Final Results

RNS Number : 4331W

Rotala PLC

27 April 2016

 

27 April 2016

Rotala plc

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

Final audited results for the year ended 30 November 2015

Rotala plc (AIM:ROL), a provider of transport solutions across the UK, is pleased to announce its audited results for the year ended 30 November 2015

Highlights

·      Profit before taxation, mark to market provision and other exceptional items up 9% to £2.46 million (2014: £2.26 million)

·      Adjusted basic EPS up 5% to 5.19p per share (2014: 4.95p)

·      Gross profit margin of 18.7% (2014: 17.7%) on turnover of £50.9 million (2014: £51.7 million)

·      Operating margin of 7.1% (2014: 6.9%) before mark to market provision and other exceptional items

·      Average fleet age down slightly to 8.24 years (very competitive in industry terms)

·      Fuel requirement largely hedged through to 2018

·      Three strategic acquisitions completed since January 2015, expanding on operations at Heathrow and in the North West

For further information please contact:

Rotala Plc	0121 322 2222
John Gunn, Chairman
Simon Dunn, Chief Executive
Kim Taylor, Group Finance Director
Nominated Adviser & Broker: Cenkos Securities plc	020 7397 8900
Stephen Keys/Callum Davidson (Corporate Finance)

Michael Johnson/Julian Morse (Corporate Broking)

About the business:

Rotala provides a range of transport solutions, from local bus services under contract to local authorities, to commercial bus routes. Rotala has operations at Heathrow Airport, in the West Midlands, the North West and South West of England.

CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS

Chairman's Statement and Review of Operations

I am pleased to be able to make this report to the shareholders of Rotala Plc for the year ended 30 November 2015. 

Results and review of trading

Pre-tax profits for 2015, before the mark to market provision and other exceptional items, continued their year on year rise, this year reaching £2.46 million, a 9% increase over those of the previous year. These results are an encouraging reflection of our focus on excellence of management, operating efficiency and quality of service delivery. We continue to exceed industry norms in terms of timeliness and completeness of service delivery and our incidence of complaints remains very low.

The mark to market provision in respect of the derivative-based fuel hedges which the company has taken out to cover its future fuel requirements causes another large adverse movement in that provision this year. Note 3 to this statement sets out in full the component parts of the charge of £1.7 million in the mark to market provision and other exceptional items caption within the Consolidated Income Statement.  But, leaving aside the required accounting treatment, the fuel hedging we have carried out gives the business certainty over a key, and volatile, component of costs in the next three years. More information about the fuel hedging position is given below. 

Earnings per share, on profits before taxation and the mark to market provision and other exceptional items, grew by some 5% to 5.19 pence per share (2014: 4.95 pence), in accordance with Group strategy. This rate of growth differs from that for pre-tax profits because, in the latter half of 2014, there were a number of substantial conversions of loan stock to ordinary shares, which expanded the number of shares in issue. It is to minimise the effects of such occurrences in the future that we instituted our share buy-back programme. This programme will ensure that we have shares in treasury ready to meet demands for new share issues and thus avoid diluting the interests of existing shareholders.

·   Commercial Services

Commercial Services revenues have become increasingly significant to the Group in recent years. Revenues in this stream of business rose by 8% in the year to £33.2 million (2014: £30.6 million). Commercial Services now form 65% of Group turnover (2014: 59%). A considerable proportion of the growth in these revenues came from the acquisition of Green Triangle Buses Limited ("GTB") at the end of February 2015 (which I address later in this statement in more detail), but the picture elsewhere in the Group was largely positive. The Preston area suffered from a fall-off in concessionary passenger revenues, but in both the West Midlands and the South West there were notable advances. Part of the reason for this rise in the South West was the change in status of services for the University of the West of England ("UWE") from a contracted to a commercial basis in last quarter of 2014, as I outlined in my statement last year.  In the West Midlands the commercial bus services of the Group continued the pattern of revenue growth that has been evident for the last four years. One driver of this growth has been the roll-out of their enhanced Swift bus card by Centro (the West Midlands Integrated Transport Authority) in the early part of 2015. I predicted in the last annual report that this move by Centro in opening out the coverage offered by the Swift card should provide the Group with an opportunity for growth in revenues in 2015. This expectation was founded on the belief that, in concert with the multi-operator card introduced in 2014, passengers in the West Midlands now have much increased flexibility and choice in making their journeys. It is therefore pleasing to note that our revenues from Centro network cards grew by 22% year on year. At the same time income from our own network cards across the whole Group continued to grow strongly, up by some 26% for the year as a whole. Income from our own network cards has more than doubled in the last four years, demonstrating how popular these kinds of tickets are with our passengers.    

