19th Jun 2007 07:02
Brulines (Holdings) PLC19 June 2007 Press Release 19 June 2007 Brulines (Holdings) plc ("Brulines" or "the Group") Final Results Brulines (Holdings) plc (AIM: BRU), the leading provider of draught alcoholicdrinks volume, quality and profit protection systems for the UK licensedon-trade, today announces its Final Results for the year ended 31 March 2007. Highlights• Joined AIM in October 2006, raising net proceeds of £6.84 million • *Adjusted profit before tax of £3.23 million (2006: £2.60 million) • **Underlying profit before taxation for the core business up 27% at £3.45 million (2006: 2.71million) • Group turnover increased to £16.76 million • Maiden dividend of 3p per share recommended • Successful roll-out of Enterprise Inns installations • Trials of Brand Quality Monitoring ("BQM") ongoing in tenanted and managed sectors • Acquisitions of the trade and assets of Corporate Management Services and majority shareholding in Coin Metrics will enhance the Group's position in the 'gaming' machines market *this represents profit before taxation, exceptional items and amortisation ofgoodwill **as outlined in the Financial Review herewith Commenting on the Final Results, James Newman, Chairman of Brulines, said: "Overall, the trading and financial performance was slightly ahead of theBoard's expectations for the year. The higher profile and increased financialstrength as a result of the flotation has provided a good base from which toexpand the Group's activities. The acquisitions made during the last twelve months and the introduction of newproducts will extend the Group's key markets into the Managed Pub sector and thewider leisure sector, where there are significant opportunities for growth.From this strong platform, the Board is confident that the Group will continueto make further progress during the next year." - Ends - Enquiries:Brulines (Holdings) plcJames Dickson, Chief Executive Tel: +44 (0) 1642 358 [email protected] Foster, Finance [email protected] www.brulines.com RSM Robson Rhodes Corporate FinanceNeil Crawford, Corporate Finance Tel: +44 (0) 113 225 [email protected] www.rsmi.co.uk Media enquiries:Abchurch CommunicationsSarah Hollins/Justin Heath/ Emma Johnson Tel: +44 (0) 207 398 [email protected] www.abchurch-group.com CHAIRMAN'S STATEMENT I am delighted to report a period of significant progress for the Group, inthis, its first year as a public company and my first year as Chairman. AIM flotation The Group successfully floated on the AIM market in October 2006, which due tothe efforts of my colleagues on the Board and the Group's advisers, was achievedwith minimal disruption to the day to day business operations. The primary reason for listing on AIM was to give the Group a stronger financialbase from which to significantly expand its activities. These include thedevelopment of new products and markets as well as looking for suitableacquisitions. I am pleased to report that we have already started to benefitfrom the profile and financial strength as a result of the flotation. Results The Group was formed to effect the management buy-out of Brulines Limited in May2005. Consequently, the results of the Group for the period ended 31 March 2006reflect the results of Brulines Limited from the date of the acquisition, ratherthan for a full year. The Financial Review includes a table of results forBrulines Limited for the two years ended 31 March 2007 to enable a moremeaningful comparison of the underlying business. Turnover for the period was significantly ahead of the corresponding period in2006, increasing by over 50%, to £16.76 million. This was mainly as a result ofthe roll-out of the Enterprise Inns contract, which commenced in October 2005,and the replacement programme for Punch Taverns. As anticipated, gross margins reduced due to the necessary increase in costsahead of the new installations. However, as expected, this improved in thesecond half as service income from these installations started to be generated. Operating profit before goodwill and exceptional items increased by 24.4% to£3.23 million. After deducting goodwill amortisation and interest, both ofwhich occurred as a result of the management buy-out in May 2005, and theexceptional costs of the flotation, profit before tax rose to £1.91 million(2006: £1.63 million). However underlying profit before tax increasedsubstantially, by 27% to £3.45 million. Overall, the trading and financial performance