TIDMUNG
RNS Number : 4952K
Universe Group PLC
11 April 2018
11 April 2018
AIM: UNG.L
Universe Group plc
("Universe", the "Group" or the "Company")
FINAL RESULTS FOR THE YEARED 31 DECEMBER 2017
Universe Group plc (AIM: UNG.L), a leading developer and
supplier of point of sale, payment and loyalty systems, is pleased
to announce its audited results for the year ended 31 December
2017.
Highlights
-- Results in line with Trading Update given in November 2017
-- Total revenues of GBP19.62 million (2016: GBP19.71 million)
-- Gross profit margin steady at 47.6%
-- Adjusted EBITDA GBP2.77 million before GBP0.4 million of
exceptional costs (2016: GBP3.77 million)
-- Operating profit GBP0.88 million (2016: GBP2.04 million)
-- Profit after tax GBP0.63 million (2016: GBP1.83 million)
-- Statutory diluted earnings per share 0.26p (2016: 0.76p)
-- Net cash at year end GBP1.86 million (31 December 2016: GBP2.11 million)
-- Revenues were affected by the delay of a small number of high value contracts
-- Investment made in development teams and enlarging sales
teams ahead of major next generation product launches
Andrew Blazye, Non-Executive Chairman of Universe,
commented:
"Universe continued to move forward during 2017 with the
production and roll out of our next generation EPOS solution and
latest payment terminal, Gempay 3. As reported earlier in the year
however, the Group's financial performance in 2017 was affected by
delays in a small number of customer deployments. Our cost base was
also intentionally increased as we invested in further technical
development activity and sales personnel to assist with our new
product launches.
We successfully completed EPOS implementations with major
customers, including 70 installations for leading petrol forecourt
operator, Rontec. Gempay 3 was launched on time in October 2017 and
to date there have been over 1,500 implementations, cementing
Gempay's position as the UK's leading forecourt payment
terminal.
We have had a solid start to 2018 with a two-year contract
extension with a large food retailer client as well as the prospect
of new business from a major international forecourt operator with
whom we have not traded before. Our pipeline remains solid and
supports our budgeted turnover, with the exception of the
significant uncertainty regarding our contract with Conviviality,
which represents approximately GBP2 million of our pipeline revenue
for the current financial year.
Opportunities continue to materialise with existing customers
for our next generation EPOS, payment, and loyalty solutions
reflecting the strong and loyal relationships we have, and the
strength of our products. The take-up of next generation products
and feed-back from customers bodes well for the future".
For further information:
Universe Group plc T: +44 2380 689
Andrew Blazye, Non-Executive 510
Chairman
Jeremy Lewis, Chief Executive
Officer
Daryl Paton, Chief Financial
Officer
finnCap T: +44 2072 200
Stuart Andrews (corporate 500
finance)
Richard Chambers (corporate
broking)
IFC Advisory T: +44 2039 346
630
Tim Metcalfe
Heather Armstrong
CHAIRMAN'S STATEMENT
Introduction
Universe continued to advance as a business during 2017, with
the production and roll out of our next generation electronic point
of sale ("EPOS") solution and payment terminal, Gempay 3. As
reported earlier in the year however, the Group's financial
performance was affected by delays in a small number of customer
deployments. Our cost base was also intentionally increased as we
invested in further technical development activity and sales
personnel to assist with our new product launches.
In a busy year, the Group made several changes to the board of
directors, with our Chief Financial Officer, Bob Smeeton, leaving
the business in August 2017 and being replaced by Daryl Paton.
Billy Tank, who had been on medical leave since January 2017, also
left the business in November 2017. Daryl comes with a wealth of
experience in both public markets and M&A, making him an ideal
candidate to help drive further value for shareholders.