·      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 2015 this proportion was 31% (2014: 35%). The reason for this reduction was twofold: as I set out in my statement last year, the contract with British Airways ("BA"), which the Group had held for more than 10 years, came to an end in the first half of 2015. Second, the conversion of contracted services operated on behalf of UWE to commercial bus services reduced revenues in this stream of business. Aside from these two factors revenues in Contracted Services were bolstered by the acquisition of GTB. In Preston we benefited from the school and college contracts gained in the previous year; the South West also showed appreciable growth in contracts for local authorities. In the West Midlands the losses of contracts for Centro were balanced out by gains from other local authorities in the region. Thus revenues in Contracted Services fell overall by 12% to £15.8 million (2014: £17.9 million). Local authority transport budgets are clearly still under great pressure. Therefore it is our assumption that revenues from this source are very unlikely to grow in the foreseeable future. Accordingly we will continue the policy we have adopted in recent years of focusing our energies in the Contracted Services business stream on gaining more private bus networks business with corporate customers.

·   Charter Services

Revenues in Charter Services fell by 39% in 2015 to £1.9 million (2014: £3.2 million).  Most of this fall was occasioned by the end of the BA contract, as set out above. One arm of this contract was a requirement for chauffeur car movements, which we sub-contracted in their entirety. Whilst the impact on earnings from this part of the business was therefore limited, there was a disproportionate effect on revenues. Revenues from private hire coaching work were also to some extent impacted by the end of the relationship with BA. It was partly to replace these revenues that we acquired the Wings business half way through the year. More detail on this acquisition is set out below.  

Strategy and the Buses Bill

Although, at the time of writing, we can know little or nothing of the detail to be included in the forthcoming Buses Bill, we can be sure that this new initiative by the government will serve to inject further instability into the bus industry. The industry entered into a prolonged period of painful re-adjustment in 2010. It has yet to emerge from this phase and the Buses Bill will certainly not help to bring these difficulties to an end. But we must recognise that the natural companion of change is opportunity. Your Group has been able to take advantage of industry change in the acquisitions it has made in recent years and in the market positions it has been able to take up. In order to meet the challenge of the Buses Bill it is clear that the Group needs a balanced and judicious mix of businesses. We need to have a presence in the major metropolitan areas outside of London at the same time as in the more self-contained markets which the Buses Bill is unlikely to affect. Thus      Rotala, as the number two bus operator in both the Bristol area and in the West Midlands, is well- placed to capture greater market share should either of these markets be the subject of re-franchising.  During 2015 we also took an initial position in the Greater Manchester area (the area which looks likely to be in the forefront of any re-franchising arrangements) by our acquisition of Green Triangle Buses Limited (for more on which see below). At the same time we have balanced out the risks in these larger markets with our leading market positions in Preston, around Heathrow Airport, Bath and Kidderminster in Worcestershire. None of these markets look to be targeted or affected by the Buses Bill. Our strategic aim therefore is to maintain this balance and improve our position, wherever we can, by organic growth or by acquisition.  

