29 Aug 2013 07:00
29 August 2013
Rotala plc
("Rotala" or "the Company")
Unaudited Interim Results for the six months to 31 May 2013
Highlights
· Successful acquisition and integration of business in West Midlands
· EPS up 6% to 2.40p per share (2012: 2.27p)
· Net assets per share up 5% to 64p per share (2012: 61p)
· Underpinned by £9.5 million of property and £20.4 million in vehicle fleet
· Interim dividend up by 10% to 0.55 pence per share (2012: 0.50 pence)
For further information please contact:
Rotala Plc | |
John Gunn, Chairman | 020 7602 7500 |
Simon Dunn, Chief Executive | 07825 808 525 |
Kim Taylor, Group Finance Director | 07825 808 529 |
Numis Securities Limited | 020 7260 1000 |
David Poutney (Corporate Broker); Stuart Skinner/Richard Thomas (Nominated Adviser) |
Chairman's Statement
I am pleased to be able to present this interim report to shareholders in respect of the six months ended 31 May 2013. In these six months Rotala has expanded its market share in the West Midlands by the acquisition from First Group Plc ("First") of its depots in Redditch and Kidderminster. The West Midlands is, after London, the second largest bus market in the country and we remain the number two operator there under our "Diamond Bus" banner. In the South West, where we operate as "Wessex Connect", we are also the number two operator. We retain our key market share in Preston and we continue to be one of the leading providers of private bus networks in the country, especially to the aviation industry in the South East.
Results
As I outlined in the statement I made to cover the 2012 full year results, the bus industry remains in an extended phase of considerable change. This period of industry uncertainty began when the Government implemented policy changes and funding cuts, directly or indirectly, after its election in 2010. The full effects of these changes are scarcely yet visible; I am sure that, as a consequence, the bus industry will continue to undergo a searching self-examination of what it does and how it does it. In this Rotala is no different from any other operator. We have responded to the period of change with a hard look at all our operations and taken corrective action where necessary, including withdrawal from routes. We anticipate a continuing need for the same disciplined approach for the foreseeable future, but it is to be noted that, whilst revenues in the first half of 2013 were down on the first half of 2012, they were up on the second half of 2012, even though the business of the group is slightly more weighted to the second half of the year.
· Contracted Services
Revenues in Contracted Services fell overall by 7% compared to the first half of 2012. Reductions were particularly evident in local bus contracts, including those let out by Centro in the West Midlands. This reflects reduced local authority transport budgets not only in the West Midlands but also in the South West. Contracted business in Preston actually increased slightly. We have moreover been careful to avoid taking on in the current climate subsidised bus contracts at uneconomic rates, even if this means shrinking the business in this area. On the other hand income from existing corporate private bus contracts grew strongly, by more than 20% year on year. This demonstrates that we do indeed possess a key strength in this business area. Compared to the second half of 2012, revenues in Contracted Services in the first half of 2013 rose by just over 3%. The Redditch and Kidderminster acquisition will have made a small contribution to this figure.
· Commercial Services
Revenues in Commercial Services, compared to the first half of 2012, also fell by 7%. The severe weather at the beginning of the year had some impact, but this revenue reduction primarily reflects the factors that I mentioned in my 2012 full year statement:
· The reduction in concessionary fares re-imbursement rates;
· The variable revenue element of relinquished local authority contracts;
· Commercial routes cut back or deregistered.
Principally these revenue reductions took place in the West Midlands but there was some impact too in the South West. Encouragingly, even against this backdrop, our own network cards continue to record increases in revenue. Here again, compared to the second half of 2012, revenues for the first half of 2013 were up, this time also by some 3%. The acquisition of the Redditch and Kidderminster depots from First made some initial contribution here but will be more significant to the year as a whole.
· Charter Services
Revenues in Charter Services recorded an overall reduction of 8% when compared to the first half of 2012 and were down compared to the second half of 2012 as well. These reductions reflect the extent to which we have consciously reduced our exposure to this line of speculative business in the last few years. Airline related chauffeur car revenues, which we sub-contract in their entirety, actually rose, but private hire income fell considerably.
Acquisition
At the beginning of March 2013 we acquired from First certain of their bus operations in Worcestershire. For a cash consideration of £1.5 million, we bought two freehold depots, one in Kidderminster and the other in Redditch, 36 vehicles, and various items of plant and equipment. These depot acquisitions added about 100 staff to our workforce. Initially the Office of Fair Trading opened an enquiry into the acquisition but finally announced on 23 August 2013 that this enquiry was at an end and that there would be no reference of the acquisition to the Competition Commission.
