TIDMOPE
RNS Number : 9672O
Optare PLC
27 September 2011
27 September 2011
Optare plc
("Optare", the "Company" or the "Group")
Interim Results Announcement
For the six months ended 30 June 2011
CORPORATE STATEMENT
Optare (AIM:OPE), is pleased to announce its results for the six
months ended 30 June 2011. A leading name in the UK bus and coach
industry, Optare specialises in the design, manufacture and supply
of single and double deck buses, is a leader in hybrid bus
technology and also offers a comprehensive after-sales and bus
refurbishment service.
OPERATIONAL HIGHLIGHTS
-- Major investment in new Sherburn factory close to fruition.
Relocation to the new facility was started in August 11 and is
expected to be completed by mid-October 11.
-- Six consecutive months of increasing output in H1.
-- Investment in product development continued particularly in
target export markets to achieve local market testing and
approvals.
-- Significant progress being made in export markets working
collaboratively with Ashok-Leyland on potential major
contracts.
FINANCIAL HIGHLIGHTS
-- Order book increased from GBP24.4m H1 10 to GBP55m H1 11
-- Gross margin improved from 10.1% H1 10 to 10.9% H1 11
-- Term debt reduced from GBP4.5m H1 10 to GBP1.3m H1 11
-- Turnover down from GBP27.1m H1 10 to GBP22.7m H1 11, 16%
lower compared to a 27% fall in the market (Society of Motor
Manufacturers and Traders data).
-- EBITDA loss increased from GBP1.4m H1 10 to GBP2.5m H1 11 due
to lower turnover, project related costs for the new factory and
operational restructuring together with production ramp-up.
Commenting on the interim results Chief Executive Officer, Jim
Sumner said;
"Whilst the UK market in the first half of 2011 continued to be
challenging, substantial progress was maintained against the three
year turnaround plan with investment in a new state of the art
factory to support the business on its planned growth path in
domestic and export markets. The business is also targeting to move
back into profit following completion of the factory move."
For further information:
Optare plc Tel: +44 (0) 845 838 9901
Jim Sumner, Chief Executive
Officer
Peter Phillips, Chief Financial
Officer
Cenkos Tel: +44 (0) 20 7397 8900
Stephen Keys/Camilla Hume
CHAIRMAN'S STATEMENT
2011 is proving to be a milestone year for Optare. During the
first half of 2011, the Board has continued to invest in the
development of green technology products, as well as the
considerable investment needed in the new factory along with the
associated training of production staff to support higher build
rates. The opening of the Sherburn factory this autumn will be the
first new green field bus factory in the UK for nearly 40 years and
with the continued support of the strategic partnership with
Ashok-Leyland, the business is poised for further growth in the U.K
and overseas markets.
John Fickling
Non-Executive Chairman 27 September 2011
BUSINESS AND FINANCIAL REVIEW
- Turnover for the six months ended 30 June 2011 was GBP22.7
million (6 months to 30 June 2010: GBP27.1 million) due to a
continuing reduction in UK market demand. Turnover has also been
impacted by disruption to production from supply chain issues which
have now been resolved.
- Despite a reduction in turnover the gross profit margin as a
percentage of sales improved to 10.9% (2010: 10.1% and 10.8% before
exceptional items) with the absolute profit margin at GBP2.5
million (2010: GBP2.9 million).
- The EBITDA for the period was a GBP2.5 million loss (6 months
to 30 June 2010 GBP1.4 million loss). Operating loss for the
business before exceptional costs was GBP3.2 million (2010:GBP2.3
million) on 16% lower turnover.
- Exceptional costs incurred in the period totalled GBP0.9
million principally comprising redundancy costs of GBP0.2 million,
property disposal and closure costs of GBP0.2 million, supply chain
disruption of GBP0.3 million and stock write downs of GBP0.2
million. (2010 GBP0.5 million - supplier insolvency of GBP0.2
million and GBP0.3 million due to redundancy and reorganisations
costs).
- Loss per share for the period was reduced to 0.7p (2010:1.0p).
Loss per share before exceptional costs was 0.5p (2010:0.8p.).
- The Board has continued to invest in the long-term future of
the business with capital expenditure of GBP1.2 million in the
first half of 2011 (GBP0.3 million in 2010). The expenditure was
principally on the first phase of investment in the new Sherburn
plant and investments in new product development. The balance of
the planned GBP2.5 million capital expenditure on the new factory
at Sherburn will occur mainly during Q3 of 2011.
