UNG.L Regulatory News (UNG)

15 Apr 2008 07:01

Universe Group PLC15 April 2008 Embargoed until: 07.00, 15 April 2008 Universe Group PLC ("Universe" or the "Group") Preliminary results for the year ended 31 December 2007 Universe Group PLC the AIM: UNG.L listed retail and loyalty systems group, todayannounces its preliminary financial results for the year ended 31 December 2007. Highlights • Revenue increased by 16.0% to £13.2 million (2006: £11.3 million) • Gross margin increase to 37.5% (2006: 30.3%) driven by growth in data centre services • Loss after tax of £1.9 million (2006: £6.5 million) after exceptional costs* • Adjusted operating profit** up 28.4% to £0.8 million (2006: £0.7 million) • Adjusted profit before tax*** up 97.9% to £0.7 million (2006: £0.3 million) • Short term borrowings down to £0.9 million (2006: £3.1 million), total borrowings down to £1.8 million (2006: £3.1 million) • Establishment of the new Jet wash, Air Tower and Vacuum (JAV) business * Exceptional costs comprise a write down of development costs of £2.3 millionrelating to a reappraisal of future sales prospects in a period of rapidtechnology change and other exceptional costs of £0.2m relating to refinancingand business restructuring. ** Before write down of development costs of £2.3 million and other exceptionalcosts of £0.1 million relating to restructuring. *** Before all charges disclosed in ** and before other exceptional costs of£0.1 million relating to refinancing. Unless specified otherwise, all references to adjusted operating profit andadjusted profit before tax throughout this document exclude the adjustmentsdisclosed in ** and *** above. Statutory operating loss is £1.6 million (2006: £2.8 million). John Scholes, Chairman, commented: "During 2007 a new management team has been brought in which has thoroughlyreviewed the existing business putting in place a strategy for growth. Theremaining non core subsidiary involved in currency exchange was successfullysold and new equity finance raised for the Group to relieve its reliance onshort term debt finance. "As we enter 2008 with a restructured business and having consolidated ourposition as a leading supplier of managed information systems to the petrolforecourt market, we are well positioned to expand into new markets andterritories. Our investment in sales and marketing is achieving a stronger brandand greater customer awareness and extending our reach outside of the Group'straditional UK market. "The outlook for 2008 and beyond is encouraging and the Board is confident thatsustained growth will be achieved." For further information: Universe Group PLC 023 8068 9510Paul Cooper, Chief Executive OfficerJohn Scholes, Chairman Charles Stanley Securities 020 7149 6000Nominated Advisor and BrokerRussell CookCarl Holmes Tavistock Communications 020 7920 3150John WestAndrew Dunn Chairman's Report Introduction 2007 was an important year for Universe. Following a disappointing 2006, majorchanges in the Group's financial and operational structure were necessary, andwere made. Financially, the Group strengthened its balance sheet, through a placing of newequity on 20 April 2007 raising £3.0 million (before costs), and putting inplace new bank facilities. Operationally, experienced and enthusiastic new management has been recruited tore-organise and re-energise all functions within the Group. The Board was also strengthened by the addition of a new non-executive director.I was delighted to welcome Malcolm Coster to the Board in August. Malcolm'soperating and board experience in technology services and manufacturing companies will add greatly to the Board's decision making. Ray Mackie and AdrianGrinsell have stood down from the Board and we thank them for their services tothe Group. Results and Current Trading In 2007 we achieved an adjusted operating profit of £0.8 million. Thisrepresents an increase of 28.4% compared with operating profit of £0.7 millionthe previous year. Our sales on continuing business were £13.2 million, against£11.3 million for 2006, yielding an adjusted profit before tax on continuingbusiness of £0.7 million against £0.3 million for 2006. On a statutory basis,operating loss for the year was £1.6 million (2006: £2.8 million) and loss aftertax was £1.8 million (2006: £6.5 million). Universe has made significant investment developing the products and