ROL.L Regulatory News (ROL)

RNS

28 July 2017

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, NEW ZEALAND, JAPAN OR ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Rotala Plc

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

Conditional Subscription of 3,333,332 new Ordinary Shares at 60 pence per share to raise approximately £2 million

and

Conditional Placing of 2,500,002 new Ordinary Shares at 60 pence per share to raise approximately £1.5 million

Rotala (AIM: ROL), the provider of bus services and tailored transport solutions, today announces a conditional fundraising, comprising a conditional £2 million Subscription (the "Subscription") and a conditional £1.5 million Placing (the "Placing") to raise approximately £3.5 million, in aggregate, by the issue and allotment by the Company of 5,833,334 New Ordinary Shares at the Issue Price of 60 pence per New Ordinary Share.

Transaction highlights:

· Conditional Subscription to raise £2 million

· Conditional Placing to raise £1.5 million

· Issue Price of 60 p

· Subscription proceeds to fund acquisitions of Hansons (Wordsley) Limited and another privately held bus business which is at an advanced stage of negotiation

· Subscription Shares being issued under existing authorities

· Placing proceeds to be deployed towards further acquisition opportunities in the near to mid-term

· The Placing is subject to, inter alia, completion of the Subscription and Shareholders' approval in General Meeting

John Gunn, Chairman of Rotala, commented:

"The positive start to the year is testament to the progress that the Group is making. Furthermore the contract wins which we have announced so far this year will underpin our performance in the second half. Rotala has a proven track record of steady organic growth supplemented by sensibly priced acquisitions. The acquisition that we are making and the further acquisition that we expect shortly to make with the first stage of this fundraising are in line with this policy and will bolster our presence in the West Midlands and the North West. The follow on acquisitions, if and when completed, will add greater reach to the Group's business in key markets and put the Group in a position where it can look forward to continuing progress in 2018."

Unless otherwise defined, capitalised terms shall have the meaning as those set out in the 'Definitions' section of this announcement.

For further information please contact:

About the business

Rotala provides a range of transport solutions, from local bus services under contract to local authorities, to commercial bus routes. Rotala has operations at Heathrow airport, in the West Midlands, the North West and the South West of England.

IMPORTANT NOTICES

Cenkos Securities, which is authorised and regulated in the United Kingdom by the FCA, is acting as nominated adviser and joint broker to the Company and no-one else in connection with the Subscription and the Placing and Admission. Cenkos Securities will not be responsible to anyone other than the Company for providing the regulatory and legal protections afforded to customers (as defined in the rules of the FCA) of Cenkos Securities nor for providing advice in relation to the contents of this announcement or any matter, transaction or arrangement referred to in it. The responsibilities of Cenkos Securities, as nominated adviser under the AIM Rules for Nominated Advisers, are owed solely to London Stock Exchange and are not owed to the Company or any director of the Company or to any other person in respect of their decision to subscribe for Subscription Shares or Placing Shares.

Dowgate Capital Stockbrokers, which is authorised and regulated in the United Kingdom by the FCA, is acting as joint broker to the Company and no-one else in connection with the Subscription and the Placing and Admission. Dowgate Capital Stockbrokers will not be responsible to anyone other than the Company for providing the regulatory and legal protections afforded to customers (as defined in the rules of the FCA) of Dowgate Capital Stockbrokers nor for providing advice in relation to the contents of this announcement or any matter, transaction or arrangement referred to in it.

Forward-looking statements

Some of the statements in this announcement include forward looking statements which reflect the Directors' current views with respect to financial performance, business strategy, plans and objectives of management for future operations (including development plans relating to the Group's products and services). These statements include forward looking statements both with respect to the Group and with respect to the sectors and industries in which the Group operates. Statements which include the words "expects", "intends", "plans", believes", "projects", "anticipates", "will", "targets", "aims", "may", "would", "could", "continue" and similar statements or negatives thereof are of a forward looking nature.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and therefore are based on current beliefs and expectations about future events. Forward-looking statements are not guarantees of future performance and the Group's actual operating results and financial condition, and the development of the industry in which it operates may differ materially from those made in or suggested by the forward-looking statements contained in this announcement. In addition, even if the Group's operating results, financial condition and liquidity, and the development of the industry in which the Group operates are consistent with the forward looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Accordingly, prospective investors should not rely on these forward-looking statements.

