29 Sep 2020 07:00
29 September 2020
AIM: UNG.L
Universe Group plc
("Universe", the "Group" or the "Company")
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
Universe Group plc (AIM: UNG.L), a leading developer and supplier of retail management solutions, payment and loyalty systems, is pleased to announce its unaudited interim results for the six months ended 30 June 2020.
Highlights
· Revenues in line with comparative period at £9.77 million (H1 2019: £9.92 million)
· Adjusted EBITDA of £0.37 million (H1 2019: £1.39 million) - largely attributable to impact of COVID-19 on sales mix
· Operating loss £0.65 million (H1 2019: profit £0.28 million)
· Loss per share 0.33 pence (H1 2019: earnings per share 0.07 pence)
· Net cash inflow from operations £0.10 million (H1 2019: £2.13 million)
· Net bank cash at 30 June 2020 £1.63 million (31 December 2019: £2.94 million)
· Undrawn bank facilities at 30 June 2020 £1.50 million (31 December 2019: £1.50 million)
· Business is traditionally H2 weighted. COVID-19 began to effect trading from Q2; however, our customers are all retailers of daily essentials giving reasonable visibility to year end
· New business won in payment processing as well as a major payment device contract
· Visible H2 revenues of £12.5 million through existing recurring and repeatable revenue contracts and the order book
Andrew Blazye, Non-Executive Chairman of Universe, commented:
"We are pleased to see our first half revenues hold up despite the effects of COVID-19. Much work was done in the first quarter to allow the business to continue to operate effectively under the new restrictions whilst still allowing our field engineers to be able to service our clients. I am very grateful to all our staff for the resilience they have shown.
"Despite difficult market conditions, we have won further significant business with several major clients in the payment processing space, as well as a major payment device contract. Our recent launch of the latest version of our RMS platform, ab-initio, has met with encouraging market response and bodes well for future revenues.
"We remain, as in the past, a second half weighted business, dependent on a small number of high value projects. Following completed revenues of £9.8 million in the first half, there are further revenues of £12.5 million visible through existing recurring and repeatable revenue contracts and the order book to year end.
"We are very conscious of the need to fully execute the order book over the rest of the year, however, together with a sound balance sheet showing net cash and undrawn banking facilities, we remain cautiously optimistic for 2020 and beyond."
For further information:
Universe Group plc Andrew Blazye, Non-Executive Chairman Jeremy Lewis, Chief Executive Officer Daryl Paton, Chief Financial Officer
| T: +44 2380 689 510 |
finnCap Henrik Persson / Matthew Radley (Corporate Finance) Richard Chambers (Corporate Broking)
| T: +44 2072 200 500
|
IFC Advisory | T: +44 2039 346 630 |
Tim Metcalfe / Graham Herring / Florence Chandler
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|
CHAIRMAN'S STATEMENT
Financial Results
We report below the Company's results for the six months ended 30 June 2020.
Profit & Loss
Following a strong Q1 and a COVID-19 impacted Q2, revenues for the first half finished in line with the comparative half at £9.77 million (H1 2019: £9.92 million).
Historically the Group's revenues have been heavily weighted towards the second half of the year. This remains our expectation for the current year with the position exaggerated by the impact of COVID-19.
The impact of COVID-19 has been largely felt in the areas of business involving site visits and installations as well as consultancy projects. Software licences and hardware revenues were down 24.1% to £0.90 million (H1 2019: £1.20 million) and service and installations were down 4.1% to £3.47 million (H1 2019: £3.62 million). In addition to this, consultancy and licence maintenance revenues were down 9.7% to £2.24 million (H1 2019: £2.48 million). Recurring and higher-margin data services revenues, representing maintenance and support for hosted solutions of cloud and datacentre based products, increased 19.9% to £3.15 million (H1 2019: £2.63m), and is expected to sustain at similar levels going forward.
This change in revenue mix resulted in gross profit margin reducing to 50.1% (H1 2019: 56.0%). Both service and installations and consultancy and licence maintenance revenue streams have a staff cost of sale associated with them which could not be turned off as quickly as the COVID-19 impact on the revenues.
