Final results for the year ended 30 November 2021

RNS Number : 7527E

Rotala PLC

15 March 2022

 

15 March 2022

Rotala plc

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

Final results for the year ended 30 November 2021

Rotala plc (AIM:ROL), a provider of transport solutions across the UK, is pleased to announce its audited final results for the year ended 30 November 2021.

Highlights

· Small Profit after tax for the year

· DfT support continues - Bus Recovery Grant extended

· Repaid £8.6m of RCF in the year

· Substantial CBSSG/BRG receipts post year end

· New banking facilities

· New £17m Revolving Commercial Facility completely undrawn

· Post-crisis opportunities for both organic growth and growth by acquisition

· Special interim dividend of 1.0p per share

For further information please contact:

Rotala Plc	0121 322 2222
John Gunn, Chairman Simon Dunn, Chief Executive Kim Taylor, Group Finance Director
Shore Capital	020 7408 4090
Tom Griffiths / James Thomas / Michael McGloin (Corporate Advisory) Henry Willcocks (Corporate Broking)

About the business  

Rotala provides a range of transport solutions, ranging from local bus services under contract to local authorities, through to commercial bus routes. Rotala has operations at Heathrow Airport, in the West Midlands and in the North West.   Operating companies are Diamond Bus Ltd, Diamond Bus (North West) Ltd, Hallmark Connections Ltd and Preston Bus Ltd.

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 2021. The COVID-19 pandemic began in March 2020, about one third of the way through the accounting period prior to the one upon which I am now reporting to you. Thus, d uring the whole of the year ended 30 November 2021, the operation of bus services was conducted under a variety of restrictions imposed by the Government to combat the COVID-19 pandemic. These restrictions, as they were tightened or relaxed during the year under report, to a greater or lesser degree affected the normal commercial operation of bus services, but the financial effects of these steps were counterbalanced throughout the year by the package of grants and subsidies provided by the Department for Transport ("DfT") and Local Authorities. In return for this support, we were required by the DfT to work closely with those Local Authorities in whose areas we operate. Bus s ervice levels have thus varied considerably in the year in response to changes in Government policy and to the resultant requirements of Local Authorities.

These are the key factors to be borne in mind when considering the trading performance of the group in 2021, the comparison with the previous year, and the overall position of the group at the balance sheet date. 

Passenger numbers

In the lockdown phase at the very beginning of the financial year passenger numbers fell to about 25% of those seen in the period of normal bus operation before the COVID-19 pandemic commenced in March 2020. Subsequently passenger numbers rose steadily through the spring and summer of 2021 and stabilised at about 60% to 65% of normal levels. The relaxation of the remaining COVID - 19 related restrictions in the late summer, combined with the beginning of the new school year in September 2021, saw passenger numbers resume their upward ascent and by the end of the year they stood at about 80% of the levels seen in the pre-pandemic era.  After dipping sharply in the lockdown period in December 2021, passenger numbers rebounded strongly and remain at approximately the same 80% level.

Operational conditions

As a consequence of the variability of passenger numbers in response to Government policy, but in accordance with its desire to see bus service provision maintained at pre-pandemic levels, the Government throughout the year sought to support the financial and operational performance of the bus industry with a variety of financial measures at local and national level. Initially the Government grant package was delivered principally through a specific grant ("CBSSG"), combined with the maintenance of the Bus Services Operator's Grant, concessionary fares re-imbursements and payments for contracted bus services broadly at their pre-COVID-19 levels. CBSSG was a grant which was designed to offset any losses incurred by a bus operator in running the services desired by central and local government. The effect of these measures was that bus operators were guaranteed to make neither a profit nor a loss at the normalised statutory pre-tax profit line for as long as the support package was in place.

CBSSG ended on 31 August 2021 and was replaced by a fresh support package called Bus Recovery Grant ("BRG"). In contrast to CBSSG, BRG is designed to compensate bus operators for the absence of revenue whilst passenger numbers continue their recovery back to pre-pandemic levels. BRG was initially planned to cover the period from 1 September 2021 to the end of the Government financial year in early April 2022 but has recently been extended by a further six months to October 2022. In addition, from April 2022 the new investment contained within the Government's National Bus Strategy will begin to flow. Under this strategy all local authorities have been required to write Bus Service Improvement Plans ("BSIPs") and submit them to the DfT. In essence BSIPs are bids for allocations of the new investment presently available under the National Bus Strategy. At the current time the allocation of the new investment money has yet to be announced. However, from the beginning of April 2022 concessionary fares re-imbursement levels will slowly be adjusted to reflect actual travel patterns such that by the end of 2022 the re-imbursements received should represent actual concessionary passenger usage. 

Financial results

	2021	2020	2019
Revenue	£96.5 million	£78.1 million	£67.5 million
Operating profit/(loss)	£3.4 million	(£2.6 million)	£4.2 million
Profit/(loss) before tax	£0.3 million	(£4.8 million)	£2.6 million

For the year ended 30 November 2021 group revenues were £96.5 million (2020: £78.1 million). As already stated, actual bus service volumes varied considerably during 2021 and 2020, in accordance with the directions received from Government and in response to varying passenger numbers. Consequently, the revenues set out above reflect the various packages of grants and subsidies put in place by the DfT and Local Authorities to ensure that bus service provision continued at the levels desired by these two arms of Government. Grants and subsidies totalled £47.9 million in 2021 and £29.4 million in 2020. In addition, as part of its response to the COVID-19 pandemic, the Department for Education at a number of points in the year contracted for specific home-to-school transportation. Furthermore, the changes in market conditions brought on by the pandemic caused some smaller operators to withdraw from the market and larger operators to reshape their service coverage. These developments gave us the opportunity to expand our presence in the local authority tendered market and in services for other governmental institutions. Finally, one of the new initiatives under the Government's National Bus Strategy, further details of which are set out below, is for Demand Responsive Transport. This is not a new idea, but modern technology has transformed the feasibility of such services and trial contracts, in which we are participating, have commenced in several of the local authority areas in which we operate. 

