ROTALA PLC
ANNUAL REPORT
2022
CONTENTS
Page
Directors, Secretary and Advisers
1
Chairman's Statement and Review of Operations
2
Strategic Report
11
Directors' Report
25
Auditor’s Report
30
Consolidated Income Statement
37
Consolidated Statement of Comprehensive Income
38
Consolidated Statement of Financial Position
39
Consolidated Statement of Changes in Equity
40
Consolidated Statement of Cash Flows
41
Notes to the Consolidated Financial Statements
43
Company Statement of Financial Position
87
Company Statement of Changes in Equity
88
Notes to the Company Financial Statements
89
1
DIRECTORS, SECRETARY AND ADVISERS
Country of incorporation
of parent company
England and Wales
Company registration
number
05338907
Legal form
Public Limited Company
Directors
John Gunn (Non-Executive Chairman)
Graham
Spooner
(Non-Executive
Deputy
Chairman and Senior Independent Director)
Simon Dunn (Chief Executive)
Robert Dunn (Managing Director North West)
Graham Peacock (Independent Non-Executive
Director)
Kim Taylor (Group Finance Director)
Registered Office
Rotala Group Headquarters
Cross Quays Business Park
Hallbridge Way
Tipton
Oldbury
West Midlands
B69 3HW
Telephone:
0121 322 2222
Company Secretary
Kim Taylor
Nominated Adviser
Shore Capital & Corporate Limited
and Broker
Shore Capital Stockbrokers Limited
Cassini House
57 St James’s Street
London SW1A 1LD
Auditor
Jeffreys Henry LLP
Statutory Auditor
Finsgate
5-7 Cranwood Street
London EC1V 9EE
Registrars
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
Bankers
HSBC Bank plc
120 Edmund Street
Birmingham B3 2QZ
2
CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS
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 2022 (“FY 2022”). After the disruption of the last two years, caused by the COVID-19
pandemic, patterns of bus operation have begun to stabilise, though are still underpinned by grants
and subsidies provided by the Department for Transport (“DfT”) and local authorities.
Government support
In mid-2021 the DfT replaced its initial support scheme for bus services during the pandemic with a
new scheme called “Bus Recovery Grant” (“BRG”). This scheme focuses on compensating bus
operators for the absence of revenue whilst passenger numbers continue their recovery back to pre-
pandemic levels. The period to be covered by BRG has been extended several times and the latest
announcement from the DfT has set a new termination date of 30 June 2023. The other key measure
of support comes from local authorities. With the encouragement of the DfT, concessionary fares re-
imbursements, which are controlled by local authorities, have been maintained broadly at pre-COVID
levels, subject to a variety of adjustments for actual service levels and miles driven, and do not yet
reflect actual passenger usage. It is expected that this form of support will gradually be tapered down
to reflect actual travel patterns during the year ending 30 November 2023 (“FY 2023”).
Passenger numbers
Passenger volumes have yet to recover to pre-COVID 19 levels. At the start of FY 2022 passenger
numbers ranged between 80% and 85% of pre-COVID levels, but continued to grow slowly and
steadily throughout the year. Nationally for the bus industry, passenger volumes remain at about 85%
of those levels. However, the company’s own operations have outperformed the market and have
reached 90% to 95% of pre-COVID 19 levels. Whilst some of the absence of passenger volume may
be ascribed to the reduction in commuter traffic occasioned by the desire to “work from home”, in the
case of the bus industry, the principal issue is that concessionary cardholders (largely pensioners)
have not returned to their previous travel habits. Recent industry reports make it clear that this is a
matter of confidence in travel by bus rather than any other factor. Full recovery in bus passenger
numbers will depend on concessionary card holders regaining their former confidence in travelling by
bus. The board therefore expects passenger numbers to continue to increase only slowly.
Revenues
FY 2022
FY 2021
FY 2020
£’ million
£’ million
£’ million
Commercial
53.8
31.7
31.6
Contracted
21.3
16.2
16.5
Total Commercial and Contracted Revenue
75.1
47.9
48.1
Charter
1.1
0.7
0.6
Grants and subsidies
8.7
47.9
29.4
Total Revenue
84.9
96.5
78.1
The recovery in passenger numbers and the gradual reduction in Government support are reflected
in the breakdown of revenues in the above table. Bus operation in each of the years ended 30
November 2020 and 2021 (“FY 2020” and “FY 2021”) was conducted under the burden of various
COVID-related restrictions, but in FY 2022 commercial revenues recovered sharply, as these
restrictions had fallen away by the start of the year, and passenger numbers responded accordingly.
Grants and subsidies in FY 2022 were also much lower than in the two previous financial years as
bus service levels were no longer mandated and paid for by Government and normal commercial
operation returned. The peak of Government support for the bus industry was reached in the first half
of FY 2021, fell slowly in the second half of that year, and declined substantially in FY 2022.
3
CHAIRMAN’S STATEMENT AND REVIEW OF OPERATIONS (continued)
Revenues (continued)
Contracted revenue, largely derived from tendered bus contracts operated for local authorities, was
much less sensitive to COVID restrictions. The company was particularly successful in expanding this
area of its business during FY 2022 in both the West Midlands and the North West. These trends have
continued so far in FY 2023. Charter revenue is always highly variable, but rebounded substantially
in FY 2022 as interest in ad hoc leisure travel recovered. Overall total revenues in FY 2022 were £84.9
million, compared to £96.5 million in the previous year.
Financial results
FY 2022
FY 2021
FY 2020
£’ million
£’ million
£’ million
Operating profit/(loss)
4.2
3.4
(2.6)
Loss before taxation and exceptional items
(1.1)
(1.3)
(0.8)
Profit/(loss) before tax and after exceptional
items
2.0
0.3
(4.8)
Unlike the preceding forms of Government support, BRG does not demand that a bus operator
makes neither a profit nor a loss. As passenger numbers have slowly recovered, so the company
has benefited from a corresponding increase in operating profits. The board anticipated that FY
2022 would be a year of transition as Government support packages declined in value and the
group realigned itself towards the “new normal”. The group traded in line with its budget for FY
2022. The board believes that the group is now well positioned to return to profitability in FY 2023 at
the normalised pre-tax line.
Profit before tax after exceptional items fluctuates principally as a result of the marking to market of
the group’s fuel derivative position (which produced profits of £2.6m in FY 2022 and £1.8m in FY
2021). In addition in FY 2022 a profit of £0.6 million was recorded on the sale of a surplus leasehold
property. Note 10 to these financial statements contains a full analysis of the composition of
exceptional items.
Working capital
FY 2022
FY 2021
FY 2020
£’ million
£’ million
£’ million
Inventories
1.2
1.1
3.5
Trade and other receivables
8.2
21.8
22.3
Trade and other payables
(9.2)
(6.2)
(8.3)
Total working capital
0.2
16.7
17.5
The group’s trade and other receivables of approximately £21.8 million at 30 November 2021 and
£22.3 million at 30 November 2020 were inflated by the amounts receivable from the DfT under the
various Government bus industry support schemes, which were the subject of lengthy reconciliation
exercises. During FY 2022 these exercises were completed and all grants were received in cash.
The working capital invested in trade and other receivables therefore fell steeply. Government
support also called for payment terms on trade and other payables to be accelerated. The company
has now reverted to its standard payment terms, which explains why trade and other payables have
increased in FY 2022. Overall total working capital has fallen for the time being to very low levels.
However, as the group increases its exposure to contracted services in the West Midlands and
North West (as is set out in more detail later in this statement), more working capital will be
absorbed in order to finance this type of revenue.
4
CHAIRMAN’S STATEMENT AND REVIEW OF OPERATIONS (continued)
Total net debt (including hire purchase debt)
FY 2022
FY 2021
FY 2020
£’ million
£’ million
£’ million
Revolving commercial facility drawn
nil
7.6
16.2
Mortgage debt
5.4
5.9
6.3
Hire purchase debt
33.4
39.9
37.1
(Cash)/overdraft net of cash
(1.2 )
3.2
3.3
37.6
56.6
62.9
In accordance with its stated strategy, during the COVID-19 pandemic, the board focused on cash
generation and debt reduction. The board set a target for the company’s total net debt to be at or
below £40 million at 30 November 2022. This target was successfully met.
The release of working capital occasioned by the receipt of the grants and subsidies described
above enabled the group to significantly reduce its drawings on its revolving commercial facility
(“RCF”). In March 2022, the company also announced that it had signed new banking facilities with
its principal bankers, HSBC Bank plc; these facilities include an RCF of up to £17 million. This
leaves ample resources to fund future organic growth and acquisitions. Mortgage debt continued to
amortise according to its stated terms.
The COVID-19 pandemic delayed the delivery of the replacement buses ordered as part of the
company’s acquisition of the Bolton depot from First Group plc in August 2019. The remainder of the
vehicles ordered were delivered during FY 2021 and this is primarily why hire purchase debt peaked
in that year. The group acquired a number of suitable second hand vehicles in FY 2022, but no new
ones and so added no fresh hire purchase debt in the year. In FY 2023 hire purchase debt levels will
be much changed by the developments in Greater Manchester, described in detail below. The board
does not anticipate the need to acquire any new vehicles in FY 2023, unless for new business.
Acquisitions
During FY 2022 the group made three acquisitions. First, in April 2022, it acquired the bus business
of Claribel Coaches Limited, operating in the eastern area of Birmingham, and its 18 related vehicles,
for a total cash consideration of £339,000. Then in May 2022 the group acquired the bus business of
Johnsons (Henley) Limited and a 20–strong vehicle fleet, for a total cash consideration of £1,016,000.
This business was a well-established operator of commercial and contracted bus services in
Warwickshire and the southern West Midlands. Rotala did not assume any material liabilities with
these acquisitions and there was no associated goodwill. Both businesses were, following acquisition,
immediately subsumed into the group’s Diamond Bus business operating throughout the West
Midlands and the services were rebranded into Diamond Bus livery. The acquisitions therefore
extended the group’s network of bus services in Warwickshire and the West Midlands and made more
efficient use of the capacity of the group’s existing depots in the region.
In August 2022 the company acquired the entire issued share capital of Midland Classic Limited
(“Midland”), the principal bus operator in Burton-upon-Trent for a total cash consideration of £2 million.
In addition, on completion, Rotala paid approximately £577,000 in cash to one of Midland’s
shareholders to repay an existing loan of the same sum. Midland operates about 60 vehicles from its
freehold depot in Burton-upon-Trent and employs approximately 120 staff. Besides operating in
Burton-upon-Trent, Midland provides bus services to other nearby towns such as Uttoxeter, Ashby-
de-la-Zouch and Lichfield. The acquisition extended the group’s business to a new territory in the East
Midlands from which further growth will be targeted. Operationally, Midland (which has now been
renamed Diamond Bus (East Midlands) Limited) is part of Rotala’s Midlands division and is controlled
from the company’s headquarters at Tividale, Oldbury.
5
CHAIRMAN’S STATEMENT AND REVIEW OF OPERATIONS (continued)
Franchising in Greater Manchester
On 23 December 2022, the company released an announcement about developments in the
franchising scheme for Greater Manchester. That announcement should be consulted for greater
detail, but the principal points are summarised below.
In March 2021, the Mayor of Greater Manchester made the decision to exercise his power to suspend
the deregulated commercial bus market in his area through the introduction of a franchising scheme.
The first tranche of the scheme is expected to begin operation in late September 2023. In the tender
process for this first tranche of the franchising scheme, which covers the company’s bus depot in
Bolton, together with its related bus operations, the company was not successful in its bids for either
of the large franchise areas covering Bolton and Wigan. However, the company was successful in
winning seven out of the nine available small franchises in the same areas which have a combined
annual revenue of approximately £18.7 million. These small franchises are for periods of between
three and five years. As a result, the net effect on the group is expected to be a decline in its annual
revenues in the Greater Manchester area of approximately £6 million, principally effective from the
year ending 30 November 2024.
As a consequence of these developments, the company has agreed to dispose of its Bolton depot
and the majority of the bus fleet based there in two separate stages, subject to shareholder approval.
First the company has agreed to sell its Bolton bus depot to the Greater Manchester Combined
Authority (“GMCA”), with all its associated fixtures, fittings, plant and machinery. Second the company
has agreed to place the majority of the bus fleet currently based at the Bolton depot into a notional
asset pool (“Residual Value Mechanism” (“RVM”)) created by Transport for Greater Manchester
(“TfGM”) as part of the franchising arrangements. Under this scheme TfGM allocates buses in the
asset pool to the incoming franchise operators. The successful franchise bidder is then obliged to
acquire the vehicles allocated to it in the notional asset pool at the value determined by TfGM under
the RVM.
The mortgage and hire purchase finance debt associated with these assets will be repaid out of the
proceeds of their sale. However, the award of the seven small franchise contracts referred to above
will require the company to purchase 60 new diesel buses, as specified by the relevant contracts, at
a total cost of approximately £11.9 million, which will be financed by new hire purchase debt. The
remaining vehicles in the Bolton fleet will be retained within the group for on-going work.
The overall effect of these transactions on the group is that, subject to signing conditional sale and
purchase agreements and obtaining shareholder approval for these transactions, it will receive
aggregate cash consideration of approximately £30.5 million for the assets included within the two
disposal stages outlined above. The total net book value of these assets at their dates of sale is
estimated to be approximately £23.0 million.
As the total consideration receivable for these disposals is material when compared to the company’s
market capitalisation, pursuant to Rule 15 of the AIM Rules for Companies, the approval of the
company’s shareholders in a general meeting will need to be obtained prior to the completion of the
sale of the Bolton depot and the Bolton bus fleet. At the general meeting, the board intends to
recommend to shareholders that they approve the relevant sale transactions, and the directors intend
to irrevocably commit their own shareholdings in favour of approving any such transactions. Further
announcements regarding these disposals will be made and a circular sent to shareholders in due
course.
In the period from completion of the disposal to the GMCA of the company’s Bolton bus depot to the
commencement of the Bolton franchise by the successful franchise winner, which is expected to be
in late September 2023, the group will continue to operate from the Bolton depot and carry out all the
bus services which it currently runs from that depot. To facilitate this, the company has agreed to lease
back from the GMCA, at a nominal rent, the Bolton depot, and all other assets necessary to support
the continued operation of bus services from the bus depot until the formal commencement of the
Bolton franchise in late September 2023. At that point the short-term lease will terminate.
6
CHAIRMAN’S STATEMENT AND REVIEW OF OPERATIONS (continued)
Franchising in Greater Manchester (continued)
These changes in the company’s operations in Greater Manchester do not preclude the company from
bidding for the franchises which cover the north-east and southern areas of the TfGM region. The
company has already successfully completed the pre-qualification stages for participation in these two
further franchise rounds and submitted bids in the second round of franchising which is currently
underway.
New contracts won in the West Midlands
Rotala has continued to work in partnership with Transport for the West Midlands (“TfWM”) and other
bus operators to optimise the existing overlaps on commercial routes to make sure that service
frequencies are properly married to current passenger volumes. At the same time, in response to
current Government policy and local needs, the size of the tendered services market has continued
to grow. The company has participated fully in the recent tender rounds for contracts of this type and
has won several new contracts such that it expects annualised revenues in this region to increase by
approximately £2.9 million. These new contracts, which commenced on 1 January 2023, have
durations of between one and four years. Since vehicles which were formerly used on commercial
routes will be redeployed on tendered routes, the vehicle numbers used in the company’s operation
in the West Midlands will remain roughly the same and the new work will not necessitate the purchase
of any new vehicles.
