Final Results

RNS Number : 8454S

Optare PLC

27 May 2009

 



Optare plc

('Optare', the 'Group' or the 'Company')

Unaudited Preliminary Results for the year ended 31 December 2008

The directors are pleased to announce the unaudited preliminary results of Optare plc (formerly known as Darwen Holdings PLC) for the year ended 31 December 2008. 

Financial Highlights

Turnover for the year was £49.2m (pro forma £82.4m) and loss from operations was £4.0m (pro forma £3.0m). The operating loss is reflective of the extremely difficult challenges associated with acquiring a failing business from administration and acquiring and integrating another business part way through the year. This has proved to be a more difficult and time consuming challenge than was originally envisaged. 

As we referred to in our trading update in April during the last quarter of the year the significant deterioration in Sterling against the Euro resulted in the Company incurring higher material import costs over the period with a corresponding impact on operating profit. 

Exceptional items were £7.2m (pro forma £3.5m), comprising: deal costs arising from fundraising and acquisitions during the year of £1.4m (pro forma £nil); restructuring and redundancy costs including provision for the closure of the Rotherham facility of £1.7m (pro forma £nil); abortive move costs mentioned below of £0.6m (pro forma £nil) and provisions against contracts of £3.5m (pro forma £3.5m). In an effort to establish the Group's presence in the bus markets, some contracts were committed to which were burdensome particularly when compared to the Group's then established production capacity. These decisions are being reviewed and where feasible remedial action has been taken to address any adverse impacts on the business.

Net interest cost was £0.2m (pro forma £nil). Basic and fully diluted loss per share was 15.3p. Basic and fully diluted loss per share from ongoing activities before exceptional and restructuring costs was 4.7p (pro forma 2.5p)

No dividends were paid during the year and the Board does not propose the payment of any dividend in respect of the year.

The trading results for the year ended 31 December 2008, along with pro forma results for the year ended 31 December 2008 - comprising the results of the Blackburn operation for the year, and the results of the Leeds operation for the full 12 months both pre and post the acquisition date of 15 July 2008 are shown below: The pro forma results represent the results of all Group companies as if the Group had been composed of all companies for the year ended 31 December 2008.   Restructuring, other non-trading exceptional costs and finance costs have been excluded from the pro forma statement.

The statutory financial statements will present the results for the 72 week period from the date of incorporation to 31 December 2008 and unaudited figures for this period are also shown below.

Cash flow and net debt

The cash flow statement shows the 72 week period ended 31 December 2008. 

Delays to production schedules, combined with significant levels of stock build up, resulted in a net debt position of £9.4m at 31 December 2008. The stock build up is expected to unwind through the middle part of 2009 with a corresponding reduction in net debt.

£20.9m was raised from share issues, and £1.2m of debt was repaid. £7.7m was spent on acquisition of subsidiaries. Capital expenditure was £2.2m comprising £1.2m property, plant and equipment and £1.0m investment in new product development. 

£2.4m was raised by the disposal of fixed assets - principally the sale and leaseback of the Whitebirk site in Blackburn. Operating cash outflow before exceptional items for the period was £13.4m.

This is the first reporting period of the Company and the first period that the Company has presented its consolidated financial statements under International Financial Reporting Standards ('IFRS'). The Company has reported under IFRS within its Admission document dated 20 June 2008 (the 'Admission Document').

Operational Highlights

At the time of acquiring the double-deck manufacturing business, the Board recognised that as well as the significant opportunities of the business there were also significant challenges, as major changes in personnel and culture were required.  During the year significant headway has been made into addressing these challenges. There has been a move away from a coach-built, craft-based approach towards an engineered, assembly based approach along with the introduction of leaner manufacturing techniques including the outsourcing of basic metalwork processes at the Blackburn site.  Similar developments are underway at the Leeds site.  

The Company has also increased efficiency through improved production planning and engineering and more effective supply chain management. 

As announced in the trading update of 17th April 2009, the Company is no longer re-locating the Blackburn site to Walker Park. However, management have taken steps to maintain production at its existing facilities and are continuing to review their strategic options.

Product Development

The Group continues to invest in major new product developments. The development of the Rapta integrated double-deck bus is ongoing. This bus will offer, amongst its market-leading selling points, significant improvements in fuel economy due to its weight-saving integrated design. The Solo EV, an all electric, zero emissions midi-bus was recently launched to press and customers. Initial market reaction is very positive and production will commence during the second half of 2009. There is also significant interest in the USA for this vehicle.

Order Book

At the end of 2008 the Group's order book was strong and the business expanded its manned capacity through overtime and the recruitment of contract labour to ensure production throughput.  The Group's order book currently stands at £26.1 million.

Board Changes

Given the management change during the period in which Andrew Brian, CEO, left the Company and John Fickling became Executive Chairman we were delighted to recently announce Jim Sumner as the new Group CEO. Jim was previously Managing Director of Leyland Truck Ltd, where he led the organisation through a series of key business achievements to attain strong revenue and profit growth and an increased market share. We are very much looking forward to utilising his skills at Optare.

Outlook

An increasingly weak demand for double deck vehicles has been highlighted in recent weeks as Optare's two main UK competitors announced significant redundancy programmes during the spring. 

Bus manufacturing typically requires a three-month lead time, and so the Group announced on 23 April 2009 that, in the light of the recent downturn within the industry, it is reviewing its operations to match production capacity to the falling demand for double deck buses. A 90 day consultation process was initiated at its Blackburn plant. Although currently busy the Company is not expecting there to be sufficient work to sustain the current levels of employment when the existing orders have been completed.  Accordingly, the Group has released all of the temporary workers it recruited in Blackburn at the peak of production.  

Nevertheless, Optare remains committed to the double deck market and we continue to provide a further choice to operators not just for body on chassis vehicles but shortly an integral double deck vehicle also. The Group continues to develop low- and zero-emissions vehicles, an area of increasing focus for operators. The Board continues to review strategic options for its assembly facilities and will update the market as appropriate.

Current actions will improve the Group's operations and products will leave the Group in a strong position to grow profitably as market conditions improve and we look to the future with cautious optimism.

John Fickling

Executive Chairman

Contacts

John Fickling, Chairman, Optare plc              [phone]  

Mike Dunn, CFO, Optare plc  

Stephen Keys/Camilla Hume                          [phone]  

Cenkos Securities plc  

Consolidated income statement for the year ended 31 December 2008
	Unaudited Year ended 31 December 2008	Unaudited Pro Forma Year ended 31 December 2008	Unaudited 72 week period ended 31 December 2009 Before  exceptional items	Unaudited 72 week period ended 31 December 2009 Exceptional items	Unaudited 72 week period ended 31 December 2009 Total
	£'000	£'000	£'000	£'000	£'000
Revenue	49,219	82,411	53,490	-	53,490
Cost of sales	(44,719)	(66,083)	(48,625)	(706)	(49,331)
	----------	----------	----------	----------	----------
Gross profit	4,500	16,328	4,865	(706)	4,159
Administrative expenses	(7,916)	(18,862)	(9,796)	-	(9,796)
Other Operating Income	-	82
Distribution costs	(272)	(272)	(272)	-	(272)
Amortisation of Goodwill	(126)	(126)
Amortisation of intangible assets	(151)	(151)	(151)	-	(151)
Impairment of goodwill			(126)	-	(126)
	----------	----------	----------	----------	----------
Loss from operations	(3,965)	(3,001)	(5,480)	(706)	(6,186)
Restructuring and other exceptional costs	(7,208)	(3,500)	-	(7,561)	(7,561)
Finance costs	(449)	-	(529)	-	(529)
Finance income	254	-	254	-	254
	----------	----------	----------	----------	----------
Loss for the year from continuing operations	(11,368)	(6,501)	(5,755)	(8.267)	(14,022)
Loss for the year from discontinued operations	(610)	-	(198)	(412)	(610)
	----------	----------	----------	----------	----------
Loss before tax	(11,978)	(6,501)	(5,953)	(8,679)	(14,632)
Taxation	710	342	710	-	710
	----------	----------	----------	----------	----------
Retained loss	(11,268) =======	(6,159) =======	(5,243) =======	(8,679) =======	(13,922) =======

Loss per share for the year ended 31 December 2008                                                                                       15.3p

Loss per share from continuing operations before exceptional costs for the year ended 31 December 2008             4.7p

Pro-forma loss per share for the year ended 31 December 2008                                                                          5.7p

Pro-forma loss per share before exceptional costs for the year ended 31 December 2008                                      2.5p

Consolidated balance sheet as at 31 December 2008
		Unaudited	Unaudited
		As at 31 December 2008	As at 31 December 2007
		£000	£000
Non-current assets
Good Will		5,864	-
Intangible assets		3,326	110
Property, plant & equipment		6,737	364
		-------------	-------------
		15,927	474
		-------------	-------------
Current assets
Inventories		17,223	2,856
Trade and other receivables		10,044	1,228
Cash and cash equivalents		-	2,535
		-------------	-------------
		27,267	6,619
		-------------	-------------
Total assets		43,194	7,093
		-------------	-------------
Current liabilities
Bank overdrafts		(2,318)	-
Trade and other payables		(21,200)	(2,743)
Provisions		(2,301)	(895)
Obligations under finance leases		(249)
		-------------	-------------
		(26,068)	(3,638)
		-------------	-------------
Non-Current liabilities
Bank loans		(6,799)	-
Deferred tax liabilities		(263)	-
Provisions		(1,529)	-
Obligations under finance leases		(33)	-
		-------------	-------------
		(8,624)	-
		-------------	-------------
Total liabilities		(34,692) -------------	(3,638) -------------
Net assets		8,502	3,455
		-------------	-------------
Equity
Share capital		1,084	281
Share premium		15,798	-
Merger reserve		5,542	5,644
Retained earnings		(13,922)	(2,470)
		------------	-------------
Total equity		8,502	3,455
		------------	-------------

Consolidated cash flow statement for the 72 weeks ended 31 December 2008
			Unaudited 2008  £'000
Operating activities
Cash generated from operations			(13,448)
Interest paid			(470)
			-------------
Net cash used in operating activities			(13,918)
Investing activities
Acquisition of subsidiaries			(7,660)
Cash received from acquisitions			838
Disposal of subsidiaries			(235)
Purchase of property, plant and equipment			(1,169)
Proceeds on disposal of property, plant and equipment			2,420
Purchase of intangible assets			(1,069)
Interest received			196
Loan repayments			(1,185) -------------
Net cash used in investing activities			(7,864)
Financing activities
Proceeds from issuance of ordinary shares			20,946
			-------------
Net cash used in financing activities			20,946
			-------------
Net decrease in cash and cash equivalents			(836)
			======
Cash and cash equivalents at the beginning of the period			-
Cash and cash equivalents at the end of the period			(836) ======

Notes to the preliminary financial information

1.    Basis of preparation

This unaudited consolidated preliminary financial information for the ended 31 December 2008 should be read in conjunction with the Admission Document of the Company, dated 20 June 2008 ('the Admission Document'), which was prepared in accordance with IFRS as adopted by the European Union.

These preliminary financial statements adopt the recognition and measurement requirements of those Standards expected to be applied in the Group's first accounts prepared under International Financial Reporting Standards ('IFRS'). As this is the first period of account of the Group, there are no reconciliations between results previously reported under UK GAAP.

The financial information contained in this preliminary report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The unaudited results for the 72 week period ended 31 December 2008 are also shown. 

The accounting policies adopted are consistent with those documented within the Admission Document, as described in that Admission Document.

In particular, during February 2008, the Group implemented a share for share exchange, in order to effect the acquisition of Darwen Group Limited (now Optare UK Limited). In the opinion of the Directors, the share exchange was a group reconstruction rather than an acquisition, since the shareholders in the holding company of the Group after the implementation of the share exchange, being Darwen Holdings plc (now Optare plc), were the same as the shareholders in the holding company before the implementation of the share exchange, with no change to the rights of each shareholder, relative to others. Accordingly, the Directors adopted merger rather than acquisition accounting principles in drawing up the accounts, having regard to the overriding requirement of Section 227(6) of the Companies Act 1985 for the accounts to present a true and fair view of the Group's result and financial position. IFRS3 Business combinations does not identify merger accounting as applicable for business combinations; however it does address the situation where a new holding company is added to an existing group by issuing shares in exchange for the transfer of shares in the existing group. There is currently no guidance as to the appropriate accounting in such situations under IFRS. The Directors therefore believe that it is appropriate to continue to adopt merger accounting for the Group reconstruction under IFRS.

The preliminary report was approved by the Board of Directors on 26 May 2009.

The unaudited pro-forma consolidated income statement for the year ended 31 December 2008 have been provided to give an indication of the performance of the group as if the acquisition of the Optare/Jamesstan Group had taken place prior to 1 January 2008. The pro forma P&L comprises the actual trading results of Optare plc plus the actual trading results of the Optare/Jamesstan Group after adding back certain non-trading exceptional costs. No account is taken in the pro-forma results of the discontinued activity (see below) nor of finance costs.

2.     Discontinued activity

The company completed the disposal of the trade and assets of Darwen North West, a coach refurbishment, repair maintenance and conversion business and its trailer fabrication business for a consideration of £1. The estimated loss on the sale of the business is £610k. The operating loss of the business for the period up to disposal was £127k on turnover of £557k.

3.     Principal risks and uncertainties for the year ending 31 December 2008

As for most businesses, there are a range of risks and uncertainties facing the Group. The principal risks and uncertainties are described in the Group's Admission Document dated 20 June 2008. The Admission Document can be downloaded from the Group's website (www.optare.com). In assessing the Group's likely financial performance, these risks and uncertainties should be considered. 

4.     Loss per ordinary share

The calculation of earnings per ordinary share is based on the profit or loss for the period divided by the weighted average number of equity voting shares in issue. The number of equity voting shares in issue during the period and the prior reported period ended 31 December 2007 has been restated to reflect the merger accounting of Optare UK Limited. Therefore the number of shares in the prior reported period is the aggregate of the weighted average number of shares of the combined entities, adjusted to equivalent Optare plc shares and for shares issued during that period. There were no potentially dilutive securities in existence during the period and so basic and diluted earnings per share are identical.

The pro forma earnings per share is based on the number of shares as described above plus the number of shares issued in respect of the placing and the acquisition of the Jamesstan/Optare as if they had been in issue for the whole period.

		Unaudited	Unaudited
		Year ended  31 December 2008	Pro forma year ended 31 December 2008
Retained loss for the period, (£000)		11,268	6,159
Weighted average number of shares ('000)		73,786	108,460
Basic and diluted loss per ordinary share (pence per share)		15.3p	5.7p
		-------------	-------------
Retained loss for the period from continuing operations before exceptional costs (£000)		3,450	2,659
Weighted average number of shares ('000)		73,786	108,460
Basic and diluted loss before exceptional items per ordinary share (pence per share)		4.7p	2.5p
		-------------	-------------

 

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