Rotala to buy more bus businesses

Bus group Rotala is looking to buy more businesses as it returns to normal after the constraints of the coronavirus pandemic.

Rotala owns Diamond Bus
Rotala owns Diamond Bus

Tividale-based Rotala, which owns Diamond Bus in the West Midlands, said ahead of its annual general meeting on Thursday that passenger numbers currently stood at between 80 and 85 per cent of pre-Covid-19 levels.

In some areas sharper rises in activity levels have been observed including its Hoppa services around Heathrow Airport whch have increased considerably since the start of the year in response to much improved volumes of airline travel.

The board expects passenger numbers to continue to grow slowly but steadily for the remainder of 2021-2022. A break even result at the normalised pre-tax profit line is expected for the year to the end of November.

So far in 2021-2022 it has made two small acquisitions in the West Midlands. The first was the bus business of Claribel Coaches with annual revenue of approximately £600,000 in the eastern part of Birmingham. Through its Diamond Bus subsidiary, Rotala acquired the business and 18 vehicles for a total consideration of £339,000 .

Last month it announced the acquisition of the bus business of Johnsons (Henley) together with 20 vehicles for £936,000. The business is a well-established operator of commercial and contracted bus services in Warwickshire and the southern West Midlands with estimated recurring annual revenues of £3.5 million.

As with Claribel, following completion, the acquired business will be subsumed into the Diamond Bus business and operate out of its existing Redditch depot.

During the pandemic, the board decided to focus on cash conservation and debt reduction as it anticipated that the extensive support offered by the Government during the pandemic would lead many bus operators to defer decisions that would or should otherwise have been taken.

The board's objective was to emerge from the pandemic with a robust balance sheet, fit for the post-Covid-19 bus industry, whatever shape that turned out to be. As the UK bus industry emerges from the pandemic, the Board believes that the post-pandemic recovery phase is likely to involve the general overhaul of bus networks and rationalisation amongst bus operators. The Board believes that evidence for this is to be found in the current stream of bus businesses for sale, many in a distressed condition.

Chairman John Gunn said: "We have been able to make two acquisitions this year because we concentrated on cash conservation and debt reduction during the Covid-19 pandemic and subsequently negotiated an improved package of banking facilities which we announced at the time of our 2020-2021 results.

"The end of the pandemic and return to normal commercial conditions is now obliging business owners to take the decisions which they have been deferring for the last two years. This is going to produce turbulent conditions in the bus industry in the short term, but should bring Rotala further acquisition opportunities of which, with our ample unused banking facilities, we are very well placed to take advantage."

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