UK transport group Mobico’s shares hit record low on profit warning

(Reuters) – Mobico’s shares fell by a third to a record low on Thursday after the British transport company cut its annual profit forecast and suspended dividends, as high costs hit the group’s efforts to improve profitability.

The company, which changed its name from National Express to Mobico earlier this year, said it was planning to sell its North America school bus business in early 2024 to cut debt.

The company was hit hard during the pandemic as lockdowns restricted travel and governments had to support transport operators. Its performance bounced back last year, but in 2023 the operator was hurt by high cost inflation, while profit was also impacted after a reduction in COVID-19 funding.

The shares were down 28.1% at 61.1 pence by 1050 GMT.

Mobico’s school bus business in North America has faced high costs and labour shortages.

“Investors will now wait to see what price Mobico can get for the U.S. bus business, although there is a danger that potential buyers will feel they have the advantage in any negotiations, given the seller’s desire to raise cash,” Russ Mould, analyst at AJ Bell said.

The group’s net debt at the end of June stood at 1.17 billion pounds ($1.44 billion).

Last year, Mobico had attempted to buy British peer Stagecoach, but failed after a European fund trumped its bid amid stiff competition from private funds.

Mobico said in Britain bus commercial passenger volumes were around 97% of 2019 levels in the third quarter, with revenue growth expectations for the business tempered due to a lower-than-expected increase in passenger numbers.

The transport operator, which operates bus, coach and rail services in Britain, North America, continental Europe, North Africa and the Middle East, expects annual operating profit to be between 175 million pounds to 185 million pounds , compared with an earlier forecast of between 200 million pounds and 215 million pounds.

“The profit warning just goes to show it takes more than a name change to prompt a recovery in a company’s fortunes,” Mould added.

($1 = 0.8134 pounds)

(Reporting by Radhika Anilkumar and Yadarisa Shabong in Bengaluru; Editing by Nivedita Bhattacharjee, Miral Fahmy, Sharon Singleton and Jane Merriman)