In summary then the group, before exceptional items, recorded an overall Operating Profit of £1.78 million for the year to 30 November 2021 (2020: £1.42 million). For the same period the group made an exceptional profit of £1.6 million (2020: loss of £4.0 million). This exceptional profit resulted largely from the marking to market price of the group's fuel derivative position; in 2020 the majority of the exceptional loss also came from the same source. The result for the year, after exceptional items, was a profit before tax of £295,000 (2020: loss of £4.8 million). In contrast to the loss after tax sustained in 2020 of £4.05 million, a small profit after tax of £66,000 was achieved.

Net debt (excluding hire purchase debt)

Net debt	2021	2020	2019
Revolving commercial facility drawn	£7.6 million	£16.2 million	£16.2 million
Mortgage debt	£5.9 million	£6.3 million	£6.5 million
Overdraft (net of cash)	£3.2 million	£3.3 million	£2.0 million
Total net debt	£16.7 million	£25.8 million	£24.7 million

From the commencement of the COVID-19 pandemic the company has concentrated on the conservation and management of the group's cashflow. As a consequence, cash flow, both at EBITDA level and net of all debt, interest and other payments, has been positive since very shortly after the pandemic began.  Net debt (excluding hire purchase debt) therefore declined gradually over the year and, as at 30 November 2021, stood at £16.7 million (30 November 2020: £25.8 million), down 35% during the year. The amounts drawn on the company's revolving commercial facility at 30 November 2021 amounted to £7.6 million (30 November 2020: £16.2 million); mortgage debt at 30 November 2021 was £5.9 million (30 November 2020: £6.3 million); and drawings on the company's £4.5 million overdraft facility were £3.16 million (30 November 2020: £3.3 million). As a consequence of the close management of its cashflow, the company has not at any stage of the COVID-19 crisis needed to avail itself of a loan under the various Government-backed loan schemes that were available.

New banking facilities

On 14 March 2022, the company signed a new banking facilities agreement with its principal bankers, HSBC Bank plc.   These facilities comprise a Revolving Commercial Facility ("RCF") of up to £17 million and a Mortgage Facility of £5.8 million. The RCF has an initial term of three years, expiring on 13 March 2025, with the option to extend it for up to a further two years. It is completely undrawn at this time. The Mortgage Facility commenced in 2017 and was originally of £8.0 million. Since that time repayments have reduced the amounts outstanding to £5.8 million. It remains on a term of up to twenty years expiring in December 2037. In addition, the company has an Overdraft Facility of up to £3 million with the same bank, renewed annually. 

The board took the decision to refresh its banking facilities at this time in order to equip the company with the resources necessary to take advantage of any opportunities that arise out of continuing bus industry developments. Since the Revolving Commercial Facility is currently completely undrawn, the board believes that the company possesses ample unused facilities to further its ambitions. 

Working capital

Working capital	2021	2020	2019
Inventories	£1.1 million	£3.5 million	£4.3 million
Trade and other receivables	£21.8 million	£22.3 million	£18.3 million
Trade and other payables	£6.2 million	£8.3 million	£7.6 million
Total working capital	£16.7 million	£17.5 million	£15.0 million

Before the advent of the COVID-19 pandemic, new systems to control parts stocks and digitalise engineering and maintenance spend had begun to be implemented. These new systems are now in full use and have made a major contribution to the reduction of £2.4 million in the working capital invested in inventories. The group's trade and other receivables of approximately £21.8 million at 30 November 2021 (30 November 2020: £22.3 million) were, as at the end of the previous year, inflated by the amounts receivable from the DfT under the CBSSG and BRG programmes set out above, which are the subject of lengthy reconciliation exercises. Since the year end the majority of the receipts due from these exercises have been received. This has enabled the company to be in a position at the time of writing where the Revolving Commercial Facility is completely undrawn. 

This release of working capital, combined with disposals of surplus property and other asset realisations, should ensure that net debt (including hire purchase debt, details of which are set out in the table below) is under £40 million by 30 November 2022 (2021: £57 million), in line with the board's plans and expectations. 

Hire purchase debt and fleet management

	2021	2020	2019
Hire purchase debt	£39.9 million	£37.1 million	£20.2 million
Average fleet age	7.56 years	7.95 years	8.65 years

The COVID-19 pandemic delayed the delivery of the replacement buses ordered in August 2019 as part of the plan drawn up at the time of the acquisition of the Bolton depot from First Group plc. The remainder of the vehicles ordered were delivered during the financial year. Following the completion of this planned re-equipment the board does not foresee any requirement, unless for specific new business, to acquire any further vehicles until the year ending 30 November 2023. Therefore, hire purchase debt, totalling £39.9 million at 30 November 2021 (30 November 2020: £37.1 million), stood at its peak at that date and will reduce substantially over the next year such that, by 30 November 2022, hire purchase debt levels are forecast to be approximately £34.0 million.

