TIDMOPE
RNS Number : 7726K
Optare PLC
27 June 2014
Optare plc
("Optare", the "Company" or the "Group")
Preliminary unaudited results for the year ended 31 March
2014
Optare is pleased to announce its preliminary results for the 12
months ended 31 March 2014.
Operational Highlights
-- Winning Excellence in Technology at the Prestigious National
Transport Awards 2013 for the Versa electric bus incorporation fast
charging technology
-- Launch of the Euro 6 vehicle range
-- Development of the Euro 6 Integral Double Decker
-- New export distributor appointed in Australia to take advantage of increased market demand
Financial Highlights
-- Revenue for the period was GBP56.9m, a reduction of 25% over
prior year due to reduced kit revenues.
-- There were no exceptional costs in this year accounts as the
site closure and restructuring phase of Optare has now been
completed (2013: GBP1.8m).
-- Gross profit was GBP6.1m (representing 10.7% of turnover)
over the 12 month period (2013: GBP5.2m (pre-exceptional items),
representing 6.9% of turnover).
-- Administration expenses for the period fell to GBP8.0m (2013:
GBP8.8m (pre-exceptional items)).
-- EBITDA losses reduced to GBP1.9m (2013: GBP3.6m).
-- Operating cash outflow before working capital changes was GBP1.9m (2013: GBP5.3m)
-- Loss per share reduced from 0.3p per share to 0.2p per share.
Enrico Vassallo, CEO, commented: "Despite challenging market
conditions over the last twelve months, I am pleased to report that
we are now seeing the positive signs of increased sales activities
in our key market of the UK. This has resulted in a 30% growth in
orders in 2013-14. We believe that the launch of the new Metro
range of vehicles will serve to strengthen our market position. We
have made considerable progress in supply chain cost reduction,
implementing manufacturing efficiencies and further improving the
quality of our products, and we continue to focus on our processes
to drive continuous improvement. With the business break-even point
lowered we are confident that we have built solid foundations for
the group to grow the top line and return to profitability".
For further information, please contact:
Optare plc Tel: 0845 838 9901
Enrico Vassallo - Chief Executive Officer
Cenkos Securities plc Tel: +44 (0) 20 7397 8900
Stephen Keys / Mark Connelly
Chairman's Statement
Introduction
2013/14 has been a year of evolution and I am pleased with the
progress we have made to improve efficiency and reduce fixed costs.
Some of the major achievements for the year include:
-- New export distributor appointed in Australia to take advantage of increased market demand;
-- Completion of the new Double Decker product, which was
launched to the market in May 2014. This will increase the
Company's product offering in the UK Market.
-- Continued leadership in low carbon products through
investments, recognised by winning the National Transport Award
2013 for the Versa Electric Bus that incorporated fast charging
technology.
-- Successful accreditation for passing the low carbon emission
bus benchmark. The Solo, Versa and Metrocity now meet this
accreditation requirement to produce 30% less emissions of
greenhouse gases than a normal diesel bus.
-- Metrocity Electric vehicle launched into the key target market of London.
-- We continue to integrate with Ashok Leyland to deliver key business objectives.
Strategic development
Our strategy is consistent with what we stated last year which
is outlined below:
-- Being a European leader in green bus technologies through the
development of the full range of options from fuel-efficient
diesels to dual fuel, hybrid and electric vehicles.
-- Consolidating and maintaining leadership in the UK midi-bus market.
-- Offering a product portfolio with the full range of buses
that is demanded by the UK bus market.
-- Becoming a significant exporter of buses.
-- Expanding market share in the UK and Europe by selling buses
made to global standards at competitive prices.
I am pleased to report during the year we have made progress on
all these key strategic objectives.
Our customers
Our customers remain key to our business and they continue to
provide excellent support to the Group.
We continue to strengthen our business relationships with the
major bus groups. We are confident that this relationship and
partnership will continue to grow and we remain committed to
delivering high quality, innovative and value for money products on
time.
Our people
I would like to thank our workforce for their dedication,
commitment and focus on delivering high quality products. They have
also been critical in continuing to work with us to deliver the
strategic objectives of the company. Lastly, I would like to thank
the shareholders for their continuing support.
Chairman's statement (continued)
Summary for 2014-15
In summary 2014-15 will focus on:
-- Increasing volume in the UK by the Metrocity and MetroDecker
product, with customer focus, collaboration and added value
strategy.
-- Developing products and commercial relationships for export
markets and driving international expansion.