technologyapplications which it employs today. Following the Group's development ofvarious new technology products the Board has reviewed certain of the previouslycapitalised costs and has agreed that it is appropriate to write off £2.3 million relating to the development costs of payment terminal hardware, which theBoard believes may not be recovered in future sales. The 2007 results were encouraging, setting the Group off on its renewed growthpath. HTEC's operating momentum resumed in 2007 as signalled last year. Once again, itgenerated both cash and profits, and, crucially, saw good revenue growth. Withits much more cohesive and prominent market strategy, we anticipate that thiswill continue on this course in 2008. Jet Set An important move recently made was the formation of a new subsidiary companyJet Set Wash Services Limited ("Jet Set") to focus on the provision of car washand valeting services. The new company will comprise the Company's existing carwash and valeting services, together with the acquisitions of AIB and WSF,details of which were announced on 12 February 2008. Jet Set is an excitingaddition to the Group, capable of generating both strong growth and predictableearnings through its revenue sharing contracts. Dividend We continue to be very strongly focused on generating long term growth. In orderto achieve this we need to provide sufficient financial resources to deliver thegrowth plan. Therefore we do not propose paying a final dividend for the yearbut will review the position regarding future dividend payments in the contextof the performance of the Group. Prospects Universe now has a sound financial and operational basis from which to build. Iam sure that 2008 will show continued progress in growth, profitability andmarket penetration. John ScholesChairman15 April 2008 Chief Executives Report In my first full year as CEO I can report that Universe Group has undergone atransformation designed to deliver long term sustained growth and enhanced valueto shareholders. The key elements of the strategy being a financialrestructuring, disposal of non core activities and focus on growing the mainoperating subsidiary, HTEC, and introducing it to new markets and territories. Financial Performance Review Group revenues at £13.2 million (2006: £11.3 million) showed a 16% increase andan adjusted operating profit of £0.8 million (2006: £0.7 million) saw a 28.4%increase on the previous year. Revenue increases took place in both the Retailand International divisions driving margins higher overall. Substantialinvestment in new people and infrastructure reduced overall profitability byapproximately £0.6 million however such expenditure was considered essential todrive future revenue growth. The Board will continue to monitor revenue growth, operating profit and customersatisfaction as key performance indicators. Service excellence has become anessential element in customer retention and in 2007 no major customers werelost. Revenue growth was targeted at 24% (£14 million) for the year andoperating profit growth at 98% to £1.3 million. New Senior Management It has been necessary to make a number of key appointments during the year tocreate a well-balanced management team suitable for the significant growth whichwe anticipate. Charlie Goulding took up the role of Chief Operating Officer with particularemphasis on heading the sales function and its delivery support functions. Aftera long and successful career with IBM and latterly with Verizon, he brings theexperience needed to drive the Group into new international markets. Jeff Dakin joined in January 2008 to head up the IT and product developmentareas. Again he joined us after a long and successful career with firstlyMarconi and for many years IBM. His experience in product design and data centremanagement is particularly welcome as these are key areas related to our abilityto grow. Richard Philips joined to add an international dimension to channel developmentand marketing, especially for loyalty systems. Expansion of loyalty systems intonew markets is a growth target for the Group. Darren Graham has joined Universe to create a new business line in the Jet Wash,Air and Vacuum vending ("JAV") area on petrol forecourts. He is an experiencedprofessional from the JAV arena. The Board is committed to continued development and enhancement of the