • Consolidating small regional businesses into NETS – our Transport Solutions business • Leveraging the National Express Woods Coache
Slide 63: UK & Germany – Proposed combination with Stagecoach
UK & Germany – Proposed combination with Stagecoach: Accelerating our strategy • Platform to accelerate our growth • Exciting opportunity to deliver significant operational efficiencies and bring ‘best of both’ from combined operational capabilities • Creating a stronger platform in an increasingly
Slide 64: Part 4 Financial Framework
Part 4 Financial Framework Chris Davies CFO 64
Slide 65: Financial Framework: Delivering strong financial returns
Financial Framework Delivering strong financial returns Note: unless otherwise stated, all information herein is excluding the impact of the potential all-share combination with Stagecoach Group plc announced on 21st September 2021 65
Slide 66: Strong track record of delivering strong financial results
Financial Framework – Strong track record of delivering strong financial results Revenue EBIT 350 3,000 300 2,500 250 2,000 200 1,500 2,744 150 295 2,321 2,451 258 2,094 241 1,000 1,745 100 191 218 1,628 1,740 1,708 172 182 186 174 174 1,514 1,481 1,542 149 500 50 0 0 2009 2010 2011 2012 2013 2014 2
Slide 67: Revenue recovered by 2022, adding £1bn over following 5 years
Financial Framework – Revenue recovered by 2022, adding £1bn over the following 5 years Targeting additional £1bn of revenue by 2027 2019 2020 2021 2022 2027 Notes: 1. Indicative split of £1bn revenue growth: 45% North America, 30% ALSA and 25% UK & Germany 2. The statements on this page regarding f
Slide 68: Strong pipeline of growth opportunities
Financial Framework – Strong pipeline of growth opportunities £1.5 billion pipeline by customer proposition £1.5 billion pipeline by division Reinvigorate Public 15% 21% Transport 27% Multi-Modal Expansion North America ALSA Operational 47% UK & Germany 18% Transformation Fill the Transit Gap 38% 19
Slide 69: Margin averaging circa 9%, adding over £100m EBIT by 2027
Financial Framework – Margin averaging circa 9%, adding over £100m EBIT by 2027 Margin averaging 9% Operating margin Short term margin recovery impacted by: • Mix of business c. 10% c. 9% average average • Investment to encourage customers back • Competitive intensity in UK and Spanish Coach busines
Slide 70: £100 million of permanent cost reductions
Financial Framework – £100 million of permanent cost reductions 2019 costs £2.5bn Split of £100m Cost reduction exercise in 2020 and 2021 cost savings Overheads, has permanently removed £100m of cost: insurance and other Repairs & Maintenance Other overheads • Headcount Depreciation Third party oper
Slide 71: Strong and improving cash generation
Financial Framework – Strong and improving cash generation with at least £1.25bn free cash flow between 2022 and 2027 Free cash conversion* Targeting at least c. 65% Over 80% £1.25bn of free cash flow average average between 2022 and 2027 2015 to 2019 2022 to 2027 * Free cash conversion = free cash
Slide 72: Disciplined capital allocation
Financial Framework – Disciplined capital allocation Our capital allocation model remains unchanged We will utilise the Group’s strong free cash flow generation to: Return to Maintain a prudent Invest for growth Shareholders balance sheet (targeting investments that (dividend at least (net debt to E
Slide 73: De-carbonising and freeing up capital
Financial Framework – De-carbonising and freeing up capital Total cost of ownership of EV is now lower than diesel 14% lower cost • This chart shows the lifetime present value cash flow of a single UK “platinum” bus Lifetime cost* in three different procurement scenarios £500k £480k £430k • Availabi
Slide 74: No liquidity concerns, gearing rapidly reducing
Financial Framework – No liquidity concerns, gearing rapidly reducing • No material refinancing Bond requirement before 2023 RCF 26 Other debt • £1bn cash and committed PP headroom* 41 Hybrid • Moody’s and Fitch confirmed ratings 500 • Supportive banking group 480 • Target net debt to EBITDA ratio 4
Slide 75: Proposed combination with Stagecoach
Financial Framework – Proposed combination with Stagecoach Pre-Covid Side-by-Side1 Pre-Covid Revenue by Geography3 (%) 2 Pro Forma Standalone Pro Forma (Ex. 3% 2% standalone Synergies) UK 22% 21% Revenue £2,744m £1,257m Pre-Covid Revenue by Geography1 (%)≠≠≠ £4,001m Revenue by Geography1 (%) Pre-Cov
Slide 76: Proposed combination with Stagecoach
Financial Framework – Proposed combination with Stagecoach Double-digit EPS accretive in first full year Significant growth and revenue synergies Double-digit pre-tax ROIC in first full year Accelerate reduction in leverage towards 1.5-2.0x target At least £35m of cost synergies1 Increased investmen
Slide 77: Track record of creating value from transactions
Financial Framework – Track record of creating value from transactions A track record of significant …with a tried and tested post-acquisition transactions… playbook • Preserve the DNA of the target WeDriveU Petermann c.$150m c.$250m • Minimise customer-facing change where it is not needed • Rapidly
Slide 78: Financial Framework – Summary
Financial Framework – Summary Revenue back to 2019 levels in Free cash conversion Paying a dividend at least 2022, targeting an additional £1bn over 80% 2x covered, by 2027 a year, targeting at least targeting 2022 reinstatement Margin averaging 9% for 2022 to 2027, £1.25bn A lower levered business:
Slide 79: Part 5 Summary and Close
Part 5 Summary and Close Ignacio Garat Group Chief Executive 79
Slide 80: The strategy
national express The world’s premier shared mobility operator Purpose: To lead the modal shift from cars to mass transit Fill the Transit GaP 2 3 ie 7) fo] iS o é
Slide 81: Strong pipeline of growth opportunities
Strong pipeline of growth opportunities £1.5 billion pipeline by customer proposition £1.5 billion pipeline by division Reinvigorate Public 15% 21% Transport 27% Multi-Modal Expansion North America ALSA Operational 47% UK & Germany 18% Transformation Fill the Transit Gap 38% 19% 15% Consolidate & Co
Slide 82: An attractive investment case
An attractive investment case 1 2 3 4 5 6 We benefit from We have five We are the We are uniquely We are taking We have a long-term, compelling, best-in-class diversified and environmental track record of structural growth hard-to-replicate operator balanced leadership delivering strong opportunitie
Slide 83: Part 6 Q&A
Part 6 Q&A national express 83
Slide 84: Disclaimer
The information in this presentation is general information and background only, and is not intended to be relied upon as advice to investors or potential investors as it does not take into account their particular investment objectives, financial situation or needs. The contents of this presentatio