for the year was slightly aheadof the Board's expectations at the time of the flotation. Due to the high taxcharge resulting from the disallowable flotation and amortisation costs earningsper share is 4.9p. But for the exceptional flotation costs the earnings pershare would have been 8.3p and compares favourably to that of 2006 (5.7p). Dividend In line with the statement made at the time of the flotation, the Board isrecommending that its first dividend as a public company be a final dividend inrespect of the year ended 31 March 2007 at 3p per share. Subject to theapproval of shareholders at the Group's Annual General Meeting on 24 July 2007,the dividend will be paid on 25 July 2007 to shareholders on the register on 29June 2007. Acquisitions One of the Board's primary objectives for the flotation was to generateselective acquisitions in order to extend the Group's product offering to itsexisting customers and also to enter new markets aligned to the skills andtechnologies within the Group. In September 2006, we announced the acquisition of the trade and assets ofCorporate Management Services ('CMS') to integrate into our newly formed MachineInsite Ltd subsidiary. In May 2007, we announced that we had taken a majorityshareholding in Coin Metrics Limited ('CML'), a company with an establishedcustomer base in the amusement with prizes ('AWP') and gaming industries, usingsimilar technology to the Group and, therefore, a strong strategic fit withMachine Insite. The Board continues to explore further acquisition opportunities, which willexpand the markets we operate in and create synergies for the Group's existingproducts. Board When I became Chairman of the Group in May 2006, as part of the flotationprocess, the Group's founder, Derrick Collin, stepped down as Non-ExecutiveChairman and Director. On behalf of the Board, I would like to thank Derrickfor his significant contribution to the Group over many years, as the founder,Chairman and major shareholder. Just prior to flotation, the Board appointed Stewart Gilliland as aNon-Executive Director and Duncan Noble, as Operations Director, to the plcBoard. Outlook The higher profile and increased financial strength as a result of the flotationhas provided a good base from which to expand the Group's activities. Theacquisitions made and the introduction of new products will extend the Group'skey markets into the Managed Pub sector and the wider leisure sector, wherethere are significant opportunities for growth. From this strong platform, theBoard is confident that the Group will continue to make further progress duringthe next year. James NewmanChairman19 June 2007 CHIEF EXECUTIVE'S REVIEW Turnover Growth On a comparable year on year proforma basis, core business turnover for the yearincreased by 37% to £16.50 million (2006: £12.03 million) with the majority ofgrowth attributable to the Enterprise Inns, and Marstons installation roll-outplans, as well as Punch Taverns' upgrade programme. As expected, the turnovermix in the second half moved towards recurring revenue as income from supportservice contracts was generated from the increasing installation base. In the year the Group completed 4,400 new installations and 1,507 system upgradereplacements, compared to a total of 3,652 installations in the previous year. Market drivers The Group continues to benefit from a number of sector and legislative factorswhich have increased both the breadth and depth of our market penetration. Thesepoints are summarised below: • Continued sector consolidation and migration of premises from managedand independent to the tenanted model provides good organic growth from ourexisting contracts with key consolidators. • The drive to improve the size and quality of estate has led some ofour customers, such as Enterprise and Punch, to sell on non-core pubs to otherof our customers such as Admiral and Scottish & Newcastle Pub Enterprises. Themajority of these sites already have our equipment in situ, which increases ourprofile with the acquiring pub group. • The smoking ban in England, effective from 01 July 2007, has alreadyhad a positive impact on sales of our dispense monitoring systems as pub groupsseek to gain greater transparency on pub performance leading up to and duringthe ban. • Significant competition for the leisure pound and increasinglydiscerning consumers mean that operators must continually improve the qualityand efficiency of their offering, both of which