Mobico Group H2 2024 Earnings Report

Mobico Group EPS Results

• Actual EPS: -GBX 134.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Mobico Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Mobico Group Announcement Details

• Quarter: H2 2024
• Date: 4/29/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 29, 2025
• Conference Call Time: 4:00AM ET

Mobico Group (LON:MCG) is a leading international transport operator, diversified internationally and by business area; with operations in North America, continental Europe, the UK and North Africa. We provide safe, efficient, clean and reliable shared mobility solutions to cities, businesses, education, healthcare and customers. We are internationally diversified with a balanced portfolio of high quality contracts and market-leading customer brands. We help millions of people around the world every day, getting them safely and reliably to work, school, to family and friends. We are leveraging our network economies to shape the future of multi-modal transport. To serve our customers, to make cities function better and to address the environmental challenges that our planet faces throught leadership and innovation.

Mobico Group H2 2024 Earnings Call Transcript

Key Takeaways

• ALSA delivered record performance and We Drive You achieved strong revenue growth, with pricing power supporting group-wide top-line increases.
• The Accelerate profit improvement initiative exceeded targets, contributing to an 11% rise in operating profit and delivering full-year EBIT within guidance.
• A statutory loss was recorded due to significant non-cash impairments, including a £548 million goodwill write-down on North America school bus, higher German rail contract provisions, and other adjusting items.
• The sale of the North America school bus business for a £470 million enterprise value, yielding ~£300 million net proceeds, is the first step toward accelerating net debt reduction and refocusing capital.
• German rail contract negotiations remain unresolved amid rising infrastructure work, driver shortages and penalties, forcing increased onerous contract provisions and delaying profitability recovery.

Presentation

[Ignacio Garat, CEO at Mobico Group]

Good morning and welcome to today's meeting, which is the last time I will be presenting Mobico Group results to you. Thank you for taking the time to join us for our 2024 full-year results. Firstly, I would like to start by thanking you all for your patience over the recent months. We appreciate that it has been some time since we last provided an update. As we go through this morning's presentation, I hope that you will appreciate why the process has again been longer than anticipated, with later conclusion of the audit due to complexities within the results. Overall, you will see that Mobico is continuing along a path to recovery, delivering on our commitments and making some important operational and commercial gains along the way.

[Ignacio Garat, CEO at Mobico Group]

There are some areas where, despite the relentless focus, we have not progressed as planned, as it is the case with the closing of Germany-PTA's negotiation. We will talk about this during the presentation. Helen will shortly talk more about continuing our focus on cash and our absolute commitment to debt reduction. Before I hand over to Helen, I would like to share our key messages from the 2024 results. Firstly, another record performance from ALSA and further growth from WeDriveU has driven continued revenue growth for the group, with pricing being the key contributing factor in that growth. Mobico Group has delivered EBIT within guidance in full year 2024, with a corresponding improvement in free cash flow.

[Ignacio Garat, CEO at Mobico Group]

Our comprehensive profit-improving initiative, Accelerate, delivered ahead of expectations communicated in our Q3 update, supporting an 11% growth in operating profits, which has been a key factor in delivering results that are within our guidance range for the year. We do have some significant impairments and adjusting items that have driven statutory loss for the year. These movements relate principally to North America School Bus and the U.K. business, as well as an increase in the German rail onerous contract provisions, all of which Helen will talk about later. We have seen a modest but important reduction in Covid-19 gearing to 2.8x from 3x. As you know, reducing debt and leverage remains our absolute priority, and the sale of a school bus represents an important first step towards that ambition.

[Ignacio Garat, CEO at Mobico Group]

A key contributor to the reduction in leverage in 2024 has been our much clearer focus on organic debt reduction, including more disciplined capital management. Whilst it is important to note that we have good liquidity and have no debt maturities for over two years, our options to accelerate debt reduction remain under active consideration. Last but not least, we have announced some important leadership changes. Phil White has joined as Executive Chair with effect from 1st of May, who is with us on the stage today. Paco Iglesias, the CEO of ALSA, has assumed the new role of Group COO. Kevin Gale, who is not present today but is another transport industry veteran, has assumed the role of CEO U.K. and Germany. I'm very pleased to welcome Phil and Paco. Phil will be saying a few words at the conclusion of proceedings today.

[Ignacio Garat, CEO at Mobico Group]

As you know, we have seen, we announced the sale of North America School Bus business to I Squared Capital after a long and very thorough and wide-ranging sales process with a broad potential buyer universe. During the sales process, we received consistent feedback on the position of the business and valuation ranges. The transaction delivered a headline enterprise value of $608 million, that's GBP 470 million, which represents a full year 2024 adjusted EBITDA multiple of five times. Upfront net proceeds will be circa GBP 300 million, with Mobico retaining GBP 65 million of provisions for historical claim liabilities. The conclusion of this transaction is an important step forward for the company. Firstly, it will deliver on our commitment, or it delivers on our commitment to accelerate the reduction of our net debt position, of which this is just the first step.

[Ignacio Garat, CEO at Mobico Group]

Second, it enables Mobico to reallocate cash flows away from a heavy capital-intensive business and focus them on more attractive growth opportunities with more attractive and predictable returns, especially specifically in ALSA and WeDriveU. Completing this transaction was important for Mobico, but as we have said before, all other options to further reduce debt and leverage are under constant review. Going into operational highlights, I will go through our divisional performances in detail later in the presentation, but first, let me give you a brief overview here of the key developments. Overall, this has been another tough year unwinding the challenges faced by our businesses and building a platform for continuing recovery and growth, making decisive actions to restructure and reorganize operations, and with that relentless focus on improving operating effectiveness and profitability. I am grateful to our dedicated and hardworking team for the progress we have made.

[Ignacio Garat, CEO at Mobico Group]

ALSA has delivered another record result, substantially underpinning the overall growth and profitability of the group, and with further opportunities ahead of us, including diversification to new sectors and new geographies. In North America, WeDriveU and School Bus have won new contracts and routes through the bidding seasons despite undergoing a significant separation exercise that is now behind us. WeDriveU continues to be a success story, delivering 18.9% revenue improvement versus 2023, with continued strong growth expected. In the U.K. and Germany, although challenges remain, we have taken important steps forward in restructuring and repositioning their operations. The German rail industry continues to face significant challenges that we, as other operators, are continuing to discuss with the PTAs involved, with negotiations conclusion still pending. I'm really excited about the continued top-line growth supported by a good new contract win momentum.

[Ignacio Garat, CEO at Mobico Group]

The key focus areas that we have driven that have driven this outcome are a strong management of pipeline and conversion rate, and an increased rigor on capital allocation discipline, and a selective focus on best opportunities from a quality pipeline, with 65% of our contract wins being asset light. At group level, we have won 36 new contracts, whose combined annual revenue is GBP 144 million, up from GBP 126 million secured last year. The total value of those contracts is GBP 766 million. Of particular note, within that total are WeDriveU and ALSA. The fact that WeDriveU has continued to grow its portfolio despite the activity of the school bus sales and separation process is encouraging. Average returns on all of those new contracts include 10% EBIT margins and 28% ROCE.

[Ignacio Garat, CEO at Mobico Group]

Overall, we were awarded 22% of the contracts for which we bid, which remains broadly in line with our historic conversion rate. I would like now to talk about pricing. Across all of our businesses, it remains important that the group utilizes its pricing power, particularly to offset or even exceed inflationary pressures. This slide briefly describes where we have applied such price increases across the different divisions over 2024. Our ambition remains to at least mitigate inflation through such moves, retaining remaining competitive in our markets and delivering best in sector standards for quality, on-time service, customer experience, safety, and value. I do not propose to go through all in detail. As we mentioned in the half year, it is important to make clear that we have become more disciplined in identifying where we need to make such increases and implementing them efficiently and in time.