Acquisitions

The acquisition of GTB at the end of February 2015 for a cash consideration of £903,000 gave us, as I have described above, an entry point into what we see as a key market. GTB had annual revenues of about £4 million at the time of acquisition and made a small profit. Since that date we have invested heavily in this business by completely modernising the fleet and refurbishing its depot at Atherton in the outskirts of Manchester.  We have also managed to expand GTB's operations since acquisition so that the depot is operating at close to full capacity. The depot is well placed within the local transport network and will enable the company to enhance its position in the Lancashire and Greater Manchester markets. Operationally GTB is a satellite of the North West hub of the Rotala Group's operations, with its existing headquarters in Preston headed by Bob Dunn as Managing Director.

In June 2015 we took the opportunity to strengthen our presence at Heathrow Airport by the acquisition, from Wings Luxury Travel Limited of its business and vehicle fleet for a cash consideration of £1.5 million. Following the end of Rotala's long-standing contract with British

Airways in the early part of 2015, there was ample capacity at our Heathrow depot to absorb a new business and so the opportunity was taken to bring on board the Wings operation. Wings is a well- established operator within the London private hire market and so enhanced the offering that the group makes in this key stream of business. Wings' turnover in 2014 was about £2 million from a 17 strong vehicle fleet. The vehicle fleet had a fair value of £1.1 million at the time of acquisition and so the acquisition generated about £0.4 million of goodwill.

Finally, just after the year end in January 2016, we acquired from OFJ Connections Limited that part of its business which is conducted in and around Heathrow airport. The business acquired has a long-established presence in the Heathrow area. Its principal activity is the movement of crew for a large number of airlines from their aircraft to their hotels and other destinations, including Gatwick airport. Other work is carried out for local educational institutions and for a number of private clients. The business is estimated to have revenues of about £5.5 million in a full year.  Most of this revenue will fall within our Contracted Services division. All of these activities dovetail well with our existing work at Heathrow and enhance our market presence in important parts of this market like private hire and airside and landside passenger transportation. The acquisition also brought with it a large leasehold depot well-positioned on the Heathrow perimeter road. This adds to our existing smaller depot a few miles away near Hatton Cross Station. Taken together the two depots give us ample room for further expansion in this key market.  The consideration for the acquisition was £1.3 million.  As part of the acquisition we acquired a vehicle fleet with a fair value of £0.65 million. 

Both the Wings and OFJ acquisitions will take time to refine and integrate with our pre-existing activities in and around Heathrow airport, but, when once the operation becomes fully integrated and streamlined, we are confident that our Heathrow division will make a substantial contribution to Group revenues and profits in its new and expanded form.     

Depots

Through an acquisition in 2013 the Group gained much additional depot capacity in the West Midlands area. This enabled us to undertake a review of depot locations and the capacities we required. As a result of this review the board decided to dispose of the Group's 4 acre depot in Long Acre, Birmingham, since it could be seen from the review that the depot was surplus to requirements. This sale was completed shortly after the year end, in mid-December 2015, at a price of £2.5 million, which approximated to the net book value of the property.

But at the same time we were able to take advantage of the opportunity to acquire an additional 3 acres of land on a site adjacent to our existing large depot in Oldbury, West Midlands. The consideration for this site was £380,000 and it brought with it a substantial building suitable for conversion into our centre of bus operations for the whole West Midlands division of our business. We have sought planning permission to invest about £600,000 in demolishing part of the building and converting the remainder, and to make the whole site suitable for bus operation. This land acquisition, in accordance with Group strategy on infrastructure investment and improvement of Group operational capability, gives the Group a combined 6.7 acre site for its operations in this part of the West Midlands, thus providing ample capacity to develop and enhance our West Midlands bus presence.

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 2018.

Currently the annual fuel requirement of the Group is about 11 million litres. The coverage of the Group's fuel hedges over the next three years is as follows:

·     For 2016 the company has in place hedges against about 90% of its fuel requirement for the year at an average price of about 101p a litre;

·     For 2017 the company has in place hedges against about 85% of its fuel requirement for the year at an average price of about 95p a litre;

·     For 2018 the company has in place hedges against about 88% of its fuel requirement for the year at an average price of about 91p a litre.

