Morning, everyone. Welcome to our Q3 2025 trading update. I'm Phil White, and I'm joined today by Brian Egan. As you can see from the announcement this morning, group revenue year to date has increased by over 5% versus the prior year. We're on track to deliver on full-year operating profit guidance, but towards the lower end of the 180-195 range. As you expect, ALSA is again performing strongly, with 4% growth against a very strong quarter last year. At WeDriveU, we're working very hard to minimize our losses on the WMATA contract. The client has reduced volumes further post the quarter end, and we expect losses on the contract to continue, albeit at a lower level, until both parties come to a solution. In the UK, we have two businesses, as you know, Coach and Bus. In terms of Coach, revenue declined by over 7%.
It's the result of a couple of things, really. We've exited our loss-making entities in our transport solutions, private hire business in H1, where we lost, resulting in reduced revenue of about GBP 6 million. Passenger numbers on our National Express coaches have held up despite increased competition. However, yields are down. We have since disposed of the remaining loss-making businesses in transport solutions, including Clarks of London and Kingsbury. At UK Bus, commercial revenue and passenger numbers have declined by nearly 4% and made lower consumer confidence more broadly across the UK bus market. We're still in discussions with Transport for the West Midlands regarding the transition to franchising from 2027. In Germany, Germany has seen strong revenue growth for the quarter, but there are still underlying issues with the business, and they're still there.
Again, we are continuing discussions with the five PTAs about the viability of our three contracts, but we remain confident of an outcome that suits all parties. I can't say any more at the moment. As far as the hybrid is concerned, as per today's announcement, we have decided not to exercise our voluntary option to redeem the perpetual bond, or hybrid, as we call it. We now view this as an equity instrument and an important part of our capital structure. The coupon will be reset in February, with the first payment at the new rate due in February 2027. We have good news on our auditors, which is a strange thing to have to say, but we've at long last concluded the process of appointing a Big Four auditor, KPMG, following the announcement of resignation by Deloitte in April this year.
As a result of this change, which was very late, our year-end will move from December 31 to March 31, which gives KPMG the time to 300-standard business before they conduct their first full-year audit in March. Lastly, we plan to publish 12-month accounts, which will be unaudited as of 31 December 2025. Thank you, and open to questions, guys.
Thank you, Phil. Our first question comes from Alex Paterson of Peel Hunt. What progress are you making on margins and achieving the $180 million-$195 million adjusted operating profit and your covenant gearing of circa 2.5 times?
Thank you very much, Alex. First of all, in terms of guidance, we've guided that we will be in the range $180 million-$195 million, which is the forecast guidance we started the year out with. However, it will be at the lower end of that range. In terms of covenant gearing, because we're at the lower end of the range, the covenant gearing at the end of December is likely to be a little bit higher than the 2.5. It will probably be somewhere just maybe 2.6, 2.7. In terms of cost takeout, we have had significant cost takeout. We are working hard now with Garnes. We've engaged Garnes to work with us. We are making very good progress to take out cost. A lot of it will be taken out this year, more going into next year.
This will help to take pressure off any challenges we have in terms of our margins and also to make sure that going forward that we have a stronger EBITDA.
Thank you, Brian. Follow-up question from Alex. How do you plan to monetize the UK bus assets? Is there any time frame for disposals and indications of values that you can share with us?
At the moment, we're still talking to Transport for the West Midlands on this. Our intention and our hope is to monetize the UK bus assets before franchising, but I can't say any more at the moment because we're still in discussions.
Thank you, Phil. One final question from Alex on our credit rating. Fitch has just downgraded your credit rating and retained a negative watch. What impact will this have on your financing costs and ability to refinance in the future?
I think it's going to have very, very little impact. I mean, the reality is that the Fitch rating has placed us two notches above Moody's. I think that in itself sort of gives us a little bit of an indication of the progress that we're making. In terms of the impact on our financing, I think at the moment it doesn't really have much impact, except hopefully doing a little bit more confidence that we're on the right path.