Tender Offer
The disposals outlined above are anticipated to realise capital of which the company has no current
need. Therefore the board decided to return this surplus capital to shareholders and, after due
consideration and consultation, concluded that the best and most efficient way to do this was by
means of a Tender Offer. This Tender Offer was announced on 26 January 2023 and fully described
in a circular to shareholders of the same date. This circular should be consulted for the full details of
the Tender Offer and the background and reasons for its launch. In summary the Tender Offer
proposed that the company would buy back up to £10 million of its own shares at a price of 55p per
ordinary share. The Tender Offer was fully taken up and a total of 18,181,818 shares were acquired
by the company at a cost of £10 million. Of these shares 13,993,134 were cancelled and 4,188,684
were taken to treasury to cover any potential issues of ordinary shares in respect of the outstanding
share options. Immediately after the Tender Offer closed on 16 February 2023, a total of 5,910,000
ordinary shares was held in treasury.
Share buyback
On 23 March 2022 the company announced that it would commence a Share Buy Back programme
in accordance with its existing authorities. Those authorities were renewed at the Annual General
Meeting (“AGM”) held on 19 May 2022. So far under this programme the company has acquired
921,316 ordinary shares at a total cost of £273,000. This programme is separate from the Tender
Offer described above and the resolution passed at the 2022 AGM remains valid. It is intended that
this resolution will be renewed at the forthcoming AGM. In accordance with accounting standards, the
cost of the shares acquired in this manner has been written off to reserves. A total of 1,721,316 shares
was held in treasury at 30 November 2022.
7
CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)
Dividend
In April 2022, the Company, as it resumed dividend payments post the pandemic, paid a special
interim dividend of 1.0p per share. At the same time, the board stated its intention to return to its
former policy of maintaining 2.5 times earnings cover for any future dividend payments. The board
therefore declared an interim dividend of 0.5p per share which was paid on 9 September 2022. A final
dividend of 1.0p per share in respect of FY 2022 will be recommended to the forthcoming AGM. This
dividend, if approved, will be payable on 30 June 2023 to shareholders on the register on 16 June
2023.
While dividends will therefore now reflect the group’s current profitability, the board plans to return to
the progressive dividend policy, adopted before the onset of the COVID-19 crisis, recognising the
importance of dividend flows to shareholders. It is anticipated that future interim dividends will be paid
in September and final dividends in June, in the proportion of one third at the interim dividend stage
and two thirds for the final.
Fleet management
2022
2021
2020
Average fleet age
7.89 years
7.56 years
7.95 years
During FY 2022, the company’s requirements for new vehicles were very limited, being restricted to
vehicles for new work or contracts won. Aside from the new vehicles for the small franchise
contracts in the GMCA area referred to above, the company does not expect to acquire a material
number of new vehicles in FY 2023. The company expects that in FY 2024, it will begin a fresh cycle
of fleet replacement. It is intended that these vehicles will be electric and not diesel fuelled.
When acquiring any vehicle new to the fleet, the board is always acutely conscious of its emission
standards. At the same time the capability of buses driven by non-diesel propulsion systems has
continued to improve and their operating costs to become increasingly attractive when compared to
their diesel predecessors. However it should be noted that the new vehicles which will be acquired
in FY 2023 as part of the move to a franchised bus network in Greater Manchester will necessarily
be diesel fuelled due to the timing of the change and the specification of the buses under the
franchise contract terms.
Part of the Government’s National Bus Strategy includes the subsidised introduction of 4,000 new
zero-emission vehicles. Consequently the board believes that in the medium to long term the group
will gradually transition to the acquisition of battery-electric buses or buses propelled by other fuels,
and move away from diesel-fuelled buses. Diesel driven vehicles will therefore gradually be phased
out of the fleet in accordance with Government targets. The continuing disposal of older vehicles in
the year ensured that the average fleet age remained closely comparable to previous periods. More
than half of the bus fleet is now at EURO VI emissions standard or better.
Fuel hedging
The tranche of hedging contracts which covered fuel usage in FY 2022 expired at the end of that year.
The group’s budget for FY 2023 anticipates fuel usage of approximately 13 million litres, falling to 11
million litres in FY 2024 and FY 2025 as mileage driven aligns itself with the new contracts in Greater
Manchester and the West Midlands set out above. To cover this anticipated fuel usage fresh hedging
contracts have recently been taken out such that approximately 50% of the budgeted fuel usage in
FY 2023 has been hedged, 92% of that of FY 2024 and 76% of that of FY 2025. All these hedging
contracts are at an average price of between 103p and 112p per litre. For reference, the market price
of fuel at the date of this statement (excluding VAT) is 106p per litre.
The board will continue to monitor market conditions closely and take out such further fuel hedging
contracts as it deems are appropriate to meet its objective of reducing volatility in its costs and, where
possible, creating greater business certainty.
8
CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)
Financial review
Income statement
The Consolidated Income Statement is set out on page 37. The sections set out above on Government
Support, Passenger Numbers and Revenues analyse the key factors which determined group revenue
in FY 2022, and how and where it differed from the previous year. Cost of sales fell back from the
levels seen in FY 2021 in response to these changed operational conditions.
Administrative expenses before exceptional items also decreased from £12.3 million in FY 2021 to
£9.1 million in FY 2022 as the needs of the business for an enhanced level of legal and technical
advice in the complex and challenging operating environment under COVID-19 conditions fell away.
As stated above, the board expected FY 2022 to be the year of transition back to normal operating
conditions and this indeed turned out to be the case. Given this, and the fact that FY 2021 was a year
conducted under a variety of COVID restrictions, there is little meaningful to be said about Gross
Profits, Profit from Operations and Profit before Tax, or comparisons to be drawn about these captions,
in the two financial years under report.
Finance expense fell to £2.3 million (2021: £3.1 million). This decrease can be ascribed to two factors:
first interest on hire purchase debts fell as the total level of that debt fell. Second bank borrowings
also fell markedly during FY 2022 and this had a corresponding effect on the interest expense for this
item.
The analysis of the exceptional items is set out in note 10 to these financial statements. In 2022 a
profit of £3.1 million was recorded in this caption, compared to a profit of £1.6 million in 2021. As in
2021 the principal component of this line was the marking to market of the group’s fuel derivative
position. The other exceptional profit in 2022 of £0.6 million resulted from the disposal of a surplus
leasehold property.
The Chancellor of the Exchequer has increased the rate of corporation tax from 19% to 25% from
April 2023. This change requires the company to increase the corresponding rate at which deferred
tax is provided in these financial statements. The extra charge included for this reason in the tax
expense in FY 2022 amounts to £652,000.
There were no share issues in the year. As a result of all the factors set out above basic earnings per
share in 2022, after all exceptional items, were 2.36p (2021: 0.13p).
Balance sheet
The gross assets of the group fell from £104.5 million at 30 November 2021 to £84.9 million as at 30
November 2022. The book value of property, plant and equipment declined by £4.2 million as
depreciation in the year exceeded additions to the same caption. The additions that were made to
fixed assets were almost all second-hand passenger carrying vehicles or were vehicle additions
derived from the acquisitions described above. The impact of the interest rate and market turmoil in
late 2022 caused the net asset represented by the defined benefit pension scheme to fall back
considerably to £1.47 million by the end of the year (2021: £4.25 million). The value of the scheme’s
investments fell by 34%, but at the same time the present value of the scheme’s defined benefit
obligation fell by 27%. These changes returned the surplus in the pension scheme almost exactly to
the level at which it had stood at 30 November 2020. Note 25 to these accounts sets out the full detail.
Goodwill increased as a result of the acquisition of Midland Classic Limited in August 2022, as set out
above.
Group stocks of parts, tyres and fuel rose slightly as higher levels of fuel stocks were held. Trade and
Other Receivables benefited from the realisation into cash of the DfT grants and subsidies accrued in
prior years. The fuel derivative expired at the end of the year and so there was no asset or liability
exposure from this source at the balance sheet date.
In the sections on Working Capital and Total Net Debt above the impact of the reduction of Trade and
other receivables on bank borrowings has already been set out, together with the reasons for the
increase in Trade and other payables. So, whilst Trade and other payables within Current Liabilities
increased from £6.2 million to £9.2 million, loans and borrowings fell from £11.6 million to only
£418,000, principally through a reduction in drawings under the group’s RCF. Obligations under hire
purchase contracts under both Current Liabilities and Non-Current Liabilities fell as no new hire
purchase contracts were entered into during the year but repayments of
9
CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)
Financial review (continued)
£7.4 million were made. The current portion of hire purchase liabilities is higher than the previous year
as a result of balloon payments due in 2023.
In Non-Current Liabilities the grant for the electrification of five vehicles continued to amortise over its
agreed term, as did the mortgage liability. The decrease in Provisions for Liabilities results from the
board’s review of insurance claims outstanding at the end of the year. No corporation tax is payable
on the profits for the year, but the deferred tax liability has increased in response to the increase in
corporation tax rates from April 2023 as set out above. Of this increase in the deferred tax provision
£652,000 has gone through the Consolidated Income Statement and £255,000 through the
Consolidated Statement of Comprehensive Income (in relation to the defined benefit pension
scheme). The gross liabilities of the group therefore fell to £54.1 million (2021: £71.5 million), a
decrease of 24%.
Overall group net assets were £30.8 million at 30 November 2022, compared to £33.0 million at 30
November 2021.
Cash flow statement
Cash flows from operating activities (before changes in working capital and provisions) fell to £12.5
million in FY 2022 (FY 2021: £18.3 million), principally because the depreciation charge fell by £5.9
million by comparison with the previous year. As in 2021, working capital in 2022 was released rather
than absorbed. The key reasons for this lie in the receipt in cash of the various DfT grants accrued in
prior years and the return to the company’s standard creditor payment terms, as already described
above. The consequence of these various factors was that cash generated from operations reached
£28.1 million (2021: £19.7 million), a considerable increase on the previous year. Interest paid on
lease liabilities fell in line with the fall in total lease liability debt. Cash flows from operating activities
therefore increased to £26.4 million (2021: £17.8 million).
The sale of surplus vehicles and the unused leasehold property served to offset to some extent the
cash expended on the purchase of property, plant and equipment in FY 2022. As set out above, three
acquisitions were made in the year, whereas none had been made in the previous year. The total of
£3.9 million expended on acquisitions included the sum of £577,000 related to the repayment of a
mortgage associated with one of the acquisitions. Thus, in contrast to the small amount of cash
generated in 2021 in this caption, in FY 2022 a total of £4.8 million was expended.
Two interim dividends were paid in the year, after a break in dividend payment under COVID, totalling
1.5p per share. The company also commenced a share buy back scheme in FY 2022 under which a
total of 921,316 ordinary shares were purchased. Financing activities also reflect the changes to loans
and borrowings already described. In order to finance the acquisitions in the year, £3.9 million was
drawn down under the RCF, but over the year as a whole £11.45 million was repaid, together with the
usual mortgage instalments, making a total of £11.87 million. By the end of the year there were
therefore no drawings on the RCF. The capital paid on lease liabilities rose somewhat as the Bolton
fleet re-equipment of the previous year was reflected in increased hire purchase instalments. Overall
£17.2 million was used in financing activities in 2022 compared to £17.8 million in 2021.
Cash and cash equivalents therefore increased by £4.4 million (2021: £84,000) and, instead of a net
liability in cash and cash equivalents of £3.2 million as at 30 November 2021, at 30 November 2022
the company possessed an asset in cash and cash equivalents of £1.2 million. The board regards this
outcome for the year as very satisfactory and in line with its plans and expectations.
10
CHAIRMAN'S STATEMENT AND REVIEW OF OPERATIONS (continued)
Outlook
During the COVID-19 pandemic, the board decided to focus on cash conservation and set a specific
debt reduction target, with the objective of emerging from the pandemic with a robust balance sheet,
fit for renewed commercial operation. The board believes that these objectives have been successfully
achieved.
The board’s key assumption for FY 2023 is that, as passenger numbers continue to recover slowly
and steadily, Government grants and subsidies will taper off, but that the overall outcome will be a
return to normal commercial conditions and sustainable profits at the normalised pre-tax line. In
response to inflation in many of the company’s key cost inputs, such as salaries, fuel prices and parts,
the board has throughout FY 2022 taken active steps to re-align service levels, bus operations and
fares onto a footing which will enable the group to trade successfully for the foreseeable future. This
internal work has been accompanied externally by close cooperation with all the local authorities in
whose areas the group operates, particularly those which have received funding for Bus Service
Improvement Plans, to redefine and reshape bus networks in order to take account of the changes,
at a detailed route level, in bus usage and travel patterns.
This atmosphere of change enabled the group to make the three acquisitions in FY 2022 described
above. At the same time further changes in the bus industry are bound to flow from the acquisition in
FY 2022 of two of the UK’s largest bus groups (Stagecoach Group plc and The Go Ahead Group plc).
The board believes that these investments by new entrants to the bus market are an important
statement about the positive direction of the bus industry, especially when considered against the
background of the continued large-scale investment by the Government under its banner of the
National Bus Strategy.
The board expects that change is likely to be a continuing feature of the bus industry because of the
trends set out above and so it expects the industry to experience continued turbulence while it is
reshaped in the industry’s post-pandemic recovery phase. These business conditions should bring a
healthy flow of opportunities to the company, much like the acquisitions made in FY 2022, for both
organic growth and acquisitions. The board believes that the group has available to it ample bank
facilities to cater for any such growth opportunities. For all these reasons, and despite the increased
cost of living, fluctuating fuel prices and general rise of inflation, the board remains confident about
the future prospects of the company.
John Gunn
Non-Executive Chairman
Date: 5 May 2023
11
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022
Strategy
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 and business units disposed of by larger operators
(such as Rotala’s operations in Preston and Bolton).
Rotala aims to develop profitable and 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 and the
National Bus Strategy;
•
Continue to consolidate smaller businesses via bolt on acquisitions in existing areas of
operation; and
•
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.
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 customers require;
• Results focused - focusing on the delivery of value and the job in hand; and
• Risk aware - assessing options for alternative strategies.
PLC
Our brands signify consistency, reliability and employee commitment.
12
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
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. (5338907)
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. With substantial operations in the North West, the
East and West Midlands and Heathrow areas 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.
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”). A full analysis of the company’s compliance with the QCA Code
is to be found on the company’s website at www.rotalaplc.com/our-investors/corporate-governance-
code.html.
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.
Departure from QCA Code
There is at present no formal performance review of individual directors or a formal review process of
overall board effectiveness in accordance with Principle 7 of the QCA Code. In this respect only the
company departs from the QCA Code. The reason for this departure from the Code is that the
Chairman considers 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.
13
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Departure from QCA Code (continued)
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.
Succession planning in such an environment is difficult, as it always is in a family company.
Succession to key executive roles is therefore a key 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.
Board activity
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.
The attendance record of the board in the last year is as follows. Most of the meetings were held
virtually:
Name
Number of board
meetings in the last year
Number
attended
John Gunn (Non-executive Chairman)
15
14
Graham Spooner (Non-executive
Deputy Chairman and Senior
Independent Director)
15
15
Simon Dunn (Chief Executive)
15
15
Robert Dunn (Managing Director North
West)
15
15
Graham Peacock (Independent Non-
executive Director)
15
14
Kim Taylor (Group Finance Director)
15
15
14
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Board Structures
The board is responsible for the governance of the company and the supervision of its activities. The
board has however delegated certain of its roles and responsibilities to Board Committees, whilst
reserving certain matters to itself. The chairmen of these Committees are responsible for making
appropriate reports to the board as a whole on the activities of their committees.
The following committees of the board have been instituted. These committees are formed of the non-
executive directors only:
Name
Nominations
committee member
Audit
committee
member
Remuneration
committee
member
John Gunn (Non-executive
Chairman)
Yes; chairman
Yes
Yes
Graham Spooner (Non-executive
Deputy Chairman and Senior
Independent Director)
Yes
Yes; chairman
Yes; chairman
Graham Peacock (Independent
Non-executive Director)
Yes
Yes
Yes
The functions of these committees are as follows:
1. Nominations Committee
The responsibilities of the Committee include role specification for any proposed new board
appointment, short-listing and selection of candidates, and consideration of any appointment
or re-appointment to the board, whether of executive or non-executive directors.