For the year ended 30 November 2015 the average cost of fuel to the Group was about 108p 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.  

Fleet management

Last year we were fairly active in the vehicle market and, in accordance with Group strategy, replaced about 10% of the fleet, including all those vehicles used to supplant the fleet inherited with the GTB acquisition. Most of these vehicles were second hand ones of suitable quality and specification, rather than new vehicles. Thus, overall, taking account of the OFJ acquisition just after the end of the year, the average age of the fleet fell slightly to some 8.24 years, a figure which remains very competitive in industry terms. In the current year we have already ordered 20 new single deck buses for delivery in the first half of the year, since we have a clear requirement for these. We do not see the need for a significant number of new vehicles in the remainder of the year unless new contract customers make specific requests or existing customers order upgrades, which would of course carry with them corresponding price increases. We will continue however to manage the fleet actively in accordance with our policies and this will no doubt result in some continuing level of vehicle acquisition and disposal.

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. The new buses which we have ordered in 2016, mentioned above, incorporate this new technology. This should lead not only to reduced fuel consumption and maintenance cost but also to increased reliability. 

We believe that having a modern and efficient bus fleet is a key aspect of customer service. The board monitors each vehicle in the fleet for relative fuel consumption, reliability and maintenance cost. Older vehicles 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. 

Convertible Loan Stock

The convertible loan stock issued in 2008 expired on 31 December 2014. Of the £595,000 of loan stock outstanding at 30 November 2014, £435,000 was converted, in accordance with the terms of the loan stock deed, into ordinary shares issued out of treasury and the remainder was repaid at par.

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.  Revenues for the year declined slightly compared to those of 2014. This decline of 1.5% was principally caused by the end of the Group's long standing contract with British Airways in the early part of 2015. Cost of Sales consequently also fell, by 3%. Gross Profits therefore rose by 4% and the gross profit margin improved further to 18.7% from the 17.7% recorded in 2014. Administrative Expenses increased by 6% as a result of the addition of a new depot in the Manchester area as a consequence of the acquisition made there. The Profit from Operations at £3.61 million (2014: £3.56 million) was slightly up on that seen in the previous year. Finance expense however fell by 11% once again this year, when compared to the previous year. This was principally due to the conversion or repayment of convertible loan stock in 2014 and the consequent absence of the attached interest burden. Profit before taxation therefore rose by 9% when compared to the previous year to £2.46 million (2014: £2.26 million). If, then, the costs represented by the mark to market provision and other exceptional items are included, Administrative Expenses increased by 20%, as a result of these items, and Profit from Operations was £1.89 million (2014: £2.8 million) on the same basis. Similarly, for the same reasons, profit before taxation was £742,000 (2014: £1,518,000).   

Basic earnings per share in 2015, after taking into account the mark to market provision and other exceptional items, were 1.74p (2014: 3.30p). However these mark to market provisions make the basic earnings per share numbers very difficult to understand. A better guide to true comparability is to consider the adjusted basic earnings per share numbers given above at the beginning of my statement. Adjusted basic earnings per share (before the mark to market provision and other exceptional items) were 5.19p in 2015 (2014: 4.95p). 

