Mobico Group PLC on Wednesday pledged to take further steps to cut debt as it attempts to improve its financial position, which saw the firm pass on paying a dividend for the first half.

These include starting the formal process to sell its North American business plus company-wide initiatives to cut debt.

Chief Executive Ignacio Garat said: ‘Addressing our leverage remains a priority and in addition to commencing the formal sale process for North American School Bus, we have identified new organic debt reduction initiatives that will deliver in the second half.’

In response, shares jumped 11% to 64.60 pence each in London on Wednesday. They remain down 10% in the last 12 months.

In the six months to June 30, the Birmingham-based transport operator, formerly known as National Express, said pretax loss narrowed to £1.5 million from £41.9 million a year prior. Revenue climbed 7.6% to £1.65 billion from £1.57 billion.

Adjusted operating profit rose 24% to £71.2 million from £57.5 million. Mobico said it ‘remains on track’ for adjusted operating profit to reach between £185 to £205 million for 2024.

Cost inflation is seen lower than in the prior year, with the full benefit from mitigating pricing actions in 2023 and the first half of 2024 expected in the second half of this year.

Mobico highlighted record first-half results in Alsa, the firm’s Spanish subsidiary, an improvement in North America, alongside ongoing recovery in the UK and Germany.

But the company passed on a half-year dividend compared with 1.7 pence per share last year. This reflects a commitment for debt and leverage reduction.

At June 30, the group had £0.8 billion of cash and undrawn, committed facilities and a covenant gearing ratio of 2.8x, down from 3.0x a year before.

Covenant net debt rose to £987.9 million from £908.5 million.

Interest charges for 2024 are expected to increase to £90 million from £75 million in 2023 as a consequence of higher bond coupons and interest on the revolving credit facility when drawn.

Mobico said the ’accelerate’ cost saving programme remains on track, with savings of £30 million expected in 2024 under Accelerate 1.0 and £10 million under Accelerate 2.0.

In addition, Mobico has launched a company-wide initiative targeted specifically at cash improvement and debt reduction, with projected 2024 benefits of £25 million and annualised benefits from 2025 of at least £50 million.

Operational controls have been tightened over aged debt collection and capital expenditure appraisals, including an increased focus on asset-light transactions, the firm added.

Mobico also said the formal sale process for its North American School Bus business is underway following a strong bidding season where routes won exceeded routes lost for the first time in over a decade.

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