Optare eyes profits following factory move

BUS manufacturer Optare today said it was on course to move into the black as the effects of its restructuring and sale to Indian firm Ashok Leyland bear fruit.

One of the major steps forward made by the company, according to chief executive Jim Sumner, has been the move to a new factory in Sherburn in Elmet in North Yorkshire.

The opening of the production site last year saw the closure of facilities in Leeds and Blackburn and the sale of the company’s Rotherham site.

However, the consolidation has increased capacity, reduced fixed costs and improved productivity.

Mr Sumner said: “From an extremely challenging position three years ago all the principle objectives of our turnaround plan have been achieved in terms of restructuring, new factory investment, low carbon product developments and re-financing.

“The benefit of this is showing in Optare’s UK registrations up 62% so far in 2012 and revenue annualising at over £100m following record revenues for the past three months of £26m.

“With increasing revenue, a lower single site cost base and the restructuring costs behind us the company is on course to move into profitability this year.”

He added the factory relocation’s aim had “been to move Optare from a legacy of low volume traditional ‘coach building’ to a ‘high volume assembly’ model”.

Optare completed a deal earlier this year that saw Ashok Leyland take a 75% stake in the business. The move has enabled Optare to access new finance and it has subsequently paid back debt owed to Lloyds and re-banked with HSBC.

For the 15 month period ended March 31, Optare increased revenue for the 15 month period by £20m to £72m.
 
However, pre-tax losses before exceptional items jumped from £4.3m to £8.79m· EBITDA losses for the 15 month period were £6.8m pre-exceptional.

However, Optare’s management has estimated this includes around £2.9m of costs that could have been avoided had it not been for needing to stagger factory closures and outsourcing activities, and undertake major site clearance work.

Exceptional costs for restructuring, redundancies, relocation and the factory moves totalled £4.6m.

The company’s order book stood at £45.7m on March 31 and the company has put more than 150 new hybrid and electric buses into operation in its UK and export markets.
 
It also achieved its first major export success in South Africa following an £18m order.