require better and fasteroperational information, which we are able to provide with our new Brand QualityMonitoring ('BQM') product range. • Economic factors continue to place increasing pressure on operatingfinancial performance in the leisure sector, which will only increase furtherwhere Real Estate Investment Trust ('REIT') status is implemented. Thisunderlying pressure is expected to result in an increasing demand to understandthe true operating information and potential of a property, a service that wecan provide. New contracts Negotiations for our core product offering to the tenanted - leased sector havebeen successfully completed with S&N Pub Enterprises and Admiral, and continueto advance with other national and regional operators. This is expected toincrease our market share and continue to both broaden our customer base andgain deeper penetration within existing customers' estates. New product development The Group is pleased with the progress of our BQM product range. This enablesthe Group to remotely capture five of the seven industry recognised key successfactors for the ''perfect pint", these being temperature at the point ofdispense, line cleaning, throughput, cellar temperature, and flow rate, leavingonly cleanliness of glass and dispense technique as impractical to measureautomatically. We believe that within the drinks and, in particular, the beer industry, qualityat the point of dispense is becoming increasingly important and that focus onproduct quality is becoming more evident as pub owners and brewers compete formarket share by committing investment into beer quality improvement to enhancethe consumer experience. This is resulting in some key commercial evaluationwithin both the national tenanted and managed sectors which, if successful,could lead to significant new customers for BQM in the next twelve months. Wehave already seen the first orders for this product from Punch Taverns for 100installations. Strategy for growth Our primary aim is to continue to grow the UK business organically whilstconsidering strategic acquisitions and additional complimentary products andtechnologies. We will continue to maintain our reputation for developingproducts that are accurate, robust and reliable and that are highly relevant tothe needs of our customers. As a result of the market drivers we have identified, our current ability toprovide valuable returns to customers from dispense monitoring and AWP machinemonitoring, and the emerging potential of BQM, we expect to increase ourcoverage of the tenanted - leased and managed sectors. Customer returns on investment from our core dispense monitoring and BQMproducts underpin the installation of our edisBOX communication platform in pubsand bars. Once installed the edisBOX is capable of accepting additional productswhich alone might not justify investment in a separate communication platform.These additional products might include the monitoring of footfall, soft drinksmonitoring, fridge/freezer temperature, wines & spirits, utilities and AWP 'gaming' machines. The Group is actively looking to develop and to add these types of products toour installed communications platforms within existing customers. The Group believes that our ability to provide a wider range of effectiveoperational and market data will increase our value to existing customers withintenanted / leased and managed sectors, whilst allowing entry to the hotels,clubs, and independent sectors. During the current year we will continue to invest in evaluating internationalopportunities for Dispense Monitoring, Brand Quality Monitoring and AWPMonitoring, when they may arise. Strategic growth acquisitions In August 2006 we successfully acquired the customer base of CorporateManagement Services Limited (CMS) for a consideration of £110,000 and havemigrated the customers and basic data management service provision to our newlyformed subsidiary, Machine Insite Limited. Following significant development investment we have successfully launched animproved database and data management software with web based reporting that hashelped gain new business with SA Brain, MOTO Motorway services, Spirit andOrchid. The new company traded profitably in its first seven months and willcontinue to grow its contribution to Group profit over the coming years. In May 2007, as part of our plan to launch revenue enhancing AWP monitoringproducts such as remote data capture, the Group acquired a 66 percent