TIDMOPE
RNS Number : 1636G
Optare PLC
09 May 2011
Optare plc
("Optare" or the "Company")
Audited Results for the year ended 31 December 2010
Financial Highlights
-- EBITDA loss reduced 68% to GBP2.7m, in line with expectations
despite turnover down 35%
-- Exceptional items reduced by GBP4.7m
-- Bank term debt reduced by GBP3.4m
Operational highlights
-- GBP7 million raised during the year.
-- Strategic alliance with Ashok entered into in September
2010.
-- Lease for new single production site signed.
-- Board strengthened by addition of two Ashok Leyland
executives.
Jim Sumner, CEO, commenting said, "the last two years have been
all about the turnaround of Optare from a challenging position. I
believe that, with many of the difficulties of the last few years
behind us, a new larger factory, the backing of Ashok and our
institutional investors we have every reason to look forward to
2011 and beyond with confidence
For further information, please contact:
Optare plc Tel: 0845 838 9901
Jim Sumner - Chief Executive
Cenkos Securities plc Tel: +44 (0) 20 7397 8900
Stephen Keys/Camilla Hume
Chief Executive's Statement
Order Book and Market Conditions
The focus in 2010 has been on investing in new product and
market development as part of the turnaround of Optare. This,
however, was against the background of an extremely challenging
year with the UK market down almost 40% against pre-recession
levels. As announced in the 2009 interim results Optare started Q4
of 2009 with an extremely low order-book of GBP8.8m.
In the face of these adverse market influences, our strategy of
developing low carbon buses and export markets following the
placing in September 2009 was rewarded. At the date of the last
Annual report in May 2010, I was able to report that the order book
had improved to GBP25.3m, mainly due to securing a contract for 66
Hybrid buses for GMPTE of which 20 were delivered in Q3 of
2010.
Additionally, we successfully launched our new European
specification Solo in the Benelux. In Q4 2010, 25% of our output
was destined for export markets. However in the third quarter of
2010 there was a hiatus in UK order intake as the industry waited
to see the impact of the Government's Comprehensive Spending Review
("CSR") in October 2010. This resulted in a number of smaller
operators deciding to defer order placement into the New Year.
Overall the CSR was not as bad as had been expected by the
industry and towards the end of 2010 it became clear that the big
groups were planning to increase purchases of new buses in 2011.
This along with the support provided by the Government's Green Bus
Fund, has seen a significant improvement in the order-book, which
had at, 6(th) May 2011, the last date available prior to this
report, stood at a record GBP58m.
Product and Business Development
Despite the challenging market conditions, we invested GBP3.2m
in to new product and market development in 2010. In addition to
engineering activity to conform to new EU 'type approval'
requirements from October 2010, the following milestones were
achieved during the year including;
-- Introduction of Optare's market leading Driver console to aid
fuel-efficient driving, which recently received a national award
from the Chartered Institute of Logistics and Transport;
-- Launch of Optare's Advanced Hybrid system and delivery of the
first tranche of twenty Solo and Versa variants as part of an
extended contract for 88 Hybrid buses to Greater Manchester
Passenger Transport Executive;
-- Introduction of the UK's first Bio-methane and Electric buses
into service.
-- First sales of our new high-spec left-hand drive models for
mainland Europe.
Operational highlights
Operationally 2010 was a very challenging year with the market
down close to 40% from levels pre-recession. This resulted in
operating with short lead-times putting great pressure on
production and supply chains. Disruption was also experienced by
the failure of two key suppliers during the year reflecting the
difficult trading conditions faced by the industry.
As part of the turnaround strategy, a consistent focus has been
to reduce from the 3 manufacturing sites the Company had in June
2009 (Rotherham, Blackburn & Leeds) to a single site in order
to reduce the Group's break-even point. Following closure of the
Rotherham site in August 2009, the decision was taken in September
2010 to cease the manufacture of new buses in Blackburn. The site
now maintains a relatively small workforce for refurbishment,
low-carbon upgrades, product development and some finishing
operations.
