Half Yearly Report

RNS Number : 7259R

Rotala PLC

27 August 2010

 



Rotala plc

("Rotala" or 'the Company')

Unaudited Interim Results for the six months to 31 May 2010

Highlights

·    Growth in Turnover of 16 per cent. to £22.5 million (2009: £18.3 million)

·    Profit before tax of £0.80 million (2009: £0.76 million)

·    Basic earnings per share of 2.44 pence (2009: 3.00 pence)

·    Net cash flows from operating activities of £1.20 million (2009: £1.0 million)

For further information please contact:

Rotala Plc
John Gunn, Chairman	020 7602 7500
Simon Dunn Chief Executive	0121-322-2222/07825 808 525
Kim Taylor, Group Finance Director	0121-322/2222/07825 808 529
Charles Stanley Securities - Nominated Advisor and Broker	020 7149 6000
Mark Taylor

Chairman's Statement

I am pleased to be able to present this interim report to shareholders in respect of the six month period ended 31 May 2010.  The Company has continued to make good progress in the first half of the year ending 30 November 2010.

Results

Revenue in 2010 was up by 23 per cent. to £22.5 million (2009: £18.3 million). This shows an impressive growth in the business of the Company and underpins our optimism about the ability to create a sizeable transport group in the areas in which we operate. This revenue growth, achieved in economically difficult times, is also testament to the investment we have made in new commercial routes and the winning of new contracts in the last year or more. 

Gross profits rose by 12 per cent. to £4.71 million (2009: £4.21 million), though the gross profit margin was a little lower at 21 per cent. (2009: 23 per cent.) due to increased fuel prices, increased competition in Birmingham and Worcestershire and the investment made by the Group in new routes.

Administrative expenses rose by some 23 per cent. to £3.12 million (2009: £2.54 million) due to the Group establishing two new depots to service Bath and Worcester. These are investments for the long term and the up-front costs of establishing these depots will take time to show through into profits at our target rates of return.

Operating profit was £1.6 million (2009: £1.7 million). Finance costs decreased to £0.78 million (2009: £0.91 million) principally as a result of the reduction in the total of outstanding hire purchase obligations, as the vehicle fleet reaches a greater level of maturity. The total hire purchase debt as at 31 May 2010 was £13.0 million (2009: £15.4 million), despite an increase in the fleet of approximately 10%.

Profit before tax for the six months to 31 May 2010 increased by 5 per cent. to £805,000 (2009: £764,000). Basic earnings per share, reflecting the increased weighted average number of shares in issue in the period compared to the previous year, were 2.44 pence per share (2009: 3.00 pence).

Dividend

It gives me great pleasure to note that, at the beginning of April 2010, the Company paid its maiden dividend, at a rate of 0.45 pence per share.  The Company will pay an interim dividend of 0.30 pence per share on 6 December 2010 to all shareholders on the register on 10 September 2010. As the company matures I expect the dividend to be progressive and to increase as free cash flow grows.

Review of trading

The Group has continued to invest in the future of the business by opening new depots and new commercial routes, thus expanding our network.  In many places these new services have been inserted in the gaps left by the actions of National Express Group Plc ("National Express") in optimising their own network. New commercial services always require a longer-term view, as it takes time to build customer awareness and patronage but we are confident that this is an appropriate strategy.

The Group has continued to modernise its fleet and in the first half of the year has changed some 20% of its vehicles. Partly this results from a desire to improve the passenger experience and comfort with a more modern fleet. In addition, investment in a newer fleet, despite the impact on the profit and loss account through increased depreciation and the initial costs of bringing new vehicles into service, will reduce ongoing maintenance charges.

In the period under review we saw further increases in the price of diesel. As I set out in the 2009 Annual Report, Rotala has not hedged against fuel price increases. In the six months under review we used approximately 4.8 million litres of diesel at an average price that was about 6p a litre more than we had budgeted for in that period. Whilst we were able to some extent to mitigate this increased cost with fare and contract price increases, the volatility of the fuel price did reduce our margins during the period.

