Final Results
09/05/2023 07:00
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RNS Number : 6668Y Rotala PLC 09 May 2023
9 May 2023
Rotala plc
("Rotala", the "Company" or the "Group")
Final results for the year ended 30 November 2022
Rotala plc (AIM:ROL), a provider of transport solutions across the UK, is
pleased to announce its audited final results for the year ended 30 November
2022.
Highlights
· Passenger numbers at 90% to 95% of pre-COVID
levels
· DfT support continues through Bus Recovery Grant
· Commercial revenues recovered strongly when COVID
restrictions lifted
· Working capital reduced by receipt of previous
years' Government grants
· Target for level of net debt (less than £40m at
year end) successfully met
· Sale of Bolton depot and the majority of the
fleet based there to be accomplished during FY 2023 (subject to shareholder
approval)
· Post-COVID opportunities for both organic growth
and growth by acquisition
· Proposed final dividend of 1.0p per share
For further information please contact:
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 / Lucy Bowden (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, Diamond Bus (East Midlands) Ltd, Hallmark Connections Ltd and
Preston Bus Ltd.
CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS
I am pleased to be able to make this report to the shareholders of Rotala Plc
for the year ended 30 November 2022 ("FY 2022"). After the disruption of the
last two years, caused by the COVID-19 pandemic, patterns of bus operation
have begun to stabilise, though are still underpinned by grants and subsidies
provided by the Department for Transport ("DfT") and local
authorities.
Government support
In mid-2021 the DfT replaced its initial support scheme for bus services
during the pandemic with a new scheme called "Bus Recovery Grant" ("BRG").
This scheme focuses on compensating bus operators for the absence of revenue
whilst passenger numbers continue their recovery back to pre-pandemic levels.
The period to be covered by BRG has been extended several times and the latest
announcement from the DfT has set a new termination date of 30 June 2023.
The other key measure of support comes from local authorities. With the
encouragement of the DfT, concessionary fares re-imbursements, which are
controlled by local authorities, have been maintained broadly at pre-COVID
levels, subject to a variety of adjustments for actual service levels and
miles driven, and do not yet reflect actual passenger usage. It is expected
that this form of support will gradually be tapered down to reflect actual
travel patterns during the year ending 30 November 2023 ("FY 2023").
Passenger numbers
Passenger volumes have yet to recover to pre-COVID 19 levels. At the start of
FY 2022 passenger numbers ranged between 80% and 85% of pre-COVID levels, but
continued to grow slowly and steadily throughout the year. Nationally for the
bus industry, passenger volumes remain at about 85% of those levels. However,
the company's own operations have outperformed the market and have reached 90%
to 95% of pre-COVID 19 levels. Whilst some of the absence of passenger volume
may be ascribed to the reduction in commuter traffic occasioned by the desire
to "work from home", in the case of the bus industry, the principal issue is
that concessionary cardholders (largely pensioners) have not returned to their
previous travel habits. Recent industry reports make it clear that this is a
matter of confidence in travel by bus rather than any other factor. Full
recovery in bus passenger numbers will depend on concessionary card holders
regaining their former confidence in travelling by bus. The board therefore
expects passenger numbers to continue to increase only slowly.
Revenues
FY 2022 FY 2021 FY 2020
£' million £' million £' million
Commercial 53.8 31.7 31.6
Contracted 21.3 16.2 16.5
Total Commercial and Contracted Revenue 75.1 47.9 48.1
Charter 1.1 0.7 0.6
Grants and subsidies 8.7 47.9 29.4
Total Revenue 84.9 96.5 78.1
The recovery in passenger numbers and the gradual reduction in Government
support are reflected in the breakdown of revenues in the above table. Bus
operation in each of the years ended 30 November 2020 and 2021 ("FY 2020" and
"FY 2021") was conducted under the burden of various COVID-related
restrictions, but in FY 2022 commercial revenues recovered sharply, as these
restrictions had fallen away by the start of the year, and passenger numbers
responded accordingly. Grants and subsidies in FY 2022 were also much lower
than in the two previous financial years as bus service levels were no longer
mandated and paid for by Government and normal commercial operation returned.
The peak of Government support for the bus industry was reached in the first
half of FY 2021, fell slowly in the second half of that year, and declined
substantially in FY 2022.
Contracted revenue, largely derived from tendered bus contracts operated for
local authorities, was much less sensitive to COVID restrictions. The company
was particularly successful in expanding this area of its business during FY
2022 in both the West Midlands and the North West. These trends have continued
so far in FY 2023. Charter revenue is always highly variable, but rebounded
substantially in FY 2022 as interest in ad hoc leisure travel recovered.
Overall total revenues in FY 2022 were £84.9 million, compared to £96.5
million in the previous year.
Financial results
FY 2022 FY 2021 FY 2020
£' million £' million £' million
Operating profit/(loss) 4.2 3.4 (2.6)
Loss before taxation and exceptional items (1.1) (1.3) (0.8)
Profit/(loss) before tax and after exceptional items 2.0 0.3 (4.8)
Unlike the preceding forms of Government support, BRG does not demand that a
bus operator makes neither a profit nor a loss. As passenger numbers have
slowly recovered, so the company has benefited from a corresponding increase
in operating profits. The board anticipated that FY 2022 would be a year of
transition as Government support packages declined in value and the group
realigned itself towards the "new normal". The group traded in line with its
budget for FY 2022. The board believes that the group is now well positioned
to return to profitability in FY 2023 at the normalised pre-tax line.
Profit before tax after exceptional items fluctuates principally as a result
of the marking to market of the group's fuel derivative position (which
produced profits of £2.6m in FY 2022 and £1.8m in FY 2021). In addition in
FY 2022 a profit of £0.6 million was recorded on the sale of a surplus
leasehold property. Note 3 to this announcement contains a full analysis of
the composition of exceptional items.