When acquiring any vehicle new to the fleet, the board is always acutely conscious of its emission standards. At the same time the capability of buses driven by non-diesel propulsion systems has continued to improve and their operating costs to become increasingly attractive when compared to their diesel predecessors. Part of the Government's National Bus Strategy includes the subsidised introduction of 4,000 new zero-emission vehicles. Consequently the board believes that it is unlikely that  the group will buy  new full-size diesel buses in preference to battery-electric buses or buses propelled by other fuels. Diesel driven vehicles will therefore gradually disappear from the fleet such that, in a decade or so, none of the buses in service will possess diesel engines. 

Aside from the action taken on the fleet inherited with the Bolton acquisition, we have continued to be active in reshaping the group's bus fleet to match changing needs. In the last year we have sold more than 120 vehicles. Consequently, the average age of the fleet has fallen to approximately 7.56 years (2020: 7.95 years) and more than half of the bus fleet is now at EURO 6 emissions standard or better.

Group Strategy

Before the COVID-19 crisis took hold in March 2020, the Government had announced an ambitious package of new funding to overhaul bus provision in every English region outside London. In March 2021, it published a detailed National Bus Strategy paper, "Bus Back Better", which lays out a comprehensive plan of reform and promises up to £3 billion of new Government investment. New Enhanced Partnerships, combined with subsidies for 4,000 zero emission vehicles, are designed to re-invigorate the bus market all over England and increase bus usage. The group already has extensive experience of operating routes in statutory partnerships in the West Midlands. We welcome this policy change and look forward to working closely with local and national Government in making a success of these new initiatives.

At a more detailed level the National Bus Strategy paper also sets out targets for next stop information, on bus CCTV, and cross-operator fare capping. A significant number of the group's buses are equipped with next stop systems and 90% of our bus fleet has on-board CCTV which can be remotely accessed from the depot. The group already has fare-capping architecture installed which can be used to deliver "Tap on/ Tap off" cross-operator capping, which is a desired feature of the National Bus Strategy. Therefore, the board believes that the group already has extensive experience of implementing and using these advanced systems which underlie the targets the Government has set and which are designed to smooth the travel experience of customers and enhance their perception of safety and security. 

Franchising in Greater Manchester

In late March 2021 the Mayor of Greater Manchester made the formal decision to franchise the bus market in the Greater Manchester region. The company made an immediate court claim to subject to judicial review the process by which the franchising consultation was continued by Greater Manchester Combined Authority ("GMCA") whilst the COVID-19 pandemic persisted, and the decision of the Mayor. Judgement in this claim was announced on 9 March 2022, when the judge in the case dismissed our claim.

Throughout the company's court claim, the board has remained confident that both these decisions were irrational and/or unlawful. The board still believes these decisions to be irrational and/or unlawful and is in the process of applying for permission to appeal the decision to the Court of Appeal.

As an operator in Greater Manchester, the Company has acted to attempt to protect its business from a decision that is not only detrimental to Rotala's future prospects, but also potentially detrimental to the citizens of Greater Manchester in imposing upon them the financial burden of a franchising scheme that the board believes has not been properly assessed in line with the relevant legislation.

The company remains committed to providing a high level of service to bus users in Greater Manchester and remains willing to enter into a statutory partnership with Transport for Greater Manchester and the other bus operators in Greater Manchester. The board is still of the view that the partnership approach would not only be just as effective as a franchising scheme, and be done at less risk to the public purse, but also could be implemented far more quickly than the full franchising scheme.

However, should the company be unsuccessful in its legal case and the franchising scheme is implemented, it will potentially be required to sell its Bolton depot and the bus assets based there to GMCA. The Board believes that the Bolton depot has first class facilities and is the most modern and up-to-date bus depot operating in Greater Manchester. The bus fleet based there is also the most modern of any of the large operators in that region. The board is therefore confident that the values which might potentially be realised from the sale of these assets under the mechanisms which the GMCA has already announced will at a minimum realise their book values and be more than sufficient to pay off the mortgage on the Bolton depot and the hire purchase debt associated with the bus assets based there. As a result, any sale of this nature would have no negative effect on the group's balance sheet and its leverage would fall to very low levels. In this scenario, the capital which the group currently has invested in its Bolton operation would be realised into cash and be available for re-investment or redeployment elsewhere in the group. 

Dividend

The company last paid a dividend in December 2019 in relation to the six-month period ended 31 May 2019. One of the terms of CBSSG was that bus companies were not permitted to pay dividends for as long as the grant regime was in place. As set out above CBSSG was replaced by BRG from 1 September 2021. BRG contains no such stipulation about restriction of dividend payments. Since therefore there is no longer any bar to dividends the board will pay on 29 April 2022 a special interim dividend of 1.0p per share to shareholders on the register on 1 April 2022. Thereafter, the company will return to its former policy of maintaining 2.5 times cover for any future dividend payments. Dividends will therefore be reset to reflect current profitability, but it is the board's intention to adopt a progressive approach to dividends, as before the onset of the COVID-19 crisis, recognising the importance of dividend flows to shareholders. It is anticipated that future dividends will be paid in the pattern of September (interim) and June (final), in the proportion of one third at the interim dividend stage and two thirds for the final.

