Mobico Group Plc

Good morning everyone. Excuse me. I'm Phil White. I'm executive chair of Mobico. Welcome to our 2025 half year results presentation. Now I'm not standing at the podium today. A few weeks ago I had an operation on my knee. I've got a new knee. And the last thing I want to do is stand up there and fall over. That will make the wrong headlines. Okay. So you'll have to bear with me if I sit down. So sorry for this. So anyway, can I first introduce My colleague sat next to me, on my left, is Brian Egan, who's just joined us as CFO. Brian's got a lot of experience in many difficult businesses in many difficult countries, so he's definitely the right guy for us at the moment. You'll find that he's a very softly spoken, polite, gentle, gentle Irishman from Dublin. But believe me, don't be fooled by that, he's nothing of the sort. Anybody who worked with him in the room... Well, no, he's as absolutely hard as nails, especially when you're negotiating fees with him. Okay? So don't be fooled. On my right is Paco, Paco Iglesias. Paco is our new, well, not new, but in this year, our group chief operating officer. He's also been chief executive of ALSA for nearly 10 years. Now, you only have to look at the results of ALSA for the last 10 years, which are absolutely stunning. And they continue to be so. So that's all down to Paco and his team. Welcome. All three of us are from three different countries. We've got an Irishman, a Yorkshireman, our own country, and we've got a Spaniard. But we've got one thing in common, although we speak differently. We've all joined the board this year in 2025. So what you see before you today is a brand new team. We set ourselves various commitments. The first thing I did was go around our shareholders and speak to them and introduce myself to try and understand their thoughts on why I'd been appointed, why I'd come back. Sorry to calm them down on that a bit. And when Brian came, we did a full roadshow of our lenders, our banking colleagues. And what we've said to them is that our style is perhaps different, not only from our predecessors, but probably from different countries. Going forward, we will be very open and very honest. We will communicate regularly, so hopefully there won't be any unwelcome surprises. but most importantly we will deliver what we have promised now this should be pretty easy for us because this is how we normally work we're normal people so we're going to be open and honest and probably we'll be a bit too honest at times I'm often criticized for that we will talk a lot to our stakeholders and probably a bit too much and a bit too less and we'll always try to over deliver But we are human. Sometimes we won't get it right. We can't get it right every time. We will make mistakes. So, as it says on your pads in front of you, quite interesting headline which I've just seen. What will inspire you today? And this is what we're here for. So we hope we inspire you. So, let me start by telling you how the three of us are approaching our new roles. It really is back to the future. We've actually decided to start by going backwards. I know that sounds a bit crazy, but we're taking a small step back to achieve a bigger future. We've asked ourselves two simple questions. You think the strange questions are so easy. What are we? And what's our priorities? In our case, we don't have the luxury of starting with a clean sheet of paper. We've got to work with what we've got. So what are we? Now this is very simple. We're a major public transport group. We've been listed for years on the London Stock Exchange. We've got businesses in the UK, the USA and Spain and some other business and some other countries. That's a pretty obvious answer to that question. But being listed on the LSE does give us responsibilities and obligations and we are fully aware of what our responsibilities are. The second question, what are our priorities, needs a little bit more explanation. So what I'm going to do is take you briefly through the group and all our divisions. And we're going to be absolutely open and honest with you on this. So if you look at group first, despite having some great businesses, we're not performing as well as we would like to. We have a track record of over-promising and under-performing. And we're over-leveraged and unloved by our shareholders. They've told me that, absolutely. Despite this, there are some things that haven't changed since my first spell at National Express when I was a boss here. We still have a great team of loyal people who are committed to looking after their customers and the communities in which they work. And as before, we also have a diverse portfolio of businesses, a bit different from the old days, but we've got deep expertise across many geographies and many different modes of transport. we think that we've got many opportunities for significant value creation for our investors and our people although we