Current Trading and Prospects
- The current order book stands at GBP46 million versus GBP55
million as at 30 June. This reflects a continuing ramp-up in
production to meet customer delivery requirements in H2. With this
secured order book, Optare has achieved eight consecutive months of
increased production output year to date. Output growth is expected
to continue through to year end with the benefit of increased
capacity of the new factory in Q4.
- During this ramp-up in production the Board continues to
closely monitor suppliers and their ability to grow with the
business. The lack of credit insurance in the market in general and
in our sector in particular is also a challenge and is an important
part of discussions in relation to agreeing appropriate levels of
the working capital facility for the business moving forward.
- Relocation to the new factory at Sherburn heralds a major
shift for the business from a 'coach building' model to a 'modern
assembly' environment. The discipline this brings will yield
productivity improvements, allow the business to scale-up more
efficiently and facilitate local market assembly of the product
range to grow export business outside Europe.
- Material cost savings of circa five percent per bus are
projected in the second half of this year resulting from the
collaboration on sourcing with Ashok-Leyland. In addition from Q4
the business will benefit from reducing establishment costs as the
Group's operations simplify to the single production site at
Sherburn.
- The Board is also pleased to announce that, through its
partner in South Africa, Optare has received notification that it
is the preferred bidder on a major export contract for
approximately 200 buses for deliveries starting in early 2012.
These will be provided in kit form and be assembled in the local
market. Confirmation of the contract is expected shortly and will
be notified to the market.
Board and management changes
- The Board has been further strengthened as previously
announced by the appointment of Peter Phillips as CFO in June of
this year. As will be confirmed in a following RNS, David
Stonehouse has stepped down from the Board to progress other
business interests and Jorma Halonen has been appointed as a
Non-Executive Director. In addition further strengthening of the
senior management team continues in support of the growth
strategy.
Banking and Facility Agreement
- The Company has continued to actively reduce term debt which
now stands at GBP1.3 million compared to GBP4.5 million twelve
months previously and GBP7.5 million at the same point in 2009.
Following the disposal of the first part of the Rotherham site in
June 2011, Optare has received an indicative offer on the remainder
of the site for a similar amount and anticipate completion of the
sale during Q4 2011, the proceeds of which are expected to be
applied to further reduce term debt.
- The Board has always been mindful of the requirement for
increased banking facilities to a level commensurate with the
Company's growing order book and export opportunities. Accordingly
it has been in constructive discussions with the Company's current
and other banks with a view to ensuring that the working capital
facilities are appropriate for the Company's current and future
operating requirements. These discussions are ongoing.
- In order to assist with the Company's growing operational and
working capital requirements whilst the banking discussions
continue, the Board is pleased to announce that it has entered into
a facility agreement (the "Facility Agreement") with the parent
company of one of its major shareholders, to provide Optare with up
to GBP3.0 million working capital.
- The Company's current banking facility falls due for renewal
on 30th September 2011. However, the Company has reached agreement
to extend this facility whilst the Facility Agreement is in place
until such time as the Board has completed negotiations on the
Company's new banking facilities.
- The Facility Agreement is for a fixed term to 31(st) December
2011 unless varied by mutual agreement and carries interest at
eight percentage points above base rate per annum.
- The Facility Agreement is classified as a related party
transaction in accordance with the AIM Rules by virtue of it being
with the parent company of one of Optare's substantial
shareholders. Accordingly, the independent directors, having
consulted with the Company's nominated adviser, consider the terms
of the Facility Agreement to be fair and reasonable insofar as the
Company's shareholders are concerned.
Outlook
- The third year of our turnaround strategy is about setting the
business on a growth path following a period of restructuring, debt
reduction and investment in the business. Progress is supported by
a current strong order book going into the second half of 2011 and
a high level of prospects for new business in UK and export markets
to sustain continued growth.
- The Board also 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 at our new site in Sherburn is timely and will enable us
to be able to meet this anticipated extra production demand.
- In addition the company is making good progress in export
markets and is qualifying to tender for substantial contracts with
the support of Ashok-Leyland. Given the above, the Board continues
to look to the future with confidence.
