4 Apr 2012 07:00
Universe Group PLC
("Universe", the "Group" or the "Company")
Final results for the year ended 31 December 2011
and date of Annual General Meeting
Universe Group PLC (AIM: UNG.L), the AIM listed retail and loyalty systems group, today announces its audited results for the year ended 31 December 2011.
The Company also advises that its Annual General Meeting is scheduled for 26 June 2012, notice of which will be sent to shareholders next month, along with the Annual Report.
Highlights
·; Appointment of new Chairman and CEO
·; Strategic review resulting in business reorganisation and renewed product and client focus
·; Revenue up 7.0% to £12.08 million (2010: £11.29 million) driven by significantly improved second half performance
·; Gross margin decreased to 32.9% (2010: 40.5%) due to changes to sales mix
·; Profit before tax of £0.57 million (2010: £0.50 million)*
·; Operating profit up 6.8% to £0.86 million (2010: £0.81 million)*
·; EBITDA down 4.3% to £1.78 million (2010: £1.86 million)*
·; Statutory retained loss of £1.03 million (2010: loss of £0.90 million)**
* From continuing operations and before exceptional costs of £1.64 million, mainly comprising goodwill impairment of £1.23 million and restructuring costs of £0.41 million (2010: Before exceptional costs of £0.23 million mainly comprising restructuring costs).
** After exceptional costs of £1.64 million, mainly comprising goodwill impairment of £1.23 million and restructuring costs of £0.41 million (2010: After exceptional costs of £0.23 million mainly comprising restructuring costs and loss from discontinued operations of £1.24 million).
Unless specified otherwise, all references to adjusted operating profit and adjusted profit before tax throughout this announcement exclude the exceptional costs disclosed in * above and the prior year loss from discontinued operations.
Robert Goddard, Chairman of Universe, commented:
"The Group has seen significant change during the last year, particularly in the second half when organisational restructuring, more focussed product investment and close alignment with customers has improved our capabilities and underlying profitability. The Group made ground in difficult market conditions and now, with substantially enhanced capabilities, the Company's prospects are improving. "
For further information:
Universe Group PLC 023 8068 9510
Stephen McLeod, Chief Executive www.universeplc.com
Robert Goddard , Chairman
Bob Smeeton, Finance Director
Allenby Capital Limited 020 3328 5656
Jeremy Porter
Alex Price
Chairman's Report
Introduction
In my first Chairman's statement for Universe Group PLC, I am able to report turnover growth and an increase in adjusted operating profit. Improved trading is an essential step towards achieving enhanced shareholder value, which is an over-riding goal for your Board.
The Group has largely recovered from the difficulties of the last few years and is now set on a path of growth that is based on a range of deep competencies and a clear view of market needs and opportunities.
Financial Overview
At £6,423k, turnover in the second half was 13.5% ahead of the first half and at £12,082k for the full year was 7.0% ahead of the previous year.
Sales of £5,630k in the second half in the Solutions division were 16.6% ahead of the first half. However, gross margin fell to 38.4 % compared with 44.3% in 2010 as a result of a changed mix of business within the division. Offsetting this decline in gross profit, divisional expenses were reduced by 21.8% from £3,033k in 2010 to £2,371k in 2011.
Manufacturing saw a sharp (33.7%) year-on-year increase in sales but this was at a very much lower gross margin so that gross profit turned to negative £43k in the year from a positive £107k in the previous year. Divisional expenses at £358k were marginally less than the previous year's figure of £365k so that the full year operating profit deteriorated from a loss of £258k to a loss of £401k. The continuing losses in this division have led the Board to recognise an impairment of the goodwill associated with that division of £1,234k, irrespective of the progress that has been made in improving its customer base.
Central costs of £377k were similar to last year so the adjusted operating profit improved by 6.8% to £863k. Compared with the first half, second half adjusted operating profit for the group improved by 108.2% to £583k.