Working capital
FY 2022 FY 2021 FY 2020
£' million £' million £' million
Inventories 1.2 1.1 3.5
Trade and other receivables 8.2 21.8 22.3
Trade and other payables (9.2) (6.2) (8.3)
Total working capital 0.2 16.7 17.5
The group's trade and other receivables of approximately £21.8 million at 30
November 2021 and £22.3 million at 30 November 2020 were inflated by the
amounts receivable from the DfT under the various Government bus industry
support schemes, which were the subject of lengthy reconciliation exercises.
During FY 2022 these exercises were completed and all grants were received in
cash. The working capital invested in trade and other receivables therefore
fell steeply. Government support also called for payment terms on trade and
other payables to be accelerated. The company has now reverted to its standard
payment terms, which explains why trade and other payables have increased in
FY 2022. Overall total working capital has fallen for the time being to very
low levels. However, as the group increases its exposure to contracted
services in the West Midlands and North West (as is set out in more detail
later in this statement), more working capital will be absorbed in order to
finance this type of revenue.
Total net debt (including hire purchase debt)
FY 2022 FY 2021 FY 2020
£' million £' million £' million
Revolving commercial facility drawn nil 7.6 16.2
Mortgage debt 5.4 5.9 6.3
Hire purchase debt 33.4 39.9 37.1
(Cash)/overdraft net of cash (1.2) 3.2 3.3
37.6 56.6 62.9
In accordance with its stated strategy, during the COVID-19 pandemic, the
board focused on cash generation and debt reduction. The board set a target
for the company's total net debt to be at or below £40 million at 30 November
2022. This target was successfully met.
The release of working capital occasioned by the receipt of the grants and
subsidies described above enabled the group to significantly reduce its
drawings on its revolving commercial facility ("RCF"). In March 2022, the
company also announced that it had signed new banking facilities with its
principal bankers, HSBC Bank plc; these facilities include an RCF of up to
£17 million. This leaves ample resources to fund future organic growth and
acquisitions. Mortgage debt continued to amortise according to its stated
terms.
The COVID-19 pandemic delayed the delivery of the replacement buses ordered as
part of the company's acquisition of the Bolton depot from First Group plc in
August 2019. The remainder of the vehicles ordered were delivered during FY
2021 and this is primarily why hire purchase debt peaked in that year. The
group acquired a number of suitable second hand vehicles in FY 2022, but no
new ones and so added no fresh hire purchase debt in the year. In FY 2023 hire
purchase debt levels will be much changed by the developments in Greater
Manchester, described in detail below. The board does not anticipate the need
to acquire any new vehicles in FY 2023, unless for new business.
Acquisitions
During FY 2022 the group made three acquisitions. First, in April 2022, it
acquired the bus business of Claribel Coaches Limited, operating in the
eastern area of Birmingham, and its 18 related vehicles, for a total cash
consideration of £339,000. Then in May 2022 the group acquired the bus
business of Johnsons (Henley) Limited and a 20-strong vehicle fleet, for a
total cash consideration of £1,016,000. This business was a well-established
operator of commercial and contracted bus services in Warwickshire and the
southern West Midlands. Rotala did not assume any material liabilities with
these acquisitions and there was no associated goodwill. Both businesses
were, following acquisition, immediately subsumed into the group's Diamond Bus
business operating throughout the West Midlands and the services were
rebranded into Diamond Bus livery. The acquisitions therefore extended the
group's network of bus services in Warwickshire and the West Midlands and made
more efficient use of the capacity of the group's existing depots in the
region.
In August 2022 the company acquired the entire issued share capital of Midland
Classic Limited ("Midland"), the principal bus operator in Burton-upon-Trent
for a total cash consideration of £2 million. In addition, on completion,
Rotala paid approximately £577,000 in cash to one of Midland's shareholders
to repay an existing loan of the same sum. Midland operates about 60 vehicles
from its freehold depot in Burton-upon-Trent and employs approximately 120
staff. Besides operating in Burton-upon-Trent, Midland provides bus services
to other nearby towns such as Uttoxeter, Ashby-de-la-Zouch and Lichfield. The
acquisition extended the group's business to a new territory in the East
Midlands from which further growth will be targeted. Operationally, Midland
(which has now been renamed Diamond Bus (East Midlands) Limited) is part of
Rotala's Midlands division and is controlled from the company's headquarters
at Tividale, Oldbury.
Franchising in Greater Manchester
On 23 December 2022, the company released an announcement about developments
in the franchising scheme for Greater Manchester. That announcement should
be consulted for greater detail, but the principal points are summarised
below.
In March 2021, the Mayor of Greater Manchester made the decision to exercise
his power to suspend the deregulated commercial bus market in his area through
the introduction of a franchising scheme. The first tranche of the scheme is
expected to begin operation in late September 2023. In the tender process for
this first tranche of the franchising scheme, which covers the company's bus
depot in Bolton, together with its related bus operations, the company was not
successful in its bids for either of the large franchise areas covering Bolton
and Wigan. However, the company was successful in winning seven out of the
nine available small franchises in the same areas which have a combined annual
revenue of approximately £18.7 million. These small franchises are for
periods of between three and five years. As a result, the net effect on the
group is expected to be a decline in its annual revenues in the Greater
Manchester area of approximately £6 million, principally effective from the
year ending 30 November 2024.
As a consequence of these developments, the company has agreed to dispose of
its Bolton depot and the majority of the bus fleet based there in two separate
stages, subject to shareholder approval. First the company has agreed to
sell its Bolton bus depot to the Greater Manchester Combined Authority
("GMCA"), with all its associated fixtures, fittings, plant and machinery.
Second the company has agreed to place the majority of the bus fleet
currently based at the Bolton depot into a notional asset pool ("Residual
Value Mechanism" ("RVM")) created by Transport for Greater Manchester ("TfGM")
as part of the franchising arrangements. Under this scheme TfGM allocates
buses in the asset pool to the incoming franchise operators. The successful
franchise bidder is then obliged to acquire the vehicles allocated to it in
the notional asset pool at the value determined by TfGM under the RVM.
