Final Results

RNS Number : 9498H

Brulines Group PLC

07 June 2011

 



Press Release

07 June 2011

Brulines Group plc

("Brulines" or "the Group")

Final Results

Brulines Group plc (AIM:BRU), the leading provider of real time monitoring systems and data management services for the leisure and forecourt services sectors, is pleased to announce its final results for the year ended 31 March 2011.

Trading and financial highlights

·	Turnover for the year increased by 22.4% to £24.28 million (2010: £19.83 million) with Leisure and Fuel Solutions divisions contributing £18.16 million (2010: £19.33 million) and £6.12 million (2010: £0.50 million), respectively
·	761 new beer flow monitoring installations, of which 677 were higher value iDraught™
·	Operating profit before amortisation of goodwill, share option and exceptional costs of £3.96 million (2010: £5.07 million), in line with Trading Update of March 2011
·	Gross margin at 54% (2009: 59%) reflecting a combination of Leisure division at 58% and Fuel Solutions division at 42%
·	Profit before tax of £3.02 million (2010: £4.03 million)
·	Final dividend of 3.98 pence per share giving a full year increase of 2.7% to 5.65 pence per share (2010: 5.50 pence per share)

Strategic development highlights

·	Established Brulines Fuel Solutions division with three successful acquisitions to create a 'one stop' integrated service and product offering which was formally launched in February 2011, comprising: ·     Energy Level Systems Ltd - acquired April 2010 ·     Retail and Forecourt Solutions Ltd - acquired June 2010 ·     LBI Installations Ltd - acquired July 2010
·	Acquisition and integration of trade and assets of Amscreen M2M Limited for an initial consideration of £2.00 million, creating ViaTelemetryTM, the Group's leading edge data gathering and transmission provider

Since period end

·	Vianet secured a five year contract extension and replacement programme for vending telemetry with a leading drinks brand
·	Launched Nucleus Smart Till electronic point of sale system to the Leisure sector gaining roll out to 500 new sites during 2012

Commenting on the final results, James Newman, Chairman of Brulines Group plc, said: 

"Despite the ongoing difficult economic conditions, this has been a transformational year for the Group.  We have made a total of four acquisitions, three of which strengthen our Fuel Solutions division in particular, where the Board sees considerable opportunity for growth.  The Group has made good progress in terms of both developing its products and enhancing its market positioning, ensuring that our offering is highly targeted for the significant markets that are available. 

"With our expanded offering across all four of our sectors, leisure, vending telemetry, forecourt operations and telemetry solutions, the Board believes that the Group is well positioned to continue to gain market share and achieve market leadership in each of these areas.  We look forward to updating shareholders on our progress in achieving that strategy over the coming year." 

- Ends -

Enquiries:

Brulines Group plc James Dickson, Chief Executive
Mark Foster, Finance Director	Tel: [phone]
[e-mail]	www.brulines.com
Cenkos Securities plc Stephen Keys / Camilla Hume [e-mail]	Tel: [phone]

Media enquiries:

Abchurch
Sarah Hollins / Joanne Shears / Mark Dixon	Tel: [phone]
[e-mail]	www.abchurch-group.com

Chairman's Statement

The past year has been a mixed one for the Group.  Whilst the trading background within the Leisure division has remained difficult, with pub sell-offs and delayed commitment to new activity from our core leisure customers, the acquisitions during the year have transformed our fledgling Fuel Solutions division into a leading player in the market and have also secured and enhanced our technology platform and capability.

Results

On 4 March 2011, we issued a trading update stating that the operating profits for the year (before amortisation of intangible assets, share based payments and exceptional costs) would be around £4.0 million.  The actual operating profits for the year ended 31 March 2011 amounted to £3.96 million.

Turnover for the year was £24.28 million, an increase of 22.4% ahead of the £19.83 million recorded in 2010, due to the contributions from the acquisitions in the Fuel Solutions division, where turnover increased from £0.50 million to £6.12 million.  Turnover in the Leisure division decreased from £19.33 million to £18.16 million, largely due to our pub company customers reducing their estates and delaying projects for a number of reasons, including waiting for the positive results from Brulines' NMO testing.

The fall in the number of new installations of beer monitoring systems was a significant factor in the decrease in Leisure division turnover.

The level of contractual and recurring revenues remains high at just over 70% of Group turnover, although this has decreased from the equivalent figure for 2010 of 84% due to the current lower level of contracted business in the Fuel Solutions division.

The Group's gross margins decreased to 54% from 59% in 2010, impacted by lower margins in the acquired businesses: the Leisure division gross margin remained broadly level with last year at 58%, and Fuel Solutions is currently 42% with good prospects for increase.

