Final Results

RNS Number : 4882I

Rotala PLC

26 March 2015

 



26 March 2015

Rotala plc

("Rotala" or 'the Company')

Final audited results for the year ended 30 November 2014

Highlights

·     Turnover £51.7 million (2013: £53.3 million)

·     Gross profit margin up to 17.7% (2013: 17.1%)

·     Profit before taxation (before exceptional items) up 8% to £2.26 million (2013: £2.09 million)

·     Pro forma EPS for 2014 of 4.95p per share (before exceptional items)

·     Net debt at year end down 8 % to £18.4 million (2013: £20.0 million)

·     Increased final proposed dividend, reflecting strong operational cash flow,  of  1.20 pence per share (2013: 1.05 pence), making 1.85 pence for the year, a rise of 16%

For further information please contact:

Rotala Plc
John Gunn, Chairman	020 7602 7500
Simon Dunn, Chief Executive	07825 808 525
Kim Taylor, Group Finance Director	07825 808 529
Numis Securities Limited	020 7260 1000
David Poutney (Corporate Broker); Stuart Skinner/Richard Thomas (Nominated Adviser)

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 2014. 

Review of trading

It is encouraging to see that pre-tax profits for the year, on a slightly reduced level of turnover and before exceptional items, rose by 8% compared with those of 2013. These results reflect our determination to pursue profitable turnover rather than turnover regardless of margin. In this outcome we met our expectations for the year and fulfilled our objective of continuing to focus on increased operating efficiency and enhanced customer service. Exceptional items were largely comprised of the mark to market provisions for the derivative-based fuel hedges which the company has taken out to cover its future fuel requirements. Movements in mark to market provisions must be taken to profit or loss every year, but the fuel hedges are in reality in place to benefit the business in the future. The accounting therefore does not follow the economic reality and distorts the results.   More information about the fuel hedging position is given below in the relevant paragraph covering that point. 

·   Contracted Services

The proportion of the group's revenues derived from Contracted Services has been falling for several years now, as the focus of our activities has shifted more and more towards Commercial Services. In 2014 this proportion was 35% (2013: 39%). The reason for this reduction was twofold: first in 2013 there was still some revenue from the two National Express Limited ("NEL") route diagrams which we ceased to operate in March of that year. The legal dispute with NEL that resulted from the halting of these contracts was satisfactorily resolved in June 2014. Second, in the last quarter of 2014 the contracted services operated on behalf of the University of the West of England ("UWE") were, by mutual consent, converted into commercial bus services. Aside from these two factors revenues in Contracted Services were reasonably stable. In Preston we gained some local school and college contracts and in the South West and the West Midlands the gains and losses on local authority contracts more or less balanced each other out. Thus revenues in Contracted Services fell overall by 13% to £17.9 million (2013: £20.6 million). There are some signs that the substantial contraction in local authority transport budgets has levelled out. However it must be expected that any new round of budget reductions directed by Central Government after the upcoming General Election will have a further impact on available revenues in this area. Accordingly we will continue the policy we have adopted in recent years of focusing our energies in Contracted Services on gaining more private bus networks business with corporate customers.

·   Commercial Services

As revenues in Contracted Services have fallen, so the proportion of revenues from Commercial Services has risen, in 2014 to 59% of group turnover (2013: 56%). Part of the reason for this rise was a full year contribution from the Redditch and Kidderminster depots which we acquired in 2013. But here and in Preston revenues showed some underlying growth. In addition the change in status of services for UWE, as described above, had an impact. The UWE change will drive growth in Commercial Services further in 2015. To take advantage of this we have upgraded management in the South West by creating a Managing Director post with specific responsibility only for this region. In the West Midlands the commercial bus services of the group have largely been repositioned over the last couple of years to focus on the western side of the Birmingham conurbation and on Redditch and Kidderminster in the northern part of Worcestershire. In these areas we hold more significant market shares upon which we are focusing our investment and management attention. Furthermore in January 2015 Centro (the West Midlands Integrated Transport Authority) announced thattheir Oyster-style bus cards will be rolled out to all operators by the spring.Income from the Centro Network card was stable in 2014 but this opening out of the coverage offered by the Swift card should provide an opportunity for some modest growth in revenue in 2015 and beyond as, in concert with the

CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)

multi-operator card introduced last year, travellers will now be offered increased flexibility and choice. Income from our own network cards continued to grow strongly in all our operational areas whilst income from concessionary fares remained steady year on year. Thus overall revenues in Commercial Services in 2014 rose by 2% to £30.6 million (2013: £29.9 million).

