Mobico Group Plc

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 colleagues 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 Irishman from Dublin. But believe me, don't be fooled by that.

It's nothing of the sort. Anybody who worked with him in the room will know he's as absolutely hard as [indiscernible], especially when you're negotiating fees with him.

Okay? So don't be fooled.

On my right is Paco Iglesias. Paco is our new -- 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 3 of us are from 3 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've been appointed, why I'd come back. So I had to calm them down on that a bit.

And when Brian came, we did a full roadshow of our lenders and 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 will 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 overdeliver. 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 3 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 are taking a small step back to achieve a bigger future. We've asked ourselves 2 simple questions.

We 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 U.K., the U.S.A.

and Spain and some other business in 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 overpromising and underperforming, and we're overleveraged 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 bossier.

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 U.K., 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.

U.K. 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 U.K., is highly recognized and it will remain as it is.

We have today announced that Javier Martinez Prieto has been appointed as MD of U.K. 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 traveling 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 U.K.

Bus, as you know, in my time, U.K. Bus was formerly the jewel in the National Express Group Crown.

It's a 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 conventions. 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. WeDriveU operate shuttle transit services across the U.S.A.

It has nearly 100 contracts, the majority -- the vast majority, in fact, of which are profitable. But unfortunately, 2 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 mobilization at the start of the contract and significant driver management issues. As you know, WeDriveU 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 4 new contracts already secured for the second half of this year, which is good news. Our focus going forward will be securing more asset-light 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 5 rail operators in Germany.

We have 3 contracts, 1 profitable and 2 loss-making. I've 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 U.K.

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 finalized in the coming months. I'm told from a reliable source that we've made more progress in the last 4 months than the last 4 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 Automóviles Luarca Sociedad Anónima. I think Phil has made up a new name.

That's much better.

But when I go [indiscernible] called ALSA, a life-saving acquisition. And it truly is.

And we much prefer ALSA to the big name, don't we? 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 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-light contract in Saudi Arabia.

This contract is valued at over EUR 500 million and is part of a EUR 75 billion global investment there to create the world's largest entertainment destination. So if we get that, that will be really good news.

But ALSA 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 maximizing ALSA's operational experience to drive improved performance across the whole group. So looking ahead, there are 3 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 a success of a 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 sake and invest 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 from us compared to managing our revenue. Hitting the costs, controlling the cost, 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 U.K., WeDriveU 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 GBP 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 that 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. 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, and 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. And 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 GBP 86 million, reaching GBP 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 WeDriveU, we also saw strong revenue growth of over 13%, driven by new contracts in corporate, university shuttle space and paratransit operations. U.K.

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 U.K.

remains extremely competitive. Adjusting operating profit for the group is GBP 59.9 million, an GBP 8.7 million decrease versus last year.

This reduction was the result of lower profitability in WeDriveU caused by operational challenges in Washington-based paratransit contract. Of particular note, GBP 82 million profit was generated by ALSA.

The rest of the group reduced the profit by GBP 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 GBP 180 million to GBP 195 million.

Free cash flow of GBP 57.8 million is GBP 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 H2.

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 GBP 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 GBP 35 million, a GBP 23 million improvement on the prior year. Revenue has grown across all of our business, except for U.K.

Coach, and this is the result of the exit of the loss-making private coach operations, which reduced revenue by GBP 12.5 million. In terms of operating profit, only 2 divisions made a profit, ALSA and WeDriveU.

However, the profit from WeDriveU is GBP 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.

ALSA's continued strong performance saw revenue increase of over 13%. Adjusted operating profit was in line with the last year with a 0.9% increase in adjusted operating profit.

There was particularly good momentum in regional urban and long-distance markets in Spain, where revenue grew by over 10% and operating 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 GBP 18 million to GBP 39 million.

It's also important to note that of the GBP 97 million profit generated by ALSA, GBP 9.3 million came from outside Spain. Underlying profit margin is in line with Half 1 one-off settlements in regional and urban businesses in the prior year taking 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 Andalucia, [indiscernible] and the contract in Saudi Arabia that Phil mentioned earlier on.

Whilst WeDriveU has seen revenue grow by 16%, the operating 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 rightsized.

Looking forward, streamlined business processes, automated systems and tight cost control will drive margin improvement in WeDriveU. Strong contract momentum continued in half 1, and these contract wins alone will increase annual operating profit by over $2 million.

Moving on to the U.K. 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 GBP 12.5 million.

However, this was due to our exiting of the loss-making NXTS and NEAT Coach businesses. Otherwise, revenue is flat.

Growth continued in Ireland with strong -- with revenues up GBP 2.7 million due to strong demand. The reduction of GBP 1.5 million in operating losses to GBP 9.1 million in the Coach business is materially driven by the exit of the loss-making contracts that I've already mentioned.

Total U.K. Coach operating margin improved by 0.6% as a result of the restructuring and changes to seasonal timetables to optimize the network utilization.

U.K. Bus reported an operating loss reduced by GBP 2.5 million to negative GBP 0.5 million.