Administrative overheads increased by £2.03 million to £9.10 million, largely arising from the acquisitions made within the Fuel Solutions division.  Action has been taken to reduce costs in the Leisure division, and the integration of the acquisitions is yielding anticipated synergies, with the benefit of these coming through in the current financial year.  Exceptional and amortisation costs were similar to 2010 at £0.90 million (2010: £0.96 million) and are outlined in the Financial Review.  Group profit before taxation amounted to £3.03 million, compared to £4.03 million in 2010.

Basic earnings per share pre-exceptional costs decreased to 9.06 pence from 12.68 pence in 2010.

Dividend

At the time of the trading update on 4 March 2011, the Board anticipated that it would maintain the progressive dividend policy and, in line with this, it is recommending the payment of a final dividend of 3.98 pence per share in respect of the year ended 31 March 2011.

Together with the interim dividend of 1.67 pence per share paid in January 2011, this makes a total dividend of 5.65 pence per share, an increase of 2.7% over the 5.5 pence per share paid in respect of the year ended 31 March 2010.

Subject to the approval of shareholders at the Annual General Meeting to be held on 12 July 2011, the final dividend will be paid on 28 July 2011 to shareholders on the register as at 17 June 2011.

Acquisitions

During the last financial year, the Fuel Solutions division has been transformed by three acquisitions as follows:

●	In April 2010, the Group acquired Energy Level Systems Limited ("ELS") for an initial cash consideration of £0.7 million, together with potential further deferred consideration of a maximum of £1.35 million dependent on the earnings before interest and tax of ELS for the two years ending 31 March 2012.  ELS provide fuel management systems, tank gauging and lining solutions and liquefied petroleum gas ("LPG") system support, and other forecourt maintenance services.
●	In June 2010, the Group acquired Retail & Forecourt Solutions Limited ("RFS") for an initial cash consideration of £1.2 million together with an earn-out in respect of the year ending 31 July 2011.  RFS is the UK market leader in fuel dispense calibration and legal verification, as well as compliance services.
●	In July 2010, the Group completed the acquisition of LBI Installations Limited ("LBI") for an initial cash consideration of £0.36 million, together with potential further performance related deferred consideration.  LBI operates in web-based facilities and contract management solutions, as well as engineering and project management solutions, for forecourt operations.

Following these acquisitions, the Fuel Solutions division now offers an integrated toolbox of best-in-class information management and associated products and services for fuel operators.  This commercial proposition was formally launched to the marketplace in February 2011 at the International Forecourt Show and initial reaction from major supermarkets and leading forecourt operators has been extremely encouraging.  The Board believes that the Fuel Solutions division is now in a position to replicate, in the forecourt market, the success enjoyed by the Leisure division.

In December 2010, the Group announced the acquisition of the machine-to-machine business of Amscreen Limited for an initial cash consideration of £2.0 million, together with the potential for further deferred consideration, dependent on the business achieving certain milestones.  This business, which now operates within the Group as ViaTelemetry^TM, is involved in delivering patented next-generation data collection and monitoring platforms and had been providing the Group with products and services for two years.  This acquisition enables the Group to underpin its leading edge technology and also provides a dedicated technology business, not only to develop further its products and services, but also to provide expansion opportunities through its telemetry product lines and customers.

All of these acquisitions have been financed from the Group's own cash and overdraft resources.

Board and senior management

I would like to thank all of my Board colleagues, senior management and staff for their continued efforts and commitment on behalf of the Group in these difficult economic conditions and in the transformation of the Group over the past year.

Proposed change of Group name

Your Board is proposing to change the name of the Group from Brulines Group plc to Vianet plc.

The Group has evolved significantly from when it was floated on the Alternative Investment Market in October 2006, when the activities of Brulines Limited represented virtually all of the Group's business.  Whilst Brulines Limited is still the largest company within the Group, the name "Brulines" is very much associated with the beer dispense products and has little relevance to other parts of the Group.

Your Board believes that the name "Vianet" more accurately describes the fundamental business of the Group, which is the delivery of solutions (be they leisure, fuel or vending related) primarily by way of networks and web-based reporting.  Your Directors currently intend to rename the Group as Vianet plc when the name becomes available or, if not, to select another name that is more reflective of the strategic direction and capability of the Group as a whole.  Consequently a resolution to grant the Directors the power to change the name of the Group is being proposed at the Annual General Meeting to be held on 12 July 2011.

Outlook

The Group's strategic intent remains to extend its data management and support services presence in each of the leisure, vending and fuel forecourt sectors where there is considerable technical and operational overlap.

Within the Leisure division, the relaunch of iDraught™ has been received very positively by customers and increased penetration is being achieved within the on-premise draught beer market. Vianet, the Group's Vending Solutions business is making excellent progress in developing significant new sales opportunities, including trials of its cashless and contactless solutions with major international companies.

Despite the difficult economic backdrop, your Board believes that there are significant opportunities for all its services and that the current financial year will benefit from both a full year's contribution from the recently acquired businesses as well as from a number of exciting new business opportunities.