These forward looking statements speak only as of the date of this announcement. The Company expressly disclaims any obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise, unless required to do so by applicable law or the AIM Rules for Companies. All subsequent written and oral forward looking statements attributable to the Group or individuals acting on behalf of the Group are expressly qualified in their entirety by this paragraph. Prospective investors should specifically consider the factors identified in this announcement which could cause actual results to differ from those indicated or suggested by the forward looking statements in this announcement before making an investment decision.

Important information

Neither this announcement nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) or distributed, directly or indirectly, in the United States. Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia, Canada, the Republic of South Africa, New Zealand, Japan or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, South African, New Zealand or Japanese securities laws or the securities laws of any other jurisdiction (other than the United Kingdom). The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe any such restrictions. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for securities in the United States, Australia, Canada, the Republic of South Africa, New Zealand, Japan or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

The securities to which this announcement relates have not been, and will not be, registered under the Securities Act or with any regulatory authority or under any applicable securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of the securities in the United States. The securities have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the securities or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence in the United States. In addition, offers, sales or transfers of the securities in or into the United States for a period of time following completion of the Subscription and the Placing by a person (whether or not participating in the Subscription or the Placing) may violate the registration requirement of the Securities Act.

The securities referred to herein have not been and will not be registered under the applicable securities laws of Australia, Canada, the Republic of South Africa, New Zealand or Japan and, subject to certain exceptions, may not be offered or sold within Australia, Canada, the Republic of South Africa, New Zealand or Japan or to any national, resident or citizen of Australia, Canada, the Republic of South Africa, New Zealand or Japan or any other jurisdiction where to do so might constitute a violation of local securities laws or regulations.

No representation or warranty, express or implied, is made by the Company, Cenkos Securities or Dowgate Capital Stockbrokers as to any of the contents of this announcement, including its accuracy, completeness or for any other statement made or purported to be made by it or on behalf of it, the Company, the Directors or any other person, in connection with the Subscription and the Placing and Admission, and nothing in this announcement shall be relied upon as a promise or representation in this respect, whether as to the past or the future (without limiting the statutory rights of any person to whom this announcement is issued). Cenkos Securities and Dowgate Capital Stockbrokers do not accept any liability whatsoever for the accuracy of any information or opinions contained in this announcement or for the omission of any material information from this announcement for which the Company and the Directors are solely responsible.

Introduction

The Board is pleased to announce a conditional Subscription to raise £2 million (before fees and expenses) by the issue and allotment of 3,333,332 Subscription Shares to certain existing Shareholders at the Issue Price of 60 pence per Ordinary Share. The proceeds from the Subscription will be used to finance the Hansons Acquisition and the Proposed Acquisition.

Furthermore, the Company also announces a conditional Placing to raise to raise an additional £1.5 million (before fees and expenses) by the issue and allotment of 2,500,002 Placing Shares at the Issue Price to investors. The net proceeds from the Placing, subject to approval by Shareholders at the General Meeting, are expected to be deployed towards further acquisition opportunities in the near to mid-term.

The Placing is conditional, inter alia, upon Shareholders approving the Resolutions at the General Meeting, which will grant to the Directors the authority to allot the Placing Shares and the power to disapply statutory pre-emption rights in respect of the Placing Shares.

First Admission in respect of the Subscription Shares is expected to occur at 8.00 a.m. on 2 August 2017. Second Admission in respect of the Placing Shares is expected to occur at 8.00 a.m. on 21 August 2017 or such later time and/or date as Cenkos Securities and the Company may agree, not being later than 28 August 2017. Neither the Subscription nor the Placing are underwritten.

The Subscription is conditional only on First Admission (and therefore not on completion of the Placing) and does not require Shareholder consent.

The Issue Price represents the closing middle market price of 60 pence per Existing Ordinary Share on 27th July 2017 (being the last practicable date before publication of this announcement).

The Circular, which will set out further details of the Subscription, the Placing, the Acquisition and the Proposed Acquisition and will also have attached to it the Notice of General Meeting, is expected to be sent to Shareholders on 31 July 2017.

An expected timetable of principal events and key statistics in relation to the Subscription and the Placing are set out in Appendices I and II to this announcement.

The Placing, but not the Subscription, is conditional on, amongst other things, the passing of the Resolutions to be proposed at the General Meeting. Shareholders should be aware that if the Resolutions are not approved at the General Meeting, the Placing will not proceed.

