Final results for the year ended 30 November 2020

RNS Number : 6771X

Rotala PLC

06 May 2021

 

6 May 2021

Rotala plc

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

Final results for the year ended 30 November 2020

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 2020.

Highlights

· Operating profit before exceptional items of £1.4m (2019: £6.1m), despite impact of COVID-19

· Passenger volumes gradually increasing as COVID-19 restrictions ease

· Operating well within recently revised banking facilities

· Bus services continue to be supported by Government's "CBSSG Restart" scheme

· No use of any Government-supported loan schemes

·   Post-crisis opportunities for both organic growth and growth by acquisition  

The Company's Annual Report and Accounts are expected to be posted to shareholders later today and are also available to view on the Company's website at http://www.rotalaplc.com

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 / 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.

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 2020.  Up until the COVID-19 pandemic triggered the first of the several "lockdowns" of the year, the Group was trading in line with budget and was well on course to achieve its best ever annual results.  However the pandemic, and the Government's response to it, meant that we were required to switch swiftly to a new basis of operation as restrictions on travel for all but essential workers were introduced on 23 March 2020. 

Review of Operations

From the beginning of the COVID-19 crisis the support of Government at local and national level was and continues to be key to sustaining our operations. As soon as the first "lockdown" phase of the coronavirus pandemic began, the UK Government designated bus operation to be an essential service. Government also took steps, through specific direction provided by the Cabinet Office to all arms of the State at both national and local level and through the Department for Transport ("DfT"), to ensure that bus companies had sufficient cash flow to support the operations that they were being asked to run. These measures encompassed a specific COVID-19 Bus Service Support Grant (now renamed "CBSSG Restart") and the maintenance of Bus Services Operator's Grant, concessionary fares re-imbursements and payments for contracted bus services broadly at their pre-crisis levels. These measures are designed to put a bus company in a no profit/no loss position in return for the running of the level of bus service desired by the relevant Local Authority working in concert with the DfT. These support measures continue to be in place at the current time. We remain grateful to Government for recognising early that bus operation was indeed an essential public service and for putting in place the support measures that were necessary to keep services running in very adverse circumstances.

In response to these developments we consulted closely with the Local Authorities in whose areas we operate (as we were directed to do by the Government), reconfigured timetables to meet the likely new passenger levels and reduced driver rosters to match the new levels of service provision. By these means we were able to refine the costs of operation and conserve cash. Cash flow, both at EBITDA level and net of all debt, interest and other payments, was quickly stabilised . The bankers to the Group, HSBC Bank Plc, responded to the COVID-19 crisis by increasing the Group's overdraft facility to £6.6 million. The Group has operated well within that facility in the intervening period and, whilst it has benefited from the grants Government is providing to the bus sector, it has not taken up any of the options offered under the various Government-supported loan schemes, and at the current time sees no requirement to do so. Subsequent to the balance sheet date the expiry date of the banking facilities was extended to 5 December 2022. At the same time the overdraft facility was reduced to £4.5 million, which was the level at which it had stood before the inception of the COVID-19 crisis. Furthermore it was agreed that the revolving facility should amortise down to a maximum of £13.2 million by 5 December 2022, the amortisation to take place at four equal quarterly rests commencing on 30 September 2021.

Besides the response of HSBC Bank Plc outlined above, the Group benefited from a moratorium of between three and six months declared by the majority of hire purchase finance providers.

At the beginning of the pandemic passenger loadings fell to under 15% of expected levels on a like for like basis but then recovered slowly as the crisis eased into the summer of 2020 and the Government lifted many of the initial restrictions. When the new school year began in September 2020 and the holiday season ended loadings rose steadily to about 60% of those of the previous year. To match these increases bus service frequencies were gradually returned to pre-crisis levels. In the November 2020 lockdown period passenger volumes fell back once more to about 45% of the levels of the previous year but service frequencies were maintained. In the latest lockdown period put in place by the UK Government in January 2021 passenger numbers declined once more to about 25% of normal levels and service frequencies, working in co-ordination with Local Authorities and the DfT, were adjusted to 80% to 85% of pre-crisis levels. Since then however passenger numbers have recovered steadily and now stand at more than 50% of the levels seen before the COVID-19 pandemic. As lockdown restrictions are eased further, passenger confidence is likely to return more strongly. Service frequencies have already been restored to those operated before COVID-19.

As mentioned above, the CBSSG Restart scheme contains a ratchet mechanism which ensures that, as passenger numbers increase (or decline), grant support increases or declines, maintaining the no profit/no loss position for a bus operator. Government has confirmed that CBSSG Restart and all other support measures will continue in place for the time being. The DfT has stated that, if it decides to terminate CBSSG Restart, it will give eight weeks' notice of termination. This should give ample time for us to make any service changes which might be necessary following the withdrawal of the grant.

