Final Results

RNS Number : 3027L

Optare PLC

09 August 2013

 



Optare plc

("Optare" or the "Company")

Preliminary results for the year ended 31 March 2013

Optare is pleased to announce it preliminary audited results for the 12 months ended 31 March 2013.

Operational Highlights

·      Winning the prestigious society of motor manufacturers and traders (SMMT) award for innovation for fast charging Electric vehicle (EV) technology.

·      Launch of 3 exciting new products, Metrocity, Versa 11.7m and Bonito.

·      Completed 10,000th bus since Optare formation in 1985.

·      Investment in a new paint shop and engineering systems to continue to deliver high quality engineered products.

·      Successfully completed the export of 177 Solo kits to the City of Cape Town, this is the highest ever export order achieved by the company.

Financial Highlights

·      Revenue for the period is £75.9m a growth of 6% over prior period of 15 months to 31 March  2012.

·      Direct labour costs were 7.6% of revenue a reduction of 6.0% compared to 13.6% over the previous period.

·      Pre-exceptional gross profit was 6.9% of turnover over the 12 month period (4.9% for 2011-12, 15 month period).

·      Pre-exceptional administration costs were 11.6% of turnover over the 12 month period (15.0% for, 15 month period from 31 December 2011 to 31 March 2012).

·      EBITDA Pre exceptional losses were £3.6m (£6.8m for 15 month period from 31 December 2011 to 31 March 2012).

·      Exceptional costs of £1.8m were for continued Blackburn site closure, redundancy and restructuring costs.

·      Loss per share reduced from 1.4p per share to 0.3p per share.

·      New increased banking facilities established with three year term loan and one year overdraft facility.

PG Nilsson Interim CEO commented: "Despite challenging market conditions over the last twelve months, I am pleased to report that we are now seeing the positive rewards resulting from consolidating the manufacturing sites and the significant investment in our new facilities. We have made considerable progress in supply chain cost reduction, implementing manufacturing efficiencies and further improving the quality of our products, and we continue to focus on our processes to drive continuous improvement. We are confident that we have built solid foundations for stability and growth to meet future challenges, secure in the knowledge that we have the support and backing of Ashok Leyland."

For further information, please contact:

Optare plc                      Tel: [phone]

PG Nilsson - Interim Chief Executive

Cenkos Securities plc        Tel: [phone]

Stephen Keys/Camilla Hume   

Interim Chief Executive's Statement

I am happy to report that in FY 2012-13 the company continued to deliver improvements to achieve its strategic goal of delivering profitability. The Company posted overall sales of 389 single deck vehicles, a slight decrease on the previous 15 month period. Further to our traditional sales, we also successfully exported 177 kits to our partners in South Africa.

The total sales turnover increased from £71.9m to £75.9m, representing a growth of 6% over the previous 15 month to 31 March 2012 period. Loss after tax was £7.4m, a reduction of £6.0m and 45% from the prior period due to continued restructuring progress.

The retail market continues to be suppressed with the overall sale volumes flat across the Company's traditional markets, with higher manufacturing capacity than demand. This continues to put pressure on the both price and volume. The continued financial crisis in the EU last year also put pressure on the volume front due to limited access to funding.

FY 2012-13 saw some exciting products launched Versa 11.7m, Metrocity and Bonito. The full benefits of these products are expected to be seen in the 2013-14 financial year.  Metrocity, which was shown in the October bus show, is a perfect example of designing a product for the London market which has been buoyant. This product is undergoing various trials with our customers. Versa 11.7m has been a success story where we have already sold 40 vehicles post the launch. The Bonito enables us to participate in a new segment, with a number of exciting opportunities being pursued on this front.

We ended the year with market share of 36% in the 8-13 ton segment which is our primary market. This is a growth of 5% points from the prior year.

The 8-13 ton is our primary participation market but is only 40% of the overall UK market. To reduce dependency on one section and one market and to improve top line growth, the Company intends to diversify the product range and participate in various bus segments across both the UK and Europe in the future. Optare continues to invest in new products to secure the long term growth of the Company.  There are more exciting products that the Company will launch in the FY 2013-14 financial year to expand the range and enable Optare to compete in more than 90% of the market segment in UK.

FY 2012-13 was a year of continuing consolidation from three sites down to one and focusing on short term actions to achieve profitability and minimise cash out flow while maintaining a long term view of having the right product to grow and deliver sustainable profits. We continued to drive our headcount down from 531 in April 2012 to 376 in March 2013 delivering operational efficiencies.

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

Financial Performance

The financial results for the year show a net loss of £7.4m compared to a loss of £13.4m in the previous 15 month period which represents an improvement of 45%.

The £7.4m includes exceptional costs of £1.8m primarily relating to further Blackburn site closure costs and redundancy program to deliver operational efficiencies. Improvements in performance were primarily driven by increased revenues combined with improvements in operational efficiency in the period. As a result the gross profit margin saw a 40% improvement on the prior year, before exceptional items.

Current Trading

On the 31^st March 2013, the order book stood at £12.2m, the current order book stands at £20.2m. While higher bus manufacturing capacity in UK and continued economic challenges in Europe provides significant headwind, the successful launch of three new products, Metrocity, Versa 11.7m and Bonito should offset the risks and help deliver volume and revenue as per plan.

We are the industry leaders in Electric Vehicles in the UK market. The winning of the SMMT innovation award is a testament to our market leading technology, and recently we won one of the largest single EV bus contract with Nottingham which further enhances our reputation in this technology. With increasing pressure on fuel cost and environmentally conscious customers, this provides the company with an avenue to differentiate and grow in a mature market.

Board and Management Changes

Following the implementation of the three year turnaround plan, Jim Sumner elected to leave the organisation and resign from the Board of Directors. We thank him for his contribution and wish him the very best.

The board are in advanced discussions to appoint a successor as Chief Executive Officer and this is expected to be announced in the coming months.

Outlook

With the consolidation of site and turnaround behind us, it is time for the Company to deliver profitability. This will be driven by the product pipeline including, the Double Decker and other new products for the export market in 2014.

The Board anticipates that the UK market will be flat in the near future but growing opportunities exist in the Middle East, South East Asia and African countries. There are number of contracts that Optare is participating in overseas markets and we are awaiting outcomes that, if positive, could, in the Board's view, significantly change the outlook for the business. We are confident that our quality, unique design and life cycle cost will enable us to win some major tenders in the international market.

The Board looks forward to a profitable future with the successful launch of the new products, increasing demand and participation in the international market given the successful integration with Ashok and recognition of the company's low carbon technology.

Chairman's Statement

Introduction

2012/13 has been a year of success for recognition of the Company's position as a leading supplier of green technology of passenger vehicles and launch of products. Some of the major achievements for the year include:

1.     Winning the prestigious Society of Motor Manufacturers and Traders (SMMT) award for innovation for fast charging Electric Vehicle (EV) technology.

2.     Launch of 3 new exciting products, Metrocity, Versa 11.7m and Bonito.

3.     Completed 10,000^th bus since Optare formation in 1985.

4.     Investment in a new paint shop and engineering systems to continue to deliver high quality engineered products.

5.     Successfully completed the export of 177 Solo kits to the City of Cape Town.

Since the investment of Ashok Leyland, integration with the larger group has been continuing. Through joint participation in a number of tenders for 2013-14 we are confident that we will be successful in new export opportunities. I would like to thank Ashok for their continued support.

Strategic Development

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

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

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

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

·      Becoming a significant exporter of buses.

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

During the year we have made progress on all these key strategic objectives.

Our Customers

Our customers remain key to our business and they continue to provide excellent support to the Company. We are also pleased to have received very good feedback on the quality and performance of the products and will continue to deliver excellent value through lower life time cost by designing and building lighter buses.

We are delighted to continue to strengthen our business with all the major bus groups including supplying to First Group after a gap of eight years. We are confident that this relationship will continue to grow and we remain committed to delivering high quality, innovative, value for money products on time.

Our People

Our workforce are critical to the success of our business. I would like to thank their dedication, commitment and focus on delivering high quality products. They have also been critical in continuing to work with us to deliver the strategic objectives of the Company. Lastly, I would like to thank the shareholders for continuing to support the Company during its turnaround phase.

Summary

In summary 2013-14 will focus on:

·      With Ashok Leyland support developing products for export markets and driving international expansion.

·      Increasing volume in the UK by further expanding the product range and participating in market segments where we do not have a presence.

·      Continuing to deliver environmentally friendly product technology.

