Final Results

RNS Number : 8468W

Brulines (Holdings) PLC

17 June 2008

 



Press Release

17 June 2008

Brulines (Holdings) plc

('Brulines' or 'the Group')

Final Results 

Brulines (Holdings) plc, the market leading provider of real time monitoring systems and data management services for the UK Leisure Sector, is pleased to announce its final results for the year ended 31 March 2008 on an IFRS basis.

Highlights

	Revenue improved as anticipated to £17.06 million (2007: £16.76 million)
	Operating profit increased 56.5% to £3.99 million (2007: £2.55 million)
	Profit before tax increased 75.7% to £4.17 million (2007: £2.37 million post exceptional items)
	Gross margins improved to 53.4% (2007: 43.5%)
	Earnings per share increased by 65.1% to 11.84 pence (2007: 7.17pence)
	Recurring income streams now 64% of turnover
	Final dividend of 3.55 pence per share giving a full year total of 5.0 pence per share (2007: 3.0 pence per share )
	Acquisitions successfully integrated
	Satisfactory progression on new installations taking the total installation base to over 21,500

Commenting on the Final Results, James Newman, Chairman of Brulines (Holdings) plc, said: 

 'The Group has made good progress in the year, not only in its existing business activities, but also in the development and achievement of its strategic plans.  

The gross margin has risen from 43.5% in 2007 to over 53% for 2008 and the recurring income now represents more than 64% of Group turnover.  

The acquisitions made and the introduction of new products has extended the Group's key markets and technology capabilities across the wider leisure sector, where there are significant opportunities for growth both home and abroad.

Consequently, the Board is confident that the Group will continue to grow its activities and make further progress towards its strategic goals during the next financial year'.  

- Ends - 

Enquiries:

Brulines (Holdings) plc
James Dickson, Chief Executive	Tel: [phone]
[e-mail]
Mark Foster, Finance Director
[e-mail]	www.brulines.com

Grant Thornton UK LLP
Gerry Beaney	Tel: [phone]
	www.gtuk.com

Media enquiries:

Abchurch Communications
Sarah Hollins / Chris Lane / Amy West [e-mail]	Tel: [phone] www.abchurch-group.com

  Chairman's Statement

I am delighted to report another good year for the Group both in terms of financial performance and progress in the achievement of its longer term strategy.  

Results

As had been forecast, revenue for the year at £17.06 million was only slightly ahead of the £16.76 million achieved in 2007.  This was almost entirely due to the large scale installation programme, which took place in 2007 and was not repeated this year.  The two acquisitions, Coin Metrics and Nucleus, contributed £765,000 to revenue in the year.  However, the level of Group income derived from contractual services rose significantly in the year to 64%, which gives the Group much greater transparency in its forward revenue expectations.  This change of sales mix also had the effect of substantially increasing gross margins to over 53% up from 44% last year.  

With other overheads being well controlled due to operating efficiencies and good management, this resulted in Group operating profit before amortisation of intangibles and exceptional costs, increasing by 26.8% to £4.10 million (2007: £3.23 million).  IFRS Group profit before tax at £4.17 million (2007: £2.37 million) was substantially ahead of last year.  Basic earnings per share at 11.84 pence (2007: 7.17 pence) is 65% up on last year, an excellent achievement.  

These are the first full year accounts reported under International Financial Reporting Standards ('IFRS').  The impact has not been significant to the Group's results with relatively minor changes (see Financial Review).

Dividend

The Board paid a first interim dividend of 1.45 pence per share and, in line with the Board's progressive dividend policy, is recommending a final dividend of 3.55 pence (2007: 3.0 pence) per share in respect of the year ended 31 March 2008.  This gives a total dividend for the year of 5.0 pence (2007: 3.0 pence) per share, subject to the approval of shareholders at the Group's Annual General Meeting on 21 July 2008. The final dividend will be paid on 24 July 2008 to shareholders on the register on 27 June 2008.  

Acquisitions

During the year the Group continued its strategy of making selective acquisitions in order to extend the Group's product offering to its existing customers and also to enter new markets aligned to the skills and technologies within the Group.  