holding inCoin Metrics Limited (CML) for a consideration of £685,000, of which £622,750was paid in cash, with the balance satisfied by the issue of 36,974 ordinaryshares. Brulines has also entered into an option agreement with the shareholders of CML,whereby the remaining shares in CML may be acquired on a formula based upon thelevel of recurring income generated by CML in any of the three years ending 31March 2012. CML, established in 2005 and based in Milton Keynes, has developed the SiteGuardian system, a wireless data product that allows its customers in theamusement and gaming (or 'AWP') industries to monitor constantly the financialperformance of their gaming sites and assets accurately and in real time. Todate, CML has sold over 4,000 Site Guardian units to 100 sites across the UK,primarily to owners of gaming centres or family entertainment centres. The acquisition of CML is a strong strategic fit with the Group's existingMachine Insite business which already provides gaming machine data managementand consultancy services to operators within the pub, club and leisure markets. Importantly, the acquisition will enable the Group to accelerate the growth ofthe AWP data management business to market leadership through real time remotedownload of data from AWP machines, whilst also opening up new applications andmarkets for the next generation of wireless data capture systems, such asvending. The acquisition has strong product synergy and very little overlap between ourrespective customer bases, where there are already strong relationships. Thisgives us a solid platform to cross sell and also take a market leading portfolioto a wider market. Management and employees During the year the Group has made good progress both in the recruitment of newtalent and in ongoing personnel development in order to strengthen themanagement team at all levels. It was particularly pleasing that the quality of our business and peopleattracted two high calibre Non Executive Directors, those being James Newman andStewart Gilliland. James's considerable financial and non-executive experiencehas been invaluable in guiding the executive team during our first year as apublic company, whilst Stewart has brought substantial industry knowledge andhas made a significant contribution to our activities. I would like to thankthem for their support during the past year. Key organisational developments in the year have been: • the addition of Mark Foster and Ron Colley as Group Finance Director and Commercial and Marketing Director respectively in early 2006, which has enhanced the depth of the management team, supporting the business as it continues to grow; • the key commercial operations and service functions were restructured in October 2006 to ensure that the Group is aligned to future growth plans and our customer partnership needs. I am proud to say that we have a dedicated and ambitious management team, whoare well supported by a strong workforce which is committed to the Group, ourcustomers, and our values. I thank everyone for their contribution during thelast twelve months. James DicksonChief Executive19 June 2007 FINANCIAL REVIEW Pro-forma trading table As noted in the Chairman's statement, the comparative figures for the Group forthe period ended 31 March 2006 represent the results of Brulines Limited onlyfrom 19 May 2005, the date of the management buy-out of Brulines Limited. Toenable shareholders to review the performance of the Group in a more meaningfulway the following table compares the results of our core business for the twoyears ended 31 March 2007: FY 2007 FY 2006 £'000's £'000'sTurnover 16,499 12,035Gross Profit 7,238 (43.9%) 5,566 (46.2%)EBITDA 3,524 3,066EBIT 3,296 2,681PBT 3,445 2,711 Gross Margin As stated at the time of the flotation, gross margin was impacted by theincreased costs related to operational set up in delivering the agreedinstallation plan for Enterprise Inns roll-out programme. Gross margin in thesecond half of the financial year improved from 42.7% to 45.4%, reflecting ashift in the revenue mix towards support service income arising from anincreased installation base. Actual Group Profit The consolidated Group profit before amortisation of goodwill, exceptional costsand taxation increased by 24.2% to £3.23 million (2006: £2.60 million). Theamortisation of goodwill of £0.46 million relates to the management buy-out ofBrulines Limited in May 2005. The exceptional costs of £0.68 