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Rotala PLC   -  ROL   

Final Results

Released 07:00 02-Apr-2019

RNS Number : 7557U
Rotala PLC
02 April 2019
 

 

 

2 April 2019

 

Rotala plc

("Rotala", the "Company" or the "Group")

 

Final audited results for the year ended 30 November 2018

 

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 2018.

 

Highlights*

 

·      Turnover of £62.4 million (2017: £52.6 million), up 19%

 

·      Adjusted EBITDA** of £8.8 million (2017: £7.75 million), up 14%

 

·      Adjusted operating profit** of £5.8 million (2017: £4.9 million), up 18%

 

·      Adjusted profit before taxation** up 18% to £4.23 million (2017: £3.59 million)

 

·      Adjusted basic earnings per share** up 9% to 7.22p per share (2017: 6.65p)

 

·      Dividends for the year paid and proposed total 2.70p per share (2017: 2.50p), in accordance with progressive dividend policy

 

 

*2017 comparable results show restated figures to account for discontinued operations

 

**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 2018.  The Company continues to make good progress and its results clearly show the benefit of the acquisition strategy which the board has pursued over the last three years. In that time we have made seven acquisitions. 

 

Results and review of trading

 

Revenues for the Group (excluding discontinued businesses) for the year ended 30 November 2018 were £62.4 million. This represents an increase of 19% on the revenues of £52.6 million achieved in the previous year. Gross margin decreased very slightly to 20.0% (2017: 20.5%). Pre-tax profits before exceptional items rose by 18% to £4.23 million (2017: £3.59 million).     

 

·    Contracted Services

Revenues in Contracted Services rose overall by 16% to £21.6 million (2017: £18.6 million). Contracted Services comprised 35% of Group revenues in 2018, unchanged as a proportion of Group revenues compared to the previous year. In this division revenues fall under two broad headings: local authority bus contracts and corporate contracts.

Looking first at the local authority bus contracts sector, in 2017 we made acquisitions in both the West Midlands and the North West. We followed that up in the first quarter of 2018 with a further acquisition in the West Midlands of the Central Buses business, as described below in more detail. One of the reasons for making these acquisitions was to put the Group in a position to obtain a greater share of the contracted bus markets in these regions by extending our operational reach.  In my report last year I outlined the contracts we had subsequently gained in both the West Midlands and the North West in late 2017 and early 2018. We further benefited from an increase in the local bus contracts that we operate for Surrey County Council from our Heathrow depot. These contract gains ensured that revenues from local authority contracts grew strongly in 2018 and now form the greater share of revenues in the Contracted Services division.

In contrast, revenues in the corporate contracts sector of this division fell somewhat. This fall resulted from operational management sticking to Group policy in tendering for contracts, Our policy is always to ensure that all the work we do contributes to group profitability. We do not chase turnover for its own sake, regardless of the financial implications of taking on such business. At contract renewal a number of airline and other corporate customers in and around Heathrow proved to have unrealistic expectations of the price at which proper services could be delivered. Therefore we, with equanimity, decided rather to give up a number of contracts than carry them out at a rate detrimental to the Group's financial health. 

Overall then the Contracted Services division maintained its share of Group revenues with some very pleasing gains in the key local authority markets which we had targeted in drawing up the acquisition strategy implemented in the last few years. 

  

·    Commercial Services

Revenues in the Commercial Services division grew by 25% in 2018 to reach £38.9 million for the year (2017: £31.2 million). Commercial Services comprised 62% of Group revenues in 2018, compared to 59% in 2017. The growth in revenue in Commercial Services in 2018 was in part fueled, just as in the Contracted Services division, by the acquisitions we have made in the last two years in the West Midlands and in Manchester. In the West Midlands the acquisition of Hansons in 2017 and Central Buses in 2018 has seen commercial revenues from the region rise to a new peak. Similarly, in Manchester the acquisition of the Goodwins bus business in 2017 allied to the establishment of a number of new commercial routes has seen commercial revenues in that conurbation double in the last three years.  In order to facilitate expansion in the Manchester market we also in the year purchased for £220,000 the freehold site immediately adjacent to the one which we acquired with the Goodwins acquisition in 2017. We have cleared this new site of its unwanted buildings and thereby doubled the size of the freehold depot we possess in the Eccles area of Manchester.  The depot is now comparable in size to our Atherton depot and gives us ample room for expansion in accordance with our plans for the area.

At the very end of the 2017 accounting year we acquired the Hotel Hoppa business which serves routes between the Heathrow airport terminals and local hotels. In its first full year under our ownership this business provided a significant proportion of the increase in revenues in the Commercial Services division. Immediately after its acquisition we completely re-equipped the business with our standard Ticketer ticket machines. These possess a contactless payment feature which was quickly taken up by many Hotel Hoppa users. We also installed automated ticket kiosks at the hotels this business serves, which have proved equally popular with passengers.

We have made considerable investment in the Commercial Services division over the last five years. It is pleasing to be able to report that revenues have as a result grown by about 30% in that time period. 