Subsequent to the year end and as recently announced, Optare has
signed a 17 year lease for a new manufacturing site in the Leeds
area. The board believes that the new facility will be better able
to support the Company in its growth phase by significantly
increasing capacity enabling us to demonstrate to major operators
that we have the ability to deliver fleet volumes. The new
optimised plant layout is also expected to considerably improve
efficiency.
Strategic partnership
We reported early last year that extensive discussions had been
progressing with potential strategic partners. In July we were
delighted to announce that Optare had entered into a strategic
co-operation with Ashok Leyland ("Ashok"). Ashok, part of the
Hinduja Group, acquired a 26% holding in Optare.
Ashok is India's largest bus manufacturer and second largest
commercial vehicle maker in the medium and heavy vehicle segment.
The Board continues to believe that entering into this partnership
is a key part of Optare's strategy to realise the full potential of
the business and that we will start to see the benefits, in terms
of best cost sourcing and joint product development activity,
emerging during 2011.
Board and Management Changes
Following the strategic partnership with Ashok Leyland, two very
experienced industry professionals in Mr Seshasayee and Dr
Sumantran have strengthened the board joining as Non-Executive
Directors. Subsequently David Maughan stepped down as a
Non-Executive Director to pursue other business interests and we
thank him for his contribution to the Company. Glenn Saint also
stepped down from the Board but remains in a full-time role as COO,
having taken on additional responsibility for the forthcoming Leeds
site move.
To support the growth of the business, the Company has also
commenced an initiative to strengthen its Executive, senior and
middle management team following significant restructuring.
Financial Performance
The Group's financial performance for the year ended 31 December
2010 is reported below, however key highlights relating to progress
against the turnaround plan, to year end 2010 compared with 2009
are;
-- While turnover was down 35% on 2009, EBITDA losses were
reduced 68%;
-- Gross profit improved from 5.4% in 2009 to 8.5% and overheads
reduced 31%;
-- Breakeven revenue reduced 30%; and
-- Exceptional costs reduced from GBP6.9m in 2009 to
GBP2.2m.
In addition, a key focus of the turnaround plan has been to
significantly reduce debt, which in June 2009 was reported at
GBP10.3m compared to GBP3.3m at end of Q1 2011. The Group has
repaid early the GBP6.3m term loan taken out in July 2008. The only
remaining term debt is a GBP2.3m mortgage secured against the
Rotherham freehold site. The site is being sold in two parts with
completion planned on the first tranche for just under GBP1m
expected during May 2011.
A total of GBP22.1m of net proceeds have been raised via issue
of equity during the turnaround and have been used as follows:
-- Debt reduction - GBP7.3m:
-- Capital investment in new product development - GBP4.1m;
-- Redundancy costs incurred during the restructuring and
consolidation to a single site - GBP3.6m;
-- Funding allocated for investment to be made in new factory -
GBP2.5m; and
-- Other capital investment - GBP0.8m.
Remaining funds have been consumed on trading losses during the
turnaround and on the balance of exceptional costs which have been
offset by some improvements in working capital management.
Outlook
The last two years have been all about the turnaround of Optare
from a challenging position. Although trading conditions during
2010 were tough, we have managed to continue laying down solid
foundations for the future and are extremely proud of what has been
achieved so far.
To date we have achieved a substantial increase in the order
book, a major reduction in net debt, reduced the break-even revenue
and invested in new product development. The Board is now of the
opinion that, two years into the three year turnaround plan, 2011
will be the year that we really begin to see the fruits of our
labour as the company moves into profitability.
We have formed a very strong partnership with Ashok which has
been a great support so far and we expect to see the benefits of
best cost sourcing and joint product development activity coming
through this year.
Following the Placing in January 2011 we have secured our new
factory which we expect to move to in the third quarter of this
year. This new factory will be designed to meet our specific needs
and will thus allow us to improve the production process and
increase production output.
