Rotala Management - Questions & Answers

[Simon Dunn]

Hi Simon,

Any updates on the reinstatement of 20503 yet?

Will

Will

Not yet


Simon

[Simon Dunn]

Hi Simon,

1 - re: New Banking Facilities
I see Rotala have agreed new banking facilities of up to £18 Million allowing headroom of £10 Million available to fund potential acquisitions & share buy backs. Reading the RNS it suggests that the share backs will be funded by additional debt, is that the case? Are Rotala Plc not concerned that the groups current market cap @ 56p/share i.e. £19.8 Million is only £2.8 Million above the £17 Million debt that Rotala will have at the year end?

2 - re: Share Buybacks
I see Rotala have acquired 200,000 of their own shares today. Why are Rotala insistent on proceeding with share buybacks? I know that you've previously said that by reducing the number of shares in issue will boost the earning per share ratio, but that's artificially stimulating those figures, fundamentally the profit & debt levels of group will remain un-changed.

If Rotala has the means to buy back shares, in the absence of an earnings enhancing acquisition, would it not be more prudent to grow & expand Rotala's existing businesses through targeted investment i.e. expanding route networks/places served, increasing frequencies where possible to support continued growth and re-launching select routes that offer the greatest potential for growth & returns with new/nearly new buses & branding?

All other bus groups are investing heavily and experiencing growth and increased returns across their businesses.

3 - re: Group vehicle replacement policy
How long do Rotala currently anticipate having a low requirement for replacement vehicles for? Surely, the longer the level of vehicle replacements is kept low, the harder it will be to maintain the groups current average age of less than 8 years and it will cost more in subsequent years to keep it at that level.

The above policy doesn't meet the extract below from Rotala's Enviromental policy:

Rotala recognises its responsibility to limit the impact of its vehicles on the environment.
Exhaust fumes comprising (but not limited to) Carbon Monoxide (CO), Nitrogen (N) and Carbon Dioxide (CO2) are the major contributors to pollution from our vehicles.

Rotala aims to decrease its impact by constantly updating its fleet to newer, more fuel efficient and exhaust restricted vehicles.

4 - Wessex Expansion
I see from reports on a SW forum that Wessex are currently advertising for drivers on its buses due to expansion and all 12 Bristol services are being revised, can you advise when you anticipate registrations may be submitted or give any further details of Rotala's plans etc at this stage?

5 - Diamond
It's pleasing to see the effort Diamond have gone to re-launch the 301 & new 302 services with solid B7RLE. Obviously Tividale has gained some extra B7RLE's over the past few months i.e. 30002, 30813, 30855 & 30860 along with extra Solo's, but during the same it has lost the 6 Cadets + more recently two more of its biggest Darts to KR i.e. 30426 & 30512.

Looking at the remaining fleet make-up, Tividale now has 32 full size buses i.e. 31 x B7RLE, 1 x MAN, these are now the mainstay for the 002, 4/4H, 56, 301 & 302 which I assume spares are now few & far between. With only 7 x Cadets + 4 full size Darts remaining (i.e. 30432, 30437 & 30454/5) Tividale must be under to pressure to put large enough buses out on some of the above routes + other Sandwell Value services & in the event of B7RLE breakdown.

I know you've previously acknowledged Diamond has too many small buses, but the issue seems to be getting worse for Tividale at least. Could Rotala not look to acquire some additional/newer full length Darts either ex London (converted to single door) or ex Rental similar to the 52 plate Hanson's examples to boost availability of larger vehicle & capacity?

5 - VDL / Plaxton Centro's
I know they are not your vehicle of choice, but would the batch of 12M 58 plate VDL/Plaxton Centro's currently for sale at Arriva Bus & Coach not be of interest to Rotala to add to the 5 being retained at Redditch? I'm sure not being so popular, Rotala may be able to pick them up cheaper

http://arrivabusandcoach.co.uk/vehicles/search/condition:Used/vehicle_type_id:2/use_advanced:0/mileage:210,000%20-%20500,000%20Miles/seats:30%20-%2060/age:2%20-%2015%20Years/toilet:on

Thanks in advance & I look forward to your replies,

Winston,

1.  There is no relevance of debt and market capitalisations.  Typically people consider the relationship between EBITDA/Debt.  I am not allowed under market rules to outline our leverage levels, but I will say that we consider our business to be conservatively leveraged.