2. Audit Committee
The primary function of the Committee is to assist the board in fulfilling its oversight
responsibilities by:
•
serving as an independent and objective party to monitor the quality and timeliness of
the financial reporting process and the internal financial control system;
•
reviewing financial reports and other financial information in advance of their
publication;
•
monitoring, on a continuing basis, the systems of internal controls covering finance
and accounting established by management and the board; and
•
monitoring the auditing, accounting and financial reporting processes generally.
The Committee’s primary duties and responsibilities are to:
•
serve as an independent and objective party to monitor the quality and timeliness of
the financial reporting process and monitor the internal financial control system;
•
review and appraise the audit efforts of the external auditors;
•
provide an open avenue of communication between the external auditors, financial
and senior management, and the board; and
•
confirm and assure the independence and objectivity of the external auditor.
15
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Board Structures (continued)
3. Remuneration Committee
The Committee’s primary duties and responsibilities are to:
•
make recommendations on the company’s framework of executive remuneration and
its cost; this will include, as appropriate, the implementation and overview of the
company’s bonus and share option programmes;
•
determine, on the board’s behalf, specific remuneration packages for each of the
executive directors, including pension rights and any compensation payments;
•
approve any contract of employment or related contract with executive directors on
behalf of the company; and
•
determine and approve any contract of employment of any other employee in respect
of whom the board shall have requested the Committee to act.
In addition the board has reserved certain matters to itself. These matters include:
• Approval of interim and final financial statements;
• Approval of any significant changes in accounting policies or practices;
• Changes to the company’s capital structure;
• Board appointments and removals;
• Responsibilities of and scope of tasks of the Chairman, Chief Executive and any other
executive director;
• Terms of reference of and membership of board committees;
• Approval of the group’s long term objectives and commercial strategy;
• Approval of the group’s annual operating and capital expenditure budgets;
• Changes to the group’s management and reporting structure;
• Any acquisition or disposal of any business or company;
• Any contract of any description not in the ordinary course of business;
• Risk management strategy;
• Health and safety policy; and
• Environmental policy.
The board does expect that, as the company grows in size and evolves, its governance structures
will need to evolve and develop in commensurate fashion.
16
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Relationships with stakeholders
In the bus industry there are many important interest groups. These groups may have direct influence
over the company through the legal powers entrusted in them or they may possess a more informal
influence, which is of no lesser importance to the company. The board regards it of the utmost
importance to maintain contact with all these stakeholder interests and to listen to what they have to
say. Identified more formally constituted stakeholders include:
•
The Department for Transport and key government regulatory bodies (Traffic Commissioners
and The Driver and Vehicle Standards Agency);
•
Local Transport Authorities, Local Councils, local Members of Parliament, Local Councillors;
•
Local bus user representative groups (including groups or charities with mobility interests); and
•
Individual bus users: individual bus users can make their views known via the company’s
website. This also incorporates a complaints facility. All complaints are recorded and
systematically replied to.
The company is in constant contact at managerial level with all these stakeholders and conducts
formal meetings with all of them, whether individually or through bus operator representative bodies.
By these means the company gains insight not only into fresh legal or regulatory demands but also
into the thinking and more general objectives of these stakeholder groups, with the added advantage
of being able to influence them in return. The board receives regular reports of developments in these
key relationships from the Chief Executive as part of his formal reporting. The company regards its
relations with these bodies as being of critical importance in ensuring its success.
Other stakeholders include:
Employees
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. All drivers are also regularly
put through the training courses which are mandatory in enabling them to retain their driving
qualifications.
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. Executive directors and
senior managers, as a matter of policy, are frequently on hand when services begin to run out first
thing in the morning. By these means they make themselves known to all employees and enable
themselves to get to know each individual employee.
17
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Employees (continued)
Managers pride themselves on being approachable and ready to listen to employee suggestions and
comments about operating difficulties.
An SAYE scheme exists for the benefit of all employees. The details of the scheme are set out in note
28 to these financial statements. The board has judged that it is not appropriate to offer further
tranches under this scheme until the effects of the COVID-19 pandemic are shaken off and normal
trading conditions in the bus industry resume.
Key suppliers and corporate customers
More formal relationships are conducted with corporate customers and key suppliers. Here the basis
of the relationship is a written contract which governs dealings between the two parties. Contract
performance reviews are regularly conducted with corporate customers. Here the key matters will be
service delivery according to the targets embedded in the contract. It need hardly be pointed out that
contract renewal is almost always dependent to some degree on the strength of the relationship with
the customer and of course the performance against target. With the suppliers the relationship is the
other way round: they are being held to account and their delivery performance reviewed against the
agreed targets. Nevertheless a harmonious long-term relationship is always desired.
Relationships with shareholders
The company values the views of its shareholders and recognises their interest in the company’s
strategy and performance.
As regards institutional shareholders, the board obtains their views and expectations through the
usual well-established channels:
•
Individual meetings with such shareholders as and when requested;
•
Invitations to business tours if requested;
•
“Road show” meetings as part of each half year and full year reporting cycle;
•
Close liaison with the company’s broker; and
•
Regular meetings with any analysts covering the company (who are in turn in close contact
with their clients).
The company’s broker provides regular feedback on the outcomes of all these forms of meeting and
this feedback is distributed to the whole board. Each member of the board also receives all notes
published by the analysts which follow the company.
As regards private shareholders the Annual General Meeting (“AGM”) and the Annual Report are the
principal channels of communication. The directors are always available to answer questions at the
AGM. Private shareholders are encouraged to participate via the AGM but very few private
shareholders presently attend it. Aside from the AGM, it is harder for the company to ascertain the
views and expectations of private shareholders directly. Besides these initiatives the company
normally attends a number of conferences during the year which are specifically aimed at the private
shareholder. These events give the private shareholder the opportunity to ask questions and convey
their views. The board has found these to be valuable and will continue to engage with private
shareholders by these means. Any question can be put to the company by e-mail at info@rotala.co.uk
All historic annual reports, and Stock Exchange announcements, together with other key
organisational documents, are available from the company’s website www.rotalaplc.com/our-
investors/ . The results of AGM business are announced via the Regulatory News Service, together
with the details of each vote for and against AGM resolutions.
18
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Streamlined energy and carbon reporting
Rotala, being an AIM-traded large company as defined by the ‘Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008’, is required to disclose its
annual energy use and greenhouse gas emissions, and related information, as follows:
2022
2022
2021
2021
Fuel
Millions of
KWH
Emissions
– tonnes
gross
CO2e
Millions
of KWH
Emissions
– tonnes
gross
CO2e
Diesel
123.21
29,640
116.76
27,657
Gas
0.93
136
2.24
392
Electricity
1.38
293
1.28
273
Total
125.52
30,069
120.28
28,322
Intensity ratio per £’million
of revenue
354
293
Methodology
The figures in the above table have been derived from records of actual diesel fuel usage, gas and
electricity consumption in the reporting period. These consumption statistics have then been
converted into kilowatt hours (“KWH”) and tonnes of gross CO2 equivalent (“tonnes gross CO2e”)
using the conversion factors set out in the paper “UK Government GHG Conversion Factors for
Company Reporting”.
As can be readily appreciated from the above table 98% of the group’s energy consumption and CO2
emissions comes from the bus fleet. As set out in the section on “Fleet Management” in the Chairman’s
Statement, the board is acutely conscious of the emission standards both of the fleet as a whole and
its individual component vehicles. The board’s aim, over time, is gradually to improve the emission
standards of the group and this policy guides the board’s decisions on fleet replacement. All new
vehicles introduced into the fleet in recent years are of a minimum EURO VI standard.
The above table sets out an Intensity Ratio for the year of 354 tonnes (2021: 293 tonnes) of CO2e per
£’million of revenue. However, in comparing these two figures it should be born in mind that operations
in 2021 were affected at various times by COVID-related restrictions. At the same time revenues were
increased by the level of Government support in 2021, which tapered down in 2022. Given these
factors apply unequally to the two years being compared, it is difficult to derive meaningful conclusions
from the statistics set out above. It will require several years of bus operation under normal operating
conditions to establish a data set against which performance can be compared and interrogated.
19
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Statement in relation to Section 172 of the Companies Act
The board makes the following statement for the year ended 30 November 2022 in relation to Section
172 of the Companies Act.
Acting in good faith
The paragraph headed “Rotala’s Core Values” above sets out very clearly the board’s expectations in
this area. Attention is drawn in particular to these words in that paragraph: “Our commitment is to
conduct business in an ethical manner”. This is a statement by which the board has stood for many
years and continues to do so.
Reputation
The paragraph above headed “Rotala’s Mission” sets out the commitment to deliver consistent quality
of service in accordance with the service level requirements of all stakeholders, while at the same
time offering value for money. The board also aims continually to improve the quality of service
delivery, which it successfully did throughout the year.
Long-term decisions
By its very nature the bus industry is a long term business. Some of the company’s bus routes,
particularly those in urban centres, are the same today as they were a century and more ago, when
they would first have been operated by horse drawn trams. This factor therefore requires decision
making of an equally long term nature. As set out in its statement on “Strategy” above, the board, in
its decision making always seeks to build profitable and sustainable revenue streams with the aim of
improving continually the operating capability and efficiency of the group.
As the bus industry began in 2022 to recover from the effects of the COVID-19 pandemic, the board
continued to have very close co-operation with relevant Local Authorities, Transport Authorities
(particularly in the West Midlands and Greater Manchester) and the Department for Transport
throughout the period.
Employees
The paragraph above headed “Employees” describes the many avenues by which employees are
made aware of the progress of the group’s business and their part in enhancing service delivery and
continually improving the group’s performance. The board also believes that employee training is a
key contributor to the improvement in service delivery. Much effort is put into this activity, backed up
by a very extensive handbook which every employee receives upon joining the group. As noted above
this handbook lays out in great detail the standards to which every employee is expected to adhere.
Another key aspect of the operation of a bus company is a healthy and safe working environment, as
much for passengers as for employees. The safety and security of passengers and employees is the
first priority of the board. Indeed a standing item on the board meeting agenda is the one for “Health
and Safety”. All material events involving risk to Health & Safety are required to be reported to the
board for consideration at every meeting. This subject was of course of particular relevance during
the COVID-19 pandemic, from the perspective both of employees and passengers, but will always be
a key item considered at every board meeting.
Business relationships
The manner in which the relationships with suppliers, corporate customers and other key stakeholders
are governed is set out in the paragraphs above headed “Relationships with stakeholders” and “Key
suppliers and corporate customers”. Inevitably there is a certain tension between the interests and
outlooks of these groups and the interests of shareholders but the board’s approach is always to look
to the long term and attempt to achieve a fair balance between the sometimes conflicting interests of
these stakeholder groups.
20
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Statement in relation to Section 172 of the Companies Act (continued)
Community and the environment
The board recognises that many of its individual bus users are completely reliant on the bus services
provided by the group for their mobility because they do not have access to a car. Thus the board is
keenly aware of its responsibility to ensure that it delivers low-cost, reliable and efficient services to
its customer base, particularly to these individual bus users.
Bus services are furthermore largely delivered in high-density urban environments where the
reduction in pollution from vehicles is a key aim. The board has been committed for many years to
upgrading the group’s bus fleet while continually improving the bus fleet’s emission standards and fuel
efficiency. The paragraph in the Chairman’s Statement headed “Fleet Management” should be
consulted for a full description of the progress in this area over the year. The Streamlined Energy and
Carbon Report above should also be consulted for the impact of the group’s business on the
environment.
21
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Principal risks and uncertainties
The directors consider that the following factors may be considered to be the material risks and
uncertainties facing the group in normal circumstances. The long term impact of the COVID-19
pandemic on the bus industry is still not clear and so it is not possible at this time to evaluate and
describe all the potential risk implications of the pandemic for the business of the group. With that
caveat, the board has nevertheless taken action to mitigate identified risks, as follows:
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
hedging
arrangements
as
described
in
the
Chairman’s Statement. Management also
closely monitors fleet fuel efficiency.
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.
22
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Streams of Business
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; and
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.
• 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 group’s key performance indicators from continuing operations (before mark to market provisions,
acquisition expenses and other exceptional items) are considered to be:
2022
2021
Revenue
£84,871,000 £96,543,000
Gross profit margin 12.1%
14.6%
Profit from operations before mark to market provisions
and other exceptional items
£1,142,000 £1,780,000
(Loss) before taxation and mark to market provisions
and other exceptional items
(£1,102,000) (£1,297,000)
23
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Key performance indicators (KPIs) (continued)
The group’s key performance indicators from continuing operations (after all exceptional items) are
considered to be:
2022
2021
Revenue
£84,871,000 £96,543,000
Gross profit margin 12.1%
14.6%
Profit from operations
£4,216,000
£3,372,000
Profit before taxation
£1,972,000
£295,000
These key performance indicators are used as follows:
1.
Revenue: this measure is a key indication of the success of the group in increasing its market
share and thus its prominence within the bus industry. Management also tracks this measure and
compares it to the targeted turnover levels which will maximise the throughput that the group
achieves within its current depot infrastructure. The more throughput achieved, up to the
maximum practicable amounts, the more efficient will be the group’s operations;
2.
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;
3.
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;
4.
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 2 to 10.
The group's results for the year are set out on page 37. The results of the year and the financial
position as at 30 November 2022 are considered by the directors to be satisfactory.
24
STRATEGIC REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
Going concern
The UK Government from early in the COVID-19 pandemic designated bus operation to be an
essential service. In the early months of the pandemic passenger numbers dropped to very low levels
but have since climbed steadily, though not yet to pre-pandemic levels. At present Government
continues to support the operation of bus services with the BRG grant package. However it is still not
clear what effect, if any, the pandemic will have had on living and work patterns in the long term and
therefore what the impact of any new trends will be on demand for bus travel.
In the light of this uncertainty the board has examined its strategy and considered its profit and loss
and cash flow projections for the accounting periods to 30 November 2025. It has assumed, in its
downside scenario, that passenger volumes will only recover fully during 2023. It has also evaluated
the hire purchase, loan and overdraft facilities available to the group in connection with the periods
examined. After due enquiry and the modelling of the downside scenario, 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.
By order of the board
Kim Taylor
Secretary
Date: 5 May 2023
25
DIRECTORS' REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022
The directors present their statutory report for the group for the year ended 30 November 2022.
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 2 to 10 for a full description of
these matters.
Streamlined energy and carbon reporting
AIM-traded ‘large’ companies (such as Rotala) are also required to disclose their annual energy
use and greenhouse gas emissions, and related information in the Directors’ Report by Schedule
7 of the ‘Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008’. In these accounts reference should be made to the Strategic Report on page 18 for a full
description of these matters.
Financial instruments
Details of financial instruments, including information about exposure to financial risks and the
financial risk management objectives and policies, are given in note 31.
Dividends and Share Price
A special interim dividend of 1.0p per share was paid on 29 April 2022 and an ordinary interim dividend
of 0.5p per share on 9 September 2022. A final dividend of 1.0p per share will be proposed to the
Annual General Meeting.
The company's share price at 30 November 2022 was 34.0p (2021: 30.00p). The high and low prices
in the year were 35.5p and 21.5p respectively.
Effect of the COVID-19 pandemic
The impact of the COVID-19 pandemic, following its emergence and the various stages of restriction
which the UK Government imposed in response, is fully described in the Chairman’s Statement, to
which reference should be made upon this matter.