 

·    Charter Services

Revenues in Charter Services fell by 31% compared to the previous year to £1.9 million (2017: £2.8 million). Charter Services comprised 3.1% of Group revenues in 2018, compared to 5.3% in 2017. This decrease was almost entirely due to the fact that we were unable this year to obtain the same level of rail replacement work which we had secured in 2017. Revenues from private hire elsewhere, principally serviced from our Heathrow depot, held up well when compared with the revenues from this source achieved in the previous year. 

 

Strategy and the Bus Services Act 2017

 

The Bus Services Act 2017 continues to have a major impact on developments in the bus industry. The Act enables the re-franchising of bus networks in any area with an elected mayor. This affects two regions in which we have a major presence, but the approach of the respective transport authorities in each of these regions is different.

 

In Greater Manchester, Transport for Greater Manchester ("TfGM"), under the direction of the Mayor, has stated a desire to achieve complete control over the region's bus networks by the re-franchising process set out in the Bus Services Act, if this can be achieved. TfGM has commissioned the feasibility study which the Act empowers it to undertake to look at the refranchising proposal. At the present time the outcome of this study is unknown. However we do not see refranchising in this region as a threat. Currently the Manchester market is completely dominated by two major players. Any refranchising plan will seek to spread market share more equally among market participants, as in the London market. Thus, in a refranchised market, a Group like Rotala might potentially achieve a market share which it could not possibly aspire to under current market conditions.     

 

In the West Midlands however a different approach is being followed by Transport for the West Midlands ("TfWM""). TfWM has not utilised powers from the Bus Services Act 2017 for Enhanced Partnerships or franchising schemes but has continued with the Bus Alliance which was already underway using powers from previous legislation. These powers enable TfWM to promote partnerships between bus operators on routes on which they already compete providing they can demonstrate a customer benefit. So far TfWM has created two of these partnerships on routes on which our Diamond Bus subsidiary competes directly against the bus subsidiary of National Express plc. This is beneficial for passengers who can now buy a multi-operator ticket which is valid on any bus on the routes in question without price supplements. The buses from both operators are branded in a common livery and run at an agreed headway which ensures that a bus will pass any stop every few minutes. From our perspective we are experiencing, as we expected from our modelling, lower operating costs but higher bus loadings with no reduction in overall revenues. These Bus Alliances therefore have produced benefits for both passengers and bus operators in a more planned and co-ordinated approach to running on a major route. Negotiations with TfWM continue to expand Bus Alliances to further routes in 2019, for which there are a number of existing candidates. 

 

Acquisitions and Disposals

At the end of February 2018 the Group acquired from CEN Group Limited, trading as Central Buses ("Central"), its entire bus business, bus brand and 31-strong vehicle fleet for a cash consideration of £1,950,000. The Central business had annual revenues of approximately £2.8 million and its vehicle fleet had a fair value at acquisition of approximately £1.5 million. No other assets or liabilities of any materiality were assumed on acquisition.

Central Buses was a well-established operator of commercial and contracted bus services in the northern part of the West Midlands area. This business, with its staff, was immediately integrated into the existing depot infrastructure which Rotala already possesses in the West Midlands and so no additional overhead was required as part of the acquisition. The acquisition extends the Group's network of bus services in the northern part of Birmingham, particularly in the Perry Barr area.

In order to integrate the acquisition with the rest of the Group we re-equipped the business with the standard Ticketer ticket machines which we use in the West Midlands region. In the first half of 2018 we also moved the whole Manchester business onto these machines and in the second half completed the roll out of this ticketing system over the whole group by converting the Preston business to these ticket machines. This investment in new ticket machines forms the majority of the addition to plant and machinery of £895,000 in the year.

 

I have for several years been reporting to you the steadily reducing size of our operations in the South West of England. During the year we reviewed our position. We concluded that market changes in the region as a result of the Bus Services Act were likely in the medium, rather than the short, term and that we would achieve better returns on our available capital by investing in the West Midlands and the North West. Therefore we took the decision to deregister our remaining commercial services and novate the bus contracts we held to a local subsidiary of Stagecoach plc. A small part of the business was transferred to our Heathrow depot. Almost all the staff were re-deployed internally or externally by these steps. A small number of vehicles were sold to Stagecoach plc at their net book values and the remainder were redeployed to other depots in the Group. Finally at the end of the accounting year we were able to dispose of the now unused Avonmouth depot to a property investor at a small profit. 

 

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 0.92 pence per share in December 2018. The board will recommend to the forthcoming Annual General Meeting a final dividend in respect of 2018 of 1.78 pence per share making a total of 2.70 pence for the year (2017: 2.50 pence). The dividend will be paid, subject to shareholder approval at the Annual General Meeting, on 28 June 2019 to all shareholders on the register on 7 June 2019.