All employees not rostered to work in the initial lockdown period were placed into the Coronavirus Job Retention Scheme. At one time just under 50% of staff were on furlough but this proportion fell steadily as the lockdown restrictions eased in the early summer of 2020 and, bearing in mind that between 5% and 10% of staff are always on holiday, almost all staff were back at work by the middle of the year. The board is very mindful of the extraordinary demands made on the workforce of the Group throughout this extended period of abnormal operation. The board therefore wishes to record its thanks to all employees for the stoicism and flexibility shown in these extraordinary times. 

Results

For the year ended 30 November 2020 Group revenues were £78.1 million (2019: £68.5 million). However, as mentioned above, there is no comparability between the two accounting periods and therefore little meaningful comparison to be made, except to point out that the 2020 figures include the benefit of a full year's ownership of the Bolton depot acquired in August 2019, but that the results for the previous year obviously do not include a contribution for a similar length of time. In the year to 30 November 2020 the grant and subsidy regime described above contributed £29.4 million to total revenues. The breakdown of this package of grants and subsidies is set out in note 2 to this announcement. 

Despite the adverse operating conditions, before exceptional items, the Group recorded an overall Operating Profit of £1.42 million for the year to 30 November 2020 (2019: £6.05 million). For the same period the Group incurred a charge of £4.0 million for exceptional items, largely brought about by the COVID-19 crisis. The charge is analysed in detail in note 3 to this announcement and is the main cause of the loss before tax of £4.8 million (2019: profit before tax £2.6 million). The principal components of that charge are as follows:

· As the COVID-19 crisis took hold it rapidly became clear to the board that the oldest vehicles in the bus fleet (retained mainly to increase the flexibility of service operation) were very unlikely ever to see service again. Accordingly, the board concluded that it would be more beneficial to Group cash flow to sell these seventy one vehicles for scrap and take a one-off charge to the profit and loss account of £913,000. The Group's cash flow will be improved by about £300,000 by the combined effect of the sale of the buses and the release back into the tyre pool of the tyres used by these vehicles;

· In order to hedge its requirement for diesel fuel, the Group enters, in a normal year, into diesel commodity forward contracts. This means that the Group's entire fuel derivative exposure is marked to the market price at the end of any reporting period. But immediately following the onset of the COVID-19 crisis fuel prices fell steeply and have since only slowly recovered. Therefore, the profit and loss account for the year recognises the charge of £2.51 million required to reflect its losses in this regard.

The Group has continued to take other measures to realign its operations to likely future requirements. At Heathrow Airport, the opportunity has been taken not to renew the lease of a depot near Hatton Cross station, which expired in October 2020, and to concentrate operations at the airport at the Group's other depot on the south side of the airport perimeter road. This decision will result in annual savings of approximately £400,000. Most of the benefit of the decision will accrue in the financial year ending 30 November 2021.

In addition, the Company has historically operated a small number of coaches. In the current operating climate there has been, as with many coach operators throughout the country, little demand for such vehicles. As the operating leases for these vehicles have come to an end, they have not therefore been replaced. As and when coach business returns, for example at Heathrow Airport, the board will consider the economic rationale for investing in this business stream and temper the scale of its investment accordingly. 

Fleet management

The COVID-19 pandemic delayed delivery of the buses for the Bolton depot ordered to replace those leased from First Group plc in accordance with the terms of the acquisition in August 2019. A large batch of these new vehicles arrived therefore in the second half of the year and caused the book value of passenger service vehicles and the hire purchase debt financing them to increase markedly by 30 November 2020. The remainder of the vehicles on order, with a value of some £10 million, almost all destined for Bolton, will arrive by the middle of 2021. In cash flow terms all these acquisitions will be cash neutral: the annual capital repayments on the new vehicles are no greater than the leasing costs of the vehicles they are replacing. In addition the replacement vehicles are far more fuel efficient and have much lower maintenance costs; they also meet the Low Emission Bus standards and so qualify for the enhanced rates of Bus Services Operator's Grant. Furthermore, given the change in circumstances since these orders were placed last year, we do not foresee any requirement, unless for completely new business, to acquire any vehicles for the following two years. In a normal year we would expect to invest about £4.0 million in the natural cycle of fleet replacement, so, after the initial large increase in the size of the outstanding hire purchase debt, that increase will be temporary and reduce rapidly so that, when the next re-equipment cycle begins, hire purchase debt levels will be comparable to those at the end of 2019 (at around £20 million).

Aside from the action taken on the fleet inherited with the Bolton acquisition, we have continued to be active in reshaping the Group's bus fleet to match changing needs. Consequently the average age of the fleet fell to about 7.95 years (2019: 8.65 years). By the time the Bolton re-equipment has finished in mid-2021 the average fleet age will have fallen further to about 7.00 years.

When acquiring any vehicle new to the fleet we are acutely conscious of its emission standards and relative fuel consumption. We believe that having a modern and efficient bus fleet is a key aspect of customer service. Management monitors each vehicle in the fleet for relative fuel consumption, reliability and maintenance cost. Older vehicles also produce a greater level of emissions and we are keen to minimise this aspect of bus operation. Those vehicles that fall outside of acceptable parameters are designated for disposal. 

Group Strategy

Before the COVID-19 crisis took hold in early 2020 the Government had announced an ambitious package of new funding to overhaul bus provision in every region outside London. It has now published a detailed strategy paper, "Bus Back Better", which lays out a comprehensive plan of reform and investment. New Enhanced Partnerships, combined with £3 billion of Government investment in 4,000 zero emission vehicles, are designed to re-invigorate the bus market all over the country and increase bus usage. We welcome this policy change and look forward to working closely with Local and National Government in making a success of these new initiatives. In Greater Manchester, Transport for Greater Manchester ("TfGM") has recently carried out another consultation on the franchising of bus services in Greater Manchester under the Bus Services Act 2017 and the Mayor has made the decision to proceed with franchising. In our view this decision stands at the end of a flawed process and we are challenging it (with another bus operator) in the courts.

Dividend

The Company paid an interim dividend of 0.95 pence per share in December 2019. Given the advent of the coronavirus crisis the board decided that it was not prudent to recommend a final dividend in respect of the year ended 30 November 2019 to the Annual General Meeting in May 2020. One of the terms of the CBSSG Restart grant is that bus companies may not pay dividends as long as the grant is in place. Accordingly it will be necessary for the CBSSG Restart grant to cease and normal bus operation to re-commence successfully before the board can give any thought to the resumption of dividend payments.

Fuel hedging

When opportunities arose before the pandemic to hedge the fuel requirements of the Group the board as usual took out fuel hedges, using diesel derivatives. As a result about 87% of the Group's fuel requirement for 2021 is covered by hedging contracts, at an average price of 100p per litre, though t he forecast fuel requirement of the Group for 2021 is at the reduced level of about 11.5 million litres for the year . The Group's forecasts anticipate fuel usage of about 14 million litres in 2022. About 54% of this fuel usage is covered by hedging contracts, at an average price of 87p per 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 in its costs and creating business certainty.

Financial review

Income statement

The Consolidated Income Statement is set out below. Because of the COVID-19 crisis and the designation of bus operation as an essential service, Government provided a grant and subsidy support package to the bus industry (see note 2 of this announcement for the breakdown of this package and its impact on Group revenues). In return the Group provided the service levels requested by the DfT and the Local Authorities in whose areas the Group operates. These service levels also varied during the year, as the country moved into and out of lockdown periods and different parts of the country endured varying levels of restriction. Thus, looking at 2020 stand alone or 2020 against 2019, there is no useful comparison or comment to be made about the levels of Revenue, Cost of Sales, Gross Profit, Gross Profit Margin, Loss or Profit from Operations and Loss or Profit before Taxation.

Administrative expenses (setting aside exceptional items) did increase considerably compared to the previous year (from £7.56 million to £10.68 million). However a significant part of this increase was caused by the inclusion in the Group of the new Bolton depot for a full year, rather than four months as in the previous year. Unsurprisingly COVID-19 caused overhead expense to increase in many areas but particularly in that of legal and professional advice, reflecting the need of management for a much enhanced level of legal and specific technical advice in very challenging and unusual times. The exit from the second Heathrow depot referred to above also caused a one-off dilapidation expense.

Finance expense in 2020 includes a charge of £393,000 for the interest element of leases falling under the ambit of IFRS 16. There is no corresponding charge in the same caption in 2019. IFRS 16 is being implemented for the first time this year, but, in accordance with an option in the accounting standard, the prior year figures have not been restated. The interest expense related to hire purchase agreements also rose in the year commensurately with the increased use of this type of vehicle finance. 

The exceptional items represented by the mark to market provision on fuel derivatives and other exceptional costs are analysed in detail in note 3 to this announcement. The principal components of the exceptional items are described fully in the "Results" section of this statement above.

There were no share issues in the year. As a result of all the factors set out above the basic loss per share in 2020, after all exceptional items, was 8.08p (2019: earnings of 4.00p per share). 

Balance sheet

The gross assets of the Group grew by 17% in the year to £108.7 million at 30 November 2020 (2019: £92.6 million). The book value of property, plant and equipment increased by £13.7 million; part of this increase was due to the recognition, for the first time, of right of use assets totalling £1.3 million under IFRS 16. The rest of the increase reflected the delivery of about two-thirds of the vehicles ordered to replace those leased from First Group plc when the Bolton depot was acquired from them in August 2019. The asset represented by the defined benefit pension scheme decreased somewhat: asset values were maintained, but the actuary reduced the discount rate from 1.90% to 1.30%, thus increasing the net present value of liabilities. Goodwill and other intangible assets fell slightly as the result of the amortisation of the remaining £339,000 in contract-related intangibles. 

Group stocks of parts, tyres and fuel fell by 19% compared to the previous year in response to the reduced demands under pandemic conditions. The growth in Trade and Other Receivables reflects the switch in revenue from cash, contactless sales and concessionary fares to the CBSSG Restart grant. This grant is subject to a complex series of submissions and reconciliations which inevitably considerably elongate the timing of the actual receipt of the income in cash. 

The loans and borrowings of the Group shown under Current Liabilities rose in response to the increased size of the overdraft (but this increase was offset to some degree by the increased holding of cash and cash equivalents at the year's end). Drawings under the Group's Revolving Commercial Facility were unchanged year on year. Obligations under hire purchase contracts under both Current Liabilities and Non-current Liabilities increased as a result of the new vehicle deliveries for the Bolton fleet already mentioned above. Other lease liabilities in both Current and Non-current Liabilities are occasioned by the adoption for the first time of IFRS 16. In doing this the Group has opted for the modified retrospective approach which does not involve the restatement of prior year figures. The gross liabilities of the Group therefore rose to £78.1 million (2019: £56.02 million), an increase of 39%.

Therefore overall, mostly as the result of the losses inflicted on the Group by the COVID-19 pandemic, the net assets of the Group fell to £30.7 million at 30 November 2020, compared to £36.6 million at 30 November 2019.

Cash flow statement

Cash flows from operating activities (before changes in working capital and provisions) fell considerably to £6.35 million (2019: £9.50 million), a reduction of 33%, as a result of the fall in profits caused by the pandemic. However little working capital was absorbed compared to the previous year such that cash generated from operations, at £5.59 million (2019: £5.88 million), was only 5% down on the previous year. Interest actually paid on hire purchase agreements benefited from the moratorium declared by finance providers at the height of the COVID-19 pandemic. Interest paid on leases falling under IFRS 16 is shown separately for the first time, without any comparative for the reasons given above. Cash flows from operating activities therefore fell by 12% to £4.59m (2019: £5.21 million).

There were no acquisitions in the year. The sale of the surplus depot in Atherton, Greater Manchester served to offset the somewhat reduced level of cash expenditure on property, plant and equipment this year. Thus cash used in investing activities was only £292,000 compared to £7.2 million in the previous year.

Financing activities reflect the circumstances of the year. There were no share issues and no new bank borrowings. The only dividend paid occurred in December 2019, before the onset of the COVID-19 pandemic. Bank borrowings repaid in 2020 were slightly reduced by the payment moratorium already mentioned (the corresponding repayment in 2019 included a tranche of £1 million of mortgage principal linked to the sale of a property the previous year). The bank interest paid in the year was little changed. As with other borrowings of a similar nature the capital element of payments on hire purchase agreements benefited from the aforementioned moratorium. The capital element of leases falling under IFRS 16 is also shown separately for the first time, without any comparative in accordance with the modified retrospective approach adopted by the Group in transitioning to the new standard. Thus overall £5.58 million in cash was used in financing activities in 2020 compared to the £282,000 in cash generated under very different circumstances in 2019. 

In summary then cash and cash equivalents decreased by £1.29 million, which was, considering background events, a notably lower level of decrease than in 2019, when cash and cash equivalents decreased by £1.73 million compared to 2018. 

Outlook

As mentioned above, the provisions of CBSSG Restart and the associated UK Government support measures have been designed to ensure that the Group makes neither a profit nor a loss at the normalised level for as long as this package of measures is in place. Therefore any financial results for the year ending 30 November 2021 must be expected to conform to these restrictions unless and until CBSSG and its associated measures are terminated. These same factors caused the Company to cease to be able to give market guidance and, until CBSSG and its associated measures are terminated, this will continue to be the case. Further announcements will be made on these matters as appropriate.

In making its forecasts for going concern testing purposes the board has assumed that social distancing measures on bus will drop away in the latter part of this year, together with the CBSSG Restart grant. The board has also assumed that passenger volumes will continue to be negatively affected throughout 2022 and that true recovery will not occur until 2023. At this stage these are little more than best guesses because the long term effects of COVID-19 on travel, living and working patterns are fundamentally unknown. 

However, on the more optimistic side of the ledger, the Government's new National Bus Strategy does promise large scale fresh investment in bus transport. This must be a good thing for the industry in general. Our belief continues to be that the trends, which bus companies, both large and small, have sought to combat, largely unsuccessfully, over the last decade, have not gone away during the pandemic. If anything, as in so many walks of business, the crisis has speeded up the onset of those trends. However I continue to believe very firmly that the "new normal" in the bus industry, whatever its shape, will more than ever require management which is swift to think and swift to act. The slow, indecisive and cumbersome will be left behind. I am glad to say that Rotala possesses just the management team to prosper in those conditions with exactly the right characteristics and attitudes that are going to be required. Our track record over the last 15 years demonstrates this convincingly. Thus I think that your Company is very well placed to take full advantage of the opportunities which are likely to occur for both organic growth and acquisitions, and I am therefore confident about the prospects of the Group in the years ahead.

John Gunn

Non-Executive Chairman

Date: 5 May 2021

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2020

	Note	2020	2020	2020	2019	2019	2019
		Results before  exceptional items	Exceptional items (note 3)	Results for the year	Results before  exceptional items	Exceptional items (note 3)	Results for the year
		£'000	£'000	£'000	£'000	£'000	£'000
Continuing operations
Revenue	2	78,115	-	78,115	67,533	-	67,533
Cost of sales		(66,010)	-	(66,010)	(53,917)	-	(53,917)
Gross profit		12,105		12,105	13,616	-	13,616
Administrative expenses		(10,683)	(3,999)	(14,682)	(7,563)	(1,806)	(9,369)
(Loss)/profit from operations	3	1,422	(3,999)	(2,577)	6,053	(1,806)	4,247
Finance income		43	-	43	53	-	53
Finance expense		(2,247)	-	(2,247)	(1,688)	-	(1,688)
(Loss)/profit before taxation		(782)	(3,999)	(4,781)	4,418	(1,806)	2,612
Tax credit/(expense)	4	149	585	734	(840)	175	(665)
(Loss)/profit for the year attributable to the equity holders of the parent		(633)	(3,414)	(4,047)	3,578	(1,631)	1,947
(Loss)/earnings per share for (loss)/profit attributable to the equity
holders of the parent during the year:
Basic (pence)	5	(1.26)		(8.08)	7.35		4.00
Diluted (pence)	5	(1.26)		(8.08)	7.35		4.00

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED

30 NOVEMBER 2020

		2020	2019
		£'000	£'000
(Loss)/profit for the year		(4,047)	1,947
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit pension scheme		(890)	527
Deferred tax on actuarial (loss)/gain on defined benefit pension scheme		169	(100)
Other comprehensive (loss)/profit for the year (net of tax)		(721)	427
Total comprehensive (loss)/income for the year attributable to the equity holders of the parent		(4,768)	2,374

IFRS 16 was adopted on 1 December 2019 for statutory reporting purposes, without restating prior year figures. As a result, the primary statements are shown on an IFRS 16 basis for 2020 and an IAS 17 basis for 2019. Note 10 provides a reconciliation of the two measures.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2020

	Note	2020	2019
		£'000	£'000
Assets
Non-current assets
Property, plant and equipment	6	65,392	51,698
Defined benefit pension asset		1,441	2,319
Goodwill and other intangible assets		14,907	15,246
Total non-current assets		81,740	69,263
Current assets
Inventories		3,489	4,310
Trade and other receivables		22,299	18,275
Derivative financial instruments		165	36
Cash and cash equivalents		1,035	746
Total current assets		26,988	23,367
Total assets		108,728	92,630
Liabilities
Current liabilities
Trade and other payables		8,338	7,648
Loans and borrowings	7	20,842	19,267
Lease liabilities	8	6,340	4,295
Derivative financial instruments		1,267	3
Total current liabilities		36,787	31,213
Non- current liabilities
Loans and borrowings	7	5,881	6,124
Lease liabilities	8	33,195	15,934
Provision for liabilities		579	234
Net deferred taxation		1,612	2,515
Total non-current liabilities		41,267	24,807
Total liabilities		78,054	56,020
TOTAL NET ASSETS		30,674	36,610
Shareholders' funds
Share capital		12,731	12,731
Share premium reserve		12,369	12,369
Merger reserve		2,567	2,567
Shares in treasury		(806)	(806)
Retained earnings		3,813	9,749
TOTAL EQUITY		30,674	36,610

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 NOVEMBER 2020

	Share capital £'000	Share premium reserve £'000	Merger reserve £'000	Shares in treasury £'000	Retained earnings £'000	Total £'000
At 1 December 2018	12,220	11,779	2,567	(817)	9,146	34,895
Profit for the year					1,947	1,947
Other comprehensive income	-	-	-	-	427	427
Total comprehensive income	-	-	-	-	2,374	2,374
Transactions with owners:
Dividends paid and accrued	-	-	-	-	(1,773)	(1,773)
Shares issued	511	590	-	11	-	1,112
Share based payment	-	-	-	-	2	2
Transactions with owners	511	590	-	11	(1,771)	(659)
At 30 November 2019	12,731	12,369	2,567	(806)	9,749	36,610
Change in accounting policy - IFRS 16 leases	-	-	-	-	(1,168)	(1,168)
Loss for the year	-	-	-	-	(4,047)	(4,047)
Other comprehensive loss					(721)	(721)
Total comprehensive loss	-	-	-	-	(5,936)	(5,936)
Transactions with owners:
Dividends paid	-	-	-	-	-	-
Transactions with owners	-	-	-	-	-	-
At 30 November 2020	12,731	12,369	2,567	(806)	3,813	30,674

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2020

		2020	2019
		£'000	£'000
Cash flows from operating activities
(Loss)/profit before taxation		(4,781)	2,612
Adjustments for:
Depreciation		7,765	4,361
Acquisition expenses		-	578
Finance expense (net)		2,204	1,635
Loss/(gain) on sale of property, plant and equipment		793	(4)
Contribution to defined benefit pension scheme		-	(190)
Intangible asset amortisation		339	501
Notional expense of defined benefit pension scheme		31	5
Cash flows from operating activities before changes in working capital and provisions		6,351	9,498
Decrease/(increase) in inventories		821	(590)
(Increase) in trade and other receivables		(4,024)	(2,377)
Increase/(decrease) in trade and other payables		962	(79)
Movement in provisions		345	(506)
Movement on derivative financial instruments		1,135	(71)
		(761)	(3,623)
Cash generated from operations		5,590	5,875
Interest paid on hire purchase agreements		(606)	(664)
Interest paid on other lease liabilities under IFRS 16		(394)	-
Net cash flows from operating activities carried forward		4,590	5,211

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 NOVEMBER 2020 (Continued)

		2020	2019
		£'000	£'000
Cash flows from operating activities brought forward		4,590	5,211
Investing activities
Purchases of property, plant and equipment		(878)	(1,325)
Acquisition of businesses		-	(5,992)
Sale of property, plant and equipment		586	96
Net cash used in investing activities		(292)	(7,221)
Financing activities
Shares issued		-	1,112
Dividends paid		(476)	(1,297)
Proceeds of mortgage and other bank loans		-	6,750
Repayment of bank and other borrowings		(243)	(1,283)
Bank interest paid		(1,069)	(1,037)
Hire purchase refinancing receipts		185	353
Capital settlement payments on vehicles sold		(228)	(117)
Capital paid on other lease liabilities under IFRS 16		(801)	-
Capital paid on hire purchase agreements		(2,952)	(4,199)
Net cash (used in)/from financing activities		(5,584)	282
Net (decrease) in cash and cash equivalents		(1,286)	(1,728)
Cash and cash equivalents at beginning of year		(1,959)	(231)
Cash and cash equivalents at end of year		(3,245)	(1,959)

Notes to the Preliminary Announcement of results for the year ended 30 November 2020

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 2020. These policies are   in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

2.  Turnover:

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.

· Grants and subsidies provided by the Department for Transport and Local Authorities to support bus services run at their behest under COVID-19 conditions have been taken directly to income. Grant income is recognised on submission of a claim as there are no unfulfilled conditions at this point in time.

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. 

	2020	2019
	£'000	£'000
Commercial	31,596	45,842
Contracted	16,501	20,223
Charter	665	1,468
Grants and subsidies	29,353	-
Total Revenue	78,115	67,533

As set out in the Chairman's Statement the Group has been the beneficiary of extensive support in the current accounting period from the Department for Transport and Local Authorities.

The principal component parts of the income from grants and subsidies in the period were:

· Concessionary fares income received but not matched by the carriage of a passenger - £7,335,000;

· Bus Services Operator's Grant not matched by actual kilometres driven - £946,000;

· COVID-19 Bus Services Support Grant - £20,339,000.

3.  Profit before taxation:

Profit before taxation includes the following mark to market provisions and other exceptional items:

	2020	2019
	£'000	£'000
Mark to market (loss)/profit on fuel derivatives	(2,511)	58
Loss on disposal of vehicles scrapped (see Chairman's statement)	(913)	-
Amortisation of intangible assets	(339)	(501)
Redundancy and reorganisation costs and costs of integration of acquisitions	(236)	(784)
Acquisition costs	-	(578)
Share based payment expense	-	(1)
Loss within profit before taxation	(3,999)	(1,806)

4.  Tax expense:

Tax expense includes the following:

	2020	2019
	£'000	£'000
Current tax
Current tax on profits for the year	-	-
	_______	_______
Total current tax	-	-
	_______	_______
Deferred tax
Origination and reversal of temporary differences	871	(693)
Prior year adjustments	(137)	126
Change in rate of tax	-	(98)
	_______	_______
Total deferred tax	734	(665)
	_______	_______
Income tax credit/(expense)	734	(665)
	_______	_______

The tax assessed for the year is different to the standard rate of corporation tax in the U.K. for the following reasons:

	2020	2019
	£'000	£'000
(Loss)/profit before taxation	(4,781)	2,612
	_______	_______
(Loss)/profit at the standard rate of corporation tax in the UK of 19% (2019: 19%)	908	(496)
Non-taxable items	(37)	(197)
Adjustments in respect of prior periods	(137)	126
Impact of change in tax rates	-	(98)
	_______	_______
Total tax credit/(expense)	734	(665)
	_______	_______

The main rate of corporation tax was formerly set to fall to 17% from 1 April 2020 but this plan has been reversed and the rate of corporation tax maintained at 19%.

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.

5.  Earnings per share:

  (a) Basic earnings per share

	Basic	Basic
	2020	2019
	£'000	£'000
(Loss)/profit attributable to ordinary share holders	(4,047)	1,947
Weighted average number of shares in issue	50,091,109	48,673,701
Basic (loss)/earnings per share	(8.08p)	4.00p

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
	2020	2019
	£'000	£'000
(Loss)/profit attributable to ordinary share holders	(4,047)	1,947
(Loss)/profit for the purposes of diluted earnings per share	(4,047)	1,947
Weighted average number of shares in issue	50,091,109	48,673,701
Adjustment for exercise of options	-	-
Weighted average number of ordinary shares for the purposes of diluted earnings per share	50,091,109	48,673,701
Diluted (loss)/earnings per share	(8.08p)	4.00p

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.

( c) Adjusted basic earnings per share (adjusted before mark to market provision and other exceptional items):

	Basic	Basic
	2020	2019
	£'000	£'000
(Loss)/profit attributable to ordinary share holders	(633)	3,578
Weighted average number of shares in issue	50,091,109	48,673,701
Adjusted basic (loss)/earnings per share	(1.26p)	7.35p

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
	2020	2019
	£'000	£'000
(Loss)/profit attributable to ordinary share holders	(633)	3,578
(Loss)/profit for the purposes of diluted earnings per share	(633)	3,578
Weighted average number of shares in issue	50,091,109	48,673,701
Adjustment for exercise of options	-	-
Weighted average number of ordinary shares for the purposes of diluted (loss)/earnings per share	50,091,109	48,673,701
Adjusted diluted (loss)/earnings per share	(1.26p)	7.35p

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.  

6.  Property, plant and equipment:

	Freehold and leasehold land and buildings	Right of use assets under IFRS16	Plant and machinery	Public service vehicles	Total
	£'000	£'000	£'000	£'000	£'000
Cost:
At 1 December 2018	7,103	-	5,238	50,954	63,295
Acquisition	4,692	-	500	-	5,192
Additions	186	-	895	10,435	11,516
Disposals	(11)	-	(323)	(2,721)	(3,055)
At 30 November 2019	11,970	-	6,310	58,668	76,948
Right of use assets recognised under IFRS 16	-	4,159	-	-	4,159
Reclassifications	(904)	904	17	(17)	-
Additions	10	259	281	20,454	21,004
Disposals	(169)	(508)	(341)	(7,713)	(8,731)
At 30 November 2020	10,907	4,814	6,267	71,392	93,380
Depreciation:
At 1 December 2018	503	-	1,604	21,744	23,851
Charge for the year	75	-	486	3,800	4,361
Disposals	(11)	-	(321)	(2,630)	(2,962)
At 30 November 2019	567	-	1,769	22,914	25,250
Depreciation on right of use assets recognised under IFRS 16	-	2,293	-	-	2,293
Reclassification	(254)	254	9	(9)	-
Charge for the year	47	790	598	6,330	7,765
Disposals	(16)	(478)	(183)	(6,643)	(7,320)
At 30 November 2020
	344	2,859	2,193	22,592	27,988
Net book value:
At 30 November 2020	10,563	1,955	4,074	48,800	65,392
At 30 November 2019	11,403	-	4,541	35,754	51,698

The net book value of right of use assets at 30 November 2020 consisted of public service vehicles (£1,329,000) and leasehold land and buildings (£626,000). Depreciation charged thereon was £767,000 and £23,000 respectively.

The Group had already recognized as an asset a leasehold interest at its fair value at the date of its acquisition in 2006. This has now been reclassified as a right of use asset. Accounting standards at that time did not require the recognition of a corresponding lease liability; therefore this liability has been recognized as part of the transition adjustments in the application of IFRS 16.

7.  Loans and borrowings:

	2020	2019
	£'000	£'000
Current:
Overdrafts	4,280	2,705
Bank loans	16,562	16,562
	_______	_______
	20,842	19,267
	_______	_______
Non-current:
Bank loans	5,881	6,124
	_______	_______
	26,723	25,391
	_______	_______

In 2017 HSBC Bank plc became the principal bankers to the Group. The Senior Facilities Agreement as at 30 November 2020 provided for a revolving facility of up to £16.2 million and a mortgage facility of £8.0 million, with a corresponding overdraft facility of up to £6.6 million. The Group has entered into a cross-guarantee and floating charge agreement covering these facilities. At the balance sheet date these facilities were scheduled to expire on 5 December 2021. Subsequent to the balance sheet date these facilities were revised and extended to 5 December 2022.  

The bank loans are 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	2020	2019
	£'000	£'000
Obligations under hire purchase agreements (see note 9)	5,788	4,295
Other lease liabilities (see note 9)	552	-
Total current liabilities	6,340	4,295

Non - current liabilities	2020	2019
	£'000	£'000
Obligations under hire purchase agreements (see note 9)	31,309	15,934
Other lease liabilities (see note 9)	1,886	-
Total non - current liabilities	33,195	15,934

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.

On transition to IFRS 16 at 1 December 2019, the Company has adopted the modified retrospective approach in which the net present value of the remaining lease payments at the transition date is recognised as the opening liability with a right of use asset to be depreciated over the remaining lease period. The comparative figures for 2019 have not been adjusted in accordance with the requirements of this approach.

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:

	2020	2019
	£'000	£'000
Current liabilities	5,788	4,295
Non-current liabilities	31,309	15,934
	37,097	20,229

Future lease payments are due as follows:

	Minimum lease payments 2020	Interest 2020	Present value 2020
	£'000	£'000	£'000
Not later than one year	7,404	1,616	5,788
More than one year but less than two years	6,962	1,106	5,856
More than two years but less than five years	18,715	1,722	16,993
Later than five years	8,984	524	8,460
	42,065	4,968	37,097

	Minimum lease payments 2019	Interest 2019	Present value 2019
	£'000	£'000	£'000
Not later than one year	5,003	708	4,295
More than one year but less than two years	4,373	533	3,840
More than two years but less than five years	8,781	730	8,051
Later than five years	4,233	190	4,043
	22,390	2,161	20,229

(b)  Other lease liabilities

Other lease liabilities consist of leases treated as finance leases under IFRS 16 but which take the legal form of rental agreements without the legal right of ownership of the asset leased. On transition to IFRS 16 at 1 December 2019, the Company has adopted the modified retrospective approach in which the net present value of the remaining lease payments at the transition date is recognised as the opening liability with a right of use asset to be depreciated over the remaining lease period. Comparative figures for 2019 have not been presented in accordance with the requirements of this approach.

The present values of future lease payments are analysed as:

	2020
	£'000
Current liabilities	552
Non-current liabilities	1,886
	2,438

Future lease payments are due as follows:

	Minimum lease payments 2020	Interest 2020	Present value 2020
	£'000	£'000	£'000
Not later than one year	757	205	552
More than one year but less than two years	565	139	426
More than two years but less than five years	818	203	615
Later than five years	1,583	738	845
	3,723	1,285	2,438

10.  IFRS 16 adoption reconciliation:

The following is a reconciliation of the financial statement line items from IAS 17 to IFRS 16 as at 1 December 2019:

	Carrying amount at 30 November 2019	Remeasure-ments	IFRS 16 carrying amount at 1 December 2019
	£'000	£'000	£'000
Intangible and pension assets	17,565	-	17,565
Property, plant and equipment	51,698	1,866	53,564
Current assets	23,367	-	23,367
Total assets	92,630	1,866	94,496
Loans and borrowings	(19,267)	-	(19,267)
Obligations under hire purchase contracts	(4,295)	-	(4,295)
Other lease obligations under IFRS 16	-	(3,034)	(3,034)
Other current liabilities	(7,651)	-	(7,651)
Non-current liabilities	(24,807)	-	(24,807)
Total liabilities	(56,020)	(3,034)	(59,054)
Net assets	36,610	(1,168)	35,442
Share capital	12,731	-	12,731
Other reserves	14,130	-	14,130
Retained earnings	9,749	(1,168)	8,581
Total equity	36,610	(1,168)	35,442

In accordance with IFRS 16 the Group has recognised what were previously considered to be operating leases and classified them into their right of use and lease obligation components at 1 December 2019, being the date of transition. The values for right of use assets were established on the assumption that the standard had been applied at the inception of the respective leases. The values for lease obligations were established by discounting the lease payments from the inception of the respective leases at the applicable incremental borrowing rate in order to arrive at an appropriate net present value.   

As allowed by IFRS 16 the Group has taken advantage of the available practical expedients in:

· adopting the exemption for leases ending within 12 months of the transition date;

· using the exemption for low value items;

· using a single discount rate for bundles of leases of similar assets and characteristics.

11.  Financial Information:

The Financial Statements for the year ended 30 November 2020 were approved by the Board of Directors on 5 May 2021. 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 2020 will be delivered to the Registrar of Companies following the Company's Annual General Meeting due to be held on 28 May 2021. The auditors have reported on the 2020 accounts; the auditors' opinion is unqualified and does not include a statement under section 498 of the Companies Act 2006.

12.  Further Information:

The Company's Annual Report and Accounts for the year ended 30 November 2020 are expected to be posted to shareholders later today and will also be available to view on the Company's website at the following link: http://www.rotalaplc.com

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

 

END

 

 

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