Final Results

RNS Number : 7726K

Optare PLC

27 June 2014

 



Optare plc

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

Preliminary unaudited results for the year ended 31 March 2014

Optare is pleased to announce its preliminary results for the 12 months ended 31 March 2014.

Operational Highlights

·      Winning Excellence in Technology at the Prestigious National Transport Awards 2013 for the Versa electric bus incorporation fast charging technology

·      Launch of the Euro 6 vehicle range

·      Development of the Euro 6 Integral Double Decker

·      New export distributor appointed in Australia to take advantage of increased market demand

Financial Highlights

·      Revenue for the period was £56.9m, a reduction of 25% over prior year due to reduced kit revenues.

·      There were no exceptional costs in this year accounts as the site closure and restructuring phase of Optare has now been completed (2013: £1.8m).

·      Gross profit was £6.1m (representing 10.7% of turnover) over the 12 month period (2013: £5.2m (pre-exceptional items), representing 6.9% of turnover).

·      Administration expenses for the period fell to £8.0m (2013: £8.8m (pre-exceptional items)).

·      EBITDA losses reduced to £1.9m (2013: £3.6m).

·      Operating cash outflow before working capital changes was £1.9m (2013: £5.3m)

·      Loss per share reduced from 0.3p per share to 0.2p per share.

Enrico Vassallo, CEO, commented: "Despite challenging market conditions over the last twelve months, I am pleased to report that we are now seeing the positive signs of increased sales activities in our key market of the UK.   This has resulted in a 30% growth in orders in 2013-14. We believe that the launch of the new Metro range of vehicles will serve to strengthen our market position. We have made considerable progress in supply chain cost reduction, implementing manufacturing efficiencies and further improving the quality of our products, and we continue to focus on our processes to drive continuous improvement. With the business break-even point lowered we are confident that we have built solid foundations for the group to grow the top line and return to profitability".

For further information, please contact:

Optare plc                      Tel: [phone]

Enrico Vassallo - Chief Executive Officer

Cenkos Securities plc        Tel: [phone]

Stephen Keys / Mark Connelly

Chairman's Statement

Introduction

2013/14 has been a year of evolution and I am pleased with the progress we have made to improve efficiency and reduce fixed costs. Some of the major achievements for the year include:

·      New export distributor appointed in Australia to take advantage of increased market demand;

·      Completion of the new Double Decker product, which was launched to the market in May 2014. This will increase the Company's product offering in the UK Market.

·      Continued leadership in low carbon products through investments, recognised by winning the National Transport Award 2013 for the Versa Electric Bus that incorporated fast charging technology.

·      Successful accreditation for passing the low carbon emission bus benchmark. The Solo, Versa and Metrocity now meet this accreditation requirement to produce 30% less emissions of greenhouse gases than a normal diesel bus.

·      Metrocity Electric vehicle launched into the key target market of London.

·      We continue to integrate with Ashok Leyland to deliver key business objectives.

Strategic development

Our strategy is consistent with what we stated last year which is outlined below:

·      Being a European leader in green bus technologies through the development of the full range of options from fuel-efficient diesels to dual fuel, hybrid and electric vehicles.

·      Consolidating and maintaining leadership in the UK midi-bus market.

·      Offering a product portfolio with the full range of buses that is demanded by the UK bus market.

·      Becoming a significant exporter of buses.

·      Expanding market share in the UK and Europe by selling buses made to global standards at competitive prices.

I am pleased to report during the year we have made progress on all these key strategic objectives.

Our customers

Our customers remain key to our business and they continue to provide excellent support to the Group.

We continue to strengthen our business relationships with the major bus groups. We are confident that this relationship and partnership will continue to grow and we remain committed to delivering high quality, innovative and value for money products on time.

Our people

I would like to thank our workforce for their dedication, commitment and focus on delivering high quality products. They have also been critical in continuing to work with us to deliver the strategic objectives of the company. Lastly, I would like to thank the shareholders for their continuing support.

Chairman's statement (continued)

Summary for 2014-15

In summary 2014-15 will focus on:

·      Increasing volume in the UK by the Metrocity and MetroDecker product, with customer focus, collaboration and added value strategy.

·      Developing products and commercial relationships for export markets and driving international expansion.

·      Continuing to deliver environmentally friendly product technology.

·      Continuing to drive cost reduction and improve quality. 