In September 2017, Robert Goddard stepped down from his position
as Non-Executive Chairman and Director, a position he had held for
six years, during which he was central to guiding the Group through
a period of turnaround and transition. On the same day, I was
appointed to this role and am enjoying the opportunities involved
in taking the Company to the next level. We wish to thank Robert,
Bob and Billy for their contributions and commitment to
Universe.
During the year, we also made a number of management changes
within our trading entity, HTEC Limited, creating an executive
board with clear roles and responsibilities reporting to a newly
appointed divisional Managing Director.
The deployment delays left revenues only marginally down
year-on-year at GBP19.62 million (2016: GBP19.71 million). Profit
before tax, excluding GBP0.40 million of cost associated with the
retiring and appointment of senior management, was GBP1.18 million.
Reported profit before tax was GBP0.78 million (2016: GBP2.01
million). During the year, the Group continued to increase its
investment in technical research and development, with spend up
GBP0.35 million to GBP2.94 million, representing 15.0% of revenues,
as well as investment in the strengthening of the sales and product
management teams. These were the major contributors to the increase
in costs in the year, but will drive and support growth in the
future.
Historically, gross margin has included the cost of research and
development, however, as is customary with most other software
companies, this has now been included in administrative expenses.
Following the reclassification, gross profit margin is consistent
with the prior year at 47.6% (2016: 48.0%). Statutory diluted
earnings per share was 0.26p (2016: 0.76p).
Net cash remained strong, ending the year at GBP1.86 million (31
December 2016: GBP2.11 million).
Overview
The two priorities for 2017 continued to be product development
and the deployment readiness of our next generation EPOS offering,
together with the completion, launch and roll out of our next
generation payment terminal, Gempay 3.
Whilst there is now significant uncertainty in the EPOS
deployment to Conviviality, we successfully completed
implementations with other customers, including 70 installations
for leading petrol forecourt operator, Rontec.
Gempay 3 was launched on time in October 2017 and to date there
have been over 1,500 implementations, cementing Gempay's position
as the UK's leading forecourt payment terminal.
Under the trusted brand HTEC, the Group has supported customers
for more than 30 years, with a combination of EPOS, payment and
loyalty solutions. We continue to look for opportunities to broaden
our product portfolio under a build, buy or collaborate
strategy.
During the year, we installed our first self-check-out,
featuring FingoPay, an innovative payment device allowing customers
to pay by registering payment cards to finger vein records. In
March 2018, a partnership agreement was signed with NetPay Merchant
Services Limited which compliments and broadens our existing
payment services offering, allowing us to be the single payment
counterparty for our retailers. Universe continues to look for
value creating acquisition opportunities to expand and broaden the
business.
Staff
2017 was an extremely busy year for Universe and could not have
been achieved without the creativity, determination and dedication
of our people and for this we thank them.
Summary and outlook
Universe continued to move forward during 2017 with the
production and roll out of our next generation EPOS solution and
latest payment terminal, Gempay 3. As reported earlier in the year
however, the Group's financial performance in 2017 was affected by
delays in a small number of customer deployments. Our cost base was
also intentionally increased as we invested in further technical
development activity and sales personnel to assist with our new
product launches.
We successfully completed EPOS implementations with major
customers, including 70 installations for leading petrol forecourt
operator, Rontec. Gempay 3 was launched on time in October 2017 and
to date there have been over 1,500 implementations, cementing
Gempay's position as the UK's leading forecourt payment
terminal.
We have had a solid start to 2018 with a two-year contract
extension with a large food retailer client as well as the prospect
of new business from a major international forecourt operator with
whom we have not traded before. Our pipeline remains solid and
supports our budgeted turnover, with the exception of the
significant uncertainty regarding our contract with Conviviality,
which represents approximately GBP2 million of our pipeline revenue
for the current financial year.
Opportunities continue to materialise with existing customers
for our next generation EPOS, payment, and loyalty solutions
reflecting the strong and loyal relationships we have, and the
strength of our products. The take-up of next generation products
and feed-back from customers bodes well for the future.