Background to and reasons for the Subscription and Placing

Company overview

Rotala is a provider of bus services and tailored transport solutions to both public and private sectors in the UK. In recent years the Company has experienced significant growth, primarily through acquisition, and now operates over 600 vehicles and employs approximately 1,500 people. Throughout 2016, Rotala continued to grow through acquisition, acquiring three businesses which expanded the Company's operations at Heathrow airport, a key market for Rotala, as well as providing a stronger foothold in the North West of England. For the year ended 30 November 2016, the Company reported revenues of £55.0 million (FY 2015: £50.9 million) across 8 sites, with an additional estimated annualised revenue of £4.7 million secured in new contract wins during FY 2017 to date. Rotala benefits from strong operational leverage and the Directors believe that its existing asset base is able to support revenues of £85 million.

Industry changes and opportunities

As has been widely reported, the UK bus market is undergoing a period of significant change. Rotala currently has a less than 1 per cent. market share of the estimated £6 billion UK bus market. This is dominated by five large players, Arriva, Stagecoach, FirstGroup, Go-Ahead and National Express, which are estimated to account for, in aggregate, approximately 70 per cent. of the market. The remaining 30 per cent. of the market is held by a large number of smaller independent operators, such as Rotala. Today, operators face market pressures in the form of reduced government subsidies and local authority budgets, more stringent emissions standards and higher specification requirements. These industry changes can adversely affect profitability, particularly for smaller businesses, as well as re-direct resource and investment by the larger operators to focus on the more profitable units within their groups. Rotala aims to capitalise on these ongoing industry changes by consolidating market share from undercapitalised businesses in the sector, creating synergies by integrating those businesses into the Company's existing operations.

Further changes to the industry are expected as a result of the Bus Services Act 2017 (the "Buses Act"), which received Royal Assent in May 2017. In parallel with the Buses Act, regional authorities have been created to take advantage of the anticipated powers that they could inherit as a result of implementation of the Buses Act. The Directors believe an important component of the Buses Act is the possible re-franchising of bus networks in major cities throughout the UK. Rotala currently has a presence in three of those conurbations, Greater Manchester, the South West (Bristol) and the West Midlands (Birmingham).

The Directors believe that re-franchising offers the prospect of considerably increasing market share in these locations where Rotala operates. If the franchising model is employed in these areas then the Directors believe that the current dominant market players will likely have their market shares eroded by new entrants to the market, thus representing a significant opportunity for the Group.

The Directors believe that Manchester will be the first Mayor-controlled local authority outside of London to franchise its bus market and believes that TfGM will want to create similar competition to that seen in London where the franchise system prevails. Representatives of TfGM have begun to consult all bus operators in the region and to collect relevant data from them, under powers granted under the Buses Act. In Greater Manchester, Rotala's overall market share is currently very small and the Directors believe that the Company has good prospects of significantly raising its market share in the future under a franchised market regime. In the South West, Rotala has a more significant market share and is the second largest operator, providing it with a strong foothold from which to increase market share in the future if franchising is introduced into this market. In the West Midlands, though Rotala's market share is again relatively small in a market dominated by one very large operator, the Directors believe that the Company can materially enhance its market share in certain parts of the West Midlands market and thereby improve loadings and operational efficiencies, as Transport for The West Midlands implements the powers accorded to it by the Buses Act.

Acquisition and Proposed Acquisition

In light of the industry changes described above and in line with its growth strategy, Rotala has been exploring acquisition opportunities to expand its existing areas of operation and is currently in discussions with a number of parties in relation to potentially acquiring them. Following a period of due diligence, the Company has entered into a sale and purchase agreement in respect of the Hansons Acquisition (in the West Midlands), which has completed, and expects shortly to enter into a sale and purchase agreement in respect of the Proposed Acquisition which, if entered into, would be the acquisition of a bus business in the Manchester region which is expected to complete towards the end of September 2017 following completion of final TUPE consultations. The consideration for the Hansons Acquisition is £1 million and the expected consideration for the Proposed Acquisition is approximately £1 million, the aggregate of which includes working capital needs and the capital expenditures associated with the Acquisition and the Proposed Acquisition. The Acquisition and the Proposed Acquisition will be financed from the proceeds of the Subscription and are expected to be earnings accretive within the first full year following their completion.

In addition to the Acquisition and the Proposed Acquisition, the Company is exploring other acquisition opportunities, including a further strategic acquisition in Manchester and an airport based hotel bus business. Should they, or other similar opportunities proceed, they would be financed from the net proceeds of the Placing. It is expected that these acquisitions will be completed, if they should proceed, within the current financial year.

