Acquisition strategy a winner for Rotala

Rotala updated the market on its trading for the year ended 30 November on Wednesday, reporting that the 2018 financial year was in line with market expectations.

The AIM-traded firm said net debt, which stood at £32.8m at the half year, had fallen to £31.5m by the end of the year.

During the financial year, the group said it achieved further growth through the acquisition, from CEN Group, of its entire bus business, trading as ‘Central Buses’.

That acquisition was made in accordance with Rotala’s declared strategy of acquisitive growth, and had “considerably strengthened” the group's network of bus services in the northern part of Birmingham, particularly in the Perry Barr area.

Currently, the annual fuel requirement of the group was approximately 11.5 million litres.

The board explained that taking advantage of a weakness in crude oil prices, in late November it took out a number of fuel hedge contracts, using diesel derivatives, in order to cover around 50% of its fuel requirement for the 2019 full-year.

The coverage of those hedging contracts had recently been extended.

“All of the group's fuel requirement for 2019 has now been covered by hedging contracts, at an average price of 100p per litre, which is the price that the group has used in preparing its budget for 2019,” the board said.

It added that it would continue to monitor market conditions closely and take out such further fuel hedges as it deemed were appropriate, to meet its objective of reducing volatility in its costs and creating business certainty.

Rotala said it expected to maintain its progressive dividend policy, and would be announcing details of a final dividend payment in due course.

“The company is pleased to report that trading for the current year has begun in line with budget.

“In the view of the board, the uncertainty and disruption caused by the Bus Services Act 2017 continues to drive change in the bus industry.

“Accordingly, the board remains focused on identifying suitable acquisitions which will enhance and expand the services of the group.”

At the same time, Rotala said it possessed “ample” financial facilities to undertake further acquisitions.

“The group performed well in 2018 and, with a strong management team and a comprehensive network of operating facilities, is well placed to take advantage of these continuing developments in the bus industry.

“Such uncertainty brings opportunity to groups like Rotala, and the group is well placed to take advantage of any acquisition opportunities that may arise.”