John Fickling
Non-executive Chairman

30 June 2014

Chief Executive's Statement

Business and financial report

Business and financial performance

2013/14 represented an important step forward for Optare in terms of business growth through the recovery of sales in our major market the UK, and the consolidation of International sales, mainly in Australia and South Africa.  Order intake grew by 30 % in 2013/14 compared to the previous financial year, reaching a total number of 372 units.

The Company posted overall sales of 351 single deck vehicles, a slight decrease on the previous year. Further to our traditional sales, we also exported 31 kits to South Africa and the first 15 units of the Australian order.

Group turnover decreased from £75.9m to £56.9m, mainly due to the completion of deliveries of the kits for the Cape Town tender, which generated significant revenues in 2012/13. Profit after tax was a net loss of £4.1m, a reduction of £3.3m on the prior year principally due to continued progress on driving cost reductions and increased process efficiencies.

Total registrations in our core market, the UK bus market, totalled 2,494 units in 2013/14, showing a contraction of 347 units against the previous year, but representing an increase in its market share in the UK Bus market from 11.5% to 14.1%.  Optare continues to be strong in the less than 12 ton market (Solo), where we achieved 100% share of the UK market, and saw growth in the 12-16 ton market (Versa).

The majority of the bus market consists of 12-16 ton range (42%) and double deck range (38%).  In the period under review, Optare launched the Metrocity to compete in the 12-16 ton market and completed the development of the MetroDecker (double deck) for commercial launch in Q3 of 2014/15.   

The business completed the Metrocity range with the addition of the electric option, gaining the first vehicle orders in October 2013. Paybacks on Electric Vehicle (EV) products are now well within the lifetime of the vehicle, with technological developments in fast charging and inductive charging EV now commercially viable across cities in the UK and Europe and we expect demand to increase as tighter controls on emissions are introduced across the world.

To reduce dependency on one market and to improve top line growth, the Group will continue to diversify the product range and participate in various bus segments outside the UK through the dealer distribution network. The Company continues to invest in new products to secure the long term growth of the Company with a pipeline of new products to meet our growth strategy. 

2013-14 was a year of continuing focus and improvement on operational and fixed costs to return to profitability and minimise cash outflow. This delivered net savings of £1.8m in cost of sales and £0.8m in administration expenses. The business remains focused on reducing operational costs and this will gain momentum in 2014-15 through lean manufacturing, with the likely associated cost savings expected to deliver a further £2.0m in the next 12 months. This focus on continuing to drive cost reductions in operations through lean manufacturing will gain momentum in 2014-15, while maintaining a long term view of having the right quality product to grow and deliver sustainable profits.

The integration with our parent company, Ashok Leyland continues to grow in a number of key areas through synergies with their international operations for export opportunities and product cost reduction within the Ashok Global business. We are confident that this will result in an increased presence in new markets and lead to the conversion of major contracts into future sizeable orders through the Ashok Group's extensive global sales network. Furthermore, we have exchanged key personnel in critical areas to focus on continuous improvement of engineering, quality and efficiency to transfer synergies between the organisations. We have also been successfully working with Ashok Leyland's supply chain to benefit from their critical mass and purchasing leverage to source materials from lower cost countries to deliver material cost reductions.

Financial performance

The financial results for the year show a net loss of £4.1m compared to a loss of £7.4m (post exceptional items) in the previous period, which represents an improvement of 45%.

The key highlights for the period ending are:

·      Revenue for the period is £56.9m; a reduction of 25% over prior year due to reduced kit revenues.

·      There were no exceptional costs in this year accounts as the site closure and restructuring phase of Optare has now been completed (2013: £1.8m).

·      Gross profit was £6.1m (representing 10.7% of turnover) over the 12 month period (2013: £5.2m (pre-exceptional items), representing 6.9% of turnover).

·      Administration expenses for the period fell to £8.0m (2013: £8.8m (pre-exceptional items)).

·      EBITDA losses reduced to £1.9m (2013: £3.6m).

·      Operating cash outflows before working capital changes was £1.9m (2013: £5.3m)

·      Loss per share reduced from 0.3p per share to 0.2p per share.

Current trading

On the 31 March 2014, the order book stood at £28.4m compared to £12.3m in the previous year. This reflects our substantial investment in market leading low carbon vehicles and our planned export expansions. Additionally, as announced in May, we successfully launched our new MetroDecker product that completes our product offering in the market.

