ROL.L Regulatory News (ROL)

2 Apr 2007 07:03

Rotala PLC02 April 2007 ROTALA PLC PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2006 CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS I am pleased to be able to make this report to the shareholders of Rotala plc("Rotala" or "the Company") for the year ended 30 November 2006, the first fullyear of the Company's operation. The profit and loss account shows that theCompany sustained a loss of £2.7m for the year. This may be compared to a lossof £1.15m in the prior period, most of which was sustained in the three monthsafter the acquisition of the Flights Group in August 2005. Nevertheless Ibelieve that it has been a year in which the board has managed to effectconsiderable change in the business of the group and thus make significantprogress towards the objective of achieving positive results, after the mostinauspicious start caused by the circumstances of the acquisition of Flights.Those difficulties are now well behind us and your board has throughout the yearbeen focusing on delivering the strategy which was set out at the time of thefoundation of the Company. I think it is as well at this point to re-iterate what that strategy is. Rotalawas conceived as a consolidator in an industry which, outside of the giantswithin it, is highly fragmented. Many existing operators are small and are onlymarginally profitable at best. The opportunity therefore exists to putbusinesses together, reduce overall overheads and secure decent margins. At thesame time the industry is a product of de-regulation some 20 years ago. Thosewho set themselves up in business then are now approaching retirement and arelooking to capitalise on their lifetime of work. Rotala is well placed to takeadvantage of this factor. Since Rotala was conceived and launched in early 2005there has also been a welter of political developments which have served tobolster the logic of the original strategy. The various reports on congestionand environmental pollution, debates on road pricing and congestion zones havefocused attention on the necessity of investing in bus and other transportnetworks, particularly in and around the large conurbations. It is the objectiveof your board to fulfil this strategy by building a business, both byacquisition and organic growth, around depots situated in those parts of thecountry where there is suitable density of population and prospects ofcontinuing economic growth. With this aim in mind one of the first steps that we took in the year underreview was to conclude in April 2006 our negotiations to acquire the freehold tothe Company's main depot at Long Acre in Birmingham. This 4.5 acre site is welllocated both close to the city centre and just off junction 6 of the M6. Thepurchase price was £2 million. A placing of £1.625 million was completed at thistime, both to finance the acquisition of the freehold and replenish theCompany's equity capital. A commercial mortgage of £1.5million was also obtainedon the property to help with the finance. We have concentrated since then onseeking businesses in the area whose acquisition would enable us to make bestuse of the site and its excellent facilities. Just before the end of theaccounting year, in October 2006, we were able to announce the successfulacquisition of Zak's Bus & Coach Services Limited ("Zak's") for £30,000, thoughthe acquisition included taking on responsibility for debts in the companyamounting to £450,000. Zak's, operating about 40 vehicles in and around the North Birmingham area, turns over some £2.1million per annum, consisting primarily of contracts with the West MidlandsPassenger Transport Executive ("Centro"), Worcestershire County Council,Staffordshire County Council and Birmingham City Council. To fund theacquisition, and to meet the considerable extra demands on working capital, wehad conducted a further share placing of £1.571 million also in October.Following the acquisition, the vehicles and operations of Zak's were transferredto and integrated with those at Long Acre. Duplicated administrative andmaintenance overheads were thereby eliminated. Just after the year end we addedto this business that of Birmingham Motor Traction Limited for a considerationof £34,000. This business turns over some £600,000 a year and operates 20vehicles. The customer base is very similar to that of Zak's. This business toohas been transferred to Long Acre to similar effect. We continue to look forother suitable businesses in the northern part of Birmingham to complement ourfleet and make the maximum possible use of the space at the depot. The acquisition of Zak's brought with it an additional