Shares tumble after Mobico's first half disappoints

(Sharecast News) - Shares in Mobico Group tumbled on Tuesday, after the owner of National Express posted a slide in half-year profits. Revenues from continuing operations rose 7% in the six months to 30 June, to £1.32bn, but adjusted operating profits slid 12.7% to £59.9m. Pre-tax profits slumped 31.3% to £19.8m.

The group, which operates bus, coach and rail services in the UK, North America, Europe, North Africa and the Middle East, attributed the weaker profits to "temporary operational challenges" in two WeDriveU contracts. WeDriveU is Mobico's Silicon Valley employee shuttle service.

It also flagged a "competitive" trading environment in the UK. Revenues in the UK and Germany business fell 2.2% during the period.

As at 0845 BST, shares in the FTSE 250 group had plunged 22% to 25.10p.

However, looking to the full year and Mobico insisted it was "confident" of an improved performance in the second half, leaving it on track to meet forecast profits of between £180m and £195m.

Phil While, executive chair, said: "Mobico has delivered a solid performance in the first half, with revenue growth supported by continuing positive passenger demand, further contract win momentum and another record performance at [Spanish bus company] ASLA.

"We remain confident of achieving our full-year adjusted operating profit guidance."

In April, Mobico agreed to sell its US school bus business for $608m. The deal weighed heavily on the share price but the firm said rising wages and potential tariff costs had made the unit too expensive to run.

Proceeds from the sale - which completed in July - are being used to cut Mobico's £1.2bn debt pile.

Jack Cummings, analyst at Berenberg - which has a 'hold' rating on the stock - said: "While Mobico has reaffirmed its full-year guidance, it does imply that Mobico will need to deliver around 9-23% operating profit growth in the second half following the declines in the first.

"While this is not unachievable, particularly given the seasonality in the company's second half profit in the last few years, Mobico will need to executive well in the second half to hit this target."

Cummings also noted that the balance sheet "remains stretched".

Alexander Paterson, analyst at Peel Hunt, said the results looked "a little disappointing in terms of covenant leverage and underlying operating profit, but it reiterated full-year guidance.

"There are simple explanations for what impacted the first half, and the outlook appears more positive than we expected for German rail."

Peel Hunt also has a 'hold' rating on Mobico.

On a statutory basis, Mobico's interim numbers were restated for a correction to the German Rail onerous contract provision and to represent prior periods for discontinued operations, including the North American school bus business.

On that basis, the pre-tax loss narrowed to £7.1m from £29.3m, but the loss per share widened to 44.0p from 8.4p a year previously.