 

 

 

Fleet management

 

We have been very active this year in reshaping the bus fleet to match our changing requirements. We acquired 10 new buses for local bus contracts servicing northern Surrey early in the year and 16 smaller buses (based on a Mercedes van chassis) for use in Preston and the West Midlands. These vehicles have proved popular with passengers and drivers, and have shown themselves to be most suitable to the narrow streets often found in older built up areas. In addition we acquired some 40 attractively-priced second hand vehicles, integrated the 31 vehicles inherited with the Central Buses acquisition, and the 40 vehicles redeployed from the former South West operation. This resulted in the disposal of a matching number of older vehicles in the year. Since the year end we have acquired a 20 strong batch of new buses for our West Midlands operation. The average age of the fleet is therefore now about 9.42 years, slightly better than the comparable figure of 9.50 years which we saw at the beginning of the year. These figures are both closely comparable to bus fleets outside Greater London, where different contractual conditions apply.

 

Both TfGM and TfWM are under pressure to meet air quality targets in the near future in their respective city centres and we therefore expect to continue to upgrade the buses used for these locations, as we did in the West Midlands shortly after the year end. However government or local authority grant packages are expected to be available to facilitate the attainment of these targets and so we do not anticipate that these changes will have a material impact on our business. Elsewhere in our operations we do not see the need for a significant number of new vehicles in the remainder of 2019 unless customer requirements change. New vehicles in these circumstances would be matched by significant additional revenues and so make commercial sense. We will 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. 

 

 

Fuel hedging

 

The annual fuel requirement of the Group is approximately 11.5 million litres. Taking advantage of a weakness in crude oil prices, in late November 2018, the Board took out a number of fuel hedge contracts, using diesel derivatives, in order to cover approximately 50% of its fuel requirement for 2019. The coverage of these hedging contracts was later further extended. Consequently all of the Group's fuel requirement for 2019 is now covered by hedging contracts, at an average price of 100p per litre, which is the price that the group has used in preparing its budget for 2019.

 

The Board will continue to monitor market conditions closely and take out such further fuel hedges as it deems are appropriate to meet its objective of reducing volatility in its costs and creating business certainty.

 

Banking

 

At the beginning of the year, 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 £5.5m, a revolving facility of £15.5m and an overdraft facility of £3.5m, 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 £10 million of headroom with which it can finance further potential acquisitions.  

 

Financial review

 

Income statement

 

The Consolidated Income Statement is set out below. This section of the review addresses the results for continuing operations before the mark-to-market provision for fuel derivatives and other exceptional items.  Revenues for the year rose by 19% compared to those of 2017. This increase was principally driven by the acquisitions made in the year. Cost of Sales correspondingly rose by 19%. Gross Profits increased by 16%, whilst the gross profit margin fell slightly to 20.0% (2017: 20.46%) as the new acquisitions were integrated into the rest of the Group. Administrative expenses increased by 13.5% as a result of the general expansion in the size of the Group and information technology costs, particularly the Ticketer ticket machine system now deployed across the whole group. Profit from Operations grew to £5.76 million (2017: £4.86 million), an increase of 19% on the previous year. As a consequence adjusted EBITDA rose by 14% to £8.8 million (2017: £7.75 million). Finance expense however rose by 21%, reflecting the increased bank and HP borrowings used to finance the acquisitions made over the last two years. Profit before taxation therefore rose by 18% when compared to the previous year to £4.23 million (2017: £3.59 million).

The 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 announcement. Profit from Operations after exceptional items was £5.18 million, compared to £4.06 million in 2017, a rise of 28%. Furthermore Profit before Taxation, and after all exceptional items, was in 2018 £3.65 million (2017: £2.80 million), representing an increase of 30%. The losses from the discontinued operations in the South West are analysed separately below.

All earnings per share calculations were affected by the underlying increase in the weighted average number of shares in issue. These rose from 44 million in 2017 to 48 million in 2018, a rise of 9%. Nevertheless basic earnings per share in 2018, after taking into account the mark to market provision and other exceptional items, rose, for continuing operations, by 9% to 5.92p per share (2017: 5.42p). Basic earnings per share for the discontinued operations were a loss of 1.11p per share (2017: a loss of 0.69p per share).  However, the impact of the mark to market provisions, the other exceptional items and the discontinued operation 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, the other exceptional items and the discontinued operation) were 7.22p in 2018, compared to 6.65p in 2017, an increase of 9% year on year. 

 

Balance sheet

 

The gross assets of the Group grew by 10% in the year and stood at £76.0 million at 30 November 2018 (2017: £68.9 million). The book value of property, plant and equipment increased by some £2.5 million year on year. This reflected both the assets which arrived with the acquisition made in the year, the considerable changes to the vehicle fleet described in the Chairman's Statement and the disposal of the depot at Avonmouth right at the end of the year. Following the lifting of the asset ceiling restriction we have been able to recognise the full defined benefit pension scheme asset in these accounts. Goodwill and other intangible assets increased only slightly as a result of the one acquisition made in the year and the amortisation of £450,000 of contract-related intangibles. 

Stocks of parts, tyres and fuel were increased at the year's end. This was partly the result of the increased size of the Group but also because we stocked up on fuel to take advantage of the prevailing price. The growth in Trade and Other Receivables also reflects the increased size of the Group, particularly in contracted business, but also the lags in recovery of such items as Bus Services Operator's Grant which are slow to adjust to increased levels of activity. Trade and Other Payables were stable.