have to be a lot more disciplined in our execution but please remember we are a new team and we don't have all the answers just yet so let's take a look at our various divisions firstly coach This is where it all started in the 70s with National Express coaches created under National Bus Company. And we still have a national network of coach services in the UK, mainly run by third parties under our branding. I think that model is well known to you all. But we are now creating a pan-European coach powerhouse. UK coach will join ALSA from January next year. This will unlock our ability to compete, win and grow and deliver more efficiencies and synergies. The National Express brand is highly respected in the UK, is highly recognised and it will remain as it is. We have today announced that Xavier Martinez Prieto has been appointed as MD of UK Coach. As you know, we're facing many competitive challenges to our network, particularly in pricing. We are fighting back by continuing to invest in the digital customer service interface, more dynamic pricing and upgrading customer service in all our coach stations. This will give our passengers a much better experience of travelling with us. Although at the moment we are maintaining our passenger numbers, which is great news, we are experiencing reduction in our yields. So we have to respond by being more efficient and more cost effective. If you look at UK Bus, as you know in my time, UK Bus was formerly the jewel in the National Express Group crown. It's the leading operator in the West Midlands market but has struggled a lot since Covid. We now have a funding agreement with Transport for the West Midlands which covers fares and service levels. Thanks to Kevin Gale and his new team we have now much improved relationships with our West Midlands stakeholders which is crucial to us given what is coming around the corner. So what's coming around the corner? The answer is The Mayor of the West Midlands, as you know, has decided to introduce bus franchising in the region and this will happen between 2027 and 2030. This marks the end of the deregulated and commercial bus network introduced in 1986. Our focus now is on preparing for franchising, leveraging our long history in the area, but also looking for opportunities in the other major conurbations. As we did when deregulation was introduced in the 80s, we will embrace the change and do our best to help our local authority partners achieve a seamless transition to the new regulated era. Over to the States. We Drive You operates shuttle and transit services across the USA. It has nearly 100 contracts, the vast majority of which are profitable. but unfortunately two are loss making and that's affected the group's results today. One of the loss makers is in Charleston and this will terminate at the end of the year, the contract, and we will not be renewing it. The other loss maker is our Washington contract and this has operational issues. We have an action plan in place to fix the problems which have been caused by a difficult mobilisation at the start of the contract and significant driver management issues. As you know, We Drive You separated from its sister business, School Bus, when School Bus was sold earlier in the year and it is now run as a separate stand-alone business. There is a strong pipeline of growth opportunities, both in shuttle and in transit, with four new contracts already secured for the second half of this year, which is good news. Our focus going forward will be securing more asset-like contracts, which are cheaper to operate and carry far less risk. Moving on to German Rail. We're the second largest operator in North Rhine-Westphalia and one of the top five rail operators in Germany. We have three contracts, one profitable and two less making. I haven't got the balance quite right there. These have been very difficult contracts for us, particularly in driver recruitment and issues arising from poor rail infrastructure. We are now making progress in reducing the driver shortage gap, which has vastly improved network performance. And we are looking forward to more work by Deutsche Bahn on the network to fix the problems we have that have plagued the system for quite some time now. We have a new management team in Germany and the UK who have engaged a lot more closely with our local stakeholders. Again, crucially important. I can say today that discussions with our German local authority colleagues on our contracts are progressing very well. We are aiming to press ahead with supplementary agreements which hopefully will be finalised in the coming months. I'm told from a reliable source that we've made more progress in the last four months than the last four years. Hopefully it will soon be sorted. Moving on to ALSA. In preparing for my script for today, I googled to try and find what the original name of ALSA was, and here it is. But I can't pronounce it, so Paco, what is it?