·   Charter Services

Revenues in Charter Services grew by 14% in 2014 to £3.2 million (2013: £2.8 million).  Revenues in chauffeur car hire movements, which we carry out for our airline customers and which we sub-contract in their entirety, were little changed. In contrast revenues from private hire coaching work continued their strong recovery. Hire rates in this area of business have responded well to increased demand and we have been able to take advantage of the increased availability of work through the efficient deployment of our existing coach fleet. 

Strategy and acquisitions

Rotala continues to hold a leading market position in Preston and be the number two bus operator in Bristol and Bath. In the West Midlands (the second largest bus market in the country after London), we are also the number two bus operator. Our strategic aim is to improve our position, based upon our current hubs of operation, wherever we can by organic growth or, more particularly, by acquisition.

With this aim in mind we, on 28 February 2015, acquired Green Triangle Buses Limited ("GTB") for a cash consideration of £900,000 and the repayment of its existing overdraft of £368,000. GTB has revenues of approximately £3.9 million and made a profit before tax and exceptional items of £107,000 in the year ended 31 August 2014. GTB operates 43 vehicles from a long leasehold depot in Atherton, Manchester and employs about 100 staff. The depot is well placed within the local transport network and capable of handling the expansion needs envisaged for GTB at the current time. The acquisition will enable the company to enhance its position in the Lancashire market and give it access for the first time to the Greater Manchester area which falls under the remit of Transport for Greater Manchester. Operationally GTB (which will be renamed Diamond Bus (North West) Limited) will be part of the North West division of Rotala, with its existing hub in Preston headed by Bob Dunn as Managing Director. The acquisition is not expected to have a material impact on earnings in the current financial year, but, following the integration of operations and overheads during the remainder of this year, is expected to have a beneficial effect on earnings in future years.

This acquisition was facilitated by therevised suite of banking facilities which we entered into with our principal bankers, RBS/Natwest in October 2014. These new facilities, totalling £18.0m, replaced the group's existing facilities of approximately £11.0m with the same bank. The new facilities comprise a Term Loan Facility of £7.0m, a Revolving Facility of £9.0m and an Overdraft Facility of £2.0m, with a maturity date for all facilities of 30 April 2018. In addition we possess substantial unused vehicle financing facilities. In the opinion of the board these facilities are ample for the current needs of the group. Taking into account these new facilities and the parallel asset finance facilities, the group has much headroom within which it can readily finance any further acquisitions.

Fuel and hedging

The cost of diesel fuel remains a significant factor in the business. The board's stated policy is to create certainty over the Group's fuel costs by hedging the total fuel requirement, whenever it seems prudent to do so. The board's view is that hedging the fuel requirement is a prudent and conservative approach which reduces the volatility of underlying earnings and cash flows whilst also giving certainty to business planning and financial forecasts. The board therefore has continued to take out fuel hedges against the fuel requirements of the group, at the present time up to November 2017.

CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)

For 2015, where hedges at about 108p a litre were already in place for almost all of the 10 million litre full year fuel requirement, recent oil price volatility will have little or no impact on the company's prospects. For 2016 the company has been able, taking advantage of recent falls in the oil price, to extend the coverage of its fuel hedge and reduce the average price per litre of that hedge. The company has now hedged about 84% of its fuel requirement for that year at an average price of about 102p a litre. For 2017 some 70% of the fuel requirement for that year has now been hedged at an average price of just under 96p a 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 and creating business certainty. Oil prices continue to be volatile and the effect on fuel prices has been marked. But the fuel duty and delivery cost components of a litre of diesel are unchanged at some 58p and 3p respectively.

