REG - Mobico Group PLC - Full Year Results
Tue 07:00
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RNS Number : 5180G Mobico Group PLC 29 April 2025
Mobico Group PLC ("Mobico" or the "Group"): results for the twelve months
ended 31 December 2024
FY24 Adjusted Operating Profit in-line with guidance with continued revenue
growth and disciplined cost management
Announced sale of North American School Bus an important step in reducing net
debt
Full year results, twelve months ended 31 December 2024
Summary
Group
§ FY 24 Adjusted Operating Profit in line with market guidance, growth of
11.3% to £187.7m
§ Statutory Group operating Loss after Tax of £793.8m
o Reflects principally non-cash adjusting items including goodwill
impairment of NASB, write-off of deferred tax assets in UK and North America,
and an increased onerous contract provision in German Rail; see adjusting
items section below
§ Continued Group revenue growth* of 8.3%
o Record progress at ALSA + further growth in WeDriveU (WDU) & School
Bus (NASB) + good progress in UK Bus
§ Covenant gearing reduced to 2.8x
o Good Free Cash Flow generation of £210.2m (£163.7m in FY23)
o Organic debt reduction initiatives delivered targeted £25m of benefits in
the year
o Ample liquidity with no maturities for over 24 months and intention to
refinance well ahead of time
§ Announced sale of North America School Bus for an enterprise value of up to
$608m
o Expected upfront net proceeds of approximately $365 - 385 million(#)
o Delivers on the Group's commitment to accelerate net debt reduction - with
further deleveraging options under review
o Enables the Group to reallocate cash flows from the capital-intensive
School Bus business
o Creates a simpler portfolio with a stronger platform to delever alongside
allowing the Group to focus strategically on fully unlocking ALSA's high
quality growth and return potential
§ Important Board and management appointments
o Phil White as Chair from 1 May 2025, Francisco (Paco) Iglesias as Group
COO (ongoing ALSA CEO) to drive operational improvements, and Kevin Gale as UK
& Germany CEO, bringing substantial transport experience
Divisions
§ ALSA
o Delivers another record performance in FY 24
o 13.9% growth in revenue, driven by Regional and Long Haul
o Continuing diversification with strong growth in International and New
Markets
§ North America
o Revenue growth of 8.0% reflects NASB route wins prior to disposal
o Whilst NA School Bus EBIT has grown $6.2m persistent market challenges
such as driver wage inflation and increased maintenance costs has meant that
FY 24 performance was below expectations and impacted future forecasts leading
to a goodwill impairment.
o Continuing organic revenue growth (18.9% vs FY 23) in newly separated and
strengthened WeDriveU
§ UK & Germany:
o In UK Bus an improved funding agreement agreed with TfWM for 2025 as an
important first step towards sustainable profitability. UK Bus benefitted from
an increase in demand for services and the benefit of price rises, with
commercial passenger numbers up 9.5% and a price increase from July 2024 of 6%
being implemented.
o Significant restructuring within UK Coach making progress, with margin
upside expected in FY 25 from a range of different initiatives
o German Rail performance reflects continuing industry challenges.
Discussions with local PTAs are ongoing and remain constructive
Outlook
§ Further to the appointment of the new chair Philip White, effective 1(st)
May 2025 and the North America School Bus transaction, we expect provide a
trading update ahead of the AGM in June 2025.
§ In FY25, on a continuing business basis, the Group expects to make
continued revenue and adjusted operating profit progress, with further strong
performance from ALSA and ongoing growth in WeDriveU, alongside further
recovery in UK & Germany
§ Sale of North America School Bus expected to complete early in Q3
§ Group expects Covenant Gearing to remain broadly neutral for FY25 depending
on the timing of, and closing adjustments for, the disposal of North American
School Bus. The Group continues to target organic reduction to 1.5-2.0x range
over time
*All revenue performance numbers are expressed on an organic, constant
currency basis (OCC).
# Net upfront proceeds for covenant deleveraging, after deduction for
debt-like items including IFRS 16 leases, deferred capital expenditure, and
other items, as well as transaction fees. The net proceeds figure does not
include the earn-out amount. The final amount of Net Proceeds will be subject
to customary completion adjustment by virtue of the completion accounts
mechanism and dependent on the timing of completion.
Ignacio Garat, Mobico Group Chief Executive, said:
"The Group achieved good revenue growth in 2024, with adjusted profits in line with guidance, at the lower end of the range. This performance was driven by another record result from ALSA, tight cost control, and targeted pricing actions, along with a mixed performance in the UK and the impact of continuing industry challenges in German rail. The sale of North America School Bus, announced on 25 April 2025, represents an important first step in strengthening our balance sheet, and we continue to explore further options to accelerate debt and leverage reduction. Looking ahead, the disposal will also enable us to reallocate capital to attractive growth opportunities across the Group, particularly in ALSA. We look forward to making progress in 2025."
FY 24 FY 23 Change (Constant FX) Change (Reported)
Restated(2)
Group Revenue £3.41bn £3.15bn 10.3% 8.3%
Group Adjusted EBITDA(1) £426.2m £386.0m 13.1% 10.4%
Group Adjusted(1) Operating Profit £187.7m £168.6m 14.4% 11.3%
Group Adjusted(1) Profit Before Tax £101.1m £92.9m
Adjusted basic(1) EPS 4.8p 4.5p
Dividend per share 0.0p 1.7p
Return on Capital Employed 10.2% 7.0%
Statutory
Group Operating Profit/(Loss) £(519.9)m £(43.2)m
Group Loss Before Tax £(609.3)m £(120.1)m
Group Loss After Tax £(793.8)m £(184.2)m
Basic EPS (134.2)p (33.7)p
Free cash flow £210.2m £163.7m
Covenant net debt £991.3m £987.1m
Covenant gearing 2.8x 3.0x
Enquiries
Helen Cowing, John Dean Mobico Group Tel: +44 (0)121 803 2580
Stephen Malthouse, Matt Denham, Antonia Pollock Headland Tel: +44 (0)7734 956 201
Tel: +44(0) 7551 825 496
Tel: +44 (0)7789 954 356
A live webcast of the analyst meeting taking place today at 9:00am (BST) will
be available on the investor page of the Group's website: www.mobicogroup.com.
(http://www.mobicogroup.com.)
Notes
1. To supplement IFRS reporting, we also present our results (including
EBITDA) on an adjusted basis to show the performance of the business before
adjusting items. These are detailed in note 5 to the Financial Statements and
principally comprise intangible amortisation for acquired businesses,
re-measurement of historic onerous contract provisions and impairments. In
addition to performance measures directly observable in the Group financial
statements (IFRS measures), alternative financial measures are presented that
are used internally by management as key measures to assess performance.
2. FY 2023 has been restated in respect of a correction to the onerous
contract provisions in German Rail. This has changed 2023 Group Statutory
Operating Profit/Loss from £(21.4)m to £(43.2m), Group Statutory (Loss)
Before Tax from £(98.3m) to £(120.1m) Group Statutory Loss After Tax from
£(162.7)m to £(184.2)m and FY 2023 statutory EPS from (30.2)p to (33.7)p.
Please see note 1 to the Financial Statements.
3. This announcement contains forward-looking statements with respect to the
financial condition, results and business of Mobico Group. By their nature,
forward-looking statements involve risk and uncertainty and there may be
subsequent variations to estimates. Mobico's actual future results may differ
materially from the results expressed or implied in these forward-looking
statements. Unless otherwise required by applicable law, regulation or
accounting standard, Mobico does not undertake to update or revise any
forward-looking statements, whether as a result of new information, future
developments or otherwise. Forward-looking statements can be made in writing
but also may be made verbally by members of the management of the Group
(including without limitation, during management presentations to financial
analysts) in connection with this announcement.
Results overview
In FY 24, the Group has delivered another good revenue performance across most
of the major business units reflecting a continuing ability to capture growth
in markets with attractive long-term drivers. ALSA has delivered another
record performance. Crucially the results reflect another year of continued
and substantive change, principally within two of the divisions, North America
and UK & Germany. Both have embarked on a plans to reposition their
operations to address markets that have either faced significant structural
challenges (German Rail, UK Bus & UK Coach), or where that repositioning
will make them more effective and able to unlock further opportunity (NA
School Bus and WeDriveU). In each case, the businesses have taken decisive
action that will together have a further positive impact in FY 25. As we
continue to drive these improvements, the Group's priority - debt and leverage
reduction - remains; the divestment of NA School Bus, which will be completed
in Q3 25, is an important first step in accelerating that process.
Adjusted StatutoryRestated(1)
£m FY 24 FY 23 Change FY 24 FY 23 Change
Revenue
ALSA 1,327.6 1,165.4 13.9% 1,327.6 1,165.4 13.9%
North America 1,205.3 1,115.6 8.0% 1,205.3 1,115.6 8.0%
UK and Germany 879.5 869.9 1.1% 879.5 869.9 1.1%
Group 3,412.4 3,150.9 8.3% 3,412.4 3,150.9 8.3%
Operating profit/(loss)
ALSA 186.1 136.8 36.0% 176.9 121.0 46.2%
North America 38.3 27.1 41.3% (531.6) (7.1) (7387.3)%
UK and Germany (2.8) 23.7 (111.8)% (109.0) (120.6) 9.6%
Central Functions (33.9) (19.0) (78.4)% (56.2) (36.5) (54.0)%
Group 187.7 168.6 11.3% (519.9) (43.2) (1103.5)%
Operating margin 5.5% 5.4% 0.1% (15.1)% (1.4)% (13.9%)
(1)FY 23 has been restated in respect of a correction to the onerous contract
provisions in German Rail. Please see note 1 to the financial statements.
Revenue grew by £261.5m (8.3%) on a reported basis, and by 10.3% on an OCC
(organic constant currency) basis. This principally reflects record
performances at ALSA, continuing passenger growth in most other businesses,
and positive impact from price increases of £116.1m (equivalent to around
3.7%). Adjusted Operating Profit grew 11.3% to £187.7m (with Statutory
Operating Loss of £(519.9)m).
ALSA's record performance continued to reflect growth across the business,
including strong performances in Regional and Long Haul, with Adjusted
Operating Profit up 36.0%, driven by revenue growth of 13.9%. Long-Haul was
supported by the renewed 'Young Summer' scheme, though Long-Haul growth
progressed after that programme ended in September, driven by effective
revenue management and CRM. ALSA continued also to see revenue from the
multi-voucher scheme which has been extended to H1 2025 under the current
framework.
North America grew revenue by 8.0% on a reported basis (11.0% at on an OCC
basis), reflecting progress in both School Bus and WDU (WeDriveU). WDU
delivered revenue growth of 15.8%, despite the previously flagged $25m
reduction in volumes from one technology customer in the period. Adjusted
Operating Profit increased to £38.3m (up 41.3% vs. FY 23), with both route
recovery and pricing gains contributing to the School Bus result, and with
important contract wins in WDU also having an impact. However, persistent
market challenges such as driver wage inflation and increased maintenance
costs have impacted future forecasts leading to a goodwill impairment in
School Bus.
In the UK and Germany, revenues increased 1.1%. With continued mixed trading
in UK Coach and UK Bus with the latter's patronage improving, UK turnover
grew 2.1%. However, the divisional result was also affected by a further
decline in German Rail. Adjusted Operating profit in UK and Germany
declined £(26.5)m in FY24 principally reflecting the continuing challenges
faced by the Group due to the ongoing challenges in the German Rail Industry.
Discussions with the local PTAs to address the ongoing challenges with the
German Rail contracts are ongoing and remain constructive. The UK business
benefited from a reduction in losses at NXTS due to the turnaround work
undertaken. UK Coach profit decline reflects, in part, the result of
fewer Rail strikes compared to FY 23. UK Bus closed the year having taken an
important step forward in its changing relationship with its main customer,
TfWM (Transport for West Midlands) with the announcement of a new funding
agreement to December 2025, as all parties continue to evaluate
franchising. The expectation is that the new agreement with UK Bus should
result in improvements following the recent history of weak financial
performance.
Balance Sheet
At 31 December 2024, the Group had £803.1m of cash and undrawn, committed
facilities and a covenant gearing ratio of 2.8x (FY 23: 3.0x). The Group
continues to benefit from strong liquidity having earlier in the year extended
the vast majority of its Core RCF facility a further year to 2029.
Nonetheless, our overarching priority to reduce leverage & debt remains in
place, as does our longer-term ambition to maintain an Investment Grade
rating.
Adjusted net interest charges for FY 24 rose to £89.8m (£75.2m in FY 23) as
a consequence of higher bond coupons and interest on the RCF when drawn. 77.6%
of our debt is fixed, with the majority of the floating portion due to revert
to fixed in 2025.
Mobico has made clear its commitment to debt and leverage reduction and the
announced sale of the North America School Bus business, which is expected to
complete in Q3 25, is an important step in that process. In addition,
operational controls have been tightened, particularly over-aged debt
collection and capital expenditure appraisals, and there has been an increased
focus on asset-light transactions. These measures will help strengthen our
balance sheet and will, together with our wider business repositioning
activities, drive more commercial behaviours in our operations, improved
profitability and better cash flows.
Adjusting items
During FY 24, the Group incurred adjusting items after tax of £849.9m (FY 23
restated: £234.6m); principally comprising of the following three items:
· A goodwill impairment of North America School Bus of £547.7m
($695.8m). Whilst School Bus has demonstrated its recovery from the pandemic
effects it continues to face significant headwinds such as driver wage
inflation and rising maintenance costs. These headwinds reduced profitability
below expectations and have been reflected into future cash flow forecasts.
Furthermore, future improvements have only been included to the extent that
they can be objectively evidenced as of the FY24 year end. Consequently, the
carrying value of the business has been reduced significantly and is now more
closely aligned to the expected market value.
· A £194.4m tax charge in relation to derecognition of deferred
tax assets in the UK and North America. This is as a result of the length of
time it would take to utilise the losses, based on the same future cash flow
forecasts as described above; as well as further negative evidence as to
ongoing recognition including further tax losses being made in the UK in FY 24
and the goodwill impairment in North America as described above. This
write-off has no impact on the ability of the Group to utilise the losses in
future years and hence no impact on future cash tax.
· An £86.4m charge for the remeasurement of the German Rail
onerous contract provision relating to the RRX contracts. This was as a result
of the worsening of industry-wide cost pressures compared to our previous
expectations; most pertinently in relation to driver shortages, which have not
recovered as quickly as we had previously anticipated. This has also had a
subsequent impact on higher investments being required in driver pay,
recruitment and training to attempt to improve the shortage issues.
A full breakdown of all adjusting items is shown in the CFO report.
Dividend
As the Group remains focused on reducing debt and leverage, the Board has
decided that no 2024 dividend will be paid.
Outlook
In FY25, on a continuing business basis, the Group expects to make continued
revenue and adjusted operating profit progress, with further strong
performance from ALSA and ongoing growth in WeDriveU, alongside further
recovery in UK & Germany.
Long - term guidance
Given the significance of the sale of NA School Bus, we are reviewing the Group's long-term financial targets and will update the market in due course.
Strategic Commentary
Despite another year characterised in part by significant, continuing
challenges in some businesses and some consequently disappointing results,
2024 has been another year of hard work and meaningful positive change across
the Group, with each of the businesses at different stages of structural
improvement or growth. It is also an important characteristic of the Group
that, although diverse, it has a clear, unifying purpose - improving social
mobility, reducing harmful emissions from transport, and facilitating economic
development across regions. The underlying momentum in demand for low emission
and mass transit mobility solutions is likely to provide long-term structural
support to many of our key markets.
In FY 24, the further progress delivered by both ALSA and the North America
businesses has been particularly encouraging. The former has continued to
capture significant volume growth with ALSA delivering another record year.
The latter has reaped the rewards of important improvements made to its
operations over the last 18 months. NA School Bus delivered a strong bid
season with net routes won for the first time in a decade. And WDU delivered
good growth in revenue and profits, despite reduced spending from one
significant customer.
In three of our businesses, (UK Bus, UK Coach and Germany), leadership
continued to take decisive action, both in anticipation of and in response to,
continuing challenges, as well as potential market change. They too have taken
important steps forward even if it will take a little time before the rewards
are as clearly evident. In UK Coach important changes have been made to
operations to better address seasonal business fluctuations and optimise
profitability, whilst continuing to improve our customer offering and
strengthen our market positions. In UK Bus, we enter a new phase in our
partnership arrangement with TfWM (Transport for West Midlands) as we
transition from an operating model that formally ended in December 2024, has
subsequently been extended to December 2025, and will likely evolve as we and
the authority contemplate the potential move towards franchising.
German Rail negotiations
Discussion with German Rail PTAs (Passenger Transport Authorities) are continuing and remain constructive. Nonetheless, the outcome of those discussions remains critical to the fortunes of our German business. The increase in the onerous contract provision principally reflects the continuation of, and the worsening of compared to prior expectations, industry-wide issues - particularly around driver shortages and the consequent increased costs and investments to attempt to mitigate where possible, and penalties for the subsequent service reductions.
Post year-end leadership changes
In February we announced that Helen Weir had informed the Board that, for personal reasons, she does not intend to stand for re-election as a member of the Board at the Group's 2025 AGM. We have since appointed a new Chair, Phil White, who assumes the role with the Group on 1(st) May, at which time Helen will step down. We are grateful to Helen for her contribution to the Mobico Group whilst in the Chair and wish her well. We're delighted to welcome Phil to the business, who brings considerable and relevant experience to the role.
We have also made two changes to operational leadership. We're delighted that Francisco (Paco) Iglesias has accepted the role of Group COO (Chief Operating Officer), whilst remaining as CEO of ALSA. Paco brings 30 years of experience with ALSA - a business which has a very strong track record of delivery. In the UK & Germany, following the departure of Alex Jensen as CEO, Kevin Gale has assumed that leadership role. Kevin brings wide-ranging operational experience within the transport (Bus and Rail) industry and was previously Group Operations Director at Mobico Group, which he joined in 2013.
Key contract wins
During FY 24 we secured 36 new contract wins, compared with 43 won in FY 23, with annual contract revenues higher than in FY 23 (£144m vs. FY 23: £126m), and total contract values of £766m. Average Operating Profit margins on those contracts are 10%, with 28% ROCE. The overall conversion rate on bids submitted and awarded was 23%. The largest part of those contracts are Asset-Light in nature, consistent with our strategic ambition to improve ROCE.
Priority remains debt & leverage reduction
Debt & Leverage reduction remains an immediate and continuing priority for the Group with the sale of NASB an important first structural step in that process. The Board, in partnership with the management team, continues to review all available options. In the meantime, our increased discipline around capital allocation, a disciplined CapEx approvals process, and a clear focus on cash has delivered early benefits that will grow as profitability does.
Achieved, so far:
• Targets for organic reduction in debt set out at HY 24 have been achieved, and this remains an important initiative driving better outcomes for the business.
• Our two successful 'Accelerate' cost reduction programmes have both now concluded, having delivered savings of £34m in FY24, in excess of target.
• The divestment of School Bus has progressed the Group's commitment to debt reduction.
Further step-change options?
• Further options to reduce debt and leverage remain under active consideration albeit the business enjoys ample liquidity and no debt refinancing for the vast majority of the Core RCF facility due until 2029.
After launching a Company-wide initiative focused specifically on cash
improvement and debt reduction at HY 24, those programmes have delivered
significantly in excess of the projected FY 24 target of £25m. Further, we
remain on-track to deliver the target of an additional £25m in FY25. This
programme sits outside the Accelerate cost-reduction initiatives that have
themselves delivered ahead of expectations in FY24, with £52m of savings
achieved and a further small uplift expected in FY25 as these savings
annualise. The measures taken have both reduced costs and fundamentally
improved the competitiveness of our businesses across the portfolio,
underpinning profit sustainability.
Environmental, Social & Governance
Mobico's Evolve strategy remains directly aligned to pressing environmental and social needs in society. It operates tailored solutions that enable communities to transition from low occupancy modes of transport to much more efficient, cleaner and safer mass transit choices. Those choices advance global ambitions for both a low carbon society and greater social mobility.
The Group is retaining focus on our transition to Zero Emissions Vehicles
(ZEVs) in fleets across businesses, around the world - whilst also ensuring
that their adoption is financially and commercially sensible for our customers
and our wider stakeholders. Profitability is critical to innovation and
investment, and Mobico is determined to deliver sustainable solutions that are
also financially sustainable.
Mobico has previously set out zero emission fleet targets to reach net zero by
2040 (Scope 1 & 2 emissions) and an interim target of 1,500 ZEVs in
service or on order by the end of 2024. However, during the year we made the
commercial decision to slow the rate of further ZEV orders in the short term,
to reflect our unrelenting focus on cash generation and deleveraging while our
business performance continues to improve. As a consequence, our 2024 outturn
on ZEVs was 1,100 compared with the target of 1,500. Nonetheless, our longer
term targets remain unchanged at the current time, subject to any necessary
adjustment in the event of the sale of School Bus. We will continue to review
those and other targets in the context of the overall scale of the Group as
well as financial, commercial and sustainability priorities.
Divisional Results overview
The following section describes the performance of the Group's continuing
business for the twelve month period to 31 December 2024, compared to the same
period in 2023.
ALSA
ALSA is the leading company in the Spanish road passenger transport sector. It
has, over a number of years, significantly diversified its portfolio away from
predominantly Long Haul services to having a multi-modal offering, which today
spans Regional and Urban Bus and Coach services across Spain, Morocco,
Switzerland, Portugal and Saudi Arabia.
FY 24 FY 23 Change Change
m m m %
Reporting currency (£) £ £ £
Revenue £1,327.6 £1,165.4 £162.2 13.9%
Adjusted Operating Profit £186.1 £136.8 £49.3 36.0%
Statutory Operating Profit/(Loss) £176.9 £121.0 £55.9 46.2%
Local Currency (€)
Revenue €1,568.5 €1,340.4 €228.1 17.0%
Adjusted Operating Profit €219.8 €157.4 €62.4 39.6%
Adjusted Operating Margin 14.0% 11.7% 2.3% 2.3%
Statutory Operating Profit/(Loss) €209.0 €139.2 €69.8 50.1%
Statutory Operating Margin 13.3% 10.4% 2.9% 2.9%
FX rates: FY 24: €1.18:£1; FY 23: €1.15:£1
KPIs
ALSA Long Haul (as reported) FY 2024 FY 2023 vs FY 2023 %
PAX total Long Haul (000's) 16,675 14,574 15.2%
PAX (9 main corridors) (000's) 11,269 9,905 13.8%
Yield (9 main corridors) 22.37 21.38 4.7%
Occupancy (9 main corridors) 62% 61% 1%pt
ALSA Urban FY 2024 FY 2023 vs FY 2023 %
PAX (000s) 103,960 97,674 6.4%
ALSA Regional Risk & Venture FY 2024 FY 2023 vs FY 2023 %
PAX (000s) 50,572 45,098 9.8%
ALSA
Highlights
ALSA continues to grow across a diverse portfolio delivering another strong result in the year; a new record for the business, on different measures including revenue:
▪ Strong growth with revenues up 17.0% (at constant currency) (13.9%
on a reported basis) and Adjusted Operating Profit growth of 39.6% (at
constant currency); Statutory Operating Profit of €209.0m, an increase of
50.1% versus FY 23;
▪ Regional revenues 11.9% higher vs. FY 23 due to operational
efficiencies, passenger growth and the multi-voucher scheme impact
▪ Long Haul 9 Main Corridors revenues up 19.1% vs. FY 23 driven by
passenger growth (up 13.8%) and yields (up 4.7%);
▪ Urban up 0.9%, despite absorbing the impact of the Bilbao strike;
▪ Diversification and international expansion (including Portugal)
continue with revenue growth of 67.4% and 87.6% respectively, vs FY 23;
▪ Sophisticated CRM and revenue management enables customer
segmentation and management of KPIs;
▪ Successfully managing increased competitive pressure from HSR
(High-Speed Rail);
▪ New businesses: CanaryBus and Medical Transport, progressing well
ALSA
Commentary
ALSA delivered another record year with Revenue of £1,327.6m, up 17.0% (at
constant currency) when compared to FY 23. Adjusted Operating profit was
£186.1m, a 36.0% improvement over the previous year.