Group'sproduct range and to keep ahead of anticipated technical and legislativechanges. HTEC For 2007, HTEC was the only trading subsidiary of the Group. HTEC has occupied aprominent position in the UK petrol forecourt managed services market for anumber of years and in 2007 set out to expand its range of services and pushinto international markets using its relationships with existing globalcustomers. HTEC's systems currently run the petrol forecourts of two majorsupermarket chains and over 33% (3,000+) of all UK forecourts have some HTECequipment on them. After examining HTEC's business, I concluded that because of the diverse rangeof product lines within the business, a divisional structure would be theoptimal way to ensure focus. By divisionalising it was possible to analyseperformance and potential of the different business lines in order to targetfunding into the most appropriate areas. The trading divisions are: i. Retail Systems ii. International Oils and Loyalty iii. Jetwash, Airtowers, Vacuums (JAV) iv. Custom Electronics Manufacturing (CEM) These are supported by central services including product development and a datacentre. For the UK petrol forecourt market, HTEC positions itself as an end toend supplier of complete solutions based on its own industry leading hardwareand software. The business strategy is to move towards a fully managed servicemodel using these products. Managed services revenues are now in excess of 50%of turnover enhancing the quality of earnings of the company from good margincontracted revenue streams. Today, HTEC provide Mission Critical Services to a customer base including:ASDA, Morrisons, ChevronTexaco, Total Oil and BP Europe. We are now investing inexpanding this business internationally. Retail Systems The core of the HTEC business is the supply of point of sale (POS) systems tothe UK petrol forecourt market. Investment has been made during the year toexpand and repackage the system elements to allow for expansion into a channelsales model sitting alongside the traditional direct sales force. Developmentcontinues with the software to improve functionality for the growing conveniencestore market and to allow foreign language versions to be developed. During the year HTEC purchased the IP rights to the number plate recognitionsoftware (ANPR) it previously sold as a licensed product. Investment has beenmade to upgrade the software ready for sale through channel partners whilstusing the HTEC data centre to hold and process data. Links are being establishedto police databases to enhance the system's capability. The rapidly increasingmarket for surveillance and security products provides a growing sales channelfor future years. Revenue grew by 18% to £5.3million (2006: £4.5million) with a gross margin of32.9%. International Oil Companies and Loyalty This division handles the systems that rely on the data centre infrastructureincluding on line payment systems and global loyalty systems. HTEC has developedsystems which can collect data from many of the best known third party POSsystems moving it away from a situation where it could only work with its ownproprietary software. Being independent of POS software allows HTEC to integratewith a variety of channel partners enabling better global reach. New productdevelopments are in the main customer driven and 2008 will see trials of aschool meals charging system in Portugal and a city card system in Spain. Bothprojects show the flexibility of the HTEC loyalty database software. HTECcurrently process £6 billion worth of EFT transactions per year and have loyaltyschemes with up to 14 million members in a real time system. The Iberian office has been bolstered with an additional sales person andmoreover, new partnerships in Portugal have led to the need to open a smalloffice there. Elsewhere in Europe we have recruited a convenience store industry expert basedin Holland to open channels in northern Europe. Revenue grew by 31% to £3.8 million (2006: £2.9 million) with a gross margin of70.5%. Jet Wash, Air and Vacuum (JAV) This new venture has started well winning business resulting in major accounts.The concept of revenue share from equipment owned by the supplier and sited onthe customers premises allied to monitoring in real time through the HTEC datacentre adds a management information feature not available from other