 

The gross loans and borrowings of the Group overall rose by about 10% to £17.9 million (2017: £16.3 million). At the 2017 year end HSBC Bank plc was about to become the Group's principal banker. This change duly happened early in December 2017. However this change dictated that all the borrowings of the Group were classified as current at the end of 2017, but the 2018 balance sheet reflects the appropriate split between current and longer-term mortgage elements.

 

In line with the fleet changes already mentioned obligations under hire purchase contracts rose to £14.0 million at the year end compared to £11.5 million the year before. The gross liabilities of the Group were therefore 12% higher than the previous year at £41.1 million (2017: £36.6 million).  There were no new share issues this year, but, responding to the positive factors described above, the net assets of the Group rose to £34.9 million at the end of the year, compared to £32.4 million at the end of 2017, a rise of 8% year on year.

 

Cash flow statement

 

Cash flows from operating activities (before changes in working capital and provisions) rose strongly to reach £7.98 million (2017: £6.28 million), an increase of 27%. However the Hotel Hoppa acquisition right at the end of 2017 and the Central Buses acquisition of 2018 were both deals for trade and assets only. Therefore the Group had to supply the working capital necessary to sustain these businesses from its own resources. This was much the same picture as had prevailed in 2017, for very similar reasons. The accrued mark to market profit on the fuel derivative at the end of 2017 proved to be a considerable underestimate of cash inflows from this source as fuel prices rose further in the year. Interest paid on HP agreements increased somewhat when compared to the previous year. As a result of the above factors net cash flows from operating activities were 23% up on 2017 at £4.13 million (2017: £3.34 million).

 

Cash used in investing activities in the year was much lower than the previous year, largely because of the sale of the Avonmouth depot. Purchases of property, plant and equipment rose year on year. The monies expended in 2018 included an additional piece of freehold property so as to be able to expand our Eccles depot. In addition only one business was acquired in 2018, compared to three in 2017. Sales of surplus vehicles however raised a very similar sum to that of the previous year. The sale of the Avonmouth depot ensured that gross spend on property, plant and equipment was this year considerably outweighed by the funds raised by selling property, plant and equipment. Thus cash used in investing activities was £1.5 million net of related proceeds (2017: £4.1 million net).

 

Financing activities were affected by a number of events. No new shares were issued this year, unlike in 2017. Dividends paid reflect both an increase in the dividend per share and the number of shares in issue. As related above, in the first few days of the financial year, the principal banking relationship of the group moved to HSBC Bank plc. Accordingly all bank loans existing at that point were repaid and drawings on the new facilities replaced them. The bank interest paid in the year reflects the enlarged facilities granted to the group by its new bankers.

Advantage was again taken this year of the unencumbered value represented by the vehicle fleet. By refinancing these vehicles with new hire purchase arrangements £1.7 million (2017: £0.72 million) of capital was released to invest in the business. The capital element of payments on hire purchase agreements rose considerably to £3.75 million (2017: £3.09 million). This change was caused by the extensive changes made to the vehicle fleet in the year, reflected in both the increased HP financing obligation and the HP refinancing activity described above. The cash absorbed by financing activities therefore rose somewhat to £1.15 million net (2017: £0.57 million net).

 

Overall therefore cash and cash equivalents increased in the year by £1.47 million (2017: declined by £1.36 million). The closing overdraft, net of cash and cash equivalents, of £0.23 million was much improved on the £1.7 million in closing overdraft of 2017, and was in line with management's expectations.

 

Outlook

 

The Group performed well in 2018 and trading for the current year has begun in line with expectations.

 

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 continue to be actively engaged in hunting out potential acquisitions and, with the backing of our new bankers, possess considerable firepower with which we can attain our objectives. In our assessment there will continue to be much divestment and acquisition activity in the bus market in the next few years. Government policy changes since 2010 and now the Bus Services Act are the primary causes of the demise of the stability which had subsisted in the bus industry for the generation that followed its de-nationalisation in the 1980's. Such change brings opportunity to youthful and dynamic businesses like Rotala and we think we are very well positioned to take full advantage of any eventualities.

We are confident therefore 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: 2 April 2019

 

 

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2018

 

 

 

 

 

 

 

 

 

 

 

 

Note

2018

2018

2018

2017

2017

2017

 

 

 

Results

before

 exceptional items


Exceptional

items

(notes 3 and 5)



Results

for the

year

 

Results

before

 exceptional

items

(Restated)


 

Exceptional

items

(notes 3 and 5)



Results

for the

year (Restated)

 

 

£'000

£'000

£'000

£'000

£'000

£'000

Continuing operations

 

 

 

 

 

 

 

Revenue

2

62,408

-

62,408

52,625

-

52,625

 

 

 

 

 

 

 

 

Cost of sales

 

(49,942)

-

(49,942)

(41,860)

-

(41,860)

 

 

 

 

 

 

 

 

Gross profit

 

12,466

-

12,466

10,765

-

10,765

 

 

 

 

 

 

