Mobico Group Plc · LSE:MCG
Mobico — National Express Group — Investor Presentation (October 2017)
53 slides from Mobico's investor presentation, October 2017
Slide 1: Investor presentation Autumn 2017
Investor presentation Autumn 2017 Includes Half Year financial results to 30 June 2017
Slide 2: Cautionary statement
Cautionary statement This Review is intended to focus on matters which are relevant to the interests of shareholders in the Company. The purpose of the Review is to assist shareholders in assessing the strategies adopted and performance delivered by the Company and the potential for those strategies
Slide 3: Contents
Contents o Investment case and business model o Our markets o Strategic focus and areas for growth o Business review – Half year 2017 o Financial results – Half year 2017 o Appendix 3
Slide 4: Investment case and Business model
Investment case Business model 4
Slide 5: Our diversity is our strength
Investment case Our diversity is our strength… … helping to deliver sustainable, long-term shareholder value o Best in class public transport operator with differentiated proposition: o Well balanced & diversified portfolio with around 80% of earnings from overseas o Strong recurring revenue streams
Slide 6: Business model
Business model Using operational excellence… …to serve our customers … and create profit and cash, generating long- term shareholder value 6
Slide 7: Differentiating through diversification
Business model Differentiating through diversification Balanced portfolio with attractive geographic & modal exposure National Express o Diversified portfolio with leading positions in many of our Group Revenue £2.1bn markets Diversified revenue stream (1) o Lower geographical and regulatory exposur
Slide 8: Delivering on our strategy: strong track record on improving returns
Delivering on our strategy Strong track record on improving returns Focus on operational excellence is delivering sustainable & growing returns Free Cash Flow* ROCE* £m % 11.9 11.7 164.8 138.6 111 10.7 2014 2015 2016 2014 2015 2016 Dividend per share Earnings per share* p p 27.3 12.28 23.4 18.9 11.3
Slide 9: Our markets
Our markets 9
Slide 10: Attractive markets with opportunity for growth
Our markets Attractive markets with opportunity for growth ALSA North UK Bus Rail UK Coach Spain, Morocco & America Regional Bus Germany Scheduled Coach Switzerland School Bus & £4.8bn market €9bn £300m market Bus & Coach Transit (excluding London) 60% share regional & urban €3.7bn market $24bn scho
Slide 11: Our markets: ALSA
Our markets ALSA Market size • €3.7bn Features • Regulated & highly segmented market with 3 levels of Government regulation; national, regional & urban • Each concession is exclusive to the operator Competition • Intercity competition from state-backed rail & low cost airlines • Concessions awarded
Slide 12: Our markets: North America
Our markets North America Market size • $24bn School Bus – c.1/3 outsourced, $25bn Transit c.1/3 outsourced Features • Fragmented SB market with top 4 players accounting for nearly 50% • Low barriers to entry but hard to get scale • Local relationships are key Competition • Bigger players - access t
Slide 13: Our markets: UK Bus
Our markets UK Bus Market size • £4.8bn Features • Primarily de-regulated with low barriers to entry Competition • National & local bus operators, car & rail • Top 5 players – Stagecoach, FirstGroup, Go-Ahead, Arriva, National Express Growth drivers • Increasing passenger volumes through modal shift
Slide 14: Our markets: UK Coach
Our markets UK Coach Market size • £300m Features • Highly de-regulated • Operators able to compete flexibly on selected routes Competition • Selective competition from rail, large bus operators & localised services • Main competitor is Megabus (Stagecoach) but on limited number of routes Growth dri
Slide 15: Our markets: Rail
