Annual Report
for year ended 30 November 2018
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
Rotala at a Glance
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 Financial Position
Consolidated Statement of Changes in Equity
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
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Rotala Plc | Annual Report 2018
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
Company Secretary
Kim Taylor
Nominated Adviser and Broker
Auditor
Cenkos Securities Plc
6.7.8 Tokenhouse Yard
London
EC2R 7AS
Mazars LLP
Statutory Auditor
45 Church Street
Birmingham B3 2RT
Registrars
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
HSBC Bank plc
120 Edmund Street
Birmingham B3 2QZ
Bankers
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Rotala Plc | Annual Report 2018
Rotala at a Glance
Statutory Reports
Financial Statements
Shareholder information
Rotala at a Glance
Rotala Plc is an AIM-traded company operating commercial and
subsidised bus routes for businesses, local authorities and the
general public.
Our Operating Companies:
• Diamond Bus Ltd
• Diamond Bus (North West) Ltd
• Hallmark Connections Ltd
• Preston Bus Ltd
n
o
i
t
a
r
e
p
O
f
o
s
a
e
r
A
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
M4
M5
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
Rotala at a Glance
05
06
Rotala Plc | Annual Report 2018 Financial Highlights
A glance at the highlights of the financial year
ended 30 November 2018.
Revenue
Profit before Taxation
Dividend
£62,400,000*
£4,230,000*
19%
18%
(before exceptional items)
2.70p
8%
2018
£62,400,000*
2018
£4,230,000*
2017
£52,600,000*
2017
£3,590,000*
2018
2017
2.70p
2.50p
2016
£55,000,000
2016 £2,680,000
2016
2.30p
2015
£50,889,000
2015 £2,460,000
2015
2.10p
Contracted Revenue
Commercial Revenue
Charter Revenue
£21.6m*
16%
£38.9m*
25%
£1.9m
31%
2018
£21.6m*
2018
£38.9m*
2018
£1.9m
2017
£18.6m*
2017
£31.2m*
2017
£2.8m
2016
£19.7m
2016
£32.9m
2016
£2.4m
2015
£15.8m
2015
£33.2m
2015
£1.9m
* Continuing business only
07
Rotala at a GlanceRotala at a GlanceStatutory ReportsFinancial StatementsShareholder information 08
Rotala Plc | Annual Report 2018
Rotala at a Glance
Statutory Reports
Financial Statements
Shareholder information
2
Review of
Operations
& Statutory
Reports
Statutory Reports
09
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 2018.
The company continues to make good progress and its results clearly show the benefit of the
acquisition strategy which the board has pursued over the last three years. In that time we
have made seven acquisitions.
Profit before Taxation
Results and review of trading
£4,230,000*
18%
(before exceptional items)
2018
£4,230,000*
2017
£3,590,000*
2016 £2,680,000
2015 £2,460,000
Revenue by Stream
35% Contracted
62% Commercial
3% Charter
Revenues for the group (excluding discontinued businesses) for the year ended 30 November
2018 were £62.4 million. This represents an increase of 19% on the revenues of £52.6 million
achieved in the previous year. Gross margin decreased very slightly to 20.0% (2017:20.5%). Pre-
tax profits before exceptional items rose by 18% to £4.23 million (2017: £3.59 million).
Contracted Services
Revenues in Contracted Services rose overall by 16% to £21.6 million (2017: £18.6
million). Contracted Services comprised 35% of group revenues in 2018, unchanged
as a proportion of group revenues compared to the previous year. In this division
revenues fall under two broad headings: local authority bus contracts and corporate
contracts.
Looking first at the local authority bus contracts sector, in 2017 we made
acquisitions in both the West Midlands and the North West. We followed that up
in the first quarter of 2018 with a further acquisition in the West Midlands of the
Central Buses business, as described below in more detail. One of the reasons for
making these acquisitions was to put the group in a position to obtain a greater
share of the contracted bus markets in these regions by extending our operational
reach. In my report last year I outlined the contracts we had subsequently gained
in both the West Midlands and the North West in late 2017 and early 2018. We
further benefited from an increase in the local bus contracts that we operate for
Surrey County Council from our Heathrow depot. These contract gains ensured that
revenues from local authority contracts grew strongly in 2018 and now form the
greater share of revenues in the Contracted Services division.
In contrast revenues in the corporate contracts sector of this division fell somewhat.
This fall resulted from operational management sticking to group policy in tendering
for contracts. Our policy is always to ensure that all the work we do contributes to
group profitability. We do not chase turnover for its own sake, regardless of the
financial implications of taking on such business. At contract renewal a number
of airline and other corporate customers in and around Heathrow proved to have
unrealistic expectations of the price at which proper services could be delivered.
Therefore we, with equanimity, decided rather to give up a number of contracts than
carry them out at a rate detrimental to the group’s financial health.
Overall then the Contracted Services division maintained its share of group
revenues with some very pleasing gains in the key local authority markets which
we had targeted in drawing up the acquisition strategy implemented in the last few
* Continuing business only
years.
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Rotala Plc | Annual Report 2018
Contracted Revenue
£21.6m*
16%
2018
£21.6m*
2017
£18.6m*
Commercial Services
Revenues in the Commercial Services division grew by 25% in 2018 to reach £38.9
2016
£19.7m
million for the year (2017: £31.2 million). Commercial Services comprised 62%
of group revenues in 2018, compared to 59% in 2017. The growth in revenue in
Commercial Services in 2018 was in part fueled, just as in the Contracted Services
division, by the acquisitions we have made in the last two years in the West
Midlands and in Manchester. In the West Midlands the acquisition of Hansons in
2017 and Central Buses in 2018 has seen commercial revenues from the region
rise to a new peak. Similarly in Manchester the acquisition of the Goodwins bus
business in 2017 allied to the establishment of a number of new commercial routes
has seen commercial revenues in that conurbation double in the last three years.
In order to facilitate expansion in the Manchester market we also in the year
purchased for £220,000 the freehold site immediately adjacent to the one which
we acquired with the Goodwins acquisition in 2017. We have cleared this new site
of its unwanted buildings and thereby doubled the size of the freehold depot we
possess in the Eccles area of Manchester. The depot is now comparable in size to
our Atherton depot and gives us ample room for expansion in accordance with our
plans for the area.
At the very end of the 2017 accounting year we acquired the Hotel Hoppa business
which serves routes between the Heathrow airport terminals and local hotels. In its
first full year under our ownership this business provided a significant proportion of
the increase in revenues in the Commercial Services division. Immediately after its
acquisition we completely re-equipped the business with our standard Ticketer ticket
machines. These possess a contactless payment feature which was quickly taken up
by many Hotel Hoppa users. We also installed automated ticket kiosks at the hotels
this business serves, which have proved equally popular with passengers.
2015
£15.8m
Commercial Revenue
£38.9m*
25%
2018
£38.9m*
2017
£31.2m*
2016
£32.9m
2015
£33.2m
We have made considerable investment in the Commercial Services division over
the last five years. It is pleasing to be able to report that revenues have as a result
Charter Revenue
grown by about 30% in that time period.
Charter Services
Revenues in Charter Services fell by 31% compared to the previous year to £1.9
million (2017: £2.8 million). Charter Services comprised 3.1% of group revenues in
2018, compared to 5.3% in 2017. This decrease was almost entirely due to the fact
that we were unable this year to obtain the same level of rail replacement work
which we had secured in 2017. Revenues from private hire elsewhere, principally
serviced from our Heathrow depot, held up well when compared with the revenues
from this source achieved in the previous year.
£1.9m
31%
2018
£1.9m
2017
£2.8m
2016
£2.4m
2015
£1.9m
* Continuing business only
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Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Chairman’s Statement and
Review of Operations
(continued)
Strategy and the Bus Services Act 2017
The Bus Services Act 2017 continues to have a major impact on developments in the bus industry. The Act enables the re-franchising of bus
networks in any area with an elected mayor. This affects two regions in which we have a major presence, but the approach of the respective
transport authorities in each of these regions is different.
In Greater Manchester, Transport for Greater Manchester (“TfGM”), under the direction of the Mayor, has stated a desire to achieve complete
control over the region’s bus networks by the re-franchising process set out in the Bus Services Act, if this can be achieved. TfGM has
commissioned the feasibility study which the Act empowers it to undertake to look at the refranchising proposal. At the present time the outcome
of this study is unknown. However we do not see refranchising in this region as a threat. Currently the Manchester market is completely dominated
by two major players. Any refranchising plan will seek to spread market share more equally among market participants, as in the London market.
Thus, in a refranchised market, a group like Rotala might potentially achieve a market share which it could not possibly aspire to under current
market conditions.
In the West Midlands however a different approach is being followed by Transport for the West Midlands (“TfWM””). TfWM has not utilised
powers from the Bus Services Act 2017 for Enhanced Partnerships or franchising schemes but has continued with the Bus Alliance which was
already underway using powers from previous legislation. These powers enable TfWM to promote partnerships between bus operators on routes
on which they already compete providing they can demonstrate a customer benefit. So far TfWM has created two of these partnerships on routes
on which our Diamond Bus subsidiary competes directly against the bus subsidiary of National Express plc. This is beneficial for passengers who
can now buy a multi-operator ticket which is valid on any bus on the routes in question without price supplements. The buses from both operators
are branded in a common livery and run at an agreed headway which ensures that a bus will pass any stop every few minutes. From our
perspective we are experiencing, as we expected from our modelling, lower operating costs but higher bus loadings with no reduction in overall
revenues. These Bus Alliances therefore have produced benefits for both passengers and bus operators in a more planned and co-ordinated
approach to running on a major route. Negotiations with TfWM continue to expand Bus Alliances to further routes in 2019, for which there are a
number of existing candidates
Acquisitions and Disposals
At the end of February 2018 the Group acquired from CEN Group Limited, trading as Central Buses (“Central”), its entire bus business, bus brand
and 31–strong vehicle fleet for a cash consideration of £1,950,000. The Central business had annual revenues of approximately £2.8 million and
its vehicle fleet had a fair value at acquisition of approximately £1.5 million. No other assets or liabilities of any materiality were assumed on
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 Rotala already possesses in the West Midlands and
so no additional overhead was required as part of the acquisition. The acquisition extends the Group’s network of bus services in the northern
part of Birmingham, particularly in the Perry Barr area.
