Mobico Group H2 2025 & Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
July 29, 2026

Key Takeaways

  • Positive Sentiment: 2026 operating profit guidance was raised to £215 million–£230 million, supported by a strong first quarter, improved German Rail contracts, continued Alsa growth and lower central costs.
  • Positive Sentiment: Alsa delivered record performance, with revenue up more than 10% and growth across Spanish transport, international and diversified operations. The company also cited new opportunities in Saudi Arabia and Spain.
  • Positive Sentiment: Mobico is targeting at least £100 million of full-year run-rate savings and plans to reduce annual capital expenditure to £120 million from 2027, while reporting improved first-quarter free cash flow and lower central costs.
  • Neutral Sentiment: German Rail has been substantially de-risked: RME was converted to a gross contract and RRX’s term was shortened, with the combined operations expected to be at least cash neutral. However, approximately £130 million of German PTA advances remains subject to negotiations over the final amount and repayment timing.
  • Negative Sentiment: Leverage remains the board’s main concern, with adjusted net debt at about £1.1 billion and management acknowledging that debt is too high for the current group size. Advisors are evaluating all balance-sheet options, with nothing—including equity issuance—ruled out, while legacy school-bus claims, pension funding and German liabilities continue to consume cash.
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Earnings Conference Call
Mobico Group H2 2025 & Q1 2026
00:00 / 00:00

Transcript Sections

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Phil White
Executive Chair at Mobico

Good morning, everyone. I'm Phil White, I'm Chair of Mobico. Welcome to our audited results presentation for the 15 months ended 31st of March 2026. Joining me today are Brian Egan, our CFO, and Paco Iglesias, who was promoted to Group CEO last April. You've met the three of us a few times before, you've got to know us a bit more over the last year. I think we warned you last time that our reporting period in 2026 would be a bit complicated, many apologies for that. Today's presentation is a bit later than we planned, but as you know, it's been a World Cup year, we've been in extra time, and we've been in extra time in extra time. We've had a few VAR reviews that very pleasing to say, no yellow cards, a clean set of accounts.

Phil White
Executive Chair at Mobico

We delivered good results in 2025, and we've made a strong start to 2026. This start has enabled us to build up a stable platform to de-risk legacy issues and take the business forward. Over the last year or so, our focus has been still on simplifying and restructuring the group to make it stronger. We've had a lot of legacy liabilities to manage, but we've made a lot of progress. We're now on track to deliver the GBP 75 million cost savings we promised for 2026. This is equivalent to GBP 100 million in a full year. We've also dialed back our CapEx to a more disciplined GBP 120 million per year starting from 2027, and we're also looking at more ways to significantly reduce our costs even further. In Germany, we did what was absolutely necessary to de-risk our rail contracts.

Phil White
Executive Chair at Mobico

At the RME contract, we improved profitability and removed revenue risk by entirely shifting it from a net to a gross contract. RRX is still loss-making, but we've successfully reduced its lifespan by three years. On a combined basis, these changes mean that our rail ops will now be at least cash neutral over their remaining contract lives. This brings more certainty to the group and frees up more management time to focus on the future rather than the past. It's important to note here that we still have some payment advances we are discussing with the German PTAs. This is one of the legacy liabilities that Brian will explain in more detail later. German Rail is not the only area of our focus as we've been rationalizing other parts of our business.

Phil White
Executive Chair at Mobico

During the period, we exited two loss-making subsidiaries in UK Coach, and we've addressed two significant loss-making contracts in the U.S. in WeDriveU. As always, the jewel in our crown, Alsa, delivered another set of record figures. This was driven by continued strong performance in Spain and also growth in our international and our diversified businesses. It's no surprise that Alsa is increasingly playing a more important role across the group. Based on the strong start to 2026, we've raised our operating profit guidance for the year to GBP 215 million-GBP 230 million. Looking ahead, our priorities are plain and simple. We're continuing to stabilize and de-risk the group. We're maintaining the strong trading performance of Alsa by continuing to invest in the business. We're completing the monetization and de-risking of the UK Bus business.

Phil White
Executive Chair at Mobico

We're also continuing to streamline our central framework by removing the corporate glue that holds us back. We're focusing on cash generation to help us de-risk and de-leverage. Finally, we are looking at all options to manage our balance sheet better as the current level of debt is too high for the size of the group. I think this is important. Let me now hand over to Brian, who will take you through the numbers in some detail.

Brian Egan
Group CFO at Mobico

Okay, thank you very much, Phil, and good morning, everybody. Today, we're reporting on an extended 15-month period ending the 31st of March 2026. Since we previously discussed our 12-month results, the focus today is our trading progress in quarter one and other key areas of focus. When measured against the previous 15-month period, revenue increased by 6% to GBP 3.4 billion, driven largely by Alsa's stronger growth momentum. Group adjusted operating profit grew 18% to GBP 231 million. Statutory operating profit was lower at GBP 12 million. This gap between adjusted and statutory operating profit continues to reflect a number of significant adjusting items. We discussed these in detail at the 12-month results, an updated breakdown is included in the appendix to the presentation.