Exceptional items incurred during the year included £407k of costs resulting from the mid-year reorganisation and the goodwill impairment of £1,234k referred to above.
An improved cash flow from trading enabled a reduction of £234k in net debt from £1,990k at the end of 2010 to £1,756k at the end of 2011.
Business review
Competitive pressures in 2011 were no less than in the previous year and this was evidenced by depressed gross margins in both divisions. At the same time, the profile of the customer base is changing as more demanding retail specialists take over networks from some of the more traditional oil companies.
The mid-year restructuring of the board has provided a fresh perspective on the business and has lead to a clearer internal reporting structure and greater personal accountability for individual and team performance. Combined with a re-setting of personal performance objectives over the last six months this has meant a much sharper focus on the evolving needs of customers and the market place.
An understanding of these evolving needs has enabled the Group to define more clearly the service levels and product suites that will be needed in future. Alongside this process, we have determined where the Company is best placed to cooperate with others in meeting these needs and those areas where the particular strengths of the Group enable us to create our own new and competitive products.
These important initiatives have benefited from the focus and clarity that has arisen from the creation of the two separate divisions of 'Solutions' and 'Manufacturing'. These now operate much more independently and do not suffer from unwitting cross-subsidy. Separation of the Manufacturing and Solutions businesses is important for clarity and for driving performance.
There has been a thorough review of the needs of existing customers, potential customers, tightening industry standards and the evolving market place for the Solutions business. This has shown that competitive provision of leading edge products and services will be achieved best by integrating third party products with developments of our own. By this means we can differentiate the Group's offering and deliver it sooner than would otherwise be the case. The Company is pursuing this strategy in a number of areas and agreements are already in place for several of them. This approach is also intended to allow us to enter adjacent vertical markets with different suites of more modularised products.
Dividend
The Board does not intend to declare a dividend. This is because it believes that it is in the best interests of shareholders to utilise available cash for product and service development, at least in the near term.
Summary
Actions taken in 2011 have provided the Group with a stable foundation from which to build and 2012 is to be a year of refreshing and re-investing in the product range. The Group continues to examine opportunities for growth within its core markets.
The Group has seen significant change in the year and through this period has benefitted from the ongoing loyalty and dedication of its staff, particularly in embracing those changes. The Board's thanks are due to them and to our loyal shareholders for retaining their interest. We look forward to the coming year with confidence.
Robert Goddard
Chairman
3 April 2012
Chief Executive's Report
I am pleased to present these results for 2011, my first since assuming the position of CEO in June, 2011. This is also my first opportunity to describe the reorganisation and re-energising of the Company - a process that started in mid-year and has already had a positive effect on the Group's performance.
Historically your Company has been reticent in broadcasting and exploiting its many strengths and achievements. HTEC Ltd ("HTEC"), the Group's operating subsidiary, has been a widely respected and influential pioneer in the payment and loyalty sectors of the retail fuel industry for more than 20 years. Its technical capabilities have been sufficiently well-regarded for it to be a Tier-1 level partner to some of the biggest and most highly respected names in food and fuel retailing.
The Company has always been a provider of solutions for complex client demands. In doing so, it has acquired a formidable reputation, not only for innovative and robust approaches but also for the quality and reliability of its field support to customers who demand transaction accuracy and 24 /7 uptime. The strengths and many successes of the Company and its people have hitherto been largely hidden and unappreciated by all except industry insiders. This will change.
Clarity of purpose
The fundamental reappraisal of HTEC's strategy and market posture during 2011 has guided the re-structuring of the organisation. There is now clarity of purpose, greater focus on customer partnerships and more capable and sustainable product sets, all aimed at improved profitability.
HTEC's principal business activities are the development of payment and loyalty software and its integration into effective customer retail solutions. These activities are supported by technical and field service resources. Together, these activities are grouped into what we now call the "Solutions" division. The fundamentally different business of Contract Electronic Manufacturing ("CEM") is now operated on a stand alone basis. Whilst it continues to support the Solutions division with the production and repair of some items, the majority of CEM revenues are drawn from external customers on a project-by-project basis.