John Fickling

Non-executive Chairman

Consolidated Income Statement for the year ended 31 March 2013

		Before    Exceptional items	Exceptional items	Total	Before Exceptional  items	Exceptional items	Total
		Year  ended	Year  ended	Year  ended	Period Ended	Period Ended	Period Ended
		31 Mar 2013	31 Mar 2013	31 Mar 2013	31 Mar  2012	31 Mar  2012	31 Mar  2012
		£'000	£'000	£'000	£'000	£'000	£'000
Revenue		75,938	-	75,938	71,935	-	71,935
Cost of sales		(70,695)	(1,483)	(72,178)	(68,370)	(3,823)	(72,193)
Gross profit/(loss)		5,243	(1,483)	3,760	3,565	(3,823)	(258)
Administrative expenses		(8,839)	(328)	(9,167)	(10,812)	(776)	(11,588)
Distribution costs		(512)	-	(512)	(493)	-	(493)
Amortisation of intangible assets		(643)	-	(643)	(422)	-	(422)
Loss from operations		(4,751)	(1,811)	(6,562)	(8,162)	(4,599)	(12,761)
Finance costs		(788)	-	(788)	(853)		(853)
Finance income		-	-	-	222	-	222
Loss for the period from continuing operations		(5,539)	(1,811)	(7,350)	(8,793)	(4,599)	(13,392)
Loss on ordinary activities before taxation		(5,539)	(1,811)	(7,350)	(8,793)	(4,599)	(13,392)
Taxation		-	-	-	-	-	-
Loss attributable to the equity holders of the parent company		(5,539)	(1,811)	(7,350)	(8,793)	(4,599)	(13,392)

Loss per share (Note 4):	Year  ended	Period ended
	31 Mar 2013	31 Mar 2012
From continuing operations (basic and diluted)	(0.3)p	(1.4)p

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

Consolidated Statement of Changes in Equity for the year ended 31 March 2013

		Share premium	Merger reserve	Retained Loss	Share based payment reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2011	3,821	26,759	5,542	(31,137)	27	5,012
Loss for the period	-	-	-	(13,392)	-	(13,392)
Total comprehensive income for the period	-	-	-	(13,392)	-	(13,392)
Transactions with owners in their capacity as owners:-
Issue of shares and warrants	5,184	6,219	-	-	171	11,574
Transaction Costs	-	(582)	-	-	-	(582)
Total transactions with owners in their capacity as owners	5,184	5,637	-	-	171	10,992
Balance at 31 March 2012	9,005	32,396	5,542	(44,529)	198	2,612
Loss for the year	-	-	-	(7,350)	-	(7,350)
Total comprehensive income for the year	-	-	-	(7,350)	-	(7,350)
Transactions with owners in their capacity as owners:-
Transfer between reserves on Forfeiture of options	-	-	-	156	(156)	-
Total transactions with owners in their capacity as owners	-	-	-	156	(156)	-
Balance at 31 March 2013	9,005	32,396	5,542	(51,723)	42	(4,738)

Consolidated Balance Sheet as at 31 March 2013

		31 March  2013	31 March  2012
		£'000	£'000
Non - Current Assets
Goodwill		8,574	8,574
Other intangible assets		8,271	8,032
Property, plant and equipment		3,356	3,126
		20,201	19,732
Current Assets
Inventories		10,338	11,275
Trade and other receivables		7,720	8,143
Cash & cash equivalents		-	587
		18,058	20,005
Assets held for sale		-	1,000
Total Assets		38,259	40,737
Current Liabilities
Trade and other payables		20,466	20,167
Loans and overdrafts		18,652	15,207
Provisions		2,217	1,405
Obligations under finance leases		79	49
		41,414	36,828
Non Current Liabilities
Provisions		1,394	1,052
Obligations under finance leases		189	245
		1,583	1,297
Total Liabilities		42,997	38,125
Net (Liabilities)/Assets		(4,738)	2,612
Equity
Share capital		9,005	9,005
Share premium		32,396	32,396
Share based payment reserve		42	198
Merger reserve		5,542	5,542
Retained loss		(51,723)	(44,529)
Total equity attributable to equity holders of the parent		(4,738)	2,612

Consolidated Cash Flow Statement for the year ended 31 March 2013

		Year ended  31 March 2013	Period ended  31 March 2012
		£'000	£'000
Operating activities
Cash absorbed by operations		(2,537)	(14,946)
Interest paid		(788)	(853)
Net cash used in operating activities		(3,325)	(15,799)
Investing activities Disposal of assets held for sale		1,000	1,000
Purchase of property, plant and equipment		(800)	(1,920)
Internal capitalised costs		(882)	(1,582)
Interest received		-	222
Net cash used in investing activities		(682)	(2,280)
Financing activities
Proceeds from issuance of ordinary shares		-	10,821
Finance lease repayments		(60)	(23)
Loan repayments		-	(3,395)
Short term loan		2,023	9,995
Net cash generated from financing activities		1,963	17,398
Net (decrease) in cash and cash equivalents		(2,044)	(681)
Cash and cash equivalents at start of year		(3,401)	(2,720)
Cash and cash equivalents at end of period		(5,445)	(3,401)

1.      BASIS OF PREPARATION

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

The financial information set out in this preliminary announcement is abridged and does not constitute the Company's statutory financial statements for the year ended 31 March 2013. The statutory accounts for 2013 have been prepared following accounting policies consistent with those for the period ended 31 March 2012. The financial information has been extracted from the financial statements for the year ended 31 March 2013, which were approved by the Board on 8 August 2013 and on which the auditors have reported without qualification.