At the same time board policies in other areas have aided the reduction in overall levels of fuel consumption. When acquiring any vehicle new to the fleet we are acutely conscious of its relative fuel consumption and certainly favour those marques which have demonstrable advantages in this regard. Furthermore we are close followers of new fuel technologies, particularly those spin offs from the engineering of hybrid vehicles which focus on the optimisation of heating and cooling and the harvesting of available engine power. We continue to trial a number of prototypes in this area of development. The fuel consumption improvements which are promised certainly encourage further close study. These redesigns of accepted conventional bus power systems also promise interesting enhancements in service reliability and thus savings in maintenance cost.

Fleet management

Last year in my report to shareholders I said that we saw very little need to replace vehicles in the fleet unless specific new requirements arose. This expectation was borne out in practice and in the event only about 5% of the vehicle fleet needed to be replaced during the year. This meant that, by the end of the year, the average age of the fleet was extended to some 8.34 years (2013: 7.64 years), a figure which remains very competitive in industry terms. In the current year we once again foresee a low requirement for vehicle replacement unless new contract customers make specific requests or existing customers order upgrades, which would of course carry with them corresponding price increases.

The board monitors each vehicle in the fleet for relative fuel consumption, reliability and maintenance cost. We believe that having a modern and efficient bus fleet is a key aspect of customer service. Older vehicles also produce a greater level of emissions and we are keen to minimise this aspect of bus operation. Those vehicles that fall outside of acceptable parameters are designated for disposal. Any replacements were a judicious mix of  new and  second hand, chosen so as to meet the criteria which we have set. The objective, to possess an efficient and effective fleet of the right age profile, continues to be met.     

Convertible Loan Stock

The convertible loan stock issued in 2008 expired on 31 December 2014. Of the £2.32m loan stock outstanding at 30 November 2013, £2.16 million was converted into ordinary shares in accordance with the terms of the loan stock deed and the remainder has been repaid at par.

CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)

Share Options

On 24 November 2014 2,685,000 share options were issued to executive directors and senior managers below board level. At the same time certain share option issues nearing their expiry date were extinguished. The new share options are however entirely performance related; the new option issue is split into three equal tranches. For the options to be exercisable the share price must exceed the level set for each tranche, which is 65 pence, 80 pence and 95 pence respectively. Thus the interests of shareholders and management are completely aligned: for the share options to be worth anything, management must increase the market value of the company significantly, which must be in the interest of shareholders.   

Financial review

The Consolidated Income Statement is set out below. This section of the review addresses the results before the mark to market provision for fuel derivatives and other exceptional items.  I have already highlighted the 3% decrease in revenues year on year and the reasons for this variance. Cost of Sales fell by 4%; the principal business reasons for this have been described above.  Gross Profits were therefore up by just over 1% and the gross profit margin improved somewhat to 17.7% from the 17.1% of 2013. Administrative Expenses were a little higher than those of the previous year. The Profit from Operations at £3.55 million was therefore almost identical to that of 2013. Finance expense fell by 11% compared to the previous year. Hire purchase debt fell by some 6% year on year and so did the associated interest expense and the early conversion of the bulk of the convertible loan notes maturing at the end of 2014 also had a beneficial effect. The net finance cost on the defined benefit pension scheme was furthermore appreciably lower. Profit before taxation therefore rose by 8% when compared to the previous year to £2.26 million (2013: £2.09 million). Basic earnings per share in 2014, after taking into account the mark to market provision and other exceptional items, was 3.30p. Because of the mark to market provision and other exceptional items in 2014 it is very difficult to derive a meaningful and succinct comparison to a similar figure for 2013, where the earnings per share were distorted by a low tax charge, which resulted from a number of one-off prior year deferred tax adjustments. But the underlying earnings per share picture would, like for like, be roughly comparable to the increase in profit before taxation.    

