This move also enabled Optare to become more closely integrated
into Ashok's ambitious global bus strategy which seeks to maintain
and improve on their aspiration to be among top five global bus
manufacturers. Through leveraging the synergies of the two
companies, we are confident that going forward we will be able to
reduce supply chain costs, accelerate technology sharing and
fast-track growth in export markets.
4. Long-term Refinancing
Optare has suffered during the turnaround from its legacy of
relatively high term debt and its incumbent covenant conditions
coupled with the lack of general credit insurance in the market,
both putting substantial pressure on day to day working capital
requirements of the business.
The full extent of GBP7.5m of term debt owed to Lloyds/BoS in
June 2009 has been paid back with all fixed and floating charges
held over the business now released. Optare has now re-banked with
HSBC and has a working capital facility supported by Ashok at
competitive borrowing rates.
Financial performance
The Group's financial performance for the period ended 31 March
2012 is reported in the Directors' Report, however key highlights
for the period ending are;
-- Revenue for the 15 month period GBP72m.
-- Capital investment of GBP2.2m made in the new factory.
-- Direct labour costs were 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
three months run-rate of 9.0% with the cost benefits 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 GBP9.3 will be useable when the Group returns to
profitability.
Current trading
On the 31st March 2012, the order book stood at GBP45.7 million.
However while the current economic environment remains challenging,
particularly in the Eurozone, Optare's UK market registrations are
up 62% so far in 2012 and revenue is now annualising at over
GBP100m following record revenues for the past three months of
GBP26m.
In addition we are seeing the benefits as shown in the financial
summary of the efficiency improvements of the new single site in
Sherburn with Labour cost for the last three months reducing to
9.4% of sales, and administration costs reducing to 9.0% of sales.
With increasing revenue, a lower single site cost base and the
restructuring costs behind us the company is on target to move into
profit during 2012.
Following the introduction into service of our 11.1m electric
Versa along with our fast charging system we have had customers
show very strong interest. The feedback we are receiving from many
operators is that, with the increase in fuel costs and greater
environmental challenges, a key market trend will be towards
electric buses. Optare is uniquely positioned to exploit this
opportunity and is actively working to develop supply chains to
allow production to be quickly scaled as demand develops.
We are currently working on a number of tenders in the Middle
East and Far East to further expand our export operations, as well
as building on the South African presence. We are also looking to
exploit opportunities in a number of Western Europe markets as
fiscal pressures are moving operators to consider smaller more fuel
efficient buses for which we have a strong product offering.
Board and management changes
Following the increase in Ashok's stake in the company, the
Board has been reorganised to take advantage of the supporting
strengths of Ashok executives, as well as a very experienced
industry professional during the year. Mr Halonen, a former
Chairman of Volvo Bus Corporation, joined the Board in September
2011. Mr Sridharan, CFO of Ashok, Mr Nilsson, International
Operations Director, Ashok, and Mr Kathuria, Global Strategic
Sourcing and Supply Chain Director of Ashok, joined the Board in
March 2012.
To support growth of the business, the company continues to
strengthen its senior and middle management team following the
significant restructuring, both drawing on Ashok resources and key
industry experienced personnel.
Outlook
The focus and thrust during the last three years was on the
turnaround of Optare from an extremely challenging position.
Although trading conditions during 2010 and 2011 have been tough,
we have successfully reshaped the business so that it is well
positioned to take advantage of the opportunities that we foresee
in the UK and export markets.
The Board anticipates an increase in the UK demand, particularly
for single-deck buses in 2013, driven by an expected pre-buy of
buses ahead of Euro VI introduction and to comply with the
Disability Discrimination legislation mandated for all
single-decker buses by 2014. The increased capacity at our new site
in Sherburn is timely and will enable us to be able to meet this
anticipated extra production demand. In addition the Company is
making good progress in export markets and is qualifying to tender
for substantial contracts with the support of Ashok.
The Board looks forward to 2012 and beyond with confidence given
the benefits of the new factory in Sherburn, the investment in low
carbon bus technology, a developing export business and the support
of its major shareholder Ashok. With the objectives of the three
year turnaround plan largely achieved, and with the formation of
deeper and wider cooperation with Ashok, focus has now turned to
accelerating growth from the firmly established foundations.
Jim Sumner
Chief Executive Officer
Chairman's Statement
Introduction
2011/12 was a period of major change to prepare the business for
future growth. The major achievements in the period include:
-- completing the move to a new bus manufacturing facility in
Sherburn in Elmet, the first major bus manufacturing facility in
the UK since the 1970s, and the closure of the old facilities in
Blackburn, Leeds and Rotherham;
-- becoming part of Ashok Leyland Limited (Ashok) and of the wider Hinduja Group;
-- delivering a large number of green bus products following the
extensive development investment, giving Optare the position of the
leading single deck hybrid bus manufacturer in Europe;
-- completing the rebanking of the business to a level
commensurate with the anticipated growth requirements;
-- securing a major export contract with the City of Cape Town,
which is expected to be the precursor to significant long term
volume business.
As a strategic partner, Ashok were extremely supportive of the
needs of the business. Ashok Leyland and its associates increased
their stake in the Company in January 2012 to 75.1%, Subsequent to
this increased stake, their support has both deepened and widened
to a large measure, with cooperation across the business driving
continuous improvements. I would like to thank Ashok for this
support and we look forward to realising the significant mutual
benefits from our renewed relationship.
Strategic development
We remain committed to our aims of:-
-- being an European leader in green bus technologies through
the development of the full range of options from fuel-efficient
diesels to dual fuel, hybrid and electric vehicles;
-- consolidating and maintaining the UK leadership in the midi-bus market;
-- offering a product portfolio with the full range of buses
that is demanded by the UK bus market;
-- becoming a significant exporter of buses;
-- expanding the market share in UK and Europe by selling buses
to global standards at competitive prices.
The Board is very pleased with the progress that has been made
on all the above fronts during the period, as detailed in the
Business and Financial Review.
Our customers
Despite the significant changes to the business over the period,
our customers have been very patient during a time of some
disruption to the smooth process of meeting customer requirements.
Their patience is appreciated and gratefully acknowledged.
Overwhelmingly, we have received excellent feedback from
customers who have had the opportunity to visit the new Sherburn
plant. They share our excitement at the opportunities that the
plant presents for future products and innovation, and we remain
committed to delivering high quality, innovative and value for
money products.
Our people
The period continued to bring new challenges, which I am proud
to say our management and workforce have risen to. Whilst some of
the decisions have been difficult, I would like to thank all our
employees for their dedication, flexibility and commitment during
what has been a very difficult period.
Annual Report and Accounts
The Company advises that its annual report and accounts for the
period ending 31(st) March 2012 will be posted to shareholders and
available on the Company's website at www.optare.com on or before
9th July 2012. Additional copies will be available from the
Company's registered office at Unit 3, Hurricane Way South,
Sherburn in Elmet, Leeds, North Yorkshire, LS25 6PT.
Summary
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