 

 

Administrative expenses

 

 

(6,705)

 

(580)

 

(7,285)

 

(5,910)

 

(796)

 

(6,706)

Profit from operations

 

 

 

5,761

 

(580)

 

5,181

 

4,855

 

(796)

 

4,059

 

 

 

 

 

 

 

 

 

Finance expense

 

 

 

(1,531)

 

-

 

(1,531)

 

(1,264)

 

-

 

(1,264)

 

 

 

 

 

 

 

 

 

Profit before taxation

 

3

 

4,230

 

(580)

 

3,650

 

3,591

 

(796)

 

2,795

 

 

 

 

 

 

 

 

Tax expense

4

(761)

(46)

(807)

(666)

257

(409)

 

 

 

 

 

 

 

 

Profit for the year from continuing operations

 

3,469

(626)

2,843

2,925

(539)

2,386

 

Loss for the year from discontinued operations

 

5

 

-

 

(534)

 

 

(534)

 

-

 

(305)

 

(305)

 

 

Profit for the year attributable to the equity holders of the parent

 

 

 

 

 

 

3,469

 

 

 

 

 

(1,160)

 

 

 

 

 

2,309

 

 

 

 

 

2,925

 

 

 

 

 

(844)

 

 

 

 

 

2,081

 

 

 

 

 

 

 

Earnings per share for profit attributable to the equity

 

 

 

 

 

 

 

holders of the parent during the year:

 

 

 

 

 

 

 

Basic -continuing operations (pence)

6

7.22

 

5.92

6.65

 

5.42

Basic - discontinued operations (pence)

6

-

 

(1.11)

-

 

(0.69)

Total

 

7.22

 

4.81

6.65

 

4.73

 

 

 

 

 

 

 

 

Diluted - continuing operations (pence)

6

7.22

 

5.92

6.63

 

5.41

Diluted - discontinued operations (pence)

6

-

 

(1.11)

-

 

(0.69)

Total

 

7.22

 

4.81

6.63

 

4.72


 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED

30 NOVEMBER 2018

 

 

 

 

2018

2017

 

 

£'000

£'000

 

 

 

 

Profit for the year

 

2,309

2,081

Other comprehensive income:

 

 

 

Items that will not subsequently be reclassified to profit or loss:

 

 

 

 

 

 

 

 

Actuarial gain on defined benefit pension scheme

 

1,748

58

 

 

 

 

Deferred tax on actuarial gain on defined benefit pension scheme


 

 

(315)

 

(11)

 

 

 

 

Other comprehensive profit for the year (net of tax)

 

1,433

47

 

 

 

 

 

 

 

 

Total comprehensive income for the year attributable to the equity holders of the parent

 

 

3,742

 

2,128

 

 

All of the activities of the Group are classed as continuing.

 

  

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2018

 

 

   

Note

2018

2017

   

 

£'000

£'000

Assets

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

7

39,444

36,925

Defined benefit pension asset

 

1,737

-

Goodwill and other intangible assets

 

14,876

14,759

Total non-current assets

 

56,057

51,684

 

 

 

 

Current assets

 

 

 

Inventories

 

3,525

2,526

Trade and other receivables

 

15,895

13,646

Derivative financial instruments

 

95

450

Cash and cash equivalents

 

446

627

Total current assets

 

19,961

17,249

 

 

 

 

Total assets

 

76,018

68,933

 

 

 

 

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

 

6,465

6,477

Loans and borrowings

8

13,830

16,278

Obligations under hire purchase contracts

9

3,843

3,158

Derivative financial instruments

 

132

-

Defined benefit pension obligation

 

129

325

Total current liabilities

 

24,399

26,238

 

 

 

 

Non-current liabilities

 

 

 

Loans and borrowings

8

4,068

-

Obligations under hire purchase contracts

9

10,159

8,357

Provision for liabilities

 

740

1,203

Defined benefit pension obligation

 

-

102

Net deferred taxation

 

1,757

682

Total non-current liabilities

 

16,724

10,344

 

 

 

 

Total liabilities

 

41,123

36,582

 

 

 

 

TOTAL NET ASSETS

 

34,895

32,351

 

 

 

 

Shareholders' funds

 

 

 

Share capital

 

12,220

12,220

Share premium reserve

 

11,779

11,779

Merger reserve

 

2,567

2,567

Shares in treasury

 

(817)

(817)

Retained earnings

 

9,146

6,602

TOTAL EQUITY

 

34,895

32,351

 

 

 

 

 

  


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 NOVEMBER 2018

 

 

 

 

Share

capital

£'000

Share

premium

reserve

£'000

 

Merger

reserve

£'000

 

Shares in treasury

£'000

 

Retained

earnings

£'000

 

 

Total

£'000

 

 

 

 

 

 

 

At 1 December 2016

10,762

9,875

2,567

(817)

5,424

27,811

 

Profit for the year

 

-

 

-

 

-

 

-

 

2,081

 

2,081

Other comprehensive expense

 

-

 

-

 

-

 

-

 

