12 Aug 2009 07:00
12 August 2009
UNIVERSE GROUP PLC
("Universe", the "Company" or the "Group")
INTERIM RESULTS FOR THE 6 MONTHS ENDED 30th JUNE 2009
Universe (UNG.L) the AIM-listed retail and loyalty systems provider, is pleased to announce its unaudited interim results for the six months to 30th June 2009.
Highlights
Adjusted operating profit of £345,000 (2008: loss of £347,000) on reduced revenue of £7.3million (2008: £7.9million)
Gross margin increased to 32% (2008: 28%)
Operating loss of £21,000 ( 2008: loss of £483,000)
Loss Per Share (0.15p) (2008: Loss Per Share 0.54p)
Cash inflow from operating activities of £1,274,000 (2008: outflow of £417,000)
Borrowings reduce by £655,000 from £3.2million at the year end to £2.6million
Cash increases to £516,000 from £70,000 at the year end
John Scholes, Chairman, commented:
The benefits of improved quality of earnings and reductions in the cost base have enabled the Group to report an improvement in adjusted operating profit of £692,000 on reduced turnover of £7.3 million. Having made the changes we have made, I am confident that the Group is now well placed to benefit from any economic recovery.
Paul Cooper, Chief Executive, commented:
Against a backdrop of continued economic downturn I am pleased to report that our strategy of moving away from manufacturing and towards higher margin software and managed services combined with a programme of cost realignment has improved profitability and reduced debt. This continues the turnaround started in H2 last year. The recession has temporarily interrupted top line growth but we have a much stronger platform to exploit a return to better market conditions.
| For Further Information: | |
| Universe Group plc Paul Cooper, Chief Executive Officer John Scholes, Chairman Bob Smeeton, Chief Financial Officer | 023 8068 9510 |
| Arbuthnot Securities Limited Tom Griffiths | 020 7012 2000 |
CHAIRMAN'S STATEMENT
As we announced on 3rd July 2009 the first six months of this trading period have been impacted by weak demand for new systems from our major customers. However the results for the six months to 30th June 2009 are starting to show the benefits of the transition from manufacturer to end-to-end solutions provider. I am pleased to be able to report an operating profit before non-recurring items of £345,000 compared to a loss of £347,000 for the same period last year.
This has been achieved despite a 6.5% decline in turnover compared to the first half of last year and is a result of better sales mix and improved cost control driving a 4% improvement in gross margin percentage (from 28% to 32%). Administrative overheads have also been reduced by 19% compared to the first half of last year, as a result of cost saving measures announced previously.
Cost saving measures come at a price in terms of employment termination costs, we have therefore incurred non-recurring costs of £366,000 during the period. Further such costs will arise in the second half of 2009 but the majority of termination costs have now been paid.
Despite these termination costs the Group has generated £1.3 million of cash from its operations, which has been mainly used to reduce borrowings and build cash balances.
The highlight of the year to date has been the successful completion of the first four country implementations of the On-Line Loyalty scheme for a global oil company. As a result the Universe Data Services division has shown significant turnover and profit growth. Turnover is up 91% and the division has moved into profit, delivering a segment result of £447,000, compared to a loss of £242,000 for the same period last year.
The Petrol Forecourt Services division has seen a 15% fall in its revenues, and has suffered from the deferral of capital expenditure programmes by its major customers. The segmental result was down by 9% to a profit of £935,000 compared to the first half of last year.
Continued difficulty in attracting asset-based finance remains the biggest obstacle to success for JetSet. Revenue growth of 69% has yet to translate into operating profits. Changes to the management of this division have occurred and progress has been made in identifying funding for the revenue share machines, and in building a pipeline of machine sales.
Good cash generation and working capital management has ensured that the Group complied with its banking covenant tests and has improved its net borrowing position by £1.1 million since the year end. However this level of debt repayment restricted growth and we continue to seek more favourable financing arrangements.
The benefits of improved quality of earnings and reductions in the cost base have enabled the Group to report an improvement in adjusted operating profit of £692,000 on reduced turnover of £7.3 million. Having made the changes we have made, I am confident that the Group is now well placed to benefit from any economic recovery.