Brian Egan
Group CFO at Mobico

Free cash flow of GBP 132 million came in lower than 12 months 2024, largely due to the cash outflow related to school bus business prior to its sale back in July 2025. Very importantly, covenant gearing remains well within the tolerance at 2.9. Turning to the first quarter of 2026, we saw continued operational momentum with group revenue increasing by GBP 28 million or 9%, with group adjusted operating profit nearly doubling from the equivalent period a year ago. Alsa's revenue improved by GBP 29 million and adjusted operating profit by GBP 6 million. It's important to highlight that Alsa's strong performance is well-balanced across the business. Long-haul continues to grow and is boosted by the government's single-ticket initiative. Regional and urban are both growing strongly. Health transport and other diversified activities are seeing particularly strong momentum.

Brian Egan
Group CFO at Mobico

Very importantly, we also recognized our first technical service fee from Qiddiya contract in Saudi Arabia. Finally, in Morocco, operations have stabilized after December changes, and we remain profitable in Morocco. WeDriveU shows a GBP 4 million improvement in operating profit. This is mainly due to losses in WMATA during quarter one of 2025, which were not covered by the owner's contract provision. UK Coach has had a difficult quarter of trading, with levels of competition remaining high. Adjusted operating profit is down by GBP 4 million versus the previous year. This mainly reflects a provision taken in March related to a legal claim made by a supplier. We are confident of a positive outcome, which will be reflected in the next reporting period. Our UK Bus business continues to be affected by lower passenger volumes and higher costs.

Brian Egan
Group CFO at Mobico

This, along with changes to the treatment of supplier rebates, resulted in quarter one operating profit worsening by GBP 4 million. This was supported by a subsidy from Transport for West Midlands of GBP 18 million. That's a very important point. We're supported by a subsidy from Transport for West Midlands. German Rail recorded a GBP 12 million improvement in operating profit, reflecting the financial benefits of stabilized operations, which commenced in quarter four of last year. This also includes a GBP 6 million benefit related to the RRX Lot 1 Emergency Award contract, which was operated between 2022 and 2023. Central function costs have almost halved to GBP 2.9 million, showing the right sizing of our central functions is progressing well.

Brian Egan
Group CFO at Mobico

On the back of good quarter one results and revised contracts in Germany, as Phil mentioned already, our adjusted operating profit guidance is being adjusted from up to GBP 205 million to GBP 230 million. That's from GBP 195 to GBP 210. In Alsa, the Verano Joven initiative in Spain restarted last month, we are already seeing volumes above last year's. Taken together, the remaining divisions are broadly expected to offset central costs, we continue to focus on reducing costs and are implementing a number of initiatives to improve performance.

Brian Egan
Group CFO at Mobico

Adjusted operating profit for WeDriveU is expected to be broadly in line with 2025 as focus returns to core operations and streamlining the business and a transformation is well underway. In UK Coach, the focus remains on improving the competitiveness, and we expect the benefits of integration in Alsa and significant cost reduction to make an impact in the second half.

Brian Egan
Group CFO at Mobico

UK Bus is expected to be broadly break even, with local authority support offsetting the decrease in patronage that the bus industry has seen nationwide. Central costs have reduced significantly. However, increased audit costs have offset most of the savings. We expect the audit fee to normalize once we return to our usual reporting cycle. Underpinning our increased guidance is our strong cost visibility, noting we are 100% hedged on fuel for the full year 2026 and nearly fully hedged for 2027. I want to spend time talking about our legacy liabilities and the impact these are having on our balance sheet.

Brian Egan
Group CFO at Mobico

The core business is generating strong cash flow, which is enabling us to reduce these legacy liabilities. However, these liabilities are impacting on our ability to reduce debt. For the retained school bus claims, we have a provision of GBP 62.5 million to cover expected settlements. The cash outflow will occur as the claims are settled over the next five years.

Brian Egan
Group CFO at Mobico

The school bus purchase dispute is also capped at GBP 35 million. However, we've made an appropriate provision, we expect the outcome to be substantially below that. Again, we'd expect this cash outflow to take place in 2026. We also have German PTA advances of circa GBP 130 million. These consist of historic penalties and overpayment subsidies. We are in discussions with PTAs in regard to the value and timing of these repayments. We currently expect these will be repayable over the lifetime of each contract. Finally, we have a pension deficit in the U.K. of GBP 53 million. Here we have a three-year funding arrangement to see annual cash outflows of just under GBP 20 million. Moving on to cash flow.

Brian Egan
Group CFO at Mobico

We have excluded the negative contribution of school bus to show a clear picture of our cash flow. Focusing on the first quarter of the year, we spent GBP 32 million on maintenance CapEx and had working capital inflow of GBP 22 million. We made GBP 4 million in pension deficit contributions and paid GBP 14 million in interest. Overall, free cash flow was GBP 55 million, and free cash flow after growth was GBP 50 million growth CapEx. The improvement reflects our much more disciplined approach to CapEx and working capital, which Phil has mentioned earlier in his presentation. Looking forward, we expect CapEx this year to be at GBP 135 million. That is in the calendar year due to prior vehicle orders. We remain fully committed to our disciplined target of GBP 120 million per annum from 2027 onwards.