[Ignacio Garat, CEO at Mobico Group]

As you know, the group is in the midst of contract negotiations within the U.K. bus and German rail businesses. In U.K. bus, we have secured an improved funding agreement with Transport for West Midlands that runs until the end of 2025 and will result in an improved business performance for the current year. With the industry more widely contemplating a move to franchising, including the West Midlands, our discussions with our customers regarding long-term future relationships are ongoing and constructive, with the mayoral decision on franchising expected in May. In the meantime, the business remains dedicated to providing a best-in-class service and experience to our customers, supporting our market-leading reputation. In Germany, the rail industry as a whole continues to be beset by issues that are difficult to resolve. Active discussions with our PTA customers to find an equitable solution for both parties are continuing.

[Ignacio Garat, CEO at Mobico Group]

This discussion covers two key areas. Firstly, addressing the multiple industry-wide challenges, which include material disruptions caused by significantly increased infrastructure and maintenance work, which severely impacts productivity and reliability, triggering additional penalties. Additionally, this amplifies the sector-wide driver shortage issues and increases labor costs. Secondly, resetting the underlying profitability of all long-term contracts. Albeit at a somewhat slower pace than we had hoped, their outcome remains critical to the business, and both parties are obliged to reach an equitable solution. Despite this, there has been some positive movement in reduction in 2024. Also in 2025, the PTAs have agreed a sector initiative that would lead to reduced services and penalties on delivery, with that money being reinvested into driver training. This remains a complex situation, and despite this being a top priority for the group, we remain reliant on the engagement of multiple third parties.

[Ignacio Garat, CEO at Mobico Group]

Helen will have more to say on the detailed position on the German rail business later in the presentation. With that, I will now pass to Helen, who will take you through the financials in more detail.

[Helen Cowing, CFO at Mobico Group]

Thank you, Ignacio. Good morning, and thanks, everybody, for coming today. We're going to look, first of all, at the consistent financial imperatives. I'd like to begin by recapping those in terms of what's important for the company. Our key priority is improving liquidity and reducing the company's net debt. The North America school bus divestment is the first significant step to addressing our liquidity and net debt objectives. This action de-risks the balance sheet and improves our liquidity position. This is only the first step, and all options remain on the table. After the close of the North America school bus transaction, we'll continue to work through those solutions. In addition, we continue our organic cash improvement, cash generation, which over time will improve the net debt situation after we've covered the short-term capital obligations that we have during the current year.

[Helen Cowing, CFO at Mobico Group]

Our focus on sustainable, profitable growth is critical for the development of the financials of the business, contributing to improved liquidity and net debt reduction over time. To deliver this, we've improved our rigor around our capital decision-making in capital investment and also exploring CapEx light opportunities for the group. How have we improved those investment decisions? We've put higher focus on capital investment decision-making by choosing the best opportunities from a quality pipeline. This helps improve our cash flow and our return on capital employed. As part of this journey, we've lifted the overall skill set in the group finance function, ensuring we have the right support around financial decision-making for the group. It's also building on an existing high-performing team in business finance and in business development, recognizing the workload anticipated with a more rigorous approach.

[Helen Cowing, CFO at Mobico Group]

The outstanding performance in ALSA, profitable growth in WeDriveU, and progress in the U.K. turnaround have all contributed positively to cash flow and our ability to reduce debt over time. Although this isn't a quick fix, our program of cash improvements has achieved significantly more than our target of GBP 25 million full year 2024, and we'll continue that way of operating through 2025 and beyond. More than GBP 25 million was achieved from a standing start in May through December 2024. We actually achieved GBP 50.4 million in that seven-month period. We continue to identify cost reduction opportunities across the group, and this has become an embedded culture for Mobico rather than one-off programs or projects going forward.

[Helen Cowing, CFO at Mobico Group]

Now we come on to talk about the financial highlights, and allow me to take a few moments to share these with you so that when you look at the figures on the next page, you've got a feeling for what's behind them. Revenues improved, driven by growth across most markets, underpinned by positive passenger demand, and a strong performance by business development to grow that pipeline of opportunities. Mobico Group has delivered EBIT within guidance before we talk about impairments in the full year 2024, with an improvement in free cash flow and debt. This is despite the fact that German Rail have not yet concluded PTA negotiations and the ongoing implementation of a complex turnaround in the U.K. As we said at the half year, the U.K. turnaround is taking longer than we initially expected.

[Helen Cowing, CFO at Mobico Group]

We won't see the full benefit of those U.K. run rates until this year, 2025, but we still need to deliver full year guidance for the group before considering those one-off impairments. Profit improvement initiatives across the group, including Accelerate, remain on track with divisions at various stages of performance and delivery. ALSA remains the single biggest profit contributor to the group. We're building the other businesses. For example, WeDriveU has exciting further growth potential. The group adjusted net debt was stable versus the full year 2023 year-end, with an improvement in covenant gearing. The group showed good positive cash generation with free cash flow before growth CapEx and M&A up significantly year on year. This is driven by improvements in working capital and initiatives to improve cash, which has funded an increase in maintenance CapEx.

[Helen Cowing, CFO at Mobico Group]

We have plans to further deleverage with the organic initiatives improving such that we've been able to prove them successful in 2024. We'll continue that trend in 2025, and our level of ambition continues to grow. The statutory operating loss is a result of the goodwill impairment charge from North America School Bus, together with an increased onerous contract provision in German rail. I will come on and talk about these in detail through the presentation. The sale of North America School Bus brings several positives to the group. It brings certainty from a liquidity perspective, given the debt repayment profile of the group. It mitigates interest costs. It gives us greater flexibility and resource allocation to stronger growth opportunities and greater business resilience generally. It's also true to say that North America School Bus is non-core for Mobico.

[Helen Cowing, CFO at Mobico Group]

It would require significant capital with less attractive returns than the rest of the portfolio, and I'll come on and talk about that in a bit more detail. The group's delivered on the financial targets within its control in terms of revenue, profit, cash, and debt before those impairments, which are one-off in their nature. The group has delivered within profit guidance at the lower end of the range, but still well within the range, despite those inflationary headwinds and not closing the DTA negotiations for Germany. The goodwill impairment in North America School Bus is a result of our normal review process each reporting period and is not connected with the sale of School Bus. It's a reflection of lower than anticipated growth in the market and headwinds of cost. That impairment, while disappointing, is unavoidable.

[Helen Cowing, CFO at Mobico Group]

The capital investment required to improve School Bus is prohibitive and would take too long to turn around if it remained within the group. We continue our support for the U.K. turnaround, which is progressing. We've implemented a new financial model in Germany, which gives us more rigor, and we invest in further growth opportunities across the group. Our business is growing. It's delivering profit and developing strong cash generation and greater resilience. Now I'd like to take you through the financial results in more detail. Before doing that, we need to address the issue of the restatement of 2023, which you can see on here. As a comparison for this year's results, full year 2023 is restated with a correction to the onerous contract provision in German rail.

[Helen Cowing, CFO at Mobico Group]

In line with U.K. accounting standards, we're required to adjust for any changes expected over the entire life of the contract on a prudent basis. This restatement has increased the 2023 group's statutory operating loss by GBP 22 million to GBP 43.2 million, and I'll talk about those specifics shortly. Now to the 2024 underlying business results. Group revenue increased by GBP 261.5 million and 8.3% growth year on year to reach GBP 3.4 billion for 2024 full year. We will break this down by division in the following slide. Let's now look at the group operating profit. Despite several of the group's divisions being in various stages of recovery, group full year profit, as I mentioned, is GBP 187.7 million and an 11.8% increase versus 2023 before we talk about impairments. ALSA in North America, particularly WeDriveU, have performed well, partially offset by that lower profitability in the U.K. and Germany.

[Helen Cowing, CFO at Mobico Group]

Our adjusted basic earnings per share increased to GBP 4.8 due to EBIT growth, offset by some higher finance costs and profits from associates. No dividend has been paid at the end of the financial year 2024. I'll address free cash flow more fully shortly. Return on capital employed is at 10.2% versus 7% in the year before, and it's driven primarily by the write-down of goodwill in School Bus, leading to a lower asset base. We continue to focus on contracts with improved returns in relation to CapEx we've invested, and we're becoming a more CapEx-light business. This is enabled by the pipeline approach that I talked about earlier. Covenant gearing at year-end 2024 improved by 20 basis points to 2.8 times, a positive development versus three times at the year-end 2023 and in line with the commitment we gave at the half year.