John Scholes
Chairman
CHIEF EXECUTIVE'S BUSINESS REVIEW
Against a backdrop of continued economic downturn I am pleased to report that our strategy of moving away from manufacturing and towards higher margin software and managed services combined with a programme of cost realignment has improved profitability and reduced debt. This continues the turnaround started in H2 last year. The recession has temporarily interrupted top line growth but we now have a much stronger platform to exploit a return to better market conditions.
Universe Group reports in 4 business segments: Petrol Forecourt Services (PFS), Universe Data Systems (UDS), Manufacturing (Mfg) and JetSet.
The Group is an acknowledged leader in the supply of petrol forecourt systems technology including payment and loyalty systems. It has continued with its strategy to be an end to end solutions provider. The Group designs, builds, tests and operates mission critical retail systems through its own PCI DSS certified data centre. Its robust applications based on open systems technologies allow customers an easy integration route to their other business systems. It numbers amongst its clients major UK supermarket groups, convenience store brand leaders and global oil companies. Systems include chip and pin payment terminals, unmanned outdoor payment terminals, on line loyalty systems and forecourt point of sale systems.
PFS sales in H1 were down by 15% to £3.8m (2008: £4.4m) and reflect mainly the managed service element of the business as across the board new projects have been deferred as a result of the recession. New business opportunities for the current year are in the main coming from the commercial fuel market and from independent forecourt groups.
UDS revenues up by 91% to £1.6m (2008: £0.8m) are benefiting from the implementation of a global loyalty scheme now live in Italy, Germany, Belgium and Holland for a major oil company. The successful roll out of this system is a benchmark for expansion in international markets and although there are long sales cycles associated with these systems they are expected to play a major part in future growth and profitability.
Although Manufacturing showed a segmental loss it did make a positive contribution to fixed costs and its contraction is being managed such that the current in-house needs can be supplied more cost effectively from own manufacture than via subcontract. Turnover fell to less than £1.0m (2008: £2.0m) as the exit from low margin subcontract continues.
The growth of JetSet last year highlighted the need both to have supply chain control through having in-house manufacturing and a service operation with national coverage. These two requirements were met by the acquisition of a manufacturing and trading facility in Bedford to form JetSet. The Group's results were impacted by JetSet's continuing losses of £153,000 in H1 (£183,000 loss in H1 2008). Jet Set is now moving into profit and has won some prestigious contracts. Its performance is dictated by a revenue share model and therefore has predictable revenue streams once equipment is on site and has reached a critical number of sites. Continuing lack of available asset finance has significantly hindered equipment roll outs. The order potential remains strong and I am confident that the start up losses are now a thing of the past.
Financial Review
Group revenues were down by 6.5% to £7.3m (2008: £7.9m). Within this movement the gains in UDS of £0.8m largely replaced the declining manufacturing business which was £1m down but were unable to cover the fall suffered by PFS where a number of expected new projects have been deferred due to the recession. Underlying managed services revenues remain stable. The cost realignment which has been an ongoing process since last summer together with a better margin due to the change in business mix has continued the trend begun in H2 2008 of returning to adjusted operating profit and cash generation. Adjusted operating profits of £345,000 (2008: loss of £347,000) are a significant improvement and this was achieved despite the losses in JetSet of £153,000. Restructuring costs of £366,000 are largely as a result of the continued move from manufacturing to software services and are not expected to recur at this level in future periods. The segmental profit at 14% on turnover is increased from 6% in 2008. Overall gross margin increased to 32% (2008: 28%) as a result of a better business mix with margin increases from PFS and UDS as the main contributors.
Cash flow has strengthened considerably allowing the £1.3m (2008: outflow £0.4m) generated from operating activities to repay £0.7m of net debt and create a cash balance of £0.5m at the end of June. The business still has aggressive debt repayment requirements and as a result despite this level of cash generation is being held back in its development requirements.
The current order book and identified opportunities provide a good base for the remainder of the year.