Brian Egan
Group CFO at Mobico

Despite the disciplined CapEx target, we are still able to pursue new growth opportunities throughout by focusing on CapEx-like contracts. For example, the joint venture contracts in the Middle East and elsewhere in Alsa, as well as asset-light opportunities in the U.S. Moving back to the 15-month figures. We delivered free cash flow after growth in M&A of GBP 40 million. We received GBP 286 million from the disposal of the school bus business and had GBP 158 million of cash outflows in relation to adjusting items. A fuller breakdown of adjusting items is included in the appendix. We spent GBP 43 million on the hybrid coupon payments. Notion that this reflects we had two coupon payments in the period. Other movements saw a GBP 10 million outflow, leaving the group with net funds inflow of GBP 115 million for the 15 months.

Brian Egan
Group CFO at Mobico

Adjusted net debt at March 2026 was at GBP 1.1 billion, down from an opening balance of GBP 1.25 billion at the 31st of December 2024. Covenant gearing of 2.9 is a 0.2x increase from the 12-month unaudited results at the end of, and 0.1 from the end of 2024. We expect net funds inflow of GBP 50 million before legacy liabilities over the remainder of the year. As a result, we expect our overall cash outflow as the business de-risk legacy liabilities. We do expect a small reduction in covenant at December 2026. We expect the covenant ratio to come down at the end of the year. Our liquidity position remains robust with GBP 0.8 billion in total liquidity, including GBP 240 million in cash. We have more than sufficient runway to manage our private placement maturities in mid-2027.

Brian Egan
Group CFO at Mobico

86% of our group debt is maintained at fixed rate, and the weighted average rate is at 3.5%. For the hybrid, the coupon rate reset at 8.1% last February, and the first payment at this higher rate is scheduled for February 2027, and we will decide on that payment closer to the time. To sum up, debt reduction remains the board's absolute priority. To achieve this, we are driving operational excellence to generate strong and predictable cash flow and de-risking our UK Bus operational assets ahead of the regional transition to franchising. Turning to de-leveraging, the board and management are working closely with our advisors to evaluate all of our strategic and financial options to de-leverage, and we will be providing an update later in the year. Please can I hand over to Paco?

Paco Iglesias
Group CEO at Mobico

Thank you, Brian. Thank you, Phil. Good morning, everyone. I'm Paco Iglesias. As you know, I've been appointed CEO in April. That means that I have spent already 100 days. The first 100 days, actually 120. What I think that you expect from me is to have a vision of where we are, and I'll try to do from the operational side. I think my main goal for today is that you understand the position where we are that is completely different to where we were six months ago and to keep being transparent with you. I think the same that all the numbers that have been shown by Brian, I try to do the same through facts over narrative. I'm an engineer, and I like numbers. I like real facts. First to say is we are in a completely new company.

Paco Iglesias
Group CEO at Mobico

I think it would be easier for me to explain what have been running in the same way that we were six months ago. I think thanks to leadership of Phil that has given us all the confidence to make all the changes, and I think all the team I have, and I want to thank especially people who are here, James, Helge, Marcos, Patrick, of course, all of you because you have made a great effort in these days. I have good and bad news as everyone. Bad news is we inherited a company in a very difficult position. I think you have seen from Brian. The good news is we have a very solid plan that, not a solid plan for the future, solid plan that has been implemented in the last months and that is giving us some positive outcome on that.

Paco Iglesias
Group CEO at Mobico

Don't expect from me to give you a new strategic plan with new consultancy firms or all the work has been done by these guys and the rest of the team that are working. We started from the top-down with the main ideas, what are the things that we have to do. After that, bottom-up, we designed all the initiatives that I'll try to sum up in a while. Very simple things in order to recover your trust in the company. Just first, and I think it's in this specific order. First, establishing operations. You know that we have some operations that we are not working well, performing well. This has been my main priority that I will go through every single division right now with some facts, but this is the first.

Paco Iglesias
Group CEO at Mobico

If you ask me, I would say that we are more than 50% done in terms of the change on operation. Second point is the risk in contracts. You know that we have a good pipeline of businesses, but we had several issues with the company, as Brian and Phil mentioned. Fortunately, I would say 80% of them, we have now avoided in several ways. I think the two main points are quite ahead of where we are. Third point is, I think when you reach a position like me, first thing that you want is, what's my goal? To generate cash and how to get us more revenues or less cost. With this, we have designed internally a very solid plan in terms of savings and reduction on CapEx that I will show you right now.

Paco Iglesias
Group CEO at Mobico

Finally, we cannot live for the future only with savings. We need to keep the illusion, the happiness of the people, because when we are able to grow, to have new contracts, as you have explained and I go later, we have had some success on growing in the last months. This is very simple. This is the plan that we have, and with figures, facts. You can ask me how. First point on CapEx, to get a reduction. You know that we come from more than GBP 150 million CapEx in a year, the commitment is a real fact that for this year, we will have a reduction in CapEx of more than GBP 30 million. This is a number. It's not an opinion. It's not something we need to achieve. This is something that we have got from that. All the savings, as you say.

Paco Iglesias
Group CEO at Mobico

We have more than 100 initiatives that are going to give us, in a run rate, GBP 100 million of cash. For example, in terms of overheads, in terms of central expenses, we have achieved, so far, more than GBP 25 million reduction on savings. The second point is everything related with the loss-making contract. You know what is happening with WMATA in the U.S., what has happened, the problem in Germany, and some other points where we have been working. Finally, we are still growing. We have launched a new, huge contract in Spain, in Ibiza, and also in Qiddiya in Saudi Arabia. Right, couple of weeks ago, we were awarded as preferred bidder of Medina. Medina is a huge contract in Saudi with more than 220 buses, we will run operation with a local partner as well.