James H Newman

Chairman

7 June 2011

Chief Executive's Statement

Financial performance

Despite good progress with iDraught™, Vianet and the Fuel Solutions division, the difficult economic conditions and well documented commercial pressures affecting some customers in the core Leisure division resulted in the Group's trading for H2 being lower than initially anticipated.

In addition, the severe weather conditions caused travel disruption to compound the impact of the usually lower levels of activity for the Group's field-based services in December 2010 and January 2011 and, taken together, these factors have also impacted the Group's outcome for the year.

In line with the Trading Update issued on 4 March, operating profits were £3.96 million (2010: £5.07 million)

Whilst trading in the core beer monitoring business remains challenging, the progress in reducing the losses associated with Vianet, integrating the recent acquisitions in the Fuel Solutions division, and developing Brulines' key products has been encouraging and the Group is confident that these factors will drive a return to growth in the coming year.

Group turnover was up by 22.4% at £24.3 million (2010: £19.8 million) primarily arising from the acquisitions made in the Fuel Solutions division, whilst on a comparable year-on-year basis, the core leisure business turnover decreased by 6.7% to £18.10 million (2010: £19.40 million) as a consequence of a number of installations being delayed due to the tighter availability of finance for our customers. 

Whilst Leisure division gross margins are broadly steady at 58%, the overall consolidated gross margin declined to 54% (2010: 59%) as a result of the increased contribution from the Fuel Solutions division where the gross margin was 41.4%, impacted by a transitional year of acquisition integration and delayed tank lining activity.  On a consolidated basis, management anticipates that Group gross margins are sustainable at around 55%. 

The Leisure division, incorporating Vianet, accounted for 75% of Group revenues and although Leisure revenues are expected to grow in 2012, the share of the total will fall under 70% as revenues from the Fuel Solutions division continue to grow.

The revenue mix continues to be weighted towards recurring revenue as income from support service contracts in beer monitoring and Vianet is sustained, whilst the Group is moving to longer term contracts for the provision of forecourt services.  Recurring revenue currently accounts for over 70% of Group revenue and management expects this to remain broadly similar for the foreseeable future as we develop the contribution of Fuel Solutions and Vianet. 

Diversification strategy is making strong commercial gains

The Group now has three divisions; Leisure, Fuel Solutions, and Technology Solutions, encompassing four key product areas each with the potential to expand further and generate good levels of growth for the Group.   

Although the benefits of diversification and the development of newer businesses have not yet been fully realised, the Board is confident that the strategy is firmly on track and that each of the four key product areas will contribute significantly to earnings over the medium term. 

The Leisure division consists of the current core business, draught beer monitoring solutions, as well as the Vianet vending telemetry solutions.  The beer monitoring solutions, DMS and iDraught™, provide recurring income streams which underpin the Group's growth strategy.  The Group continues to invest in people, processes and technology to protect this position and its market leadership.  With Vianet, the Group's turnaround of this business is almost complete and we are now exploiting our unique telemetry and contactless payment solutions to establish market leadership.

The new Fuel Solutions division has now successfully integrated three recent acquisitions into the original Edensure fuel stock management business.  This division now has a highly relevant product portfolio focussed on driving return on investment for forecourt and commercial operators from fuel stocks and the assets used for fuel supply and sale.

ViaTelemetry^TM provides enabling technology for the Group and beyond

The recently acquired Amscreen M2M, which provides next generation data capture and transmission technology, has been integrated into existing Group resources to create ViaTelemetry^TM, the Group's Technology division. 

This acquisition was extremely complementary as it strengthened the leading edge technology the Group has in relation to the services it provides for its iDraught™, fuel and vending telemetry solutions, whilst also providing horizontal market opportunities for its telemetry solutions.  

This acquisition will also improve procurement and reduce the time to market for the Group's technology solutions, as it seeks to develop global markets. 

LEISURE DIVISION

The Group's core market is the Leisure sector, where our primary offerings provide operational transparency through data capture and associated services for draught beer, vending machines, and gaming machines. 

The Group has experienced a continuation of the well-documented economic conditions and commercial pressures affecting some core leisure customers, resulting in pub sell-offs and delayed commitment to new activity.  At the same time, customers have deferred committing to projects for a number of reasons, including waiting for results from Brulines' National Measurement Office ("NMO") testing, as well as increased clarity on the Business, Innovation and Skills Committee ("BISC") pub industry enquiry, and also carrying out extensive evaluation of iDraught™ as a replacement for standard Dispense Monitoring Services. The Board feels that the positive results from the NMO testing, as well as successful evaluation of iDraught puts the Group in a stronger position going forward.  

Core beer monitoring service customers and contracts

The re-launch of iDraught™ in March 2011 has been received very positively by customers, and increased penetration is being achieved across the on-premise draught beer market.

The iDraught™ system offers pub licensees a vital tool to monitor the quality and yield of beer served, providing valuable intelligence about their business, helping them to improve beer quality, reducing wastage and cost on draught products, all of which drive an increase in retail profit.