Andrew Blazye
Non-Executive Chairman
10 April 2018
Extracts from the Strategic Report
Principal activity
The Group designs, develops and supports point-of-sale, payment
and loyalty solutions and systems for the UK petrol forecourt and
convenience store markets. These can be provided as a
comprehensive, fully-managed offering or as discrete products,
according to customer needs.
The Group's activities generate four distinct revenue streams
from:
-- Software licences and hardware: this income stream comes from
the sale of products, such as our point-of-sale and back office
systems. The enlargement of our existing customer base brings new
revenues but also typically adds additional, recurring revenues
from support contracts. In addition to securing new customers,
there are regular opportunities to refresh the products on existing
customer estates.
-- Service and installations: the sale of our software and
hardware products typically leads to an additional, recurring
revenue stream through the provision of support services, and
customer installations. We provide industry--leading customer
service levels, with 24-hour helpdesk support, a nationwide field
service and a specialised repair and refurbishment team, all of
which help to promote close, long term customer relationships.
-- Data services: our data centres, which accept, process, store
and transmit credit card information are accredited at the highest
level of the Payment Card Industry ("PCI") standards. Our data
centres also maintain and support hosted solutions for our
cloud--based products covering management information, loyalty and
as an agent for payment processing. They deliver high uptime and
excellent transaction processing speeds to a growing customer
base.
-- Consultancy and software maintenance: two software
development teams provide product development, consultancy services
and product support to customers, with the teams focused
respectively on products and hosted solutions.
Across each of these revenue streams, innovation and high levels
of customer care are central to the Group's success.
Organisational overview
The Group's business is directed by the Board and managed by the
Executive Directors, led by Chief Executive, Jeremy Lewis. A Senior
Management Team, comprising the Chief Executive, the Chief
Financial Officer, the HTEC Limited Managing Director and Senior
Executives, is responsible for Sales, Operations, Human Resources,
Development and Data Centres. There are two Non-Executive
Directors.
The main operating entity is HTEC Limited.
Strategy and business plan
We intend to increase shareholder value by being the leading
solutions partner to retailers in our chosen verticals, supplying
customers with our market-leading, innovative systems for
point-of-sale, payment and loyalty operations. These systems are
real-time, mission-critical and data rich, and our customers rely
on us to keep them trading at all times. Accordingly, effective and
efficient support, from our data centre teams, field force and
helpdesk professionals, remains a core part of what we do.
Opportunities to acquire new businesses are reviewed on a
regular basis, in particular where they may assist in extending our
penetration within addressable markets, adding complementary
technology or broadening our geographic reach. During 2017, the
Board considered several significant opportunities in detail but
chose not to further progress them since they did not meet our
value delivery criteria.
Business and product development
2017 was a continuation of 2016 in terms of the preparation of
our next generation products for deployment to fuel and convenience
customers. Pilots continued to run throughout the year and
significant roll-outs were completed, including the successful
implementation of our next generation point of sale product Europa,
back office product Callisto and head office product Jupiter, in 70
sites for the major fuel retailer, Rontec. Whilst we have
successfully installed our next generation EPOS solution across
many sites now, we experienced delays in one case. During the year,
we also increased our sales, marketing and product management
efforts so that we are well placed to increase penetration into our
core sectors of petrol forecourts and convenience stores.
As well as the development of our next generation EPOS solution,
we also completed and launched on time, our third-generation
payment solution, Gempay 3, which was launched in the second half
of 2017 and we have now completed over 1,500 installations.
In addition to our core products and as part of our strategic
ambition to be a one-stop-shop for fuel and convenience retailers,
we continued to work on and market several add-on products, which
will be used to enhance our core EPOS offering. These include:
-- Iocaste, a cloud--hosted content management system that
provides central control of store--based media screens and allows
reactive advertising by the retailer;
-- self-checkout solutions from the market--leading suppliers.