In May 2007, we announced that we had taken a majority shareholding in Coin Metrics Limited ('CML'), a company with an established customer base in the amusement with prizes ('AWP') and gaming industries, using similar technology to the Group.  This acquisition was seen as a strong strategic fit with our existing Machine Insite business, which already provides data and consultancy services into similar markets and customers.  

In September 2007, the Group announced its intention to purchase Nucleus Data Holdings Limited ('Nucleus'), one of our competitors in the dispense monitoring market.  After the Office of Fair Trading (OFT) decided not to refer the proposed merger to the Competition Commission, Nucleus became part of the Group on 4 January 2008.  The integration of both companies into the Group structure has gone well and the anticipated synergies from the Nucleus merger are expected to be achieved.  

The Board continues to explore further acquisition and trading opportunities, both home and abroad, which will expand the markets in which we operate and create synergies for the Group's existing products.  

Extraordinary General Meeting

The Extraordinary General Meeting held on 21 November 2007 enabled the Group to purchase up to approximately 10% of its own shares.  To date a total of 216,000 shares have been purchased by the Group to satisfy options outstanding under the Group's share option scheme.  

Outlook

The recent downturn in the economy coupled with last year's smoking ban has put further pressure on the pub and leisure sectors to extract operating efficiencies and value from their activities.  

This Group's core and new product offerings have, therefore, assumed greater importance within our customer base as our data and analysis services are put to increasing use by our customers to manage their own costs and marketing activities.  

The acquisitions made and the introduction of new products has extended the Group's key markets and technology capabilities across the wider leisure sector, where there are significant opportunities for growth both at home and abroad.  

Consequently, the Board is confident that the Group will continue to grow its activities and make further progress towards its strategic goals during the next financial year.  

Finally I would like to thank all my colleagues for their effort and contribution to this most successful year.  

James H Newman

Chairman

17June 2008  Chief Executive's Statement

Group profit

Trading in the second half of the 2008 financial year has been robust and the Group results for the year to 31 March 2008 are in line with management and market expectations.  

The Group revenue at £17.06 million was 1.8% ahead of last year whilst, as anticipated, on a comparable year on year basis, the core business turnover for the year decreased by 2.6% to £16.07 million (2007: £16.50 million) with the decline attributable to the exceptionally high level of installation activity associated with Enterprise Inns roll out in 2006/7.  

The revenue mix continued to improve, moving towards recurring revenue as income from support service contracts was generated from the increasing installation base.  Recurring revenue currently accounts for over 64% of Group revenue and management expects this to continue to rise for the foreseeable future.  

Gross margin has risen from 43.5% for 2006/7 to over 53.4% for 2007/8 as a result of increased recurring revenue, operational improvements and non recurrence of the high set up costs associated with the Enterprise Inns roll out programme in early 2006/7.  Other direct costs of sale also decreased by 17% as lower direct operating costs have been achieved from improved efficiency.  Next year's operating costs will come under pressure from fuel price driven inflation although we anticipate that gross margins will be sustained around the current levels.  

After absorbing costs associated with the integration and support of Machine Insite, Coin Metrics, and Nucleus Data, the Group profit before taxation for 2007/8 at £4.17 million is £1.80 million greater than the same period last year delivering a 65% increase in earnings per share to 11.84 pence.  

Customers and contracts

New installations, system replacements and upgrades have progressed satisfactorily in the year with almost 2,000 new installations and over 1,300 existing system upgrade replacements taking our total installation base including Nucleus Data to over 21,500 sites, providing year-on-year growth in recurring revenue and increased margins associated with support services.  

The OFT investigation into the merger with Nucleus Data had an adverse impact on both companies' installation pipelines as several customers delayed their investment programmes until after the OFT decision.  Since the merger was completed in early January 2008 there has been increased interest from an even wider range of customers.  

Negotiations for our core product offering to the tenanted/leased sector have been successfully completed with several customers including S&N Pub Enterprises, Charles Wells and a five year extension with Punch Taverns.  Against a background of a demanding trading environment for our customers, we are advancing discussions with other national and regional operators, and this should lead to increased market share and the broadening of our customer base and deeper penetration within existing customers' estates.