Issue of share options

In order to incentivise management as the group recovers from COVID-19, the Remuneration Committee of the board has decided to issue a fresh package of  share options to the executive directors to match those issued to  senior management during 2021. Under the company's long-established share option scheme, share options may be issued up to 13.47% of the current number of issued ordinary shares. The share options now to be issued will take the share options in issue up to 11.95% of the current number of issued ordinary shares. The existing share options, which were issued more than seven years ago, have hurdle rates of up to 95 pence per share. The new share options, exercisable at par or the current market price, if higher, have hurdle rates of between 56 pence and 62 pence per share and contain a stipulation that the hurdle share price must be maintained for at least 20 consecutive trading days in order that the share options may become exercisable. 

The executive directors have been awarded the following share options:

· Simon Dunn (Chief Executive) 2,000,000 share options;

· Robert Dunn (Managing Director North West) 800,000 share options;

· Kim Taylor (Group Finance Director) 400,000 share options.

Share buyback

In connection with the issue of share options set out above the company also intends to institute a share buy-back programme with the aim of covering the share options which have been awarded. At the current time the company holds 800,000 ordinary shares in treasury. Therefore, the company will seek to acquire up to a further 4.25 million ordinary shares for treasury, provided that such shares are available at suitable market prices and within the mandate given to the board by the relevant AGM resolution. This programme will potentially take the number of shares in treasury up to the statutory maximum of ordinary shares held in treasury of 10% of the company's issued share capital. 

Fuel hedging

When opportunities arose before the pandemic to hedge the fuel requirements of the group the board in accordance with its usual practice took out fuel hedges, using diesel derivatives. The group's forecasts anticipate fuel usage of about 14 million litres in 2022. Approximately 54% of this fuel usage is covered by hedging contracts, at an average price of 87p per litre . For reference the market price of fuel at the date of this report (excluding VAT) is 142.5p per litre.  

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, where possible, creating business certainty.

Financial review

Income statement

The Consolidated Income Statement is set out below. As set out above in the section headed Financial Results, national and local Government continued throughout the year to provide a grant and subsidy support package to the bus industry in response to the prolongation of the COVID-19 pandemic. Note 2 of this announcement should be consulted for the breakdown of group revenues. The support package in turn enabled the group to provide the service levels requested by the DfT and those Local Authorities in whose areas the group operates. As stated above these service levels varied, and passenger volumes increased and decreased, in response to the changes in restrictions brought in by the Government in its own response to the path of the pandemic. Therefore, given the variability of operations in both 2021 and 2020, there is no useful comparison or comment to be made about the levels of Revenue, Cost of Sales, Gross Profit, Gross Profit Margin, Profit or Loss from Operations and Profit or Loss before Taxation except to highlight that the broad intention of the Government in providing its package of grants and subsidies was that a group such as Rotala should make neither a profit nor a loss while the grant and subsidy package was in place, and that this was more or less the outcome for the year. 

Administrative expenses before exceptional items increased from £10.7 million in 2020 to £12.3 million in 2021. This increase largely reflected the needs of the business for the continuing much enhanced level of legal and specific technical advice in the complex and challenging operating environment which resulted from the existence of the COVID-19 pandemic throughout the whole year.

Finance expense rose to £3.1 million (2020: £2.2 million). This increase was caused by the interest arising on the new hire purchase agreements which have been entered into in the last two years to finance the replacement of the bus fleet at the Bolton depot acquired in August 2019. 

The analysis of the exceptional items is set out below. In 2021 a profit of £1.6 million was recorded in this caption, compared to the loss of £4.0 million suffered in 2020. As in 2020 the principal component of this line was the marking to market of the group's fuel derivative position. However, in 2021 the outcome was a profit of £1.8 million, compared to a loss of £2.5 million in 2020, as diesel prices rebounded strongly. The other exceptional cost in 2021 resulted from the fire at the group's Heathrow depot in February 2021, which was announced at the time. 

There were no share issues in the year. As a result of all the factors set out above basic earnings per share in 2021, after all exceptional items, were 0.13p (2020: loss per share of 8.08p). 

Balance sheet

The gross assets of the group fell slightly from £108.7 million in 2020 to £104.5 million as at 30 November 2021. The book value of property, plant and equipment declined by £4.3 million as depreciation in the year exceeded additions to the same caption. Almost all the additions were to passenger carrying vehicles and comprised the remaining third of the vehicles ordered to replace those leased from First Group plc when the Bolton depot was acquired in 2019. The net asset represented by the defined benefit pension scheme grew considerably to reach £4.25 million by the end of the year (2020: £1.44 million). The value of the scheme's investments rose by 9% to stand at £21.5 million (2020: £19.7 million). At the same time the present value of the scheme's defined benefit obligation fell by 6%. These changes produced the strong position of the scheme as at 30 November 2021. 

Group stocks of parts, tyres and fuel fell further in 2021 as the new systems to control parts stocks and purchasing had their full effect. Trade and Other Receivables, although slightly down on the total seen in 2020, continue at a high level. This results from the nature of the grants provided by the DfT to support the bus industry during the COVID-19 pandemic. The grants are subject to a complex series of submissions and reconciliations which inevitably considerably elongate the timing of the actual receipt of the income in cash. Since the year end the majority of the outstanding reconciliations have been agreed and the related receipts received in cash. Finally, as has been pointed out under exceptional items, the fuel derivative swung from a net liability in 2020 to an asset in 2021.