2.  If we can foresee an opportunity to increase earnings by investment, then we will proceed.  Rotala has considerable ability to both undertake buy backs, invest and make acquisitions.

3.  We do intend to constantly update our fleet, and we have shown that over the years so we are consistent with this statement.  In terms of what, when, and how much.  Time is on our side.

4.  We are evolving our structure, and from mid January 2015 we have created a new post and appointed a Managing Director responsible for this business unit. 

5.  We have made an offer to acquire 6 x B7RLE's and 2 x E300's, which would be for DBCL.   

6.  It is not a vehicle which we want to invest in. 




Simon

Winston,

Before the end of November, we will start and re-structure/rename a number of our legal entities and move operrating depots into other legal entities.

This change is focused on regionalising our business into a London, Midlands, South West and North West region.

So you will see, operating licence changes to reflect this.




Simon

[winston]

Hi Simon,

1 - re: New Banking Facilities
I see Rotala have agreed new banking facilities of up to £18 Million allowing headroom of £10 Million available to fund potential acquisitions & share buy backs. Reading the RNS it suggests that the share backs will be funded by additional debt, is that the case? Are Rotala Plc not concerned that the groups current market cap @ 56p/share i.e. £19.8 Million is only £2.8 Million above the £17 Million debt that Rotala will have at the year end?

2 - re: Share Buybacks
I see Rotala have acquired 200,000 of their own shares today. Why are Rotala insistent on proceeding with share buybacks? I know that you've previously said that by reducing the number of shares in issue will boost the earning per share ratio, but that's artificially stimulating those figures, fundamentally the profit & debt levels of group will remain un-changed.

If Rotala has the means to buy back shares, in the absence of an earnings enhancing acquisition, would it not be more prudent to grow & expand Rotala's existing businesses through targeted investment i.e. expanding route networks/places served, increasing frequencies where possible to support continued growth and re-launching select routes that offer the greatest potential for growth & returns with new/nearly new buses & branding?

All other bus groups are investing heavily and experiencing growth and increased returns across their businesses.

3 - re: Group vehicle replacement policy
How long do Rotala currently anticipate having a low requirement for replacement vehicles for? Surely, the longer the level of vehicle replacements is kept low, the harder it will be to maintain the groups current average age of less than 8 years and it will cost more in subsequent years to keep it at that level.

The above policy doesn't meet the extract below from Rotala's Enviromental policy:

Rotala recognises its responsibility to limit the impact of its vehicles on the environment.
Exhaust fumes comprising (but not limited to) Carbon Monoxide (CO), Nitrogen (N) and Carbon Dioxide (CO2) are the major contributors to pollution from our vehicles.

Rotala aims to decrease its impact by constantly updating its fleet to newer, more fuel efficient and exhaust restricted vehicles.

4 - Wessex Expansion
I see from reports on a SW forum that Wessex are currently advertising for drivers on its buses due to expansion and all 12 Bristol services are being revised, can you advise when you anticipate registrations may be submitted or give any further details of Rotala's plans etc at this stage?

5 - Diamond
It's pleasing to see the effort Diamond have gone to re-launch the 301 & new 302 services with solid B7RLE. Obviously Tividale has gained some extra B7RLE's over the past few months i.e. 30002, 30813, 30855 & 30860 along with extra Solo's, but during the same it has lost the 6 Cadets + more recently two more of its biggest Darts to KR i.e. 30426 & 30512.

Looking at the remaining fleet make-up, Tividale now has 32 full size buses i.e. 31 x B7RLE, 1 x MAN, these are now the mainstay for the 002, 4/4H, 56, 301 & 302 which I assume spares are now few & far between. With only 7 x Cadets + 4 full size Darts remaining (i.e. 30432, 30437 & 30454/5) Tividale must be under to pressure to put large enough buses out on some of the above routes + other Sandwell Value services & in the event of B7RLE breakdown.

I know you've previously acknowledged Diamond has too many small buses, but the issue seems to be getting worse for Tividale at least. Could Rotala not look to acquire some additional/newer full length Darts either ex London (converted to single door) or ex Rental similar to the 52 plate Hanson's examples to boost availability of larger vehicle & capacity?