Market drivers

Pub, brewing and leisure businesses are experiencing a very challenging trading environment, components of which include the smoking bans, duty rises, declining beer sales, cheap drinks in supermarkets, rising costs and falling discretionary spend as the economic climate deteriorates. 

Over time the Group will benefit from these factors.  The increasing requirements on all leisure operators to improve the quality and efficiency of their offering will tend to increase demand for the Group's products despite any potential consumer slow down.  

Brand Quality Monitoring ('BQM') product development

Further strong progress has been made with the development of the BQM product range as quality at the point of dispense becomes increasingly important due to pub owners and brewers competing for market share against a background of falling on-premises beer consumption.  BQM is proven technology with positive customer feedback on its capability to address waste, revenue shrinkage and poor beer quality.  

The Group is working with industry stakeholders, utilising the BQM platform as part of an integrated solution to help improve competitiveness through optimising quality and cost reduction.    Cellar technical service operations are an area where the industry can improve performance:

	Six key players supply, install and maintain drinks dispense systems in over 95% of draught outlets in the UK licensed on trade covering pubs, bars, hotels, restaurants, casinos, clubs and stadiums;
	These parties employ the equivalent of over 800 technicians who make in excess of 800,000 maintenance call out visits per year; and
	Used in conjunction with desk top diagnostics the data provided by BQM could reduce the number of call outs by as much as 20% or more, and improve targeting of resource to dramatically reduce costs, improve product quality, reduce non availability and improve competitiveness.

The Group is already in discussion with leading players amongst the pub companies and technical services providers to develop an integrated solution.  

There is an increasing interest and demand from a growing number of pub companies for a commercial evaluation of BQM, with activity ongoing in both the national tenanted and managed sectors with a broad range of operators. There is also significant interest from regional brewers where beer quality is a high priority.  

The Group now has in excess of two hundred BQM systems installed including over 100 in Punch Taverns where we have a five year support service contract.  

Strategic growth acquisitions

In early 2006, the Group decided to enter the amusement and gaming (or 'AWP') machine market to provide a monitoring and data management product.  We have now completed two acquisitions which have been successfully integrated and are well positioned to establish a leading data capture and machine management position in the leisure sector.  

Machine Insite - leading position in gaming machine data management and consultancy

Machine Insite provides gaming machine data management and consultancy services to operators within the pub, club and leisure markets and is trading well and will grow its contribution to Group profit over the coming years. Following our investment in a new database and data management software with web based reporting, it has gained new business with SA Brain, Spirit, Orchid, Trust Inns, Cains and Charles Wells during the past year and we now provide data management for approximately 25,000 AWP machines in 3,700 outlets across 30 groups and customers within the pub and leisure markets.  

Coin Metrics - remote data capture for gaming and vending machines

In May 2007, as part of our plan to provide enhanced AWP and vending monitoring products such as remote data capture, the Group acquired a 66 percent holding in Coin Metrics Limited ('CML').  The core CML product is Site Guardian, a wireless data product that allows owners of gaming centres or family entertainment centres in the AWP industries to constantly monitor the financial performance of their gaming sites and assets accurately and in real time.  

The acquisition of CML is a strong strategic fit with Machine Insite as the real time data capture capability will allow Machine Insite to provide advanced machine reporting and machine to machine services. This will enable the Group to accelerate the growth of the AWP data management business to market leadership, whilst also opening up new applications and markets for the next generation of wireless data capture systems into new business sectors, such as vending.  Key business gains have been MOTO Motorway services, Welcome Break and Odeon.

The Group is in discussion with potential customers and partners within the vending industry for the development and supply of VENDGuardianTM which will provide real time data capture on vending machine operational information such as sales activity, stock level, stock replenishment, and temperature monitoring in a chilled vending environment.  

Nucleus Data Holdings Limited ('Nucleus') - data capture and management for the pub industry

The acquisition of Nucleus was an important strategic development in the Group's growth plans as it enhances product development, further strengthens the senior team and provides a solid commercial platform from which to accelerate our entry into new markets.  

Following a successful outcome from the OFT investigation into the merger the acquisition was completed on 4 January 2008 and therefore has been only earnings neutral in the year to 31 March 2008.  The integration has gone to plan and the anticipated synergies are being realised and the Board believes that the acquisition will thus be earnings enhancing in the year to 31 March 2009.  