26
DIRECTORS' REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (Continued)
Directors' interests
The beneficial interests of the directors and their families in the company's shares and share options
at 30 November 2022 and 2021 were as follows:
2022
2022
2021
2021
Options
Options
over
over
Ordinary
ordinary
Ordinary
ordinary
shares
shares
shares
shares
of 25p each of 25p each of 25p each of 25p each
J H Gunn
Beneficial
5,623,897
-
5,623,897
-
R A Dunn
Beneficial
2,470,676
1,415,000
1,999,676
615,000
S L Dunn
Beneficial
1,827,196
2,900,000
1,773,187
900,000
G F Peacock
Beneficial
3,184,166
-
3,184,166
-
G M Spooner
Beneficial
800,000
-
746,540
-
K M Taylor
Beneficial
590,556
795,000
590,556
395,000
J H Gunn is also a director of and shareholder in The 181 Fund Limited: see note 32 – Related Parties
and Transactions.
Share
options
At
30 November
2021
Issued
Exercise
price
At
30 November
2022
Date
exercisable
R A Dunn
615,000
- 54.0p
615,000
24/11/2017
-
800,000
25.0p
800,000
16/03/2022
Total
615,000
800,000
1,415,000
S L Dunn
900,000
- 54.0p
900,000
24/11/2017
-
2,000,000
25.0p
2,000,000
16/03/2022
Total
900,000
2,000,000
2,900,000
K M Taylor
395,000
- 54.0p
395,000
24/11/2017
-
400,000
25.0p
400,000
16/03/2022
Total
395,000
400,000
795,000
All share options expire on 23 November 2024. Further details about the performance conditions
which must be reached before these options become fully exercisable are to be found in note 28.
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 32 – Related Parties and Transactions.
27
DIRECTORS' REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (Continued)
Substantial shareholdings
As at 5 May 2023 the company had been notified that the following were interested in 3% or more of
the ordinary share capital of the company:
Name
Number of
ordinary shares
%
Mr John Gunn
5,623,897
18.13
Mr Nigel Wray
2,742,249
8.84
Mr Robert Dunn
2,470,676
7.96
Mr Graham Peacock
2,275,075
7.33
Mrs S Tobbell
2,275,075
7.33
Close Asset Management Limited
2,201,712
7.10
Mr Simon Dunn
1,827,196
5.89
The 181 Fund Limited
1,702,443
5.49
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.
2022
2022
2022
2021
2021
2021
Number
% of
called
up
share
capital
Cost or
proceeds
Number
% of
called up
share
capital
Cost or
proceeds
£
£
Ordinary shares held in
treasury at beginning of
year
833,809
1.64
805,540
833,809
1.64
805,540
Acquired during the year
921,316
1.81
273,031
-
-
-
Issued in lieu of cash
bonus
(33,809)
(0.07)
(9,805)
-
-
-
Ordinary shares held in
treasury at end of year
1,721,316
3.38 1,068,766
833,809
1.64
805,540
The maximum number of ordinary shares held in treasury during the year was 1,721,316 (2021:
833,809), representing 3.38% of the called up share capital of the company (2021: 1.64%). A total of
2,515,000 shares were acquired for treasury between 2014 and 2016 at prices between 54p and 75p
per ordinary share to meet the share issues which were occasioned by share option exercises and
loan stock conversions in those financial years.
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.
28
DIRECTORS' REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (Continued)
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 UK adopted international
accounting standards (“IFRSs”). 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; and
• 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.
29
DIRECTORS' REPORT FOR THE YEAR ENDED 30 NOVEMBER 2022 (Continued)
Employment policies and employee involvement and communication
The group's policies in the matters of employment (including the disabled), employee involvement
and communication are dealt with in the Strategic Report, to which reference should be made for
these items. The Strategic Report also covers such matter as relationships with customers and
suppliers.
Note 34 should be consulted for any significant post balance sheet events.
Auditors
Mazars LLP resigned as auditors on 2 August 2022 and Jeffreys Henry LLP were appointed to fill the
casual vacancy. Jeffreys Henry LLP (a member of the Gravita Group) has indicated that it will not
seek re-appointment as the company’s auditor at the forthcoming Annual General Meeting as,
following a business reorganisation, the group will provide audit services to clients from another
company in the group, Gravita Audit Limited. A resolution to appoint Gravita Audit Limited as the
company’s auditor will be proposed at the Annual General Meeting.
For the year ended 30 November 2022, 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: 5 May 2023
Company no: 05338907
30
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 2022 which comprise the consolidated income
statement, the consolidated statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in equity, the consolidated statement of cash
flows, the company statement of financial position and the 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 the preparation of the group financial
statements is applicable law and UK adopted International accounting standards (IFRSs). The
financial reporting framework that has been applied in the preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards, including Financial
Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted
Accounting Practice).
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 2022 and of the Group’s loss for the year then ended;
•
the Group financial statements have been properly prepared in accordance with UK adopted
international accounting standards;
•
the parent company financial statements have been properly prepared in accordance with UK
Generally Accepted Accounting Practice 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, 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern
basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the
directors’ assessment of the Group’s and the Parent Company’s ability to continue to adopt the going
concern basis of accounting included reviews of expected cash flows for at least 12 months from the
date of approval, to determine expected cash burn, which was compared to the liquid assets held in
the Group.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the Group’s and
the Parent Company’s ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
31
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROTALA PLC (Continued)
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Goodwill
and
other
intangible
assets
and
investments carrying value
As at 30 November 2022, goodwill and other intangible
asset on the statement of financial position is £15.96
million (2021: £14.91 million).
There is a risk that the goodwill carrying value may not
be adequately reported and an impairment omitted by
management due to inadequate consideration of
estimates.
The Directors have a duty to confirm that all intangibles,
are correctly recognised and appropriately considered
for any impairment at the year end.
Furthermore,
should
impairment
indicators
be
identified, there is a level of judgement exercised by
management in estimating fair value of intangibles,
which may result in inaccurate valuation of balances.
The Company had investments of £40.55 million (2021:
£42.63 million) as at the year ended 30 November
2022.
The Directors have confirmed all investments, including
additions were correctly calculated and being held at
cost.
We identified a risk that the investment held within the
parent company financial statements in its subsidiaries,
may be impaired.
Management’s assessment of the recoverable amount
of investments in subsidiaries requires estimation and
judgement around assumptions used, including the
cash flows to be generated from continuing operations.
Changes to assumptions could lead to material
changes in the estimated recoverable amount,
impacting the value of investment in the subsidiary and
impairment charges.
We
have
performed
the
following
audit
procedures:
• We enquired of management and reviewed their
assessment in line with related justifications and
evidence to ensure appropriate carrying value
disclosed at year end;
• We reviewed the projected revenue and income
streams to evaluate management’s judgement that
the carrying value is recoverable;
• Where no indicators of impairment were
highlighted by management, we challenged the
judgements made in management’s assessment
by identifying contradictory signs of any potential
indicators of impairment;
• We also considered the appropriateness of the
Group’s disclosures.
• Reviewed management’s assessment of future
operating cashflows and indicators of impairment;
• Assessed the methodology used by
management to estimate the future profitability of
its subsidiaries and recoverable value of the
investment, in conjunction with any intra-group
balances, to ensure that the method used is
appropriate;
• Assessed the appropriateness and applicability
of discount rate applied to the current business
performance;
Based on the audit work performed, we are
satisfied that management have appropriately
valued intangibles and investments in line with their
accounting policy and in accordance with the
requirements of IFRS. We are also satisfied that all
necessary disclosure have been made in the
consolidated financial statements.
32
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROTALA PLC (Continued)
Key audit matters (continued)
Carrying value of retirement benefit obligation and
disclosures of retirement benefit obligations
There is a risk that the retirement benefit asset
amounting to £1.47m (2021: £4.25m) and before
deferred tax adjustment, has been incorrectly stated.
The valuation of scheme is comprehensive and
requires a high degree of judgement based on the
actuarial assumptions over the prevailing future outlook
at the point of valuation. Therefore, we considered that
there are risks associated with the judgements related
to key assumptions used in the valuation reporting of
defined benefit scheme.
We
have
performed
the
following
audit
procedures:
• Audit procedures were designed to ensure that
reliance could be placed on the expert actuary.
• Additional procedures were designed to ensure
that the calculations used were reasonable and that
they were properly extracted from the report
prepared by the actuary and presented in the
consolidated financial statements.
• Enquiries were made where required, to
document and obtain further insight in terms of the
key assumptions for liabilities and assets disclosed
by the actuary;
Based on the audit procedures, we are satisfied
that management has appropriately valued the
defined benefit pension scheme and all necessary
disclosures has been made in the consolidated
financial statements.
Revenue recognition
The Group had a total turnover of £84.9m (2021
£96.5m) as at the year ended 30 November 2022.
Revenue is the principal measure used by stakeholders
to determine the performance of the group. Revenue
recognition and in particular cut-off are presumed to be
significant risk areas of the audit.
The directors disclose the basis of recognition of
revenue in the accounting policies and have also in note
4 segmented income based on 3 key streams:
contracted, commercial and charter. In addition, in the
current and prior year, income from grants and
subsidies were a significant source for the group.
We have performed the following audit
procedures:
• Commercial income receipts in the year were
reconciled to the till receipts system and nominal
ledgers. Detailed testing of a sample of
transactions were performed and cut-off checked.
Walkthrough of revenue were performed to check
that controls were working appropriately.
• We performed detailed testing of a sample of
accrued and deferred income to ensure that
income was posted to the correct period.
• We agreed a sample of contracts and vouched
income through to bank statements.
• For grant income we verified receipts to bank
statements and reviewed correspondence with
relevant government bodies to identify any
potential issues regarding the claims made. We
confirmed that the grant income was recognised in
accordance with the grant rules and conditions.
We checked for completeness and accuracy of
grant income.
Based on the audit work performed, we are
satisfied that management has appropriately
recognised revenue and all necessary disclosures
have been made in the consolidated financial
statements.
33
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROTALA PLC (Continued)
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 in aggregate on the financial statements as a whole.
Based on our professional judgment, we determined materiality for the financial statements as a whole
as follows:
Group Financial statements
Company
Financial
Statements
Overall
materiality
£850,000
£425,000
How
we
determined it
Based on 1% of turnover
Based on 1% of gross
assets
Rationale for
benchmark
applied
We believe that turnover is the
primary measure used by the
shareholders in assessing the
performance of the Group and
that
the
group
has
full
operations and trading activities.
We believe that gross
assets is the primary
measure used by the
shareholders in assessing
the performance of the
parent company as it does
not
have
any trading
activities and its purpose
is that of holding of
investments in subsidiary
entities.
For each component in the scope of our Group audit, we allocated a materiality that is less than our
overall Group materiality. The range of materiality allocated across components ranged from £110,000
to £300,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our
audit for the Group above £42,500 and for the Parent Company above £21,250 as well as
misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we looked at where the Directors made
subjective judgments, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in all of our audits we
also addressed the risk of management override of internal controls, including evaluating whether
there was evidence of bias by the Directors that represented a risk of material misstatement due to
fraud.
34
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROTALA PLC (Continued)
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial statements as a whole, taking into account the structure of the Group and the
Company, the accounting processes and controls, and the industry in which they operate.
The Group financial statements are a consolidation of the parent company and its subsidiaries detailed
in Note 36 of the consolidated financial statements. We conducted a full scope audit of the Group and
key components whilst carrying out targeted audit procedures on non-significant components. We
conducted sufficient appropriate audit procedures on the subsidiaries for the purposes of the
consolidation.
We have audited all components within the Group, and no unaudited components remain.
Other information
The other information comprises the information included in the annual report other than the financial
statements and our auditor’s report thereon. The Directors are responsible for the other information
contained within the annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
•
the Strategic report and the Directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company and its environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic report nor 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 Company, or returns adequate for our
audit have not been received from branches not visited by us; or
•
the 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.
35
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROTALA PLC (Continued)
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 28, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
The objectives of our audit, in respect to fraud are: to identify and assess the risks of material
misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence
regarding the assessed risks of material misstatements due to fraud, through designing and
implementing appropriate responses; and to respond appropriately to fraud or suspected fraud
identified during the audit. However, the primary responsibility for the prevention and detection of fraud
rests with both those charged with governance of the entity and management.
Our approach to identifying and assessing the risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and regulations, was as follows:
•
the senior statutory auditor ensured the engagement team collectively had the appropriate
competence, capabilities and skills to identify or recognise non-compliance with applicable
laws and regulations;
•
we identified the laws and regulations applicable to the company through discussions with
directors and other management, and from our knowledge and experience of the entity's
activities.
•
we focused on specific laws and regulations which we considered may have a direct material
effect on the financial statements or the operations of the company, including Companies Act
2006, taxation legislation, data protection, employment and health and safety legislation.
•
we assessed the extent of compliance with the laws and regulations identified above through
making enquiries of management and reviewing legal expenditure; and
•
identified laws and regulations were communicated within the audit team regularly and the
team remained alert to instances of non-compliance throughout the audit.
36
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROTALA PLC (Continued)
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud (continued)
We assessed the susceptibility of the Group and the Parent Company’s financial statements to
material misstatement, including obtaining an understanding of how fraud might occur, by:
•
making enquiries of management as to where they considered there was susceptibility to fraud,
their knowledge of actual, suspected and alleged fraud; and
•
considering the internal controls in place to mitigate risks of fraud and non-compliance with
laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
•
performed analytical procedures to identify any unusual or unexpected relationships;
•
tested journal entries to identify unusual transactions;
•
assessed whether judgements and assumptions made in determining the accounting
estimates were indicative of potential bias; and
•
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed
procedures which included, but were not limited to:
•
agreeing financial statement disclosures to underlying supporting documentation;
•
reading the minutes of meetings of those charged with governance; and
•
enquiring of management as to actual and potential litigation and claims
There are inherent limitations in our audit procedures described above. The more removed that laws
and regulations are from financial transactions, the less likely it is that we would become aware of
non-compliance. Auditing standards also limit the audit procedures required to identify noncompliance
with laws and regulations to enquiry of the directors and other management and the inspection of
regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error
as they may involve deliberate concealment or collusion. Our audit procedures are designed to detect
material misstatements. We are not responsible for preventing non-compliance or fraud and cannot
be expected to detect non-compliance with all laws and regulations.
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 this report
This report is made solely to the Parent 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 Parent 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 Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Sachin Ramaiya (Senior Statutory Auditor)
For and on behalf of
Jeffreys Henry LLP, Statutory Auditor
Finsgate
5-7 Cranwood Street
London EC1V 9EE
5 May 2023
37
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 NOVEMBER 2022
Note
2022
2022
2022
2021
2021
2021
Results
before
exceptional
items
Exceptional
items
(note 10)
Results
for the
year
Results
before
exceptional
items
Exceptional
items
(note 10)
Results
for the
year
£'000
£'000
£'000
£'000
£'000
£'000
Continuing
operations
Revenue
4
84,871
-
84,871
96,543
-
96,543
Cost of sales
(74,611)
-
(74,611)
(82,429)
-
(82,429)
Gross profit
10,260
10,260
14,114
14,114
Administrative
expenses
(9,118)
3,074
(6,044)
(12,334)
1,592
(10,742)
Profit from
operations
7
1,142
3,074
4,216
1,780
1,592
3,372
Finance income
8
68
-
68
19
-
19
Finance expense
9
(2,312)
-
(2,312)
(3,096)
-
(3,096)
(Loss)/profit before
taxation
10
(1,102)
3,074
1,972
(1,297)
1,592
295
Tax credit/(expense)
11
209
(1,014)
(805)
247
(476)
(229)
(Loss)/profit for the
year attributable to
the equity holders of
the parent
(893)
2,060
1,167
(1,050)
1,116
66
(Loss)/earnings per
share for (loss)/profit
attributable to the
equity
holders of the parent
during the year:
Basic (pence)
12
(1.80)
2.36
(2.10)
0.13
Diluted (pence)
12
(1.80)
2.36
(2.10)
0.13
The accompanying notes form an integral part of these financial statements.