The gross assets of the Group grew by 11% in the year and stood at £56.2 million at 30 November 2015 (2014: £50.8 million). Goodwill rose by just over £1 million as a result of the two acquisitions made during the year. The Long Acre depot sold shortly after the year end is classified as a Held  for Sale asset in the consolidated balance sheet. It is easier to treat this asset as being within Property, Plant and Equipment for the purposes of comparison with 2014. Looked at like this, holdings of freehold property increased somewhat year on year as the Oldbury depot was upgraded preparatory to the sale of the Long Acre depot and additional land was purchased adjacent to the Preston depot. The book value of the vehicle fleet also increased, in the main because of the acquisitions made in the year but also because of the cycle of fleet replacement described above. Trade Receivables fell somewhat compared to the previous year; the rise in other receivables is accounted for by the GTB acquisition. The increase in Trade and Other Payables was caused by the same factor. The gross loans and borrowings of the Group rose by some £4 million in the year. The majority of these borrowings was incurred as a result of the acquisitions made, but drawings on the Group's revolving facility were also used to finance the investment in freehold property and the share buy-back programme. The proceeds of the sale for £2.5 million of the Long Acre depot shortly after the year end were used to reduce borrowings. The convertible loan stock of £0.6 million in existence at the beginning of 2015 was all converted or repaid early in the year. The low oil price at the balance sheet date caused a £1.2 million increase in the mark to market provision needed in respect of the Group's fuel derivative position, which covers the next three accounting years. The movement on this provision is the key reason why the net assets of the Group fell compared to the previous year. There was also little overall change in the HP obligations or the pension obligations of the Group year on year. The gross liabilities of the Group were therefore 24% higher than the previous year at £31.2 million (2014: £25.6 million).  Net assets reached £25.0 million at the end of the year, compared to £25.6 million at the end of 2014.

Cash flows from operating activities after changes in working capital and movements on the fuel derivative provision increased by £0.7 million compared to 2014 to £5.1 million. Working capital was absorbed into inventories and receivables in order to finance the acquisitions made during the year but this effect has less of an impact than in 2014.  Interest paid on HP agreements fell markedly; net cash flows from operating activities were therefore £0.7 million higher than in 2014 at £4.6 million.

Investment in property, plant and equipment rose considerably to £2.4 million (2014: £1.1 million). This reflects the purchase of freehold property and replacement of vehicles and equipment during the year. Sale of vehicles, after taking account of the related hire purchase settlements, produced £0.6 million for the Group (2014: £0.3 million).  Two businesses were acquired in the year for a total of £2.4 million. Dividends paid reflect both an increase in the dividend per share and the number of shares in issue. The share buy-back programme continued and £771,000 was expended on this activity in the year (2014: £380,000) though this was partly offset by the issue of £95,000 of shares from treasury for cash. The Group's revolving credit facility was used to finance the acquisitions made, the investment in freehold property and the share buy-back programme. A consequence of the greater use of bank borrowings was an increase in bank interest paid. The capital element of payments on hire purchase agreements remained steady at £3.5 million. There was therefore a decrease in cash and cash equivalents for the year of £0.5 million (2014: increase of £1.1 million). The closing overdraft, net of cash and cash equivalents, of £0.6 million at the end of 2015 (2014: £0.1 million overdraft), was in line with management's plans and expectations.  

Dividend

As the company matures I expect the dividend to be progressive. The board is conscious of the importance of dividend flows to shareholders and has set a target dividend cover of 2.5 times earnings, to match underlying earnings and free cash flows. I expect this target to be met by the end of 2017. 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.

In view of the changes the government announced in 2015 to the taxation of dividends receivable by private individuals, the company paid a second interim dividend in respect of 2015 on 30 March 2016 at a rate of 1.375 pence per share. The board will not recommend a final dividend at the Annual General Meeting in May 2016. The company paid an interim dividend of 0.725 pence per share in December 2015. The total dividend for 2015 will therefore be 2.10 pence per share (2014: 1.85 pence).

Outlook

Trading for the current year has begun in line with budget. Following the three acquisitions which have been made in the last year or so, turnover in the current year should show a return to growth. This will not be at the expense of margins, which, given that the policy of the board is not to pursue low margin business for the sake of it, have shown a steady improvement over recent years. The Group remains conservatively geared and possesses ample facilities to make any further acquisitions that may arise. The Group performed well in 2015, and, with a strong management team and an excellent base of operating facilities and tangible assets, is well placed to take advantage of continuing developmental change in the bus industry.