At the same time our ability to increase fares to compensate for increased operating costs has been in certain areas inhibited by the activities of our competitors. Rotala is the number two operator and is now well-established on the routes it serves in Birmingham, the second largest bus market in the country.  In Birmingham, National Express has been changing the mix of its fare revenues.  On some major routes we compete head to head with National Express and we have either to match their fares or withdraw from these routes, as we have done in some cases. To some degree therefore these actions by National Express have restricted the margins we have been able to obtain on certain of our existing routes.  

In Worcestershire, First Group Plc ("First") has reduced fares to extremely low levels on routes where Rotala competes directly, which has affected the Group's gross margin on these routes.  Additionally, in Worcester, Rotala's access to the main bus station, which is controlled by First, has been restricted, which has prevented the Company expanding its network there.

New Contracts

It is pleasing to be able to report continuing success in achieving our target of sustained organic growth in the revenues of the Group through the addition of new contracts. In a separate announcement of today's date we have announced the award of a further £0.8 million in new contracts, making a total of £2.7 million for the year so far. The benefits of these recent contract wins will appear only in small part in the results for the second half of this year; the full impact will become visible in 2011.

New Banking Facilities

As part of our planning to sustain the expansion of the Group, the Royal Bank of Scotland ("RBS") has been appointed as Rotala's new clearing bankers. This move enabled us to discontinue the use of sales finance as a means of funding working capital and so reduce the effective rate of interest on these borrowings which were replaced by a £2.0 million conventional overdraft arrangement. At the same time all existing property mortgages, totalling £1.9 million, (at the time with three different lenders) have been consolidated and re-financed with RBS. Through their Lombard arm, RBS too is able to increase the amount of vehicle finance facilities available to the group. This addition, together with other existing vehicle finance providers, gives us unused facilities in excess of £2.5 million and thus underpins our plans for further growth in the Group's businesses.

Outlook

I continue to believe that more opportunities will arise out of the need to improve public transport in the areas in which we operate and that the actions of our major competitors, in both the Birmingham area and Bristol, in trimming their operations and optimising their own performance, will provide us in the medium term with many attractive opportunities to expand our commercial services. With our inherently lower cost base we are well positioned to take on routes in our areas of operation which to the larger operators may seem marginal. I also believe that the focus of government on the reduction of pollution and congestion will provide further opportunity for growth in Rotala's private bus networks business.

In the shorter term it is harder to be certain of the financial impact of key factors which will affect the business.  The Group remains without an effective hedge against fuel price increases and is therefore vulnerable to further price increases in diesel fuel, a significant cost to the business. Although the Group has been able to mitigate this increased cost with fare and contract price increases in some areas, as a result of increased competition in Birmingham and Worcestershire, a number of routes will operate at lower margins.

The government has stated that it is considering the future of the Bus Service Operator's Grant, which shields bus operators from the majority of the taxation placed on fuel. Any reduction in or withdrawal of this grant would have a major impact on the industry, which as a body has made its views known to the relevant minister. However, should the government take such action, it must be recognised that there would be a short term impact before fare and contract price increases could be fully implemented to mitigate the resulting increase in costs.

The market for new tenders in public and private spheres is still active. However local authorities are uncertain of the impact that the government's public expenditure review in October 2010 will have on their budgets and so currently have limited incentive to commit to new work. Similarly organisations in the private sector see every reason to feel the need for more certainty before they take any of their decisions. This uncertainty has undoubtedly delayed the award of new business during 2010. However, once the prevailing atmosphere of uncertainty has cleared, we anticipate the new business wins that we would otherwise have expected. Material contribution from any of these potential new contracts would therefore be deferred until 2011.  

The Group continues to make progress, as witnessed by the continuing growth in its revenues. However the Board anticipates, due to the factors outlined above, a slowdown in the rate of growth of the company's business in the second half of this year and a reduction in margins which will inevitably restrict any significant growth in profitability in 2010. Corrective actions on contract prices and fare levels will take time to have effect and so will be of benefit only in the following year.

The Board is confident that Rotala has the opportunity to build a credible transport group and that the difficult factors of short term importance now will have been resolved by 2011. It therefore remains optimistic about the prospects of the Group in the medium term.

