Annual Report
for year ended 30 November 2017
Rotala Plc
Hallbridge Way, Tipton Road, Tividale, West Midlands B69 3HW
Telephone: 0121 322 2222
Website: www.rotalaplc.com
Produced by Sue Willdigg, Corporate Design Manager for the Rotala Group
Contents
1. Rotala at a Glance
Directors, Secretary & Advisers
Financial Highlights
2. Review of Operations & Statutory Reports
Chairman’s Statement & Review of Operations
Strategic Report
Directors’ Report
Independent Auditor’s Report
3. Financial Statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
4. Shareholder Information
Notice of Annual General Meeting
Notes to Members
Explanatory Notes to Notice of Annual General Meeting
04
05
08
16
22
26
33
34
35
36
38
40
78
79
80
94
96
98
02
Rotala Plc | Annual Report 2017
Rotala at a Glance
Statutory Reports
Financial Statements
Shareholder information
1
Rotala
at a Glance
Rotala at a Glance
03
Directors, Secretary & Advisers
Country of incorporation of parent company
England and Wales
Company registration number
5338907
Legal form
Directors
Registered Office
Public Limited Company
John Gunn (Non-Executive – Chairman)
Graham Spooner (Non-Executive - Deputy Chairman)
Simon Dunn (Chief Executive)
Robert Dunn (Executive Director)
Graham Peacock (Non-Executive Director)
Kim Taylor (Group Finance Director)
Rotala Group Headquarters,
Cross Quays Business Park,
Hallbridge Way,
Tividale, Oldbury,
West Midlands, B69 3HW.
Telephone: 0121 322 2222
Fax: 0121 322 2718
Company Secretary
Kim Taylor
Nominated Adviser and Broker
Auditor
Registrars
Bankers
Cenkos Securities Plc
6.7.8 Tokenhouse Yard
London
EC2R 7AS
Mazars LLP
Statutory Auditor
45 Church Street
Birmingham B3 2RT
Link Asset Services
65 Gresham Street
London EC2V 7NQ
HSBC Bank plc
120 Edmund Street
Birmingham B3 2QZ
04
Rotala Plc | Annual Report 2017
Rotala at a Glance
Statutory Reports
Financial Statements
Shareholder information
Financial Highlights
A glance at the highlights of the financial year
ended 30 November 2017.
Revenue
Profit before Taxation
Dividend
£57,900,000
5%
£3,200,000
20.0%
(before exceptional items)
2.50p
8.7%
2017
£57,900,000
2017
£3,200,000
2016
£55,000,000
2016
£2,680,000
2017
2016
2.50p
2.30p
2015
£50,889,000
2015 £2,460,000
2015
2.10p
2014
£51,674,000
2014 £2,263,000
2014
1.85p
Contracted Revenue
Commercial Revenue
Charter Revenue
£21.4m
9.0%
£33.7m
3.0%
£2.8m
16.0%
2017
£21.4m
2017
£33.7m
2017
£2.8m
2016
£19.7m
2016
£32.9m
2016
£2.4m
2015
£15.8m
2015
£33.2m
2015 £1.9m
2014
£17.9m
2014
£30.6m
2014
£3.2m
Rotala at a Glance
05
06
Rotala Plc | Annual Report 2017
Rotala at a Glance
Statutory Reports
Financial Statements
Shareholder information
2
Review of
Operations
& Statutory
Reports
Statutory Reports
07
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 2017
Profit before Taxation
£3,200,000
20.0%
(before exceptional items)
2017
£3,200,000
2016
£2,680,000
I am pleased to be able to make this report to the shareholders of Rotala Plc for the year
ended 30 November 2017. The company made good progress this year and the results clearly
show the benefit of the three acquisitions we made in 2016. We have pursued our acquisition
strategy in 2017 by making three more acquisitions in the year and one shortly after the year
end. The two smaller acquisitions were aimed at enlarging our bus business, firstly in the West
Midlands and secondly in Greater Manchester. The last and largest acquisition just before the
year end, for our Heathrow depot, further increased our presence in this key market. Shortly
after the year end we acquired another small bus business in the West Midlands area in order
to extend our route network there. The seven acquisitions we have made since 2016 have
very much enlarged the scale of the group’s operations and considerably raised the group’s
prospects in a market which continues to undergo much change.
Results and review of trading
Revenues for the group as a whole for the year ended 30 November 2017 were £57.9 million.
This represents an increase of 5% on the revenues of £55.0 million achieved in the previous
year. Gross margin increased slightly to 19.1% (2016:18.3%). I am also pleased to report that
2015 £2,460,000
pre-tax profits before exceptional items rose by 20% to £3.22 million (2016: £2.68 million)
demonstrating our ability to manage cost and margin effectively.
2014 £2,263,000
Contracted Services
Revenues in Contracted Services rose overall by 9% to £21.4 million (2016: £19.7 million).
Contracted Services comprised 37% of group revenues in 2017, compared to 36% in
2016. Revenues in this division fall under two broad headings, those from local authority
contracts and those from corporate contracts. The latter stream of income benefited
in particular from the full year effect of the acquisition we made at Heathrow in 2016
but also from the transportation contracts servicing Bicester Shopping Village, the full
implementation of which began in April 2017. Corporate contracted income is now the
largest component of the Contracted Services division and is set to grow further with the
effect of the Hotel Hoppa acquisition which we made right at the end of the accounting
year. A considerable proportion of Hotel Hoppa’s revenue is delivered under contract to
corporate bodies like airlines and hotels.
In the local authority arena the proportion of group revenues derived from this source
increased slightly to about 16% (2016:15%). In monetary terms these revenues were in
fact up some 9% compared to those seen in 2016. This rise reflected diverging trends in
our various areas of operation. In the South West our income from local bus contracts
fell considerably as the available contract base has shrunk in line with local transport
budgets. But this reduction was more than made up for elsewhere in the country. From
our Heathrow depot we began, as we announced in the early part of 2017, to operate
bus contracts for Surrey County Council; in Greater Manchester we have been successful
in growing incrementally the contracts we operate for Transport for Greater Manchester
(“TfGM”); and in my report to you at this time last year I mentioned the contracts that we
had at that time been recently awarded by Transport for the West Midlands (“TfWM”)
and which began operations also in April 2017.
Revenue by Stream
37% Contracted
58% Commercial
5% Charter
08
Rotala Plc | Annual Report 2017
Contracted Revenue
£21.4m
9.0%
2017
£21.4m
2016
£19.7m
2015
£15.8m
I expect to see further growth in this source of revenue in 2018, partly as a result of
the contracts brought in by the bus business acquisitions we have made in 2017 in the
West Midlands and Manchester (for which see later in this statement). A key reason for
making these acquisitions was to put the group in a position to obtain a greater share of
the contracted markets in these regions by extending our operational reach. Furthermore
2014
£17.9m
we have recently been awarded new bus contracts in both Preston and Greater
Manchester. In the Preston area Lancashire County Council, having previously reduced its
transport budget, has now increased it again and we have been successful in winning
a number of contracts which should bring in new revenues (combining both contracted
and commercial elements) of some £1.6 million in a full year. These contracts began
in December 2017. In Greater Manchester we have been awarded a series of new
contracts, commencing in April 2018, which will bring new revenues (again combining
both contracted and commercial elements) of £401,000 in a full year. Thus the overall
contribution of Contracted Services revenues to the group will continue its upward trend
of the last few years.
Commercial Services
Commercial Revenue
£33.7m
3.0%
2017
£33.7m
Revenues in Commercial Services, at £33.7 million for the year, grew by 3% compared to
the 2016 total of £32.9 million. Commercial Services comprised 58% of group revenues
2016
£32.9m
in 2017, compared to 60% in 2016. As mentioned above, the primary reason for the fall
in the proportion of group revenues coming under this heading is the expansion of the
Contracted Services division in the last two years. The growth in revenue in Commercial
Services in 2017 largely reflected the regional pattern seen in Contracted Services.
2015
£33.2m
In the South West over the last few years we have slowly reduced our exposure to
2014
£30.6m
commercial revenues by curtailing the number of services we run. This has however
enabled us to redeploy vehicles elsewhere in the group and expand our commercial
revenues in the West Midlands, Surrey and Greater Manchester in the same time period,
as we announced periodically throughout 2017. A further boost to commercial revenues
will come from the acquisitions made in 2017 and the early part of 2018. The two bus
business acquisitions in the West Midlands have a strong commercial element, as does
the Hotel Hoppa acquisition at Heathrow Airport.
The new contracts awarded by Lancashire County Council and TfGM, mentioned above,
have a commercial stream which will fall into this division. These revenues will provide
another source of growth in the current year. In summary therefore I expect the division
to show appreciable growth in 2018.The proportion of group revenues provided by this
division should however be expected to continue to fall, reflecting the greater investment
which the group is making in Contracted Services at the current time.
Charter Revenue
£2.8m
16.0%
2017
£2.8m
2016
£2.4m
2015 £1.9m
2014
£3.2m
09
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Chairman’s Statement and
Review of Operations
(continued)
Charter Services
Revenues in Charter Services rose by 16% compared to the previous year to £2.8 million (2016: £2.4 million). Charter Services comprised
4.8% of group revenues in 2017, compared to 4.4% in 2016. This increase reflects the contribution in the private hire stream of business
of the two small acquisitions of Wigan Coachways and Elite Minibus and Coach Services completed in 2016. The year on year increase
in revenues saw a significant contribution from the North West of the country, which was the target of the making of these two small
acquisitions. We had identified that we had little or no penetration of this potentially lucrative market in that area of the country. The two
acquisitions were designed to remedy this weakness and we are pleased with the progress we have made. There was also a strong
contribution from private hire work associated with the Bicester Shopping Village contract. Revenues in Charter Services therefore are
now 70% higher than they were two years ago, as a result of the three acquisitions we have made in that period to improve radically our
presence in the private hire markets at Heathrow Airport and in the North West of England.
Strategy and the Bus Services Act 2017
In May 2017 the Bus Services Act 2017 received the Royal Assent. The Act enables the re-franchising of bus networks in any area with an elected
mayor. The approach of the transport authorities in each of the regions affected by the Act in which we have a presence is however different. In
both the South West and Greater Manchester it is clearly envisaged that the local authorities will use the legislation to achieve complete control
over local bus networks by the franchise process. But in the West Midlands a more collaborative approach using bus alliances is favoured by the
local authority. From our perspective both lines of approach offer the prospect of being able to increase our market shares to levels to which we
could not possibly have aspired under the existing structure of the bus markets in these locations.
The speed with which changes are likely to happen is however difficult to gauge with any certainty. In the West Midlands we anticipate a gradual
introduction of bus alliances covering a number of routes over the next few years. In Manchester TfGM seems to be positioning itself to implement
any mayoral direction to take control of bus networks but this decision could be a year or two away. In the South West the rate of progress is
uncertain and so it is difficult to formulate a definite view.
Our appreciation of these developments has however driven our acquisition strategy, as outlined below. In the West Midlands we have sought
to increase our reach on the western and northern parts of the conurbation by making infill acquisitions of two smaller bus businesses. These
acquisitions have increased our market shares in key locations. In Greater Manchester we decided that we needed to increase the size of our
overall operation so that we could have a more meaningful part to play in bidding for any franchises that might come up. Thus we bought a small
local bus operation on the western side of Manchester. In the South West the lack of clear direction has dissuaded us from making any further
investment in the near term and we are content to await developments there.
Acquisitions
During the year the group made three acquisitions, followed shortly after the year end by a fourth. The first occurred at the end of July 2017 when
we acquired Hansons (Wordsley) Limited for a cash consideration of £608,000. This company was based in Stourbridge between two of our
existing depots and had a turnover of some £2 million per annum. It had about 50 staff and operated some 30 vehicles. We saw the opportunity
through this acquisition to increase the size of our operation in this part of the West Midlands and to cement our position as the second largest
operator in the West Midlands conurbation as a whole. In addition the acquisition made it possible to increase the utilisation of our existing
overhead structure and so take advantage of economies of scale. Following acquisition we therefore immediately moved Hansons vehicles and
drivers to our existing depots and put the Stourbridge property on the market. Completion of the sale of this property occurred at the end of
January 2018 at a price of £320,000.
10
Rotala Plc | Annual Report 2017
We followed this up in early September 2017 with an acquisition in the Eccles area of Greater Manchester. This acquisition was the bus business
of Go Goodwins (Coaches) Limited and comprised a bus and minibus business turning over about £2 million per annum, with 28 staff and 18
buses. The cash consideration was £707,000 and included a well located freehold depot. Furthermore it brought with it the opportunity, which we
have since taken up, to acquire the immediately adjacent freehold plot which will enable us to double the size of the depot and operate about 50
vehicles from there, a very similar size of operation to our existing depot in Atherton. By this acquisition we therefore put ourselves in a position to
double the scale of our operations in Greater Manchester in anticipation of developments in the re-franchising of bus networks by TfGM.
Then, just before the year end, in late November 2017 we purchased for £2 million in cash the Hotel Hoppa bus business from National Express
together with the fleet of 32 buses. This business, with revenues of about £6 million per annum and about 90 employees, comprises a passenger
transport service between all the terminals of Heathrow Airport and hotels within a five mile radius of Heathrow Central Bus Station, delivered
under contracts with those hotels and other airline customers. This acquisition enabled Rotala to strengthen significantly its operations in the
Heathrow area. Many of the airline customers of the Hotel Hoppa business are already users of various airside and landside services provided
by us in and around Heathrow Airport. No additional overheads were incurred as a result of the acquisition because the acquired business
utilised spare capacity in the existing Rotala depots on the southern side of the airport.
Finally, in February 2018, we acquired from CEN Group Limited its entire bus business, trading as Central Buses, and 30–strong vehicle fleet for a
cash consideration of £1.95 million. The business has annual revenues of approximately £2.8 million. Central Buses is a well-established operator
of commercial and contracted bus services in the northern part of the West Midlands area. This business, with its 40 staff, has been folded into
the existing depot infrastructure which Rotala already possesses in the West Midlands. The acquisition extends the group’s network of bus services
in the northern part of Birmingham, particularly in the Perry Barr area, and so adds further to our market presence in the key West Midlands
conurbation.
Technology investment
On 23 April 2017 Rotala went live with new ticket machines equipped with the latest ticketing technology. We have invested £900,000 in this new
ticketing system across the whole of the West Midlands and Worcestershire network operated by our Diamond Bus brand. The equipment was
supplied by UK-based company Ticketer and, working closely with them, we were able to go from the decision to acquire the new ticket machines
to implementation in approximately six months.
The investment means that Diamond Bus can now offer passengers a range of new features. From a passenger’s perspective one key advantage
is Contactless Payment, giving the customer a more convenient way to pay. Usage of this feature has been growing steadily since inception. From
the operator’s perspective this means less time purchasing a ticket and so better time keeping. Rotala is the first operator in the West Midlands
area to offer contactless payment on a network-wide basis. We have also been able to make tracking information available to passengers
through our own mobile app and website. This has been well received by users. In due course, in coordination with TfWM, Real Time Information
(“RTI”) will be passed from the new ticket machines to TfWM’s RTI infrastructure.
We also extended the usage of Ticketer machines to the Hotel Hoppa business immediately after its acquisition in November 2017, as described
above. Here the Contactless Payment function rapidly showed its worth. Uptake of this method of payment by passengers has grown steeply from
a standing start and now forms a significant proportion of ticket sales revenue. Passengers can buy tickets by the contactless method both on bus
and at automated kiosks which we have installed in their hotels. These kiosks also give passengers RTI about the location of their next bus.
From the business perspective the new ticket machines, equipped with the latest in tracking and communications technology, give live location
and status feeds for each vehicle to depot traffic offices. This feature enables managers to report delays much more accurately to customers
and liaise more easily with drivers to identify and rectify problems. Tickets are also printed with individual Quick Response (“QR”) codes. The QR
codes are scanned when boarding a bus and are unique to each ticket. This significantly reduces the risk of fraudulent ticket abuse, a perennial
management problem for any bus operator.
11
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Chairman’s Statement and
Review of Operations
(continued)
Fleet management
The focus of our fleet management activity in this accounting period was on the integration of the vehicles acquired with the three acquisitions we
made during the year and then shaping the combined fleet to fit the on-going group requirements. This has resulted in the disposal of a large
number of older vehicles this year, but, principally because of the ages of the fleets of the acquired businesses, the average age of the fleet has
gone up to 9.50 years (2016: 8.45 years). This however is still a figure which is closely comparable to bus fleets outside Greater London. Since
the year end we have acquired a 20 strong batch of second hand vehicles but we do not see the need for a significant number of new vehicles
in the remainder of 2018 unless customer requirements change. New vehicles in these circumstances would be matched by significant additional
revenues and so make commercial sense. We continue to manage the fleet actively in accordance with our policies and this will no doubt result in
an on-going level of vehicle acquisition and disposal.
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.
Dividend
As the company matures I expect the dividend to be progressive. The board is conscious of the importance of dividend flows to shareholders and
has set a target dividend cover of 2.5 times earnings, to match underlying earnings and free cash flows.
The company paid an interim dividend of 0.85 pence per share in December 2017. The board will recommend to the forthcoming Annual General
Meeting a final dividend in respect of 2017 of 1.65 pence per share making a total of 2.50 pence for the year (2016: 2.30 pence).
Banking
Just after the year end, the group changed its principal bankers to HSBC Bank plc and entered into new and enlarged facilities to support its
greater scale of operation. These facilities are generally on more favourable terms than the ones they replaced but the borrowings of the group
were initially unchanged. The new facilities comprise a term loan of £5.5m, a revolving facility of £15.5m and an overdraft facility of £3.5m, with
a maturity date for all these facilities of 5 December 2021. Taking into account these new facilities and parallel asset finance facilities, the group
has approximately £10 million of headroom with which it can finance further potential acquisitions.
Placing of New Shares
On 2 August 2017, the company raised £2 million, before fees and expenses, through a subscription by two existing shareholders at a price of
60p a share, and one of these subscribers, Graham Peacock, subsequently joined the board, as set out below. On 18 August 2017 a further £1.5
million was raised through a placing with certain other investors, also at 60p per share.
The net proceeds from these issues of equity were used to finance the acquisitions described above.
12
Rotala Plc | Annual Report 2017 Board changes
As mentioned above, following his participation in the subscription for new shares on 2 August 2017, we were delighted to welcome Graham
Peacock to the board as a non-executive director. Graham has significant expertise in the transport services sector and was previously Chief
Executive Officer and a substantial shareholder of MRH (GB) Limited, the UK’s largest independent owner and operator of petrol stations in the
UK. The experience he brings will be invaluable to the company in executing its strategy of organic and acquisitive growth.
With effect from 1 June 2017 Graham Spooner, an existing non- executive director of the company, was appointed to the post of Deputy
Chairman.
It is also my sad duty to report the sudden and most unexpected death of Geoff Flight last month. Geoff was an investor in and director of Rotala
for a decade or more, until he stepped down in 2016. Geoff was a well-known figure in the coach industry. He will be sorely missed.
Fuel hedging
The fuel hedge position is little changed over the last year. Given the uncertain direction of oil prices during 2017, the board decided not to
consider fuel hedging while this market uncertainty remains unresolved. The group does however have a fuel hedge in place for the whole of
2018. This covers about 78% of the fuel requirement at an average price of 91p a litre.
Financial review
Income Statement
The Consolidated Income Statement is set out on page 33. This section of the review addresses the results before the mark to market provision
for fuel derivatives and other exceptional items. Revenues for the year rose by 5% compared to those of 2016. This increase was principally driven
by the acquisitions made in the year. Cost of Sales also rose by 4%. Gross Profits therefore increased by 10%, whilst the gross profit margin rose
slightly to 19.1% (2016: 18.3%) as the new acquisitions were integrated into the rest of the group. Administrative expenses increased by 7.6% as
a result of the general expansion in the size of the group and its depot footprint. The Profit from Operations at £4.48 million (2016: £3.95 million)
was 13% up on that achieved in the previous year. As a consequence adjusted EBITDA rose by 11% to £7.8 million (2016: £7.0 million). Finance
expense however fell very slightly as borrowings were more or less static and interest expense overall was little changed. Profit before taxation
therefore rose by 20% when compared to the previous year to £3.22 million (2016: £2.68 million).
