Optare, the specialist bus & coach manufacturer, provides the following trading update for the year ended 31 December 2010:
Current trading and Prospects
The Board is pleased to report that the Company's order book has further improved from £24.4m per our interim statement on the 30 September 2010 to over £34m. In addition the Board anticipates continued growth in the order book and a stronger than forecast output in 2011. The major groups have indicated a more normal level of bus purchases from Q2 based on recent tenders which have been received. Also the deadline for orders under the Green Bus scheme is the end of March, which is expected to further increase the order board in the first quarter.
However, Optare was not immune from the effects of the extreme weather conditions experienced in December which, combined with a re-phasing of some customer orders from Q4 2010 to early 2011 have impacted turnover for the year ended 31 December 2010. This has a corresponding impact on EBITDA. The board expects this volume to be recovered in early 2011.
Product and market development
For Optare 2010 was a significant year for product development and a new regime of EU 'type approvals' in the UK. Whilst at times this level of change has had a disruptive effect on production, it has also been successful with introduction of its market leading Hybrid, Electric and Biomethane buses.
In addition Optare's new driver console to aid fuel efficient driving was recognised by a major award for innovation from the Chartered Institute of Logistics and Transport. The board now expects to build close to 100 Hybrid and Electric buses in 2011. It can also report that as part of the 'Flybus' project, that a demonstration vehicle with a low cost mechanical hybrid system will be available for testing at the end of Q1.
Strong progress has been made in export markets with over 25% of Q4 volumes sold to customers outside the UK. It is also planned for Optare to build initial demonstration vehicles for the Indian market with Ashok Leyland drive-lines and low cost sourced components in early Q2. As previously announced, market launch of Optare's new integral double decker will also be aligned with the sourcing of low cost components to achieve a very competitive price point in the market.
Operations and cost reduction activity
Vigorous actions continue to be taken to further reduce costs including the move as previously announced to concentrate production on a single site during Q3 2010. This strategy will also be assisted from the benefits of low cost sourcing leveraging Ashok Leyland supply chain this year.
Plans are also being reviewed for the relocation of the Leeds factory later this year to a new local facility as the current site lease is not expected to be renewed beyond the end of 2011. This new facility will provide increased capacity and improved productivity due to a more optimal plant layout. The board is currently considering the most appropriate options to finance this relocation.
Debt and financing
Bank term debt is currently £3.3m, which the Board anticipates will be significantly reduced by sale of the Rotherham facility where offers have now been accepted to sell the site as two separate developments. Also in addition to the current overdraft arrangement of £3m with Bank of Scotland a further £1.5m facility for a term of 90 days was agreed through the parent company of a major shareholder given the disruption to production and cash-flow in December.
However the Board continues to be extremely vigilant of limitations on supplier credit and working capital pressures on the business in the current economic environment. Options continue to be reviewed, given strong progress made reducing bank term debt, to achieve a more appropriate long-term level of headroom and working capital facility for the business.
The board looks forward to 2011 with confidence given the benefits of an improving order book, recent investments in product development and a strongly supportive long-term partner in Ashok Leyland.
Jim Sumner, CEO, commented, "I continue to be encouraged by the progress turning the business around during what has been a challenging 18 months of restructuring and repositioning Optare at a time of extremely difficult economic conditions. Given the continuing improvements in order book and benefits from the strategic collaboration with Ashok Leyland, I am very excited about the Company's prospects in 2011 and beyond."
For further information please contact:
Jim Sumner - Chief Executive
Tel: 0845 838 9901
Cenkos Securities plc
Stephen Keys/Camilla Hume
Tel: +44 (0) 20 7397 8900
This information is provided by RNS
The company news service from the London Stock Exchange
Datafeed and UK data supplied by NETbuilder and Interactive Data.
While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk!
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.