ROL.L Regulatory News (ROL)

RNS

19 May 2022

Rotala Plc

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

AGM Statement & Trading Update

Rotala plc (AIM:ROL), an operator of bus routes in the UK for businesses, local authorities and the general public, provides the following update ahead of its Annual General Meeting ("AGM") being held later today.

Passenger numbers

At 30 November 2021, passenger numbers stood at between 80% and 85% of pre-COVID-19 levels, where they have remained so far during the year ending 30 November 2022 ("FY 22"), albeit growing towards the upper end of that range. However, in certain areas sharper rises in activity levels have been observed: for example, usage of the "Hoppa" services around Heathrow Airport has increased considerably since the start of the year in response to much improved volumes of airline travel. The Board expects passenger numbers to continue to grow slowly but steadily for the remainder of FY 22.

Current trading

The Group continues to trade in line with budget for FY 22. The Board's base assumption for the year was the trend in passenger numbers described above. Given this assumption, the Board sees no reason to revise its judgement that a break even result at the normalised pre-tax profit line is to be expected for FY 22 as a whole.

Acquisitions and new business

So far in FY 22, the Company has made two small acquisitions in the West Midlands. The first was the bus business of Claribel Coaches Limited ("Claribel") which completed on 22 April 2022. Claribel was a bus operator with recurring annual revenues of approximately £0.6 million in the eastern part of Birmingham. Through its Diamond Bus subsidiary, Rotala acquired the business and 18 vehicles for a total consideration of £339,000 payable in cash. No other assets or liabilities were assumed. On completion, the acquired business was immediately transferred to, and integrated within, the Group's existing depot infrastructure in the West Midlands.

On 29 April 2022, the Company announced the acquisition of the bus business of Johnsons (Henley) Limited together with 20 vehicles for a cash consideration of £936,000 payable on completion which is expected to occur on 29 May 2022. The acquisition is expected to be earnings enhancing from completion. The business is a well-established operator of commercial and contracted bus services in Warwickshire and the southern West Midlands with estimated recurring annual revenues of approximately £3.5 million. Rotala will not assume any other assets or liabilities of any materiality on acquisition.   As with Claribel, following completion, the acquired business will be subsumed into the Company's Diamond Bus business and operate out of its existing Redditch depot. The acquisition will extend the Group's network of bus services in Warwickshire and the West Midlands and make more efficient use of the capacity of the Company's Redditch depot.

Finally, the Company is pleased to announce the award by Lancashire County Council of a three-year contract to its Preston Bus subsidiary to run services in the Lytham St Anne's area. This contract has estimated annual revenues of £1.04 million .

Bus franchising in Manchester

On 25 March 2021, the Mayor of Greater Manchester made the formal decision to franchise the bus market in the Greater Manchester region. The Company made an immediate claim to the High Court to judicially review a number of aspects of the consultation process carried out by the Greater Manchester Combined Authority which led up to the decision of the Mayor to franchise the bus network. On 9 March 2022, Mr Justice Julian Knowles rejected these arguments, dismissed the claim and refused to give leave to appeal. The Company decided to apply to the Court of Appeal to seek permission to appeal the decision to the Court of Appeal. As previously announced, the Court of Appeal has now granted leave to appeal on certain aspects of the case. The appeal hearing is expected to take place before August 2022.

Government support

The Department for Transport ("DfT") recently announced awards under its Bus Service Improvement Plan ("BSIP") scheme, which is part of the Government's National Bus Strategy. A number of the local authorities in which the Group operates were awarded funds under this scheme, including Greater Manchester, the West Midlands and Lancashire. The next stage is that the local authorities concerned must develop, with the support of bus operators, detailed schemes for further submission to the DfT. While the effect of these awards on Rotala's businesses cannot yet be known in detail, the overall position is clearly positive.

The DfT also recently announced the extension of its Bus Recovery Grant ("BRG") scheme, which was originally due to expire in early April 2022, with a further £150 million package under the same scheme covering the period up to October 2022. However, at the same time, concessionary fares' re-imbursement levels are being gradually adjusted to reflect actual travel patterns such that by the end of 2022 the re-imbursements received will represent actual concessionary passenger usage.

Outlook

During the pandemic, the Board decided to focus on cash conservation and debt reduction as it anticipated that the extensive support offered by the Government during the pandemic would lead many bus operators to defer decisions that would or should otherwise have been taken. In contrast, the Board's objective was to emerge from the pandemic with a robust balance sheet, fit for the post-COVID-19 bus industry, whatever shape that turned out to be. As the UK bus industry emerges from the pandemic, the Board believes that the post-pandemic recovery phase is likely to involve the general overhaul of bus networks and rationalisation amongst bus operators. The Board believes that evidence for this is to be found in the current stream of bus businesses for sale, many in a distressed condition. The Board anticipates therefore a phase of renewed turbulence in the bus industry, as it copes with these factors, which should bring a healthy flow of opportunities to Rotala for both organic growth and acquisitions in the remainder of the year and beyond.

John Gunn, Non-executive Chairman of Rotala, commented: -

"We have been able to make two acquisitions this year because we concentrated on cash conservation and debt reduction during the COVID-19 pandemic and subsequently negotiated an improved package of banking facilities which we announced at the time of our FY21 results. The end of the pandemic and return to normal commercial conditions is now obliging business owners to take the decisions which they have been deferring for the last two years. This is going to produce turbulent conditions in the bus industry in the short term, but should bring Rotala further acquisition opportunities of which, with our ample unused banking facilities, we are very well placed to take advantage."

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, Hallmark Connections Ltd and Preston Bus Ltd.