In order to integrate the acquisition with the rest of the Group we re-equipped the business with the standard Ticketer ticket machines which
we use in the West Midlands region. In the first half of 2018 we also moved the whole Manchester business onto these machines and in the
second half completed the roll out of this ticketing system over the whole group by converting the Preston business to these ticket machines. This
investment in new ticket machines forms the majority of the addition to plant and machinery of £895,000 in the year.
I have for several years been reporting to you the steadily reducing size of our operations in the South West of England. During the year we
reviewed our position. We concluded that market changes in the region as a result of the Bus Services Act were likely in the medium, rather than
the short, term and that we would achieve better returns on our available capital by investing in the West Midlands and the North West. Therefore
we took the decision to deregister our remaining commercial services and novate the bus contracts we held to a local subsidiary of Stagecoach
plc. A small part of the business was transferred to our Heathrow depot. Almost all the staff were re-deployed internally or externally by these
steps and less than a handful had to be made redundant. A small number of vehicles were sold to Stagecoach plc at their net book values
and the remainder were redeployed to other depots in the group. Finally at the end of the accounting year we were able to dispose of the now
unused Avonmouth depot to a property investor at a small profit.
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Rotala Plc | Annual Report 2018 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 0.92 pence per share in December 2018. The board will recommend to the forthcoming Annual General
Meeting a final dividend in respect of 2018 of 1.78 pence per share making a total of 2.70 pence for the year (2017: 2.50 pence).
Fleet management
We have been very active this year in reshaping the bus fleet to match our changing requirements. We acquired 10 new buses for local bus
contracts servicing northern Surrey early in the year and 16 smaller buses (based on a Mercedes van chassis) for use in Preston and the West
Midlands. These vehicles have proved popular with passengers and drivers, and have shown themselves to be most suitable to the narrow
streets often found in older built up areas. In addition we acquired some 40 attractively-priced second hand vehicles, integrated the 31 vehicles
inherited with the Central Buses acquisition, and the 40 vehicles redeployed from the former South West operation. This resulted in the disposal
of a matching number of older vehicles in the year. Since the year end we have acquired a 20 strong batch of new buses for our West Midlands
operation. The average age of the fleet is therefore now about 9.42 years, slightly better than the comparable figure of 9.50 years which we
saw at the beginning of the year. These figures are both closely comparable to bus fleets outside Greater London, where different contractual
conditions apply.
Both TfGM and TfWM are under pressure to meet air quality targets in the near future in their respective city centres and we therefore expect
to continue to upgrade the buses used for these locations, as we did in the West Midlands shortly after the year end. However government or
local authority grant packages are expected to be available to facilitate the attainment of these targets and so we do not anticipate that these
changes will have a material impact on our business. Elsewhere in our operations we do not see the need for a significant number of new
vehicles in the remainder of 2019 unless customer requirements change. New vehicles in these circumstances would be matched by significant
additional revenues and so make commercial sense. We will 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.
Fuel hedging
The annual fuel requirement of the Group is approximately 11.5 million litres. Taking advantage of a weakness in crude oil prices, in late
November 2018, the Board took out a number of fuel hedge contracts, using diesel derivatives, in order to cover approximately 50% of its fuel
requirement for 2019. The coverage of these hedging contracts was later further extended. Consequently all of the group’s fuel requirement for
2019 is now covered by hedging contracts, at an average price of 100p per litre, which is the price that the group has used in preparing its
budget for 2019.
The Board will continue to monitor market conditions closely and take out such further fuel hedges as it deems are appropriate to meet its
objective of reducing volatility in its costs and creating business certainty.
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Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Chairman’s Statement and
Review of Operations
(continued)
Banking
At the beginning of the year, 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.
Financial review
Income statement
The Consolidated Income Statement is set out on page 35. This section of the review addresses the results for continuing operations before the
mark to market provision for fuel derivatives and other exceptional items. Revenues for the year rose by 19% compared to those of 2017. This
increase was principally driven by the acquisitions made in the year. Cost of Sales correspondingly rose by 19%. Gross Profits increased by 16%,
whilst the gross profit margin fell slightly to 20.0% (2017: 20.46%) as the new acquisitions were integrated into the rest of the group. Administrative
expenses increased by 13.5% as a result of the general expansion in the size of the group and information technology costs, particularly the
Ticketer ticket machine system now deployed across the whole group. Profit from Operations grew to £5.76 million (2017: £4.86 million), an
increase of 19% on the previous year. As a consequence adjusted EBITDA rose by 14% to £8.8 million (2017: £7.75 million). Finance expense
however rose by 21%, reflecting the increased bank and HP borrowings used to finance the acquisitions made over the last two years. Profit
before taxation therefore rose by 18% when compared to the previous year to £4.23 million (2017: £3.59 million).
The exceptional items represented by the mark to market provision on fuel derivatives and other exceptional costs are analysed in detail in note
9 to these financial statements. Profit from Operations after exceptional items was £5.18 million, compared to £4.06 million in 2017, a rise of 28%.
Furthermore Profit before Taxation, and after all exceptional items, was in 2018 £3.65 million (2017: £2.80 million), representing an increase of
30%. The losses from the discontinued operations in the South West are analysed separately in note 11.
All earnings per share calculations were affected by the underlying increase in the weighted average number of shares in issue. These rose from
44 million in 2017 to 48 million in 2018, a rise of 9%. Nevertheless basic earnings per share in 2018, after taking into account the mark to market
provision and other exceptional items, rose, for continuing operations, by 9% to 5.92p per share (2017: 5.42p). Basic earnings per share for the
discontinued operations were a loss of 1.11p per share (2017: a loss of 0.69p per share). However, the impact of the mark to market provisions,
the other exceptional items and the discontinued operation 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, the other exceptional items and the discontinued operation) were 7.22p in 2018, compared to 6.65p in 2017, an increase of 9%
year on year.
Balance sheet
The gross assets of the group grew by 10% in the year and stood at £76.0 million at 30 November 2018 (2017: £68.9 million). The book value
of property, plant and equipment increased by some £2.5 million year on year. This reflected both the assets which arrived with the acquisition
made in the year, the considerable changes to the vehicle fleet described in the Chairman’s Statement and the disposal of the depot at
Avonmouth right at the end of the year. Following the lifting of the asset ceiling restriction, as described in note 24, we have been able to
recognise the full defined benefit pension scheme asset in these accounts. Goodwill and other intangible assets increased only slightly as a result
of the one acquisition made in the year and the amortisation of £450,000 of contract-related intangibles.
14
Rotala Plc | Annual Report 2018
Stocks of parts, tyres and fuel were increased at the year’s end. This was partly the result of the increased size of the group but also because we
stocked up on fuel to take advantage of the prevailing price. The growth in Trade and Other Receivables also reflects the increased size of the
group, particularly in contracted business, but also the lags in recovery of such items as Bus Services Operator’s Grant which are slow to adjust to
increased levels of activity. Trade and Other Payables were stable.
The gross loans and borrowings of the group overall rose by about 10% to £17.9 million (2017: £16.3 million). At the 2017 year end HSBC Bank
plc was about to become the group’s principal banker. This change duly happened early in December 2017. However this change dictated that
all the borrowings of the group were classified as current at the end of 2017, but the 2018 balance sheet reflects the appropriate split between
current and longer-term mortgage elements.
In line with the fleet changes already mentioned obligations under hire purchase contracts rose to £14.0 million at the year end compared to
£11.5 million the year before. The gross liabilities of the group were therefore 12% higher than the previous year at £41.1 million (2017: £36.6
million). There were no new share issues this year, but, responding to the positive factors described above, the net assets of the group rose to
£34.9 million at the end of the year, compared to £32.4 million at the end of 2017, a rise of 8% year on year.
Cash flow statement
Cash flows from operating activities (before changes in working capital and provisions) rose strongly to reach £7.98 million (2017: £6.28 million),
an increase of 27%. However the Hotel Hoppa acquisition right at the end of 2017 and the Central Buses acquisition of 2018 were both deals for
trade and assets only. Therefore the group had to supply the working capital necessary to sustain these businesses from its own resources. This
was much the same picture as had prevailed in 2017, for very similar reasons. The accrued mark to market profit on the fuel derivative at the end
of 2017 proved to be a considerable underestimate of cash inflows from this source as fuel prices rose further in the year. Interest paid on HP
agreements increased somewhat when compared to the previous year. As a result of the above factors net cash flows from operating activities
were 23% up on 2017 at £4.13 million (2017: £3.34 million).
Cash used in investing activities in the year was much lower than the previous year, largely because of the sale of the Avonmouth depot.
Purchases of property, plant and equipment rose year on year. The monies expended in 2018 included an additional piece of freehold property
so as to be able to expand our Eccles depot. In addition only one business was acquired in 2018, compared to three in 2017. Sales of surplus
vehicles however raised a very similar sum to that of the previous year. The sale of the Avonmouth depot ensured that gross spend on property,
plant and equipment was this year considerably outweighed by the funds raised by selling property, plant and equipment. Thus cash used in
investing activities was £1.5 million net of related proceeds (2017: £4.1 million net).