[Helen Cowing, CFO at Mobico Group]

The improvement is a function of our increased profitability while holding adjusted net debt stable versus the year-end 2023. That was possible because although we encountered headwinds from a cash point of view, we had generated significant extra cash. Overall, we've delivered revenue growth. We've managed those debt levels to hold them stable. We've generated cash and delivered profit within guidance before we talk about those one-off impairments. We move next to look at divisional performance in a little more detail, and Ignacio will also talk about it a bit later on from an operational standpoint. We delivered profitable growth in ALSA and North America in both WeDriveU and School Bus, while the U.K. and Germany continue their recovery.

[Helen Cowing, CFO at Mobico Group]

In 2024, ALSA delivered an outstanding performance, the growth that led to revenue of GBP 1.3 billion, GBP 162 million, up from full year 2023, which is a huge growth achieved in a single year. Our regional and long-haul sectors in ALSA saw a 36% jump in adjusted operating profit to GBP 186.1 million from GBP 136.8 million, fueled by that revenue growth. Long-haul has continued its momentum due to the leadership shown in the ALSA business, as well as a successful young summer scheme. North America is showing good progress with 8% reported revenue growth at GBP 1.2 billion from GBP 1.1 billion, with operating profit increasing by GBP 11.2 million to GBP 38 million. Now, although we do not report audited results by each North American division due to the recent separation of the businesses, I can provide illustrative figures, and I would like to do that. I think it is going to be helpful.

[Helen Cowing, CFO at Mobico Group]

On an indicative unaudited basis, North America School Bus delivered GBP 793 million of revenue, which is a growth of 4% year on year. Its indicative operating profit was GBP 9 million, with an operating margin of about 1%, an improvement on prior year. North America School Bus has achieved its first net positive route outcome in a decade, which is showing its recovery. It operates with a focus on school year rather than Mobico financial year. When we talk about price increases for 2023-2024, we saw 7.5% on a school year contract basis, and we see the early effects already of the 6.3% overall price increase for School Bus for the 2024-2025 school year. Significant CapEx is going to be needed if we had retained that business to fuel higher growth and complete its recovery. Come on and talk about WeDriveU.

[Helen Cowing, CFO at Mobico Group]

WeDriveU is an exciting business for us. It's experienced in the region of 16% revenue growth despite reduction in volume with a single major client, and it's been able to manage those headwinds incredibly effectively. In 2024, those illustrative unaudited financials show revenue for WeDriveU of GBP 412 million and an operating profit of GBP 29 million, which is up 31% versus the prior year, with significant opportunity for growth. A higher cost base where we've invested in people has affected our ability to translate at the moment all of that revenue growth into profitability. Examples of such costs are driver wages and maintenance, but also investing in overheads. Over time, we'll be able to scale our revenue to result in recovery of that investment. WeDriveU has a solid pipeline of opportunities, and it continues to develop the CapEx light proposition.

[Helen Cowing, CFO at Mobico Group]

Come on now and talk about the U.K. Delivered revenue of GBP 623 million with growth of GBP 12.9 million, operating profit down by GBP 17 million. Looking at bus and coach individually, U.K. bus revenue, GBP 265.5 million, an increase of GBP 19.5 million. U.K. coach revenue, GBP 357.5 million, slightly down at GBP 6.6 million year on year. Coach was a key driver of reduction in profit when you compare to the prior year, and that's really due to the headwinds of the rail strike where we received significant benefits in 2023. As we've cycled that performance, we've not been able to recover all of that. German rail maintained revenue of GBP 256.5 million. It's a GBP 3.3 million decrease on prior year expressed in sterling, but on a local currency basis, it's actually an increase of EUR 4.2 million.

[Helen Cowing, CFO at Mobico Group]

This was despite the revenue that we lost due to national driver shortages, which is a challenge faced across the industry, and you'll hear us talk about that today. The adjusted operating loss of GBP 9.3 million versus the prior year was close to break even, but it's still a disappointing result. That deterioration is principally due to labor costs, overhead inflation, and higher penalties, which all of the industry is facing, and have resulted from those industry-wide driver shortages causing an agreed mileage reduction. Those industry-wide shortages have had a significant adverse impact on results, which, as we talked about, because we haven't closed the negotiations with the DTA, those have not yet been compensated, which we would expect to have a positive effect financially. In summary, we're achieving revenue growth across the business, across 90% of our business, and 74% of the business's revenue shows double-digit profit growth.

[Helen Cowing, CFO at Mobico Group]

Let's just talk about Accelerate and revisiting what we talked about in the half year when we talked about the program. At the full year 2024, the Accelerate program has delivered ahead of expectations with GBP 52 million of savings now embedded. Accelerate has over-delivered by GBP 2 million, the target we set and spoke to you about at the half year. These savings are across organizational design, procurement, and digital enablement. The Accelerate program will now deliver sustainable savings of GBP 52 million for the full year 2025 and beyond, and the mindset of cost review is a cultural shift. We've appointed a new Head of Procurement, and we've also focused resources on indirect costs to maintain momentum in this area with benefits for the future. I'm going to walk you through adjusting items in detail because I think that's something that you would probably like to understand further.

[Helen Cowing, CFO at Mobico Group]

These are the adjusting items that are bringing us to a statutory loss after all of that good performance that I talked about and after delivering ongoing profitability within guidance on an underlying basis. These are one-off, but I'll take you through each of these. To start with, we have GBP 27.7 million in non-cash amortization for acquired intangibles, which we're basically classifying as an adjusting item due to its size and nature, which aligns with historical accounting practice for the group. North America School Bus's post-pandemic recovery still faces headwinds, and the recovery is not quite as fast as we would like because we're seeing driver wage inflation, rising maintenance cost, and potential fleet cost inflation from new tariffs. These have lowered our profitability and our future cash flow forecasts.

[Helen Cowing, CFO at Mobico Group]

Future improvements are only included in these figures for audit purposes if evidenced by full year 2024 year-end documentation, and we're not able to substantiate significantly to be able to improve on the forecast. Consequently, a GBP 547.7 million goodwill impairment for North America School Bus was agreed in full year 2024 and is an entirely appropriate adjustment in our balance sheet. It's unconnected with the sale and it really reflects the appropriate carrying value for this asset in the balance sheet of Mobico. On an ongoing basis, we also have to review onerous contracts and the provisions in accordance with U.K. accounting rules for accounting for contracts. Remesurement of remaining onerous contracts and impairments resulting from both the COVID-19 pandemic and also North America driver shortages resulted in a total credit of GBP 4.8 million as these customer contracts have returned to profitability across the group.

[Helen Cowing, CFO at Mobico Group]

We have recorded a GBP 86.4 million charge related to the remeasurement of onerous contract provision in German rail on the RRX contracts. A shift in the broader industry landscape primarily drives this change. We are experiencing persistent, slower than anticipated recovery from driver shortages and the penalties, as well as other cost pressures. We will cover Germany in more detail a little bit later in the presentation. We then have GBP 50.6 million in restructuring and other costs, and these relate to group-wide strategic initiatives and restructuring from which we will see future benefits. This includes expenses associated with our Accelerate initiative, which came down as we expected second half on a run rate basis and as we talked about at the half year. This restructuring also includes costs directly linked to the previously announced sale of our North America School Bus division.

[Helen Cowing, CFO at Mobico Group]

Below operating loss, so it does not affect the reported profit, there is a GBP 194.4 million tax charge in relation to the derecognition of tax assets in the U.K. and North America. This is because of the length of time it would take to utilize those losses based on the future cash flow forecasts. It is entirely aligned with U.K. accounting practice, where the standard for retaining tax losses in the U.K. has a rather high bar for acceptance. It is important to note that this write-off has no impact whatsoever on our ability to utilize those losses in the future and therefore has no impact on future cash tax payable. Excluding North America School Bus impairment, adjusting items are lower than full year 2023.