Given the significant reduction in debt and progress with the
turnaround, the board expects working capital and asset financing
to be a more effective option to meet the funding needs of the
business moving forward.
The Board anticipates stronger UK demand, particularly for
single-deck buses in 2012 and 2013, driven by an expected pre-buy
of existing Euro 5 emission buses to avoid the additional cost
burdens of Euro 6 legislation compliance due in 2013 and to comply
with the Disability Discrimination legislation which is required
for all single-decker buses by 2014. The increased capacity in our
new site will enable us to be able to meet this anticipated extra
production demand. In addition the company is making solid progress
in export markets and is qualifying to tender for substantial
contracts with the support of Ashok Leyland.
In light of the above and with the difficulties of the last few
years behind us, a new, larger factory and the backing of Ashok and
our institutional investors we have every reason to look forward to
2011 and beyond with confidence.
Jim Sumner
Chief Executive Officer
Chairman's Statement
2010 was a year in which huge strategic milestones were passed,
despite a backdrop of continued weakness in the market. As the
downturn extended longer than had been anticipated through 2010, it
became the worst recession for bus manufacturing in living memory.
The major achievements in the year included:
-- key green bus product developments completed and buses
delivered, making Optare the leading single deck hybrid bus
manufacturer in Europe;
-- securing a strategic partnership with a global bus
manufacturer, Ashok Leyland;
-- reduction in debt levels; and
-- successful delivery of significant export contracts to
mainland Europe for the first time.
Strategic Development
Our aim is to be:
-- a European leader in green bus technologies by the
development of the full range of options from fuel-efficient
diesels to dual fuel, hybrid and electric vehicles;
-- the UK leader in the midi-bus market;
-- offering a product portfolio with the full range of buses
that is demanded by the UK bus market;
-- a significant exporter of buses;
-- expanding market share in UK and Europe by selling high
quality designs at competitive costs
The Board is very pleased with the progress that has been made
on all these fronts during the year.
Our People
The year brought with it new challenges, to which our management
and workforce have risen. Whilst there is still a tremendous amount
to do, I would like to thank all our employees for their dedication
and hard work during what has been a very difficult period.
Summary
2010 was a year of strategic progress against a difficult market
backdrop. We look forward to working with our strategic partner,
and relocating to our new manufacturing facility, to take full
advantage of the undoubtedly stronger market situation for 2011 and
beyond.
John Fickling
Non-Executive Chairman
Consolidated Income Statement as at 31 December 2010
Before Before
Exceptional Exceptional Exceptional
Items items Total Items Exceptional Total
Year Year Year Year Year Year
ended ended ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2010 2010 2010 2009 2009 2009
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 52,271 - 52,271 79,831 - 79,831
Cost of
sales (47,826) (200) (48,026) (72,670) (2,236) (74,906)
Gross profit 4,445 (200) 4,245 7,161 (2,236) 4,925
Administrative
expenses (7,681) - (7,681) (11,296) - (11,296)
Distribution
costs (524) - (524) (558) - (558)
Amortisation
of intangible
assets (290) - (290) (173) - (173)
Loss from
operations (4,050) (200) (4,250) (4,866) (2,236) (7,102)
Restructuring
and other
exceptional
costs - (1,963) (1,963) - (4,648) (4,648)
Finance
costs (393) - (393) (303)
Finance
income 93 - 93 41 - 41
Loss for the
year from
continuing
operations (4,350) (2,163) (6,513) (5,128) (6,884) (12,012)
Loss on
ordinary
activities
before tax (4,350) (2,163) (6,513) (5,128) (6,884) (12,012)
Taxation 73 - 73 28 - 28
Loss
attributable
to the equity
holders of the
parent
company (4,277) (2,163) (6,440) (5,100) (6,884) (11,984)
Loss per
share (Note
3):
2010 2009
From continuing
and
discontinued
operations
(basic and
Diluted) (2.1)p (8.4)p
There are no other recognised items of income and expense other
than those presented above.