5 - VDL / Plaxton Centro's
I know they are not your vehicle of choice, but would the batch of 12M 58 plate VDL/Plaxton Centro's currently for sale at Arriva Bus & Coach not be of interest to Rotala to add to the 5 being retained at Redditch? I'm sure not being so popular, Rotala may be able to pick them up cheaper

http://arrivabusandcoach.co.uk/vehicles/search/condition:Used/vehicle_type_id:2/use_advanced:0/mileage:210,000%20-%20500,000%20Miles/seats:30%20-%2060/age:2%20-%2015%20Years/toilet:on

Thanks in advance & I look forward to your replies,

Winston,

1.  There is no relevance of debt and market capitalisations.  Typically people consider the relationship between EBITDA/Debt.  I am not allowed under market rules to outline our leverage levels, but I will say that we consider our business to be conservatively leveraged.

2.  If we can foresee an opportunity to increase earnings by investment, then we will proceed.  Rotala has considerable ability to both undertake buy backs, invest and make acquisitions.

3.  We do intend to constantly update our fleet, and we have shown that over the years so we are consistent with this statement.  In terms of what, when, and how much.  Time is on our side.

4.  We are evolving our structure, and from mid January 2015 we have created a new post and appointed a Managing Director responsible for this business unit. 

5.  We have made an offer to acquire 6 x B7RLE's and 2 x E300's, which would be for DBCL.   

6.  It is not a vehicle which we want to invest in. 




Simon

Winston,

Before the end of November, we will start and re-structure/rename a number of our legal entities and move operrating depots into other legal entities.

This change is focused on regionalising our business into a London, Midlands, South West and North West region.

So you will see, operating licence changes to reflect this.

Simon

1. I'm aware of the EBITA/debt ratio measurement, but obviously Nett Asset Value is reduced the more debt you have/take on as is the retained profit due to higher interest charges.

2. Are Rotala primarily looking to make acquisitions to add to their existing business or would you consider buying operators within new area? Is the Heathrow operation big enough to warrant it's own region or is it a region you're looking to expand  upon?

4. Yes I saw the new MD post advertized

5. The only source I can think of with 6 x B7RLE's for sale & potentially 2 x E300's is Yourbus, is the offer expected to conclude a deal? As 8 extra full size full size buses at Diamond would improve the balance. Could the Red Diamond MPD's at Tividale not be the first ones facing the axe.

7. Are the structural changes taking place designed to reduce the amount of admin & associated costs?

Thanks for your replies,

[Simon Dunn]

Winston,

1.  More debt, does not directly affect the Market Cap.  Net Asset Value is different to this, and during this last few months from the various stock market announcements that have been made, we have had somewhere in the region of £1.6/£1.7 million worth of convertlible loan notes transfer into equity

2.  We have an open mind.  However, clearly development of current areas is normally more value enhancing.

7.  We want to change the way we manage the business units.  The legal entities reflect that, the branding, and the management units.




Simon

[winston]

Winston,

1.  More debt, does not directly affect the Market Cap.  Net Asset Value is different to this, and during this last few months from the various stock market announcements that have been made, we have had somewhere in the region of £1.6/£1.7 million worth of convertlible loan notes transfer into equity

2.  We have an open mind.  However, clearly development of current areas is normally more value enhancing.

7.  We want to change the way we manage the business units.  The legal entities reflect that, the branding, and the management units.

Simon

Simon,

1. Yes, I saw those which dated back to the 2008 acquisitions

Thanks for all the various replies

One last thing, Do Rotala plan to re-start the re-painting of the remaining Royale / 002 branded B7RLE's once Red Diamond livery is removed from Redditch. Obviously Kidderminster now has GWM, Black Diamond & current Diamond Blue liveries due to more recent additional services & buses being moved in.

[Simon Dunn]

Winston,

1.  More debt, does not directly affect the Market Cap.  Net Asset Value is different to this, and during this last few months from the various stock market announcements that have been made, we have had somewhere in the region of £1.6/£1.7 million worth of convertlible loan notes transfer into equity

2.  We have an open mind.  However, clearly development of current areas is normally more value enhancing.

7.  We want to change the way we manage the business units.  The legal entities reflect that, the branding, and the management units.

Simon

Simon,

1. Yes, I saw those which dated back to the 2008 acquisitions

Thanks for all the various replies

One last thing, Do Rotala plan to re-start the re-painting of the remaining Royale / 002 branded B7RLE's once Red Diamond livery is removed from Redditch. Obviously Kidderminster now has GWM, Black Diamond & current Diamond Blue liveries due to more recent additional services & buses being moved in.