The mortgage and hire purchase finance debt associated with these assets will
be repaid out of the proceeds of their sale. However, the award of the seven
small franchise contracts referred to above will require the company to
purchase 60 new diesel buses, as specified by the relevant contracts, at a
total cost of approximately £11.9 million, which will be financed by new hire
purchase debt. The remaining vehicles in the Bolton fleet will be retained
within the group for on-going work.
The overall effect of these transactions on the group is that, subject to
signing conditional sale and purchase agreements and obtaining shareholder
approval for these transactions, it will receive aggregate cash consideration
of approximately £30.5 million for the assets included within the two
disposal stages outlined above. The total net book value of these assets at
their dates of sale is estimated to be approximately £23.0 million.
As the total consideration receivable for these disposals is material when
compared to the company's market capitalisation, pursuant to Rule 15 of the
AIM Rules for Companies, the approval of the company's shareholders in a
general meeting will need to be obtained prior to the completion of the sale
of the Bolton depot and the Bolton bus fleet. At the general meeting, the
board intends to recommend to shareholders that they approve the relevant sale
transactions, and the directors intend to irrevocably commit their own
shareholdings in favour of approving any such transactions. Further
announcements regarding these disposals will be made and a circular sent to
shareholders in due course.
In the period from completion of the disposal to the GMCA of the company's
Bolton bus depot to the commencement of the Bolton franchise by the successful
franchise winner, which is expected to be in late September 2023, the group
will continue to operate from the Bolton depot and carry out all the bus
services which it currently runs from that depot. To facilitate this, the
company has agreed to lease back from the GMCA, at a nominal rent, the Bolton
depot, and all other assets necessary to support the continued operation of
bus services from the bus depot until the formal commencement of the Bolton
franchise in late September 2023. At that point the short-term lease will
terminate.
These changes in the company's operations in Greater Manchester do not
preclude the company from bidding for the franchises which cover the
north-east and southern areas of the TfGM region. The company has already
successfully completed the pre-qualification stages for participation in these
two further franchise rounds and submitted bids in the second round of
franchising which is currently underway.
New contracts won in the West Midlands
Rotala has continued to work in partnership with Transport for the West
Midlands ("TfWM") and other bus operators to optimise the existing overlaps on
commercial routes to make sure that service frequencies are properly married
to current passenger volumes. At the same time, in response to current
Government policy and local needs, the size of the tendered services market
has continued to grow. The company has participated fully in the recent tender
rounds for contracts of this type and has won several new contracts such that
it expects annualised revenues in this region to increase by approximately
£2.9 million. These new contracts, which commenced on 1 January 2023, have
durations of between one and four years. Since vehicles which were formerly
used on commercial routes will be redeployed on tendered routes, the vehicle
numbers used in the company's operation in the West Midlands will remain
roughly the same and the new work will not necessitate the purchase of any new
vehicles.
Tender Offer
The disposals outlined above are anticipated to realise capital of which the
company has no current need. Therefore the board decided to return this
surplus capital to shareholders and, after due consideration and consultation,
concluded that the best and most efficient way to do this was by means of a
Tender Offer. This Tender Offer was announced on 26 January 2023 and fully
described in a circular to shareholders of the same date. This circular should
be consulted for the full details of the Tender Offer and the background and
reasons for its launch. In summary the Tender Offer proposed that the company
would buy back up to £10 million of its own shares at a price of 55p per
ordinary share. The Tender Offer was fully taken up and a total of 18,181,818
shares were acquired by the company at a cost of £10 million. Of these shares
13,993,134 were cancelled and 4,188,684 were taken to treasury to cover any
potential issues of ordinary shares in respect of the outstanding share
options. Immediately after the Tender Offer closed on 16 February 2023, a
total of 5,910,000 ordinary shares was held in treasury.
Share buyback
On 23 March 2022 the company announced that it would commence a Share Buy Back
programme in accordance with its existing authorities. Those authorities were
renewed at the Annual General Meeting ("AGM") held on 19 May 2022. So far
under this programme the company has acquired 921,316 ordinary shares at a
total cost of £273,000. This programme is separate from the Tender Offer
described above and the resolution passed at the 2022 AGM remains valid. It is
intended that this resolution will be renewed at the forthcoming AGM. In
accordance with accounting standards, the cost of the shares acquired in this
manner has been written off to reserves. A total of 1,721,316 shares was held
in treasury at 30 November 2022.
Dividend
In April 2022, the Company, as it resumed dividend payments post the pandemic,
paid a special interim dividend of 1.0p per share. At the same time, the board
stated its intention to return to its former policy of maintaining 2.5 times
earnings cover for any future dividend payments. The board therefore declared
an interim dividend of 0.5p per share which was paid on 9 September 2022. A
final dividend of 1.0p per share in respect of FY 2022 will be recommended to
the forthcoming AGM. This dividend, if approved, will be payable on 30 June
2023 to shareholders on the register on 16 June 2023.
While dividends will therefore now reflect the group's current profitability,
the board plans to return to the progressive dividend policy, adopted before
the onset of the COVID-19 crisis, recognising the importance of dividend flows
to shareholders. It is anticipated that future interim dividends will be paid
in September and final dividends in June, in the proportion of one third at
the interim dividend stage and two thirds for the final.
Fleet management
2022 2021 2020
Average fleet age 7.89 years 7.56 years 7.95 years
During FY 2022, the company's requirements for new vehicles were very limited,
being restricted to vehicles for new work or contracts won. Aside from the new
vehicles for the small franchise contracts in the GMCA area referred to above,
the company does not expect to acquire a material number of new vehicles in FY
2023. The company expects that in FY 2024, it will begin a fresh cycle of
fleet replacement. It is intended that these vehicles will be electric and not
diesel fuelled.