One of the avenues of business support devised by the Government early in the pandemic was a delay to the payment of PAYE and NHI liabilities; the group took advantage of this facility in 2020 but brought all such payments up to date during 2021. This caused trade and other payables to fall year on year. The loans and borrowings of the group shown under Current Liabilities also fell from £20.8 million in 2020 to £11.6 million in 2021. The principal cause of this fall was the reduction in drawings under the group's Revolving Commercial Facility, which fell from £16.2 million in 2020 to £7.6 million at the balance sheet date. Obligations under hire purchase contracts under both Current Liabilities and Non-Current Liabilities increased as a result of the remaining new vehicle deliveries for the Bolton fleet already mentioned above. The item for deferred income arose from the receipt in the year of a grant of £690,000 for the conversion from diesel to electric propulsion of five vehicles; this grant is being amortised to the profit and loss account over the remaining lives of these assets. Provisions for liabilities increased as a result of the prudent view taken by the board of insurance incidents occurring during 2021. The gross liabilities of the group therefore fell to £71.5 million (2020: £78.1 million), a decrease of 8%.

Overall, the net assets of the group increased to £33.03 million at 30 November 2021, compared to £30.67 million at 30 November 2020.

Cash flow statement

Cash flows from operating activities (before changes in working capital and provisions) recovered sharply in 2021 to reach £18.3 million (2020: £6.35 million), as a result both of the swing to a small profit from the considerable loss incurred in 2020 and of the increased depreciation charge occurring in the year when compared to the year before. Overall in 2021 working capital was released rather than absorbed, as it was in 2020. The decrease in inventories was more or less matched by the decrease in trade and other payables and the increase in provisions was only a little greater than the movement on derivative financial instruments. The outcome of these various factors was that cash generated from operations, at £19.7 million (2020: £5.59 million), more than tripled. Interest paid on lease liabilities increased because of the new hire purchase agreements entered into over the last two years to give effect to the Bolton fleet renewal. Cash flows from operating activities therefore increased to £17.8 million (2020: £4.6 million). The sale of surplus vehicles served to offset to a great extent the cash expended on the purchase of property, plant and equipment this year, which also benefited from the receipt of the grant already referred to. Thus, a small amount of cash was generated in 2021 in this caption, compared to the sum of £292,000 used in 2020.

Financing activities reflect the changes to loans and borrowings already described. Drawings on the group's revolving commercial facility fell by £8.6 million in the year and so bank interest paid was little changed from the previous year overall. In 2020, as with other borrowings of a similar nature, the capital paid on lease liabilities benefited for a substantial part of the year from a moratorium instituted by finance providers as a response to the COVID-19 pandemic; no such moratorium prevailed in 2021 and thus, combined with the increased size of hire purchase repayments resulting from the Bolton fleet re-equipment, capital paid on lease liabilities rose to £6.9 million (2020: £3.8 million). Overall, £17.8 million was used in financing activities in 2021 compared to £5.6 million in 2020.

Cash and cash equivalents therefore increased by £84,000, net of all the movements set out above but in particular the reduction of £8.6 million in the drawings on the group's Revolving Commercial Facility, compared to a decrease of £1.29 million in cash and cash equivalents in the previous year. The board regards this outcome for the year as very satisfactory and in line with its plans and expectations.

Outlook

In making its forecasts for going concern testing purposes the board has assumed that passenger volumes will continue to be negatively affected throughout 2022 and that true recovery will not occur until the 2023 financial year. However, the board does expect passenger numbers to continue to rise as 2022 progresses. As this happens, and the new Government investment initiatives start to have effect, the company expects to return to commercial profitability, albeit initially at lower than pre-pandemic levels. The company intends to use the same assumptions in giving guidance to the market about its forecast future performance. 

The Government's new National Bus Strategy promises new investment in bus transport on a large scale. The shape and scope of this investment will become clearer in the next few months when the DfT announces the outcome of its review of the BSIP's submitted by every local authority in the latter part of 2021. The Government is promising to provide up to £3 billion in new investment over the next few years. This must be beneficial for the bus industry as a whole and Rotala in particular. At the same time, I believe that, as the bus industry emerges from the protection afforded by the CBSSG regime and commercial reality returns, opportunities for organic growth and acquisitions are likely to arise once more. Already one of the largest UK bus operators, Stagecoach Group plc, has attracted considerable bid interest. I believe that this transaction could be a pre-cursor of many others in the bus industry, at both large and small levels, in the short to medium term.

During the COVID-19 pandemic Rotala deliberately concentrated on improving its business efficiency, software systems and use of working capital and on reducing its unsecured debt. If acquisition opportunities do arise, we will therefore be able to draw on large unused facilities to support our ambitions. Accordingly, I continue to believe that the company is very well placed, with excellent prospects in a bus industry which will see extensive and exciting changes in the foreseeable future. 

