UNG.L Regulatory News (UNG)

27 Mar 2007 07:04

Universe Group PLC27 March 2007 27 March 2007 UNIVERSE GROUP PLC UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 Universe Group PLC ("Universe" or the "Company"), the retail and informationsystems company, is pleased to announce unaudited Preliminary Results for theyear ended 31 December 2006. KEY POINTS: • Operating profit on continuing business, before goodwill impairment and non-recurring costs, £656,000 (2005: £1,526,000) • Asset impairment adjustment and non-recurring cost totalling £6.6 million • Loss before tax and goodwill impairment £895,000 (2005: Profit £357,000) • New contract with major global oil company • Restructured bank facility • Sale of French bureaux de change • Focus upon core HTEC business • Placing of equity of £3.0 million Commenting on today's results, John Scholes, Chairman of Universe said: "Universe has taken a number of important steps taken to refocus and re-energisethe business in the last few weeks, to address many of the issues that led tothe generally disappointing performance in 2006. Since I joined the Boardearlier this year, with Paul Cooper who was appointed as Chief Executive at thesame time, we, and our fellow directors, have completed the strategic reviewthat the board initiated in November. Universe has been through difficult timesin the recent past, but we have put into place a sound basis from which to buildthe business anew. I look forward to 2007 and beyond with great purpose andoptimism." For Further Information: Universe Group plc 023 8068 9510 John Scholes, Chairman Paul Cooper, Chief Executive Charles Stanley Securities 020 7149 6000 Russell Cook Anthony Noakes Chairman's Statement Introduction Universe has taken a number of important steps taken to refocus and re-energisethe business in the last few weeks, to address many of the issues that led tothe generally disappointing performance in 2006. The board initiated a strategicreview in November, which has now been completed. That review included boardcomposition, corporate structure, financial and operational aspects, all ofwhich are described in more detail below. Results and Current Trading In 2006 we achieved an operating profit on our continuing business (pre goodwillimpairment and non-recurring items) of £0.7 million, compared to £1.5 millionthe previous year. Our sales on continuing business were £11.3 million, against£15.6 million for 2005, yielding a profit before tax on our continuing business(pre goodwill impairment and non-recurring items) of £0.3 million. The 2006 results were disappointing in the context of prior years. Group demandsnecessitated cash restraints on HTEC, which have undoubtedly held it back.Nonetheless, HTEC generated both cash and profits. HTEC continues to make goodprogress. The Company has won a contract with a major oil company to supplysoftware and services to its European petrol retailing outlets with theopportunity to extend this contract on a global basis. The Company is undertaking a major restructuring of its finances through aplacing of new equity to raise £3.0 million (before costs). We are also puttingin place a new bank facility to replace the exiting debt structure. I amconfident that HTEC's operating momentum will resume in 2007, to the benefit ofboth the business and our shareholders. The Universe Team What has impressed me most in working with Universe since joining the Board inJanuary 2007 is the enthusiasm and professionalism of its team. The Company isstaffed by people who are genuine enthusiasts for what they do. I am confidentthat this team can take us to great success in the future. I believe that Universe has all the ingredients to move ahead strongly from itspresent position. The addition of Paul Cooper to the executive team as CEO brings deep andpertinent operating experience to the team. His senior roles in hardware,software and managed services companies span start-ups, large high growthinternational companies and turnarounds. His contribution to the Company will beextensive and positive. As part of our recent board changes, Ray Mackie has moved from being ExecutiveChairman to a non-executive director role. Ray continues to support the companyboth in his board role and as a significant shareholder. Restructuring As announced in the last AGM, the decision was taken to divest the Frenchbureaux de change business. That divestment has now taken place, as approved byour shareholders at the EGM on 26 January 2007. Also approved at that EGM was a small share placing which raised £373,000. Theproceeds from both the disposal