38
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED
30 NOVEMBER 2022
Note
2022
2021
£'000
£'000
Profit for the year
1,167
66
Other comprehensive income:
Items that will not subsequently be reclassified to profit or loss:
Actuarial (loss)/gain on defined benefit pension scheme
25
(2,847)
2,821
Deferred tax on actuarial gain/(loss) on defined benefit pension
scheme
26
712
(536)
Adjustment for change in deferred tax rate
26
(255)
-
Other comprehensive (loss)/profit for the year (net of tax)
(2,390)
2,285
Total comprehensive (loss)/income for the year attributable
to the equity holders of the parent
(1,223)
2,351
The accompanying notes form an integral part of these financial statements.
39
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 NOVEMBER 2022
Note
2022
2021
£'000
£'000
Assets
Non-current assets
Property, plant and equipment
13
56,900
61,091
Defined benefit pension asset
25
1,474
4,253
Goodwill and other intangible assets
14
15,960
14,907
Total non-current assets
74,334
80,251
Current assets
Inventories
16
1,229
1,090
Trade and other receivables
17
8,154
21,796
Derivative financial instruments
23
-
958
Cash and cash equivalents
18
1,214
442
Total current assets
10,597
24,286
Total assets
84,931
104,537
Liabilities
Current liabilities
Trade and other payables
19
9,175
6,217
Loans and borrowings
20
418
11,615
Lease liabilities
21
8,566
7,319
Total current liabilities
18,159
25,151
Non-current liabilities
Deferred income
19
410
640
Loans and borrowings
20
5,021
5,445
Lease liabilities
21
25,361
34,485
Provisions for liabilities
24
2,088
3,414
Net deferred taxation
26
3,085
2,377
Total non-current liabilities
35,965
46,361
Total liabilities
54,124
71,512
TOTAL NET ASSETS
30,807
33,025
Shareholders’ funds
Share capital
27
12,731
12,731
Share premium reserve
12,369
12,369
Merger reserve
2,567
2,567
Shares in treasury
(1,069)
(806)
Retained earnings
4,209
6,164
TOTAL EQUITY
30,807
33,025
The consolidated financial statements were approved by the Board of Directors and authorised for
issue on 5 May 2023
Simon Dunn
Kim Taylor
Chief Executive
Group Finance Director
The accompanying notes form an integral part of these financial statements.
40
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 NOVEMBER 2022
Share
capital
£'000
Share
premium
reserve
£'000
Merger
reserve
£'000
Shares in
treasury
£'000
Retained
earnings
£'000
Total
£'000
At 1 December 2020
12,731
12,369
2,567
(806)
3,813
30,674
Profit for the year
-
-
-
-
66
66
Other comprehensive
income
-
-
-
-
2,285
2,285
Total comprehensive
income
-
-
-
-
2,351
2,351
Transactions with
owners:
Dividends paid and
accrued
-
-
-
-
-
-
Transactions with
owners
-
-
-
-
-
-
At 30 November 2021
12,731
12,369
2,567
(806)
6,164
33,025
Profit for the year
-
-
-
-
1,167
1,167
Other comprehensive
income
-
-
-
-
(2,390)
(2,390)
Total comprehensive
income
-
-
-
-
(1,223)
(1,223)
Transactions with
owners:
Dividends paid
-
-
-
-
(742)
(742)
Purchase of own
shares
-
-
-
(273)
-
(273)
Shares issued from
treasury
-
-
-
10
(10)
-
Share based payment
-
-
-
-
20
20
Transactions with
owners
-
-
-
(263)
(732)
(995)
At 30 November 2022
12,731
12,369
2,567
(1,069)
4,209
30,807
•
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 and to pay bonuses in lieu of
cash;
•
Retained earnings include all current and prior period retained profits and losses.
The accompanying notes form an integral part of these financial statements.
41
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 NOVEMBER 2022
2022
2021
Note
£'000
£'000
Cash flows from operating activities
Profit before taxation
1,972
295
Adjustments for:
Depreciation
7
9,022
14,906
Finance expense (net)
8,9
2,244
3,077
Acquisition expenses
10
143
-
(Profit)/loss on sale of property, plant and
equipment
7
(655)
3
Contribution to defined benefit pension scheme
-
-
Share based payment
5
20
1
Amortisation of grants received
20
(230)
(50)
Notional expense of defined benefit pension scheme
25
-
28
Cash flows from operating activities before changes in
working capital and provisions
12,516
18,260
(Increase)/decrease in inventories
(63)
2,398
Decrease in trade and other receivables
14,413
503
Increase/(decrease) in trade and other payables
1,947
(2,233)
Movement in deferred income and provisions
(1,326)
2,834
Movement on derivative financial instruments
639
(2,060)
15,610
1,442
Cash generated from operations
28,126
19,702
Interest paid on lease liabilities
(1,697)
(1,920)
Net cash flows from operating activities carried forward
26,429
17,782
The accompanying notes form an integral part of these financial statements.
42
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (Continued)
2022
2021
£'000
£'000
Cash flows from operating activities brought forward
26,429
17,782
Investing activities
Purchases of property, plant and
equipment
(1,489)
(1,883)
Grants received thereon
-
690
Business acquisitions (including mortgage repaid)
(3,914)
-
Sale of property, plant and equipment
560
1,268
Net cash (used in)/from investing activities
(4,843)
75
Financing activities
Dividends paid
29
(742)
-
Purchase of own shares
(273)
-
Bank borrowings drawn down
3,851
-
Repayment of bank and other borrowings
(11,869)
(8,987)
Bank and other interest paid
9
(608)
(1,124)
Capital settlement payments on vehicles sold
(171)
(719)
Capital paid on lease liabilities
(7,399)
(6,943)
Net cash used in financing activities
(17,211)
(17,773)
Net increase in cash and cash equivalents
4,375
84
Cash and cash equivalents at beginning of year
18
(3,161)
(3,245)
Cash and cash equivalents at end of year
18
1,214
(3,161)
The accompanying notes form an integral part of these financial statements.
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022
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 2022 (including the comparatives for
the year ended 30 November 2021) were approved by the Board of Directors on 5 May 2023.
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 UK adopted
international accounting standards (“IFRSs”). The financial statements have been prepared on
a going concern basis as described on page 24.
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. No significant judgements were made by the directors
during the current year.
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) 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
25 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 25.
44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
2
Accounting policies (continued)
(c) 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 £2,088,000 (2021: £3,414,000).
(d) 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;
the useful lives of passenger carrying vehicles in particular are regularly reviewed, and
depreciation rates correspondingly adjusted, to reflect management’s estimates of their
remaining service lives within the bus fleet. 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.
Basis of consolidation
The group financial statements consolidate the results of the company and all its subsidiary
undertakings as at 30 November 2022. 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.
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.
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
2
Accounting policies (continued)
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.
46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (Continued)
2
Accounting policies (continued)
Revenue
Revenue represents sales to external customers excluding value added tax. Revenue is
recognised at a point in time upon satisfaction of the relevant performance obligations for the
various revenue streams:
•
Passenger revenue is recognised when the service is delivered;
•
Subsidy revenue from local authorities is recognised on an accruals basis, based on
actual passenger numbers when services are provided; and
•
Contracted and charter services revenues are recognised when services are delivered,
based on agreed contract rates.
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.
Grants and subsidies provided by the Department for Transport and Local Authorities (see note
4) to support bus services run at their behest under COVID-19 conditions have been taken
directly to income. Grant income is recognised on submission of a claim as there are no
unfulfilled conditions at this point in time.
Government grant receipts
Government revenue grants are recognised as income when there is a reasonable assurance
that the business will comply with the attached conditions and that the grant will be receivable.
Revenue grant income is recognised as income over the relevant period and deducted against
the related cost. Government capital grants are initially recognised as a liability and amortised
to the profit and loss account over the relevant period stated by the grant.
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
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
-
Not depreciated
Freehold buildings
-
Fifty years straight line
Leasehold property
-
Shorter of the lease term or fifty years straight line
Plant and machinery
-
Between ten and four years straight line
Passenger Carrying Vehicles
-
On a reducing balance basis over the remaining
(“PCVs”)
useful economic life
Fixtures and fittings
-
Three years straight line
Right of use asset
-
Straight line over the period of the lease
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.
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
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
At inception of a leasing contract, the company assesses whether a contract contains a right-
of-use asset and a corresponding lease liability. It recognises a right-of-use asset and a
corresponding lease liability, as appropriate, with respect to all lease arrangements in which it
is the lessee. The right-of-use assets and the lease liabilities are presented as separate line
items in the statement of financial position.
Right of use assets and liabilities arising from a lease are initially measured at the present
value of the lease payments and payments to be made under reasonably certain extension
options are also included in the measurement of the liability. The lease payments are
discounted using the interest rate implicit in the lease or the incremental borrowing rate that
the individual lessee would have to pay to borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar economic environment with similar terms,
security and conditions in the event the interest rate implicit within the lease is not readily
determinable.
Lease payments are allocated between principal, presented as a separate category within
borrowings, and finance cost. The finance cost is charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period. Right-of-use assets are measured at cost comprising the amount of the initial
measurement of lease liability, any lease payments made at or before the commencement date
less any lease incentives received and any initial direct costs and are presented as a separate
category within tangible fixed assets.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis. If the company is reasonably certain to exercise a purchase
option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases of equipment and vehicles and all leases of low-
value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term
leases are leases with a lease term of 12 months or less.
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
2
Accounting policies (continued)
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 the third party insurer in respect of each accounting period. These premiums are
held by the third party insurer 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 (c) 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.
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.
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
2
Accounting policies (continued)
Financial assets
The group classifies its financial assets as a financial asset measured at amortised cost, fair
value through other comprehensive income or fair value through profit or loss in accordance
with IFRS 9.
Trade and other 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.
A provision for impairment of trade receivables is established based on the expected credit loss
(“ECL”). The group applies the IFRS 9 simplified approach to measuring ECLs which uses a
lifetime expected loss allowance for all trade receivables, which are grouped based on shared
credit risk characteristics and the days past due. The amount of the provision is recognised in
the balance sheet within trade receivables. Movements in the provision are recognised in the
profit and loss account in administrative expenses. Any change in their value through impairment
or reversal of impairment is recognised in the income statement.
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 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.
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.
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
2
Accounting policies (continued)
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 declared.
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.
Aside from the grant and subsidy regime provided by the DfT and Local Authorities, which is
described in the Chairman’s Statement, the group has three main commercial 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 Strategic
Report.
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
3
Changes in accounting standards and interpretations
The group has, in its annual reporting period commencing on 1 December 2021, applied for the
first time the following accounting standards and amendments, none of which have had a
material impact on the group’s financial statements for the year ended 30 November 2022:
•
IAS 16 Property, Plant and Equipment (Amendment): Proceeds Before Intended Use;
•
IAS 37 Provisions, Contingent Liabilities and Contingent Assets: (Amendment): Onerous
Contracts – Cost of Fulfilling a Contract;
•
IFRS 3 Business Combinations (Amendment): Reference to the Conceptual Framework;
•
Annual Improvements to IFRSs (2018 – 2020 cycle).
The following new accounting standards, amendments to accounting standards and
interpretations, which are relevant to the group, have been published but are not yet effective;
they have not been adopted early by the group. These standards, amendments or
interpretations are not expected to have a material impact on the group in the current or future
reporting periods:
IASB
effective
date:
periods
beginning on or
after
IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2 Making Materiality Judgements (Amendment): Disclosure
of Accounting Policies
1 January 2023
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors (Amendment): Definition of Accounting Estimates
1 January 2023
IAS
1
Presentation
of
Financial
Statements
(Amendment):
Classification of Liabilities as Current or Non-current and Classification
of Liabilities as Current or Non-current - Deferral of Effective Date
1 January 2024
IFRS 16 Lease liability in a Sale and Leaseback
1 January 2024
IAS 1 Non-current Liabilities with Covenants
1 January 2024
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
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.
2022
2021
£'000
£'000
Commercial
53,838
31,684
Contracted
21,318
16,179
Charter
1,067
734
Grants and subsidies
8,648
47,946
Total Revenue
84,871
96,543
As set out in the Chairman’s Statement the group has been the beneficiary of extensive
support in the current accounting period from the Department for Transport and Local
Authorities.
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 first 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.
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 2022 and 2021 no service customer constituted more than 10% of Revenues.
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
5
Staff costs
2022
2021
£'000
£'000
Staff costs (including directors) comprise:
Wages and salaries
43,046
40,784
Employer’s national insurance contributions
4,261
4,305
Defined contribution pension costs
675
1,110
______
______
47,982
46,199
Share-based payment expense
20
1
_______
_______
48,002
46,200
_______
_______
Staff costs in 2021 are stated after grant income received or receivable in respect of the
Coronavirus Job Retention Scheme totalling £751,000.
The average number of employees, including directors, during the year was as follows:
2022
2021
Number
Number
Management and administrative
81
82
Direct
1,337
1,438
_______
_______
1,418
1,520
_______
_______
6
Directors' and key management personnel remuneration
2022
2021
£'000
£'000
Salaries and other short term employee benefits
752
787
Contribution to defined contribution pension scheme (note 25)
16
16
_______
_______
768
803
_______
_______
One director (2021: one) is a member of the group's defined contribution pension scheme.
Emoluments of the highest paid director were £290,000 (2021: £294,000). Pension contributions
of £16,500 (2021: £15,500) were made on his behalf.
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
6
Directors' and key management personnel remuneration (continued)
The directors' remuneration was as follows:
2022
2022
2022
2021
2021
2021
£'000
£'000
£'000
£'000
£'000
£'000
Remuneration
Pension
contributions
Total
Remuneration
Pension
contributions
Total
Executive
S L Dunn
290
16
306
294
16
310
R A Dunn
199
-
199
225
-
225
K M Taylor
111
-
111
116
-
116
Non-
Executive
J H Gunn
80
-
80
80
-
80
G M Spooner
40
-
40
40
-
40
G F Peacock
32
-
32
32
-
32
____
___
____
____
___
____
752
16
768
787
16
803
____
___
____
____
___
____
Certain of the services of John Gunn were provided by Wengen Limited under a contract with
that company.
The board considers the directors of the company to be the key management personnel of the
group.
7
Profit/(loss) from operations
2022
2021
£'000
£'000
This is arrived at after charging:
Depreciation of property, plant and equipment
8,639
14,425
Depreciation of right of use assets
383
481
Short term or low value asset lease expense:
- property
398
349
- plant and machinery
508
389
(Profit)/loss on disposal of property, plant and equipment
(655)
3
Auditor's fees:
- audit of the parent company and the group
68
52
- audit of the accounts of subsidiaries
12
11
- other non–audit services
-
-
_______
_______
8
Finance income
2022
2021
£'000
£'000
Net finance income on pension scheme (note 25)
68
19
_______
_______
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
9
Finance expense
2022
2021
£'000
£'000
Bank borrowings and overdraft interest
608
1,069
Lease liabilities
1,704
1,972
Other interest
-
55
_______
_______
2,312
3,096
_______
_______
10
Exceptional items within profit/(loss) before taxation
Profit/(loss) before taxation includes the following mark to market provisions and other
exceptional items:
2022
2021
£’000
£’000
Mark to market profit on fuel derivatives (note 31)
2,620
1,779
Loss resulting from Heathrow depot fire
-
(187)
Acquisition costs
(143)
-
Share based payment
(20)
-
Sale of surplus leasehold property
617
-
Profit within profit before taxation
3,074
1,592
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
11
Tax expense
2022
2021
£'000
£'000
Current tax
Current tax on profits for the year
-
-
_______
_______
Total current tax
-
-
_______
_______
Deferred tax
Origination and reversal of temporary differences
(292)
(150)
Prior year adjustments
139
(79)
Change in rate of tax
(652)
-
_______
_______
Total deferred tax
(805)
(229)
_______
_______
Income tax expense
(805)
(229)
_______
_______
The tax assessed for the year is different to the standard rate of corporation tax in the U.K. for
the following reasons:
2022
2021
£'000
£'000
Profit before taxation
1,972
295
_______
_______
Profit at the standard rate of corporation tax in the UK of 19% (2021:
19%)
(375)
(56)
Non-taxable items
83
(94)
Adjustments in respect of prior periods
139
(79)
Impact of change in tax rates
(652)
-
_______
_______
Total tax expense
(805)
(229)
_______
_______
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.