When acquiring any vehicle new to the fleet, the board is always 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. However it should be noted that the new vehicles which
will be acquired in FY 2023 as part of the move to a franchised bus network in
Greater Manchester will necessarily be diesel fuelled due to the timing of the
change and the specification of the buses under the franchise contract terms.
Part of the Government's National Bus Strategy includes the subsidised
introduction of 4,000 new zero-emission vehicles. Consequently the board
believes that in the medium to long term the group will gradually transition
to the acquisition of battery-electric buses or buses propelled by other
fuels, and move away from diesel-fuelled buses. Diesel driven vehicles will
therefore gradually be phased out of the fleet in accordance with Government
targets. The continuing disposal of older vehicles in the year ensured that
the average fleet age remained closely comparable to previous periods. More
than half of the bus fleet is now at EURO VI emissions standard or better.
Fuel hedging
The tranche of hedging contracts which covered fuel usage in FY 2022 expired
at the end of that year. The group's budget for FY 2023 anticipates fuel usage
of approximately 13 million litres, falling to 11 million litres in FY 2024
and FY 2025 as mileage driven aligns itself with the new contracts in
Greater Manchester and the West Midlands set out above. To cover this
anticipated fuel usage fresh hedging contracts have recently been taken out
such that approximately 50% of the budgeted fuel usage in FY 2023 has been
hedged, 92% of that of FY 2024 and 76% of that of FY 2025. All these hedging
contracts are at an average price of between 103p and 112p per litre. For
reference, the market price of fuel at the date of this statement (excluding
VAT) is 106p per litre.
The board will continue to monitor market conditions closely and take out such
further fuel hedging contracts as it deems are appropriate to meet its
objective of reducing volatility in its costs and, where possible, creating
greater business certainty.
Financial review
Income statement
The Consolidated Income Statement is set out below. The sections set out above
on Government Support, Passenger Numbers and Revenues analyse the key factors
which determined group revenue in FY 2022, and how and where it differed from
the previous year. Cost of sales fell back from the levels seen in FY 2021 in
response to these changed operational conditions.
Administrative expenses before exceptional items also decreased from £12.3
million in FY 2021 to £9.1 million in FY 2022 as the needs of the business
for an enhanced level of legal and technical advice in the complex and
challenging operating environment under COVID-19 conditions fell away. As
stated above, the board expected FY 2022 to be the year of transition back to
normal operating conditions and this indeed turned out to be the case. Given
this, and the fact that FY 2021 was a year conducted under a variety of COVID
restrictions, there is little meaningful to be said about Gross Profits,
Profit from Operations and Profit before Tax, or comparisons to be drawn about
these captions, in the two financial years under report.
Finance expense fell to £2.3 million (2021: £3.1 million). This decrease can
be ascribed to two factors: first interest on hire purchase debts fell as the
total level of that debt fell. Second bank borrowings also fell markedly
during FY 2022 and this had a corresponding effect on the interest expense for
this item.
The analysis of the exceptional items is set out in note 3 to this
announcement. In 2022 a profit of £3.1 million was recorded in this caption,
compared to a profit of £1.6 million in 2021. As in 2021 the principal
component of this line was the marking to market of the group's fuel
derivative position. The other exceptional profit in 2022 of £0.6 million
resulted from the disposal of a surplus leasehold property.
The Chancellor of the Exchequer has increased the rate of corporation tax from
19% to 25% from April 2023. This change requires the company to increase the
corresponding rate at which deferred tax is provided in its financial
statements. The extra charge included for this reason in the tax expense in FY
2022 amounts to £652,000.
There were no share issues in the year. As a result of all the factors set out
above basic earnings per share in 2022, after all exceptional items, were
2.36p (2021: 0.13p).
Balance sheet
The gross assets of the group fell from £104.5 million at 30 November 2021 to
£84.9 million as at 30 November 2022. The book value of property, plant and
equipment declined by £4.2 million as depreciation in the year exceeded
additions to the same caption. The additions that were made to fixed assets
were almost all second-hand passenger carrying vehicles or were vehicle
additions derived from the acquisitions described above. The impact of the
interest rate and market turmoil in late 2022 caused the net asset represented
by the defined benefit pension scheme to fall back considerably to £1.47
million by the end of the year (2021: £4.25 million). The value of the
scheme's investments fell by 34%, but at the same time the present value of
the scheme's defined benefit obligation fell by 27%. These changes returned
the surplus in the pension scheme almost exactly to the level at which it had
stood at 30 November 2020. Goodwill increased as a result of the acquisition
of Midland Classic Limited in August 2022, as set out above.
Group stocks of parts, tyres and fuel rose slightly as higher levels of fuel
stocks were held. Trade and Other Receivables benefited from the realisation
into cash of the DfT grants and subsidies accrued in prior years. The fuel
derivative expired at the end of the year and so there was no asset or
liability exposure from this source at the balance sheet date.
In the sections on Working Capital and Total Net Debt above the impact of the
reduction of Trade and other receivables on bank borrowings has already been
set out, together with the reasons for the increase in Trade and other
payables. So, whilst Trade and other payables within Current Liabilities
increased from £6.2 million to £9.2 million, loans and borrowings fell from
£11.6 million to only £418,000, principally through a reduction in drawings
under the group's RCF. Obligations under hire purchase contracts under both
Current Liabilities and Non-Current Liabilities fell as no new hire purchase
contracts were entered into during the year but repayments of £7.4 million
were made. The current portion of hire purchase liabilities is higher than the
previous year as a result of balloon payments due in 2023.
In Non-Current Liabilities the grant for the electrification of five vehicles
continued to amortise over its agreed term, as did the mortgage liability.
The decrease in Provisions for Liabilities results from the board's review of
insurance claims outstanding at the end of the year. No corporation tax is
payable on the profits for the year, but the deferred tax liability has
increased in response to the increase in corporation tax rates from April 2023
as set out above. Of this increase in the deferred tax provision £652,000 has
gone through the Consolidated Income Statement and £255,000 through the
Consolidated Statement of Comprehensive Income (in relation to the defined
benefit pension scheme). The gross liabilities of the group therefore fell
to £54.1 million (2021: £71.5 million), a decrease of 24%.