The merged business will be able to pool resources for accelerated technology development to expand our product portfolio and improve existing product offering.  It will also reduce complexity and administration for customers who historically have used both suppliers as a result of the significant movement of pubs between pub companies following their acquisition and disposal processes.  Former Nucleus customers are already benefiting from the scale and reaction times of the Group's nationwide in-house field service engineering resources.  

Strategy for growth

Our core Dispense Monitoring business alone has the potential market to maintain satisfactory growth over the next three years. However the Board anticipate incremental contribution and margin growth from additional complimentary products and technologies such as BQM, AWP, soft drinks monitoring, fridge/freezer temperature monitoring, wines and spirits monitoring, and market insights.  The Group has a strong customer and recurring revenue base and solid foundations for significant growth as we commercialise development products, extend into new markets and make selective acquisitions.  

Our Coin Metrics and Machine Insite businesses are positioned to achieve significant growth as we develop our AWP machine monitoring and data management products to market leadership in their existing and new leisure sectors.  

The increasing interest in BQM is expected to increase our coverage of the tenanted/leased and managed sectors as the product becomes central to industry quality and efficiency improvements for draught drinks dispense.

Our core beer monitoring products underpin customer investment in our edisBOX communication platforms which, once installed are capable of accepting additional products and services.  

The Group believes that our ability to provide a wider range of effective operational and market data will increase our value to existing customers within tenanted/leased and managed sectors, whilst allowing entry to the hotels, clubs, and independent sectors.  

The Group is now well positioned to pursue an acquisitive growth strategy as we have the resources to identify, acquire and integrate appropriate targets.  

Management and employees

During the year the Group has made continued good progress both in the recruitment of new talent and in ongoing personnel development including the successful integration of Nucleus's operations in order to strengthen the management team at all levels.  

Following the respective acquisitions, the Group welcomes Jeff Anspach and Clive Consterdine from Nucleus and Richard Adams and Ian Daintith from Coin Metrics to the senior management team.  

The Group also recently announced the appointment of Bill Knowles in the new role of Managing Director of the Group's gaming machine management interests comprising Machine Insite and Coin Metrics.  He brings a wealth of experience acquired in senior roles within the machines and pub sector over the last 25 years, including 19 years with Punch Taverns and Allied Domecq.  

We have a dedicated and ambitious management team, who are well supported by a strong workforce which is committed to the Group, our customers, and our values.  Once again I thank everyone for their contribution during the last twelve months.  

James Dickson  Chief Executive

17 June 2008

  Financial Review

Trading table 

Results are reported for the first time on a first full year adopted IFRS basis.  The results of the Group have pleasingly taken a positive step forward.  While revenue increased by only 1.8%, operating profit increased by £1.44 million, being 56.5% ahead of 2007, largely resulting from increased penetration, change in revenue mix with 64% recurring income, and improved cost control, as well as there being no exceptional listing fee costs in the year.  In the year, the Group delivered 1,956 new installations and 1,319 replacement upgrade systems, as well as 106 BQM systems.  

Our subsidiaries of Machine Insite Ltd and Coin Metrics Ltd contributed £1.0 million in revenue and £0.26 million in profit before tax.  The acquisition of Nucleus Data Ltd in January 2008, as expected, was not earnings enhancing in the period to the year end, but is expected to be in the new financial year.  

Overall results pre amortisation of intangible assets and option costs were a profit of £4.35 million - slightly ahead of the broker expectation of £4.20 million. The table below shows the performance of the Group, as follows:  

	FY 2008 £'000's	FY 2007 £'000's
Revenue	17,063	16,756
Gross Profit	9,117	7,294
Gross Profit %	53.4	43.5
EBIT	3,988	2,549
PBT	4,165	2,370

Gross margin

As stated above, the change in revenue mix to being 64% recurring with no large set up cost requirement this year has seen the progression of the gross margin to 53.4%.  

Actual group profit

The consolidated Group pre tax profit increased by 75.7% to £4.17 million (2007: £2.37 million), reflecting the comments made above.  