Under the Finance Act 2021 the main rate of corporation tax will increase from 19% to 25% with
effect from 1 April 2023, with a corresponding effect on deferred tax balances arising or reversing
after that date.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
12
Earnings per share
(a) Basic earnings per share
Basic
Basic
2022
2021
£’000
£’000
Profit attributable to ordinary share holders
1,167
66
Weighted average number of shares in issue
49,502,254
50,091,109
Basic earnings per share
2.36p
0.13p
The calculation of the basic earnings/(loss) 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.
(b) Basic diluted earnings per share
Diluted
Diluted
2022
2021
£’000
£’000
Profit attributable to ordinary share holders
1,167
66
Profit for the purposes of diluted earnings per share
1,167
66
Weighted average number of shares in issue
49,502,254
50,091,109
Adjustment for exercise of options
-
-
Weighted average number of ordinary shares for the purposes of
diluted earnings per share
49,502,254
50,091,109
Diluted earnings per share
2.36p
0.13p
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. However all share options in existence
during the year were antidilutive and thus no adjustment was required.
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
12 Earnings per share (continued)
(c) Adjusted basic (loss)/earnings per share (adjusted before mark to market provision
and other exceptional items):
Basic
Basic
2022
2021
£’000
£’000
(Loss) attributable to ordinary share holders
(893)
(1,050)
Weighted average number of shares in issue
49,502,254
50,091,109
Adjusted basic (loss) per share
(1.80p)
(2.10p)
The calculation of the adjusted basic (loss)/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.
(d) Adjusted diluted (loss) per share (adjusted before mark to market provision and other
exceptional items):
Diluted
Diluted
2022
2021
£’000
£’000
(Loss) attributable to ordinary share holders
(893)
(1,050)
(Loss) for the purposes of diluted earnings per share
(893)
(1,050)
Weighted average number of shares in issue
49,502,254
50,091,109
Adjustment for exercise of options
-
-
Weighted average number of ordinary shares for the purposes of
diluted (loss) per share
49,502,254
50,091,109
Adjusted diluted (loss) per share
(1.80p)
(2.10p)
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. However all share options in existence
during the year were antidilutive and thus no adjustment was required.
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
13
Property, plant and equipment
Freehold
and
leasehold
land and
buildings
Right of
use assets
under
IFRS16
Plant and
machinery
Passenger
carrying
vehicles
Total
£’000
£’000
£’000
£’000
£’000
Cost:
At 1 December 2020
10,907
4,814
6,267
71,392
93,380
Additions
-
-
-
11,905
11,905
Disposals
-
(1,751)
(239)
(15,115)
(17,105)
At 30 November 2021
10,907
3,063
6,028
68,182
88,180
Additions
69
-
56
1,364
1,489
Acquisitions
956
-
400
4,335
5,691
Disposals
-
(1,136)
(12)
(2,052)
(3,200)
At 30 November 2022
11,932
1,927
6,472
71,829
92,160
Depreciation:
At 1 December 2020
344
2,859
2,193
22,592
27,988
Charge for the year
512
481
2,210
11,703
14,906
Disposals
-
(1,722)
(103)
(13,980)
(15,805)
At 30 November 2021
856
1,618
4,300
20,315
27,089
Charge for the year
113
383
857
7,669
9,022
Acquisitions
-
-
186
1,355
1,541
Disposals
-
(542)
(2)
(1,848)
(2,392)
At 30 November 2022
969
1,459
5,341
27,491
35,260
Net book value:
At 30 November 2022
10,963
468
1,131
44,338
56,900
At 30 November 2021
10,051
1,445
1,728
47,867
61,091
The group’s freehold property provides security for the bank loans – see note 20.
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
13
Property, plant and equipment (continued)
Net book value held under
leases:
Freehold
and leasehold
land and
buildings
Right of
use assets
under
IFRS16
Plant and
machinery
Passenger
carrying
vehicles
Total
£’000
£’000
£’000
£’000
£’000
At 30 November 2022
-
468
479
38,467
39,414
At 30 November 2021
-
1,445
968
36,816
39,229
Depreciation charged
thereon :
In 2022
-
383
347
5,530
6,260
In 2021
-
481
426
3,583
4,490
Net book value of right
of use assets:
At 30
November
2022
At 30
November
2021
£’000
£’000
Passenger carrying vehicles
468
842
Leasehold land and buildings
-
603
Depreciation charged
thereon :
Passenger carrying vehicles
374
458
Leasehold land and buildings
9
23
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
14
Goodwill and other intangible assets
Purchased
brands
Contracts
Goodwill
Total
£'000
£'000
£'000
£'000
Cost
At 1 December 2020
250
1,621
14,907
16,778
Additions
-
-
-
-
_______
_______
_______
_______
At 30 November 2021
250
1,621
14,907
16,778
Additions
-
-
1,053
1,053
_______
_______
_______
_______
At 30 November 2022
250
1,621
15,960
17,831
_______
_______
_______
_______
Amortisation
At 1 December 2020
250
1,621
-
1,871
Charge for the year
-
-
-
-
_______
_______
_______
_______
At 30 November 2021
250
1,621
-
1,871
_______
_______
_______
_______
Charge for the year
-
-
-
-
_______
_______
_______
_______
At 30 November 2022
250
1,621
-
1,871
_______
_______
______
_______
Net book value
At 30 November 2022
-
-
15,960
15,960
_______
_______
_______
_______
At 30 November 2021
-
-
14,907
14,907
_______
_______
_______
_______
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 central core provides all support services
such as purchasing, accounting and payroll. 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.
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
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 three
year period to 30 November 2025. Major assumptions are as follows:
CGU
CGU
2022
2021
%
%
Discount rate
12
10
Operating margin
8
8
Long term growth rate
2
2
Inflation
3
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 three 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. Based on the above assumptions, the value in use calculated
for the business is £48m (2021: £51m). 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
2022
2021
£'000
£'000
Fuel, tyres and spares
1,229
1,090
_______
_______
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 £22,984,000 (2021:
£21,175,000). No inventory has been written down to fair value in 2022 or 2021 and therefore
no associated expense was incurred.
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
17
Trade and other receivables
2022
2021
£'000
£'000
Trade receivables
1,408
825
Tax and social security
709
546
Prepayments and accrued income
6,037
20,425
_______
_______
8,154 21,796
_______
_______
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 2022 and 2021 all trade and other receivables have been reviewed for indicators of
impairment. A provision of £37,000 (2021: £453,000) has been 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:
2022
2021
£'000
£'000
Not more than 3 months overdue
28
-
More than 3 months but not more than 1 year
5
-
_______
_______
33
-
_______
_______
Movements in the group trade receivables provision in the year are as follows:
2022
2021
£'000
£'000
Balance brought forward at 1 December
453
Provided
37
453
Used
-
-
_______
_______
Balance carried forward at 30 November
490
453
_______
_______
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
18
Cash and cash equivalents
Cash and cash equivalents for the purposes of the cash flow statement are analysed as follows:
2022
2021
£'000
£'000
Cash at bank
1,214
442
Bank overdraft (note 20)
-
(3,603)
_______
_______
1,214
(3,161)
_______
_______
19
Trade and other payables - current
2022
2021
£'000
£'000
Trade payables
4,756
2,747
Taxation and social security
1,115
519
Other creditors
972
1,037
Accruals and deferred income
2,332
1,914
_______
_______
9,175
6,217
_______
_______
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.
Trade and other payables – non-current
2022
2021
£'000
£'000
Deferred income
410
640
_______
_______
410
640
_______
_______
In 2021 the group received a capital grant of £690,000 in order to facilitate the conversion of
five diesel PCV’s to all-electric operation. This grant is being amortised to the profit and loss
account over the life of the grant, which is five years.
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
20
Loans and borrowings
2022
2021
£'000
£'000
Current:
Overdrafts
-
3,603
Bank loans - RCF
-
7,600
Bank loans – Mortgage Facility
418
412
_______
_______
418
11,615
_______
_______
Non-current:
Bank loans – Mortgage Facility
5,021
5,445
_______
_______
5,439
17,060
_______
_______
On 14 March 2022 new banking facilities were agreed with the group’s principal bankers, HSBC
Bank plc. These facilities comprise a Revolving Commercial Facility (“RCF”) of up to £17 million
and a Mortgage Facility of £5.8 million. The RCF has an initial term of three years, expiring on
14 March 2025, with the option to extend it for up to a further two years. The Mortgage Facility
commenced in 2017, when HSBC Bank plc became bankers to the group, and was originally of
£8.0 million. Since that time repayments have reduced the amounts outstanding to £5.4 million.
It remains on a term of up to twenty years expiring in December 2037. In addition, the company
has an Overdraft Facility of up to £3 million with the same bank, renewed annually.
The Mortgage Facility is 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
Bank
Loans and
overdrafts
2022
Obligations
under
hire
purchase
agreements
(note 22)
2022
Other
lease
liabilities
(note 22)
2022
Trade and
other
payables
2022
Total
2022
£’000
£'000
£’000
£'000
£'000
In one year or less, or on
demand
744
9,330
429
4,756
15,259
In more than one year but
less than two years
719
6,990
180
-
7,889
In more than two years
but less than five years
2,007
15,004
4
-
17,015
Later than five years
4,957
5,442
-
-
10,399
8,427
36,766
613
4,756
50,562
The analysis above represents minimum payments on an undiscounted basis, except for other
lease obligations under IFRS 16, which are discounted.
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
20
Loans and borrowings (continued)
Bank
Loans and
overdrafts
2021
Obligations
under
hire
purchase
agreements
(note 22)
2021
Other
lease
liabilities
(note 22)
2021
Trade and
other
payables
2021
Total
2021
£’000
£'000
£’000
£'000
£'000
In one year or less, or on
demand
12,003
8,426
561
2,747
23,737
In more than one year but
less than two years
684
9,718
523
-
10,925
In more than two years
but less than five years
1,991
17,954
364
-
20,309
Later than five years
5,696
8,800
1,514
-
16,010
20,374
44,898
2,962
2,747
70,981
The analysis above represents minimum payments on an undiscounted basis.
21
Lease liabilities
Current liabilities
2022
2021
£'000
£'000
Obligations under hire purchase agreements (see note 22)
8,177
6,897
Other lease liabilities (see note 22)
389
422
Total current liabilities
8,566
7,319
Non - current liabilities
2022
2021
£'000
£’000
Obligations under hire purchase agreements (see note 22)
25,184
33,025
Other lease liabilities (see note 22)
177
1,460
Total non - current liabilities
25,361
34,485
The group’s obligations under hire purchase agreements are secured by the lessors’ rights
over the leased assets. Other lease liabilities are long term operating lease agreements. The
total cash outflow in respect of lease liabilities (including interest) in 2022 was £9,096,000
(2021: £8,863,000).
68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
22
Obligations under hire purchase agreements and other lease liabilities
(a) Obligations under hire purchase agreements:
Future lease payments are due as follows:
Minimum
lease
payments
2022
Interest
2022
Present
value
2022
£'000
£'000
£'000
Not later than one year
9,330
1,153
8,177
More than one year but less than two years
6,990
834
6,156
More than two years but less than five years
15,004
1,163
13,841
Later than five years
5,442
255
5,187
36,766
3,405
33,361
Minimum
lease
payments
2021
Interest
2021
Present
value
2021
£'000
£'000
£'000
Not later than one year
8,426
1,529
6,897
More than one year but less than two years
9,718
1,657
8,061
More than two years but less than five years
17,954
1,518
16,436
Later than five years
8,800
272
8,528
44,898
4,976
39,922
The present values of future lease payments are analysed as:
2022
2021
£'000
£'000
Current liabilities
8,177
6,897
Non-current liabilities
25,184
33,025
33,361
39,922
It is the group’s policy to lease certain of its plant and equipment and the majority of its vehicles
under hire purchase agreements. The average lease term is 5.0 years (2021: 5.8 years). For the
year ended 30 November 2022, the average effective borrowing rate was 4.36 per cent (2021:
4.24 per cent). All leases are on a fixed repayment basis, but interest rates are variable on some
leases and fixed on others (see note 31). No arrangements have been entered into for contingent
rental payments. All lease obligations are denominated in UK sterling.
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
22
Obligations under hire purchase agreements and other lease liabilities (continued)
(b) Other lease liabilities:
Future lease payments for leases treated as leases under IFRS 16 but which take the legal form
of rental agreements without the right of ownership of the asset leased are as follows:
Minimum
lease
payments
2022
Interest
2022
Present
value
2022
£'000
£'000
£'000
Not later than one year
429
40
389
More than one year but less than two years
180
7
173
More than two years but less than five years
4
-
4
Later than five years
-
-
-
613
47
566
Minimum
lease
payments
2021
Interest
2021
Present
value
2021
£'000
£'000
£'000
Not later than one year
561
139
422
More than one year but less than two years
523
91
432
More than two years but less than five years
364
163
201
Later than five years
1,514
687
827
2,962
1,080
1,882
The present values of future lease payments are analysed as:
2022
2021
£'000
£'000
Current liabilities
389
422
Non-current liabilities
177
1,460
566
1,882
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
23
Derivative financial instruments
Derivative financial instruments are analysed as follows (see also note 31):
2022
2021
£'000
£'000
Current assets
-
958
Current liabilities
-
-
Asset
-
958
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 31.
24
Provisions for liabilities
Insurance
claims
provision
£'000
At 1 December 2021
3,414
Additions
760
Released
(2,086)
Balance at 30 November 2022
2,088
Insurance claims provision
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.
As at 30 November 2022 and 2021 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.
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.
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
25
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 £675,000 (2021: £1,110,000). Contributions amounting to £114,000 (2021:
£113,000) were payable to the funds at the balance sheet date.
Another group company operates a defined benefit pension scheme within the West Midlands
Pension Fund (“WMPF”), governed by the Local Government Pension Regulations (“LGPR”).
The administering authority for the Fund is the West Midlands Combined Authority. This pension
scheme provides a pension to its members.
The group accounts for pensions in accordance with IAS 19 “Employee Benefits”. No
contributions were paid in the year and none were payable to the fund at the balance sheet
dates. Expected contributions for the year ending 30 November 2023 are £nil.
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 UK
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 2022 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 2022 is 12
years (2021: 12 years).
WMPF defined benefit pension scheme
The calculations of the IAS 19 disclosures for the WMPF have been based on the most recent
actuarial valuation, which have been updated to 30 November 2022 to take account of the
requirements of IAS 19. The calculations and disclosures have been made by the actuary to the
WMPF, who is an independent professionally qualified actuary.
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
25
Pensions (continued)
The principal actuarial assumptions used were as follows:
30 November
30 November
2022
2021
%
%
Rate of increase in salaries
n/a
n/a
Rate of increase of pensions in payment 3.05
3.15
Discount rate 4.30
1.60
The life expectancy assumptions used for the scheme are periodically reviewed and as at 30
November were:
30 November
30 November
2022
2021
Years
Years
Current pensioner aged 65 – male
20.4
20.6
Current pensioner aged 65 – female
23.7
23.8
Future pensioners at aged 65 (aged 45 now) – male
22.2
22.4
Future pensioners at age 65 (aged 45 now) – female
25.5
25.7
Since the scheme has been closed for a number of years, there is no current service cost to be
charged to operating profits.
