AGM Statement & Trading Update
19/05/2022 07:00
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RNS Number : 9927L Rotala PLC 19 May 2022
RNS
19 May 2022
Rotala Plc
("Rotala", the "Company" or the "Group")
AGM Statement & Trading Update
Rotala plc (AIM:ROL), an operator of bus routes in the UK for businesses,
local authorities and the general public, provides the following update ahead
of its Annual General Meeting ("AGM") being held later today.
Passenger numbers
At 30 November 2021, passenger numbers stood at between 80% and 85% of
pre-COVID-19 levels, where they have remained so far during the year ending
30 November 2022 ("FY 22"), albeit growing towards the upper end of that
range. However, in certain areas sharper rises in activity levels have been
observed: for example, usage of the "Hoppa" services around Heathrow Airport
has increased considerably since the start of the year in response to much
improved volumes of airline travel. The Board expects passenger numbers to
continue to grow slowly but steadily for the remainder of FY 22.
Current trading
The Group continues to trade in line with budget for FY 22. The Board's base
assumption for the year was the trend in passenger numbers described above.
Given this assumption, the Board sees no reason to revise its judgement that a
break even result at the normalised pre-tax profit line is to be expected for
FY 22 as a whole.
Acquisitions and new business
So far in FY 22, the Company has made two small acquisitions in the West
Midlands. The first was the bus business of Claribel Coaches Limited
("Claribel") which completed on 22 April 2022. Claribel was a bus operator
with recurring annual revenues of approximately £0.6 million in the eastern
part of Birmingham. Through its Diamond Bus subsidiary, Rotala acquired the
business and 18 vehicles for a total consideration of £339,000 payable in
cash. No other assets or liabilities were assumed. On completion, the acquired
business was immediately transferred to, and integrated within, the Group's
existing depot infrastructure in the West Midlands.
On 29 April 2022, the Company announced the acquisition of the bus business of
Johnsons (Henley) Limited together with 20 vehicles for a cash consideration
of £936,000 payable on completion which is expected to occur on 29 May 2022.
The acquisition is expected to be earnings enhancing from completion. The
business is a well-established operator of commercial and contracted bus
services in Warwickshire and the southern West Midlands with estimated
recurring annual revenues of approximately £3.5 million. Rotala will not
assume any other assets or liabilities of any materiality on acquisition.
As with Claribel, following completion, the acquired business will be
subsumed into the Company's Diamond Bus business and operate out of its
existing Redditch depot. The acquisition will extend the Group's network of
bus services in Warwickshire and the West Midlands and make more efficient use
of the capacity of the Company's Redditch depot.
Finally, the Company is pleased to announce the award by Lancashire County
Council of a three-year contract to its Preston Bus subsidiary to run services
in the Lytham St Anne's area. This contract has estimated annual revenues of
£1.04 million .
Bus franchising in Manchester
On 25 March 2021, the Mayor of Greater Manchester made the formal decision to
franchise the bus market in the Greater Manchester region. The Company made an
immediate claim to the High Court to judicially review a number of aspects of
the consultation process carried out by the Greater Manchester Combined
Authority which led up to the decision of the Mayor to franchise the bus
network. On 9 March 2022, Mr Justice Julian Knowles rejected these arguments,
dismissed the claim and refused to give leave to appeal. The Company decided
to apply to the Court of Appeal to seek permission to appeal the decision to
the Court of Appeal. As previously announced, the Court of Appeal has now
granted leave to appeal on certain aspects of the case. The appeal hearing is
expected to take place before August 2022.
Government support
The Department for Transport ("DfT") recently announced awards under its Bus
Service Improvement Plan ("BSIP") scheme, which is part of the Government's
National Bus Strategy. A number of the local authorities in which the Group
operates were awarded funds under this scheme, including Greater Manchester,
the West Midlands and Lancashire. The next stage is that the local authorities
concerned must develop, with the support of bus operators, detailed schemes
for further submission to the DfT. While the effect of these awards on
Rotala's businesses cannot yet be known in detail, the overall position is
clearly positive.
The DfT also recently announced the extension of its Bus Recovery Grant
("BRG") scheme, which was originally due to expire in early April 2022, with a
further £150 million package under the same scheme covering the period up to
October 2022. However, at the same time, concessionary fares' re-imbursement
levels are being gradually adjusted to reflect actual travel patterns such
that by the end of 2022 the re-imbursements received will represent actual
concessionary passenger usage.
Outlook
During the pandemic, the Board decided to focus on cash conservation and debt
reduction as it anticipated that the extensive support offered by the
Government during the pandemic would lead many bus operators to defer
decisions that would or should otherwise have been taken. In contrast, the
Board's objective was to emerge from the pandemic with a robust balance sheet,
fit for the post-COVID-19 bus industry, whatever shape that turned out to be.
As the UK bus industry emerges from the pandemic, the Board believes that the
post-pandemic recovery phase is likely to involve the general overhaul of bus
networks and rationalisation amongst bus operators. The Board believes that
evidence for this is to be found in the current stream of bus businesses for
sale, many in a distressed condition. The Board anticipates therefore a phase
of renewed turbulence in the bus industry, as it copes with these factors,
which should bring a healthy flow of opportunities to Rotala for both organic
growth and acquisitions in the remainder of the year and beyond.
John Gunn, Non-executive Chairman of Rotala, commented: -
"We have been able to make two acquisitions this year because we
concentrated on cash conservation and debt reduction during the COVID-19
pandemic and subsequently negotiated an improved package of banking facilities
which we announced at the time of our FY21 results. The end of the pandemic
and return to normal commercial conditions is now obliging business owners to
take the decisions which they have been deferring for the last two years. This
is going to produce turbulent conditions in the bus industry in the short
term, but should bring Rotala further acquisition opportunities of which, with
our ample unused banking facilities, we are very well placed to take
advantage."
Rotala Plc 0121 322 2222
John Gunn, Chairman
Simon Dunn, Chief Executive
Kim Taylor, Group Finance Director
Shore Capital 020 7408 4090
Tom Griffiths / James Thomas / Michael McGloin (Corporate Advisory)
Henry Willcocks (Corporate Broking)
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.
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