suppliers.This offering combines into an industry leading solution. To support this new activity we have purchased the assets and trade of AIBServices Limited in Bedford since the year end. AIB has been a leading supplierof JAV equipment for many years and its manufacturing facility gives us controlover quality and supply of equipment alongside an established service operation.We have also acquired WSF in Scotland which gives us a northern service base andcomplete national coverage. JAV operations had little impact on the 2007 resultsbut will add a substantial new business line in future years. Custom Electronic Manufacture The traditional business of HTEC was subcontract design and manufacture but overa number of years this had been in decline to the point that when I joined HTECeither sale or closure seemed the inevitable option. A strategic review showedthat it was marginally profitable but had operational and sales difficulties. Animmediate disposal was ruled out as impractical. The recruitment of anexperienced manufacturing manager with sales responsibility and a reorganisationhas transformed the performance and we now have a growing business with a widercustomer base. Revenue was marginally up to £4.1 million (2006: £3.9 million) with a grossmargin of 12.4%. Investment in Growth To achieve the Board's growth targets, 2007 saw emphasis placed on investment inthe Group's infrastructure. The recruitment of new sales staff at all levels,implementation of a CRM system and a brand relaunch all took place in the yearincreasing costs by in excess of £0.6 million. A programme of trade shows bothin the UK and Europe, product rebranding, website enhancement and new marketingmaterial have been put in place to support the growth programme. The strategic review and product clarification during the year forms the basisfor HTEC's product development. Product and systems development during the yearhas concentrated on moving from a largely bespoke customer driven model to apre-defined standard model. This opens up more sales channels and delivers alower cost of sale. For the first time in 2007 we successfully trialled on lineauthorisation for payment transactions with a supermarket, rolled out the firstphase of a global loyalty scheme for an oil company and integrated HTEC'soutdoor payment terminals with a leading fuel pump manufacturer. I am confident that the new management team will deliver sustained year on yeargrowth. Paul CooperChief Executive Officer15 April 2008 Consolidated income statementFor the year ended 31 December 2007 Before exceptional Exceptional 2007 2006 items items Total Total £'000 £'000 £'000 £'000 Continuing operations Revenue 13,186 - 13,186 11,346 Cost of sales (8,247) - (8,247) (7,911) -------- ------- ------- -------Gross profit 4,939 - 4,939 3,435 Administrative expenses (4,097) (2,415) (6,512) (6,262) -------- ------- ------- -------Operating profit /(loss) 842 (2,415) (1,573) (2,827) Finance costs (189) (120) (309) (685) -------- ------- ------- -------Profit/(loss) before 653 (2,535) (1,882) (3,512)taxation Taxation - - ------- -------Loss for the year fromcontinuing operations (1,882) (3,512) Loss for the year from - (3,007)discontinued operations ------- -------Loss for the yearattributable to equity shareholders (1,882) (6,519) ======= =======Loss per shareBasic and diluted Continuing (1.85) (5.41)Discontinued - (4.63) ------- ------- (1.85) (10.04) Consolidated Statement of changes in equity Year ended 31 December 2007 Share Equity Share Revaluation Merger Translation Profit Total capital reserve premium reserve reserve on reserve and loss equity acquisition £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2007 3,281 - 10,117 - 8,603 (181) (3,619) 18,201Shares issued 2,466 - 636 - - - - 3,102Share options - 110 - - - - - 110issued Loss for the year - - - - - - (1,882) (1,882)attributable toequity shareholders ------ ----- ------ ------ ------ ------ ------- --------At 31 December 2007 5,747 110 10,753 - 8,603 (181) (5,501) 19,531 ====== ===== ====== ====== ====== ====== ======= ======== At 1 January 2006 3,147 39 9,823 131 8,603 (169) 3,064 24,638Revaluation change - - - (131) - - - (131)Shares issued 134 (39) 294 - - - - 389Loss for the year - - - - - - (6,519) (6,519)attributable toequity shareholdersDividends to - - - - - - (164) (164)shareholdersTranslation - - - - - (12) - (12)difference ------ ----- ------ ------ ------ ------ ------- --------At 31 December 2006 3,281 - 10,117 - 8,603 (181) (3,619) 18,201 ====== ===== ====== ====== ====== ====== ======= ======== Consolidated Balance Sheet Year ended 31 December 2007 2007 2006 £000 £000 Non-current assets Goodwill 17,250 17,250Development costs 800 2,655Property, plant and 2,170 1,472equipment ------ ------ 20,220 21,377 ------ ------Current assets Inventories 1,768 1,205Trade and other receivables 2,720 1,793Cash and cash equivalents 93 5 ------ ------ 4,581 3,003Assets held for sale - 854 ------ ------ 4,581 3,857 ------ ------Total assets 24,801 25,234 ======== ========Current liabilities Trade and other payables (3,119) (3,412)Current tax liabilities (373) (240)Short term borrowings (888) (3,140) ------- ------- (4,380) (6,792)Liabilities directlyassociated with assetsclassified as held for - (154)sale ------- ------- (4,380) (6,946) ------- -------Non-current liabilities Medium term borrowings (890) (31) Deferred tax liabilities - (56) ------- ------- (890) (87) ------- -------Total liabilities (5,270) (7,033) ======= =======Net assets 19,531 18,201 ======= =======Equity Share capital 5,747 3,281Equity reserve 110 -Share premium 10,753 10,117Other reserves 8,603 8,603Translation reserve (181) (181)Profit and loss account (5,501) (3,619) ------- -------Total equity 19,531 18,201 ======= ======= Consolidated Cash Flow Statement Year ended 31 December 2007 2007 2006 £000 £000Cash flows from operating activities:Operating loss- Continuing (1,573) (2,827)- Discontinued - (3,334)Depreciation and amortisation 601 629Impairments 2,306 5,624Share-based payment expense 110 - ------- -------- 1,444 92Movement in working capital:(Increase)/decrease in inventories (563) 590(Increase)/decrease in receivables (777) 951(Decrease)/increase in payables (236) 175Interest paid (309) (326)Dividends paid - (255)Tax paid 20 (94) ------- -------Net cash (outflow)/inflow from (421) 1,133operating activities ======= ========Cash flows from investing activities:Purchase of plant, property & (371) (79)equipment Expenditure on product development (650) (366)Proceeds from assets held for sale 550 - ------- --------Net cash outflow from investing (471) (445)activities: ======= ======== Cash flow from financing activities:Repayments of obligations under (101) (166)finance leasesRepayment of borrowings (3,414) (979)Issue of shares net of expenses 3,102 389New bank loans raised 1,871 - ------- --------Net cash inflow/(outflow) from 1,458 (756)financing: ======= ======== Increase/(decrease) in cash and cash 566 (68)equivalents:Cash and cash equivalents at beginning (473) (393)of yearExchange differences - (12) ------- --------Cash and cash equivalents at end of year 93 (473) ======= ======== Notes 1. General information The financial information set out in the announcement does not constitute theCompany's statutory accounts for the years ended 31 December 2007 or 2006. Thefinancial information for the year ended 31 December 2006 is derived from thestatutory accounts for that year which have been delivered to the Registrar ofCompanies. The auditors reported on those accounts; their report was unqualifiedand did not contain a statement under s.237(2) or (3) Companies Act 1985. The audit of the statutory accounts for the year ended 31 December 2007 is notyet complete. These accounts will be finalised on the basis of the financialinformation presented by the directors in this preliminary announcement and willbe delivered to the Registrar of Companies following the company's annualgeneral meeting. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with International Financial Reporting Standards(IFRSs), this announcement does not itself contain sufficient information tocomply with IFRSs. The Company expects to publish full financial statements thatcomply with IFRSs in May 2008. 