Change in assumption
Impact on overall liability
Discount rate
Increase/decrease by 0.1%
Increase/decrease of 1.0%
Pension increase rate
Increase/decrease by 0.1%
Increase/decrease of 1.0%
Life expectancy
Increase by 1 year
Increase of 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.
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
25
Pensions (continued)
The amounts recognised in the statement of financial position were determined as follows:
30 November
30 November
2022
2021
£’000
£’000
Equities
1,749
3,068
Bonds
7,645
11,686
Other
2,791
6,637
Cash
1,937
142
_______
_______
Total market value of assets
14,122
21,533
Present value of scheme liabilities
(12,648)
(17,280)
_______
_______
Gross pension asset before tax
1,474
4,253
Related deferred tax liability
(369)
(808)
_______
_______
Net pension asset
1,105
3,445
_______
_______
The equity investments and bonds which are held in plan assets are valued at the current bid
price.
The current actuarial valuation was carried out as at 31 March 2022. In this valuation cycle the
actuary has set a contribution rate of £nil for the period to 31 March 2026. As at 31 March 2022
the actuarial surplus of the scheme was £5,139,000, which represented a funding level of 136%
of actuarial liabilities. The economic benefit of the pension asset may be realised in the future
by further contribution holidays or, ultimately, refunds of contributions paid.
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
25
Pensions (continued)
The total charge to profit and loss for pensions is as follows:
2022
2021
£’000
£’000
Administration expense
-
(28)
Finance cost
- interest return on plan assets
337
251
- interest cost on pension liabilities
(269)
(232)
_______
_______
Net finance income
68
19
_______
_______
Total defined benefit profit/(loss)
68
(9)
Defined contribution costs (note 5)
(675) (1,110)
_______
_______
Total profit and loss charge
(607)
(1,119)
_______
_______
Analysis of amount included within the group’s statement of total comprehensive income:
2022
2021
£’000
£’000
Return on assets (in excess of interest)
(6,794)
2,406
Changes in demographic assumptions
86
293
Experience gain on defined benefit obligation
8
498
Changes in assumptions underlying the present value of the
scheme liabilities
3,853
(376)
_______
_______
Actuarial (loss)/gain
(2,847)
2,821
_______
_______
Actuarial gains/(losses) as a percentage of scheme assets and liabilities at 30 November 2022
were as follows:
2022
2021
2020
Return on assets as a percentage of scheme assets
(48.1)
11.2
4.1
Total actuarial (loss)/gain recognised in statement of
total comprehensive income as a percentage of the
present value of scheme liabilities
(22.5)
16.3
(4.9)
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
25
Pensions (continued)
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 £670,000 (2021: gain of £2,177,000). The actual
return on plan assets was a loss of £6,457,000 (2021: gain of £2,657,000).
The movement in deficit during the year under IAS 19 was:
2022
2021
£’000
£’000
Surplus in scheme at 30 November
4,253
1,441
Movement in the period
- Contributions
-
-
- Administrative expenses
-
(28)
- Actuarial (loss)/gain due to changes in financial assumptions
(2,847)
2,821
- Interest on plan assets
337
251
- Interest cost
(269)
(232)
_______
_______
Surplus in scheme at the end of the year
1,474
4,253
_______
_______
The movement in assets during the year under IAS 19 is as follows:
2022
2021
£’000
£’000
At 30 November
21,533
19,731
Interest return on plan assets
337
251
Return on plan assets
(6,794)
2,406
Employer contributions
-
-
Administrative expenses
-
(28)
Benefits paid
(954)
(827)
_______
_______
At end of year
14,122
21,533
_______
_______
The movement in liabilities during the year under IAS 19 is as follows:
2022
2021
£’000
£’000
At 30 November
(17,280)
(18,290)
Interest cost
(269)
(232)
Actuarial gain/(loss) – changes in assumptions
3,853
(376)
Change in demographic assumptions
86
293
Experience gain on defined benefit obligation
8
498
Benefits paid
954
827
_______
_______
At end of year
(12,648)
(17,280)
_______
_______
76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
26 Deferred taxation
The net deferred tax liability included in the Statement of Financial Position is analysed as
follows:
Accelerated
capital
allowances
Arising on fair
value
adjustments on
acquisitions
Arising
on
defined
benefit
pension
scheme
Arising on
provisions
Losses
Total
£’000
£’000
£’000
£’000
£’000
£’000
At 1 December
2020
(1,638)
14
(274)
209
77
(1,612)
Dealt with in the
profit and loss
account
(56)
(11)
2
(87)
(77)
(229)
Dealt
with
in
other
comprehensive
income
-
-
(536)
-
-
(536)
At 30 November
2021
(1,694)
3
(808)
122
-
(2,377)
Dealt with in the
profit and loss
account
(797)
(3)
(18)
(19)
32
(805)
Dealt
with
in
other
comprehensive
income
-
-
457
-
-
457
Dealt
with
in
business
combinations
(360)
-
-
-
-
(360)
At 30 November
2022
(2,851)
-
(369)
103
32
(3,085)
At 30 November 2022 there were £nil (2021: £nil) temporary differences or unused tax losses
for which deferred tax has not been provided.
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
27
Share capital
Allotted and called up
and fully paid
2022
2022
2021
2021
Number
£’000
Number
£’000
Ordinary shares of 25p each
50,924,918
12,731
50,924,918
12,731
_________
_________
_________
_________
Issued share capital
Number
Nominal
Value
£’000
As at 1 December 2020 and 2021, and 30 November 2021 and 2022 50,924,918
12,731
________
________
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 2022 1,721,316 ordinary shares were held in treasury (2021: 833,809).
28
Share options
As at 30 November 2022 the following share options had been issued and were outstanding
under the company’s employee share option schemes:
Number of
options
Earliest
Exercise
Date of grant
granted
exercise date
Date of expiry
price
24 November 2014
1,910,000
24 November 2017
23 November 2024
54.00p
15 October 2021
800,000
15 October 2021
23 November 2024
29.00p
16 March 2022
3,200,000
16 March 2022
23 November 2024
25.00p
The company 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 relevant market price vesting condition must have
been met.
In respect of the issue of 24 November 2014 the options are 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.
In respect of the issue of 15 October 2021 for the options to be exercisable the share price of
the company must have reached 75p. At the balance sheet date the market price vesting
condition had not been met.
In respect of the issue of 16 March 2022 the options are split into three tranches of 924,445,
1,061,926 and 1,213,629 options. For a tranche to be exercisable the share price of the
company must have reached 56p, 60p and 62p respectively, and remain at that price for at least
20 consecutive business days. At the balance sheet date the market price vesting condition had
not been met in relation to any of these tranches.
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
28
Share options (continued)
In addition the company possesses a His Majesty’s Revenue & Customs approved share option
scheme, open to all employees, called “The Rotala Plc SAYE Share Option Scheme” (the
“Scheme”), but there are at present no issues outstanding in relation to this Scheme because
of the uncertainties resulting from COVID-19. Nominally a Scheme runs for a three year period.
Employees subscribe, through payroll deductions, a monthly sum which accumulates in their
individual savings accounts at a chosen institution. At the end of the three year period the
employee has then 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.
2022
2022
2021
2021
Weighted
Weighted
average
average
exercise
exercise
price (p)
Number
price (p)
Number
Outstanding at beginning of the year
46.62
2,710,000
54.21
1,910,000
Forfeited during the year
-
-
-
-
Lapsed during the year
-
-
-
-
Granted during the year
25.00
3,200,000
29.00
800,000
_______
________
_______
________
Outstanding at the end of the year
34.91
5,910,000
46.62
2,710,000
_______
________
_______
________
The exercise price of options outstanding at the end of the year ranged between 25.0p and
54.0p (2021: 29.0p and 54.0p) and their weighted average remaining contractual life was 2 years
(2021: 3 years).
Of the outstanding options at the reporting date 636,667 (2021: 636,667) were exercisable. The
weighted average exercise price of these options was 54.0p (2021: 54.0p).
The fair value of options granted in 2022 was determined under IFRS 2 using a binominal
valuation model. Significant assumptions used in the calculations included:
• a share price volatility of 25% based on expected and historical price movements;
• a discount of 50% to reflect the market-related performance conditions applicable to these
options;
• a weighted average share price of 24.0p;
• a risk-free interest rate of 5.5%; and
• a period to maturity of 2.71 years from the date of grant of the options.
The weighted average fair value of options granted was 2.0p.
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
29 Dividends paid and proposed
Declared and paid in the year
2022
2021
£'000
£'000
Special interim dividend for 2022 of 1.00 pence per share
496
-
Ordinary interim dividend for 2022 of 0.50 pence per share
246
-
_______
_______
742
-
_______
_______
Proposed for approval (not recognised as a liability at 30 November)
Ordinary final dividend for 2022 of 1.0 pence per share
310
-
_______
_______
310
-
_______
_______
No dividends were paid or proposed in respect of 2021.
30
Commitments under operating leases
The group had total commitments under non-cancellable operating leases as set out below:
2022
2022
2021
2021
Land and
Other
Land and
Other
buildings
assets
buildings
assets
£'000
£'000
£'000
£'000
Operating lease commitments
payable:
Within one year
236
6
231
6
In two to five years
20
-
38
1
In more than five years
-
-
-
-
_______
_______
_______
_______
256
6
269
7
_______
_______
_______
_______
Operating lease payments for land and buildings in 2022 and 2021 consist principally of rentals
payable by the group on short term leases for a depot and for facilities at bus stations.
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
31
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 fair value through profit and loss ("FVTPL") or
at amortised cost; financial liabilities are measured at amortised cost or FVTPL.
The principal financial assets and liabilities on which financial risks arise are as follows:
Carrying
Carrying
value
value
2022
2021
£'000
£'000
Financial assets
Trade and other receivables
6,343
19,981
Cash and cash equivalents
1,214
442
_______
_______
7,557
20,423
_______
_______
Financial asset or liability – FVTPL
Fuel commodity forward derivative contracts - asset
-
958
_______
_______
Fuel commodity forward derivative contracts – liability
-
-
_______
_______
Financial liabilities – at amortised cost
Trade and other payables
8,060
5,698
Loans and borrowings
5,439
17,060
_______
_______
13,499
22,758
_______
_______
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. These gave the group
certainty over a substantial proportion of its projected diesel expenditure up to 30 November
2022.
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); and
• 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.
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
31
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:
2022
£'000
Balance (asset) at 1 December 2021
958
Taken to exceptional items within operating profit
2,620
Receipts on matured instruments
(3,578)
_______
Balance at 30 November 2022
-
_______
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 up to 30 November 2022.
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:
2022
2021
< 6 months 6-12 months > 12 months < 6 months 6-12 months > 12 months
£'000 £'000 £'000 £'000
£'000
£'000
Cash inflow/(outflow) -
-
- 520
438
-
_______ _______ _______ _______ ______ _______
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
31
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 UK sterling, was
as follows:
Financial
Financial
liabilities on
Financial liabilities on
Financial
which a liabilities on
which a liabilities on
floating which a fixed
floating which a fixed
rate is paid
rate is paid
rate is paid
rate is paid
2022
2022
2021
2021
£'000
£'000
£'000
£'000
UK Sterling
18,173
21,193
28,136
30,728
_______
_______
_______
_______
In the year the group paid interest at a rate of between 3.19% and 5.26% (2021: between 2.59%
and 3.65%) 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 1.97% and 13.79% (2021: between 2.09% and 11.52%) 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, based on management’s consideration
of an individual customer’s payment history, credit risk and relevant forward-looking conditions,
it is deemed that 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. 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.
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
31
Financial instruments - risk management (continued)
Capital risk (continued)
Capital for the reporting period under review is as follows:
2022
2021
£'000
£'000
Share capital
12,731
12,731
Share premium reserve
12,369
12,369
Merger reserve
2,567
2,567
Shares in treasury
(1,069)
(806)
Retained earnings
4,209
6,164
_______
_______
At end of year
30,807
33,025
_______
_______
32
Related parties and transactions
•
Certain of 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 (2021: £nil) of the amount charged was unpaid and included within creditors.
During the year J H Gunn received from Rotala a total of £84,358 (2021: £nil) in dividends
on ordinary shares.
•
During the year R A Dunn received from Rotala a total of £36,835 (2021: £nil) in dividends
on ordinary shares.
•
During the year S L Dunn received from Rotala a total of £27,408 (2021: £nil) in dividends
on ordinary shares.
•
During the year K M Taylor received from Rotala a total of £8,858 (2021: £nil) in dividends
on ordinary shares.
•
During the year G M Spooner received from Rotala a total of £12,000 (2021: £nil) in
dividends on ordinary shares.
•
During the year G F Peacock received from Rotala a total of £47,762 (2021: £nil) in
dividends on ordinary shares.
•
J H Gunn is a director of The 181 Fund Limited (“The Fund”), a company incorporated in
Jersey. The Fund held an interest in 1,702,443 ordinary shares of Rotala as at 30 November
2022 (2021: 1,702,443 ordinary shares). At 30 November 2022 Mr. Gunn and his beneficial
interests held 35.14% (2021: 35.14%) of the ordinary share capital of The Fund. During the
year The Fund received from Rotala a total of £25,537 (2021: £nil) in dividends on ordinary
shares.
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
33
Capital commitments
As at 30 November 2022 the group had capital commitments outstanding of £nil (2021: £nil).
34 Acquisitions
(a) Midland Classic Limited (now renamed Diamond Bus (East Midlands) Limited)
As set out in the Chairman’s Statement, in August 2022 the company acquired Midland
Classic 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 £2 million in cash. In
addition, on completion, the company paid approximately £577,000 in cash to one of Midland’s
shareholders to redeem an existing loan of the same sum.
The book values of the assets acquired are set out below.
Book value
Fair value
adjustments
Fair value on
acquisition
£'000
£'000
£'000
Fixed assets
Freehold property
956
-
956
Goodwill
134
-
134
Vehicles
1,737
-
1,737
Plant and equipment
103
-
103
Total fixed assets
2,930
-
2,930
Current assets
Inventory
76
76
Trade and other receivables
454
-
454
Cash
160
-
160
690
-
690
Current liabilities
Trade and other payables
(956)
-
(956)
Taxation
-
(50)
(50)
(956)
(50)
(1,006)
Non-current liabilities
Obligations under hire purchase contracts
(596)
-
(596)
Loans and borrowings
(577)
-
(577)
Deferred taxation
(360)
-
(360)
(1,533)
-
(1,533)
Net assets
1,081
Goodwill
919
Acquisition costs (note 10)
95
2,095
Total cash consideration paid
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
(a) Midland Classic Limited (now renamed Diamond Bus (East Midlands) Limited)
(continued)
The revenues of the acquired business for the period from acquisition up to 30 November 2022
were £2,420,000, and the profits before taxation attributable to the group for this period were
approximately £5,000.
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 have made an assessment of whether there were any intangible assets acquired
with the business. No licenses were acquired with the business. The sales and purchase
agreement includes a standard non-compete clause; however, the sellers had no intention of
re-entering the respective markets at the acquisition date and so there could be no value
attributable to this clause. Where there were contracts in place, there was no evidence that
these contracts produced any immediately identifiable profits or positive cash flows in the hands
of the previous owners. On these bases no separate intangible assets have been identified. The
acquisition expenses incurred by the group amounted to £95,000 and have been expensed in
the Consolidated Income Statement in Administrative Expenses.
(b) Bus businesses of Claribel Coaches Limited and Johnsons (Henley) Limited
As set out in the Chairman’s Statement, in January and April 2022 the group acquired,
respectively, the bus businesses of Claribel Coaches Limited and Johnsons (Henley) Limited.
