TIDMROL
RNS Number : 6390K
Rotala PLC
12 April 2018
12 April 2018
Rotala plc
("Rotala" or "the Company" or "the Group")
Final audited results for the year ended 30 November 2017
Rotala plc (AIM:ROL), a provider of transport solutions across
the UK, is pleased to announce its audited results for the year
ended 30 November 2017.
Highlights
-- Turnover of GBP57.9 million (2016: GBP55.0 million), up 5%
-- Adjusted EBITDA* of GBP7.8 million (2016: GBP7.0 million), up 11%
-- Adjusted operating profit* of GBP4.5 million (2016: GBP4.0 million), up 13%
-- Adjusted profit before taxation* up 20% to GBP3.22 million (2016: GBP2.68 million)
-- Strong net cash generation from operations, doubling to
GBP3.84 million (2016: GBP1.93 million)
-- Adjusted basic earnings per share* up 8% to 5.95p per share (2016: 5.51p)
-- Three acquisitions completed during the year, expanding
operations in the West Midlands, the North West and at Heathrow
airport
-- New and extended bank finance package negotiated to support further acquisitions
-- Another acquisition completed shortly after the year end
-- Dividends for the year paid and proposed total 2.50p per
share (2016: 2.30p), in accordance with progressive dividend
policy
*before mark to market provision, acquisition related costs and
other exceptional items further described in note 3 to this
announcement below
For further information please contact:
Rotala Plc 0121 322 2222
John Gunn, Chairman
Simon Dunn, Chief Executive
Kim Taylor, Group Finance Director
Nominated Adviser & Joint Broker:
Cenkos Securities plc 020 7397 8900
Stephen Keys/ Callum Davidson (Corporate Finance)
Michael Johnson/Julian Morse (Corporate Broking)
Joint Broker: Dowgate Capital Stockbrokers Ltd 0203 903 7715
David Poutney/James Serjeant (Corporate Broking)
About the business:
Rotala provides a range of transport solutions, from local bus
services under contract to local authorities, to commercial bus
routes. Rotala has operations at Heathrow Airport, in the West
Midlands, the North West and South West of England.
CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS
Chairman's Statement and review of operations
I am pleased to be able to make this report to the shareholders
of Rotala Plc for the year ended 30 November 2017. The Company made
good progress this year and the results clearly show the benefit of
the three acquisitions we made in 2016. We have pursued our
acquisition strategy in 2017 by making three more acquisitions in
the year and one shortly after the year end. The two smaller
acquisitions were aimed at enlarging our bus business, firstly in
the West Midlands and secondly in Greater Manchester. The last and
largest acquisition just before the year end, for our Heathrow
depot, further increased our presence in this key market. Shortly
after the year end we acquired another small bus business in the
West Midlands area in order to extend our route network there. The
seven acquisitions we have made since 2016 have very much enlarged
the scale of the Group's operations and considerably raised the
Group's prospects in a market which continues to undergo much
change.
Results and review of trading
Revenues for the Group as a whole for the year ended 30 November
2017 were GBP57.9 million. This represents an increase of 5% on the
revenues of GBP55.0 million achieved in the previous year. Gross
margin increased slightly to 19.1% (2016:18.3%). I am also pleased
to report that pre-tax profits before exceptional items rose by 20%
to GBP3.22 million (2016: GBP2.68 million), demonstrating our
ability to manage cost and margin effectively.
Contracted Services
Revenues in Contracted Services rose overall by 9% to GBP21.4
million (2016: GBP19.7 million). Contracted Services comprised 37%
of Group revenues in 2017, compared to 36% in 2016. Revenues in
this division fall under two broad headings, those from local
authority contracts and those from corporate contracts. The latter
stream of income benefited in particular from the full year effect
of the acquisition we made at Heathrow in 2016 but also from the
transportation contracts servicing Bicester Shopping Village, the
full implementation of which began in April 2017. Corporate
contracted income is now the largest component of the Contracted
Services division and is set to grow further with the effect of the
Hotel Hoppa acquisition which we made right at the end of the
accounting year. A considerable proportion of Hotel Hoppa's revenue
is delivered under contract to corporate bodies like airlines and
hotels.
In the local authority arena the proportion of Group revenues
derived from this source increased slightly to about 16%
(2016:15%). In monetary terms these revenues were in fact up some
9% compared to those seen in 2016. This rise reflected diverging
trends in our various areas of operation. In the South West our
income from local bus contracts fell considerably as the available
contract base has shrunk in line with local transport budgets. But
this reduction was more than made up for elsewhere in the country.
From our Heathrow depot we began, as we announced in the early part
of 2017, to operate bus contracts for Surrey County Council; in
Greater Manchester we have been successful in growing incrementally
the contracts we operate for Transport for Greater Manchester
("TfGM"); and in my report to you at this time last year I
mentioned the contracts that we had at that time been recently
awarded by Transport for the West Midlands ("TfWM") and which began
operations also in April 2017.
I expect to see further growth in this source of revenue in
2018, partly as a result of the contracts brought in by the bus
business acquisitions we have made in 2017 in the West Midlands and
Manchester (for which see later in this statement). A key reason
for making these acquisitions was to put the Group in a position to
obtain a greater share of the contracted markets in these regions
by extending our operational reach. Furthermore we have recently
been awarded new bus contracts in both Preston and Greater
Manchester. In the Preston area Lancashire County Council, having
previously reduced its transport budget, has now increased it again
and we have been successful in winning a number of contracts which
should bring in new revenues (combining both contracted and
commercial elements) of some GBP1.6 million in a full year. These
contracts began in December 2017. In Greater Manchester we have
been awarded a series of new contracts, commencing in April 2018,
which will bring new revenues (again combining both contracted and
commercial elements) of GBP401,000 in a full year. Thus the overall
contribution of Contracted Services revenues to the Group will
continue its upward trend of the last few years.
Commercial Services
Revenues in Commercial Services, at GBP33.7 million for the
year, grew by 3% compared to the 2016 total of GBP32.9 million.