Hansons Acquisition

Hansons is based in Stourbridge between two of Rotala's existing depots. The Directors believe that acquisition of Hansons will cement Rotala as the second largest operator in the West Midlands and is expected to strengthen its negotiating position for tendered services in the future. The Company expects to benefit from material synergies upon the integration and rationalisation of Hansons, with an expected Group EBITDA contribution of £0.4 million once integrated. These synergies will be realised primarily from:

· moving Hansons assets across to Rotala's existing depots;

· eliminating surplus overhead; and

· the disposal of Hanson's existing depot.

As at 31 March 2017, Hansons had net assets of approximately £0.4 million and generated revenues and gross profits of approximately £2.0 million and £1.1 million respectively.* The cost of the Hansons acquisition is approximately £1 million, including the necessary working capital and capital expenditure associated with the acquisition, which will be satisfied from the net proceeds of the Subscription.

*Hansons unaudited financial statements for year ended 31 March 2017

The Proposed Acquisition

The Proposed Acquisition comprises a purchase of a freehold site and 18 buses from a business based in Greater Manchester. The Proposed Acquisition would be a strategic acquisition aimed at capitalising on the re-franchising opportunities in Greater Manchester. The Directors believe that, should it complete, it will enable Rotala to significantly grow its operations in this area and potentially double its bus capacity. No additional overheads are expected to be required as a result of the acquisition and the Directors believe that the Company will benefit from additional sales, gross profit and EBITDA contributions of approximately £2.0 million, £0.4 million and £0.2 million respectively under Rotala's ownership, in the first full year following completion of the Proposed Acquisition.

The expected cost of the Proposed Acquisition is approximately £1 million, including the necessary working capital and capital expenditure associated with the acquisition, which will be satisfied from the net proceeds of the Subscription.

Other acquisition opportunities

The Company is also currently in negotiations relating to other acquisitions, all of which are at a preliminary stage, including:

Opportunity A

· A further strategic acquisition in Manchester that could increase Rotala's bus capacity to 200 vehicles, representing approximately 10 per cent. of the local market

· Cost of acquisition expected to be approximately £4.6 million, (financed through equity and debt)

· Estimated revenue and EBITDA contributions of £11.0 million and £0.9 million in the first full year following completion of such acquisition

Opportunity B

· Acquisition of airport based bus business

· Common customer base with existing business

· Would use existing spare depot capacity and overhead

· Cost of acquisition expected to be £2.2 million, (financed through equity and debt)

· Historic sales and EBITDA of £6.1 million and £0.5 million*

*Information provided by target

Use of proceeds

The Company has conditionally raised £2 million, before fees and expenses, through the Subscription and a further £1.5 million before fees and expenses through the Placing. The estimate of expenses for the Subscription and Placing is expected to be approximately £0.2 million. Whilst completion of the Placing is conditional, inter alia, on completion of the Subscription, completion of the Subscription is not conditional on completion of the Placing.

The net proceeds are expected to be used by the Company for the following purposes:

(i) circa £2.0 million towards funding the Hansons Acquisition and the Proposed Acquisition; and

(ii) circa £1.3 million towards funding other acquisition opportunities, including those specific opportunities described above.

Should they occur, opportunities A & B are expected to be financed, in part, by the net proceeds of the Placing. If neither opportunity A nor opportunity B completes, the net proceeds of the Placing are expected to be deployed towards other acquisitions, strengthening the balance sheet and/or for general working capital purposes.

Current Trading and Prospects

The Company today announces the following update on trading for the six months ended 31 May 2017 and on the outlook for the year ending 30 November 2017;

· Revenue up 4.5 % vs. H1 2016 to £28.6 million*

· Improvement in gross profit margin to 19%*

· Profit from operations up 12.1% to £1.96 million*

· Increase reflects benefit from operational gearing as asset utilisation improves; further improvements to come through

· Profit before taxation up 18.1% to £1.34 million*

· Basic adjusted earnings per share up 8.9% to 2.58p*

· Interim dividend increased to 0.85p per share (2016: 0.80p)

· Net debt at half-year end of £25.7 million vs £25.8 million at 31 May 2016

· The contract wins announced in the accounting period in are expected to produce additional estimated revenues of £4.7 million in a full year

· The Company continues to pursue attractive acquisition targets

· Current trading in line with market expectations

\* Trading performance highlights of the Group for six months ended 31 May 2017, before mark to market provision and other exceptional items

The Group has made good progress during the first half of the year. The 4.5% increase in revenues over that achieved in the same period of 2016, leading to the 18% increase in profit before taxation, gives the Board confidence that the Group remains on course to meet market expectations for the financial year.