Exceptional items represented by the mark to market provision on fuel derivatives and other exceptional costs are analysed in detail in note 10 to
these financial statements. Profit from Operations after all exceptional items was £3.68 million (2016: £3.96 million). However in 2016 there was
a much larger mark to market profit than in 2017. Similarly Profit before Taxation and after all exceptional items was in 2017 £2.42 million (2016:
£2.69 million).
Basic earnings per share in 2017, after taking into account the mark to market provision and other exceptional items, were 4.73p per share (2016:
5.49p). However, the impact of the mark to market provisions and the other exceptional items make the basic earnings per share numbers very
difficult to understand. A better guide to true comparability is to consider the adjusted basic earnings per share numbers. Adjusted basic earnings
per share (before the mark to market provision and other exceptional items) were then 5.95p in 2017 (2016: 5.51p), giving an increase of 8% year
on year.
13
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Chairman’s Statement and
Review of Operations
(continued)
Balance Sheet
The gross assets of the group grew by 9% in the year and stood at £68.9 million at 30 November 2017 (2016: £63.5 million). Goodwill and other
intangible assets rose by £2.7 million as a result of the three acquisitions made during the year. Holdings of freehold property increased following
the addition of a freehold depot with the acquisition of the Eccles – based business in September 2017. The bulk of the investment in plant and
machinery was represented by new ticket equipment. The book value of the vehicle fleet also increased partly because of the acquisitions made
in the year but also because of the reshaping of the group fleet that was required after the business acquisitions made during the year.
Stocks of parts, tyres and fuel were unchanged overall. However both Trade and Other Receivables rose considerably, both because of the
increased size of the group but also because much of the new business of the year was delivered by contract, rather than being commercial
income. These changes in the shape of the business also drove the increases in prepayments and accrued income, where the bulk of the
increase was accounted for by amounts receivable in Bus Services Operators’ Grant, concessionary fares schemes and local authority run fares
collection systems. Trade and Other Payables reflected the same business factors and showed a commensurate increase. The dollar/sterling
exchange rate and the oil price rise of the latter part of 2017 moved the mark to market asset held in respect of the group’s fuel derivative
position into even greater surplus at the period end.
The gross loans and borrowings of the group overall were very little changed from the previous year at £16.3 million (2016: £16.0 million), as the
acquisitions made were largely financed by the new share issues. Because the group’s banking facilities were due to expire five months after the
year end all borrowings were classified as current at that date. However within a few days of the year end the group banking facilities moved to
HSBC Bank plc and assumed a more conventional shape as set out on a proforma basis in note 20 to these financial statements.
Obligations under hire purchase contracts also saw little change year on year: the present value stood at £11.5 million at 30 November 2017
compared to £11.3 million the year before. This position reflects the extensive fleet changes which occurred after the business acquisitions of
the year and a number of hire purchase refinancing transactions. The pension obligations of the group (£427,000) now reflect the remaining
contributions due to be paid to this defined benefit scheme, as certified by the scheme’s independent actuary. As can be seen from note 24 to
these financial statements the scheme actually moved from an accounting deficit of £800,000 in 2016 to an accounting surplus of £894,000 at the
end of 2017. The rules of this government – run scheme prevent at present the return of any surplus. This is why the remaining contributions to the
scheme are recognised as a group liability.
The gross liabilities of the group were therefore 3% higher than the previous year at £36.6 million (2016: £35.7 million). Responding to the new
share issues of £3.4 million net of expenses in August 2017, in addition to the positive factors described above, the net assets of the group rose to
£32.4 million at the end of the year, compared to £27.8 million at the end of 2016, a rise of 16% year on year.
Cash Flow Statement
Cash flows from operating activities (before changes in working capital and provisions) were little changed from the previous year at £6.28 million
(2016: £6.46 million). However the increased size of the group and the fact that the businesses acquired were largely in the contracted services
sector, where revenues are billed by invoice rather than being collected at delivery as with commercial bus services, caused cash to be absorbed
into working capital. This picture was much the same as it had been in 2016 and for similar reasons, though the extra working capital required
was at a much lower level than was the case in the prior year. Interest paid on HP agreements was slightly increased when compared to the
previous year. As a result of the above factors net cash flows from operating activities were much improved on 2016 at £3.34 million (2016: £1.45
million).
Cash used in investing activities in the year was much greater than the previous year. That year had seen the benefit of the sale of the Long Acre
depot. There was no similar event in 2017. Investment in property, plant and equipment was lower than that made in 2016 at £1.80 million (2016:
£2.56 million). Sales of surplus vehicles however raised a very similar sum to that of the previous year and so the net spend on property, plant
and equipment was this year £0.8 million (2017: £1.5 million). The amount spent on the three acquisitions made in the year (£3.3 million) was
much higher than that spent on a similar number of acquisitions in 2016 (£1.87 million) Thus cash used in investing activities was £4.13 million net
of related proceeds (2016: £0.93 million net).
14
Rotala Plc | Annual Report 2017 Financing activities were affected by a number of events. Once again in 2017 new shares were placed. This happened in August 2017 and raised
£3.36 million (2016: £2.4 million). The sum raised in 2017 was almost exactly that expended on acquisitions, as laid out above. Dividends paid
reflect both an increase in the dividend per share and the number of shares in issue. There was no share buy-back this year.
In 2017 £722,000 of bank loans were repaid in accordance with their standard terms and moderate drawings were made on the revolving facility
such that bank borrowings changed little over the year as a whole. This was very like 2016 where new bank loans and repayments were geared
around the receipt of the sale proceeds of the Long Acre depot. Bank interest paid in 2017 was also at a very similar level to that seen in 2016.
Advantage was again taken this year of the unencumbered value represented by the vehicle fleet. By refinancing these vehicles with new hire
purchase arrangements £700,000 of capital was released to invest in the business. The capital element of payments on hire purchase agreements
fell somewhat in the year to £3.09 million (2016: £3.37 million). The cash absorbed by financing activities therefore rose slightly to £0.57 million
net (2016: £0.27 million net).
Overall therefore cash and cash equivalents declined by £1.38 million in the year compared to an increase of £256,000 in the prior year. The
closing overdraft, net of cash and cash equivalents, of £1.7 million (2016: £342,000 overdraft), was in line with management’s expectations.
Outlook
The group performed well in 2017 and trading for the current year has begun in line with expectations. Following the four acquisitions which have
been made in 2017 and in the early part of 2018, together with the more recent announcements of new business, turnover in the current year
should show further significant growth. We have moreover underpinned the growth prospects of the group by successfully negotiating enlarged
and more favourable banking facilities to provide the headroom and finance for further acquisitions. Rotala has grown predominantly through
acquisition and we continue to be actively engaged in looking for attractive acquisition opportunities.
The group possesses a strong and very experienced management team which has demonstrated over the last decade that it has the right
strategy and the skills to implement it. We have shaped our current strategy to take full advantage of the opportunities to be presented by the
Bus Services Act 2017. The Act will potentially enable Rotala to increase its market shares significantly in areas where such ambitions would
once have been thought to be unattainable. The Act also, taken together with the effects of other transport policy changes by government in
recent years, continues to force change on the bus industry. Change brings opportunity to businesses like Rotala and we think we are very well
positioned to take full advantage of any eventualities.
Overall therefore we are confident about the prospects of the group and excited about the possibility of expanding it considerably in the years
ahead.
John Gunn
Non-Executive Chairman
Date: 11 April 2018
15
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Strategic Report
For the year ended 30 November 2017
Rotala Plc is an AIM traded company operating commercial and
subsidised bus routes for businesses, local authorities, the public and
private individuals.
Rotala was formed in 2005 and has grown through the acquisition and amalgamation of local coach and bus operations and is now one of the
largest operators in its chosen geographical locations.
Rotala aims to develop sustainable revenue streams through the expansion of its commercial bus and contracted activities and by being an
active participator in transport business trends in the UK. Our transport management expertise has taken us throughout the country, organising
and delivering turn-key solutions to events and areas requiring many different types and capacities of transport.
North West Trading Brands
M6
Blackpool
Preston
Bolton
Wigan
Manchester
Atherton
Atherton
& Eccles
& Eccles
M6
M1
M6
Wolverhampton
Tividale
Stourbridge
Ludlow
Kidderminster
Walsall
M42
West Bromwich
Midlands Trading Brands
Birmingham
Solihull
M42
Coventry
Redditch
Worcester
Warwick
M5
Stratford
-upon-Avon
Evesham
M40
M1
Wooton-under-Edge
Chipping Sodbury
Avonmouth
Avonmouth
Kingswood
Bath
M4
Bristol
M5
South West Trading Brands
A1(M)
M11
M25
M4
M25
London
London
Heathrow
Heathrow
Stanwell & Hounslow
Stanwell & Hounslow
M20
London Trading Brands
M3
Key
Operational Depot
Places of Operation
(Not all are shown at this scale)
Motorways
Country Border
n
o
i
t
a
r
e
p
O
f
o
s
a
e
r
A
16
Rotala Plc | Annual Report 2017
s Rotala Plc pursues three key strategic goals:
l
a
o
G
• To achieve sustainable growth in shareholder value;
• To improve continually the operational capability of the group;
• To deliver a consistent quality of service to customers.
r
u
O
s
e
u
a
V
l
r
u
O
n
o
i
s
s
i
M
r
u
O
These goals are measured by:
• a focus on earnings per share and the resultant share price;
• the level of new investment in infrastructure, technology and training;
• continually monitoring the timeliness and completeness of service delivery
and levels of customer complaint.
Our commitment is to conduct business in an ethical manner; our core values convey our organisational beliefs:
• Professional - in our approach to business, with expert presence;
• Innovative - in creating new solutions;
• Agile - quick to respond and make decisions;
• Collaborative - working together with all stakeholders;
• Commercially orientated - delivering what clients require;
• Results focused - focusing on the delivery of value and the job in hand;
• Risk aware - assessing options for alternative strategies.
Our brands signify consistency, reliability and employee commitment.
The commitment is to the delivery of a consistent quality of service in accordance with the service level requirements of all
stakeholders. Continuous improvement is sought; close monitoring of service levels identifies areas for improvement. Well-
planned, clearly focused training supports an improved quality of service.
Rotala aims to become the first choice supplier for bus operations
in its target regions.
Having grown through acquisition in key areas, Rotala has put itself into a position from which it can take advantage of future
developments in the transport industry. The possession of substantial operations in the North West, the West Midlands, the
South West and Heathrow areas ensures that the company is well positioned for future contract wins and organic commercial
growth.
Rotala is committed to providing service excellence to stakeholders, by
offering value for money and continuous improvement without compromising
on the quality of service.
By working closely with other businesses, councils and educational institutions, we ensure that flexibility and proactive
management are key strengths in which Rotala invests. Our commitment to all stakeholders makes it possible to offer value to
all sizes of organisation from the largest corporate to the smallest individual daily user.
The focus of the business is to build profitable and sustainable revenue. The business is composed largely of contracted or
predictable commercial revenue streams which equate to more than 90% of current revenue levels.
To achieve this level of predictability the business focuses on the development of its three principal revenue streams: contract,
commercial and charter.
17
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Strategic Report
For the year ended 30 November 2017
Contract
The key aspect of Contracted Operations is that the service is delivered under contract, to specified standards, with the price for the service
determined by the contract alone. Contracted operations service two types of customer:
1. Individual organisations:
Individual organisations: these can have specific transport needs. Private bus networks are designed on a bespoke basis around these
needs. One of the key factors which drives this customer need comes from the increasing prevalence of planning restrictions on new
developments. These restrict car usage and available car parking facilities. There has been much growth in this area of business in
recent years and government policy continues to drive change.
2. Local authorities:
Local authorities: since bus denationalisation in the 1980’s the bus market has evolved and the dominant operators are now more
focused on creating profitable route networks, in contrast to the pre-denationalisation approach when size and breadth of service
were the sole concerns. Thus commercial bus groups have, over time, either curtailed or withdrawn services and Local Authorities have
made decisions that there is a social need to subsidise the on-going provision of bus services to locations which would not support a
commercial bus route. Contracts for these subsidised services operate on a variety of different bases but the contracted element of the
revenue is included under this heading. Major examples of these types of services during this accounting year were operated under
contract to TfGM, TfWM, Lancashire County Council, Surrey County Council, Bristol City Council, Worcestershire County Council, South
Gloucestershire County Council, and Bath and North East Somerset Council together with many smaller entities.
Commercial
On a purely commercial bus service, the company takes all the risk of operation. Where a contracted service obliges the operator to take an
element of revenue risk (the proportion of which can vary considerably), the variable element of the revenue is also included under this heading.
Since its foundation Rotala has considerably expanded the number of commercial services it conducts in all of its operating areas.
Charter
Besides the main business streams above, Rotala also provides a transport management service to a variety of customers. Typically this covers
business or service disruption and bespoke large event management.
18
Rotala Plc | Annual Report 2017
Key performance indicators (KPIs)
The key performance indicators of the group (before mark to market provisions, acquisition expenses and other exceptional items) are considered
to be:
Gross profit margin
Profit from operations before mark to market
provisions and other exceptional items
Profit before taxation and mark to market
provisions and other exceptional items
2017
19.1%
£4,479,000
£3,215,000
The key performance indicators of the group (after all exceptional items) are considered to be:
Gross profit margin
Profit from operations
Profit before taxation
These key performance indicators are used as follows:
1. Gross profit margin:
2017
19.1%
£3,683,000
£2,419,000
2016
18.3%
£3,947,000
£2,680,000
2016
18.3%
£3,955,000
£2,688,000
It is fundamental to the longer term sustainability of the group that it attains a suitable level of gross profit in all of its activities. In any
contracted business the gross profit margin is computed as part of the pricing process. Actual margin is then monitored in relation to
the contract and service delivery targets. Gross profit margin will vary depending on the type, location and duration of the contract.
Where the revenue is variable and derived from passengers, routes are constantly monitored for gross profit margin. Passenger
loadings are also analysed and, in concert with margin analysis, frequencies and routes adjusted to maximise revenue yields. In
these instances margins will vary in acceptability depending upon the length, locality and maturity of the route and the extent of
competition;
2. Profit from operations before exceptional items:
Profit from operations before mark to market provisions and other exceptional items is a very important determinant of the long term
success of the whole business. Because this indicator is calculated before interest it represents the theoretical debt-free performance
of the group and is thus a key measure of value. It is also a measure of how effectively and efficiently the group is using its operating
assets, particularly in relation to its peers. Therefore this metric is monitored monthly and progress is frequently reviewed;
3. Profit before taxation before mark to market provisions and other exceptional items:
This indicator is a key determinant of return to shareholders. Therefore it is monitored through the prism of the monthly management
accounts and reviewed by the board at its monthly meetings. The board places particular emphasis upon the target that this indicator
should grow constantly because in this manner it can be confident that it is serving the interests of shareholders and providing the
group thereby with the means to sustain its ambitions to increase its overall levels of business.
19
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Strategic Report
For the year ended 30 November 2017
Trading results and Statement of Financial Position
A review of the group’s activities, using its key performance indicators, and a review of its future prospects are contained in the Chairman’s
Statement and Review of Operations on pages 8 to 15. The group’s results for the year are set out on page 33. The results of the year and the
financial position as at 30 November 2017 are considered by the directors to be satisfactory.
Principal risks and uncertainties
The directors consider that the following factors may be considered to be material risks and uncertainties facing the group:
Risk
Potential impact
Management or mitigation
Variations in the price of fuel.
Fuel is a significant cost to the
business. If fuel increases in price
in circumstances where sales prices
cannot be increased, then profitability
will be affected.
Management monitors fuel prices closely, negotiates fuel
escalator clauses where possible and increases fares if
input costs rise in a sustained pattern. Management enters
into fuel price fixing arrangements as described in the
Chairman’s Statement. Management also monitors fleet fuel
efficiency and uses technological aids to optimise fuel usage.
The availability of sufficient capital and
leasing facilities to finance the growth
in the group’s businesses.
The group may miss growth
opportunities.
New government legislation (such as
the Bus Services Act 2017) or industry
regulation.
Significant unplanned or unforeseen
costs may be imposed on the business.
Availability of management resources
of the appropriate quality.
Lack of appropriate management
skills damages the business and its
prospects.
Fleet insurance and cover and level of
vehicle insurance rates – particularly in
the event of a major accident involving
passenger fatality.
The group may not be able to obtain
adequate levels of insurance cover.
Management maintains close contact with actual and
potential shareholders. Relationships with the providers of
the group’s asset financing and banking facilities are dealt
with centrally in order to keep them fully briefed about
the progress of the group. All bank account and treasury
management is conducted at group level.
Management continually monitors regulatory and legal
developments and participates keenly in industry forums.
Management also ensures that it responds to requests for
information and insight from governmental bodies.
The board continually assesses skill requirements,
management and structures as the business grows.
Appropriate recruits are brought into the business and any
necessary management development courses are instituted.
The group is self-insured for high frequency claims of low
value, as set out in the group’s accounting policies. Claims
above a certain level are comprehensively insured in the
normal way. Driver training emphasises a risk - averse culture.
Accident rates are monitored centrally. Claims are managed
by a claims handler who works closely with the group’s
insurance adviser and insurers. Relationships with insurance
brokers and providers are considered to be key and are
managed centrally by the group.
Going concern
The board has examined its strategy and considered its profit and loss and cash flow projections over the two years to 30 November 2019. It has
also evaluated the hire purchase, loan and overdraft facilities available to the group in connection with that period. After due enquiry, the board
has judged the cash flow forecasts, asset financing and banking resources of the group to be adequate to support its continued operations for
the foreseeable future and has adopted the going concern basis in preparing the financial statements.
20
Rotala Plc | Annual Report 2017
Corporate governance
As the company’s shares are traded on AIM, the company is not required to comply with the UK Corporate Governance Code (‘the Code’) nor
has it done so. However, the company is committed to high standards of corporate governance and draws upon available best practice, including
those aspects of the Code considered appropriate. The board is responsible for the management and successful development of the group by:
• setting the strategic direction;
• monitoring and guiding operational performance;
• establishing policies and internal controls to safeguard the group’s assets.
The composition of the board provides a blend of skills and experience that ensures it operates as a balanced team.
The board meets regularly to review trading performance, to ensure adequate funding is available, to set and monitor strategy, and when
appropriate, to report to shareholders. To enable the board to discharge its duties, all directors receive appropriate and timely information.
The board is responsible for maintaining a strong system of internal control to safeguard shareholders’ investments and the group’s assets. The
system of internal financial control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss.
The directors are responsible for the group’s system of financial control and for reviewing its effectiveness. As the group continues to grow, the
directors will review their compliance with the Code from time to time and will adopt such of the provisions as they consider to be appropriate.
Relationships with shareholders
The company values the views of its shareholders and recognises their interest in the company’s strategy and performance. The Annual General
Meeting is used to communicate with shareholders and they are encouraged to participate. The directors will be available to answer questions at
the Annual General Meeting.
By order of the Board.
Kim Taylor
Secretary
Date: 11 April 2018
21
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Directors’ Report
For the year ended 30 November 2017
The directors present their statutory report for the group for the year
ended 30 November 2017
Directors
The following Directors have held office during the year:
J H Gunn
R A Dunn
S L Dunn
G F Peacock (appointed 11 August 2017)
G M Spooner
K M Taylor
Future developments and achievement of strategic goals
Likely future developments in the business and the progress that the group has made towards its strategic goals are dealt with in the Chairman’s
Statement and Review of Operations set out on pages 8 to 15.
Dividends and Share Price
An interim dividend in respect of 2017 of 0.85p per share was paid on 8 December 2017. The directors will propose a final dividend for the year
to the Annual General Meeting of 1.65p per share. In respect of the year ended 30 November 2016, an interim dividend of 0.80p per share was
paid on 8 December 2016. A final dividend of 1.50p per share was paid on 30 June 2017. The total cash outflow for dividends paid in the year
was therefore £970,000.
The company’s share price at 30 November 2017 was 55.50p (2016: 52.5p). The high and low prices in the year were 64.5p and 45.5p
respectively.
Employment policies and employee involvement and communication
The group’s employment policies are regularly reviewed to ensure they remain effective. These policies promote a working environment which
underpins the recruitment and retention of professional and conscientious employees, and which improves productivity in an atmosphere free
of discrimination. The group is committed to giving full and fair consideration to all applications for employment from those who are disabled,
to their training, career development and promotion, where employed, and to continuing the employment and training of those who become
disabled while employed.