The gross assets of the group stood at £50.8 million at both 30 November 2013 and 2014.  Holdings of Property, Plant and Equipment fell slightly as the result of depreciation. Trade Receivables were down a little year on year but there were no other variances worthy of mention in this caption. The reduction in Trade and Other Payables is largely accounted for by a fall in Trade Payables. This fall in turn reflects the strong cash flow throughout the year. The gross loans and borrowings of the group fell by almost £1m. This was however the product of a number of opposing movements. HP obligations fell by £0.6 million year on year to £8.5 million (2013: £9.1 million). The convertible debt fell by £1.7 million to a figure of £0.6 million at the balance sheet date. Bank debt rose by £1.4 million, as a result of the renegotiated banking facilities described above, to £10.3 million at the year end. However the bulk of this debt, totalling £7.0 million, is mortgage debt secured on the freehold properties of the group. Finally there was a further positive movement in the Preston pension fund as the funding outlook for the Scheme improved still more on an accounting basis so that the balance sheet liability stood at only £257,000 at 30 November 2014. The gross liabilities of the group  were therefore 8% lower than the previous year at £25.2 million (2013: £27.3 million).  Net assets reached £25.6 million at the year's end, compared to £23.6 million at the end of 2013.

Cash flows from operating activities before changes in working capital, at £5.5 million (2013: £5.8 million), were a little down on those generated in the previous year. As remarked above, advantage was taken of the strong cash flow this year to reduce trade and other payables. The unwinding of a tyre contract also meant that more tyres were taken on as stock, explaining the variance in this

CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)

caption, but this was balanced out by a reduction in trade and other receivables. Cash Generated from Operations was therefore somewhat down on last year at £4.5 million (2013: £6.0 million).  Investment in property, plant and equipment fell back in 2014 to £1.1 million (2013: £2.6 million), as a result of the low need for replacement vehicles. Sale of vehicles, after taking account of the related hire purchase settlements, produced £0.3 million for the group (2013: £1.2 million). In addition the cash flow statement incorporates the amount expended on the purchase of own shares for the first

time (£0.4 million).  The wholesale refinancing of the group's banking facilities, described earlier in this statement, has a considerable positive impact on the cash flow, as does the net £1.1 million realised from refinancing some older hire purchase agreements. The capital element of payments on hire purchase agreements continued its downward path to £3.5 million (2013: £4.5 million). After taking account of rising dividends but lower bank interest payments, the group benefited from a positive cash inflow of £1.1 million for the year (2013: £0.2 million), and so a closing overdraft, net of cash and cash equivalents, of £0.1 million at the end of 2014 (2013: £1.2 million overdraft), in line with management's plans and expectations.

Dividend

The company paid an interim dividend of 0.65 pence per share in December 2014. At the forthcoming Annual General Meeting the board will recommend a final dividend in respect of 2014 of 1.20p per share, making 1.85p for the year as a whole. The dividend will be paid, subject to shareholder approval at the Annual General Meeting, on 26 June 2015 to all shareholders on the register on 5 June 2015.

As the company matures I expect the dividend to be progressive. The board is conscious of the importance of dividend flows to shareholders and has set a target dividend cover of 2.5 times earnings, to which it will move as underlying earnings and free cash flows improve. The board also intends to continue its programme of share buy backs, which it commenced in late 2014. This programme offers the opportunity to meet the need to issue shares, arising from the conversion of loan stock or exercise of share options, out of the existing pool of shares in issue, rather than issuing new shares and diluting the interest of current shareholders.

CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)

Outlook

Trading for the current year has begun positively. However in the first half of the year the contract with British Airways, which the group has held for more than 10 years, will come to an end. This will of course have a negative impact on the results of the second half of the year. But the board is confident that this impact will be largely mitigated by the effect of new contracts and further gains in operating efficiencies.

The board intends to continue taking the opportunities currently on offer to fix fuel costs for a number of years ahead. Thus the board will extend the group's fuel hedges whenever that is possible in order to give certainty and predictability to a key operating cost over a three year time horizon. This policy should lock in a key operating cost at a much lower level than has been experienced for a number of years. It is a step which will also underpin the board's commitment to a progressive dividend policy. It is pleasing to note that our determination to deliver value for shareholders has been reflected in a stronger share price over the past two years and this strength should be bolstered by the certainty of lower fuel prices over the next three years as the result of our hedging activities.  

