Half Yearly Report

RNS Number : 4435O

Rotala PLC

07 August 2014

 



7 August 2014

Rotala plc

("Rotala" or "the company")

Unaudited Interim Results for the six months to 31 May 2014

Highlights

·    Profit before taxation up 12% to £1.055 million (2013: £0.946 million) on marginally lower revenues

·    Interim dividend increased by 18% to 0.65p per share (2013: 0.55p)

·    Strong balance sheet with net assets per share up 8% at 69p per share (2013: 64p)

·    Marginal improvement in earnings per share at 2.41p (2013: 2.40p) after moving to a standard tax charge

·    Fuel costs fully hedged for the whole of 2014 and 2015

·    Improving cash flow and anticipated lower levels of capital expenditure will enable enhancement of earnings per share through share buy-back programme

For further information please contact:

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

Chairman's Statement

I am pleased to be able to present this interim report to shareholders in respect of the six months ended 31 May 2014. Rotala is one of the leading providers of private bus networks in the country, especially to the aviation industry in the South East. In Preston we continue to hold a significant share of the bus market in that city. In Bristol and Bath we remain the number two bus operator, as we do in the West Midlands.

Results

In the statement which accompanied the 2013 full year results, I made clear my view that government decisions at local and national level were making life harder for bus operators both large and small. I have not seen any evidence in the intervening period to lead me to change my views. We have, despite these adverse factors, continued to improve our services to customers and we are seeing a slow but steady improvement in our financial results.       

·    Contracted Services

Revenues in Contracted Services fell overall by 9% compared to the first half of 2013. However this was entirely due to the loss of two route diagrams operated on behalf of National Express Limited ("NEL"), referred to in the company's results for the 2013 full financial year. Rotala commenced legal proceedings against NEL for breach of contract and announced in June 2014 that it had reached a full and final settlement with NEL in respect of its claim in terms satisfactory to the company. Setting aside the loss of the revenues associated with these contracts, corporate contracts continued to show significant growth. These gains in revenue, combined with growth in school and college contracts in Preston in particular, served to more than outweigh the effect of the reduction in subsidised local bus contracts around Bristol and Bath which I also mentioned in my last statement. We expect that the pressure on local authority budgets will continue for the foreseeable future. Accordingly in the last few years we have re-positioned our Contracted Services business away from such a significant exposure to local authority bus contracts and successfully focused our energies on gaining more privately contracted bus services with corporate customers.    

·    Commercial Services

Revenues in Commercial Services, compared to the first half of 2013, rose by 2%. The principal effect here was undoubtedly a full six month contribution from the acquisition of the Redditch and Kidderminster businesses of First Group Plc at the beginning of March 2013. I have described in previous statements how we have taken deliberate decisions to cut route mileage and pull out of services which we felt were unlikely to be economic in the longer term. These services were predominantly in the central and eastern areas of Birmingham. The result of the business acquisition from First Group Plc has been to add routes adjacent to areas where we already had some significant presence. The commercial bus services of the group in the West Midlands have therefore largely been repositioned over the last couple of years to focus on the western side of the Birmingham conurbation and on Redditch and Kidderminster in the northern part of Worcestershire. In these areas we hold more significant market shares upon which we are focusing our investment and management attention. Elsewhere in the group commercial bus revenues were stable with little discernible change from the same period in the previous year.

·    Charter Services

Revenues in Charter Services recorded an overall increase of 19% when compared to the first half of 2013. This increase reflects a small rise in the amount of chauffeur car hire movements which we carry out for our various airline customers (and which we sub-contract out in their entirety), but mainly a substantial recovery in the revenues from private coach hire business. Hire rates in this area have firmed up significantly in recent months and we have been able to take advantage of this in the efficient deployment of our existing coach fleet.     

Fuel

The cost of fuel remains a significant factor to the business. As a board we are anxious to have as much certainty as possible over all the principal costs of the business, so that we can have confidence in our budgets and forecasts for the foreseeable future. The policy of the board is therefore to take out fuel hedges or obtain fuel fixes whenever it seems prudent to do so. At the current time, using a combination of fuel fixes and fuel hedges via derivative instruments, we have covered all of the fuel requirements of the group for the whole of 2014 and 2015 at a combined rate of about 110p per litre.  We have extended this further into 2016, so that, at the present time, we have covered about 55% of the fuel requirements of the group out to the middle of that year, also at about 110p per litre.      