ALSA is Automobiles and Worker Sociedad Anónima, but I think Phil has made up a new name for ALSA, but it's much better, much better.

But when I googled it, some wag had called ALSA a life-saving acquisition. And it truly is. And we much prefer Alsa to the big name, don't we, Paco? But we like a life-saving acquisition, because that makes me feel good as well. So Alsa truly has been a life-saving acquisition. It is a new jewel in the Mobico crown. It's the largest bus and coach operator in mainland Spain, and has expanded into the Canaries, the Balearics, and also Morocco, Portugal, Switzerland, and the Middle East. It has also been very brave and very successful in diversifying into other transport related businesses such as health transport which basically is ambulances. There is also a strong pipeline of growth opportunity in both new contracts and potential acquisitions. For instance, ALSA are currently bidding with a local partner for a significant 10 year asset like contract in Saudi Arabia. This contract is valued at over 500 million euros and is part of a 75 billion euro global investment there to create the world's largest entertainment destination. So if we get that, that will be really good news. That also continues to be our dominant business within the group. Underlying profit growth compared to last year is again in double figures at around 10%. We will be maximising ALSA's operational experience to drive improved performance across the whole group. So looking ahead, there are three things we need to do. Firstly, we've got to simplify our business. Secondly, we've got to strengthen our balance sheet. And thirdly, we've got to succeed by delivering on our premises. We've got to stop letting people down. So we're streamlining our management structure, we're attacking overheads, we're removing duplication and integrating businesses where this makes sense to do so. Sounds simple and it is. We will strengthen our balance sheet by generating more cash, improving liquidity and reducing debt, which is far too big. We are already reviewing our capex and acquisition plans to get better value from our investments. succeed what does succeed mean well i always feel the biggest motivator for people who work for us and work with us is not money it's the successes of business if we have a successful business we have happy people who provide quality service for all our customers if our people feel good about our business they'll stay with us fight for us and hopefully feel even happier and this is what i focused on in the first few months i'm trying to get a buzz back in the business A good feeling. But to achieve success, we've got to deliver what we've promised. And we haven't done this for quite a while. Which is not good. So, we've got to make our customers happy. We've got to hit our targets. We've got to generate cash to fund more investment in the business. We've got to be smarter. We can't settle for second best anymore. And we've got to achieve the right value for our investors, earn back their trust, and we want to make them love us again. So just a brief explanation of the results before I hand over to my colleague on my left. Here is a summary slide of our H1 results. You've already seen these in the RNS this morning. The good news, particularly in public transport, is the top line is still growing. Up 7% in the group compared to last year. But the bottom line is not so good. We're not converting our revenue and our cash into profits. So we've got to manage our costs better. Let's face it, this should be a lot easier job for us compared to managing our revenue. Hitting the costs, controlling the costs, reducing their costs is a lot easier than making your customers and your stakeholders pay for you. So ALSA has delivered another strong performance this year, but unfortunately it's not been replicated elsewhere in the group. Our UK, We Drive You and German rail businesses have made little or no financial contribution to the half-year bottom line. This is incredibly sad and it can't continue. As a result of this, EBIT is 9 million down on last year and we've also had to make a further impairment charge on the sale of school bus. This means we have wasted even more money on bad investment. I'll be as bold to say that. We've got to invest our monies a lot better than we have done in the past. So it's a first half where we could have done much better. But as I've said this morning, we are taking immediate action to address all these underlying issues. And we expect to deliver full year results, Gerald, in line with our previously stated guidance. I will now hand over to Brian to give you some interesting stuff.