Paco Iglesias
Group CEO at Mobico

Everything is with the same goal, to generate cash, to improve position, and to keep performing better. Let's go division by division. I'll try not to be so long. Alsa, you know that I know Alsa very well, One of the questions that I remember from last presentation was, would be Alsa able to keep growing to maintain the margins and to be on that position? Well, this is numbers. This is revenue. We have been able to grow the revenue by more than 10% with all the things that. I think I can move here. I will go to Long Haul later, but the growth in Long Haul is not the most important part of the company in this period. We have been able to grow, but the main part where we have grown a lot is this international and other businesses and diversification.

Paco Iglesias
Group CEO at Mobico

This is the key of the contract that we have had. As you know, Morocco, we had a problem at the end of last year, we have lost revenues, Fortunately, now we are still the leader in the urban transport in Morocco with four cities, the number one and number two, Casablanca and Rabat, we are making profits in Morocco as well. Not at the level we had in the past, but we are still having. Of course, we are taking advantage of the policy of the government in order to support public transport. That I will go later with U.K., because I see some similarities with the U.K. This is the main messages I would like to show you. It's important, number of passengers is almost 10% because I will go later with that.

Paco Iglesias
Group CEO at Mobico

This is another key question from, especially, I remember Gerald, 10 years ago, the franchise system in Spain. Maybe we haven't been able to explain better how the system work in Spain. We run about 200 contracts for long distance, for regional, for urban transport, some other kind of contract with more than 50 PTAs between Spain, Morocco, the areas where Alsa run. We have, under a tendering process, between 5%-10% every single year for the last years. It's not a question that the franchising system is a stop. What we have had is in Long Haul, a delay on the process, but in the last year, we have also go for bidding. This is important message. We have roughly 20 contracts every year that we have to renew. And what's our success on them? The ratio when we are the incumbent is 95%.

Paco Iglesias
Group CEO at Mobico

If you ask me last year, 25% is 100%. Well, sometimes we lose some contract. When we are not incumbent, the ratio could be 20%-25%. This means that we are still in a process that we are in a good position. What about margins? What happened after the tendering process? Of course, you have to reduce fare and our margins usually, it's a range, it's a lot of contract, different contract, could drop 3%-4%. It depends. As I showed you earlier, number of passengers last year, 8.8%. What happens after the tendering process, we usually keep growing number of passengers. The historic, the background we have in the tendering process is after two, three years, we are in the same margin that we had in the past.

Paco Iglesias
Group CEO at Mobico

Sorry, I didn't say, but the margin that we have kept in the last year is even higher than what we had. We have been in Alsa margins between 12-14 from COVID. In the last five, six years, we have not made significant change on that. Let's go to the States. If you remember the key messages I said from the operational side, CapEx, savings, loss-making contract, and growth. Let's start. In terms of CapEx, we are pursuing opportunities in the State for asset-light. We don't want to keep spending money on CapEx, even we have some good opportunities, but it's not the right time to do that, so we're not doing that. On the savings, we have changed completely the company in the States.

Paco Iglesias
Group CEO at Mobico

Now we work in the State more similar on what we do in Alsa, for example, with regional areas, five regional areas alongside the country, and a very tough central department headquarter who takes control of finance, legal, procurement, safety, everything where we can get significant savings. All these people that were working in the past in the regional areas, now we have been able to reduce. Significant savings on that. Loss-making contract. We avoid the two significant loss-making contract that we had in the past right now. I think it's another of the main goal we have. Growth. We have a pipeline of, I think it's written right now, of more than GBP 600 million. We have a very little market share in the States, less than 10%. The capability that we have for growth is too high.

Paco Iglesias
Group CEO at Mobico

We will be very disciplined, very selective with the process where we want to go. UK Coach. I have to acknowledge that this is something that I am not happy in the operational side, but I am optimistic. What has happened? We have a significant delay in the integration of UK Coach of Alsa. Maybe I misunderstood all the difficulties that we have on there, but let me give you some facts, is our main competitors there have grown in number of flights, number of mileage, up to 70% in the last year. We have lost less than 5% of passengers, but we need to reduce our average ticket by another two, three points. This is part of that. But if you go to the strategy that I pointed out, first, CapEx.

Paco Iglesias
Group CEO at Mobico

We are now in a process that we are going to make new agreement with third parties, and we are going to transfer part of a fleet. Here with me is Rafael, the Managing Director for UK Coach, that if you ask later, he can answer. It's a joke because he told me earlier, "Please, don't ask me any question." No, but he's in a process. We are going to reduce our own fleet by half. This is important. Savings. We got on the overheads in U.K. and general expenses, as I said, more than GBP 25 million. Loss-making contract. We have avoided the non-core businesses that we were running in the past. Not only that, we are in an operational plan that we are avoiding the routes with less profitability. We are going to reduce our network significantly, keeping the most profitable routes. This is another point.