Overall group net assets were £30.8 million at 30 November 2022, compared
to £33.0 million at 30 November 2021.
Cash flow statement
Cash flows from operating activities (before changes in working capital and
provisions) fell to £12.5 million in FY 2022 (FY 2021: £18.3 million),
principally because the depreciation charge fell by £5.9 million by
comparison with the previous year. As in 2021, working capital in 2022 was
released rather than absorbed. The key reasons for this lie in the receipt in
cash of the various DfT grants accrued in prior years and the return to the
company's standard creditor payment terms, as already described above. The
consequence of these various factors was that cash generated from operations
reached £28.1 million (2021: £19.7 million), a considerable increase on the
previous year. Interest paid on lease liabilities fell in line with the fall
in total lease liability debt. Cash flows from operating activities therefore
increased to £26.4 million (2021: £17.8 million).
The sale of surplus vehicles and the unused leasehold property served to
offset to some extent the cash expended on the purchase of property, plant and
equipment in FY 2022. As set out above, three acquisitions were made in the
year, whereas none had been made in the previous year. The total of £3.9
million expended on acquisitions included the sum of £577,000 related to the
repayment of a mortgage associated with one of the acquisitions. Thus, in
contrast to the small amount of cash generated in 2021 in this caption, in FY
2022 a total of £4.8 million was expended.
Two interim dividends were paid in the year, after a break in dividend payment
under COVID, totalling 1.5p per share. The company also commenced a share buy
back scheme in FY 2022 under which a total of 921,316 ordinary shares were
purchased. Financing activities also reflect the changes to loans and
borrowings already described. In order to finance the acquisitions in the
year, £3.9 million was drawn down under the RCF, but over the year as a whole
£11.45 million was repaid, together with the usual mortgage instalments,
making a total of £11.87 million. By the end of the year there were therefore
no drawings on the RCF. The capital paid on lease liabilities rose somewhat
as the Bolton fleet re-equipment of the previous year was reflected in
increased hire purchase instalments. Overall £17.2 million was used in
financing activities in 2022 compared to £17.8 million in 2021.
Cash and cash equivalents therefore increased by £4.4 million (2021:
£84,000) and, instead of a net liability in cash and cash equivalents of
£3.2 million as at 30 November 2021, at 30 November 2022 the company
possessed an asset in cash and cash equivalents of £1.2 million. The board
regards this outcome for the year as very satisfactory and in line with its
plans and expectations.
Outlook
During the COVID-19 pandemic, the board decided to focus on cash conservation
and set a specific debt reduction target, with the objective of emerging from
the pandemic with a robust balance sheet, fit for renewed commercial
operation. The board believes that these objectives have been successfully
achieved.
The board's key assumption for FY 2023 is that, as passenger numbers continue
to recover slowly and steadily, Government grants and subsidies will taper
off, but that the overall outcome will be a return to normal commercial
conditions and sustainable profits at the normalised pre-tax line. In response
to inflation in many of the company's key cost inputs, such as salaries, fuel
prices and parts, the board has throughout FY 2022 taken active steps to
re-align service levels, bus operations and fares onto a footing which will
enable the group to trade successfully for the foreseeable future. This
internal work has been accompanied externally by close cooperation with all
the local authorities in whose areas the group operates, particularly those
which have received funding for Bus Service Improvement Plans, to redefine and
reshape bus networks in order to take account of the changes, at a detailed
route level, in bus usage and travel patterns.
This atmosphere of change enabled the group to make the three acquisitions in
FY 2022 described above. At the same time further changes in the bus industry
are bound to flow from the acquisition in FY 2022 of two of the UK's largest
bus groups (Stagecoach Group plc and The Go Ahead Group plc). The board
believes that these investments by new entrants to the bus market are an
important statement about the positive direction of the bus industry,
especially when considered against the background of the continued large-scale
investment by the Government under its banner of the National Bus Strategy.
The board expects that change is likely to be a continuing feature of the bus
industry because of the trends set out above and so it expects the industry to
experience continued turbulence while it is reshaped in the industry's
post-pandemic recovery phase. These business conditions should bring a healthy
flow of opportunities to the company, much like the acquisitions made in FY
2022, for both organic growth and acquisitions. The board believes that the
group has available to it ample bank facilities to cater for any such growth
opportunities. For all these reasons, and despite the increased cost of
living, fluctuating fuel prices and general rise of inflation, the board
remains confident about the future prospects of the company.