Commercial Services comprised 58% of Group revenues in 2017,
compared to 60% in 2016. As mentioned above, the primary reason for
the fall in the proportion of Group revenues coming under this
heading is the expansion of the Contracted Services division in the
last two years. The growth in revenue in Commercial Services in
2017 largely reflected the regional pattern seen in Contracted
Services. In the South West over the last few years we have slowly
reduced our exposure to commercial revenues by curtailing the
number of services we run. This has however enabled us to redeploy
vehicles elsewhere in the Group and expand our commercial revenues
in the West Midlands, Surrey and Greater Manchester in the same
time period, as we announced periodically throughout 2017. A
further boost to commercial revenues will come from the
acquisitions made in 2017 and the early part of 2018. The two bus
business acquisitions in the West Midlands have a strong commercial
element, as does the Hotel Hoppa acquisition at Heathrow
Airport.
The new contracts awarded by Lancashire County Council and TfGM,
mentioned above, have a commercial stream which will fall into this
division. These revenues will provide another source of growth in
the current year. In summary therefore I expect the division to
show appreciable growth in 2018.The proportion of Group revenues
provided by this division should however be expected to continue to
fall, reflecting the greater investment which the Group is making
in Contracted Services at the current time.
Charter Services
Revenues in Charter Services rose by 16% compared to the
previous year to GBP2.8 million (2016: GBP2.4 million). Charter
Services comprised 4.8% of Group revenues in 2017, compared to 4.4%
in 2016. This increase reflects the contribution in the private
hire stream of business of the two small acquisitions of Wigan
Coachways and Elite Minibus and Coach Services completed in 2016.
The year on year increase in revenues saw a significant
contribution from the North West of the country, which was the
target of the making of these two small acquisitions. We had
identified that we had little or no penetration of this potentially
lucrative market in that area of the country. The two acquisitions
were designed to remedy this weakness and we are pleased with the
progress we have made. There was also a strong contribution from
private hire work associated with the Bicester Shopping Village
contract. Revenues in Charter Services therefore are now 70% higher
than they were two years ago, as a result of the three acquisitions
we have made in that period to improve radically our presence in
the private hire markets at Heathrow Airport and in the North West
of England.
Strategy and the Bus Services Act 2017
In May 2017, the Bus Services Act 2017 received the Royal
Assent. The Act enables the re-franchising of bus networks in any
area with an elected mayor. The approach of the transport
authorities in each of the regions affected by the Act in which we
have a presence is however different. In both the South West and
Greater Manchester it is clearly envisaged that the local
authorities will use the legislation to achieve complete control
over local bus networks by the franchise process. But in the West
Midlands a more collaborative approach using bus alliances is
favoured by the local authority. From our perspective both lines of
approach offer the prospect of being able to increase our market
shares to levels to which we could not possibly have aspired under
the existing structure of the bus markets in these locations.
The speed with which changes are likely to happen is however
difficult to gauge with any certainty. In the West Midlands we
anticipate a gradual introduction of bus alliances covering a
number of routes over the next few years. In Manchester TfGM seems
to be positioning itself to implement any mayoral direction to take
control of bus networks but this decision could be a year or two
away. In the South West the rate of progress is uncertain and so it
is difficult to formulate a definite view.
Our appreciation of these developments has however driven our
acquisition strategy, as outlined below. In the West Midlands we
have sought to increase our reach on the western and northern parts
of the conurbation by making infill acquisitions of two smaller bus
businesses. These acquisitions have increased our market shares in
key locations. In Greater Manchester we decided that we needed to
increase the size of our overall operation so that we could have a
more meaningful part to play in bidding for any franchises that
might come up. Thus we bought a small local bus operation on the
western side of Manchester. In the South West the lack of clear
direction has dissuaded us from making any further investment in
the near term and we are content to await developments there.
Acquisitions
During the year the Group made three acquisitions, followed
shortly after the year end by a fourth. The first occurred at the
end of July 2017 when we acquired Hansons (Wordsley) Limited for a
cash consideration of GBP608,000. This company was based in
Stourbridge between two of our existing depots and had a turnover
of some GBP2 million per annum. It had about 50 staff and operated
some 30 vehicles. We saw the opportunity through this acquisition
to increase the size of our operation in this part of the West
Midlands and to cement our position as the second largest operator
in the West Midlands conurbation as a whole. In addition the
acquisition made it possible to increase the utilisation of our
existing overhead structure and so take advantage of economies of
scale. Following acquisition we therefore immediately moved Hansons
vehicles and drivers to our existing depots and put the Stourbridge
property on the market. Completion of the sale of this property
occurred at the end of January 2018 at a price of GBP320,000.
We followed this up in early September 2017 with an acquisition
in the Eccles area of Greater Manchester. This acquisition was the
bus business of Go Goodwins (Coaches) Limited and comprised a bus
and minibus business turning over about GBP2 million per annum,
with 28 staff and 18 buses. The cash consideration was GBP707,000
and included a well located freehold depot. Furthermore it brought
with it the opportunity, which we have since taken up, to acquire
the immediately adjacent freehold plot which will enable us to
double the size of the depot and operate about 50 vehicles from
there, a very similar size of operation to our existing depot in
Atherton. By this acquisition we therefore put ourselves in a
position to double the scale of our operations in Greater
Manchester in anticipation of developments in the re-franchising of
bus networks by TfGM.
Then, just before the year end, in late November 2017 we
purchased for GBP2 million in cash the Hotel Hoppa bus business
from National Express together with the fleet of 32 buses. This
business, with revenues of about GBP6 million per annum and about
90 employees, comprises a passenger transport service between all
the terminals of Heathrow Airport and hotels within a five mile
radius of Heathrow Central Bus Station, delivered under contracts
with those hotels and other airline customers. This acquisition
enabled Rotala to strengthen significantly its operations in the
Heathrow area. Many of the airline customers of the Hotel Hoppa
business are already users of various airside and landside services
provided by us in and around Heathrow Airport. No additional
overheads were incurred as a result of the acquisition because the
acquired business utilised spare capacity in the existing Rotala
depots on the southern side of the airport.