John Gunn

Non-Executive Chairman

Date: 26 April 2016

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2015

	Note	2015	2015	2015	2014	2014	2014
		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 mark to market provision and other exceptional items	Mark to market provision  and other exceptional items (note 3)	Results for the year
		£'000	£'000	£'000	£'000	£'000	£'000
Revenue	2	50,889	-	50,889	51,674	-	51,674
Cost of sales		(41,358)	-	(41,358)	(42,517)	-	(42,517)
Gross profit		9,531	-	9,531	9,157	-	9,157
Administrative expenses		(5,922)	(1,719)	(7,641)	(5,603)	(745)	(6,348)
Profit from operations		3,609	(1,719)	1,890	3,554	(745)	2,809
Finance income		12	-	12	11	-	11
Finance expense		(1,160)	-	(1,160)	(1,302)	-	(1,302)
Profit before taxation	3	2,461	(1,719)	742	2,263	(745)	1,518
Tax expense	4	(474)	399	(75)	(498)	156	(342)
Profit for the year attributable to the equity holders of the parent		1,987	(1,320)	667	1,765	(589)	1,176
Earnings per share for profit attributable to the equity
holders of the parent during the year:
Basic (pence)	5	5.19		1.74	4.95		3.30
Diluted (pence)	5	5.16		1.74	4.84		3.26
______

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED

30 NOVEMBER 2015

		2015	2014
		£'000	£'000
Profit for the year		667	1,176
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit pension scheme		(362)	41
Deferred tax on actuarial (loss)/gain on defined benefit pension scheme		72	(9)
Other comprehensive (loss)/ income for the year (net of tax)		(290)	32
Total comprehensive income for the year attributable to the equity holders of the parent		377	1,208

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 NOVEMBER 2015

	Share capital £'000	Share premium reserve £'000	Merger reserve £'000	Shares in treasury £'000	Retained earnings £'000	Total £'000
At 1 December 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
Profit for the year	-	-	-	-	667	667
Other comprehensive income	-	-	-	-	(290)	(290)
Total comprehensive income	-	-	-	-	377	377
Transactions with owners:
Dividends paid	-	-	-	-	(713)	(713)
Share based payment	-	-	-	-	16	16
Purchase of own shares	-	-	-	(242)	-	(242)
Transactions with owners	-	-	-	(242)	(697)	(939)
At 30 November 2015	9,794	8,603	2,567	(622)	4,702	25,044

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2015

	Note	2015	2014
		£'000	£'000
Assets
Non-current assets
Property, plant and equipment		31,798	30,454
Goodwill and other intangible assets		10,581	9,482
Deferred taxation		-	73
Total non-current assets		42,379	40,009
Current assets
Inventories		2,355	2,197
Trade and other receivables		7,905	7,506
Held for sale assets		2,479	-
Cash and cash equivalents		1,118	1,050
Total current assets		13,857	10,753
Total assets		56,236	50,762
Liabilities
Current liabilities
Trade and other payables		5,370	4,899
Loans and borrowings	6	9,536	4,604
Obligations under hire purchase contracts	7	3,107	3,479
Derivative financial instruments		502	566
Total current liabilities		18,515	13,548
Non-current liabilities
Loans and borrowings	6	5,600	6,300
Obligations under hire purchase contracts	7	5,406	5,051
Derivative financial instruments		1,257	-
Defined benefit pension obligation		278	257
Deferred taxation		136	-
Total non-current liabilities		12,677	11,608
Total liabilities		31,192	25,156
TOTAL NET ASSETS		25,044	25,606
Shareholders' funds
Share capital		9,794	9,794
Share premium reserve		8,603	8,603
Merger reserve		2,567	2,567
Shares in treasury		(622)	(380)
Retained earnings		4,702	5,022
TOTAL EQUITY		25,044	25,606