It is a key policy of the group to consider the health and welfare of employees by maintaining safe places and methods of work. The group
employs a Health and Safety Auditor, who assesses regularly all places of work under a standardised testing scheme. Reports of these tests are
communicated to the board.
Training is also a priority task and is a focus of considerable effort, especially in the field of dealing with passengers. All drivers are issued with a
handbook at the commencement of their employment which sets out in detail the standards which they are expected to meet.
Employees are briefed regularly about the performance and prospects of the group and their individual depots; they are also consulted about
and involved in the development of the group in a number of ways, which include regular briefings, team updates and announcements.
An SAYE scheme exists for the benefit of all employees. The details of the scheme are set out in note 27 to these financial statements.
22
Rotala Plc | Annual Report 2017 Directors’ interests
The beneficial interests of the directors and their families in the company’s shares and share options were as follows:
2017
Ordinary shares
of 25p each
2017
Options over
ordinary shares
of 25p each
2016
Ordinary shares
of 25p each
2016
Options over
ordinary shares
of 25p each
5,364,487
931,925
1,536,117
2,741,666
50,000
573,056
-
1,046,007
1,003,604
-
-
480,000
5,364,487
931,925
1,522,596
-
50,000
573,056
200,000
1,046,007
1,203,604
-
-
720,000
J H Gunn
R A Dunn
S L Dunn
G F Peacock*
G M Spooner
K M Taylor
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
*from date of appointment.
J H Gunn is also a director of and shareholder in The 181 Fund Limited: see note 31 – Related Parties and Transactions.
At
Exercise
At
30 November 2016
Price
Lapsed
30 November 2017
Date Exercisable
Date of Expiry
J H Gunn
R A Dunn
S L Dunn
200,000
200,000
400,000
31,007
615,000
1,046,007
200,000
85,000
18,604
900,000
62.5p
(200,000)
(200,000)
50.0p
58.05p
54.0p
62.5p
50.0p
58.05p
54.0p
-
-
-
(200,000)
-
-
-
-
-
400,000
31,007
615,000
1,046,007
-
85,000
18,604
-
-
05/09/2011
04/09/2018
01/12/2019
01/06/2020
24/11/2017
23/11/2024
-
-
05/09/2011
04/09/2018
01/12/2019
01/06/2020
900,000
24/11/2017
23/11/2024
1,203,604
(200,000)
1,003,604
K M Taylor
240,000
85,000
395,000
62.5p
50.0p
54.0p
(240,000)
-
-
-
85,000
395,000
-
-
05/09/2011
04/09/2018
24/11/2017
23/11/2024
720,000
(240,000)
480,000
The remuneration of the directors is set out in note 6 of these financial statements. Contracts existing during, or at the end of the year, in which a
director was or is materially interested, other than employment contracts, are disclosed in note 31 – Related Parties and Transactions.
23
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Directors’ Report
For the year ended 30 November 2017
Purchase of own shares
Ordinary shares have been purchased for treasury in order to meet the need to issue shares in respect of the exercise of share options.
2017
2017
Number
% of called up
share capital
2017
£
Cost or
proceeds
854,338
1.98
817,036
-
-
-
-
-
-
2016
2016
Number
812,313
500,000
% of called up
share capital
2.07
1.16
2016
£
Cost or
proceeds
621,734
367,501
(457,975)
(1.06)
(172,199)
854,338
1.75
817,036
854,338
1.98
817,036
Ordinary shares held in
treasury at beginning of year
Acquired during the year
Issued for cash in respect of
share option exercises
Ordinary shares held in
treasury at end of year
The maximum number of ordinary shares held in treasury during the year was 854,338 (2016: 1,218,831), representing 1.98% of the called up
share capital of the company (2016: 2.83%)
Substantial shareholdings
As at 11 April 2018 the company had been notified that the following were interested in 3% or more of the ordinary share capital of the company:
Name
Mr Nigel Wray
Close Asset Management Limited
Mr John Gunn
Mr Graham Peacock
Mrs S Tobbell
The 181 Fund Limited
Mr S L Dunn
Financial instruments
Number of Ordinary Shares
7,609,400
6,628,543
5,364,487
2,741,666
2,741,666
1,802,443
1,536,117
%
15.84
13.80
11.17
5.71
5.71
3.75
3.20
Details of financial instruments, including information about exposure to financial risks and the financial risk management objectives and policies,
are given in note 30.
24
Rotala Plc | Annual Report 2017
Directors’ responsibilities statement
The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors prepare the group
financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The directors
have elected to prepare the parent company financial statements in accordance with applicable law and United Kingdom Generally Accepted
Accounting Standards (United Kingdom Generally Accepted Accounting Practice including Financial Reporting Standard 101 ‘Reduced Disclosure
Framework’). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs and profit or loss of the company and group for that period. In preparing these financial statements, the directors are
required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• for the group financial statements, state whether applicable IFRSs have been followed, subject to any material departures
disclosed and explained in the financial statements;
• for the parent company financial statements, state whether applicable UK accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will
continue in business.
The directors are responsible for keeping adequate accounting records which are sufficient to show and explain the company’s transactions and
disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and the company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors confirm that:
• so far as each director is aware, there is no relevant audit information of which the company’s auditors are unaware; and
• the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors’ indemnity
The company’s Articles of Association provide, subject to the provisions of UK legislation, an indemnity for directors and officers of the company
in respect of liabilities they may incur in the discharge of their duties or in the exercise of their powers, including any liabilities relating to the
defence of any proceedings brought against them which relate to anything done or omitted, or alleged to have been done or omitted, by them
as officers or employees of the company. Appropriate directors’ and officers’ liability insurance cover is in place in respect of all the directors.
Auditors
Grant Thornton UK LLP resigned as auditors on 3 October 2017 and Mazars LLP were appointed to fill the casual vacancy. Mazars LLP have
expressed their willingness to continue in office as auditor. A resolution to re-appoint them will be proposed at the forthcoming Annual General
Meeting.
For the year ended 30 November 2017, the group has taken advantage of the exemption offered in sections 479A – 479C of the Companies
Act 2006 and some of its subsidiaries have not been subject to an individual annual audit. Rotala Plc has given a statutory guarantee to each of
these subsidiaries guaranteeing their liabilities, a copy of which will be filed at Companies House.
By order of the Board.
Kim Taylor
Secretary
Date: 11 April 2018
Company No: 05338907
25
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Independent Auditor’s Report
To the members of Rotala Plc
Opinion
We have audited the financial statements of Rotala Plc (the ‘company’) and its subsidiaries (the ‘group’) for the year ended 30 November
2017, which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Statement of Changes in Equity,
Consolidated Statement of Financial Position, Consolidated Statement of Cash Flows, Company Statement of Financial Position, Company
Statement of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 November
2017 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We
are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, including the Financial Reporting Council’s (“FRC”) Ethical Standard as applied to listed entities and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Use of the audit report
This report is made solely to the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body for our audit work, for this report, or for the opinions we have formed.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve
months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
26
Rotala Plc | Annual Report 2017
The Risk
Our Response
Revenue Recognition
Our procedures over revenue recognition included, but were not
Revenue is a material balance for Rotala Plc and represents the
limited to:
largest balance in the consolidated statement of comprehensive
• Review and testing of the controls in place around the recognition
income. An error in this balance could significantly affect a user’s
of revenue to ensure that revenue in the statutory accounts is
interpretation of the financial statements.
accurately stated.
• Detailed testing of a sample of revenue transactions pre and post
There is risk of fraud or error in the financial reporting relating to
year end to ensure they were accounted for in the correct period.
revenue recognition due to the potential to inappropriately record
• Reconciliation of cash received throughout the year to reported
revenue in the wrong period. We therefore consider cut-off on both the
revenue.
Contracted and Commercial revenue streams to be a key audit matter.
No material misstatements were identified as a result of the audit
procedures performed.
Useful economic lives of vehicles
Our procedures in relation to the useful economic lives of vehicles
Public service vehicles represent a significant proportion of the
balance sheet, totalling £25.5m at 30 November 2017. Assessing
included, but were not limited to:
• Review of any profit/(loss) made on the disposal of vehicles which
the useful economic lives (UELs) of these assets is considered a key
may be indicative of inaccurate useful economic lives.
judgement area as changes to the UELs can result in significant
• Review of management’s calculations and the underlying
variances in both carrying values and amounts charged to the
assumptions.
Consolidated Income Statement.
• Review of the consistency of the assumptions being applied and
perform a comparison to other entities in the sector.
As a result of procedures performed, UELs of the vehicles and
assumptions adopted are considered reasonable and no material
misstatements have been identified.
27
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on the financial
statements and our audit. Materiality is used so we can plan and perform our audit to obtain reasonable, rather than absolute, assurance
about whether the financial statements are free from material misstatement. The level of materiality we set is based on our assessment of the
magnitude of misstatements that individually or in aggregate, could reasonably be expected to have influence on the economic decisions the
users of the financial statements may take based on the information included in the financial statements.
Based on our professional judgement the level of overall materiality we set for the financial statements is outlined below:
Financial Statement materiality:
£866,000
Benchmark applied:
Materiality has been determined with reference to a benchmark of
Basis for chosen benchmark:
Revenue, of which it represents 1.5%.
We used Revenue to calculate our materiality as, in our view, this is
the most relevant measure of the underlying financial performance of
the company.
On the basis of our risk assessments, together with our assessment of the group’s overall control environment, our judgement was that
performance materiality was approximately 60 per cent of our financial statement materiality, namely £520,000.
We agreed with the Board of Directors that we would report to the Board all audit differences in excess of £26,000 as well as differences below
that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Board on disclosure matters that we identified
during the course of assessing the overall presentation of the financial statements.
Audit work on subsidiary entities for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based
on individual statutory performance materiality which is lower than the consolidated materiality set out above. The performance materiality set for
each subsidiary is based on the relative scale and risk of the subsidiary to the group as a whole and our assessment of the risk of misstatement
at subsidiary level. In the current period, the performance materiality allocated to the sole subsidiary of the group subject to an audit was
£146,000.
The company financial statement materiality has been set as 1.5% of Total Assets, namely £318,000. Performance materiality has been set at
approximately 60 per cent of our financial statement materiality, namely £191,000.
An overview of the scope of our audit
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. Our audit included an assessment of:
whether accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements
and to identify any information that is apparently incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our
report.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are discussed
under “Key audit matters” within this report.
Our group audit was scoped by obtaining an understanding of the group and its environment, including group-wide controls, and assessing
the risks of material misstatement at the group level. Based on that assessment, all entities within the group were subject to full scope audit
performed by the group audit team. At the parent company level we also tested the consolidation process and carried out analytical procedures
to confirm our conclusion that there were no significant risks of material misstatement of the aggregated financial information.
28
Rotala Plc | Annual Report 2017
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than
the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we
have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specific by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement set out on page 18, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Louis Burns
(Senior Statutory Auditor) for and on behalf of Mazars LLP.
Chartered Accountants and Statutory Auditor, 45 Church Street, Birmingham B3 2RT
Date: 11 April 2018
29
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
30
Rotala Plc | Annual Report 2017
Rotala at a Glance
Statutory Reports
Financial Statements
Shareholder Information
3
Financial
Statements
Financial Statements
31
32
Rotala Plc | Annual Report 2017 Consolidated Income Statement
For the year ended 30 November 2017
2017
Exceptional
items
(note 10)
£’000
Results before
exceptional
items
£’000
57,906
(46,828)
11,078
(6,599)
4,479
-
(1,264)
3,215
(595)
-
-
-
(796)
(796)
-
-
(796)
257
Results for
the year
£’000
57,906
(46,828)
11,078
(7,395)
3,683
-
(1,264)
2,419
(338)
2016
Exceptional
items
(note 10)
£’000
Results before
exceptional
items
£’000
54,975
(44,895)
10,080
(6,133)
3,947
14
(1,281)
2,680
(468)
-
-
-
8
8
-
-
8
(14)
Results for
the year
£’000
54,975
(44,895)
10,080
(6,125)
3,955
14
(1,281)
2,688
(482)
2,620
(539)
2,081
2,212
(6)
2,206
Note
4
7
8
9
10
11
Revenue
Cost of sales
Gross profit
Administrative
expenses
Profit from operations
Finance income
Finance expense
Profit before taxation
Tax expense
Profit for the year
attributable to the
equity holders of the
parent
Earnings per share for
profit attributable to
the equity holders of
the parent during the
year:
Basic (pence)
Diluted (pence)
12
12
5.95
5.94
4.73
4.72
5.51
5.46
5.49
5.44
The accompanying notes form an integral part of these financial statements.
33
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Consolidated Statement of
Comprehensive Income
For the year ended 30 November 2017
Note
24
25
Profit for the year
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Actuarial profit/(loss) on defined benefit pension scheme
Deferred tax on actuarial profit/loss on defined
benefit pension scheme
Other comprehensive profit/(loss) for the year (net of tax)
Total comprehensive income for the year attributable to the equity
holders of the parent
All of the activities of the group are classed as continuing.
2017
£’000
2,081
58
(11)
47
2,128
2016
£’000
2,206
(860)
163
(697)
1,509
The accompanying notes form an integral part of these financial statements.
34
Rotala Plc | Annual Report 2017 Consolidated Statement of
Changes in Equity
For the year ended 30 November 2017
Share capital
£'000
Share
premium
reserve
£'000
Merger
reserve
£'000
Shares in
treasury
£'000
At 30 November 2015
9,794
8,603
2,567
(622)
Profit for the year
Other comprehensive expense
Total comprehensive income
Transactions with owners:
Dividends paid
Share based payment
Shares issued
Purchase of own shares
Transactions with owners
-
-
-
-
-
968
-
968
-
-
-
-
-
1,272
-
1,272
-
-
-
-
-
-
-
-
Retained
earnings
£'000
4,702
2,206
(697)
Total
£'000
25,044
2,206
(697)
1,509
1,509
(803)
16
-
-
(803)
16
2,412
(367)
-
-
-
-
-
172
(367)
(195)
(787)
1,258
At 30 November 2016
10,762
9,875
2,567
(817)
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners:
Dividends paid
Share based payment
-
-
-
-
-
-
-
-
-
-
Shares issued
1,458
1,904
Transactions with owners
1,458
1,904
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,424
2,081
47
27,811
2,081
47
2,128
2,128
(970)
20
-
(970)
20
3,362
(950)
2,412
At 30 November 2017
12,220
11,779
2,567
(817)
6,602
32,351
• Called up share capital represents the nominal value of shares which have been issued;
• The share premium account includes any premiums received on the issue of share capital. Any transaction costs associated with the issuance of
shares are deducted from the share premium reserve;
• The merger reserve arose as a consequence of an acquisition in 2005 in which more than 90% of the share capital of the acquired companies
was purchased and new shares formed part of the consideration;
• Shares in Treasury result from the acquisition by the company of its own shares. Shares are issued from Treasury to meet the requirement to
satisfy the exercise of share options under the company’s SAYE and unapproved share option schemes;
• Retained earnings include all current and prior period retained profits and losses.
The accompanying notes form an integral part of these financial statements.
35
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Consolidated Statement of
Financial Position
As at 30 November 2017
Note
13
14
16
17
22
18
19
20
21
22
20
21
23
24
25
Assets
Non-current assets
Property, plant and equipment
Goodwill and other intangible assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Obligations under hire purchase contracts
Derivative financial instruments
Total current liabilities
Non-current liabilities
Loans and borrowings
Obligations under hire purchase contracts
Provision for liabilities
Defined benefit pension obligation
Deferred taxation
Total non-current liabilities
Total liabilities
TOTAL NET ASSETS
The accompanying notes form an integral part of these financial statements.
36
2017
£’000
36,925
14,759
51,684
2,526
13,646
450
627
17,249
68,933
6,477
16,278
3,158
-
25,913
-
8,357
1,203
427
682
10,669
36,582
32,351
2016
£’000
34,876
12,033
46,909
2,607
11,483
327
2,159
16,576
63,485
5,195
11,096
3,034
285
19,610
4,900
8,256
1,653
800
455
16,064
35,674
27,811
Rotala Plc | Annual Report 2017 Shareholders’ funds
Share capital
Share premium reserve
Merger reserve
Shares in treasury
Retained earnings
TOTAL EQUITY
Note
26
2017
£’000
12,220
11,779
2,567
(817)
6,602
32,351
2016
£’000
10,762
9,875
2,567
(817)
5,424
27,811
The consolidated financial statements were approved by the Board of Directors and authorised for issue on 11 April 2018.
.
Simon Dunn
Chief Executive
Kim Taylor
Group Finance Director
The accompanying notes form an integral part of these financial statements.
37
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Consolidated Statement
of Cash Flows
For the year ended 30 November 2017
Cash flows from operating activities
Profit before taxation
Adjustments for:
Depreciation
Acquisition expenses
Finance expense (net)
Gain on sale of property, plant and equipment
Contribution to defined benefit pension scheme
Goodwill amortisation
Notional expense of defined benefit pension scheme
Equity settled share-based payment expense
Cash flows from operating activities before changes in working capital
and provisions
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
Decrease/(increase) in trade and other payables
Movement in provisions
Movement on derivative financial instruments
Cash generated from operations
Interest paid on hire purchase agreements
Net cash flows from operating activities carried forward
The accompanying notes form an integral part of these financial statements.
38
2017
£’000
2,419
3,274
47
1,264
(446)
(337)
19
22
20
6,282
80
(2,056)
396
(450)
(408)
(2,438)
3,844
(501)
3,343
2016
£’000
2,688
3,050
125
1,267
(342)
(350)
-
7
16
6,461
(500)
(3,330)
(339)
1,437
(1,801)
(4,533)
1,928
(474)
1,454
Rotala Plc | Annual Report 2017 Cash flows from operating activities brought forward
Investing activities
Purchases of property, plant and equipment
Acquisition of businesses
Sale of assets held for sale as at 30 November 2015
Sale of property, plant and equipment
Net cash (used in) investing activities
Financing activities
Shares issued
Dividends paid
Own shares purchased
Proceeds of mortgage and other bank loans
Repayment of bank and other borrowings
Bank interest paid
Hire purchase refinancing receipts
Capital settlement payments on vehicles sold
Capital element of lease payments
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2017
£’000
3,343
(1,799)
(3,329)
-
1,002
(4,126)
3,362
(970)
-
1,105
(722)
(740)
717
(240)
(3,086)
(574)
(1,357)
(342)
(1,699)
2016
£’000
1,454
(2,558)
(1,871)
2,479
1,023
(927)
2,412
(803)
(367)
2,775
(2,700)
(744)
2,522
-
(3,366)
(271)
256
(598)
(342)
The accompanying notes form an integral part of these financial statements.
39
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Notes to the Consolidated
Financial Statements
For the year ended 30 November 2017
1. General information
Rotala Plc is incorporated and domiciled in the United Kingdom. Its principal activity is the provision of bus services and all activities take
place in the United Kingdom.
The financial statements for the year ended 30 November 2017 (including the comparatives for the year ended 30 November 2016) were
approved by the Board of Directors on 11 April 2018. Amendments to the financial statements are not permitted after they have been
approved.
2. Accounting policies
Basis of preparation
The group’s financial statements have been prepared in accordance with applicable International Financial Reporting Standards (“IFRS”) as
adopted by the European Union. The financial statements have been prepared on a going concern basis as described on page 20.
Overall considerations
The significant accounting policies that have been used in the preparation of these financial statements are summarised below.
The financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and
expense. The measurement bases are more fully described in the accounting policies below.
Critical accounting estimates and judgements
Certain estimates and judgements need to be made by the directors of the group which affect the results and position of the group as
reported in the financial statements. Estimates and judgements are required if, for example, as at the reporting date not all liabilities have
been settled, and certain assets and liabilities are recorded at fair value which require a number of estimates and assumptions to be
made.
Estimates
The major areas of estimation within the financial statements are as follows:
(a)
Impairment of goodwill
The group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is
determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the
choice of a discount rate in order to calculate the present value of the cash flows. Actual outcomes may vary. More information
about the impairment review and the reasons for the directors’ assessment that there is but a single Cash Generating Unit is
included in note 15.