Finally, in February 2018, we acquired from CEN Group Limited
its entire bus business, trading as Central Buses, and 30-strong
vehicle fleet for a cash consideration of GBP1.95 million. The
business has annual revenues of approximately GBP2.8 million.
Central Buses is a well-established operator of commercial and
contracted bus services in the northern part of the West Midlands
area. This business, with its 40 staff, has been folded into the
existing depot infrastructure which Rotala already possesses in the
West Midlands. The acquisition extends the Group's network of bus
services in the northern part of Birmingham, particularly in the
Perry Barr area, and so adds further to our market presence in the
key West Midlands conurbation.
Technology investment
On 23 April 2017 Rotala went live with new ticket machines
equipped with the latest ticketing technology. We have invested
GBP900,000 in this new ticketing system across the whole of the
West Midlands and Worcestershire network operated by our Diamond
Bus brand. The equipment was supplied by UK-based company Ticketer
and, working closely with them, we were able to go from the
decision to acquire the new ticket machines to implementation in
approximately six months.
The investment means that Diamond Bus can now offer passengers a
range of new features. From a passenger's perspective one key
advantage is Contactless Payment, giving the customer a more
convenient way to pay. Usage of this feature has been growing
steadily since inception. From the operator's perspective this
means less time purchasing a ticket and so better time keeping.
Rotala is the first operator in the West Midlands area to offer
contactless payment on a network-wide basis. We have also been able
to make tracking information available to passengers through our
own mobile app and website. This has been well received by users.
In due course, in coordination with TfWM, Real Time Information
("RTI") will be passed from the new ticket machines to TfWM's RTI
infrastructure.
We also extended the usage of Ticketer machines to the Hotel
Hoppa business immediately after its acquisition in November 2017,
as described above. Here the Contactless Payment function rapidly
showed its worth. Uptake of this method of payment by passengers
has grown steeply from a standing start and now forms a significant
proportion of ticket sales revenue. Passengers can buy tickets by
the contactless method both on bus and at automated kiosks which we
have installed in their hotels. These kiosks also give passengers
RTI about the location of their next bus.
From the business perspective the new ticket machines, equipped
with the latest in tracking and communications technology, give
live location and status feeds for each vehicle to depot traffic
offices. This feature enables managers to report delays much more
accurately to customers and liaise more easily with drivers to
identify and rectify problems. Tickets are also printed with
individual Quick Response ("QR") codes. The QR codes are scanned
when boarding a bus and are unique to each ticket. This
significantly reduces the risk of fraudulent ticket abuse, a
perennial management problem for any bus operator.
Fleet management
The focus of our fleet management activity in this accounting
period was on the integration of the vehicles acquired with the
three acquisitions we made during the year and then shaping the
combined fleet to fit the on-going Group requirements. This has
resulted in the disposal of a large number of older vehicles this
year, but, principally because of the ages of the fleets of the
acquired businesses, the average age of the fleet has gone up to
9.50 years (2016: 8.45 years). This however is still a figure which
is closely comparable to bus fleets outside Greater London. Since
the year end we have acquired a 20 strong batch of second hand
vehicles but we do not see the need for a significant number of new
vehicles in the remainder of 2018 unless customer requirements
change. New vehicles in these circumstances would be matched by
significant additional revenues and so make commercial sense. We
continue to manage the fleet actively in accordance with our
policies and this will no doubt result in an on-going level of
vehicle acquisition and disposal.
When acquiring any vehicle new to the fleet we are acutely
conscious of its emission standards and relative fuel consumption.
We believe that having a modern and efficient bus fleet is a key
aspect of customer service. Management monitors each vehicle in the
fleet for relative fuel consumption, reliability and maintenance
cost. Older vehicles also produce a greater level of emissions and
we are keen to minimise this aspect of bus operation. Those
vehicles that fall outside of acceptable parameters are designated
for disposal.
Dividend
As the Company matures I expect the dividend to be progressive.
The board is conscious of the importance of dividend flows to
shareholders and has set a target dividend cover of 2.5 times
earnings, to match underlying earnings and free cash flows.
The Company paid an interim dividend of 0.85 pence per share in
December 2017. The board will recommend to the forthcoming Annual
General Meeting a final dividend in respect of 2017 of 1.65 pence
per share making a total of 2.50 pence for the year (2016: 2.30
pence). The dividend will be paid, subject to shareholder approval
at the Annual General Meeting, on 29 June 2018 to all shareholders
on the register on 8 June 2018.
Banking
Just after the year end, the Group changed its principal bankers
to HSBC Bank plc and entered into new and enlarged facilities to
support its greater scale of operation. These facilities are
generally on more favourable terms than the ones they replaced but
the borrowings of the Group were initially unchanged. The new
facilities comprise a term loan of GBP5.5m, a revolving facility of
GBP15.5m and an overdraft facility of GBP3.5m, with a maturity date
for all these facilities of 5 December 2021. Taking into account
these new facilities and parallel asset finance facilities, the
Group has approximately GBP10 million of headroom with which it can
finance further potential acquisitions.
Placing of new shares
On 2 August 2017, the Company raised GBP2 million, before fees
and expenses, through a subscription by two existing shareholders
at a price of 60p a share, and one of these subscribers, Graham
Peacock, subsequently joined the board, as set out below. On 18
August 2017 a further GBP1.5 million was raised through a placing
with certain other investors, also at 60p per share.
The net proceeds from these issues of equity were used to
finance the acquisitions described above.
Board changes
As mentioned above, following his participation in the
subscription for new shares on 2 August 2017, we were delighted to
welcome Graham Peacock to the board as a non-executive director.
Graham has significant expertise in the transport services sector
and was previously Chief Executive Officer and a substantial
shareholder of MRH (GB) Limited, the UK's largest independent owner
and operator of petrol stations in the UK. The experience he brings
will be invaluable to the Company in executing its strategy of
organic and acquisitive growth.