million relate tothe costs of flotation, which were not directly attributable to the raising ofnew capital for the Group with the £0.48 million balance of the costs writtenoff against the share premium account. Taxation The taxation charge of £0.91 million represented an effective tax rate of 47.9%on the reported profit before taxation of £1.91 million. The overall taxationcharge was higher than the standard rate of corporation tax due to theamortisation of goodwill and the flotation expenses being disallowable fortaxation purposes. Earnings per share Basic earnings per share for the year ended 31 March 2007 amounted to 4.9p.However, before exceptional items, basic earnings per share amounted to 8.25p,an increase of 43.2% over the 101/2 month period to 31 March 2006. Fully dilutedearnings per share, which takes account of all outstanding share options,amounted to 8.1p Balance sheet - change post flotation The balance sheet reported at the year end reflects the full impact of theflotation, which took place on 26 October 2006, raising £8.00 million beforecosts and resulting in the repayment of all debt. Following the positive tradingcash flow during the year of £5.19 million, the Group had net cash balances of£4.08 million at 31 March 2007 which will provide a strong base from which totake advantage of growth opportunities. Transition to International Financial Reporting Standards (IFRS) As an AIM listed company, the Group will adopt IFRS for the year ending 31 March2008. The impact of IFRS is considered to be minimal with no material effectsother than that amortisation of goodwill will not occur. The Interim Resultsfor the six months ended 30 September will be prepared under IFRS. Mark FosterFinance Director19 June 2007 Consolidated profit and loss accountfor the year ended 31 March 2007 Before Exceptional Exceptional Total Period ended Year ended Year ended Year ended 31 31 March 2007 31 March 2007 31 March 2007 March 2006 Note £'000 £'000 £'000 £'000 Turnover 16,756 - 16,756 11,076 Cost of Sales (9,462) - (9,462) (5,901) Gross Profit 7,294 - 7,294 5,175 Administrative Expenses (4,063) (681) (4,744) (2,577) Operating profit beforeamortisation of goodwill 3,231 (681) 2,550 2,598 Amortisation of goodwill (463) - (463) (432) Group operating profit 2,768 (681) 2,087 2,166 Net interest (payable) (179) - (179) (540) Profit on ordinary activitiesbefore taxation 3 2,589 (681) 1,908 1,626 Tax on profit on ordinaryactivities 1 (913) - (913) (627) Profit on ordinary activitiesafter taxation 1,676 (681) 995 999 Basic earnings per share (p) 2 8.25 (3.35) 4.90 5.76 Diluted earnings per share (p) 2 8.10 (3.29) 4.81 5.76 There are no recognised gains or losses other than those shown in the profit andloss account above. Reconciliation of movement in shareholders' fundsfor the year ended 31 March 2007 Year ended Period ended 31 March 31 March 2007 2006 £'000 £'000 Opening shareholders' funds 2,734 - Profit for financial period 995 999New shares issued 673 1,735Premium on shares allotted during the period 6,966 -Shares to be issued 32 -Own shares (152) - Closing shareholders' funds 11,249 2,734 Consolidated balance sheetas at 31 March 2007 31 March 31 March 2007 2006 £'000 £'000 Fixed assetsIntangible assets - goodwill 8,767 9,382Tangible assets 487 281 9,254 9,663 Current assetsStocks and work in progress 1,288 920Debtors 2,893 6,238Bank balances 4,079 2,650 8,260 9,808 Creditors: Amounts falling due within one year (6,265) (7,698) Net current assets 1,995 2,110 Total assets less current liabilities 11,249 11,773 Creditors: Amounts falling due after one year - (9,024) Provision for liabilities and charges - (15) Net assets 11,249 2,734 Equity shareholders' fundsCalled up share capital - ordinary shares 2,408 1,735Share premium 6,966 -Shares to be issued 32 -Profit and loss account 1,994 999Own shares (152) - 11,249 2,734 Consolidated cash flow statementfor the year ended 31 March 2007 Year ended Period ended 31 March 31 March 2007 2006 Note £'000 £'000 Net cash inflow from operating activities Operating profit before exceptionals 2,768 2,166Exceptionals (681) -Operating profit after exceptionals 2,087 2,166 Depreciation and amortisation 655 722Profit on sale of tangible assets - (213)Increase in stocks (368) (269)Decrease/ (increase) in debtors 3,352 (5,005)(Decrease)/ increase in creditors (565) 5,085Other - share based payment 32 - Net cash inflow from operating activities 5,193 2,486 Returns on investment and