-- Continuing to deliver environmentally friendly product technology.
-- Continuing to drive cost reduction and improve quality.
John Fickling
Non-executive Chairman
30 June 2014
Chief Executive's Statement
Business and financial report
Business and financial performance
2013/14 represented an important step forward for Optare in
terms of business growth through the recovery of sales in our major
market the UK, and the consolidation of International sales, mainly
in Australia and South Africa. Order intake grew by 30 % in 2013/14
compared to the previous financial year, reaching a total number of
372 units.
The Company posted overall sales of 351 single deck vehicles, a
slight decrease on the previous year. Further to our traditional
sales, we also exported 31 kits to South Africa and the first 15
units of the Australian order.
Group turnover decreased from GBP75.9m to GBP56.9m, mainly due
to the completion of deliveries of the kits for the Cape Town
tender, which generated significant revenues in 2012/13. Profit
after tax was a net loss of GBP4.1m, a reduction of GBP3.3m on the
prior year principally due to continued progress on driving cost
reductions and increased process efficiencies.
Total registrations in our core market, the UK bus market,
totalled 2,494 units in 2013/14, showing a contraction of 347 units
against the previous year, but representing an increase in its
market share in the UK Bus market from 11.5% to 14.1%. Optare
continues to be strong in the less than 12 ton market (Solo), where
we achieved 100% share of the UK market, and saw growth in the
12-16 ton market (Versa).
The majority of the bus market consists of 12-16 ton range (42%)
and double deck range (38%). In the period under review, Optare
launched the Metrocity to compete in the 12-16 ton market and
completed the development of the MetroDecker (double deck) for
commercial launch in Q3 of 2014/15.
The business completed the Metrocity range with the addition of
the electric option, gaining the first vehicle orders in October
2013. Paybacks on Electric Vehicle (EV) products are now well
within the lifetime of the vehicle, with technological developments
in fast charging and inductive charging EV now commercially viable
across cities in the UK and Europe and we expect demand to increase
as tighter controls on emissions are introduced across the
world.
To reduce dependency on one market and to improve top line
growth, the Group will continue to diversify the product range and
participate in various bus segments outside the UK through the
dealer distribution network. The Company continues to invest in new
products to secure the long term growth of the Company with a
pipeline of new products to meet our growth strategy.
2013-14 was a year of continuing focus and improvement on
operational and fixed costs to return to profitability and minimise
cash outflow. This delivered net savings of GBP1.8m in cost of
sales and GBP0.8m in administration expenses. The business remains
focused on reducing operational costs and this will gain momentum
in 2014-15 through lean manufacturing, with the likely associated
cost savings expected to deliver a further GBP2.0m in the next 12
months. This focus on continuing to drive cost reductions in
operations through lean manufacturing will gain momentum in
2014-15, while maintaining a long term view of having the right
quality product to grow and deliver sustainable profits.
The integration with our parent company, Ashok Leyland continues
to grow in a number of key areas through synergies with their
international operations for export opportunities and product cost
reduction within the Ashok Global business. We are confident that
this will result in an increased presence in new markets and lead
to the conversion of major contracts into future sizeable orders
through the Ashok Group's extensive global sales network.
Furthermore, we have exchanged key personnel in critical areas to
focus on continuous improvement of engineering, quality and
efficiency to transfer synergies between the organisations. We have
also been successfully working with Ashok Leyland's supply chain to
benefit from their critical mass and purchasing leverage to source
materials from lower cost countries to deliver material cost
reductions.
Financial performance
The financial results for the year show a net loss of GBP4.1m
compared to a loss of GBP7.4m (post exceptional items) in the
previous period, which represents an improvement of 45%.
The key highlights for the period ending are:
-- Revenue for the period is GBP56.9m; a reduction of 25% over
prior year due to reduced kit revenues.
-- There were no exceptional costs in this year accounts as the
site closure and restructuring phase of Optare has now been
completed (2013: GBP1.8m).
-- Gross profit was GBP6.1m (representing 10.7% of turnover)
over the 12 month period (2013: GBP5.2m (pre-exceptional items),
representing 6.9% of turnover).
-- Administration expenses for the period fell to GBP8.0m (2013:
GBP8.8m (pre-exceptional items)).
-- EBITDA losses reduced to GBP1.9m (2013: GBP3.6m).
-- Operating cash outflows before working capital changes was GBP1.9m (2013: GBP5.3m)
-- Loss per share reduced from 0.3p per share to 0.2p per share.
