Final Results

RNS Number : 8617S

Rotala PLC

28 May 2009

 



Rotala plc

('Rotala' or 'the Group')

Final audited results for the financial year ended 30 November 2008

Rotala (ROL.LN) is pleased to announce its final results for the year ended 30 November 2008.

Highlights

• Growth in Turnover of 84.5 per cent. to £35.7 million (2007: £19.3 million)

• Maiden full year profit before tax of £1.2 million (2007: loss £0.7 million)

• Basic earnings per share of 5.79 pence, diluted earnings per share of 5.55 pence

• Net cash flow from operating activities of £2.8 million (2007: net cash outflow of £0.4 million)

• Significant new contract wins

• Targeted acquisitions completed to augment organic growth

• The board intends to initiate a programme of dividend payments in the latter part of 2009

• Trading in the year to date is in line with market expectations

For further information please contact:

Rotala Plc
John Gunn, Chairman Simon Dunn Chief Executive	020 7621 5770 07825 808 525
Kim Taylor, Group Finance Director	07825 808 529
Charles Stanley Securities - Nominated Advisor and Broker	020 7149 6000
Mark Taylor / Ben Johnston

CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS

Financial analysis

 As has been a consistent theme of my reports to you, the Group has continued to make pleasing progress. Compared to 2007 the progression is particularly marked: Revenue is up 84.5 per cent. and Cost of Sales also showed a considerable increase, both as a result of the acquisitions made in the first half of the financial year and of the underlying growth in the core business. Gross profits in 2008 were more than double those of 2007 at £6.7 million (2007: £3.3 million). The programme of acquisitions, taken together with the significant contribution from organic growth, has transformed the Group's financial performance. I shall return to these acquisitions later in this statement.

A Profit from Operations of £3.4 million was reported for 2008, compared with a figure of only £190,000 for the previous year. These figures include the effect on the Group of the massive but thankfully temporary spike in diesel prices in the summer and autumn of 2008. We estimate that the extra cost of fuel to the Group in that period was some £650,000. This cost was however offset to a large degree by the benefit to the Group's results of the acquisition of the Diamond Bus Company Limited. As set out in note 4 to this announcement, the net benefit of this transaction included within the Consolidated Income Statement was some £500,000. It should in addition be pointed out, for the more technically minded, that the Income Statement includes a total of charges, for the amortisation of intangibles and share-based payments, of £139,000 (2007: £72,000).

Interest payable rose considerably in 2008, reflecting both the impact of investment in new vehicles this year and last and the additional interest cost of the convertible loan stock issue made to fund the acquisitions in the period. 

Overall the group recorded a profit before tax for the year of £1,204,000, compared to a loss of £689,000 in 2007. This is a very encouraging result indeed. Basic earnings per share were 5.79 pence (2007: loss per share: 4.08 pence). The board intends to initiate a programme of dividend payments in the latter part of the current financial year. 

Acquisitions

The principal impact on these accounts has come from acquisitions. The most important transaction in the year was the acquisition of the Diamond Bus operation from Go Ahead Group plc at the end of February 2008. For this business, including a freehold property, we paid a sum of just over £2 million. Diamond Bus operates in the Black Country area of the West Midlands just to the west of Birmingham itself. The integration of this business within our existing network progressed speedily. We were able to streamline the overhead costs of the business by making effective use of our existing infrastructure in the region and we made considerable changes to the route network. Initially this action focused on efficiency and contribution to overheads, but then we were able to begin a renewed phase of investment and expansion. In this period we acquired 40 new buses for the business, invested considerable time and energy in marketing initiatives and signed two Voluntary Quality Partnerships. At the beginning of April 2008, we were also able to acquire another bus company, which operated in an area adjacent to that of Diamond, Ludlows of Halesowen Limited ('Ludlows'). The cost of this acquisition was £850,000. By integrating the Ludlows operation into Diamond we have been able to create a single business operating in a defined area of the Birmingham conurbation, whilst making efficient and economical use of existing management, depots and overhead.