Winston

It should never have stopped.

At present we have a high numbers of VOR's, which we need to reduce.


Simon

[Cedric]

Simon
is there a possiblety  that diamond will take up  the routes whittles are droping   or altering some diamond routes to cover   missing
routes such as rerouting the 2 through the Queensway  in wribbenhall    to cover that bit of the 2a/2c.  and re route  the x3 at Kidderminster
hospital to run through to bewdley turning around the church  and then on to stourport  to cover that bit. it used to do that on a sunday as the 334 from Redditch to Kidderminster  and then  as the 300  from Kidderminster to Worcester hospital. It was a  through service even though the number changed in Kidderminster. it maybe just a touch longer than the x3 turning at the hospital on to the main Kidderminster stourport road
with the traffic hold ups on there it would more than likely be quicker. cedric

[Simon Dunn]

Simon
is there a possiblety  that diamond will take up  the routes whittles are droping   or altering some diamond routes to cover   missing
routes such as rerouting the 2 through the Queensway  in wribbenhall    to cover that bit of the 2a/2c.  and re route  the x3 at Kidderminster
hospital to run through to bewdley turning around the church  and then on to stourport  to cover that bit. it used to do that on a sunday as the 334 from Redditch to Kidderminster  and then  as the 300  from Kidderminster to Worcester hospital. It was a  through service even though the number changed in Kidderminster. it maybe just a touch longer than the x3 turning at the hospital on to the main Kidderminster stourport road
with the traffic hold ups on there it would more than likely be quicker. cedric

Dear Sir,

We would like to grow our Kidderminster bus business.

We are currently reviewing following the recent changes our network and what if anything we should be doing



Simon

[Cedric]

Simon
is there a possiblety  that diamond will take up  the routes whittles are droping   or altering some diamond routes to cover   missing
routes such as rerouting the 2 through the Queensway  in wribbenhall    to cover that bit of the 2a/2c.  and re route  the x3 at Kidderminster
hospital to run through to bewdley turning around the church  and then on to stourport  to cover that bit. it used to do that on a sunday as the 334 from Redditch to Kidderminster  and then  as the 300  from Kidderminster to Worcester hospital. It was a  through service even though the number changed in Kidderminster. it maybe just a touch longer than the x3 turning at the hospital on to the main Kidderminster stourport road
with the traffic hold ups on there it would more than likely be quicker. cedric

Dear Sir,

We would like to grow our Kidderminster bus business.

We are currently reviewing following the recent changes our network and what if anything we should be doing



Simon

there are several things  I can think of Simon  but  rather than sending little bits  when  I  can think of them all I will  post in one go

[the trainbasher]

Hi Simon

Has Diamond thought about "filling in the gap" so to speak between Stourbridge operating area and Kidderminster area (I.e. Running a similar service to Whittles along the 125 route?)

Also, have diamond thought about trying the Stourbridge-Merry Hill corridor, especially as NXs reliability on their X96/276 is negotiable at the best of times (last time diamond tried it was when the 300 was in operation, but that mainly suffered because of the length of the route imo)

And finally, is there any plans to deal with the bunching and lateness on the 002/lateness on the 226 services. Some days I've seen 2 or 3 002s arriving in merry hill during the daytime within a matter of seconds of each other and some 226s up to 10-15 miniutes late arriving too.

Cheers

Tom

[Simon Dunn]

Hi Simon

Has Diamond thought about "filling in the gap" so to speak between Stourbridge operating area and Kidderminster area (I.e. Running a similar service to Whittles along the 125 route?)

Also, have diamond thought about trying the Stourbridge-Merry Hill corridor, especially as NXs reliability on their X96/276 is negotiable at the best of times (last time diamond tried it was when the 300 was in operation, but that mainly suffered because of the length of the route imo)

And finally, is there any plans to deal with the bunching and lateness on the 002/lateness on the 226 services. Some days I've seen 2 or 3 002s arriving in merry hill during the daytime within a matter of seconds of each other and some 226s up to 10-15 miniutes late arriving too.

Cheers

Tom

Tom,

The 125 is a part funded service by Shropshire County Council, and as such this would suggest that the service you are providing is not commercially viable.

We are continuing to look for opportunities to expand our Kidderminster depot, and we have considered numerous opprotunities. 

In terms of the 002.