John Gunn
Non-Executive Chairman
Date: 5 May 2023
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2022
Note 2022 2022 2022 2021 2021 2021
Exceptional Results Exceptional Results
Results items for the Results items for the
before (note 10) year before (note 10) year
exceptional items exceptional
items
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 2 84,871 - 84,871 96,543 - 96,543
Cost of sales (74,611) - (74,611) (82,429) - (82,429)
Gross profit 10,260 10,260 14,114 14,114
Administrative expenses
(9,118) 3,074 (6,044) (12,334) 1,592 (10,742)
Profit from operations
3 1,142 3,074 4,216 1,780 1,592 3,372
Finance income 68 - 68 19 - 19
Finance expense (2,312) - (2,312) (3,096) - (3,096)
(Loss)/profit before taxation (1,102) 3,074 1,972 (1,297) 1,592 295
Tax credit/(expense) 4 209 (1,014) (805) 247 (476) (229)
(Loss)/profit for the year attributable to the equity holders of the parent
(893) 2,060 1,167 (1,050) 1,116 66
(Loss)/earnings per share for (loss)/profit attributable to the equity
holders of the parent during the year:
Basic (pence) 5 (1.80) 2.36 (2.10) 0.13
Diluted (pence) 5 (1.80) 2.36 (2.10) 0.13
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
30 NOVEMBER 2022
Note 2022 2021
£'000 £'000
Profit for the year 1,167 66
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit pension scheme (2,847) 2,821
Deferred tax on actuarial gain/(loss) on defined benefit pension scheme 712 (536)
Adjustment for change in deferred tax rate (255) -
Other comprehensive (loss)/profit for the year (net of tax) (2,390) 2,285
Total comprehensive (loss)/income for the year attributable to the equity
holders of the parent
(1,223) 2,351
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 NOVEMBER 2022
Note 2022 2021
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 6 56,900 61,091
Defined benefit pension asset 1,474 4,253
Goodwill and other intangible assets 15,960 14,907
Total non-current assets 74,334 80,251
Current assets
Inventories 1,229 1,090
Trade and other receivables 8,154 21,796
Derivative financial instruments - 958
Cash and cash equivalents 1,214 442
Total current assets 10,597 24,286
Total assets 84,931 104,537
Liabilities
Current liabilities
Trade and other payables 9,175 6,217
Loans and borrowings 7 418 11,615
Lease liabilities 8 8,566 7,319
Total current liabilities 18,159 25,151
Non-current liabilities
Deferred income 410 640
Loans and borrowings 7 5,021 5,445
Lease liabilities 8 25,361 34,485
Provisions for liabilities 2,088 3,414
Net deferred taxation 3,085 2,377
Total non-current liabilities 35,965 46,361
Total liabilities 54,124 71,512
TOTAL NET ASSETS 30,807 33,025
Shareholders' funds
Share capital 12,731 12,731
Share premium reserve 12,369 12,369
Merger reserve 2,567 2,567
Shares in treasury (1,069) (806)
Retained earnings 4,209 6,164
TOTAL EQUITY 30,807 33,025
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 NOVEMBER 2022
Share
Share premium Merger Shares in treasury Retained
capital reserve reserve £'000 earnings Total
£'000 £'000 £'000 £'000 £'000
At 1 December 2020 12,731 12,369 2,567 (806) 3,813 30,674
Profit for the year - - - - 66 66
Other comprehensive income - - - - 2,285 2,285
Total comprehensive income - - - - 2,351 2,351
Transactions with owners:
Dividends paid and accrued - - - - - -
Transactions with owners - - - - - -
At 30 November 2021 12,731 12,369 2,567 (806) 6,164 33,025
Profit for the year - - - - 1,167 1,167
Other comprehensive income - - - - (2,390) (2,390)
Total comprehensive income - - - - (1,223) (1,223)
Transactions with owners:
Dividends paid - - - - (742) (742)
Purchase of own shares - - - (273) - (273)
Shares issued from treasury - - - 10 (10) -
Share based payment - - - - 20 20
Transactions with owners - - - (263) (732) (995)
At 30 November 2022 12,731 12,369 2,567 (1,069) 4,209 30,807
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 NOVEMBER 2022
2022 2021
£'000 £'000
Cash flows from operating activities
Profit before taxation 1,972 295
Adjustments for:
Depreciation 9,022 14,906
Finance expense (net) 2,244 3,077
Acquisition expenses 143 -
(Profit)/loss on sale of property, plant and (655) 3
equipment
Contribution to defined benefit pension scheme - -
Share based payment 20 1
Amortisation of grants received (230) (50)
Notional expense of defined benefit pension scheme - 28
Cash flows from operating activities before changes in working capital and 12,516 18,260
provisions
(Increase)/decrease in inventories (63) 2,398
Decrease in trade and other receivables 14,413 503
Increase/(decrease) in trade and other payables 1,947 (2,233)
Movement in deferred income and provisions (1,326) 2,834
Movement on derivative financial instruments 639 (2,060)
15,610 1,442
Cash generated from operations 28,126 19,702
Interest paid on lease liabilities (1,697) (1,920)
Net cash flows from operating activities carried forward 26,429 17,782
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (Continued)
2022 2021
£'000 £'000
Cash flows from operating activities brought forward 26,429 17,782
Investing activities
Purchases of property, plant and (1,489) (1,883)
equipment
Grants received thereon - 690
Business acquisitions (including mortgage repaid) (3,914) -
Sale of property, plant and equipment 560 1,268
Net cash (used in)/from investing activities (4,843) 75
Financing activities
Dividends paid (742) -
Purchase of own shares (273) -
Bank borrowings drawn down 3,851 -
Repayment of bank and other borrowings (11,869) (8,987)
Bank and other interest paid (608) (1,124)
Capital settlement payments on vehicles sold (171) (719)
Capital paid on lease liabilities (7,399) (6,943)
Net cash used in financing activities (17,211) (17,773)
Net increase in cash and cash equivalents 4,375 84
Cash and cash equivalents at beginning of year (3,161) (3,245)
Cash and cash equivalents at end of year 1,214 (3,161)
Notes to the Preliminary Announcement of results for the year ended 30
November 2022
1. Basis of preparation:
The accounting policies used in the preparation of this financial information
are those that have been used in the preparation of the annual statutory
financial statements of the Company for the year ended 30 November 2022. These
policies are in accordance with UK adopted international accounting standards
("IFRSs").
2. Revenue:
Revenue represents sales to external customers excluding value added tax.
Revenue is recognised at a point in time upon satisfaction of the relevant
performance obligations for the various revenue streams:
· Passenger revenue is recognised when the service is delivered;
· Subsidy revenue from local authorities is recognised on an
accruals basis, based on actual passenger numbers when services are
provided;
· Contracted and charter services revenues are recognised when
services are delivered, based on agreed contract rates;
· Government revenue grants are recognised as income when there is
a reasonable assurance that the business will comply with the attached
conditions and that the grant will be receivable.
All of the activities of the Group are conducted in the United Kingdom within
the operating segment of provision of bus services. The Group has three main
revenue streams: contracted, commercial and charter, and management monitors
revenue across these three streams. All streams operate within the operating
segment of the provision of bus services.
