Mobico plans to sell its US bus business to reduce debt while profits recover

Mobico Group shares soared on Wednesday after the travel business returned to profit and announced the sale of its North American school bus division was underway.

The owner of National Express revealed last October that it was considering selling its school bus division to reduce debt and focus on operations with “higher return potential”.

Since then, the segment has enjoyed a strong sales season, gaining more routes than it lost for the first time in more than a decade, and a boost to profits thanks to inflation-beating price increases at contract renewals.

Mobico shares were up 16.9 per cent at 67.9 pence at 11.30am on Wednesday, though they are still down around a fifth since the start of the year.

Mobico reported total operating profit of £45.5m for the six months ended June, compared with a loss of £9.2m in the first half of the previous year.

And on an adjusted basis, operating profit rose 28.1 per cent on a constant currency basis to £71.2 million.

Trade benefited from another record performance from its Spanish subsidiary ALSA, whose revenues expanded 10.3 per cent to £617.1m thanks to strong regional and long-haul demand.

Its UK business also performed well, with turnover up 7.7 per cent to £307m, thanks to spectacular growth in passenger numbers and a 12.5 per cent rise in bus fares.

This offset falling sales in Germany, where the company was hit by lower subsidies, and allowed Mobico’s total revenue to expand 7.6 per cent to £1.7 billion.

The Birmingham-based group struggled to remain profitable last year, largely due to accounting problems at its German rail division.

They were also hit by £30m of restructuring costs, North American driver recruitment costs and a lower than anticipated increase in bus ridership.

For the current year, it expects to achieve between £185m and £205m, supported by at least £40m in cost savings.

Mobico CEO Ignacio Garat said the company “performed well in the first half of 2024, with continued positive passenger demand and revenue growth.”

Adam Vettese, market analyst at eToro, said: ‘The focus will now be on cost reduction and deleveraging as cost pressures begin to ease and in turn Mobico will benefit from inflation-adjusted pricing in the second half.

‘Investors may be wary of thinking this is the start of a big redemption story, as there is still some fat left to trim at the company.’