We are looking to change the timetable to re-time parts of the service.

In terms of 226

We are not aware of a problem.  Our service monitorings have suggested that the service is operating in the window of tolerance.

I will request that this is monitored shortly.



Simon

[iamwilljh92]

Hi Simon,

Any movements/updates regarding 20503?

Will

[Simon Dunn]

Hi Simon,

Any movements/updates regarding 20503?

Will

Will

No.

From our point of view, there are a lot more things which are more important at the minute.




Simon

[Cedric]

Simon
re my last post here are my sugestions for the Kidderminster network

service 1 needs no change
service 2  reroute it back along the main road going up bewdley hill  and a right turn a catchems end to go through the queensway
service 2L reroute it back along the main road going up bewdley hill  and not round the estates in bewdley  because as it is a long distance route
to Ludlow  this would make it better able to keep to time .
service3 no change
service X3  as I said before  make it  Redditch-Kidderminster-bewdley(town centre)-stouport -Astley cross . this would enable people from bewdley to get to Redditch  and reddicth hospital easier
service  4a  Go back to how it  was as   there as been a cut in service here  have in it as the following
service 4 habberley-ferndale-franche  back down  the main  franche road to Kidderminster maybe  4a going the other way round
service 5 puxton drive- Fairfield- wolverly  this would partly replace whittles 7
service 6  greenhill -sionhill-cookley this would  replace the rest of the  whittles 7   and the bit to cookley  is also covered by the 9 which is a subsidisd  service as well as the 7 so combinded the who save the council money and give the cookley people better service as the 9 is only run by ford transit type none dda
service10 as it is now except for when the vehicle leaves  spennells   instead of going back up comberton road  turn the other way and go up chester road south back to Kidderminster it would be a little quicker and only misses 2 stops out which are cover by the x3  and  nobody hardly gets on at them.
service  15 do not realy know much about it
service 125 is subsidised a bit by  SCC  to  help operators  to cover the villages along the route it is well used in the summer by tourist  and  most of the time other times a year as it is the only way to get to Kidderminster or bridgnorth if you have no   car as it is the only bus service  that is the bridgnorth to Kidderminster section  buses leaving kiddeminster to go to Stourbridge  I have seen seam fairly well loaded as it does not go the main road it goes through Norton in to Stourbridge  and  till you get to the out skirts of Stourbridge  it is the only bus
service 192  the only thing I can think of if all 192 turned right just past stourport school it would  give a better service to that part of stourport.
maybe the 125 and 192  could be linked up with some of your  black country  and Birmingham area services . to provide better transport links for Kidderminster to other areas .  and maybe even some sunday services in the area . I have not mention  the following services as I do not know enough about them  they are the 133,294,295, 303.   Simon know some of these are not diamond services , you will have a idea why I have listed them  regards cedric

[winston]

Hi Simon,

That's good news on securing the 8 extra full size buses from Yourbus, I'm assuming that the 3 x Signature Merc Citaro's haven't been taken in part exchange?

I was thinking whether the additional buses/resulting withdrawals & cascades could work as follows to benefit TE, RH & KR garages:

Tividale:

In - SV04DVH/ DVK/ DVL/ DVM - B7RLE/Wright
       BK10 MFX/MFY - B7RLE / Plaxton Centro
       
Out - MPD's 20501, 20502, 20505 (Red Diamond liveried), 20507 (GWM Liveried) & 20535/36 (allover Red ex Swift 226) cascaded to KR via repaint.

Only 3 buses remain not in either current allover blue or Black Diamond livery i.e. Darts 30454/5 (allover Red ex Swift 226) & 30487 (GWM) livery

Redditch:

In - SN10 CDF/CDK - Enviro 300's
 
Out - Darts 20850 & 30902 to KR, excess spares to leave namely MPD's - 20372 (Red Diamond liveried) goes first.

Kidderminster:

In - Large Darts 20850 & 30902 & MPD's 20535/6
Out - V-reg MPD's 20652/54/57 & 658

Direct swaps to standardize fleet:

TE - MAN 30806 (after repaint) - swapped with an RH B7RLE
LAC - MAN 30704 & 30804 swapped with Longs Darts 30636 & 30701 at RH

- All MAN's concentrated at RH
- Majority of Darts removed from RH

Future - Additional E300's acquired for RH as/when become available to cascade B7RLE to Tividale

Any good?