Rotala hopeful fuel costs will favour operations during 2015

BUS and coach company Rotala has said full year pre-tax profits are likely to be modest but in line with management expectations.

The Birmingham-based company, which operates the Flights coach services, said in a year end update that turnover was likely to be slightly reduced on 2013 but nevertheless, profits would be up.

Exceptional items were largely due to market provisions for the fuel hedges which the company has taken out to cover its future fuel requirements. It said market to market provisions had to be taken to profit or loss every year, but the fuel hedges were in reality in place to benefit the business in the future.  
 
The board said its policy was to create certainty over the group’s fuel costs by hedging the total fuel requirement, whenever it seemed prudent to do so.

“The board’s view is that hedging the fuel requirement is a prudent and conservative approach which reduces the volatility of underlying earnings and cash flows whilst also giving certainty to business planning and financial forecasts,” it said.

“The board therefore has continued to take out fuel hedges against the fuel requirements of the group, at the present time up to November 2017.”

Operating cash flow was said to be very good and enabled the group to improve the balance between current assets and current liabilities by £2.5m in the year to November 30, 2014 compared to the position at the end of 2013. Net debt, which at November 2013 stood at £20m, fell to £18.4m by year-end.

Trading for the current year has begun in line with budget but it warned the end of its 10-year contract with British Airways during the first half would impact the business going forward.

Nevertheless, it said it was confident that this impact would  be largely mitigated by the effect of new contracts, gains in operating efficiencies and service enhancements in a number of its operating centres.    
 
John Gunn, Rotala chairman, said: “Current market prices for fuel offer an opportunity to fix a key operating cost at a much lower level for a number of years ahead. This will underpin the board’s commitment to a progressive dividend policy which reflects improvements to underlying earnings and cash flows. It is pleasing to note that our determination to deliver value for shareholders has been reflected in a stronger share price over the past two years and this strength should be underpinned by the certainty of lower fuel prices over the next three years as the result of our hedging activities.  
 
“The enhanced banking facilities which we announced in November 2014 leave us well placed to make acquisitions and increase the size of the company considerably in the next few years. We have also strengthened operational management recently with key recruits at a senior level. Change is still the watchword in the bus industry and we are confident that we can, strongly equipped as we are in both financial and management resources, play an increasing role in this process. We believe that the company has performed well in 2014 and the current financial year has started positively.”