Paco Iglesias
Group CEO at Mobico

And growth. For example, we have introduced the revenue management tool coming from Alsa and, let me not give you many details because of the competition, but we are growing significantly passengers in some areas of U.K. where we have already introduced this tool. I think it's, like I said, I am not happy, but I have a very positive vision that we will be in break-even at the end of this year or next year at all. UK Bus. UK Bus, maybe it's a different strategy. You probably have read in the last days that the new Prime Minister has said that he wants to support public transport. He want to change the rules from the age of Margaret Thatcher, and now he wants to have a local control with the control of the asset in the local areas.

Paco Iglesias
Group CEO at Mobico

What has happened in U.K. in the last years, London has grown passengers a lot, but the rest of the area has been dropping number of passengers. It's not only West Midlands, but around the rest of the cities, Manchester, Liverpool and the rest. What's our strategy here to de-risk this business? What we are doing, we have in the process of monetization of the asset and making savings, because even with a patronage that, as I said, is coming down, we are still in a quite flat as we were one year ago. That I think is not that easy to achieve. For growth, we have prepared a new bidding team in order to fight for the franchises, not only West Midlands but the rest of the opportunities with positive margin. We are not going to go only for size, only for being award.

Paco Iglesias
Group CEO at Mobico

It's just if we are able to make money in our business case. This is the strategy that we are doing in that. German Rail. I'm sorry that I cannot say very much because we are under an NDA document with the five German PTAs, but it's public that we signed a couple of months ago, a final agreement with them. As Brian said, I would be prudent if I say cash neutral from a business that you know that was a very negative numbers in the past. It's not only because of the agreement. For example, in the operational side, when I'm more comfortable, we got a significant improvement. For example, for the first time, we have 100% of the drivers that we need for running the company.

Paco Iglesias
Group CEO at Mobico

Even more, we are hiring part of our driver skill who comes from our training center to third companies, and we are getting money, of course, off of that. We are in the moment of when we have less penalties for the company in the history of the company. Another fact, we have the best safety ratio in the industry in Germany, in the area. These are facts, public facts. Finally, we are working in terms of growth strategy, and as I said, growth. We are now working to create a platform there because you know that we are the largest private company in the area where we run trains, that is Westphalia.

Paco Iglesias
Group CEO at Mobico

Now there is a public tender where we have been pre-qualified, and the idea is trying to increase our business there and to create a platform that could add a lot of value in the company. Because it's very difficult to enter a new market, especially in rail. We are there and we are now in a very stabilized business. I think this is the last one. Just a summary of where we are. Very focused on cash generation. I think I have given you example of every single business that are real initiatives. Of course, I said that we have changed completely the company, and it's not a surprise that we are working in a model more similar on how we work in Alsa, for centralized with very tough control of the procedures and so on.

Paco Iglesias
Group CEO at Mobico

Finally, well, for example, in the organizational side, there we have also our new COO, Rafael Sterling, who joined the company in the last days, and he's in charge of procurement, safety, maintenance, everything, but not for Alsa, for the whole company. It's the first time that we have a single role for the whole company with the same procedures, with the same goals for all the countries. Finally, as I said, cash generation. I've never failed in a budget. I can do, of course, in the future. I think another fact that is clear, Brian has said, we have given a new guidance for this year with an increase by 10%. I can assure you that if we have said that, we will hit the numbers. I'm not able to accept that we are not going to fulfill with the numbers and to put excuses.

Paco Iglesias
Group CEO at Mobico

I can assure you that if we say this is the number, this will be the number. Very difficult times, thanks to all the team, but we are on track of getting the things fixed. I think I have nothing else. Please, Phil, if you don't mind to close.

Phil White
Executive Chair at Mobico

I'll close. Thank you. Thank you, Paco. I'll get your name right this time. I often do that. I think people call it a senior moment, which often applies to me, sorry, Paco. Look, I've changed the opening of this script again. It's been tough. I can't tell you how tough it's been. There's been a lot of issues and a lot of surprises, and some of the surprises have been pretty unpleasant. We're tackling them, we're dealing with them, and we're getting there. Dealing with stuff like this when you're a contract business, it takes a lot of hard work, a lot of time, and a lot of cost. It really does. It costs us cash, as Brian's shown you. It's better getting it done, getting everything clean, and having some nice businesses rather than businesses that hemorrhage cash.

Phil White
Executive Chair at Mobico

I want to reiterate and start by saying, look, we've made a great start to 2026, and we hope it continues. Alsa continues to outperform. Alsa is absolutely key to the group. We continue to invest in it so it can achieve its growth potential. The stabilization of our German Rail contracts, which looked impossible, but we managed to get it, and it ensures our services have a future, and we can continue to operate a quality service. Which, as Paco's already mentioned, we are hitting 100% service levels now. In the U.K., we are progressing the monetization of our UK Bus assets in the West Midlands to de-risk the business well ahead of the move to the re-regulation of bus services and the introduction of bus franchising. Every move we make now is focused on driving cash generation and managing these key issues we inherited.