2022 2021
£'000 £'000
Commercial 53,838 31,684
Contracted 21,318 16,179
Charter 1,067 734
Grants and subsidies 8,648 47,946
Total Revenue 84,871 96,543
3. Profit before taxation:
Profit before taxation includes the following mark to market provisions and
other exceptional items:
2022 2021
£'000 £'000
Mark to market profit on fuel derivatives 2,620 1,779
Loss resulting from Heathrow depot fire - (187)
Acquisition costs (143) -
Share based payment (20) -
Sale of surplus leasehold property 617 -
Profit within profit before taxation 3,074 1,592
4. Tax expense:
Tax expense includes the following:
2022 2021
£'000 £'000
Current tax
Current tax on profits for the year - -
_______ _______
Total current tax - -
_______ _______
Deferred tax
Origination and reversal of temporary differences (292) (150)
Prior year adjustments 139 (79)
Change in rate of tax (652) -
_______ _______
Total deferred tax (805) (229)
_______ _______
Income tax expense (805) (229)
_______ _______
The tax assessed for the year is different to the standard rate of corporation
tax in the U.K. for the following reasons:
2022 2021
£'000 £'000
Profit before taxation 1,972 295
______ ______
Profit at the standard rate of corporation tax in the UK of 19% (2021: 19%) (375) (56)
Non-taxable items 83 (94)
Adjustments in respect of prior periods 139 (79)
Impact of change in tax rates (652) -
_______ _______
Total tax expense (805) (229)
_______ _______
Deferred tax has been measured at the average tax rates that are expected to
apply in the accounting periods in which the timing differences are expected
to reverse, based on the tax rates and laws which have been enacted or
substantively enacted at the balance sheet date.
Under the Finance Act 2021 the main rate of corporation tax will increase from
19% to 25% with effect from 1 April 2023, with a corresponding effect on
deferred tax balances arising or reversing after that date.
5. Earnings per share:
(a) Basic earnings per share
Basic Basic
2022 2021
£'000 £'000
Profit attributable to ordinary share holders 1,167 66
Weighted average number of shares in issue 49,502,254 50,091,109
Basic earnings per share 2.36p 0.13p
The calculation of the basic earnings per share is based on the earnings
attributable to the ordinary shareholders divided by the weighted average
number of shares in issue during the year.
(b) Basic diluted earnings per share
Diluted Diluted
2022 2021
£'000 £'000
Profit attributable to ordinary share holders 1,167 66
Profit for the purposes of diluted earnings per share 1,167 66
Weighted average number of shares in issue 49,502,254 50,091,109
Adjustment for exercise of options - -
Weighted average number of ordinary shares for the purposes of diluted 49,502,254 50,091,109
earnings per share
Diluted earnings per share 2.36p 0.13p
In order to arrive at the diluted earnings per share, the weighted average
number of ordinary shares has been adjusted on the assumption of conversion of
all dilutive potential ordinary shares. The potential ordinary shares take the
form of share options. A calculation has been carried out to determine the
number of shares, at the average annual market price of the company's shares,
which could have been acquired, based on the monetary value of the rights
attached to those shares. This number has then been subtracted from the number
of shares that could be issued on the assumption of full exercise of the
outstanding options, in order to compute the necessary adjustments in the
above table. However all share options in existence during the year were
antidilutive and thus no adjustment was required.
(c) Adjusted basic earnings per share (adjusted before mark to market
provision and other exceptional items):
Basic Basic
2022 2021
£'000 £'000
(Loss) attributable to ordinary share holders (893) (1,050)
Weighted average number of shares in issue 49,502,254 50,091,109
Adjusted basic (loss) per share (1.80p) (2.10p)
The calculation of the adjusted basic earnings per share is based on the
earnings attributable to the ordinary shareholders divided by the weighted
average number of shares in issue during the year.
(d) Adjusted diluted earnings per share:
Diluted Diluted
2022 2021
£'000 £'000
(Loss) attributable to ordinary share holders (893) (1,050)
(Loss) for the purposes of diluted earnings per share (893) (1,050)
Weighted average number of shares in issue 49,502,254 50,091,109
Adjustment for exercise of options - -
Weighted average number of ordinary shares for the purposes of diluted (loss) 49,502,254 50,091,109
per share
Adjusted diluted (loss) per share (1.80p) (2.10p)
In order to arrive at the diluted earnings per share, the weighted average
number of ordinary shares has been adjusted on the assumption of conversion of
all dilutive potential ordinary shares. The potential ordinary shares take the
form of share options. A calculation has been carried out to determine the
number of shares, at the average annual market price of the company's shares,
which could have been acquired, based on the monetary value of the rights
attached to those shares. This number has then been subtracted from the number
of shares that could be issued on the assumption of full exercise of the
outstanding options, in order to compute the necessary adjustments in the
above table. However all share options in existence during the year were
antidilutive and thus no adjustment was required.