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2015

		2015	2014
		£'000	£'000
Cash flows from operating activities
Profit before taxation		742	1,518
Adjustments for:
Depreciation		3,025	3,136
Acquisition expenses		46	-
Finance expense		1,148	1,291
Gain on sale of property, plant and equipment		(440)	(103)
Contribution to defined benefit pension scheme		(350)	(404)
Notional expense of defined benefit pension scheme		8	10
Equity settled share-based payment expense		16	7
Cash flows from operating activities before changes in working capital and provisions		4,195	5,455
(Increase)/decrease in inventories		(94)	(372)
(Increase)/decrease in trade and other receivables		(299)	361
Increase/(decrease) in trade and other payables		106	(1,468)
Movement on financial instrument provision		1,193	569
		906	(910)
Cash generated from operations		5,101	4,545
Interest paid on hire purchase agreements		(476)	(610)
Net cash flows from operating activities carried forward		4,625	3,935

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2015 (continued)

		2015	2014
		£'000	£'000
Cash flows from operating activities brought forward		4,625	3,935
Investing activities
Purchases of property, plant and equipment		(2,403)	(1,065)
Acquisition of businesses		(2,431)	-
Sale of property, plant and equipment		680	435
Net cash (used in) investing activities		(4,154)	(630)
Financing activities
Shares issued		95	30
Dividends paid		(713)	(564)
Own shares purchased		(771)	(380)
Proceeds of mortgage and other bank loans		4,970	9,650
Repayment of bank and other borrowings		(1,163)	(7,827)
Loan stock and bank loan interest paid		(684)	(601)
Hire purchase refinancing receipts		1,152	2,222
Hire purchase settlement payments		-	(1,103)
Capital settlement payments on vehicles sold		(301)	(105)
Capital element of lease payments		(3,545)	(3,522)
Net cash used in financing activities		(960)	(2,200)
Net (decrease)/increase in cash and cash equivalents		(489)	1,105
Cash and cash equivalents at beginning of year		(109)	(1,214)
Cash and cash equivalents at end of year		(598)	(109)

Notes to the Preliminary Announcement of results for the year ended 30 November 2015

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 2015.  These policies are in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRSs) as endorsed by the European Union.

2.   Turnover:

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

All of the activities of the Group are conducted in the United Kingdom within the operating segment of provision of bus services. The Group has three main revenue streams: contracted, commercial and charter, and management monitors revenue across these 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.

	2015	2014
	£'000	£'000
Commercial	33,155	30,623
Contracted	15,816	17,891
Charter	1,918	3,160
Total Revenue	50,889	51,674

3.  Profit before taxation:

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

	2015	2014
	£'000	£'000
Acquisition costs	46	-
Abortive acquisition costs	48	-
Share based payment expense	17	-
Mark to market provision on fuel derivatives	1,193	559
Payments on fuel derivatives	415	81
Prior year fleet insurance payment (see below)	-	105
	1,719	745

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. 

4.  Tax expense:

Tax expense includes the following:

	2015	2014
	£'000	£'000
Current tax
Current tax on profits for the year	-	-
	_______	_______
Total current tax	-	-
	_______	_______
Deferred tax
Origination and reversal of temporary differences	74	305
Change in rate of tax	1	37
	_______	_______
Total deferred tax	75	342
	_______	_______
Income tax expense	75	342
	_______	_______

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

	2015	2014
	£'000	£'000
Profit before taxation	742	1,518
	_______	_______
Profit at the standard rate of corporation tax in the UK of 20% (2014: 21%)	148	319
Expenses not taxable	(74)	(14)
Adjustments in respect of prior periods	1	37
	_______	_______
Total tax expense	75	342
	_______	_______

5.  Earnings per share:

Basic	2015		2014
	£'000		£'000
Profit attributable to ordinary shareholders	667		1,176
Weighted average number of ordinary shares in issue	38,310,257		35,659,541
Basic earnings per share	1.74p		3.30p

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.