[Helen Cowing, CFO at Mobico Group]

While the North America School Bus impairment is disappointing, it has to be done to recognize the appropriate level of goodwill in the accounts, given we do not amortize goodwill on an annual basis for the group. Now I would like to come on and talk about cash flow. Our operating free cash flow generation has seen a significant uplift of GBP 46.4 million compared to last year before we have then utilized some of it on growth CapEx and M&A. Several key factors drive this positive momentum. Firstly, we have delivered improved EBITDA of GBP 426 million in that full year 2024, and that increased profitability clearly translates to improved cash flow. Moving on to maintenance capital expenditure, the GBP 157.9 million invested primarily focuses on essential asset purchases, for example, replenishment of vehicles for profitable contracts.

[Helen Cowing, CFO at Mobico Group]

The maintenance investment is an increase of GBP 22.2 million against prior year, driven by the renewal of the profitable asset base in ALSA. We have achieved a substantial improvement in working capital, resulting in a GBP 48.2 million cash inflow. That is a direct consequence of our focus on cash collections through full year 2024, particularly in ALSA, which we are actively rolling out as best practice across the group. This has been achieved without any compromise whatever to customer relationships. This is not about stretching payables or collections in any way. These three items together produce operating cash flow of GBP 309 million full year 2024. Interest costs increased by GBP 22.6 million, and the increase in interest paid is due to two main factors. Firstly, the first full interest payment on a new EUR 500 million bond, which replaced a maturing bond with a lower interest rate in September 2023.

[Helen Cowing, CFO at Mobico Group]

Secondly, the impact of higher interest rates on our floating rate debt and RCF facility. Tax was lower by GBP 12.2 million. We paid GBP 15 million compared to GBP 27.2 million in full year 2023. This lower figure is primarily due to a tax refund received in ALSA related to historical tax losses, which were already accounted for as a receivable at the end of full year 2023, but we received the cash in 2024. Free cash flow before growth CapEx and M&A grew by GBP 46.6 million to GBP 210 million. Our growth capital expenditure amounted to GBP 59.3 million, an increase of GBP 41.4 million compared to GBP 17.9 million outflow in full year 2023. That increase in expenditure reflects several key strategic imperatives.

[Helen Cowing, CFO at Mobico Group]

Increased investments driven by new growth contract wins in North America, the timing of fleet purchases in ALSA, and the fact that the prior year benefited from a GBP 12 million funding receipt from local authority related to the new Casablanca fleet. It makes this year look comparatively worse by GBP 12 million. Finally, our acquisitions resulted in a cash outflow of GBP 57.9 million, primarily related to the acquisition of Canary Bus in ALSA, which is performing well and on plan. You can see that after investing additional funds in maintenance CapEx, growth CapEx, and M&A, we're still delivering an improved free cash flow of GBP 6.7 million at GBP 92.9 million.

[Helen Cowing, CFO at Mobico Group]

We continue to focus on cash improvement targets, now without the CapEx requirements of North America, which I'll come on and talk about, North America School Bus, I'm sorry, for the second half of 2025, given that we expect the close to take place in July. Coming on to look at net debt in more detail. Covenant gearing had an improvement to 20 basis points to 2.8 times, driven by the improvements in earnings and our ability to hold net debt stable. We did this despite various headwinds by generating the cash that we've just talked about. You can see from what I've talked about how it's been utilized. As discussed in the half year results, we've extended the core RCF facility for a further year, with a one-year extension option available, taking us to 2030 if we decided to enter into those discussions.

[Helen Cowing, CFO at Mobico Group]

We could consider requesting an extension, but we're not ready to share our thinking at this time as we're currently reviewing the total debt stack post the sale of North America School Bus. To break down the net debt items, GBP 23.1 million of coupon payments on the hybrid instrument were made in the period, in line with prior periods, and other inflows of GBP 26.7 million reflect the movement in exchange rates, principally on the group's euro-denominated debt and the settlement of foreign exchange derivatives. This resulted in a marginal change in net funds flow. The sale of school buses is expected to be broadly neutral to covenant gearing in full year 2025, depending on the timing of completion and the adjustments on the close. Now let's come on and look at debt maturity, and we can see that it's improved.

[Helen Cowing, CFO at Mobico Group]

As of the 31st of December last year, the group had approximately GBP 1.2 billion of net debt and GBP 600 million of undrawn committed facilities, with an average maturity of 8.9 years. Importantly, our revolving credit facility was extended and remained undrawn by the year-end. We had a total of GBP 800 million available in cash and undrawn committed facilities. To ensure financial flexibility, the board requires a holding of a minimum of GBP 300 million in cash and undrawn committed facilities. This policy excludes our factoring facilities, which efficiently manage working capital through the without recourse sale of receivables. We strategically utilize foreign currency debt and swaps as net investment hedges, and these instruments are crucial in mitigating potential volatility arriving from the foreign currency translation of our overseas net assets.

[Helen Cowing, CFO at Mobico Group]

As of 31st of December 2024, the proportion of group debt at the floating rates remained consistent with the prior year at 21%. GBP 500 million hybrid bond is a core element of our capital structure, and it provides important financial flexibility as the business continues to balance deleveraging with investment for growth. As we approach the call period of November to February, we'll assess our options and the market conditions to determine the best course of action. The final amount of net proceeds from the North America School Bus will be subject to customary completion adjustment by virtue of the completion accounts mechanism, and after repayment of School Bus non-IFRS 16 leases, approximately $75 million at 31st of December, the remainder of those net proceeds will initially be held as cash. Now let's come on and talk about German rail.

[Helen Cowing, CFO at Mobico Group]

You heard from Ignacio that the German rail industry continues to face significant challenges that we and other operators are continuing to discuss with the PTA. Those industry delays have prompted us to increase the onerous contract provision in the normal annual review of such provisions, given changes in our view of the contract's future profitability. Three main factors impact that future view. Firstly, we continue to experience persistent levels of driver shortages, which lead to contractual penalties incurred due to train cancellations. Secondly, we're facing higher pay inflation, and finally, central overhead costs have also contributed to significant increase in the RRX onerous contract provision. It remains the case that the PTAs are obliged to find a mutually acceptable solution to these problems, which are referred to in the contract as equitable solution. Despite the challenges, we've made excellent progress in closing the driver gap.

[Helen Cowing, CFO at Mobico Group]

Training course capacity now at Mobico has increased by 121%, and we now have driver training places up from 24 in 2023 to 164 currently, and those will come to fruition later this year, as you heard Ignacio refer to. It's a 12-18 months lead period, and we're nearing the end of that, which will help significantly. We're also improving productivity to help mitigate the impact of driver shortages. This investment in drivers, crucial for the medium and long-term health of operations, also contributes to the current onerous contract provision increase because of the costs involved. Let's come on and talk about prioritizing debt reduction. Now, as we've talked about and as I promised, I'd like to share some more details on our debt reduction and our key focus as a leadership team.

[Helen Cowing, CFO at Mobico Group]

Due to trading performance and other initiatives, the group's net debt level was stable from full year 2023 to 2024, and our covenant gearing, as I mentioned, was reduced to 2.8 times. We recently announced the sale of School Bus for net proceeds of approximately $365-385 million. This sale is an essential first step in our journey to deleverage the group, and we're pleased to have successfully concluded that with a comprehensive sales process. We expect the close of the transaction to take place in July of this year. The Accelerate program has proved highly effective in delivering annualized savings, which we've talked about, GBP 52 million per annum. In parallel, we're working on continued initiatives to conserve cash and reduce our debt organically. These plans are business-wide with a pipeline of initiatives greater than our target to ensure delivery.