Okay, thank you very much Phil and good morning everyone. Thank you very much for coming today. First of all, I would like to begin by highlighting the direction we are taking in terms of the financials. The good news is that our revenue continues to grow year on year. However, we are now focused on reducing and controlling costs in order to improve profitability. Second, We need to manage our balance sheet, and this means in particular tighter control over CapEx and working capital. This will increase our cash generation so we can reduce our debt to acceptable levels. As Phil said, we need to simplify and strengthen the business. H1 group revenue increased by 86 million, reaching 1.3 billion. This is a 7% increase. mainly reflects the strong growth in ALSA where passenger figures grew across all businesses, including 11.5% in Spain. And in We Drive You, we also saw strong revenue growth of over 13% driven by new contracts in corporate, university shuttle space and paratransit operations. UK revenue was flat in H1 when you take into account the exit of NXTS contracts. It is important to note that the coach sector in the UK remains extremely competitive. Adjusting operating profit for the group is 59.9 million, an 8.7 million decrease versus last year. This reduction was the result of lower profitability in We Drive You caused by operational challenges in Washington-based paratransit contract. On particular note, 82 million profit was generated by ALSA. The rest of the group reduced their profit by 22 million. This is being addressed. The business simply cannot afford the central and divisional overheads at this level and steps to reduce them significantly have already been taken. I would like to confirm that our full year profit guidance remains at 180 to 195 million. Free cash flow of 57.8 million is 38.5 million down from the prior year as a result of an increase in working capital mainly because of delayed collections in ALSA. This is expected to reverse in H2O. Return on capital employed was 11.6% versus 8.1% in half year 24. However, this is primarily due to the impairment of school bus, leading to a lower asset base. Whilst net debt and covenant gearing have increased since the year end, this is before the benefit of the 273 million school bus deleveraging proceeds. Taking these proceeds into account, gearing would have been 2.7% rather than 3%. Statutory profit from continuing operations is 35 million, a 23 million improvement on the prior year. Revenue has grown across all of our business except for UK coach, and this is the result of the exit of the loss-making private coach operations, which reduced revenue by 12.5 million. In terms of operating profit, only two of the divisions made a profit, ALSA and We Drive You. However, the profit from Redrive U is 13 million lower than last year due to operational challenges in the WMATA contract. It is clear that there is a strong top-line growth, but we need much better control over our costs. And as I mentioned before, central and divisional overheads are being reduced at present. I will now discuss our divisions in their local currencies. As is continued strong performance or revenue increase of over 13%. Adjusted operating profit was in line with the last year, with a 0.9% increase in adjusted operation profit. There was particularly good momentum in regional, urban and long-distance markets in Spain, where revenue grew by over 10% and operation profit grew 8%. The extended Young Summer initiative has driven strong long-haul performance, which is 20% up on prior years. ALSA continues to diversify business in Spain, For example, the health transport business, where revenue more than doubled since the same period last year, from 18 million to 39 million. It's also important to note that of the 97 million profit generated by ALSA, 9.3 million came from outside Spain. Underlying profit margins in line with half 1.1 of settlements in regional and urban businesses in the prior year taken into account, the underlying profit growth was 11%. ALSA had a successful half-year in terms of contract retention and bids for new contracts, including Andalusia, Bita, and the contract in Saudi Arabia that Phil mentioned earlier on. Whilst We Drive You has seen revenue grow by 16%, the operation profit of $3.4 million is disappointing. This is as a result of operational challenges with the WMATA contract. Although it took some time, WMATA operational targets are now being met. However, costs grew in doing so, and these are now being right-sized. Looking forward, streamlined business processes, automated systems, and tight cost control will drive margin improvement in We Drive You. Strong contract momentum continued in half one, and these contract wins alone will increase annual operating profit by over 2 million. Moving on to the UK performance. During H1, we saw increased competition in the coach sector. and the announcement by TFWM of their intention to franchise the regional bus market. Overall revenue declined by 12.5 million. However, this was due to our exiting of the loss-making NXGS and NEAT coach businesses. Otherwise, revenue is flat. Growth continued in Ireland with revenues up 2.7 million due to strong demand. The reduction of 1.5 million in operating losses to 9.1 million in the coach business, materially driven by the exit of the loss-making contracts that I've already mentioned. Total UK coach operating margin improved by 0.6 of a percent as a result of the restructuring and changes to seasonal timetables to optimize the network utilization. UK bus reported an operating loss reduced by 2.5 million to negative 0.5 million, so it's virtually break-even. However, this was supported by funding increases from 23.7 million to 26.2 million from TFWM. To optimize business operations, a 2% national production commenced in May with a 1% already in effect and the remainder expected by September. This will improve operation profit by approximately 1.4 million. In addition, an agreed price increase of 8.6%. which was affected from the 16th of June. This is expected to generate almost £8 million in operating profit for the full year 25. Finally, turning to German Rail. A rail business in Germany performed in line with expectations, delivering a H1 turnover of £143 million, up 1.9% and delivering an operating profit of £0.6 million. The ORRX1 and ORRX2-3 contracts are both owner's contracts with losses of 26.5 million. That's cash losses of 26.5 million being offset by a utilization of the owner's contract provision, which is now reduced to 158 million at the 30th of June. Our investment in driver training is paying off with an increase of 22 drivers year-to-date, up to 333 drivers in total. The increased level of infrastructure works and network disruption continued to result in penalties under the contract. However, as Phil has already stated, the discussions with the German PTAs are progressing constructively and are expected to conclude in the coming months. Now looking at our cash, focusing on our cash. Our operating free cash flow generation is lower by 38.5 million versus last year. This is driven by increased working capital outflow in the period. The outflow is as a result of the timing of cash collections in ALSA and is expected to reverse before the year end. Growth capital expenditure of 61.5 million has increased by 33.4. 50.8 million of this cap is related to school bus. Acquisitions cash outflow of $114.9 million related to deferred consideration on the Canary Bus acquisition that ALSA completed last year. In terms of net debt, the cash outflow of $44.1 million consists of $26.5 million OCP utilization, which I mentioned previously on the German rail contracts. 17.6 million related to restructuring, the vast majority of which relates to the school bus disposal. Adjusting items are explained in more detail in the appendix. 21.3 million of coupon payments on the hybrid instrument were made in the period in line with prior periods, and net funds outflow for the period of 19 million resulted in adjusted net debt of 1.3 billion at the end of the period. At 30th of June, covenant gearing was three times. And again, as I mentioned before, this does not reflect the benefit of school bus net proceeds for the covenant leveraging of 273 million. This would have reduced gearing to 2.7 million, but obviously the cash came in in July and missed the year end. We expect full year 25 covenant gearing to be approximately 2.5 times. And that's at the 31st of December. Finally, debt maturity. At the 30th of June, 25, the group had utilised 1.2 billion of committed facilities with an average maturity of five years. And we had cashed and undrawn facilities of 700 million in total. And, of course, we received the school bus to leverage in proceeds in July. 75% of our debt is fixed, with most of the floating portions due to revert to fixed by the end of the year. With the proceeds from school bus sale, we have sufficient liquidity to meet the earliest debt maturities, which are May 2027. In addition, the majority of the RCA facility has been extended to 2029. Finally, in relation to the hybrid bonds, the call window, which expires in February 26, the group will decide whether to roll the bond prior to this date. So I would now like to hand you back to Phil.