John Gunn

Non-Executive Chairman

Date: 14 March 2022

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2021

	Note	2021	2021	2021	2020	2020	2020
		Results before  exceptional items	Exceptional items (note 3)	Results for the year	Results before  exceptional items	Exceptional items (note 3)	Results for the year
		£'000	£'000	£'000	£'000	£'000	£'000
Continuing operations
Revenue	2	96,543	-	96,543	78,115	-	78,115
Cost of sales		(82,429)	-	(82,429)	(66,010)	-	(66,010)
Gross profit		14,114		14,114	12,105		12,105
Administrative expenses		(12,334)	1,592	(10,742)	(10,683)	(3,999)	(14,682)
Profit/(loss) from operations	3	1,780	1,592	3,372	1,422	(3,999)	(2,577)
Finance income		19	-	19	43	-	43
Finance expense		(3,096)	-	(3,096)	(2,247)	-	(2,247)
(Loss)/profit before taxation		(1,297)	1,592	295	(782)	(3,999)	(4,781)
Tax credit/(expense)	4	247	(476)	(229)	149	585	734
(Loss)/profit for the year attributable to the equity holders of the parent		(1,050)	1,116	66	(633)	(3,414)	(4,047)
(Loss)/earnings per share for (loss)/profit attributable to the equity
holders of the parent during the year:
Basic (pence)	5	(2.10)		0.13	(1.26)		(8.08)
Diluted (pence)	5	(2.10)		0.13	(1.26)		(8.08)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED

30 NOVEMBER 2021

		2021	2020
		£'000	£'000
Profit/(loss) for the year		66	(4,047)
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit pension scheme		2,821	(890)
Deferred tax on actuarial gain/(loss) on defined benefit pension scheme		(536)	169
Other comprehensive profit/(loss) for the year (net of tax)		2,285	(721)
Total comprehensive income/(loss) for the year attributable to the equity holders of the parent		2,351	(4,768)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2021

	Note	2021	2020
		£'000	£'000
Assets
Non-current assets
Property, plant and equipment	6	61,091	65,392
Defined benefit pension asset		4,253	1,441
Goodwill and other intangible assets		14,907	14,907
Total non-current assets		80,251	81,740
Current assets
Inventories		1,090	3,489
Trade and other receivables		21,796	22,299
Derivative financial instruments		958	165
Cash and cash equivalents		442	1,035
Total current assets		24,286	26,988
Total assets		104,537	108,728
Liabilities
Current liabilities
Trade and other payables		6,217	8,338
Loans and borrowings	7	11,615	20,842
Lease liabilities	8	7,319	6,340
Derivative financial instruments		-	1,267
Total current liabilities		25,151	36,787
Non- current liabilities
Deferred income		640	-
Loans and borrowings	7	5,445	5,881
Lease liabilities	8	34,485	33,195
Provisions for liabilities		3,414	579
Net deferred taxation		2,377	1,612
Total non-current liabilities		46,361	41,267
Total liabilities		71,512	78,054
TOTAL NET ASSETS		33,025	30,674
Shareholders' funds
Share capital		12,731	12,731
Share premium reserve		12,369	12,369
Merger reserve		2,567	2,567
Shares in treasury		(806)	(806)
Retained earnings		6,164	3,813
TOTAL EQUITY		33,025	30,674

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 NOVEMBER 2021

	Share capital £'000	Share premium reserve £'000	Merger reserve £'000	Shares in treasury £'000	Retained earnings £'000	Total £'000
At 1 December 2019	12,731	12,369	2,567	(806)	9,749	36,610
Change in accounting policy - IFRS 16 leases	-	-	-	-	(1,168)	(1,168)
Loss for the year	-	-	-	-	(4,047)	(4,047)
Other comprehensive loss					(721)	(721)
Total comprehensive loss	-	-	-	-	(5,936)	(5,936)
Transactions with owners:
Dividends paid and accrued	-	-	-	-	-	-
Transactions with owners	-	-	-	-	-	-
At 30 November 2020	12,731	12,369	2,567	(806)	3,813	30,674
Profit for the year	-	-	-	-	66	66
Other comprehensive income	-	-	-	-	2,285	2,285
Total comprehensive income	-	-	-	-	2,351	2,351
Transactions with owners:
Dividends paid	-	-	-	-	-	-
Transactions with owners	-	-	-	-	-	-
At 30 November 2021	12,731	12,369	2,567	(806)	6,164	33,025

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2021

		2021	2020
		£'000	£'000
Cash flows from operating activities
Profit/(loss) before taxation		295	(4,781)
Adjustments for:
Depreciation		14,906	7,765
Finance expense (net)		3,077	2,204
Loss on sale of property, plant and equipment		3	793
Contribution to defined benefit pension scheme		-	-
Intangible asset amortisation		-	339
Amortisation of grants received		(50)	-
Notional expense of defined benefit pension scheme		28	31
Cash flows from operating activities before changes in working capital and provisions		18,259	6,351
Decrease in inventories		2,398	821
Decrease/(increase) in trade and other receivables		503	(4,024)
(Decrease)/increase in trade and other payables		(2,232)	962
Movement in deferred income and provisions		2,834	345
Movement on derivative financial instruments		(2,060)	1,135
		1,443	(761)
Cash generated from operations		19,702	5,590
Interest paid on lease liabilities		(1,920)	(1,000)
Net cash flows from operating activities carried forward		17,782	4,590

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2021 (Continued)

		2021	2020
		£'000	£'000
Cash flows from operating activities brought forward		17,782	4,590
Investing activities
Purchases of property, plant and equipment		(1,883)	(878)
Grants received thereon		690	-
Sale of property, plant and equipment		1,268	586
Net cash from/(used in) investing activities		75	(292)
Financing activities
Dividends paid		-	(476)
Repayment of bank and other borrowings		(8,987)	(243)
Bank and other interest paid		(1,124)	(1,069)
Hire purchase refinancing receipts		-	185
Capital settlement payments on vehicles sold		(719)	(228)
Capital paid on lease liabilities		(6,943)	(3,753)
Net cash used in financing activities		(17,773)	(5,584)
Net increase/(decrease) in cash and cash equivalents		84	(1,286)
Cash and cash equivalents at beginning of year		(3,245)	(1,959)
Cash and cash equivalents at end of year		(3,161)	(3,245)

