Revenue-shredding competition in the UK intercity coach market amid a price war being waged by FlixBus has prompted Mobico, the parent of National Express, to downgrade profit forecasts and cut jobs.
In further developments at the group, the National Express coach company’s sister business running buses in the West Midlands has been put up for sale, and Mobico has delayed the end of its financial reporting year to March from the end of December.
The latter move, just five weeks before what would have been the end of its reporting period, indicates the depth of the financial crisis at the company following the resignation of its auditor Deloitte. The accountant quit earlier this year over its concerns of “significant weaknesses in internal control” within the group.
Mobico has appointed a new auditor, KPMG, but said it had shifted its accounting dates “to allow the company sufficient time to prepare the financial statements and for KPMG to have sufficient time to complete the audit”.
The continued run of bad news from the one-time constituent of the FTSE 100 left its shares marooned around all-time lows, trading on Wednesday afternoon at 22p, up ¼p, or 1.4 per cent, and valuing the group at £130 million, significantly less than its expected annual operating profits.
In a statement covering the trading quarter to the end of September, the group said underlying annual operating profits were expected to come in at the lower end of the previously guided range of between £180 million and £195 million.
As a result, it said, the business was now on a “large scale cost reduction programme”.
Following its withdrawal from the UK railways — it was once Britain’s largest train operator — and more recently a hugely loss-making exit from running school buses in the US, Mobico, despite being still listed in London, is primarily a Spanish coach operation.
That business, Alsa, which accounts for all of Mobico’s profits, is still performing strongly. with revenues up 4 per cent in the quarter.
Not so at its UK operations, where National Express’s decades-long all-but-monopoly on the country’s intercity coach networks has been shattered by the entry into the UK during the pandemic of FlixBus, a German start-up.
National Express reported a 7.4 per cent decline in revenues as a result of “increased competition on key routes which reduced passenger yields.”
The company has been paring back its nationwide footprint and disposed of associated coach businesses like Clarkes of London, The Kings Ferry, based in the capital and in Kent, Lucketts in Hampshire and Dorset, and Worthing Coaches of West Sussex.
The group has been running the buses in the West Midlands since privatisation nearly 40 years ago. However, its dominance in the region is at an end after the West Midlands mayor decided to move to local franchised operators from 2027.
After months of speculation over what Mobico’s response might be, the company said it was now “exploring options to monetise the assets of the business.”
The company has been without a chief executive for six months with no news on a new appointment. It is being led by Phil White, executive chairman, who rejoined the company in the spring 20 years after he retired as its chief executive.
“We continue to focus on simplifying and strengthening the group, taking decisive actions to improve operational and financial performance,” White said.
“The key priorities remain strengthening the group’s balance sheet [it is more than £1 billion in debt] and improving profitability through our strategic initiatives.”
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