6. Property, plant and equipment:
Freehold Right of use assets under IFRS16 Passenger carrying Total
and leasehold land and buildings Plant and vehicles
machinery
£'000 £'000 £'000 £'000 £'000
Cost:
At 1 December 2020 10,907 4,814 6,267 71,392 93,380
Additions - - - 11,905 11,905
Disposals - (1,751) (239) (15,115) (17,105)
At 30 November 2021 10,907 3,063 6,028 68,182 88,180
Additions 69 - 56 1,364 1,489
Acquisitions 956 - 400 4,335 5,691
Disposals - (1,136) (12) (2,052) (3,200)
At 30 November 2022 11,932 1,927 6,472 71,829 92,160
Depreciation:
At 1 December 2020 344 2,859 2,193 22,592 27,988
Charge for the year 512 481 2,210 11,703 14,906
Disposals - (1,722) (103) (13,980) (15,805)
At 30 November 2021 856 1,618 4,300 20,315 27,089
Charge for the year 113 383 857 7,669 9,022
Acquisitions - - 186 1,355 1,541
Disposals - (542) (2) (1,848) (2,392)
At 30 November 2022
969 1,459 5,341 27,491 35,260
Net book value:
At 30 November 2022 10,963 468 1,131 44,338 56,900
At 30 November 2021 10,051 1,445 1,728 47,867 61,091
7. Loans and borrowings:
2022 2021
£'000 £'000
Current:
Overdrafts - 3,603
Bank loans - RCF - 7,600
Bank loans - Mortgage Facility 418 412
______ ______
418 11,615
______ ______
Non-current:
Bank loans - Mortgage Facility 5,021 5,445
______ ______
5,439 17,060
______ ______
On 14 March 2022 new banking facilities were agreed with the group's principal
bankers, HSBC Bank plc. These facilities comprise a Revolving Commercial
Facility ("RCF") of up to £17 million and a Mortgage Facility of £5.8
million. The RCF has an initial term of three years, expiring on 14 March
2025, with the option to extend it for up to a further two years. The Mortgage
Facility commenced in 2017, when HSBC Bank plc became bankers to the group,
and was originally of £8.0 million. Since that time repayments have reduced
the amounts outstanding to £5.4 million. It remains on a term of up to twenty
years expiring in December 2037. In addition, the company has an Overdraft
Facility of up to £3 million with the same bank, renewed annually.
The Mortgage Facility is secured on the group's freehold property. The annual
mortgage repayments are calculated such that the mortgage facilities amortise
in a straight line over a term of 20 years which is considered to give a
reasonable approximation to the effective interest rate.
8. Lease liabilities:
Current liabilities 2022 2021
£'000 £'000
Obligations under hire purchase agreements (see note 9(a)) 8,177 6,897
Other lease liabilities (see note 9(b)) 389 422
Total current liabilities 8,566 7,319
Non - current liabilities 2022 2021
£'000 £'000
Obligations under hire purchase agreements (see note 9(a)) 25,184 33,025
Other lease liabilities (see note 9(b)) 177 1,460
Total non - current liabilities 25,361 34,485
The group's obligations under hire purchase agreements are secured by the
lessors' rights over the leased assets. Other lease liabilities are long term
operating lease agreements.
9. Obligations under hire purchase agreements and other lease liabilities:
(a) Obligations under hire purchase agreements
The present values of future lease payments are analysed as:
2022 2021
£'000 £'000
Current liabilities 8,177 6,897
Non-current liabilities 25,184 33,025
33,361 39,922
Minimum
lease Present
payments Interest value
2022 2022 2022
£'000 £'000 £'000
Not later than one year 9,330 1,153 8,177
More than one year but less than two years 6,990 834 6,156
More than two years but less than five years 15,004 1,163 13,841
Later than five years 5,442 255 5,187
36,766 3,405 33,361
Minimum
lease Present
payments Interest value
2021 2021 2021
£'000 £'000 £'000
Not later than one year 8,426 1,529 6,897
More than one year but less than two years 9,718 1,657 8,061
More than two years but less than five years 17,954 1,518 16,436
Later than five years 8,800 272 8,528
44,898 4,976 39,922
(b) Other lease liabilities
Future lease payments for leases treated as leases under IFRS 16 but which
take the legal form of rental agreements without the right of ownership of the
asset leased are as follows.
The present values of future lease payments are analysed as:
2022 2021
£'000 £'000
Current liabilities 389 422
Non-current liabilities 177 1,460
566 1,882
Minimum lease payments
2022 Present
Interest value
2022 2022
£'000 £'000 £'000
Not later than one year 429 40 389
More than one year but less than two years 180 7 173
More than two years but less than five years 4 - 4
Later than five years - - -
613 47 566
Minimum lease payments
2021 Present
Interest value
2021 2021
£'000 £'000 £'000
Not later than one year 561 139 422
More than one year but less than two years 523 91 432
More than two years but less than five years 364 163 201
Later than five years 1,514 687 827
2,962 1,080 1,882
10. Financial Information:
The Financial Statements for the year ended 30 November 2022 were approved by
the Board of Directors on 5 May 2023. The financial information in this
announcement does not constitute statutory accounts within the meaning of
section 434 of the Companies Act 2006. Statutory accounts for 2022 will be
delivered to the Registrar of Companies in due course. The auditors have
reported on the 2022 accounts; the auditors' opinion is unqualified and does
not include a statement under section 498(2) or 498(3) of the Companies Act
2006.
11. Further Information:
The Company's Annual Report and Accounts for the year ended 30 November 2022
will be posted to shareholders today and are also available to view on the
Company's website at the following link: http://www.rotalaplc.com
(https://url.avanan.click/v2/___http:/www.rotalaplc.com___.YXAxZTpzaG9yZWNhcDphOm86N2FhNDg3MWI1OGVjMjYxY2MwY2VkNWY0ZjA0NjIxZGE6Njo5M2QwOmFlZWQyOGJiNzdjYmJjYjJjMWYxZmJjNTU1MTVjNDkzOGIxNmE3YTc1Njg0MTlkMGJiMTI3Y2I4NDY0MDE1ZWM6cDpU)
Copies of this statement are available from the registered office of the
Company at Cross Quays Business Park, Hallbridge Way, Tipton, Oldbury, West
Midlands, B69 3HW and/or on the Company's website at the following link:
http://www.rotalaplc.com
(https://url.avanan.click/v2/___http:/www.rotalaplc.com___.YXAxZTpzaG9yZWNhcDphOm86N2FhNDg3MWI1OGVjMjYxY2MwY2VkNWY0ZjA0NjIxZGE6Njo5M2QwOmFlZWQyOGJiNzdjYmJjYjJjMWYxZmJjNTU1MTVjNDkzOGIxNmE3YTc1Njg0MTlkMGJiMTI3Y2I4NDY0MDE1ZWM6cDpU)
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