Dividend

The company will pay an interim dividend of 0.65 pence per share (2013: 0.55 pence) on 8 December 2014 to all shareholders on the register on 24 October 2014.  The board is conscious of the importance of dividend flows to shareholders; the board has adopted a policy of moving progressively to a target dividend cover of 2.5 times earnings, as underlying earnings and free cash flows improve.

Financial review

Revenues declined by 2% when compared with the same period in 2013. I have explained the reasons for this slight reduction in revenues above. Cost of Sales fell by 3% and so Gross Profits rose a little compared to the previous period. Administrative Expenses showed only a very small increase and so Profit from Operations rose by 4% over that achieved in 2013. Interest Expense fell by 7% and thus Profit before Taxation rose by 12% to £1.055 million (2013: £0.946 million). Basic earnings per share marginally improved to 2.41 pence (2013: 2.40 pence). The tax charge for 2013 was not a standard one and was affected by a number of prior year credits which made it abnormally low.

The gross assets of the group stood at £51.4 million at 31 May 2014, closely comparable to the £51.1 million of the previous year. The loans and borrowings of the group, including its obligations under hire purchase contracts, stood at £20.1 million at 31 May 2014, the same as a year earlier and slightly down on the equivalent figure at 30 November 2013. A detailed analysis of these borrowings is set out in Notes 4 and 5 to this statement. Net assets reached £24.2 million at the period end (2013: £22.4 million), equivalent to 69 pence per share.

Cash flows from operating activities were somewhat improved on the comparative period, but working capital temporarily absorbed funds in the first half of the year; these flows are anticipated to reverse by the year end. Hire purchase interest paid also continued to fall. With investment in property, plant and vehicles at a low level in the period, cash used in Investing Activities was much lower than has been experienced recently and there were of course no acquisitions. The capital element of payments on HP agreements dipped further to £1.95 million in 2014 (2013: £2.25 million). After dividend and interest payments the closing figure for cash and cash equivalents at the end of the period was a borrowing of £1.55 million (at 30 November 2013 a borrowing of £1.21 million).

Outlook

Our management efforts are concentrated on expanding our commercial bus activities in all our geographical areas of operation. We are also keen to continue the encouraging inroads which our private bus networks business has made in the last few years. Little can be expected from local authority transport work in the foreseeable future. Pressure on local government budgets will undoubtedly be a continuing theme.

    The group has a solid financial base and can make good use of this in the current market conditions. We have a strong and experienced management team and remain on the lookout for suitable acquisitions.  We are confident about our ultimate strategy and the future prospects of the group.

   In the short to medium term we see a low requirement for replacement vehicles: the fleet is in good condition, well matched to the demands being placed upon it. Hire purchase instalments on the current fleet will also continue to fall and will be about £3.4 million for the year as a whole (2013: £4.5 million). Thus I see free cash flows increasing and, in the absence of acquisitions, my aim will be to continue the steady increase in dividends per share. We will also look to using our existing permissions to buy back ordinary shares for cancellation or treasury should market conditions and cash flows permit.       

John Gunn

Non-Executive Chairman

7 August 2014

Condensed consolidated income statement
	Notes	Unaudited 6 months ended 31 May 2014	Unaudited  6 months ended 31 May 2013	Audited year ended 30 November 2013
		£'000	£'000	£'000
Revenue	2	26,086	26,665	53,303
Cost of sales		(21,616)	(22,293)	(44,210)
		________	________	______
Gross profit		4,470	4,372	9,093
Administrative expenses		(2,811)	(2,777)	(5,668)
		_____	_____	_____
Profit from operations		1,659	1,595	3,425
Finance expense		(604)	(649)	(1,367)
		_____	_____	_____
Profit before taxation		1,055	946	2,058
Tax expense		(205)	(100)	(145)
		_____	_____	_____
Profit for the period attributable to the equity holders of  the parent		850	846	1,913
		=====	=====	=====
Earnings per share for period attributable to the equity holders of the parent
Basic (pence)	3	2.41p	2.40p	5.42p
Diluted (pence)	3	2.32p	2.31p	5.17p