The Kidderminster depot comprises a site of some two acres and was purpose built in 2001. It can accommodate up to 60 vehicles. The Redditch depot, built about 35 years ago, has a slightly smaller useable area and can accommodate about 50 vehicles. The two depots enable us to extend our existing route networks on the western side of the Birmingham conurbation.
By integrating these acquired depots into our current depot network, we will in time gain operating efficiencies but the impact on 2013 will be limited. We immediately deployed more than 20 vehicles from our existing fleet in order to be able to take out of service older, inefficient, vehicles and many of those that did not comply with the provisions of the Disability Discrimination Act which begin to come into force in 2014. A certain amount of further investment will be required in replacement vehicles and depot resources to complete the work that is required.
Fuel
Fuel cost remains a significant factor to the business. The policy of the board is to take out fuel hedges or obtain fuel fixes whenever it seems prudent to do so. At the current time about 53% of the fuel requirements of the group out to the middle of 2014 are hedged at about 110p per litre. In the light of current fuel prices, we may seek to take out more cover if opportunities arise at what we consider to be a price suitable to our needs.
Dividend
The Company will pay an interim dividend of 0.55 pence per share (2012: 0.50 pence) on 9th December 2013 to all shareholders on the register on 27th September 2013. The Board is conscious of the importance of dividend flows to shareholders and intends that dividends should grow at least in line with the growth in underlying earnings and free cash flows.
Financial review
I have already highlighted the 7% reduction in revenues period on period. Cost of Sales fell by 8% and so Gross Profits rose slightly compared to the previous period. Administrative Expenses increased by 3% reflecting underlying inflation. Profit from Operations was therefore almost identical to that of 2012. Interest Expense fell slightly and so there was little change in Profit before Taxation at £0.946 million (2012: £0.959 million). Basic earnings per share, after an allowance for the estimated tax charge for the year as a whole, increased by 6% compared to the first half of 2012.
The gross assets of the Group stood at £51.1 million at 31 May 2013, up 10% from the position a year before. This resulted largely from the acquisition of the Redditch and Kidderminster depots from First, as well as the purchase early in 2013 of the freehold of the depot in Avonmouth, Bristol, which we formerly held on lease. Note 4 to this statement contains an analysis of the changes to Property, Plant and Equipment in the first half of the year.
The loans and borrowings of the Group, including its obligations under hire purchase contracts, stood at £20.1 million at 31 May 2013 (2012: £16.1 million). This increase reflects the fact that the freehold and business acquisitions set out above were financed exclusively by debt instruments. As set out in Notes 5 and 6 to this statement, obligations under hire purchase agreements continued to fall to £9.39 million at 31 May 2013, compared to £10.88 million as at 30 November 2012. In order to finance the acquisitions of business and freehold property made in the period, a further £2.1 million was drawn down on the group's Revolving Credit Facility and £1.6 million in additional property mortgages was arranged. These steps will have increased the ratio of total debt to earnings before interest, depreciation and amortisation (pro rata to the full year) temporarily, when compared to 2012, but in time this will come down as cash flow from the acquisition improves.
Net assets reached £22.4 million at the period end (2012: £21.4 million), equivalent to 64 pence per share.
Cash flows from operating activities were very similar to the comparative period, but cash generated from operations was much improved as the working capital absorbed by operations in 2012 began to be released, as I predicted in my 2012 statement. Hire purchase interest paid also continued to fall. Cash used in Investing Activities reflects the acquisition of the Avonmouth freehold and the First business as above. These acquisitions were financed by new loans and mortgages of £3.9 million. The capital element of payments on HP agreements totalled £2.25 million in 2013 (2012: £2.26 million). Far fewer changes were made to the vehicle fleet in the first half of 2013 compared to 2012 and so both the proceeds from vehicles sold and the corresponding HP settlement payments were much reduced. After dividend and interest payments the closing figure for cash and cash equivalents at the end of the period was a borrowing of £0.94 million (at 30 November 2012 a borrowing of £1.41 million).
Outlook
The acquisition of the Redditch and Kidderminster depots from First has expanded the commercial bus revenues of the group, a trend that we intend should continue. Local authority transport budgets will remain under pressure and some further contraction in this area might be expected. However the activity that we have seen in the sector of the market for private bus networks is encouraging and we are confident that we will continue to be successful in expanding this key strand in our business offering.