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

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

2,309

2,309

Other comprehensive income

-

-

-

-

1,433

1,433

Total comprehensive income

-

-

-

-

3,742

3,742

 

 

 

 

 

 

 

Transactions with owners:

 

 

 

 

 

 

Dividends paid

-

-

-

-

(1,201)

(1,201)

Share based payment

-

-

-

-

3

3

 

 

 

 

 

 

 

Transactions with owners

-

-

-

-

(1,198)

(1,198)

 

 

 

 

 

 

 

At 30 November 2018

12,220

11,779

2,567

(817)

9,146

34,895

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2018

 

   

 

 

2018

2017

 

 

£'000

£'000

Cash flows from operating activities

 

 

 

Profit before taxation*

 

2,998

2,419

Adjustments for:

 

 

 

Depreciation

 

3,391

3,274

Acquisition expenses

 

64

47

Finance expense (net)

 

1,531

1,264

Gain on sale of property, plant and

equipment

 

(172)

(446)

Contribution to defined benefit pension scheme

 

(298)

(337)

Intangible asset amortisation

 

450

19

Notional expense of defined benefit pension scheme

 

11

22

Equity settled share-based payment

expense

 

3

20

 

 

 

 

Cash flows from operating activities before changes in working capital and provisions

 

7,978

6,282

 

 

 

 

(Increase)/decrease in inventories

 

(998)

80

(Increase) in trade and other receivables

 

(2,250)

(2,056)

(Decrease)/increase in trade and other payables

 

(41)

396

Movement in provisions

 

(463)

(450)

Movement on derivative financial instruments

 

487

(408)

 

 

 

 

 

 

 

 

 

 

(3,265)

(2,438)

 

 

 

 

 

 

 

 

Cash generated from operations

 

4,713

3,844

 

 

 

 

Interest paid on hire purchase agreements

 

(588)

(501)

 

 

 

 

 

 

 

 

Net cash flows from operating activities carried forward

 

4,125

3,343

 

 

 

 

 

 

 

 

 

2018

2017

 

 

£'000

£'000

 

 

 

 

*Profit before taxation comprises:

 

 

 

 

 

 

 

Profit before taxation in the Consolidated Income Statement

 

3,650

2,795

Loss before taxation for discontinued operations

 

(387)

(376)

Impairment recognised on the re-measurement of the assets of the disposed business, gross of a tax credit of £48,000

 

(265)

-

 

 

 

 

Profit before taxation for the purposes of the cash flow statement

 

2,998

2,419

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2018 (Continued)

 

 

       

 

 

2018

2017

 

 

£'000

£'000

 

 

 

 

Cash flows from operating activities brought forward

 

4,125

3,343

 

 

 

 

 

 

 

 

Investing activities

 

 

 

Purchases of property, plant and

equipment

 

(2,174)

(1,799)

Acquisition of businesses

 

(2,014)

(3,329)

Sale of property, plant and equipment

 

2,685

1,002

 

 

 

 

 

 

 

 

Net cash (used in) investing activities

 

(1,503)

(4,126)

 

 

 

 

Financing activities

 

 

 

Shares issued

 

-

3,362

Dividends paid

 

(1,201)

(970)

Proceeds of mortgage and other bank loans

 

18,379

1,105

Repayment of bank and other borrowings

 

(15,111)

(722)

Bank interest paid

 

(942)

(740)

Hire purchase refinancing receipts

 

1,709

717

Capital settlement payments on vehicles sold  

 

(237)

(240)

Capital element of lease payments

 

(3,751)

(3,086)

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

(1,154)

(574)

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

1,468

(1,357)

 

 

 

 

Cash and cash equivalents at beginning of year

 

(1,699)

(342)

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of year

 

(231)

(1,699)

 

 

 

 

 

     

Notes to the Preliminary Announcement of results for the year ended 30 November 2018

 

 

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 2018.  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.

 

 

2018

2017

 

£'000

£'000

 

 

 

Commercial

38,865

31,193

Contracted

21,620

18,643

Charter

1,923

2,789

Total Revenue

62,408

52,625

 

3.  Profit before taxation:

 

Profit before taxation includes the following mark to market provisions and other exceptional items:

 

 

 

2018

2017

 

£'000

£'000

 

 

 

Mark to market profit on fuel derivatives

475

162

Acquisition costs

(64)

(47)

Abortive transaction costs

(99)

-

Redundancy costs and costs of integration of acquisitions

(394)

(337)

Costs of change of principal bankers

(45)

(58)

Amortisation of intangible assets

(450)

(19)

Share based payment expense

(3)

(20)

Revenue debtor written off (see note below)

-

(477)

 

 

 

 

 

 

(Loss)/profit within profit before taxation

(580)

(796)

 

 

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 was no longer available, the item was written off to the profit and loss account.  