Paul Cooper
Chief Executive Officer
Universe Group plc
Condensed Consolidated Income Statement (unaudited)
for the 6 months ended 30th June 2009
| Six months to 30th June 2009 £'000 | Six months to 30th June 2008 (as restated) £'000 | Year to 31st December 2008 (as restated) £'000 | |||
| Revenue | 7,349 | 7,863 | 16,556 | ||
| Cost of sales | (4,964) | (5,676) | (11,158) | ||
| Gross profit | 2,385 | 2,187 | 5,398 | ||
| Administrative expenses excluding non-recurring items | (2,040) | (2,534) | (4,882) | ||
| Non-recurring items | (366) | (136) | (627) | ||
| Administrative expenses | (2,406) | (2,670) | (5,509) | ||
| Operating loss | (21) | (483) | (111) | ||
| Operating loss is analysed as: | |||||
| Operating profit/(loss) before non-recurring items | 345 | (347) | 516 | ||
| Non-recurring items | (366) | (136) | (627) | ||
| (21) | (483) | (111) | |||
| Finance costs | (153) | (135) | (373) | ||
| Loss before taxation | (174) | (618) | (484) | ||
| Taxation | - | - | 139 | ||
| Loss for the period attributable to equity shareholders | (174) | (618) | (345) | ||
| Loss per share | pence | pence | pence | ||
| Basic and diluted - Continuing | (0.15) | (0.54) | (0.30) | ||
| Condensed Consolidated Statement of Changes in Equity (unaudited) | |||||
| At start of period | 19,139 | 19,531 | 19,531 | ||
| Shares cancelled | - | - | (12) | ||
| Loss for the period attributable to equity shareholders | (174) | (618) | (345) | ||
| Translation difference | 1 | - | (35) | ||
| At end of period | 18,966 | 18,913 | 19,139 |
Universe Group plc
Condensed Consolidated Balance Sheet (unaudited)
as at 30th June 2009
|
30th June 2009 £'000 | 30th June 2008 £'000 | 31st December 2008 £'000 | |||
| Fixed assets | |||||
| Goodwill | 17,712 | 17,492 | 17,712 | ||
| Development costs | 991 | 925 | 1,113 | ||
| Property, plant and equipment | 2,854 | 2,628 | 3,093 | ||
| 21,557 | 21,045 | 21,918 | |||
| Current assets | |||||
| Inventories | 1,654 | 1,933 | 1,647 | ||
| Trade and other receivables | 2,555 | 2,555 | 3,061 | ||
| Cash and cash equivalents | 516 | 2 | 70 | ||
| 4,725 | 4,490 | 4,778 | |||
| Total assets | 26,282 | 25,535 | 26,696 | ||
| Current liabilities | |||||
| Trade and other payables | (4,419) | (3,107) | (4,008) | ||
| Tax liabilities | (318) | (373) | (315) | ||
| Short term borrowings | (1,747) | (1,506) | (1,951) | ||
| (6,484) | (4,986) | (6,274) | |||
| Non current liabilities | |||||
| Medium term borrowings | (832) | (1,636) | (1,283) | ||
| Total liabilities | (7,316) | (6,622) | (7,557) | ||
| Net assets | 18,966 | 18,913 | 19,139 | ||
| Equity | |||||
| Share capital | 5,735 | 5,747 | 5,735 | ||
| Equity reserve | 110 | 110 | 110 | ||
| Share premium account | 10,753 | 10,753 | 10,753 | ||
| Other reserves | 8,603 | 8,603 | 8,603 | ||
| Translation reserve | (215) | (181) | (216) | ||
| Profit and loss account | (6,020) | (6,119) | (5,846) | ||
| Total equity | 18,966 | 18,913 | 19,139 | ||
Universe Group plc
Condensed Consolidated Cash Flow Statement (unaudited)
for the six months ended 30th June 2009
| Six months to 30th June 2009 £'000 | Six months to 30th June 2008 £'000 | Year to 31st December 2008 £'000 | |||
| Cash flows from operating activities | |||||
| Operating loss | (21) | (483) | (111) | ||