Financing activities were affected by a number of events. No new shares were issued this year, unlike in 2017. Dividends paid reflect both an
increase in the dividend per share and the number of shares in issue. As related above, in the first few days of the financial year, the principal
banking relationship of the group moved to HSBC Bank plc. Accordingly all bank loans existing at that point were repaid and drawings on the
new facilities replaced them. The bank interest paid in the year reflects the enlarged facilities granted to the group by its new bankers.
15
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Chairman’s Statement and
Review of Operations
(continued)
Advantage was again taken this year of the unencumbered value represented by the vehicle fleet. By refinancing these vehicles with new hire
purchase arrangements £1.7 million (2017: £0.72 million) of capital was released to invest in the business. The capital element of payments on
hire purchase agreements rose considerably to £3.75 million (2017: £3.09 million). This change was caused by the extensive changes made to
the vehicle fleet in the year, reflected in both the increased HP financing obligation and the HP refinancing activity described above. The cash
absorbed by financing activities therefore rose somewhat to £1.15 million net (2017: £0.57 million net).
Overall therefore cash and cash equivalents increased in the year by £1.47 million (2017: declined by £1.36 million). The closing overdraft,
net of cash and cash equivalents, of £0.23 million was much improved on the £1.7 million in closing overdraft of 2017, and was in line with
management’s expectations.
Outlook
The group performed well in 2018 and trading for the current year has begun in line with expectations.
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 continue to be actively engaged in hunting out potential acquisitions and, with the backing of our new
bankers, possess considerable firepower with which we can attain our objectives. In our assessment there will continue to be much divestment
and acquisition activity in the bus market in the next few years. Government policy changes since 2010 and now the Bus Services Act are the
primary causes of the demise of the stability which had subsisted in the bus industry for the generation that followed its de-nationalisation in
the 1980’s. Such change brings opportunity to youthful and dynamic businesses like Rotala and we think we are very well positioned to take full
advantage of any eventualities.
We are confident therefore 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: 1 April 2019
16
Rotala Plc | Annual Report 2018 17
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Strategic Report
For the year ended 30 November 2018
Rotala Plc is an AIM-traded company operating commercial and
subsidised bus routes for businesses, local authorities, and the general
public. Rotala was formed in 2005 and has grown largely through the
acquisition of smaller local bus operations.
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. The board believes that government policy since the election of the Coalition Government in
2010 has profoundly upset the old order in the bus industry. It has made life much more difficult for the small bus operator at the same time as
undermining the viability of many operating units within the businesses of the large operators.
Rotala’s strategy is therefore to:
• Take advantage of the opportunities being created by the Bus Services Act 2017 in the West Midlands and Greater
Manchester areas;
• Continue to consolidate smaller businesses via bolt on acquisitions in existing areas of operation;
• Look to consolidate unwanted business units from the larger bus operators.
Within these objectives Rotala Plc pursues the following key strategic goals:
• To achieve sustainable growth in shareholder value;
• To meet our stated progressive dividend policy;
• To improve continually the operational capability of the group; and
• To deliver a consistent quality of service to customers.
These goals are measured by:
• A focus on earnings per share and the resultant share price;
• A focus on strong organic growth and higher margin business;
• The level of new investment in infrastructure, technology and training with the objective of a sustained increase in
operational efficiency; and
• Continually monitoring the timeliness and completeness of service delivery and levels of customer complaint.
Clearly all business activity contains risks. The objective of the board is to achieve the goals set out above whilst taking on acceptable, but not
excessive levels of risk, so as to ensure that the company is viable in the long term. The key risks are outlined further below.
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Rotala Plc | Annual Report 2018
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.
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.
New government legislation (such
as the Bus Services Act 2017) or
industry regulation.
Significant unplanned or
unforeseen costs may be imposed
on the business.
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.
Availability of management
resources of the appropriate
quality.
Lack of appropriate management
skills damages the business and its
prospects.
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.
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.
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.
19
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Strategic Report
(continued)
Rotala’s Core Values
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.
Rotala’s Mission
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 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.
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: these can have specific transport needs. Private bus networks are designed on a bespoke basis around
these needs;
2. 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 and Surrey County Council.
20
Rotala Plc | Annual Report 2018
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 private hire service to a variety of customers. Typically this covers
business or service disruption, such as rail replacement or plane diversion.
Key performance indicators (KPIs)
The key performance indicators of the group from continuing operations (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
2018
20.0%
2017
20.5%
£5,761,000
£4,855,000
Profit before taxation and mark to market provisions and other exceptional items
£4,230,000
£3,591,000
The key performance indicators of the group from continuing operations (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:
2018
20.0%
£5,181,000
£3,650,000
2017
20.5%
£4,059,000
£2,795,000
1. Gross profit margin: 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;
21
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
Strategic Report
(continued)
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.
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 10 to 16. The group’s results for the year are set out on page 35. The results of the year and the
financial position as at 30 November 2018 are considered by the directors to be satisfactory.
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 2020. 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.
Corporate governance
As the company’s shares are traded on AIM, the company is required to comply with a Corporate Governance code. It has chosen as its
benchmark the Corporate Governance Code developed by the Quoted Companies Alliance (“QCA”). On the company’s website at
www.rotalaplc.com/our-investors/corporate-governance-code is to be found a full analysis of the QCA code in as far as it applies to the company.
The board is responsible for the management and successful development of the group by:
• setting its strategic direction;
• monitoring and guiding operational performance;
• establishing polices 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 considers that it
possesses collectively, through its members, a considerable range of experience in both transport and non-transport sectors. The board believes
that this range of experience equips it well to supervise the running of the group and to give it effective direction. Members of the board commit
through their contracts to devote as much time as is necessary to carry out their designated roles.
The Chairman does not believe that in a group such as this the board should seek to delegate any of its responsibilities to committees. The
Chairman therefore requires that all directors participate fully in debates about remuneration and nomination to the board, and that the board as
a whole meets with the Statutory Auditor to agree the audit strategy and to receive his Audit Report annually. On this matter the company does
not comply with Principle 5 of the QCA Code for the reasons stated above.
Furthermore the board does not currently review its effectiveness of performance on a regular or formal basis. Nor does it formally review the
performance of individual directors. The Chairman believes that the company still retains the characteristics of its starting point: it began as a
family company and in the main still is one. Given these attributes the Chairman takes the view that the formal review of the performance of each
director is not appropriate. The board supports the Chairman in this approach. The board as a whole also believes that, at the current time, to
review in any formal sense the effectiveness or the performance of the board would not serve any purpose. This does not mean that the board
tolerates under-performance or lacks self-criticism. The Chairman has constructed a board in which he expects to see very robust, full and frank
views delivered on the performance of the company and all other items on the agenda. This expectation is met at all board meetings. The board
believes that it operates effectively at the current time in serving the strategic objectives of the company.
22
Rotala Plc | Annual Report 2018
Succession planning in such an environment is difficult, as it always is in a family company. Succession to key executive roles is therefore a risk,
which the board acknowledges, while noting that it believes that no one is indispensable. As the company grows in size, the board expects that it
too will grow commensurately. Over time therefore the expectation is that more formality over performance of individuals and board will naturally
develop, as the company ceases to be reliant on its family base.
Because there is no formal performance review of individual directors nor a formal review process of overall board effectiveness in accordance
with Principle 7 of the QCA Code, the company departs from the Code in this respect also.
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.
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: 1 April 2019
23
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Directors’ Report
For the year ended 30 November 2018
The directors present their statutory report for the group for the year
ended 30 November 2018.
Directors
The following Directors have held office during the year:
J H Gunn
R A Dunn
S L Dunn
G F Peacock
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 required to be addressed
in the Directors’ Report by Schedule 7 of the ‘Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008’, in
accordance with section 414C (11) of the Companies Act. In these accounts reference should be made to the Chairman’s Statement and Review
of Operations set out on pages 10 to 16 for a full description of these matters.
Dividends and Share Price
An interim dividend in respect of 2018 of 0.92p per share was paid on 7 December 2018. The directors will propose a final dividend for the year
to the Annual General Meeting of 1.78p per share. In respect of the year ended 30 November 2017, an interim dividend of 0.85p per share was
paid on 8 December 2017. A final dividend of 1.65p per share was paid on 29 June 2018. The total cash outflow for dividends paid in the year
was therefore £1,201,000.
The company’s share price at 30 November 2018 was 47.30p (2017: 55.50p). The high and low prices in the year were 59.95p and 47.30p
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.
24
Rotala Plc | Annual Report 2018 Directors’ interests
The beneficial interests of the directors and their families in the company’s shares and share options were as follows:
J H Gunn
R A Dunn
S L Dunn
G F Peacock
G M Spooner
K M Taylor
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
Beneficial
2018
Ordinary shares
of 25p each
2018
Options over
ordinary shares
of 25p each
2017
Ordinary shares
of 25p each
2017
Options over
ordinary shares
of 25p each
5,364,487
1,112,425
1,593,047
2,916,666
250,000
573,056
-
646,007
918,604
-
-
395,000
5,364,487
931,925
1,536,117
2,741,666
50,000
573,056
-
1,046,007
1,003,604
-
-
480,000
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 2017
Price
Lapsed
30 November 2018
Date Exercisable
Date of Expiry
R A Dunn
S L Dunn
K M Taylor
400,000
31,007
615,000
1,046,007
85,000
18,604
900,000
1,003,604
85,000
395,000
480,000
50.0p
(400,000)
58.05p
54.0p
50.0p
58.05p
54.0p
50.0p
54.0p
-
-
(400,000)
(85,000)
-
-
(85,000)
(85,000)
-
(85,000)
-
31,007
615,000
646,007
-
18,604
900,000
918,604
-
395,000
395,000
-
01/12/2019
24/11/2017
-
01/12/2019
24/11/2017
-
01/06/2020
23/11/2024
-
01/06/2020
23/11/2024
-
-
24/11/2017
23/11/2024
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.