More generally I expect this phase of volatility and instability in the bus industry to continue for some time. The full effect of government policy changes has yet to work its way through the sector. This makes for a challenging business environment but also will bring much opportunity. Operators, large and small, continue to consider their strategic options and make their choices to divest and withdraw. This is where we are able to add value and enlarge our business by acquisition. The group has a solid financial base and can make good use of this in the current market conditions. There will continue to be ample opportunities for expansion and this gives the Board every confidence about future prospects.
John Gunn
Non-Executive Chairman
29 August 2013
Condensed consolidated income statement | ||||
Notes | Unaudited 6 months ended 31 May 2013 | Unaudited 6 months ended 31 May 2012 | Audited year ended 30 November 2012 | |
£'000 | £'000 | £'000 | ||
Revenue | 2 | 26,665 | 28,522 | 54,813 |
Cost of sales | (22,293) | (24,212) | (45,790) | |
________ | ________ | ______ | ||
Gross profit | 4,372 | 4,310 | 9,023 | |
Administrative expenses | (2,777) | (2,696) | (5,631) | |
_____ | _____ | _____ | ||
Profit from operations | 1,595 | 1,614 | 3,392 | |
Finance expense | (649) | (655) | (1,316) | |
_____ | _____ | _____ | ||
Profit before taxation | 946 | 959 | 2,076 | |
Tax expense | (100) | (157) | (210) | |
_____ | _____ | _____ | ||
Profit for the period attributable to the equity holders of the parent | 846 | 802 | 1,866 | |
===== | ===== | ===== | ||
Earnings per share for profit attributable to the equity holders of the parent during the period | ||||
Basic (pence) | 3 | 2.40p | 2.27p | 5.29p |
Diluted (pence)
| 3 | 2.31p | 2.24p | 5.18p
|
| |||
Condensed consolidated statement of comprehensive income | Unaudited 6 months ended 31 May 2013 | Unaudited 6 months ended 31 May 2012 | Audited year ended 30 November 2012
|
£'000 | £'000 | £'000 | |
Profit for the period | 846 | 802 | 1,866 |
Other comprehensive income: | |||
Actuarial loss on defined benefit pension scheme | (167) | (200) | (1,009) |
Deferred tax on actuarial loss on defined benefit pension scheme | 41 | 50 | 242 |
Other comprehensive income for the period (net of tax) | (126) | (150) | (767) |
Total comprehensive income for the period attributable to the equity holders of the parent | 720 | 652 | 1,099 |
Condensed consolidated statement of financial position | Notes | Unaudited as at 31 May 2013 | Unaudited as at 31 May 2012 | Audited as at 30 November 2012 |
£'000 | £'000 | £'000 | ||
Assets | ||||
Non-current assets | ||||
Property, plant and equipment | 4 | 31,320 | 26,550 | 27,509 |
Goodwill and other intangible assets | 9,482 | 9,482 | 9,482 | |
Deferred taxation | 427 | 382 | 521 | |
_____ | _____ | _____ | ||
Total non-current assets | 41,229 | 36,414 | 37,512 | |
Current assets | ||||
Inventories | 1,905 | 1,372 | 1,892 | |
Trade and other receivables | 7,983 | 8,648 | 8,454 | |
Cash and cash equivalents | - | - | 351 | |
_____ | _____ | _____ | ||
Total current assets | 9,888 | 10,020 | 10,697 | |
_____ | _____ | _____ | ||
Total assets | 51,117 | 46,434 | 48,209 | |
Liabilities | ||||
Current liabilities | ||||
Trade and other payables | (7,177) | (8,016) | (6,228) | |
Loans and borrowings | 5 | (4,869) | (1,013) | (3,550) |
Obligations under hire purchase agreements | 6 | (3,497) | (3,998) | (3,931) |
______ | ______ | _____ | ||
Total current liabilities | (15,543) | (13,027) | (13,709) | |
Non-current liabilities | ||||
Loans and borrowings | 5 | (5,799) | (4,399) | (4,216) |
Obligations under hire purchase agreements | 6 | (5,892) | (6,727) | (6,945) |
Defined benefit pension obligation | (1,463) | (854) | (1,463) | |
______ | ______ | ______ | ||
Total non-current liabilities | (13,154) | (11,980) | (12,624) | |
______ | ______ | ______ | ||
Total liabilities | (28,697) | (25,007) | (26,333) | |
_____ | _____ | _____ | ||
Net assets | 22,420 | 21,427 | 21,876 | |
====== | ====== | ===== | ||
