Universal Salvage PLC
21 June 2001
UNIVERSAL SALVAGE PLC
UK's largest vehicle salvage & services group
PRELIMINARY RESULTS FOR THE YEAR ENDED 28 APRIL 2001
* Pre-tax profit increased by 18% to £6.6 million (2000: £5.5 million)
* Significant improvement in gross margin to 22.6% (2000: 19.7%)
* Earnings per share increased by 20% to 16.9p per share (2000: 14.1p per
* Turnover slightly reduced at £84.2 million (2000: £87.6 million)
* Strong cash generation from operating activities
* Proposed final dividend of 3.1p per share, giving a total dividend of
4.2p per share (2000: 3.5p), an overall increase of 20%
* Important developments:
+ new services introduced for motor insurance customers & auction
+ improved marketing & presentation of salvage vehicles to achieve
better auction prices
+ investment in Group infrastructure - modernisation of transporter
fleet & major IT project to offer integrated business solution
+ opened two vehicle processing units to de-pollute and crush low
value vehicles - to be rolled out nationally
* Forthcoming European Union End of Life Vehicle legislation to benefit
Commenting, Chairman, Alexander Foster, said,
'I am very pleased to announce strong trading results for the year. During the
year we have continued to focus on improving the Group's operating efficiency
and developing additional services that add value to all our customers.
The marketplace in which we operate is undergoing significant change and the
forthcoming introduction of the European Union End of Life Vehicle legislation
is a catalyst for further transformation. We welcome the new legislation and
believe that it will substantially expand our growth opportunities.
Trading in the new financial year has begun very encouragingly. I look forward
to reporting further growth at the half year.'
For further information:
Universal Salvage plc Martin Hynes, chief executive T: 020 7448 1000
Biddick Katie Tzouliadis T: 020 7448 1000
I am very pleased to announce strong trading results for the year ended 28
April 2001. Operating profit increased by 19% to £6.8m (2000: £5.7m) and
profit before tax increased by 18% to £6.6m (2000: £5.5m). Basic earnings per
share rose to 16.9p (2000: 14.1p), an increase of 20%. Net assets as at 28
April 2001 increased to £19.7m from £16.1m last year end and net borrowings
stood at £5.2m (2000: £4.2m), representing gearing of 26.3% (2000: 25.9%).
Turnover was 4% lower than last year at £84.2m (2000: £87.6m), reflecting the
reduced number of vehicles handled as well as an overall decline in
second-hand vehicle values. The lower turnover, however, was more than offset
by the improvement in gross margin from 19.7% to 22.6%.
These results are a reflection of the successful progress we are continuing to
make in developing the services the Group offers. This is a key objective as
we work towards improving the quality of the Group's earnings and enhancing
revenue streams. Universal's performance was particularly strong in the second
half of the year. This was partly due to motor insurance claims returning to
more normal levels after a quiet first half but also resulted from the range
of new initiatives introduced in the last four months of the year.
A final dividend of 3.1p per share (2000: 2.5p per share) is proposed, which
will be paid on 13 September 2001 to shareholders on the register at 17 August
2001. This 24% increase in the final dividend will bring the total dividend
for the year to 4.2p per share (2000: 3.5p per share), an overall increase of
During the year, we have continued to focus on improving the Group's operating
efficiency and enhancing the service levels we provide our customers.
A key development has been our work with our motor insurance customers to
reduce the costs that they incur in the claims handling process. As I reported
at the half year stage, our secure on-line salvage management system,
StatUS.net is central to this. This year we launched an enhanced version,
which has been quickly adopted. It is, as anticipated, promoting an
increasingly close relationship with insurers and has been a significant
differentiator in our marketplace. The value-added services we can now provide
have been an important factor in the Group's success in winning new customers
during the year and increasing our share of existing customers' business.
These additional contracts will more than offset the termination of our
contract with Norwich Union on 31 March 2001 and will give us a much wider
spread of customers going forward.
We have also used new technology to improve and diversify the service we
provide our auction bidder customers. Our website www.universal-salvage.com,
which has been steadily upgraded over the period now represents an important
marketing platform for us. Universal Select, our recycled-parts locator
business introduced this year, has been very well received. The Review of
Operations describes the innovations we have made this year in more detail.