Thank you. So let me just summarise and conclude the presentation by telling you what we want to do with the business going forward. Please remember we are a new team, we've got a new approach, we've got a very different style and we've got a very simple strategy. So our first objective is to get the group right by fixing the underperforming businesses. This is an absolute must. Secondly, we want to continue to invest in our strong businesses to ensure they continue to grow and develop. This is also very important. We have to continue to feed and support our growing businesses. Thirdly, we need to be leaner and smarter. We want to be more efficient and improve our EBITDA. We have to do this to strengthen our balance sheet. Fourthly, we're going to continue to generate positive cash flows to reduce our debt levels so they're more manageable and more affordable. Fifthly, to care for our customers, give them a great experience on their journeys so they come back and stay with us. And most importantly of all, to make our people feel proud again. Happy people means happy customers. Thank you. So, over to you guys now. It's your turn. Q&As. And Paco's been very quiet this morning, so he's going to answer all the difficult questions. Aren't you, Paco? Gerald. A nice, easy one to get it going.

Morning, everyone. Gerald Koo from Pamule Liberum. I'll start with three. Firstly, can you elaborate on the problem contract in Washington? You talked about inherited problems. How much of that was foreseen? How much of it was foreseeable? How do you go about fixing it, the operations and therefore the profitability? Secondly, UK Coach, what changes with, shall we say, the effective merger operationally with ALSA? What's going to be run differently and how much can change, given the fact that 80% of the operations are actually outsourced? And finally, UK Bus, what share do you think you have of the West Midlands bus market? And what opportunities might there be to extract capital or assets once franchising has run its course?