These are fully integrated with our point-of-sale systems and
provide retailers with greater flexibility in the way they serve
their customers; and
-- tobacco--dispensing units linked to our point-of-sale system.
These will greatly facilitate the sale of tobacco following the new
plain packaging legislation, that came into effect in 2017.
Financial review
Profit and loss
Revenues for the year were marginally down to GBP19.62 million
(2016: GBP19.71 million). Revenues were impacted by implementation
delays, in a single large customer, resulting in revenues from
software licences and hardware being down 20.6% to GBP3.70 million
(2016: GBP4.66 million). This drop was mitigated by a robust
performance in service and installations which were up 9.4% to
GBP7.90 million (2016: GBP7.22 million) following the installation
of over 1,500 Gempay 3 terminals in the second half of the year and
revenues from consultancy and licence maintenance, which includes
development and loyalty platform revenues up 4.0% to GBP3.99
million (2016: GBP3.84 million). Data services revenues, which
include revenues from our hosted EPOS and payment platforms were
flat at GBP4.04 million (GBP4.00 million).
Historically, our gross margin has included the cost of research
and development. Research and development is not however dependent
on revenues and therefore not a true cost of sale. As a result, and
as is customary with most other software companies, this expense
has now been included in administrative expenses. Following this
reclassification, gross profit margin is consistent with the prior
year at 47.6% (2016: 48.0%). Included in gross margin is GBP2.56
million of third party EPOS specific hardware, representing 13.0%
of revenues (2016: GBP2.78 million representing 14.1% of
revenues).
Administrative expenses (which now include the expensed cost of
research and development) were up GBP1.04 million in the year to
GBP8.46 million (2016: GBP7.42 million). GBP0.40 million of the
increase related to exceptional costs associated with senior
management changes and GBP0.35 million due to the increase in
expensed research and development at GBP2.94 million representing
15.0% of revenues (2016: GBP2.59 million representing 13.1% of
revenues). During the year, the Group also continued to invest in
its sales, marketing and product management teams to capitalise on
the investment in our new EPOS product suite.
Earnings before interest, taxes, share-based payments,
depreciation and amortisation ('adjusted EBITDA') was GBP2.77
million (2016: GBP3.77 million), adjusting in particular for the
exceptional charges of GBP0.40 million relating to senior
management changes. Operating profit reduced to GBP0.88 million
(2016: GBP2.04 million).
Net finance expense was GBP0.10 million (2016: GBP0.03 million).
This is up on the prior year, benefiting from a GBP0.08 million
credit arising from the release of an over-provision of contingent
consideration payable as a result of the acquisition of Indigo
Retail Holdings Limited in 2013.
The underlying tax charge for the period was GBP0.15 million
(2016: GBP0.18 million) resulting from a GBP0.09 million credit
relating to a prior period being offset by a GBP0.24 million charge
linked to a movement in the deferred tax balance. No corporation
tax is payable for the 2017 trading performance. Earnings per share
for the year were 0.27p (2016: 0.79p).
Cash flow and financing
Adjusted EBITDA (see note 3) decreased to GBP2.77 million (2016:
GBP3.77 million).
Working capital requirements reduced the net cash inflow from
operations to GBP1.61 million (2016: GBP2.36 million), as sales
were somewhat concentrated in the final two months of the year.
Investment in capitalised product development increased
significantly in 2017 to GBP1.42 million (2016: GBP0.99 million). A
large proportion of this was spent on our next generation EPOS
solutions, including the point of sale, back office and head office
products, as well as integration to self-check outs, payment
devices and payment and loyalty platforms and other third-party
retail devices. We continued to develop the Iocaste content
management system and this product is now in pilot with a number of
customers.
The net cash inflow from operating activities helped to fund
product development; a GBP0.35 million investment in fixed assets
(2016: GBP0.40 million); GBP0.06 million covering the final balance
of deferred and contingent consideration on the two recent
acquisitions (2016: GBP0.35 million) and GBP0.31 million of finance
lease capital repayments (2016: GBP0.59 million).
