TIDMROL
RNS Number : 3480F
Rotala PLC
16 November 2020
RNS
16 November 2020
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014. Upon the publication of this
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Rotala Plc
("Rotala", the "Company" or the "Group")
Update
Rotala plc (AIM:ROL), an operator of bus routes in the UK for
businesses, local authorities and the general public, announces the
following update on the continuing impact of the Coronavirus
epidemic ("COVID-19") on its business and the likely impact on
trading results for the year ending 30 November 2020 ("FY 20").
COVID-19
Bus operation continues to be regarded by the UK Government as
an essential service. Since mid-March 2020, the Company has
concentrated on aligning bus services with local requirements,
reducing the costs of operation where possible and conserving cash.
Cash flow, both at EBITDA level and net of all debt, interest and
other payments, has been positive since the beginning of May 2020
and is expected to remain so for the foreseeable future. Net debt
(excluding hire purchase debt) continues to decline gradually from
the level of GBP26.6 million set out in the Company's unaudited
half year results to 31 May 2020, which were announced on 15
September 2020 ("H1 results"). The amounts currently drawn on the
Company's revolving commercial facility (GBP16.2 million as at 31
May 2020) are unchanged. Mortgage debt (GBP6.3 million as at 31 May
2020) has fallen slightly as repayments have been made. Drawings on
the Company's overdraft facility fluctuate according to the precise
timing of the receipt of instalments in the Government grant
package described below. The amounts currently due to the Company
under this grant package exceed the GBP4.1 million drawn on the
overdraft facility as at 31 May 2020. As previously announced, and
as a consequence of these factors, the Company has not needed to
take up any of the options available under the various
Government-supported loan schemes and does not currently foresee
any requirement to do so.
The financial and operational performance of the Company
throughout the COVID-19 crisis has been underpinned by the key
support of Government at local and national level, for which the
Company remains very grateful. Currently, these support measures
encompass a specific grant ("CBSSG Restart") and the maintenance of
the Bus Services Operator's Grant, concessionary fares
re-imbursements and payments for contracted bus services broadly at
their pre- COVID-19 levels. The effect of these measures is that
bus operators are guaranteed to make neither a profit nor a loss at
the normalised statutory pre-tax profit line for as long as the
support package is in place.
The Government has confirmed that CBSSG Restart and all other
support measures will continue in place for the foreseeable future
. Furthermore, it has stated that it will give eight weeks' notice
in the event of termination of CBSSG Restart, which should give
ample time for the Company to make any necessary service changes
following the withdrawal of the grant. In addition, the Company is
playing its full part in the Home to School transport initiative
being funded separately by the Department of Education. This
funding has been confirmed for the remainder of the current school
term.
Passenger numbers
Passenger numbers rose steadily throughout the summer months
and, prior to the re-imposition of lockdown restrictions in
England, which became effective on 5 November 2020, reached a peak
of approximately 60% of the levels seen in the same period last
year. To match these increases, bus service frequencies, supported
by the Government grants referred to above, were returned to
pre-COVID-19 levels. The commencement of the renewed lockdown phase
earlier this month has reduced passenger volumes once again to
about 45% of pre-COVID-19 levels. However, CBSSG Restart contains a
ratchet mechanism which ensures that, as passenger numbers decline,
grant support increases, maintaining the no profit/no loss position
for the bus operator referred to above.
Fuel hedging
The Group's historical normal annual fuel requirement is
approximately 15.0 million litres . Given the current lows in fuel
prices, the Board has hedged 50% of the Group's normal fuel
requirement for the 12 months ending 30 November 2022 at an average
fuel price of approximately 87p per litre .
About 77% of the Group's normal fuel requirement for 2020, and
about 87% of its normal fuel requirement for 2021, is already
covered by hedging contracts. Actual fuel usage during the COVID-19
crisis has been well below expected levels. Full mark to market
provision for the losses on these hedging contracts was made in the
H1 results.
Current trading and prospects
The Company has continued to take other measures to realign its
operations to likely future requirements. At Heathrow Airport, the
opportunity has been taken not to renew the lease of a depot near
Hatton Cross station, which expired in October 2020, and to
concentrate operations at the airport at the Company's other depot
on the south side of the airport perimeter road. This decision will
result in annual savings of approximately GBP400,000. Most of the
benefit of the decision will accrue in the financial year ending 30
November 2021.
In addition, the Company has historically operated a small
number of coaches. In the current operating climate there has been,
as with many coach operators throughout the country, little demand
for such vehicles. As the operating leases for these vehicles have
come to an end, they have not therefore been replaced. As and when
coach business returns, for example at Heathrow Airport, the
Company will consider the economic rationale for investing in this
business stream and temper the scale of its investment
accordingly.
The commencement of the COVID-19 crisis led the Company to
withdraw its previous market guidance for FY20 and beyond. As set
out above, the provision of CBSSG Restart and the associated UK
Government measures have been designed to ensure that the Company
makes neither a profit nor a loss at the normalised level for the
second half of FY 20. Therefore, the Company's results for FY 20
are likely to be broadly the same at the normalised level as the H1
results. A further announcement on the Group's current trading and
prospects will be made following the Company's year-end and this is
expected to be released in mid-January 2021.
Commenting, Simon Dunn, Chief Executive of Rotala, said: -
" For the foreseeable future, we will continue to work closely
with the Department for Transport and relevant local authorities
and be in receipt of the various elements of Government support in
the form of the grants and subsidies set out above.
"In the longer term, the Board believes that the pre-existing
drivers of change in the bus industry will have been further
strengthened by the impact of COVID-19. Therefore, we continue to
believe that opportunities for growth, both organic and by
acquisition, will arise once the crisis has passed. The Group's
service delivery and reliability levels have improved throughout
the crisis and our increased investment in systems infrastructure
has continued to produce discernible benefits. The Board is
therefore confident that operationally the Group is in good shape,
well able to meet the challenges and capture the opportunities that
lie beyond the end of the COVID-19 crisis."
Rotala Plc 0121 322 2222
John Gunn, Chairman
Simon Dunn, Chief Executive
Kim Taylor, Group Finance Director
Shore Capital 020 7408 4090
Tom Griffiths / James Thomas / Michael McGloin (Corporate Advisory)
Henry Willcocks (Corporate Broking)
About the business
Rotala provides a range of transport solutions, ranging from
local bus services under contract to local authorities, through to
commercial bus routes. Rotala has operations at Heathrow Airport,
in the West Midlands and in the North West. Operating companies are
Diamond Bus Ltd, Diamond Bus (North West) Ltd, Hallmark Connections
Ltd and Preston Bus Ltd.
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