TIDMOPE
RNS Number : 4354G
Optare PLC
29 June 2012
Optare plc
("Optare" or the "Company")
Audited Results for the period ended 31 March 2012
Operational Highlights
-- Major operational and business restructuring complete, with
closure of the Leeds and Blackburn facilities along with the sale
of the Rotherham site.
-- Move successfully completed to new factory in Sherburn in Elmet.
-- Over 150 new Hybrid and Electric buses now in operation in UK and export markets.
-- Europe's first 11.1m Electric bus launched.
-- Major export success achieved in South Africa with initial GBP18m order.
-- Ashok Leyland increased its stake in Optare to 75.1% in
January 2012 and committed to maintaining its AIM market
listing.
-- Board strengthened by the appointment of four new
Non-executives including Jorma Halonen, former Chairman of Volvo
Bus corporation.
Financial Highlights
-- Revenue for the 15 month period GBP72m.
-- Capital investment of GBP2.2m made in new Factory.
-- Direct labour was 13.6% of revenue over the 15 month period
(14.3% 2010), this compares with the last three months run-rate at
the new Sherburn facility of 9.4%, demonstrating the significant
efficiency improvements of the new single site.
-- Administration costs pre-exceptional were 14.4% of revenue
over the 15 month period (14.7% 2010). This compares with the last
3 months of 9.0% with the full impact of the Blackburn closure yet
to be fully reflected.
-- EBITDA losses for the 15 month period were GBP6.8m
pre-exceptional. Management estimate this includes around GBP2.9m
of costs that could have been avoided had it not been for needing
to stagger factory closures and outsourcing activities, undertake
major site clearance work and retain skills during production
transfers.
-- Exceptional costs for restructuring, redundancies, relocation
and the factory moves totalled GBP4.6m.
-- Loss per share reduced from 2.1p per share to 1.4p per share
-- Remaining term debt with Lloyds Bank of Scotland paid down
and all fixed and floating charges released.
-- New working capital facility agreed with HSBC and supported by Ashok.
-- Tax losses at current corporation tax rates equivalent to
approximately GBP9.3m will be useable when the Group achieves
profitability.
-- Order book stood at GBP45.7m at year end 31st March 2012.
Jim Sumner, CEO commented, "from an extremely challenging
position 3 years ago all the principle objectives of turnaround
plan have been achieved in terms of restructuring, new factory
investment, low carbon product developments and re-financing. The
benefit of this in showing in Optare's UK registrations up 62% so
far in 2012 and revenue annualising at over GBP100m following
record revenues for the past 3 months of GBP26m. With increasing
revenue, a lower single site cost base and the restructuring costs
behind us the company is on course to move into profitability this
year."
For further information, please contact:
Optare plc Tel: 0845 838 9901
Jim Sumner - Chief Executive
Cenkos Securities plc Tel: +44 (0) 20 7397 8900
Stephen Keys/Camilla Hume
Chief Executive's Statement
Three year turnaround summary
The management and Board agreed on a three year turnaround plan
in June 2009 against what was an extremely challenging situation
for the company. This radical strategy involved four key objectives
focused not only on ensuring survival but also putting in place the
long term foundations for business growth and success. On now
completing the three years, a summary follows on the progress
achieved;
1. Single site location
Central to the turnaround strategy has been the consolidation of
operations from three sites onto a single modern site to reduce
fixed costs, increase capacity and improve productivity. Having
withdrawn production from Rotherham in Q3 2009, Optare completed
the transfer of production from its former Leeds site to a brand
new facility in Sherburn in Elmet in Q4 2011. The Leeds facility
was subsequently handed back to the landlord following site
clearance in December 2011 and has no ongoing liabilities. Finally
the Blackburn facility was closed in May this year and the site is
currently being cleared in readiness for hand back to its landlord.
Additionally, while it has been a protracted process in a difficult
commercial property market, the sale of the balance of the former
Rotherham site has also been completed on 28 June 2012.