(b)
Share based payment
The group has an equity-settled share-based remuneration scheme for employees. Employee services received, and the
corresponding increase in equity, are measured by reference to the fair value of the equity instruments at the date of grant,
excluding the impact of any non-market vesting conditions. The fair value of share options is estimated on the date of grant by
using the Black-Scholes valuation model or a binomial valuation model, according to the characteristics of the option, and is
based on certain assumptions. Those assumptions include, among others, the dividend growth rate, expected volatility, and the
expected life of the options. Management then apply the fair value to the number of options expected to vest.
(c)
Pension scheme valuation
The liabilities in respect of defined benefit pension schemes are calculated by qualified actuaries and reviewed by the group,
but are necessarily based on subjective assumptions. The principal uncertainties relate to the estimation of the life expectancies
of scheme members, future investment yields and general market conditions for factors such as inflation and interest rates. The
specific assumptions adopted are disclosed in detail in note 24 to the consolidated financial statements. Profits and losses in
relation to changes in actuarial assumptions are taken directly to Other Comprehensive Income and therefore do not impact on
the profitability of the business, but the changes do impact on net assets.
40
Rotala Plc | Annual Report 2017
2. Accounting policies (continued)
(d)
Self-insurance
The estimation of insurance costs, under the group’s self-insurance scheme, is based on premiums paid and claims experience.
The actual outcome of claims made is determined over the five years following each period end; no rebate of premium is
accounted for until each insurance period is closed. The directors regularly review claims made and, should insurance premiums
paid to date and the insurance claims provision be considered inadequate in the light of claims experience, further appropriate
provision would be made.
(e)
Acquisition fair values and intangibles
In attributing value to intangibles on acquisition, management has made certain assumptions about the profitability of acquired
businesses, brands and customer relationships. The key assumptions relate to the trading performance of the acquired business
and the derivation of the fair value of assets or liabilities acquired, including any value attributable to intangible assets such as
brands and contracts. Where a business acquired is loss-making, it is considered to be unlikely that brands or contracts have
any value. Management uses valuation techniques and its knowledge of the market, combined with its experience of previous
acquisitions, to determine the fair value of net assets acquired in business combinations. Management bases its assumptions on
observable data as far as possible, but this is not always available. Where observable data is not available management uses
the most suitable information it can identify. Estimated fair values may vary from the actual prices that would be achieved in an
arms’ length transaction at the reporting date.
Judgements
The major areas of judgement within the financial statements are as follows:
(a) Useful lives of property, plant and equipment
Property, plant and equipment is depreciated over its useful life. Useful lives are based on the management’s estimates of
the periods within which the assets will generate revenue and which are periodically reviewed for continued appropriateness.
Changes to judgements can result in significant variations in the carrying value and amounts charged to the Consolidated
Income Statement in specific periods. More details about carrying values are included in note 13.
(b) Deferred tax assets
In determining the deferred tax asset to be recognised, management carefully review the recoverability of these assets on a
prudent basis and reach a judgement based on the best available information.
Basis of consolidation
The group financial statements consolidate the results of the company and all its subsidiary undertakings as at 30 November 2017.
The results of subsidiary undertakings acquired are included from the date on which control over the acquisition, the right to exercise that
control, and exposure to variable returns from the acquisition passed to the group. Intercompany transactions and balances between group
companies are therefore eliminated in full.
Business combinations
Where the acquisition method is used, the results of the subsidiary are included from the date of acquisition. The purchase consideration is
allocated to assets and liabilities on the basis of fair value at the date of acquisition. Acquisition costs are expensed as incurred.
41
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
2. Accounting policies (continued)
Goodwill
Goodwill represents any excess of the fair value of consideration transferred for the business acquisition over the acquisition date fair value
of the identifiable assets, liabilities and contingent liabilities acquired.
Goodwill is tested annually for any impairment and carried at cost less accumulated impairment losses. Any impairment charge would
be included within administrative expenses in the Consolidated Income Statement. As the group has taken advantage of the exemption
from restating all pre-transition period acquisitions under IFRS 3 ‘Business Combinations’, goodwill includes intangibles arising on those
acquisitions that are not separately identifiable prior to the date of the change of policy.
Where the fair value of identifiable assets, liabilities and contingent liabilities exceeds the fair value of consideration paid, the excess is
credited in full in profit or loss on the acquisition date.
Other intangible assets - brands
Purchased brands, which are controlled through custody or legal rights and which could be sold separately from the rest of the business,
are capitalised, where fair value can be reliably measured. Where intangible assets are regarded as having a limited useful economic
life, the cost is amortised on a straight-line basis over that life. Currently these intangibles are amortised over a period of 3 years in
administrative expenses in the Consolidated Income Statement.
Other intangible assets - contracts
Where an acquisition is made which contains within it rights to contracted revenue, the present value of the profits inherent in those
contracts is capitalised as an intangible asset. This asset is then amortised over the remaining life of those contracts in administrative
expenses in the Consolidated Income Statement.
Impairment
The group’s goodwill and intangible assets are subject to impairment testing.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.
Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and
represent the lowest level within the group at which management controls the related cash flows.
Individual intangible assets or cash-generating units that include goodwill with an indefinite useful life are tested for impairment at least
annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use, based on an
internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated,
are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash
generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised as income immediately.
Revenue
Revenue represents sales to external customers excluding value added tax. Passenger revenue is recognised when payment is received
in cash. Subsidy revenue from local authorities is recognised on an accruals basis, based on actual passenger numbers. Contracted and
charter services revenues are recognised when services are delivered, based on agreed contract rates.
42
Rotala Plc | Annual Report 2017
2. Accounting policies (continued)
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost, which includes both the purchase price and any directly attributable
costs. Following initial recognition property, plant and equipment is carried at depreciated cost.
The useful lives and residual values of property, plant and equipment are reviewed at least annually and adjusted, where applicable. When
disposed of, property plant and equipment is derecognised. Where an asset continues to be used by the group but is expected to provide
reduced or minimal future economic benefits, it is considered to be impaired. Profits and losses on disposal are calculated by comparing
the disposal proceeds with the carrying value of the asset, and the resultant gains or losses are included in the consolidated income
statement. A gain or loss incurred at the point of derecognition is also included in the consolidated income statement at that point.
Repairs and maintenance are charged to profit or loss in the financial period in which they are incurred. Where probable future economic
benefits, in excess of the current standard of performance of the existing asset, are considered to be derived from its major renovation, the
cost of that major renovation is added to the carrying value of that asset. Major renovations are then depreciated over the remaining useful
life of the asset.
Depreciation is provided to write off the cost, less estimated residual values, of all property, plant and equipment, except freehold land,
over their expected useful lives. It is calculated at the following rates:
Freehold land
Freehold buildings
Long leasehold property
- Not depreciated
-
-
Fifty years straight line
Shorter of the lease term or fifty years straight line
Short leasehold property
- Over the period of the lease
Plant and machinery
- Between ten and four years straight line
Public Service Vehicles (“PSVs”)
- Between 10% and 25% per annum on a reducing balance basis
Fixtures and fittings
-
Three years straight line
Grants
Grants relating to property, plant and equipment are netted off the assets to which they relate and the net investment in the asset is
depreciated as set out above. Other grants are held in trade and other payables until credited to the income statement as the related
expenditure is expensed.
Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours.
Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily
convertible to known amounts of cash with insignificant risk of change in value.
Inventories
Inventories are initially recognised at cost on a first in first out basis, and subsequently at the lower of cost and net realisable value. Cost
comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition.
Held for sale assets
When the group decides to dispose of a non-current asset and the sale of that asset is probable at the balance sheet date, the asset is
reclassified as a “held for sale” asset in current assets, held at the lower of its carrying or net realisable value and not subject to further
depreciation.
Mark to market provision and other exceptional costs
These items are those which the directors consider to be outside of the normal trading transactions of the group or those which hinder
understanding of the underlying trading results of the group. They are highlighted separately on the Consolidated Income Statement.
43
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
2. Accounting policies (continued)
Taxation
The charge for current taxation is provided at rates of corporation tax that have been enacted or substantively enacted by the reporting
date. Current tax is based on taxable profits for the year and any adjustments to tax payable in respect of previous years.
Deferred tax is provided, using the balance sheet method, on all temporary differences which result in an obligation at the reporting date to
pay more tax, or a right to pay less tax, at a future date, based on tax rates and tax laws that have been enacted or substantively enacted
at the reporting date. Temporary differences arise between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. The exceptions, where deferred tax assets are not recognised nor deferred tax liabilities provided, are:
• On initial recognition of goodwill;
• The initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
• Taxable temporary differences associated with investments in subsidiary undertakings where the timing of the reversal of the
temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Leased assets
In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the
risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the
fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by
the lessee. A corresponding amount is recognised as a finance leasing liability.
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to profit or
loss over the period of the lease.
All other leases are regarded as operating leases and the payments made under them are charged to profit or loss on a straight line basis
over the lease term. Lease incentives are spread over the term of the lease.
Where the group enters into sale and leaseback transactions, the accounting treatment depends on the type of lease involved and the
economic and commercial substance of the arrangement. Where the group retains the majority of the risks and rewards of ownership of
the assets they are accounted for as finance leases and any excess of sales proceeds over the carrying amount of the asset is deferred
and amortised over the lease term. Where the group transfers substantially all the risks and rewards of ownership to the lessor they are
accounted for as operating leases and any excess of sales proceeds over the carrying value of the asset is recognised in the income
statement as a gain on disposal.
Where finance leases or hire purchase agreements are refinanced, amounts received as cash inflows are shown in the cash flow statement
as hire purchase refinancing, and cash outflows to settle the original leases are shown as hire purchase settlement payments.
Self-insurance
The group’s policy is to self-insure high frequency, but low value, claims such as those for traffic accidents and to protect itself against high
value claims through an insurance policy issued by a third party subject to an excess. Under this scheme, premiums to obtain the latter
insurance are paid to QBE Insurance Limited (“QBE”) in respect of each accounting period. These premiums are held by QBE in a trust
separate from the assets of the company in order to meet those claims as and when they are settled. The company has no control over the
assets of this trust. The administration of high frequency but low value claims is made by a claims handling specialist and the funding of the
settlement of these claims is made by the company to the claims handler as and when required.
Provisioning for insurance claims is a major area of estimation in these financial statements and the approach used is described in detail
in item (d) of the section on “Estimates” set out above. Claims can be made for a period of up to five years after the accounting period
to which they relate. Should a year of insurance be in surplus, no rebate is recognised until the claim period has expired. Should a year of
insurance be calculated at any time to be in deficit, an appropriate provision is made. Any provision made is discounted to take account of
the expected timing of future payments.
44
Rotala Plc | Annual Report 2017
2. Accounting policies (continued)
Pension costs
Defined contribution schemes
Contributions to the group’s defined contribution pension schemes are charged in profit or loss in the year in which they become
payable.
Defined benefit pension schemes
Scheme assets are measured at fair values. Scheme liabilities are measured on an actuarial basis using the projected unit method
and are discounted at appropriate high quality corporate bond rates that have terms to maturity approximating to the terms of the
related liability. Appropriate adjustments are made for unrecognised actuarial gains or losses and past service costs. Any actuarial
gains and losses are recognised immediately in Other Comprehensive Income. Past service cost is recognised as an expense on a
straight-line basis over the average period until the benefits become vested. To the extent that benefits are already vested the group
recognises past service cost immediately.
Financial assets
The group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was
acquired. The group has not classified any of its financial assets as held to maturity or available for sale.
Loans and receivables: these assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate
other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for
impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the
counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the terms of
the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future
expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in
a separate allowance account with the loss being recognised within administrative expenses in profit or loss. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Financial assets are de-recognised when the contractual rights to the cash flows from the asset expire or when the financial asset and all
substantial risks and rewards are transferred.
The group’s loans and receivables comprise trade and other receivables in the consolidated statement of financial position.
Financial assets and liabilities include derivative financial instruments held at fair value through profit and loss (“FVTPL”). These assets
and liabilities are, if they meet the relevant conditions, designated at FVTPL upon initial recognition. All of the group’s derivative financial
instruments currently fall into this category. Assets and liabilities in this category are measured at fair value with gains or losses recognised
in profit or loss. The fair values of these financial assets and liabilities are determined by reference to active market transactions or using a
valuation technique where no active market exists.
45
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
2. Accounting policies (continued)
Financial liabilities
The group classifies its financial liabilities in a manner which depends on the purpose for which the liability was acquired:
• Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such
interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any
interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of
financial position. Interest expense in this context includes initial transaction costs and premiums payable on redemption, as well as any
interest or coupon payable while the liability is outstanding;
• Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost,
using the effective interest method;
• The group has entered into diesel commodity forward contracts. The agreements do not meet the definitions of hedging transactions
under IAS 39 ‘Financial Instruments: Recognition and Measurement’, but are accounted for as a derivative and are recorded at fair value
through profit and loss.
A financial liability is de-recognised when it is extinguished, cancelled or it expires. The group has not classified any of its financial
liabilities, other than derivatives, at fair value through profit or loss.
Equity
Share capital is determined using the nominal value of shares that have been issued. Premiums received on the initial issuing of share
capital are credited to the share premium reserve. Any transaction costs associated with the issuing of shares are deducted from share
premium, net of any related income tax benefits. Retained earnings include all current and prior period results.
The merger reserve represents the difference between the issue price and the nominal value of shares issued as consideration for the
acquisition of a subsidiary undertaking.
Share based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged in profit or loss over the
vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each
balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that
eventually vest. Market and non-market vesting conditions are factored into the fair value of the options granted. As long as all other vesting
conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged in profit or loss over the remaining vesting period. A decrease in fair value
is not recognised.
Dividends
Dividend distributions to the company’s shareholders are recognised as a liability in the group’s financial statements on the date when
dividends are approved by the company’s shareholders. Interim dividends are recognised on the date that they are paid.
Segmental reporting
IFRS 8 requires the identification of operating segments on the basis of internal reports that are regularly reviewed by the entity’s chief
operating decision maker (“CODM”). The CODM has been determined to be the executive directors.
The group has three main revenue streams: contracted, commercial and charter. All operate within a single operating segment, that is the
provision of bus services. The activities of each revenue stream are as described in the Chairman’s Statement.
46
Rotala Plc | Annual Report 2017
3. Changes in accounting standards and interpretations
The adoption of the following accounting standards, amendments and interpretations in the current year has not had a material impact on
the group’s financial statements.
EU effective date: Periods
beginning on or after
Amendment to IAS 1 Presentation of Financial State-ments: Disclosure initiative
1 January 2016
Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets:
Clarification of acceptable methods of depreciation and amortisation
1 January 2016
Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture: Bearer plants
1 January 2016
Amendment to IAS 19 Employee Benefits: Defined benefit plans - Employee contributions
1 February 2015
Amendment to IAS 27 Separate Financial Statements: Equity method in separate financial
statements
Amendments to IFRS 10 Consolidated Financial State-ments, IFRS 12 Disclosure of Interests in
Other Entities and IAS 28 Investments in Associates and Joint Ventures: Investment entities -
Applying the consolidation exception
Amendment to IFRS 11 Joint Arrangements: Accounting for acquisitions of interests in joint
operations
Annual Improvements to IFRSs (2010 - 2012)
Annual Improvements to IFRSs (2012 - 2014)
1 January 2016
1 January 2016
1 January 2016
1 February 2015
1 January 2016
The adoption of the following standards, amendments and interpretations (including IFRS 9 and 15) in future years is not expected to have
a material impact on the group’s financial statements.
The group is however continuing to assess the full impact that adopting IFRS 16 will have on future financial statements, and therefore the
full effect is yet to be determined.
EU effective date:
Periods beginning
on or after
IASB effective date:
Periods beginning
on or after
IAS 7 Statement of Cash Flows: Amendment in respect of the disclosure initiative
1 January 2017
1 January 2017
IAS 12 Income Taxes: Amendment in relation to the recognition of deferred tax assets for
unrealised losses
Annual Improvements to IFRSs (2014 - 2016): Clarification of the scope of IFRS 12
Disclosure of Interests in Other Entities
IAS 19 Employee Benefits: Amendment in relation to plan amendment, curtailment or
settlement
IAS 28 Investments in Associates and Joint Ventures: Amend-ment in relation to Long-term
interests in Associates and Joint Ventures
IAS 40 Investment Property: Amendment in relation to transfers of investment property
IFRS 2 Share-based Payment: Amendment in relation to classifi-cation and measurement
of share-based payment transactions
IFRS 4 Insurance Contracts: Amendment in relation to applying IFRS 9 Financial
Instruments with IFRS 4 Insurance Contracts
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments: Amendment in relation to Prepay-ment features with
negative compensation
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 17 Insurance Contracts
Annual Improvements to IFRSs (2014 - 2016)
Annual Improvements to IFRSs (2015 - 2017)
1 January 2017
1 January 2017
1 January 2017
1 January 2017
1 January 2019†*
1 January 2019
1 January 2019†*
1 January 2019
†**
†**
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2019†*
1 January 2019
1 January 2018
1 January 2018
1 January 2019
1 January 2019
†**
1 January 2021
1 January 2018
1 January 2018
1 January 2019†*
1 January 2019
IFRIC 22 Foreign Currency Transactions and Advance Consid-eration
†**
1 January 2018
IFRIC 23 Uncertainty over Income Tax Treatments
1 January 2019†*
1 January 2019
Standards, amendments and interpretations cannot be adopted in the EU until they have been EU-endorsed.
† Pending endorsement *Expected to be endorsed by the IASB effective date. **Not expected to be endorsed by the IASB effective date.
47
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
4. Segmental analysis and revenue
All of the activities of the group are conducted in the United Kingdom within the operating segment of provision of bus services.
Management monitors revenue across the following streams: contracted, commercial and charter:
Commercial
Contracted
Charter
Total Revenue
2017
£’000
33,702
21,415
2,789
57,906
2016
£’000
32,873
19,707
2,395
54,975
The group consists of a number of operational depots arranged around and reliant on a central core, in concept a hub and spoke
arrangement. All the services that the group performs are similar and most depots in the group deliver services in each of the three
sub-headings set out above. Furthermore, as a matter of management practice, the business of the group is managed by contract (for
Contracted Revenue) or by route (for Commercial Revenue) or in certain circumstances by both contract and route, depending on the type
of business. Charter business is typically delivered by short term contracts.
Contracted and Charter Services are usually delivered against an agreed service level agreement. Detailed costs for that individual contract
are monitored against those modelled in the original bid calculation. Management then takes appropriate action to correct variances as
necessary whilst maintaining the agreed level of service.
In Commercial Business, where the revenue is variable and derived from passengers, individual routes are constantly monitored for
loadings and revenues and trends in passenger revenues and loadings. Passenger loadings are analysed, often by fare stage, to establish
usage and appropriate routes. In concert with margin analysis, individual frequencies and routes are adjusted to maximise revenue yields.
In certain parts of the business revenues can be derived from a complex combination of a variable passenger revenue underpinned
by a fixed revenue base delivered by contract. These types of service are managed by individual contract and route and so require a
combination of management techniques and analyses to ensure that loadings and revenues are maximised whilst delivery to the service
agreement is maintained.
In these circumstances it is impractical to allocate local and central overhead to individual routes and contracts. Costs and Operating Profits
by revenue stream are therefore not calculated. By the very nature of the business the operating assets are also interchangeable and the
vehicles used in particular localities or on specific routes are frequently changed. Thus it is also not practicable to calculate figures for
revenue stream assets. Other information such as capital expenditure, depreciation and impairment is also not analysed separately for this
reason.
In 2017 and 2016 no customer constituted more than 10% of Revenues.
48
Rotala Plc | Annual Report 2017
5. Staff costs
Staff costs (including directors) comprise:
Wages and salaries
Employer’s national insurance contributions
Defined contribution pension costs
Share-based payment expense
The average number of employees, including directors, during the year was as follows:
Management and administrative
Direct
6. Directors’ and key management personnel remuneration
Salaries and other short term employee benefits
Social security costs
Contribution to defined contribution pension scheme (note 24)
Share based payment expense
2017
£’000
29,824
2,727
348
32,899
20
32,919
2017
Number
82
1,282
1,364
2017
£’000
562
48
12
11
633
2016
£’000
28,921
2,591
348
31,860
16
31,876
2016
Number
90
1,180
1,270
2016
£’000
560
48
12
11
631
One director (2016: 1) is a member of the group’s defined contribution pension scheme.