The core beer monitoring business which underpins the Leisure division's strong recurring revenues, delivered 761 new installations, of which 677 were the higher value iDraught™.  This takes iDraught™ penetration to over 8% of the active installation base which, factoring in pub closures, fell to around 20,000 sites.  Although it was disappointing that new installations fell over the year the fact that nearly 90% of these were higher value iDraught™ was highly encouraging.    

During the period, the Group continued the roll-out of iDraught™ to several customers including the Greene King Pub Partners estate.  Further iDraught™ progress is expected through 2012, both in the tenanted and managed arenas as commercial pilot tests and contract negotiations are concluded, although the impact of this could be offset to some extent by further pub disposals that certain pub companies are evaluating.

As part of its long term business strategy, the Group continues to invest carefully in developing iDraught™ internationally, with initial focus on the on-trade channels in the Denver metropolitan area, USA, and in France where we have a distribution agreement and installations in a range of pubs and bars.

Despite a particularly tough consumer environment for pubs and bars in the USA, the Group now has over 46 sites in the Denver, including Denver International Airport, with prospects for a further 65 during H1 2012. We anticipate the USA operations achieving breakeven in 2011/12.

In March 2011, the Group launched its Nucleus Smart Till electronic point of sale system ("EPOS") which has been developed as a standalone product which interfaces directly to iDraught™ to provide till variance analysis.

This new product is currently undergoing commercial pilots in several leading pub companies and recently commenced an initial 100 system full roll out.

Business, Innovation and Skills Committee (formerly BEC) Report on the leased Pubco model

The Business, Innovation and Skills Committee (BISC) has confirmed that follow up oral hearings will be held on 28 June 2011 and 6 July 2011 to review the progress which the industry has made since publishing of the initial two reports and recommendations.

The Group has had open dialogue with the appropriate committees and industry bodies, and in its submissions and accompanying evidence has validated its flow monitoring equipment and procedures, supported by reviews conducted by independent national authorities and regulatory bodies, such as the National Measurement Office, Trading Standards, and the OFT.

The Board believes that the Government will find little merit in further political intervention given the significant progress that the industry has made in addressing the concerns raised by the two reports, especially after the UK and EU competition authorities both cleared the tied model in 2010.

Gaming machine monitoring

Brulines has a leading data capture and machine management proposition in the leisure sector, where the product offering allows gaming machine operators and owners to monitor the financial performance of their gaming sites and assets both accurately and constantly in real time.

In a particularly difficult gaming machine market the consolidated revenue was flat at £612,000, delivering a net profit of £61,000.

Key contract wins and retentions in SNPC, Moto and Welcome Break have consolidated performance in line with last year. 

Whilst this continues to be a difficult period for the gaming machine industry, the Group believes that its offering, as a result of increased Leisure division cross-selling, will provide some incremental growth. 

Vianet vending telemetry solutions set for break out

The losses associated with Vianet have been further reduced to £21,000 in H2, and there has been excellent progress in developing significant new sales opportunities for the Group's vending telemetry, including trial of the Group's cashless and contactless payment, including Near Field Communications ("NFC") solutions with major international companies.

The Group has made excellent progress in re-engineering products and infrastructure, and in revamping both the commercial organisation and customer proposition, to ensure the unique solutions it provides are fit for purpose in addressing the significant global markets which are available.   Vianet's market leading end-to-end vending telemetry solutions became fully available to the market during H2 2011, and have gained excellent traction through several successful technical and commercial pilots with large international brand owners, with some already planning orders for full commercial application.

The vending market place provides the Group with considerable growth opportunities in the UK and internationally. With a product capable of global sales and with no dominant competitor, the Board remains confident that there are opportunities to achieve market leadership in this sector. Vianet's solutions provide customers with the insight and means required to substantially increase the profitability of vending operations through reducing the cost of machine servicing and restocking, and driving rate of sale growth through improved machine, product and transaction availability.

Vianet achieved approximately 2,700 unit sales in the year, but with customers taking the opportunity to rationalise their vending parks in H2 2011, the overall installation base remains at just over 10,000 units.  

The operation was close to monthly breakeven during H2 2011, and the Board believes that Vianet will gain sufficient new business to make a positive contribution during 2012, allowing the Group to begin utilising the c. £16 million of accumulated tax losses which were inherited on acquisition. 

FUEL SOLUTIONS DIVISION

The long term trend of increasing fuel prices, driven by a combination of the ongoing escalation in crude oil extraction costs, and increased taxation, means that it is becoming more important to ensure integrity and efficiency of the forecourt retail supply chain.  Leaks, evaporation, fraud, over dispense, and poor stock management can have a significant impact on forecourt profits.   Furthermore, failure to manage fuel stocks properly can result in costly environmental impacts and brand damage resulting from negative publicity.

The ongoing consolidation in the fuel sector also means that managers are gaining responsibility for more sites which require increased visibility and dependable control.

