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Transportation Group Mobico sold the North American school bus business after searching for buyers for almost two years. The sale was designed to scrape off the debt mountains that bulged after a series of losses during a crushing recovery from the pandemic. However, the final result disappointed analysts and shareholders.
It’s not only about the overwhelming final price, but also about the huge leakage of the transaction. A portion of the advance cash revenue is allocated to legacy leases and historic claim payments related to the school bus business rather than clearing the obligation.
Therefore, the owner of National Express said the transaction is expected to have a “neutral” effect on contract net liabilities, a metric that excludes permanent bonds on £500 million and items such as liabilities such as fleets and real estate leases. In other words, sales originally designed to reduce leverage are no longer expected to move the needle.
As a result, the pressure is still there. Mobico’s Covenant Gearing ratio was 2.8 times higher at the end of last year. The company previously targeted 1.5 to 2 cuts by 2027, but now it’s softer with “time passing.” Ignacio Garat, who resigned last month as Mobico’s chief executive, said that other options to reduce debt remain “under aggressive considerations” before resigning.
The stock has fallen 45% since the transaction’s announcement, in parallel with warnings that the 2024 operating profit adjustment will land at the bottom of the guidance. The group also suffered from many “one-time” items, bringing its statutory post-tax loss that year to nearly £800 million.
One bright spot was Spanish subsidiary Alsa, which ran ahead of expectations. Francisco Iglesias, the division’s chief executive officer and group chief operating officer at Mobico, shows some confidence despite the broader company struggle. He purchased a share of 98,350 euros (£83,552) on April 29th.