With effect from 1 June 2017 Graham Spooner, an existing
non-executive director of the Company, was appointed to the post of
Deputy Chairman.
It is also my sad duty to report the sudden and most unexpected
death of Geoff Flight last month. Geoff was an investor in and
director of Rotala for a decade or more, until he stepped down in
2016. Geoff was a well-known figure in the coach industry. He will
be sorely missed.
Fuel hedging
The fuel hedge position is little changed over the last year.
Given the uncertain direction of oil prices during 2017, the board
decided not to consider fuel hedging while this market uncertainty
remains unresolved. The Group does however have a fuel hedge in
place for the whole of 2018. This covers about 78% of the fuel
requirement at an average price of 91p a litre.
Financial review
Income statement
The Consolidated Income Statement is set out below. This section
of the review addresses the results before the mark to market
provision for fuel derivatives and other exceptional items.
Revenues for the year rose by 5% compared to those of 2016. This
increase was principally driven by the acquisitions made in the
year. Cost of Sales also rose by 4%. Gross Profits therefore
increased by 10%, whilst the gross profit margin rose slightly to
19.1% (2016: 18.3%) as the new acquisitions were integrated into
the rest of the Group. Administrative expenses increased by 7.6% as
a result of the general expansion in the size of the group and its
depot footprint. The Profit from Operations at GBP4.48 million
(2016: GBP3.95 million) was 13% up on that achieved in the previous
year. As a consequence adjusted EBITDA rose by 11% to GBP7.8
million (2016: GBP7.0 million). Finance expense however fell very
slightly as borrowings were more or less static and interest
expense overall was little changed. Profit before taxation
therefore rose by 20% when compared to the previous year to GBP3.22
million (2016: GBP2.68 million).
Exceptional items represented by the mark to market provision on
fuel derivatives and other exceptional costs are analysed in detail
in note 3 to this statement. Profit from Operations after all
exceptional items was GBP3.68 million (2016: GBP3.96 million).
However in 2016 there was a much larger mark to market profit than
in 2017. Similarly Profit before Taxation and after all exceptional
items was in 2017 GBP2.42 million (2016: GBP2.69 million).
Basic earnings per share in 2017, after taking into account the
mark to market provision and other exceptional items, were 4.73p
per share (2016: 5.49p). However, the impact of the mark to market
provisions and the other exceptional items make the basic earnings
per share numbers very difficult to understand. A better guide to
true comparability is to consider the adjusted basic earnings per
share numbers. Adjusted basic earnings per share (before the mark
to market provision and other exceptional items) were then 5.95p in
2017 (2016: 5.51p), giving an increase of 8% year on year.
Balance sheet
The gross assets of the Group grew by 9% in the year and stood
at GBP68.9 million at 30 November 2017 (2016: GBP63.5 million).
Goodwill and other intangible assets rose by GBP2.7 million as a
result of the three acquisitions made during the year. Holdings of
freehold property increased following the addition of a freehold
depot with the acquisition of the Eccles - based business in
September 2017. The bulk of the investment in plant and machinery
was represented by new ticket equipment. The book value of the
vehicle fleet also increased partly because of the acquisitions
made in the year but also because of the reshaping of the Group
fleet that was required after the business acquisitions made during
the year.
Stocks of parts, tyres and fuel were unchanged overall. However
both Trade and Other Receivables rose considerably, both because of
the increased size of the Group but also because much of the new
business of the year was delivered by contract, rather than being
commercial income. These changes in the shape of the business also
drove the increases in prepayments and accrued income, where the
bulk of the increase was accounted for by amounts receivable in Bus
Services Operators' Grant, concessionary fares schemes and local
authority run fares collection systems. Trade and Other Payables
reflected the same business factors and showed a commensurate
increase. The dollar/sterling exchange rate and the oil price rise
of the latter part of 2017 moved the mark to market asset held in
respect of the Group's fuel derivative position into even greater
surplus at the period end.
The gross loans and borrowings of the Group overall were very
little changed from the previous year at GBP16.3 million (2016:
GBP16.0 million), as the acquisitions made were largely financed by
the new share issues. Because the Group's banking facilities were
due to expire five months after the year end all borrowings were
classified as current at that date. However within a few days of
the year end the Group banking facilities moved to HSBC Bank plc
and assumed a more conventional shape as described below.
Obligations under hire purchase contracts also saw little change
year on year: the present value stood at GBP11.5 million at 30
November 2017 compared to GBP11.3 million the year before. This
position
reflects the extensive fleet changes which occurred after the
business acquisitions of the year and a number of hire purchase
refinancing transactions. The pension obligations of the Group
(GBP427,000) now reflect the remaining contributions due to be paid
to this defined benefit scheme, as certified by the scheme's
independent actuary. The scheme actually moved from an accounting
deficit of GBP800,000 in 2016 to an accounting surplus of
GBP894,000 at the end of 2017. The rules of this government - run
scheme prevent at present the return of any surplus. This is why
the remaining contributions to the scheme are recognised as a Group
liability.
The gross liabilities of the Group were therefore 3% higher than
the previous year at GBP36.6 million (2016: GBP35.7 million).
Responding to the new share issues of GBP3.4 million net of
expenses in August 2017, in addition to the positive factors
described above, the net assets of the Group rose to GBP32.4
million at the end of the year, compared to GBP27.8 million at the
end of 2016, a rise of 16% year on year.
Cash flow statement
Cash flows from operating activities (before changes in working
capital and provisions) were little changed from the previous year
at GBP6.28 million (2016: GBP6.46 million). However the increased
size of the Group and the fact that the businesses acquired were
largely in the contracted services sector, where revenues are
billed by invoice rather than being collected at delivery as with
commercial bus services, caused cash to be absorbed into working
capital. This picture was much the same as it had been in 2016 and
for similar reasons, though the extra working capital required was
at a much lower level than was the case in the prior year. Interest
paid on HP agreements was slightly increased when compared to the
previous year. As a result of the above factors net cash flows from
operating activities were much improved on 2016 at GBP3.34 million
(2016: GBP1.45 million).
