ROL.L Regulatory News (ROL)

4 February 2016

Rotala plc

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

Pre-close Trading Statement

Rotala is pleased to announce the following update on trading for the year ended 30 November 2015 and prospects for the current year ending 30 November 2016.

Year ended 30 November 2015

Pre-tax profits, on a slightly reduced level of turnover and before exceptional items, were broadly in line with management expectations. Exceptional items are largely comprised of the mark to market provisions for the derivative-based fuel hedges which the Company has taken out to cover its future fuel requirements. Mark to market provisions must be taken to profit or loss every year, but the fuel hedges are in reality in place to benefit the business in the future. The current position on fuel hedges is set out in detail below.

Acquisitions

During the year ended 30 November 2015 the Company made two acquisitions, Green Triangle Buses Limited and the Wings Luxury Travel business. Shortly after the year end the Heathrow business of OFJ Connections Limited was acquired for a consideration of £1.3m. These acquisitions have considerably strengthened our business offering in the North West and in the Heathrow area.

Cash flows and Net Debt

Operating cash flows remain strong. Net debt, which at 30 November 2014 stood at £18.4m, rose to £22.7m as at 30 November 2015. The causes of this increase in debt were the two acquisitions made in the year, investment in freehold property and the programme of share buy backs for holding in treasury. Shortly after the year end, the Group was able to dispose of a depot surplus to requirements and, at the same time, significantly to extend the size of another key depot in the West Midlands. The net effect of these transactions was to reduce debt by £2.1m.

Fuel Hedging

The board's stated policy is to create certainty over the Group's fuel costs by hedging the total fuel requirement, whenever it seems prudent to do so. The board's view is that hedging the fuel requirement is a prudent and conservative approach which reduces the volatility of underlying earnings and cash flows whilst also giving certainty to business planning and financial forecasts. The board therefore has continued to take out fuel hedges against the fuel requirements of the Group, at the present time up to November 2018. Currently the annual fuel requirement of the group is about 11 million litres.

The coverage of the group's fuel hedges over the next three years is as follows:

· For 2016 the Company has in place hedges against about 90% of its fuel requirement for the year at an average price of about 101p a litre;

· For 2017 the Company has in place hedges against about 85% of its fuel requirement for the year at an average price of about 95p a litre;

· For 2018 the Company has in place hedges against about 88% of its fuel requirement for the year at an average price of about 91p a litre.

For the year ended 30 November 2015 the average cost of fuel to the group was about 108p a litre. The board will continue to monitor market conditions closely and take out such further fuel hedges as it deems are appropriate to meet its objective of reducing volatility and creating business certainty.

Dividends

In view of the government's recent changes to the taxation of dividends receivable by private individuals, the Company intends to pay a second interim dividend in respect of 2015 on 30 March 2016 at a rate of 1.375 pence per share to all shareholders on the register on 4 March 2016. The board will not recommend a final dividend at the Annual General Meeting in May 2016. The total dividend for 2015 will therefore be 2.10 pence per share (2014: 1.85 pence).

Prospects for 2015 and beyond

Trading for the current year has begun in line with budget. Following the three acquisitions which have been made in the last ten months, turnover in the current year should show a return to growth. This will not be at the expense of margins, which, given that the policy of the board is not to pursue low margin business for the sake of it, have shown a steady improvement over recent years. The Group remains conservatively geared and possesses ample facilities to make any further acquisitions that may arise. The Group performed well in 2015, and, with a strong management team and an excellent base of operating facilities and tangible assets, is well placed to take advantage of continuing developmental change in the bus industry.

John Gunn, Chairman, said:

"The current financial year has begun positively. Hedging our fuel requirements for three years ahead underpins the board's commitment to a progressive dividend policy which reflects improvements to underlying earnings and cash flows.

We have made considerable strides in the last twelve months to reshape our depot footprint to conform to anticipated requirements, at the same time as making a number of key acquisitions. This leaves the group well placed in 2016 and beyond. Our asset cover remains strong and we have a good geographical spread of businesses and activities which offer protection against any renewed local authority control of bus services through the prospective Buses Bill.

We also have a good track record of successfully making incremental acquisitions at sensible prices. Government policy towards the bus industry continues to drive change, but this uncertainty does bring opportunity to groups like ourselves and consequently I do anticipate further acquisition activity in the current year."

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