Adjusted administrative expenses, which excludes the cost of the acquisition of Celtech, the amortisation of acquired intangibles, and the impact of share-based payments rose 5.0% to £5.36 million (H1 2019: £5.10 million). The increase was due to the inclusion of a full six months of expense for Camden Technologies, whereas H1 2019 included only three months following the acquisition in April 2019.
Earnings before interest, taxes, share-based payments, depreciation, amortisation, acquisition costs expensed and excluding depreciation on right-of-use assets ('adjusted EBITDA excluding depreciation on right-of-use assets') was £0.37 million (H1 2019: £1.39 million). The drop in gross profit, referred to above, accounted for £0.66 million of this fall, with the balance coming from the inclusion of a full six months of Celtech expense as opposed to three months in the comparative period.
The operating loss was £0.65 million (H1 2019: operating profit £0.28 million).
Net finance expense was £0.18 million (H1 2019: £0.10 million) and included six months of interest on the £3.50 million HSBC 4-year term loan as well as notional interest on the right-of-use assets, prior year included three months of loan interest.
The underlying tax charge for the period was £0.00 million (H1 2019: credit £0.00 million).
Loss per share for the period was 0.33 pence (H1 2019: earnings per share 0.07 pence).
Balance sheet and cash flow
The balance sheet at 30 June 2020 remains strong. Like for like net current assets (excluding the impact of IFRS 16, Leases) were £2.44 million (31 December 2019: £4.21 million) and like for like non-current liabilities (excluding the impact of IFRS 16, Leases) were £2.63 million (31 December 2019: £3.07 million). Both net current assets and non-current liabilities include the remainder of the HSBC £3.50 million term loan.
Of note on the balance sheet, inventories were up from £1.13 million at 31 December 2019 to £5.10 million at 30 June 2020 following the receipt of equipment due to be installed across a single customers estate in the second half of the year.
Cash inflows from operating activities in the half year were £0.10 million (H1 2019: £2.13 million). This is lower than the prior period largely due to the reduction in profits for the period (£1.01 million) and an increase in working capital (£1.12 million).
Investment in the core business continued with capitalised development costs of £0.79 million (H1 2019: £0.58 million) focused on our next generation of retail systems.
Capital expenditure in the period was £0.18 million (H1 2019: £0.22 million).
Cash at 30 June 2020 was £4.09 million compared to £6.41 million at 31 December 2019.
Net cash (excluding debt associated with right-of-use assets, IFRS 16 and capitalised loan fees) at 30 June 2020 was £1.63 million (31 December 2019: £2.94 million).
Trading update
Whilst a number of the COVID-19 restrictions have now been lifted and many of our customers are able to return to a new normal, we continue to assess its impact on trading in the current year in the face of a changing level of restrictions on business. Existing customer relationships are robust, and whilst there are uncertainties on the speed at which deployments can be made in the face of changing societal restrictions, it is encouraging that the Group has a revenue pipeline for the second half of £12.5 million.
We started the year with £6.4 million of gross cash, alongside undrawn bank facilities of a further £1.5 million. At 30 June 2020 we had £4.1 million of gross cash, along with the £1.5 million undrawn bank facility.
During the lockdown we had 48 employees on furlough and at the time of writing all staff have returned from furlough. Whilst the government furlough scheme supported the Company through the lockdown period it ends in October and as a result, in August we sadly had to make 11 employees redundant in service areas where we had seen a reduction in customer activity, unlikely to pick-up in the near future.
Whilst COVID-19 has created significant commercial uncertainties it is encouraging that the Group has a revenue pipeline for this year that indicates already completed revenues of £9.8 million in H1, with further revenues of £12.5 million visible through existing recurring and repeatable revenue contracts and the order book. In the current context, the Group is mindful that the final value, terms and timing of delivery of the order book, remain subject to ongoing discussions.
Outlook
We are pleased to see our first half revenues hold up despite the effects of COVID-19. Much work was done in the first quarter to allow the business to continue to operate effectively under the new restrictions whilst still allowing our field engineers to be able to service our clients. I am very grateful to all our staff for the resilience they have shown.
