Rotala PLC (LON:ROL) hiked its dividend as profits increased in the first half of the year, but said the main event for the year is its recent acquisition of Bolton bus depot and its associated routes.
The £5.3mln cash purchase from First Manchester completed on 11 August and will add 18 commercial bus routes operating from the Bolton and Bury areas into the centre of Manchester.
Management expects the acquisition will earnings enhancing in the first full year as it strengthens existing operations in the area, in the form of two smaller depots, and has added to the company’s strength in the West Midlands.
“The board believes that the acquisition provides an exciting opportunity to achieve a significantly larger presence in this key bus market and to improve further the financial performance of the new combined Manchester business in the medium term,” said chairman John Gunn.
For the first half of the year, revenues of £30.5mln were down from £30.99mln a year ago, as commercial and charter turnover were flat and up 5% respectively, but contracted services were down 4%.
Gunn noted that this resulted from the board’s strategy of “not chasing turnover regardless of profitability”.
In line with this aim, the period saw gross profit margin rise to 19.1% from 17.9% a year ago, meaning pre-tax profits before exceptional edged up to £1.53mln from £1.50mln.
The interim dividend was lifted 3% to 0.95p per share as the board operates within a target for dividend cover of 2.5 times earnings in the longer term.
Looking forward, Gunn said the Bolton acquisition is an indicator of how the UK bus landscape is beginning to change: “We can expect more divestment by the big bus groups in future years, as has been publically stated by certain of these groups.
“We undoubtedly have the management skills and the resources to capitalise on these opportunities. This makes us confident about the prospects of the group in 2019 and beyond.”