Consolidated Statement of Changes in Equity as at 31 December
2010
Share
based
Share Share Merger Retained payment
capital premium reserve earnings reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
December 2008 1,084 15,798 5,542 (14,361) - 8,063
Loss for the
year - - - (11,984) - (11,984)
Total
comprehensive
income for
the year - - - (11,984) - (11,984)
Transactions
with owners in
their
capacity as
owners:-
Issue of
shares and
warrants 1,240 6,822 - - - 8,062
Total
transactions
with owners
in their
capacity as
owners 1,240 6,822 - - - 8,062
Share-based
payment - - - - 27 27
Balance at 31
December 2009 2,324 22,620 5,542 (26,345) 27 4,168
Loss for the
year - - - (6,440) - (6,440)
Total
comprehensive
income for
the year - - - (6,440) - (6,440)
Transactions
with owners in
their
capacity as
owners:-
Issue of
shares and
warrants 1,497 4,139 - 1,648 - 7,284
Total
transactions
with owners
in their 1,497 4,139 - 1,648 - 7,284
Balance at 31
December 2010 3,821 26,759 5,542 (31,137) 27 5,012
The merger reserve was created when Optare plc acquired Darwen
Ltd via a share for share transaction.
Fair value of warrants issued within the year is GBP1,648,000
(2009 GBPnil)
Consolidated Balance Sheet as at 31 December 2010
2010 2009
GBP'000 GBP'000
Non - Current
Assets
Goodwill 8,574 8,574
Other intangible
assets 6,872 3,953
Property, plant
and equipment 2,312 3,680
17,758 16,207
Current Assets
Inventories 7,742 7,175
Trade and other
receivables 4,774 4,456
12,516 11,631
Assets held for
sale 2,000 2,400
Total Assets 32,274 30,238
Current Liabilities
Trade and other
payables 17,031 14,198
Bank loans and
overdrafts 5,427 2,301
Provisions 1,245 1,958
Obligations under
finance leases 23 35
23,726 18,492
Non Current Liabilities
Bank loans 1,912 5,287
Provisions 1,600 2,247
Obligations under
finance leases 24 44
3,536 7,578
Total Liabilities 27,262 26,070
Net Assets 5,012 4,168
Equity
Share capital 3,821 2,324
Share premium 26,759 22,620
Share based payment
reserve 27 27
Merger reserve 5,542 5,542
Retained loss (31,137) (26,345)
Total equity attributable
to equity holders
of the parent 5,012 4,168
Consolidated Cash Flow as at 31 December 2010
2010 2009
GBP'000 GBP'000
Operating activities
Cash absorbed
by operations (3,418) (4,203)
Interest paid (393) (303)
Net cash used
in operating activities (3,811) (4,506)
Investing Activities
Purchase of property,
plant and equipment (75) (1,065)
Purchase of intangible
assets (3,209) (800)
Interest received 93 41
Net cash used
in investing activities (3,191) (1,824)
Financing activities
Proceeds from
issuance of ordinary
shares and warrants 7,284 8,062
Loan repayments (3,407) (1,715)
Short term loan 1,224 -
Net cash generated
from financing
activities 5,101 6,347
Net increase /(decrease)
in cash and cash
equivalents (1,901) 17
Cash and cash
equivalents at
end of year
Overdraft (2,720) (819)
Notes
1 The financial information set out herein does not constitute
the Groups statutory accounts for the year ended 31 December 2010
or the year ended 31 December 2009 but is derived from those
accounts. The information in respect of 2010 statutory accounts has
been derived from the audited statutory accounts for the year ended
on that date on which an unqualified audit opinion was expressed
and which did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.. The comparative information in respect
of the year ended 31 July 2009 has been derived from the audited
statutory accounts for the year ended on that date upon which an
unqualified audit opinion was expressed and which did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
The audited accounts will be posted to all shareholders in due
course and will be available on request by contacting the Company
Secretary at the Company"s Registered Office.
2 Basis of Preparation
Optare plc is a company incorporated and domiciled in the
UK.