Despite difficult market conditions, we have won further significant business with several major clients in the payment processing space, as well as a major payment device contract. Our recent launch of the latest version of our RMS platform, ab-initio, has met with encouraging market response and bodes well for future revenues.
We remain, as in the past, a second half weighted business, dependent on a small number of high value projects. We are also mindful of the potential impact of COVID-19 in the second half and the potential for changes in restrictions on our operations. This must however be tempered with the reassurance that comes from further revenues of £12.5 million visible through existing recurring and repeatable revenue contracts and the order book to year end to add to our performance for the first half.
We are very conscious of the need to fully execute the order book over the rest of the year, however, together with a sound balance sheet showing net cash and undrawn banking facilities, we remain cautiously optimistic for 2020 and beyond.
Andrew Blazye
Non-Executive Chairman
29 September 2020
Consolidated Statement of Total Comprehensive Income (unaudited)
For the six months ended 30 June 2020
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Six months ended 30 June 2020£'000 |
Six months ended 30 June 2019£'000 |
Year ended 31 December 2019£'000 |
Revenue | 9,769 | 9,922 | 22,441 |
Cost of sales | (4,874) | (4,369) | (10,824) |
Gross profit | 4,895 | 5,553 | 11,617 |
Adjusted administrative expenses | (5,355) | (5,100) | (9,830) |
Adjusted operating profit | (460) | 453 | 1,787 |
Adjusted administrative items: |
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Acquisition costs expensed | (30) | (149) | (159) |
Impairment of development costs | - | - | (2,751) |
Amortisation of acquired intangibles | (157) | (18) | (242) |
Share-based payments | (2) | (2) | 40 |
| (189) | (169) | (3,112) |
Total administrative expenses | (5,544) | (5,269) | (12,942) |
Statutory operating (loss)/profit | (649) | 284 | (1,325) |
Finance income | 10 | 9 | 19 |
Finance expense | (187) | (112) | (279) |
(Loss)/profit before taxation | (826) | 181 | (1,585) |
Taxation | - | - | 119 |
(Loss)/profit and total comprehensive income for the period | (826) | 181 | (1,466) |
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Earnings per share | Pence | Pence | Pence |
Basic (losses)/earnings per share | (0.33) | 0.07 | (0.58) |
Diluted (losses)/earnings per share | (0.33) | 0.07 | (0.58) |
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Condensed Consolidated Statement of Changes in Equity | £'000 | £'000 | £'000 |
At start of period | 23,714 | 23,982 | 23,982 |
(Loss)/profit and total comprehensive (expense)/income for the period | (826) | 181 | (1,466) |
Share issue net of expenses | - | 1,120 | 1,238 |
Share-based payments | 2 | 2 | (40) |
At end of period | 22,890 | 25,285 | 23,714 |
Condensed Consolidated Balance Sheet (unaudited)
As at 30 June 2020
| 30 June 2020 £'000 |
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30 June 2019 '000 | 31 December 2019 £'000 | ||
Non-current assets |
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Goodwill and other intangibles | 18,230 | 18,025 | 18,387 |
Development costs | 2,909 | 4,039 | 2,645 |
Property, plant and equipment | 1,176 | 2,047 | 1,255 |
Right-of-use assets | 2,910 | 2,627 | 3,383 |
| 25,225 | 26,738 | 25,670 |
Current assets |
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Inventories | 5,106 | 1,326 | 1,128 |
Trade and other receivables | 3,541 | 7,343 | 5,253 |
Current tax asset | 334 | - | 452 |
Cash and cash equivalents | 4,089 | 3,376 | 6,407 |
| 13,070 | 12,045 | 13,240 |
Total assets | 38,295 | 38,783 | 38,910 |
Current liabilities |
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Trade and other payables | (9,353) | (6,451) | (7,719) |
Borrowings | (1,592) | (2,142) | (3,115) |
Deferred consideration | (274) | (274) | (274) |
| (11,219) | (8,867) | (11,108) |
Non-current liabilities |
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Borrowings | (3,024) | (3,910) | (2,926) |