ALSA's new record performance in FY 24 further enhanced its reputation as the
leading operator in the market. Continued close control of key metrics -
Occupancy, Revenue Management, Digital Sales and Customer Experience, all of
which are improved vs last year - has again contributed to this performance.
At the half-year stage, one key expectation for the balance of 2024 was the
continued growth of Long Haul, including from the renewed Young Summer
discount scheme (90% discount for passengers aged 18 - 30, travelling between
1 July and 30 September) - and that continuing growth has been delivered.
Along with a number of record days in the Summer season, Young summer scheme
carried 1.5m passengers in 2024 representing a +13.7% increase vs 2023
figures. Encouragingly, demand continued to be strong after the Young Summer
scheme ended in September. The business has also delivered strong growth from
Regional, as well as upside in some Urban contracts. Diversification through
the award of new contracts - and Portugal - have also been key contributors.
Competition
The most notable competition risk to ALSA Long Haul continues to be from the
liberalisation of HSR (High Speed Rail) corridors, which has been affecting a
growing number of ALSA routes (Madrid-Murcia has recently joined
Madrid-Barcelona and Madrid-Alicante as key areas of overlap), particularly
when those operators run aggressive pricing campaigns. This is another reason
why the quality of ALSA's service and of the whole experience delivered is so
crucial, and why it succeeds in retaining the loyalty of so many.
Business plans are not predicated upon a repeat of Young Summer - or any other
such short-term incentives - and the business continues with its
long-established strategy of broadening the range of markets and segments to
which it and The Group are exposed. In the meantime, we await clarity on
whether the Young Summer scheme will be repeated. We continue to progress with
the proportion of ticket sales via digital platforms, reflecting our strategic
focus on enhancing the customer experience and improving retention. Digital
sales closed FY 24 at 71.4% (vs 65.7% in FY 23).
International expansion and diversification
In recent years, international expansion has strengthened ALSA's position in
key markets. Successful entry into 3 countries in the last 5 years is
supported by a strong pipeline of opportunities, including M&A and tenders
in emerging geographies. Switzerland/France have built a successful hub in
five years, creating an extensive EU network with urban PSO contracts, as well
as school and occasional services. Portugal continues to experience organic
growth, while MENA (Middle East & North Africa) is progressing with
strategic developments and new opportunities and tenders. Progress was also
delivered in KSA (Saudi Arabia) and others. An extension to our contract in
Bahrain was also secured. Whilst in Switzerland the market was affected by
reduced demand, ALSA became the first operator to run 100% EVs in Geneva. And
there remain opportunities in FY 25 for further service-distance growth, brand
unification and cost optimisation.
During FY 24 CanaryBus, the most recent 'new territory' acquisition, has
performed well in its first ten months of ALSA ownership, and in line with the
business case at acquisition. The integration process has been meticulously
managed across all departments, fostering operational excellence and safety.
With continuing growth in the Tourism market likely, CanaryBus promises
further underlying progress in FY 25.
ALSA continues to evaluate other opportunities to broaden its scope in new
countries - whilst also considering opportunities in discretionary services,
especially in sectors such as MICE (Meetings, Incentives, Conferences, and
Exhibitions) and corporate transport, which are linked to high-potential
regions.
New contracts and opportunities
There remains a strong pipeline of opportunities for ALSA to pursue, to build
on the high level of retentions consistently enjoyed by the business. In 2024
an asset-light was won for the operation of healthcare transport service in
the Basque country, and for 2025 Catalonia, covering both scheduled and urgent
services. The opportunity in Basque Country came about after the failure of an
incumbent and could be worth c.€154m in total. Furthermore in Catalonia,
ALSA was awarded a lot with the best technical evaluation of all the bids
(gross cost contract worth €152m in 6 years) with expected start of
operation by year end. More importantly, it's a vindication of ALSA's strategy
to develop into new and adjacent markets, like Healthcare, and progressively
build their positions.
North America
The North America business operates in thirty-four states and two provinces in
Canada. School Bus operates through medium-term contracts awarded by local
school boards. Within WeDriveU, Transit focuses predominantly on Paratransit
(the transportation of passengers with special needs) and Urban Bus. Shuttle
offers corporate employee shuttle services to a range of sectors including
Technology, Biotechnology, Manufacturing and Universities such that we now
have a stronger, diversified portfolio of sectors and customers.
FY 24 FY 23 Change Change
m m m %
Reporting currency (£) £ £ £
Revenue £1,205.3 £1,115.6 £89.7 8.0%
Adjusted Operating Profit £38.3 £27.1 £11.2 41.3%
Statutory Operating Profit/(Loss) £(531.6) £(7.1) £(524.5) (7387.3)%
Local currency ($)
Revenue $1,540.5 $1,387.7 $152.8 11.0%
Adjusted Operating Profit $49.0 $33.7 $15.3 45.4%
Adjusted Operating Margin 3.2% 2.4% 0.8% 0.8%
Statutory Operating Profit/(Loss) $(679.4) $(8.8) $(670.6) (7620.5)%
Statutory Operating Margin (44.1)% (0.6)% (43.5)% (43.5)%
FX rates: FY 24: $1.28:£1; FY 23: $1.24:£1
KPIs
NA - Shuttle FY 2024 FY 2023 vs FY 2023 %
PAX (000's) 11,125 8,899 25.0%
Service Level (avg no. of vehicles through year) 1,061 957 10.9%
North America
Highlights
▪ North America delivered an encouraging performance in 2024, with
Revenue of £1,205.2m, up 11.0% (at constant currency) (8.0% on a reported
basis) when compared to FY 23. Adjusted Operating profit was £38.3m, a 41.3%
improvement over the previous year. This reflects continuing progress within
both NA School Bus and WeDriveU - despite the distraction created for both
businesses through the year as a consequence of the School Bus disposal
process.
▪ The statutory loss principally reflected a £547.7m impairment
charge in relation to sale of School Bus (as described in detail above) and
when compared to the adjusted profit represented a £524.5m deterioration when
compared with FY 23.
▪ Since the pandemic Mobico has sought to address the long-term
challenges which the pandemic
created for School Bus. Following the appointment of a new leadership team in
2023, significant operational improvements have been made, focused on
improving driver retention and recruitment, route reinstatement, and improved
contract pricing. The business has also improved fleet allocation which has
led to better asset utilisation, cash flow and customer satisfaction. All of
these culminated in School Bus delivering a net positive route outcome for the
current school year bid season, the first in over a decade.
▪ However, whilst School Bus has demonstrated its recovery from the
pandemic effects it continues to require significant maintenance and growth
capital investment and experienced persistent market challenges such as driver
wage inflation and maintenance costs.
▪ These headwinds reduced profitability below expectations and have
been reflected into future cash flow forecasts leading to a goodwill
impairment.
▪ As announced on 25 April 2025, the Group has agreed to sell the
North America School Bus business to I Squared for an enterprise value of up
to $608 million, including an earn-out of up to $70 million which is dependent
on certain future performance conditions. Further details of the transaction
can be found in the RNS announcement. School Bus will appear in the accounts
as held for sale for the period in FY 25 up to the completion date and will
report as such. The net proceeds are broadly in line with the carrying value
of the business; and the disposal is in line with our stated strategic
objectives to improve liquidity and leverage.
▪ The separation of WeDriveU will allow that business to flourish
with its now separated and focused infrastructure. Whilst the process has
necessitated some temporary costs along the way, it is expected that through
the balance of FY 25 returns will start to improve as profitability flows
through from a strengthening revenue base.
▪ WeDriveU delivered strong new order wins, alongside the separation
of its operations and support infrastructure from that of School Bus. In terms
of total annualised revenue, WDU has secured $73m worth of contracts during
the year, contributing $33m of that to revenue in FY 24. As the business
settles into its new operating structure, the expectation is to continue to
gradually expand operating margins to achieve their sustainable, long-term
potential - whilst also capturing a good share of available volume
opportunities in this attractive segment. An increasing number of those
opportunities are asset-light in nature with all the implications that has for
improved capital efficiency.
School Bus
Highlights
▪ Underlying revenue growth delivered FY 24 7.3% higher (4.4% higher
on a reported basis)] than in FY 23;
▪ First net positive route outcome (routes won vs routes lost) in
over a decade;
▪ Improved driver recruitment and retention contributes to
competitive strength
▪ Much improved fleet allocation to contracts (with 544 vehicles
cascaded in the year) and optimised life spans, driving stronger CapEx and
cash control;
▪ Strong, above inflation, pricing performance with average rate
increases for SY 24/25 of 10.3% on expiring contracts and 6.3% on the
portfolio overall, ahead of inflationary cost increases;
▪ Persistent cost headwinds such as driver wage inflation and higher
maintenance costs have offset some of this growth, reducing profitability
below expectations and have been reflected into future cash flow forecasts
leading to a goodwill impairment. The separation of the two North America
businesses into two cash generating units in the year was also a contributing
factor to the impairment, as School Bus generates lower cash flows relative to
its asset base, compared to WeDriveU.
▪ Achievement of targeted cost savings in organisation design
workstream, as part of the Accelerate programme.
School Bus
Commentary
As was reported at HY 24, School Bus delivered another successful bidding
season in preparation for the School Year 2024 / 2025; a school year start-up
process that has subsequently launched well, as expected. The season's route
outcome (routes won vs routes lost) was the first to deliver net route gains
in over a decade. Overall, in SY 24/25 bidding, the contract retention rate
was 94% - an improvement over both of the previous two years. So far, there
have been no contract losses for the SY 25/26 bid season, and several
successful negotiations already.
In the three months September to November 2024, the business has secured 228
routes, representing an encouraging early start ahead of the formal bidding
process covering the forthcoming SY 25/26 (for which the same process as the
prior year will be followed).
During 2024, the business also completed its latest phase of price increases
on contracts that were ready for renewal. That means that for the SY 24/25,
prices on the renewing portfolio rose by 10.3% (6.3% overall) having risen for
the earlier renewing portfolio (i.e. different contracts) for SY 23/24 by
13.1% (7.5% overall). This is all part of the normal cycle of price
renegotiations which will continue as the team approaches the bidding season
for SY 25/26, when a new batch of contracts will be subject to review.
Operational efficiencies have continued to be a focus in the business. In
September 2024 a new Asset Management team was created to centrally manage our
cascade and asset utilisation process, which has traditionally been handled by
maintenance leaders. The business is now far more adept at identifying and
tracking under-utilised fleet having created and deployed the new MOR ('Max On
Road') system that highlights underutilised assets and makes them available
elsewhere. In FY 24, we cascaded 544 buses to meet contract requirements in
this way. This improved fleet allocation of vehicles no longer suited to one
customer, to other contracts, is helping to improve asset utilisation, cash
flow and customer satisfaction.
At the half year we reported that the team's restructuring, to better service
high priority CSCs (Customer Service Centres), was having a positive impact on
driver recruitment and retention - historically a significant pressure point
for the wider industry. Drivers employed at the end of 2024 numbered 12,116
(vs. 11,689 at the end of 2023). This means that, at the close of the year,
only 13 locations (8%) have a driver gap of 10 or more - well within the
manageable risk level. This represents a competitive differentiator in the
market and ensures we can deliver market leading levels of reliability in our
service to customers.
As at 20 December 2024 we operated 11,198 routes (for SY 23/24 we operated
10,986 routes). New contract wins included West Ada, Idaho; Calgary Catholic
in Alberta; and Indian River, New York. Contracts where we are to provide an
expanded service include: Duval County, Florida and San Bernardino in
California.
The roll-out of new technology is also continuing. Bytecurve (the system used
to generate live time performance data to analyse and improve service) is
currently running in 146 of 167 CSCs, with other pilots running and further
deployment planned as remaining sites require it. Centralised billing is
currently in use at 58 CSCs with planned completion in late 2025.
WeDriveU
Highlights
• Following separation from School Bus, WDU now enjoys a strengthened operating structure from which to build on its good recent growth.
• Continued organic growth with FY 24 revenues up 18.9% (15.8% on a reported basis) vs FY 23.
• Further notable contract wins, retentions and mobilisations secured, including with Netflix, Amazon and Uber, with continuing momentum throughout the year;
• Rapid expansion of services for WMATA (Washington Metropolitan Area Transport Authority), while maintaining prior year operational service levels;
• 100% retention of key strategic contracts (only 3 losses elsewhere);
• Completed the process of both combining Transit & Shuttle operations, establishing a central services model, and separating the unified WDU from School Bus;
WeDriveU
Commentary
During 2024 WeDriveU, hitherto the lead brand in the Shuttle business, has
been adopted as the single, unifying brand for the whole Transit & Shuttle
operation, bringing together the seven North America Transit brands that
existed previously.
FY 24 has been an encouraging year insofar as contract wins and retentions
have continued to be secured whilst the business has been implementing very
significant operational changes in support of both the establishment of a
central services model for the newly combined WDU entity, and the final
separation of WDU from School Bus.
Workstreams separating the now combined WDU business from School Bus have been
wide-ranging and are now largely complete. These include establishing our new
Finance systems, transitioning our payroll and our Maximo maintenance systems,
and the Standardisation team's focus on building a suite of Standard Operating
Procedures (SOPs). We anticipate process improvements and efficiencies to
continue to build throughout 2025 as these systems and associated processes
mature.
We also realigned our people resources and added strategic talent in key
positions in H2 24 to lead strategic plans and implementations enabling
independence from School Bus systems, resources and processes. This
realignment will increasingly bear fruit as we execute on our 3-year plan.
The greatest success of WDU in 2024 is that it has all but completed such
fundamental changes across its operations, albeit with some disruption to the
business. The objective of all those improvements to the business is to
properly equip it to address what we continue to believe is a long-term growth
market, where the WDU reputation is one of the strongest in the market.
Delivering improvements in profitability remains a key priority and will be
gradually delivered as the business settles into its new structure. In FY 24
WDU progressed further with its initiative to improve margins from contracts
that have been deemed less profitable than is acceptable. Such measures have
improved EBIT by 40 basis points, generating an additional $2m in additional
profits for the year. Areas of focus - across different CSCs - have included
subcontractor spend, liquidated damages (LDs), and staffing levels &
costs. Plans for improvement, along with clear responsibilities, have been
allocated to each.
In the meantime, new order wins have continued the momentum of the first half
of the year and through FY 24 the business won contracts that will deliver
$73m in annualised revenue. In addition, approximately 95% of strategic
contracts have been retained, where they have come for renewal. Key customers
who have renewed or extended their agreements with WDU include Amazon Los
Angeles and Netflix Los Angeles adding to a new win with Uber.
Our partnership with a leading electric car manufacturer has seen significant
growth as the customer has rapidly expanded its operations. Our ability to
adapt and respond quickly to their evolving needs has strengthened their trust
in us and demonstrated our capacity to take on additional responsibilities,
further solidifying the partnership.
The business has continued to demonstrate the importance of high quality of
service levels - including regarding safety, on time performance, and
reliability. And they remain important performance measures to drive,
especially where there is greater competition or customer budget pressure.
The rapid launch in July of the extended Paratransit service for WMATA
represented the fastest launch and most expansive contract WDU has mobilised,
involving over 750 additional vehicles, significant numbers of new drivers and
control of 2 new facilities, which were launched in c3-4 weeks. As a result of
the rapid-scaling of volume and routes after mobilisation, we established a
third hub in Montgomery County at relatively low-cost to boost on-time
performance and service delivery.
After the gradual recovery of public transit ridership, we experienced in H1
24, we continue to see modest improvement in ridership trends as some
employers embrace transportation to facilitate a return to the office.
University accounts continue to be stable. We continue to pursue numerous
opportunities for growth, especially those that are asset-light and
margin-accretive as WDU enters the next phase of its development.
Pricing has changed little. Though, as reported in H1 24, continuing pressure
in some government agency budgets (which seem unlikely to ease under President
Trump) will continue to affect some operators and routes.
WDU has successfully sponsored and developed three major Zero Emission
Leadership Coalition events for FY24, reinforcing our thought leadership and
engagement with key stakeholders as we continue to adopt ZEV technologies
where it is appropriate to do so.
UK & Germany
The UK Bus & Coach businesses have successfully executed major
organisational change over the last twelve months as each repositions in the
face of structural headwinds and emerging opportunities. The German Rail
business in particular has acted to address significant industry challenges
with critical negotiations with the PTAs (Passenger Transport Authorities)
continuing.
Across UK Bus and Coach, turnover grew 2.1% with the German Rail performance
adversely affecting the overall division's result which reported FY 24
Turnover down (1.3)% vs FY 23. In the UK, FY 24 Adjusted Operating Loss
reduced (72.3%) when compared to FY 23, significantly impacted by the
reduction in rail strike benefit in FY24. In the early part of 2024 a
significant cost reduction programme was developed with momentum building
through FY 24, spanning both network and operational cost savings as well as
organisational and overhead savings as part of the Accelerate 2.0 programme.
Those initiatives have laid the groundwork for further improved financial and
operational performance in UK Bus and UK Coach in FY 25.
The German Rail business in particular has acted to address significant
industry challenges with critical negotiations with the PTAs (Passenger
Transport Authorities) continuing with the objective of resetting the
underlying profitability of these long term contracts.
In Germany, Adjusted Operating Loss declined to £(9.3)m pertaining fully to
the RME contract. The increased loss versus the prior year is principally due
to a reduction in the expected overall lifetime contract value, which results
in adjustments to the IFRS 15 contract asset, and the ending of the Lot1
Emergency Award contract.
UK
In the UK Bus sector, Mobico is the market leader in the West Midlands - the
largest UK urban bus market outside London. UK Coach is the largest operator
of scheduled coach services in the UK, and also serves the fragmented
commuter, corporate shuttle, private hire and accessible transport markets.
UK
FY 24 FY 23 Change Change
m m m %
Reported / Local currency (£) £ £ £
Revenue £623.0 £610.1 £12.9 2.1%
Adjusted Operating (Loss) / Profit £6.5 £23.5 £(17.0) (72.3)%
Adjusted Operating Margin 1.0% 3.9% (2.9)% (2.9)%
Statutory Operating (Loss) / Profit £(12.2) £1.3 £(13.5) (1038.5)%
Statutory Operating Margin (2.0)% 0.2% (2.2)% (2.2)%
UK Bus FY 2024 FY 2023 vs FY 2023 %
Commercial and Concessionary PAX (000's) 231,358 212,241 9.0%
Commercial PAX (000's) 199,312 182,037 9.5%
UK Coach Core FY 2024 FY 2023 vs FY 2023 %
PAX (000's) 18,397 19,212 (4.2)%
Yield 13.94 13.54 2.9%
Occupancy 67% 70% (3)%pts
UK
Highlights
The UK delivered Turnover of £623.0m, up 2.1% when compared to FY 23.
Adjusted Operating profit was £6.5m, a (72.3)% reduction over the previous
year.
UK Bus revenue grew 7.9% year on year principally driven by fare rises in July
2024 of 6% and July 2023 of 12.5%. In addition FY23 suffered from the bus
drivers strike in H1 23 impacting both revenue and profitability. The fare
increases achieved in both 2024 and 2023 were the first two increases since
2017.
Year on year operating profit was broadly flat, with the negative impacts from
cost inflation and lease cost increases from new electric vehicles offset by
the absence of driver strikes in 2024, as well as the growth in revenue from
passenger and fare rises and overhead cost savings delivered through the year.
UK White Coach revenue increased by 0.4% but grew 6.7% when adjusted to
exclude the FY23 and FY24 impact of rail strikes. The underlying revenue
growth was primarily driven by strong yield management - a discipline that
National Express continues to prioritise.
Revenue on our competed routes grew by 4.2%, with PAX (passenger numbers) on
these routes reduced YoY by c.0.5%. Overall, PAX numbers reduced 4.2%,
partly as a result of increased competitor activity, and as a result of a
network optimisation initiative implemented during Q3 24, which resulted in a
c.10% reduction in service capacity, while improving profitability of
services through H2 24.
The year on year Coach operating profit performance was impacted materially by
the scale of rail strikes in 2023 (c£13m negative year on year impact).
Further year on year cost pressures were also seen as a result of the
significant re investment in new vehicles (post covid network rebuild)
impacting lease costs and reflecting general levels of cost inflation.
Together these cost increases outstripped revenue growth from passenger
numbers and yield improvement as the business addressed strong competition
from both rail and other coach operators. The impact of these pressures was
mitigated by action taken to address the losses within the NXTS business,
network optimisation actions (described above) and organisational and overhead
efficiencies delivered through the year.
UK Bus
Highlights
• UK Bus Revenue £265.5m (+7.9%) benefiting from the reversal of
the drivers strike impact in 2023, steady passenger growth post Covid rebuild
and the benefit of the fare rises secured in July 2024 of 6% and July 2023
of 12.5%.
• Successful negotiations with TfWM in Q4 24 result in a new
transition arrangement, with ongoing discussions around our long-term future
relationship. The funding settlement between regional bus operators and TfWM
has been secured for FY25, with discussions commenced regarding 2026 onwards
in light of potential franchising of the region.
• Improvement in operational KPIs, including on-time performance,
driven by a continued focus on network performance and reliability.
• Overhead costs reduced, moving from 20% of revenue in FY23 to 16%
of revenue in FY24
• Collaborative approach to marketing, with joint campaigns with
TfWM throughout the year, ending with a free travel scheme over Christmas to
drive passenger awareness.
UK Bus
Commentary
FY 24 Revenue growth of 7.9% is the highest in the last 5 years and has been
underpinned by fare rises in July 2024 of 6% and July 2023 of 12.5%, on a
network that is now 13.5% smaller in mileage terms than it was in 2019.
Despite this, the West Midlands still remains the cheapest metropolitan
operator in the country to its customers.
Our intensive focus on operational KPIs resulted in achieving higher scores in
six of the seven metrics for customer satisfaction in 2024 when compared to
2023 (Your Bus Journey - independent bus user survey - 2024, conducted by
transportfocus)
• Of which one was customer satisfaction in relation to punctuality
where we delivered our best performance metrics on record. (70%, an 8%
improvement on 2023).
• Continuous improvement on customer satisfaction in 2025, with 9%
decrease in the overall number of customer complaints Q1-25 vs Q1-24, with a
20% drop in service reliability complaints.
• 'Project Clockwork' initiative, which was delivered under
'OPERATE' management principles, aimed at improving punctuality and enhancing
our customer's' experience with us and was recognised at the British Quality
Foundation Excellence Awards, with our team crowned winners of the Excellence
in Customer Experience Award.