Okay. We drive you first. I'll answer it generally and perhaps Brian or Eric can come in, but Eric will correct me if I'm wrong. This was a contract in Washington. We did have a contract there already. But this opportunity gave us to secure a much, much bigger operation. We were given a very short time scale, I think a month to mobilise it. And probably, you know, hindsight's a wonderful thing on these sort of things, but we could have pushed back on that, given more time. And also, I think when you talk about inheritance, there were also driver retentions and recruitment problems, Gerald, before we got there. And these turned out to be much bigger than we thought. So, first of all, the issue was understanding the financial information when we first arrived and understanding what it was telling us. And secondly, we had to tackle the driver recruitment issue very quickly because we weren't hitting our required service levels, which were incurring penalties on us, quite expensive penalties. We fixed that by recruiting more drivers. Like in Germany, we've bridged the gap. Probably, to be on the safe side, we've recruited more drivers than we need. So instead of incurring the penalties, we're incurring extra operational costs. So what we've got to try and achieve, and it's really what our main purpose in life is, to get the number of drivers in line with the number of buses we've got to get out every morning. So it's not rocket science. It's just getting down to the detail, managing the driving port, getting on one of the buses, and hitting the service, and making our customer happy, which is not the moment, right? So it's probably a longer job than we thought. As far as ALSA is concerned and the transfer of ALSA to coach, the coach market has changed, as you know. We've got people who want more of our business than we like them to have, but that's life. There's different rules applying to disruptors coming in and how you can act to incumbents already there and how you can respond. And the balance of power under competition law is with the disruptor, not the incumbent. And you might think that's fair. How long they cream off our existing routes is another matter. They don't operate a network, these disruptors. They cream off the best routes and take our best revenue away. So we've got big issues to face. The market's changed. It won't go back. And we've got to respond by being meaner and leaner. and we can't afford the overhead costs that go with the current business. So this is why it's going to be part of ALSA to form a big pan-European coaching business. That will bring new eyes into the business. The coach operation has been operated for a long time. We've been people who can look at things differently. Probably be a bit harder than our current management and me. I'm too soft. So we need somebody else coming in there, looking at the new model, using all the systems and best practices from ALSA, and really looking at the business as an acquisition. That's what we want them to do. I think what I'd like to do, if at all possible, is to become the new disruptor. And we can't do that ourselves. It's impossible. And secondly, UK bus market share, it's big, Gerald. I don't want to quote a number, but it's bloody big. Right? And, you know, there's a lot of interest. The key to successive bus re-regulation is having the vehicles and the depots. You can see that in Manchester. And I've got a long queue of 3D operators ringing me every day to buy our buses and to buy our depots. So there's a lot of interest. But I think there's better ways of doing this in the future. I think, as I said before, we didn't like deregulation, but we embraced it. We don't like re-regulation now, because it doesn't suit us. Deregulation didn't, but we'll embrace re-regulation. And we're working with the local authorities in the West Midlands. And we want them to begin to think again, to love us. Not to think we're just after the money, because we're not.

Thank you. Morning, everyone. Jack Cummings at Barenbo. Also, three questions, please. Firstly, just two on the guidance. The profit guidance is obviously quite half-two weighted, so can we just get a little bit more colour in terms of the building blocks, which can get you to that half-two profit number to hit the guidance? Then secondly, on the guidance, obviously there's a 15 million range. What needs to happen or what are the kind of pinch points here that could get you to the top end versus the bottom end of that guidance? And then the final question is just on the capex. So what goes into the decision-making process between that growth capex and the capex that's kind of to the side for small M&A versus potential cash conversion given the leverage? Thank you.

Thanks, Jack. They're three easy ones, so I'll hand it over to Brian.

So just looking at H1 versus H2, I mean, traditionally one-third of the profit is H1, two-thirds H2, and that's mainly driven by the fact that particularly July and August are really big months for the business. And in fact, December is also a big month. So it really is very much in line with, if you go back over the last two or three years. In terms of delivering at the higher end of the range, you know, look towards Eric here. I mean, some of the critical factors, particularly We Drive You is a big one. So if We Drive You, can manage to get the cost issue under control earlier. It's going to help us towards the higher end. If it's going to be later, then we're going to be towards the lower end. That's probably the biggest one, if I'm honest about it. The third one was, so we are looking at CapEx. It's a bit hard to understand at the moment. At CapEx, we have a budget that we've agreed for CapEx over the next couple of years. The priority, obviously, is retention CapEx. And then there's a balance left. And then it depends upon, you know, a level of flexibility around that, depending on the opportunity. But one of the problems of the moment is that we are quite constrained because of our debt position. But the priority is number one is retention, retention capex. Then there is an amount left over. And then we look at the returns, depending on whether it's a contract bid. And there are a couple of good opportunities, in fact, that we're looking at at present, certainly that ALSA is looking at at the moment. But that will depend on the return of both of those.

Hi, it's Alex Patterson from Peel Hunt. As I'm greedy, can I ask four questions, please? But they're all very simple ones.

That's fine. No condition.

First question is, just before the North American school bus deal closed, you were talking about leverage being fairly flat year on year. You're now saying two and a half times. Can you just say what's driven that improvement, please? in the uk bus can you say what sort of proportion of your fleet is is owned because i know you've got some of it through zenobi and i'm not quite sure what those proportions are now and thirdly on germany can you say has the group given any guarantees over the german rail losses And then lastly, just on Germany, as it stands, so if nothing changed, what would your expectation of cash losses be in the next couple of years? If you can get a better deal, when you described it as equitable in the statement, does that mean no more outflows or what kind of change on that?