Emoluments of the highest paid director were £206,000 (2016: £217,000). Pension contributions of £11,817 (2016: £11,600) were made on
his behalf.
49
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
6. Directors’ and key management personnel remuneration (continued)
The directors’ remuneration was as follows:
2017
£’000
Share
based
payment
expense
Remuneration
Pension
Total Remuneration
2016
£’000
Share
based
payment
expense
Executive
S L Dunn
R A Dunn
K M Taylor
Non- Executive
J H Gunn
G M Spooner
G F Peacock*
F G Flight*
206
131
100
80
35
10
-
5
4
2
-
-
-
-
12
-
-
-
-
-
-
223
135
102
80
35
10
-
217
121
103
80
15
-
24
5
4
2
-
-
-
-
Pension
Total
12
-
-
-
-
-
-
234
125
105
80
15
-
24
562
11
12
585
560
11
12
583
*from date of appointment or up to date of resignation
The services of John Gunn and certain of those of Robert Dunn are provided respectively by Wengen Limited, and motorBus Limited under
contracts with those companies.
The board considers the directors of the company to be the key management personnel of the group.
7. Profit from operations
This is arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Operating lease expense:
- property
- plant and machinery
Profit on disposal of property, plant and equipment
Auditor’s fees:
- audit of the parent company and the group
- audit of the accounts of subsidiaries
- other non–audit services
50
2017
£’000
3,274
554
1,896
(446)
40
10
-
2016
£’000
3,050
468
2,135
(342)
42
12
-
Rotala Plc | Annual Report 2017
8.
Finance income
Interest receivable on bank deposits
9.
Finance expense
Bank borrowings and overdraft interest
Hire purchase contracts
Net finance costs on pension scheme (note 24)
Other interest
2017
£’000
-
2017
£’000
697
525
17
25
1,264
10. Exceptional items within profit before taxation
Profit before taxation includes the following mark to market provisions and other exceptional items:
Mark to market profit on fuel derivatives (note 30)
Acquisition costs
Provision against onerous leases resulting from acquisition
Revenue debtor written off (see note below)
Redundancy costs and costs of integration of acquisitions
Costs of change of principal bankers
Amortisation of intangible assets
Share based payment expense
(Loss)/profit within profit before taxation
2017
£’000
162
(47)
-
(477)
(337)
(58)
(19)
(20)
(796)
2016
£’000
14
2016
£’000
750
520
5
6
1,281
2016
£’000
684
(125)
(310)
-
(225)
-
-
(16)
8
As a result of its acquisition of Green Triangle Buses Limited (now renamed Diamond Bus (North West) Limited) in 2015, the group inherited
a long standing dispute over the correct rate of concessionary fare re-imbursement. This dispute has now been amicably resolved but part
of the settlement terms affected the pre-acquisition element of the revenue in question. Had the resolution of the dispute occurred before
the end of the 2016 accounting year, the settlement of the dispute would have been reflected in a corresponding increase in positive
goodwill arising on consolidation. However, since that window of adjustment is now closed, the item has had to be written off to the profit
and loss account.
51
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
11. Tax expense
Current tax
Current tax on profits for the year
Total current tax
Deferred tax
Origination and reversal of temporary differences
Prior year adjustments
Change in rate of tax
Total deferred tax (note 25)
Income tax expense
2017
£’000
2016
£’000
-
-
434
(96)
-
338
338
-
-
483
13
(14)
482
482
2016
£’000
2,688
538
(15)
13
(54)
482
The tax assessed for the year is different to the standard rate of corporation tax in the U.K. for the following reasons:
Profit before taxation
Profit at the standard rate of corporation tax in the UK of 19%
(2016: 20%)
Non-taxable items
Adjustments in respect of prior periods
Impact of changes in tax rates
Total tax expense
2017
£’000
2,419
460
(2)
(96)
(24)
338
The main rate of corporation tax will fall further to 17% from 1 April 2020 (a change which has been substantively enacted).
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.
52
Rotala Plc | Annual Report 2017
12. Earnings per share
Basic:
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares
Basic earnings per share
2017
£’000
2,081
44,001,465
4.73p
2016
£’000
2,206
40,164,072
5.49p
The calculation of the basic and diluted 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.
Adjusted basic before mark to market provision and other
exceptional items:
Profit before exceptional items attributable to ordinary
shareholders
Weighted average number of ordinary shares
Basic before exceptional items earnings per share
Diluted:
Profit attributable to ordinary share holders
Profit for the purposes of diluted earnings per share
2017
£’000
2,620
44,001,465
5.95p
2017
£’000
2,081
2,081
2016
£’000
2,212
40,164,072
5.51p
2016
£’000
2,206
2,206
Weighted average number of shares in issue
44,001,465
40,164,072
Adjustments for:
- exercise of options
111,164
369,473
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
44,112,629
40,533,545
Diluted earnings per share
4.72p
5.44p
53
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
12. Earnings per share (continued)
Adjusted diluted before mark to market provision and other
exceptional items
Profit attributable to ordinary share holders
Profit for the purposes of diluted earnings per share
2017
£’000
Diluted
2,620
2,620
2016
£’000
Diluted
2,212
2,212
Weighted average number of shares in issue
44,001,465
40,164,072
Adjustments for:
- exercise of options
111,164
369,473
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
44,112,629
40,533,545
Adjusted diluted earnings per share
5.94p
5.46p
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.
54
Rotala Plc | Annual Report 2017 13. Property, plant and equipment
Long and short
Freehold land
and buildings
£’000
leasehold
property
£’000
Plant and
Public service
Fixtures and
machinery
£’000
vehicles
£’000
fittings
£’000
Total
£’000
Cost:
At 1 December 2015
6,930
1,072
2,730
38,620
148
49,500
Acquisition
Additions
Disposals
-
421
-
-
12
-
-
770
(16)
630
4,937
(1,350)
At 30 November 2016
7,351
1,084
3,484
42,837
Acquisition
Additions
Disposals
585
14
(270)
-
4
-
30
1,254
(69)
1,192
3,302
(1,678)
At 30 November 2017
7,680
1,088
4,699
45,653
Depreciation:
At 1 December 2015
Charge for the year
Disposals
At 30 November 2016
Charge for the year
Acquisitions
Disposals
At 30 November 2017
Net book value:
At 30 November 2017
At 30 November 2016
302
62
-
364
62
35
(35)
426
7,254
6,987
172
29
-
201
29
-
-
1,044
231
(4)
16,116
2,707
(680)
1,271
18,143
284
30
(69)
2,880
450
(1,358)
230
1,516
20,115
858
883
3,183
25,538
2,213
24,694
Net book value held under hire purchase agreements :
At 30 November 2017
At 30 November 2016
Depreciation charged thereon :
In 2017
In 2016
-
-
-
-
-
-
-
-
1,026
15,521
497
15,560
15
24
1,965
1,406
-
40
-
188
15
12
(26)
189
68
21
-
89
19
15
(26)
97
92
99
-
-
-
-
630
6,180
(1,366)
54,944
1,822
4,586
(2,043)
59,309
17,702
3,050
(684)
20,068
3,274
530
(1,488)
22,384
36,925
34,876
16,547
16,057
1,980
1,430
55
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information 14. Goodwill and other intangible assets
Purchased brands
£’000
Contracts
£’000
Goodwill
£’000
Cost:
At 1 December 2015
Additions
At 30 November 2016
Additions
At 30 November 2017
Amortisation:
At 1 December 2015
Charge for the year
At 30 November 2016
Charge for the year
At 30 November 2017
Net book value
At 30 November 2017
At 30 November 2016
250
-
250
--
250
250
-
250
-
250
-
-
Total
£’000
11,143
1,452
12,595
2,745
312
-
312
877
10,581
1,452
12,033
1,868
1,189
13,901
15,340
312
-
312
19
331
858
-
-
-
-
-
-
562
-
562
19
581
13,901
14,759
12,033
12,033
15. Goodwill and impairment
The group consists of a number of operational depots arranged around and reliant on a central core, in concept a hub and spoke
arrangement. The complex matrix of management of the group’s business is set out in detail in note 4 to these financial statements. In
summary, the group’s businesses are managed at their lowest levels by contract and by bus route, or sometimes by both methods. They are
not managed by revenue stream. Moreover the manner in which the group has expanded, with the addition, integration and transformation
of a number of businesses and entities, has obscured the formal breakdown of the total amount of goodwill. The directors consider that, in
the light of these factors, the group’s business represents a single cash generating unit for the purposes of evaluating the carrying value of
goodwill. Accordingly, the evaluation calculations have been carried out on this basis.
56
Rotala Plc | Annual Report 2017
15. Goodwill and impairment (continued)
The recoverable amount of the goodwill of the business has been determined from value in use calculations based on cash flow projections
from formally approved budgets covering a two year period to 30 November 2019. Major assumptions are as follows:
Discount rate
Operating margin
Long term growth rate
Inflation
CGU
2017
%
12
8
2
3
CGU
2016
%
12
8
2
3
Operating margins have been based on past experience and future expectations in the light of anticipated economic and market
conditions. Discount rates are based on the group’s weighted average cost of capital. Growth rates, beyond the first two years, are based
on management estimates and on the historic achievements of the group. This rate does not exceed the average long term growth rate
for the relevant markets. Inflation has been based on management’s expectation given historic trends. After applying sensitivity analysis in
respect of the results and future cash flows, in particular for presumed growth rates and discount rates, management is satisfied that it is
highly improbable that there would be such change in a key assumption that it would reduce recoverable amount to below book value.
16. Inventories
Fuel, tyres and spares
2017
£’000
2,526
2016
£’000
2,607
There is no material difference between the replacement cost of stocks and the amounts stated above.
The amount of inventories recognised as an expense during the year was £13,575,000 (2016: £12,344,000). No inventory has been written
down to fair value in 2017 or 2016 and therefore no associated expense was incurred.
17. Trade and other receivables
Trade receivables
Tax and social security
Prepayments and accrued income
2017
£’000
3,693
369
9,584
13,646
2016
£’000
3,569
215
7,699
11,483
57
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
17. Trade and other receivables (continued)
The carrying values of trade and other receivables are considered to be a reasonable approximation of fair value. The effect of discounting
trade and other receivables has been assessed and is deemed to be immaterial to the results.
In 2017 and 2016 all trade and other receivables have been reviewed for indicators of impairment. No provision was created.
In addition, some of the unimpaired trade receivables are past due as at the reporting date. The ages of trade receivables past due but
not impaired are as follows:
Not more than 3 months overdue
More than 3 months but not more than 1 year
Movements in the group trade receivables provision in the year are as follows:
Balance brought forward at 1 December
Provided
Released
Balance carried forward at 30 November
18. Cash and cash equivalents
Cash and cash equivalents for the purposes of the cash flow statement are analysed as follows:
Cash at bank
Bank Overdraft (note 20)
2017
£’000
16
207
223
2017
£’000
-
-
-
-
2017
£’000
627
(2,326)
(1,699)
2016
£’000
63
54
117
2016
£’000
-
-
-
-
2016
£’000
2,159
(2,501)
(342)
58
Rotala Plc | Annual Report 2017
19. Trade and other payables - current
Trade payables
Taxation and social security
Other creditors
Accruals and deferred income
2017
£’000
3,999
820
1,106
552
6,477
2016
£’000
3,326
652
694
523
5,195
The directors consider that the carrying amount of trade and other payables approximates to their fair value. The effect of discounting trade
and other payables has been assessed and is deemed to be immaterial to the group’s results.
20. Loans and borrowings
Current:
Overdrafts
Bank loans
Non-current
Bank loans
2017
£’000
2,326
13,952
16,278
-
-
2016
£’000
2,501
8,595
11,096
4,900
4,900
59
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
20. Loans and borrowings (continued)
Analysis of maturity
In one year or less or
on demand
In more than one year but not
more than two years
In more than two years but not
more than five years
Later than five years
In one year or less or
on demand
In more than one year but not
more than two years
In more than two years but not
more than five years
Later than five years
2017
£’000
2017
£’000
2017
£’000
2017
£’000
Bank loans
Obligations under
Trade and other
and overdrafts
hire purchase
payables
Total
16,568
-
-
-
3,590
3,249
5,098
619
5,105
25,263
-
-
-
3,249
5,098
619
16,568
12,556
5,105
34,229
2016
£’000
2016
£’000
2016
£’000
2016
£’000
Bank loans
Obligations under
Trade and other
and overdrafts
hire purchase
payables
Total
11,474
4,982
-
-
3,448
3,165
4,679
974
4,020
18,942
-
-
-
8,147
4,679
974
16,456
12,266
4,020
32,742
The analysis above represents minimum payments on an undiscounted basis.
Bank borrowings
The above analysis reflects the banking arrangements of the group as at 30 November 2017. These facilities were due to expire on 30 April
2018.
However, on 5 December 2017 the group engaged HSBC Bank plc as its principal bankers and all the group’s facilities were transferred to
that bank. This new Senior Facilities Agreement provides for a revolving facility of up to £15.5 million and a mortgage facility of £5.5 million,
with a corresponding overdraft facility of up to £3.5 million. The group entered into a cross-guarantee and floating charge agreement on
that same date covering these facilities. The facilities expire on 5 December 2021 but are renewable at that date.
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.
Had the new bank facilities been in place on 30 November 2017 the analysis of maturity would have been as follows:
60
Rotala Plc | Annual Report 2017
20. Loans and borrowings (continued)
Pro forma analysis of maturity as at 30 November 2017:
In one year or less or
on demand
In more than one year but not
more than two years
In more than two years but not
more than five years
Later than five years
2017
£’000
2017
£’000
2017
£’000
2017
£’000
Bank loans
Obligations under
Trade and other
and overdrafts
hire purchase
payables
Total
11,364
539
5,490
-
3,590
3,249
5,098
619
5,105
-
-
-
20,059
3,788
10,588
619
17,393
12,556
5,105
35,054
21. Obligations under hire purchase contracts
Future lease payments are due as follows:
Not later than one year
More than one but less than two years
More than two but less than five years
Later than five years
Not later than one year
More than one but less than two years
More than two but less than five years
Later than five years
2017
£’000
Minimum lease payments
3,590
3,249
5,098
619
12,556
2016
£’000
Minimum lease payments
3,448
3,165
4,679
974
12,266
2017
£’000
Interest
432
287
306
16
1,041
2016
£’000
Interest
414
272
261
29
976
2017
£’000
Present value
3,158
2,962
4,792
603
11,515
2016
£’000
Present value
3,034
2,893
4,418
945
11,290
61
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
21. Obligations under hire purchase contracts (continued)
The present values of future lease payments are analysed as:
Current liabilities
Non-current liabilities
2017
£’000
3,158
8,357
11,515
2016
£’000
3,034
8,256
11,290
It is the group’s policy to lease certain of its fixtures and equipment under finance leases. The average lease term is 3 years. For the year
ended 30 November 2017, the average effective borrowing rate was 4 per cent (2016: 4 per cent). Interest rates are fixed at the contract
date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. All lease
obligations are denominated in sterling.
The group’s obligations under finance leases are secured by the lessors’ rights over the leased assets disclosed in note 20.
22. Derivative financial instruments
Derivative financial instruments are analysed as follows (see also note 30):
Current assets
Current assets – debtors due in more than one year
Current liabilities
Asset/(liability)
2017
£’000
450
-
-
450
2016
£’000
-
327
(285)
42
Financial assets at fair value through profit or loss are presented within Operating Activities and therefore form part of changes in working
capital in the statement of cash flows.
The fair value of the commodity forward contracts is determined in accordance with the procedure described in note 30.
23. Provision for liabilities
Provision for
onerous leases
Insurance claims
arising as a result
provision
of acquisitions
£’000
1,301
-
(98)
-
1,203
£’000
352
-
(338)
(14)
-
Total
£’000
1,653
(436)
(14)
1,203
At 1 December 2016
Created during the year
Utilised during the year in profit or loss
Released
Balance at 30 November 2017
62
Rotala Plc | Annual Report 2017
23. Provision for liabilities (continued)
(a) Insurance claims provision
As set out in note 2 to these financial statements, the accounting policy of the group is to self-insure high frequency, but low value, claims
such as those for traffic accidents and to protect itself against high value claims through an insurance policy issued by a third party subject
to an excess. At the end of the 2016 accounting period responsibility for the administration of new claims passed to a third party claims
handling specialist and QBE retained responsibility for settling all claims made up to 30 November 2016. At the same time QBE returned
£1.3 million in cash to the company out of the trust fund which it held to settle claims made against the group, but the company assumed
responsibility for funding those claims when they were settled.
In addition to the provision set out above, in order to meet claims as and when they are settled, QBE at 30 November 2017 retained a
further £300,000 in cash (2016: £600,000). These funds are held in a trust account separate from the assets of the company. The company
has no control over this trust account and accordingly does not recognise it as an asset.
As at 30 November 2016 and 2017 it is considered by the company that the provision held is sufficient to meet the settlement responsibility
which falls on the company at those dates. Although the form of the manner in which insurance claims are made against the company and
settled by the company has therefore changed, the substance has not changed and the accounting policy remains the same as in previous
accounting periods.
Given the length of time which can elapse in dealing with insurance claims, it is probable that the above provision will be utilised gradually
over the five year period in which claims can be made. Claims experience in the future will dictate the extent to which additions to the
provision may be required and the extent of its utilisation in any accounting period.
(b) Onerous lease provisions
As part of the acquisition of the OFJ Business in 2016, the group re-organised its bases of operation in the Heathrow area. In this
reorganisation the company vacated a property but was unable to sub-let it at terms which enabled it to recover the costs of the lease
to expiry. Accordingly a provision was created to provide for the irrecoverable costs. In addition, in the same acquisition, the directors
identified that certain vehicle operating lease contracts were at terms which were higher than market rates for that type of vehicle.
Accordingly a provision was made at acquisition to recognise the liability which had been inherited with the acquisition of the business.
24. Pensions
Group companies operate defined contribution pension schemes. The assets of the schemes are held separately from those of the group in
independently administered funds. The pension charge amounted to £348,000 (2016: £348,000). Contributions amounting to £44,979 (2016:
£39,441) were payable to the funds at the balance sheet date.
Another group company operates a defined benefit pension scheme within the West Midlands Integrated Transport Authority Pension Fund
(“WMITAPF”), governed by the Local Government Pension Regulations (“LGPR”). The group accounts for pensions in accordance with IAS
19 “Employee Benefits”. Contributions amounting to £27,083 (2016: £44,554) were payable to the fund at the balance sheet date. Expected
contributions for the year ending 30 November 2018 are £325,000.
The plan exposes the group to actuarial risks such as interest rate risk, investment risk, longevity risk and inflation risk.
Interest rate risk
The present value of the defined benefit liability is calculated using a discount rate determined by reference to market yields of high
quality corporate bonds. The estimated term of the bonds is consistent with the estimated term of the defined benefit obligation and is
denominated in sterling. A decrease in market yield on high quality corporate bonds will increase the group’s defined benefit liability,
although it is expected that this would be offset partially by an increase in the fair value of certain of the plan assets.
Investment risk
The plan assets at 30 November 2017 are predominantly in equities and bonds. The equities are largely invested in a spread of UK, North
American, European and Asian equities, together with investments in two different diversified growth funds. This is considered to form a
good spread of risk..
Longevity risk
The group is required to provide benefits for life for the members of the defined benefit pension scheme. An increase in the life expectancy
of members will increase the defined benefits liability.
63
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
24. Pensions (continued)
Inflation risk
A significant proportion of the defined benefits liability is linked to inflation. An increase in the inflation rate will increase the group’s liability.
The weighted average duration of the defined benefit obligation at 30 November 2017 is 12 years (2016: 13 years).
WMITAPF defined benefit pension scheme
The calculations of the IAS 19 disclosures for the WMITAPF have been based on the most recent actuarial valuations, which have been
updated to 30 November 2017 by an independent professionally qualified actuary to take account of the requirements of IAS 19.
