Rotala upbeat on future ahead of Buses Bill

Bus operator Rotala updated the market on its current trading on Thursday, saying it made good progress during the year and the longer term trading outlook remained in line with market expectations.

The AIM-traded firm said growth had been achieved this year predominantly through acquisition, with the company making three acquisitions during the year.

“Two of these, Elite Minibus and Wigan Coachways increased the scale of our operations in the North West,” the board said in its statement.

“The more substantial acquisition of the Heathrow business of OFJ Connections in January brought a considerable expansion of our business at Heathrow Airport.”

It said the integration of Elite Minibus and Wigan Coachways had gone well, considerably broadening the services it offers in the North West of the country.

“We expect these acquisitions to provide a positive contribution to the group's profits in FY 2017.

“The completion of the integration of OFJ in the Heathrow area was, as anticipated and as stated at the time of the acquisition, to require the whole of the remainder of FY 2016.”

Rotala said integration proceeded on schedule, although higher than anticipated levels of temporary staffing during the period resulted in some additional non-recurring costs being taken in FY 2016, with a minor impact on profit before tax expected this year.

“The desired level of permanent staffing has now been achieved and the integration will be completed by the end of FY2016, with a positive contribution to profits expected in 2017.”

In the South West, where the company provides a number of bus services linked to the universities in Bristol and Bath, passenger numbers remained consistent.

“We have however seen a shift in the buying habits of the passenger in the region, such that purchases of weekly or daily ticket products are increasingly more favoured over the longer dated pass products.

“This change in preference of ticket product is expected to defer a small amount of revenue anticipated to crystallise in 2016 into 2017 instead.”

Looking ahead, Rotala said there had been a number of positive developments which were expected to underpin its trading prospects for 2017.

“In the West Midlands it is encouraging that we have been noticeably more successful at winning local bus contracts offered by Transport for West Midlands, the successor body to Centro, in its last contract round.”

The board said TfWM was also making progress on its plan to take the Bus Alliance route, rather than waiting for the Buses Bill to deliver the ability to adopt full bus franchising.

“We are in active negotiation with TfWM to introduce a bus alliance on a key West Midlands bus corridor and we expect this to commence in early 2017.

“Such bus alliances will bring significant benefits to the passenger, as well as to bus operators.”

Rotala explained it had also seen a significant pickup in its private bus networks business where the new contracts which it won considerably outweigh the contracts lost through the usual rotation.

“As we look ahead to 2017 and beyond, we remain confident that we are well placed to take advantage of the opportunities which are being presented by the continuing state of change in the bus industry, a state of change which will be further reinforced by the Buses Bill.