The Group strives to be very effective at handling large numbers of vehicles
and the Board has the simple philosophy of ensuring that we maximise the value
of salvage vehicles and minimise the cost of disposal.
It was for these reasons that the decision was taken to set up a vehicle
processing unit at our Corby branch in the first half of the year. This unit,
which de-pollutes and crushes low value vehicles, has won two industry
environmental awards over the last year. A second processing unit has been
established at our Sandtoft branch and we are replicating and installing
additional processing units across our other salvage sites.
The importance to the Group of these processing units will be felt when the
European Union End of Life Vehicle ('ELV') legislation comes into force in the
UK in the Spring of 2002. This legislation will not only introduce new
standards into the ELV marketplace, but also will change the way in which
certain categories of damaged vehicles can be handled under insurance
contracts. Many smaller salvage operators who do not have the requisite
facilities and full waste management licences will be restricted to which
category of vehicle they will be permitted to handle. As market leader,
Universal welcomes the legislative changes. We believe that they will assist
in improving standards across the whole industry and substantially expand the
marketplace in which the Group operates.
The Board has received a number of approaches from parties interested in
acquiring its site in Redbourn, near St. Albans. All the offers will be
subject to the requisite planning permission being given and the Board is
currently reviewing all options.
REVIEW OF OPERATIONS
Our core business, the disposal of salvage vehicles, centres around the four
key processes of collection, storage, categorisation and finally disposal,
principally through auctions. Our largest customers are insurance companies,
but also include motor manufacturers, fleet management companies and
self-insured fleets. All these parties require a secure service that handles
and disposes of each vehicle in an appropriate manner.
Another distinct set of customers is the buyers of vehicles or vehicle parts
from the Group.
During the year, we have been focusing on developing additional services
around these core processes that add value to both types of customer. The
results of these initiatives can be seen not only through the new contracts
that we have won, but also through the improving margin that we are achieving.
One of our key aims over the last year has been to reach a consistency of
service across all our branches and we have made considerable progress in this
aim by introducing standards that are applied across the entire Group. These
standards include the introduction of new grading and training for all of our
yard and administration staff, the development of new vehicle handling
equipment, increased vehicle protection against inclement weather, measures to
improve vehicle presentation at auctions and the introduction of a national
delivery service for auction bidders.
All these standards have made a valuable impact across the Group, with
particular focus being placed on vehicle presentation at auction. As part of
this initiative, in the second half of the year we introduced 'drive through'
auctions at all branches, where at the beginning of an auction a number of
prepared vehicles are driven past the bidders prior to the usual 'static'
auction format. The results have been extremely promising with increased
auction attendance and better prices being achieved.
Enhancing our routes to the marketplace is important as we develop the
infrastructure of the Group. We have invested heavily in modernising our truck
fleet over the last two years. This has improved our operational efficiency,
capacity and levels of service. The national delivery service that was
introduced during the year has improved our truck utilisation and enabled us
to fulfil buyers' demands for cost effective delivery of vehicles. This is
particularly important for both lower value vehicles where third party
delivery can be prohibitively expensive, as well as for customers who have
purchased vehicles sold via our internet bidding system. The modernisation and
expansion of our truck fleet is now appropriate for current requirements. We
therefore anticipate a significantly lower level of truck investment in the
coming year compared to the last two years.
Alongside fleet modernisation, the Group has continued to invest in the branch
infrastructure in order to improve facilities and capacity. We are at the
final planning stages for adding substantial further capacity to our network
in Scotland, the North West and the West Midlands. We look forward to
reporting further progress at the half year.
The marketplace in which we operate is undergoing significant change and the
forthcoming introduction of the European Union End of Life Vehicle ('ELV')
legislation is a particular catalyst for further transformation. From January
2002, all ELVs will be deemed to be hazardous waste, requiring them to be
de-polluted at an Approved Treatment Centre ('ATC'), prior to being
'densified'. From April 2002 the manufacturers will be required to set in
place networks which are capable of handling the vehicles they manufacture
from this date and by April 2007 they must have in place networks capable of
handling every vehicle they have ever produced. At the same time, it is
anticipated that certain categories of damaged insurance vehicles will be
defined as ELVs. This will therefore have an impact on our own marketplace, as
well as bringing in more demanding standards for traditional operators in this
Over the last eighteen months, Universal has been acquiring the full waste
management licences and planning permission necessary to achieve ATC status at
each branch. The overall investment over this coming year will be
approximately £1 million and it will place Universal in a position to
de-pollute and process a large number of vehicles nationally.