Effect of the Withdrawal of the United Kingdom from the European Union
The directors do not anticipate that the withdrawal of the United Kingdom from the European Union will have any material impact on the business
of the company or the group.
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Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Directors’ Report
For the year ended 30 November 2018
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.
2018
2018
Number
% of called up
share capital
2018
£
Cost or
proceeds
2017
2017
Number
% of called up
share capital
2017
£
Cost or
proceeds
854,338
1.75
817,036
854,338
1.98
817,036
-
-
-
-
-
-
-
-
-
-
-
-
854,338
1.75
817,036
854,338
1.75
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 (2017: 854,338), representing 1.75% of the called up share
capital of the company (2017: 1.98%)
Substantial shareholdings
As at 1 April 2019 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
6,716,309
5,364,487
2,916,666
2,916,666
1,702,443
1,603,687
%
15.84
13.98
11.17
6.07
6.07
3.54
3.34
Details of financial instruments, including information about exposure to financial risks and the financial risk management objectives and policies,
are given in note 30.
26
Rotala Plc | Annual Report 2018
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
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 2018, 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: 1 April 2019
Company No: 05338907
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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 ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 30 November
2018 which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of
Changes in Equity, Consolidated Statement of Financial Position, Consolidated Statement of Cash Flows, Company Statement of Financial Position
and 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
2018 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 FRC’s 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.
The impact of uncertainties due to United Kingdom exiting the European Union on our audit
The Directors’ view on the impact of Brexit is disclosed on page 25.
The terms on which the United Kingdom may withdraw from the European Union are not clear and it is therefore not currently possible to evaluate
all the potential implications to the group’s and the parent company’s trade, customers, suppliers and the wider economy.
We considered the impact of Brexit on the group and the parent company as part of our audit procedures, applying a standard firm wide
approach in response to the uncertainty associated with the group’s and company’s future prospects and performance.
However, no audit should be expected to predict the unknowable factors or all possible implications for the group and the parent company and
this is particularly the case in relation to Brexit.
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.
28
Rotala Plc | Annual Report 2018
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.
The Risk
Our Response
Our procedures over revenue recognition included, but were not
Revenue Recognition
limited to:
The group’s accounting policy for revenue recognition is set out in the
• The review and testing of controls in place around the recognition
accounting policy notes on page 44.
of Bus ticket income to ensure that revenue stated in the statutory
Revenue is a material balance for Rotala Plc and represents the
accounts is accurate. Specifically, this included reviewing the
largest balance in the consolidated statement of comprehensive
reconciliation between the Till Receipt system and the nominal ledger
income. An error in this balance could significantly affect a user’s
and performing a test of control around the accuracy of the Till
interpretation of the financial statements.
Receipt system with reference to the amounts banked in relation to
As a result, we identified revenue recognition and, in particular, cut-off
commercial income streams.
on both the contracted and commercial revenue streams to be a key
• Detailed testing of a sample of revenue transactions pre and post
audit matter.
year end to ensure they were accounted for in the correct period.
No material misstatements in both contracted and commercial
revenues were identified as a result of the audit procedures
performed.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial
statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial Statement materiality:
£1,166,000
Benchmark applied:
Materiality has been determined with reference to a benchmark of
Basis for chosen benchmark:
Revenue, of which it represents 1.8%.
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 75 per cent of our financial statement materiality, namely £874,500.
We agreed with the Board of Directors that we would report to the Board all audit differences in excess of £35,000 as well as differences below
that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Board of Directors 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
£254,000.
The company financial statement materiality has been set as 1.8% of Total Assets, namely £950,000. Performance materiality has been set at
approximately 75 per cent of our financial statement materiality, namely £713,000.
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Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risk of material misstatement in the financial statements. In particular,
we looked at where the directors made subjective judgements such as making assumptions on significant accounting estimates.
We gained an understanding of the legal and regulatory framework applicable to the group and company, the structure of the group and the
parent company and the industry in which it operates. We considered the risk of acts by the company which were contrary to the applicable laws
and regulations including fraud. We designed our audit procedures to respond to those identified risks, including non-compliance with laws and
regulations (irregularities) that are material to the financial statements.
We focused on laws and regulations that could give rise to a material misstatement in the financial statements, including, but not limited to, the
Companies Act 2006.
We tailored the scope of our group audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements
as a whole. We used the outputs of a risk assessment, our understanding of the parent company and group’s, accounting processes and controls
and its environment and considered qualitative factors in order to ensure that we obtained sufficient coverage across all financial statement line
items.
Our tests included, but were not limited to, 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 irregularities including fraud, review
of minutes of directors’ meetings in the year and enquiries of management. As a result of our procedures, we did not identify any Key Audit
Matters relating to irregularities, including fraud.
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.
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.
30
Rotala Plc | Annual Report 2018
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 specified 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 27, 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 Financial Reporting Council’s website at www.
frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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.
Louis Burns
(Senior Statutory Auditor) for and on behalf of Mazars LLP.
Chartered Accountants and Statutory Auditor, 45 Church Street, Birmingham B3 2RT
Date: 1 April 2019
31
Statutory ReportsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
32
Rotala Plc | Annual Report 2018
Rotala at a Glance
Statutory Reports
Financial Statements
Shareholder Information
3
Financial
Statements
Financial Statements
33
34
Rotala Plc | Annual Report 2018 Consolidated Income Statement
For the year ended 30 November 2018
2018
2017
Results before
exceptional
items
£’000
Exceptional
items
(notes 9 & 11)
£’000
Note
Results before
exceptional
items
(restated)
£’000
Results for
the year
£’000
Exceptional
items
(notes 9 & 11)
£’000
Results for
the year
(restated)
£’000
4
62,408
(49,942)
12,466
(6,705)
5,761
(1,531)
4,230
(761)
7
8
9
10
-
-
-
(580)
(580)
-
(580)
(46)
62,408
52,625
(49,942)
(41,860)
12,466
(7,285)
5,181
(1,531)
3,650
(807)
10,765
(5,910)
4,855
(1,264)
3,591
(666)
-
-
-
(796)
(796)
-
(796)
257
52,625
(41,860)
10,765
(6,706)
4,059
(1,264)
2,795
(409)
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit from operations
Finance expense
Profit before taxation
Tax expense
3,469
(626)
2,843
2,925
(539)
2,386
-
(534)
(534)
-
(305)
(305)
3,469
(1,160)
2,309
2,925
(844)
2,081
Profit for the year from continuing
operations
Loss for the year from discontinued
operations
11
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 –continuing operations (pence)
Basic – discontinued operations
(pence)
Total
Diluted – continuing operations
(pence)
Diluted – discontinued operations
(pence)
Total
12
12
12
12
The accompanying notes form an integral part of these financial statements.
7.22
-
7.22
7.22
-
7.22
5.92
(1.11)
4.81
5.92
(1.11)
4.81
6.65
-
6.65
6.63
-
6.63
5.42
(0.69)
4.73
5.41
(0.69)
4.72
35
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Consolidated Statement of
Comprehensive Income
For the year ended 30 November 2018
Note
24
25
Profit for the year
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Actuarial gain on defined benefit pension scheme
Deferred tax on actuarial gain on defined
benefit pension scheme
Other comprehensive profit 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.
2018
£’000
2,309
1,748
(315)
1,433
3,742
2017
£’000
2,081
58
(11)
47
2,128
The accompanying notes form an integral part of these financial statements.
36
Rotala Plc | Annual Report 2018 Consolidated Statement of
Financial Position
As at 30 November 2018
Note
13
24
14
16
17
22
18
19
20
21
22
24
20
21
23
24
25
Assets
Non-current assets
Property, plant and equipment
Defined benefit pension asset
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
Defined benefit pension obligation
Total current liabilities
Non-current liabilities
Loans and borrowings
Obligations under hire purchase contracts
Provision for liabilities
Defined benefit pension obligation
Net deferred taxation
Total non-current liabilities
Total liabilities
TOTAL NET ASSETS
2018
£’000
39,444
1,737
14,876
56,057
3,525
15,895
95
446
19,961
76,018
6,465
13,830
3,843
132
129
24,399
4,068
10,159
740
-
1,757
16,724
41,123
34,895
2017
£’000
36,925
-
14,759
51,684
2,526
13,646
450
627
17,249
68,933
6,477
16,278
3,158
-
325
26,238
-
8,357
1,203
102
682
10,344
36,582
32,351
The accompanying notes form an integral part of these financial statements.
37
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Shareholders’ funds
Share capital
Share premium reserve
Merger reserve
Shares in treasury
Retained earnings
TOTAL EQUITY
Note
26
2018
£’000
12,220
11,779
2,567
(817)
9,146
34,895
2017
£’000
12,220
11,779
2,567
(817)
6,602
32,351
The consolidated financial statements were approved by the Board of Directors and authorised for issue on 1 April 2019.
.
Simon Dunn
Chief Executive
Kim Taylor
Group Finance Director
The accompanying notes form an integral part of these financial statements.
38
Rotala Plc | Annual Report 2018
Consolidated Statement of
Changes in Equity
For the year ended 30 November 2018
Share capital
£'000
Share
premium
reserve
£'000
Merger
reserve
£'000
Shares in
treasury
£'000
At 1 December 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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
At 30 November 2017
12,220
11,779
2,567
(817)
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners:
Dividends paid
Share based payment
Transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Retained
earnings
£'000
5,424
2,081
47
Total
£'000
27,811
2,081
47
2,128
2,128
(970)
20
-
(970)
20
3,362
(950)
2,412
6,602
2,309
1,433
32,351
2,309
1,433
3,742
3,742
(1,201)
(1,201)
3
3
(1,198)
(1,198)
At 30 November 2018
12,220
11,779
2,567
(817)
9,146
34,895
• 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.