Our markets Rail Market size • Germany €9bn regional & urban market Features • Liberalising German market with DB needing to exit 40% of market share • Over 30 contracts coming up for bid in the next 3 years • Franchise sizes smaller than UK ~€20m to €100m revenue p.a.– lower risk Competition • Dome
Slide 16: Business & strategic review: Half year highlights
Business & strategic review Half year highlights
Slide 17: Strategic focus
Strategic focus Clear strategy with 4 strategic priorities 1. Delivering operational excellence 2. Deployment of technology throughout our business 3. Growing our business through targeted bolt- on acquisitions 4. Diversification into complementary markets 17
Slide 18: Our strategy is working
Our strategy is working o Excellence driving organic growth o Acquisitions delivering strong returns o Diversification proving to be a strength o Focus on problems and opportunities, quickly & effectively 18
Slide 19: North America: Record half year
North America Record half year with acquisitions performing well Delivering operational excellence Generating superior cash & returns o Good bid season for 2017/18 2017 2016 o Strong contract retention – 95% for renewals o Average price increase of around 2.5% across portfolio, nearly 4% on our Reve
Slide 20: Acquisitions delivering expected returns
Acquisitions delivering expected returns o Delivering returns of between 15-20% o Continued focus on capital discipline and rigorous screening to maintain return thresholds o 2 small acquisitions made in first half 2017 (Odier & Santo Domingo); acquired Cook-DuPage Transportation in July, entry into
Slide 21: ALSA: Record half year with RMS
ALSA Record half year with RMS driving strong long-haul performance Delivering operational excellence Generating superior cash & returns o 1m more passengers this year, with a particularly strong performance in Spanish long-haul 2017 2016 o RMS driving revenue, volume & yield Revenue €369.9m €344.4m
Slide 22: ALSA: RMS driving incremental growth & returns
ALSA RMS driving incremental growth & returns o Enhanced RMS providing greater accuracy on forecasting demand Long haul 9 main corridors H1 2017 v 2016 o Delivering passenger growth on off-peak services and optimising price on peak services o Strong growth in revenue, passenger volumes & yield o See
Slide 23: ALSA: Better outlook for concession renewal
ALSA Better outlook for concession renewal o Bidders to present an economic sustainability study, Bid criteria for long haul concessions including passenger demand data o Changing emphasis, with greater proportion of score now related to technical/quality elements versus price/fare 35 45 o New metho
Slide 24: UK Coach: Good first quarter but terror attacks impacting
UK Coach Good first quarter but recent terror attacks impacting Delivering operational excellence Generating superior cash & returns o Core revenue growth impacted by terrorist attacks 2017 2016 o Responding through RMS - focus on retaining market share o Management actions – network efficiencies &
Slide 25: UK Coach: Impact of terrorism on core revenue
UK Coach Impact of terrorism on Core revenue UK Coach core monthly revenue & passenger growth – impact of terror attacks 3.5% o Pre-terrorist attacks, core 1.5% revenue growth averaged +2.4% across January and 2017 Growth -0.5% February -2.5% Revenue Growth -4.5% o Following the 4 attacks over Passe
Slide 26: UK Bus: Improving trend in Q2
UK Bus Improving trend in Q2 following management actions on fares Delivering operational excellence Generating superior cash & returns o Robust revenue growth: commercial revenue broadly flat for H1, having 2017 2016 been down in Q1 o Lower fare zones delivering a return to passenger growth & reven
Slide 27: UK Bus: Driving volumes through lower fares