Basic	2015		2014
Adjusted basic before mark to market provision and other exceptional items	£'000		£'000
Profit attributable to ordinary shareholders	1,987		1,765
Weighted average number of ordinary shares in issue	38,310,257		35,659,541
Basic earnings per share	5.19p		4.95p

Diluted	Diluted	Diluted
	2015	2014
	£'000	£'000
Profit attributable to ordinary share holders	667	1,176
Interest expense of convertible loan notes	5	38
Profit for the purposes of diluted earnings per share	672	1,214
Weighted average number of shares in issue	38,310,257	35,659,541
Adjustments for:
- assumed conversion of convertible loan notes	-	1,322,222
- exercise of options	328,914	271,052
Weighted average number of ordinary shares for the purposes of diluted earnings per share	38,639,171	37,252,815
Diluted earnings per share	1.74p	3.26p

5.  Earnings per share (continued):

	Diluted	Diluted
	2015	2014
Before mark to market provision and other exceptional items	£'000	£'000
Profit attributable to ordinary share holders	1,987	1,765
Interest expense of convertible loan notes	5	38
Profit for the purposes of diluted earnings per share	1,992	1,803
Weighted average number of shares in issue	38,310,257	35,659,541
Adjustments for:
- assumed conversion of convertible loan notes	-	1,322,222
- exercise of options	328,914	271,052
Weighted average number of ordinary shares for the purposes of diluted earnings per share	38,639,171	37,252,815
Adjusted diluted earnings per share	5.16p	4.84p

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.

6.  Loans and borrowings:

	2015	2014
	£'000	£'000
Current:
Overdrafts	1,716	1,159
Bank loans	7,820	2,850
Convertible loan stock	-	595
	_______	_______
	9,536	4,604
	_______	_______
Non-current:
Convertible loan stock	-	-
Bank loans	5,600	6,300
	_______	_______
	5,600	6,300
	_______	_______

7.  Obligations under hire purchase contracts:

Future lease payments are due as follows:

	Minimum lease payments 2015	Interest 2015	Present value 2015
	£'000	£'000	£'000
Not later than one year	3,465	358	3,107
More than one year but less than two years	2,412	203	2,209
More than two years but less than five years	3,012	166	2,846
Later than five years	360	9	351
	9,249	736	8,513

	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

The present value of future lease payments are analysed as:

	2015	2014
	£'000	£'000
Current liabilities	3,107	3,479
Non-current liabilities	5,406	5,051
	8,513	8,530

8.  Post Balance Sheet Events - Acquisition

On 7 January 2016 the Group acquired from OFJ Connections Limited ("OFJ") that part of OFJ's business which is conducted in and around Heathrow airport. The consideration for this acquisition was £1.3 million.  The Group acquired, through the acquisition, a vehicle fleet which has a fair value of £0.65 million, but has not assumed any other assets or liabilities of any materiality.  Management is in the process of assessing the goodwill and any other intangibles generated by this acquisition.  Acquisition costs to be recognised as an expense will total about £40,000.

The acquisition is estimated to have revenues of approximately £5.5 million and is not initially expected to make a material contribution to the profits of Rotala. The acquisition will, over time, be fully integrated with Rotala's existing business of the same general nature in the Heathrow area. The integration of operations and overheads is expected to have been fully implemented by the end of 2016. The business acquired has a long-established presence in and around Heathrow. Its principal activity is the movement of crew for a large number of airlines from their aircraft to their hotels and other destinations, including Gatwick airport. Other work is carried out for local educational institutions and for a number of private clients. The acquisition uses a 70 strong fleet of vehicles matched to the characteristics of this work. These vehicles, with key operating management and about 120 staff, will become part of Rotala's existing business structure at Heathrow Airport.

9.  Financial Information:

The Financial Statements for the year ended 30 November 2015 were approved by the Board of Directors on 26 April 2016. 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 2015 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on the 2015 accounts; the auditors' opinion is unqualified and does not include a statement under section 496 of the Companies Act 2006.

10. Further Information:

The Company's Annual Report and Accounts for the year ended 30 November 2015 are expected to be posted to shareholders on 4 May 2016 and will also be available to view on the Company's website at the following link: http://www.rotalaplc.com

Copies of this statement are available from the registered office of the Company at Cross Quays Business Park, Hallbridge Way, Tipton, Oldbury, West Midlands, B69 3HW.or the Company's website at the following link: http://www.rotalaplc.com

 

END

 

 

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