So it's virtually breakeven. However, this was supported by funding increases from GBP 23.7 million to GBP 26.2 million from TfWM.

To optimize business operations, a 2% network reduction commenced in May with a 1% already in effect and the remainder expected by September. This will improve operating profit by approximately GBP 1.4 million.

In addition, an agreed price increase of 8.6%, which was effective from the 16th of June. This is expected to generate almost GBP 8 million in operating profit for the full year '25.

Finally, turning to German Rail. Our Rail business in Germany performed in line with expectations, delivering a H1 turnover of EUR 143 million, up 1.9% and delivering an operating profit of EUR 0.6 million.

The RRX1 and RRX 2/3 contracts are both onerous contracts with losses of GBP 26.5 million. That's cash losses of GBP 26.5 million, being offset by a utilization of the onerous contract provision, which has now reduced from -- to GBP 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 GBP 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 GBP 61.5 million has increased by GBP 33.4 million, GBP 50.8 million of this CapEx related to School Bus.

Acquisitions cash outflow of GBP 14.9 million related to deferred consideration on the CanaryBus acquisition that ALSA completed last year. In terms of net debt, the cash outflow of GBP 44.1 million consists of GBP 26.5 million OCP utilization, which I mentioned previously on the German Rail contracts, GBP 17.6 million related to restructuring, the majority of which is -- the vast majority, in fact, of which relates to the School Bus disposal.

Adjusting items are explained in more detail in the appendix. GBP 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 GBP 90 million resulted in adjusted net debt of GBP 1.3 billion at the end of the period. At 30th of June, covenant gearing was 3x.

And again, as I mentioned before, this does not reflect the benefit of School Bus net proceeds for the covenant deleveraging of GBP 273 million. This would have reduced gearing to GBP 2.7 billion.

But obviously, the cash came in, in July and missed the year-end. We expect full year '25 covenant gearing to be approximately 2.5x, and that's at the 31st of December.

Finally, debt maturity. At the 30th of June '25, the group had utilized GBP 1.2 billion of committed facilities with an average maturity of 5 years.

And we had cash and undrawn facilities of GBP 700 million in total. And of course, we received the School Bus deleveraging proceeds in July.

75% of our debt is fixed with most of the floating portion 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 core RCF facility has been extended to 2029. Finally, in relation to the hybrid bond's call window, which expires in February '26, the group will decide whether to roll the bond prior to this date.

So I'd now like to hand you back to Phil.

So let me just summarize 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 want to -- 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 are more manageable and more affordable. Fifthly, to care for our customers, give them a great experience on their journeys, so they come back and they 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 has been very quiet this morning. So he's going to answer all the difficult questions.

Paco. Gerald?

Nice easy one to get going.

Gerald Khoo from Panmure Liberum. I will 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 the operations and therefore, the profitability? Secondly, in U.K.

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, in U.K.

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. WeDriveU 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 mobilize it. And probably we -- hindsight is a wonderful thing on these sort of things, but we could push back on that and give them more time.

And also, I think when you talk about an inheritance, there were also driver retentions and recruitment problems, Gerald, before we start -- before we got there. And these turned out to be much bigger than we thought.

So it was -- 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 driver, getting them on the buses and hitting the service and making our customer happy, which is not at 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 the 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 has 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 bring people in 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.

We can't do that ourselves. It's impossible.

And secondly, on U.K. Bus market share, it's big, Gerald.

I don't want to quote a number, but it's pretty big, right? And there's a lot of interest.

The key to success of bus reregulation is having the vehicles and the depots. You can see that in Manchester.

And I've got a long queue, [indiscernible] operators ring 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 reregulation now because it don't suit us.

Deregulation didn't, but we'll embrace reregulation, and we're working with the local authorities in the West Midlands. And we want to begin to think again to lovers, not to think we're just after the money because we don't.

Jack Cummings at Berenberg. Also three questions, please.

Firstly, just two on the guidance. The profit guidance is obviously quite half 2 weighted.

So could we just get a little bit more color in terms of the building blocks, which can get you to that half 2 profit number to hit the guidance? Then secondly, on the guidance.

So obviously, there's a GBP 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 decide for small M&A versus potential cash conversion given the leverage?

They are three easy ones, so I'll hand it over to Brian.

So just looking at H1 versus H2, I mean, traditionally, 1/3 of the profit is H1, 2/3 is 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 2 or 3 years. In terms of delivering at the higher end of the range, I look towards Eric here.

I mean some of the critical factors, particularly WeDriveU is a big one. So if WeDriveU 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 at this time of moment.

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 a level of flexibility around that depending on the opportunity. But one of the problems at the moment is that we are quite constrained because of our debt position.

But the priority 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 present -- that ALSA is looking at the moment.

But that will depend on the return of both of those.

It's Alex Paterson from Peel Hunt. As if 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 2.5x.

Can you just say what's driven that improvement, please? Secondly, in the U.K.

Bus, can you say what sort of proportion of your fleet is owned, because I know you've got some of it through Zenobe, 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 is 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 -- I mean, first of all, cash losses for Germany.