Strategy

The two acquisitions described above have increased our operational fleet to well over 400 vehicles. Besides our two depots in the south of England at Heathrow and Gatwick airports and our depot at Bristol, we now control a broad sweep of operations around Birmingham, from Redditch in the south, through Oldbury in the west and Aston in the north of Birmingham. These depot locations give us an excellent infrastructure platform from which we can further develop the bus business of the Group. The strategy of the Group remains focused on the areas in which we have invested so far. Principally this means Birmingham, which is the second largest bus market in the country, after London. However we are strongly represented at Heathrow and Gatwick airports and we wish to expand our operations in the London area if the appropriate opportunities arise. Our area of operation also extends down the M5 to Bristol. We intend to continue to invest in the Bristol and Bath region, to balance the on-going growth in Birmingham, and we are considering a number of locations and businesses here. We also believe that it is important to retain a balance in the business of the Group. With the addition of the Diamond Bus commercial bus business, the turnover of the Group is more broadly based and is now more or less equally divided between revenues from commercial bus networks, subsidised bus routes and contracted private bus networks.

We feel sure that more opportunities will spring out of the need to improve public transport, relieve congestion and reduce pollution, both in the West Midlands and in and around our other principal depots. Moreover it is our view that the recently announced review of local bus services by the Office of Fair Trading can only be of benefit to the smaller but growing companies such as Rotala. The review will undoubtedly look to enhance competition in the bus market and we believe Rotala is well-placed to take advantage of these developments.

New contracts

It is furthermore pleasing to be able to record continuing success in the year in achieving our target of sustained organic growth in the revenues of the Group through the addition of new contracts. In 2008 we were able to secure new contracts in both the public and private sectors with an annualised value of £5.6 million. These contract wins repeated almost exactly the revenue growth we had seen in 2007 in this area of our business. The success in obtaining new contracts underlines our commitment to increase the Group's turnover and to become a significant force in transport operations in our chosen locations. A further £4.7 million in new contract awards were announced in April 2009, as I will discuss below.

Investment and Innovation

This year we have invested heavily, not only in new vehicles, but also in other technology. In the acquisition of vehicles we have looked in particular at achieving fuel efficiency and low emission levels. This has been combined with specifying vehicles which provide the customer with the highest possible standard of service. This has been a particular focus of our investment in Diamond Bus but we have followed the same strategy in Bristol, for example, where over the last two years we have completely renewed the fleet which we inherited through the initial business acquisition there. 

We have also paid much attention to training, staff communication, common uniforms, branding and customer care. This investment has been repaid by the work force in their commitment and enthusiasm for their daily tasks. There is no doubt that this programme of engagement with staff has produced good results which have had a very positive impact on the progress of the Group. The investment in marketing and branding has, as we can see from customer reaction, had a very beneficial effect on operations and has been a key component in increasing ridership and cementing relationships with both corporate and local authority customers. All these innovations are a testament to the hard work and dedication of our operational management and the workforce as a whole. I extend my thanks to them for another successful year, and I know that this enthusiasm and dedication continues to be shown in 2009.  

Fundraising

 In order to make the acquisitions outlined above and to fund the working capital investment required for the new contracts we raised £5.1 million in the first quarter of 2008. This took the form of approximately £4.7 million in convertible loan notes, as sanctioned at the Extraordinary General Meeting held in February 2008, and £400,000 in new ordinary equity. Just after the year end, in December 2008, we raised further equity as described below. 

IFRS

This reporting period is the one in which the Group is required to adopt International Financial Reporting Standards ('IFRS'). As a result the figures for the current period have been presented in accordance with IFRS and the comparatives have been suitably restated. 

Events since the year end

The acquisition of Diamond Bus and Ludlows has enabled us to construct an extensive network of operations in the Black Country. In the short term we continue to make considerable further investment in the Diamond Bus operations. This investment will improve and enlarge the Black Country network of Diamond Bus. In order to make funds available for this investment, in December 2008 we raised a further £1.1 million in new ordinary equity, more than half of which was contributed by the Board, as a demonstration of our faith in the continuing progress of the Group. At the same time a total of £865,000 in loan notes and loan stock was retired and replaced by the same sum in ordinary share capital. These two steps reduced Group debt and increased the capital base of the Group by some £2 million. 

Our quest for suitable new work continues, as well as our pursuit of more acquisition targets in our chosen areas of operation. We were able to announce, in April 2009, a further batch of contract wins, for a total of £4.7 million in new revenue. This included the transportation contract for the prestigious Rotary International meeting in Birmingham in 2009, worth just over £1 million to us.  

