Mobico profits fall despite revenue growth

22nd Apr 2024 07:13

(Sharecast News) - Mobico Group reported a fall in profit in its 2023 results on Monday, below the expectations it set at the start of the financial year, despite continued revenue growth.

The FTSE 250 company, formerly known as National Express Group, reported 12.2% rise in revenue, which it put down to sustained efforts in pricing adjustments and boosting passenger volumes across its operations.

It reported a record-breaking year for ALSA, and a significant recovery in North America school bus operations.

However, its adjusted operating profit decreased to £168.6m, from £197.3m year-on-year.

The board said that decline was primarily due to cost inflation, reduced Covid subsidies, and lower profitability in the German segment.

Mobico recorded a statutory operating loss of £21.4m, influenced by restructuring costs of £30m and a £99m charge related to the German rail onerous contract provision.

The group announced new leadership appointments during the year, with a focus on driving growth and operational efficiencies.

Efforts were underway for restructuring in the UK, including the NXTS turnaround, while challenges were persisting in the German market due to labour scarcity, lower productivity, and high inflation.

Mobico said it was optimistic looking ahead, with ongoing pricing adjustments and restructuring initiatives expected to deliver further benefits.

The company said it had secured 43 new contracts, valued at over £1bn, aligning with its 'Evolve' strategy and expanding its presence in key target cities.

Despite a slight increase in covenant net debt and gearing, the group improved its debt maturity and liquidity by refinancing a significant portion of its credit facilities.

Looking ahead, Mobico said it expected adjusted operating profit in the range of £185m to £205m for the 2024 financial year.

"Our 2023 results are below the expectations we set ourselves at the beginning of the year," said group chief executive officer Ignacio Garat.

"The delays due to the additional work relating to the German rail business was regrettable but it is now concluded.

"Although group revenue growth was encouraging, driven by passenger demand and actions taken to recover inflation, this has not translated into an improvement in reported profitability."

Garat said progress was still made in transforming the business, with new leadership appointed in North America school bus and the UK and Germany making a tangible impact, while the first phase of its 'Accelerate' cost efficiency programme delivered ahead of expectations.

"Our focus remains on delivering the benefits of our restructuring programs and in recovering inflationary costs through pricing, while maintaining a relentless focus on the quality of our offering to support growth.

"Opportunities remain to create a more appropriate and sustainable cost structure and we will not hesitate to take action where there is a clear strategic and financial benefit."

Reporting by Josh White for Sharecast.com.