[Helen Cowing, CFO at Mobico Group]

We're ambitious, and we're engaging the entire organization around the metric of cash. It's easily understandable. Everybody can relate to it, and everybody can have a direct impact. We made a strong start by significantly exceeding our full year 2024 target of GBP 25 million, which we've now delivered GBP 54 million for last year. We're confident that we can achieve our target in 2025, which was initially set at GBP 50 million, which we hope to significantly exceed. These are proven initiatives where we've already delivered. In the short term, net debt will increase due to historic CapEx commitments where advantageous terms were negotiated, and you'll see that in 2025. It benefited 2023 and 2024, but you'll see a short-term bump in 2025. That relates to received vehicles that we now have to pay for. Those were favorable commercial terms at the time and commercially positive for the group.

[Helen Cowing, CFO at Mobico Group]

We just need to pay the bill. This takes nothing away from the underlying improvement in cash and our ongoing commitment to self-help by looking not just at strategic options, but also at organic deleverage. I'm now going to hand back to Ignacio to take you through a brief operational review before closing the presentation and opening for questions. Thank you.

[Ignacio Garat, CEO at Mobico Group]

Thank you, Helen. Now moving into details across all areas of the business, I'll turn to ALSA. The division has once again delivered outstanding revenue growth, reflecting consistently good progress in regional, long-haul, and urban bus products. We have also seen continued momentum on diversification, including medical and international expansion, countries such as Portugal. We also saw our contract in Bahrain extended for five years, which is a great sign of the outstanding service and customer satisfaction that we provide. In Saudi, the coach contract won in 2023 is performing well and is attracting many new appealing business opportunities in the area. Our success in Bahrain and Saudi has built strong credentials and highlights the potential platform for future growth across the Middle East.

[Ignacio Garat, CEO at Mobico Group]

There was also investment made in state-of-the-art CRM and revenue management tools, which have delivered high-quality customer segmentation data and have enabled increasingly targeted marketing to increase returns. As a reminder, this exceptional level of performance in the division has been delivered in the face of increased competition from high-speed rail, highlighting the exceptional resilience of the business. Moving on to North America and starting with a quick recap on School Bus, the underlying revenue growth of 7.3% for the year reflects the first net route wins for many years and targeted pricing actions that had a positive impact on the bottom line. There were also significant operational improvements implemented, which included areas such as fleet management and driver training. As previously noted, the GBP 548 million impairment charge is a consequence of lower profitability and cash flow forecast due to continued market challenges despite significant operational improvements.

[Ignacio Garat, CEO at Mobico Group]

WeDriveU continues to offer significant growth opportunities, which have resulted in almost doubling the profits delivered across the past three years when I decided to combine the divisions, moving from $90 million in 2022 to a profit of $70 million in 2024. This has been underpinned by operational improvements and significant actions over loss and low-margin contracts. The business has displayed strong resilience and an ability to capture new contracts despite the not inconsiderable disruption of the separation from the school bus business and the reduction of $50 million revenue from a top high-tech customer over the period. WeDriveU also links strongly to one of our key strategic focuses, that being enabling the business to direct its growth towards asset-light investments. This was evident in 2024, with over three quarters of the new contract wins being asset-light investments.

[Ignacio Garat, CEO at Mobico Group]

There have also been changes made in the operations to optimize the business setup. This includes improving the operating base as well as newly separated and better resource functions. Looking forward, margin will continue to recover and is expected through H2 2025 and also into 2026, which will follow the H1 2025 increased cost through the separation process. In the U.K., revenue growth reflected passenger growth together with fare increases in July 2023 of 12.5% and in July 2024 of 6%. In addition, the successful negotiation with the Transport for West Midlands secures a funding extension at a more equitable profit margin until December 2025. The appointment of Kevin Gale as Divisional CEO is a cornerstone of the continuing turnaround as he brings considerable operational experience both in the U.K. and Germany and as well as bus, coach, and rail.

[Ignacio Garat, CEO at Mobico Group]

In U.K. coach, decisive actions implemented last year to optimize network and operations. These included a redesign of a seasonal network to cope more efficiently with seasonal volume changes, review of third-party costs, improved asset utilization, and reduction in maintenance cost. This has delivered significant run rate efficiency into 2025. In NXDS, the transfer solutions, we saw GBP 5 million improvement in losses with further work underway to eliminate remaining losses during 2025. We secured important strategic retention of key airport contracts for Dublin and Stansted, and this adds to the successful renewal of Luton at the end of 2023. Moving into Germany, it was another difficult year, reporting revenue of GBP 256.5 million, down 1.2% on a constant currency basis, and the adjusting operating loss was GBP 9.3 million.

[Ignacio Garat, CEO at Mobico Group]

Revenue continued to be impacted by higher operational penalties because of train cancellations caused by the continued worsening of industry-wide factors, worsening infrastructure reliability, and increased infrastructure repair and renewals activity impacting on driver availability and utilization. As mentioned by Helen, a GBP 86 million charge was taken to increase the onerous contract provisions for RX1 and RX2 and 3, reflecting the further deterioration in anticipated profitability over the life of the contracts. However, it is important to note again that the German results presented are stated prior to any mitigations that might be agreed with negotiations continuing. Despite the above challenges, significant investment and progress has been made in the year to address the underlying driver shortages and ensure a strong position moving through 2025 and into 2026.

[Ignacio Garat, CEO at Mobico Group]

A meaningful driver recruitment, training, retention, and development program was launched in early 2024 to arrest the decline experienced and reverse the dependency on agency drivers. By the end of 2024, there were a total of 164 candidates in training compared to 59 in the previous year, with a further 152 expecting to commence training in 2025. As a reminder, the training process lasts 12 to 14 months. In Q1, we have already seen net increases of 22 drivers. Solving the driver shortages will enable us to progressively reinstate mileage and significantly reduce penalties. Now, I'll turn briefly to our opportunity pipeline. As I have mentioned earlier, the largest part of the growth prospect we can assess are increasingly asset-light in nature. That is important partly because it reflects the continuing opportunity to shift towards being a business with lower capital intensity, greater flexibility, and higher ROCE.

[Ignacio Garat, CEO at Mobico Group]

Indeed, that was a key driver behind the decision to sell a school bus. The dominance of asset-light options in the mix allows us to both favor lower capital intensity while also cherry-picking those opportunities that do require investment but offer the returns to justify it. To summarize our objectives from here, in conclusion, let me recap on key focus areas for full year 2025. We remain focused on our consistent financial imperatives, net debt reduction, sustainable profitable growth, U.K. turnaround and improved margins and cash generation, optimizing or exciting opportunities in ALSA, newly and newly consolidated WeDriveU. Conclude the German PTA rail negotiation. Finally, our newly appointed CEO, Paco, will be driving best practices and driving operational improvements across the group.

[Ignacio Garat, CEO at Mobico Group]

Before we go to Q&A, and as this will be my last presentation as CEO of Mobico, I would like to say a few words. It has clearly been a more difficult period than we all would have hoped for, but I would like to thank you for your support and your time. I would also like to put down on record my admiration for the work of our Mobico colleagues across our operations, our teams, the drivers, and those in the depot and the central teams play a tremendous role in the communities which we serve, and it's been a privilege working with them. With that, we can go now to the Q&A, and Phil will say a few words at the conclusion of our meeting today. We'll take the questions from the room. Gerald, you were the first one.

[Gerald Khoo, Transport Analyst at Panmure Liberum]

Thanks very much. Good morning. Gerald Khoo from Panmure Liberum. Three if I can. Starting with the school bus disposal, I was just trying to reconcile the maximum consideration of $608 million to the various components. Obviously, you've given the net upfront figure. There are the IFRS 16 leases that move across, and then there's the earnout, but there's still a gap, which by my reckoning is about $115 million. I was just wondering whether you could clarify what goes into that beyond transaction costs. I'm assuming it's not $115 million of transaction costs, hoping. Secondly, on the German rail onerous contract provisions, there's been no—I don't think there was any discussion in the presentation about electricity indexation because that was a big problem this time last year.

[Gerald Khoo, Transport Analyst at Panmure Liberum]

Is that still in the mix in terms of what you—is there still scope to recover that as part of all of these discussions? Who decides—I mean, who decides what's equitable? I mean, obviously, there's a negotiation, but if you don't reach an agreement, is there a mechanism whereby someone else rules or is there an appeals process? Finally, on the balance sheet, am I right to say that you're unwinding the deferred CapEx mechanism? Basically paying for CapEx a year in the rears, and that's what's driving the short-term disincrease. Can you clarify what the number is excluding school bus now, please?