Overall organisational structure
To achieve the clarity of purpose and to drive out waste and inefficiencies, there have been wide ranging organisational changes. There is now clear accountability for all our activities - activities now have a single owner and budget. Alongside this we are progressively reducing activities that do not benefit clients. Sixteen staff positions were affected by the changes and approximately £600k in annual savings were generated, contributing to a 17.5% reduction in administrative expenses and enabling investment in the skills the Company requires going forward.
Executive management structure
To achieve quicker and more decisive executive management, an executive committee has been formed. Janet Barraclough is Director of Sales and Marketing with a mission to implement our "Customer Partnership" programme, strengthen our sales team and build a market intelligence process. Following an extensive external search, we appointed Alasdair Mackay to the critical position of Technical Director. Under his leadership there have already been significant improvements in project management, resource allocation and the distribution of skills. Bob Smeeton, as Financial Director, is being relied upon increasingly to lead the strategically-critical commercial contracting activities. Judith Legg leads our human resources function.
Focussed and sustainable product sets
Our past focus on problem solving has meant that our solutions were often bespoke to customers. Instead, they need to become more modular to provide greater flexibility and better value for a wider range of customers. A highly focussed set of product families has been agreed to form a core offering that will be closely aligned to the needs of customers and markets. A number of legacy products have been discontinued.
2012 will see new product development and releases. The new GemPay terminal is poised to replace our widely-used Gemini unit. The first release is planned of a new family of state-of-the-art outdoor payment terminals to augment and extend our current models. Planning is well advanced for the introduction of new and more feature-rich loyalty and payment platforms that can meet future customer demands and take advantage of advances in technology.
Financial performance at Group level
In spite of continued difficult trading conditions in the UK the Company's adjusted operating profit performance in 2011 was ahead of 2010 and particularly bolstered by a much improved second half. Turnover at £12.1m was up by 7.0% and there was a similar increase in adjusted operating profit to £863k (2010: £808k). A one-off charge of £407k was incurred as a result of the mid-year restructuring of the Group which delivered a reduction of 17.5% in administration costs. Finance costs continued to fall in the period, largely arising from our aggressive pay-down of debt. The reduction of £174k in our term loan balance was accompanied by a fall in interest costs from £311k to £289k.
Financial performance: Solutions
Sales by HTEC's core Solutions division grew by 4% in the year to £10.5m. However the gross margin fell from 44% to 38%, reflecting changes in business mix. The operating profit result was £208k ahead of 2010 at £1.64m due to improved sales effectiveness and reduced overhead expenses. Particularly pleasing was the second half growth in our major client accounts reflecting renewed confidence in the Company as a Tier-1 partner. In the year ahead we expect to see increased growth of key accounts, stable gross margins from the forecast business mix and delivery of a stronger operating profit. 2012 will see the refreshment and strengthening of the key elements of our product range as well as new product developments and extensions. In short, 2012 will be the year the Company consolidates its strong position with existing accounts while re-equipping and re-skilling to meet future customer needs and market opportunities. The impact of these investments will become apparent towards year-end and will be fully realised in 2013.
Financial performance: Contract Electronics Manufacturing (CEM)
The CEM business was separated from Solutions at mid-year and now operates as a separate division with its own profit and loss account. The business has seen revenue improvement following the appointment of a new sales executive and sales have grown by 34% to £1.6m, despite the loss of an important repairs contract. The year saw a change in weighting of business mix from repairs to manufacturing and its accompanying margin reduction resulted in a negative gross margin of £43k and a corresponding divisional loss of £401k for the year. 2012 prospects are more promising and have been boosted by anticipated strong demand from the Solutions division, to which CEM remains an important supplier.
Summary and outlook
2011 has been a year of recovery and re-assessment. Many projects have been tackled and completed; new processes have been introduced and a new culture of customer focus implemented. Although for many these changes represented a marked change in style from the past, the Company's staff have embraced the new methods and approaches with enthusiasm, and I thank them for that and their ongoing commitment to the Company.