We are the industry leaders in Electric Vehicles in the UK market. Winning the National Transport award is a testament to our market leading technology, with increasing pressure on fuel cost and environmentally conscious customers, this provides the Company with an avenue to differentiate and grow in a mature market.

Board and management changes

Following the initial strategic integration of Optare into Ashok Leyland, PG Nilsson, Interim Chief Executive Officer elected to retire and leave the organisation and step down from the Board of Directors. We thank PG Nilsson for his contribution and wish him the very best.

Following my appointment as CEO of the Optare board on the 7^th October 2013, the senior management team has been strengthened further to create an organisation that is customer focused to underpin our top line growth expansion plans.

Outlook

With the business break-even point lowered we now believe it is time for the Group to deliver profitability by increased top line sales growth. We believe that this will be driven by the product pipeline including, the Metrocity and MetroDecker and other new products for the export market in 2014-15 and beyond.

The Board anticipates that the UK market will be flat but the Company will continue to gain market share with the introduction of the Metrocity and MetroDecker. In addition, the Company is making solid progress to qualify to tender for substantial export contracts to take advantage of opportunities that exist in Europe, the Middle East and South East Asia.

Overall the Board expect progress to be accelerated in 2014-15 with the successful introduction of the new products and with increased demand for our low carbon products, especially in Europe.

 EnricoVassallo  
Chief Executive Officer

30 June 2014

Consolidated Income Statement for the year ended 31 March 2014

		Total	Before Exceptional  items	Exceptional items	Total
		Year  ended	Year Ended	Year Ended	Year Ended
		31 Mar 2014	31 Mar  2013	31 Mar  2013	31 Mar  2013
		£'000	£'000	£'000	£'000
Revenue		56,947	75,938	-	75,938
Cost of sales		(50,826)	(70,695)	(1,483)	(72,178)
		----_______	-_______	_______	_______
Gross profit		6,121	5,243	(1,483)	3,760
Administrative expenses		(8,039)	(8,839)	(328)	(9,167)
Distribution costs		(499)	(512)	-	(512)
Amortisation of intangible assets		(624)	(643)	-	(643)
		_______	_______	_______	_______
Loss from operations		(3,041)	(4,751)	(1,811)	(6,562)
Finance costs		(1,020)	(788)	-	(788)
		_______	_______	_______	_______
Loss on ordinary activities before taxation		(4,061)	(5,539)	(1,811)	(7,350)
Taxation		-	-	-	-
		_______	_______	_______	_______
Loss attributable to the equity holders of the parent company		(4,061)	(5,539)	(1,811)	(7,350)
		_______	_______	_______	_______

Loss per share (Note 4):	Year  ended	Period ended
	31 Mar 2014	31 Mar 2013
Loss per share (basic and diluted)	(0.2)p	(0.3)p
	_______	_______

There are no other recognised items of income and expense other than those presented above.

Consolidated Statement of Changes in Equity for the year ended 31 March 2014

	Share capital	Share premium	Merger reserve	Profit and Loss Account	Share based payment reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 April 2012	9,005	32,936	5,542	(44,529)	198	2,612
	_______	_______	_______	_______	_______	_______
Loss for the year	-	-	-	(7,350)	-	(7,350)
	_______	_______	_______	_______	_______	_______
Total comprehensive income for the period	-	-	-	(7,350)	-	(7,350)
Transactions with owners in their capacity as owners:
Transfer between reserves on forfeiture of options	-	-	-	156	(156)	-
	_______	_______	_______	_______	_______	_______
Total transactions with owners in their capacity as owners	-	-	-	156	(156)	-
	_______	_______	_______	_______	_______	_______
Balance at 31 March 2013	9,005	32,396	5,542	(51,723)	42	(4,738)
	_______	_______	_______	_______	_______	_______
Loss for the year	-	-	-	(4,061)	-	(4,061)
	_______	_______	_______	_______	_______	_______
Total comprehensive income for the year	-	-	-	(4,061)	-	(4,061)
	_______	_______	_______	_______	_______	_______
Balance at 31 March 2014	9,005	32,396	5,542	(55,784)	42	(8,799)
	_______	_______	_______	_______	_______	_______

 

Consolidated Balance Sheet as at 31 March 2014

		31 March  2014	31 March  2013
		£'000	£'000
Non - Current Assets
Goodwill		8,574	8,574
Other intangible assets		8,324	8,271
Property, plant and equipment		3,300	3,356
		_______	_______
		20,198	20,201
		_______	_______
Current Assets
Inventories		12,423	10,338
Trade and other receivables		7,998	7,720
		_______	_______
		20,421	18,058
		_______	_______
Total Assets		40,619	38,259
		_______	_______
Current Liabilities
Trade and other payables		18,632	20,466
Loans and overdrafts		10,092	18,652
Provisions		1,589	2,217
Obligations under finance leases		64	79
		_______	_______
		30,377	41,414
		_______	_______
Non Current Liabilities
Bank Loans		15,000	-
Provisions		3,940	1,394
Obligations under finance leases		101	189
		_______	_______
		19,041	1,583
		_______	_______
Total Liabilities		49,418	42,997
		_______	_______
Net (Liabilities)/Assets		(8,799)	(4,738)
		_______	_______
Equity
Share capital		9,005	9,005
Share premium		32,396	32,396
Share based payment reserve		42	42
Merger reserve		5,542	5,542
Retained loss		(55,784)	(51,723)
		_______	_______
Total equity attributable to equity holders of the parent		(8,799)	(4,738)
		_______	_______

Consolidated Cash Flow Statement for the year ended 31 March 2014

		Year ended  31 March 2014	Year ended  31 March 2013
		£'000	£'000
Operating activities
Cash absorbed by operations		(4,166)	(2,537)
Interest paid		(1,020)	(788)
		_______	_______
Net cash used in operating activities		(5,186)	(3,325)
Investing activities Disposal of assets held for sale			1,000
Purchase of property, plant and equipment		(543)	(800)
Capitalised development costs		(678)	(882)
		_______	_______
Net cash used in investing activities		(1,221)	(682)
Financing activities
Finance lease repayments		(69)	(60)
Short term loan		7,476	2,023
		_______	_______
Net cash generated from financing activities		7,408	1,963
		_______	_______
Net (decrease) in cash and cash equivalents		1,001	(2,044)
Cash and cash equivalents at start of year		(5,445)	(3,401)
		_______	_______
Cash and cash equivalents at end of period		(4,444)	(5,445)
		_______	_______

1.      BASIS OF PREPARATION

Optare plc is a company incorporated and domiciled in the UK.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2014 or 31 March 2013. The financial information for 2013 is derived from the statutory accounts for the year ended 31 March 2013, which have been delivered to the Registrar of Companies. The auditor has reported on the year ended 31 March 2013 accounts; their report was:

i.              unqualified;

ii.             did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and

iii.            did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The statutory accounts for the year ended 31 March 2014 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies in due course.

Copies of the Annual Report and Financial Statements for the year ended 31 March 2014 will be available on the Company's website www.optare.comfrom 31 July 2014 and from the Company Secretary, Optare plc, Unit 3 Hurricane Way South, Sherburn in Elmet, Leeds, North Yorkshire, LS25 6PT.

2.      GOING CONCERN

The financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future. The Group made a net loss of £4.1m in the year ended 31 March 2014 (2013: £7.4m loss), which has resulted in the Group now having net liabilities of £8.8m (2013: net liabilities of £4.7m).

The Group has conducted a thorough review of its strategy for the next three years and put forward updated trading forecasts through to March 2017, which include detailed cash flow calculations. The Group is forecast to be cash generative in 2014/15. The Group continues to have facilities in place to meet its funding requirements. The forecasts are based on detailed assumptions as to sales performance, variable and fixed costs. The forecasts reflect sales of recently launched products from 2014/15 (Metrocity and Double Decker), the strength of the current order book and prospects. This includes an increased level of exports through direct and distributor sales channels and continued sales of Green Bus vehicles - both electric vehicles and hybrids. Details of sales performance in 2013/14 and the increased order book are included in the Chief Executive's Statement on pages 4 and 5.

The forecasts assume a gradual increase in the level of savings in material costs over the forecast period, achieved both through the Company's own efforts and through joint initiatives with Ashok. Improvement in labour productivity is factored in and further expected gains from process improvement and redesigns of the buses for efficient manufacturing.

There is inherent uncertainty in any forecast. In assessing such forecasts the Directors have considered the impact of such uncertainties, including the financial strength of customers, any lack of visibility regarding sales beyond the current order book, the ability of suppliers to meet demand, the achievability of material and labour savings and the possibility that the external economic environment might worsen. The Directors feel that a reasonably conservative approach has been taken in the forecasts and that the facilities in place have adequate headroom to allow for these uncertainties.