This confidence is underpinned by the contract wins announced earlier in the year which are expected to make a much more significant contribution to revenues in the second half of the year. The prospects for the full year will continue to support the Group's progressive dividend policy. In respect of the period to 31 May 2017 the board intends to declare an interim dividend of 0.85p per share (2016: 0.80p).

Furthermore the new ticketing technology for the West Midlands, announced in April 2017, is already providing some of the predicted benefits. Communications with both customers and drivers have significantly improved as a result of the better quality of information feed. Operational problems are immediately visible and can be more speedily resolved. The take up of contactless payment, with all the flexibility that offers to passengers, has been noticeably rapid and continues to accelerate.

Looking beyond the current year, the Board remains confident that the Bus Services Act 2017 will provide more opportunities than challenges. Rotala has a proven track record of steady organic growth supplemented by sensibly priced acquisitions. There is currently no shortage of potential targets and the strength of our balance sheet and operational cash flow mean that we are well positioned to build on a strong performance in the current year.

The Company expects to announce its half yearly report in respect of the six months ended 31 May 2017 in August 2017.

Details of the Subscription and the Placing

Details of the Subscription

The Company has conditionally raised £2 million before expenses by the conditional Subscription of 3,333,332 Subscription Shares at the Issue Price to Graham Peacock and Susan Tobbell. The Subscription is conditional on First Admission. Following First Admission, Graham Peacock and Susan Tobbell will each hold 2,741,666 Ordinary Shares in the Company.

Application will be made to the London Stock Exchange for the admission of the Subscription Shares to trading on AIM. It is expected that First Admission will occur and that dealings in the Subscription Shares will commence at 8.00 a.m. on 2 August 2017. Following First Admission, the Company will have 45,526,578 Ordinary Shares in issue carrying voting rights, which excludes 854,338 shares currently held in Treasury that do not carry voting rights.

Details of the Placing

The Company has conditionally raised £1.5 million before expenses by the conditional Placing of 2,500,002 Placing Shares at the Issue Price. The Placing is conditional on, inter alia:

(i) First Admission;

(ii) the passing of the Resolutions at the General Meeting;

(iii) the Placing Agreement becoming or being declared unconditional in all respects and not having been terminated in accordance with its terms prior to Second Admission; and

(iii) Second Admission becoming effective at 8.00 a.m. on 21 August 2017 or such later time and/or date (being not later than 8.00 a.m. on 28 August 2017) as Cenkos Securities and the Company may agree.

If any of the conditions are not satisfied, the Placing Shares will not be issued and all monies received from the Placees will be returned to them (at Placees' risk and without interest) as soon as possible thereafter.

Application will be made to the London Stock Exchange for the admission of the Placing Shares to trading on AIM. It is expected that Second Admission will occur and that dealings in the Placing Shares will commence at 8.00 a.m. on 21 August 2017. Following Second Admission, the Company will have 48,026,580 Ordinary Shares in issue carrying voting rights, which excludes 854,338 shares currently held in Treasury that do not carry voting rights.

Placing Agreement

Pursuant to the Placing Agreement, Cenkos Securities has agreed to use its reasonable endeavours as agent of the Company to procure subscribers for the Placing Shares at the Issue Price.

The Placing Agreement provides, inter alia, for payment by the Company to Cenkos Securities of commissions based on certain percentages of the product of the number of Placing Shares placed by Cenkos Securities multiplied by the Issue Price.

The Company will bear all other expenses of and incidental to the Placing, including the fees of the London Stock Exchange, printing costs, Registrar fees, all legal and accounting fees of the Company and all stamp duty and other taxes and duties payable.

The Placing Agreement contains certain warranties and indemnities from the Company in favour of Cenkos Securities and is conditional, inter alia, upon:

(a) First Admission

(b) the passing of all the Resolutions at the General Meeting;

(c) the Placing Agreement having become unconditional in all respects (save for the condition relating to Second Admission) and not having been terminated in accordance with its terms prior to Admission; and

(d) Second Admission becoming effective not later than 8.00 a.m. on 21 August 2017 or such later time and/or date as the Company and Cenkos Securities may agree, being not later than 8.00 a.m. 28 August 2017.

