Profit blowout for National Express parent company
By Simon Hacker | 13th October 2023
After a bumper 367% rise in profits reported back in March, National Express veered over onto the hard shoulder with shares for its parent company deflating to a record low this week.
In a Q3 trading update, the international coach, rail and bus giant Mobico Group (formerly known as National Express) has warned that the FTSE 250 firm's profits will take longer than earlier predicted thanks to rising costs in the UK and North America.
As a result, Mobico has revised its 2023 forecast down from a band of £200m to between £215m and £175m and a best-possible £185m.
Shares in Mobico dropped yesterday by 27.5%, to 61.6p, but this morning rose back to 63.7p. The company has scrapped its final dividend.
Alongside National Express in the UK, Mobico also operates USA school bus transport but it is now looking to sell this off while also eyeing disposal of two of its five depots for private hire here in the UK.
It is uncertain whether Mobico's update bears any implications for Gloucester's Eastern Avenue-based operator Bennetts Coaches, which maintains a trading partnership with National Express.
In March this year, the company announced that it had begun work on a new £1.8 million coach park off Metz Way, with business "bursting at the seams".
Managing director Gavin Bennett told Punchline-Gloucester.com at the time: "Looking to the future we know that the work's there, we know we're growing."
Punchline approached Bennetts today and the company declined to comment.
Despite the overall figures, National Express actually saw a 13% revenue rise for Q3 and a revenue rise, against Q3 of 2022, of 26%, underpinned by a passenger growth of 24%. Rail strikes led to a rise in coach bookings, while Mobico has noted that 12% of diverted passengers have since rebooked on non-strike days.
The Q3 report noted: "We are seeing particularly strong growth on our core inter-city routes and have been able to capture significant upside from the rail strikes in the UK."
National Express has been enjoying a resurgence since the Pandemic, although Mobico now says full recovery in profitability is "taking longer to deliver" and that "decisive action [is] being taken on our cost base and to accelerate deleveraging."
In a statement, the company explained: "In the UK & Germany division, Alex Jensen joined as CEO in September with a clear remit to sharpen the division's commercial focus. Working at pace with Alex, we have performed a rapid assessment of that division and have identified clear areas for improvement including: (i) better commercial scrutiny and ambition; (ii) tighter cost control and ownership of cost reduction initiatives; and (iii) improved allocation of capital and resources."
Ignacio Garat, Group Chief Executive, added: "We recognise that the recovery of our profitability will take longer than we had previously expected. That is why we are announcing decisive actions to ensure we deliver sustainable profitability from our growing revenue base. Whilst our belief in the potential of the Group remains strong, we will move at greater pace with new leadership teams in the UK and North America."
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