Against these uncertainties, there are upside opportunities which are not reflected in the forecast but which would offset or mitigate the impact of downside risks which might occur. These include achieving higher than forecast a) sales volumes b) an improved sales mix c) material savings, arising from joint initiatives with Ashok, and d) productivity savings. Further significant high volume sales opportunities exist in Europe, Southern Africa, the Middle East, Asia and Australia in excess of the forecast volumes. Further fixed cost base synergies to integrate the business further with Ashok.

The Company was successful in restructuring its debt in June 2013 to provide total bank facilities of £23m. These are structured into a term loan for three years for £15.0m backed by corporate guarantee provided by Ashok and an overdraft element of £8.0m which has been renewed and now falls due for review in June 2015. There is a fixed charge on the assets of the Company following the re-negotiation of facilities in June 2013. Both of these facilities are placed with Barclays Plc. Due to the corporate guarantee, no financial performance covenants attach to these facilities.

The Group also has a £5.1m short-term loan facility from Ashok as at 31 March 2014, with a 30 day notice repayment notice subject to banking covenants. These facilities have been rolled forward until December 2015.

The Directors are confident that the assumptions underlying their forecast are reasonable and that the Group will be able to operate within its current funding limits arranged with support from Ashok. The Directors believe that the Group is well placed to manage its business risk successfully.

On the above basis the Board believes that it is appropriate to prepare the financial statements on the going concern basis. The financial statements do not include any adjustment to the value of the balance sheet assets or provisions for further liabilities, which would result should the going concern concept not be valid.

3.   CRITICAL JUDGEMENTS AND ESTIMATES

The preparation of historical financial information in conformity with EU Adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The key sources of estimation that have a significant impact on the carrying value of assets and liabilities are discussed below:

1      Provision For Warranty Claims

Management has estimated the cost of potential warranty claims arising on acquisition of the various businesses and on new bus sales. This requires an element of judgement about the likely level of claims and their financial impact upon the business. The factors affecting the level of warranty cost are: the number of buses sold; the length in periods and the breadth in cover of the terms of the warranty given with the bus; the ability of the Company to obtain suitable back-to-back warranties from its suppliers; the efficiency of the quality processes applied in designing and building the buses; the strictness with which warranty claims from customers are vetted; and the extent to which goodwill claims are allowed. Judgements on the level of warranty provision that is required are based on the number of buses in service and their remaining warranty life, with the key estimation being the likely warranty cost per bus. This is based on historical data, with estimates where necessary for new vehicle designs. If the assumption for likely warranty cost per vehicle was adjusted by 10% this would equate to an under or over provision of £504,000. 

2      Impairment Reviews

Management performs impairment reviews annually on goodwill, other intangible assets and tangible assets. These involve comparing the estimated future cash flows of the business, using a discounted rate, to the carrying value of the Group's non-current assets. Where the net present value of the forecast cash flows exceeds the carrying value, no impairment is required. As required by IFRS, no assumption is made that profits growth can exceed national, market or product averages without justification.

Clearly, there is an element of judgement required in assessing the potential future benefits to be derived from these assets. When completing the impairment review the Directors considered the same factors as outlined for the going concern review; critical judgements are the discount rate used and the growth in turnover in the next three years' business plan by the introduction of new products.

 

4.  LOSS PER SHARE

The calculation of the basic and diluted loss per share is based on the following data:	Year ended 31 March 2014	Period ended  31 March 2013
	£'000	£'000
Loss:
Loss for the purposes of basic loss per share
(net loss for the period attributable to equity holders of the parent)	(4,061)	(7,350)
	_______	_______
	Number	Number
Weighted average number of ordinary share for the purposes of basic earnings per share
	2,235,291,827	2,235,291,827
	-____________	____________
Basic and fully diluted loss per share	(0.2)p	(0.3)p
	-____________	-____________
Excluding Exceptional Items	Year ended 31 March 2014	Period ended  31 March 2013
	£'000	£'000
Net loss for the period attributable to equity holders of the parent	(4,061)	(7,350)
Adjustment to exclude exceptional costs	-	1,811
	_______	_______
Loss from continuing operations for the purposes of basic earnings per share	(4,061)	(5,539)
	_______	_______
Basic and fully diluted loss per share	(0.2)p	(0.2)p
	_______	_______

 

END

 

 

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