As transport authorities around the country - including TfWM (Transport for
West Midlands) - contemplate a shift towards franchising, both National
Express and other regional operators are doing the same, with the consultation
currently underway. We are committed to exploring the opportunities of
franchising, however, the need to strike the balance of risk and reward is the
priority; maintaining an appropriate, high quality service to our valued
customers, whilst generating a fair return for our shareholders. At the end of
December 24, our funding agreement with TfWM came to its scheduled conclusion
and an interim agreement has subsequently been successfully concluded for
2025.
UK Coach
Highlights
• Year on year reduction in Adjusted Operating Profit reflects the
loss of rail strike related financial benefit in FY 24 vs FY 23 (c.£13m
profit headwind for the full year).
• Excluding the impact of fewer rail strikes there was moderate
underlying growth in demand in FY 24, yield was up 5.8% with flat customer
numbers. Reported passenger volumes, without adjusting for rail strikes, were
4.2% down year on year while yield increased by 2.9%.
• A full review of network design and capacity, using OPERATE
principles, was performed through H1 24. This resulted in a timetable
relaunch and optimisation of network capacity in May and Sept, delivering
significant run rate efficiency through the H2 24 and into 2025;
• NXTS profitability improved by £5m year on year, with further
work underway to eliminate the remaining run rate losses within the business
during 2025;
• Retained key routes serving London Stansted and Dublin, meaning
across both 2023 and 2024 UK Coach has won all the airports routes that it
bid for.
UK Coach
Commentary
FY24 marked a period of market evolution for the UK Coach business.
Settlement of the rail driver disputes marked an end to the significant
financial upside for Coach travel across the UK, and the re-establishment of
rail as a reliable transport provider and competitor. Flixbus also stepped
up activity within the intercity coach market growing significantly through
the year and emerging as a strengthening competitor moving into 2025. The
exit of Megabus from a number of competed services in the final month of
2024 also reflects the challenging economic environment in the scheduled coach
sector.
Against this backdrop, UK Coach has delivered Improved yield and maintained
strong underlying passenger numbers in FY 24. After adjusting for the rail
strike benefit in both FY 23 and, to a lesser extent, in FY 24, both revenue
and yield are both up vs. last year. Regional intercity and regional airport
routes have performed well. Route optimisation and efficiency actions have
included moving from a static seasonal schedule to a flexible seasonality
adjusted schedule.
Specifically, the UK Coach network has been scaled down from September
onwards, by approximately 10%, to optimise our service and better respond to
customer demand. Since this has taken place, utilisation (occupancy) on
impacted services has improved and revenue levels have remained broadly
consistent with the same period in FY23, with a lower cost of delivery
boosting route profitability. This initiative has only been live since early
September, with full benefit expected in 2025.
Other Coach initiatives are gaining momentum with particular focus on further
pricing optimisation, driving conversion rates through an improved web and app
solution and leverage of CRM and expanding revenue potential through
additional ancillary offers.
In Ireland, the business has grown in size and profitability over the course
of the year, delivering excellent customer service in a market impacted by
competition and rail disruption.
The NXTS business delivered a £5m reduction in losses in FY 24, but did not
achieve a return to run-rate profitability in H2 24. However, following the
sale of Stewarts and Mortons (FY24), and the closure of the Gillingham (FY24)
and Sydenham (FY23) loss-making operations the business enters FY25 in a much
improved financial position. Management continues to address performance
through a number of different initiatives.
Germany
In Germany, Mobico is the second-largest rail operator in North
Rhine-Westphalia and one of the top five operators in Germany.
FY 24 Restated(1) Change Change
FY 23
m m M %
Reporting currency (£) £ £ £
Revenue £256.5 £259.8 £(3.3) (1.3)%
Adjusted Operating (Loss) / Profit £(9.3) £0.2 £(9.5) (4750.0)%
Statutory Operating (Loss) (1) £(96.8) £(121.9) £25.1 20.6%
Local currency (€)
Revenue €303.0 €298.8 €4.2 1.4%
Adjusted Operating (Loss) / Profit € (11.0) €0.2 €(11.2) (5600.0)%
Adjusted Operating Margin (3.6)% 0.1% (3.7)% (3.7)%
Statutory Operating (Loss)(1) €(114.4) €(140.3) €25.9 18.5%
Statutory Operating Margin(1) (37.8)% (47.0)% 10.6% 10.6%
FX rates: FY 24: €1.18:£1; FY 23: €1.15:£1
(1)FY 2023 has been restated in respect of a correction to onerous contract
provisions.
German Rail
Highlights
Germany had another difficult year reporting Revenue of £256.5m, down (1.3)%
(on a reported currency basis) ((1.4%) on a constant currency basis) when
compared to FY 23. Adjusted Operating Loss was £(9.3)m.
▪ Revenue continued to be impacted by higher operational penalties
as a result of train cancellations caused by the continued worsening of
industry-wide factors: worsening infrastructure reliability, increased
infrastructure repair and renewals activity, both of which impact on driver
availability and utilisation
▪ In addition, an €102m charge was taken to increase the onerous
contract provisions for RRX1 and RRX2/3. This reflects the further
deterioration in anticipated profitability of these contracts, impacted by the
worsening industry-wide factors described above.
It should be noted that the German results presented are stated prior to any
mitigations that might be agreed (between the Group and the PTA) in the
context of contracts that require both the operator and the PTA to
economically re-balance the contract if events outside of the control of the
operator impact the original profitability assumed within the contract.
German Rail
Commentary
Passenger volumes were boosted by the German Government's €49 monthly travel
initiative, which was extended until the end of 2025, albeit with an increased
ticket price of €58 starting January 2025. Despite this, revenue reduced by
€4.2m (1.4%) on a constant currency basis due to lower net subsidies
received (net of penalties) due to the ongoing industry wide challenges
impacting the sector.
The main structural issues continuing to fundamentally impact our German
business and the wider sector remain: industry-wide labour shortage of drivers
within the market; mileage and operational disruption caused by a growing
level of infrastructure repair and maintenance activity; and continued energy
market price volatility and uncertainty.
The adjusted operating loss of (€9.3m) reflects performance of the RME
contract alone, as both RRX contracts are both onerous contracts with in-year
losses being offset by utilisation and remeasurements of the onerous contract
provision. In relation to RME, the impact of ongoing drivers shortages,
network disruption due to construction activity, and changes in energy market
price forecasts have impacted on the forward looking profit assumption for the
contract. This reduction in total contract value results in an adjustment to
the IFRS 15 contract asset.
In 2023, the German Business benefitted from the performance of the RRX1
Emergency Award contract. This delivered an operating profit of £4m in
2023. This contract ended in December 2023 and was replaced by the long term
RRX1 contract running from Dec 2023 to Dec 2033. This contract has now been
assessed as onerous and therefore does not contribute to Operating Profit /
Loss in 2024; with remeasurements of the onerous contract provision treated as
an adjusting item.
Planned and reactive infrastructure investment on the network in Germany
continues to be an operational challenge with significant levels of
cancellation of services in the region. This results in significant disruption
under our contracts and ongoing elevated levels of performance penalty and
challenging resource utilisation.
The German Rail management team continues to work closely with the German Rail
PTAs to address the structural issues facing the industry, and to protect
Mobico's interests, within the terms of the current contracts. Whilst it is
still too early to tell how those critical discussions might conclude, it
remains clear that all parties are motivated to arrive at a sustainable and
commercially viable conclusion.
Despite the above challenges, significant progress has been made in the year
to address the underlying driver shortage and to ensure a stronger resource
position moving through 2025 and into 2026. A significant driver
recruitment, training, retention and development programme was launched in
early 2024 to arrest the decline experienced in the number of drivers and to
reverse the dependency of the business on agency drivers. By the end of
2024, there were a total of 164 candidates in training (a c12-14 month
training process), with a further 152 expecting to commence training during
2025. This represents a c.€12m pa investment in driver training and
development.
Group Chief Financial Officer's review
Mobico Group has delivered EBIT within guidance in the full year 2024, with a
corresponding improvement in free cash flow and debt. An underlying good
performance with some headwinds mean we have more to deliver but are
continuing on a positive journey.
Mobico Group has benefitted from continuing positive passenger demand across
much of the Group with strong revenue growth of 8.3% over 2023. Profit
improvement initiatives across the Group, including Accelerate, remain on
track with Adjusted Operating Profit increasing by 11.3% to £187.7m, with
divisions at various stages of turnaround.
Statutory operating loss increased significantly to a £519.9m loss in FY24,
compared to a £43.2m loss in the prior year; primarily driven by a goodwill
impairment charge of North America School Bus; and an increased onerous
contract provision in German Rail.
The Group is showing strong cash generation, with Free Cash Flow of £210.2m
up 28.4% year on year (£163.7m in FY23), coupled with clear plans to reduce
leverage further into FY25 with further cash generation initiatives.
Group adjusted net debt was stable on FY23, with covenant gearing improving to
2.8x (FY23: 3.0x).
Group Performance
Year ended 31 December
Adjusted result(1) Adjusting items Statutory total Adjusted result(1) Adjusting items(2) Statutory total(2)
2024 2024 2024 2023 2023 2023
£m
£m
£m £m £m £m
Revenue 3,412.4 - 3,412.4 3,150.9 - 3,150.9
Operating costs (3,224.7) (707.6) (3,932.3) (2,982.3) (211.8) (3,194.1)
Operating profit/(loss) 187.7 (707.6) (519.9) 168.6 (211.8) (43.2)
Share of results from associates 3.2 - 3.2 (0.5) - (0.5)
Net finance costs (89.8) (2.8) (92.6) (75.2) (1.2) (76.4)
Profit/(loss) before tax 101.1 (710.4) (609.3) 92.9 (213.0) (120.1)
Tax charge (41.4) (143.1) (184.5) (42.5) (21.6) (64.1)
Profit/(loss) for the year 59.7 (853.5) (793.8) 50.4 (234.6) (184.2)
1: To supplement IFRS reporting, we also present our results on an adjusted
basis which shows the performance of the business before adjusting items,
principally comprising amortisation of intangibles for acquired businesses,
goodwill impairment, remeasurement of onerous contract provisions and
restructuring costs. Treatment as an adjusting item provides users of the
accounts with additional useful information to assess the year-on-year trading
performance of the Group. Further explanation in relation to these measures,
together with cross-references to reconciliations to statutory equivalents
where relevant, can be found in the Alternative Performance Measures section
below.
2: Restated for correction to the German Rail onerous contract provision, see
note 1 in the Financial Statements for further information.
Group Revenue increased by £261.5m (8.3%) year-on-year to £3,412.4m (FY23:
£3,150.9m). Overall, passenger growth in the key parts of the business that
are exposed to passenger volume-related revenues continued to be strong;
particularly in ALSA Long Haul, ALSA Urban Bus and UK Bus commercial; only
partly offset by lower UK Coach passenger numbers.
Additionally, price increases have benefitted revenue with UK Bus increasing
fares in July 2024 of 6% together with the annualization of the July 2023
price rise of 12.5%.
In North America School Bus, an average 7.5% price increase across School Bus
contracts renewed for the 2023/24 school year was achieved and revenue has
also benefitted from the early effects of a 6.1% price increase for the
2024/25 school year.
German Rail revenue has continued to be impacted by higher operational
penalties as a result of train cancellations. These are driven by continued
worsening of industry-wide factors, including driver shortages and increased
track maintenance and repair activities.
The business continues to grow both organically through contract wins as well
as through acquisitions. There were 36 new contract wins secured in FY24
coupled with the Canary Bus acquisition in ALSA.
Overall, Group profitability has increased with Adjusted Operating Profit up
£19.1m (11.3%) from £168.6m to £187.7m, despite several of the Group's
divisions being in varying stages of recovery. Both the ALSA and North America
divisions have performed well, with both revenue and profit up on prior year -
Adjusted Operating Profit up 36.0% and 41.3% respectively (on a reported
basis). This was partly offset by lower profitability in the UK and Germany.
Adjusted Operating Margin was 5.5% (FY23: 5.3%), with the increase on the
prior year largely reflective of price increases as explained above, and the
benefit of cost-reduction initiatives such as Accelerate. This has been partly
offset by the impact of inflation on the cost base, particularly driver costs,
and lower Covid-19 funding (down £26.0m on 2023) as explained below.
Covid-19 funding recognised within Adjusted Operating Profit for FY24 was
£0.3m, down £26.0m on the prior year amount of £26.3m (which principally
related to ALSA government compensation and the UK Bus Recovery Grant).
After £707.6m (FY23 restated: £211.8m) of adjusting items, described in
further detail below, the statutory operating loss increased to £519.9m (FY23
restated: £43.2m loss).
Adjusted Net Finance Costs increased by £14.6m to £89.8m (FY23: £75.2m), as
anticipated and in line with previous guidance, due to both the annualization
of the €500m bond interest cost (which in September 2023 replaced a maturing
bond that had a lower interest rate), and the impact of higher interest rates
on the Group's floating rate debt.
The Group recorded an Adjusted Profit Before Tax of £101.1m (FY23: £92.9m),
and the statutory loss before tax was £609.3m (FY23 restated: £120.1m loss).
The Adjusted tax charge was £41.4m (FY23: £42.5m). The Adjusted effective
tax rate of 40.9% (FY23: 45.7%) continues to be significantly impacted by an
interest disallowance in the UK due to the Corporate Interest Restriction
rules (restricting interest deductions to 30% of Tax EBITDA) and higher
interest rates.
The statutory tax charge was £184.5m (FY23 restated: £64.1m), with a tax
charge on adjusting items of £143.1m (FY23 restated: £21.6m charge),
consisting of a £39.7m tax credit (FY23: £nil) on the US School Bus goodwill
impairment, a £9.8m credit (FY23: £10.4m credit) on amortisation of
intangible assets, a £1.8m tax credit (FY23 restated: £53.2m credit) on tax
deductible adjusting items, and a £194.4m charge (FY23 restated: £85.2m
charge) on the derecognition of deferred tax assets in the UK and US which is
also considered adjusting as it is material in size and non-recurring in
nature.
The statutory loss for the period was £793.8m (FY23 restated: £184.2m loss).
Adjusting items
Adjusting operating items of £707.6m (FY23 restated: £211.8m) were recorded
as a net cost in the Income Statement, of which £99.2 million (FY23: £71.0m)
represented cash outflows in the period. These largely relate to goodwill
impairment in School Bus recognising the need to reduce the value of School
Bus based on more realistic future cash flows.
Adjusting items Income statement Income statement Cash Cash
2024 2023(1) 2024 2023
£m
£m
£m
£m
Goodwill impairment of North America School Bus (547.7) - - -
Re-measurement of the Rhine-Ruhr onerous contract provision (86.4) (121.0) (45.7) (27.9)
Restructuring and other costs (50.6) (30.1) (41.4) (26.2)
Intangible amortisation for acquired businesses (27.7) (35.3) - -
Re-measurements of onerous contracts and impairments resulting from the 4.1 (2.1) (1.4) (7.1)
Covid-19 pandemic
Re-measurement of onerous contract provision charges and impairments in 0.7 (12.0) (1.8) (9.8)
respect of North America driver shortages
Final re-measurement of the WeDriveU put liability - (2.4) - -
Repayment of UK Coronavirus Job Retention Scheme grant ('Furlough') - (8.9) (8.9) -
Total adjusting items before tax (707.6) (211.8) (99.2) (71.0)
(1) Restated for correction to the German Rail onerous contract provision, see
note 1 in the Financial Statements for further information.
Goodwill impairment reviews are carried out annually by comparing the carrying
value of each cash generating unit ('CGU') with the net present value of its
future cash flows. As a result of the most recent impairment review, a
non-cash goodwill impairment charge in the School Bus CGU amounting to
£547.7m (FY23: £nil) was identified. This results in a full impairment of
the goodwill balance for this CGU. This arose as a result of reduced future
cash flow generation in the forecasts used for the impairment assessment; as
whilst the strategic plan forecasts prepared in 2024 include profit
improvement actions that aim to improve the future financial performance of
School Bus, these have not been included in the forecasts used for the
goodwill impairment assessment as they cannot currently be objectively
evidenced at this stage in the turnaround. The separation of the two North
America businesses into two CGUs in the year was also a contributing factor to
the resulting impairment charge as School Bus generates lower cash flows
relative to its asset base, compared to WeDriveU.
In Germany, the Rhine-Ruhr (RRX) onerous contract provision, relating to Lots
1 and Lots 2/3, which run to 2033, has been re-measured based on the latest
forecasts of future losses anticipated; resulting in a £86.4m charge (FY23
restated: £121.0m charge) to the income statement. Persisting levels of
driver shortages (which have a consequent impact on contractual penalties
suffered due to train cancellations), higher pay inflation, increased
investment in driver recruitment and training, and central overhead costs, are
the key contributing factors to the significant increase to the RRX onerous
contract provision, as at 31 December 2024 compared to prior year.
Restructuring and other costs of £50.6m (FY23 £30.1m) comprise the impact of
costs relating to the sale of the School Bus business and Group wide strategic
initiatives and restructuring. Consistent with the prior year, these include
Accelerate initiative projects which focus on organisational design,
procurement and digital enablement. These costs reduced on a run rate basis
during the second half.
Non-cash intangible amortisation in respect of acquired businesses, reduced by
£7.6m in the period. Consistent with previous periods, the Group classifies
the non-cash amortisation for acquired intangibles as an adjusting item by
virtue of its size and nature. This enables monitoring and comparison of
divisional performance regardless of whether through acquisition or organic
growth. Equally, it improves comparability of the Group's results with those
of peer companies.
Amounts relating to re-measurement of the remaining onerous contracts and
impairments, resulting from both the Covid-19 pandemic and North America
driver shortages, were significantly reduced due to improvements in
profitability of those onerous contracts with a total credit of £4.8m in the
period (FY23: £14.1m charge).
The tax charge on adjusting items of £143.1m included a £194.4m charge in
relation to derecognition of deferred tax assets in the UK and North America;
arising from reduced future cash flow generation in the forecasts used, which
were consistent with those used for goodwill impairment as described above.
Segmental performance
Year ended 31 December
Adjusted Operating Profit/(Loss) Adjusting items Statutory Adjusted Operating Adjusting items(1) Statutory
2024
2024
Profit/(Loss)
2023
total(1)
£m
£m total
2023
£m
2023
2024
£m
£m £m
ALSA 186.1 (9.2) 176.9 136.8 (15.8) 121.0
North America 38.3 (569.9) (531.6) 27.1 (34.2) (7.1)
UK 6.5 (18.7) (12.2) 23.5 (22.2) 1.3
German Rail (9.3) (87.5) (96.8) 0.2 (122.1) (121.9)
Central Functions (33.9) (22.3) (56.2) (19.0) (17.5) (36.5)
Operating profit/(loss) 187.7 (707.6) (519.9) 168.6 (211.8) (43.2)
(1) Restated for correction to the German Rail onerous contract provision, see
note 1 in the Financial Statements for further information.
ALSA's Adjusted Operating Profit has increased by £49.3m to £186.1m as a
result of strong passenger demand with Spanish Long Haul performing
particularly well. There were high levels of occupancy and increased yields,
benefitting from the continuation of the multi-voucher scheme. The Regional
business has also seen continuing growth, boosted by increased mobility and
network increases. The acquisition of Canary Bus completed successfully within
the year, integration into the ALSA business is materially complete, and
performance is in line with the acquisition business case. Adjusting items in
ALSA related to both intangible amortisation for acquired businesses and
re-measurements of onerous contracts, resulting from the Covid-19 pandemic.
North America Adjusted Operating Profit also increased by £11.2m to £38.3m,
benefiting from a 7.5% average price increase across School Bus contracts
renewed for the 2023/24 school year and the early effects of a 6.1% price
increase for the 2024/25 school year, which will then annualise into FY25.
WeDriveU has delivered strong new order wins in FY24 and has materially
completed its separation from the School Bus business to operate
independently. The segment result is impacted by a goodwill impairment charge,
as set out in the Adjusting items section below, and costs related to the
prospective sale of the School Bus business.
In the UK, Adjusted Operating Profit reduced by £17.0m to £6.5m, driven by a
reduction in funding from Covid-19 Bus Recovery Grant and Bus Service
Improvement Plan (BSIP) of £8.7m and £4.3m respectively, coupled with
increased scheduled coach hire costs, a reduction in Core Coach passenger
numbers, fewer high-margin rail strikes, and lower ancillary income. This was
only partly offset by an increase in demand for services and the benefit of
price rises in UK Bus, with commercial passenger numbers up year on year and a
price increase from July 2024 of 6% being implemented. The UK continues to
progress its turnaround and restructure its operations. Adjusting items are
reduced by £3.5m on FY23 and principally reflect restructuring costs.
German Rail Adjusted Operating Loss of (£9.3m), is down £9.5m on prior year.
The RRX contracts contributed £nil to Adjusted Operating Profit as they are
covered by the remeasurement of the onerous contract provision; with the
Adjusted Operating Loss pertaining fully to the RME contract. The increased
loss versus the prior year is principally due to labour and overhead inflation
and higher penalties which have resulted from industry-wide driver shortages
causing an increase in train cancellations. The segment result was impacted by
a £86.4m charge relating to the increase in the onerous contract provision,
reflecting the latest view of profitability of the RRX contracts over the
remaining contract life to 2033.
Central Functions costs included incremental restructuring, legal and bonus
costs of £14.0m (FY23: £nil) related to (i) improved performance of the
Group resulting in higher costs of performance linked remuneration benefits,
(ii) commission payable on completion of a property transaction in the year,
and (iii) the costs incurred in the current year relating to the close out of
the FY23 year end process. The remainder of the year on year increase (£0.9m)
was reflective of pay inflation and targeted investments in critical Group
functions. The segment result is also impacted by the costs relating to the
sale of the School Bus business and other restructuring costs.
Treasury & cash management
Funds flow 2024 2023
£m £m
Adjusted Operating Profit 187.7 168.6
Depreciation and other non-cash items 238.5 217.4
Adjusted EBITDA* 426.2 386.0
Net maintenance capital expenditure* (157.8) (135.7)
Working capital movement 48.0 9.1
Pension contributions above normal charge (7.6) (7.5)
Operating cash flow 308.8 251.9
Net interest paid (83.6) (61.0)
Tax paid (15.0) (27.2)
Free cash flow 210.2 163.7
Growth capital expenditure* (59.3) (17.9)
Acquisitions (net of cash acquired/disposed) (57.9) (59.6)
Adjusting items (99.2) (71.0)
Payment on hybrid instrument (21.3) (21.3)
Dividend - (41.1)
Other, including foreign exchange 26.7 53.4
Net funds flow (0.8) 6.2
Adjusted net debt* (1,202.5) (1,201.7)
* Adjusted EBITDA, Adjusted net debt, net maintenance capital expenditure and
growth capital expenditure are defined in the glossary of Alternative
Performance Measures.
The Group generated Adjusted EBITDA of £426.2m in the period, (FY23:
£386.0m) is driven by the improvement in Adjusted Operating Profit as
explained above.
£157.8m of maintenance capital expenditure is principally related to asset
purchases in North America and ALSA and is £22.1m higher than FY23 as the
Group accelerated capital expenditure at the end of December 2022 in order to
secure production slots, resulting in a lower cash outflow in FY23.
Working capital benefitted from strong cash collections in FY24 resulting in
an inflow of £48.0m, compared to an inflow of £9.1m in the previous year.