UK Bus Driving volumes through lower fares Sandwell & Dudley - YoY figures for pre-trial & trial period 3.8% 1.2% 0.4% 0.1% (0.3%) (2.6%) Yield Passenger volumes Revenue o Launched first local fare zone in Q1 in Sandwell & Dudley o Sandwell & Dudley seeing revenue growth improved by 1.2% & patronage
Slide 28: German Rail: Delivering first profit
German Rail Delivering first profit Delivering operational excellence Generating superior cash & returns o Strong growth in revenue, up 22.7%, reflecting full revenue recognition 2017 2016 with catch up from 2016, including latest passenger count data o Post settlement, RME is a profitable contract
Slide 29: Delivering our strategy: Outlook
Delivering our strategy Outlook o Full year expectations remain positive & unchanged The business is performing strongly o Dividend up 10% o Cash generation remains strong o Cash availability gives us options for growth o Strong pipeline of opportunities exists, enhanced by exiting UK Rail o Impro
Slide 30: Financial highlights: Half year 2017
Financial highlights Half year 2017 30
Slide 31: H1 2017 Key highlights
H1 2017 Key highlights o Continued strong performance from our diverse international portfolio of cash generative businesses o Both North America & ALSA delivering record half year profits o UK performance more mixed reflecting market conditions, but positive reaction to management actions o 2 acqui
Slide 32: 2017 Financial Highlights
2017 Financial Highlights Strong start to the year Change in Continuing operations £m 2017 *2016 Change Constant FX Revenue 1,170.5 1,007.2 +16.2% +6.5% Group normalised operating profit 111.6 93.7 +19.1% +8.3% Group normalised PBT 88.9 70.7 +25.7% +11.0% Normalised EPS 13.0p 10.9p +19.3% Statutory
Slide 33: Revenue
Revenue Recent acquisitions delivering strong growth £m o Strong revenue increase, up 6.5% in constant currency o Organic growth boosted by acquisitions in North America & Spain o Positive impact from currency, with £ weaker versus both the US $ & € 33
Slide 34: Operating profit
Operating profit Continuing strong growth in overseas divisions Revenue (YOY change*) Operating profit H1 2017 **H1 2016 ALSA €45.2m €41.4m North America $70.1m $64.8m UK Bus £16.6m £16.8m UK Coach £9.4m £10.4m German Rail €2.0m €(2.9)m Centre £(10.6)m £(8.7)m *Underlying year-on-year change shown i
Slide 35: Operating profit: strong constant currency growth
Operating profit Strong constant currency growth £m (2) 11 (17) 12 5 9 112 103 94 H1 2016 FX Underlying Growth Acquisitions Cost inflation Cost Other H1 2017 efficiencies o Operating profit up 8.3% on a constant currency basis o Robust organic growth in our overseas businesses boosted by acquisition
Slide 36: Income statement
Income statement Double digit reported growth £m H1 2017 H1 2016* Change Operating profit 111.6 93.7 +19.1% Share of results of associates & JVs (3.9) 0.7 Net finance costs (18.8) (23.7) £4.9m Profit before tax 88.9 70.7 +25.7% Tax (21.4) (14.1) £(7.3)m Profit after tax 67.5 56.6 +19.3% EPS 13.0p 10
Slide 37: Superior cash and returns: £120m FCF target
Superior cash and returns Remain on target to deliver £120m FCF £m H1 2017 H1 2016 FY 2016 EBITDA 179.9 153.9 344.6 Working capital 18.0 9.6 (3.1) Maintenance capex (77.4) (57.4) (134.7) Pension deficit payments (1.4) (2.8) (5.5) Operating cash flow 119.1 103.3 201.3 Tax/interest/other (37.3) (37.2)
Slide 38: Superior cash and returns: investing for growth
Superior cash and returns Continued focus on investing for future growth £m H1 2017 H1 2016 FY 2016 Cash flow available for growth & dividends 81.8 63.3* 133.7* Net growth capital expenditure (3.0) (15.5) (27.0) Net inflow from discontinued operations 29.9 - - Acquisitions (52.9) (37.6) (88.8) Divid
Slide 39: Foreign currency effects: lapping Brexit
Foreign currency effects Lapping ‘Brexit’ in second half NEX currency profile o Translational impact from movements in USD, EUR, CAD o £9m positive PBT impact in H1 – expect FX tailwinds to moderate in second half 39