Phil White
Executive Chair at Mobico

This includes driving further cost savings over and above those we announced in the 2025 12-month results. There's more to come. Repeat it, I think, for the fourth time today, we've upped our guidance for 2026 to between GBP 215 and GBP 230 operating profit. Our priority, which is a huge one, is leverage reduction. We are working closely with all our advisors to look at every option that's available to us so we can de-leverage the business and get the balance sheet in a much better state. That's the real job this year. We'll give you an update on all this in the second half of the year. As usual, many thanks to all our people, whether they're driving buses or trying to close accounts. Everybody who works tremendously hard for us.

Phil White
Executive Chair at Mobico

Thanks to our shareholders and our stakeholders and our advisors who sometimes get very tired of us. We appreciate that. We thank everybody for their patience and understanding. To return to my World Cup theme this year, we're all out tonight for a hydration break. I really appreciate what FIFA have introduced so we can do this. Over to you guys now. Any questions you want to ask us? Thank you very much. Gerald, are you first in again?

Gerald Khoo
Analyst at Panmure Liberum

Thanks. Gerald Khoo from Panmure Liberum. Three, if I can. Starting on the de-leveraging point. You talked about evaluating options. Is there anything that you would rule out at this stage, in particular equity issuance? What's your stance on that? Secondly, on the UK Bus pension deficit. Firstly, can you just clarify whether the GBP 53 million is IFRS or is it the actuarial deficit? Why has it increased so much? Given the fact we're now in a, shall we say, normal interest rate environment, would that not imply that certainly the deficit should be shrinking rather than growing? Then finally, on CapEx, you talked about the lower annual target from 2027 onwards. How sustainable is that? Is that buying fewer vehicles? Is that a lower CapEx bill as a result of financing structure?

Gerald Khoo
Analyst at Panmure Liberum

If it's buying fewer vehicles, what does that mean for the average age of the fleet?

Phil White
Executive Chair at Mobico

Okay. I'll split that between the three of us, Gerald. On your first question, the balance sheet review and looking at our debt levels. We're in the position at the moment we're not ruling anything out at all at this stage. Brian, on pensions?

Brian Egan
Group CFO at Mobico

Yeah. On pensions, it's an actuarial funding deficit. We've got a defined benefit scheme in the U.K. It's actuarial deficit of GBP 53, which actually also is reflected in the accounts. We have a valuation every three years. One of the points of that is it does relate to UK Bus, and we are looking to demonetize or to monetize rather, that asset. That would be rolled into that particular transaction.

Phil White
Executive Chair at Mobico

Paco, CapEx?

Paco Iglesias
Group CEO at Mobico

Yes. On CapEx, there is not a single reason behind this. I can give you some example. For example, first is that we're going to buy less vehicles because we have avoid some loss-making contract and we are also in negotiation process with PTA to extend the age of the fleet. This is one point. Second point, we are buying more affordable vehicles. For example, we have introduced Chinese vehicle in some of our operation. That makes us to make significant savings. Third, we are now in a process of scheduling operational scheduling fleet that you know in the process of cascading to be able to be more efficient in taking advantage of fleet from the first-hand to the second-hand.

Phil White
Executive Chair at Mobico

Jack

Jack Cummings
Jack Cummings
Analyst at Berenberg

Jack Cummings at Berenberg. Three questions, please. The first one, if I could just ask on the guidance. I think what you said is kind of Alsa seems to be performing a bit better, Coach a little bit worse, and obviously you've signed the German agreement. Could you help us kind of bridge from the previous guidance to the new guidance? Second question on WeDriveU. Obviously, exited WMATA and the [Carter] contracts. Guidance is for profit to be flat year-on-year. How should we think about kind of the growth profile of that business, both in terms of revenue and margin? Then finally, just going back to kind of the UK Bus point. If you are able to monetize those assets in the short term, would we anticipate that any transaction would be covenant-neutral, or could this actually help in the de-leveraging? Thank you.

Phil White
Executive Chair at Mobico

Thanks, Jack. Brian.

Brian Egan
Group CFO at Mobico

If we just take a couple of those. First of all, with guidance. The guidance has been improved or has been increased because of a number of factors which you've actually mentioned. We're going to see the benefit of Germany coming through. We're seeing the benefit of stronger Alsa performance, and which Paco spent quite a bit of time managing the downside on trading for Coach. It really is a combination of all of those, and then we will update again when we do our September results.

Paco Iglesias
Group CEO at Mobico

Can I add? If I have to say very simple, I would say the improvement in guidance comes. Alsa and Germany are going to perform better. I don't expect significant variation in UK Bus, UK Coach, and with WeDriveU. We will have also material savings from the central functions. If you add all these things, I think it's not difficult. It's not the right word, but it's achievable at all to look at the-

Phil White
Executive Chair at Mobico

Paco, could you just say a little bit more on the opportunities in the U.S.?

Paco Iglesias
Group CEO at Mobico

Oh, in the U.S. Yeah. As I said, we are focused mainly the asset-light. We are not now looking for opportunities in shuttle because it's more heavy CapEx. But we are entering in a new segment that is universities, and with some of them, and also some commuting services are there.

Paco Iglesias
Group CEO at Mobico

As I said, for the next 12 months, I was reviewing the other day, there are more than 30 opportunities. We are going to be very selective because we are not capable to go to all of them. It's mainly university asset-light and in the geographic areas where we are. As I explained, we have five different regions. We are not trying to enter a new region where we don't have presence, where we have to start from scratch. Very sensitive. Sensible, sorry. Okay. The final-

Jack Cummings
Jack Cummings
Analyst at Berenberg

The U.K.