Consolidated income statement for the six month period ended 30th June
2011 (unaudited)
Unaudited Unaudited Audited
Six month 12 month
Six month period period ended
period ended ended 30 31 December
30 June 2011 June 2010 2010
GBP000's GBP000's GBP000's
Notes
Revenue 22,749 27,094 52,271
----------- ----------- -------------
Cost of Sales
non exceptional (20,268) (24,166) (47,826)
exceptional (200) (200)
total (20,268) (24,366) (48,026)
----------- ----------- -------------
Gross profit 2,481 2,728 4,245
% 10.9% 10.1% 8.1%
Administrative expenses (5,381) (4,894) (8,205)
Amortisation of intangibles (325) (86) (290)
Loss from operations (3,225) (2,252) (4,250)
Restructuring and other
exceptional costs (896) (310) (1,963)
Finance income 154 - 93
Finance costs (433) (137) (393)
Loss for the period from
continuing operations (4,400) (2,699) (6,513)
Loss on ordinary activities
before taxation (4,400) (2,699) (6,513)
Taxation - - 73
Profit attributable to the
equity holders of the parent
company (4,400) (2,699) (6,440)
----------- ----------- -------------
Earnings/(loss) per
ordinary share
From continuing operations
after exceptional items
(basic and diluted) (0.7)p (1.0)p (2.1)p
From continuing operations
before exceptional items
(basic and diluted) (0.6)p (0.8)p (1.4)p
There were no recognised gains or losses in the period other than the
profit for the period and therefore no statement of recognised income
and expenses is presented.
Consolidated balance sheet as at 30th June 2011 (unaudited)
Unaudited Unaudited Audited
As at As at As at
30 June 2011 30 June 2010 31 December 2010
GBP000's GBP000's GBP000's
Non-current assets
Goodwill 8,574 8,574 8,574
Other intangible assets 7,160 4,063 6,872
Property, plant equipment 2,524 3,179 2,312
18,258 15,816 19,486
-------------- -------------- ------------------
Current assets
Inventories 10,549 6,086 7,742
Trade and other
receivables 5,217 4,317 4,774
15,766 10,403 12,516
-------------- -------------- ------------------
Asset held for resale 1,004 2,400 2,000
Total assets 35,028 28,618 32,274
-------------- -------------- ------------------
Current liabilities
Trade and other payables 20,802 14,108 17,031
Bank loans and overdrafts 3,025 3,088 5,427
Current provisions 909 1,135 1,245
Obligations under finance
leases 23 32 23
24,759 18,363 23,726
-------------- -------------- ------------------
Non current liabilities
Bank loans 1,264 4,546 1,912
Deferred tax liabilities - -
Provisions 1,423 2,159 1,600
Obligations under finance
leases 22 30 24
2,709 6,735 3,536
-------------- -------------- ------------------
Total liabilities 27,468 25,098 27,262
-------------- -------------- ------------------
Net Assets 7,560 3,520 5,012
-------------- -------------- ------------------
Equity
Called up share capital 7,521 2,694 3,821
Share premium 29,967 24,300 26,759
Share based payment
reserve 49 27 27
Merger reserve 5,542 5,542 5,542
Retained loss (35,519) (29,043) (31,137)
Total equity attributable
to equity holders of the
parent 7,560 3,520 5,012
-------------- -------------- ------------------
Consolidated statement of changes in equity for the six month period ended 30
June 2011 (unaudited)
Share
based
Share Share Merger Retained payment
Capital Premium Reserve earnings reserve Total
GBP000's GBP000's GBP000's GBP000's GBP000's GBP000's
Balance at
31st December
2010 3,821 26,759 5,542 (31,137) 27 5,012
Loss for the
year (4,400) (4,400)
Total
comprehensive
income for
the year (35,537) 612
Transactions
with owners in
their capacity
as owners:
Issues of
shares and
warrants 3,700 3,208 18 6,927
Share based
payments 22 22
Transactions
with owners
in their
capacity as
owners: 3,700 3,208 - 18 22 6,949
Balance at 30
June 2011 7,521 29,967 5,542 (35,519) 49 7,560
--------- --------- --------- --------- --------- ---------
Consolidated Cash flow Statement for the six month period ended 30th June
2011 (unaudited)
Unaudited Unaudited Audited
Six month Six month 12 month
period ended period ended period ended
30 June 2011 30 June 2010 31 December 2010
GBP000's GBP000's GBP000's
Operating activities
Loss before tax (4,400) (2,699) (6,513)
Tax 73
Depreciation and
amortisation 689 632 1,518
Share based payments - -
Net finance expense 279 137 300
Loss on disposal of fixed
assets (20) - 12
Operating cash flows
before movements in
working capital (3,452) (1,929) (4,610)
-------------- -------------- ------------------
Movement in inventories (2,807) 1,089 37
