Stop and start year for bus group Rotala

BIRMINGHAM-based coach and bus operator Rotala has recorded a mixed set of annual results with profit up and turnover down.

In the year ended November 30, the firm saw turnover dip to £54.8m from 2011’s £56.1m but profit before tax was up by 10.5% to £2.08m (2011: £1.88m).

In a statement to the Stock Exchange, Rotala said it has since strengthened its position in the West Midlands bus market – the second largest market in the UK after London – with the acquisition from First Group of its depots in Kidderminster and Redditch earlier this year.

Explaining the mixed results, the firm said: “The 2012 financial year was one of profound and continuing change for the bus industry. Against the background of an economy, at the very least, showing no signs of recovery, the industry has been obliged to confront and deal with the challenges put in its way by a number of changes in Government policy.

“These changes stem from the austerity measures which the Government has introduced since its election in 2010. In April 2012 the 20% reduction in the fuel tax rebate inherent in the Bus Services Operators’ Grant took effect.

“For Rotala this cut in rebate amounted to approximately £1m.

“This increase in the effective cost of fuel came on top of progressive reductions in concessionary fares reimbursement rates and the fall in local authority transport budgets. These measures made and make for a challenging operating environment.”

Reductions in revenue resulted from further cutbacks in transport budgets in areas such as Worcestershire.

Revenues in Commercial Services fell by some 4% to £29.6m (2011: £30.9m) while charter revenues fell by 18% to £2.7m (2011: £3.3m).

Rotala said its acquisition of the Worcestershire depots – as well as vehicles, plant and equipment – from First Group for £1.5m will in time see operating efficiencies but at present the acquisition is expected to generate “a small amount of negative goodwill”.

The acquisition has also meant additional costs.

“The 36 vehicles we did acquire from First did not comprise the whole of their fleet at these two depots. We immediately brought in more than 20 vehicles from our existing fleet in order to bring the fleet numbers up to those required for efficient operations,” the firm said.

“Furthermore, many of the vehicles do not comply with the requirements of the Disability Discrimination Act which begin to come into force in 2014. We will thus need to replace most of these vehicles in due course, and in certain cases have done this already.”

Rotala said that during the year it has received the remainder of its initial batch of 15 hybrid-power buses from the Optare Group.

“These have performed well in service and have achieved the targeted 30% fuel saving, when compared to a similar diesel bus,” it said.

“We were also awarded a grant of £683,000 in the third round of the Government’s Green Bus funding. This is in respect of a further eight hybrid-power vehicles, this time from the Wright group using the Volvo chassis and hybrid drive system.”

At the end of the year Rotala entered into a new banking arrangement with its principal bankers RBS/NatWest.

The new package, totalling £11m, increased its existing facilities.

“In addition to these facilities we had at the year’s end available but unused vehicle financing facilities of approximately £10m,” the firm said.

“Thus we believe that the group has been provided with sufficient working capital and financing facilities to continue its growth, whether by acquisition or otherwise, for the foreseeable future.”