Brian. Okay, so they weren't so easy. Okay, so let me just put it sort of randomly. First of all, cash losses for Germany. So you'll see for the first half of this year, 26. So we have actually an impairment at the start of the year of 170 million. So that is the expected cash loss from those contracts. So clearly, you know, the discussions are having a present. You know, we are optimistic. I mean, they are going quite well. So anything that will. you know, hopefully end up, because discussions end up in a positive note, we will hopefully be able to reverse some or maybe even all of that 170, depending on how they get on. So that is cash. They are correct. That's correct. So this year it's almost 50 million. In terms of the improved leverage as a result of school bus, this year we have the benefit of a half year's profit from school bus and that half year disappears last year so we get a double benefit in this particular year because we have a half year benefit of the school bus profit next year that half year disappears so in fact we have a negative impact with school bus taken out next year so it sort of it goes it improves and then it sort of goes back a little bit and then we look at next year unless of course we take actions to address that which we're looking at at the moment There is a guarantee in relation to Germany. And in terms of the percent of fleet owned by us.

Kevin, have you got that number?

Circa two-thirds, one-third. So two-thirds and one-third.

Okay. Happy annex.

Any other questions, guys? Good morning. It's Rory Cullinane from RBC. The first question is, it doesn't seem like you're looking for a CEO, which I think was a top priority in the spring. So what drove the change there? Secondly, could you touch on options to deliver? Would that be non-core disposals, what could be on the cards, given the potential upward pressure to leverage in full year 26 as school bus EBITDA drops off? And then finally, I think there was a fair increase in UK bus last summer, but there wasn't much sign of it annualising in H1, so could you just explain that, and should we expect a fair increase this summer to annualise as a typical fair increase? Thank you.

Okay. As sort of executive chairman, which means both jobs, I think I'm best to answer the first question. And at the moment, I think the board are happy with the new team. We've got a lot of projects in hand at the moment. I'd like to work with Paco and Brian into the near future to make sure all those projects are achieved in a good way. So I don't think at the moment the board are rushing to find a new CEO. I'm quite happy to stick with the team that's here and hopefully we'll deliver the results the results have asked us to deliver. the leverage I suppose the easy answer is when you're in a position like that when we're earning the EBITDA we've got at the moment and we've got the level of debt we've got the moment nothing's off the table and I think we've got to be hard there might be disposals there might be more disposals and we've already said we're going to look at efficiencies we're looking at integrating the businesses together we're going to duplicate in We're going to cut out the duplication. But you have to remember, you know, between 60% and 70% of our costs are labour costs. So when we're talking about being more efficient, cutting costs, we're really talking about people. But the important thing is if we do that, we've got to be honest with them and we've got to do it in a kind and caring way. But as I said, we're looking at everything at the moment.

so I think in general we haven't you know we put a detailed plan together but there are two approaches first of all is to reduce the debt itself we have to look at how we do that and the second is create capacity to manage more debt by improving our EBITDA so they're the two things we're looking at first we create more capacity with the higher EBITDA and second then to attack the debt and the fair increase on the fair increase it's in eight points and

Sorry? When did we implement it Kevin? The end of June. Oh it's the end of June, so that's pretty early. For this year it's... It's 8.6% so it's a big one. So it's going to be interesting to see how the customers react to it.

So the expectation is a 7.5 million impact.

I think Kevin will agree with me. We've spent too many years with... You get a funding agreement with it, but you don't get it for nothing. So... to get that funding agreement, which is savings at the moment. You know, they control our service levels and our fares. But it's the first increase we've had in how many years, Kevin?

It's the first substantial increase in five years.

So it's a big one. So it's going to be interesting to see whether we land it.

Kate Shell from Bank of America. Thanks for taking my questions. Also three from me. First, I think, Brian, you mentioned for We Drive You, you're expecting a $2 million improvement. Can I just confirm it's a $2 million kind of on top of first half performance, basically for We Impact coming through in the second half? And then second, on ALSA margins, you mentioned some one-off items to the first half. Can you elaborate a little bit on what those items are? And just thinking ahead for the second half, how should we think about margin? It's going to be kind of similar, around 12 percent, that kind of level. And then number three, on the hybrid, I appreciate a decision is coming in the next few months.