and the placing have been used to repay thegroup's overdraft with its bankers Royal Bank of Scotland Plc. Our review also considered it important to restructure our banking facilitiesand move to a new bank, which supports the new team and direction of theCompany. We are pleased to announce that the Company has agreed a facility witha new bank, including a rescheduled lending facility with repayment terms inline with the current operations of the business. The agreement is expected tobe signed on or before 31 March 2007. Strategic Review On 17 November 2006, the Company announced that it had received a number ofunsolicited approaches to acquire the Company, but had received no firmproposals. However, in the light of the expressions of interest that had beenreceived, and given the continuing disappointing share price performance, theboard decided to conduct a strategic review of the business and theopportunities available to the Company, including means of improving theCompany's balance sheet. That review is now complete. While there have been discussions with a number ofthird parties, none of those discussions have resulted in specific proposalswhich have a material chance of being of interest to Universe's shareholders.The board has therefore taken steps to focus on the operational strengths of itskey business, HTEC Limited ("HTEC"), and to strengthen the group's balance sheetby securing a supportive banking relationship and bringing further equityfunding into the group by means of a placing to raise £3.0 million before costs.With this backing, I am confident that we can exploit our excellent marketposition to drive strong growth in the business. Dividend We are now very strongly focused on generating long term growth. In order toachieve 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 has been through difficult times in the recent past, but we have putinto place a sound basis from which to build the business anew. I look forwardto 2007 and beyond with great purpose and optimism. John Scholes Chairman Chief Executive's Report Having taken part in the strategic review set up by the Board in 2006, I agreedto become CEO to drive through the recommendations from that process at thebeginning of 2007. The main elements of the future strategy are a financial restructuring, thedisposal of non core activities and a focus on growing the now unencumberedsubsidiary, HTEC, into new markets and territories. HTEC From the start of 2007 this is the only continuing business and it provides asolid base for growth. HTEC already occupies a leading position in the UKforecourt managed services market and is poised to expand into internationalmarkets both in forecourt services and the wider retail arena. Managed services revenues are now around 50% of turnover, enhancing the qualityof earnings of the Company from good margin contract revenue streams. HTEC provides Mission Critical Services to a customer base including: ASDA,Morrison, Texaco Chevron, Total Oil and BP Europe. The HTEC product sets fall into 2 main categories: Real Time Management Solutions:- On line loyalty schemes Virtual Back Office Automatic number plate recognition Help desk Field service Payments systems:- Chip and PIN terminals Outdoor payment terminals EFT solutions Petrol EPOS and forecourt controllers These systems give our customers unparalleled on-line power from the informationgathered and reported on. HTEC's on-line systems for example help to prevent"drive offs" from petrol stations by instant comparison of customer numberplates to our databases prior to authorising pump use. Our systems alsoconstantly monitor customers' operational-critical equipment allowing us toalert customers immediately of malfunctions or disruption to their facilities.This power is encapsulated as "Information Pays" in the new 2007 marketingcollateral. The Board is committed to continued development and enhancement of the productrange to keep ahead of anticipated technical and legislative changes. Infrastructure and Investment HTEC operates from modern well-equipped premises with sufficient capacity forgrowth. To achieve the Board's growth targets, 2007 will see emphasis placed oninvestment in the sales and marketing function. Together with the strategicreview's product clarification initiative this investment will take HTEC intonew markets and geographic territories. A programme of trade shows both in theUK and Europe, product re-branding, website enhancement and new marketingmaterial are being put in place to support this programme. The strategic review has at its core a growth message