Cash used in investing activities in the year was much greater
than the previous year. That year had seen the benefit of the sale
of the Long Acre depot. There was no similar event in 2017.
Investment in property, plant and equipment was lower than that
made in 2016 at GBP1.80 million (2016: GBP2.56 million). Sales of
surplus vehicles however raised a very similar sum to that of the
previous year and so the net spend on property, plant and equipment
was this year GBP0.8 million (2016: GBP1.5 million). The amount
spent on the three acquisitions made in the year (GBP3.3 million)
was much higher than that spent on a similar number of acquisitions
in 2016 (GBP1.87 million) Thus cash used in investing activities
was GBP4.13 million net of related proceeds (2016: GBP0.93 million
net).
Financing activities were affected by a number of events. Once
again in 2017 new shares were placed. This happened in August 2017
and raised GBP3.36 million (2016: GBP2.4 million). The sum raised
in 2017 was almost exactly that expended on acquisitions, as laid
out above. Dividends paid reflect both an increase in the dividend
per share and the number of shares in issue. There was no share
buy-back this year.
In 2017 GBP722,000 of bank loans were repaid in accordance with
their standard terms and moderate drawings were made on the
revolving facility such that bank borrowings changed little over
the year as a whole. This was very like 2016 where new bank loans
and repayments were geared around the receipt of the sale proceeds
of the Long Acre depot. Bank interest paid in 2017 was also at a
very similar level to that seen in 2016. Advantage was again taken
this year of the unencumbered value represented by the vehicle
fleet. By refinancing these vehicles with new hire purchase
arrangements GBP700,000 of capital was released to invest in the
business. The capital element of payments on hire purchase
agreements fell somewhat in the year to GBP3.09 million (2016:
GBP3.37 million). The cash absorbed by financing activities
therefore rose slightly to GBP0.57 million net (2016: GBP0.27
million net).
Overall therefore cash and cash equivalents declined by GBP1.38
million in the year compared to an increase of GBP256,000 in the
prior year. The closing overdraft, net of cash and cash
equivalents, of GBP1.7 million (2016: GBP342,000 overdraft), was in
line with management's expectations.
Outlook
The Group performed well in 2017 and trading for the current
year has begun in line with expectations. Following the four
acquisitions which have been made in 2017 and in the early part of
2018, together with the more recent announcements of new business,
turnover in the current year should show further significant
growth. We have moreover underpinned the growth prospects of the
Group by successfully negotiating enlarged and more favourable
banking facilities to provide the headroom and finance for further
acquisitions. Rotala has grown predominantly through acquisition
and we continue to be actively engaged in looking for attractive
acquisition opportunities.
The Group possesses a strong and very experienced management
team which has demonstrated over the last decade that it has the
right strategy and the skills to implement it. We have shaped our
current strategy to take full advantage of the opportunities to be
presented by the Bus Services Act 2017. The Act will potentially
enable Rotala to increase its market shares significantly in areas
where such ambitions would once have been thought to be
unattainable. The Act also, taken together with the effects of
other transport policy changes by government in recent years,
continues to force change on the bus industry. Change brings
opportunity to businesses like Rotala and we think we are very well
positioned to take full advantage of any eventualities.
Overall therefore we are confident about the prospects of the
Group and excited about the possibility of expanding it
considerably in the years ahead.
John Gunn
Non-Executive Chairman
Date: 11 April 2018
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 30 NOVEMBER
2017
Note 2017 2017 2017 2016 2016 2016
Results Results
before Exceptional Results before Exceptional Results
exceptional items for the exceptional items for the
items (note year items (note year
3) 3)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2 57,906 - 57,906 54,975 - 54,975
Cost of
sales (46,828) - (46,828) (44,895) - (44,895)
Gross
profit 11,078 - 11,078 10,080 - 10,080
Administrative
expenses (6,599) (796) (7,395) (6,133) 8 (6,125)
Profit
from operations 4,479 (796) 3,683 3,947 8 3,955
Finance
income - - - 14 - 14
Finance
expense (1,264) - (1,264) (1,281) - (1,281)
Profit
before
taxation 3 3,215 (796) 2,419 2,680 8 2,688
Tax expense 4 (595) 257 (338) (468) (14) (482)
Profit
for the
year attributable
to the
equity
holders
of the
parent 2,620 (539) 2,081 2,212 (6) 2,206
Earnings
per share
for profit
attributable
to the
equity
holders
of the
parent
during
the year:
Basic
(pence) 5 5.95 4.73 5.51 5.49
Diluted
(pence) 5 5.94 4.72 5.46 5.44
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEARED
30 NOVEMBER 2017
2017 2016
GBP'000 GBP'000
Profit for the year 2,081 2,206
Other comprehensive income:
Items that will not subsequently
be reclassified to profit or loss:
Actuarial profit/(loss) on defined
benefit pension scheme 58 (860)
Deferred tax on actuarial profit/loss
on defined benefit pension scheme (11) 163
Other comprehensive profit/(loss)
for the year (net of tax) 47 (697)
Total comprehensive income for
the year attributable to the equity
holders of the parent 2,128 1,509
-------- --------
All of the activities of the Group are classed as
continuing.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30
NOVEMBER 2017
Share
Share premium Merger Shares Retained
capital reserve reserve in treasury earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 December
2015 9,794 8,603 2,567 (622) 4,702 25,044
Profit for
the year - - - - 2,206 2,206
Other comprehensive
expense - - - - (697) (697)
---------- --------- ---------- -------------- ----------- ----------
Total comprehensive
income - - - - 1,509 1,509
---------- --------- ---------- -------------- ----------- ----------
Transactions
with owners:
Dividends
paid - - - - (803) (803)
Share based
payment 16 16
Shares issued 968 1,272 - 172 - 2,412
Purchase of
own shares - - - (367) - (367)
Transactions
with owners 968 1,272 - (195) (787) 1,258
---------- --------- ---------- -------------- ----------- ----------
At 30 November
2016 10,762 9,875 2,567 (817) 5,424 27,811
Profit for
the year - - - - 2,081 2,081
Other comprehensive
income - - - - 47 47