39
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Consolidated Statement
of Cash Flows
For the year ended 30 November 2018
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
Intangible asset 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
(Increase)/decrease in inventories
Increase 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
*Profit before taxation comprises:
Profit before taxation in the Consolidated Income Statement
Loss before taxation for discontinued operations (note 11)
Impairment recognised on the re-measurement of the assets of the
disposed business, gross of a tax credit of £48,000 (note 11)
Profit before taxation for the purposes of the cash flow statement
The accompanying notes form an integral part of these financial statements.
40
2018
£’000
2,998
3,391
64
1,531
(172)
(298)
450
11
3
7,978
(998)
(2,250)
(41)
(463)
487
(3,265)
4,713
(588)
4,125
2018
£’000
3,650
(387)
(265)
2,998
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
2017
£’000
2,795
(376)
-
2,419
Rotala Plc | Annual Report 2018 Cash flows from operating activities brought forward
Investing activities
Purchases of property, plant and equipment
Acquisition of businesses
Sale of property, plant and equipment
Net cash used in investing activities
Financing activities
Shares issued
Dividends paid
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 increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2018
£’000
4,125
(2,174)
(2,014)
2,685
(1,503)
-
(1,201)
18,379
(15,111)
(942)
1,709
(237)
(3,751)
(1,154)
1,468
(1,699)
(231)
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)
The accompanying notes form an integral part of these financial statements.
41
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Notes to the Consolidated
Financial Statements
For the year ended 30 November 2018
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 2018 (including the comparatives for the year ended 30 November 2017) were
approved by the Board of Directors on 1 April 2019. 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 22.
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. For carrying
amounts at the period end, see note 27.
(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. For carrying amounts at the period end, see note 24.
42
Rotala Plc | Annual Report 2018
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. The carrying amount at the period end amounted to £740,000 (2017: £1,203,000).
(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. For carrying amounts at the period end, see note 14.
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 2018.
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.
43
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.
44
Rotala Plc | Annual Report 2018
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
Short leasehold property
Plant and machinery
Fifty years straight line
Shorter of the lease term or fifty years straight line
- Not depreciated
-
-
- Over the period of the lease
- 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
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.
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.
45
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.
46
Rotala Plc | Annual Report 2018
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.
47
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 of the
provision of bus services. The activities of each revenue stream are as described in the Chairman’s Statement.
48
Rotala Plc | Annual Report 2018
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
Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative
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
1 January 2017
1 January 2017
1 January 2017
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 continuing to assess the 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
Amendments to IAS 40 Investment Property: Transfer of Investment Property
1 January 2018
1 January 2018
Amendments to IFRS 2 Share-based Payment: Classification and measurement of Share-
based payment transactions
Amendments to IFRS 4 Insurance Contracts: Applying IFRS 9 Financial Instruments with
IFRS 4 Insurance Contracts
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
Clarifications to IFRS 15 Revenue from Contracts with Customers
1 January 2018
1 January 2018
IFRIC 22 Foreign Currency Transactions and Advance Consideration
1 January 2018
1 January 2018
Annual Improvements to IFRSs (2014 - 2016)
Annual Improvements to IFRSs (2015 - 2017)
1 January 2018
1 January 2018
1 January 2019†**
1 January 2019
Amendments to IAS 19 Employee Benefits: Plan amendment, curtailment or settlement
1 January 2019†**
1 January 2019
Amendment to IAS 28 Investments in Associates and Joint Ventures: Long-term interests in
Associates and Joint Ventures
Amendments to IFRS 9 Financial Instruments: Prepayment features with negative
compensation
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatments
1 January 2019†**
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
Amendments to References to the Conceptual Framework in IFRS Standards
1 January 2020†*
1 January 2020
Amendment to IFRS 3 Business Combinations
Amendments to IAS 1 and IAS 8: Definition of Material
IFRS 17 Insurance Contracts
1 January 2020†*
1 January 2020
1 January 2020†*
1 January 2020
†
1 January 2021
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.
49
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
2018
£’000
38,865
21,620
1,923
62,408
2017
£’000
31,193
18,643
2,789
52,625
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 2018 and 2017 no customer constituted more than 10% of Revenues.
50
Rotala Plc | Annual Report 2018
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
2018
£’000
33,088
3,203
522
36,813
3
36,816
2018
Number
85
1,396
1,481
2018
£’000
710
67
15
-
792
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
One director (2017: 1) is a member of the group’s defined contribution pension scheme.
Emoluments of the highest paid director were £284,000 (2017: £206,000). Pension contributions of £14,725 (2017: £11,817) were made on
his behalf.
51
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
6. Directors’ and key management personnel remuneration (continued)
The directors’ remuneration was as follows:
2018
£’000
Share
based
payment
expense
Remuneration
Pension
Total Remuneration
2017
£’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
284
168
106
80
40
32
710
-
-
-
-
-
-
-
15
-
-
-
-
-
299
168
106
80
40
32
206
131
100
80
35
10
5
4
2
-
-
-
Pension
Total
12
-
-
-
-
-
223
135
102
80
35
10
15
725
562
11
12
585
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
Amortisation of contract intangibles
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
52
2018
£’000
3,391
450
530
1,717
(172)
43
10
-
2017
£’000
3,274
19
554
1,896
(446)
40
10
-
Rotala Plc | Annual Report 2018
8.
Finance expense
Bank borrowings and overdraft interest
Hire purchase contracts
Net finance costs on pension scheme (note 24)
Other interest
2018
£’000
913
589
6
23
1,531
9.
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
Abortive transaction costs
Redundancy costs and costs of integration of acquisitions
Costs of change of principal bankers
Amortisation of intangible assets
Share based payment expense
Revenue debtor written off (see note below)
(Loss)/profit within profit before taxation
2018
£’000
475
(64)
(99)
(394)
(45)
(450)
(3)
-
(580)
2017
£’000
697
525
17
25
1,264
2017
£’000
162
(47)
-
(337)
(58)
(19)
(20)
(477)
(796)
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 was no longer available, the item was written off to the profit
and loss account.
53
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
10. 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
Income tax expense
2018
£’000
2017
£’000
-
-
749
58
-
807
807
-
-
505
(96)
-
409
409
2017
£’000
2,795
531
(2)
(96)
(24)
409
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 18%
(2017: 19%)
Non-taxable items
Adjustments in respect of prior periods
Impact of changes in tax rates
Total tax expense
2018
£’000
3,650
657
92
58
-
807
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.
54
Rotala Plc | Annual Report 2018
11. Discontinued operations
The results of the discontinued operation and the result recognised on the re-measurement of the assets of the business disposed of are as
follows:
Revenue
Cost of sales
Gross profit
Administrative expenses
Loss before taxation
Tax credit
Loss after tax
Impairment (net of a tax credit of £48,000) recognised on
the re-measurement of the assets of the disposed business
Loss for the year from the discontinued operation
2018
£’000
2,382
(2,508)
(126)
(261)
(387)
70
(317)
(217)
(534)
As described fully in the Chairman’s Statement the decision was taken during the year to cease operations in the South West.
Cash Flows
Operating cash flows
Investing cash flows
Financing cash flows
Total cash flows
2018
£’000
(309)
242
-
(67)
2017
£’000
5,281
(4,968)
313
(689)
(376)
71
(305)
-
(305)
2017
£’000
6
(83)
-
(77)
55
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
12. Earnings per share
(a) Basic earnings per share
Basic total:
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares
Basic earnings per share
Basic - continuing operations:
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares
Basic earnings per share
Basic - discontinued operations:
Loss attributable to ordinary shareholders
Weighted average number of ordinary shares
Basic loss per share
2018
£’000
2,309
48,026,580
4.81p
2018
£’000
2,843
48,026,580
5.92p
2018
£’000
(534)
48,026,580
(1.11)p
2017
£’000
2,081
44,001,465
4.73p
2017
£’000
2,386
44,001,465
5.42p
2017
£’000
(305)
44,001,465
(0.69)p
The calculation of the basic 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.
56
Rotala Plc | Annual Report 2018
12. Earnings per share (continued)
(b) Diluted earnings per share
Diluted total:
Profit attributable to ordinary share holders
Profit for the purposes of diluted earnings per share
2018
Diluted
£’000
2,309
2,309
2017
Diluted
£’000
2,081
2,081
Weighted average number of shares in issue
Adjustment for exercise of options
48,026,580
-
44,001,465
111,164
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
48,026,580
44,112,629
Diluted earnings per share
4.81p
4.72p
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 cal-
culation 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.
Diluted basic - continuing operations
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares (as above)
Basic earnings per share
Diluted basic - discontinued operations:
Loss attributable to ordinary shareholders
Weighted average number of ordinary shares (as above)
Basic loss per share
2018
£’000
2,843
48,026,580
5.92p
2018
£’000
(534)
48,026,580
(1.11)p
2017
£’000
2,386
44,112,629
5.41p
2017
£’000
(305)
44,112,629
(0.69)p
57
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
12. Earnings per share (continued)
(c) Adjusted basic earnings per share (adjusted before mark to market provision and other exceptional items):
Adjusted basic total:
Profit attributable to ordinary shareholders
Weighted average number of ordinary shares
Basic earnings per share
2018
£’000
3,469
48,026,580
7.22p
2017
£’000
2,925
44,001,465
6.65p
The calculation of the adjusted basic 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 diluted total:
Profit attributable to ordinary share holders
Profit for the purposes of diluted earnings per share
2018
Diluted
£’000
3,469
3,469
2017
Diluted
£’000
2,925
2,925
Weighted average number of shares in issue
Adjustment for exercise of options
48,026,580
-
44,001,465
111,164
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
48,026,580
44,112,629
Adjusted diluted earnings per share
7.22p
6.63p
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.