Current trading
On the 31 March 2014, the order book stood at GBP28.4m compared
to GBP12.3m in the previous year. This reflects our substantial
investment in market leading low carbon vehicles and our planned
export expansions. Additionally, as announced in May, we
successfully launched our new MetroDecker product that completes
our product offering in the market.
We are the industry leaders in Electric Vehicles in the UK
market. Winning the National Transport award is a testament to our
market leading technology, with increasing pressure on fuel cost
and environmentally conscious customers, this provides the Company
with an avenue to differentiate and grow in a mature market.
Board and management changes
Following the initial strategic integration of Optare into Ashok
Leyland, PG Nilsson, Interim Chief Executive Officer elected to
retire and leave the organisation and step down from the Board of
Directors. We thank PG Nilsson for his contribution and wish him
the very best.
Following my appointment as CEO of the Optare board on the 7(th)
October 2013, the senior management team has been strengthened
further to create an organisation that is customer focused to
underpin our top line growth expansion plans.
Outlook
With the business break-even point lowered we now believe it is
time for the Group to deliver profitability by increased top line
sales growth. We believe that this will be driven by the product
pipeline including, the Metrocity and MetroDecker and other new
products for the export market in 2014-15 and beyond.
The Board anticipates that the UK market will be flat but the
Company will continue to gain market share with the introduction of
the Metrocity and MetroDecker. In addition, the Company is making
solid progress to qualify to tender for substantial export
contracts to take advantage of opportunities that exist in Europe,
the Middle East and South East Asia.
Overall the Board expect progress to be accelerated in 2014-15
with the successful introduction of the new products and with
increased demand for our low carbon products, especially in
Europe.
EnricoVassallo
Chief Executive Officer
30 June 2014
Consolidated Income Statement for the year ended 31 March
2014
Before
Exceptional Exceptional
Total items items Total
Year Year Year Year
ended Ended Ended Ended
31 Mar 31 Mar 31 Mar 31 Mar
2014 2013 2013 2013
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 56,947 75,938 - 75,938
Cost of sales (50,826) (70,695) (1,483) (72,178)
----_______ -_______ _______ _______
Gross profit 6,121 5,243 (1,483) 3,760
Administrative expenses (8,039) (8,839) (328) (9,167)
Distribution costs (499) (512) - (512)
Amortisation of
intangible assets (624) (643) - (643)
_______ _______ _______ _______
Loss from operations (3,041) (4,751) (1,811) (6,562)
Finance costs (1,020) (788) - (788)
_______ _______ _______ _______
Loss on ordinary activities
before taxation (4,061) (5,539) (1,811) (7,350)
Taxation - - - -
_______ _______ _______ _______
Loss attributable to the equity
holders of the parent company (4,061) (5,539) (1,811) (7,350)
_______ _______ _______ _______
Loss per share (Note 4): Year Period
ended ended
31 Mar 31 Mar
2014 2013
Loss per share (basic and diluted) (0.2)p (0.3)p
_______ _______
There are no other recognised items of income and expense other
than those presented above.
Consolidated Statement of Changes in Equity for the year ended
31 March 2014
Share
Profit based
Share Share Merger and Loss payment
capital premium reserve Account reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April
2012 9,005 32,936 5,542 (44,529) 198 2,612
_______ _______ _______ _______ _______ _______
Loss for the year - - - (7,350) - (7,350)
_______ _______ _______ _______ _______ _______
Total comprehensive
income for the
period - - - (7,350) - (7,350)
Transactions with
owners
in their capacity
as owners:
Transfer between
reserves on forfeiture
of options - - - 156 (156) -
_______ _______ _______ _______ _______ _______
Total transactions
with owners
in their capacity
as owners - - - 156 (156) -
_______ _______ _______ _______ _______ _______
Balance at 31 March
2013 9,005 32,396 5,542 (51,723) 42 (4,738)
_______ _______ _______ _______ _______ _______
Loss for the year - - - (4,061) - (4,061)
_______ _______ _______ _______ _______ _______
Total comprehensive
income for the
year - - - (4,061) - (4,061)
_______ _______ _______ _______ _______ _______
Balance at 31 March
2014 9,005 32,396 5,542 (55,784) 42 (8,799)
_______ _______ _______ _______ _______ _______
Consolidated Balance Sheet as at 31 March 2014
31 March 31 March
2014 2013
GBP'000 GBP'000
Non - Current Assets
Goodwill 8,574 8,574
Other intangible assets 8,324 8,271
Property, plant and equipment 3,300 3,356
_______ _______
20,198 20,201
_______ _______
Current Assets
Inventories 12,423 10,338
Trade and other receivables 7,998 7,720