John Gunn

Non-Executive Chairman

27 August 2010

Condensed consolidated group income statement
	Notes	Unaudited 6 months ended 31 May 2010	Unaudited  6 months ended 31 May 2009	Audited year ended 30 November 2009
		£'000	£'000	£'000
Revenue		22,512	18,332	40,561
Cost of sales		(17,805)	(14,121)	(32,481)
		________	________	______
Gross profit		4,707	4,211	8,080
Administrative expenses		(3,118)	(2,539)	(4,774)
		_____	_____	_____
Operating profit		1,589	1,672	3,306
Finance income		-	4	-
Finance costs		(784)	(912)	(1,778)
		_____	_____	_____
Profit before income tax		805	764	1,528
Tax expense		-	-	-
		_____	_____	_____
Profit for the period attributable to the equity holders of  the parent		805	764	1,528
		=====	=====	=====
Earnings per share - basic	2	2.44p	3.00p	5.74p
Earnings per share - diluted	2	2.43p	2.93p	5.66p

All operations are continuing and the profit for the periods is the same as the total comprehensive income for the periods.

Condensed consolidated statement of financial position	Unaudited as at 31 May 2010	Unaudited as at 31 May 2009	Audited as at 30 November 2009
	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	25,800	26,768	26,381
Goodwill and other intangible assets	9,632	9,743	9,661
Deferred taxation	23	23	23
	_____	_____	_____
Total non-current assets	35,455	36,534	36,065
Current assets
Inventories	801	768	603
Trade and other receivables	7,260	4,596	5,647
Cash and cash equivalents	202	398	1,927
	_____	_____	_____
Total current assets	8,263	5,762	8,177
	_____	_____	_____
Total assets	43,718	42,296	44,242
Liabilities
Non-current liabilities
Loans and borrowings	(5,152)	(6,257)	(6,261)
Obligations under hire purchase agreements	(9,053)	(11,937)	(9,474)
Provisions	-	(59)	-
	______	______	______
Total non-current liabilities	(14,205)	(18,253)	(15,735)
Current liabilities
Trade and other payables	(5,504)	(5,166)	(4,750)
Loans and borrowings	(1,696)	(828)	(1,938)
Obligations under hire purchase agreements	(3,988)	(3,454)	(4,219)
	______	______	_____
Total current liabilities	(11,188)	(9,448)	(10,907)
	______	______	______
Total liabilities	(25,393)	(27,701)	(26,642)
	_____	_____	_____
Net assets	18,325	14,595	17,600
	======	======	=====
Equity attributable to equity holders of parent
Called up share capital	8,265	6,761	8,238
Share premium reserve	7,762	7,032	7,751
Merger reserve	2,567	2,567	2,567
Warrant reserve	370	370	370
Retained earnings	(639)	(2,135)	(1,326)
	______	______	_____
Total equity	18,325	14,595	17,600
	=====	=====	====

Condensed consolidated cash flow statement	Unaudited 6 months ended 31 May 2010	Unaudited  6 months ended 31 May 2009	Audited year ended 30 November 2009
	£'000	£'000	£'000
Cash flows from operating activities
Profit for the period	805	764	1,528
Finance costs -net	784	909	1,778
Depreciation	1,294	1,208	2,481
Amortisation	30	60	142
Gains on sale of property, plant and equipment	(200)	(30)	(254)
Equity-settled share based payment expense	30	40	84
	____	____	____
Cash flows from operating activities before changes in working capital	2,743	2,951	5,759
(Increase)/decrease in trade and other receivables	(1,613)	438	(567)
Increase/(decrease) in trade and other payables	753	(1,590)	(1,109)
(Increase)/decrease in inventories	(198)	(75)	91
Decrease in provisions	-	-	(105)
	____	____	____
	(1,058)	(1,227)	(1,690)
	____	____	____
Cash generated from operations	1,685	1,724	4,069
Interest paid on hire purchase obligations and invoice discounting agreements	(488)	(681)	(1,298)
	____	____	____
Net cash flows from operating activities	1,197	1,043	2,771
Cash flows from investing activities
Interest received	-	4	-
Purchases of public service vehicles and other fixed assets	(538)	(724)	(1,622)
Sale of public service vehicles	1,519	993	1,245
	_____	_____	_____
Net cash flows from/(used in) investing activities	981	273	(377)