Moving forward, your Company will be investing in areas where the needs of our partners are well understood and the opportunities for additional revenues are clear. We aim to be a highly-focussed solutions provider and a market leader in payments and loyalty sectors, underpinned by a well balanced professional team capable of developing and supporting modern software platforms. Our existing and highly effective field service and call-centre team will be strengthened to complement the proposed new products.
2012 is intended to be a springboard year for significant advances in market position and growth. In addition to our clear objectives, vital to achieving this will be a renewed emphasis on training, skills development and apprenticeships, along with being a responsible and attractive employer.
Stephen McLeod
Chief Executive Officer
3 April 2012
Consolidated Statement of Total Comprehensive Income
For the year ended 31 December 2011
Before exceptional items £'000 | Exceptional items £'000 |
2011 Total £'000 | 2010 Total £'000 | |
Continuing operations | ||||
Revenue | 12,082 | - | 12,082 | 11,292 |
Cost of sales | (8,113) | - | (8,113) | (6,719) |
|
|
|
| |
Gross profit | 3,969 | - | 3,969 | 4,573 |
Administrative expenses | (3,106) | (1,641) | (4,747) | (3,995) |
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|
|
| |
Operating profit | 863 | (1,641) | (778) | 578 |
Finance costs | (289) | - | (289) | (311) |
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Profit/(loss) before taxation | 574 | (1,641) | (1,067) | 267 |
Taxation |
33
| 80 | ||
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| |||
(Loss)/profit for the period from continuing operations | (1,034) | 347 | ||
Discontinued operations | ||||
Loss from discontinued operation | - | (1,241) | ||
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| |||
(1,034) | (894) | |||
Other comprehensive expense - translation differences
|
- |
(6) | ||
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| |||
Total comprehensive income and expense attributable to equity holders |
(1,034) |
(900) | ||
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| |||
Earnings per ordinary share - basic and diluted | ||||
From continuing operations |
(0.90)p |
0.30p | ||
From discontinued operations | - | (1.08)p | ||
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| |||
Total loss per share | (0.90)p | (0.78)p | ||
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Consolidated Statement of Changes in Equity
For the year ended 31 December 2011
Share capital £'000 | Equity reserve £'000 | Share premium £'000 | Merger reserve on acquisition £'000 | Translation reserve £'000 | Profit and loss £'000 | Total equity £'000 | |||
At 1 January 2010 | 5,735 | 110 | 10,753 | 3,503 | (219) | (6,346) | 13,536 | ||
Share based payments | - | - | - | - | - | 6 | 6 | ||
Total comprehensive expense for the year attributable to equity shareholders | - | - | - | - | (6) | (894) | (900) | ||
Reserves transfer | - | (110) | - | - | - | 110 | - | ||
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| |||
At 1 January 2011 | 5,735 | - | 10,753 | 3,503 | (225) | (7,124) | 12,642 | ||
Share based payments | - | - | - | - | - | 19 | 19 | ||
Total comprehensive expense for the year attributable to equity shareholders | - | - | - | - | - | (1,034) | (1,034) | ||
Reserves transfer | - | - | - | (1,234) | - | 1,234 | - | ||
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At 31 December 2011 | 5,735 | - | 10,753 | 2,269 | (225) | (6,905) | 11,627 | ||
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Consolidated Balance Sheet
As at 31 December 2011
2011 £'000 | 2010 £'000 | |
Non-current assets | ||
Goodwill | 10,916 | 12,150 |
Development costs | 704 | 760 |
Property, plant and equipment | 1,658 | 1,909 |
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| |
13,278 | 14,819 | |
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| |
Current assets | ||
Inventories | 832 | 1,224 |
Trade and other receivables | 2,223 | 1,856 |
Cash and cash equivalents | 410 | 362 |
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| |
3,465 | 3,442 | |
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| |
Total assets | 16,743 | 18,261 |
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Current liabilities | ||
Trade and other payables | (2,615) | (2,932) |
Current tax liabilities | (335) | (335) |
Short term borrowings | (1,071) | (965) |
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| |
(4,021) | (4,232) | |
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Non-current liabilities | ||
Medium term borrowings | (1,095) | (1,387) |
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| |
Total liabilities | (5,116) | (5,619) |
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| |
Net assets | 11,627 | 12,642 |