Our strategic focus continues to be on the expansion of our Commercial Services revenue stream. The enhanced banking facilities which we announced in November 2014 leave us well placed to make further acquisitions like GTB and increase the size of the company considerably in the next few years. We have also strengthened operational management recently with key recruits at a senior level. We are confident that we can, strongly equipped as we are in both financial and management resources, implement our strategy successfully. We believe that the company has performed well in 2014 and that it has good prospects in the years to come.

John Gunn

Non-Executive Chairman

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2014

	Note	2014	2014	2014	2013	2013	2013
					(As restated)		(As restated)
		Results before mark to market provision and other exceptional items	Mark to market provision and other exceptional items (note 3)	Results for the year	Results before gain on acquisition, acquisition expenses and exceptional items	Gain on acquisition, acquisition expenses and exceptional items (note 3)	Results for the year
		£'000	£'000	£'000	£'000	£'000	£'000
Revenue	2	51,674	-	51,674	53,303	-	53,303
Cost of sales		(42,517)	-	(42,517)	(44,210)	-	(44,210)
Gross profit		9,157	-	9,157	9,093	-	9,093
Administrative expenses		(5,603)	(745)	(6,348)	(5,546)	(132)	(5,678)
Profit from operations		3,554	(745)	2,809	3,547	(132)	3,415
Finance income		11	-	11	8	-	8
Finance expense		(1,302)	-	(1,302)	(1,461)	-	(1,461)
Profit before taxation	3	2,263	(745)	1,518	2,094	(132)	1,962
Tax expense	4	(498)	156	(342)	(244)	119	(125)
Profit for the year attributable to the equity holders of the parent		1,765	(589)	1,176	1,850	(13)	1,837
Earnings per share for profit attributable to the equity
holders of the parent during the year:
Basic (pence)	5			3.30			5.21
Diluted (pence)	5			3.26			4.88

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED

30 NOVEMBER 2014

		2014	2013
		£'000	£'000
			(As restated)
Profit for the year		1,176	1,837
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Actuarial gain on defined benefit pension scheme		41	451
Deferred tax on actuarial gain on defined benefit pension scheme		(9)	(95)
Other comprehensive income for the year (net of tax)		32	356
Total comprehensive income for the year attributable to the equity holders of the parent		1,208	2,193

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 NOVEMBER 2014

	Share capital £'000	Share premium reserve £'000	Merger reserve £'000	Shares in treasury £'000	Retained earnings £'000	Total £'000
At 1 December 2012	8,818	7,828	2,567	-	2,663	21,876
Profit for the year	-	-	-	-	1,837	1,837
Other comprehensive income	-	-	-	-	356	356
Total comprehensive income	-	-	-	-	2,193	2,193
Transactions with owners:
Dividends paid	-	-	-	-	(494)	(494)
Share based payment	-	-	-	-	9	9
Transactions with owners	-	-	-	-	(485)	(485)
At 30 November 2013	8,818	7,828	2,567	-	4,371	23,584
Profit for the year	-	-	-	-	1,176	1,176
Other comprehensive income	-	-	-	-	32	32
Total comprehensive income	-	-	-	-	1,208	1,208
Transactions with owners:
Dividends paid	-	-	-	-	(564)	(564)
Share based payment	-	-	-	-	7	7
Shares issued	976	775	-	-	-	1,751
Purchase of own shares	-	-	-	(380)	-	(380)
Transactions with owners	976	775	-	(380)	(557)	814
At 30 November 2014	9,794	8,603	2,567	(380)	5,022	25,606

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2014

	Note	2014	2013
		£'000	£'000
Assets
Non-current assets
Property, plant and equipment		30,454	30,930
Goodwill and other intangible assets		9,482	9,482
Deferred taxation		73	424
Total non-current assets		40,009	40,836
Current assets
Inventories		2,197	1,826
Trade and other receivables		7,506	7,863
Derivative financial instruments		-	3
Cash and cash equivalents		1,050	317
Total current assets		10,753	10,009
Total assets		50,762	50,845
Liabilities
Current liabilities
Trade and other payables		4,899	6,304
Loans and borrowings	6	4,604	5,462
Obligations under hire purchase contracts	7	3,479	3,318
Derivative financial instruments		566	-
Total current liabilities		13,548	15,084
Non-current liabilities
Loans and borrowings	6	6,300	5,712
Obligations under hire purchase contracts	7	5,051	5,793
Defined benefit pension obligation		257	672
Total non-current liabilities		11,608	12,177
Total liabilities		25,156	27,261
TOTAL NET ASSETS		25,606	23,584

