The owner of National Express said it had begun selling its North American school bus business in a bid to reduce its £1.2 billion debt, sending the company’s shares soaring.
Shares in Mobico, which will change its name from National Express Group in June 2023, rose nearly 18% to close at 68 pence on the London Stock Exchange on Wednesday, but were down slightly from the day’s high of 70 pence.
Mobico is best known in the UK for its National Express brand, which has the largest market share in coach transport, but also operates rail and bus services in 12 countries including Spain, Portugal, Morocco and Switzerland, as well as a division of Deutsche Bahn.
As well as announcing the start of the formal sale process for its North American business, Mobico also reported a nearly 24% increase in half-year operating profit to £71.2 million.
The sale will help Mobico achieve its priority of addressing its borrowings, Chief Executive Officer Ignacio Garrat said, adding that the company was also identifying other debt reduction measures for the second half of the year.
Garratt said the company remained confident that its full-year adjusted operating profit would be in the range of 185 million to 205 million pounds.
Its North American Bus Company is one of the largest school bus suppliers in the United States, operating in 33 states and two Canadian provinces, but has struggled in recent years with staffing shortages and inflationary pressures.
Mobico said in October last year it was considering selling the business as a key part of its turnaround strategy after issuing a profit warning and suspending its dividend.
Despite recent struggles, the US business made adjusted operating profits of £21.4 million in the first half of this year, up 55% on last year thanks to expansions on a number of routes.
Mobico has suffered a series of losses since the coronavirus pandemic and its debt has risen in recent years.
The company reported a pre-tax loss of £98.3 million in April, an improvement from the £335 million reported in 2022.
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These have caused the company’s share price to fall 65% in two years from 186 pence in mid-August 2022.
“Mobico is on track to deliver strong performance in the first half of 2024, with continued growth in passenger demand and revenue,” Garratt said in an update on Wednesday.
“We have retained, won and successfully developed significant new business across various divisions of the group, and our cost reduction initiatives have delivered savings somewhat faster than expected.”