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Equity | ||
Share capital | 5,735 | 5,735 |
Equity reserve | - | - |
Share premium | 10,753 | 10,753 |
Other reserves | 2,269 | 3,503 |
Translation reserve | (225) | (225) |
Profit and loss account | (6,905) | (7,124) |
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Total equity | 11,627 | 12,642 |
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Consolidated Cash Flow Statement
For the year ended 31 December 2011
2011 £'000 | 2010 £'000 | |
Cash flows from operating activities: | ||
Net cash flow from operating activities | ||
- Continuing operations | 1,003 | 1,586 |
- Discontinued operations | - | (199) |
Interest paid including exceptional finance costs | (289) | (356) |
Tax received | 128 | 25 |
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Net cash inflow from operating activities | 842 | 1,056 |
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Cash flows from investing activities: | ||
Disposal of subsidiary undertakings | - | 289 |
Purchase of property, plant & equipment | (128) | (587) |
Expenditure on product development | (303) | (318) |
Proceeds from sale of fixed assets | 133 | 4 |
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| |
Net cash outflow from investing activities | (298) | (612) |
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Cash flow from financing activities: | ||
Repayments of obligations under finance leases | (404) | (389) |
Repayment of borrowings | (199) | (1,192) |
New borrowings entered into | 107 | 354 |
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| |
Net cash outflow from financing | (496) | (1,227) |
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Increase/(decrease) in cash and cash equivalents | 48 | (783) |
Cash and cash equivalents at beginning of year | 362 | 1,145 |
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Cash and cash equivalents at end of year | 410 | 362 |
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Notes
1. General Information
Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The group intends to publish full financial statements that comply with IFRS.
The preliminary announcement has been prepared on the basis of the accounting policies as stated in the financial statements for the year ended 31 December 2011.
The financial information contained in the preliminary announcement does not constitute the Group's statutory results for the year ended 31 December 2011 or 2010 but is derived from those accounts. The above figures for the year ended 31 December 2011 and 2010 are an abridged version of the Group's audited accounts. The auditors have reported on these accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis; and did not contain any statements required under either s237(2) or s237(3) of the Companies Act 1985 or s498(2) or s498(3) of the Companies Act 2006. The full annual report and accounts will be posted to shareholders and the Annual General Meeting is due to be held on 26 June 2012. The statutory accounts for 2011 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
This announcement was approved by the board on 3 April 2012 and is available on the Company's website, www.universeplc.com.
2. Operating Profit and EBITDA before exceptional items and discontinued activities
2011 £'000 | 2010 £'000 | |
Revenue | 12,082 | 11,292 |
Cost of sales | (8,113) | (6,719) |
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| |
Gross profit | 3,969 | 4,573 |
Administrative expenses | (3,106) | (3,765) |
Exceptional items | (1,641) | (230) |
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Operating (loss)/profit | (778) | 578 |
Add back: exceptional items | 1,641 | 230 |
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Operating profit before exceptional items and discontinued operations | 863 | 808 |
Add back: | ||
Depreciation | 556 | 484 |
Amortisation | 359 | 565 |
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EBITDA before exceptional items and discontinued operations | 1,778 | 1,857 |
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3. Segment information
The Group now has two business segments. All material operations and assets are in the UK. The two trading divisions are: HTEC Solutions ('Solutions') and HTEC Contract Electronic Manufacturing ('CEM'). In the prior year the Solutions division was split between Petrol Forecourt Services and Universe Data Services. The restructuring in 2011 led to the amalgamation of these two segments into the Solutions division. In addition central costs that were previously unallocated are now taken in full against the Solutions division subject to a service charge applied against the CEM division. Comparative information has been restated to reflect these changes to organisational structure. Further information is presented below on a divisional basis.