Condensed consolidated cash flow statement	Unaudited 6 months ended 31 May 2010	Unaudited  6 months ended 31 May 2009	Audited year ended 30 November 2009
	£'000	£'000	£'000
Condensed cash flow from financing activities
Issue of ordinary shares	38	2,331	3,825
Loan stock and bank loan interest paid	(236)	(173)	(355)
Dividends paid	(148)	-	-
Proceeds of mortgages and other loans	-	650	1,650
Proceeds of hire purchase refinancing agreements	933	-	-
Other loans and loan notes repaid	(1,000)	(1,415)	(1,415)
Bank loan repaid	(76)	(21)	(486)
Capital element of lease payments and settlements	(3,080)	(2,698)	(4,408)
	_____	_____	____
Net cash used in  financing activities	(3,569)	(1,326)	(1,189)
Net (decrease)/increase in cash and cash equivalents	(1,391)	(10)	1,205
Cash and cash equivalents at start of period	1,148	(57)	(57)
	_____	_____	_____
Cash and cash equivalents at end of period	(243)	(67)	1,148
	======	=====	====

Condensed consolidated Statement of Changes in Equity	Called up share capital	Share premium account	Merger reserve	Warrant reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 December 2008	5,254	6,208	2,567	370	(2,938)	11,461
Total comprehensive income for the period ended 31 May 2009	-	-	-	-	764	764
Transactions with owners:
Share based payment adjustment	-	-	-	-	39	39
Issue of share capital	1,507	904	-	-	-	2,411
Costs of issue of share capital	-	(80)	-	-	-	(80)
	____	____	___	__	_____	_____
At 31 May 2009	6,761	7,032	2,567	370	(2,135)	14,595
Total comprehensive income for the period ended 30 November 2009	-	-	-	-	764	764
Transactions with owners:
Share based payment adjustment	-	-	-	-	45	45
Issue of share capital	1,477	865	-	-	-	2,342
Costs of issue of share capital	-	(146)	-	-	-	(146)
	____	____	____	___	_____	_____
At 30 November 2009	8,238	7,751	2,567	370	(1,326)	17,600
Total comprehensive income for the period ended 31 May 2010	-	-	-	-	805	805
Transactions with owners:
Share based payment adjustment	-	-	-	-	30	30
Issue of share capital	27	11	-	-	-	38
Dividends paid	-	-	-	-	(148)	(148)
	____	____	____	___	_____	_____
At 31 May 2010	8,265	7,762	2,567	370	(639)	18,325
	====	====	====	==	=====	=====

Notes to the unaudited Consolidated Interim Accounts for the six months ended 31 May 2010

1.   Basis of preparation:

The consolidated interim accounts have been prepared using the accounting policies set out in the Group's 2009 statutory accounts. The financial statements of the group for the full year are prepared in accordance with IFRS's as adopted by the European Union and these interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting".   

2.   Earnings per share:

Basic earnings per share have been calculated on the basis of profit after taxation and the weighted average number of shares in issue for the period of 32,965,330 (May 2009: 25,476,181; November 2009: 26,610,256). Diluted earnings per share have been calculated on the basis of profit after taxation (adjusted where necessary for the effect of convertible loan stock interest) and the weighted average number of shares in issue (including such potential issues as are dilutive) for the period of 33,171,807 (May 2009: 32,412,510; November 2009: 33,562,652).

3.   Dividends:

On 1 April 2010, the Company paid its maiden dividend, as an interim dividend in respect of the year ending 30 November 2010. This dividend totaled £148,000, paid at a rate of 0.45 pence per share.

4.   Additional information :

The unaudited Consolidated Interim Report was approved by the Board of Directors on 24 August 2010. The consolidated interim financial information for the six months ended 31 May 2010 and for the six months ended 31 May 2009 is unaudited. The financial information in this interim announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts of Rotala plc for the year ended 30 November 2009 have been reported on by the Company's auditors and have been delivered to the Registrar of Companies. The report of the auditors on these accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498 (2) - (3) of the Companies Act 2006.

5.   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 www.rotalaplc.co.uk

 

END

 

 

IR PGUWURUPUGQQ