58
Rotala Plc | Annual Report 2018
13. Property, plant and equipment
Freehold land
and buildings
£’000
Long and short
leasehold
property
£’000
Plant and
machinery
£’000
Public service
vehicles
£’000
Fixtures and
fittings
£’000
Cost:
At 1 December 2016
7,351
1,084
3,484
42,837
Acquisitions
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
Acquisition
Additions
Disposals
Transfers
-
375
(2,032)
(5)
-
1
-
(4)
20
897
(542)
9
1,463
5,638
(1,800)
-
At 30 November 2018
6,018
1,085
5,083
50,954
Depreciation:
At 1 December 2016
Charge for the year
Acquisitions
Disposals
At 30 November 2017
Charge for the year
Disposals
At 30 November 2018
Net book value:
At 30 November 2018
At 30 November 2017
364
62
35
(35)
426
66
(248)
244
5,774
7,254
Net book value held under hire purchase agreements :
At 30 November 2018
At 30 November 2017
Depreciation charged thereon :
In 2018
In 2017
-
-
-
-
201
29
-
-
230
29
-
259
826
858
-
-
-
-
1,271
284
30
(69)
18,143
2,880
450
(1,358)
1,516
20,115
369
(344)
2,908
(1,279)
1,541
21,744
3,542
3,183
29,210
25,538
990
16,103
1,026
15,521
66
15
1,301
1,965
188
15
12
(26)
189
-
28
(62)
-
155
89
19
15
(26)
97
19
(53)
63
92
92
-
-
-
-
Total
£’000
54,944
1,822
4,586
(2,043)
59,309
1,483
6,939
(4,436)
-
63,295
20,068
3,274
530
(1,488)
22,384
3,391
(1,924)
23,851
39,444
36,925
17,093
16,547
1,367
1,980
59
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 2016
Additions
At 30 November 2017
Additions
At 30 November 2018
Amortisation:
At 1 December 2016
Charge for the year
At 30 November 2017
Charge for the year
At 30 November 2018
Net book value
At 30 November 2018
At 30 November 2017
250
-
250
-
250
250
-
250
-
250
-
-
312
877
1,189
432
1,621
312
19
331
450
781
840
858
Total
£’000
12,595
2,745
15,340
567
12,033
1,868
13,901
135
14,036
15,907
-
-
-
-
-
562
19
581
450
1,031
14,036
14,876
13,901
14,759
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.
60
Rotala Plc | Annual Report 2018
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 2020. Major assumptions are as follows:
Discount rate
Operating margin
Long term growth rate
Inflation
CGU
2018
%
12
8
2
3
CGU
2017
%
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
2018
£’000
3,525
2017
£’000
2,526
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 £15,181,000 (2017: £13,575,000). No inventory has been written
down to fair value in 2018 or 2017 and therefore no associated expense was incurred.
17. Trade and other receivables
Trade receivables
Tax and social security
Prepayments and accrued income
2018
£’000
2,871
410
12,614
15,895
2017
£’000
3,693
369
9,584
13,646
61
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 2018 and 2017 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)
2018
£’000
155
286
441
2018
£’000
-
-
-
-
2018
£’000
446
(677)
(231)
2017
£’000
16
207
223
2017
£’000
-
-
-
-
2017
£’000
627
(2,326)
(1,699)
62
Rotala Plc | Annual Report 2018
19. Trade and other payables - current
Trade payables
Taxation and social security
Other creditors
Accruals and deferred income
2018
£’000
4,432
1,080
184
769
6,465
2017
£’000
3,999
820
1,106
552
6,477
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
2018
£’000
677
13,153
13,830
4,068
17,898
2017
£’000
2,326
13,952
16,278
-
16,278
63
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
2018
£’000
2018
£’000
2018
£’000
2018
£’000
Bank loans
Obligations under
Trade and other
and overdrafts
hire purchase
payables
Total
14,182
481
3,980
-
4,333
3,456
6,206
1,276
4,616
-
-
-
23,131
3,937
10,186
1,276
18,643
15,271
4,616
38,530
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
The analysis above represents minimum payments on an undiscounted basis.
Bank borrowings
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.
64
Rotala Plc | Annual Report 2018
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
2018
£’000
Minimum lease payments
4,333
3,456
6,206
1,276
15,271
2017
£’000
Minimum lease payments
3,590
3,249
5,098
619
12,556
The present values of future lease payments are analysed as:
Current liabilities
Non-current liabilities
2018
£’000
Interest
490
336
407
36
1,269
2017
£’000
Interest
432
287
306
16
2018
£’000
Present value
3,843
3,120
5,799
1,240
14,002
2017
£’000
Present value
3,158
2,962
4,792
603
1,041
11,515
2018
£’000
3,843
10,159
14,002
2017
£’000
3,158
8,357
11,515
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 2018, the average effective borrowing rate was 4.5 per cent (2017: 4.5 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.
65
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
22. Derivative financial instruments
Derivative financial instruments are analysed as follows (see also note 30):
Current assets
Current liabilities
(Liability)/asset
2018
£’000
95
(132)
(37)
2017
£’000
450
-
450
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
At 1 December 2017
Utilised
Balance at 30 November 2018
Insurance claims provision
Insurance claims provision
£’000
1,203
(463)
740
As set out in note 2 to these financial statements, the 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 2018 retained a
further £300,000 in cash (2017: £300,000). 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 2017 and 2018 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.
66
Rotala Plc | Annual Report 2018
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 £522,000 (2017: £348,000). Contributions amounting to £57,570 (2017:
£44,979) 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 administering authority for the Fund is the
West Midlands Combined Authority. The Pension Fund Committee oversees the management of the Fund whilst the day to day fund
administration is undertaken by a team within the administering authority.
The group accounts for pensions in accordance with IAS 19 “Employee Benefits”. Contributions amounting to £27,083 (2017: £27,083) were
payable to the fund at the balance sheet date. Expected contributions for the year ending 30 November 2019 are £129,000.
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 2018 are predominantly in equities and bonds. The equities are largely invested in a spread of UK, North
American, European and Asian equities. 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.
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 2018 is 13 years (2017: 12 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 2018 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
30 November
2018
%
30 November
2017
%
n/a
2.6
2.9
2.6
n/a
2.4
2.3
2.4
67
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
24. Pensions (continued)
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
2018
Years
30 November
2017
Years
21.9
24.0
24.1
26.3
21.8
23.9
24.0
26.2
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 1.1%
Increase/decrease by 0.1%
Increase/decrease of 1.2%
Increase by 1 year
Increase of 4.4%
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:
30 November
2018
£’000
30 November
2017
£’000
Equities
Bonds
Other
Cash
Total market value of assets
Present value of scheme liabilities
Pension asset before tax
Asset ceiling restriction
Remaining certified pension contributions
Pension asset/ (liability) after asset ceiling restriction
and before tax
Related deferred tax (liability)/asset
Net pension asset/(liability)
68
4,872
9,247
4,413
157
18,689
(16,952)
1,737
-
(129)
1,608
(294)
1,314
4,810
10,039
4,429
143
19,421
(18,527)
894
(1,321)
-
(427)
77
(350)
Rotala Plc | Annual Report 2018
24. Pensions (continued)
The equity investments and bonds which are held in plan assets are quoted and are valued at the current bid price.
At 30 November 2017, the LGPR did not offer to employers the facility to recover contributions once paid and consequently an asset ceiling
restriction applied. Legislation to allow return of contributions to employers was put in place in May 2018. Therefore from that date no asset
ceiling restriction applies.
The last formal actuarial valuation was carried out as at 31 March 2016. In that valuation cycle the contributions certified by the actuary
cease with effect from 31 March 2019. The next actuarial valuation will be carried out as at 31 March 2019. As at 31 March 2016 the
actuarial deficit of the scheme was £1,000,000. However the actuary regularly rolls forward the actuarial position and, as at the latest
available date of 31 December 2018, the actuary estimated that the actuarial surplus was £883,000, equivalent to a funding level of 105%
of estimated actuarial liabilities.
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
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 before asset ceiling restriction
Reversal of/ (imposition of) asset ceiling restriction
Remaining certified pension contributions
Adjusted actuarial gain
2018
£’000
(5)
439
(445)
(6)
(11)
(522)
(533)
2018
£’000
(525)
1,081
556
1,321
(129)
1,748
2017
£’000
(5)
496
(513)
(17)
(22)
(348)
(370)
2017
£’000
830
549
1,379
(1,321)
-
58
69
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
24. Pensions (continued)
Actuarial gains/(losses) as a percentage of scheme assets and liabilities at 30 November 2018 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
2018
2017
2016
(2.8)
10.3
4.3
0.3
9.0
(4.4)
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 £281,000 (2017: £2,029,000). The
actual return on plan assets was a loss of £86,000 (2017: a gain of £1,326,000).