The Board believe that this legislation, along with the changes brought in by
the Vehicle Crime Reduction Action Team (VCRAT) legislation, will drive a
large number of less scrupulous individuals out of the industry and provide
Universal Salvage with further opportunities to grow.
We are also currently expanding the engineering service that we offer
insurance companies. In addition to our normal salvage offering, we now can
carry out an inspection of a damaged vehicle to confirm its valuation and
categorisation. This has proved extremely popular in trials and is now being
offered to all our insurance clients. The service originally covered only cars
but is now being rolled out to include heavy commercial vehicles, motor bikes
and specialised vehicles. The service offers the dual benefit to the insurer
of taking cost out of the claims process and saving significant sums on
We continue to develop Universal Select, the recycled parts locator business.
The introduction of a Parts Categorisation Guide for all its customers and
suppliers gives a set of standards as to both the condition and definition of
each part and has been well received by the industry. We continue to expand
the number and quality of dismantlers supplying Select, which has the effect
of creating more opportunities for the use of recycled parts in bodyshops.
Harnessing appropriate technology to improve our operations and customer
service levels has always been a priority for Universal.
Our secure on-line management information system, StatUS.net, which was
introduced in April last year, is now used successfully by most of our
insurance customers. The product continues to be developed and enhanced, with
our engineering inspection service being the next area that will be
StatUS draws its data from our vehicle management and accounting systems. We
are currently replacing these core systems with a more modern, adaptable and
integrated solution, which will enable Universal Salvage to be increasingly
flexible in the way that it structures and charges for its services. As we
indicated at the half-year, we believe that StatUS is a significant
differentiator for us and a key component in winning new contracts and
deepening existing relationships.
One of the most important links to our auction and retail customer base has
become our website www.universal-salvage.com. In order to widen our channels
of vehicle distribution further, we have recently introduced internet proxy
bidding at our Sandwich site. This facility enables potential bidders to place
bids on vehicles having looked at the images on the website or physically
visited the auction. These bids are then carried into the live auction where
they are integrated into the auction process. To date the trial at Sandwich
has been very successful in broadening auction audience and will be widened to
cover other auctions over the coming year.
The ongoing investment we are making in the Group continues to bring many
different opportunities to grow the business around its core vehicle handling
capabilities. We believe that there is excellent scope to continue to increase
and develop our insurance contract business and the forthcoming European Union
ELV legislation will add a further dimension to our operations.
We will continue to focus on improving our core operations and services and I
am delighted that the benefits of recent initiatives have enhanced our profits
and the value of the Group.
The new financial year has begun encouragingly and the Board looks forward to
reporting further growth at the half year.
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 28 April 2001
Note 2001 2000
Turnover 84,217 87,623
Cost of sales (65,211) (70,375)
Gross profit 19,006 17,248
Administrative expenses (12,661) (11,995)
Other operating income 435 439
Operating profit 6,780 5,692
Profit on sale of properties - 107
Interest receivable 24 53
Interest payable (248) (306)
Profit on ordinary activities before 6,556 5,546
Tax on profit on ordinary activities 2,3 (2,000) (1,755)
Profit on ordinary activities after tax 4,556 3,791
Dividends 4 (1,131) (942)
Retained profit 3,425 2,849
Earnings per ordinary share - basic 5 16.9p 14.1p
5 16.3p 13.5p
Dividends per ordinary share 4 4.2p 3.5p
All operations of the group continued throughout both periods and no material
operations were acquired or discontinued.