Notes to the Preliminary Announcement of results for the year ended 30 November 2021

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 2021. These policies are in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

2.  Turnover:

Revenue represents sales to external customers excluding value added tax. Revenue is recognised at a point in time upon satisfaction of the relevant performance obligations for the various revenue streams: 

· Passenger revenue is recognised when the service is delivered;

· Subsidy revenue from local authorities is recognised on an accruals basis, based on actual passenger numbers when services are provided; 

· Contracted and charter services revenues are recognised when services are delivered, based on agreed contract rates.

· Grants and subsidies provided by the Department for Transport and Local Authorities to support bus services run at their behest under COVID-19 conditions have been taken directly to income. Grant income is recognised on submission of a claim as there are no unfulfilled conditions at this point in time.

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 the operating segment of the provision of bus services. 

	2021	2020
	£'000	£'000
Commercial	31,684	31,596
Contracted	16,179	16,501
Charter	734	665
Grants and subsidies	47,946	29,353
Total Revenue	96,543	78,115

As set out in the Chairman's Statement the Group has been the beneficiary of extensive support in the current accounting period from the Department for Transport and Local Authorities.

3.  Profit before taxation:

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

	2021	2020
	£'000	£'000
Mark to market profit/(loss) on fuel derivatives	1,779	(2,511)
Loss resulting from Heathrow depot fire	(187)	-
Loss on disposal of vehicles scrapped	-	(913)
Amortisation of intangible assets	-	(339)
Redundancy and reorganisation costs and costs of integration of acquisitions	-	(236)
Profit/(loss) within profit before taxation	1,592	(3,999)

4.  Tax expense:

Tax expense includes the following:

	2021	2020
	£'000	£'000
Current tax
Current tax on profits for the year	-	-
	_______	_______
Total current tax	-	-
	_______	_______
Deferred tax
Origination and reversal of temporary differences	(150)	871
Prior year adjustments	(79)	(137)
Change in rate of tax	-	-
	_______	_______
Total deferred tax	(229)	734
	_______	_______
Income tax credit/(expense)	(229)	734
	_______	_______

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

	2021	2020
	£'000	£'000
Profit/(loss) before taxation	295	(4,781)
	_______	_______
Profit/(loss) at the standard rate of corporation tax in the UK of 19% (2020: 19%)	(56)	908
Non-taxable items	(94)	(37)
Adjustments in respect of prior periods	(79)	(137)
Impact of change in tax rates	-	-
	_______	_______
Total tax (expense)/credit	(229)	734
	_______	_______

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.

On 24 May 2021 the Finance Bill 2021 was substantively enacted with the consequence that the main rate of corporation tax will increase from 19% to 25% with effect from 1 April 2023, with a corresponding effect on deferred tax balances arising after that date. 

5.  Earnings per share:

  (a) Basic earnings per share

	Basic	Basic
	2021	2020
	£'000	£'000
Profit/(loss) attributable to ordinary share holders	66	(4,047)
Weighted average number of shares in issue	50,091,109	50,091,109
Basic earnings/(loss) per share	0.13p	(8.08p)

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) Basic diluted earnings per share

	Diluted	Diluted
	2021	2020
	£'000	£'000
Profit/(loss) attributable to ordinary share holders	66	(4,047)
Profit/(loss) for the purposes of diluted earnings per share	66	(4,047)
Weighted average number of shares in issue	50,091,109	50,091,109
Adjustment for exercise of options	-	-
Weighted average number of ordinary shares for the purposes of diluted earnings per share	50,091,109	50,091,109
Diluted earnings/(loss) per share	0.13p	(8.08p)

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.

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

	Basic	Basic
	2021	2020
	£'000	£'000
(Loss)/profit attributable to ordinary share holders	(1,050)	(633)
Weighted average number of shares in issue	50,091,109	50,091,109
Adjusted basic (loss)/earnings per share	(2.10p)	(1.26p)

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.

(d) Adjusted diluted earnings per share:

	Diluted	Diluted
	2021	2020
	£'000	£'000
(Loss)/profit attributable to ordinary share holders	(1,050)	(633)
(Loss)/profit for the purposes of diluted earnings per share	(1,050)	(633)
Weighted average number of shares in issue	50,091,109	50,091,109
Adjustment for exercise of options	-	-
Weighted average number of ordinary shares for the purposes of diluted (loss)/earnings per share	50,091,109	50,091,109
Adjusted diluted (loss)/earnings per share	(2.10p)	(1.26p)

In order to arrive at the diluted earnings per share, the weighted average number of ordinary shares has been adjusted on the assumption of conversion of all dilutive potential ordinary shares. The potential ordinary shares take the form of share options. A calculation has been carried out to determine the number of shares, at the average annual market price of the Company's shares, which could have been acquired, based on the monetary value of the rights attached to those shares. This number has then been subtracted from the number of shares that could be issued on the assumption of full exercise of the outstanding options, in order to compute the necessary adjustments in the above table.