_______ _______
20,421 18,058
_______ _______
Total Assets 40,619 38,259
_______ _______
Current Liabilities
Trade and other payables 18,632 20,466
Loans and overdrafts 10,092 18,652
Provisions 1,589 2,217
Obligations under finance leases 64 79
_______ _______
30,377 41,414
_______ _______
Non Current Liabilities
Bank Loans 15,000 -
Provisions 3,940 1,394
Obligations under finance leases 101 189
_______ _______
19,041 1,583
_______ _______
Total Liabilities 49,418 42,997
_______ _______
Net (Liabilities)/Assets (8,799) (4,738)
_______ _______
Equity
Share capital 9,005 9,005
Share premium 32,396 32,396
Share based payment reserve 42 42
Merger reserve 5,542 5,542
Retained loss (55,784) (51,723)
_______ _______
Total equity attributable to equity holders
of the parent (8,799) (4,738)
_______ _______
Consolidated Cash Flow Statement for the year ended 31 March
2014
Year ended Year ended
31 March 31 March
2014 2013
GBP'000 GBP'000
Operating activities
Cash absorbed by operations (4,166) (2,537)
Interest paid (1,020) (788)
_______ _______
Net cash used in operating activities (5,186) (3,325)
Investing activities
Disposal of assets held for sale 1,000
Purchase of property, plant and equipment (543) (800)
Capitalised development costs (678) (882)
_______ _______
Net cash used in investing activities (1,221) (682)
Financing activities
Finance lease repayments (69) (60)
Short term loan 7,476 2,023
_______ _______
Net cash generated from financing activities 7,408 1,963
_______ _______
Net (decrease) in cash and cash equivalents 1,001 (2,044)
Cash and cash equivalents at start of
year (5,445) (3,401)
_______ _______
Cash and cash equivalents at end of
period (4,444) (5,445)
_______ _______
1. BASIS OF PREPARATION
Optare plc is a company incorporated and domiciled in the
UK.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 March 2014 or
31 March 2013. The financial information for 2013 is derived from
the statutory accounts for the year ended 31 March 2013, which have
been delivered to the Registrar of Companies. The auditor has
reported on the year ended 31 March 2013 accounts; their report
was:
i. unqualified;
ii. did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report; and
iii. did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2014 will be
finalised on the basis of the financial information presented by
the directors in this preliminary announcement and will be
delivered to the Registrar of Companies in due course.
Copies of the Annual Report and Financial Statements for the
year ended 31 March 2014 will be available on the Company's website
www.optare.comfrom 31 July 2014 and from the Company Secretary,
Optare plc, Unit 3 Hurricane Way South, Sherburn in Elmet, Leeds,
North Yorkshire, LS25 6PT.
2. GOING CONCERN
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 made a net loss of GBP4.1m in the year ended 31 March
2014 (2013: GBP7.4m loss), which has resulted in the Group now
having net liabilities of GBP8.8m (2013: net liabilities of
GBP4.7m).
The Group has conducted a thorough review of its strategy for
the next three years and put forward updated trading forecasts
through to March 2017, which include detailed cash flow
calculations. The Group is forecast to be cash generative in
2014/15. The Group continues to have facilities in place to meet
its funding requirements. The forecasts are based on detailed
assumptions as to sales performance, variable and fixed costs. The
forecasts reflect sales of recently launched products from 2014/15
(Metrocity and Double Decker), the strength of the current order
book and prospects. This includes an increased level of exports
through direct and distributor sales channels and continued sales
of Green Bus vehicles - both electric vehicles and hybrids. Details
of sales performance in 2013/14 and the increased order book are
included in the Chief Executive's Statement on pages 4 and 5.
The forecasts assume a gradual increase in the level of savings
in material costs over the forecast period, achieved both through
the Company's own efforts and through joint initiatives with Ashok.
Improvement in labour productivity is factored in and further
expected gains from process improvement and redesigns of the buses
for efficient manufacturing.
There is inherent uncertainty in any forecast. In assessing such
forecasts the Directors have considered the impact of such
uncertainties, including the financial strength of customers, any
lack of visibility regarding sales beyond the current order book,
the ability of suppliers to meet demand, the achievability of
material and labour savings and the possibility that the external
economic environment might worsen. The Directors feel that a
reasonably conservative approach has been taken in the forecasts
and that the facilities in place have adequate headroom to allow
for these uncertainties.
