Diamond Bus owner in £1 million deal for Hanson's in Stourbridge
Rotala, the owner of Black Country-based Diamond Bus, is spending £1 million on the takeover of Stourbridge firm Hansons.
A second £1m takeover deal, for an unnamed bus company in Manchester, is "at an advanced stage of negotiation", says Rotala, while a pair of deals worth a total of £6.8m are also in the offing.
The Hansons deal will see the Stourbridge firm's buses and operations move to nearby Rotola depots and the Hansons' depot in Hayes Lane, Lye, will be sold off.
Rotala is paying £575,000 to Hansons' owners and the rest of the £1m will be used to pay for "necessary working capital and capital expenditure associated with the acquisition".
Hansons has assets of around £400,000 and generated £2m in revenue and £1.1m in gross profits in the year to the end of March.
The firm started life back in the early 1980’s as a driver training operation originally based in Wordsley, near Stourbridge. It was established by Margaret Hanson who had continued to run the business with her daughter Louise until the sale. It had transformed into a coach operator and then a bus business with around 25 vehicles. Hansons' bus operations are continuing as normal following the takeover.
Around 50 people work at the business and Rotala says the plan is to transfer them all across with no redundancies. Consultation with staff started on Friday and they will move to Rotala depots at Kidderminster or Tividale.
Rotala, which is based in Tividale, says the deal makes it the second biggest bus operator in the West Midlands after National Express.
The group has also announced the sale of 5.8 million new shares to raise £2m to fund the takeover of Hansons (Wordsley) Ltd and the other unnamed privately owned bus company, and raising £1.5m to pay for further acquisitions 'in the near to mid-term'. These include a larger bus company deal in Manchester and an airport-based hotel bus business.
Rotala chairman John Gunn said: "The positive start to the year is testament to the progress that the group is making.
"Furthermore the contract wins which we have announced so far this year will underpin our performance in the second half.
"Rotala has a proven track record of steady organic growth supplemented by sensibly priced acquisitions. The acquisition that we are making and the further acquisition that we expect shortly to make with the first stage of this fundraising are in line with this policy and will bolster our presence in the West Midlands and the North West.
"The follow-on acquisitions, if and when completed, will add greater reach to the group's business in key markets and put the group in a position where it can look forward to continuing progress in 2018."
As well as its operations in the West Midlands Rotala runs buses at Heathrow airport and in the North West and South West. It now runs more than 600 vehicles and employs around 1,500 people. Last year it bought three businesses, at Heathrow and in the North West. Revenues for the 12 months to the end of November 2015 were £55m across it eight sites and Rotala's directors believe the group has the potential to reach £85m.
It currentlfy has less than one per cent of the £6bn bus market dominated by Arriva, Stagecoach, FirstGroup, Go-Ahead and National Express, which are estimated to account for 70 per cent.
Industry changes as part of the new Bus Services Act could involve re-frachising of networks in major cities, and Rotala now has bases in three: Greater Manchester, Bristol and Birmingham. it believes re-franchising could benefit new entrants to the bus market, "thus representing a significant opportunity for the group".
As a result, Rotala has been looking to expand and is in takeover talks with a number of other small operators
It is currently looking at a £4.6m deal for another bus company in Manchester that could give Rotala 200 vehicles in the area and a £2.2m deal for an airport-based bus busniess.
Rotala says its trading in the six months to the end of May saw revenue rising 4.5% to £28.6m, with pre-tax profits up 18.1% to £1.34 million. Contract wins are expected to add another £4.7m to revenues during the year.
Meanwhile new ticketing technology in the West Midlands, announced in April, is already providing some of the predicted benefits. Rotala said: "Communications with both customers and drivers have significantly improved as a result of the better quality of information feed. Operational problems are immediately visible and can be more speedily resolved. The take up of contactless payment, with all the flexibility that offers to passengers, has been noticeably rapid and continues to accelerate."