Deferred tax | (1,162) | (721) | (1,162) |
| (4,186) | (4,631) | (4,088) |
Total liabilities | (15,405) | (13,498) | (15,196) |
Net assets | 22,890 | 25,285 | 23,714 |
Equity |
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Share capital | 2,602 | 2,552 | 2,602 |
Capital redemption reserve | 4,588 | 4,588 | 4,588 |
Share premium | 14,021 | 13,953 | 14,021 |
Merger reserve | 2,269 | 2,269 | 2,269 |
Translation reserve | (225) | (225) | (225) |
Retained earnings | (365) | 2,148 | 459 |
Total equity attributable to equity shareholders | 22,890 | 25,285 | 23,714 |
Consolidated Cash Flow Statement (unaudited)
For the period ended 30 June 2020
| Six months ended 30 June 2020£'000 | Six months ended 30 June 2019£'000 | Year ended 31 December 2019£'000 |
Net cash flows from operating activities |
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(Loss)/Profit before taxation | (826) | 181 | (1,585) |
Depreciation and amortisation | 1,407 | 1,325 | 2,341 |
Impairment of capitalised development | - | - | 2,751 |
Share option charge | 2 | 2 | (40) |
Finance income | (10) | (9) | (19) |
Finance expense | 187 | 112 | 279 |
| 760 | 1,611 | 3,727 |
(Increase)/decrease in inventories | (3,978) | (116) | 82 |
Decrease/(increase) in receivables | 1,712 | (128) | 1,290 |
Increase in payables | 1,634 | 731 | 2,337 |
Interest received | 10 | 9 | 19 |
Interest paid | (156) | (62) | (233) |
Tax received | 118 | 86 | 351 |
Net cash inflow from operating activities | 100 | 2,131 | 7,573 |
Cash flows from investing activities: |
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Acquisition of subsidiary undertakings | - | (2,880) | (2,855) |
Purchase of property, plant and equipment | (175) | (223) | (287) |
Expenditure on capitalised product development | (787) | (575) | (1,922) |
Net cash outflow from investing activities | (962) | (3,678) | (5,064) |
Cash flow from financing activities: |
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Proceeds from issue of shares | - | - | 119 |
Repayments of obligations under leases | (372) | (397) | (853) |
Repayments of obligations under operating leases | (423) | (432) | (902) |
Repayment of loans | (661) | (219) | (438) |
New loans raised | - | 3,254 | 3,255 |
Net cash (outflow)/inflow from financing activities | (1,456) | 2,206 | 1,181 |
Increase/(Decrease) in cash and cash equivalents | (2,318) | 659 | 3,690 |
Cash and cash equivalents at beginning of period | 6,407 | 2,717 | 2,717 |
Cash and cash equivalents at end of period | 4,089 | 3,376 | 6,407 |
Borrowings |
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Current |
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Finance leases | 186 | 295 | 535 |
Operating leases | 592 | 1,033 | 1,766 |
Bank loans | 875 | 875 | 875 |
Capitalised loan fees | (61) | (61) | (61) |
| 1,592 | 2,142 | 3,115 |
Non-current |
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Finance leases | 45 | 108 | 68 |
Operating leases | 1,560 | 1,566 | 809 |
Bank loans | 1,527 | 2,406 | 2,188 |
Capitalised loan fees | (108) | (170) | (139) |
| 3,024 | 3,910 | 2,926 |
Net (debt)/cash | (527) | (2,676) | 366 |
Net cash/(debt) excluding the impact of IFRS16 | 1,625 | (77) | 2,941 |
Notes
1. General information
The interim financial statements, which are unaudited, have been prepared on the basis of the accounting policies expected to apply for the financial year to 31 December 2020 and in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRSs) as endorsed by the European Union. The accounting policies applied in the preparation of these interim financial statements are consistent with those used in the financial statements for the year ended 31 December 2019. The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all the disclosures in IAS 34 'Interim Financial Reporting'. Accordingly, whilst the interim statements have been prepared in accordance with IFRSs, they cannot be construed as being in full compliance with IFRSs. |
The financial information for the year ended 31 December 2019 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006. |
The Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of reasonably possible changes in trading conditions show that the Group should be able to operate within the level of its facilities. After making enquiries the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future (being a period of at least 12 months from the date of this report). Accordingly, they continue to adopt the going concern basis in preparing the interim condensed financial statements. |
The half year results were neither audited nor reviewed by the auditors. The interim financial information has been prepared on the basis of accounting policies set out in the Group's statutory accounts for the year ended 31 December 2019. |
2. Turnover analysis
| Six months ended 30 June 2020£'000 | Six months ended 30 June 2019£'000 | Year ended 31 December 2019£'000 |
Software licences and hardware | 908 | 1,196 | 2,862 |
Service and installations | 3,471 | 3,621 | 7,778 |
Data services | 3,151 | 2,628 | 6,342 |
Consultancy and license maintenance | 2,239 | 2,477 | 5,459 |
| 9,769 | 9,922 | 22,441 |
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3. Operating segments and adjusted EBITDA
| Six months ended 30 June 2020£'000 | Six months ended 30 June 2019£'000 | Year ended 31 December 2019£'000 |
Revenue | 9,769 | 9,922 | 22,441 |
Cost of sales | (4,874) | (4,369) | (10,824) |
Gross profit | 4,895 | 5,553 | 11,617 |
Administrative expenses | (5,544) | (5,269) | (12,942) |
Operating (loss)/profit | (649) | 284 | (1,325) |
Add back: |
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Depreciation on owned assets | 254 | 295 | 451 |
Depreciation on right-of-use assets | 473 | 369 | 1,015 |
Amortisation of intangible assets | 523 | 643 | 633 |
Amortisation of acquired intangible assets | 157 | 18 | 242 |
Impairment of development costs | - | - | 2,751 |
EBITDA | 758 | 1,609 | 3,767 |
Share-based payments | 2 | 2 | (40) |
Acquisition costs expensed | 30 | 149 | 159 |
Adjusted EBITDA | 790 | 1,760 | 3,886 |
Adjusted EBITDA excluding depreciation on right of use assets | 367 | 1,391 | 2,984 |
4. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
| Six months ended 30 June 2020£'000 | Six months ended 30 June 2019£'000 | Year ended 31 December 2019£'000 |
Earnings |
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(Loss)/profit after tax - used for basic and diluted earnings per share | (826) | 181 | (1,466) |
Add back net finance charge | 177 | 103 | 260 |
Add back taxation charge | - | - | (119) |
(Loss)/profit used for operating profit per share | (649) | 284 | (1,325) |
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Number of shares | No '000 | No '000 | No '000 |
Weighted average number of ordinary shares for the purposes of basic and operating earnings per share | 251,080 | 243,330 | 251,080 |
Dilutive effect of share options | 2,656 | 17,018 | 2,656 |
| 253,736 | 260,348 | 253,736 |
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| pence | pence | pence |
Basic (losses)/earnings per share | (0.33) | 0.07 | (0.58) |
Diluted (losses)/earnings per share | (0.33) | 0.07 | (0.58) |
Operating (loss)/profit per share | (0.26) | 0.12 | (0.53) |
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The number of shares in issue at 30 June 2020 was 260,191,720.
5. Net finance expense
| Six months ended 30 June 2020£'000 | Six months ended 30 June 2019£'000 | Year ended 31 December 2019£'000 |
Interest receivable on bank deposits | 10 | 9 | 19 |
Finance income | 10 | 9 | 19 |
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Interest payable on bank loans and overdrafts | (5) | (5) | (10) |
Interest payable on finance leases | (17) | (22) | (46) |
Interest payable on operating leases | (34) | (35) | (85) |
Other interest | (100) | (35) | (92) |
Amortisation of loan fees | (31) | (15) | (46) |
Finance expense | (187) | (112) | (279) |
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Net finance expense | (177) | (103) | (260) |
6. Copies of the interim report 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.