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 achieving higher than forecast a) sales volumes b) an
improved sales mix c) material savings, arising from joint
initiatives with Ashok, and d) productivity savings. Further
significant high volume sales opportunities exist in Europe,
Southern Africa, the Middle East, Asia and Australia in excess of
the forecast volumes. Further fixed cost base synergies to
integrate the business further with Ashok.
The Company was successful in restructuring its debt in June
2013 to provide total bank facilities of GBP23m. These are
structured into a term loan for three years for GBP15.0m backed by
corporate guarantee provided by Ashok and an overdraft element of
GBP8.0m which has been renewed and now falls due for review in June
2015. There is a fixed charge on the assets of the Company
following the re-negotiation of facilities in June 2013. Both of
these facilities are placed with Barclays Plc. Due to the corporate
guarantee, no financial performance covenants attach to these
facilities.
The Group also has a GBP5.1m short-term loan facility from Ashok
as at 31 March 2014, with a 30 day notice repayment notice subject
to banking covenants. These facilities have been rolled forward
until December 2015.
The Directors are confident that the assumptions underlying
their forecast are reasonable and that the Group will be able to
operate within its current funding limits arranged with support
from Ashok. The Directors believe that the Group is well placed to
manage its business risk successfully.
On the above basis the Board believes that it is appropriate to
prepare the financial statements on the going concern basis. 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.
3. CRITICAL JUDGEMENTS AND ESTIMATES
The preparation of historical financial information in
conformity with EU Adopted IFRS requires management to make
judgements, estimates and assumptions that affect the application
of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. The key sources of
estimation that have a significant impact on the carrying value of
assets and liabilities are discussed below:
1 Provision For Warranty Claims
Management has estimated the cost of potential warranty claims
arising on acquisition of the various businesses and on new bus
sales. This requires an element of judgement about the likely level
of claims and their financial impact upon the business. The factors
affecting the level of warranty cost are: the number of buses sold;
the length in periods and the breadth in cover of the terms of the
warranty given with the bus; the ability of the Company to obtain
suitable back-to-back warranties from its suppliers; the efficiency
of the quality processes applied in designing and building the
buses; the strictness with which warranty claims from customers are
vetted; and the extent to which goodwill claims are allowed.
Judgements on the level of warranty provision that is required are
based on the number of buses in service and their remaining
warranty life, with the key estimation being the likely warranty
cost per bus. This is based on historical data, with estimates
where necessary for new vehicle designs. If the assumption for
likely warranty cost per vehicle was adjusted by 10% this would
equate to an under or over provision of GBP504,000.
2 Impairment Reviews
Management performs impairment reviews annually on goodwill,
other intangible assets and tangible assets. These involve
comparing the estimated future cash flows of the business, using a
discounted rate, to the carrying value of the Group's non-current
assets. Where the net present value of the forecast cash flows
exceeds the carrying value, no impairment is required. As required
by IFRS, no assumption is made that profits growth can exceed
national, market or product averages without justification.
Clearly, there is an element of judgement required in assessing
the potential future benefits to be derived from these assets. When
completing the impairment review the Directors considered the same
factors as outlined for the going concern review; critical
judgements are the discount rate used and the growth in turnover in
the next three years' business plan by the introduction of new
products.
4. LOSS PER SHARE
The calculation of the basic and diluted Year ended Period ended
loss per share is based on the following 31 March 31 March
data: 2014 2013
GBP'000 GBP'000
Loss:
Loss for the purposes of basic loss per
share
(net loss for the period attributable
to equity holders of the parent) (4,061) (7,350)
_______ _______
Number Number
Weighted average number of ordinary share
for the purposes of basic earnings per
share
2,235,291,827 2,235,291,827
-____________ ____________
Basic and fully diluted loss per share (0.2)p (0.3)p
-____________ -____________
Year ended Period ended
31 March 31 March
Excluding Exceptional Items 2014 2013
GBP'000 GBP'000
Net loss for the period attributable
to equity holders of the parent (4,061) (7,350)
Adjustment to exclude exceptional costs - 1,811
_______ _______
Loss from continuing operations for the
purposes of basic earnings per share (4,061) (5,539)
_______ _______
Basic and fully diluted loss per share (0.2)p (0.2)p
_______ _______
This information is provided by RNS
The company news service from the London Stock Exchange
END
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