Fuel Solutions acquisitions successfully integrated and gaining sales traction 

The Group's recent acquisitions in the forecourt services market have been successfully integrated, so that the Fuel Solutions division now has a fully integrated, one stop service solution, and information toolbox for forecourt operators.  This integrated commercial proposition was launched at the International Forecourt Show in the NEC in late February 2011, and customer reaction from major supermarkets through to leading independent forecourt operators has been very encouraging. This positive reaction underpins the Group's decision to replicate the Group's success in the leisure sector in the forecourt market.

Fuel Solutions division now has all the components of the end to end solution

Our management solutions are central to driving higher profits for forecourt operators

Fuel Solutions division offers an integrated toolbox of best-in-class information management and associated products and services that allow managers of fuel installations to maximise return on investment from fuel stocks and the assets which store, control and issue fuels.

The division's high calibre team is actively cross-selling to its existing customer base, which currently controls c.60% of forecourt fuel sales in a UK market. The Group estimates potential annual recurring UK revenues to be worth over £30 million, over £200 million across Europe, and many times that globally. 

During what has been a transformational year, these acquisitions added £6.1 million to Group turnover, and helped the Fuel Solutions division progress towards profitability.  During the past year, the Group has invested further to ensure that the business infrastructure and capacity is capable of supporting the division's growth aspirations.  This has included carrying overhead and building stock in anticipation of increased activity.

The increased commercial traction is expected to begin enhancing earnings in H1 2012, and thereafter contributing significantly to Group performance.

STRATEGY FOR GROWTH

The Group's strategic intent is to extend market presence in data handling and monitoring systems in the four sectors of leisure, vending, forecourt management solutions, and telemetry solutions, where there is considerable skill and operational overlap. There is also a considerable opportunity for the Group to achieve market leading positions in each using its core capabilities and market leading products.

The Group is focused on three highly complementary divisions which are Leisure, Fuel Solutions, and Technology Solutions.  These divisions operate in markets in which:

·     the need for improved data and controls will grow;

·     integrated data provision is sought and can be backed up with associated services;

·     there is no other dominant competitor;

·     market leadership is available;

·     good margins are available from increasing customer return on investment; and

·     The Group's products are globally scalable.

The Leisure division on its own has the products and market potential to achieve growth for several years, underpinned by iDraught™ in the core beer monitoring business and supplemented by the vending telemetry opportunities.  The Group's strong customer and recurring revenue base provides a solid foundation for this strategy as we commercialise development products, extend into new markets and make selective acquisitions. 

For the pub and bar market, the Group's ability to provide a wider range of effective operational and market data increases its value to existing customers and their own operational control within tenanted/leased and managed sectors.  These same benefits are available to other channels such as hotels, clubs, and the independent sectors, both in the UK and internationally.   

The integration of Vianet's vending telemetry offering into the Leisure division is a natural extension of the Group's core capabilities into a growing and significant adjacent remote data capture and management market.  Vianet has leading, globally scalable products and operates in international markets with no dominant competitor, giving an opportunity to establish a leading presence.

Whilst maintaining its investment in the core Leisure market, the Group has had the opportunity through selective acquisitions to establish a market leading data handling position for the Forecourt Solutions division's 'information toolbox' in the forecourt sector where it has identified considerable technology, operational and commercial overlap.

With the Group well placed to sustain its organic path for growth within the Leisure sector, the Directors believe that the Group's cash generation, together with the December 2008 Placing funds and competitive debt financing, will enable the Group to take advantage of further complementary acquisition and commercial opportunities as and when they arise. 

Management and employees

The Group continues to develop the calibre of its people and leadership so that it is able to capitalise on the significant growth opportunities available across all its sectors.

In July 2010, Phil Prow was appointed Sales and Marketing Director of Fuel Solutions.  He brings over 20 years of experience in the retail petroleum equipment and services industry.  Additionally, with the three acquisitions in this division we have strengthened the overall calibre of the team, and have now assembled a high quality senior management team capable of delivering the Fuel Solution division's growth aspirations.

In August 2010, Steve Alton was appointed Commercial Director for the core beer monitoring business, where the Board believes there are still very attractive growth opportunities.

Outlook

The Group's investment decisions have been made with a three to five year horizon whilst also committing to short term delivery of shareholder value. 

Following the integration of recent acquisitions and weathering of the challenging economic environment, the Group is particularly well placed to drive earnings growth through achieving market leading positions, using its core capabilities and products, through growth in iDraught^TM and vending solutions in the Leisure division and through profitable extension of the Fuel Solutions division footprint.

Over the medium term the Group's intent is to deliver:

·   organic growth from core beer monitoring solutions

·   Vianet vending telemetry solutions to global markets, and Fuel Solutions division each contributing over 25% of Group profit 

·   profit contribution from ViaTelemetry^TM in excess of £1 million

The Group aims to become the market leader in the UK and beyond for the provision of telemetry, data management analysis, software and support services across the leisure, vending and telemetry sectors, and in petrol forecourt solutions where the opportunity exists to become a 'one stop shop' provider for customers.