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 28 April 2001
Profit on ordinary activities after taxation 4,556 3,791
Prior year adjustment 3 (593) -
Total recognised gains and losses relating to the year 3,963 3,791
GROUP BALANCE SHEET
at 28 April 2001
Intangible assets - 90
Tangible assets 25,717 22,000
Investments - own shares 332 -
Stocks 3,973 3,327
Debtors 3,975 4,009
Cash at bank and in hand 8 8
Creditors: amounts falling due within one year (9,624) (10,369)
Net current liabilities (1,668) (3,025)
Total assets less current liabilities 24,381 19,065
Creditors: amounts falling due after more than one year (3,870) (2,389)
Provisions for liabilities and charges (824) (614)
Capital and reserves
Called up share capital 2,709 2,691
Share premium account 263 81
Capital redemption reserve 30 30
Revaluation reserve 4,232 4,232
Profit and loss account 12,453 9,028
Equity shareholders' funds 19,687 16,062
GROUP STATEMENT OF CASH FLOWS
for the year ended 28 April 2001
Net cash inflow from operating activities 7,005 8,249
Returns on investment and servicing of finance
Interest received 24 53
Interest paid (including interest capitalised) (249) (301)
Interest element of finance lease rentals (5) (8)
Net cash outflow from returns on investment and servicing of (230) (256)
Corporation tax paid (1,629) (504)
Payments to acquire tangible fixed assets (5,089) (5,641)
Receipts from sales of tangible fixed assets 22 784
Purchase of own shares (332) -
Acquisitions and disposals
Payments to acquire trades or businesses - (100)
Equity dividends paid (967) (511)
Net cash (outflow)/ inflow before financing (1,220) 2,021
Issue of share capital 200 5
Capital element of finance lease rental payments (14) (66)
Bank and other loans drawndown/ (repaid) 1,519 (1,790)
Net cash inflow/(outflow) from financing 1,705 (1,851)
Increase in cash 485 170
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. The accounting policies adopted are consistent with those in the most
recently published set of financial statements dated 29 April 2000, except
for the adoption of FRS 19 'Deferred tax' for the first time. Details are
included in note 3 below.
The financial information set out above does not comprise the
Company's statutory accounts. Statutory accounts for the previous
financial year ended 29 April 2000 have been delivered to the
Registrar of Companies. The auditors' report on those accounts was
unqualified and did not contain any statement under section 237 (2)
and (3) of the Companies Act 1985.
The auditors have given an unqualified opinion on the accounts for the
year ended 28 April 2001 which will be delivered to the Registrar of
Companies following the annual general meeting to be held on 5
The tax charge represents an effective rate of 30.5% (2000: 31.6%).
3. Prior year adjustment
The Group has adopted FRS 19 'Deferred tax' in the financial statements
for the year ended 28 April 2001. Previously deferred tax was only
provided to the extent that timing differences were expected to reverse in
the future without being replaced. Deferred tax is now provided in respect
of all timing differences that have originated but not reversed at the
balance sheet date where transactions or events that result in an
obligation to pay more tax in the future or a right to pay less tax in the
future have occurred at the balance sheet date. The accounting policy in
the notes to the statutory accounts describes the full deferred tax
This results in a prior year adjustment to increase the deferred tax
provision and decrease brought forward reserves by £593,000. In addition
there is a current year increase in the provision and overall tax charge
of £239,000 as a result of implementing FRS 19. Without implementation of
FRS 19, the effect of deferred tax on the tax charge would be to reduce it
by £29,000 in the year. The actual net tax charge for the year is
therefore £210,000. The total provision for deferred tax at 28 April 2001
is £824,000 (2000 restated: £614,000). The comparative figures in the
primary statements and notes to the statutory accounts have been restated
to reflect the adoption of FRS 19.
A final dividend of £837,000 (3.1 pence per ordinary share), making a
total for the year of 4.2 pence per ordinary share (2000: 3.5 pence per
ordinary share), is proposed to be paid, subject to shareholder approval,
on 13 September 2001 to shareholders on the register on 17 August 2001.
5. Earnings per share
Earnings per share has been calculated on the profit on ordinary
activities after taxation for the year of £4,556,000 (2000: £3,791,000)
divided by the weighted average number of Ordinary shares of 26,922,000
The diluted earnings per share has been calculated on the profit on
ordinary activities after taxation for the year of £4,556,000 (2000: £
3,791,000) divided by the weighted average number of ordinary shares
taking into account all dilutive potential Ordinary shares.
6. Report and Accounts
The Report and Accounts were approved by the Board of Directors on 20
June 2001. The Report and Accounts will be posted to shareholders on
10 August 2001. Further copies can be obtained from the Company's
registered office at Acrey Fields, Woburn Road, Wootton, Bedfordshire,