Cash on the balance sheet at the year-end stood at GBP2.89
million (2016: GBP3.41 million) and after deducting debt of GBP1.03
million (31 December 2016: GBP1.29 million), net cash at the
year-end was GBP1.86 million (31 December 2016: GBP2.11
million).
Summary
We are always very aware that the systems we provide to our
clients are mission critical and geared to helping them improve
service and profitability. 2017 was a year of investment and new
product releases which have been well received and we look to
capitalise on this work in 2018.
Jeremy Lewis
Chief Executive Officer
10 April 2018
Consolidated Statement of Total Comprehensive Income
For the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
Continuing operations
Revenue 19,622 19,712
Cost of sales (10,291) (10,252)
Gross profit 9,331 9,460
Administrative expenses (8,455) (7,418)
Operating profit 876 2,042
Finance income 11 99
Finance expense (108) (131)
Profit before taxation 779 2,010
Taxation (145) (175)
Profit and total comprehensive
income for the year 634 1,835
Earnings per ordinary share
Basic earnings per share 0.27p 0.79p
Diluted earnings per share 0.26p 0.76p
Consolidated Statement of Changes in Equity
For the year ended 31 December 2017
Capital Merger Profit
Share redemption Share reserve Translation and Total
capital reserve premium on acquisition reserve loss equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2016 2,313 4,588 13,062 2,269 (225) (1,467) 20,540
Profit and
total comprehensive
income for
the year - - - - - 1,835 1,835
Issue of share
capital 3 - - - - - 3
Share based
payments - - - - - 116 116
________ ________ ________ __________ _________ _____ _______
At 31 December
2016 2,316 4,588 13,062 2,269 (225) 484 22,494
At 1 January
2017 2,316 4,588 13,062 2,269 (225) 484 22,494
Profit and
total comprehensive
income for
the year - - - - - 634 634
Issue of share
capital 6 - - - - - 6
Share based
payments - - - - - 27 27
At 31 December
2017 2,322 4,588 13,062 2,269 (225) 1,145 23,161
Consolidated Balance Sheet
As at 31 December 2017
2017 2016
GBP'000 GBP'000
Non-current assets
Goodwill and other intangible assets 13,912 13,947
Development costs 3,447 2,745
Property, plant and equipment 2,074 2,384
19,433 19,076
Current assets
Inventories 1,409 1,084
Trade and other receivables 5,554 5,151
Cash and cash equivalents 2,885 3,408
9,848 9,643
Total assets 29,281 28,719
Current liabilities
Trade and other payables (4,560) (4,448)
Current tax liabilities - (136)
Borrowings (652) (686)
Contingent consideration - (55)
(5,212) (5,325)
Non-current liabilities
Borrowings (377) (608)
Deferred tax (531) (292)
(908) (900)
Total liabilities (6,120) (6,225)
Net assets 23,161 22,494
Equity
Share capital 2,322 2,316
Capital redemption reserve 4,588 4,588
Share premium 13,062 13,062
Merger reserve 2,269 2,269
Translation reserve (225) (225)
Profit and loss account 1,145 484
Total equity 23,161 22,494
Consolidated Cash Flow Statement
For the year ended 31 December 2017
2017 2016
GBP'000 GBP'000
Cash flows from operating activities:
Profit before tax 779 2,010
Depreciation and amortisation 1,463 1,613
Share based payments 27 116
Net finance expense 97 32
2,366 3,771
Movement in working capital:
Increase in inventories (325) (203)
Increase in receivables (407) (855)
Increase in payables 116 3
Interest paid (97) (102)
Tax paid (42) (259)
Net cash inflow from operating
activities 1,611 2,355
Cash flows from investing activities:
Deferred and contingent consideration
arising on the acquisition of
subsidiary undertakings (55) (345)
Purchase of property, plant &
equipment (352) (400)
Expenditure on product development (1,417) (993)
Net cash outflow from investing
activities (1,824) (1,738)
Cash flow from financing activities:
Proceeds from issue of shares 6 3
Repayments of obligations under
finance leases (316) (592)
Net cash outflow from financing (310) (589)
(Decrease)/increase in cash and
cash equivalents (523) 28
Cash and cash equivalents at
beginning of year 3,408 3,380
Cash and cash equivalents at
end of year 2,885 3,408
Notes
1. General Information
The financial information set out in this document does not
constitute the Company's statutory accounts for 2016 or 2017.
