Rotala PLC (LON:ROL) shares advanced on Tuesday after the bus and coach operator raised its dividend by 8% after strong 2018 earnings.
The AIM-traded company, which provides bus services under contract to local authorities and bus routes, posted an 18% jump in adjusted pre-tax profit to £4.23mln for the year to 30 November 2018.
READ: Bus operator Rotala reports full-year profit growth as it expands in Heathrow
Turnover increased 19% to £62.4mln, supported by the acquisitions in the past two years in the West Midlands, including Hansons in 2017 and Central Buses in 2018.
Revenue from contracted services rose by 16% to £21.6mln while revenue from commercial services gained 25% to £38.9mln, offsetting a 31% drop in charter services to £1.9mln.
The group raised its dividend for the year to 2.7p per share from 2.50p a year ago as net cash flows from operating activities grew 23% to £4.13mln.
“The company continues to make good progress and its results clearly show the benefit of the acquisition strategy which the board has pursued over the last three years,” said non-executive chairman John Gunn.
Rotala 'confident' about future prospects
Rotala said trading in the new financial year has started in line with expectations.
The group plans to continue to look for potential acquisitions in the bus market.
“We are confident therefore about the prospects of the group and excited about the possibility of expanding it considerably in the years ahead,” said Gunn.
Shares rose 2.9% to 53p each.
Cenkos repeats 'buy' recommendation
UK stockbroker Cenkos maintained a ‘buy’ rating, saying it believes Rotala offers “great value” for investors, trading on a 2019 enterprise value/adjusted EBITDA of 6.0x and a dividend yield of 5.4%.
“Rotala continues to successfully execute on its business plan in a challenging market environment,” Cenkos said.
“Several acquisition opportunities are presenting themselves, and as the company gains scale, higher utilisation rates and exploits its operational leverage it should accelerate growth.”