[Ignacio Garat, CEO at Mobico Group]

Helen, can you take maybe the first and the third on the school bus discussion on the balance sheet, and then I will conclude with the PTA negotiations?

[Helen Cowing, CFO at Mobico Group]

Sure. Let me take CapEx first. You can hear me okay? No, we're not adopting a policy of deferred CapEx. It is simply that some favorable negotiations were held two years ago where there was deferred payment agreed. I think it's also fair to say that we moved to a level of CapEx which is much more favorable for the business going forward. The bump this year is probably between $50-$70 million of CapEx, which will be exceptional due to that process that I've talked about. In terms of on an ongoing basis, the CapEx for the group before the divestment of school bus is between GBP 250-GBP 300 million. North America School Bus historically has cost about GBP 100 million of CapEx. Therefore, going forward, a good indication would be between GBP 150-GBP 200 million.

[Helen Cowing, CFO at Mobico Group]

Of that, about 75% is maintenance and about 25% is growth CapEx. On the first point, I think, look, there's a number of things. We're not providing a breakdown at this stage. There's still quite a lot of things to unwind. We have to unwind our hedges. We have to unwind our Forex. What I will say is advisor fees are completely industry standard. There are some contingent elements of that. The normal pieces you would suggest, really, that's probably about as much as we can say about that breakdown at the moment. As you said, leases are also part of that.

[Ignacio Garat, CEO at Mobico Group]

Good. Coming back to the German negotiation and the Onerous Contract Provision, yes, electricity is one of the components. It is true that in these negotiations, the sector, as you know, introduced a new index. At this moment in time, we have not been able to change that new index, and it is part of the discussion. The bigger discussion is the impact, the huge impact that we have seen in the sector on the infrastructure, and I will come back to that. To your question, yes, both parties are obliged to reach an equitable solution. There is a process, there is a mechanism. We will, at a certain point, present—I mean, actually, we have a meeting today with the PTAs again, and we will present a claim.

[Ignacio Garat, CEO at Mobico Group]

That claim needs to be reviewed, and if nothing comes out of that, we will need to provide a legal claim, and it will be a lawsuit. We have never in the precedence of the several negotiations that we have done during the history gone into that level. Yes, there are contractual obligations to seek that obligation. The thing, let me come back to the—because this is what we need to understand. The level of infrastructure work that I have mentioned in my presentation is massive. To give you an indication, when the bidding was awarded in 2015, for example, most of them were at that area, we had 19 maintenance works in the region per year. In 2019, we had 63. Last year, we had 400 infrastructure works in the region. Already in January and February, we have 228.

[Ignacio Garat, CEO at Mobico Group]

That is a massive impact, which is impacting all operators around. This is the big change. Why? Because it impacts the productivity, it amplifies the issue with the drivers, and that is why it is so complex because everyone is impacted. There are so many PTAs involved, and this is what really triggers that. Also, obviously, the penalties. The penalties regime needs to be adapted. It is very complicated legal because it's public procurement, and this is what is taking so long. By the way, President, we did review in the past, for example, RX1, 2, and 3. It took us almost two years. It is not different to any public negotiations that we do. It has taken Spain and ALSA for big contracts a year and a half in Bilbao or some cities in Morocco.

[Ignacio Garat, CEO at Mobico Group]

This is normal negotiation, but it is true that it is disappointing when you cannot progress at pace.

[Helen Cowing, CFO at Mobico Group]

Also, if you'd excuse me, sorry, in answering the question you had on the gap between the net proceeds and the headline, the other element which I didn't mention was deferred CapEx. Where we've had vehicles delivered still to be paid for or indeed imminent vehicles, and we've had a negotiation around all of that. An element also of that bridge is deferred CapEx.

[Ignacio Garat, CEO at Mobico Group]

I think you're good.

[Othmane Bricha, Equity Research Associate at Bank of America]

Othmane Bricha from Bank of America. I have a few questions. First, on North America, for the WeDriveU business, is there any potential impact from tariffs on that business? Do you see any synergies now? Can you quantify these synergies? Longer term, does it make sense for you to keep that business? Just follow up on CapEx for 2025. You just gave us an indication of a run rate of GBP 150 million-GBP 200 million excluding the school bus. Is that valid for 2025? On the U.K., please, can you quantify the loss achieved for NXTS in 2025? Can you quantify the impact of the recent U.K. budget on 2024 and 2025? Thank you very much.

[Helen Cowing, CFO at Mobico Group]

Okay. I think I'll probably take some of that, and some of it I'll cover outside if that's okay, just in the interest of time and complexity. Let's talk about Withdraw view, first of all. Let me make sure I've got this right. You want to talk about the synergies, long-term to keep the business. There was another element of the Withdraw view question. What was it?

[Othmane Bricha, Equity Research Associate at Bank of America]

Would anything make sense to keep that business longer term?

[Helen Cowing, CFO at Mobico Group]

No, you asked a question at the beginning. You talked about—pardon?

[Ignacio Garat, CEO at Mobico Group]

Impact of tariffs. Tariffs.

[Helen Cowing, CFO at Mobico Group]

Thank you. Right. The first thing to say then is that although we manufacture any of the vehicles internally in the U.S., there is the impact of imported steel. We're quite well capitalized at the moment, and we've got orders placed for our vehicles, so we don't expect that impact to be coming in the near term, but it might have a slightly longer-term impact. We'll have to see what happens at that point. Tariffs may not be in place by then. I don't know. We'll see. Also fuel, but we hedge our fuel quite effectively in a layered approach. I think we're okay there. Any synergies? We had a shared service center in Chicago for both businesses. We separated those out last October. We have right-sized WeDriveU overhead. We needed to invest anyway because of the stage at which they were growing.

[Helen Cowing, CFO at Mobico Group]

They probably wouldn't have been able to make as much use of the shared services in Chicago going forward because they're growing now at such a rate. If you like, it was about bringing forward something that would probably inevitably happen anyway because it's quite low-level operations taking place. I mean, low-level, disrespectfully, but some quite administrative accounting elements taking place in Chicago. There are not significant synergies, but we have invested in overhead, but that's much more to support the growth of the business. It will probably take a cycle of 18 months to two years to outstrip those and scale through. Long-term, look, I'll pass on to Ignacio as well to comment, but what I would say is it's a very attractive, exciting business. We've said that all options are on the table, and that's exactly what we mean.

[Helen Cowing, CFO at Mobico Group]

We're not ready to talk about the sequencing of asset disposal at this point. Did you want to add anything?

[Ignacio Garat, CEO at Mobico Group]

You know what? I mean, as I mentioned during the presentation, we have delivered remarkable operational and financial improvements in the last two years. The speed and pace that this business is growing with an addressable market of $20 billion, you can double the size of this business in four or five years. Where we focus, look at the new business, $77 million compared to $54 million in the last year. Again, the top priority that we have as a board is to reduce the net debt. All options are on the table, and they're not sacred cows.

[Helen Cowing, CFO at Mobico Group]

Just to recap on the CapEx side, we said that for the group, without school bus, it'd be about $150-$200 million, but you need to add to that the rump that we'll have this year between $50 and $80. You asked about NXTS. We're probably not going to comment on that here. We're currently looking at all options, including whether we retain NXTS and think about that business. You asked about the impact of the budget. I recall from memory, I think the NI on costs we had were about $4 million for the U.K., but I'll need to double-check that number and come back to you.

[Ignacio Garat, CEO at Mobico Group]

Three for you.

[Joe Thomas, Equity Analyst at HSBC]

Morning. It's Joe Thomas from HSBC. A lot has been covered, but can you just cover a few things off, please? First of all, ALSA. I mean, it was a really strong performance. I'm just wondering to the extent to which that was supported by the multi-voucher scheme and the risk that that's removed and how we should think about how that plays out for the forthcoming year. Secondly, central costs. There was a step up in that, and I'd just be interested in what that was the result of. Can you hear me okay?