This consolidation of production involved a major investment in
new facilities, outsourcing of component manufacturing and
structure fabrication, operator training, improved IT systems,
engineering data management and assembly process documentation. The
key result of these changes has been to move Optare from a legacy
of low volume traditional 'coach building' to a 'high volume
assembly' model. This is expected to provide the business with the
ability to support growth in fleet sales and in export markets
including providing CKD kits.
The new facility at Sherburn in Elmet has already enabled the
business to clearly identify further opportunities for operational
efficiency improvements. The high visibility assembly process in
the new factory has provided opportunities for enhanced engineering
controls, better stock management, de-bottlenecking and
improvements in build and supplier quality. It is very pleasing
that the greater part of the existing Leeds workforce have been
capable of making the change to the new Sherburn facility and we
continue to upgrade the skills and competencies of the workforce as
new practises roll out across the business.
The past year of transition has been a particular challenge for
the business, which had to keep production running, whilst
investing in and starting up a new site, shutting down the old
sites, developing a CKD operation in South Africa along with
introducing a number of new products. Within this context, we also
had to manage some exceptional supplier issues, with causes ranging
from the knock-on effect of the Japanese Tsunami to a component
failure from a key supplier.
During the period ending 31st March a capital investment of
GBP2.2m was made in the new factory.
2. New product and business development
Following a substantial investment of GBP3.2 million in 2010, we
invested a further GBP1.7 million in 2011/12 into new product
development. Highlights during the period include;
-- Launch of the first full-sized single deck electric buses in the UK and now in service.
-- Development and launch of an innovative lighter weight hybrid
school bus in association with Transport for Greater Manchester. It
has a capacity to seat 55 children and is now in service with five
operators in the Greater Manchester area.
-- We continue to make strong progress on a low cost flywheel
system as an alternative approach to Diesel-electric hybrid
technology.
-- Full development of the export CKD Solo in kit form, initially for use in South Africa.
-- Development with Ashok for the export of CKD Solo kits for
the Indian and Middle East markets. Demonstrator vehicles have been
completed and the first kits are to be supplied in Q3 2012.
-- Launch of the new more fuel efficient Tempo SR 12m bus, which has now entered service.
-- Development and launch later this year of a Versa product,
principally for the London market, which addresses operators' needs
for a high capacity lighter-weight single deck product.
-- Development of an 11.7m Versa targeted at the fleet market,
with the initial vehicles going into major UK operators for
evaluation in Q3.
-- Work continues on the prototype of a new double deck bus,
which is currently undergoing reliability trials.
-- Further improvements to the Solo SR following the retirement of the original Solo.
Over the past three years from the initial development of the
design concepts we have now delivered over 150 hybrid and electric
vehicles in the UK and Europe, and are the leading European
manufacturer of single deck hybrid and electric buses. In addition
Optare is realigning its Versa product range to allow it to compete
in the fleet market for larger single deck busses.
We were also very pleased to win a large CKD export order from
the City of Cape Town, in cooperation with our South African
partner, Busmark. This order was two years in the making and
vindicated the long term strategy of seeding the right product into
the right market well ahead of the competition, putting us in pole
position to win the contract.
Finally in terms of export market development we are working
closely with Ashok in terms of the geographic clusters of West
Asia, Africa, ASEAN and Latin America they are actively developing
as export markets. In addition we are working with Ashok sales
teams in the Middle East where they have a well established
base.
3. Strategic partnership
Given the increasingly global nature of the commercial vehicle
industry, Optare's limited scale and its intrinsic challenges, the
Board recognised that the best option to secure the future of the
business was to secure a long-term partnership with a major volume
bus manufacturer.
Following extensive discussions with other European and Asian
manufacturers, in July 2010 we were delighted to announce that
Optare had entered into a strategic co-operation with Ashok Leyland
Limited (Ashok), part of the Hinduja Group, when Ashok acquired a
26% holding in Optare. Following a period of cooperation and joint
assignments in 2011, Ashok and its associated companies increased
their stake in the business to 75.1% and provided corporate
guarantees which enabled Optare to pay down the balance of its
fixed term debt with Lloyds/Bank of Scotland (BoS) and facilitated
re-banking with HSBC, thereby providing working capital facilities
as needed.
Optare (LSE:OPE)
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