---------- --------- ---------- -------------- ----------- ----------
Total comprehensive
income - - - - 2,128 2,128
Transactions
with owners:
Dividends
paid - - - - (970) (970)
Share based
payment - - - - 20 20
Shares issued 1,458 1,904 - - - 3,362
Transactions
with owners 1,458 1,904 - - (950) 2,412
---------- --------- ---------- -------------- ----------- ----------
At 30 November
2017 12,220 11,779 2,567 (817) 6,602 32,351
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 NOVEMBER 2017
Note 2017 2016
GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 36,925 34,876
Goodwill and other intangible assets 14,759 12,033
Total non-current assets 51,684 46,909
-------- --------
Current assets
Inventories 2,526 2,607
Trade and other receivables 13,646 11,483
Derivative financial instruments 450 327
Cash and cash equivalents 627 2,159
-------- --------
Total current assets 17,249 16,576
-------- --------
Total assets 68,933 63,485
-------- --------
Liabilities
Current liabilities
Trade and other payables 6,477 5,195
Loans and borrowings 6 16,278 11,096
Obligations under hire purchase contracts 7 3,158 3,034
Derivative financial instruments - 285
Total current liabilities 25,913 19,610
-------- --------
Non-current liabilities
Loans and borrowings 6 - 4,900
Obligations under hire purchase contracts 7 8,357 8,256
Provision for liabilities 1,203 1,653
Defined benefit pension obligation 427 800
Deferred taxation 682 455
Total non-current liabilities 10,669 16,064
-------- --------
Total liabilities 36,582 35,674
-------- --------
TOTAL NET ASSETS 32,351 27,811
Shareholders' funds
Share capital 12,220 10,762
Share premium reserve 11,779 9,875
Merger reserve 2,567 2,567
Shares in treasury (817) (817)
Retained earnings 6,602 5,424
-------- --------
TOTAL EQUITY 32,351 27,811
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 NOVEMBER 2017
2017 2016
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 2,419 2,688
Adjustments for:
Depreciation 3,274 3,050
Acquisition expenses 47 125
Finance expense (net) 1,264 1,267
Gain on sale of property, plant and
equipment (446) (342)
Contribution to defined benefit pension scheme (337) (350)
Goodwill amortisation 19 -
Notional expense of defined benefit pension scheme 22 7
Equity settled share-based payment
expense 20 16
-------- --------
Cash flows from operating activities before changes in working capital and provisions 6,282 6,461
-------- --------
Decrease(increase) in inventories 80 (500)
(Increase)/decrease in trade and other receivables (2,056) (3,330)
Increase(decrease) in trade and other payables 396 (339)
Movement in provisions (450) 1,437
Movement on derivative financial instruments (408) (1,801)
(2,438) (4,533)
Cash generated from operations 3,844 1,928
Interest paid on hire purchase agreements (501) (474)
Net cash flows from operating activities carried forward 3,343 1,454
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 NOVEMBER 2017 (Continued)
2017 2016
GBP'000 GBP'000
Cash flows from operating activities brought forward 3,343 1,454
Investing activities
Purchases of property, plant and
equipment (1,799) (2,558)
Acquisition of businesses (3,329) (1,871)
Sale of assets held for sale as at 30 November 2015 - 2,479
Sale of property, plant and equipment 1,002 1,023
Net cash (used in) investing activities (4,126) (927)
Financing activities
Shares issued 3,362 2,412
Dividends paid (970) (803)
Own shares purchased - (367)
Proceeds of mortgage and other bank loans 1,105 2,775
Repayment of bank and other borrowings (722) (2,700)
Bank interest paid (740) (744)
Hire purchase refinancing receipts 717 2,522
Capital settlement payments on vehicles sold (240) -
Capital element of lease payments (3,086) (3,366)
Net cash used in financing activities (574) (271)
Net (decrease)/increase in cash and cash equivalents (1,357) 256
Cash and cash equivalents at beginning of year (342) (598)
Cash and cash equivalents at end of year (1,699) (342)
Notes to the Preliminary Announcement of results for the year
ended 30 November 2017
1. Basis of preparation:
The accounting policies used in the preparation of this
financial information are those that have been used in the
preparation of the annual statutory financial statements of the
Company for the year ended 30 November 2017. These policies are in
accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRSs) as endorsed by
the European Union.
2. Turnover:
Revenue represents sales to external customers excluding value
added tax. Passenger revenue is recognised when payment is received
in cash. Subsidy revenue from local authorities is recognised on an
accruals basis, based on actual passenger numbers. Revenues
delivered under contract are recognised as services are delivered,
based on agreed contract rates.
All of the activities of the Group are conducted in the United
Kingdom within the operating segment of provision of bus services.
The Group has three main revenue streams: contracted, commercial
and charter, and management monitors revenue across these three
streams. All streams operate within a single operating segment,
that is the provision of bus services. The activities of each
revenue stream are as described in the Chairman's Statement.
2017 2016
GBP'000 GBP'000
Commercial 33,702 32,873
Contracted 21,415 19,707
Charter 2,789 2,395
--------- ---------
Total Revenue 57,906 54,975
========= =========
3. Profit before taxation:
Profit before taxation includes the following mark to market
provisions and other exceptional items:
2017 2016
GBP'000 GBP'000
Mark to market profit on fuel derivatives 162 684
Acquisition costs (47) (125)
Provision against onerous leases
resulting from acquisition - (310)
Revenue debtor written off (see (477) -
note below)
Redundancy costs and costs of integration
of acquisitions (337) (225)
Costs of change of principal bankers (58) -
Amortisation of intangible assets (19) -
Share based payment expense (20) (16)
(Loss)/profit within profit before
taxation (796) 8
======== ========
As a result of its acquisition of Green Triangle Buses Limited
(now renamed Diamond Bus (North West) Limited) in 2015, the Group
inherited a long standing dispute over the correct rate of
concessionary fare re-imbursement. This dispute has now been
amicably resolved but part of the settlement terms affected the
pre-acquisition element of the revenue in question. Had the
resolution of the dispute occurred before the end of the 2016
accounting year, the settlement of the dispute would have been
reflected in a corresponding increase in positive goodwill arising
on consolidation. However, since that window of adjustment is now
closed, the item has had to be written off to the profit and loss
account.