The historical financial statements consolidate those of Optare
plc and its subsidiaries.
The historical financial statements have been prepared in
accordance with International Financial Reporting Standards and
IFRIC interpretations issued by the International Accounting
Standards Board (IASB) and adopted by the European Union ("Endorsed
IFRS") and with those parts of the Companies Act 2006 applicable to
companies preparing their accounts under Endorsed IFRS.
The financial statements have been prepared on the going concern
basis, which assumes that the Group will continue to be able to
meet its liabilities as they fall due for the foreseeable future.
The Group's banking facilities were renegotiated in September 2010.
The overdraft facility, which comprises GBP3.0m and is annually
renewable, falls due for renewal in September 2011. The directors
are confident that this will facility will be renewed.
The Group has prepared trading forecasts through to December
2012 which include detailed cash flow calculations. The forecasts
are based on detailed assumptions as to sales performance by month.
The forecasts reflect a higher level of turnover for the second
half of 2011 than the first half, but are based largely upon order
book. This includes an increased level of sales of Green Bus
vehicles - both electric vehicles and hybrids. The forecast assumes
a moderate level of savings in material costs, achieved both
through the company's own efforts and through joint initiatives
with Ashok.
During the first quarter of 2011, disruption was suffered due to
restricted working capital. The forecast is based on the current
state of affairs, where these issues have been resolved. Trade
debtors and creditors are forecast to increase consistent with
increased sales.
There is inherent uncertainty in any forecast. Such
uncertainties include the risks involved in managing a rapid
increase in output volumes; the risks involved in any site move;
lack of visibility regarding sales beyond the current order book.
and the possibility that the external economic environment might
worsen. However the Company is taking measures to ensure that
production management is strengthened to boost output, and
experienced project management is heavily involved in planning and
executing the site move. Labour efficiency is important in
achieving profitability, and the Directors have put in place
strengthened operational management and procedures to ensure that
this is achieved. The Directors feel that a reasonably balanced
approach has been taken to these risks in the forecast.
Against these uncertainties, there are upside opportunities
which are not reflected in the forecast but which would offset or
mitigate the impact of downside risks which might occur. These
include the further benefits of savings in material costs arising
from joint initiatives with Ashok. Sales opportunities exist in
Europe and other foreign territories for our buses in excess of the
forecast volumes.
The Directors are confident that the assumptions underlying
their forecasts are reasonable and that the Group will be able to
operate within its overdraft limit. The Board believes that it is
appropriate to prepare the financial statements on the going
concern basis and that the uncertainties referred to above, when
considered together with the upside opportunities, do not represent
a material uncertainty. The financial statements do not include any
adjustment to the value of the balance sheet assets or provisions
for further liabilities, which would result should the going
concern concept not be valid.
The financial statements have been prepared on a historical cost
basis.
3. Loss Per Share
The calculation of the basic and diluted earnings per share is
based on the following data:
2010 2009
Loss:
Loss for the purposes of basic earnings per
share
(net profit for the year attributable to
equity holders of the parent) (6,440) (11,984)
Number Number
Weighted average number of ordinary share
for the purposes of
basic earnings per share 307,965,208 142,760,280
Basic and fully diluted loss per share (2.1)p (8.4)p
Excluding Exceptional Items
2010 2009
Net loss for the year attributable to equity
holders of the parent (6,440) (11,984)
Adjustment to exclude exceptional costs 2,163 6,884
Loss from continuing operations for the purposes
of basic earnings per share (4,277) (5,100)
Number Number
Weighted average number of ordinary share
for the purposes of
basic earnings per share 307,965,208 142,760,280
Basic and fully diluted loss per share (1.4)p (3.6)p
There are no dilutive potential ordinary shares in issue.
Potentially dilutive share options in issue are detailed in the
Directors Remuneration Report. Subsequent to the year-end a share
issue took place which would have affected the number of shares in
issue if had taken place prior to the year-end
This information is provided by RNS
The company news service from the London Stock Exchange
END
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