depot of 3.5 acres inNorth Birmingham on a long leasehold with 43 years to run. For the purposes ofthese results this property has been valued at £900,000 by our professionalvaluation advisers. The board believes that this depot offers attractivepossibilities for expansion in the North Birmingham area once Long Acre isrunning at full capacity, which we expect to be achieved in 2007. Alternatively,if the Board believes that it is beneficial, this asset will be exploited in itsown right. Quite apart from these activities on the acquisition and capital fronts, theboard has also continued to devote much effort to the increase of turnover,reduction of costs and renewal of the group's vehicle fleet. Much attention hasbeen devoted to the appropriate profile of the vehicle fleet. The leases on thehigh cost elements of the fleet acquired with the Flights Group in 2005 in themain end in 2007. The replacements for those vehicles which are being retiredhave been carefully planned and we are confident that, as the fleet is renewed,reliability will improve and maintenance costs fall. The Board has taken apolicy decision to acquire vehicles by hire purchase. Over time this will creategreater value for shareholders through the equity the Company will own in thosevehicles. This is in stark contrast to the use, by the previous management, ofoperating leases which bring with them no such beneficial characteristics. Inaddition we can already see that the hire purchase rates at which the vehicleleases will be taken out will in themselves serve to reduce basic operatingcosts from their current levels. The focus on cost reduction has yieldedannualised savings of some £1.2 million in the year and by the time the costreduction plan has had full effect at the end of 2007 a further £1.5 million inannualised cost savings will have been achieved. We have furthermore, wherever possible, sought to streamline managementstructures and improve decision making. It was with this object in mind thatearlier in the year we decided to amalgamate our two streams of business,airline on the one hand and coach and bus on the other, under a single managingdirector. We appointed Simon Dunn to this role and I am glad to say that I wasin September able to welcome Simon onto the board of Rotala in recognition ofhis new role and enhanced responsibilities. He was at the same time joined byGeoff Flight, a well-known figure in the industry, whose family had founded thecore of the Flights Group. Geoff has made a considerable impact with hisexpertise and has been a valuable additional resource in the implementation ofour acquisition strategy. I am also pleased to be able to report continuing success in our objective toincrease the revenues of the group with new contracts. Last year I was able tosay that up to the time of reporting, which was in May 2006, we had managed tobe able to obtain some £2.5 million of new work since we had acquired theFlights Group. We have managed a continuation of this trend in the last year andnow the figure for new turnover totals some £6 million. Within this figure arethe contracts which were the subject of our recent announcement. In it we weredelighted to be able to state that we had established a presence in the Bristolmarket by obtaining two prestigious park and ride contracts there. In our viewBristol has just the characteristics which I have delineated above in my outlineof the group's strategy. The success in obtaining new contracts underlines our commitment to increase thegroup's turnover and to become a significant force in transport operations inour chosen locations. The board remains convinced that the transport sectoroffers many opportunities for growth, both organically and by acquisition as Ihave outlined earlier in this statement. I continue to believe that one of thekeys to success in the sector is a strong financial as well as operational base.I intend that we will take further decisive strides towards these twinobjectives as 2007 passes and build on the successes we have achieved so far. I am pleased that the trend in reduction of losses has continued in 2007 inaccordance with our budgets. I expect that the group will attain positiveresults month by month both in cash flows and profits as 2007 progresses. TheBoard believes that this strategy will deliver a sizeable and profitable,integrated transport group. I look forward to being able to report furthersuccesses to you as the year goes on. It is pleasing to note that the Company'sshare price has begun to reflect the progress that is being made by reaching alevel of 3.25p at the time of writing compared to 1.875p at the end of November2006. In