Brian Egan
Group CFO at Mobico

The final one is.

Paco Iglesias
Group CEO at Mobico

U.K. Okay.

Brian Egan
Group CFO at Mobico

is UK Bus, and it's quite an important one to understand. Really offloading that is about de-risking the business. In terms of the covenant, it's really going to have very little impact on the covenant. What it does is we have assets, and we've focused on getting full value for our assets. On the other side, we have quite substantial liabilities which carry risk. One of them is the pension, which you mentioned earlier on, Gerald, which now has a GBP 53 million deficit. Defined benefit scheme carries risk all the time. We have a risk constantly because we have to get funding from the local authority. It is actually a loss-making business. We're getting funding all the time. That requires lengthy negotiations every year.

Brian Egan
Group CFO at Mobico

The third issue is we have very substantial leases associated with the business, over GBP 300 million worth of leases, and there's quite a detailed description of those in the finance in the accounts this year. What we will do by offloading this business is we de-risk it by offloading leases, offloading pensions, offloading the funding risk that we have every single year. For that, we are taking over our assets. In terms of covenant, it just really has very little impact.

Jack Cummings
Jack Cummings
Analyst at Berenberg

Thank you.

Phil White
Executive Chair at Mobico

Thanks, guys.

Ruairi Cullinane
Ruairi Cullinane
Analyst at RBC

Good morning. It's Ruairi Cullinane from RBC. A couple of questions, please. Firstly, on covenant gearing, encouraging you expect that to tick down by year end. Should we expect that to continue into full year 2027 excluding any potential disposals or anything like that? Secondly, German Rail. Your interest in potential new contracts there. What would you like to see in terms of contract terms or risk rewards to bid for further business in German Rail? Thank you.

Phil White
Executive Chair at Mobico

Brian.

Brian Egan
Group CFO at Mobico

Yeah. On the covenant, we are expecting it to improve by the year end. I think we're not really going to go out further than that because there's so many hurdles we've got to leap over the next while in terms of the balance sheet. I think, at the end of the year, we certainly expect it to be better than it is at present.

Phil White
Executive Chair at Mobico

Paco at the end.

Paco Iglesias
Group CEO at Mobico

The German contract, well, it has been launched right now. We are still in the process of analyzing the ITT. We are working in the financial model in the negotiation with the provider because for that and the negotiation also with the PTA. We are working in a different way than we have in the past. We are working with two different teams, like Chinese wall, in order to keep clear that we don't make mistake. We can make mistake. Everyone can make mistake. It's easier to be more comfortable if we have two outcome from different groups at the end. If we see after all the analysis that is not going to be profitable or it's going to take risk, we will not go for it. Completely sure.

Phil White
Executive Chair at Mobico

As Paco said, these long-term rail contracts are very complicated. If you start with a bad contract, you will never recover from it. We're not going to get into that position again. We're spending a lot of time on due diligence and what the contracts actually mean when you're operating the business.

Jack Roberts
Jack Roberts
Analyst at Bank of America

Hi, good morning. [Jack Roberts] at Bank of America. Two, three question, if that's okay. Could you give some more detail on the UK Coach issues? Specifically, do you expect structurally lower pricing in the U.K. going forward given heightened competition? How do you see the growth trajectory of that business once you break even either this year or next? On German balances, can you reconcile the GBP 132 million in PTA advances? You've got GBP 113 million on the German OCP. How much cash is payable in 2026, and how should we think about that annually thereafter? Maybe more generally, how should we think about modeling legacy cash liabilities beyond this year? Thanks.

Paco Iglesias
Group CEO at Mobico

Yes, thank you. On the UK Coach, as I said, competition is working well. I think competition is good for us not to be asleep. Yes, we are going down our fares because we need to keep some margin, but we are not going to do the same in every single corridor. As I said, there are some corridors where we are even growing average ticket. We are growing passengers. There are some other corridors where we have tough competition, and we have to keep competing. There is some other corridors where we are going to avoid. Yes, as figures, our revenue per mileage, that is a key KPI for efficiency is we are performing better than our competitor. Our main problem in UK Coach is the base cost.

Paco Iglesias
Group CEO at Mobico

This is where we are working. We have done a lot of things, we have a lot of things still pending to be finalized. In summary, if we are able to work to run with a base cost simplified from what we have, very good technology in terms of revenue management and a good approach on the corridors is not difficult to achieve. It takes time, I'm absolutely optimistic and confident that we will achieve in the next months.

Brian Egan
Group CFO at Mobico

Okay. On German Rail, I'm going to try and explain. I was just wondering, would it be possible to put up slide 22 again on the presentation? It's Paco's slide. Do you mind if I just go on this one? Sorry. The first thing to say is there are two separate issues. There's the OCP and there's the balance due in advances. First of all, let me just take the OCP. We've got two contracts. We've got the RME and we've got the RRX. The OCP relates to the RRX contract. That GBP 130 million, they are the losses we expect to make over the remaining years of the contract up to 2030. Roughly, we're going to be losing about GBP 20 million-GBP 25 million a year on the RRX contract. That loss each year, it goes against the provision.

