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Universal Salvage (UVS)

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Thursday 26 June, 2003

Universal Salvage

Final Results

Universal Salvage PLC
26 June 2003


                             UNIVERSAL SALVAGE PLC

               PRELIMINARY RESULTS FOR THE 53 WEEKS TO 3 MAY 2003

                                   Key Points

Financials:

   •Operating profit of £1.0 million
   •Pre-tax profit of £0.6 million
   •Earnings per share of 1.1p
   •Final dividend of 1.3p per share proposed, making total of 2.5p for the
    period
   •Strong cash generation from operating activities - £6.5 million

Operations:

   •Cost base reviewed
   •Senior management team strengthened
   •Sales teams restructured and expanded
   •New services introduced - including vehicle inspection reports for
    insurers
   •Capital expenditure of £4.6 million - including decontamination &
    processing facilities at a further two branches
   •Customer base broadening - now auctioning vehicles for motor dealers and
    disposing of abandoned vehicles for Local Authorities
   •Insurance volumes being rebuilt, although more slowly than anticipated
   •Major contract agreed with Royal & SunAlliance Insurance Plc post year
    end - 'solus' relationship in place

Chairman, Alexander Foster, said,

'Volumes are now being rebuilt around our enhanced service offering that is
widening our income streams and broadening our customer base. This will reduce
reliance on particular customers and a single income stream. There are
substantial opportunities to grow both within our core business and in
complementary areas. We will be maximising all our efforts to capitalise on
these opportunities. I remain confident of the Group's prospects over the
medium-term and expect the coming year to confirm an improving trend in our
earnings.'

Enquiries:

Universal Salvage plc       Martin Hynes,          T: 020 7448 1000 today
                            chief executive 
                            Andy Somerville,       Thereafter: 01234 762283
                            finance director

Biddicks                    Katie Tzouliadis/      T: 020 7448 1000
                            Kathryn  Burn

CHAIRMAN'S STATEMENT

For the 53 weeks to 3 May 2003

Results

The Group's trading result for the 53 weeks to 3 May 2003 shows a pre-tax profit
of £0.6 million (52 weeks to 27 April 2002: £6.5 million). Turnover reduced from
£72.0 million last year to £61.3 million in the period to 3 May 2003. Turnover
has been restated to reflect a change of accounting policy, introduced in the
interim results, concerning the recharge of recovery and storage payments to
third parties (see note 1).

During the period under review the gross margin declined to 24.3% from 28.7%
last year. Basic earnings per share decreased to 1.1p (2002: 16.2p per share).

Net assets decreased to £23.9 million (2002: £24.3 million). Net borrowings
increased to £6.7 million compared to £5.8 million last year, representing
gearing of 27.9% (2002: 24.0%).

As shareholders are aware, these results reflect the impact of the loss of our
largest salvage contract, which accounted for approximately 40% of the volume of
vehicles we handled during 2001/2002. The contract went into 'run off' at the
end of June 2002.

Dividend

A final dividend of 1.3p per share (2002: 3.8p) is proposed, which will be paid
on 18 September 2003 to shareholders on the register at 15 August 2003. This
will bring the total dividend for the period to 2.5p per share (2002: 5.0p per
share).

Business Development

The year we are reporting on was always going to be a challenge. I have been in
business long enough to know that nothing goes in a straight line. How
management deals with the business cycle is the acid test. Much has been
achieved over the last twelve months, although it is taking longer to restore
volumes than we would have liked. Most importantly, it was essential that we did
not compromise on price or service for a quick gain.

We have focused on two key objectives. Firstly, rebuilding our core insurance
company business and, secondly, continuing our development into complementary
areas. We believe that our skills as both motor salvage experts and low value
vehicle resellers can be used to broaden our business base and bring on new
streams of income.

In light of the loss of the Direct Line account in 2002, we reviewed the Group's
cost base. This resulted in substantial savings and included the closure of our
auction and storage facility at Corby in July last year. However, in adjusting
the cost base, we also took the decision to maintain surplus capacity in order
that we are well positioned to take on additional volumes as new business comes
on stream.

In our core market of accident-damaged vehicles for insurance companies, we have
made steady progress in rebuilding volumes over the year. We have gained a
number of new contracts with both motor insurers and accident management
companies. More recently, I am pleased to report that we agreed terms with Royal
& SunAlliance Insurance Plc to handle all its 'total loss' vehicles. This
contract significantly extends our existing relationship with Royal &
SunAlliance and the new solus arrangement started in May 2003. I can report that
the 'pipeline' of potential new clients is lengthening as a large number of
other insurance contracts are coming up for tender over the next six months.

Through the year, we expanded and refined our sales operations. This was not
only with the aim of supporting our initiatives in the insurance and
accident-damaged market, but also to underpin our expansion into related
markets. The two areas we are focusing on are undamaged, low value vehicles and
End of Life Vehicles ('ELVs'). I am delighted to report significant progress in
both areas.

In the low value vehicle marketplace, we have been running a number of trials
with motor dealerships and finance houses. These have been very successful. We
offer an integrated transport and auction service for their low value trade-in
and part-exchange vehicles and at the same time, ensure that if a vehicle is not
sold, it can be decontaminated and disposed of through our processing
facilities. The disposal of any unsold vehicles is a key attraction as it
reduces handling costs for motor dealers. The 'one stop shop' solution we offer,
combined with good auction returns, continues to win new business for the Group.