conclusion I would like to express my thanks to the whole management team andall the staff, both older and more recent arrivals. In a public facing industrysuch as this, I am forever conscious that individuals in the group, at whateverlevel, represent the Company day in and day out. At the current level ofoperations the Company conducts more than 1,000 vehicle movements per day. It istherefore the commitment, enthusiasm and attention to detail of all the staffwhich will ensure the continued success of this business, allied as it is tooperational management of much skill and experience. Based on these strengths Ibelieve that my optimism for the continued successful development of the groupis well founded. John GunnNon-Executive Chairman2ND April 2007 Contact: Rotala plcJohn Gunn 020 7236 6236 Blue Oar Securities Plc*David Seal/Rhod Cruwys 020 7448 4400 * Blue Oar Securities was formerly Corporate Synergy Plc and acts as NominatedAdviser & Broker for the Company CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 30 NOVEMBER 2006 Unaudited Audited Year ended Period ended 30 November 30 November Note 2006 2005 £ £ Turnover - continuing business 2 15,800,459 3,960,795 - acquired business 294,461 16,094,920 3,960,795 Cost of sales - continuing business (14,757,688) (4,220,226) - acquired business (251,741) (15,009,429) (4,220,226) _________ _________ Gross profit/loss - continuing business 1,042,771 (259,431) - acquired business 42,720 - 1,085,491 (259,431) Administrative expenses - continuing business (3,553,233) (931,258) - acquired business (25,691) - (3,578,924) (931,258) Operating (loss)/profit - continuing business (including goodwill amortisation of £403,125 (2005: (2,510,462) (1,190,689) £115,086) - acquired business (including 17,029 - negative goodwill amortisation of £3,125) Operating loss (2,493,433) (1,190,689) Interest receivable 19,301 67,429 Interest payable and similar charges (251,534) (25,223) _________ _________ Loss on ordinary activities before taxation (2,725,666) (1,148,483) Taxation on loss on ordinary activities - - _________ _________ Loss on ordinary activities after taxation (2,725,666) (1,148,483) _________ _________ Loss per share (basic and diluted) 3 (1.05p) (1.33p) All amounts relate to continuing activities. All recognised gains and losses inthe current year are included in the profit and loss account. Movements inshareholders' funds in the current year are shown in note 4. CONSOLIDATED BALANCE SHEET AS AT 30 NOVEMBER 2006 Unaudited Unaudited Audited Audited 2006 2006 2005 2005 £ £ £ £Fixed assets Intangible assets - other 8,213,046 8,322,717 - negative goodwill (475,246) - _________ _________ 7,737,800 8,322,717 Tangible assets 5,675,158 1,496,333 _________ _________ 13,412,958 9,819,050Current assets Stocks 164,511 141,690 Debtors - due within one year 3,358,994 3,422,031 - due after one year 180,436 330,049 3,539,430 3,752,080 Cash at bank and in hand - 1,000,000 3,703,941 4,893,770Creditors: amounts falling duewithin one year Convertible debt (275,000) - Other (5,665,235) (5,160,631) _________ _________Net current liabilities (2,236,294) (266,861) _________ _________ Total assets less current liabilities 11,176,664 9,552,189 Creditors: amounts falling dueafter more than one year (3,597,582) (1,769,868) Provisions for liabilities (893,431) (1,547,000) _________ _________ (4,491,013) (3,316,868) _________ _________ 6,685,651 6,235,321 _________ _________Capital and reserves Called up share capital 3,676,910 1,719,744 Share premium account 4,316,223 3,097,393 Merger reserve 2,566,667 2,566,667 Profit and loss account (3,874,149) (1,148,483) _________ _________ Shareholders' funds 6,685,651 6,235,321 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2006 Unaudited Unaudited Audited Audited Year ended Year ended Period ended Period ended 30 November 30 November 30 November 30 November Note 2006 2006 2005 2005 £ £ £ £ Net cash outflow from operating activities 5 (2,977,867) (3,095,171) Returns on investments and servicing of finance Interest received 19,301 67,429 Interest paid (147,672) (16,324) Interest element of finance lease payments paid (52,331) (8,899) _________ _________Net cash inflow from returns oninvestments and servicing of finance (180,702) 42,206Capital expenditure and financialinvestment Payments to acquire intangible fixed assets (250,000) - Payments to acquire tangible fixed assets (2,173,208) (57,607) Sale of tangible fixed assets 90,447 3,894 _________ _________Net cash outflow from capitalexpenditure and financial investment (2,332,761) (53,713) Acquisitions Acquisition (30,000) - Expenses incurred in making acquisitions (132,308) (603,835) Bank overdraft acquired with the acquisitions (40,150) (149,912) _________ _________Cash outflow from acquisitions (202,458) (753,747) _________ _________Cash outflow before use of liquidresources and financing (5,693,788) (3,860,425) Management of liquid resources Decrease/(increase) in deposits with banks 1,000,000 (1,000,000) Financing Issue of ordinary share capital 3,331,002 4,660,001 Issue costs (130,006) (309,530) Issue of convertible loan notes 250,000 - Bank loan 1,500,000 - Bank loan repaid (3,902) - Capital element of finance lease payments (647,801) - _________ _________ 4,299,293 4,350,471 _________ _________ Decrease in cash for the year (394,495) (509,954) _________ _________ 1. Basis of preparation and consolidation The preliminary results have been prepared in accordance with applicableAccounting Standards and on the basis of the accounting policies set out in theannual report and accounts for the year ended 30 November 2005 which haveremained unchanged. Whereas these preliminary results 2006 represent those ofthe whole group for that year those for 2005 comprise the results of the holdingcompany, Rotala Plc, only from 21 January 2005 (the date of incorporation) until30 November 2005 and the results of the Flights Group of companies from 30August 2005 (the date of acquisition) to 30 November 2005. 2. Turnover Turnover represents sales to external customers at invoiced amounts less valueadded tax. All of the activities of the group are conducted in the UnitedKingdom and all are within the transport sector. 3. Earnings (loss) per share The calculation of the basic and diluted loss per share is based on the earningsattributable to the ordinary shareholders divided by the weighted average numberof shares in issue during the year. The effect of all potential ordinary sharesis not dilutive. The weighted average number of equity shares in issue is 259,006,815 and theearnings, being a loss after tax, are £2,725,666 (2005 - £1,148,183). 4. Movement in shareholders' funds: Group Group Year ended Period ended 30 November 30 November 2006 2005 £ £ Loss for the year (2,725,666) (1,148,483) Issue of shares 3,331,002 7,693,334 Expenses of share issues (155,006) (309,530) _________ _________ Net addition to shareholders' funds 450,330 6,235,321 Opening shareholders' funds 6,235,321 - _________ _________ Closing shareholders' funds 6,685,651 6,235,321 _________ _________ 5. Reconciliation of operating loss to net cash outflow from operating activities Year ended Period ended 30 November 30 November 2006 2005 £ £ Operating loss (2,493,433) (1,190,689) Depreciation of tangible fixed assets 263,144 132,618 Amortisation of goodwill 400,000 115,086 Amortisation of intangibles 18,000 - Decrease/(increase) in debtors 456,322 (413,342) (Decrease)/Increase in creditors (984,641) (1,603,491) Decrease in stock 13,440 26,396 Loss/(profit) on disposal of fixed assets 2,870 (516) Movement on provisions (653,569) (161,233) _________ _________ (2,977,867) (3,095,171) _________ _________ 6. Summarised balance sheet of the acquisition: Accounting Fair value Book value policy adjustments Total £ £ £ £ Fixed assets: Intangible 18,900 - (18,900) - Tangible 777,902 (87,000) 704,146 1,395,048 Current assets: Stocks 36,261 - - 36,261 Debtors 305,488 - (10,285) 295,203 _________ _________ _________ _________ Total assets 1,138,551 (87,000) 674,961 1,726,512 Creditors: Due within one year (640,105) - - (640,105) Due after more than one year (507,182) - - (507,182) _________ _________ _________ _________ Net assets (8,736) (87,000) 674,961 579,225 _________ _________ _________ _________ The fair value adjustments arose as a result of the writing off of goodwill, therevaluation of the company's short leasehold property, a review of the marketvalue of the vehicles owned by the company and the writing off of certainprepayments. £ Acquisition expenses 70,854 Cash paid 30,000 _________ 100,854 Net assets acquired 579,225 _________ Negative goodwill arising on acquisition 478,371 _________ 7. Financial Information The preliminary financial statements do not comprise statutory accounts for thepurpose of S240 of the Companies Act 1985. The 2006 figures are based onunaudited accounts for the year ended 30 November 2006. The comparatives forthe full year ended 30 November 2005 are not the company's full statutoryaccounts for that year. A copy of the statutory accounts for that year has beendelivered to the Registrar of Companies. The auditor's report on those accountswas unqualified and did not contain a statement under section 237 (2) - (3) ofthe Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange