Final Results
Rotala PLC
02 April 2007
ROTALA PLC
PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2006
CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS
I am pleased to be able to make this report to the shareholders of Rotala plc
('Rotala' or 'the Company') for the year ended 30 November 2006, the first full
year of the Company's operation. The profit and loss account shows that the
Company sustained a loss of £2.7m for the year. This may be compared to a loss
of £1.15m in the prior period, most of which was sustained in the three months
after the acquisition of the Flights Group in August 2005. Nevertheless I
believe that it has been a year in which the board has managed to effect
considerable change in the business of the group and thus make significant
progress towards the objective of achieving positive results, after the most
inauspicious start caused by the circumstances of the acquisition of Flights.
Those difficulties are now well behind us and your board has throughout the year
been focusing on delivering the strategy which was set out at the time of the
foundation of the Company.
I think it is as well at this point to re-iterate what that strategy is. Rotala
was conceived as a consolidator in an industry which, outside of the giants
within it, is highly fragmented. Many existing operators are small and are only
marginally profitable at best. The opportunity therefore exists to put
businesses together, reduce overall overheads and secure decent margins. At the
same time the industry is a product of de-regulation some 20 years ago. Those
who set themselves up in business then are now approaching retirement and are
looking to capitalise on their lifetime of work. Rotala is well placed to take
advantage of this factor. Since Rotala was conceived and launched in early 2005
there has also been a welter of political developments which have served to
bolster the logic of the original strategy. The various reports on congestion
and environmental pollution, debates on road pricing and congestion zones have
focused attention on the necessity of investing in bus and other transport
networks, particularly in and around the large conurbations. It is the objective
of your board to fulfil this strategy by building a business, both by
acquisition and organic growth, around depots situated in those parts of the
country where there is suitable density of population and prospects of
continuing economic growth.
With this aim in mind one of the first steps that we took in the year under
review was to conclude in April 2006 our negotiations to acquire the freehold to
the Company's main depot at Long Acre in Birmingham. This 4.5 acre site is well
located both close to the city centre and just off junction 6 of the M6. The
purchase price was £2 million. A placing of £1.625 million was completed at this
time, both to finance the acquisition of the freehold and replenish the
Company's equity capital. A commercial mortgage of £1.5million was also obtained
on the property to help with the finance. We have concentrated since then on
seeking businesses in the area whose acquisition would enable us to make best
use of the site and its excellent facilities. Just before the end of the
accounting year, in October 2006, we were able to announce the successful
acquisition of Zak's Bus & Coach Services Limited ('Zak's') for £30,000, though
the acquisition included taking on responsibility for debts in the company
amounting to £450,000. Zak's, operating about
40 vehicles in and around the North Birmingham area, turns over some £2.1
million per annum, consisting primarily of contracts with the West Midlands
Passenger Transport Executive ('Centro'), Worcestershire County Council,
Staffordshire County Council and Birmingham City Council. To fund the
acquisition, and to meet the considerable extra demands on working capital, we
had conducted a further share placing of £1.571 million also in October.
Following the acquisition, the vehicles and operations of Zak's were transferred
to and integrated with those at Long Acre. Duplicated administrative and
maintenance overheads were thereby eliminated. Just after the year end we added
to this business that of Birmingham Motor Traction Limited for a consideration
of £34,000. This business turns over some £600,000 a year and operates 20
vehicles. The customer base is very similar to that of Zak's. This business too
has been transferred to Long Acre to similar effect. We continue to look for
other suitable businesses in the northern part of Birmingham to complement our
fleet and make the maximum possible use of the space at the depot.
The acquisition of Zak's brought with it an additional depot of 3.5 acres in
North Birmingham on a long leasehold with 43 years to run. For the purposes of
these results this property has been valued at £900,000 by our professional
valuation advisers. The board believes that this depot offers attractive
possibilities for expansion in the North Birmingham area once Long Acre is
running at full capacity, which we expect to be achieved in 2007. Alternatively,
if the Board believes that it is beneficial, this asset will be exploited in its
own right.
Quite apart from these activities on the acquisition and capital fronts, the
board has also continued to devote much effort to the increase of turnover,
reduction of costs and renewal of the group's vehicle fleet. Much attention has
been devoted to the appropriate profile of the vehicle fleet. The leases on the
high cost elements of the fleet acquired with the Flights Group in 2005 in the
main end in 2007. The replacements for those vehicles which are being retired
have been carefully planned and we are confident that, as the fleet is renewed,
reliability will improve and maintenance costs fall. The Board has taken a
policy decision to acquire vehicles by hire purchase. Over time this will create
greater value for shareholders through the equity the Company will own in those
vehicles. This is in stark contrast to the use, by the previous management, of
operating leases which bring with them no such beneficial characteristics. In
addition we can already see that the hire purchase rates at which the vehicle
leases will be taken out will in themselves serve to reduce basic operating
costs from their current levels. The focus on cost reduction has yielded
annualised savings of some £1.2 million in the year and by the time the cost
reduction plan has had full effect at the end of 2007 a further £1.5 million in
annualised cost savings will have been achieved.
We have furthermore, wherever possible, sought to streamline management
structures and improve decision making. It was with this object in mind that
earlier in the year we decided to amalgamate our two streams of business,
airline on the one hand and coach and bus on the other, under a single managing
director. We appointed Simon Dunn to this role and I am glad to say that I was
in September able to welcome Simon onto the board of Rotala in recognition of
his new role and enhanced responsibilities. He was at the same time joined by
Geoff Flight, a well-known figure in the industry, whose family had founded the
core of the Flights Group. Geoff has made a considerable impact with his
expertise and has been a valuable additional resource in the implementation of
our acquisition strategy.
I am also pleased to be able to report continuing success in our objective to
increase the revenues of the group with new contracts. Last year I was able to
say that up to the time of reporting, which was in May 2006, we had managed to
be able to obtain some £2.5 million of new work since we had acquired the
Flights Group. We have managed a continuation of this trend in the last year and
now the figure for new turnover totals some £6 million. Within this figure are
the contracts which were the subject of our recent announcement. In it we were
delighted to be able to state that we had established a presence in the Bristol
market by obtaining two prestigious park and ride contracts there. In our view
Bristol has just the characteristics which I have delineated above in my outline
of the group's strategy.
The success in obtaining new contracts underlines our commitment to increase the
group's turnover and to become a significant force in transport operations in
our chosen locations. The board remains convinced that the transport sector
offers many opportunities for growth, both organically and by acquisition as I
have outlined earlier in this statement. I continue to believe that one of the
keys to success in the sector is a strong financial as well as operational base.
I intend that we will take further decisive strides towards these twin
objectives as 2007 passes and build on the successes we have achieved so far.
I am pleased that the trend in reduction of losses has continued in 2007 in
accordance with our budgets. I expect that the group will attain positive
results month by month both in cash flows and profits as 2007 progresses. The
Board believes that this strategy will deliver a sizeable and profitable,
integrated transport group. I look forward to being able to report further
successes to you as the year goes on. It is pleasing to note that the Company's
share price has begun to reflect the progress that is being made by reaching a
level of 3.25p at the time of writing compared to 1.875p at the end of November
2006.
In conclusion I would like to express my thanks to the whole management team and
all the staff, both older and more recent arrivals. In a public facing industry
such as this, I am forever conscious that individuals in the group, at whatever
level, represent the Company day in and day out. At the current level of
operations the Company conducts more than 1,000 vehicle movements per day. It is
therefore the commitment, enthusiasm and attention to detail of all the staff
which will ensure the continued success of this business, allied as it is to
operational management of much skill and experience. Based on these strengths I
believe that my optimism for the continued successful development of the group
is well founded.
John Gunn
Non-Executive Chairman
2ND April 2007
Contact:
Rotala plc
John Gunn 020 7236 6236
Blue Oar Securities Plc*
David Seal/Rhod Cruwys 020 7448 4400
* Blue Oar Securities was formerly Corporate Synergy Plc and acts as Nominated
Adviser & Broker for the Company
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 NOVEMBER 2006
Unaudited Audited
Year ended Period ended
30 November 30 November
Note 2006 2005
£ £
Turnover - continuing business 2 15,800,459 3,960,795
- acquired business 294,461
16,094,920 3,960,795
Cost of sales - continuing business (14,757,688) (4,220,226)
- acquired business (251,741)
(15,009,429) (4,220,226)
_________ _________
Gross profit/loss - continuing business 1,042,771 (259,431)
- acquired business 42,720 -
1,085,491 (259,431)
Administrative expenses - continuing business (3,553,233) (931,258)
- acquired business (25,691) -
(3,578,924) (931,258)
Operating (loss)/profit - continuing business
(including goodwill amortisation of £403,125 (2005: (2,510,462) (1,190,689)
£115,086)
- acquired business (including 17,029 -
negative goodwill amortisation of £3,125)
Operating loss (2,493,433) (1,190,689)
Interest receivable 19,301 67,429
Interest payable and similar charges (251,534) (25,223)
_________ _________
Loss on ordinary activities before taxation (2,725,666) (1,148,483)
Taxation on loss on ordinary activities - -
_________ _________
Loss on ordinary activities after taxation (2,725,666) (1,148,483)
_________ _________
Loss per share (basic and diluted) 3 (1.05p) (1.33p)
All amounts relate to continuing activities. All recognised gains and losses in
the current year are included in the profit and loss account. Movements in
shareholders' funds in the current year are shown in note 4.
CONSOLIDATED BALANCE SHEET AS AT 30 NOVEMBER 2006
Unaudited Unaudited Audited Audited
2006 2006 2005 2005
£ £ £ £
Fixed assets
Intangible assets - other 8,213,046 8,322,717
- negative goodwill (475,246) -
_________ _________
7,737,800 8,322,717
Tangible assets 5,675,158 1,496,333
_________ _________
13,412,958 9,819,050
Current assets
Stocks 164,511 141,690
Debtors - due within one year 3,358,994 3,422,031
- due after one year 180,436 330,049
3,539,430 3,752,080
Cash at bank and in hand - 1,000,000
3,703,941 4,893,770
Creditors: amounts falling due
within one year
Convertible debt (275,000) -
Other (5,665,235) (5,160,631)
_________ _________
Net current liabilities (2,236,294) (266,861)
_________ _________
Total assets less current liabilities 11,176,664 9,552,189
Creditors: amounts falling due
after more than one year (3,597,582) (1,769,868)
Provisions for liabilities (893,431) (1,547,000)
_________ _________
(4,491,013) (3,316,868)
_________ _________
6,685,651 6,235,321
_________ _________
Capital and reserves
Called up share capital 3,676,910 1,719,744
Share premium account 4,316,223 3,097,393
Merger reserve 2,566,667 2,566,667
Profit and loss account (3,874,149) (1,148,483)
_________ _________
Shareholders' funds 6,685,651 6,235,321
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2006
Unaudited Unaudited Audited Audited
Year ended Year ended Period ended Period ended
30 November 30 November 30 November 30 November
Note 2006 2006 2005 2005
£ £ £ £
Net cash outflow from operating
activities 5 (2,977,867) (3,095,171)
Returns on investments and
servicing of finance
Interest received 19,301 67,429
Interest paid (147,672) (16,324)
Interest element of finance lease
payments paid (52,331) (8,899)
_________ _________
Net cash inflow from returns on
investments and servicing of finance (180,702) 42,206
Capital expenditure and financial
investment
Payments to acquire intangible fixed assets (250,000) -
Payments to acquire tangible fixed assets (2,173,208) (57,607)
Sale of tangible fixed assets 90,447 3,894
_________ _________
Net cash outflow from capital
expenditure and financial investment (2,332,761) (53,713)
Acquisitions
Acquisition (30,000) -
Expenses incurred in making
acquisitions (132,308) (603,835)
Bank overdraft acquired with the
acquisitions (40,150) (149,912)
_________ _________
Cash outflow from acquisitions (202,458) (753,747)
_________ _________
Cash outflow before use of liquid
resources and financing (5,693,788) (3,860,425)
Management of liquid resources
Decrease/(increase) in deposits with banks 1,000,000 (1,000,000)
Financing
Issue of ordinary share capital 3,331,002 4,660,001
Issue costs (130,006) (309,530)
Issue of convertible loan notes 250,000 -
Bank loan 1,500,000 -
Bank loan repaid (3,902) -
Capital element of finance lease payments (647,801) -
_________ _________
4,299,293 4,350,471
_________ _________
Decrease in cash for the year (394,495) (509,954)
_________ _________
1. Basis of preparation and consolidation
The preliminary results have been prepared in accordance with applicable
Accounting Standards and on the basis of the accounting policies set out in the
annual report and accounts for the year ended 30 November 2005 which have
remained unchanged. Whereas these preliminary results 2006 represent those of
the whole group for that year those for 2005 comprise the results of the holding
company, Rotala Plc, only from 21 January 2005 (the date of incorporation) until
30 November 2005 and the results of the Flights Group of companies from 30
August 2005 (the date of acquisition) to 30 November 2005.
2. Turnover
Turnover represents sales to external customers at invoiced amounts less value
added tax. All of the activities of the group are conducted in the United
Kingdom and all are within the transport sector.
3. Earnings (loss) per share
The calculation of the basic and diluted loss 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. The effect of all potential ordinary shares
is not dilutive.
The weighted average number of equity shares in issue is 259,006,815 and the
earnings, being a loss after tax, are £2,725,666 (2005 - £1,148,183).
4. Movement in shareholders' funds:
Group Group
Year ended Period ended
30 November 30 November
2006 2005
£ £
Loss for the year (2,725,666) (1,148,483)
Issue of shares 3,331,002 7,693,334
Expenses of share issues (155,006) (309,530)
_________ _________
Net addition to shareholders' funds 450,330 6,235,321
Opening shareholders' funds 6,235,321 -
_________ _________
Closing shareholders' funds 6,685,651 6,235,321
_________ _________
5. Reconciliation of operating loss to net cash outflow from operating activities
Year ended Period ended
30 November 30 November
2006 2005
£ £
Operating loss (2,493,433) (1,190,689)
Depreciation of tangible fixed assets 263,144 132,618
Amortisation of goodwill 400,000 115,086
Amortisation of intangibles 18,000 -
Decrease/(increase) in debtors 456,322 (413,342)
(Decrease)/Increase in creditors (984,641) (1,603,491)
Decrease in stock 13,440 26,396
Loss/(profit) on disposal of fixed assets 2,870 (516)
Movement on provisions (653,569) (161,233)
_________ _________
(2,977,867) (3,095,171)
_________ _________
6. Summarised balance sheet of the acquisition:
Accounting Fair value
Book value policy adjustments Total
£ £ £ £
Fixed assets:
Intangible 18,900 - (18,900) -
Tangible 777,902 (87,000) 704,146 1,395,048
Current assets:
Stocks 36,261 - - 36,261
Debtors 305,488 - (10,285) 295,203
_________ _________ _________ _________
Total assets 1,138,551 (87,000) 674,961 1,726,512
Creditors:
Due within one year (640,105) - - (640,105)
Due after more than one year (507,182) - - (507,182)
_________ _________ _________ _________
Net assets (8,736) (87,000) 674,961 579,225
_________ _________ _________ _________
The fair value adjustments arose as a result of the writing off of goodwill, the
revaluation of the company's short leasehold property, a review of the market
value of the vehicles owned by the company and the writing off of certain
prepayments.
£
Acquisition expenses 70,854
Cash paid 30,000
_________
100,854
Net assets acquired 579,225
_________
Negative goodwill arising on acquisition 478,371
_________
7. Financial Information
The preliminary financial statements do not comprise statutory accounts for the
purpose of S240 of the Companies Act 1985. The 2006 figures are based on
unaudited accounts for the year ended 30 November 2006. The comparatives for
the full year ended 30 November 2005 are not the company's full statutory
accounts for that year. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditor's report on those accounts
was unqualified and did not contain a statement under section 237 (2) - (3) of
the Companies Act 1985.
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