4. Tax expense:
Tax expense includes the following:
2017 2016
GBP'000 GBP'000
Current tax
Current tax on profits for the year - -
_______ _______
Total current tax - -
_______ _______
Deferred tax
Origination and reversal of temporary
differences 434 483
Prior year adjustments (96) 13
Change in rate of tax - (14)
_______ _______
Total deferred tax 338 482
_______ _______
Income tax expense 338 482
_______ _______
The tax assessed for the year is different to the standard rate
of corporation tax in the U.K. for the following reasons:
2017 2016
GBP'000 GBP'000
Profit before taxation 2,419 2,688
_______ _______
Profit at the standard rate of corporation
tax in the UK of 19% (2016: 20%) 460 538
Non-taxable items (2) (15)
Adjustments in respect of prior
periods (96) 13
Impact of change in tax rates (24) (54)
_______ _______
Total tax expense 338 482
_______ _______
The main rate of corporation tax will fall further to 17% from 1
April 2020 (a change which has been substantively enacted).
Deferred tax has been measured at the average tax rates that are
expected to apply in the accounting periods in which the timing
differences are expected to reverse, based on the tax rates and
laws which have been enacted or substantively enacted at the
balance sheet date.
5. Earnings per share:
Basic 2017 2016
GBP'000 GBP'000
Profit attributable to ordinary shareholders 2,081 2,206
Weighted average number of ordinary shares in issue 44,001,465 40,164,072
Basic earnings per share 4.73p 5.49p
=========== ===========
The calculation of the basic and diluted earnings per share is
based on the earnings attributable to the ordinary shareholders
divided by the weighted average number of shares in issue during
the year.
Basic 2017 2016
Adjusted basic before mark to market provision and other exceptional items: GBP'000 GBP'000
Profit before exceptional items attributable to ordinary shareholders 2,620 2,212
Weighted average number of ordinary shares in issue 44,001,465 40,164,072
Basic before exceptional items earnings per share 5.95p 5.51p
=========== ===========
Diluted Diluted
2017 2016
GBP'000 GBP'000
Diluted:
Profit attributable to ordinary
share holders 2,081 2,206
Profit for the purposes of diluted
earnings per share 2,081 2,206
----------- -----------
Weighted average number of shares
in issue 44,001,465 40,164,072
Adjustments for:
- exercise of options 111,164 369,473
----------- -----------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 44,112,629 40,533,545
----------- -----------
Diluted earnings per share 4.72p 5.44p
=========== ===========
Diluted Diluted
2017 2016
Adjusted diluted before mark to GBP'000 GBP'000
market provision and other exceptional
items:
Profit attributable to ordinary
share holders 2,620 2,212
Profit for the purposes of diluted
earnings per share 2,620 2,212
----------- -----------
Weighted average number of shares
in issue 44,001,465 40,164,072
Adjustments for:
- exercise of options 111,164 369,473
----------- -----------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 44,112,629 40,533,545
----------- -----------
Adjusted diluted earnings per share 5.94p 5.46p
=========== ===========
In order to arrive at the diluted earnings per share, the
weighted average number of ordinary shares has been adjusted on the
assumption of conversion of all dilutive potential ordinary shares.
The potential ordinary shares take the form of share options. A
calculation has been carried out to determine the number of shares,
at the average annual market price of the Company's shares, which
could have been acquired, based on the monetary value of the rights
attached to those shares. This number has then been subtracted from
the number of shares that could be issued on the assumption of full
exercise of the outstanding options, in order to compute the
necessary adjustments in the above table.
6. Loans and borrowings:
2017 2016
GBP'000 GBP'000
Current:
Overdrafts 2,326 2,501
Bank loans 13,952 8,595
_______ _______
16,278 11,096
_______ _______
Non-current:
Bank loans - 4,900
_______ _______
- 4,900
_______ _______
The above analysis reflects the banking arrangements of the
Group as at 30 November 2017. These facilities were due to expire
on 30 April 2018.
However, on 5 December 2017 the Group engaged HSBC Bank plc as
its principal bankers and all the Group's facilities were
transferred to that bank. This new Senior Facilities Agreement
provides for a revolving facility of up to GBP15.5 million and a
mortgage facility of GBP5.5 million, with a corresponding overdraft
facility of up to GBP3.5 million. The Group entered into a
cross-guarantee and floating charge agreement on that same date
covering these facilities. The facilities expire on 5 December 2021
but are renewable at that date.
The bank loans are secured on the Group's freehold property. The
annual mortgage repayments are calculated such that the mortgage
facilities amortise in a straight line over a term of 20 years
which is considered to give a reasonable approximation to the
effective interest rate.
7. Obligations under hire purchase contracts:
Future lease payments are due as follows:
Minimum
lease Present
payments Interest value
2017 2017 2017
GBP'000 GBP'000 GBP'000
Not later than one year 3,590 432 3,158
More than one year but less
than two years 3,249 287 2,962
More than two years but less
than five years 5,098 306 4,792
Later than five years 619 16 603
12,556 1,041 11,515
========== =========== ==========
Minimum
lease Present
payments Interest value
2016 2016 2016
GBP'000 GBP'000 GBP'000
Not later than one year 3,448 414 3,034
More than one year but less
than two years 3,165 272 2,893
More than two years but less
than five years 4,679 261 4,418
Later than five years 974 29 945
12,266 976 11,290
========== =========== ==========
The present value of future lease payments are analysed as:
2017 2016
GBP'000 GBP'000
Current liabilities 3,158 3,034
Non-current liabilities 8,357 8,256
11,515 11,290
======== ========
8. Acquisitions:
(a) Hansons (Wordsley) Limited
As set out in the Chairman's Statement, in July 2017 the Group
acquired Hansons (Wordsley) Limited. The Chairman's Statement
describes the details of and the reasons for the acquisition, and
should be consulted for a detailed description of all the relevant
factors. The consideration for the acquisition (excluding
acquisition costs) was GBP608,000 in cash. The book values of the
assets acquired are set out below.
