ROL.L Regulatory News (ROL)

RNS

3 August 2022

Rotala Plc

("Rotala", the "Company" or the "Group")

Acquisition of Midland Classic Limited and extension of services in the East Midlands

Rotala (AIM: ROL.L), an operator of bus routes in the UK for businesses, local authorities and the general public, is pleased to announce the acquisition of the entire issued share capital of Midland Classic Limited ("Midland"), the principal bus operator in Burton-upon-Trent (the "Acquisition"). Midland has been acquired for a total cash consideration of £2 million. In addition, on completion, Rotala has paid approximately £577,000 in cash to one of Midland's shareholders to repay an existing loan of the same sum.

In the year ended 31 July 2021, the most recent financial year for which figures are available, Midland had unaudited revenues of approximately £5.6 million (2020: £5.2 million) and a profit before tax of £2,000 (2020: £621,000). At 31 July 2021, Midland had unaudited net assets of approximately £1.3 million (31 July 2020: £1.3 million), including a freehold property with a net book value of £956,000 and a passenger carrying vehicle fleet with a net book value of £2.1 million. Hire purchase debt of approximately £900,000 was being used to finance this vehicle fleet, which Rotala has assumed on completion of the Acquisition. On this basis, the Acquisition is expected to generate approximately £750,000 of positive goodwill, including stamp duty and transaction costs.

Midland operates 60 vehicles from its freehold depot in Burton-upon-Trent and employs approximately 110 staff. It is the principal bus operator in Burton-upon-Trent, from where it provides bus services to other nearby towns such as Uttoxeter, Ashby-de-la-Zouch and Lichfield. The Acquisition represents an extension of the Group's business to a new territory in the East Midlands from which further growth will be targeted. Operationally, Midland (which will immediately be renamed Diamond Bus (East Midlands) Limited) will be part of Rotala's Midlands division and will be controlled from the Company's headquarters at Tividale, Oldbury.

The Board does not expect that the Acquisition will have a material impact on earnings in the Company's current financial year ending 30 November 2022. The consideration was funded using the Group's existing debt facilities. As with the other acquisitions which the Company has made recently, Midland will adopt the Group's centralised IT systems covering such matters as accounting, purchasing, stock control and payroll. These integration steps are expected to have been fully implemented by 30 November 2022. The Directors believe that, following these steps and the continuing slow, but steady recovery in bus passenger numbers throughout England, the Acquisition will have a beneficial effect on the Company's future earnings.

Simon Dunn, Chief Executive of Rotala, commented: -

"Midland Classic is a sizeable well-established business in an attractive bus territory. It represents the entry by Rotala into the East Midlands which is a new market for the Group. However, at the same time, geographically it is adjacent to our existing operations in the West Midlands and so easily managed from there. The business also has its own freehold depot from which we will look to further expand Rotala's services as the recovery in passenger numbers post-COVID continues."

About the business

Rotala provides a range of transport solutions, ranging from local bus services under contract to local authorities, through to commercial bus routes. Rotala has operations at Heathrow Airport, in the West Midlands and in the North West. Operating companies are Diamond Bus Ltd, Diamond Bus (North West) Ltd, Diamond Bus (East Midlands) Ltd, Hallmark Connections Ltd and Preston Bus Ltd.