Rotala PLC (AIM:ROL) is set to escape much of the pain of fuel increases through some canny hedging arrangements entered into before the pandemic struck.
The buses operator revealed in its results for the year to the end of November 2021 that when opportunities arose before the pandemic to hedge the fuel requirements of the group the board took out fuel hedges, using diesel derivatives.
The group's forecasts anticipate fuel usage of about 14 million litres in 2022, with about 54% of this fuel usage covered by hedging contracts, at an average price of 87p per litre; the current market price of fuel (excluding VAT) is around 142.5p per litre.
The board said it would continue to monitor market conditions closely and take out such further fuel hedges as it deems are appropriate to meet its objective of reducing volatility in its costs and, where possible, creating business certainty.
The company announced a special interim dividend of 1p, having previously been prevented from paying dividends as it was receiving money from the government’s COVID-19 Bus Service Support Grant (CBSSG). That grant has now ended and the company intends to return to its former practice of paying out 40% of retained annual earnings, with the interim dividend half that of the final dividend.
The company revealed that annual revenue rose to £96.5mln from £78.1mln the year before, with the group returning to profit, thanks to an exceptional one-off profit of £1.6mln, most of which was accounted for by the gains on its fuel hedges.
Operating profit improved to £3.4mln compared to a loss the previous year of £2.6mln while the transport provider scraped a profit before tax £295,000 compared to a loss the year before of £4.8mln.
The board has budgeted for the current year on the assumption that passenger volumes will continue to be negatively affected throughout 2022 and that true recovery will not occur until the 2023 financial year; however, the board does expect passenger numbers to continue to rise as 2022 progresses.
“As this happens, and the new Government investment initiatives start to have effect, the company expects to return to commercial profitability, albeit initially at lower than pre-pandemic levels. The company intends to use the same assumptions in giving guidance to the market about its forecast future performance,” the company’s results statement said.
Shares in Rotala trucked 9.3% higher to 23.5p.