| Depreciation and amortisation | 534 | 345 | 692 | ||
| Impairments | - | - | 10 | ||
| 513 | (138) | 591 | |||
| Movement in working capital: | |||||
| (Increase)/decrease in inventories | (7) | (94) | 208 | ||
| Decrease/(increase) in receivables | 506 | 243 | (150) | ||
| Increase/(decrease) in payables | 415 | (293) | 533 | ||
| Interest paid | (153) | (135) | (353) | ||
| Tax paid | - | - | (3) | ||
| Net cash inflow/(outflow) from operating activities | 1,274 | (417) | 826 | ||
| Cash flows from investing activities | |||||
| Acquisition of business and subsidiary | - | (364) | (388) | ||
| Purchase of tangible fixed assets | (83) | (46) | (1,198) | ||
| Purchase of intangible fixed assets | (90) | (258) | (569) | ||
| Net cash outflow from investing activities | (173) | (668) | (2,155) | ||
| Cash flow from financing activities | |||||
| Repayment of obligations under finance leases | (272) | (159) | (439) | ||
| Repayment of borrowings | (566) | (1,097) | (1,389) | ||
| New finance leases received | 183 | - | - | ||
| New loans raised | - | 2,250 | 3,134 | ||
| Net cash (outflow)/inflow from financing | (655) | 994 | 1,306 | ||
| Increase/(decrease) in cash and cash equivalents | 446 | (91) | (23) | ||
| Cash and cash equivalents at beginning of period | 70 | 93 | 93 | ||
| Exchange differences | - | - | - | ||
| Cash and cash equivalents at end of period | 516 | 2 | 70 | ||
| | UDS £’000 | Mfg £’000 | PFS £’000 | Jet Set £’000 | Total £’000 |
| Revenue | 1,605 | 983 | 3,773 | 988 | 7,349 |
| | |||||
| Gross profit | 717 | 77 | 1,450 | 141 | 2,385 |
| Segment expenses | (270) | (244) | (515) | (294) | (1,323) |
| | |||||
| Segmental result | 447 | (167) | 935 | (153) | 1,062 |
| Unallocated central and corporate costs | | | | | (717) |
| | | | | | |
| Operating profit before non-recurring items | | | | | 345 |
| Non-recurring items | | | | | (366) |
| | | | | | |
| Operating loss | | | | | (21) |
| | UDS £’000 | Mfg £’000 | PFS £’000 | Jet Set £’000 | Total £’000 |
| Revenue | 842 | 1,998 | 4,439 | 584 | 7,863 |
| | |||||
| Gross profit | 207 | 205 | 1,545 | 230 | 2,187 |
| Segment expenses | (449) | (323) | (518) | (413) | (1,703) |
| | |||||
| Segmental result | (242) | (118) | 1,027 | (183) | 484 |
| Unallocated central and corporate costs | | | | | (831) |
| | | | | | |
| Operating profit before non-recurring items | | | | | (347) |
| Non-recurring items | | | | | (136) |
| | | | | | |
| Operating loss | | | | | (483) |
| | UDS £’000 | Mfg £’000 | PFS £’000 | Jet Set £’000 | Total £’000 |
| Revenue | 1,885 | 3,263 | 9,933 | 1,475 | 16,556 |
| | |||||
| Gross profit | 638 | 501 | 3,556 | 703 | 5,398 |
| Segment expenses | (707) | (621) | (1,070) | (884) | (3,282) |
| | |||||
| Segmental result | (69) | (120) | 2,486 | (181) | 2,116 |
| Unallocated central and corporate costs | | | | | (1,600) |
| | | | | | |
| Operating profit before non-recurring items | | | | | 516 |
| Non-recurring items | | | | | (627) |
| | | | | | |
| Operating loss | | | | | (111) |
9. All shareholders will be informed about the interim report and copies will be available from the Company's head and registered office: Southampton International Park, George Curl Way, Southampton, SO18 2RX, and on the Company's website, www.universeplc.com.