 

4.  Tax expense:

 

Tax expense includes the following:

 

2018

2017

 

£'000

£'000

Current tax

 

 

Current tax on profits for the year

-

-

 

_______

_______

Total current tax

-

-

 

_______

_______

Deferred tax

 

 

Origination and reversal of temporary differences

749

505

Prior year adjustments

58

(96)

Change in rate of tax

-

-

 

_______

_______

Total deferred tax

807

409

 

_______

_______

Income tax expense

807

409

 

_______

_______

 

 

The tax assessed for the year is different to the standard rate of corporation tax in the U.K. for the following reasons:

           

 

2018

2017

 

£'000

£'000

 

 

 

Profit before taxation

3,650

2,795

 

_______

_______

 

 

 

Profit at the standard rate of corporation tax in the UK of 18% (2017: 19%)

657

531

Non-taxable items

92

(2)

Adjustments in respect of prior periods

58

(96)

Impact of change in tax rates

-

(24)

 

_______

_______

Total tax expense

807

409

 

_______

_______

 

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.  Discontinued operations:

 

The results of the discontinued operation and the result recognised on the re-measurement of the assets of the business disposed of are as follows:

 

 

 

 

 

2018

2017

 

£'000

£'000

 

 

 

Revenue

2,382

5,281

 

 

 

Cost of sales

(2,508)

(4,968)

 

 

 

Gross profit

(126)

313

 

Administrative expenses

 

(261)

 

(689)

 

Loss before taxation

 

(387)

 

(376)

 

 

 

Tax  credit

70

71

 

 

 

Loss after tax

(317)

(305)

 

 

 

Impairment (net of a tax credit of £48,000) recognised on the re-measurement of the assets of the disposed business

(217)

-

 

 

 

Loss for the year from the discontinued operation

(534)

(305)

 

 

As described fully in the Chairman's Statement the decision was taken during the year to cease operations in the South West.

 

Cash flows                                                                                                              

 

 

2018

2017

 

£'000

£'000

 

 

 

Operating cash flows

(309)

6

Investing cash flows

242

(83)

Financing cash flows

-

-

Total cash flows

(67)

(77)

 

 

 

 

 

6.  Earnings per share:

 

                                                                                                                                           

          (a) Basic earnings per share

 

2018

2017

Basic total:

£'000

£'000

 

 

 

Profit attributable to ordinary shareholders

2,309

2,081

Weighted average number of ordinary shares

48,026,580

44,001,465

Basic earnings per share

4.81p

4.73p

 

 

 

 

         

 

 

 

Basic continuing operations:

£'000

£'000

 

 

 

Profit attributable to ordinary shareholders

2,843

2,386

Weighted average number of ordinary shares

48,026,580

44,001,465

Basic earnings per share

5.92p

5.42p

 

 

 

 

 

 

 

 

Basic discontinued operations:

£'000

£'000

 

 

 

Loss attributable to ordinary shareholders

(534)

(305)

Weighted average number of ordinary shares

48,026,580

44,001,465

Basic loss per share

(1.11)p

(0.69)p

 

 

 

 

         

The calculation of the basic 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.

 

       

        (b) Diluted earnings per share

 

                                              

Diluted

Diluted

 

2018

2017

 

£'000

£'000

Diluted total:

 

 

 

 

 

Profit attributable to ordinary share holders

2,309

2,081

 

 

 

Profit for the purposes of diluted earnings per share

2,309

2,081

 

 

 

Weighted average number of shares in issue

48,026,580

44,001,465

Adjustment for exercise of options

-

111,164

 

 

 

Weighted average number of ordinary shares for the purposes of diluted earnings per share

48,026,580

44,112,629

 

 

 

Diluted earnings per share

4.81p

4.72p

       

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. 

 

       

 

 

 

Diluted basic - continuing operations:

£'000

£'000

 

 

 

Profit attributable to ordinary shareholders

2,843

2,386

Weighted average number of ordinary shares (as above)

48,026,580

44,112,629

Basic earnings per share

5.92p

5.41p

 

 

 

 

 

 

 

 

Diluted basic - discontinued operations:

£'000

£'000

 

 

 

Loss attributable to ordinary shareholders

(534)

(305)

Weighted average number of ordinary shares (as above)

48,026,580

44,112,629

Basic loss per share

(1.11)p

(0.69)p

 

 

 

 

         

         

(c) Adjusted basic earnings per share (adjusted before mark to market provision and other exceptional items):

         

 

2018

2017

Basic total:

£'000

£'000

 

 

 

Profit attributable to ordinary shareholders

3,469

2,925

Weighted average number of ordinary shares

48,026,580

44,001,465

Basic earnings per share

7.22p

6.65p

 

 

 

       

The calculation of the adjusted basic 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.

 

Adjusted diluted earnings per share:

 

 

                                              

Diluted

Diluted

 

2018

2017

Adjusted diluted total:

£'000

£'000

 

 

 

Profit attributable to ordinary share holders

3,469

2,925

 

 

 

Profit for the purposes of diluted earnings per share

3,469

2,925

 

 

 

Weighted average number of shares in issue

48,026,580

44,001,465

Adjustment for exercise of options

-

111,164

 

 

 

Weighted average number of ordinary shares for the purposes of diluted earnings per share

48,026,580

44,112,629

 

 

 

Adjusted diluted earnings per share

7.22p

6.63p

 

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. 