but also identified thatthe decline in manufacturing revenue from HTEC's traditional business lines hasresulted in manufacturing overcapacity. I will be addressing this issue as ourManaged Service business grows over 2007 and 2008. I have commissioned an internal study of the carrying value of our goodwill. Thegoodwill arising on the acquisition of the currency division has been writtenoff in the discontinued line. The remaining goodwill relates to HTEC. Ourinitial calculations underpin a carrying value of £20.1 million but applying amore challenging discount rate (the cost of money is rising) results in animpairment of £2.8 million. This amount has been written off the carrying value,which is now £17.3 million. Business Focus Our focus in 2007 is on sales of our new petrol outdoor payment systems andloyalty systems. In the former we have a proven system, which will be taken upas retailers upgrade their pumps to accommodate the mandated requirements ofStage 2 Vapour Recovery. In loyalty we have systems, which can and will be soldacross borders and we will be seeking every opportunity for global, European andnational operators to buy HTEC's systems for implementation in other Europeancountries and beyond. Paul Cooper Chief Executive Officer Unaudited Consolidated Income Statement Restated Notes 2006 2005 Result excluding asset Asset impairment impairment Total Total £000 £000 £000 £000Continuing operations Revenue 11,346 - 11,346 15,669Net operating costs excluding non-recurring items (10,690) - (10,690) (14,143) Operating profit before non-recurring items 2. 656 - 656 1,526Non-recurring items 3. (612) (2,871) (3,483) - Operating profit/(loss) 44 (2,871) (2,827) 1,526 Finance costs excluding non-recurring items (326) - (326) (546)Non-recurring finance costs 3. (359) - (359) - Finance costs 5. (685) - (685) (546) (Loss)/profit before taxation (641) (2,871) (3,512) 980 Taxation - - - (119) (Loss)/profit for the year from continuing operations (641) (2,871) (3,512) 861 Loss for the year from discontinued operations 4. (254) (2,753) (3,007) (623) Loss)/profit for the year attributable to equity shareholders (895) (5,624) (6,519) 238 (Loss)/earnings per share (p) Basic and diluted Continuing (5.41) 1.40Discontinued (4.63) (1.01) 6. (10.04) 0.39 Unaudited Statement of changes in equity Group 2006 2005 £000 £000 At 1 January 24,638 24,724Revaluation changes (131) (170)Deferred tax on revaluation changes - 60Shares issued 389 342(Loss)/profit for the year attributable to equity shareholders (6,519) 238Exchange differences (12) (99)Dividends declared (164) (457) At 31 December 18,201 24,638 Unaudited Balance sheets Notes Group 2006 2005 £000 £000Non-current assets Goodwill 8. 17,250 20,983Development costs 2,655 2,533Fonds de commerce - 2,433Property, plant and equipment 1,472 2,068Investments - - 21,377 28,017 Current assets Inventories 1,205 1,795Trade and other receivables 1,793 2,744Cash and cash equivalents 5 146 3,003 4,685 Assets held for sale 854 - 3,857 4,685 Total assets 25,234 32,702 Current liabilities Trade and other payables (3,412) (3,272)Current tax liabilities (296) (390)Short term borrowings (3,140) (2,621) (6,848) (6,283) Liabilities directly associated with (154) -assets classified as held for sale (7,002) (6,283) Non-current liabilities Medium term borrowings (31) (1,454)Deferred tax liabilities - (327) (31) (1,781) Total liabilities (7,033) (8,064) Net assets 18,201 24,638 Equity Share capital 3,281 3,147Shares to be issued - 39Share premium 10,117 9,823Revaluation reserve - 131Other reserves 8,603 8,603Translation reserve (181) (169)Profit and loss account (3,619) 3,064 Total equity 18,201 24,638 Unaudited Group Cash Flow Statements Restated 2006 2005Cash flows from operating activities: Operating profit/(loss) - Continuing (2,827) 1,526 - Discontinued (2,680) (623)Depreciation and amortisation 629 933Loss on disposal of fixed assets 55Impairments 5,624 -Movement in working capital: Decrease in inventories 590 641 Decrease in receivables 97 261 Increase/(decrease) in payables 375 (991)Interest paid (326) (465)Dividends paid (255) (305)Tax paid (94) - Net cash inflow from operating activities 1,133 1,032 Cash flows from investing activities: Purchase of tangible fixed assets (79) (294)Purchase of intangible fixed assets (366) (856)Disposal of fixed assets -- 515 Acquisitions and disposals - 191 Net cash outflow from investing activities: (445) (444) Cash flow from financing activities: Capital elements of lease payments (166) (432)Repayment of loans (979) (945)Issue of shares net of expenses 389 342Other new