Movement in trade and
other receivables (443) 139 (319)
Movement in trade and
other payables 3,771 (90) 2,833
Movement in provisions (515) (928) (1,359)
Cash absorbed by
operations (3,446) (1,719) (3,418)
-------------- -------------- ------------------
Interest received 154 - 93
Interest paid (433) (137) (393)
Net cash flow from
operating activities (3,725) (1,857) (3,718)
-------------- -------------- ------------------
Investing activities
Purchase of property,
plant and equipment (575) (45) (75)
Purchased intangible
assets (614) (197) (3,209)
Proceeds of property sale 1,016
Net cash flow from
investing activities (173) (241) (3,284)
-------------- -------------- ------------------
Financing activities
Loan repayments (3,236) (741) (2,183)
Proceeds from issuance of
ordinary shares 6,949 2,051 7,284
Net cash flow from
financing activities 3,713 1,310 5,101
-------------- -------------- ------------------
Net decrease in cash and
cash equivalents (185) (788) (1,901)
Cash and cash equivalents
at the beginning of the
period (2,720) (819) (819)
Cash and cash equivalents
at the end of the
period (2,905) (1,607) (2,720)
-------------- -------------- ------------------
Notes to the half yearly financial information for the six month
period ended 30 June 2011
1. Basis of preparation
The unaudited consolidated half-yearly financial information for
the half year ended 30 June 2011 has been prepared in accordance
with IAS 34, 'Interim financial reporting' as adopted by the
European Union
The interim financial statements have been prepared in
accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS) as adopted in
the EU. The current and comparative periods to June have been
prepared using the accounting policies adopted in the annual
financial statements for the period ended 31 December 2010 and
those which are expected to be adopted in the 31 December 2011
financial statements.
The financial information contained in this interim report does
not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. This report has not been audited by the Group's
auditors
Comparative figures for the period ended 31 December 2010 have
been extracted from the statutory financial statements for that
period which carried an unqualified audit report, did not contain a
statement under section 237(2) or (3) of the Companies Act 1985 and
have been delivered to the Registrar of Companies.
The interim report was approved by the Group's Board of
Directors on 26 September 2011.
2 Principal risks and uncertainties for the six months ending 30
June 2011
As for most businesses, there are a range of risks and
uncertainties facing the Group. The principal risks and
uncertainties are described in the Group's 2010 Annual Report and
Accounts which can be downloaded from the Group's website
(www.optare.com). In particular in 2011 there are a number of risks
with the construction and opening of the new Sherburn plant, for
which management has developed appropriate mitigation strategies.
In assessing the Group's likely financial performance for the
second half of current financial year, these risks and
uncertainties should be considered. Seasonality is not believed to
be a major factor for the Group.
3 Loss per ordinary share
The calculation of earnings per ordinary share is based on the
profit or loss for the period divided by the weighted average
number of equity voting shares in issue. There were no potentially
dilutive ordinary shares in existence during the period and so
basic and diluted earnings per share are identical.
Unaudited Unaudited Audited
Six month Six month 12 month
period ended period ended period ended
30 June 2011 30 June 2010 31 December 2010
GBP000's GBP000's GBP000's
Loss for period for
the purpose (4,400) (2,699) (6,440)
-------------- -------------- ------------------
of basic earnings
per share
(GBP'000)
Weighted Average
number of shares
('000) 617,033 264,111 307,965
Basic and diluted
loss per ordinary
share (pence per
share) (0.7)p (1.0)p (2.1)p
Retained Loss for
the period before
exceptional (3,505) (2,189) (4,277)
-------------- -------------- ------------------
costs (GBP'000)
Weighted Average
number of shares
('000) 617,033 264,111 307,965
Basic and diluted
loss before
exceptional items
per ordinary share
(pence per share) (0.6)p (0.8)p (1.4)p
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EAANKAEEFEAF
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