No statement has been made by the auditor under section 498 (2) or (3) of the Companies Act 2006 in respect of these abridged financial statements.

The statutory financial statements for the year ended 31 March 2013 will be posted no later than  19 August 2013 to shareholders and, once approved, will be delivered to the Registrar of Companies following the Annual General Meeting on 24 September 2013.

Copies of the Annual Report and Financial Statements for the year ended 31 March 2013 will be available on the Company's website www.optare.comfrom 19 August 2013 and from the Company Secretary, Optare plc, Unit 3 Hurricane Way South, Sherburn in Elmet, Leeds, North Yorkshire, LS25 6PT.

2.      GOING CONCERN

The financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future. The group made a net loss of £7.4m in the year ended 31 March 2013 (2012 £13.4m), which has resulted in the group now having net liabilities of £4.7m (2012 net assets of £2.6m).

The Group has reviewed its strategy in 2013 and put forward a trading forecast through to March 2016 which includes detailed cash flow calculations. The Group has put facilities in place to meet its funding requirements. The forecasts are based on detailed assumptions as to sales performance, variable and fixed costs. The forecasts reflect the introduction of new products from 2014/15, the strength of the current order book and prospects. This includes an increased level of exports, both fully built and kits, and continued sales of Green Bus vehicles - both electric vehicles and hybrids.

The forecast assumes a gradual increase in the level of savings in material costs over the forecast period, achieved both through the Company's own efforts and through joint initiatives with Ashok. Improvement in labour productivity is factored in, recognising what has been achieved so far in 2012/13 and from further expected gains from process improvement and redesigns of the buses for efficient manufacturing.

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

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

The Company has been successful in restructuring its debt in June 2013 to provide total bank facilities of £23m. These are structured into a term loan for three years for £15.0m backed by corporate guarantee provided by Ashok and an overdraft element of £8.0m which falls due for renewal in June 2014. There is a fixed charge on the assets of the Company following the re-negotiation of facilities in June 2013. Both of these facilities are placed with Barclays Plc. The directors are confident that the overdraft bank facilities will be renewed.

The Group also has a £5.2m short term loan facility from Ashok as at 31^st March 2013, with a 30 day notice repayment notice subject to banking covenants.

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

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

3.   CRITICAL JUDGEMENTS AND ESTIMATES

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

1      Provision For Warranty Claims

Management has estimated the cost of potential warranty claims arising on acquisition of the various businesses, and on new bus sales. This requires an element of judgement about the likely level of claims and their financial impact upon the business. The factors affecting the level of warranty cost are: the number of buses sold; the length in periods and the breadth in cover of the terms of the warranty given with the bus; the ability of the Company to obtain suitable back-to-back warranties from its suppliers; the efficency of the quality processes applied in designing and building the buses; the strictness with which warranty claims from customers are vetted, and the extent to which goodwill claims are allowed. Judgements on the level of warranty provision that is required are based on the number of buses in service and their remaining warranty life, with the key estimation being the likely warranty cost per bus.   This is based on historical data, with estimates where necessary for new vehicle designs.   If the assumption for likely warranty cost per vehicle was adjusted by 10% this would equate to an under or over provision of £292,000.

2      Impairment Reviews

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

Clearly, there is an element of judgement required in assessing the potential future benefits to be derived from these assets. When completing the impairment review the Directors considered the same factors as outlined for the Going Concern review, critical judgements are the discount rate used and the growth in turnover in the next 3 years business plan by the introduction of new products.

4.  LOSS PER SHARE

The calculation of the basic and diluted loss per share is based on the following data:	Year ended 31 March 2013	Period ended  31 March 2012
	£'000	£'000
Loss:
Loss for the purposes of basic loss per share
(net loss for the period attributable to equity holders of the parent)	(7,350)	(13,392)
	Number	Number
Weighted average number of ordinary share for the purposes of basic earnings per share
	2,235,291,827	967,052,981
Basic and fully diluted loss per share	(0.3)p	(1.4)p
Excluding Exceptional Items	Year ended 31 March 2013	Period ended  31 March 2012
	£'000	£'000
Net loss for the period attributable to equity holders of the parent	(7,350)	(13,392)
Adjustment to exclude exceptional costs	1,811	4,599
Loss from continuing operations for the purposes of basic earnings per share	(5,539)	(8,793)
Basic and fully diluted loss per share	(0.2)p	(0.9)p

 

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