The principal actuarial assumptions used were as follows:
Rate of increase in salaries
Rate of increase of pensions in payment
Discount rate
Inflation
Expected long-term rate of return
- Equities
- Government bonds
- Other bonds
- Cash
30 November
2017
%
30 November
2016
%
n/a
2.4
2.3
3.3
6.5
2.6
3.6
0.5
n/a
2.3
2.7
3.5
6.5
2.6
3.6
0.5
The expected rates of return are based on expectations at the beginning of the period for returns over the entire life of the benefit
obligation. The expected returns are set in conjunction with external actuaries and take account of market factors, fund managers’ views
and targets for future returns and, where appropriate, historical returns.
The life expectancy assumptions used for the scheme are periodically reviewed and as at 30 November were:
Current pensioner aged 65 - male
Current pensioner aged 65 - female
Future pensioners at aged 65 (aged 45 now) - male
Future pensioners at aged 65 (aged 45 now) - female
30 November
2017
Years
30 November
2016
Years
21.8
23.9
24.0
26.2
21.6
24.5
23.4
26.4
Since the scheme has been closed for a number of years, there is no current service cost to be charged to operating profits.
Discount rate
Inflation
Life expectancy
Change in assumption
Impact on overall liability
Increase/decrease by 0.1%
Increase/decrease of 1.2%
Increase/decrease by 0.1%
Increase/decrease of 1.2%
Increase by 1 year
Increase of 4.4%
64
Rotala Plc | Annual Report 2017
24. Pensions (continued)
The above analysis is based on a change in an assumption whilst holding all other assumptions constant. In practice, this is unlikely to
occur and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to significant actuarial
assumptions has been estimated, based on the average age and the normal retirement age of members and the duration of the liabilities
of the scheme.
The amounts recognised in the statement of financial position were determined as follows:
Equities
Bonds
Other
Cash
Total market value of assets
Present value of scheme liabilities
Pension asset/(liability) before tax
Asset ceiling restriction
Pension liability after asset ceiling restriction and before tax
Related deferred tax asset
Net pension liability
30 November
2017
£’000
4,810
10,039
4,429
143
19,421
(18,527)
894
(1,321)
(427)
77
(350)
30 November
2016
£’000
4,605
10,045
3,887
127
18,664
(19,464)
(800)
-
(800)
144
(656)
The equity investments and bonds which are held in plan assets are quoted and are valued at the current bid price.
The above analysis shows that, as at 30 November 2017, the group in principle possessed a net pension asset in respect of this scheme.
However the LGPR at present do not offer to employers the facility to recover contributions once paid. Therefore an asset ceiling restriction
applies and, in accordance with IAS 19, the pension liability of the group equates to the remaining total contributions to the scheme of
£427,000, as certified by the scheme’s actuary.
The total charge to profit and loss for pensions is as follows:
Administration expense
Finance cost
- return on plan assets
- interest cost on pension liabilities
Net finance loss
Total defined benefit loss
Defined contribution costs
Total profit and loss charge
2017
£’000
(5)
496
(513)
(17)
(22)
(348)
(370)
2016
£’000
(7)
566
(571)
(5)
(12)
(348)
(360)
65
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
24. Pensions (continued)
Analysis of amount included within the group’s statement of total comprehensive income:
Return on assets (less interest)
Changes in assumptions underlying the present value of the
scheme liabilities
Actuarial gain/(loss) before asset ceiling restriction
Asset ceiling restriction
Actuarial gain/(loss) after asset ceiling restriction
2017
£’000
830
549
1,379
(1,321)
58
2016
£’000
1,673
(2,533)
(860)
-
(860)
Actuarial gains/(losses) as a percentage of scheme assets and liabilities at 30 November 2017 were as follows:
Return on assets as a percentage of scheme assets
Total actuarial gain/(loss) recognised in statement of total
comprehensive income as a percentage of the present value of
scheme liabilities
2017
2016
4.3
0.3
9.0
(4.4)
2015
(as restated)
(0.9)
(2.1)
The cumulative amount of actuarial gains and losses on defined benefit schemes recognised in the statement of total comprehensive
income since 25 January 2011 (the date at which the pension scheme entered the group) is a loss of £2,045,000 (2016: £2,087,000). The
actual return on plan assets was £1,326,000 (2016: £2,239,000).
The movement in deficit during the year under IAS 19 was:
Deficit in scheme at 30 November
Movement in period
- Contributions
- Administrative expenses
- Actuarial gain/(loss)
- Return on plan assets
- Interest cost
Surplus/(deficit) in scheme at the end of the year
2017
£’000
(800)
337
(5)
1,379
496
(513)
894
2016
£’000
(278)
350
(7)
(860)
566
(571)
(800)
66
Rotala Plc | Annual Report 2017
24. Pensions (continued)
The movement in assets during the year under IAS 19 is as follows:
At 30 November
Expected return on plan assets
Actuarial gains
Employer contributions
Administrative expenses
Benefits paid
At end of year
The movement in liabilities during the year under IAS 19 is as follows:
At 30 November
Interest cost
Actuarial gain/(loss) – changes in assumptions
Benefits paid
At end of year
25. Deferred taxation
2017
£’000
18,664
496
830
337
(5)
(901)
19,421
2017
£’000
(19,464)
(513)
549
901
(18,527)
The deferred tax liability included in the Statement of Financial Position is analysed as follows:
Accelerated
capital
allowances
£’000
Arising on fair
value adjustments
on acquisitions
£’000
Arising on
defined benefit
pension scheme
£’000
Arising on
derivative financial
instruments
£’000
2016
£’000
16,916
566
1,673
350
(7)
(834)
18,664
2016
£’000
(17,194)
(571)
(2,533)
834
(19,464)
Losses
£’000
113
325
-
Total
£’000
(136)
(482)
163
438
(455)
At 1 December 2015
Dealt with in the profit and
loss account
Dealt with in other
comprehensive income
(770)
(366)
-
At 30 November 2016
(1,136)
Dealt with in the profit and
loss account
Dealt with in other
comprehensive income
Dealt with in business
combinations
291
-
-
At 30 November 2017
(845)
114
(7)
-
107
(61)
-
-
46
55
(74)
163
144
(56)
(11)
-
77
352
(360)
-
(8)
(73)
(439)
(338)
-
-
-
122
(11)
122
(81)
121
(682)
At 30 November 2017 there were £nil (2016: £nil) temporary differences or unused tax losses for which deferred tax has not been provided.
67
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
26. Share capital
Allotted and called up and fully paid
2017
Number
2017
£’000
2016
Number
Ordinary shares of 25p each
48,880,918
12,220
43,047,584
2016
£’000
10,762
Issued Shared Capital
As at 1 December 2015
8 June 2016
As at 30 November 2016
2 August 2017
18 August 2017
Number
Nominal Value
39,175,003
3,872,581
43,047,584
3,333,332
2,500,002
48,880,918
£’000
9,794
968
10,762
833
625
12,220
Share issue costs of £138,000 and £84,000 respectively were incurred in the share issues of 2017 and 2016, and were charged to the share
premium account.
Ordinary shares participate fully in the rights to vote, receive dividends and take part in any distribution of capital. There are no restrictions
on ordinary shares nor are there any redeemable shares of any kind.
At 30 November 2017 854,338 ordinary shares were held in treasury (2016: 854,338).
68
Rotala Plc | Annual Report 2017
27. Share options and warrants
As at 30 November 2017 the following share options had been issued and were outstanding under the company’s employee share option
schemes:
Date of grant
Number of
options granted
Earliest exercise date
Date of expiry
Exercise price
5 September 2008
655,000
5 September 2011
4 September 2018
24 November 2014
2,585,000
24 November 2017
23 November 2024
17 October 2016
429,903
1 December 2019
1 June 2020
50.00p
54.00p
58.05p
The Rotala Plc SAYE Share Option Scheme (the “Scheme”) is an HM Revenue & Customs approved share option scheme, administered by
the Yorkshire Building Society (“YBS”), open to all employees. The issue of share options on 17 October 2016 is at present the only issue
in relation to this Scheme. The Scheme runs for a three year period. Employees will subscribe, through payroll deductions, a monthly sum
which will accumulate in their individual savings accounts at YBS. At the end of the three year period the employee will have the option to
purchase ordinary shares of 25 pence in the company (“Ordinary Shares”) at a price fixed at the start of each three year period. Under
the rules of the Scheme, the board is free to price the share option at a discount to the market price of the Ordinary Shares, at the time the
option is granted.
The company also operates an unapproved equity-settled share based remuneration scheme for group executive directors and senior
management. The only vesting condition is that the individual remains an employee of the group until the option is exercised, except for the
issue of 24 November 2014. Here the option issue is split into three equal tranches. For a tranche to be exercisable the share price of the
company must have reached 65p, 80p and 95p respectively.
2017
Weighted average
exercise price (p)
2016
Weighted average
Number
exercise price (p)
Number
Outstanding at beginning of the year
Forfeited during the year
Lapsed during the year
Exercised
Issued during the year
55.52
58.05
62.50
-
-
4,643,210
(73,307)
(900,000)
-
-
53.69
(57.92)
-
(37.60)
58.05
4,851,905
(253,930)
-
(457,975)
503,210
Outstanding at the end of the year
53.76
3,669,903
55.52
4,643,210
The exercise price of options outstanding at the end of the year ranged between 50.0p and 58.05p (2016: 50.0p and 62.5p) and their
weighted average remaining contractual life was 5.38 years (2016: 5.19 years).
Of the outstanding options at the reporting date 1,516,667 (2016: 1,555,000) were exercisable. The weighted average exercise price of
these options was 52.27p (2016: 57.23p).
The fair value of options granted in 2016 was determined under IFRS 2 using a binominal valuation model. Significant assumptions used in
the calculations included:
• a share price volatility of 15% based on expected and historical price movements;
• a weighted average share price of 58.05p;
• a risk-free interest rate of 3%; and
• a period to maturity of three and a half years from the date of grant of the options.
The weighted average fair value of options granted was 3.46p
69
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
28. Dividends paid and proposed
Declared and paid in the year
Ordinary first interim dividend for 2016 of 0.80 pence per share (2015: 0.725 pence)
Final dividend for 2016 of 1.50 pence per share
(2015: second interim dividend of 1.375 pence)
Proposed for approval (not recognised as a liability at 30 November)
Ordinary interim dividend for 2017 of 0.85 pence per share (2016: 0.80 pence)
Ordinary final dividend for 2017 of 1.65 pence per share (2016: 1.50 pence)
29. Commitments under operating leases
The group had total commitments under non-cancellable operating leases as set out below:
2017
£’000
2016
£’000
337
633
970
408
792
1,200
276
527
803
337
633
970
Operating lease commitments payable:
Within one year
In two to five years
In more than five years
2017
£’000
2016
£’000
Land and
buildings
Other
assets
Land and
buildings
Other
assets
552
1,185
3,303
1,758
2,226
-
446
1,406
3,372
1,800
2,554
-
5,040
3,984
5,224
4,354
Operating lease payments for land and buildings represent principally rentals payable by the group for certain of its depots. Short leases
are negotiated for an average term of five years, where rentals are either fixed or increase in line with RPI. There were no lease incentives.
Longer term leases range in length from 28 to 100 years. In these cases there are periodic rent reviews at the prevailing market rents.
Operating lease payments for other assets principally represent rentals payable by the group for a part of its vehicle fleet. Leases are
negotiated for an average term of five years and rentals are fixed for those years with an option to extend for a further two years at an
agreed continuation rate.
70
Rotala Plc | Annual Report 2017
30. Financial instruments - risk management
The group holds derivative financial instruments to finance its operations and manage its operating risks. The Board agrees and reviews
policies and financial instruments for risk management. Financial assets are classified as loans and receivables or designated at fair value
through profit and loss (“FVTPL”); financial liabilities are measured at amortised cost or FVTPL.
The principal financial assets and liabilities on which financial risks arise are as follows:
2017
£’000
2016
£’000
Carrying value
Carrying value
Financial assets - loans and receivables
Trade and other receivables
Cash and cash equivalents
Financial liability – FVTPL
Fuel commodity forward derivative contracts - asset
Fuel commodity forward derivative contracts – liability
Financial liabilities - at amortised cost
Trade and other payables
Loans and borrowings
7,663
627
8,290
450
-
5,657
16,278
21,935
6,726
2,159
8,885
327
285
4,478
15,996
20,474
The group’s derivative financial instruments relate to fuel commodity forward contracts which help to mitigate the group’s exposure
to fluctuations in diesel prices. There are a number of contracts in place at the reporting date. These give the group certainty over a
substantial proportion of its projected diesel expenditure up to November 2018.
Financial assets and liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value
hierarchy. This grouping is determined based on the lowest level of significant inputs used in fair value measurement, as follows:
•
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
•
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices)
•
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The allocation of the group’s financial assets and financial liabilities at fair value is classified as Level 2.
71
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
30. Financial instruments - risk management (continued)
The group’s diesel forward contracts are not traded in active markets. The fair value of the diesel forward contracts has been measured by
the contracting entities using inputs obtained from forward pricing curves corresponding to the maturity of the contracts.
The reconciliation of the carrying amounts of financial instruments classified within Level 2 is as follows:
Balance (asset) at 1 December 2016
Released to exceptional items within operating profit
Payments on matured instruments
Balance net (asset) at 30 November 2017
2017
£’000
42
162
246
450
Gains or losses related to these financial instruments are recognised within profit from operations in profit or loss and all amounts
recognised in the current period relate to financial assets or liabilities held at 30 November 2017.
Changing inputs to Level 2 valuations to reasonably possible alternative assumptions would not change significantly amounts recognised in
profit or loss, total assets, total liabilities or total equity.
Financial risk management
The principal financial risks to which the group is exposed are liquidity, credit, interest rate, commodity and capital risk. Each of these is
managed as set out below. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly
affecting the group’s competitiveness and flexibility.
Liquidity risk
The group has a policy of ensuring that sufficient funds are always available for its operating activities. The Board continually monitors
the group’s cash requirements, as disclosed in the Strategic Report.
In assessing and managing the liquidity risks of its derivative financial instruments the group considers both contractual inflows and
outflows. The contractual cash flows of the group’s derivative financial assets and liabilities are as follows:
2017
£’000
2016
£’000
‹ 6 months
6-12 months
› 12 months
‹ 6 months
6-12 months
› 12 months
Cash inflow/(outflow)
239
211
-
(126)
(159)
327
72
Rotala Plc | Annual Report 2017
30. Financial instruments - risk management (continued)
Interest rate risk
The group seeks to obtain a favourable interest rate on its cash balances through the use of bank treasury deposits.
The interest rate profile of the financial liabilities of the group, all of which are in Sterling, was as follows:
2017
£’000
2016
£’000
Financial liabilities on
Financial liabilities on
Financial liabilities on
Financial liabilities on
which a floating rate
which a fixed rate is
which a floating rate
which a fixed rate is
is paid
16,257
paid
11,515
is paid
16,087
paid
11,199
UK Sterling
In the year the group paid interest at a rate of between 2.85% and 3.50% (2016: between 2.85% and 3.25%) on the liabilities subject to
floating rates of interest set out above. The financial liabilities set out above subject to fixed rates of interest (fixed for the whole year)
were at rates between 3.3% and 4.45% (2016: between 3.3% and 4.45%) in the year. If floating rates of interest changed by 1%, the
group’s interest expense would not change by a material sum.
Credit risk
The group is exposed to credit risk on cash and cash equivalents, and trade and other receivables. Cash balances, all held in the UK,
are placed with the group’s principal bankers. The client base of the group lies mainly in government and semi-government bodies
and substantial blue chip organisations. As a result the group rarely needs to carry out credit checks, but does do so if it judges this
to be appropriate. Provisions for doubtful debts are established in respect of specific trade and other receivables where it is deemed
they are impaired.
Commodity risk
TThe group is exposed to risk in the fluctuating price of diesel. It mitigates this risk when it considers it appropriate to do so through
entering fixed price purchase contracts and fuel commodity forward derivative contracts.
Capital risk
The group considers its capital to comprise its ordinary share capital, share premium, other reserves and accumulated retained
earnings. The group manages its capital to ensure that entities in the group will be able to continue as going concerns, while
maximising the return to shareholders. The board closely monitors current and forecast cash balances to allow the group to maximise
returns to shareholders by way of dividends, whilst maintaining suitable amounts of liquid funds to allow continued investment in the
group. The group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The group
manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics
of the underlying assets. For example, in the past two years the board has undertaken refinancing of debt to optimise the position. In
order to maintain or adjust the capital structure, the group may also adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares, or sell assets to reduce debt.
Capital for the reporting period under review is as follows:
Share capital
Share premium reserve
Merger reserve
Shares in treasury
Retained earnings
At end of year
2017
£’000
12,220
11,779
2,567
(817)
6,602
32,351
2016
£’000
10,762
9,875
2,567
(817)
5,424
27,811
73
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
31. Related parties and transactions
•
The services of J H Gunn were provided by Wengen Limited, a company controlled by J H Gunn, and invoiced by that company to
Rotala, as set out in note 6. At the year end £nil (2016: £nil) of the amount charged was unpaid and included within creditors. During
the year J H Gunn received from Rotala a total of £123,383 (2016: £127,585) in dividends on ordinary shares.
•
Certain of the services of R A Dunn were provided by motorBus Limited, a company controlled by R A Dunn, and invoiced by that
company to subsidiary undertakings of Rotala, as set out in note 6. At the year end £23,417 (2016: £15,544) of the amount charged
was unpaid and included within creditors. During the year R A Dunn received from Rotala a total of £21,434 (2016: £19,570) in
dividends on ordinary shares.
•
During the year S L Dunn received from Rotala a total of £35,223 (2016: £30,825) in dividends on ordinary shares.
•
During the year K M Taylor received from Rotala a total of £13,180 (2016: £10,874) in dividends on ordinary shares.
•
During the year G M Spooner received from Rotala a total of £1,150 (2016: £nil) in dividends on ordinary shares.
•
J H Gunn is a director of The 181 Fund Limited (“The Fund”), a company incorporated in Jersey. The Fund held an interest in 1,802,443
ordinary shares of Rotala as at 30 November 2017 (2016: 1,802,443 ordinary shares). Under Jersey law, Mr Gunn, as a non-resident
of that state, is unable to exercise his vote at board meetings of The Fund. At 30 November 2017 Mr. Gunn and his beneficial interests
held 30% (2016: 30%) of the ordinary share capital of The Fund. During the year The Fund received from Rotala a total of £41,456
(2016: £37,851) in dividends on ordinary shares.
74
Rotala Plc | Annual Report 2017
32. Acquisitions
(a) Hansons (Wordsley) Limited
As set out in the Chairman’s Statement, in July 2017 the group acquired Hansons (Wordsley) Limited. The Chairman’s Statement describes
the details of and the reasons for the acquisition, and should be consulted for a detailed description of all the relevant factors. The
consideration for the acquisition (excluding acquisition costs) was £608,000 in cash. The book values of the assets acquired are set out
below.
Book value
£’000
Fair value
adjustment
£’000
Fair value
on acquisition
£’000
Fixed assets
Freehold property
Plant and equipment
Total fixed assets
Current assets
Trade and other receivables
Cash
Current liabilities
Trade and other receivables
Taxation
Non-current liabilities
Obligations under hire purchase contracts
Loans and borrowings
Deferred taxation
Net assets
Goodwill
Acquisition costs (note 10)
Total cash consideration paid
277
162
439
107
66
173
(843)
(8)
(851)
(53)
(75)
(17)
(145)
(42)
-
(42)
-
-
-
-
8
8
-
-
140
140
235
162
397
107
66
173
(843)
-
(843)
(53)
(75)
123
(5)
(278)
886
30
638
Because the acquired business was immediately folded into the existing operations of the group in the relevant locality, it is not possible to
distinguish revenues and profits for the acquired business in the period to 30 November 2017. Pre-acquisition book values were determined
based on applicable IFRS, immediately prior to the acquisition. The values of assets recognised on acquisition are their estimated fair
values. For the vehicles acquired this is based on the directors’ assessment of the age and condition of each of the vehicles and their
knowledge of disposal values for equivalent vehicles.
75
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
32. Acquisitions (continued)
The directors have made an assessment of whether there are any intangible assets acquired with the business. No licenses were acquired
with the business. The sales and purchase agreement includes a standard non-compete clause; however, the sellers had no intention of
re-entering the respective markets at the acquisition date and so there could be no value attributable to this clause. Where there were
contracts in place, there was no evidence that these contracts produced any immediately identifiable profits or positive cash flows in
the hands of the previous owners. On these bases no separate intangible assets have been identified. The goodwill generated by the
acquisition arose from the benefit of synergies with the existing business of the group in the respective location. As stated above the
business acquired includes a vehicle fleet and these vehicles were immediately subsumed into existing operations following acquisition.