loans - 290 Net cash outflow from financing: (756) (745) Decrease in cash and cash equivalents: (68) (157)Cash and cash equivalents at beginning of year (393) (217)Exchange differences (12) (19) Cash and cash equivalents at end of year (473) (393) Notes 1. Financial Information These statements do not constitute accounts as defined by section 240 ofthe Companies Act 1985. The financial information for the full preceding year is based on thestatutory accounts for the financial year ended 31 December 2005 as adjusted toInternational Financial Reporting Standards. These statements have beenprepared on the going concern basis. The Directors consider this to beappropriate in the context of the matters referred to in this announcement, andin particular the placing of new equity to raise £2.8 million after expenses andnew bank facilities to replace our existing debt structure. Nonetheless thegoing concern basis is dependent upon the passing of the Resolutions at the EGMreferred to in the announcement. The Company's financial statements have been prepared under the historiccost convention modified by property revaluations on a going concern basis andin accordance with applicable International Financial Reporting Standards (IFRS)as adopted for use in the EU and as applied in accordance with the Companies Act1985. 2. Operating profits on continuing operations before non-recurring items 2006 2005 £000 £000 Revenue 11,346 15,669 Cost of sales (7,911) (10,517) Gross profit 3,435 5,152 Administrative expenses (2,779) (3,626) Operating profit on continuing operations before 656 1,526 non-recurring items 3. Non-recurring items 2006 £000 Results excluding non-current asset impairment Write off HTEC non RoHS compliant stock that after 1 July 2006 cannot be used in some manufactured products 267 Group restructuring costs 345 612 Non-current asset impairment Impairment of HTEC Goodwill 2,811 Impairment of property to be sold in 2007 60 2,871 Finance costs Accelerated amortisation of loan issue costs 254 Bank fees 105 359 4. Discontinued operations On 29 December 2006 the Group agreed to dispose of Bellword Sarl, whichcarried out the Group's remaining foreign currency operations. The disposal wasapproved at an extraordinary general meeting on 26 January 2007 and completedon 30 January 2007 on which date control of Bellword Sarl passed to theacquirer. The discontinued operations reported a loss in 2006 of £254,000, whichhas been included in the 2006 consolidated income statement A loss of £2,753,000 arose on the impairment of the assets andliabilities of Bellword Sarl prior to its disposal, being the contractedproceeds of disposal less the carrying amount of the subsidiary's net assets andattributable goodwill. 5. Finance costs 2006 2005 £000 £000 Interest payable on bank loans and overdrafts 300 421 Interest payable on finance leases 26 44 Amortisation of loan issue costs - 81 Non-recurring finance costs 359 - 685 546 Details of 2006 non-recurring items are included in note 3. 6. Loss Per Share The loss per share is calculated by reference to the weighted average of64,973,000 ordinary shares in issue during the year (2005: 61,506,000). Thenumber of ordinary shares in issue at 31 December 2006 was 65,622,396 (2005:62,927,345). 7. Dividend The Board is not recommending payment of a final dividend (2005: 0.25p). 8. Goodwill 2006 2006 Total 2005 2005 Total HTEC Master-change HTEC Master-change £000 £000 £000 £000 £000 £000 Cost at 1 January 20,061 922 20,983 20,061 922 20,983 Impairment (2,811) (922) (3,733) - - - Cost at 31 December 17,250 - 17,250 20,061 922 20,983 Goodwill has been tested for impairment in accordance with IAS 36 bydiscounting estimated future cash flows. The Group prepares cash flow forecastsderived from the most recent financial forecasts approved by the Directors. Thediscount rate used is the Group's estimated weighted average cost of capital.Management has concluded that the carrying value of HTEC Goodwill aftercarrying out this impairment review is £17.25 million. 9. Events after the balance sheet date An EGM was held on 26 January 2007 to: 1) agree to the sale of Bellword Sarl to Prime Bureau Limited, ofwhich R.Mackie is a Director and shareholder; and 2) agree to a placing of 6,225,000 new ordinary 5p shares at 6p pershare; On 26 January 2007 Company placed 6,225,000 new ordinary shares at 6pence per share. On 28 January 2007 the sale of Bellword Sarl was completed. 10. Report and Accounts Copies of the Annual Report and Accounts will be sent to shareholders inApril 2007 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