Condensed consolidated statement of comprehensive income	Unaudited 6 months ended 31 May 2014	Unaudited  6 months ended 31 May 2013	Audited year ended 30 November 2013
	£'000	£'000	£'000
Profit for the period	850	846	1,913
Other comprehensive income:
Actuarial (loss)/gain on defined benefit pension scheme	(67)	(167)	355
Deferred tax on actuarial (loss)/gain on defined benefit pension scheme	14	41	(75)
Other comprehensive income for the period (net of tax)	(53)	(126)	280
Total comprehensive income for the period attributable to the equity holders of the parent	797	720	2,193

Condensed consolidated statement of financial position	Notes	Unaudited as at 31 May 2014	Unaudited as at 31 May 2013	Audited as at 30 November 2013
		£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		30,811	31,320	30,930
Goodwill and other intangible assets		9,482	9,482	9,482
Deferred taxation		232	427	424
		_____	_____	_____
Total non-current assets		40,525	41,229	40,836
Current assets
Inventories		1,799	1,905	1,826
Trade and other receivables		9,114	7,983	7,866
Cash and cash equivalents		-	-	317
		_____	_____	_____
Total current assets		10,913	9,888	10,009
		_____	_____	_____
Total assets		51,438	51,117	50,845
Liabilities
Current liabilities
Trade and other payables		(6,445)	(7,177)	(6,304)
Loans and borrowings	4	(5,479)	(4,869)	(5,462)
Obligations under hire purchase agreements	5	(3,275)	(3,497)	(3,318)
		______	______	_____
Total current liabilities		(15,199)	(15,543)	(15,084)
Non-current liabilities
Loans and borrowings	4	(5,568)	(5,799)	(5,712)
Obligations under hire purchase agreements	5	(5,808)	(5,892)	(5,793)
Defined benefit pension obligation		(672)	(1,463)	(672)
		______	______	______
Total non-current liabilities		(12,048)	(13,154)	(12,177)
		______	______	______
Total liabilities		(27,247)	(28,697)	(27,261)
		_____	_____	_____
Net assets		24,191	22,420	23,584
		======	======	=====
Equity attributable to equity holders of parent
Called up share capital		8,818	8,818	8,818
Share premium reserve		7,828	7,828	7,828
Merger reserve		2,567	2,567	2,567
Retained earnings		4,978	3,207	4,371
		______	______	_____
Total equity		24,191	22,420	23,584
		=====	=====	====

Condensed consolidated cash flow statement	Unaudited 6 months ended 31 May 2014	Unaudited  6 months ended 31 May 2013	Audited year ended 30 November 2013
	£'000	£'000	£'000
Cash flows from operating activities
Profit for the period before tax	1,055	946	2,058
Finance costs	604	649	1,367
Depreciation	1,605	1,610	3,253
Gains on sale of vehicles	(43)	(136)	(283)
Gain on acquisition	-	(46)	(387)
Acquisition expenses	-	-	155
Contribution to defined benefit pension scheme	(67)	(167)	(333)
Equity-settled share based payment expense	4	-	9
	____	____	____
Cash flows from operating activities before changes in working capital	3,158	2,856	5,839
(Increase)/decrease in trade and other receivables	(1,247)	400	(95)
Increase in trade and other payables	224	393	147
Decrease/(increase) in inventories	27	(13)	66
	____	____	____
	(996)	780	118
	____	____	____
Cash generated from operations	2,162	3,636	5,957
Interest paid on hire purchase obligations	(331)	(343)	(671)
	____	____	____
Net cash flows from operating activities	1,831	3,293	5,286
Cash flows from investing activities
Acquisition of business	-	(1,714)	(1,714)
Purchases of property, plant and equipment	(371)	(2,525)	(2,564)
Sale of public service vehicles	63	864	1,941
	_____	_____	_____
Net cash flows used in investing activities	(308)	(3,375)	(2,337)