Net interest paid increased by £22.6m reflecting the first €500m bond
interest payment (which in September 2023 replaced a maturing bond that had a
lower interest rate), and the impact of higher interest rates on the Group's
floating rate debt and RCF facility.
Tax paid of £15.0m (FY23: £27.2m) was reduced by a tax refund in ALSA
relating to historical tax losses, which was a receivable on the balance sheet
at the end of FY23.
Free cash inflow is £210.2m in the period (FY23: £163.7m), representing
strong free cash flow conversion and a significant increase of 28.4% on the
prior year.
Growth capital expenditure of £59.3m has increased by £41.4m (FY23: £17.9m
outflow) reflective of (a) increased investments as a result of growth
contract wins in North America; (b) the timing of fleet purchases in ALSA; and
(c) the prior year outflow of £17.9m benefitting from being net of a £12.0m
funding receipt from the local authority relating to the new Casablanca fleet;
which lowered growth capital expenditure in the prior year.
Acquisitions cash outflow of £57.9m (FY23: £59.6m) relate primarily to the
acquisition of CanaryBus in ALSA, a leading provider of tourist and
discretionary services in the Canary Islands, as well as deferred
consideration paid for previous acquisitions. The prior year reflects multiple
smaller acquisitions in ALSA.
A cash outflow of £99.2m was recorded in respect of the items excluded from
adjusted results as explained above. £21.3m of coupon payments on the hybrid
instrument were made in the period, in line with prior periods. No final FY23
dividend nor an interim FY24 dividend have been declared, therefore no
external dividend has been paid in FY24; the prior year included a dividend
payment of £41.1m. Other inflows of £26.7m reflect the movement in exchange
rates, principally on the Group's Euro denominated debt, and settlement of
foreign exchange derivatives.
Net funds outflow for the period of £0.8m (FY23: £6.2m inflow) resulted in
adjusted net debt of £1,202.5m (FY23: £1,201.7m).
See the Supporting Reconciliations section below for a reconciliation to the
statutory cash flow statement.
The Group maintains a disciplined approach to its financing and is currently
rated by Moody's and Fitch at (Ba2/Stable) and (BBB-/Stable) respectively.
The Group has two key bank covenant tests; a <3.5x test for gearing and a
>3.5x test for interest cover. At 31 December 2024, covenant gearing was
2.8x (FY23: 3.0x) and interest cover was 4.6x (FY23: 5.2x).
At 31 December 2024, the Group had utilised c.£1.2 billion of debt capital
and committed facilities, with an average maturity of 4.9 years. The Group's
RCFs were undrawn and the Group had available a total of £0.8 billion in cash
and undrawn committed facilities. The table below sets out the composition of
these facilities.
Funding facilities Facility Utilised at 31 December 2024 Headroom at 31 December 2024 Maturity year
£m £m
£m
Core RCFs* 600 - 600 2028-2029*
2028 bond 250 250 - 2028
2031 bond 414 414 - 2031
Private placement 396 396 - 2027-2032
Divisional bank loans 101 101 - various
Leases 194 194 - various
Funding facilities excluding cash 1,955 1,355 600
Net cash and cash equivalents (203) 203
Total 1,152 803
* During the year the Group extended the vast majority of its Core RCF
facility a further year from the original expiry in 2028. £571m of the
facility will now mature in 2029 with £29m maturing in 2028. The Group has a
further one year extension option available later in 2025 to further extend
the maturity to 2030.
To ensure sufficient availability of liquidity, the Board requires the Group
to maintain a minimum of £300 million in cash and undrawn committed
facilities at all times. This does not include factoring facilities which
allow the without-recourse sale of receivables. These arrangements provide
the Group with more economic alternatives to early payment discounts for the
management of working capital, and as such are not included in (or required
for) liquidity forecasts.
At 31 December 2024, the Group had foreign currency debt and swaps held as net
investment hedges. These help mitigate volatility in the foreign currency
translation of our overseas net assets. The Group also hedges its exposure to
interest rate movements, to maintain an appropriate balance between fixed and
floating interest rates on borrowings. At 31 December 2024, the proportion of
Group debt at floating rates was 21% (FY23: 21%).
The Group hedges its exposure to fuel prices in order to provide a level of
certainty of cost in the short term and to reduce the year-on-year impact of
price fluctuations over the medium term. Fuel cost represents approximately 8%
of revenue (FY23: 9%). At 31 December 2024, the Group is around 98% hedged for
2025 at an average price of 51.8p per litre; around 52% hedged for 2026 at an
average price of 47.0 per litre; and around 13% hedged for 2027 at an average
price of 44.6p per litre. This compares to an average hedged price in 2023 and
2024 of 48.5p and 51.6p per litre respectively.
Return on capital employed
The return on capital employed at the end of the period was 10.2% (FY23:
7.0%). Demonstrating the conversion from pipeline of more profitable
contracts versus capital invested.
Dividend
A final dividend has not been proposed for the current period (FY23: £nil).
Pensions
The Group's principal defined benefit pension scheme is in the UK. The
combined deficit under IAS 19 on 31 December 2024 was £11.5m (FY23: £32.6m),
with the IAS 19 deficit for the Group main's scheme, West Midlands Bus being
£11.3m (FY23: £30.0m), a decrease of £18.7m on the prior year, mostly
driven by an increase in the discount rate.
Going concern
The Financial Statements have been prepared on a going concern basis as the
Directors are satisfied that the Group has adequate resources to continue in
operational existence for a period of not less than 12 months from the date of
approval of the financial statements. Details of the Board's assessment of the
Group's 'base case', 'reasonable worse case', and 'reverse stress tests' are
detailed in note 1 of the Financial Statements.
Principal risks and uncertainties
The Board considers the following are the principal risks and uncertainties
facing the business:
· Unprecedented external factors threatening the resilience of the
business: The resilience of the business can be challenged from major
incidents such as a future pandemic, a financial crisis or extreme weather. If
the Group is not able to identify and prepare appropriately, it might lead to
significant financial, operational and reputational damages.
· Adverse economic conditions affecting our speed of recovery:
Declining economic conditions and very high inflation rates can impact demand
for travel.
· Adverse political and policy environment affecting funding:
Political and geopolitical events such as trade tensions and regional
conflicts can bring change. Those changes may impact government policy and
funding for transport, which may impact the Group's operations.
· Regulatory landscape and ability to comply: Changes in current
regulations and newly introduced regulations can impact the cost structure and
operational procedures in our business as we strive to remain compliant.
· Climate changes (physical): We see increased frequency and
intensity of extreme weather events such as hurricanes, floods and heatwaves
that can lead to extensive damage to infrastructure, loss of lives, and
disruptions to communities. The Group can lose key locations or suffer severe
asset damages, or operations can be interrupted and cause revenue loss even if
the Group's assets are undamaged.
· Climate changes (transitional): The transition to zero emissions
mass mobility is driven by regulatory changes, market demands, and Group's
commitment to reducing its carbon footprint. The successful and sustainable
transition poses a number of challenges due to significant changes required to
infrastructure and changes to the risk profile associated with owning and
operating the assets.
· Implications of new technology in our business model (ZEV
transformation): Transition to ZEV means introducing new technology that
involves changes impacting across the business model including financing,
contracting, maintaining and operating of the assets.
· Competition and market dynamics in a digital world: The evolving
digital landscape in the transportation sector brings a number of challenges
and opportunities including: i) shifting consumer preferences towards
digitalisation; ii) alternative revenue structures which may disrupt
traditional fare structures; iii) structural transformation which could cause
unforeseen disruptions or affect productivity.
· Shortages of drivers and frontline employees: A tightening labour
market leads to a combination of higher turnover and lower numbers of new
recruits. A material shortage of drivers, engineering and maintenance
employees impacts our ability to effectively deliver services and impact
profitability, operations and reputation.
· Industrial action: Industrial action can impact the delivery of
service, revenues and damage our brand and reputation, along with employee
engagement and morale.
· Cyber attack: Major IT failure could disrupt operations and lead
to loss of revenue. Data compromise involving a loss of customer information
could result in reputational damage and significant remedial costs.
· Safety incidents, litigation and claims: Major safety related
incident could impact the Group both financially and reputationally. Higher
than planned claims or cash settlements could adversely affect profit and cash
outflow. Non-compliance with regulations can create legal and financial risk.
A security incident (e.g. terrorism) would have a direct impact through asset
damage, disruption to operations and revenue loss.
· Credit/financing: A material increase in interest rates would
increase the Group's cost of borrowing, albeit around 80% of our debt is now
at fixed rates with a significant portion that is currently floating will
revert to fixed in November 2025. Constrained equity and/or debt markets
increase the costs of capital and debt financing. Regulation of debt providers
and macro political and economic events can impact access to and/or cost of
capital.
· Attraction and retention of talent and succession planning: Risk
of not being able to attract or retain talented individuals with key skills
needed to deliver the Evolve strategy.
Helen Cowing
Group Chief Financial Officer
28 April 2025
Alternative performance measures
In the reporting of financial information, the Group has adopted various
Alternative Performance Measures ("APMs"). APMs should be considered in
addition to IFRS measurements. The Directors believe that these APMs assist in
providing useful information on the Adjusted performance of the Group, enhance
the comparability of information between reporting periods, and are used
internally by the Directors to measure the Group's performance. The key APMs
that the Group focuses on are as follows:
Measure Closest IFRS measure Definition and reconciliation Purpose
Adjusted EBITDA Operating profit(1) Adjusted Earnings Before Interest and Tax plus Depreciation and Amortisation. Adjusted EBITDA is used as a key measure to understand profit and cash
It is calculated by taking Adjusted Operating Profit and adding back generation before the impact of investments (such as capital expenditure and
depreciation, fixed asset grant amortisation, and share-based payments. working capital). It is also used to derive the Group's gearing ratio.
Gearing & Covenant EBITDA No direct Gearing is defined as the ratio of Covenant net debt to Covenant EBITDA over The gearing ratio is considered a key measure of balance sheet strength and
the last 12 months. Covenant EBITDA is calculated by making the following financial stability by which the Group and interested stakeholders assess its
equivalent amendments to Adjusted EBITDA (which is defined above): including any financial position.
pre-acquisition Adjusted EBITDA generated in that 12-month period by
businesses acquired by the Group during that period; the reversal of IFRS 16 Covenant EBITDA is used for the purpose of calculating the Group's two key
accounting; the exclusion of the profit or loss from associates; the exclusion bank covenant tests: being gearing and interest cover.
of the profit or loss attributable to minority interest; and the add back of
interest costs arising from the unwind of the discount on provisions.
Free cash flow Net cash generated from operating activities The cash flow equivalent of Adjusted Profit After Tax. Free cash flow allows us and external parties to evaluate the cash generated
by the Group's operations and is also a key performance measure for the
A reconciliation of Adjusted Operating Profit and net cash flow from operating Executive Directors' annual bonus structure and management remuneration.
activities to free cash flow is set out in the supporting tables below.
Net maintenance No direct Comprises the purchase of property, plant and equipment and intangible assets, Net maintenance capital expenditure is a measure by which the Group and
capital expenditure
other than growth capital expenditure, less proceeds from their disposal. It interested stakeholders assesses the level of investment in new/existing
equivalent excludes capital expenditure arising from discontinued operations. It includes capital assets to maintain the Group's profit.
the capitalisation of leases initiated in the year in respect of existing
business.
A reconciliation of capital expenditure in the statutory cash flow statement
to net maintenance capital expenditure (as presented in the Group Chief
Financial Officer's Report) is set out in the supporting tables below.
Growth capital expenditure No direct Growth capital expenditure represents the cash investment in new or nascent Growth capital expenditure is a measure by which the Group and interested
parts of the business, including new contracts and concessions, which drive stakeholders assesses the level of capital investment in new capital assets to
equivalent enhanced profit growth. It includes the capitalisation of leases initiated in drive profit growth.
the year in respect of new business.
Adjusted net debt Borrowings less cash and related hedges Cash and cash equivalents (cash overnight deposits, other short-term deposits) Net debt is the measure by which the Group and interested stakeholders assess
and other debt receivables, offset by borrowings (loan notes, bank loans and its level of overall indebtedness.
finance lease obligations) and other debt payable (excluding accrued
interest).
The components of adjusted net debt as they reconcile to the primary financial
statements and notes to the accounts is disclosed in note 15.
Covenant net debt Borrowings less cash and related hedges Adjusted net debt adjusted for certain items agreed with the Group's lenders Covenant net debt is the measure that is applicable in the covenant gearing
as being excluded for the purposes of calculating net debt for covenant test.
assessment. The adjustments principally comprise the exclusion of IFRS 16
liabilities, the exclusion of amounts owing under arrangements to factor
advance subsidy payments, the add back of trapped cash, and an adjustment to
retranslate any borrowing denominated in foreign currency to the average
foreign currency exchange rates over the preceding 12 months.
Adjusted earnings Profit after tax Adjusted earnings is Profit attributable to equity shareholders for the Adjusted earnings is a key measure used in the calculation of Adjusted
period, excluding Adjusting items (as described below) and can be found on the earnings per share.
face of the Group Income Statement in the first column.
Adjusted earnings Basic earnings per share Is Adjusted earnings divided by the weighted average number of shares in Adjusted earnings per share is widely used by external stakeholders,
per share issue, excluding those held in the Employee Benefit Trust which are treated as particularly in the investment community.
cancelled.
A reconciliation of statutory profit to Adjusted profit for the purpose of
this calculation is provided within note 8 of the financial statements.
Adjusted Operating Profit Operating profit(1) Statutory operating profit excluding Adjusting items (as described below), and Adjusted Operating Profit is a key performance measure for the Executive
can be found on the face of the Group Income Statement in the first column. Directors' annual bonus structure and management remuneration. It also allows
for ongoing trends and performance of the Group to be measured by the
Directors, management and interested stakeholders.
Adjusting Items No direct equivalent Adjusting items are items that are considered significant in nature and value, Treatment as an Adjusting item provides users of the accounts with additional
not in the normal course of business, or are consistent with items that were useful information to assess the year-on-year trading performance of the
treated as Adjusting items in prior periods. Group.
Adjusted Operating Margin Operating profit(1) divided by revenue Adjusted Operating Profit/(Loss) divided by revenue Adjusted Operating Margin is a measure used to assess and compare
profitability. It also allows for ongoing trends and performance of the
Group to be measured by the Directors, management and interested stakeholders.
Adjusted Profit Before Tax Profit before tax Statutory profit before tax excluding Adjusting Items can be found on the face Adjusted Profit before tax allows a view of the profit before tax after taking
of the Group Income Statement in the first column. account of the Adjusting items.
Return on capital employed (ROCE) Operating profit(1) and net assets Adjusted Operating Profit divided by average capital employed. Capital ROCE gives an indication of the Group's capital efficiency and is a key
employed is net assets excluding adjusted net debt and derivative financial performance measure for the Executive Directors' remuneration.
instruments, and for the purposes of this calculation is translated using
average exchange rates.
The calculation of ROCE is set out in the reconciliation tables below.
(1 ) Operating profit is presented on the Group income statement. It is not
defined per IFRS, however is a generally accepted profit measure.
( )
( )
Supporting reconciliations
Reconciliation of net cash flow from operating activities to free cash flow 2024 2023
£m £m
Net cash flow from operating activities 259.0 230.0
Cash (receipts)/payments in respect of IFRIC 12 asset purchases treated as - (12.0)
working capital for statutory cash flow*
Cash expenditure in respect of adjusting items 99.2 71.0
Net maintenance capital expenditure (157.8) (135.7)
Other non-cash movements (2.0) (2.7)
Profit on disposal of fixed assets 11.8 13.1
Free cash flow 210.2 163.7
* During the prior year the Group received cash in respect of a capital grant
receivable for assets (principally vehicles) acquired in previous years to
fulfil a contract in Morocco that is accounted for under the IFRIC12 (service
concession arrangements - an arrangement whereby a government or other public
sector body contracts with a private operator to develop (or upgrade), operate
and maintain the grantor's infrastructure assets) financial asset model and
where the statutory cash flow for these purchases and grants receivable are
accordingly presented as a movement in working capital, with the assets being
recorded as contract assets on the balance sheet rather than property, plant
and equipment or intangible assets. In order to be consistent with the
treatment of asset purchases on other contracts, these asset purchases are
reclassified to capital expenditure for the purposes of the "funds flow"
presented in the CFO report. The grant receipt was included as growth capital
expenditure, consistent with the original asset purchases for new business and
consistent with previous years.
Reconciliation of capital expenditure in statutory cash flow to funds flow 2023
2024 £m
£m
Purchase of property, plant and equipment (195.6) (128.2)
Proceeds from disposal of property, plant and equipment 47.4 33.8
Payments to acquire intangible assets (6.4) (12.9)
Proceeds from disposal of intangible assets 3.6 4.9
Net capital expenditure in statutory cash flow statement (151.0) (102.4)
Profit on disposal of fixed assets (11.8) (13.1)
Capitalisation of leases initiated in the year, less disposals (54.3) (50.1)
Cash receipts/payments in respect of IFRIC12 purchases (as explained above) - 12.0
Net capital expenditure in the funds flow (presented in the Group Chief (217.1) (153.6)
Financial Officer's Report)
Split as:
Net maintenance capital expenditure (157.8) (135.7)
Growth capital expenditure (59.3) (17.9)
( )
( )
Reconciliation of ROCE 2024 2023
£m
£m
Group statutory operating loss (519.9) (43.2)
Add back: adjusting items 707.6 211.8
Return - Adjusted Group Operating Profit 187.7 168.6
Average net assets 633.0 1,209.2
Average adjusted net debt 1,202.1 1,204.8
Average derivatives, excluding amounts within adjusted net debt 21.3 0.7
Foreign exchange adjustment (11.1) (11.6)
Average capital employed 1,845.3 2,403.1
Return on capital employed 10.2% 7.0%
Reconciliation of depreciation and other non-cash items 2024 2023
£m
£m
Depreciation charge 213.4 199.3
Amortisation charge (excluding amortisation from intangibles from acquired 22.5 18.5
businesses)
Share-based payments 4.6 1.6
Amortisation of fixed asset grants (2.0) (2.0)
Depreciation and other non-cash items 238.5 217.4
Directors' responsibilities
The Directors are required to prepare the Group financial statements in
accordance with United Kingdom adopted international accounting standards. The
Group financial statements also comply with International Financial Reporting
Standards (IFRS) as issued by the IASB. The Directors have chosen to prepare
the Company's financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law), including FRS 101 'Reduced Disclosure Framework'. Under
company law, the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group and Company
for the period in question.
In preparing the Group financial statements, International Accounting Standard
1 requires that Directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the entity's
financial position and financial
performance; and
• make an assessment of the Group's ability to continue as a going concern.
In preparing the Company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
• prepare such financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Financial Statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for preparing a Strategic Report, Directors'
Report, Directors' Remuneration Report and Corporate Governance Statement that
comply with applicable law and regulations.
The Directors are also responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
Group taken as a whole;
• the Strategic Report and Directors' Report, taken together, include a fair
review of the development and performance of the business and the position of
the Company and the Group, together with a description of the principal risks
and uncertainties that they face; and
• the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's and the Group's position and performance,
business model and strategy.