 

7.  Property, plant and equipment:

 

 

Freehold

land and

buildings

Long and short

leasehold

property

 

Plant and

machinery

Public

service

vehicles

Fixtures

and

fittings



Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Cost:

 

 

 

 

 

 

At 1 December 2016

7,351

1,084

3,484

42,837

188

54,944

Acquisition

585

-

30

1,192

15

1,822

Additions

14

4

1,254

3,302

12

4,586

Disposals

(270)

-

(69)

(1,678)

(26)

(2,043)

 

 

 

 

 

 

 

At 30 November 2017

7,680

1,088

4,699

45,653

189

59,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition

-

-

20

1,463

-

1,483

Additions

375

1

897

5,638

28

6,939

Disposals

(2,032)

-

(542)

(1,800)

(62)

(4,436)

Transfers

(5)

(4)

9

-

-

-

 

 

 

 

 

 

 

At 30 November 2018

6,018

1,085

5,083

50,954

155

63,295

 

 

 

 

 

 

 

Depreciation:

 

 

 

 

 

 

At 1 December 2016

364

201

1,271

18,143

89

20,068

Charge for the year

62

29

284

2,880

19

3,274

Acquisitions

35

-

30

450

15

530

Disposals

(35)

-

(69)

(1,358)

(26)

(1,488)

At 30 November 2017

426

230

1,516

20,115

97

22,384

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charge for the year

66

29

369

2,908

19

3,391

Disposals

(248)

-

(344)

(1,279)

(53)

(1,924)

At 30 November 2018

244

259

1,541

21,744

63

23,851

 

 

 

 

 

 

 

Net book value:

 

 

 

 

 

 

At 30 November 2018

5,774

826

3,542

29,210

92

39,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 November 2017

7,254

858

3,183

25,538

92

36,925

 

 

 

 

 

 

 

 

8.  Loans and borrowings:

 

                       

2018

2017

 

£'000

£'000

Current:

 

 

Overdrafts

677

2,326

Bank loans

13,153

13,952

 

_______

_______

 

13,830

16,278

 

_______

_______

Non-current:

 

 

Bank loans

4,068

-

 

_______

_______

 

17,898

16,278

 

_______

_______

 

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 £15.5 million and a mortgage facility of £5.5 million, with a corresponding overdraft facility of up to £3.5 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.

 

9.  Obligations under hire purchase contracts:

 

 

 

Future lease payments are due as follows:

 

 

Minimum

lease

payments

2018

 

 

Interest

2018

 

Present

value

2018

 

£'000

£'000

£'000

 

 

 

 

Not later than one year

4,333

490

3,843

More than one year but less than two years

3,456

336

3,120

More than two years but less than five years

6,206

407

5,799

Later than five years

1,276

36

1,240

 

 

 

 

 

15,271

1,269

14,002

 

 

 

Minimum

lease

payments

2017

 

 

Interest

2017

 

Present

value

2017

 

£'000

£'000

£'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

 

 

 

The present value of future lease payments are analysed as:

 

 

 2018

2017

 

£'000

£'000

 

 

 

Current liabilities

3,843

3,158

Non-current liabilities

10,159

8,357

 

 

 

 

14,002

11,515

  

 

10.  Acquisition:

 

Central Buses
 

As set out in the Chairman's Statement, in February 2018 the group acquired the entire bus business of CEN Group 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 £1,950,000 in cash.  The book values of the assets acquired are set out below.

 

 

 

Book value

Fair value adjustments

Fair value on acquisition

 

£'000

£'000

£'000

Fixed assets

 

 

 

Vehicles

1,742

(280)

1,462

Plant and equipment

20

-

20

Customer contracts

-

432

432

Total fixed assets

1,762

152

1,914

 

 

 

 

Current liabilities

 

 

 

Other payables and accruals

-

(27)

(27)

 

 

 

 

 

-

(27)

(27)

 

 

 

 

Net assets

 

 

1,887

Goodwill

 

 

63

Acquisition costs

 

 

64

 

 

 

2,014

Total cash consideration paid

 

 

 

 

 

 

 

 

Because the acquired business was 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 business in the period to 30 November 2018. 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 business.  Principally this involved an assessment of the value of the intangible asset attributable to the contracts inherited with this business. 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 business. The sales and purchase agreement included 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 acquisition arose from the benefit of synergies with the existing business of the group in their respective locations. As stated above the business acquired included a vehicle fleet and these vehicles were immediately subsumed into existing operations following acquisition. The acquisition expenses incurred by the group amounted to £64,000 and have been expensed in the Consolidated Income Statement in Administrative Expenses.

 

 

11.  Financial Information:

 

The Financial Statements for the year ended 30 November 2018 were approved by the Board of Directors on 1 April 2019. 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 2018 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on the 2018 accounts; the auditors' opinion is unqualified and does not include a statement under section 498 of the Companies Act 2006.

  

 

12.  Further Information:

 

 

 

The Company's Annual Report and Accounts for the year ended 30 November 2018 are expected to be posted to shareholders on 3 May 2019 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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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