Condensed consolidated cash flow statement	Unaudited 6 months ended 31 May 2014	Unaudited  6 months ended 31 May 2013	Audited year ended 30 November 2013
	£'000	£'000	£'000
Cash flow from financing activities
Dividends paid	(194)	(176)	(494)
Proceeds of mortgages and other loans	500	3,927	3,927
Proceeds of hire purchase refinancing agreements	824	-	-
Repayment of bank and other borrowings	(644)	(201)	(289)
Loan stock and bank loan interest paid	(356)	(296)	(706)
Capital settlement payments on vehicles sold	(33)	(452)	(702)
Capital element of lease payments	(1,954)	(2,248)	(4,489)
	_____	_____	____
Net cash from/(used in)  financing activities	(1,857)	554	(2,753)
Net (decrease)/increase  in cash and cash equivalents	(334)	472	196
Cash and cash equivalents at start of period	(1,214)	(1,410)	(1,410)
	_____	_____	_____
Cash and cash equivalents at end of period	(1,548)	(938)	(1,214)
	======	=====	====

Condensed consolidated Statement of Changes in Equity	Called up share capital	Share premium account	Merger reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
At 1 December 2012	8,818	7,828	2,567	2,663	21,876
Profit for the period	-	-	-	846	846
Other comprehensive income	-	-	-	(126)	(126)
Total comprehensive income	-	-	-	720	720
Transactions with owners:
Dividends paid	-	-	-	(176)	(176)
Transactions with owners	-	-	-	(176)	(176)
At 31 May 2013	8,818	7,828	2,567	3,207	22,420
Profit for the period	-	-	-	1,067	1,067
Other comprehensive income	-	-	-	406	406
Total comprehensive income	-	-	-	1,473	1,473
Transactions with owners:
Share based payment	-	-	-	9	9
Dividends paid	-	-	-	(318)	(318)
Transactions with owners	-	-	-	(309)	(309)
At 30 November 2013	8,818	7,828	2,567	4,371	23,584
Profit for the period	-	-	-	850	850
Other comprehensive income	-	-	-	(53)	(53)
Total comprehensive income	-	-	-	797	797
Transactions with owners:
Share based payment	-	-	-	4	4
Dividends paid	-	-	-	(194)	(194)
Transactions with owners	-	-	-	(190)	(190)
At 31 May 2014	8,818	7,828	2,567	4,978	24,191

Notes to the Unaudited Consolidated Interim Accounts for the six months ended 31 May 2014

1.   Basis of preparation:

The unaudited condensed consolidated interim accounts have been prepared using the accounting policies set out in the group's 2013 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.   Turnover:

Revenue represents sales to external customers excluding value added tax. All of the activities of the group are conducted in the United Kingdom within the operating segment of provision of bus services. Management monitors revenue across the following business streams: contracted services, commercial services and charter services.

	Six months ended 31 May 2014	Six months ended 31 May 2013	Year ended 30 November 2013
	£'000	£'000	£'000
Contracted	10,009	11,029	20,602
Commercial	14,712	14,485	29,937
Charter	1,365	1,151	2,764
Total	26,086	26,665	53,303

3.   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 35,270,888 (May 2013: 35,270,888; November 2013: 35,270,888). 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 40,678,071 (May 2013: 40,548,268; November 2013: 40,579,583).

4.   Loans and borrowings:

	At 31 May 2014	At 31 May 2013	At 30 November 2013
	£'000	£'000	£'000
Current:
Overdrafts	1,548	938	1,531
Revolving credit facility	3,642	3,642	3,642
Mortgages	289	289	289
	5,479	4,869	5,462
Non- current:
Mortgages	3,252	3,483	3,396
Convertible loan stock	2,316	2,316	2,316
	5,568	5,799	5,712

5.   Obligations under hire purchase agreements:

	At 31 May 2014	At 31 May 2013	At 30 November 2013
	£'000	£'000	£'000
Present value:
Not later than one year	3,275	3,497	3,318
More than one but less than two years	2,843	2,817	3,189
More than two but less than five years	2,782	3,075	2,482
Later than five years	183	-	122
	9,083	9,389	9,111

6.   Dividends:

On 9 December 2013 the company paid an interim dividend of 0.55 pence per share in respect of the year ended 30 November 2013 and a final dividend in respect of the same accounting year on 27 June 2014 at a rate of 1.05 pence per share. All dividends are payable in cash only.  

7.   Additional information:

The unaudited Consolidated Interim Report was approved by the Board of Directors on 6 August 2014. The consolidated interim financial information for the six months ended 31 May 2014 and for the six months ended 31 May 2013 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 2013 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 and does not include a statement under section 496 of the Companies Act 2006.

8.   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.com.

 

END

 

 

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