Thank you, Phil. Brian, sorry. A question from Chris V. Vesta of Bank of America. On the German Rail settlement, why is it taking so long to reach an agreement? Can you give us some color on the discussions there?
I'll take that one. In the UK, on the UK. bus, we're dealing with one PTA. Dealing with PTAs will do a very different but difficult job to us with a different decision process. In Germany, we're discussing the future with five PTAs. You can understand the process is much slower. It is not an easy process, and it is taking some time. Again, that is all I can say at the moment.
Thank you. Sort of follow-up on that from Chris V. Is there a parent company guarantee that is making it difficult to exit the contracts?
The answer is that there is a parent guarantee, but that really isn't central to the discussions.
Thank you, Brian. Again, a question from Chris V. Switching over to the hybrids. Do we intend to pay the coupons next year?
You'll see in the announcement that we have decided that we will not be repaying the hybrid loans. However, we still have to make a decision on the coupon, and that will be made in advance of the deadline, which is February. We'll make an announcement closer to the date.
Thank you. Final question from Chris V. Switching over to the U.S. Has there been any progress in improving the margins with the Washington contract?
We've certainly done a lot of work on the operational side of the business. We have made quite a bit of improvement over our costs and also the level of losses that we were making in the first half. Those losses have been reduced quite considerably, but they're expected to continue for a while yet.
Maybe just to give a number, we were losing over $1 million a month. We're now losing about $750,000 a month. That is with the reduced volumes. There is an improvement, albeit that we continue to lose money at the contract.
Thanks, Brian. Two questions from Berenberg Jack Cummings. What drove the ALSA revenue slowdown? Was it primarily the tough comparative period?
Jack, we've still got strong growth in ALSA, and it's nearly 5%. It's just that the comparable period last year, there was massive growth, I think nearly 20%, which resulted from the free multi-value scheme on long-haul travel. The results are a bit distorted, but we're still happy with the growth we're achieving in ALSA.
Jack's second question. Could you quantify the extent of cost savings you expect to achieve as part of the large-scale cost reduction program?
We haven't given a number out at the moment. We're still working on this with Garnes, but it is going to be a very sizable cost saving. Right across the company head office, all of the divisions, it will be the tens of millions, but we haven't got a number that we can disclose at the moment. We've got to.
One of the questions was, can you clarify any change in the financial year and when will audit accounts be published?
We have appointed KPMG as our new auditors. Because it is so late in the year, it is not possible for them to resource a 31st of December audit. The year-end has been moved to the 31st of March in order to facilitate that. However, we will still be publishing unaudited accounts at the 31st of December. I should say, the intention is that we will publish the December accounts towards the end of February.
Are we aiming for July for the pre-evidence?
We have to confirm a date for that, the end of June, early July.
Is management expecting to transition towards full quarterly reports rather than just trading updates?
No, we'll continue doing half-yearly and don't have trading updates at this point.
We have a question from Wolfgang Felix. Congratulations on your new auditor. What is your outlook now for the WeDriveU for the next 12 months?
We'll give guidance after the year-end and the next announcement, we'll give guidance for 2026, if that's okay.
Thank you. We haven't published any forward-looking guidance at this point, but should we model modest revenue growth in 2026 for the entire business if we're able to?
I think we can say yes to that.
Thank you.
Just on the German contracts, I mean, Fitch has already said it's very hard for us to say anything at the moment. We are in intensive discussions with the German PTAs, and as soon as we're in a position to do so, we will make an announcement.
I think we've answered both questions.
We will remain.
Yeah, absolutely. On the press release, there is the IR email address, so please do follow up with any questions by email.
Thanks, guys, for joining in. Appreciate all the interest you've got in us. As we've said, if there's any more questions, please don't hesitate to get hold of us through either IR or through Brian in particular, and I'm sure he'll help you with all the issues you've got. Thank you very much. Bye.