Solutions 2011 £'000 | CEM 2011 £'000 | Total 2011 £'000 | |
Revenue - all external | 10,457 | 1,625 | 12,082 |
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| |
Gross profit | 4,012 | (43) | 3,969 |
Segment expenses | (2,371) | (358) | (2,729) |
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Segment result | 1,641 | (401) | 1,240 |
Corporate costs | (377) | ||
| |||
Operating profit | 863 | ||
Unallocated items: | |||
Exceptional items (see note 4) | (1,641) | ||
Finance costs | (289) | ||
Taxation | 33 | ||
| |||
Loss for the year from continuing operations | (1,034) | ||
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Solutions 2010 £'000 | CEM 2010 £'000 | Total 2010 £'000 | |
Revenue - all external | 10,077 | 1,215 | 11,292 |
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Gross profit | 4,466 | 107 | 4,573 |
Segment expenses | (3,033) | (365) | (3,398) |
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Segment result | 1,433 | (258) | 1,175 |
Corporate costs | (367) | ||
| |||
Operating profit | 808 | ||
Unallocated items: | |||
Exceptional items (see note 4) | (230) | ||
Finance costs | (311) | ||
Taxation | 80 | ||
| |||
Profit for the year from continuing operations | 347 | ||
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4. Exceptional items - Continuing operations
2011 £'000 | 2010 £'000 | |
Administrative expenses Goodwill impairment | 1,234 | - |
Advisor fees in respect of Brulines approach | - | 9 |
Group restructuring costs | 407 | 221 |
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1,641 | 230 | |
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5. Loss per share from continuing operations
The calculation of the basic and diluted loss per share is based on the following data:
2011 £'000 | 2010 £'000 | |
(Loss)/profit from continuing operations including other comprehensive expense | (1,034) | 341 |
Loss from discontinued operations | - | (1,241) |
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| |
Loss for the purposes of basic and diluted earnings per share being net loss attributable to equity holders of the parent | (1,034) | (900) |
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Number '000 | Number '000 | |
Number of shares | ||
Weighted average number of ordinary shares for the purposes of basic loss per share | 114,705 | 114,705 |
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| |
Weighted average number of ordinary shares for the purposes of diluted loss per share | 114,705 | 114,705 |
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6. Cash flows from operations
| Group | |
| 2011 £000 | 2010 £000 |
Continuing operations | ||
Cash flows from operating activities | ||
Operating profit | (778) | 578 |
Depreciation and amortisation | 915 | 1,049 |
Goodwill impairment | 1,234 | - |
Share based payments | 19 | 6 |
|
| |
1,390 | 1,633 | |
Movement in working capital: | ||
Decrease/(increase) in inventories | 392 | (112) |
(Increase)/decrease in receivables | (462) | 616 |
Decrease in payables | (317) | (551) |
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| |
Net cash flow from operating activities | 1,003 | 1,586 |
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| |
Discontinued operations | ||
Cash flows from operating activities | ||
Operating loss | - | (1,196) |
Depreciation and amortisation | - | 145 |
Impairment of goodwill | - | 462 |
Impairment of other debtors | - | 94 |
Loss on disposal of subsidiary | - | 207 |
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| |
- | (288) | |
Movement in working capital | ||
Increase in inventories | - | (12) |
Decrease in debtors | - | 276 |
Decrease in creditors | - | (175) |
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Net cash flow from operating activities | - | (199) |
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7. Report and Accounts
Copies of the Annual Report and Accounts will be sent to shareholders in May 2012 and copies will also be available, free of charge, from the Company's registered office at George Curl Way, Southampton SO18 2RX and from the Company's website, www.universeplc.com.