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2014 (Continued)

		2014	2013
		£'000	£'000
Shareholders' funds
Share capital		9,794	8,818
Share premium reserve		8,603	7,828
Merger reserve		2,567	2,567
Shares in treasury		(380)	-
Retained earnings		5,022	4,371
TOTAL EQUITY		25,606	23,584

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2014

		2014	2013
		£'000	£'000
			(as restated)
Cash flows from operating activities
Profit before taxation		1,518	1,962
Adjustments for:
Depreciation		3,136	3,253
Gain on acquisition		-	(387)
Acquisition expenses		-	155
Finance expense		1,291	1,453
Gain on sale of property, plant and equipment		(103)	(283)
Contribution to defined benefit pension scheme		(404)	(333)
Notional expense of defined benefit pension scheme		10	10
Equity settled share-based payment expense		7	9
Cash flows from operating activities before changes in working capital and provisions		5,455	5,839
Decrease/(increase) in trade and other receivables		361	(95)
(Increase)/decrease in inventories		(372)	66
(Decrease)/increase in trade and other payables		(1,468)	147
Movement on financial instrument provision		569	-
		(910)	118
Cash generated from operations		4,545	5,957
Interest paid on hire purchase agreements		(610)	(671)
Net cash flows from operating activities carried forward		3,935	5,286

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2014 (Continued)

		2014	2013
		£'000	£'000
Cash flows from operating activities brought forward		3,935	5,286
Investing activities
Purchases of property, plant and equipment		(1,065)	(2,564)
Acquisition of business		-	(1,714)
Sale of public service vehicles		435	1,941
Net cash (used in) investing activities		(630)	(2,337)
Financing activities
Shares issued		30	-
Dividends paid		(564)	(494)
Own shares purchased		(380)	-
Proceeds of mortgage and other bank loans		9,650	3,927
Repayment of bank and other borrowings		(7,827)	(289)
Loan stock and bank loan interest paid		(601)	(706)
Hire purchase refinancing receipts		2,222	-
Hire purchase settlement payments		(1,103)	-
Capital settlement payments on vehicles sold		(105)	(702)
Capital element of lease payments		(3,522)	(4,489)
Net cash used in financing activities		(2,200)	(2,753)
Net increase in cash and cash equivalents		1,105	196
Cash and cash equivalents at beginning of year		(1,214)	(1,410)
Cash and cash equivalents at end of year		(109)	(1,214)

Notes to the Preliminary Announcement of results for the year ended 30 November 2014

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 2014.  These policies are in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRSs) as endorsed by the European Union.

The group has also adopted the revisions within IAS 19 Employee Benefits. IAS 19 has been applied retrospectively in accordance with its transitional provisions. Consequently, the group has restated its reported results throughout the comparative periods presented; there was no cumulative effect to opening equity as at 1 December 2012. There was no effect on the statements of financial position at 1 December 2012 and 30 November 2013 resulting from the application of IAS 19, nor did the application of IAS 19 affect the statement of financial position at 30 November 2014.

The effects of the application of IAS 19 on the statement of comprehensive income for the year ended 30 November 2013 and 30 November 2014 are as follows:

	Year to 30 November 2014 £'000	Year to 30 November 2013 £'000
Increase in finance costs	(120)	(86)
Increase in other financial items	(10)	(10)
Decrease in tax expense	27	20
(Decrease) in profit for the year	(103)	(76)
Other comprehensive income:
Increase in actuarial remeasurement	130	96
Increase in income tax relating to items not reclassified	(27)	(20)
Increase in other comprehensive income	103	76
Increase / (decrease) in total comprehensive income	-	-

The effects on earnings per share for the year ended 30 November 2013 are as follows:

Earnings per share for profit attributable to the equity holders of the parent during the year:			As originally reported	Effect of prior year adjustment	Restated
Basic (pence)			5.42	(0.21)	5.21
Diluted (pence)			5.17	(0.29)	4.88

The application of IAS 19 did not have a material impact on the statement of cash flows for   the year ended 30 November 2013 and 2014.