Profit value of contracts won in the first half of the year. So that's the annual profit increase expected to be generated from those contracts. In terms of the margin, if you compare like for like, you'll see the margin, while the profit margin is slightly down, in the first half of last year, a provision was released so the expectation was we'd have to repay some grants we didn't have to repay the grants therefore we released, it was an 8 million provision, so it basically slightly inflated the last year's result compared to this year, so if you back that out you'll see that overall there's an 11% growth in profit in ELSA and the final one on the hybrid we will take a view but the current thinking is that we will roll it

We will make a decision closer to the date. You sort of outlined the sort of scope of talks. You talked about how, well, there was discussion about how the owner's contract provisions are front-end loaded. What's the trade-off between time and value? And if talks were to drag on, is there a lost opportunity to recover? Or is it not possible to recover past losses, so to speak?

No, so the discussion is, I mean, there are two broad buckets. The first is compensation for the past, is what we are seeking. Whether we'd be successful or not, we don't know at this time. But there are two buckets. One is to do with compensation for the past. So, for example, we've incurred a lot of penalties which really relate to the poor infrastructure. And then the second bit is in terms of profitability going forward. So it's they're the two areas. And then, you know, depending on how we come out, we have two different pockets. So the answer is yes, we absolutely are looking for compensation for some of the past costs.

Absolutely.

Yeah, Rory Cullinane, RBC again. Just on, is there any growth angle to incorporating a UK coach within ALSA? Obviously, there's mention of making it a pan-European powerhouse, or is it mostly about best practice?

I can get that.

So, you know, are there, apart from the integration, what are the sort of, do we see a growth opportunity of putting it right there at ALSA?

First, sorry for my English. I'm a very simple person, so I think that the success is to do the things simple. That's the reason I believe in this project, I believe in this team, this strategy is very simple. And the plan for this merger between UK Coach and ALSA is right there, is to get the things simple. And what do I mean by that? For me, we need to focus on the metrics, on the basics. What does it mean? For example, occupancy. What is the ratio of occupancy? Can we improve that? For sure, I think. For example, customers. Can we improve the scoring from our customers? What do they need? Are we delivering the best for them? I think we can do that. For example, the cost. Can we remove duplicates between people in ALSA and people in UK? For sure. UK does things better than ALSA and ALSA does other things better than UK. Can we get the best of that? So my expectation is to focus on these three things. Operation, that occupancy level, cost efficiency, customer, how to deliver better, and cost that is very related with technology. We have different technologies in UK and ALSA. We are not going to get just ALSA, but I think we have to make a better decision in the next tools, for example, for planning, for pricing, for whatever you can consider that is important in a transport business. So this is my idea. And I'll work with Kevin and the team and the new people that are going to join the project. And I think we're not going to make up the wheel again. It's just to make very simple things. And I think we have had success in the past. Why not in the future? Let's see in the next month. But I'm optimistic.

Okay, thanks, Paka. Anymore? Okay then, guys. Just before we finish, I'd just like to thank a few people, if you don't mind me saying so. So thanks for everybody in the room today, and thanks for all the people who have dialed in to listen and see the presentation. I would also like to thank our fantastic advisors who make us think differently and help us to really explain our strategy to everybody, our shareholders and our lenders. Thank you to all the people at the centre and in our divisions who work so hard. We deliver what they're doing. They've worked incredibly hard over the last few weeks in getting the results in order and the presentation so we can explain the results to guys like you and people on the phone. But I'd also say a special thank you for two people. First of all, thank you for the RMT. for being so caring again and looking after all your customers in London. You do a great job of that. And thank you to a writer in the Sunday Times called Rod Liddle. I don't know whether you saw it over the weekend, but he was comparing various accents in the north of England and how nice Geordie and Cleveland accents were. Lovely to hear. But he described the Yorkshire accent, quote, as a pantomime agglomeration of belched arrogance. So, thank you for listening to my belched arrogance this morning. I really appreciate it. Now, going forward, we're going to update you later in the year. This will include a strategic update on ALSA. And we'll do quite a comprehensive presentation on that to you. And secondly, we'll bring you up to date on the progress we're making and efforts to improve our efficiency and to increase our EBITDA, things that have formed such a huge part of the presentation this morning. So great to see you all. Have a safe journey back to work or back to home. Avoid the tube. Give a big kiss to RMT and we'll see you soon. Thank you.