In the light of the continuing growth of the size and complexity of the Group's businesses we have also decided to re-arrange responsibilities at Board level. I am pleased to be able to say that Simon Dunn will change his role from Managing Director to be that of Chief Executive. Kim Taylor will focus his time on the role of Group Finance Director.  

The Board believes that its strategy will deliver a sizeable and profitable, integrated transport group. It should, however, be noted that, like all in the transport industry, the Group's results are sensitive to fluctuations in the price of diesel. The price peak seen in 2008 had a considerable impact on the Group. Whilst we were able, by a careful mixture of cost reduction and fare increases, to limit the effect on the Group's results, there is no doubt that the fuel price is a constant factor in our business. We continuously monitor the situation and will hedge, if we believe that this can be justified.

Outlook

I am however very pleased with the progress of the Group, both in 2008 and in the year so far. I am sure that we will be able to report further positive moves in the development of the Group in the remainder of the year. I believe that market conditions for a business based on public transport in its various forms are favourable, despite the current contraction in business activity nationally. Indeed the recession is producing effects on our larger competitors with rail interests which are beneficial for a bus-focused group such as Rotala. With our lower cost base, we are able to take on bus routes which the larger operators see as marginal, and turn them to good effect. The Group is showing a strong upward trend and I am confident that the group's performance will show continued progress.

John Gunn
Non-Executive Chairman

27 May 2009

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 NOVEMBER 2008

	Note	2008	2007
		£'000	£'000
Revenue	2	35,677	19,348
Cost of sales		(28,980)	(16,084)
Gross profit		6,697	3,264
Administrative expenses		(3,267)	(3,074)
Profit from operations		3,430	190
Finance expense		(2,254)	(957)
Finance income		28	78
Profit/(loss) before tax		1,204	(689)
Tax expense		-	-
Profit/(loss) for the year attributable to the equity holders		1,204	(689)
of the   parent
Earnings/(loss) per share for profit attributable to the equity
holders of the parent during the year:
- Basic (pence)	3	5.79	(4.08)
- Diluted (pence)	3	5.55	(4.08)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 NOVEMBER 2008

	Called up share capital £'000	Share premium account £'000	Merger reserve £'000	Warrant reserve £'000	Retained earnings £'000	Total £'000
At 1 December 2006	3,676	4,316	2,567	-	(3,595)	6,964
Loss for the year	-	-	-	-	(689)	(689)
Total recognised income
and expense for the year	-	-	-	-	(689)	(689)
Issue of share capital	1,413	1,993	-	-	-	3,406
Costs of issue of share
capital	-	(207)	-	-		(207)
Share based payment
adjustment	-	-	-	-	58	58
At 30 November 2007	5,089	6,102	2,567	-	(4,226)	9,532
Profit for the year	-	-	-	-	1,204	1,204
Total recognised income
and expense for the year	-	-	-	-	1,204	1,204
Issue of share capital	165	229	-	-	-	394
Costs of issue of share
capital	-	(123)	-	-	-	(123)
Share based payment
adjustment	-	-	-	-	84	84
Equity element arising on
issue of convertible loan	-	-	-	370	-	370
stock with warrants
At 30 November 2008	5,254	6,208	2,567	370	(2,938)	11,461

CONSOLIDATED BALANCE SHEET 

AS AT 30 NOVEMBER 2008

	Note	2008	2008	2007	2007
		£'000	£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		25,701		15,214
Goodwill and other intangible assets		9,803		9,041
Trade and other receivables		48		288
Total non-current assets			35,552		24,543
Current assets
Inventories		694		145
Trade and other receivables		5,011		3,879
Cash and cash equivalents		509		11
Total current assets			6,214		4,035
Total assets			41,766		28,578
Liabilities
Non-current liabilities
Loans and borrowings		6,471		2,935
Obligations under hire purchase		11,932		8,250
Provision		59		145
Deferred tax liability		-		196
Total non-current liabilities			18,462		11,526
Current liabilities
Trade and other payables		6,759		4,483
Loans and borrowings		1,440		1,103
Obligations under hire purchase		3,644		1,934
Total current liabilities			11,843		7,520
Total liabilities			30,305		19,046
TOTAL NET ASSETS			11,461		9,532