6.  Property, plant and equipment:

	Freehold and leasehold land and buildings	Right of use assets under IFRS16	Plant and machinery	Passenger carrying vehicles	Total
	£'000	£'000	£'000	£'000	£'000
Cost:
At 1 December 2019	11,970	-	6,310	58,668	76,948
Right of use assets recognised under IFRS 16	-	4,159	-	-	4,159
Reclassifications	(904)	904	17	(17)	-
Additions	10	259	281	20,454	21,004
Disposals	(169)	(508)	(341)	(7,713)	(8,731)
At 30 November 2020	10,907	4,814	6,267	71,392	93,380
Additions	-	-	-	11,905	11,905
Disposals	-	(1,751)	(239)	(15,115)	(17,105)
At 30 November 2021	10,907	3,063	6,028	68,182	88,180
Depreciation:
At 1 December 2019	567	-	1,769	22,914	25,250
Depreciation on right of use assets recognised under IFRS 16	-	2,293	-	-	2,293
Reclassification	(254)	254	9	(9)	-
Charge for the year	47	790	598	6,330	7,765
Disposals	(16)	(478)	(183)	(6,643)	(7,320)
At 30 November 2020	344	2,859	2,193	22,592	27,988
Charge for the year	512	481	2,210	11,703	14,906
Disposals	-	(1,722)	(103)	(13,980)	(15,805)
At 30 November 2021
	856	1,618	4,300	20,315	27,089
Net book value:
At 30 November 2021	10,051	1,445	1,728	47,867	61,091
At 30 November 2020	10,563	1,955	4,074	48,800	65,392

7.  Loans and borrowings:

	2021	2020
	£'000	£'000
Current:
Overdrafts	3,603	4,280
Bank loans	8,012	16,562
	_______	_______
	11,615	20,842
	_______	_______
Non-current:
Bank loans	5,445	5,881
	_______	_______
	17,060	26,723
	_______	_______

In 2017 HSBC Bank plc became the principal bankers to the group. The Senior Facilities Agreement as at 30 November 2021 provided for a revolving facility of up to £15.4 million and a mortgage facility, originally of £8.0 million but, after repayments since its inception, standing at £5.8 million with a corresponding overdraft facility of up to £4.5 million. The group has entered into a cross-guarantee and floating charge agreement covering these facilities. At the balance sheet date these facilities were scheduled to expire on 5 December 2022, by which time the revolving facility would have amortised down to £13.2 million by equal quarterly rests. Subsequent to the balance sheet date these facilities were revised and renewed. 

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.

8.  Lease liabilities:

Current liabilities	2021	2020
	£'000	£'000
Obligations under hire purchase agreements (see note 9(a))	6,897	5,788
Other lease liabilities (see note 9(b))	422	552
Total current liabilities	7,319	6,340

Non - current liabilities	2021	2020
	£'000	£'000
Obligations under hire purchase agreements (see note 9(a))	33,025	31,309
Other lease liabilities (see note 9(b))	1,460	1,886
Total non - current liabilities	34,485	33,195

The Group's obligations under hire purchase agreements are secured by the lessors' rights over the leased assets. Other lease liabilities are long term operating lease agreements.

9.  Obligations under hire purchase agreements and other lease liabilities:

(a)  Obligations under hire purchase agreements

The present values of future lease payments are analysed as:

	2021	2020
	£'000	£'000
Current liabilities	6,897	5,788
Non-current liabilities	33,025	31,309
	39,922	37,097

	Minimum lease payments 2021	Interest 2021	Present value 2021
	£'000	£'000	£'000
Not later than one year	8,426	1,529	6,897
More than one year but less than two years	9,718	1,657	8,061
More than two years but less than five years	17,954	1,518	16,436
Later than five years	8,800	272	8,528
	44,898	4,976	39,922

	Minimum lease payments 2020	Interest 2020	Present value 2020
	£'000	£'000	£'000
Not later than one year	7,404	1,616	5,788
More than one year but less than two years	6,962	1,106	5,856
More than two years but less than five years	18,715	1,722	16,993
Later than five years	8,984	524	8,460
	42,065	4,968	37,097

(b)  Other lease liabilities

Future lease payments for leases treated as finance leases under IFRS 16 but which take the legal form of rental agreements without the legal right of ownership of the asset leased are as follows:

The present values of future lease payments are analysed as:

	Minimum lease payments 2021	Interest 2021	Present value 2021
	£'000	£'000	£'000
Not later than one year	561	139	422
More than one year but less than two years	523	91	432
More than two years but less than five years	364	163	201
Later than five years	1,514	687	827
	2,962	1,080	1,882

	Minimum lease payments 2020	Interest 2020	Present value 2020
	£'000	£'000	£'000
Not later than one year	757	205	552
More than one year but less than two years	565	139	426
More than two years but less than five years	818	203	615
Later than five years	1,583	738	845
	3,723	1,285	2,438

10.  Financial Information:

The Financial Statements for the year ended 30 November 2021 were approved by the Board of Directors on 14 March 2022. 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 2021 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on the 2021 accounts; the auditors' opinion is unqualified and does not include a statement under section 498 of the Companies Act 2006.

11.  Further Information:

The Company's Annual Report and Accounts for the year ended 30 November 2021 are expected to be posted to shareholders in April 2022 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 and/or on the Company's website at the following link: http://www.rotalaplc.com

 

END

 

 

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