Statutory accounts for the years ended 31 December 2016 and 31
December 2017 have been reported on by the Independent Auditors.
The Independent Auditors' Reports on the Annual Report and
Financial Statements for each of 2016 and 2017 were unmodified, did
not draw attention to any matters by way of emphasis and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
Statutory accounts for the year ended 31 December 2016 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 31 December 2017 will be delivered to the Registrar
in due course, and will be available from the Company's registered
office at George Curl Way, Southampton International Park,
Southampton, SO18 2RX and from the Company's website
www.universeplc.com.
The financial information set out in these results has been
prepared using the recognition and measurement principles of
International Accounting Standards, International Financial
Reporting Standards and Interpretations adopted for use in the
European Union (collectively "Adopted IFRSs"). The accounting
policies adopted in these results have been consistently applied to
all the years presented and are consistent with the policies used
in the preparation of the statutory accounts for the period ended
31 December 2016. The principal accounting policies adopted are
unchanged from those used in the preparation of the statutory
accounts for the period ended 31 December 2016.
2. Turnover analysis
2017 2016
GBP'000 GBP'000
Software licences and hardware 3,696 4,657
Service and installations 7,896 7,218
Data services 4,039 3,998
Consultancy and software maintenance 3,991 3,839
19,622 19,712
3. Operating Profit and adjusted EBITDA
2017 2016
GBP'000 GBP'000
Operating profit 876 2,042
Add back:
Depreciation 713 870
Amortisation 750 743
Share based payments 27 116
Exceptional costs related to management changes 402 -
Adjusted EBITDA 2,768 3,771
4. Segment information
The Group has only one business segment, 'htec Solutions'. All
material operations and assets are in the UK.
Solutions Corporate Total
2017 2017 2017
GBP'000 GBP'000 GBP'000
Revenue - all external 19,622 - 19,622
Gross profit 9,331 - 9,331
Segment expenses (8,120) (335) (8,455)
Segment operating profit 1,211 (335) 876
Unallocated items:
Net finance expense (97)
Taxation (145)
Profit for the year 634
Solutions Corporate Total
2016 2016 2016
GBP'000 GBP'000 GBP'000
Revenue - all external 19,712 - 19,712
Gross profit 9,460 - 9,460
Segment expenses (6,794) (624) (7,418)
Segment operating profit 2,666 (624) 2,042
Unallocated items:
Net finance expense (32)
Taxation (175)
Profit for the year 1,835
5. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2017 2016
GBP'000 GBP'000
Profit for the purposes of basic
and diluted earnings per share being
net profit attributable to equity
holders of the parent 634 1,835
2017 2016
Number Number
'000 '000
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
earnings per share and operating
profit per share 231,860 231,348
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 239,719 241,553
At the year end the Group had in issue 232,223,935 ordinary
shares of 1p each (2016: 231,598,935 ordinary shares of 1p
each).
6. Material non-cash transactions
During the year the Group entered into GBP381,000 (2016:
GBP685,000) of finance leases for plant and equipment.
These transactions are not reflected in the cash flow
statement.
7. Report and Accounts
Copies of the Annual Report and Accounts will be sent to
shareholders in April 2018 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.
8. Annual General Meeting
The Company's Annual General Meeting is scheduled for 26 June
2018, notice of which will be sent to shareholders in May 2018.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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