Notes to the Preliminary Announcement of results for the year ended 30 November 2014 (continued)

2.   Turnover:

Revenue represents sales to external customers excluding value added tax. Passenger revenue is recognised when payment is received in cash.  Subsidy revenue from local authorities is recognised on an accruals basis, based on actual passenger numbers.  Revenues delivered under contract are recognised as services are delivered, based on agreed contract rates.

All of the activities of the group are conducted in the United Kingdom within the operating segment of provision of bus services. The group has three main revenue streams: contracted, commercial and charter, and management monitors revenue across these there streams.  All streams operate within a single operating segment, that is the provision of bus services.  The activities of each revenue stream are as described in the Chairman's Statement.

	2014	2013
	£'000	£'000
Contracted	17,891	20,602
Commercial	30,623	29,937
Charter	3,160	2,764
Total Revenue	51,674	53,303

Notes to the Preliminary Announcement of results for the year ended 30 November 2014 (continued)

3.  Profit before taxation:

Profit before taxation includes the following:

	Mark to market provision and other exceptional items	Gain arising on acquisition, acquisition expenses and exceptional items
	2014	2013
	£'000	£'000
Acquisition costs	-	(155)
Gain arising on acquisition	-	387
Contract exit costs	-	(364)
Mark to market provision on fuel derivatives	(559)	-
Payments on fuel derivatives	(81)	-
Prior year fleet insurance payment (see below)	(105)	-
Loss within profit before taxation	(745)	(132)

When the group acquired Preston Bus Limited in early 2011, expert assessment of that company's self-insured motor insurance fund at that time indicated that the fund was actually in surplus. In the event this opinion proved erroneous and in 2014 a payment of the above sum was made to close all insurance years before the acquisition of Preston Bus Limited by the group. If this deficit had been known about at acquisition, it would naturally have been provided for at the time. 

Notes to the Preliminary Announcement of results for the year ended 30 November 2014 (continued)

4.  Tax expense:

Tax expense includes the following:

		(As restated)
	2014	2013
	£'000	£'000
Current tax
Current tax on profits for the year	-	-
	_______	_______
Total current tax	-	-
	_______	_______
Deferred tax
Origination and reversal of temporary differences	305	428
Change in rate of tax	37	22
Adjustments in respect of prior periods	-	(325)
	_______	_______
Total deferred tax	342	125
	_______	_______
Income tax expense	342	125
	_______	_______

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

		(As restated)
	2014	2013
	£'000	£'000
Profit before taxation	1,518	1,962
	_______	_______
Profit at the standard rate of corporation tax in the UK of 21% (2013: 23%)	319	451
Expenses not taxable	(14)	(23)
Adjustments in respect of prior periods	37	(303)
	_______	_______
Total tax expense	342	125
	_______	_______

Notes to the Preliminary Announcement of results for the year ended 30 November 2014 (continued)

5.  Earnings per share:

			(As restated)
Basic	2014		2013
	£'000		£'000
Profit attributable to ordinary shareholders	1,176		1,837
Weighted average number of ordinary shares in issue	35,659,541		35,270,888
Basic earnings per share	3.30p		5.21p

The calculation of the basic and diluted 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.

	Diluted	Diluted
	2014	2013
	£'000	£'000
Profit attributable to ordinary share holders	1,176	1,837
Interest expense of convertible loan notes	38	142
Profit for the purposes of diluted earnings per share	1,214	1,979
Weighted average number of shares in issue	35,659,541	35,270,888
Adjustments for:
- assumed conversion of convertible loan notes	1,322,222	5,146,333
- exercise of options	271,052	162,362
Weighted average number of ordinary shares for the purposes of diluted earnings per share	37,252,815	40,579,583
Diluted earnings per share	3.26p	4.88p

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 company has in issue two sources of potential ordinary shares: convertible loan notes and share options. The convertible loan notes are assumed to have been converted into ordinary shares (where dilutive), but the associated interest expense has been added back to the profit attributable to shareholders. In respect of the 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.

