ROL.L Regulatory News (ROL)

RNS

16 December 2021

Rotala Plc

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

Trading Update

Rotala plc (AIM:ROL), an operator of bus routes in the UK for businesses, local authorities and the general public, announces the following trading update on its results for the year ended 30 November 2021 ("FY 21"). The audited full year results announcement, for FY 21, is expected to be released in March 2022.

Outturn for the year

It has been the case since the beginning of the COVID-19 pandemic that, given the support measures which the Government put in place for the bus industry, the Group would be expected to make neither a profit nor a loss at the normalised level for any accounting period. The Company can now confirm that this was indeed the outcome for FY21 and that it expects, subject to audit, to announce a profit before tax of approximately £0.3 million (2020: loss £4.8 million) and turnover of approximately £96.5 million (2020: £78.0 million), up c. 24% year on year.

Passenger numbers

In the lockdown period at the very beginning of FY 21, passenger numbers fell to about 25% of those seen in more normal times throughout 2019. Subsequently, passenger numbers rose steadily through the spring and summer and stabilised at about 60% to 65% of pre-COVID-19  levels. The relaxation of the remaining COVID - related restrictions in the late summer, combined with the beginning of the new school year in September 2021 saw passenger numbers resume their upward ascent and, by the end of FY 2021, they stood at between 80% and 85% of pre-COVID-19  levels.

Operational update

As a consequence of the variability of passenger numbers in response to Government policy, but in accordance with its desire to see bus service provision maintained at pre-pandemic levels, the Government sought to support the financial and operational performance of the bus industry with a variety of financial measures at local and national level. Initially the Government grant package was delivered principally through a specific grant ("CBSSG Restart"), combined with the maintenance of the Bus Services Operator's Grant, concessionary fares re-imbursements and payments for contracted bus services broadly at their pre-COVID-19 levels. CBSSG was a grant which was designed to offset any losses incurred by a bus operator in running the bus services desired by central and local government. The effect of these measures was that bus operators were guaranteed to make neither a profit nor a loss at the normalised statutory pre-tax profit line for as long as the support package was in place.

CBSSG ended on 31 August 2021 and was replaced by a fresh support package called Bus Recovery Grant ("BRG"). In contrast to CBSSG, BRG is designed to compensate bus operators for the absence of revenue whilst passenger numbers continue their recovery back to pre-pandemic levels. BRG will cover the period from 1 September 2021 to the end of the Government's financial year in early April 2022. At that point, the balance of the £3 billion in new investment set out by the Government in its National Bus Strategy document will become available. Under this strategy, all local authorities have been required to write Bus Service Improvement Plans ("BSIPs") and submit them to the Department for Transport. In essence, BSIPs are bids for allocations of the £3 billion of investment available under the National Bus Strategy. The allocation of the new investment money has currently not been announced. In addition, from the beginning of April 2022, concessionary fares' re-imbursement levels will slowly be adjusted to reflect actual travel patterns such that by the end of 2022 the re-imbursements received represent actual concessionary passenger usage.

Working capital and debt

From the commencement of the COVID-19 crisis, the Board has concentrated on the conservation and management of the Group's cashflow. As a consequence, cash flow, both at EBITDA level and net of all debt, interest and other payments, has been positive since very shortly after the pandemic began. Before the advent of the COVID-19 pandemic new systems to control parts, stocks and digitalise engineering and maintenance spend had begun to be implemented. These new systems are now in full use and have reduced inventories, and thus working capital, in FY21 by £2.4 million compared to the previous year.

Net debt (excluding hire purchase debt) therefore declined gradually over FY 21 and, as at 30 November 2021, was approximately £16.62 million (30 November 2020: £25.7 million), down 35% during the year. The amounts drawn on the Company's revolving commercial facility at 30 November 2021 stood at £7.6 million (30 November 2020: £16.2 million); mortgage debt at 30 November 2021 was £5.86 million (30 November 2020: £6.27 million); and drawings on the Company's £4.5 million overdraft facility were £3.16 million (30 November 2020: £3.3 million). As a consequence of the close management of its cashflow, the Company did not at any stage of the COVID-19 crisis need to avail itself of a loan under the various Government-backed loan schemes.

The Group's trade and other receivables of approximately £22.0 million at 30 November 2021 (30 November 2020: £22.3 million) have, as at the end of FY2020, been inflated by the amounts receivable from the Department for Transport under the CBSSG and BRG programmes set out above, which are the subject of lengthy reconciliation exercises. Once these exercises have been completed, the Board expects working capital to fall and facilitate further reduction in drawings on the Company's revolving commercial facility such that, by 31 May 2022, this facility, which currently stands at £13.2 million, is completely undrawn.

Hire purchase debt and fleet management

The COVID-19 pandemic delayed the delivery of the replacement buses for the Company's Bolton depot which were ordered as part of the plan drawn up at the time of the acquisition of the depot from First Group plc in August 2019. The remainder of the vehicles ordered were delivered during 2021. Following the completion of this planned re-equipment, the Board does not foresee any requirement, unless for specific new business, to acquire any further vehicles until FY 2023. Therefore, hire purchase debt, which totalled £39.9 million at 30 November 2021 (30 November 2020: £37.1 million), stood at its peak at that date and will reduce substantially over the next year such that, by 30 November 2022, hire purchase debt levels are forecast to be approximately £33.0 million.

When acquiring any vehicle new to the fleet, the Board has always been acutely conscious of its emission standards. At the same time the capability of buses driven by non-diesel propulsion systems has continued to improve and their operating costs to become increasingly attractive when compared to their diesel predecessors. Part of the Government's National Bus Strategy includes the subsidy of the introduction of 4,000 new zero-emission vehicles. Consequently, the Board believes that it is unlikely that circumstances will now arise in which it will buy new diesel buses in preference to battery-electric buses or buses propelled by other fuels. Diesel driven vehicles will therefore gradually disappear from the Group's fleet such that, in a decade or so, none of the buses in service will possess diesel engines. At that point, the Group will have reached Net Zero in its operations.

Commenting, Simon Dunn, Chief Executive of Rotala, said: -

"Since the onset of the COVID-19 pandemic, Rotala has deliberately concentrated on reducing its unsecured debt, economising on its use of working capital and improving its operational capability. The advent of the Government's National Bus Strategy, combined with the stresses and strains caused by the pandemic, will, I believe, bring with it renewed opportunities for both organic growth and acquisitions. As a result of the Board's focus on cash conservation and debt reduction, we have access to ample unused banking facilities and so are very well placed to take advantage of these opportunities as they arise. Although there remains some uncertainty around the timing of a recovery, we continue to invest in the business and I believe we are well placed to create value over the long-term."

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.