Cenkos Securities may terminate the Placing Agreement in certain circumstances, if, inter alia, the Company is in material breach of any of its obligations under the Placing Agreement; if there is a material adverse change in the financial position and prospects of the Company; or if there is a material adverse change in the financial, political, economic or stock market conditions, which in its reasonable opinion is or will be materially prejudicial to the successful outcome of the Placing.

Acquisition Agreement and Draft Acquisition Agreement

The Hansons Acquisition

Pursuant to the terms of a share purchase agreement ("SPA") entered into between (1) the vendor of Hansons (the "Seller") and (2) the Company, the Company has acquired from the Seller the entire issued share capital of Hansons (Wordsley) Limited ("Hansons") for a cash consideration of £575,000 paid in full on completion of the SPA. Under the SPA the Seller has provided the Company with certain customary warranties relating to Hansons' business and assets, which are subject to financial and other limitations customary for a transaction of this nature, and further customary warranties as to her title to, and capacity to sell, her shares in Hansons and has also agreed to be bound by certain customary non-compete and non-solicitation restrictive covenants in respect of Hansons' business.

The Proposed Acquisition

Pursuant to the terms of a business purchase agreement ("BPA") expected to be entered into between the vendors of the privately held assets referred to above and Diamond Bus (North West) Limited, a subsidiary of Rotala (the "Buyer"), the Buyer is to agree to acquire a bus and minibus services business which comprises 18 buses, a freehold property in the Manchester area, together with goodwill and the benefit of TfGM bus service contracts, for a cash consideration of £700,000 payable in full on completion of the BPA.

Should the agreement be entered into, completion of the BPA is expected to occur by the end of September 2017, following compliance by the target company with its obligations under the Transfer of Undertakings (Protection of Employment) Regulations 2006.

Under the terms of the BPA, the target company is to provide the Company with customary warranties relating to the business, assets, transferring employees and property, subject to customary financial and other limitations and to commit to carry on the business in the ordinary course pending completion and agreed to be bound by certain non-compete and non-solicitation restrictive covenants relating to the business post completion.

Directors' voting intentions

The Directors, who in aggregate hold 8,455,586 Existing Ordinary Shares, representing approximately 19.6 per cent. of the Existing Ordinary Shares in issue at today's date, intend to vote (or procure a vote) in favour of the Resolutions at the General Meeting.

Directorate changes

It is proposed that Graham Peacock will be appointed to the board following publication of the Company's half year results for the six months ended 31 May 2017. Mr Peacock has significant expertise in the transport services sector and was previously Chief Executive Officer and a substantial shareholder of MRH (GB) Limited, the UK's largest independent owner and operator of petrol stations in the UK, before it was sold to a US private equity firm. Further details in relation to Graham's appointment to the board will be announced by the Company in due course.

Furthermore, the Company announces that Graham Spooner, non-executive director, has been appointed to the post of Deputy Chairman with immediate effect.

General Meeting

The Directors do not currently have authority to allot all of the New Ordinary Shares on a non pre-emptive basis and, accordingly, the Board is seeking the approval of Shareholders to allot the Placing Shares at the General Meeting and to dis-apply pre-emption rights.

A notice convening the General Meeting, which is to be held at the offices of Rotala Plc Hallbridge Way, Tipton Road, Tividale, West Midlands, B69 3HW at 10.00 a.m. on 18 August 2017, will be set out at the end of the Circular, which is expected to be posted to Shareholders on 31 July 2017.

Recommendation

The Directors believe that the Placing and the passing of the Resolutions are in the best interests of the Company and Shareholders, taken as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions.

The Placing is conditional, inter alia, upon the passing of the Resolutions at the General Meeting. Shareholders should be aware that if the Resolutions are not approved at the General Meeting, the Placing will not proceed.

DEFINITIONS

The following definitions apply throughout this announcement unless the context requires otherwise:

APPENDIX I

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Notes:

(i) If any of the details contained in the timetable above should change, the revised times and dates will be notified by means of an announcement through a Regulatory Information Service.

(ii) Certain of the events in the above timetable are conditional upon, amongst other things, the approval of the Resolutions to be proposed at the General Meeting. 

(iii) All references are to London time unless stated otherwise.

APPENDIX II

KEY STATISTICS

SUBSCRIPTION STATISTICS

 PLACING STATISTICS

* assuming both First Admission and Second Admission become effective