This responsibility statement was approved by the Board of Directors and is
signed on its behalf by:
Ignacio Garat
Helen Cowing
Group Chief Executive Officer
Interim Group Chief
Financial Officer
28 April 2025
28 April 2025
Financial Statements
Group Income Statement
For the year ended 31 December 2024
(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
Financial Statements
Group Statement of Comprehensive Income
For the year ended 31 December 2024
2024 (Restated)
£m 2023(1)
£m
Loss for the year (793.8) (184.2)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains on defined benefit pension plans 11.2 2.6
Deferred tax charge on actuarial gains (2.8) (0.8)
Gains/(losses) on financial assets at fair value through Other Comprehensive 9.1 (1.4)
Income
17.5 0.4
Items that may be reclassified subsequently to profit or loss:
Exchange differences on retranslation of foreign operations (31.6) (74.3)
Exchange differences on retranslation of non-controlling interests (1.5) (0.9)
Gains on net investment hedges 21.3 30.1
Gains/(losses) on cash flow hedges 3.8 (14.4)
Cost of hedging 0.2 0.6
Hedging (gains)/losses reclassified to Income Statement (1.6) 3.2
Deferred tax charge on foreign exchange differences (0.5) (0.8)
Deferred tax (charge)/credit on cash flow hedges (0.7) 3.6
(10.6) (52.9)
Other comprehensive income/(expense) for the year 6.9 (52.5)
Total comprehensive expense for the year (786.9) (236.7)
Total comprehensive (expense)/income attributable to:
Equity shareholders (794.4) (236.9)
Non-controlling interests 7.5 0.2
(786.9) (236.7)
(1) See note 1 for further information
Financial Statements
Group Balance Sheet
At 31 December 2024
2024 (Restated)
£m 2023(1)
Note £m
Non-current assets
Intangible assets 986.2 1,551.8
Property, plant and equipment 1,193.6 1,164.5
Derivative financial instruments 0.2 0.1
Financial assets at fair value through Other Comprehensive Income 25.0 15.2
Investments accounted for using the equity method 6.5 11.1
Other non-current receivables 169.7 153.8
Finance lease receivable 14.8 6.5
Deferred tax assets - 164.4
Defined benefit pension assets 12 0.1 0.2
Total non-current assets 2,396.1 3,067.6
Current assets
Inventories 34.0 33.7
Trade and other receivables 547.5 573.1
Finance lease receivable 3.2 2.7
Derivative financial instruments 12.6 11.1
Current tax assets 0.6 12.4
Cash and cash equivalents 11 244.5 356.3
842.4 989.3
Assets classified as held for sale 10 - 18.2
Total current assets 842.4 1,007.5
Total assets 3,238.5 4,075.1
Non-current liabilities
Borrowings (1,258.8) (1,290.6)
Derivative financial instruments (3.4) (15.3)
Deferred tax liability (46.8) (46.8)
Other non-current liabilities (116.9) (115.2)
Defined benefit pension liabilities 12 (11.6) (32.8)
Provisions (172.2) (158.2)
Total non-current liabilities (1,609.7) (1,658.9)
Current liabilities
Trade and other payables (1,029.0) (960.6)
Borrowings (208.9) (271.2)
Derivative financial instruments (44.7) (31.6)
Current tax liabilities (9.5) -
Provisions (115.8) (108.3)
Total current liabilities (1,407.9) (1,371.7)
Total liabilities (3,017.6) (3,030.6)
Net assets 220.9 1,044.5
Shareholders' equity
Share capital 30.7 30.7
Share premium 533.6 533.6
Own shares (4.3) (3.6)
Hybrid reserve 513.0 513.0
Other reserves 396.7 397.6
Retained earnings (1,284.9) (457.0)
Total shareholders' equity 184.8 1,014.3
Non-controlling interests in equity 36.1 30.2
Total equity 220.9 1,044.5
(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
H Cowing
I Garat
Group Chief Executive Officer Group Chief Financial Officer
28 April 2025
Financial Statements
Group Statement of Changes in Equity
For the year ended 31 December 2024
Share Share Own Hybrid Other Retained Total Non- Total
capital premium shares reserve reserves earnings £m controlling equity
£m account £m £m £m £m interests £m
£m £m
At 1 January 2024 (Restated)(1) 30.7 533.6 (3.6) 513.0 397.6 (457.0) 1,014.3 30.2 1,044.5
(Loss)/profit for the year - - - - - (802.8) (802.8) 9.0 (793.8)
Other comprehensive income/(expense) for - - - - - 8.4 8.4 (1.5) 6.9
the year
Total comprehensive (expense)/income - - - - - (794.4) (794.4) 7.5 (786.9)
Shares purchased - - (2.2) - - - (2.2) - (2.2)
Own shares released to satisfy employee share schemes - - 1.5 - - (1.5) - - -
Share-based payments - - - - - 4.6 4.6 - 4.6
Deferred tax credit on share-based payments - - - - - 0.1 0.1 - 0.1
Accrued payments on hybrid instrument - - - 21.3 - (21.3) - - -
Payments on hybrid instrument - - - (21.3) - - (21.3) - (21.3)
Deferred tax charge on hybrid instrument payments - - - - -
(15.4) (15.4) - (15.4)
Hedging gains and losses and costs of hedging transferred to the cost of _ _ _ _ (0.9) (0.9)
inventory
_ _ (0.9)
Dividends paid to non-controlling interests - - - - - - - (1.6) (1.6)
At 31 December 2024 30.7 533.6 (4.3) 513.0 396.7 (1,284.9) 184.8 36.1 220.9
(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
Financial Statements
Group Statement of Changes in Equity
For the year ended 31 December 2024
Share Share Own Hybrid (Restated) (Restated) Retained (Restated) Total(1) Non- (Restated) Total
capital premium shares reserve Other rarnings(1) £m controlling equity(1)
£m account £m £m reserves(1) £m interests £m
£m £m £m
At 1 January 2023 30.7 533.6 (3.9) 513.0 481.1 (223.7) 1,330.8 43.0 1,373.8
(Loss)/profit for the year - - - - - (185.3) (185.3) 1.1 (184.2)
Other comprehensive (expense)/income for the year - - - - (53.4) 1.8 (51.6) (0.9) (52.5)
Total comprehensive (expense)/income - - - - (53.4) (183.5) (236.9) 0.2 (236.7)
Own shares released to satisfy - - 0.3 - - (0.3) - - -
employee share schemes
Share-based payments - - - - - 1.6 1.6 - 1.6
Deferred tax on share-based payments - - - - - (0.2) (0.2) - (0.2)
Accrued payments on hybrid instrument - - - 21.3 - (21.3) - - -
Payments on hybrid instrument - - - (21.3) - - (21.3) - (21.3)
Deferred tax on hybrid bond payments - - - - - 5.3 5.3 - 5.3
Dividends paid to shareholders of Company - - - - - (41.1) (41.1) - (41.1)
Hedging gains and losses and costs of hedging transferred to the cost of _ _ _ _ (30.1) _ (30.1) _ (30.1)
inventory
Recognition of liabilities with non-controlling liabilities - - - - - (8.6) (8.6) - (8.6)
Purchase of subsidiary shares from non-controlling interest - - - - - 15.0 15.0 (15.0) -
Non-controlling interest arising from business combinations - - - - - - - 0.9 0.9
Disposal of subsidiary shares from non-controlling interest - - - - - (0.2) (0.2) 0.6 0.4
Contributions from - - - - - - - 0.5 0.5
non-controlling interests
At 31 December 2023 30.7 533.6 (3.6) 513.0 397.6 (457.0) 1,014.3 30.2 1,044.5
(1) See note 1 for further information
Financial Statements
Group Statement of Cash Flows
For the year ended 31 December 2024
Note 2024 2023
£m £m
Cash generated from operations 13 355.5 315.7
Corporate income tax paid (15.0) (27.3)
Interest paid (82.5) (62.9)
Interest received 1.0 4.5
Net cash flow from operating activities 259.0 230.0
Cash flows from investing activities
Payments to acquire businesses, net of cash acquired 10 (29.2) (9.4)
Deferred consideration for businesses acquired 10 (16.2) (3.6)
Purchase of property, plant and equipment (195.6) (128.2)
Proceeds from disposal of property, plant and equipment 47.4 33.8
Payments to acquire intangible assets (6.4) (12.9)
Proceeds from disposal of intangible assets 3.6 4.9
Payments to settle net investment hedge derivative contracts (9.2) (5.0)
Receipts on settlement of net investment hedge derivative contracts 8.3 15.8
Receipts relating to associates and investments 7.3 1.5
Net cash flow from investing activities (190.0) (103.1)
Cash flows from financing activities
Dividends paid to holders of hybrid instrument (21.3) (21.3)
Principal lease payments(2) (64.5) (62.7)
Principal lease receipts(2) 3.8 5.3
Increase in borrowings 121.1 668.9
Repayment of borrowings (182.7) (576.6)
Transaction costs relating to new borrowings (0.3) (4.1)
Payments to settle foreign exchange forward contracts (29.7) (30.3)
Receipts on settlement of foreign exchange forward contracts 20.4 44.6
Purchase of own shares (2.2) -
Acquisition of non-controlling interests(1) - (46.1)
Contributions from non-controlling interest - 0.5
Disposals of non-controlling interests - 0.4
Dividends paid to non-controlling interests (1.6) -
Dividends paid to shareholders of the Company 7 - (41.1)
Net cash flow from financing activities (157.0) (62.5)
(Decrease)/increase in net cash and cash equivalents (88.0) 64.4
Opening net cash and cash equivalents 293.7 233.1
(Decrease)/increase in net cash and cash equivalents (88.0) 64.4
Foreign exchange (2.6) (3.8)
Closing net cash and cash equivalents 11 203.1 293.7
(1) Amounts in 2023 include £46.1m paid on exercise of the final 20% of the
WeDriveU put liability
(2) Prior year comparative represented to show principal lease payments and
principal lease receipts on a gross basis to be comparable with the current
year disclosures; a net payment of £57.4m was disclosed in the prior year
Financial Statements
Notes to the Consolidated Accounts
For the year ended 31 December 2024
1 Basis of preparation
These results are based on the Group Financial Statements, which have been
prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and UK adopted International
Financial Reporting Standards (IFRS).
These results are presented in pounds Sterling and all values are rounded to
the nearest one hundred thousand pounds (£0.1m) except where otherwise
indicated.
Going concern
Group
The financial statements have been prepared on a going concern basis. In
adopting this basis, the Directors have considered the Group's business
activities, principal risks and uncertainties, exposure to macroeconomic
conditions, financial position, covenant compliance, liquidity and borrowing
facilities.
The Group continues to maintain a strong liquidity position, with £0.8bn in
cash and undrawn committed facilities available to it as of 31 December 2024
and total committed facilities of £2bn at this date. There is no expiry of
these facilities within the going concern outlook period, with the first
upcoming maturity being the Private Placements totalling £234.3m which are
due to mature in 2027. The Group has positive relationships and regular
dialogue with its lenders. Certain of the Group's borrowings are subject to
covenant tests on gearing and interest cover on a bi-annual basis. A gearing
covenant whereby Covenant net debt must be no more than 3.5x Covenant EBITDA
and an interest covenant whereby Covenant EBITDA must be at least 3.5x
interest expense apply to the Group. Each input is subject to certain
adjustments from reported to covenant measure as defined in the facility
agreements, principally for presentation on a pre-IFRS 16 basis.
In 2024, the Group has delivered another good revenue performance across most
of the major business units reflecting a continuing ability to capture growth
in markets with attractive long-term drivers, with Adjusted EBITDA up year on
year from £386.0m in 2023 to £426.2m in 2024.
Most of all, the results reflect another year of continued and substantive
change, principally within two of the divisions. Both North America and UK
& Germany have been embarked on a plan to reposition their operations to
address markets that have either faced significant structural challenges
(German Rail, UK Bus & Coach), or where that repositioning will make them
more effective and able to unlock further opportunity (North America School
Bus and WeDriveU).
The Accelerate programme has delivered ahead of expectations in FY24, with
£52m of savings achieved and a further small uplift expected in FY25 as these
savings annualise. In addition, progress has been made in turnaround of the UK
and North America School Bus businesses, resulting in improvements in
underlying profitability which will continue to be seen in 2025 onwards.
We have also made clear commitment to debt and leverage, including tightening
operational controls, particularly over aged debt collection and capital
expenditure appraisals, with an increased focus on asset-light transactions.
Such measures will help protect our balance sheet and will, together with our
wider business repositioning activities, drive more commercial behaviours in
our businesses, improved profitability and better cash flows.
We acknowledge that the Group has remained loss-making on a statutory basis in
2024, however this is considered to be one-off in nature since i) the
statutory result was impacted by (a) an £86.4m onerous contract
remeasurement in German Rail; (b) derecognition of deferred tax assets of
£194.4m, as well as (c) the goodwill impairment of £547.7m recognised
against the North America School Bus cash-generating unit; and ii) adjusting
items also related to restructuring costs which will enable achievement of
significant cost savings in future, improving both adjusted and statutory
profitability, as well as costs relating to the disposal of the North America
School Bus business, which is expected to complete in 2025.
There has been an improvement in macroeconomic condition throughout 2024,
leading to reduced inflationary pressures; meanwhile, we remain confident in
the Group's prospects as a value-for-money provider of essential public
services. The outlook for 2025 is encouraging and the Directors remain
confident in the longer-term outlook for the Group. This growth ambition is
strengthened by government policy which is highly supportive of public
transport as part of the solution to climate change.
The base case projections, which cover the period to June 2026, assume a
steady continuation of underlying passenger demand increases across the Group
(when normalising for impacts such as voucher schemes in ALSA), in line with
the trends seen since the pandemic and in 2024, as well as continued growth
through new contract wins in key markets such as WeDriveU and an improvement
in adjusted operating margin in the UK and North America School Bus businesses
following significant cost reduction and pricing actions undertaken throughout
2023 and 2024 .The key points to note regarding the base case are as follows:
· In the UK, the Bus business will benefit from price increases of
6% implemented in mid-2024, they have also taken an important step forward in
changing their relationship with its main customer, TfWM (Transport for West
Midlands) with the announcement of a new interim agreement, as all parties
continue to evaluate franchising. In UK Coach, no further benefit from
rail-strike induced demand is expected beyond 2024, and the UK long haul
market is expected to remain highly competitive, albeit strategies to protect
market share and promote patronage growth are well advanced. Following an
extensive strategic review in 2024 and disposal of several business units,
there has been increased commercial focus on the NXTS business whereby a
further narrowing of operating losses is expected in 2025 driven by actions
implemented in 2024. Across all UK business there has been significant focus
on rightsizing and cost optimisation throughout 2024, with a material positive
impact expected in 2025 as these savings annualise and further initiatives
deliver sequential improvement in cost efficiency and profitability.
· In ALSA, the multivoucher scheme has been extended (as of
December 2024) to June 2025, providing increased visibility and confidence in
strong H1 trading year-on-year. At present no extension of the scheme into H2
onwards has been announced (or factored into our forecasts); despite this we
remain highly confident in the excellent track record of the ALSA business in
delivering strong operating results across all lines of business. Increased
demand for Regional, Urban and Discretionary services are all assumed in the
2025 projections, reflecting a continuation of encouraging momentum in 2024.
Meanwhile we remain protected from significant inflation by CPI-linked
indexation clauses in most of our contracted revenue streams.
· The North American School Bus business has substantially
recovered the cumulative impact of wage inflation, achieving a 6.1% price
increase for School Year 2024/25, with a further mid-single-digit increase
expected in School Year 2025/26. Significant progress on route recovery and
driver shortages have been made throughout 2023 and 2024, with 9,017 new
drivers recruited in FY24, around 21% more than in FY23 (7,470). Further focus
on rightsizing the cost base and controlling spend has also led to improved
profitability in 2024, with additional efficiencies expected in 2025.
· The North American WeDriveU business will deliver expansion into
both existing and new sectors, with many such contracts already secured in
2024. There will be a continued focus on growth, with active bidding on a
large pipeline of opportunities in strategic target markets. Rate increases
and efficiency improvements have been implemented across a number of key
locations, providing a pathway to improved profitability in 2025.
· In Germany, expectations are that 2025 will continue to suffer
from industry-wide driver scarcity, leading to elevated levels of penalty
charges from PTAs, albeit with a reduced Adjusted Operating Loss compared to
2023 and 2024.
· 2025 will continue to benefit from cost reduction programmes that
were launched in 2023 and 2024, with £52m of savings achieved and a further
small uplift expected in FY25 as these savings annualise. In addition, there
is significant annualization benefit expected in 2025 onwards from the
restructuring and pricing actions implemented in both the UK and North America
School Bus businesses in 2024.
· The base case as described above assumed that the North America
School Bus business remained part of the Group throughout the going concern
assessment period. Given the announcement post year-end regarding the sale of
that business, the Group has updated its assessment to reflect the impact of
the sale. In conclusion, the disposal of this business would not change our
conclusions as to covenant compliance or liquidity headroom with regards to
maintaining confidence that the going concern basis of preparation remains
appropriate.
The reasonable worst case ("RWC") is fully aligned with the Viability
Assessment and forms the first 18 months of that assessment (to June 2026).
In summary, the downside risks modelled are all correlated with the Group's
principal risks. These downsides modelled include, but are not limited to:
1. Reduced passenger demand adversely affecting revenues by up to 3%
in those lines of business without passenger revenue protection, fewer new
contract wins and increased competition from other operators and modes of
transport.
2. A reduction of the new growth opportunities assumed in plan as a
result of heightened competition.
3. Higher inflation on the cost base, both for labour (with additional
wage inflation increases in most divisions) and general costs (increasing by
1% above base case levels), with none of this being able to be passed on to
customers.
4. Lower price rises than anticipated.
5. A material delay in realising cost savings as part of the
Accelerate programme and the smaller portion of turnaround activities in the
UK which have not yet been actioned.
6. A deterioration in relations with government / transport
authorities, leading to a reduction in funding, adverse renewal terms on
existing public contracts, and a tightening in labour market regulations.
Against this severe but plausible downside scenario, we apply cost saving
mitigations which would be within our control and which could be reasonably
enacted without material short term damage to the business. The quantum and
nature of these mitigations is broadly consistent with those assumed in prior
years' assessments and include but are not limited to:
1. Reduced discretionary spending, with up to £11m per annum of cost
savings across Travel & Accommodation, Advertising & Marketing,
Training & Development and Legal & Professional fees which is more
than achievable as demonstrated during the Covid-19 pandemic.
2. The removal of any planned annual discretionary bonuses.
The Directors have reviewed the base case and RWC projections and in both
scenarios the Group has a strong liquidity position over the going concern
assessment period and would be able to comply with the covenant tests, albeit
under RWC, reliant on the cost saving mitigations discussed above.
In addition to the base case and RWC scenarios, the Directors have reviewed
reverse stress tests, in which the Group has assessed the set of circumstances
that would be necessary for the Group to either breach the limits of its
borrowing facilities or breach any of the covenant tests.
In applying a reverse stress test to liquidity the Directors have concluded
that the set of circumstances required to exhaust it are considered remote. As
ever, covenants that include Covenant EBITDA as a component are more sensitive
to reverse stress testing; the Directors have therefore conducted in-depth
stress testing on all covenant tests at June 2025, December 2025 and June
2026. In doing so, the Directors have considered all cost mitigations that
would be within their control if faced with another short-term material
Covenant EBITDA reduction and no lender support to amend or waive Covenant
EBITDA-related covenants. Taking this into account the Directors concluded
that the probability was remote that circumstances arise that cause covenants
to be breached. Reverse stress tests have been performed against a reduction
in revenue, incremental cost inflation that cannot be recovered, and an
inability to achieve planned cost savings and in all instances, no instances
of a covenant breach were identified.
In any case, should there be a more severe set of circumstances than those
assumed in the reasonable worst case, a number of further mitigating actions
are available to the Group which would improve EBITDA and/or benefit adjusted
net debt, including: deeper and broader cost cutting measures, sale and
leaseback of vehicles, disposal of properties, delays or reductions to capital
expenditure and disposal of investments or other assets. The Group could
also seek to raise further equity or seek further amendments or waivers of
covenants, as was demonstrated during the Covid-19 pandemic.
In conclusion, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for a period of at
least 12 months from the date of approval of the Financial Statements. For
this reason, they continue to adopt the going concern basis in preparing the
Financial Statements for the year ended 31 December 2024.
Parent company
The Company holds investments in all trading entities of the Group, employs
colleagues working for the Group PLC and holds the majority of the Group's
external debt and derivative financial instruments; and doesn't itself
generate external revenues. It relies on the trading entities of the Group to
generate income - both via dividends received and through the Group's transfer
pricing policy. At 31 December 2024 the Company had net current liabilities of
£117.7m (2023: net current liabilities of £115.5m). The net current
liabilities position at the end of 2024 is stable year on year, with creditors
due under one year predominantly due to intercompany loans owed to trading
divisions. At 31 December 2024 the Company had £600.0m of undrawn, unsecured
committed revolving credit facilities. Please refer to management's going
concern assessment of the Group detailed above. The Directors of the Company
have a reasonable expectation that the Company has adequate resources to
continue in operational existence for a period of 12 months from the date of
approval of the Financial Statements.
Changes in accounting policies and the adoption of new and revised standards
The accounting policies adopted are consistent with those of the previous
financial year except for changes arising from new standards and amendments to
existing standards that have been adopted in the current year.
The following amendments have been applied for the first time with effect from
1 January 2024:
• Supplier Finance Arrangements (Amendments to IAS 7 Statement of
Cash Flows and IFRS 7 Financial Instruments: Disclosures)
These amendments clarify the characteristics of supplier finance arrangements
and require additional disclosure of such arrangements. The disclosure
requirements in the amendments are intended to assist users of financial
statements in understanding the effects of supplier finance arrangements on an
entity's liabilities, cash flows and exposure to liquidity risk.
As a result of implementing the amendments, the Group has provided additional
disclosures about its supplier finance arrangement in the Group's Annual
Report.
In addition, the following amendments have been applied for the first time
with effect from 1 January 2024:
• Non-current Liabilities with Covenants (Amendments to IAS 1)
• Classification of Liabilities as Current or Non-current
(Amendments to IAS 1)
• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
These amendments did not have a material impact on the amounts recognised in
prior periods and are not expected to significantly affect the current or
future periods.
New standards and interpretations not applied
Certain new accounting standard amendments have been published and UK adopted
that are not mandatory for 31 December 2024 reporting period and have not been
early adopted by the Group:
• Lack of Exchangeability - Amendments to IAS 21
These amendments are not expected to have a material impact on the entity in
the current or future reporting periods or on foreseeable future transactions.
Prior year restatement
German Rail onerous contract provision
During the preparation of the financial statements for the year ended 31
December 2024, errors were identified in the German Rail onerous contract
provision calculation related to the prior year, that were not identified and
therefore not taken into account in the 2023 calculation.
Primarily, these were errors relating to the completeness and accuracy of
input data within the prior year lifetime profitability assessment model,
which were identified through a detailed and comprehensive model rebuild
undertaken during the year and further work by management to improve
visibility and control of performance across the contracts.
In addition, during the current year management also became aware that
penalties associated with cleaning related performance obligations, which
under the contracts the Group is partially responsible for administering and
carrying out, were not being identified, and therefore were being recorded
incorrectly. An assessment of the potential liability that should have been
recorded at the end of 2023 has also been included as a prior year
restatement.
The impact on each of the contracts is detailed as follows:
· The RRX 2/3 contract was previously identified as onerous in
2021, with an onerous contract provision on the balance sheet at 31 December
2023 as previously reported of £118.3m. The impact of the errors identified
(as described above) is an increase to the onerous contract provision
reflecting a deterioration of the anticipated future contract losses
considering information that was or should have been available at that time;
and
· The RRX1 contract, which commenced on 10 December 2023, was not
assessed as onerous in the prior year. However, as a result of the errors
identified, this has the effect of making the contract onerous as at 31
December 2023; as such an onerous contract provision has been booked as part
of the prior year restatement.
The total increase to the German Rail onerous contract provisions as at 31
December 2023 as a result of the restatement is £21.8m. As a result,
adjusting items in respect of the German onerous contract provisions have also
changed, with the charges for the year ended 31 December 2023 increasing to
£121.0m (previously reported for the 2023 year: £99.2m).
The tax charge on adjusting items and deferred tax liabilities have also been
restated to reflect the tax effect of the adjustments made to the onerous
contract provision summarised above.
The impact on the position at 31 December 2022 was immaterial and as such the
1 January 2023 opening position has not been restated and no third balance
sheet has been presented. Overall, net assets for the year ended 31 December
2023 have decreased by £21.5m.
Cash flow hedges - fuel derivatives
During the preparation of the financial statements for the year ended 31
December 2024, management identified a classification error relating to the
settlement of cash flow hedges on fuel derivatives. In the year ended 31
December 2023 these were incorrectly presented as part of Other Comprehensive
Expense within the Statement of Comprehensive Income, instead of being
recognised directly in Equity (referred to as a 'basis adjustment'), within
the Statement of Changes in Equity. The correction of this error results in
the £30.1m expense being removed from Other and Total Comprehensive Income
and instead presented as a movement in Equity in the restated balances. The
correction has no impact on closing reserves within the Statement of Changes
in Equity, nor the Income Statement or the Balance Sheet.
A summary of the impact of these two adjustments on the Group's primary
statements is shown below:
Group Income Statement
Reported Restated
Adjusted Adjusting Total Adjusted result Adjusted Total
items
2023
2023
items
2023
result
(note 4)
£m
£m
(note 4)
£m
2023
2023
2023
£m
£m
£m
Operating costs (2,982.3) (190.0) (3,172.3) (2,982.3) (211.8) (3,194.1)
Group operating profit/(loss) 168.6 (190.0) (21.4) 168.6 (211.8) (43.2)
Profit/(loss) before tax 92.9 (191.2) (98.3) 92.9 (213.0) (120.1)
Tax charge (42.5) (21.9) (64.4) (42.5) (21.6) (64.1)
Profit/(loss) for the year 50.4 (213.1) (162.7) 50.4 (234.6) (184.2)
Basic EPS (30.2)p (33.7)p
Diluted EPS (30.2)p (33.7)p
Group Statement of Comprehensive Income
Reported Adjustment Restated
2023 2023
£m £m £m
Loss for the year (162.7) (21.5) (184.2)
Hedging gains reclassified to Income Statement (26.9) 30.1 3.2
Other comprehensive expense for the year (82.6) 30.1 (52.5)
Total comprehensive expense for the year (245.3) 8.6 (236.7)
Total comprehensive (expense)/income attributable to:
Equity shareholders (245.5) 8.6 (236.9)
Non-controlling interests 0.2 - 0.2
(245.3) 8.6 (236.7)
Group Balance Sheet
Reported Adjustment Restated
31 December 31 December
2023 2023
£m £m £
m
Deferred tax liability (47.1) 0.3 (46.8)
Provisions (146.4) (11.8) (158.2)
Total non-current liabilities (1,647.4) (11.5) (1,658.9)
Provisions (98.3) (10.0) (108.3)
Total current liabilities (1,361.7) (10.0) (1,371.7)
Total liabilities (3,009.1) (21.5) (3,030.6)
Net assets 1,066.0 (21.5) 1,044.5
Retained earnings (435.5) (21.5) (457.0)
Total shareholders' equity 1,035.8 (21.5) 1,014.3
Total equity 1,066.0 (21.5) 1,044.5
Group Statement of Changes in Equity
Reported Restated
Other reserves Retained earnings Total Total equity Other reserves Retained earnings Total Total equity
£m
£m
£m
£m
£m £m £m £m
At 1 January 2023 481.1 (223.7) 1,330.8 1,373.8 481.1 (223.7) 1,330.8 1,373.8
Loss for the year - (163.8) (163.8) (162.7) - (185.3) (185.3) (184.2)
Other comprehensive (expense)/income for the year (83.5) 1.8 (81.7) (82.6) (53.4) 1.8 (51.6) (52.5)
Total comprehensive expense (83.5) (162.0) (245.5) (245.3) (53.4) (183.5) (236.9) (236.7)
Hedging gains and losses and cost of hedging transferred to the cost of - - - - (30.1) - (30.1) (30.1)
inventory
At 31 December 2023 397.6 (435.5) 1,035.8 1,066.0 397.6 (457.0) 1,014.3 1,044.5
As there was no impact on cash and cash equivalents, the statement of cash
flows has not been re-presented.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of Financial Statements requires the Group to make estimates
and judgements that affect the application of the Group's accounting policies
and reported amounts.
Critical accounting judgements represent key decisions made by management in
the application of the Group accounting policies. Where a significant risk of
materially different outcomes exists due to management assumptions or sources
of estimation uncertainty, this will represent a key source of estimation
uncertainty. Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates.
Management considered, throughout the year, the financial reporting impact
associated with our identified principal risks, which include the effects of
climate change and inflation.
(i) Critical accounting judgements
Recognition of deferred tax assets
The recognition of deferred tax assets in North America and the UK requires
management's assessment of the probability of the recovery of the utilisation
of tax losses and other tax attributes based on future financial projections.
In accordance with IAS 12 Income Taxes, deferred tax assets can be recognised
where it is judged that the use of tax losses and other tax attributes is
"probable".
In 2023, deferred tax assets of $136.1m in North America and £85.5m in the UK
were recognised in relation to past tax losses. As disclosed in the 2023
Annual Report, tax losses had been incurred from 2020-2023 that management
considered as being caused by a one-off event, being the Covid-19 pandemic,
from which our recovery had been slower than anticipated - due to positive
revenue growth not being sufficient to offset inflationary headwinds.
Management had expected at that time that profitability in North America and
the UK would significantly improve in the current year, with 2024 tax losses
anticipated to be significantly lower compared to previous years and a return
to taxable profits in both businesses being previously expected in the year
ended 31 December 2025.
However, actual performance in 2024 was significantly below management's
previous forecasts. In North America, this was predominantly related to North
America School Bus, and whilst the business has demonstrated its recovery from
the pandemic and showed some encouraging improvements in 2024 such as a
successful bid season and positive price increases, it continues to face
significant headwinds such as driver wage inflation, lower availability of
drivers and rising maintenance costs, which have both been materially higher
in 2024 than prior forecast expectations. In the UK, this was mainly
reflective of lower passenger volumes and yield in UK Coach than had been
projected, and far fewer benefits from rail strikes (which had been a
significant tailwind in 2023) than had been anticipated; coupled with
continued losses in the NXTS business in UK Coach.
Given this adverse performance to forecast in 2024, and given the current
stage in the turnaround of both businesses, the future profitability within
the financial forecasts for both the UK and North America School Bus as at 31
December 2024 used for the deferred tax asset recognition (and also
consistently applied to the goodwill impairment assessment) have significantly
reduced compared to the prior year. Whilst management's strategic plan
forecasts prepared in 2024 include profit improvement actions that aim to
improve the future financial performance of both businesses, these have not
been included in the forecasts used for this exercise as they cannot currently
be objectively evidenced at this stage in the turnaround. The reduced
forecasts for North America also have a consequent impact on the UK forecasts
as a result of lower forecasted transfer pricing income into the UK.
The result of this as it pertains to deferred tax asset recognition is that
there has been a significant increase in the length of time it is now
projected to take to fully recover the tax losses and other tax attributes
compared to the prior year assessment. Based on the future forecasts used in
the modelling of the utilisation of tax losses, it is now projected to take
over 20 years to utilise all the federal tax losses in the US, versus 7 years
in the prior year assessment; and take 21 years to utilise tax losses in the
UK, versus 13 years in the prior year.
Additionally in North America, there has also been a significant goodwill
impairment recorded in the North America School Bus cash-generating unit of
£547.7m (as a result of the reduced future forecast as outlined above coupled
with the separation of the two North America businesses into two CGUs in the
year, as School Bus generates lower cash flows relative to its asset base,
compared to WeDriveU); whereas in the UK, the headroom has been significantly
reduced; this is considered further negative evidence as to deferred tax asset
recognition.
Whilst the majority of tax losses in both jurisdictions can be carried forward
indefinitely, given the above factors which arose in the current year,
management have concluded that utilisation of the tax losses and other tax
attributes can no longer be considered 'probable' to enable ongoing full
recognition of the related deferred tax assets, which has the following
effect:
· In North America, deferred tax asset recognition has been limited
to the forecast taxable income generated from the reversal of deferred tax
liabilities. This results in derecognition of $168m of deferred tax assets
leaving $2m of net deferred tax liabilities on the balance sheet as at 31
December 2024. This net deferred tax liability comprises of partially
recognised deferred tax assets of $79m offset by deferred tax liabilities of
$81m. Of the $79m of recognised deferred tax assets, only $2m is in respect of
federal tax losses and $nil in respect of state tax losses; the recognised
deferred tax assets mainly relate to other temporary differences including
restricted interest expenses.
· In the UK, as the amount of deferred tax liabilities are not
material, deferred tax assets in respect of tax losses of £88.6m have been
fully derecognised.
As a result, there is a tax charge in the current year of £215.1m in relation
to derecognition of deferred tax assets in the Group. Of this £194.4m is
shown as an adjusting item in the income statement consistent with the
treatment in prior periods and £20.7m is included within the tax charge in
the statement of changes in equity; refer to note 6 for further details.
Adjusting items
The Directors believe that the profit and earnings per share measures before
adjusting items provide additional useful information to shareholders on the
performance of the Group. These measures are consistent with how business
performance is measured internally by the Board and the Group Executive
Committee. In addition, the lender covenant calculations follow the accounting
recognition for adjusting items and therefore the accounting judgment can also
have an impact on covenant headroom.
The classification of adjusting items requires significant management
judgement after considering the nature, cause of occurrence and the scale of
the impact of that item on reported performance. Note 4 provides further
details on current year adjusting items.
(ii) Key sources of estimation uncertainty
Management have considered the following are key sources of estimation
uncertainty during the year.
UK goodwill impairment
Determining whether assets are impaired requires an estimation of the value in
use of the cash-generating units and requires the entity to estimate the
future cash flows expected to arise, the growth rate to extrapolate cash flows
into perpetuity and a suitable discount rate in order to calculate present
value. Cash flow projections involve the use of estimates, notably revenue
levels, operating margins and the proportion of operating profit converted to
cash in each year. Management consider impairment, specifically of the UK
cash-generating units, to be a key source of estimation uncertainty given the
judgement involved in estimating future cash flows and therefore value in use
of businesses undergoing a significant turnaround.
Losses in the UK business have been incurred since the onset of the Covid-19
pandemic, from which our recovery has been slower than anticipated. At the end
of 2023, management had expected that profitability in the UK would
significantly improve in 2024 from the losses previously incurred since 2020.
However, actual performance in 2024 was significantly below management's
previous forecasts. This was mainly reflective of lower passenger volumes and
yield in UK Coach than had been projected, and far fewer benefits from rail
strikes (which had been a significant tailwind in 2023) than had been
anticipated; coupled with continued losses in the NXTS business in UK Coach.
Given this adverse performance to forecast in 2024, and given the current
stage in the turnaround of the UK business, the future profitability within
the financial forecasts for the UK as at 31 December 2024 used for the
goodwill impairment assessment have significantly reduced compared to the
prior year. Whilst management's strategic plan forecasts prepared in 2024
include profit improvement actions that aim to improve the future financial
performance, these have not been included in the forecasts used for this
exercise as they cannot currently be objectively evidenced at this stage in
the turnaround.
As a result, the amount by which value in use exceeds the carrying amount has
reduced significantly compared to 31 December 2023, from £521.1m to £72.0m.
At this reduced level of headroom it is now considered that reasonably
possible changes in other key inputs (such as discount rates or growth rates)
could result in an impairment charge within the next 12 months.
In the prior year, the goodwill impairment of the North America and ALSA
cash-generating units was identified as a key source of estimation
uncertainty. Headroom in the ALSA division has increased significantly in the
current year such that reasonably possible changes in key inputs over the next
12 months are not expected to result in a change in carrying value. The North
America division has been split into two separate cash-generating units in
2024. Given that the value goodwill for the North America School Bus
cash-generating unit has been impaired to nil during the year, no further
estimation uncertainty remains with regard to this division. The WeDriveU
cash-generating unit has significant headroom relative to its carrying value
and reasonably possible changes in key inputs would not lead to a change in
carrying value, therefore this has not been recognised as key source of
estimation uncertainty.
Insurance and other claims
The claims provision arises from estimated exposures at the year end for auto
and general liability, workers' compensation and environmental claims, the
majority of which will be utilised in the next five years. The estimation of
the claims provision is based on an assessment of the expected settlement of
known claims together with an estimate of settlements that will be made in
respect of incidents occurring prior to the balance sheet date but for which
claims have not been reported to the Group. The Group makes assumptions
concerning these judgemental matters with the assistance of advice from
independent qualified actuaries. At 31 December 2024 the claims provision was
£82.2m (2023: £78.1m).
In certain limited cases, additional disclosure regarding these claims may
seriously prejudice the Group's position and consequently this disclosure is
not provided. Given the differing types of claims, their size, the range of
possible outcomes and the time involved in settling these claims, there is a
reasonably possible chance that a material adjustment would be required to the
carrying value of the claims provision in the next financial year. These
different factors also make it impracticable to provide sensitivity analysis
on one single measure and its potential impact on the overall claims
provision.
RRX rail contracts
The Group operates the Rhine-Ruhr RRX1, and RRX 2&3 contracts in German
Rail, where the Group receives subsidy revenue for operating the contract.
These contracts are gross cost contracts with no exposure to passenger revenue
risk.
Following the mobilisation of the RRX 2&3 rail contract in 2019,
significant cost increases in respect of energy consumption and personnel
costs versus the original bid model were identified, leading to the contract
being identified as onerous in 2021. When the contract became onerous, related
assets on the Balance Sheet were impaired, and a provision was booked for the
anticipated losses expected to be incurred while operating the contract over
the remaining term to 2033. The provision is re-measured each period end based
on the latest estimate of losses expected to be incurred operating the
services under the contract. The level of uncertainty in the estimate of
overall loss over the remaining contract life significantly increased in the
prior year, with a £99.2m increase in the onerous contract provision booked
(as originally reported) in FY23. During the preparation of the financial
statements for the year ended 31 December 2024, errors were identified in the
German Rail onerous contract provision calculation for the prior year,
resulting in an increased onerous contract provision now being recognised as
part of a prior year restatement.
The RRX1 franchise commenced on 10 December 2023, succeeding the Emergency
Award contract that had been in operation from 1 February 2022 to 9 December
2023, after Abellio (former competing train-operator) had discontinued its
operations in Germany. Although at the prior year end the RRX1 contract was
not assessed as onerous, however due to the errors being identified in the
German Rail onerous contract provision calculation, RRX1 should have been
assessed as onerous at the end of 2023 considering information that was or
should have been available at that time. As a result, an onerous contract
provision has now been recognised as part of a prior year restatement.
Across both the RRX1 and RRX 2&3 contracts, there have been material
adverse cost pressures suffered in 2024, resulting in a worsening in
expectations of the forecast losses over the remaining contract term, which
are recognised in FY24.
The industry continues to suffer from an on-going level of driver shortage.
This had always been anticipated to continue during 2024 however during the
year we experienced a significant amount of qualified drivers leaving the
business, which had not been anticipated. This reflected both a general
turnover in driver population, as well as an increasing level of churn caused
by the worsening in infrastructure reliability and increased infrastructure
repair and renewals activity within the region - increasing churn due to these
challenging operating conditions as well as impacting on driver availability
and utilisation. At the same time we were unable to source higher levels of
qualified drivers in the market.
The combination of these factors has materially worsened the driver shortage
issue compared to our previous expectations; as drivers who left the business
could not be immediately replaced and the higher staff turnover than had been
anticipated therefore had a material effect on cancellations and therefore on
penalties suffered which has persisted throughout 2024.
In order to address the driver shortfall, we have embarked on a significant
investment in driver training and retention to move to a stronger position in
2025 and 2026. By the end of 2024, there were a total of 164 trainees in
'driver school' (a 12-18 month training process), with a further 152 trainees
expecting to commence training during 2025. This reflects a c.€12m p.a.
investment in driver training and development which have been factored into
our onerous contract provision assessment. We assume that this investment,
although required to the end of the contract, will reduce to a lower level
through 2026 and into 2027, as the shortage stabilises and operations return
to a more normal level.
Additionally, further actions have been undertaken to try to address this
shortage and minimise the impact on service within the North Rhine-Westphalia
region. We have been working closely with other train operating companies and
the PTAs during the year to mitigate the impact on services and secure a more
robust and deliverable timetable. This resulted in an agreed reduction in
mileage in 2024, which is due to continue through 2025 as part of a
sector-wide initiative to stabilise operations.
This action reduces the pressure on the current driver shortfall, and as well
as reducing pressure on the timetable and the network operations, it is also
providing more time for us, and other train operating companies, to recruit
and train the significant numbers of drivers required to reestablish normal
contractual operation. However, the reduction in mileage operated results in a
contractual penalty from the PTAs, which although negotiated to a mitigated
level, still remains a significant operational challenge and cost impact on
these contracts.
A summary of the key factors driving the worsening in the financial outlook
for the RRX contracts occurring during the current year is detailed below; in
each case the impact of which being over and above what we had previously
anticipated:
· Infrastructure disruption across the network experienced in 2024,
which has adversely impacted productivity (from the impact on driver
availability and utilisation) and resulted in higher penalties being incurred;
and
· Persisting levels of driver shortages, resulting in reduced
operating mileage, higher agency driver costs and higher contractual
penalties. The situation regarding driver shortages has not recovered in line
with what we had previously anticipated, and this key factor is further
described in detail below;
· Higher pay inflation than we had previously assumed and a
reduction in productivity, which has not been matched by the subsidy
compensation under the contracts;
· Significant additional investment in driver recruitment and
training as part of seeking to address the driver shortage issue over the
coming 12 to 24 month period; and an increase in expected future investments
in these area;
· Higher overheads and central management costs being incurred in
order to support the business during the period; at higher levels than had
been previously been anticipated; which is expected to persist over the next
2-3 years during the current disrupted period.
As a result, the remeasurement of the RRX onerous contract provision through
the Income Statement amounted to £86.4m in 2024, and the provision now totals
£176.1m at 31 December 2024 (2023 restated: £140.1m). In reaching this
conclusion, significant estimation uncertainties have been identified in
respect of driver shortages (with respect to both the increased costs whilst
this issue persists and the length of time it will take to fully recover),
driver retention rates, availability of qualified drivers, and the success of
our significant investment in trainee driver recruitment and training which
has stepped up significantly during FY24. Other key factors include future
energy costs and the level of energy compensation to be received from the
Public Transport Authority ("PTA"), together with assumptions on how certain
published indices used to calculate energy compensation respond to changes in
wholesale prices.
It is important to note, however, that the assumptions that underpin the
onerous contract provision calculations are prior to any mitigations that
might be agreed (between the Group and the PTA) in the context of a contract
that requires both the operator and the PTA to economically re-balance the
contract if events outside of the control of the operator impact the original
profitability of the contract.
The key assumptions and estimates adopted have been based on third party
information where available, including the forecasts for energy prices, the
compensation for which is based on energy index data published by the German
Federal Statistical Agency, and regression models which are used to forecast
the behaviour of the indices relative to energy cost assumptions. The revised
assumptions about driver availability are based on our internal manpower
planning models, and published industry wage inflation data (noting that our
assumption is that the wage inflation index will track our cost inflation
assumptions).
With further respect to labour shortages:
· Significant driver churn has been experienced in 2024, combined
with being unable to source qualified drivers in the market to replace
leavers;
· Driver costs have been impacted by a significant investment in
driver training and recruiting costs in FY24, which is expected to continue as
set out above;
· As a consequence, more agency drivers have had to be employed,
thereby increasing the total cost of employment; and
· Whilst the investments in driver training and retention are
expected to bear fruit in the medium to long term, the industry standard is
for it to take 12-18 months to train a driver, therefore the impact of the
above factors experienced in the year mean the current shortages are
anticipated to persist in the short term and then expected to be alleviated as
driver trainees we have in the pipeline complete their training process and
become fully qualified.
We had previously anticipated that the situation regarding labour shortages,
and its adverse impact on contract profitability, would improve substantially
throughout 2024, albeit not being fully resolved until the end of 2025. During
2024 however, the issues arising from driver shortages have persisted and have
not recovered in line with our expectations, which resulted in greater
contractual penalties being suffered from train cancellations. Our latest
assumption is for the driver shortage issue to recede somewhat in 2025 (but
not to the extent we previously assumed would be the case in 2024) and not be
fully recovered until during 2026.
In addition, the impact of correcting the errors in the prior year (refer to
the prior year restatement section above for further detail) have also had a
subsequent adverse impact on prospective costs when correctly applied in the
2024 year end assessment, given that the base, against which future costs are
forecast, is higher. This is most pertinent to cleaning costs; whereby
penalties associated with cleaning related performance obligations are
expected to continue to impact the Group in future years, albeit at an
improved level.
The re-measurement of the RRX provision has been included in adjusting items
(note 4) consistent with previous years and the Group policy on adjusted
profit.
RME rail contract
The Group operates the Rhine-Münster Express (RME) rail contract to 2030,
where the Group receives both passenger revenue and subsidy revenue for
operating the contract. Passenger revenue is recognised when passengers
travel, and the subsidy revenue is recognised over the life of the contract,
by using the input method to measure progress against the performance
obligation. The amount of subsidy revenue recognised in each period is a
proportion of the total subsidy revenue to be earned over the term of the
contract, and is based on a percentage of completion, applying net costs
(passenger revenue less costs) incurred as a proportion of total expected net
costs, which is what the subsidy is intended to compensate for. Cost drivers
under the RME contract are very similar to those under the RRX contracts as
described above.
At each balance sheet date, the Group reforecasts the contract out-turn and
performs a re-assessment of the subsidy revenue to be recognised by reference
to the stage of completion. This reassessment during the current year resulted
in an increase in the IFRS 15 contract asset recognised on the balance sheet
to £51.2m at 31 December 2024 (2023: £48.6m). This was reflective of a
reduction in the forward looking profit assumptions for the contract, which
was more than offset in the current year by a reprofiling of maintenance
expenditure incurred; the impact from which is not expected to recur in future
years.
The recognition of this contract asset is sensitive to estimates relating to
the future profitability of the rail contract, particularly relating to the
estimate of future passenger revenues over the remainder of the contract and,
to a lesser extent, the level of energy compensation and manpower cost
inflation, including the number of drivers required to run the contracts.
The passenger revenue forecast has been developed based on both historic data
and using a market forecast informed by an independent third party.
Assumptions have also been made as to the continuation of government subsidies
(in the form of subsidised ticket prices).
Pensions
The determination of the defined benefit obligation of the UK defined benefit
pension scheme depends on the selection of certain assumptions which include
the discount rate, inflation rate and mortality rates. At 31 December 2024 the
UK defined benefit pension liability was £11.3m (2023: £30.0m). The key
areas of estimation uncertainty are in respect of the discount rate, rate of
inflation, assumptions on post-retirement pension increases, and mortality
rate. While the Board believes that the assumptions are appropriate,
significant differences in actual experience or significant changes in
assumptions may significantly change the pension obligation. The Group makes
assumptions with the assistance of advice from independent qualified
actuaries. Details of the assumptions are set out in note 12 to these
Financial Statements, along with their sensitivities.
Consideration of climate change
In preparing the Financial Statements we have considered the impact of climate
change, particularly in the context of the disclosures included in the
Strategic Report. There has not been a material impact on the financial
reporting judgements and estimates arising from our considerations, consistent
with the findings disclosed within the TCFD disclosures in the Strategic
Report. We have specifically considered the impact of climate change on the
carrying value of fixed assets and in our goodwill impairment assessment.
2 Exchange rates
The most significant exchange rates to UK Sterling for the Group are as
follows:
2024 2024 2023 2023
Closing rate
Average rate
Closing rate
Average rate
US Dollar 1.25 1.28 1.27 1.24
Canadian Dollar 1.80 1.75 1.69 1.68
Euro 1.21 1.18 1.15 1.15
Morocco Dirham 12.66 12.70 12.57 12.60
If the results for the year to 31 December 2023 had been retranslated at the
average exchange rates for the year to 31 December 2024, North America would
have achieved adjusted operating profit of £26.3m on revenue of £1,084.8m,
compared with adjusted operating profit of £27.1m on revenue of £1,115.6m as
reported, ALSA would have achieved adjusted operating profit of £110.5m on
revenue of £1,134.6m, compared with adjusted operating profit of £136.8m on
revenue of £1,165.4m as reported, and German Rail would have achieved
adjusted operating profit of £0.2m on revenue of £252.9m, compared with
adjusted operating profit of £0.2m on revenue of £259.8m as reported.
3 Revenue and segmental analysis
The Group's reportable segments have been determined based on reports issued
to and reviewed by the Group Board of Directors, and organised in accordance
with the geographical regions in which they operate and the nature of services
that they provide. Management considers the Group Board to be the chief
decision-making body for deciding how to allocate resources and for assessing
operating performance.
Segmental performance is evaluated based on operating profit or loss and is
measured consistently with operating profit or loss in the Consolidated
Financial Statements. Group financing activities and income taxes are managed
on a Group basis and are not allocated to reportable segments.
The principal services from which each reportable segment derives its revenues
are as follows:
• UK - bus and coach operations
• German Rail - rail operations
• ALSA (predominantly Spain and Morocco) - bus
and coach operations
• North America (USA and Canada) - school bus,
transit and shuttle operations
(a) Revenue
Revenue is disaggregated by reportable segment, class and type of service as
follows:
2024
Analysis by class and reportable segment: Contract Passenger Grants and Private hire Other Total
revenues revenues subsidies £m revenues £m
£m £m £m £m
UK 38.2 496.3 37.4 21.6 29.5 623.0
German Rail - 38.5 218.6 - (0.6) 256.5
ALSA 273.4 717.5 171.7 89.6 75.4 1,327.6
North America 1,131.7 - - 55.2 18.4 1,205.3
Total revenue 1,443.3 1,252.3 427.7 166.4 122.7 3,412.4
Analysis by major service type:
Passenger transport 1,443.3 1,252.3 427.7 166.4 18.0 3,307.7
Other products and services - - - - 104.7 104.7
Total revenue 1,443.3 1,252.3 427.7 166.4 122.7 3,412.4
There have been no material amounts of revenue recognised in the year that
relate to performance obligations satisfied or partially satisfied in previous
years. Revenue received where the performance obligation will be fulfilled in
the future is classified as deferred income or contract liabilities.
There are no material inter-segment sales between reportable segments.
Covid-19 funding included in revenue
Included within revenue above is the following Covid-19 related funding as
follows:
2024 2023
£m
£m
UK (a) - 1.9
ALSA (b) 0.3 11.5
Total Covid-19 funding in revenue 0.3 13.4
a) In the prior year, the UK division received a final payment under the
Covid-19 Bus Services Support Grant (CBSSG) relating to an earlier period.
b) In ALSA £0.3m (2023: £11.5m) of funding was recognised from Public
Transport Authorities to compensate for revenue shortfalls due to Covid-19.
Bus Service Improvement Plan (BSIP) funding
In 2022, the West Midlands Combined Authority (WMCA), supported by our UK Bus
business and other regional operators, applied for and was awarded a grant by
the Department for Transport (DfT) under the UK Government's BSIP. A
pre-application condition for the BSIP grant set by the DfT was the existence
of an Enhanced Partnership Plan (EPP) and an Enhanced Partnership Scheme (EPS)
between WMCA and regional bus operators. This was in place for the West
Midlands prior to the commencement of the BSIP. The BSIP was available to WMCA
and regional bus operators in return for delivering certain improvements in
bus services in the West Midlands.
During the year to 31 December 2023, UK Bus renegotiated the terms of the BSIP
grant with the WMCA resulting in additional funding and releasing the business
from its commitment to freeze passenger fares for the remainder of the grant
period. The grant income relating to freezing fares was applicable up to 30
June 2023 and amounted to £3.2m. No more funding is expected under this
element of the BSIP.
For the portion of the funding available for maintaining the bus network, the
updated agreement confirmed the income to be received until 31 December 2024.
During the year the income has been recognised on a straight-line basis
prorated on the total funding available to the business to the end of 2024.
This has resulted in further grant income of £11.1m (2023: £12.2m) recorded
to reduce expenditure to reflect the elements of the BSIP programme
compensating the business for the costs incurred in maintaining the bus
network during that period.
In addition, there is a further £33.0m of BSIP funding relating to the period
1 January 2023 to 31 December 2024 of which £16.5m (2023: £16.5m) has been
recognised on a pro-rata basis against the costs incurred in maintaining
network services.
A total amount of £27.6m (2023: £31.9m) of BSIP funding has been recognised
in the period to 31 December 2024.
BSIP funding
2024 2023
£m
£m
Included in revenue - 3.2
Included within operating costs 27.6 28.7
Total BSIP funding 27.6 31.9
Prior year revenue is disaggregated by reportable segment, class and type of
service as follows:
2023
Analysis by class and reportable segment: Contract Passenger Grants and Private hire Other Total
revenues revenues subsidies £m revenues £m
£m £m £m £m
UK 36.6 479.0 40.8 23.3 30.4 610.1
German Rail - 43.3 216.0 - 0.5 259.8
ALSA 233.7 607.8 188.8 68.0 67.1 1,165.4
North America 1,050.3 - - 60.0 5.3 1,115.6
Total revenue 1,320.6 1,130.1 445.6 151.3 103.3 3,150.9
Analysis by major service type:
Passenger transport 1,320.6 1,130.1 445.6 151.3 19.1 3,066.7
Other products and services - - - - 84.2 84.2
Total revenue 1,320.6 1,130.1 445.6 151.3 103.3 3,150.9
(b) Operating profit/(loss)
Operating profit/(loss) is analysed by reportable segment as follows:
Adjusted Adjusting Segment Adjusted
profit/ (loss) items result profit/ (loss) (Restated) Adjusted (Restated) Segment
2024 2024 2024 2023 items result
£m £m £m £m 2023(1) 2023(1)
£m £m
UK 6.5 (18.7) (12.2) 23.5 (22.2) 1.3
German Rail (9.3) (87.5) (96.8) 0.2 (122.1) (121.9)
ALSA 186.1 (9.2) 176.9 136.8 (15.8) 121.0
North America 38.3 (569.9) (531.6) 27.1 (34.2) (7.1)
Central functions (33.9) (22.3) (56.2) (19.0) (17.5) (36.5)
Operating profit/(loss) 187.7 (707.6) (519.9) 168.6 (211.8) (43.2)
(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
Further information on adjusting items is provided in note 4.
4 Adjusting items
The Group reports adjusted measures because the Directors believe they provide
both management and stakeholders with useful additional information about the
financial performance of the Group's businesses.
The total adjusting items before tax for the year ended 31 December is a net
charge of £710.4m (2023 restated: £213.0m). The items excluded from the
adjusted result are:
2024 (Restated) 2023(1)
£m
£m
Intangible amortisation for acquired businesses (a) 27.7 35.3
Goodwill impairment of North America School Bus (b) 547.7 -
Re-measurements of onerous contracts and impairments resulting from the (4.1) 2.1
Covid-19 pandemic (c)
Re-measurement of the Rhine-Ruhr onerous contract provision (d) 86.4 121.0
Re-measurement of onerous contract provision charges and impairments in (0.7) 12.0
respect of North America driver shortages (e)
Final re-measurement of the WeDriveU put liability (f) - 2.4
Repayment of UK Coronavirus Job Retention Scheme grant ('Furlough') (g) - 8.9
Restructuring and other costs (h) 50.6 30.1
Total adjusting items in operating costs 707.6 211.8
Unwinding of discount of the Rhine-Ruhr onerous contract provision (d) 2.8 1.2
Total adjusting items before tax 710.4 213.0
Tax charge on adjusting items (i) 143.1 21.6
Total adjusting items after tax 853.5 234.6
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(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
(a) Intangible amortisation for acquired businesses
Consistent with previous periods, the Group classifies the non-cash
amortisation for acquired intangibles as an adjusting item by virtue of its
size and nature. Its exclusion enables monitoring and comparison of divisional
performance by the Group Board regardless of whether through acquisition or
organic growth. Equally, it improves comparability of the Group's results with
those of peer companies.
(b) Goodwill impairment of North America School Bus
The Group performs a goodwill impairment on each cash-generating unit
annually. During the current year, the North America business separated into
two cash-generating units (CGUs), School Bus and WeDriveU. The assessment
performed for School Bus indicated a required impairment charge of £547.7m.
This is separately disclosed due to both size and nature and is excluded to
enable the users of the financial statements to provide greater clarity on the
current and future performance of the Group's results; and is consistent with
the treatment of the goodwill impairments in previous financial years.
(c) Re-measurement of onerous contracts and impairments resulting directly
from the Covid-19 pandemic
As a result of the Covid-19 pandemic, a number of onerous contract provisions
and impairments were recorded in previous years. For the contracts which the
Group was still operating during the year, or there remains a commitment at
the period end, the onerous contract provision has been re-measured, resulting
in a net credit of £4.1m to the income statement. On these contracts, £1.4m
provision has been utilised during the year, with a remaining provision of
£1.0m at the period end, which is expected to be utilised within 1-2 years.
No new onerous contracts were identified in the year.
(d) Re-measurement of the Rhine-Ruhr Express onerous contract provision
The Rhine-Ruhr (RRX) onerous contract, which runs to 2033, has been
re-measured based on the latest forecasts of future losses anticipated;
resulting in a £86.4m charge (2023 restated: £121.0m charge) to the income
statement. Persisting levels of driver shortages, higher pay inflation,
investment in driver recruitment and training and central overhead costs; are
the key contributing factors to the significant increase to the RRX onerous
contract provision as at 31 December 2024 compared to prior year. Each of
these factors are described in detail in note 1.
The provision at 31 December 2024 is £176.1m for the remainder of the
contract term until 2033, following utilisation during the year of £45.8m and
£2.8m unwinding of discount.
(e) Re-measurement of onerous contract provision charges and impairments in
respect of North America driver shortages
The remaining onerous contract provision of £2.2m relates to one customer
contract which ends in June 2026. No new onerous contracts were identified in
the year. There was a credit to the income statement from a provision release
relating to this contract of £0.7m in the year.
(f) Final re-measurement of the WeDriveU put liability in prior year
In conjunction with the acquisition of WeDriveU, Inc. during 2019 the Group
issued put options to the seller for the remaining shares. The options had
three tranches for the remaining 40% of the business (10%, 10%, 20%). The
first two tranches were exercised in 2020, and 2021, with settlement in 2021
and 2022 respectively. At 31 December 2022 the final option to sell the
remaining 20% shares had been exercised by the non-controlling interest.
During 2023 the put liability for the remaining 20% shareholding in WeDriveU
had been re-measured following the final negotiations with the seller. The
re-measurement led to an additional charge of £2.4m in the year to 31
December 2023 (2023 interim: £2.3m). The liability was cash settled in July
2023 for £46.1m.
Gains and losses on re-measurement of the put liability have been recorded as
adjusting items in previous years (2020 full year: £33.9m gain, 2021 full
year: £11.5m expense, 2022 full year: £nil), therefore the final
re-measurement in the prior year has also been recorded here for consistency.
(g) Repayment of Coronavirus Job Retention Scheme grant (CJRS) ('Furlough') in
prior year
At the end of 2021 the Group announced an intention to voluntarily repay
amounts of CJRS ('furlough') received for that period following the
re-instatement of the dividend to shareholders. During 2023 a dividend was
paid and a provision was recognised for the commitment to HMRC for the CJRS
repayment of £8.9m, which was paid in early 2024. The original receipt of
CJRS was not recorded as an adjusting item and was included in adjusted profit
consistent with the staff costs which it was designed to compensate.
The repayment however, has been disclosed as an adjusting item as this is a
one-off cost which is historic in nature (occurring more than two years after
initial receipt), a significant amount, and unlike the original receipt, there
are no corresponding staff costs in the period to be offset against.
(h) Restructuring and other costs
These costs relate to Group-wide strategic initiatives and restructuring,
which includes costs relating to cost saving programmes, and costs relating to
our previously announced sale of North America School Bus. These are one-off,
short-term initiatives expected to last 1-2 years. They are material in nature
and are not considered to be part of the day-to-day operational costs of the
Group and therefore have been treated as adjusting items. These amount to
£50.6m in the year ending 31 December 2024 compared to £30.1m in the year
ending 31 December 2023.
(i) Adjusting tax charge
The tax charge on adjusting items of £143.1m (2023 restated: £21.6m charge),
comprises of a £39.7m tax credit (2023: £nil) on goodwill impairment, a
£9.8m tax credit (2023: £10.4m credit) on amortisation of intangible assets,
a £1.8m tax credit (2023 restated: £53.2m credit) on tax deductible
adjusting items, and a £194.4m tax charge (2023 restated: £85.2m charge) on
derecognition of deferred tax assets which is also considered adjusting as it
is material in size and non-recurring in nature.
5 Net finance costs
2024 2023
£m £m
Bond and bank interest payable 62.0 52.1
Lease interest payable 10.1 8.5
Other interest payable 13.1 11.1
Unwind of discounting - claims provision 5.8 5.7
Net interest cost on defined benefit pension obligations 1.2 1.8
Finance costs before adjusting items 92.2 79.2
Adjusting items:
Unwind of discounting - onerous contract provisions 2.8 1.2
Total finance costs after adjusting items 95.0 80.4
Lease interest income (0.5) (0.5)
Other financial income (1.9) (3.5)
Total finance income (2.4) (4.0)
Net finance costs after adjusting items 92.6 76.4
Of which, from financial instruments:
Financial assets measured at amortised cost (2.0) (3.6)
Financial liabilities measured at amortised cost 70.4 59.7
Derivatives 11.8 10.3
Loan fee amortisation 2.6 1.4
6 Taxation
(a) Analysis of taxation charge in the year
2024
£m (Restated) 2023(1)
£m
Current taxation:
UK corporation tax - -
Overseas corporate income tax 34.9 11.2
Current corporate income tax charge 34.9 11.2
Adjustments with respect to prior years - UK and overseas 1.5 1.5
Total current corporate income tax charge 36.4 12.7
Deferred taxation:
Origination and reversal of temporary differences (47.6) (33.5)
De-recognition of deferred tax assets 194.4 85.2
Adjustments with respect to prior years - UK and overseas 1.3 (0.3)
Total deferred tax charge 148.1 51.4
Total tax charge for the Group 184.5 64.1
The tax charge for the Group comprises:
Tax charge on profit before adjusting items 41.4 42.5
Tax charge on adjusting items 143.1 21.6
Total tax charge for the Group 184.5 64.1
(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
The tax charge on adjusting items of £143.1m (restated 2023: £21.6m charge)
comprises of a £39.7m tax credit (2023: £nil) on goodwill impairment, a
£9.8m tax credit (2023 £10.4m credit) on amortisation of intangible assets,
a £1.8m credit (restated 2023: £53.2m credit) on tax deductible exceptional
costs, and a £194.4m tax charge (2023 restated: £85.2m charge) on
derecognition of deferred tax assets which is also considered adjusting as it
is material in size and non-recurring in nature.
(b) Tax on items recognised in Other Comprehensive Income or Equity
2024 2023
£m £m
Deferred taxation:
Deferred tax charge on actuarial gains 2.8 0.8
Deferred tax charge/(credit) on cash flow hedges 0.7 (3.6)
Deferred tax charge on foreign exchange differences 0.5 0.8
Deferred tax charge/(credit) on hybrid instrument payments 15.4 (5.3)
Deferred tax (credit)/charge on share-based payments (0.1) 0.2
Total tax credit for the Group 19.3 (7.1)
7 Dividends paid and proposed
An interim dividend was not declared and paid during the year (2023: 1.7
pence). No final ordinary dividend has been proposed (2023: £nil). Total
dividends paid in the prior year of £41.1m relate to the 2023 interim
dividend and 2022 final dividend.
8 Earnings per share
2024
(Restated) 2023(1)
Basic earnings per share (134.8)p (33.7)p
Adjusted basic earnings per share 4.8p 4.5p
Diluted earnings per share (134.8)p (33.7)p
Adjusted diluted earnings per share 4.6p 4.5p
(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
Basic EPS is calculated by dividing the earnings attributable to equity
shareholders after adjusting for accrued payments on the hybrid instrument, a
loss of £824.1m (2023 restated: £206.6m loss), by the weighted average
number of ordinary shares in issue during the year, excluding those held by
the Group's Employee Benefit Trust which are treated as cancelled. Earnings
attributable to equity shareholders is inclusive of amounts accruing to the
holders of the hybrid instrument and are calculated as follows:
2024 (Restated) 2023(1)
£m £m
Loss attributable to equity shareholders (802.8) (185.3)
Accrued payments on hybrid instrument (21.3) (21.3)
Earnings attributable to equity shareholders (824.1) (206.6)
(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
For diluted EPS, the weighted average number of ordinary shares in issue
during the year is adjusted to include the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares. The reconciliation of basic and diluted
weighted average number of ordinary shares is as follows:
2024 2023
Basic weighted average shares 611,292,234 612,919,243
Adjustment for dilutive potential ordinary shares(1&2) 24,816,797 898,828
Diluted weighted average shares 636,109,031 613,818,071
(1 ) Potential ordinary shares have the effect of being
anti-dilutive for diluted earnings per share in 2024 and 2023, and have been
excluded from the calculation of diluted earnings per share. They are not
anti-dilutive for adjusted diluted earnings per share so have been included in
that calculation.
(2 ) The adjustment for dilutive potential ordinary shares
has significantly increased year on year due to share options granted in the
period under both the Long-Term Incentive Plan and Restricted Share Plan
schemes.
The adjusted basic and adjusted diluted earnings per share have been
calculated in addition to the basic and diluted earnings per share required
by IAS 33 since, in the opinion of the Directors, they reflect a key measure
of performance of the business' operations.
The reconciliation of the earnings and earnings per share to their adjusted
equivalent is as follows:
2024 (Restated) 2023(1)
£m Basic EPS Diluted EPS £m Basic EPS Diluted EPS
p p p p
Earnings attributable to equity shareholders (129.5)(3) (206.6) (33.7) (33.7)
(824.1) (134.8)
Adjusting items 710.4 116.2 111.6 213.0 34.8 34.8
Adjusting items tax 143.1 23.4 22.5 21.6 3.4 3.4
Adjusting items non-controlling interests - - - (0.2) - -
Adjusted earnings attributable to equity shareholders(2) 29.4 4.8 4.6 27.8 4.5 4.5
Amounts accruing to the holders of the hybrid instrument 21.3 21.3
Adjusted profit attributable to equity shareholders 50.7 49.1
(1) Restated for a correction to the German Rail onerous contract provision,
see note 1 for further information
(2) After deducting amounts accruing to the holders of the hybrid instrument
(3) Potential ordinary shares have the effect of being anti-dilutive for
diluted earnings per share in 2024 and 2023, and have been excluded from the
calculation of diluted earnings per share. They are not anti-dilutive for
adjusted diluted earnings per share so have been included in that calculation
9 Goodwill and impairment
Goodwill has been allocated to individual cash-generating units for annual
impairment testing on the basis of the Group's business operations.
During 2024, a separation of the School Bus and WeDriveU operating divisions
within North America has taken place, with each of these business now
identified as a separate CGU; this was done as a result of preparing the North
America School Bus business for a potential sale. As a result, there are no
comparatives available for 2023, as they were treated as one combined CGU, in
line with IAS 36, given this was the level goodwill was monitored at within
the business. Similarly, no amounts for the combined North America division
are presented in 2024, whereas the 2023 comparative has been stated, as the
impairment assessment is no longer carried out at this level. The split of the
goodwill balance (a combined £708.0m as at 31 December 2023) was apportioned
between the School Bus and WeDriveU CGUs as part of the separation based on
actual historic data.
The carrying value by cash-generating unit is as follows:
2024 2023
£m £m
UK 50.1 52.4
North America(1) n/a(1) 708.0
North America School Bus(1) - n/a(1)
North America WeDriveU(1) 158.3 n/a(1)
ALSA 576.9 550.3
785.3 1,310.7
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(1) During 2024, a separation of the School Bus and WeDriveU operating
divisions within North America has taken place; please see the Goodwill
allocation section above for further detail
Assumptions and estimates used in the goodwill impairment assessment
calculation
As per IAS 36, the cash-generating unit (CGU) is the smallest identifiable
group of assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets. During 2024, the North
America business has split into two separate operating units. As a result, the
requirements of IAS 36 now dictate that we must treat these as two separate
CGUs, since the cash flows of each can now be separately analysed and they are
under separate executive leadership.
The calculation of value in use for each CGU is most sensitive to the
assumptions over cash flows, discount rates and the growth rate used to
extrapolate cash flows into perpetuity beyond the five-year period of the
management plan. The key assumptions used for the cash-generating units are as
follows:
Pre-tax discount rate applied to cash flow projections Growth rate used to extrapolate cash flows
into perpetuity
2024 2023 2024 2023
UK 10.4% 10.8% 2.9% 2.7%
North America(1) n/a(1) 10.0% n/a(1) 3.7%
North America School Bus(1) 10.3% n/a(1) 3.8% n/a(1)
North America WeDriveU(1) 10.3% n/a(1) 3.8% n/a(1)
ALSA 12.8% 13.4% 3.4% 3.2%
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(1) During 2024, a separation of the School Bus and WeDriveU operating
divisions within North America has taken place; please see the Goodwill
allocation section above for further detail
Discount rates have reduced for the UK and ALSA, and have been impacted by an
increase in the proportion of debt to equity of the comparator companies used
in the calculation of the weighted average cost of capital (WACC).
The key estimates applied in the impairment review are the forecast level of
revenue, operating margins and the proportion of operating profit converted to
cash in each year. Forecast revenue and operating margins are based on past
performance and management's expectations for the future. A growth rate for
each division has been consistently applied in the impairment review for all
cash-generating units based on respective long-term country-specific GDP
growth rates. The cash flows are discounted using pre-tax rates that are
calculated from country-specific WACC, principally derived from external
sources. Capital expenditure is projected over the first five years using a
detailed forecast of the capital requirements of the Group for new and
replacement vehicles and other assets. In the extrapolation of cash flows into
perpetuity (the "terminal value"), capital expenditure is assumed to be a 1:1
ratio to depreciation. In line with the requirements of IAS 36, only the cost
reductions associated with restructuring programmes already delivering savings
are included within the cash flow projections. Inclusion of the cost reduction
benefits from these programmes would increase the available headroom for all
divisions; as the plans become more advanced we expect these savings to be
incorporated in future assessments.
Results of the 2024 impairment assessment
North America School Bus & UK
The value in use of the North America School Bus Division is lower than its
carrying amount by £547.7m, resulting in a full impairment of the goodwill
balance for this CGU.
The value in use of the UK exceeds its carrying amounts by £72.0m (2023:
£521.1m). As a result, the amount by which the value in use exceeds the
carrying amount has significantly reduced compared to prior year and the
impairment of goodwill for the UK CGU has been identified as a key source of
estimation uncertainty.
Losses in both North America School Bus and the UK businesses have been
incurred since the onset of the Covid-19 pandemic, from which our recovery has
been slower than anticipated. At the end of 2023, management expected at that
time that profitability in North America and the UK would significantly
improve in the current year. However, actual performance in 2024 was
significantly below management's previous forecasts. In North America School
Bus, whilst the business has demonstrated its recovery from the pandemic and
showed some encouraging improvements in 2024 such as a successful bid season
and positive price increases, it continues to face significant headwinds such
as driver wage inflation, lower driver availability and rising maintenance
costs, which have both been materially higher in 2024 than prior forecast
expectations. In the UK, this was mainly reflective of lower passenger volumes
and yield in UK Coach than had been projected, and far fewer benefits from
rail strikes (which had been a significant tailwind in 2023) than had been
anticipated.
Given this adverse performance to forecast in 2024, and given the current
stage in the turnaround of both businesses, the future profitability within
the financial forecasts for both the UK and North America School Bus as at 31
December 2024 used for the goodwill impairment assessment have significantly
reduced compared to the prior year. Whilst management's strategic plan
forecasts prepared in 2024 include profit improvement actions that aim to
improve the future financial performance of both businesses, these have not
been included in the forecasts used for this exercise as they cannot currently
be objectively evidenced at this stage in the turnaround.
As a result, goodwill in North America School Bus has been fully impaired and
whilst there is no impairment of UK goodwill, headroom has significantly
reduced year on year. The separation of the two North America businesses into
two CGUs in the year was also a contributing factor to the impairment in North
America School Bus, as it generates lower cash flows relative to its asset
base, compared to WeDriveU.
As a consequence of the full impairment of goodwill in North America School
Bus, the carrying value of the business is now more closely aligned to the
expected market value through sale.
ALSA & North America WeDriveU
The value in use of the ALSA division exceeds its carrying amount by £274.6m
(2023: £134.9m). The increase in headroom is primarily due to an improvement
in the cash flow forecast and reduction in the discount rate.
The value in use of the North America WeDriveU division exceeds its carrying
amount by £266.9m.
Prior year comparatives for School Bus and WeDriveU individually are not
available, as North America was treated as one combined CGU prior to 2024.
Climate change risk assessment
The assumptions underpinning the cash flow projections also take account of
the climate change risk assessment exercise from which the pertinent
conclusions were as follows:
· Whilst the global temperature rise above pre-industrial levels
increases the likelihood of extreme weather events, the geographical diversity
of the Group means that the risk to the Group as a whole is unlikely to be
material. We have, nonetheless, factored in an assumption of financial impact
from extreme weather disruption, albeit not to the extent of the extreme
scenario disclosed in the TCFD section of the Strategic Report.
· The Group's planning assumption is that input costs will not rise
significantly above inflation on the basis that, for electric vehicles for
example, supply will increase to match demand, and technological advances will
also help decrease manufacture costs. Furthermore the Group assumes, based on
its detailed modelling of electric versus diesel buses in the UK, that the
total cost of ownership of zero emission vehicles will be no worse than their
diesel equivalents. This assessment is inclusive of the cost of new electric
vehicle infrastructure and assumes no government funding. The Group expects to
utilise hydrogen or electric vehicles in the transition to zero emission fleet
in long haul coach services and the Group assumes that total cost of ownership
for these vehicles will also be no worse than at parity with their diesel
equivalents over their useful lives, albeit may require some level of
government subsidies on the capital cost and/or the hydrogen fuel. We will be
closely following emerging solutions for the considerably larger haulage
industry, which will likely accelerate the emergence of technology and
infrastructure solutions into the market.
· The Group already has ambitious targets for the transition to
zero emission fleets. The Group has assessed as very low the risk of the
current fleet having a net book value higher than their residual value at the
Group's targeted transition dates and has therefore concluded that no changes
to the useful economic lives of the Group's current fleet are required. Some
ZEV suppliers are actively buying back diesel vehicles to accelerate the
introduction of electric vehicles. There is also a second hand market
(especially large in the North America Transit business) enabling recovery of
any net book value of diesel vehicles.
· The opportunity from modal shift from private cars to public
transport is potentially significantly more material than that assumed in the
Group's long-term cash flow projections as central governments, transport
authorities and city councils introduce measures to tackle congestion,
pollution and emissions. We see that the benefits of modal shift far outweigh
the costs of having to comply with new regulations.
Sensitivities to key assumptions
The table below summarises the reasonably possible changes in key assumptions
which most impact the value in use of the UK CGU. Sensitivities for other CGUs
have not been prepared as these are not considered key sources of estimation
uncertainty.
UK Sensitivity (Decrease)/Increase in carrying value £m
2024 2023
Pre-tax discount rate Increase of 1.5 percentage points nil n/a(1)
Long term growth rate Decrease of 1.0 percentage point nil n/a(1)
Adjusted Operating Profit Margin throughout the assessment period Decrease of 1.5 percentage point (41.3) n/a(1)
Free cash flow in the terminal value Decrease by 10% nil n/a(1)
(1) In 2023, Goodwill impairment for the UK CGU was not identified as a key
source of estimation uncertainty, therefore sensitivity analysis was not
prepared.
Sensitivity analysis has also been conducted to assess the change required in
each of the critical inputs in order to reduce the value in use to equal the
carrying value.
Change required to reduce headroom to nil North America WeDriveU ALSA UK
2024 2023 2024 2023 2024 2023
Increase in pre-tax discount rate 4.9% n/a(1) 3.0% 1.7% 4.1% n/a(2)
Reduction in long term growth rate 4.6% n/a(1) 2.8% 1.7% 5.2% n/a(2)
Reduction in adjusted operating profit margin 3.7% n/a(1) 2.0% 1.1% 1.0% n/a(2)
(1)During 2024, a separation of the School Bus and WeDriveU operating
divisions within North America has taken place; please see the Goodwill
allocation section above for further detail
(2) In 2023, Goodwill impairment for the UK CGU was not identified as a
critical source of estimation uncertainty, therefore sensitivity analysis was
not prepared.
10 Business combinations, disposals and assets held for sale
(a) Acquisitions - ALSA
On 1 March 2024 the ALSA division obtained control of Canary Bus (known as
Grupo 1844) by acquiring 100% of the voting rights on this date. Canary Bus is
the leading provider of tourist and discretionary services in the Canary
Islands. This acquisition sees ALSA become a key player in the Canary Islands
mobility market, significantly increasing its activity in the tourism
transport sector, which is expected to grow over the next few years.
The provisional fair values of Canary Bus are noted below, along with an
adjustment to the fair value of a prior acquisition (Tranvias De Sevilla)
within the remeasurement period:
Canary Bus Tranvias De Sevilla Total
£m £m £m
Investments 0.3 - 0.3
Intangible assets 0.1 1.9 2.0
Property, plant and equipment 26.6 - 26.6
Inventory 2.3 - 2.3
Trade and other receivables 31.3 - 31.3
Other debt receivables 3.5 - 3.5
Cash and cash equivalents 2.9 - 2.9
Borrowings (16.1) - (16.1)
Trade and other payables (44.9) - (44.9)
Provisions (1.5) - (1.5)
Deferred tax asset 1.8 (0.5) 1.3
Net assets acquired 6.3 1.4 7.7
Goodwill 54.5 (1.4) 53.1
Total consideration 60.8 - 60.8
Represented by:
Cash consideration 38.3 - 38.3
Deferred consideration(1) 22.5 - 22.5
60.8 - 60.8
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(1) During the year £12.7m of deferred consideration was paid, the remaining
£9.8m will be settled within 12 months of the balance sheet date
As permitted by IFRS 3 Business Combinations, the fair value of acquired
identifiable assets and liabilities have been presented on a provisional
basis. The fair value adjustments will be finalised within 12 months of the
acquisition date, principally in relation to the valuation of provisions and
intangible assets acquired.
Trade and other receivables had a fair value and a gross contracted value of
£31.3m. The best estimate at acquisition date of the contractual cash flows
not to be collected was £nil.
Goodwill of £53.1m per the above table is comprised of £54.5m arising from
the Canary Bus acquisition, less a fair value adjustment relating to a prior
acquisition resulting in a reduction in goodwill of £1.4m. These are further
described below.
Goodwill of £54.5m arising from the Canary Bus acquisition consists of
certain intangibles that cannot be separately identified and measured due to
their nature. This includes becoming a key player in the Canary Islands
mobility market, significantly increasing ALSA's activity in the tourist
transport, a segment where it is intended to grow over the next few years.
None of the goodwill recognised is expected to be deductible for income tax
purposes.
During the period the fair value adjustments relating to intangibles acquired
in 2023 as part of the Tranvias De Sevilla acquisition were finalised. This
resulted in an increase in the fair value of separately identifiable
intangibles acquired, a corresponding decrease in deferred tax asset, and a
reduction in goodwill of £1.4m.
The acquired Canary Bus business has contributed £40.0m of revenue and £7.7m
adjusted operating profit to the Group's result for the period between
acquisition and the balance sheet date. Had the acquisition been completed on
the first day of the financial year, the Group's revenue would have been
£3,420.4m and the Group's statutory operating loss for the period would have
been £514.8m.
Acquisition costs of £1.5m (2023: £nil) have been charged to the Income
Statement.
Deferred consideration of £16.1m was paid in the period of which £12.7m
related to Canary Bus and £3.4m related to acquisitions in ALSA in earlier
years. Total cash outflow in the period from acquisitions in the ALSA division
was £29.2m, comprising consideration for current year acquisitions of £32.1m
(cash consideration above includes a prepayment of £6.2m paid in 2023), less
cash acquired in the businesses of £2.9m.
In North America deferred consideration of £0.1m was paid in the period
relating to acquisitions in earlier years.
(b) Acquisitions - further information
The movement in deferred consideration and deferred contingent consideration
in the year is as follows:
2024 2023
£m £m
Fair value:
At 1 January 8.7 11.7
Additions in the year 22.5 0.8
Payments during the year (16.2) (3.6)
Fair value movement of deferred contingent consideration through Profit and - -
Loss
Foreign exchange (0.3) (0.2)
At 31 December 14.7 8.7
Split of consideration:
Deferred consideration 14.0 8.0
Deferred contingent consideration(1) 0.7 0.7
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(1) Relates to a prior ALSA acquisition and is expected to be settled within
12 months of the balance sheet date
The Group measures deferred contingent consideration at fair value through
profit and loss and by reference to significant unobservable inputs, i.e.
classified as Level 3 in the fair value hierarchy. The significant
unobservable inputs used to determine the fair value of the contingent
purchase consideration are typically forecast earnings or estimating the
likelihood that contracts will be renewed over a fixed period.
The fair value of deferred contingent consideration is not highly sensitive to
changes in significant unobservable inputs and therefore sensitivities to the
valuation have not been disclosed.
(c) Disposals
As part of a UK restructuring the Group disposed of entities and properties
within its UK division for consideration of £6.6m, recognising a gain on
disposal of £3.2m in the Income Statement within adjusting items. The results
of these entities were included within the Group Income Statement to the date
of disposal when control was transferred to the buyer.
(d) Assets held for sale
At the balance sheet date the Group had no assets held for sale. In the prior
year, in ALSA, a building with a carrying value of £18.2m met the held for
sale IFRS 5 criteria and was subsequently sold in 2024 for proceeds of
£21.2m. A net loss of £0.7m has been recognised in the Group Income
Statement relating to this sale, comprising a net gain on disposal of £2.8m
less a commission payable of £3.5m to a related party.
11 Cash and cash equivalents
2024 2023
£m £m
Cash at bank and in hand 129.4 186.1
Overnight deposits 0.1 0.2
Other short-term deposits 115.0 170.0
Cash and cash equivalents 244.5 356.3
Included within cash and cash equivalents are certain amounts which are
subject to contractual or regulatory restrictions or withholding tax levied on
repatriation of cash. These amounts held are not readily available for other
purposes within the Group, and if repatriated would result in £0.9m of
withholding tax (2023: £2.6m).
Cash at bank and in hand earns interest at floating rates based on daily bank
deposit rates.
Short-term deposits are made for varying periods of between one day and three
months depending on the immediate cash requirements of the Group and earn
interest at the agreed short-term floating deposit rate. The fair value of
cash and cash equivalents is equal to the carrying value.
For the purposes of the Consolidated Statement of Cash Flows, cash and cash
equivalents and bank overdrafts in notional cash pooling arrangements are
presented net. Bank overdrafts form an integral part of the Group's cash
management strategy as they arise from the Group's cash pooling arrangement
with its bank and can fluctuate from positive to negative balances during the
period. Net cash and cash equivalents comprise as follows:
2024 2023
£m £m
Cash and cash equivalents 244.5 356.3
Bank overdrafts (41.4) (62.6)
Net cash and cash equivalents 203.1 293.7
12 Pensions and other post-employment benefits
The UK division (UK) operates a defined benefit pension scheme.
The Company has in the past operated a defined benefit scheme. On 23 September
2021, a full buy-out of the defined benefit section was completed, following
which Rothesay Life has become fully and directly responsible for the pension
obligations. On completion of the buy-out, the defined benefit assets
(comprising the Rothesay Life insurance policy) and matching defined benefit
liabilities were derecognised from the Group's Balance Sheet. The buy-out
transaction also triggered the return of surplus assets to the Company
totalling £7.5m, with the remaining assets retained in the scheme to cover
final expenses in completing its wind-up.
The Group also provides certain additional unfunded post-employment benefits
to employees in North America and maintains a small defined benefit scheme for
National Express Services Limited. These post-employment benefits have been
combined into the 'Other' category.
In 2020, the UK division agreed a new six-year annual deficit plan with the
trustees of the West Midlands Integrated Transport Authority Pension Fund,
which continues until March 2026 with an average contribution of £7.6m per
annum. The plan remains open to accrual for existing members only.
The assets of the defined benefit schemes are held separately from those of
the Group and contributions to the schemes are determined by independent
professionally qualified actuaries.
The net pension liability for the UK division scheme has reduced significantly
in the year, principally as a result of an increase in the discount rate.
As a result of this, the Group has considered the impact of IFRIC 14 and has
subsequently determined that the Group does not have an unconditional right to
a refund of surplus and therefore the IFRIC 14 requirements regarding
consideration of minimum funding commitments applies. As a consequence, the
net pension liability has been increased to the net present value of the
committed future deficit contributions, resulting in a restriction due to the
asset ceiling of £4.2m being applied, and a closing net pension liability for
the UK scheme of £11.3m.
The Group expects to contribute £10.0m into its defined benefit pension plans
in 2025.
During the year the Group assessed the impact of the Virgin Media legal case
on both the UK division and the National Express Services Limited defined
benefit pension schemes, and concluded there was no impact on either scheme as
a result of this ruling.
The UK division, the Company and North America also operate or contribute into
a number of defined contribution schemes.
The total pension cost charged to adjusted operating profit in the year for
the Group was £9.4m (2023: £9.2m), of which £7.8m (2023: £7.5m) relates to
the defined contribution schemes.
The defined benefit pension (liability)/asset included in the Balance Sheet is
as follows:
2024 2023
£m £m
Other 0.1 0.2
Pension assets 0.1 0.2
UK (11.3) (30.0)
Other (0.3) (2.8)
Pension liabilities (11.6) (32.8)
Total (11.5) (32.6)
The most recent triennial valuations are then updated by independent
professionally qualified actuaries for financial reporting purposes, in
accordance with IAS 19 The assumptions for the UK scheme are listed below:
UK UK
2024 2023
Rate of increase in salaries 2.5% 2.5%
Rate of increase of pensions in payment 2.6% 2.5%
Discount rate 5.4% 4.5%
Inflation assumption (RPI) 3.1% 3.1%
Inflation assumption (CPI) 2.6% 2.5%
Post-retirement mortality in years:
Current pensioners at 65 - male 18.7 18.5
Future pensioners at 65 - male 19.7 19.5
Current pensioners at 65 - female 21.7 21.5
Future pensioners at 65 - female 24.1 23.9
The Directors regard the assumptions around pensions in payment, discount
rate, inflation and mortality to be the key assumptions in the IAS 19
valuation.
The following table provides an approximate sensitivity analysis of a
reasonably possible change to these assumptions:
(Increase)/decrease in the defined benefit obligation UK UK
2024 2023
£m £m
Effect of a 0.5% increase in pensions in payment (11.8) (13.7)
Effect of a 0.5% decrease in the discount rate (18.7) (21.8)
Effect of a 0.5% increase in inflation (13.1) (15.1)
Effect of a 1-year increase in mortality rates (11.0) (13.4)
The above sensitivity analyses are based on a change in an assumption while
holding all other assumptions constant. Aside from the matching insurance
contracts held in the UK scheme, no allowance has been made for any change in
assets that might arise under any of the scenarios set out above.
Scheme assets are stated at their market values at the respective balance
sheet dates. The expected rate of return on scheme assets is determined based
on market returns on each category of scheme assets.
13 Cash flow statement
(a) Reconciliation of Group loss before tax to cash generated from operations
2024
£m (Restated)
2023(2)
£m
Loss before tax (609.3) (120.1)
Net finance costs 92.6 76.4
Share of results from associates and joint ventures (3.2) 0.5
Depreciation of property, plant and equipment 213.4 199.3
Intangible asset amortisation 50.2 53.8
Amortisation of fixed asset grants (2.0) (2.0)
Gain on disposal of property, plant and equipment (11.0) (12.7)
Gain on disposal of intangible assets (0.8) (0.4)
Share-based payments 4.6 1.6
Decrease/(increase) in inventories 1.2 (2.4)
Decrease in receivables 42.9 0.8
Increase in payables 7.1 27.8
Increase/(decrease) in provisions 0.1 (4.0)
Decrease in pensions (11.0) (8.4)
Adjusting operating items(1) 679.9 176.5
Cash flows relating to adjusting items (99.2) (71.0)
Cash generated from operations 355.5 315.7
1 Excludes amortisation from acquired intangibles which is included
within 'intangible asset amortisation'
2 Restated for a correction to the German Rail onerous contract
provision, see note 1 for further information
b) Analysis of changes in adjusted net debt
Adjusted net debt is an alternative performance measure which is not defined
or specified under the requirements of International Financial Reporting
Standards.
At Cash flow Acquisitions and disposals Exchange differences Other movements At
1 January £m £m £m £m 31 December
2024 2024
£m £m
Components of financing activities:
Bank and other loans(1) (243.9) 65.6 (4.4) 5.9 (0.7) (177.5)
Bonds(3) (659.2) - - 19.8 (8.9) (648.3)
Fair value of interest rate derivatives (16.4) - - - 7.7 (8.7)
Fair value of foreign exchange forward contracts (1.2) 9.3 - (13.2) - (5.1)
Cross currency swaps (2.2) - - 1.1 - (1.1)
Net lease liabilities(2) (171.9) 60.7 (11.7) 1.0 (54.3) (176.2)
Private placements(3) (404.7) - - 8.5 (0.3) (396.5)
Total components of financing activities (1,499.5) 135.6 (16.1) 23.1 (56.5) (1,413.4)
Cash 186.1 (56.8) 2.9 (2.8) - 129.4
Overnight deposits 0.2 (0.1) - - - 0.1
Other short-term deposits 170.0 (55.0) - - - 115.0
Bank overdrafts (62.6) 21.0 - 0.2 - (41.4)
Net cash and cash equivalents 293.7 (90.9) 2.9 (2.6) - 203.1
Other debt receivables 2.9 (3.7) 3.5 - - 2.7
Remove: fair value of foreign exchange forward contracts 1.2 (9.3) - 13.2 - 5.1
Adjusted net debt (1,201.7) 31.7 (9.7) 33.7 (56.5) (1,202.5)
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(1) Net of arrangement fees totalling £2.7m (2023: £3.3m) on bank and other
loans
(2) Net lease liabilities is inclusive of finance lease receivables which are
reported separately from borrowings on the face of the Group's Balance Sheet
(3) Excludes accrued interest on long-term borrowings
Short-term deposits relate to term deposits repayable within three months.
Borrowings include non-current interest-bearing borrowings of £1,258.8m
(2023: £1,290.6m).
Other non-cash movements include lease additions and disposals of £54.3m
(2023: £50.2m), and £2.2m amortisation of loan and bond arrangement fees
(2023: £2.3m). A £7.7m increase in the fair value of the hedging derivatives
is offset by opposite movements in the fair value of the related hedged
borrowings.
At Cash flow Acquisitions and disposals Exchange differences Other movements At 31 December
1 January
£m
£m
£m
£m
2023
2023
£m
£m
Components of financing activities:
Bank and other loans(1) (194.7) (53.4) (0.4) 6.1 (1.5) (243.9)
Bonds(3) (621.4) (28.5) - 1.1 (10.4) (659.2)
Fair value of interest rate derivatives (26.0) - - - 9.6 (16.4)
Fair value of foreign exchange forward contracts 11.9 (14.3) - 1.2 - (1.2)
Cross currency swaps (6.0) (6.3) - 10.1 - (2.2)
Net lease liabilities(2) (183.7) 57.4 - 4.6 (50.2) (171.9)
Private placements(3) (411.9) - - 7.4 (0.2) (404.7)
Total components of financing activities (1,431.8) (45.1) (0.4) 30.5 (52.7) (1,499.5)
Cash 171.7 16.0 2.0 (3.6) - 186.1
Overnight deposits 6.6 (6.9) 0.6 (0.1) - 0.2
Other short-term deposits 113.5 56.6 - (0.1) - 170.0
Bank overdrafts (58.7) (3.9) - - - (62.6)
Net cash and cash equivalents 233.1 61.8 2.6 (3.8) - 293.7
Other debt receivables 2.7 0.3 - (0.1) - 2.9
Remove: fair value of foreign exchange forward contracts (11.9) 14.3 - (1.2) - 1.2
Adjusted net debt (1,207.9) 31.3 2.2 25.4 (52.7) (1,201.7)
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(1) Net of arrangement fees totalling £3.3m (2022: £1.1m) on bank and other
loans
(2) Net lease liabilities is inclusive of finance lease receivables which are
reported separately from borrowings on the face of the Group's Balance Sheet
(3) Excludes accrued interest on long-term borrowings
(c) Reconciliation of net cash flow to movement in adjusted net debt
2024 2023
£m £m
(Decrease)/increase in net cash and cash equivalents in the year (88.0) 64.4
Cash (outflow)/inflow from movement in other debt receivables (0.2) 0.3
Cash inflow/(outflow) from movement in debt and leases liabilities 110.2 (31.2)
Change in adjusted net debt resulting from cash flows 22.0 33.5
Change in adjusted net debt resulting from non-cash movements (22.8) (27.3)
Movement in adjusted net debt in the year (0.8) 6.2
Opening adjusted net debt (1,201.7) (1,207.9)
Adjusted net debt (1,202.5) (1,201.7)
14 Financial information
The financial information set out above does not constitute the Group's
Financial Statements for the years ended 31 December 2024 or 2023, but is
derived from those Financial Statements. Statutory Financial Statements for
2023 have been delivered to the Registrar of Companies and those for 2024 will
be delivered following the Company's annual general meeting. The auditors have
reported on those Financial Statements; their reports were unqualified, did
not draw attention to any matters by way of emphasis without qualifying their
report and did not contain statements under s498(2) or (3) Companies Act 2006.
The Annual Report will be published on the Company website on 29 April 2025
and will also be available from the Company Secretary at National Express
House, Birmingham Coach Station, Mill Lane, Digbeth, Birmingham, B5 6DD.
15 Post balance sheet events
Disposal of North America School Bus business
On 25 April 2025 the Group announced the sale of its North America School Bus
business ("School Bus") to I Squared Capital, the leading global
infrastructure investment manager, for a headline enterprise value of up to
$608m; with expected upfront net proceeds of approximately $365m-$385m.
Further details of the sale, including a description of the key adjustments
between enterprise value and upfront net proceeds, can be found in the stock
exchange announcement at
https://www.londonstockexchange.com/news-article/MCG/proposed-sale-of-north-america-school-bus/17005162.
As announced on 12 October 2023, the Mobico Board concluded, in line with the
Group's disciplined capital allocation approach and focus on reducing debt and
leverage, that the capital-intensive School Bus business would be prepared for
a potential sale.
The Directors have considered whether the held for sale criteria under IFRS 5
were met as at 31 December 2024 and the Directors believe that the sale plan
was not progressed sufficiently for the held for sale criteria to have been
met as at 31 December 2024; with the sale still subject to Board approval,
lender consent, and terms not having been agreed with the buyer as at that
date.
School Bus is part of the North America reporting segment and is the second
largest operator in the North American School bus market with a 10% share of
the growing outsourced market, operating approximately 14,135 vehicles.
The disposal is conditional upon certain customary and various other
conditions, including anti-trust approvals, and is expected to complete in the
third quarter of 2025.
School Bus contributed approximately $11m to FY24 Adjusted Operating Profit.
It had net assets of approximately $455m as at 31 December 2024, excluding
both intercompany balances and liabilities that will be retained by the Group
post-completion. The Group's covenant net debt will be reduced by
approximately $365-$385m as a result of the sale, with adjusted net debt being
further reduced following the removal of IFRS 16 leases of approximately $38
million (as at 31 December 2024).
The financial effect arising from the final gain or loss on disposal, expected
to be recognised in FY25, cannot be estimated at this time primarily due to
the need to calculate the amount to be recycled from the translation reserve
and net investment hedge reserve as pertains to School Bus, as well as
accounting for final transaction costs.
Disposal of investment in Transit Technologies Holdco
As at 31 December 2024 the Group owned a non-listed US equity investment in
Transit Technologies Holdco which was held at fair value through Other
Comprehensive Income. Subsequent to the year end, on 3 March 2025, the sale of
this investment completed for a total consideration of $21.9m.
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