2. Segment information The Group now has one business segment, HTEC Limited, a retail and informationsystems provider. All material HTEC operations are in the UK. For managementpurposes, HTEC Limited is currently organised into four trading divisions:International Oils and Loyalty, Manufacturing and Repair, Retail and Jet Set.Accordingly, further information is presented below to gross margin level on adivisional basis. No information is given for the Jet Set division as this newbusiness had little impact on the results. It is not currently possible to present segment assets and liabilities on adivisional basis. "Currency" refers to discontinued operations in 2006 and "HTEC" and "HeadOffice" to continuing operations. Int'l Manufacturing HTEC Head Oils & repair Retail Total Office Total 2007 2007 2007 2007 2007 2007 £000 £'000 £'000 £'000 £000 £000 Revenue - all 3,799 4,086 5,301 13,186 - 13,186external Gross profit 2,679 507 1,753 4,939 - 4,939 Administrative - - - (4,167) 70 (4,097)expenses Operating profit/ - - - 772 70 842(loss)before exceptional items Exceptional items - - - (2,415) - (2,415) Operating loss - - - (1,643) 70 (1,573) ------- ------- ------ ------- ------ --------Unallocated items:Finance costs (309)Taxation - --------Loss for the year (1,882) ======== 2. Segment information (continued) HTEC Head Office Total 2007 2007 2007 £000 £000 £000 Total assets 24,600 201 24,801Total liabilities (4,130) (1,140) (5,270) -------- -------- --------Net book amount 20,470 (939) 19,531 ======== ======== ========Other information: Depreciation and amortisation 601 - 601 ======== ======== ========Impairment of development costs (2,306) - (2,306) Capital expenditure:Tangible assets 1,101 - 1,101Intangible assets 650 - 650 -------- -------- --------Total 1,751 - 1,751 ======== ======== ======== Int'l Manufacturing HTEC Head Oils & repair Retail Total Office Currency Total 2006 2006 2006 2006 2006 2006 2006 £000 £000 £000 £000 £000 £000 £000 Revenue - all 2,908 3,947 4,491 11,346 - 1,365 12,711external Gross profit 1,795 657 983 3,435 - (254) 3,181 Administrative - - - (2,614) (165) - (2,779)expenses Operating profit/ - - - 821 (165) (254) 402(loss)beforeexceptional items Exceptional items - - - (612) (2,871) (2,753) (6,236) Operating loss - - - 209 (3,036) (3,007) (5,834) -------- ------- ------ ------ ------- ------- -------Unallocated items: Finance costs (685)Taxation - -------Loss for the year (6,519) ======= 2. Segment information (continued) Head HTEC Office Currency Total 2006 2006 2006 2006 £000 £000 £000 £000 Total assets 24,380 204 650 25,234Total liabilities (3,389) (3,440) (204) (7,033) ------- ------- ------ --------Net book amount 20,991 (3,236) 446 18,201 ======= ======= ====== ========Other information: Depreciation and amortisation 629 - - 629 ======= ======= ======= ========Impairment of assets (267) (2,871) (2,753) (5,891) Capital expenditure:Tangible assets 126 - - 126 Intangible assets 366 - - 366 ------- ------- ------ -------Total 492 - - 492 ======= ======= ====== ======== 3. Exceptional items 2007 2006 £000 £000Operating costsImpairment of development costs 2,306 -Group restructuring costs* 109 345Write off of HTEC Stock (EU legislation) - 267Impairment of goodwill - 2,811Impairment of Antibes property sold in 2007 - 60 ------ ------ 2,415 3,483 ====== ======* Consisting mainly of redundancy costs Finance Costs Acceleration of amortisation of loan issue costs - 254Bank risk fees 63 105Interest on tax provision 57 - ------ ------ 120 359 ====== ====== 4. Loss per share from continuing and discontinued operations The calculation of the basic and diluted loss per share is based on thefollowing data: Loss from continuing operations: 2007 2006 £000 £000 Loss for the purposes of basic and diluted earnings (1,882) (3,512)per share being net loss attributable to equityholders of the parent Loss from discontinued operations: Loss for the purpose of basic and diluted loss per - (3,007)share -------- --------Total loss attributable to shareholders (1,882) (6,519) ======== ======== Number Number '000 '000Number of sharesWeighted average number of ordinary shares for the 101,602 64,973purposes of basic loss per share -------- --------Weighted average number of ordinary shares for the 101,602 64,973purposes of diluted loss per share ======== ======== 2007 2006 pence penceBasic & diluted - continuing (1.85) (5.41) Basic & diluted - discontinued - (4.63) Basic and diluted - total (1.85) (10.04) ======== ======== 5. Report and Accounts Copies of the Annual Report and Accounts will be sent to shareholders in April2008 and copies will also be available, free of charge, from the Company'sregistered office at George Curl Way, Southampton International Park,Southampton, SO18 2RX. This information is provided by RNS The company news service from the London Stock Exchange