[Ignacio Garat, CEO at Mobico Group]

Central costs.

[Joe Thomas, Equity Analyst at HSBC]

Central costs. If you could talk about what was behind the step up there and how we should think about that going forward. Also, Helen, you talked about the unwind of deferred CapEx in the U.K. this year. Is that the extent of deferred? Are you sort of clean once that's done? I mean, I'm just sort of wondering if there's just kind of one lump to think about there. Finally, just circling back, Ignacio, you were talking—I mean, I was going to ask also about how you're going to enforce this equitable solution in Germany. I mean, if you don't reach an agreement, I think the suggestion was you were going to have a conversation with them today. If you don't reach an agreement, then we're open to legal recourse. I'm just wondering, is it really that imminent that legal action could start?

[Helen Cowing, CFO at Mobico Group]

Do we take the financial ones and then you come back?

[Ignacio Garat, CEO at Mobico Group]

Yeah, take the financial ones and come back to it.

[Helen Cowing, CFO at Mobico Group]

Let's talk about the deferred CapEx, first of all. It's interesting you use the word clean. I don't see it as dirty, actually. Where we can get good commercial terms and pay later with no additional charges, that's good cash flow. It's good capital and working capital management. We don't have a lot of hidden kind of liabilities in our business, that's fair to say. We use leases more often. I think that if we see those opportunities and they don't have any other disadvantages, we continue to take advantage of them. There is no kind of hidden problem, and it's not something that's been building for years. It's simply an opportunity that was taken a couple of years ago. The second thing is you asked about central costs.

[Helen Cowing, CFO at Mobico Group]

The biggest driver of any central cost improvement is where we've paid bonus in a year where we've had better performance against a year where we didn't pay any bonus, where we had disappointing performance. That's the single biggest driver, and it is most of the reason for the difference. There are also some administrative costs on sort of one-offs where we couldn't exceptionalize them, but we've done some reorganization within the company. Quite strict rules now. What I will also say is we have been investing. I talked about we did some investment in finance, for example, but we've managed to manage that overall in our overall central cost base. We'll continue to do that.

[Helen Cowing, CFO at Mobico Group]

I think it's very important that we are, let's say, rearranging the furniture to get the best returns on the overhead that we have, but we don't want it to get out of control. We do monitor that quite closely. You want to talk about ALSA in Germany.

[Ignacio Garat, CEO at Mobico Group]

Yes, yes. Starting by ALSA, the same way that we have had headwinds in every single market in ALSA, we did experience ALSA in Spain. We have experienced tailwinds. We cannot deny that. Multi-vouchers and the young summer has obviously helped that growth. It is true that even with young summer, very successful last year, 1.5 million passengers. Even when that finished, the momentum continued. In general, in Spain, there is a full, very big support, social support on considering mobility, a right for our citizens. There is a lot of, in one way or another, incentives to promote that also with the green agenda. Of course, it has a positive impact.

[Ignacio Garat, CEO at Mobico Group]

At the same time, the reality is that with Evolve really helped us, and in particular in ALSA and WeDriveU in understanding where we wanted to concentrate, what sort of geography, what sort of sectors. If you see the diversification that we have had, it's impressive. Let me give you an example. We entered with a small acquisition almost three years now in medical transport. It was EUR 10 million. Next year, we'll be EUR 110 million. We have positioned ourselves. Now we're number one in the Madrid region. We have entered the Basque Country, and we have now been awarded a contract in Catalonia. See that capability and the operational leverage that we get with the credentials that ALSA has, the way it works. We have been diversifying that. In international, the same thing. Portugal, we're having 80% growth in international products with good margins.

[Ignacio Garat, CEO at Mobico Group]

We're diversifying as well, and this is also driving that growth that we're experiencing in ALSA. Going back to the PTA, I mean, we have never had legal procedures because, again, let's go back to all the negotiations that we have done quietly with German PTA in the past. They are very constructive. They are the first interested to make sure that it is sustainable because, again, everyone is impacted. You have had failed in the region. We have a failed operator, Eurobahn, that they have to bail out, Keolis, Abellio. They are the first interested to do that. We're very grateful for them because they have supported us in the past, and there's no reason to believe that we will not reach a settlement and agreement in this location.

[Joe Thomas, Equity Analyst at HSBC]

Can I just follow up on that? Just to remind us what there is to stop you actually just exiting those contracts?

[Ignacio Garat, CEO at Mobico Group]

There are huge financial and reputational consequences. First, you have a parent company warranty. Obviously, if you exit the business, there will be a tender, and you will be contractually obliged to pay the difference between the—so that's one. Reputationally, let's remember that we are in Europe. Any public tender will be impacted by a decision to exit unilaterally a contract, including ALSA, which has a lot of public contracting. Any other questions in the room? Should we pass on to the—are there any on the phone? Let's check.

[Operator]

Yeah. Our first question comes from Ruairi Cullinane with RBC. Ruairi, your line is now open. Please go ahead.

[Ruairi Cullinane, Transport Equity Research Analyst at RBC Capital Markets]

Good morning. My first question on the transaction, the $70 million earnout, when could you receive it, and what are the performance conditions? Secondly, what cash outflows should we expect from the provisions on your balance sheet? Finally, can you remind us on the concession renewal process for ALSA? Thank you.

[Helen Cowing, CFO at Mobico Group]

I'll take the first two. Okay. Thank you, Rory. On the first one, on the earnouts, there are quite a lot of conditions around. It is quite complex and varied, and we're not disclosing at this stage. I think it comes to fruition in two years, if I'm not mistaken, but we're not sharing the details of that earnout at this point. On the cash outflows, it's difficult to say, frankly, and I'm not avoiding the question, but for example, let's talk about the onerous contract provisions for Germany. Let's just take an example of that. Where we see an increased cost in a contract over the life of the contract, let's say that's nine years remaining, we have to allow for that, and that gives us an impact of those nine years to take in a single hit. Now, we might get DTA compensation.

[Helen Cowing, CFO at Mobico Group]

We might be able to reduce those costs. We might be able to find a way of mitigating them differently. Therefore, the actual translation of that provision into cash is uncertain. Our provisions at the moment are unwinding at the rate of about $25 million a year, but that's because we've got early on a rump in terms of $25 million, $26 million, but that will reduce to about $13 million thereafter. It is more complicated. I can't just give you a straight answer, I'm afraid. What I can say is that from a school bus point of view, that is a correction of goodwill in the balance sheet. That doesn't have a cash impact.

[Helen Cowing, CFO at Mobico Group]

If you have provisions for bad debt and so on in the normal course of business, again, that's minimal, and you would not expect that to unwind from a cash point of view unless you had a default from one of your customers. I can't really answer it in a more straightforward way, to be honest.

[Ignacio Garat, CEO at Mobico Group]

Coming to the—do you have any more?

[Helen Cowing, CFO at Mobico Group]

No.

[Ignacio Garat, CEO at Mobico Group]

Coming back to ALSA and the consensus renewal, the process has seen again another delay, and the current expectation is that the earliest could be probably the second half of 2027. The Sustainable Mobility Act is still in parliamentary process, which is what provides the legal framework and certainty to the transitory stage. That has been delayed from 2024, which was our expectation, to 2025. We still do not know when that will be concluded. Very quickly, as you know, then you have the economic work and the renewing of the concessions, then the drafting of the projects, then the approval of the concession map, and then drafting and initiating the tendering, and then the award. By the time that this is mobilized and implemented, probably now will be more closer to the end of 2027 or 2028.

[Ignacio Garat, CEO at Mobico Group]

That doesn't mean that some of the concessions could come out earlier in the period, specifically those which are loss-making for some operators.

[Joe Thomas, Equity Analyst at HSBC]

Thank you.

[Helen Cowing, CFO at Mobico Group]

Next question now.