Despite the difficult leisure sector trading environment, future growth prospects are very encouraging and management continues to view the future with confidence.   

James Dickson

Chief Executive

7 June 2011

Financial Review

Group trading result

This year has been very much a transitional one for the Group with the acquisition of four businesses, three of which were combined with our existing Edensure business to form the Fuel Solutions division.  The commercial proposition for this division was launched towards the end of February 2011.  The pub market has continued to face challenges which, coupled with what has continued to be a very difficult general economic environment, have led to a difficult trading year.  Revenue increased by 22.4% to £24.3 million with £6.1 million of that generated by the Fuel Solutions division.  Operating profit (before amortisation of intangible assets, share based payments, and exceptional items) amounted to £4.0 million (2010: £5.1 million).  The results are after absorbing transitional losses of Vianet (which approached break even in the second half), ViaTelemetry^TM and Fuel Solutions, as well as US costs of operation, in all totalling £0.8 million.  Blended recurring revenues for the Group are over 70%, with Leisure over 80% and Fuel Solutions near 20%.  Exceptional costs of £0.2 million principally relate to acquisition costs resulting in Group operating profit (pre intangible asset amortisation and share based payments) of £3.8 million (2010: £4.6 million).

Divisional performance

The Leisure division, consisting of the core beer monitoring business, Vianet and Machine Insite (including Coin Metrics), achieved turnover of £18.16 million (2010: £19.3 million) and achieved gross margins of 58% (2010: 59%).  The core business delivered 761 new installations of which 677 were the higher priced iDraught^TM systems, as well as 99 new and replacement Dispense Monitoring Services systems.  Overall, a gross total of 776 installations were achieved.  The active installation base after pub company disposals and uplifted systems is approximately 20,000 systems.  The Group did not achieve all the new and replacement installations that were originally targeted, but opportunities in this new financial year appear encouraging.

Machine Insite and Coin Metrics were merged during the year reflecting the combined commercial proposition now on offer to customers. 

In the Fuel Solutions division, where we have successfully completed three acquisitions, it has been very much a transitional and consolidation year as we have integrated the acquisitions and developed the commercial proposition which was formally launched towards the end of the financial year in February 2011.  Revenues were £6.1 million and gross margins 41% which resulted in a small net trading loss, before exceptional and bad debt costs, of around £0.2 million.  For the financial year to March 2012 we expect both margin improvement and significant profit contribution.

Overall Group results

Group results overall, before amortisation of intangible assets, share based payments, and option costs, and exceptional costs, were a profit of £4.0 million as compared to £5.1 million at March 2010, but after absorbing the transitional losses as referred to above of £0.8 million.  The results are in line with the Trading Update issued on 04 March 2011.

The table below shows the performance of the Group, pre and post exceptional costs, as follows:

	FY 2011 £'000	FY 2010 £'000
Revenue	24,282	19,834
Gross Profit	12,886 (53%)	11,638 (59%)
EBIT	3,058	4,039
PBT post exceptional costs	3,028	4,034
PBT pre exceptional costs	3,204	4,540

Divisional Performance

FY 2011	£'000	£'000	£'000
	Leisure	Fuel	Central
Revenue	17,955	6,124	204
Gross Profit	10,339	2,478	69
	(58%)	(41%)	(34%)
EBIT pre exceptional costs	4,843	(377)	(1,232)
PBT post exceptional costs	4,797	(468)	(1,301)
PBT pre exceptional costs	4,800	(378)	(1,218)

Gross margin

Blended gross margin was 54%, with the Leisure division being broadly level with last year at 58% and Fuel Solutions at 41%. Fuel Solutions margin improvement should be achieved in 2012 as we progress from this transitional year.

Actual Group profit

The Group pre-tax profit, after exceptional costs, is £3.028 million (2009: £4.034 million), reflecting the comments made above.

Taxation

The taxation charge of £0.597 million represented an effective tax rate of 19.72% on the reported profit before taxation of £3.028 million post group relief and deferred tax adjustments.

Earnings per share

Basic earnings per share for the year ended 31 March 2011 before exceptional costs amounted to 9.06 pence compared to 12.68p at March 2010.  Fully diluted earnings per share (before exceptional costs), which takes account of all outstanding share options, amounted to 8.69 pence which compares to 12.27 pence last year.

Balance sheet and cash flow

The balance sheet has been strengthened by the trading performance achieved.

Operationally, the Group generated cash returns at £1.8 million which were lower than normal as they were impacted by investment in stock in Brulines and Fuel Solutions (£0.7 million), financial support for parts of Fuel Solutions as we addressed its consolidation and supplier base (£0.9 million), and support for development of ViaTelemetry^TM our Technology division (£0.2 million).  The funds generated in the year, coupled with our opening substantial cash funds from both prior years' trading and the December 2008 Placing,  were utilised to invest in the four acquisitions, service borrowings, dividends and taxation.  Despite these expenditures, at the year-end, the Group had net borrowings of only £1.2 million (2010: net cash of £3.9 million).