The movement in deficit during the year under IAS 19 was:
Surplus/(deficit) in scheme at 30 November
Movement in period
- Contributions
- Administrative expenses
- Actuarial gain due to changes in financial assumptions
- Return on plan assets
- Interest cost
Surplus in scheme at the end of the year
The movement in assets during the year under IAS 19 is as follows:
At 30 November
Expected return on plan assets
Actuarial (losses)/gains
Employer contributions
Administrative expenses
Benefits paid
At end of year
70
2018
£’000
894
298
(5)
556
439
(445)
1,737
2018
£’000
19,421
439
(525)
298
(5)
(939)
18,689
2017
£’000
(800)
337
(5)
1,379
496
(513)
894
2017
£’000
18,664
496
830
337
(5)
(901)
19,421
Rotala Plc | Annual Report 2018
24. Pensions (continued)
The movement in liabilities during the year under IAS 19 is as follows:
At 30 November
Interest cost
Actuarial gain – changes in assumptions
Benefits paid
At end of year
2018
£’000
(18,527)
(445)
1,081
939
(16,952)
2017
£’000
(19,464)
(513)
549
901
(18,527)
25. Deferred taxation
The net 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
At 1 December 2016
Dealt with in the profit and
loss account
Dealt with in other
comprehensive income
Dealt with in business
combinations
At 30 November 2017
Dealt with in the profit and
loss account
Dealt with in other
comprehensive income
Dealt with in business
combinations
(1,136)
291
-
-
(845)
(815)
-
-
At 30 November 2018
(1,660)
107
(61)
-
-
46
(11)
-
-
35
144
(56)
(11)
-
77
(56)
(315)
-
(294)
Losses
£’000
438
(439)
-
122
Total
£’000
(455)
(338)
(11)
122
(8)
(73)
-
-
(81)
121
(682)
87
-
-
6
108
-
(73)
(687)
(315)
(73)
156
(1,757)
At 30 November 2018 there were £nil (2017: £nil) temporary differences or unused tax losses for which deferred tax has not been provided.
71
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
26. Share capital
Allotted and called up and fully paid
2018
Number
2018
£’000
2017
Number
Ordinary shares of 25p each
48,880,918
12,220
48,880,918
2017
£’000
12,220
Issued Share Capital
As at 30 November 2016
2 August 2017
18 August 2017
As at 30 November 2017 and 2018
Number
Nominal Value
43,047,584
3,333,332
2,500,002
48,880,918
£’000
10,762
833
625
12,220
Share issue costs of £138,000 were incurred in the share issues of 2017 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 2018 854,338 ordinary shares were held in treasury (2017: 854,338).
72
Rotala Plc | Annual Report 2018
27. Share options and warrants
As at 30 November 2018 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
24 November 2014
2,585,000
24 November 2017
23 November 2024
17 October 2016
303,851
1 December 2019
1 June 2020
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 individual must remain an employee of the group until the option is exercised and the market price vesting condition
must have been met. For the latter purpose 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. At the balance sheet date the market price vesting condition had
been met only in respect of the first tranche.
2018
Weighted average
exercise price (p)
2017
Weighted average
Number
exercise price (p)
Number
Outstanding at beginning of the year
Forfeited during the year
Lapsed during the year
53.76
58.05
50.00
3,669,903
(126,052)
(655,000)
55.52
58.05
62.50
4,643,210
(73,307)
(900,000)
Outstanding at the end of the year
54.43
2,888,851
53.76
3,669,903
The exercise price of options outstanding at the end of the year ranged between 54.0p and 58.05p (2017: 50.0p and 58.05p) and their
weighted average remaining contractual life was 5.53 years (2017: 5.38 years).
Of the outstanding options at the reporting date 861,667 (2017: 1,516,667) were exercisable. The weighted average exercise price of these
options was 54.0p (2017: 52.27p).
73
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
28. Dividends paid and proposed
Declared and paid in the year
Ordinary first interim dividend for 2017 of 0.85 pence per share (2017: 0.80 pence)
Final dividend for 2017 of 1.65 pence per share (2017: second interim dividend of 1.50
pence)
Proposed for approval (not recognised as a liability at 30 November)
Ordinary interim dividend for 2018 of 0.92 pence per share (2017: 0.85 pence)
Ordinary final dividend for 2018 of 1.78 pence per share (2017: 1.65 pence)
2018
£’000
2017
£’000
408
793
1,201
442
855
337
633
970
408
793
1,297
1,201
29. Commitments under operating leases
The group had total commitments under non-cancellable operating leases as set out below:
Operating lease commitments payable:
Within one year
In two to five years
In more than five years
2018
£’000
2017
£’000
Land and
buildings
Other
assets
Land and
buildings
Other
assets
532
776
3,803
1,227
987
-
552
1,185
3,303
1,758
2,226
-
5,111
2,214
5,040
3,984
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 30 to 99 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.
74
Rotala Plc | Annual Report 2018
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:
Financial assets - loans and receivables
Trade and other receivables
Cash and cash equivalents
Financial asset or 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
2018
£’000
2017
£’000
Carrying value
Carrying value
7,800
446
8,246
95
132
5,385
17,898
23,283
7,663
627
8,290
450
-
5,657
16,278
21,935
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 2019.
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.
75
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 2017
Released to exceptional items within operating profit
Receipts on matured instruments
Balance (net liability) at 30 November 2018
2018
£’000
450
475
(962)
37
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 2018.
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:
2018
£’000
2017
£’000
‹ 6 months
6-12 months
› 12 months
‹ 6 months
6-12 months
› 12 months
Cash inflow/(outflow)
29
(66)
--
239
211
-
76
Rotala Plc | Annual Report 2018
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:
2018
£’000
2017
£’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
18,547
paid
13,353
is paid
16,257
paid
11,515
UK Sterling
In the year the group paid interest at a rate of between 2.50% and 3.20% (2017: between 2.85% and 3.50%) 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 2.12% and 8.11% (2017: between 2.11% and 8.68%) 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
The 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
2018
£’000
12,220
11,779
2,567
(817)
9,146
34,895
2017
£’000
12,220
11,779
2,567
(817)
6,602
32,351
77
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 (2017: £nil) of the amount charged was unpaid and included within creditors. During the year J
H Gunn received from Rotala a total of £134,112 (2017: £123,383) 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 £18,000 (2017: £23,417) of the amount charged was
unpaid and included within creditors. During the year R A Dunn received from Rotala a total of £26,276 (2017: £21,434) in dividends on
ordinary shares.
• During the year S L Dunn received from Rotala a total of £38,997 (2017: £35,223) in dividends on ordinary shares.
• During the year K M Taylor received from Rotala a total of £14,326 (2017: £13,180) in dividends on ordinary shares.
• During the year G M Spooner received from Rotala a total of £4,550 (2017: £1,150) in dividends on ordinary shares.
• During the year G F Peacock received from Rotala a total of £69,367 (2017: £nil after date of appointment) 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 1,702,443
ordinary shares of Rotala as at 30 November 2018 (2017: 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 2018 Mr. Gunn and his beneficial interests
held 30% (2017: 30%) of the ordinary share capital of The Fund. During the year The Fund received from Rotala a total of £43,411 (2017:
£41,456) in dividends on ordinary shares.
78
Rotala Plc | Annual Report 2018
32. Acquisitions
Central Buses
As set out in the Chairman’s Statement, in February 2018 the group acquired the entire bus business of CEN Group 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 £1,950,000 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
Vehicles
Plant and equipment
Customer contracts
Total fixed assets
Current liabilities
Other payables and accruals
Net assets
Goodwill
Acquisition costs (note 9)
Total cash consideration paid
1,742
20
-
1,762
-
-
(280)
-
432
152
(27)
(27)
1,462
20
432
1,914
(27)
(27)
1,887
63
64
2,014
Because the acquired business was 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 business in the period to 30 November 2018. 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
business. Principally this involved an assessment of the value of the intangible asset attributable to the contracts inherited with this business.
The values estimated by CCW are reflected in the above table.
The directors do not consider that the brand name has any separable value. No licenses were acquired with the business. The sale and
purchase agreement includes standard non-compete clauses; however, the seller 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 acquisition arose from the
benefit of synergies with the existing businesses of the group in their respective locations. As stated above the business acquired included a
vehicle fleet and these vehicles were immediately subsumed into existing operations following acquisition. The acquisition expenses incurred
by the group amounted to £64,000 and have been expensed in the Consolidated Income Statement in Administrative Expenses.
79
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
33. Capital commitments
As at 30 November 2018 the group had capital commitments for vehicles on order amounting to £2,283,000 (2017: no capital
commitments).
34. Post balance sheet events
There were no material post balance sheet events.
35. Audit exemption for subsidiary undertakings
For the year ended 30 November 2018, 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
80
Rotala Plc | Annual Report 2018
81
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Company Statement of
Financial Position
As at 30 November 2018
Fixed assets
Investments
Tangible assets
Current assets
Debtors
Cash and cash equivalents
Creditors: amounts falling due within one year
Net current assets/(liabilities)
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
2018
£’000
32,126
198
32,324
20,486
-
20,486
2017
£’000
32,126
226
32,352
16,106
1
16,107
(14,782)
(16,183)
5,704
38,028
(4,068)
-
(740)
33,220
12,220
11,779
(817)
10,038
33,220
(76)
32,276
-
(49)
(1,203)
31,024
12,220
11,779
(817)
7,842
31,024
The parent company profit for the year after taxation was £3,394,000 (2017: £2,097,000).
The parent company financial statements were approved by the Board of Directors and authorised for issue on 1 April 2019.
Simon Dunn Kim Taylor
Chief Executive Group Finance Director
The accompanying notes form an integral part of these financial statements.
82
Rotala Plc | Annual Report 2018
Company Statement of
Changes In Equity
For the year ended 30 November 2018
Share Capital
£’000
Share Premium
Reserve
£’000
Shares in
Treasury
£’000
Retained
Earnings
£’000
At 1 December 2016
Profit for the year
Dividends paid
Share based payment
Shares issued
10,762
9,875
(817)
-
-
-
-
-
-
1,458
1,904
-
-
-
-
At 30 November 2017
12,220
11,779
(817)
Profit for the year
Dividends paid
Share based payment
-
-
-
-
-
-
-
-
-
6,695
2,097
(970)
20
-
7,842
3,394
(1,201)
3
Total
£’000
26,515
2,097
(970)
20
3,362
31,024
3,394
(1,201)
3
At 30 November 2018
12,220
11,779
(817)
10,038
33,220
The accompanying notes form an integral part of these financial statements.
