Half Yearly Report

12th 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.

ENDIR UAOWRKNRWAAR

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