It is anticipated, given the strength of the Group's balance sheet, and cash generating capacity, that this strong base will continue to provide an advantageous position to seek further growth opportunities.  

Mark Foster

Finance Director

7 June 2011

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2011

		Before Exceptional 2011 £000	Exceptional 2011 £000	Post Exceptional Total 2011 £000	Total 2010 £000
	Note
Continuing operations
Revenue		24,282	-	24,282	19,834
Cost of Sales		(11,396)	-	(11,396)	(8,196)
Gross profit		12,886	-	12,886	11,638
Administration and other operating expenses		(8,928)	(176)	(9,104)	(7,071)
Operating profit pre amortisation and share based payments		3,958	(176)	3,782	4,567
Intangible asset amortisation		(696)	-	(696)	(456)
Share based payments		(28)	-	(28)	(72)
Operating profit post amortisation and share based payments		3,234	(176)	3,058	4,039
Finance income		36	-	36	81
Finance costs		(66)	-	(66)	(86)
Profit before taxation		3,204	(176)	3,028	4,034
Income Tax expense	1	(646)	49	(597)	(969)
Profit after tax and total comprehensive income for the year attributable to the owners of the parent		2,558	(127)	2,431	3,065
Earnings per share
- Basic	3	9.06p	(0.45)p	8.61p	10.89p
- Diluted	3	8.69p	(0.43)p	8.26p	10.57p

The accompanying accounting policies and notes form an integral part of these financial statements.

Details of the exceptional items which principally relate to corporate finance acquisition costs in the year are included in note 4.

Consolidated Balance Sheet

at 31 March 2011

	Note			2011 £000	2010 £000
Assets
Non-current assets
Goodwill				17,618	13,523
Other Intangible Assets				1,638	969
Property, plant and equipment				3,643	3,397
Investments				533	556
Total non-current assets				23,432	18,445
Current assets
Inventories				2,674	1,556
Trade and other receivables				4,553	3,785
Cash and cash equivalents				2,517	6,892
				9,744	12,233
Total assets				33,176	30,678
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables				6,198	5,804
Borrowings				1,756	448
Tax liabilities				324	302
Provisions				89	89
				8,367	6,643
Non-current liabilities
Borrowings				1,992	2,495
Provisions				75	156
Deferred tax				303	340
				2,370	2,991
Equity attributable to owners of the parent
Share capital				2,825	2,825
Share premium account				11,174	11,174
Shares to be issued				276	248
Own shares				(1,154)	(1,154)
Merger reserve				310	310
Retained profit				9,008	7,641
Total equity				22,439	21,044
Total equity and liabilities				33,176	30,678

The Group financial statements were approved by the Board of Directors on 7 June 2011 and were signed on its behalf by:

J Dickson

Director

The accompanying accounting policies and notes form an integral part of these financial statements.

Consolidated Statement of Changes in Equity

for the year ended 31 March 2011

	Share capital	Share premium Account	Own Shares	Share based payment reserve	Merger reserve	Profit and loss account	Total
	£000	£000	£000	£000	£'000	£000	£000
At 1 April 2009	2,813	11,126	(864)	176	310	6,500	20,061
Dividends	-	-	-	-	-	(1,924)	(1,924)
Exercised options re own shares	-	-	13	-	-	-	13
Purchase of own shares	-	-	(303)	-	-	-	(303)
Share based payments	-	-	-	72	-	(1,924)	(2,082)
Share capital issued	12	48	-	-	-	-	60
Transactions with owners	12	48	(290)	72	-	(1,924)	(2,082)
Total comprehensive income for the year	-	-	-	-	-	3,065	3,065
Total comprehensive income less owners transactions	12	48	(290)	72	-	1,141	983
At 31 March 2010	2,825	11,174	(1,154)	248	310	7,641	21,044
At 1 April 2010	2,825	11,174	(1,154)	248	310	7,641	21,044
Dividends	-	-	-	-	-	(1,064)	(1,064)
Exercised options re own shares	-	-	-	-	-	-	-
Purchase of own shares	-	-	-	-	-	-	-
Share based payments	-	-	-	28	-	-	28
Share capital issued	-	-	-	-	-	-	-
Transactions with owners	-	-	-	28	-	(1,064)	(1,036)
Total comprehensive income for the year	-	-	-	-	-	2,431	2,431
Total comprehensive income less owners transactions	-	-	-	28	-	1,367	1,395
At 31 March 2011	2,825	11,174	(1,154)	276	310	9,008	22,439