The acquisition expenses incurred by the group amounted to £30,000 and have been expensed in the Consolidated Income Statement in
Administrative Expenses.
b) Bus business of Go Goodwins (Coaches) Limited and the Hotel Hoppa business
As set out in the Chairman’s Statement, in September and November 2017 the group acquired, respectively, the small bus business of Go
Goodwins (Coaches) Limited in Eccles, Manchester and the Hotel Hoppa bus business in and around Heathrow airport. The Chairman’s
Statement describes the details of and the reasons for the acquisitions, and should be consulted for a detailed description of all the
relevant factors. The aggregate consideration for these acquisitions was £2.8 million in cash. The book values of the assets acquired are set
out below:
Fixed assets
Freehold property
Vehicles
Customer contracts
Total fixed assets
Current liabilities
Other payables and accruals
Net assets
Goodwill
Acquisition costs (note 10)
Total cash consideration paid
Book value
£’000
Fair value
adjustment
£’000
Fair value
on acquisition
£’000
500
633
-
1,133
-
-
(185)
(53)
877
639
-
-
315
580
877
1,772
(14)
(14)
1,758
982
17
2,757
Because the acquired businesses were immediately folded into the existing operations of the group in the relevant localities, it is not
possible to distinguish revenues and profits for the acquired businesses in the period to 30 November 2017. Pre-acquisition book values
were determined based on applicable IFRS, immediately prior to the acquisition. The values of assets recognised on acquisition are their
estimated fair values. For the vehicles acquired this is based on the directors’ assessment of the age and condition of each of the vehicles
and their knowledge of disposal values for equivalent vehicles.
The directors engaged Crowe Clark Whitehill LLP (“CCW”) to make an assessment of the values of the intangible assets acquired with the
businesses. Principally this involved an assessment of the value of the intangible asset attributable to the contracts inherited with these
businesses. The values estimated by CCW are reflected in the above table.
76
Rotala Plc | Annual Report 2017
32. Acquisitions (continued)
The directors do not consider that the brand names have any separable values. No licenses were acquired with the businesses. The
sales and purchase agreements include standard non-compete clauses; however, the sellers had no intention of re-entering the respective
markets at the acquisition date and so there could be no value attributable to these clauses. The goodwill generated by the acquisitions
arose from the benefit of synergies with the existing businesses of the group in their respective locations. As stated above the businesses
acquired include vehicle fleets and these vehicles were immediately subsumed into existing operations following acquisition. The acquisition
expenses incurred by the group amounted to £17,000 and have been expensed in the Consolidated Income Statement in Administrative
Expenses.
33. Capital commitments
As at 30 November 2016 and 2017 the group had no capital commitments.
34. Post balance sheet events
In February 2018 the group completed a further acquisition, from CEN Group Limited trading as Central Buses (“Central”), of its entire
bus business, bus brand and 31-strong vehicle fleet for a total cash consideration of £1.95 million, funded from the group’s existing debt
facilities. The Central business is estimated to have annual revenues of approximately £2.8 million and its vehicle fleet a fair value of
approximately £1.5 million. No other assets or liabilities of any materiality were assumed on acquisition. On this basis the acquisition is
expected to generate about £0.45 million of positive goodwill on consolidation. No additional overheads are expected to be required as a
result of the acquisition.
Central Buses was a well-established operator of commercial and contracted bus services in the northern part of the West Midlands area.
This business, with its staff, was immediately integrated into the existing depot infrastructure which the group already possesses in the West
Midlands. The acquisition extends the group’s network of bus services in the northern part of Birmingham, particularly in the Perry Barr area.
35. Audit exemption for subsidiary undertakings
For the year ended 30 November 2017, the group has taken advantage of the exemption offered in sections 479A – 479C of the
Companies Act 2006 and, with the exception of Preston Bus Limited, its subsidiary undertakings have not been subject to an individual
annual audit. Rotala Plc has given a statutory guarantee to each of these subsidiary undertakings guaranteeing their liabilities, a copy of
which will be filed at Companies House.
The companies which have taken this exemption are as follows:
Name
Company number
Wessex Bus Limited
Shady Lane Property Limited
Diamond Bus Limited
Hallmark Connections Limited
Hallbridge Way Property Limited
Diamond Bus (North West) Limited
Diamond Bus Company Holding Limited
4327651
3506681
2531054
4390228
6504654
3037228
6504657
77
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Company Statement of
Financial Position
As at 30 November 2017
Fixed assets
Investments
Tangible assets
Current assets
Debtors
Cash and cash equivalents
Creditors: amounts falling due within one year
Net current (liabilities)/assets
Total assets less current liabilities
Creditors: amounts falling due after more than
one year
Deferred taxation
Provisions for liabilities
Net assets
Capital and reserves
Share capital
Share premium account
Shares in treasury
Retained earnings
Shareholders’ equity
Note
4
5
6
7
8
9
10
11
13
13
13
2017
£’000
32,126
226
32,352
16,106
1
16,107
2016
£’000
31,480
238
31,718
11,628
1,301
12,929
(16,183)
(11,931)
(76)
32,276
-
(49)
(1,203)
998
32,716
(4,900)
-
(1,301)
31,024
26,515
12,220
11,779
(817)
7,842
31,024
10,762
9,875
(817)
6,695
26,515
The parent company profit for the year after taxation was £2,097,000 (2016: £1,437,000).
The parent company financial statements were approved by the Board of Directors and authorised for issue on 11 April 2018.
Simon Dunn Kim Taylor
Chief Executive Group Finance Director
The accompanying notes form an integral part of these financial statements.
78
Rotala Plc | Annual Report 2017
Company Statement of
Changes In Equity
For the year ended 30 November 2017
Share Capital
£’000
Share Premium
Reserve
£’000
Shares in
Treasury
£’000
Retained
Earnings
£’000
At 1 December 2015
9,794
8,603
(622)
Profit for the year
Dividends paid
Shares issued
Share based payment
Purchase of own shares
-
-
968
-
-
-
-
1,272
-
-
At 30 November 2016
10,762
9,875
Profit for the year
Dividends paid
Share based payment
Shares issued
-
-
-
-
-
-
1,458
1,904
-
-
172
-
(367)
(817)
-
-
-
-
6,045
1,437
(803)
-
16
-
6,695
2,097
(970)
20
-
Total
£’000
23,820
1,437
(803)
2,412
16
(367)
26,515
2,097
(970)
20
3,362
At 30 November 2017
12,220
11,779
(817)
7,842
31,024
The accompanying notes form an integral part of these financial statements.
79
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Notes to the Company
Financial Statements
For the year ended 30 November 2017
1. Accounting policies
The following principal accounting policies have been applied in the preparation of the parent company financial statements.
The principal activity of the Company is that of a holding company which has remained unchanged from the previous year.
Basis of preparation
The financial statements have been prepared under the historical cost convention and are in accordance with Financial Reporting Standard
101 ‘Reduced Disclosure Framework’ and the Companies Act 2006.
Functional and presentation currency
The financial statements are presented in British Pounds Sterling.
Financial Reporting Standard 101 – reduced disclosure exemptions
The Company has taken advantage of the following disclosure exemptions under FRS 101:
•
•
•
The requirement of IFRS 7 Financial Instruments Disclosure;
The requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
The requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect of:
• Paragraph 79(a)(iv) of IAS 1;
• Paragraph 73(e) of IAS 16 Property, Plant and Equipment;
• Paragraph 118(e) of IAS 38 Intangible Assets;
• Paragraph 76 and 79(d) of IAS 40 Investment Property;
•
The requirements of paragraph 10(d), 10(f), 16, 38A, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of
Financial Statements;
The requirements of IAS 7 Statement of Cash Flows;
The requirements of paragraph 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
The requirements of paragraph 17 of IAS 24 Related Party Disclosures.
•
•
•
Grants
Grants relating to property, plant and equipment are netted off the assets to which they relate and the net investment in the asset is
depreciated as set out above. Other grants are held in trade and other payables until credited to the income statement as the related
expenditure is expensed.
Investments
Investments held as fixed assets are stated at cost less any provision for impairment. Where possible, advantage is taken of the merger
relief rules and shares issued for acquisitions are accounted for at nominal value.
Fixed assets
Items of property, plant and equipment are initially recognised at cost, which includes both the purchase price and any directly attributable
costs. Following initial recognition property, plant and equipment is carried at depreciated cost.
The useful lives and residual values of property, plant and equipment are reviewed at least annually and adjusted, where applicable.
When disposed of, property plant and equipment is derecognised. Where an asset continues to be used by the company but is expected
to provide reduced or minimal future economic benefits, it is considered to be impaired. Profits and losses on disposal are calculated by
comparing the disposal proceeds with the carrying value of the asset, and the resultant gains or losses are included in the income
statement. A gain or loss incurred at the point of derecognition is also included in the income statement at that point.
80
Rotala Plc | Annual Report 2017
1. Accounting policies (continued)
Repairs and maintenance are charged to profit or loss in the financial period in which they are incurred. Where probable future economic
benefits, in excess of the current standard of performance of the existing asset, are considered to be derived from its major renovation, the
cost of that major renovation is added to the carrying value of that asset. Major renovations are then depreciated over the remaining useful
life of the asset.
Depreciation is provided to write off the cost, less estimated residual values, of all property, plant and equipment, except freehold land,
over their expected useful lives. It is calculated at the following rates:
Plant and machinery - 33% per annum straight line
Financial assets
The company classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was
acquired. The company has not classified any of its financial assets as held to maturity or available for sale.
Loans and receivables: these assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate
other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for
impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the
counterparty or default or significant delay in payment) that the group will be unable to collect all of the amounts due under the terms of
the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future
expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in
a separate allowance account with the loss being recognised within administrative expenses in profit or loss. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Financial assets are de-recognised when the contractual rights to the cash flows from the asset expire or when the financial asset and all
substantial risks and rewards are transferred.
Financial assets and liabilities include derivative financial instruments held at fair value through profit and loss (“FVTPL”). These assets and
liabilities are, if they meet the relevant conditions, designated at FVTPL upon initial recognition. All of the company’s derivative financial
instruments currently fall into this category. Assets and liabilities in this category are measured at fair value with gains or losses recognised
in profit or loss. The fair values of these financial assets and liabilities are determined by reference to active market transactions or using a
valuation technique where no active market exists.
Financial liabilities
The company classifies its financial liabilities in a manner which depends on the purpose for which the liability was acquired:
• Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such
interest bearing liabilities are subsequently measured at amortised cost using the effective interest method, which ensures that any interest
expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of
financial position. Interest expense in this context includes initial transaction costs and premiums payable on redemption, as well as any
interest or coupon payable while the liability is outstanding;
• Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost,
using the effective interest method;
• The company has entered into diesel commodity forward contracts. The agreements do not meet the definitions of hedging transactions
under IAS 39 ‘Financial Instruments: Recognition and Measurement’, but are accounted for as a derivative and are recorded at fair value
through profit and loss.
A financial liability is de-recognised when it is extinguished, cancelled or it expires. The group has not classified any of its financial
liabilities, other than derivatives, at fair value through profit or loss.
81
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
1. Accounting policies (continued)
Taxation
The charge for current taxation is provided at rates of corporation tax that have been enacted or substantively enacted by the reporting
date. Current tax is based on taxable profits for the year and any adjustments to tax payable in respect of previous years.
Deferred tax is provided, using the balance sheet method, on all temporary differences which result in an obligation at the reporting date to
pay more tax, or a right to pay less tax, at a future date, based on tax rates and tax laws that have been enacted or substantively enacted
at the reporting date. Temporary differences arise between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. The exceptions, where deferred tax assets are not recognised nor deferred tax liabilities provided, are:
• The initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss; and
• Taxable temporary differences associated with investments in subsidiary undertakings where the timing of the reversal of the temporary
difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Fuel commodity forward contracts
The company has a number of fuel commodity forward contracts at the year end, the settlement of which lies in the future; therefore the
company has recognised both an asset and a liability in respect of these contracts, as appropriate.
Self- insurance
The company’s policy is to self-insure high frequency, but low value, claims such as those for traffic accidents and to protect itself against
high value claims through an insurance policy issued by a third party subject to an excess. Under this scheme, premiums to obtain the latter
insurance are paid to QBE Insurance Limited (“QBE”) in respect of each accounting period. These premiums are held by QBE in a trust
separate from the assets of the company in order to meet those claims as and when they are settled. The company has no control over the
assets of this trust. The administration of high frequency but low value claims is made by a claims handling specialist and the funding of the
settlement of these claims is made by the company to the claims handler as and when required.
Claims can be made for a period of up to five years after the accounting period to which they relate. Should a year of insurance be in
surplus, no rebate is recognised until the claim period has expired. Should a year of insurance be calculated at any time to be in deficit, an
appropriate provision is made. Any provision made is discounted to take account of the expected timing of future payments.
Share based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged in profit or loss over the
vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each
balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that
eventually vest. Market and non-market vesting conditions are factored into the fair value of the options granted. As long as all other vesting
conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged in profit or loss over the remaining vesting period. A decrease in fair value
is not recognised.
82
Rotala Plc | Annual Report 2017
Changes in accounting standards and interpretations
The adoption of the following accounting standards, amendments and interpretations in the current year have not had a material impact on
the company’s financial statements.
EU effective date: Periods
beginning on or after
Amendment to IAS 1 Presentation of Financial State-ments: Disclosure initiative
1 January 2016
Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets:
Clarification of acceptable methods of depreciation and amortisation
1 January 2016
Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture: Bearer plants
1 January 2016
Amendment to IAS 19 Employee Benefits: Defined benefit plans - Employee contributions
1 February 2015
Amendment to IAS 27 Separate Financial Statements: Equity method in separate financial
statements
Amendments to IFRS 10 Consolidated Financial State-ments, IFRS 12 Disclosure of Interests in
Other Entities and IAS 28 Investments in Associates and Joint Ventures: Investment entities -
Applying the consolidation exception
Amendment to IFRS 11 Joint Arrangements: Accounting for acquisitions of interests in joint
operations
Annual Improvements to IFRSs (2010 - 2012)
Annual Improvements to IFRSs (2012 - 2014)
1 January 2016
1 January 2016
1 January 2016
1 February 2015
1 January 2016
2.
Profit for the financial year
The company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own
profit and loss account in these financial statements. The group’s profit for the year includes a profit after taxation of £2,097,000 (2016:
profit £1,437,000) which is dealt with in these parent company financial statements.
3. Staff costs
Staff costs (including directors) comprise:
Wages and salaries
Employer’s national insurance contributions
Defined contribution pension costs
Share-based payment expense
The average number of employees, including directors, during the year was as follows:
Management and administrative
2017
£’000
1,106
109
24
1,239
11
1,250
2017
Number
26
2016
£’000
1,113
127
26
1,266
11
1,277
2016
Number
26
83
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
4.
Investments
Cost and net book value
At 1 December 2016
Additions
At cost
Net book value
At 30 November 2017
Net book value
At 30 November 2016
Subsidiary
undertakings
£’000
31,480
646
32,126
31,480
The principal undertakings (all held directly except where indicated), in which the company’s interest at the year end is 20% or more, are as
follows:
Country of
Proportion of voting rights
incorporation or
and ordinary share capital
Diamond Bus Limited*
Diamond Bus (North West) Limited
Hallbridge Way Property Limited
Hallmark Connections Limited
Preston Bus Limited
Shady Lane Property Limited
Wessex Bus Limited
Diamond Bus Company Holding Limited
Hansons (Wordsley) Limited
Flights Hallmark Limited
* Held indirectly
registration
England
England
England
England
England
England
England
England
England
England
held
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nature of business
Transport
Transport
Property holding
Transport
Transport
Property holding
Transport
Holding company
Dormant
Dormant
All subsidiary undertakings in the group are registered at the same address. This is:
Rotala Group Headquarters
Cross Quays Business Park
Hallbridge Way
Tividale
Oldbury
West Midlands
B69 3HW
84
Rotala Plc | Annual Report 2017
5.
Tangible assets
Plant and machinery
Cost:
At 1 December 2016
Additions
Disposals
At 30 November 2017
Depreciation:
At 1 December 2016
Charge for the year
Disposals
At 30 November 2017
Net book value:
At 30 November 2017
At 30 November 2016
6. Debtors
390
36
(7)
419
152
48
(7)
193
226
238
Prepayments and accrued income
Taxation
Deferred tax (note 9)
Financial instruments (2016: Due in more than one year)
Amounts due from subsidiary undertakings
All amounts shown under debtors fall due for payment within one year, except where indicated.
2017
£’000
400
23
-
450
15,233
16,106
2016
£’000
555
12
175
328
10,558
11,628
85
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
7. Creditors: amounts falling due within one year
Bank loans and overdrafts (note 8)
Trade creditors
Taxation and social security
Accruals and deferred income
Other creditors
Fuel commodity forward contracts liability
8. Creditors: amounts falling due after more than one year
Bank loan
Bank borrowings
2017
£’000
15,627
171
63
85
237
-
16,183
2017
£’000
-
-
2016
£’000
11,095
118
31
132
270
285
11,931
2016
£’000
4,900
4,900
The above analysis reflects the banking arrangements of the group as at 30 November 2017. These facilities were due to expire on 30 April
2018.
However, on 5 December 2017 the group engaged HSBC Bank plc as its principal bankers and all the group’s facilities were transferred to
that bank. This new Senior Facilities Agreement provides for a revolving facility of up to £15.5 million and a mortgage facility of £5.5 million,
with a corresponding overdraft facility of up to £3.5 million. The group entered into a cross-guarantee and floating charge agreement on
that same date covering these facilities. The facilities expire on 5 December 2021 but are renewable at that date.
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.
Analysis of maturity
In one year or less, or on demand
In more than one year but not more than two years
In more than two years but not more than five years
86
Bank loans
and overdrafts
2017
£’000
Bank loans
and overdrafts
2016
£’000
15,627
-
-
15,627
11,095
700
4,200
15,995
Rotala Plc | Annual Report 2017
8. Creditors: amounts falling due after more than one year (continued)
Had the new banking agreement with HSBC Bank plc been in place on 30 November 2017, the analysis of maturity set out above would
have been as follows:
Bank loans
and overdrafts
2017
£’000
Bank loans
and overdrafts
2016
£’000
In one year or less, or on demand
In more than one year but not more than two years
In more than two years but not more than five years
9. Deferred tax
The deferred tax (liability)/asset included in the company balance sheet is analysed as follows:
Accelerated capital allowances
Arising on derivative financial instruments
Losses
(Liability)/asset
10,349
275
5,003
15,627
2017
£’000
(7)
(81)
39
(49)
All movements in each category of deferred tax asset or liability in the above table were dealt with in the profit and loss account.
The movements in the deferred tax (liability)/asset in the year are as follows:
Balance brought forward at 1 December
Recognised in profit or loss
Balance carried forward at 30 November
2017
£’000
175
(224)
(49)
11,095
700
4,200
15,995
2016
£’000
3
(8)
180
175
2016
£’000
366
(191)
175
At 30 November 2017 there were £nil (2016: £nil) temporary differences or unused tax losses for which deferred tax has not been provided.
The main rate of corporation tax will fall further to 17% from 1 April 2020 (a change which has been substantively enacted).
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.
87
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
10. Provisions
Insurance claims provision
2017
£’000
1,203
1,203
2016
£’000
1,301
1,301
As set out in note 1 to the company financial statements, the accounting policy of the company is to self-insure high frequency, but low
value, claims such as those for traffic accidents and to protect itself against high value claims through an insurance policy issued by a
third party subject to an excess. At the end of the 2016 accounting period responsibility for the administration of new claims passed to a
third party claims handling specialist and QBE retained responsibility for settling all claims made up to 30 November 2016. At the same
time QBE returned £1.3 million in cash to the company out of the trust fund which it held to settle claims made against the group, but the
company assumed responsibility for funding those claims when they were settled.
In addition to the provision set out above, in order to meet claims as and when they are settled, QBE at 30 November 2017 retained a
further £300,000 in cash (2016: £600,000). These funds are held in a trust account separate from the assets of the company. The company
has no control over this trust account and accordingly does not recognise it as an asset.