83
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information Notes to the Company
Financial Statements
For the year ended 30 November 2018
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.
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.
84
Rotala Plc | Annual Report 2018
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 company 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 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 company has not classified any of its financial
liabilities, other than derivatives, at fair value through profit or loss.
85
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.
86
Rotala Plc | Annual Report 2018
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 company’s financial statements.
Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative
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
EU effective date: Periods
beginning on or after
1 January 2017
1 January 2017
1 January 2017
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 company’s financial statements.
The company is continuing to assess the 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
Amendments to IAS 40 Investment Property: Transfer of Investment Property
1 January 2018
1 January 2018
Amendments to IFRS 2 Share-based Payment: Classification and
measurement of Share-based payment transactions
Amendments to IFRS 4 Insurance Contracts: Applying IFRS 9 Financial
Instruments with IFRS 4 Insurance Contracts
1 January 2018
1 January 2018
1 January 2018
1 January 2018
IFRS 9 Financial Instruments
1 January 2018
1 January 2018
IFRS 15 Revenue from Contracts with Customers
1 January 2018
1 January 2018
Clarifications to IFRS 15 Revenue from Contracts with Customers
1 January 2018
1 January 2018
IFRIC 22 Foreign Currency Transactions and Advance Consideration
1 January 2018
1 January 2018
Annual Improvements to IFRSs (2014 - 2016)
1 January 2018
1 January 2018
Annual Improvements to IFRSs (2015 - 2017)
1 January 2019†**
1 January 2019
Amendments to IAS 19 Employee Benefits: Plan amendment, curtailment or
settlement
Amendment to IAS 28 Investments in Associates and Joint Ventures: Long-
term interests in Associates and Joint Ventures
Amendments to IFRS 9 Financial Instruments: Prepayment features with
negative compensation
IFRS 16 Leases
1 January 2019†**
1 January 2019
1 January 2019†**
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
IFRIC 23 Uncertainty over Income Tax Treatments
1 January 2019
1 January 2019
Amendments to References to the Conceptual Framework in IFRS Standards
1 January 2020†*
1 January 2020
Amendment to IFRS 3 Business Combinations
1 January 2020†*
1 January 2020
Amendments to IAS 1 and IAS 8: Definition of Material
1 January 2020†*
1 January 2020
IFRS 17 Insurance Contracts
†
1 January 2021
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.
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 company’s profit for the year includes a profit after taxation of £3,394,000 (2017:
£2,097,000 profit) which is dealt with in these parent company financial statements.
For disclosure of the Auditor’s fees reference should be made to note 7 to the consolidated financial statements
87
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
3. Staff costs
Staff costs (including directors) comprise:
Wages and salaries
Employer’s national insurance contributions
Defined contribution pension costs
Share-based payment expense
2018
£’000
1,162
122
39
1,323
-
1,323
For disclosure of the Directors’ remuneration reference should be made to note 6 to the consolidated financial statements.
The average number of employees, including directors, during the year was as follows:
Management and administrative
2018
Number
24
2017
£’000
1,106
109
24
1,239
11
1,250
2017
Number
26
88
Rotala Plc | Annual Report 2018 4.
Investments
Cost and net book value
At 1 December 2017
Additions
At cost
Net book value
At 30 November 2018
Net book value
At 30 November 2017
Subsidiary
undertakings
£’000
32,126
-
32,126
32,126
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
registration
England
England
England
England
England
England
England
England
England
held
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nature of business
Transport
Transport
Property holding
Transport
Transport
Property holding
Transport
Holding company
Dormant
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
Flights Hallmark Limited
* Held indirectly
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
89
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
5.
Tangible assets
Plant and machinery
Cost:
At 1 December 2017
Additions
Disposals
At 30 November 2018
Depreciation:
At 1 December 2017
Charge for the year
Disposals
At 30 November 2018
Net book value:
At 30 November 2018
At 30 November 2017
6. Debtors
419
22
(23)
418
193
50
(23)
220
198
226
Prepayments and accrued income
Trade debtors
Taxation
Deferred tax (note 9)
Financial instruments
Amounts due from subsidiary undertakings
All amounts shown under debtors fall due for payment within one year.
2018
£’000
759
17
43
24
95
19,548
20,486
2017
£’000
400
-
23
-
450
15,233
16,106
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Rotala Plc | Annual Report 2018
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
2018
£’000
13,829
272
29
298
222
132
2017
£’000
15,627
171
63
85
237
-
14,782
16,183
2018
£’000
4,068
4,068
2018
£’000
-
-
Bank borrowings
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
Bank loans
and overdrafts
2018
£’000
Bank loans
and overdrafts
2017
£’000
13,829
278
3,790
17,897
15,627
-
-
15,627
91
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
9. Deferred tax
The deferred tax asset/(liability) included in the company balance sheet is analysed as follows:
Accelerated capital allowances
Arising on derivative financial instruments
Losses
Net asset/(liability)
2018
£’000
12
7
5
24
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 asset/(liability) in the year are as follows:
Balance brought forward at 1 December
Recognised in profit or loss
Balance carried forward at 30 November
2018
£’000
(49)
73
24
2017
£’000
(7)
(81)
39
(49)
2017
£’000
175
(224)
(49)
At 30 November 2018 there were £nil (2017: £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.
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Rotala Plc | Annual Report 2018
10. Provisions
Insurance claims provision
2018
£’000
740
740
2017
£’000
1,203
1,203
As set out in note 1 to the company financial statements, the 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 2018 retained a
further £300,000 in cash (2017: £300,000). 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 2017 and 2018 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
2018
Number
Allotted and called up and fully paid
2018
£’000
12,220
2017
Number
48,880,918
Issued Share Capital
As at 30 November 2016
2 August 2017
18 August 2017
As at 30 November 2017 and 2018
Number
43,047,584
3,333,332
2,500,002
48,880,918
2017
£’000
12,220
Nominal Value
£’000
10,762
833
625
12,220
93
Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
11. Share capital (continued)
Share issue costs of £138,000 were incurred in the share issue of 2017, 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 2018 854,338 ordinary shares were held in treasury (2017: 854,338).
12. Share options and warrants
As at 30 November 2018 the following share options had been issued and were outstanding under the company’s employee share option
schemes:
Date of grant
24 November 2014
17 October 2016
Number of
options granted
Earliest
exercise date
Date of expiry
Exercise price
2,585,000
24 November 2017
23 November 2024
303,851
1 December 2019
1 June 2020
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.
2018
Weighted average
exercise price (p)
2018
2017
Weighted average
2017
Number
exercise price (p)
Number
Outstanding at beginning of the year
Forfeited during the year
Lapsed during the year
53.76
58.05
50.00
3,669,903
(126,052)
(655,000)
55.52
58.05
62.50
4,643,210
(73,307)
(900,000)
Outstanding at the end of the year
54.43
2,888,851
53.76
3,669,903
The exercise price of options outstanding at the end of the year ranged between 54.0p and 58.05p (2017: 50.0p and 58.05p) and their
weighted average remaining contractual life was 5.53 years (2017: 5.38 years).
Of the outstanding options at the reporting date 861,667 (2017: 1,516,667) were exercisable. The weighted average exercise price of these
options was 54.0p (2017: 52.27p).
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Rotala Plc | Annual Report 2018
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 £39,000 (2017: £24,000). Contributions amounting to £nil (2017: £989)
were payable to the scheme at the balance sheet date.
15. Capital commitments
As at 30 November 2017 and 2018 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
Other Assets
2018
£’000
Other Assets
2017
£’000
-
-
-
3
-
3
17. Contingent liabilities
The company has entered into a cross-guarantee and floating charge agreement with its subsidiaries. At 30 November 2018 the contingent
liability amounted to £110 (2017: £598,372).
The company has guaranteed the hire purchase obligations of its subsidiaries. At 30 November 2018 the contingent liability amounted to
£14,002,000 (2017: £11,515,000).
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Financial StatementsRotala at a GlanceStatutory ReportsFinancial StatementsShareholder Information
18. 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 of the group financial statements. At the year end £nil (2017: £nil) of the amount charged was unpaid and included
within creditors. During the year J H Gunn received from Rotala a total of £134,112 (2017: £123,383) 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 £18,000 (2017:
£23,417) of the amount charged was unpaid and included within creditors. During the year R A Dunn received from Rotala a total of
£26,276 (2017: £21,434) in dividends on ordinary shares.
• During the year S L Dunn received from Rotala a total of £38,997 (2017: £35,223) in dividends on ordinary shares.
• During the year K M Taylor received from Rotala a total of £14,326 (2017: £13,180) in dividends on ordinary shares.
• During the year G M Spooner received from Rotala a total of £4,550 (2017: £1,150) in dividends on ordinary shares.
• During the year G F Peacock received from Rotala a total of £69,367 (2017: £nil after date of appointment) 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 1,702,443
ordinary shares of Rotala as at 30 November 2018 (2017: 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 2018 Mr. Gunn and his beneficial interests
held 30% (2017: 30%) of the ordinary share capital of The Fund. During the year The Fund received from Rotala a total of £43,411 (2017:
£41,456) in dividends on ordinary shares.
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Rotala Plc | Annual Report 2018
Rotala Plc, Hallbridge Way, Tipton Road, Tividale, West Midlands B69 3HW
Telephone: 0121 322 2222 Website: www.rotalaplc.com