Consolidated Cash Flow Statement

for the year ended 31 March 2011

		2011 £000	2010 £000
Cash flows from operating activities
Profit for the year		2,431	3,065
Adjustments for
Interest receivable		(36)	(81)
Interest payable		66	86
Income tax expense		597	969
Amortisation of intangible assets		696	456
Depreciation		480	391
Gain pre-existing contract on acquisition		(200)	-
Profit on sale of property, plant and equipment		(80)	(41)
Share based payments		28	72
Operating cash flows before changes in working capital and provisions		3,982	4,917
Change in inventories		(510)	(185)
Change in receivables		13	861
Change in payables		(1,602)	(1,234)
Change in provisions		(80)	(76)
		(2,179)	(634)
Cash generated from operations		1,803	4,283
Income taxes paid		(834)	(1,015)
Net cash generated from operating activities		969	3,268
Cash flows from investing activities
Interest payable		(66)	(86)
Interest received		36	81
Proceeds on disposal of property, plant and equipment		121	62
Purchases of property, plant and equipment		(608)	(371)
Purchases of intangible assets		(735)	(377)
Purchase of subsidiary undertakings		(4,380)	-
Purchase of minority shareholdings		-	(175)
Purchase of investment		-	(556)
Cash acquired with subsidiary		547	-
Net cash used in investing activities		(5,085)	(1,422)
Cash flows from financing activities
Repayments of borrowings		(452)	(498)
Dividends paid	2	(1,064)	(1,924)
Options exercised/Purchase of own shares		-	(290)
Issue of ordinary share capital		-	60
Net cash used in financing activities		(1,516)	(2,652)
Net (decrease)/increase in cash and cash equivalents		(5,632)	(805)
Cash and cash equivalents at beginning of period		6,892	7,697
Cash and cash equivalents at end of period		1,260	6,892

Notes to the financial statements

1. Taxation

Analysis of charge in period

	2011 £000	2010 £000
Current tax expense
- UK corporation tax on profits of the period	804	1,067
- Amounts in respect of prior periods	-	(98)
	804	969
Deferred tax expense:
- Temporary differences	(207)	-
Income tax expense	597	969

Reconciliation of effective tax rate

The tax for the period is lower (2010: lower) than the standard rate of corporation tax in the UK (28%).  The differences are explained below:

	2011 £000	2010 £000
Profit before taxation - Continuing operations	3,028	4,034
Profit before taxation multiplied by rate of corporation tax in the UK of 28% (2009:28%)	848	1,130
Effects of:
Other expenses not deductible for tax purposes	39	90
Goodwill amortisation	145	117
Sch 23 deduction	-	(34)
Depreciation in excess of capital allowances	35	(11)
Disposal of investment	(22)	-
Adjustments for prior years	-	(98)
Rate difference	-	(3)
Research and development	(184)	(185)
Other timing differences	(57)	(37)
Total tax expense	804	969

2. Ordinary dividends

	2011 £000	2010 £000
Final dividend for the year ended 31 March 2010 of 2.24p (year ended 31 March 2009: 3.80p)	610	1,040
1st interim dividend paid in respect of the year of 1.67p (2010:1.63p)	454	441
2nd interim dividend paid in respect of the year of nil (2009:1.63p)	-	443
Amounts recognised as distributions to equity holders	1,064	1,924

In addition, the directors are proposing a final dividend in respect of the year ended 31 March 2011 of 3.98p per share. If approved by shareholders, it will be paid on 28 July 2011 to shareholders who are on the register of members on 17 June 2011.

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.

	2011			2010
	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	2,431	8.61p	8.26p	3,065	10.89p	10.57p

	2011 Number	2010 Number
Weighted average number of ordinary shares	28,248,164	28,153,878
Dilutive effect of share options	1,522,203	1,439,036
Diluted weighted average number of ordinary shares	29,770,367	29,592,914

4. Exceptional items

	2011 £000	2010 £000
Corporate finance acquisition costs	176	506
	176	506

The above costs principally relate to costs incurred resulting from the acquisitions made during the year.

5. Basis of preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in s495(2) or s495(3) of the Companies Act 2006 of the Companies Act 2006.
 
The consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet at 31 March 2011 and the consolidated cash flow statement have been extracted from the Group's financial statements upon which the auditors opinion is unqualified and does not include any statement under section 498(2) or 498(3) of the Companies Act 2006. Those financial statements have not yet been delivered to the Registrar.
 
The statutory accounts for the year ended 31 March 2010 have been delivered to the registrar, contained an unqualified audit report and did not include a statement under section 495(2) or (3) of the Companies Act 2006.

The audited accounts will be posted to all shareholders in due course and will be available on request by contacting the Company Secretary at the Company's Registered Office.

6. Annual General Meeting

The Annual General Meeting will be held on 12 July 2011 at 9:00am at the offices of Grant Thornton UK LLP, No.1 Whitehall Riverside, Leeds, LS1 4BN.

- Ends -

 

END

 

 

FR UNVVRAOANRAR