Book value Fair value Fair value
adjustments on acquisition
GBP'000 GBP'000 GBP'000
Fixed assets
Freehold property 277 (42) 235
Plant and equipment 162 - 162
Total fixed assets 439 (42) 397
----------- ------------- ----------------
Current assets
Trade and other receivables 107 - 107
Cash 66 - 66
----------- ------------- ----------------
173 - 173
----------- ------------- ----------------
Current liabilities
Trade and other payables (843) - (843)
Taxation (8) 8 -
(851) 8 (843)
----------- ------------- ----------------
Non-current liabilities
Obligations under hire
purchase contracts (53) - (53)
Loans and borrowings (75) - (75)
Deferred taxation (17) 140 123
(145) 140 (5)
----------- ------------- ----------------
Net assets (278)
Goodwill 886
Acquisition costs 30
----------------
638
Total cash consideration
paid
================
Because the acquired business was immediately folded into the
existing operations of the Group in the relevant locality, it is
not possible to distinguish revenues and profits for the acquired
business in the period to 30 November 2017. Pre-acquisition book
values were determined based on applicable IFRS, immediately prior
to the acquisition. The values of assets recognised on acquisition
are their estimated fair values. For the vehicles acquired this is
based on the directors' assessment of the age and condition of each
of the vehicles and their knowledge of disposal values for
equivalent vehicles.
The directors have made an assessment of whether there are any
intangible assets acquired with the business. No licenses were
acquired with the business. The sales and purchase agreement
includes a standard non-compete clause; however, the sellers had no
intention of re-entering the respective markets at the acquisition
date and so there could be no value attributable to this clause.
Where there were contracts in place, there was no evidence that
these contracts produced any immediately identifiable profits or
positive cash flows in the hands of the previous owners. On these
bases no separate intangible assets have been identified. The
goodwill generated by the acquisition arose from the benefit of
synergies with the existing business of the Group in the respective
location. As stated above the business acquired includes a vehicle
fleet and these vehicles were immediately subsumed into existing
operations following acquisition. The acquisition expenses incurred
by the Group amounted to GBP30,000 and have been expensed in the
Consolidated Income Statement in Administrative Expenses.
(b) Bus business of Go Goodwins (Coaches) Limited and the Hotel
Hoppa business
As set out in the Chairman's Statement, in September and
November 2017 the Group acquired, respectively, the small bus
business of Go Goodwins (Coaches) Limited in Eccles, Manchester and
the Hotel Hoppa bus business in and around Heathrow airport. The
Chairman's Statement describes the details of and the reasons for
the acquisitions, and should be consulted for a detailed
description of all the relevant factors. The aggregate
consideration for these acquisitions was GBP2.8 million in cash.
The book values of the assets acquired are set out below.
Book value Fair value Fair value
adjustments on acquisition
GBP'000 GBP'000 GBP'000
Fixed assets
Freehold property 500 (185) 315
Vehicles 633 (53) 580
Customer contracts - 877 877
Total fixed assets 1,133 639 1,772
----------- ------------- ----------------
Current liabilities
Other payables and accruals - - (14)
- - (14)
----------- ------------- ----------------
Net assets 1,758
Goodwill 982
Acquisition costs 17
----------------
2,757
Total cash consideration
paid
================
Because the acquired businesses were immediately folded into the
existing operations of the Group in the relevant localities, it is
not possible to distinguish revenues and profits for the acquired
businesses in the period to 30 November 2017. Pre-acquisition book
values were determined based on applicable IFRS, immediately prior
to the acquisition. The values of assets recognised on acquisition
are their estimated fair values. For the vehicles acquired this is
based on the directors' assessment of the age and condition of each
of the vehicles and their knowledge of disposal values for
equivalent vehicles.
The directors engaged Crowe Clark Whitehill LLP ("CCW") to make
an assessment of the values of the intangible assets acquired with
the businesses. Principally this involved an assessment of the
value of the intangible asset attributable to the contracts
inherited with these businesses. The values estimated by CCW are
reflected in the above table.
The directors do not consider that the brand names have any
separable values. No licenses were acquired with the businesses.
The sales and purchase agreements include standard non-compete
clauses; however, the sellers had no intention of re-entering the
respective markets at the acquisition date and so there could be no
value attributable to these clauses. The goodwill generated by the
acquisitions arose from the benefit of synergies with the existing
businesses of the Group in their respective locations. As stated
above the businesses acquired include vehicle fleets and these
vehicles were immediately subsumed into existing operations
following acquisition. The acquisition expenses incurred by the
Group amounted to GBP17,000 and have been expensed in the
Consolidated Income Statement in Administrative Expenses.
9. Financial Information:
The Financial Statements for the year ended 30 November 2017
were approved by the Board of Directors on 11 April 2018. The
financial information in this announcement does not constitute
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for 2017 will be delivered
to the Registrar of Companies following the Company's Annual
General Meeting. The auditors have reported on the 2017 accounts;
the auditors' opinion is unqualified and does not include a
statement under section 498 of the Companies Act 2006.
10. Further Information:
The Company's Annual Report and Accounts for the year ended 30
November 2017 are expected to be posted to shareholders on 4 May
2018 and will also be available to view on the Company's website at
the following link: http://www.rotalaplc.com
Copies of this statement are available from the registered
office of the Company at Cross Quays Business Park, Hallbridge Way,
Tipton, Oldbury, West Midlands, B69 3HW or the Company's website at
the following link: http://www.rotalaplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFDFMFFASEFL
(END) Dow Jones Newswires
April 12, 2018 02:00 ET (06:00 GMT)
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