So you'll see for the first half of this year '26. So we have actually impairment at the start of the year of GBP 170 million.

So that is the expected cash loss from those contracts. So clearly, the discussions we're having at present, we are optimistic that I mean they are going quite well.

So anything that will 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 GBP 170 million depending on how they get on. So that is cash.

I think they're quite front-end loaded.

They are, correct. That's correct.

So this year, it's almost GBP 50 million. Yes.

In terms of the improved leverage as a result of School Bus, this year, we have the benefit of 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 -- the 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 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 [indiscernible] the details, 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 2/3, 1/3, So 2/3...

Any other questions, guys?

It's Ruairi 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 delever?

Would that be noncore 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 fare increase in U.K. Bus last summer, but there wasn't sort of much sign of it annualizing in H1.

So could you just explain that? And should we expect the fare increase this summer to annualized as a sort of typical fare increase?

Okay. As sort of Executive Chairman, which means both jobs, I think I'm best answer to 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, and they're quite happy to stick with the team that's here.

And hopefully, we'll deliver the results that we are set to deliver. Delevarage.

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 at the moment, nothing is 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 between 60% and 70% of our costs are labor 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 -- 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 there are the two things we're looking at. First of all, create more capacity with the higher EBITDA and second then to tackle the debt.

And the fare increase...

On the fare increase...When do we implement it, Kevin?

The end of June.

Oh, it is end of June, so fairly 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 what -- how the customers react to it.

The expectation is a GBP 7.5 million impact.

Yes. And I think Kevin will agree with me.

It's -- we 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 [indiscernible] at the moment.

They control our service levels and our fares. But it's the first increase we've had in many years, Kevin?

Substantial increase in 5 years.

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

Kait Shao from Bank of America. Also three from me.

First, I think, Brian, you mentioned for WeDriveU, you're expecting a [ GBP 2 million ] improvement. Can I just confirm it's a [ GBP 2 million ] kind of on top of first half performance, basically full year impact coming through in the second half?

And then second, on ALSA margin. You mentioned some one-off items for the first half.

Can you elaborate a little bit on what those items are? And just thinking ahead for second half, how should we think about margin?

It's going to be kind of similar around 12%, that kind of level? and then number three, on the hybrid, I appreciate a decision is coming in the next [ year ].

Profit value of contracts won in the first half of the year. So that's the annual profit increase expected to begin [ ranging ] from those contracts.

In terms of the margin, if you compare like-for-like, you will see the margin -- the profit margin is slightly down in the first half of last year. A provision was released, so the expectation was we would have to repay some grants.

We didn't have to repay the grants, therefore, we released [ GBP 8 million ] provision. So it basically slightly inflated the last year's results compared to this year.

So if you back that out, you will see that overall there is an 11% growth in profit in ALSA. The final one, on the hybrid.

We will take a view on that [indiscernible] with the current thinking is that we will [indiscernible]. We'll make a decision closer to the date.

Gerald Khoo from Panmure Liberum again. German Rail, can you sort of outline the sort of scope of talks?

You talked about how -- well, there was a discussion about how the onerous 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 discussions -- I mean, there are two broad buckets.

The first is compensation for the past is what we are seeking. Whether we'll be successful or not, we don't know at this time.

But there are two buckets. One is to do with the 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 2 areas. And then depending on how we come out, we have two different buckets.

So the answer is yes, we absolutely are looking for compensation for some of the past costs, absolutely.

Ruauri Cullinane, RBC again. Just on -- is there any growth angle to incorporating U.K.

Coach within ALSA? Obviously, there's mention of making a pan-European powerhouse?

Or is it mostly about best practice?

So the integration sort of -- do we see a growth opportunity...

Well, okay. First, sorry for my English, sorry for English.

I'm a very simple person. So I think that the success is to do the things simple.

That's the reason why I believe in this project, I believe in this team. This strategy is very simple.

And the plan for this merger between U.K. 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's the ratio of occupancy that can we improve that?

For sure, I think. For example, customers, can we improve the scoring of the -- from our customer, 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 U.K., for sure. For sure, U.K.

does things better than ALSA and ALSA does other things better than U.K. Can we get the best of that?

So my expectation is to focus on these three things: operation, the occupancy level, cost efficiency, customer, how to deliver better and cost that is very related with technology. We have different technologies in U.K.

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 are 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?

This is -- let's see in the next months, but I'm optimistic.

Okay. Thanks, Paco.

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 advisers 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 center and in our divisions who work so hard, we deliver what they're doing.

They've worked incredibly hard over the last few weeks and 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 2 people.

First of all, thank you for the RMT for being so caring again, looking after all your customers in London. You do a great job of there.

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 it was comparing various accents in the north of England and now nice Jordi and Cleveland accents were lovely to hear.

But you described the Yorkshire accent "as a pantamine agglomeration of belched arrogance, right? 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 the strategic update on ALSA and we'll do that quite a comprehensive presentation on that to you. And secondly, we'll bring you up to date on the progress we're making in 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.