Notes to the Preliminary Announcement of results for the year ended 30 November 2014 (continued)

6.  Loans and borrowings:

	2014	2013
	£'000	£'000
Current:
Overdrafts	1,159	1,531
Bank loans	2,850	3,931
Convertible loan stock	595	-
	_______	_______
	4,604	5,462
	_______	_______
Non-current:
Convertible loan stock	-	2,316
Bank loans	6,300	3,396
	_______	_______
	6,300	5,712
	_______	_______

Notes to the Preliminary Announcement of results for the year ended 30 November 2014 (continued)

7.  Obligations under hire purchase contracts:

Future lease payments are due as follows:

	Minimum lease payments 2014	Interest 2014	Present value 2014
	£'000	£'000	£'000
Not later than one year	3,878	399	3,479
More than one year but less than two years	2,597	223	2,374
More than two years but less than five years	2,736	158	2,578
Later than five years	102	3	99
	9,313	783	8,530

	Minimum lease payments 2013	Interest 2013	Present value 2013
	£'000	£'000	£'000
Not later than one year	3,776	458	3,318
More than one year but less than two years	3,420	231	3,189
More than two years but less than five years	2,614	132	2,482
Later than five years	125	3	122
	9,935	824	9,111

The present value of future lease payments are analysed as:

	2014	2013
	£'000	£'000
Current liabilities	3,479	3,318
Non-current liabilities	5,051	5,793
	8,530	9,111

Obligations under hire purchase contracts are secured on the assets to which they relate.

Notes to the Preliminary Announcement of results for the year ended 30 November 2014 (continued)

8.   Post Balance Sheet Events - Acquisition

On 28 February 2015 the company acquiredGreen Triangle Buses Limited ("GTB") for a cash consideration of £900,000 ("The Acquisition"). At completion Rotala also repaid approximately £368,000 to GTB's bankers to settle the outstanding overdraft. At the date of acquisition GTB had net assets of some £466,000 including Hire Purchase debt of £233,000. In the year ended 31^st August 2014, GTB had revenues of approximately £3.9 million and a profit before tax and exceptional items of £107,000. On this basis the Acquisition is expected to generate about £434,000 of positive goodwill and intangible assets.

GTB operates 43 vehicles from a long leasehold depot in Atherton, Manchester and employs about 100 staff. The depot is well placed within the local transport network and capable of handling the expansion needs envisaged for GTB at the current time. The Acquisition will enable the company to enhance its position in the Lancashire market and give it access for the first time to the Greater Manchester area which falls under the remit of Transport for Greater Manchester. Operationally GTB (which will be renamed Diamond Bus (North West) Limited in due course) will be part of the North West division of Rotala, with its existing hub in Preston headed by Bob Dunn as Managing Director.

	Book value
	£'000
Fixed assets
Vehicles	838
Leasehold land and buildings	260
Other fixed assets	39
Total fixed assets	1,137
Current assets
Inventories	78
Trade and other receivables	220
Cash and cash equivalents	-
	298
Current liabilities
Bank overdraft	(368)
Creditors due within one year	(407)
	(775)
Creditors due after more than one year	(54)
Deferred taxation	(140)
Net assets	466
Preliminary goodwill arising on acquisition	434
Acquisition costs	36
Total cash consideration paid	936

The Share Purchase Agreement provides for a period of 90 days within which closing assets and liabilities as at 28 February 2015 will be precisely ascertained and valued. At the date of these accounts it is not therefore possible to state what fair value adjustments, if any, will be required.  

Notes to the Preliminary Announcement of results for the year ended 30 November 2014 (continued)

9. Financial Information:

The Financial Statements for the year ended 30 November 2014 were approved by the Board of Directors on 25 March 2015. 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 2014 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on the 2014 accounts; the auditors' opinion is unqualified and does not include a statement under section 496 of the Companies Act 2006.

10. Further Information:

Copies of this statement are available from the registered office of the Company at Beacon House, Long Acre, Birmingham, B7 5JJ or the Company's website at www.rotalaplc.co.uk.

 

END

 

 

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