Equity attributable to equity holders of parent | ||||
Called up share capital | 8,818 | 8,818 | 8,818 | |
Share premium reserve | 7,828 | 7,828 | 7,828 | |
Merger reserve | 2,567 | 2,567 | 2,567 | |
Warrant reserve | - | 127 | - | |
Retained earnings | 3,207 | 2,087 | 2,663 | |
______ | ______ | _____ | ||
Total equity | 22,420 | 21,427 | 21,876 | |
===== | ===== | ==== |
Condensed consolidated cash flow statement | Unaudited 6 months ended 31 May 2013 | Unaudited 6 months ended 31 May 2012 | Audited year ended 30 November 2012 |
£'000 | £'000 | £'000 | |
Cash flows from operating activities | |||
Profit for the period | 946 | 959 | 2,076 |
Finance costs | 649 | 655 | 1,316 |
Depreciation | 1,610 | 1,914 | 3,742 |
Gains on sale of vehicles | (136) | (224) | (417) |
Negative goodwill arising on acquisition | (46) | - | - |
Contribution to defined benefit pension scheme | (167) | (200) | (400) |
Equity-settled share based payment expense | - | - | 2 |
____ | ____ | ____ | |
Cash flows from operating activities before changes in working capital | 2,856 | 3,104 | 6,319 |
Decrease/(increase) in trade and other receivables | 400 | (2,097) | (2,663) |
Increase/(decrease) in trade and other payables | 393 | 77 | (721) |
Increase in inventories | (13) | (100) | (620) |
____ | ____ | ____ | |
780 | (2,120) | (4,004) | |
____ | ____ | ____ | |
Cash generated from operations | 3,636 | 984 | 2,315 |
Interest paid on hire purchase obligations | (343) | (489) | (862) |
____ | ____ | ____ | |
Net cash flows from operating activities | 3,293 | 495 | 1,453 |
Cash flows from investing activities | |||
Acquisition of business | (1,571) | - | - |
Purchases of property, plant and equipment | (2,668) | (606) | (1,562) |
Sale of public service vehicles | 864 | 3,480 | 5,656 |
_____ | _____ | _____ | |
Net cash flows (used in)/from investing activities | (3,375) | 2,874 | 4,094 |
Condensed consolidated cash flow statement | Unaudited 6 months ended 31 May 2013 | Unaudited 6 months ended 31 May 2012 | Audited year ended 30 November 2012 |
£'000 | £'000 | £'000 | |
Cash flow from financing activities | |||
Dividends paid | (176) | (141) | (423) |
Proceeds of mortgages and other loans | 3,927 | 620 | 3,735 |
Loan stock repaid | - | (1,337) | (1,337) |
Repayment of bank and other borrowings | (201) | (77) | (1,756) |
Loan stock and bank loan interest paid | (296) | (245) | (501) |
Capital settlement payments on vehicles sold | (452) | (1,641) | (2,535) |
Capital element of lease payments | (2,248) | (2,262) | (5,009) |
_____ | _____ | ____ | |
Net cash from/(used in) financing activities | 554 | (5,083) | (7,826) |
Net increase/(decrease) in cash and cash equivalents | 472 | (1,714) | (2,279) |
Cash and cash equivalents at start of period | (1,410) | 869 | 869 |
_____ | _____ | _____ | |
Cash and cash equivalents at end of period | (938) | (845) | (1,410) |
====== | ===== | ==== |
Condensed consolidated Statement of Changes in Equity | Called up share capital | Share premium account | Merger reserve | Warrant reserve | Retained earnings | Total |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 1 December 2011 | 8,818 | 7,828 | 2,567 | 245 | 1,600 | 21,058 |
Profit for the period | - | - | - | - | 802 | 802 |
Other comprehensive income | - | - | - | - | (150) | (150) |
Total comprehensive income | - | - | - | 652 | 652 | |
Transactions with owners: | ||||||
Release of warrant reserve | - | - | - | (118) | 118 | - |
Dividends paid or declared | - | - | - | - | (283) | (283) |
Transactions with owners | - | - | - | (118) | (165) | (283) |
At 31 May 2012 | 8,818 | 7,828 | 2,567 | 127 | 2,087 | 21,427 |
Profit for the period | - | - | - | - | 1,064 | 1,064 |
Other comprehensive income | - | - | - | - | (617) | (617) |
Total comprehensive income | - | - | - | - | 447 | 447 |
Transactions with owners: | ||||||
Share based payment | - | - | - | - | 2 | 2 |
Release of warrant reserve | - | - | - | (127) | 127 | - |
Transactions with owners | - | - | - | (127) | 129 | 2 |