Taxation

The taxation charge of £1.30 million represented an effective tax rate of 31.3% on the reported profit before taxation of £4.17 million, in line with expectation.  

Earnings per share

Basic earnings per share for the year ended 31 March 2008 amounted to 11.84p.  This compares to 7.17p last year pre exceptional items and represents a 65.1% growth in basic earnings per share.  Fully diluted earnings per share, which takes account of all outstanding share options, amounted to 11.77p (2007: 7.20p).  

Balance sheet

The balance sheet has been strengthened not only in the results achieved but also by the quality of the assets arising from the acquisitions of Nucleus Data Holdings Ltd and Coin Metrics Ltd, as well as the move to our new purpose built premises, which provide a solid platform for future growth.    

Operationally, the Group generated £5.32 million in cash, up 9.9% on last year.  The funds generated were utilised to fund the corporate acquisitions, acquire the freehold of the new premises, and service dividends and taxation.  As part of the acquisition and property additions, the Group borrowed £3.95 million. The positive cash flows have meant that at the year-end we have a net debt position of £0.8 million.  

Transition to International Financial Reporting Standards (IFRS)

As an AIM listed company, Brulines has adopted IFRS in its financial statements for the year ended 31 March 2008.  The impact of IFRS is not considered to be significant with the principal effects being the cessation of the routine amortisation of goodwill subject to an annual test for impairment, as well as establishment of intangible assets arising from acquisitions where appropriate.  

Mark Foster

Finance Director

17 June 2008  Consolidated Income Statement

for the year ended 31 March 2008

		2008 £000	2007 £000
Continuing operations
Revenue		17,063	16,756
Cost of Sales		(7,946)	(9,462)
Gross profit		9,117	7,294
Administrative expenses		(5,129)	(4,064)
Listing expenses		-	(681)
Operating profit		3,988	2,549
Finance income		249	165
Finance costs		(72)	(344)
Profit before taxation		4,165	2,370
Taxation	1	(1,303)	(913)
Profit for the year attributable to equity shareholders		2,862	1,457
Earnings per share for profit attributable to equity shareholders
Total and continuing earnings per share
- Basic	3	11.84p	7.17p
- Diluted	3	11.77p	7.20p

  Consolidated Balance Sheet

at 31 March 2008

				2008 £000	2007 £000
Assets
Non-current assets
Goodwill				12,767	9,220
Other intangible assets				847	9
Property, plant and equipment				3,383	487
				16,997	9,716
Current assets
Inventories				1,122	1,288
Trade and other receivables				3,737	2,892
Cash and cash equivalents				3,058	4,079
				7,917	8,259
Liabilities
Current liabilities
Trade and other payables				(6,435)	(5,778)
Borrowings				(394)	-
Current tax liabilities				(708)	(486)
Provisions				(89)	-
				(7,626)	(6,264)
Net current assets				291	1,995
Non-current liabilities
Borrowings				(3,485)	-
Provisions				(303)	-
Deferred tax				(242)	-
				(4,030)	-
Net assets				13,258	11,711
Shareholders' equity
Issued share capital				2,434	2,408
Share premium				7,024	6,966
Share based payment reserve				104	32
Own shares				(877)	(151)
Merger reserve				310	-
Retained earnings				4,263	2,456
Total equity attributable to equity holders of the parent				13,258	11,711

  Consolidated Cash Flow Statement

for the year ended 31 March 2008

		Group 2008 £000	Group 2007 £000
Profit after tax		2,862	1,457
Amortisation of intangible assets		108	2
Depreciation		223	191
Loss on sale of property, plant and equipment		2	-
Share based payments		72	32
Change in inventories		286	(368)
Change in receivables		(198)	3,353
Change in payables		89	(565)
Change in provisions		392	-
Interest receivable		249	165
Interest payable		(72)	(344)
Taxation expense recognised in income statement		1,303	913
Cash generated from operations		5,316	4,836
Interest payable		72	344
Interest receivable		(249)	(165)
Income taxes paid		(1,122)	(640)
Net cash generated from operating activities		4,017	4,375
Cash flows from Investing activities
Proceeds on disposal of property, plant and equipment		2	8
Purchases of property, plant and equipment		(2,909)	(405)
Purchase of subsidiary undertakings		(4,363)	(120)
Cash acquired with subsidiary		155	-
Net cash used in investing activities		(7,115)	(517)
Cash flows from financing activities
Repayments of borrowings		(71)	(5,678)
Bank funding		3,950	-
Dividends paid	2	(1,055)	-
Purchase of own shares		(726)	(151)
Repayment of loan notes		-	(4,215)
Repayments of obligations under finance leases and hire purchase contracts		(21)	(24)
Issue of ordinary share capital		-	7,639
Net cash from financing activities		2,077	(2,429)
Net (decrease)/increase in cash and cash equivalents		(1,021)	1,429
Cash and cash equivalents at beginning of period		4,079	2,650
Cash and cash equivalents at the end of the period		3,058	4,079