servicing of finance (179) (540) Taxation (640) (462) Capital expenditure and financial investment (397) 494 Acquisitions and disposals (270) (12,486) Net cash inflow/ (outflow) before financing 3,707 (10,508) FinancingRepayment of bank funding (5,678) (322)Bank funding - 6,000Loan note funding - 4,265Repayment of finance leases (24) (292)Repayment of loan note (4,215) (50)Issue of ordinary share capital 7,639 1,735 Increase in cash 4 1,429 829 Notes to the preliminary announcement 1. Tax on profit on ordinary activities The charge for tax is based on the profit for the year and comprises: Year ended Period ended 31 March 31 March 2007 2006 £'000 £'000 United Kingdom corporation tax 934 612 Deferred tax: net of originating timing differences (21) 15 913 627 Tax charge for March 2007 is impacted by: Tax on ordinary activities at 30% 573 Adjusted for: Flotation expenses 182Goodwill amortisation 139Other tax matters 40Deferred tax (21) Tax charge 913 2. Earnings per share The calculations of earnings per share are based on the following results andnumbers of shares in issue. Pre Post Period ended exceptional Exceptional exceptional 31 March 2007 2007 2007 2006 £'000 £'000 £'000 £'000Profit after tax (£) 1,676 681 995 999Basic earnings per share (p) 8.25 (3.35) 4.90 5.76Diluted earnings per share (p) 8.10 (3.29) 4.81 5.76Weighted average number of shares for basicearnings per share 20,307,028 20,307,028 20,307,028 1,734,505Weighted average number of shares fordiluted earnings per share 20,687,820 20,687,820 20,687,820 1,734,505 3. Exceptional items The exceptional costs of £680,724 incurred in the year to 31 March 2007represent the costs relating to the Company's admission to AIM. 4. Reconciliation of net cash flow to movement in net funds/(debt) Year ended Period ended 31 March 31 March 2007 2006 £'000 £'000 Increase in cash during the period 1,429 829Decrease/ (increase) in overdraft during the period 5,678 (5,678)Net funds acquired - 1,659Cash flow from lease financing and repayment of debt 24 292 Change in net debt resulting from cash flows 7,131 (2,898) New hire purchase and finance leases - (154) Movement in net debt during period 7,131 (3,052) Opening net debt (3,052) - Closing net funds/(debt) 4,079 (3,052) 5. Analysis of net (debt)/funds At At 01 April 31 March 2006 Cash flow 2007 £'000 £'000 £'000 Bank balances and deposits 2,650 1,429 4,079Overdrafts (878) 878 - 1,772 2,307 4,079 Debt due after one year (4,800) 4,800 -Hire purchase and finance lease creditors (24) 24 - (4,824) 4,824 - (3,052) 7,131 4,079 6. Post balance sheet events On 10 May 2007, the Company acquired a 66 percent shareholding in Coin MetricsLimited for a consideration of £685,000, of which £622,750 was paid in cash withthe balance satisfied by the issue of 36,974 ordinary shares of 10p each in theCompany. 7. Basis of preparation This preliminary announcement was approved by the Board on 19 June 2007. Thefinancial information in this preliminary announcement does not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985.It has been prepared using accounting policies that are consistent with thoseadopted in the statutory accounts for the year ended 31 March 2007. The yearend report is also presented and prepared in a form consistent with that whichhad been adopted in the annual accounts for the year ended 31 March 2007, havingregard to the accounting standards applicable to such accounts. The financial information for the year ended 31 March 2007 and for the periodended 31 March 2006 has been derived from the statutory accounts for thoseperiods. The statutory accounts for the ten month period ended 31 March 2006have been delivered to the Registrar of Companies and received an audit reportwhich was unqualified and did not contain statements under s237(2) or (3) of theCompanies Act 1985. The group accounts for the year ended 31 March 2007, onwhich the auditors issued an unqualified report which did not contain astatement under s237(2) or (3) of the Companies Act 1985, were approved by thedirectors on 19 June 2007 and will be delivered to the Registrar of Companiesfollowing the Annual General Meeting. 8. Distribution to shareholders The Annual Report and Financial Statements will be posted to shareholdersshortly and will be available to the public at the Company's registered office:EDIS House, Wellington Court, Preston Farm Business Park, Stockton on Tees, TS183TA. 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