UK bus operator Rotala plc (LON:ROL) has posted a 9% increase in annual profit as it expanded its business with three acquisitions, including a depot at Heathrow.
Profit before tax rose to £2.68mln in the year to 30 November 2016 from £2.46mln the previous year on turnover of £55.0mln, up 8% from £50.9mln in 2015.
Rotala said the acquisition of the Heathrow bus depot from OFJ Connections in January 2016 for £1.3mln has increased its presence in this “key market” as the government plans to expand the capacity of the airport.
The company estimated annual revenue of the business at the time of the acquisition was about £5.5mln.
“We are confident that our Heathrow division is well placed to make a substantial contribution to group revenues and profits in its new and expanded form,” said chairman John Gunn.
The group also bought two Coach charter businesses in the North West in the second half. It purchased a six-vehicle fleet in Manchester from Elite Minibus and Coach Services in July for £200,000 and in August it acquired the eight-vehicle fleet from Wigan’s Rojay Services Limited for £213,000.
Net cash flows fell to £1.45mln from £4.63mln as the businesses the company bought were largely in the services sector where revenues are billed by invoice rather than being collected at delivery in cash.
Excluding changes in working capital and provisions, cash flows from operating activities jumped 54% to £6.46mln from £4.20mln.
Gross margins also dipped to 18.3% from 18.7% as the acquisitions were integrated.
Looking ahead, Gunn said turnover in the current year should show “further significant growth” on the back of its recent acquisitions.
“Rotala has grown predominantly through acquisition and we continue to be actively engaged in looking for attractive acquisition opportunities,” he said.
He added that the government’s Buses Bill, which covers the re-franchising of bus networks in major cities, will bring greater opportunities for the group and allow it to increase its market share in areas where “such ambitions would previously have been impracticable and unattainable”.
Rotala is recommending a final dividend of 1.50p, bringing the total to 2.30p, compared to 2.10p the prior year.
Shares jumped 5.66% to 56.0p in morning trading.