1.  Taxation

Analysis of charge in period

	2008 £000	2007 £000
Current tax expense
- UK corporation tax on profits of the period	1,320	934
	1,320	934
Deferred tax expense:
- Temporary differences	(17)	(21)
Income tax expense	1,303	913

Reconciliation of effective tax rate

The tax for the period is higher (2007: higher) than the standard rate of corporation tax in the UK (30%). The differences are explained below:

	2008 £000	2007 £000
Profit before taxation - Continuing operations	4,165	2,370
Profit before taxation multiplied by rate of corporation tax in the UK of 30% (2007: 30%)	1,250	711
Effects of:
Flotation expenses	-	182
Other expenses not deductible for tax purposes	61	47
Goodwill amortisation	21	-
Depreciation in excess of capital allowances	(5)	-
Losses not relieved	2	-
Sch 23 deduction re: exercise of share options	-	(26)
Rate difference	(26)	(1)
Total tax expense	1,303	913

2.  Dividends

	2008 £000	2007 £000
Final dividend for the year ended 31 March 2007 of 3.0p (year ended 31 March 2006: 0.0p)	717	-
Interim dividend paid in respect of the year of 1.45p (2007: 0.0p)	338	-
Amounts recognised as distributions to equity holders	1,055	-

In addition, the directors are proposing a final dividend in respect of the year ended 31 March 2008 of 3.55p per share. If approved by shareholders, it will be paid on 24 July 2008 to shareholders who are on the register of members on 27 June 2008.

3.  Earnings per share

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share are calculated on the basis of profit for the year after tax divided by the weighted average number of shares in issue in the year plus the weighted average number of shares which would be issued if all the options granted were exercised

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

	2008			2007
	Earnings £000	Basic earnings per share	Diluted earnings per share	Earnings £000	Basic earnings per share	Diluted earnings per share
Profit attributable to equity shareholders	2,862	11.84p	11.77p	1,457	7.17p	7.20p

	2008 Number	2007 Number
Weighted average number of ordinary shares	24,165,880	20,307,028
Dilutive effect of share options	772,044	380,792
Diluted weighted average number of ordinary shares	24,937,924	20,687,820

4.  Basis of preparation

This preliminary announcement was approved by the Board on 17 June 2008. The financial information in this preliminary announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. It has been prepared using accounting policies that are consistent with those adopted in the statutory accounts for the year ended 31 March 2008.  The year end report is also presented and prepared in a form consistent with that which had been adopted in the annual accounts for the year ended 31 March 2008, having regard to the accounting standards applicable to such accounts.

The financial information for the year ended 31 March 2008 and for the year ended 31 March 2007 has been derived from the statutory accounts for those periods. The Group accounts for the year ended 31 March 2007 have been delivered to the Registrar of Companies and received an audit report which was unqualified and did not contain statements under s237(2) or (3) of the Companies Act 1985. 

The Group accounts for the year ended 31 March 2008, on which the auditors issued an unqualified report which did not contain a statement under s237(2) or (3) of the Companies Act 1985, were approved by the directors on 17 June 2008 and will be delivered to the Registrar of Companies following the Annual General Meeting.

5.  Annual General Meeting

The Annual General Meeting of the Group will be held at 9:00am on 21 July 2008 at Grant Thornton UK LLP, No.1 Whitehall Riverside, Leeds, West Yorkshire, LS1 4BN. 

 

END

 

 

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