 

Capital and reserves attributable to
equity holders of the company
Share capital		5,254		5,089
Share premium reserve		6,208		6,102
Merger reserve		2,567		2,567
Warrant reserve		370		-
Retained earnings		(2,938)		(4,226)
TOTAL EQUITY			11,461		9,532

CONSOLIDATED CASH FLOW STATEMENT 

FOR THE YEAR ENDED 30 NOVEMBER 2008

	Note	2008	2008	2007	2007
		£'000	£'000	£'000	£'000
Cash flows from operating activities
Profit/(loss) for the year		1,204		(689)
Adjustments for:
Depreciation		2,007		858
Amortisation		132		91
Finance income		(28)		(78)
Finance expense		2,254		957
Negative goodwill arising on acquisition		(1,168)		-
Gain on sale of property, plant and equipment		(23)		(69)
Equity settled share-based payment expense		84		58
Cash flows from operating activities before changes in working capital and provisions			4,462		1,128
Increase in trade and other receivables		(357)		(490)
(Increase)/decrease in inventories		(474)		19
Increase/(decrease) in trade and other payables		1,101		426
(Decrease) in provisions		(86)		(749)
			184		(794)
Cash generated from operations			4,646		334
Interest paid on hire purchase agreements and invoice discounting arrangements			(1,797)		(760)
Net cash flows from operating activities			2,849		(426)
Investing activities
Acquisition of subsidiary, net of cash acquired		(3,199)		(1,490)
Purchases of property, plant and equipment		(1,362)		(429)
Sale of property, plant and equipment		1,991		1,169
Purchases of intangibles		(113)		(200)
Interest received		28		78
Net cash used in investing activities			(2,655)		(872)
Financing activities
Issue of ordinary shares		272		2,923
Issue of loan stock and notes		4,568		865
Proceeds of hire purchase refinancing agreement		216		758
Loan note repaid		(150)		(100)
Repayment of bank borrowings		-		(14)
Loan stock and bank loan interest paid		(362)		(168)
Capital element of lease payments		(3,968)		(2,889)
Net cash from financing activities			576		1,375
Net increase in cash and cash equivalents			770		77
Cash and cash equivalents at beginning of year			(827)		(904)
Cash and cash equivalents at end of year			(57)		(827)

        1.  Basis of preparation:

Prior to this current accounting period it was the practice of the Group to prepare its accounts in accordance with UK Generally Accepted Accounting Principles ('UK  GAAP'). In respect of the period to 30 November 2008 the group is required to prepare its consolidated accounts under International Financial Reporting Standards (collectively 'IFRS'), which have been adopted by the European Union. In making the transition to IFRS and implementing its provisions, the requirements of IFRS 1 - First Time adoption of International Financial Reporting Standards have been followed.  In accordance with IFRS 1 the date of transition to adopted IFRS is 1 December 2006. The comparatives to the period which is the subject of this report have therefore been restated from UK GAAP to comply with adopted IFRS.  

       2.  Turnover

Turnover represents sales to external customers at invoiced amounts less 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. Contract revenues are recognised as services are delivered based on agreed contract rates.

All of the activities of the Group are conducted in the United Kingdom and all are within the transport sector.

       3.  Earnings per share      

	2008	2007
	£’000	£’000
Profit/(loss) attributable to ordinary shareholders	1,204	(689)
Weighted average number of ordinary shares in issue	20,803,526	16,900,906
Basic earnings/(loss) per share	5.79p	(4.08p)

The calculation of the basic and diluted earnings/ (loss) 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. The effect of all potential ordinary shares in 2007 was not dilutive, as the effect would have been to decrease the loss per share and consequently no comparatives for 2007 have been presented. 

The number of potential ordinary shares as at 30 November 2007 was 4,729,594. All figures in this note have been restated as if the share consolidation of 19 July 2007 had been effective throughout both 2007 and 2008 in order to ease understanding.