As at 30 November 2016 and 2017 it is considered by the company that the provision held is sufficient to meet the settlement responsibility
which falls on the company at those dates. Although the form of the manner in which insurance claims are made against the company and
settled by the company has therefore changed, the substance has not changed and the accounting policy remains the same as in previous
accounting periods.
Given the length of time which can elapse in dealing with insurance claims, it is probable that the above provision will be utilised gradually
over the five year period in which claims can be made. Claims experience in the future will dictate the extent to which additions to the
provision may be required and the extent of its utilisation in any accounting period
11. Share capital
Ordinary shares of 25p each
48,880,918
2017
Number
Allotted and called up and fully paid
2017
£’000
12,220
2016
Number
43,047,584
Issued Share Capital
As at 1 December 2015
8 June 2016
As at 30 November 2016
2 August 2017
18 August 2017
88
Number
39,175,003
3,872,581
43,047,584
3,333,332
2,500,002
48,880,918
2016
£’000
10,762
Nominal Value
£’000
9,794
968
10,762
833
625
12,220
Rotala Plc | Annual Report 2017
11. Share capital (continued)
Share issue costs of £138,000 and £84,000 respectively were incurred in the share issues of 2017 and 2016, and were charged to the share
premium account.
Ordinary shares participate fully in the rights to vote, receive dividends and take part in any distribution of capital. There are no restrictions
on ordinary shares nor are there any redeemable shares of any kind.
At 30 November 2017 854,338 ordinary shares were held in treasury (2016: 854,338).
12. Share options and warrants
As at 30 November 2017 the following share options had been issued and were outstanding under the company’s employee share option
schemes:
Date of grant
5 September 2008
24 November 2014
17 October 2016
Number of
options granted
Earliest
exercise date
Date of expiry
Exercise price
655,000
5 September 2011
4 September 2018
2,585,000
24 November 2017
23 November 2024
429,903
1 December 2019
1 June 2020
50.00p
54.00p
58.05p
The Rotala Plc SAYE Share Option Scheme (the “Scheme”) is an HM Revenue & Customs approved share option scheme, administered by
the Yorkshire Building Society (“YBS”), open to all employees. The issue of share options on 17 October 2016 is at present the only issue
in relation to this Scheme. The Scheme runs for a three year period. Employees will subscribe, through payroll deductions, a monthly sum
which will accumulate in their individual savings accounts at YBS. At the end of the three year period the employee will have the option to
purchase ordinary shares of 25 pence in the company (“Ordinary Shares”) at a price fixed at the start of each three year period. Under
the rules of the Scheme, the board is free to price the share option at a discount to the market price of the Ordinary Shares, at the time the
option is granted.
The company also operates an unapproved equity-settled share based remuneration scheme for group executive directors and senior
management. The only vesting condition is that the individual remains an employee of the group until the option is exercised, except for the
issue of 24 November 2014. Here the option issue is split into three equal tranches. For a tranche to be exercisable the share price of the
company must have reached 65p, 80p and 95p respectively.
2017
Weighted average
exercise price (p)
2017
2016
Weighted average
2016
Number
exercise price (p)
Number
Outstanding at beginning of the year
Forfeited during the year
Lapsed during the year
Exercised
Issued during the year
55.52
58.05
62.50
-
-
4,643,210
(73,307)
(900,000)
-
-
53.69
(57.92)
-
(37.60)
58.05
4,851,905
(253,930)
-
(457,975)
503,210
Outstanding at the end of the year
53.76
3,669,903
55.52
4,643,210
89
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
12. Share options and warrants (continued)
The exercise price of options outstanding at the end of the year ranged between 50.0p and 58.05p (2016: 50.0p and 62.5p) and their
weighted average remaining contractual life was 5.38 years (2016: 5.19 years).
Of the outstanding options at the reporting date 1,516,667 (2016: 1,555,000) were exercisable. The weighted average exercise price of
these options was 52.27p (2016: 57.23p).
The fair value of options granted in 2016 was determined under IFRS 2 using a binominal valuation model. Significant assumptions used in
the calculations included:
•a share price volatility of 15% based on expected and historical price movements;
•a weighted average share price of 58.05p;
•a risk-free interest rate of 3%; and
•a period to maturity of three and a half years from the date of grant of the options.
The weighted average fair value of options granted was 3.46p.
13. Reserves
• Called up share capital represents the nominal value of shares which have been issued;
• The share premium account includes any premiums received on the issue of share capital. Any transaction costs associated with the
issuance of shares are deducted from the share premium reserve;
• Shares in Treasury result from the acquisition by the company of its own shares. Shares are issued from Treasury to meet the requirement
to satisfy the exercise of share options under the company’s SAYE and unapproved share option schemes;
• Retained earnings include all current and prior period retained profits and losses.
14. Pensions
The company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the group
in independently administered funds. The pension charge amounted to £24,000 (2016: £26,000). Contributions amounting to £989 (2016:
£4,357) were payable to the scheme at the balance sheet date
15. Capital commitments
As at 30 November 2016 and 2017 the company had no capital commitments.
16. Commitments under operating leases
The company had total commitments under non cancellable operating leases as set out below:
Operating lease commitments payable:
- Within one year
- In two to five years
90
Other Assets
2017
£’000
Other Assets
2016
£’000
3
-
3
14
4
18
Rotala Plc | Annual Report 2017
17. Contingent liabilities
The company has entered into a cross-guarantee and floating charge agreement with its subsidiaries. At 30 November 2017 the contingent
liability amounted to £598,372 (2016: £1,503).
The company has guaranteed the hire purchase obligations of its subsidiaries. At 30 November 2017 the contingent liability amounted to
£11,515,000 (2016: £11,290,000).
18. Related parties and transactions
•
T he services of J H Gunn were provided by Wengen Limited, a company controlled by J H Gunn, and invoiced by that company to
Rotala, as set out in note 6 of the group financial statements. At the year end £nil (2016: £nil) of the amount charged was unpaid
and included within creditors. During the year J H Gunn received from Rotala a total of £123,383 (2016: £127,585) in dividends on
ordinary shares.
•
Certain of the services of R A Dunn were provided by motorBus Limited, a company controlled by R A Dunn, and invoiced by that
company to a subsidiary undertaking of Rotala, as set out in note 6 of the group financial statements. At the year end £23,417 (2016:
£15,544) of the amount charged was unpaid and included within creditors. During the year R A Dunn received from Rotala a total of
£21,434 (2016: £19,570) in dividends on ordinary shares.
•
•
•
•
During the year S L Dunn received from Rotala a total of £35,223 (2016: £30,825) in dividends on ordinary shares.
During the year K M Taylor received from Rotala a total of £13,180 (2016: £10,874) in dividends on ordinary shares.
During the year G M Spooner received from Rotala a total of £1,150 (2016: £nil) in dividends on ordinary shares.
J H Gunn is a director of The 181 Fund Limited (“The Fund”), a company incorporated in Jersey. The Fund held an interest in
1,802,443 ordinary shares of Rotala as at 30 November 2017 (2016: 1,802,443 ordinary shares). Under Jersey law, Mr Gunn, as a
non-resident of that state, is unable to exercise his vote at board meetings of The Fund. At 30 November 2017 Mr. Gunn and his
beneficial interests held 30% (2016: 30%) of the ordinary share capital of The Fund. During the year The Fund received from Rotala a
total of £41,456 (2016: £37,851) in dividends on ordinary shares.
91
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
92
Rotala Plc | Annual Report 2017
Rotala at a Glance
Statutory Reports
Financial Statements
Shareholder Information
4
Shareholder
Information
Shareholder Information
93
Notice of Annual General Meeting
M
G
A
NOTICE IS HEREBY given that the Annual General Meeting (“AGM”) of Rotala
Plc (the “Company”) will be held at 12 pm on 29 May 2018 at the offices of
the Company at Cross Quays Business Park, Hallbridge Way, Tividale, Oldbury,
West Midlands, B69 3HW for the purpose of considering, and if thought fit,
passing the following Resolutions with or without modifications and of which
Resolutions 1 to 7 (inclusive) will be proposed as ordinary resolutions and
Resolutions 8 to 9 will be proposed as special resolutions
Ordinary Resolutions
1.
THAT, the accounts of the Company for the financial period ended 30 November 2017, together with the directors’ report and the auditor’s
report on those accounts, be received and considered.
2.
THAT, upon the recommendation of the Board of Directors, a dividend of 1.65p per ordinary share be declared as a final dividend in
respect of the financial year ended 30 November 2017.
3.
THAT, Mazars LLP, having been appointed by the Board to fill a casual vacancy, be and are hereby re-appointed as auditors of the
Company to hold office until the conclusion of the next general meeting of the Company before which statutory accounts are laid and that
the directors of the Company be and are hereby authorised to fix the auditors’ remuneration from time to time.
4.
THAT, Simon Dunn, who is retiring by rotation in accordance with the Company’s articles of association and, being eligible, offers himself for
re election as a director of the Company, be re elected as a director of the Company.
5.
THAT, Graham Peacock, who was appointed after the 2017 AGM and so must seek re-election as a director according to the Company’s
articles of association, be re elected as a director of the Company.
Special Business
6.
THAT, in accordance with section 366 of the Companies Act 2006 (“CA 2006”), the Company and its subsidiaries are hereby authorised to:-
6.1 make political donations to political organisations or independent election candidates, as defined in sections 363 and 364 of CA 2006,
not exceeding £25,000 in total; and
6.2 incur political expenditure, as defined in section 365 of CA 2006, not exceeding £25,000 in total, during the period commencing on the
date of this Resolution and ending on the earlier of the conclusion of the next annual general meeting of the Company and 31 May
2019.
7.
THAT, in substitution for all existing such authorities, the directors be and are hereby generally and unconditionally authorised pursuant
to section 551 of CA 2006 to exercise all powers of the Company to allot shares in the Company or to grant rights to subscribe for, or
to convert any security into shares in the Company up to an aggregate nominal amount of £4,073,410 (being approximately one-third
of the issued ordinary share capital of the Company as at 11 April 2018 being the last working day prior to the publication of the notice
convening the meeting) provided that such authority, unless renewed or revoked by the Company in general meeting, shall expire on the
earlier of the conclusion of the next annual general meeting of the Company and 31 May 2019 but the Company may, before such expiry,
make an offer or agreement which would or might require shares to be allotted or rights to be granted after such expiry and the directors
may allot shares or grant rights in pursuance of that offer or agreement as if the authority conferred by this Resolution had not expired.
94
Rotala Plc | Annual Report 2017
Special Resolutions
8.
THAT, in substitution for all existing such authorities and subject to the passing of Resolution 7, the directors be generally empowered
pursuant to section 570 of CA 2006 to allot equity securities (within the meaning of section 560 of CA 2006) for cash pursuant to the
authority conferred by Resolution 7 or by way of sale of treasury shares as if section 561 of CA 2006 did not apply to the allotment or
sale provided that this power:-
8.1
is limited to the allotment of equity securities:-
8.1.1
where such securities have been offered (whether by way of a rights issue, open offer or otherwise) to holders of ordinary
shares of 25 pence each in the capital of the Company (“Ordinary Shares”) in proportion (as nearly as may be) to
their existing holdings of Ordinary Shares but subject to the directors having a right to make such exclusions or other
arrangements in connection with the offer as they deem necessary or expedient to deal with equity securities representing
fractional entitlements and/or to deal with legal and/or practical problems under the laws of any territory, or the
requirements of any regulatory body or stock exchange in any territory; and
8.1.2
otherwise than pursuant to paragraph 8.1.1 up to an aggregate nominal value of £1,222,023 (representing approximately
10 per cent. of the issued ordinary share capital of the Company as at 11 April 2018);
8.2
shall expire at the earlier of the conclusion of the next annual general meeting of the Company and 31 May 2019, but such
authority shall extend to the making of an offer or agreement which would or might require equity securities to be allotted
after such expiry date and the directors may allot equity securities in pursuance of that offer or agreement as if the power
conferred by this Resolution had not expired;
9.
THAT the Company be and is hereby generally and unconditionally authorised for the purposes of section 701 of CA 2006 to make
market purchases (within the meaning of section 693(4) of CA 2006) of Ordinary Shares provided that:-
9.1
the maximum number of Ordinary Shares which may be purchased is 4,888,092 (representing ten per cent of the Company’s
issued ordinary share capital as at 11 April 2018);
9.2
9.3
the minimum price (exclusive of expenses) which may be paid for each Ordinary Share is 25 pence;
the maximum price (exclusive of expenses) which may be paid for each Ordinary Share is an amount equal to 105 per cent
of the average of the middle market quotations of an Ordinary Share taken from the London Stock Exchange Daily Official
List for the five business days immediately preceding the day on which the share is contracted to be purchased;
9.4
this authority shall expire on the earlier of the conclusion of the next annual general meeting of the Company after the
passing of this Resolution and 31 May 2019 (unless previously renewed, varied or revoked by the Company in general
meeting); and
9.5
the Company may, before such expiry, enter into one or more contracts to purchase Ordinary Shares under which such
purchases may be completed or executed wholly or partly after the expiry of this authority and may make a purchase of
Ordinary Shares in pursuance of any such contract or contracts.
By order of the Board.
Kim Taylor
Secretary
Date: 11 April 2018
95
Shareholder InformationRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Notes to Members
1.
A member entitled to attend and vote at the meeting is also entitled to appoint one or more proxies to attend, speak and vote instead of
him/her. A member may appoint more than one proxy in relation to the meeting, provided that each proxy is appointed to exercise the
rights attached to a different share or shares held by that member. The proxy need not be a member of the Company. Please refer to the
notes to the form of proxy for further information on appointing a proxy, including how to appoint multiple proxies (as the case may be).
2.
In the absence of instructions, the person appointed proxy may vote or abstain from voting as he/she thinks fit on the specified Resolutions
and, unless otherwise instructed, may also vote or abstain from voting on any other matter (including amendments to Resolutions) which
may properly come before the meeting.
3.
Shareholders may appoint a proxy or proxies:--
3.1 by completing and returning a form of proxy by post or by hand to the offices of the Company’s registrars, Link Asset Services, PXS, 34
Beckenham Road, Beckenham, Kent BR3 4TU; or
3.2 in the case of CREST members, through the CREST electronic proxy appointment service.
4.
To be effective, the appointment of a proxy, or the amendment to the instructions given for a previously appointed proxy, must be received
by the Company’s registrars, Link Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU by one of the methods in note 3
above not less than 48 hours before the time for holding the meeting. In addition, any power of attorney or other authority under which the
proxy is appointed (or a notarially certified copy of such power or authority) must be deposited at the offices of the Company’s registrars,
Link Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less than 48 hours before the time for holding the meeting.
Any such power of attorney or other authority cannot be submitted electronically.
5.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the
procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members
who have appointed a voting service provider, should refer to their CREST sponsor or voting service provider who will be able to take the
appropriate action on their behalf.
6.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“Euroclear UK & Ireland”) specifications
and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether
it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be
valid, be transmitted so as to be received by the issuer’s agent (ID RA 10) by the specified latest time(s) for receipt of proxy appointments.
For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST
Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other
means.
7.
CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK & Ireland Limited
does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore,
apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST
member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST
sponsor or voting service provider takes) such action as shall be necessary to ensure that a message is transmitted by means of the CREST
system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers
are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
96
Rotala Plc | Annual Report 2017
8.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
9.
Completion and return of the Form of Proxy will not preclude a shareholder from attending and voting in person at the meeting.
10.
In the case of joint holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders. For this purpose seniority is determined by the order in which the names of the holders
stand in the register of members in respect of the joint holding.
11.
Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as
a member provided that they do not do so in relation to the same shares.
12.
Copies of the directors’ service contracts and the terms and conditions of appointment of non-executive directors will be available for
inspection at the registered office of the Company during usual business hours from the date of this notice until the date of the meeting and
at the venue of the meeting for at least 30 minutes prior to and at the meeting.
13.
The Company, pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only those members entered on the
register of members of the Company at the close of business on 27 May 2018 shall be entitled to attend and vote at the meeting or, if the
meeting is adjourned, the close of business on such date being not more than two days prior to the date fixed for the adjourned meeting.
Changes to entries on the register of members after such time shall be disregarded in determining the right of any person to attend or vote
at the meeting.
97
Shareholder InformationRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Explanatory Notes to Notice of
Annual General Meeting
At the Annual General Meeting the following will be proposed as
explained below:
Resolution 6 – Authority to make donations to political organisations and to incur political expenditure
Part 14 of the Companies Act 2006 (“CA 2006”), amongst other things, prohibits the Company and its subsidiaries from making donations of more
than £5,000 to an EU political party or other EU political organisation or to an independent election candidate in the EU in any 12 month period
unless they have been authorised to make donations by the Company’s shareholders.
CA 2006 defines ‘political organisations’, ‘political donations’ and ‘political expenditure’ widely. It includes organisations which carry on activities
which are capable of being reasonably regarded as intended to affect public support for a political party or an independent election candidate
in any EU Member State or to influence voters in relation to any referendum in any EU Member State. As a result, it is possible that the definition
may include bodies, such as those concerned with policy review and law reform, which the Company and/or its subsidiaries may see benefit in
supporting.
Accordingly, and as proposed to Shareholders at the Company’s annual general meeting in 2017, the Company wishes to ensure that neither
it nor its subsidiaries inadvertently commits any breaches of CA 2006 through the undertaking of routine activities, which would not normally be
considered to result in making political donations or incurring political expenditure. Neither the Company nor any of its subsidiaries has any
intention of making any particular political donations under the terms of this Resolution.
Resolution 7 – Authority to allot relevant securities
Under section 549 of CA 2006, the directors of a company may not allot shares in the Company, or grant rights to subscribe for, or to convert any
security into, shares in the Company unless authorised to do so. This resolution, if passed, will continue the directors’ flexibility to act in the best
interests of shareholders, when opportunities arise, by issuing new shares, and renews the authority given at the last AGM.
This authority will allow the directors to allot new shares and to grant rights in respect of shares up to a nominal value of £4,073,410 which is
equivalent to approximately one third of the total issued ordinary share capital as at 11 April 2018. The directors have no current intention of
exercising this authority.
This authority will expire at the conclusion of the next AGM, or 31 May 2019, whichever is the earlier.
Resolution 8 – Authority to disapply pre-emption rights
If equity securities (within the meaning of section 560 of CA 2006) are to be allotted for cash, section 561 of CA 2006 requires that those equity
securities are offered first to existing shareholders in proportion to the number held by them at the time of the offer and otherwise in compliance
with the technical requirements of CA 2006. However, it may be in the interests of the Company for the directors to allot shares and/or sell
treasury shares other than to shareholders in proportion to their existing holdings or otherwise than strictly in compliance with those requirements.
A special resolution will be proposed to renew the authority of the directors to allot equity securities for cash without first being required to offer
such securities to existing shareholders. This authority is limited to the allotment of equity securities and/or sale of treasury shares for cash up
to a maximum nominal amount of £1,222,023 which is equivalent to approximately 10 per cent of the total issued ordinary share capital of the
Company as at 11 April 2018 and allotments of equity securities and/or sale of treasury shares in connection with a rights issue or other offer to
shareholders, subject to the directors ability to make arrangements to deal with certain legal or practical problems arising in connection with such
offer. This power will expire at the conclusion of the next AGM, or 31 May 2019, whichever is the earlier.
98
Rotala Plc | Annual Report 2017
Resolution 9 – Authority to purchase own shares
The directors believe that it is in the interests of the Company and its members to continue to have the flexibility granted to the directors at the
last AGM to purchase its own shares and this resolution seeks continued authority from members to do so. The directors intend only to exercise
this authority where, after considering market conditions prevailing at the time, they believe that the effect of such exercise would be to increase
the earnings per share and be in the best interests of shareholders generally.
The outcome of such purchases would either be to cancel that number of shares or the directors may elect to hold them in treasury pursuant to
the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 (the “Regulations”).
This resolution would be limited to 4,888,092 ordinary shares, representing approximately 10 per cent of the issued share capital as at 11 April
2018. The directors intend to seek renewal of this power at each Annual General Meeting.
99
Shareholder InformationRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Rotala Plc, Hallbridge Way, Tipton Road, Tividale, West Midlands B69 3HW
Telephone: 0121 322 2222 Website: www.rotalaplc.com