Slide 40: Balance sheet: Gearing reduced to 2.3x
Balance sheet Gearing reduced to 2.3x Gearing Ratios 2017 2016 Covenant Ratings Grade Outlook Net debt/EBITDA 2.3x 2.5x <3.5x Moodys Baa3 Stable Interest cover 8.4x 6.6x >3.5x Fitch BBB- Stable o Net debt decreased to £873m o c2c disposal proceeds partially offset by higher first half capex & deferr
Slide 41: Balance sheet: interest saving & increased liquidity
Balance sheet Significant interest saving & increased liquidity Strong debt maturity profile o £400m 7 year 2.5% bond issued in November 2016 replacing £350m Jan 2017 512 6.25% bond 400 o Significant interest saving in 225 25 44 36 83 15 2017 through to 2023 25 2017 2018 2019 2020 2021 2022 2023 o £
Slide 42: Guidance
Guidance 2017 o Net maintenance capital expenditure of 1.1x to 1.2x depreciation – 2017 target c.£160-170m o Effective tax rate of c.24%, cash tax remaining relatively stable o Progressive dividend policy targeting medium-term dividend cover of at least 2.0x Group earnings o Lower fuel costs – savin
Slide 43: Appendix
X61 oer Fronkley Northfield Sally Ook rt) Cily centr Fe eh bees ent ~ oe al E- F s «er Midta’ — — uy wae ’ —s <= = — -
Slide 44: H1 2017 constant currency revenue growth
H1 2017 constant currency revenue growth Revenue Volume Yield ALSA Spain 6% 3% 3% Morocco (6)% (2)% (4)% Switzerland New - - Total 7% North America 8% UK Bus Commercial (1)% (2)% 1% Concession (4)% Total (1)% UK Coach Core NE network 0% 0% 0% Total 2% German Rail1 23% (2)% 25% 1 Includes the catch-u
Slide 45: Full year summary divisional figures
Full year Summary divisional figures 2016 (£m) ALSA N America UK Bus UK Coach German Rail Revenue 597.3 877.2 286.8 282.8 61.3 Depreciation 36 66 17 3 - Capex 46 71 32 - 5 Vehicle age (years) 7.6 7.8 8.0 n/a n/a Normalised op. profit 84.7 84.0 35.5 33.3 (1.5) Driver wages(1) 28% 48% 38% 8% 6% Fuel(1
Slide 46: ALSA – operating profit bridge
ALSA – operating profit bridge ALSA Revenue 2017 Cost Cost H1 2016 Growth M&A H1 2017 inflation efficiencies 46
Slide 47: North America – operating profit bridge
North America – operating profit bridge North America Revenue 2017 ($2m) $11m ($2m) $4m ($11m) $5m $65m $70m H1 2016 Growth M&A Operating Cost Cost Weather H1 2017 days inflation efficiencies 47
Slide 48: UK Bus – operating profit bridge
UK Bus – operating profit bridge Bus Revenue 2017 (£2m) £1m £17m (£3m) £4m £17m H1 2016 Organic Cost Cost Fuel H1 2017 growth inflation efficiencies 48
Slide 49: UK Coach – operating profit bridge
UK Coach – operating profit bridge Coach Revenue 2017 H1 2016 Growth/ Terrorism Cost Cost H1 2017 new routes inflation efficiencies 49
Slide 50: Risk management: fuel risk largely fixed until 2019
Risk management Fuel risk largely fixed until 2019 Fuel hedging 2017 2018 2019 2020 % hedged* 100% 93% 77% 30% Price per litre 44.4p 34.0p 34.6p 33.6p o Significant fuel savings expected & largely secured for 2018 * Of addressable volume (c.220 million litres) 50
Slide 51: Foreign currency effects
Foreign currency effects Effect of fluctuations on profit and debt Effect of a 1% weakening of £ USD EUR o Translational impact from movements in USD, Operating profit (£m) 1.0 0.9 EUR, CAD EBITDA (£m) 1.6 1.4 o Hedging achieved by matching local currency debt to EBITDA Debt (4.0) (3.5) H1 average r
Slide 52: Risk management: pension deficit plan
Risk management Pension deficit plan in place through to 2020 Pensions £m (IAS19) 754 715 680 692 679 677 679 626 Assets Liabilities Asset Ceiling Surplus/Deficit (12) (15) (13) (13) (88) (89) 2014 2015 2016 H1 2017 Surplus /(Deficit) Surplus /(Deficit) Profit /(charge) Profit /(charge) £m H1 2016 3
Slide 53: National Express Group PLC
National Express Group PLC
National Express Group — Investor Presentation (October 2017) on 6ix