Brian Egan
Group CFO at Mobico

It doesn't hit our P&L, it goes against the provision. On the RME contract now, that's been extended. You see this one's been shortened. That's been extended because after 2032. Each year we're going to generate cash of roughly the same amount, GBP 20 million-GBP 25 million every year, that will go on beyond the RME. We should end up generating a little bit more cash. Overall, we're sort of saying it's cash neutral, we actually expect to be slightly cash positive in the latter years. Each year, in terms of cash, they're more or less offsetting each other. We're bringing in GBP 20 million-GBP 25 million from the RME. We're losing GBP 20 million-GBP 25 million on the RRX. In terms of our P&L, the loss in the RRX goes against the provision. The profit on the RME will go into our P&L.

Brian Egan
Group CFO at Mobico

We'll get a profit each year. That will obviously help our covenant, et cetera. That's sort of how the contracts work. Separately to that, we have advances from the PTAs, which are sitting on our balance sheet of GBP 130 million. It's nothing to do with the contracts. That's advances they've been giving us each year to run the business. We have to repay that. It also involves penalties. There are two issues. First of all, we have to finalize that number, so it's a provision at the moment. We have discussions with the PTAs to agree on a final number. The second thing is, in terms of the repayment schedule, we're expecting that to happen over the contract terms. Again, that has to be finalized with the PTAs.

Brian Egan
Group CFO at Mobico

I mean, obviously they're pushing to have it happen as quickly as possible, but we want to spread it out as far as we can. I don't know if I've explained that well, have I?

Jack Roberts
Jack Roberts
Analyst at Bank of America

I guess if we think about an annual cash drain, you're basically taking that 130 million divided by number of years left or-

Brian Egan
Group CFO at Mobico

Well, it mightn't be quite like that because it depends on each contract and when the money came through to us. When we get advanced, the issue is that there are a number of years behind on their own accounts. We have to do a reconciliation with their accounts, you have a negotiation over the amount that's paid to them.

Jack Roberts
Jack Roberts
Analyst at Bank of America

Yeah.

Brian Egan
Group CFO at Mobico

It's not really equal. It's going to depend on when the advances were given to us, et cetera.

Phil White
Executive Chair at Mobico

Apologies.

Jack Roberts
Jack Roberts
Analyst at Bank of America

Could you please split the GBP 132 million between the two contracts?

Brian Egan
Group CFO at Mobico

I'd have to get the detail for that. I'm not sure how much we'd share on that because, again, it's under discussion. Let me just check to see what we can. In fact, I don't have that information to hand anyway. It's not only the contracts, it's also each year because it varies depending on the years when the advances came through to us. It has nothing to do with the profit or loss in the contracts. It's purely an advance that we have to repay to them.

Brian Egan
Group CFO at Mobico

The other point that's very important to notice now is that agreement was very important in terms of the saving, because we were looking at I don't know if we've ever disclosed the amount that we were going to lose, but it was very, very substantial.

Phil White
Executive Chair at Mobico

It's a big one.

Brian Egan
Group CFO at Mobico

It's a very, very big number, running to hundreds of millions, which now isn't going to happen. The second issue is we now have a business which actually has a value. Before, we had a business which had zero value. While we've got an amount that's due of the GBP 130 million, we also have a business now that has some value. I don't know whether I've explained that. I was trying to work out in my head how I would do, but okay.

Phil White
Executive Chair at Mobico

No, you've explained it good. Any more questions, guys?

Brian Egan
Group CFO at Mobico

Sorry, [Thomas Bird].

Phil White
Executive Chair at Mobico

Are we done? One more. Gerald again. Come in again.

Brian Egan
Group CFO at Mobico

I think it will have to be the last one, unfortunately.

Gerald Khoo
Analyst at Panmure Liberum

Yeah, Gerald Khoo from Panmure Liberum again. Just one. On the bus availability contracts, you talk about trying to exit those on a commercial basis. If you went all the way through to franchising, I can understand who you'd transfer those to. It's whoever wins the business. That might be yourselves, it might be someone else. If you're looking to exit them early, who do you transfer them to other than Transport for West Midlands?

Phil White
Executive Chair at Mobico

Difficult to answer that one at the moment, Gerald. We're in really detailed discussions on this one, we've got to be very careful what we say because we're not there yet. Please forgive me for not answering it.

Gerald Khoo
Analyst at Panmure Liberum

Just to be clear, you need the buses still to run the service?

Phil White
Executive Chair at Mobico

Absolutely.

Gerald Khoo
Analyst at Panmure Liberum

Right.

Phil White
Executive Chair at Mobico

Yeah. Else we've got no business. We're in negotiation about the assets and all the liabilities we've got, which Brian's mentioned. Okay, guys. Thank you very much. Thanks to everybody who's joined us in the room today, and thank everybody who's joined us on the webcast. Hopefully we'll see you soon. Thank you very much.

Analysts
    • Phil White
      Executive Chair at Mobico
    • Brian Egan
      Group CFO at Mobico
    • Paco Iglesias
      Group CEO at Mobico
    • Gerald Khoo
      Analyst at Panmure Liberum
    • Jack Cummings
      Analyst at Berenberg
    • Ruairi Cullinane
      Analyst at RBC
    • Jack Roberts
      Analyst at Bank of America
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