	2008
	£’000
Profit attributable to ordinary share holders	1,204
Interest expense of convertible debt	304
Profit for the purposes of diluted earnings per share	1,508
Weighted average number of shares in issue	20,803,526
Adjustments for:
- assumed conversion of convertible debt	5,935,171
- exercise of warrants	210,276
- exercise of options	208,630
Weighted average number of ordinary shares for the purposes of diluted earnings per share	27,157,603
Diluted earnings per share	5.55p

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. Rotala has in issue three sources of potential ordinary shares: convertible loan notes, share warrants and share options. The convertible loan notes are assumed to have been converted into ordinary shares, but the associated interest expense has been added back to the profit attributable to shareholders. In respect of the options and warrants a calculation has been carried out to determine the number of shares, at the average annual market price of the Rotala'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 and warrants, in order to compute the necessary adjustments in the above table.

  4.    Summarised information about the acquisitions in the year:

          Go West Midlands Limited

          On 29 February 2008 Rotala acquired 100 per cent. of the issued share capital of Go West Midlands 
          Limited (now called The Diamond Bus Company Limited) and a separate freehold property for a 
          consideration of approximately £2 million. The balance sheet at the date of acquisition, is set out below:

	Book value of assets acquired	Fair value adjustments	Fair value
	£’000	£’000	£’000
Property, plant and equipment	3,843	-	3,843
Inventories	66	-	66
Trade and other receivables	410	-	410
Deferred taxation	-	266	266
Trade and other payables	(1,101)	-	(1,101)
Obligations under hire purchase agreements	(231)	-	(231)
Net assets	2,987	266	3,253
Cash paid (including costs of acquisition)			(2,085)
Negative goodwill arising credited to the income statement within Administrative Expenses			1,168

Go West Midlands Limited contributed £9.1 million of revenue, £148,000 of operating loss and £654,000 of loss before tax to the Group Consolidated Income Statement for the period between the date of acquisition and the balance sheet date.

If the Go West Midlands Limited acquisition had been completed on 1 December 2007 the Group revenue for the period would have been increased by £2.7 million, operating profit decreased by £2.2 million and profit before tax decreased by £2.2 million.

           Acquisition of the bus business of South Gloucestershire Bus and Coach Company Limited

Also during the year the Group carried out the remaining stages of its acquisition of the bus business of South Gloucestershire Bus and Coach Company Limited. The initial stages of this acquisition took place in the year ended 30 November 2007. In the current accounting period further consideration of some £636,000 was paid. This gave rise to an intangible asset of £112,000 in relation to customer contracts acquired and goodwill of approximately £208,000, the balance of the consideration being for vehicles.

Due to the nature of the acquisition, being a part only of a business, which was then integrated with existing business of the group and greatly expanded, it is not possible to identify separately what the acquired business only contributed to the Group in the period since acquisition nor what it would have contributed between 1 December 2007 and the date of acquisition.

Ludlows of Halesowen Limited

On 1 April 2008 Rotala acquired 100 per cent. of the issued share capital of Ludlows of Halesowen Limited for a consideration of approximately £851,000. The balance sheet at the date of acquisition is set out below. No fair value adjustments are required.

	Book and fair value of assets acquired
	£’000
Property, plant and equipment	460
Inventories	8
Trade and other receivables	100
Cash	80
Trade and other payables	(190)
Deferred taxation	(46)
Net assets	412
Cash paid (including acquisition expenses)	(932)
Goodwill	520

The goodwill arising on the acquisition of Ludlows of Halesowen Limited has arisen due to the value of the business being greater than the sum of its assets and liabilities shown in the balance sheet laid out above. This premium was paid in order to capture growth opportunities in the Halesowen area and to take advantage of synergistic benefits with the Group's existing operations. 

Ludlows of Halesowen Limited contributed £1.6 million of revenue, £405,000 of operating profit and £387,000 of profit before tax to the Group Consolidated Income Statement for the period between the date of acquisition and the balance sheet date.

If the Ludlows of Halesowen Limited acquisition had been completed on 1 December 2007 the Group revenue for the period would have been increased by £478,000, operating profit decreased by £20,000 and profit before tax decreased by £22,000.

      5.    Financial Information

The financial information set out above does not constitute the company's statutory accounts, as defined in section 240 of the Companies Act 1985, for the years ended 30 November 2008 or 2007, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under the Companies Act 1985, s 237(2) or (3).

 

END

 

 

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