At 30 November 2012 | 8,818 | 7,828 | 2,567 | - | 2,663 | 21,876 |
Profit for the period | - | - | - | - | 846 | 846 |
Other comprehensive income | - | - | - | - | (126) | (126) |
Total comprehensive income | - | - | - | - | 720 | 720 |
Transactions with owners: | ||||||
Dividends paid or declared | - | - | - | - | (176) | (176) |
Transactions with owners | - | - | - | - | (176) | (176) |
At 31 May 2013 | 8,818 | 7,828 | 2,567 | - | 3,207 | 22,420 |
Notes to the Unaudited Consolidated Interim Accounts for the six months ended 31 May 2013
1. Basis of preparation:
The unaudited condensed consolidated interim accounts have been prepared using the accounting policies set out in the Group's 2012 statutory accounts. The financial statements of the group for the full year are prepared in accordance with IFRS's as adopted by the European Union and these interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting".
2. Turnover:
Revenue represents sales to external customers excluding value added tax. All of the activities of the group are conducted in the United Kingdom within the operating segment of provision of bus services. Management monitors revenue across the following business streams: contracted services, commercial services and charter services.
Six months ended 31 May 2013 | Six months ended 31 May 2012 | Year ended 30 November 2012 | |
£'000 | £'000 | £'000 | |
Contracted | 11,029 | 11,826 | 22,513 |
Commercial | 14,485 | 15,440 | 29,569 |
Charter | 1,151 | 1,256 | 2,731 |
Total | 26,665 | 28,522 | 54,813 |
3. Earnings per share:
Basic earnings per share have been calculated on the basis of profit after taxation and the weighted average number of shares in issue for the period of 35,270,888 (May 2012: 35,270,888; November 2012: 35,270,888). Diluted earnings per share have been calculated on the basis of profit after taxation (adjusted where necessary for the effect of convertible loan stock interest) and the weighted average number of shares in issue (including such potential issues as are dilutive) for the period of 40,548,268 (May 2012: 40,445,625; November 2012: 40,466,552).
4. Property, Plant and Equipment:
|
5. Loans and borrowings:
At 31 May 2013 | At 31 May 2012 | At 30 November 2012 | |
£'000 | £'000 | £'000 | |
Current: | |||
Overdrafts | 938 | 845 | 1,761 |
Revolving credit facility | 3,642 | - | 1,500 |
Mortgages | 289 | 168 | 289 |
4,869 | 1,013 | 3,550 | |
Non- current: | |||
Mortgages | 3,483 | 2,083 | 1,900 |
Convertible loan stock | 2,316 | 2,316 | 2,316 |
5,799 | 4,399 | 4,216 | |
6. Obligations under hire purchase agreements:
At 31 May 2013 | At 31 May 2012 | At 30 November 2012 | |
£'000 | £'000 | £'000 | |
Present value: | |||
Not later than one year | 3,497 | 3,998 | 3,931 |
More than one but less than two years | 2,817 | 2,974 | 3,031 |
More than two but less than five years | 3,075 | 3,753 | 3,914 |
9,389 | 10,725 | 10,876 | |
7. Dividends:
On 7 December 2012 the Company paid an interim dividend of 0.50 pence per share in respect of the year ended 30 November 2012 and a final dividend in respect of the same accounting year on 28 June 2013 at a rate of 0.90 pence per share. All dividends are payable in cash only.
8. Additional information :
The unaudited Consolidated Interim Report was approved by the Board of Directors on 28 August 2013. The consolidated interim financial information for the six months ended 31 May 2013 and for the six months ended 31 May 2012 is unaudited. The financial information in this interim announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts of Rotala plc for the year ended 30 November 2012 have been reported on by the Company's auditors and have been delivered to the Registrar of Companies. The report of the auditors on these accounts was unqualified and does not include a statement under section 496 of the Companies Act 2006.
9. Copies of this statement are available from the registered office of the company at Beacon House, Long Acre, Birmingham, B7 5JJ or the Company's website www.rotalaplc.com.