Rotala: a little-known gem Rotala owns a group of bus companies, operating in various locations across the UK. The company was formed in 2005 and took an AIM quote the same year. Since then, Rotala has made several acquisitions and now comprises four companies: Flights Hallmark, Diamond, Wessex and Preston Bus. Flights Hallmark was Rotala’s first acquisition back in 2005. Flights runs a fleet of high-spec coach vehicles (see: vipcoach.co.uk). Airport air crew and passenger transportation is a key market for Flights, satisfied from its Heathrow depot. Rotala purchased Go West Midlands in 2008, renaming the brand Diamond. The company runs public transport bus services in Lichfield, Worcestershire and the West Midlands.
balance sheet survived the acquisition trail well The Wessex brand is the second largest provider of public transport services in Bristol, Bath and South Gloucestershire. Preston Bus was acquired in 2011 and runs public transport services in the city. The company’s balance sheet survived the acquisition trail well. 4
Debt has ranged between £17.9m and £22.5m in the last five years. Fixed assets have naturally risen with the acquisitions, resulting in the company’s book value increasing from £11.5m in 2008 to £24.2m at the end of 2013. Rotala’s P&L has similarly done well. Shareholders have enjoyed significant advances in profitability and dividends. Five years ago, Rotala made a net profit of £1.2m on £35.7m of sales. By 2013, net profit reached £1.9m on sales of £53.3m. The company declared its maiden dividend in 2010, paying 0.9p per share. This has been increased every year since, hitting 1.6p for 2013.
acquisitions and a share buyback are being actively considered Recent half-year results showed impressive increases in profits, shareholder dividends and assets. The company has taken advantage of the strong pound to hedge all fuel costs for 2014 and 2015. There were some negatives in the results however, with the Chairman, John Gunn, expressing concerns over pressures on local authority budgets and their ability to subsidise bus contracts. Management made the promise with interims that as free cash flows
and underlying earnings improve, the company will move progressively to a level of payout such that dividends are covered by earnings 2.5 times. Hire purchase interest costs are expected to fall to £3.4m for the year, versus £4.5m in 2013. Management confirmed with the interims that acquisitions and a share buyback are being actively considered.
book value increasing from £11.5m in 2008 to £24.2m at the end of 2013 With a modest market capitalisation, Rotala could be just the opportunity that private investors frequently search for on AIM: a successful, dividend paying company that is off the radar screens of most fund managers. According to Stockopedia data, Rotala is set for 12% EPS growth for the full year, in-line with the number achieved at the half-year stage. A similar rate of increase is expected in the dividend. More growth is forecast for 2015. Rotala (LON:ROL) FOR Predictable, diverse income stream Successful AGAINST Vulnerable to policy change Shares thinly traded Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high
£20m 57p:59p 10.7 3.1 46p:60p www.aimprospector.co.uk
Published on Sep 2, 2014