[Operator]

Thank you very much. Just as a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now. Please ensure your device is unmuted locally. If you change your mind or your question has already been answered, please press star followed by two. Our next question comes from Alex Paterson with Peel Hunt. Alex, your line is now open. Please go ahead.

[Alex Paterson, Analyst at Peel Hunt]

Yeah, morning, everybody. I've got quite a few questions, so it might be easier if I just ask them one at a time. I was just going to ask you, in the announcement you made relating to the sale of North America School Bus, you talk about restructuring and separation costs and that they're excluded from the proceeds. Can you just say or quantify what the sort of scale of those might be? Can I just confirm that you're going to be paying them through the continuing parts of your business?

[Helen Cowing, CFO at Mobico Group]

Okay, that's fine. Also, Alex, just to say, just in the interest of everybody here, very happy to also take questions offline and also on the roadshow, which we've got starting tomorrow. Maybe if you ask a few that you think would benefit to everybody, and then if there are ones that are specific for you, we can take those offline if that's helpful. To answer the question, the bigger part of the separation costs, I think, really have probably already been incurred. We started separating the businesses last August. We took the real rump of costs from October through to December and then the very early part of this year. Some of them were exceptionalized. Some of them we couldn't exceptionalize because we had existing members of staff where we changed the nature of their job.

[Helen Cowing, CFO at Mobico Group]

It was really about separating out the shared service center in Chicago. That was one of the bigger costs. As I say, we've either already expensed it or already taken it through exceptional. Other than the fees and any elements that will be charged to disposal, we're not expecting sort of further expenses that would affect this year's P&L from the separation.

[Alex Paterson, Analyst at Peel Hunt]

Nothing for 2025 in the P&L?

[Helen Cowing, CFO at Mobico Group]

That's my expectation, yeah.

[Alex Paterson, Analyst at Peel Hunt]

Yeah, okay. Secondly, are you hedging the dollar proceeds from that sale to sterling? If you haven't so far, when would you do that, if at all?

[Helen Cowing, CFO at Mobico Group]

The proceeds won't appear until we close in July. We actually have sufficient existing hedges, so we're going to repurpose the hedges that we have, making sure those denominations, the timings, and the level fit. We've already sort of been through that, and we're quite confident that we can extend and adapt those hedges to be fit for purpose. We're already covered in that regard.

[Alex Paterson, Analyst at Peel Hunt]

No, understood. You say there's $75 million of non-IFRS 16 leases in North America School Bus. Can you say what they relate to and why they would not be transferring with the business?

[Helen Cowing, CFO at Mobico Group]

They relate mostly to vehicles and simply because the buyer has their own financing arrangements and do not need to take on that debt from us. They do not need to novate the debt. They have got their own arrangements.

[Alex Paterson, Analyst at Peel Hunt]

The vehicles are transferring separately from the leases on them?

[Helen Cowing, CFO at Mobico Group]

Effectively.

[Alex Paterson, Analyst at Peel Hunt]

Understood. Can I just ask a couple more? The first is just in the U.K., the Zenobi liability. You have a fleet as a service agreement with Zenobi. Can you just say what the value of that is remaining? What happens if there was to be franchising in the West Midlands and you did not retain all of the routes and therefore you would not require all of your fleet to operate that? What would happen to those leases?

[Helen Cowing, CFO at Mobico Group]

I want to be as helpful as I can. I'm going to try and answer part of that question, but also we're already in discussions with various parties on related topics, and I don't want to compromise that. You'll have to forgive me if I'm not super precise. I think it's fair to say, yes, we have liabilities, but they match the services we're providing and the routes that we're operating, so we're not concerned that those are out of step. It's entirely expected that should we transfer those services, those agreements would transfer with them. It's probably the easiest thing I can say. We're not expecting a liability to arise for the group, but I don't want to say more, really. I think that would be inappropriate at this point. Does that sound reasonable?

[Alex Paterson, Analyst at Peel Hunt]

Understood. Would you look to bid on any other operations which are franchising in regions outside of the West Midlands?

[Ignacio Garat, CEO at Mobico Group]

Yeah, we will certainly. Liverpool is coming now, so we will be participating. This is one of the benefits. Thinking on the future, on the equity story and why it is such an important first step, the resulting group is very common. What we see in the U.K., what we see in ALSA, what we see in WeDriveU is exactly the same business. Paco is already identifying a lot of synergies opportunities. One of them being the bid and tender. We have a very robust, experienced bid and tender team in ALSA, which has been supporting the international expansion. Paco is already working with Kevin and Kevin's team to see how we can support in that process.

[Alex Paterson, Analyst at Peel Hunt]

Great. Thank you.

[Operator]

Thank you very much. We currently have no further questions, so I will hand back over to the management team for any closing remarks.

[Ignacio Garat, CEO at Mobico Group]

Thank you very much. Again, to all of them, we have now concluded, and our new Executive Chairman would like to say a few words.

[Phil White, Executive Chair at Mobico Group]

Okay, then. I hope you don't mind, but I'll say a few words from the table. I've been sat here very, very quietly this morning, so I apologize for that. Sorry for shocking you for being here. I don't think you would have expected me to be sat here. I'm sitting at a table because that's the best podium I've ever seen in my life, and I probably won't be able to see you if I stand at it, so I think it's a bit more comfortable this way. First of all, can I just thank Ignacio for all you've done in the past few years as CEO? Also, thank you very much for helping me in the last two or three weeks trying to get myself up to date. You've done a great job on that. Thank you very much.

[Phil White, Executive Chair at Mobico Group]

Can I just say that, although it is a surprise to you and to me, I'm absolutely delighted and thrilled to be back home. It's 20 years since I was with National Express. Am I allowed to say that? 20 years since then, and it's a dream come true. Believe it or not, sat in front of you guys today and all the problems you've probably given me in the past, I've still missed you. It's an absolute delight to be sat here today. Thank you very much for accepting me back. It's a very different business these days. Can I just say I love the industry, I love the company, and I love the people. I'm really looking forward to taking up my position. I've not started yet, by the way.

[Phil White, Executive Chair at Mobico Group]

I've never done this before when I've not been in a job and I'm still presenting about it. I think the interesting thing is we've got some great businesses here, some absolutely fantastic businesses. We've got some good businesses. We've got some businesses that are in trouble. It's our job as management, really, to look after all those businesses in whatever state they're in. Working with a team, it's my job to help make the great businesses greater, to make the good businesses great, and sort out the troubled ones. It's quite a task, but I'm really looking forward to working with the team and trying to sort things out. I think an interesting statistic is that when I left National Express 20 years ago, it's a long time, isn't it?

[Phil White, Executive Chair at Mobico Group]

ALSA was 20% of the business, and the rest of the business, which is U.K. and the States, was 80%. Now ALSA is 80% of the business, and the rest is 20%, however you define it, which is a massive change. I would just like to thank Paco and all the team in Madrid and Spain for the work you've done since you joined us 20 years ago. It's been a fantastic job. I mean, ALSA is just an incredible business, and it's growing and growing, and hopefully that will continue. I suppose I've been—it's like being reborn this. It is absolutely new to me. I'm loving it. Can I just assure you I wasn't dead? I'm not rather a threat rising from the dead. I've been doing lots of interesting things.

[Phil White, Executive Chair at Mobico Group]

I've enjoyed my career since National Express, and I'm really looking forward to moving forward with the group as it is. I'm looking forward to seeing all our stakeholders in the next few weeks or so. While I'm here, if you have any questions you want to throw at me before we depart, I'm pleased to take them as long as they're easy. If you want to say a few words or ask a few questions, I'm happy to take them. Great to be back. Thank you.

Participants

Executives

• Helen Cowing, CFO
• Phil White, Executive Chair
• Ignacio Garat, CEO

Analysts

• Alex Paterson, Analyst at Peel Hunt
• Ruairi Cullinane, Transport Equity Research Analyst at RBC Capital Markets
• Gerald Khoo, Transport Analyst at Panmure Liberum
• Joe Thomas, Equity Analyst at HSBC
• Othmane Bricha, Equity Research Associate at Bank of America