TIDMROL
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 GBP0.6 million in the eastern part of Birmingham.
Through its Diamond Bus subsidiary, Rotala acquired the business
and 18 vehicles for a total consideration of GBP339,000 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 J ohnsons (Henley) Limited together with 20
vehicles for a cash consideration of GBP936,000 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
GBP3.5 million. Rotala will not assume any other assets or
liabilities of any materiality on acquisition. As with Claribel, f
ollowing completion, the acquired business will be subsumed into
the Company's Diamond Bus business and operate out of its existing
Redditch depot. T he 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 GBP1.04 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 GBP150 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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