The Chairman’s Statement describes the details of and the reasons for the acquisitions, and
should be consulted for a detailed description of all the relevant factors. The aggregate
consideration for these acquisitions was £1.355 million in cash. The consideration paid was
represented by the value of the vehicles acquired. No liabilities of any materiality were
assumed.
Because the acquired businesses were immediately folded into the existing operations of the
group in the relevant localities, it is not possible to distinguish revenues and profits for the
acquired businesses in the period to 30 November 2022. The values of assets recognised on
acquisition are their estimated fair values and equate to their pre-acquisition book values
determined under applicable IFRS. 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 have made an assessment of whether there were any intangible assets acquired
with the business. No licenses were acquired with the business. The sales and purchase
agreement includes a standard non-compete clause; however, the sellers had no intention of
re-entering the respective markets at the acquisition date and so there could be no value
attributable to this clause. Where there were contracts in place, there was no evidence that
these contracts produced any immediately identifiable profits or positive cash flows in the hands
of the previous owners. On these bases no separate intangible assets have been identified. The
acquisition expenses incurred by the group amounted to £48,000 and have been expensed in
the Consolidated Income Statement in Administrative Expenses.
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
35 Post balance sheet events
The Chairman’s statement covers the two principal events which occurred after 30 November
2022, that is the Tender Offer, which was announced on 26 January 2023 and closed on 16
February 2023, and the effect on the company and the group of the advent of franchising in
the Greater Manchester area. The statement sets out the latest position as at the date of
approval of these accounts but shareholders will be kept updated with further announcements
on the Regulatory News Service, as necessary.
On 13 February 2023 the company commenced a contract to provide a private bus service in
the Heathrow area. Whilst initially the service requires no fresh capital expenditure, through
the use of existing diesel vehicles, the company has entered into a commitment to replace
these vehicles in due course with new electric vehicles at a total capital cost of approximately
£1.1 million. The extra costs of the electric vehicles will be entirely offset by income
increments.
On 31 March 2023 the company announced the acquisition of a new freehold depot in the
Eccles area of Greater Manchester for a cash consideration of £1.9 million.
36
Audit exemption for subsidiary undertakings
For the year ended 30 November 2022, 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
Rotala Shared Services Limited
04327651
Shady Lane Property Limited
03506681
Diamond Bus Limited
02531054
Hallmark Connections Limited
04390228
Hallbridge Way Property Limited
06504654
Diamond Bus (North West) Limited
03037228
Diamond Bus Company Holding Limited
06504657
Diamond Bus (East Midlands) Limited
05504785
87
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 NOVEMBER 2022
Note
2022
2021
£'000
£'000
Fixed assets
Investments
4
40,548
42,626
Tangible assets
5
163
64
_______
_______
40,711
42,690
_______
_______
Current assets
Debtors
6
715
15,544
Cash at bank and in hand
716
-
_______
_______
Total current assets
1,431
15,544
Creditors: amounts falling due
within one year
7
(2,963)
(12,157)
_______
_______
Net current (liabilities)/assets
(1,532)
3,387
_______
_______
Total assets less current liabilities
39,179
46,077
Creditors: amounts falling due
after more than one year
8
(5,021)
(5,445)
Provisions for liabilities
10
(2,088)
(3,414)
_______
_______
Net assets
32,070
37,218
_______
_______
Capital and reserves
Share capital
11
12,731
12,731
Share premium account
13
12,369
12,369
Shares in treasury
13
(1,069)
(806)
Retained earnings
13
8,039
12,924
_______
_______
Shareholders' funds - equity
32,070
37,218
_______
_______
The parent company loss for the year after taxation was £4,153,000 (2021: profit £1,965,000).
The parent company financial statements were approved by the Board of Directors and authorised for
issue on 5 May 2023.
Simon Dunn
Kim Taylor
Chief Executive
Group Finance Director
The accompanying notes form an integral part of these financial statements.
88
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 NOVEMBER 2022
Share
capital
£'000
Share
premium
reserve
£'000
Shares in
treasury
£'000
Retained
earnings
£'000
Total
£'000
At 1 December 2020
12,731
12,369
(806)
10,959
35,253
Profit for the year
-
-
-
1,965
1,965
Dividends paid
-
-
-
-
-
Shares issued
-
-
-
-
-
At 30 November 2021
12,731
12,369
(806)
12,924
37,218
Loss for the year
-
-
-
(4,153)
(4,153)
Dividends paid
-
-
-
(742)
(742)
Purchase of own
shares
-
-
(273)
-
(273)
Share based payment
-
-
-
20
20
Shares issued from
treasury
-
-
10
(10)
-
At 30 November 2022
12,731
12,369
(1,069)
8,039
32,070
The accompanying notes form an integral part of these financial statements.
89
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022
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.
Critical accounting estimates and judgements
Certain estimates and judgements need to be made by the directors of the company which affect
the results and position of the company as reported in the financial statements. There were no
significant judgements made by the directors during the current year.
Estimates
The major areas of estimation within the financial statements are as follows:
(a) Impairment of investments in subsidiary undertakings
The company has carried out an impairment review on its investment in subsidiary
undertakings. 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. No impairment loss
was identified. At the year end, the carrying value of the investment in subsidiary
undertakings subject to this estimation uncertainty is £44.6 million.
(b) Impairment of receivables
The company has carried out an impairment assessment on the amounts due from
subsidiary undertakings. This assessment has applied the IFRS 9 simplified approach
measuring expected credit losses using a lifetime expected credit loss allowance. In making
this assessment, consideration has been given to the ageing of debt amounts, the individual
subsidiary’s payment history, credit risk and relevant current and forward-looking economic
conditions. At the year end the provision held is £nil and the carrying value of the amounts
due from subsidiary undertakings subject to this estimation uncertainty is £nil.
Functional and presentation currency
The financial statements are presented in UK sterling.
90
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
1
Accounting policies (Continued)
Financial Reporting Standard 101 – reduced disclosure exemptions
The company has applied the disclosure exemptions available in the standard in the following
areas:
•
IFRS 5 disclosures regarding cash flows from discontinued operations;
•
IFRS 7 disclosures regarding financial instruments;
•
IFRS 13 disclosures on fair values;
•
IFRS 15 disclosures regarding revenue from contracts with customers;
•
IFRS 16 disclosures regarding leases;
•
IAS 1 requirement for full comparative information on property, plant and equipment and
intangible assets;
•
IAS 1 requirement to disclose the company’s objectives, policies and processes for
managing capital;
•
IAS 7 requirement to produce a statement of cash flows and related notes;
•
IAS 8 requirement to disclose information about the impact of standards not yet effective;
•
IAS 16 requirement to disclose information about the sale of items that are not an output
of the entity’s ordinary activities;
•
IAS 24 requirements in respect of disclosing remuneration of key management
personnel and intragroup transactions; and
•
IAS 36 requirements on some detailed disclosures regarding impairment of assets.
Investments
Investments in subsidiary undertakings 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.
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.
91
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
1
Accounting policies (Continued)
Fixed assets (continued)
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.
Trade and other 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 services , 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.
A provision for impairment of receivables is established based on the expected credit loss
(“ECL”). The company applies the IFRS 9 simplified approach to measuring ECLs which uses a
lifetime expected loss allowance for all trade receivables, which are grouped based on shared
credit risk characteristics and the days past due. The amount of the provision is recognised in
the balance sheet within receivables. Movements in the provision are recognised in the profit
and loss account in administrative expenses. Any change in their value through impairment or
reversal of impairment is recognised in the income statement.
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.
92
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
1
Accounting policies (Continued)
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.
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.
93
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
1
Accounting policies (Continued)
Pension costs
Defined contribution schemes
Contributions to the company's defined contribution pension schemes are charged in profit or
loss in the year in which they become payable.
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 the third party insurer in respect of each accounting period. These premiums are
held by the third party insurer 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.
Changes in accounting standards and interpretations
The company, in its annual reporting period commencing on 1 December 2021, has for the first
time applied the following accounting standards and amendments, none of which have had a
material impact on the company’s financial statements for the year ended 30 November 2022:
•
IAS 16 Property, Plant and Equipment (Amendment): Proceeds Before Intended Use;
•
IAS 37 Provisions, Contingent Liabilities and Contingent Assets: (Amendment): Onerous
Contracts – Cost of Fulfilling a Contract;
•
IFRS 3 Business Combinations (Amendment): Reference to the Conceptual Framework;
•
Annual Improvements to IFRSs (2018 – 2020 cycle).
94
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
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/loss for the year includes a loss after taxation of £75,000
(2021: profit £1,965,000) 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.
3
Staff costs
2022
2021
£'000
£'000
Staff costs (including directors) comprise:
Wages and salaries
1,486
1,361
Employer’s national insurance contributions
185
151
Defined contribution pension costs
41
43
______
______
1,712
1,555
Share-based payment expense
20
-
_______
_______
1,732
1,555
_______
_______
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:
2022
2021
Number
Number
Management and administrative
29
28
_______
_______
95
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
4
Investments
Subsidiary
undertakings
£'000
Cost and net book value
At 1 December 2021
42,626
Additions
At cost
2,000
Impairment charge for the year
(4,078)
______
Net book value
At 30 November 2022
40,548
______
Net book value
At 30 November 2021
42,626
______
In August 2022 the company acquired all the share capital of Midland Classic Limited (now
renamed Diamond Bus (East Midlands) Limited) for a consideration of £2 million. Reference
should be made to the Chairman’s statement in the consolidated financial statements and to
note 34 in those statements for more details about this acquisition.
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:
Proportion
of voting
Country of
rights and
incorporation ordinary share
Nature of
or registration
capital held
business
Diamond Bus Limited*
England
100%
Transport
Diamond Bus (North West) Limited
England
100%
Transport
Diamond Bus (East Midlands) Limited
England
100%
Transport
Hallbridge Way Property Limited
England
100%
Property holding
Hallmark Connections Limited
England
100%
Transport
Preston Bus Limited
England
100%
Transport
Shady Lane Property Limited
England
100%
Property holding
Rotala Shared Services Limited
England
100%
Transport
Diamond Bus Company Holding Limited
England
100%
Holding company
Flights Hallmark Limited
England
100%
Dormant
* 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
Tipton
Oldbury
West Midlands
B69 3HW
96
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
5
Tangible assets
6
Debtors
2022
2021
£'000
£'000
Prepayments and accrued income
351
40
Taxation
2
34
Deferred tax (note 9)
43
45
Other debtors
319
-
Financial instruments
-
958
Amounts due from subsidiary undertakings
-
14,467
_______
_______
715
15,544
_______
_______
All amounts shown under debtors fall due for payment within one year. The company
is exposed to credit risk from its amounts due from subsidiary undertakings. Provisions
for doubtful debts are established in respect of amounts due from subsidiary
undertakings where, based on management’s consideration of an individual
subsidiary’s payment history, credit risk and relevant forward-looking conditions, it is
deemed that they are impaired. No such provision was considered to be necessary at
30 November 2022 or 2021.
Plant and
machinery
Fixtures
and fittings
Total
£’000
£’000
£’000
Cost:
At 1 December 2021
178
327
505
Additions
104
-
104
At 30 November 2022
282
327
609
Depreciation:
At 1 December 2021
114
327
441
Charge for the year
5
-
5
At 30 November 2022
119
327
446
Net book value:
At 30 November 2022
163
-
163
At 30 November 2021
64
-
64
97
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
7
Creditors: amounts falling due within one year
2022
2021
£'000
£'000
Bank loans and overdrafts (note 8)
418 11,615
Trade creditors
-
103
Taxation and social security
50
50
Accruals and deferred income
260
150
Other creditors
238
239
Amounts due to subsidiary undertakings
1,997
-
_______
_______
2,963
12,157
_______
_______
8
Creditors: amounts falling due after more than one year
2022
2021
£'000
£'000
Bank loan
5,021
5,445
_______
_______
5,021
5,445
_______
_______
Bank borrowings
On 14 March 2022 new banking facilities were agreed with the group’s principal bankers, HSBC
Bank plc. These facilities comprise a Revolving Commercial Facility (“RCF”) of up to £17 million
and a Mortgage Facility of £5.8 million. The RCF has an initial term of three years, expiring on
14 March 2025, with the option to extend it for up to a further two years. The Mortgage Facility
commenced in 2017, when HSBC Bank plc became bankers to the group, and was originally of
£8.0 million. Since that time repayments have reduced the amounts outstanding to £5.4 million.
It remains on a term of up to twenty years expiring in December 2037. In addition, the Company
has an Overdraft Facility of up to £3 million with the same bank, renewed annually.
The Mortgage Facility is 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.
98
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
8
Creditors: amounts falling due after more than one year (Continued)
Analysis of maturity
Bank
Bank
loans
loans
and
and
overdrafts
overdrafts
2022
2021
£'000 £'000
In one year or less, or on demand
418
11,615
In more than one year but not more than two years
418
412
In more than two years but not more than five years
1,254
1,254
In more than five years
3,349
3,779
_______
_______
5,439
17,060
_______
_______
9
Deferred tax
The deferred tax asset included in the company balance sheet is analysed as follows:
2022
2021
£'000
£'000
Accelerated capital allowances
43
45
_______
_______
Net asset
43
45
_______
_______
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 in the year are as follows:
2022
2021
£'000
£'000
Balance brought forward at 1 December
45
231
Recognised in profit or loss
(2)
(186)
_______
_______
Balance carried forward at 30 November
43
45
_______
_______
At 30 November 2022 there were £nil (2021: £nil) temporary differences or unused tax losses
for which deferred tax has not been provided.
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.
99
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
10
Provisions
2022
2021
£'000
£'000
Insurance claims provision
2,088
3,414
_______
_______
2,088
3,414
_______
_______
As set out in note 1 to the company financial statements and note 2 to the consolidated financial
statements, the policy of the company and 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. Formally the company
contracts with these service providers on behalf of group operating companies. Therefore the
provision is maintained in the parent company balance sheet and is not passed down to its
subsidiary undertakings.
As at 30 November 2022 and 2021 it is considered by the company that the provision held is
sufficient to meet the settlement responsibility which falls on the company and the group at those
dates.
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
Allotted and called up
and fully paid
2022
2022
2021
2021
Number
£'000
Number
£'000
Ordinary shares of 25p each
50,924,918
12,731
50,924,918
12,731
_________
_________
_________
_________
Issued share capital
Number
Nominal
Value
£’000
As at 1 December 2020 and 2021, and 30 November 2021 and 2022 50,924,918
12,731
________
________
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 2022 1,721,316 ordinary shares were held in treasury (2021: 833,809).
100
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
12
Share options
For details of the company’s share option schemes see note 28 to the consolidated financial
statements.
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; and
•
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 £41,000 (2021: £43,000). Contributions amounting to £2,967 (2021:
£3,520) were payable to the scheme at the balance sheet date.
15
Capital commitments
As at 30 November 2022 and 2021 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:
2022
2021
Other
Other
assets
assets
£'000
£'000
Operating lease commitments
payable:
Within one year
6
5
In two to five years
-
-
_______
_______
6
5
_______
_______
Operating lease payments for other assets in 2022 consist of rentals payable for low value
assets.
17
Contingent liabilities
The company has entered into a cross-guarantee and floating charge agreement with its
subsidiaries. At 30 November 2022 the contingent liability amounted to £nil (2021: £nil).
The company has guaranteed the hire purchase obligations of its subsidiaries. At 30 November
2022 the contingent liability amounted to £33,361,000 (2021: £39,922,000).
101
NOTES TO THE COMPANY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 NOVEMBER 2022 (continued)
18
Related parties and transactions
For details of the company’s related parties and their transactions see note 32 to the
consolidated financial statements.
19
Post balance sheet events
For disclosure of post balance sheet events reference should be made to note 35 to the
consolidated financial statements.