While the proportion of ELV business we handle is relatively small, we have
extended our work with Local Authorities. The success of our contract to manage
the collection and disposal of abandoned vehicles for Kettering Local Authority
has helped us to win a number of contracts with other authorities. We expect
this business to grow substantially over the year. In addition, we are
continuing our dialogue with the major motor manufacturers about the forthcoming
European ELV legislation and the role that the Group can play in providing
compliance.

Board Changes

The Board has been significantly strengthened this year. In January, we were
pleased to announce two new appointments; Peter Goodright as sales director and
Biju Chudasama as information systems director.

Peter joined the Group in October 2002 from Link Insurance. He has substantial
experience of the insurance industry, and his expertise will be of particular
benefit to the Board. Biju joined the Group in June 1999 as information
technology director of our main trading subsidiary. He has been responsible for
the implementation of our major business systems changes.

In March this year, we appointed Andrew Somerville as Group finance director.
Andrew has held senior finance positions at Bunzl PLC and Corporate Express
(UK). Prior to joining Universal, he was group finance director of Baldwins
Industrial Services PLC. Andrew replaces Jonathan Cook, who left the Group in
January.

REVIEW OF OPERATIONS

Introduction

Over the last year, we have continued to focus on broadening the business, so
that we use the expertise we have developed in the 'total loss' arena to expand
into new marketplaces.

The Group's strengths have been built around our key competencies of managing
the collection, storage and auction of 'total loss' vehicles. The vehicles we
handle range from burnt-out wrecks and vehicles fit only for breaking up,
through to roadworthy cars requiring only minor repair. More recently, the
addition of decontamination and processing facilities at our branches has
extended our service offering.

In migrating the business model, we are concentrating on two new areas; low
value, undamaged dealer part-exchange vehicles and the ELV marketplace. Both
areas offer significant scope for growth and take the Group into much larger
marketplaces than we have traditionally operated in. According to the
Association of British Insurers, in the year to December 2002, the number of
vehicles classified as 'total losses' amounted to over 550,000. This compares to
approximately two million ELVs (of which approximately 350,000 are abandoned
vehicles) and two million low value vehicles that are sold annually.

In October, we appointed Peter Goodright as a dedicated sales director to
oversee the process of expanding and restructuring our sales teams, so that we
address each market opportunity effectively. While conditions in the insurance
marketplace remain difficult, we have secured a number of new contracts and,
outside this market, we are making very encouraging progress in developing
relationships with motor dealerships. In the ELV arena, we have been mainly
concentrating on Local Authorities in order to demonstrate the benefits of the
Group's services.

With the European ELV legislation finally reaching the end of its consultation
period, dialogue with the motor manufacturers on providing solutions for
handling ELVs is taking on increasing importance. We believe that our national
infrastructure and ability to provide an electronic audit trail in the disposal
process is an attractive, cost effective solution for manufacturers and
operators with ELV responsibilities.

The number of customers that understand the Group's service offering is now many
times higher than it was a year ago and we have every confidence that this will
convert into further contract wins in all categories over the next six months.

Service Offering

It has always been a prime concern to the Group to maximise the value that all
vehicles achieve on disposal. Careful preparation and marketing of vehicles are
important stages in the auction process. A recent innovation of driving vehicles
through auctions has proved popular and we have enlarged this section of our
accident-damaged vehicle auctions. It has also become the basis of our undamaged
low value dealer vehicle auctions that now take place across the country.

With the use of the internet, direct and other marketing methods, buyer numbers
are approaching 500 per auction at certain sites. During April 2003, our overall
auction attendance was 7% up on the same time last year. One of our projects
this year is to improve facilities and services for our buyers.

During the year, we set up a dedicated logistics division. This has enabled us
to improve our transport utilisation, as well as to introduce a new delivery
service to our buyers. Demand for the new delivery service is good, particularly
from those customers buying vehicles over the internet, and we are generating
additional revenue from it.

Speeding up the claims process and reducing the associated costs for our
insurance clients has always been a key part of the Group's offering. The
introduction of an engineering service for our insurance and accident management
clients has been very successful. In response to growing demand for these
electronic inspection reports, we have recruited additional inspection engineers
and expanded our central engineering function.

We are able to reduce costs further from insurers' claims processes by linking
our engineering service to our other Total Loss Management ('TLM') services. The
benefits are particularly striking in relation to very low value vehicles, where
the process costs alone can exceed the value of the vehicle many fold. The
important issue is to dispose of the vehicle as soon as possible and with as few
vehicle transport movements as possible. Clients are increasingly recognising
this and a number are starting to outsource more elements of their business to
the Group.

We believe the key to encouraging the adoption of these new services is to
establish audit procedures to validate the work carried out. Over the last year,
these procedures have been developed and introduced throughout the business.

These innovations have all been factors in winning contracts and give the Group
the ability to offer different solutions to different clients depending upon how
much of the process they wish to outsource. Over the next few months, we are
moving forward our ideas in pilots with two insurance companies.

Investment

At the beginning of the financial year, we purchased the site adjacent to our
Sandy branch and obtained Local Authority consent to develop the unused front
section of the branch. This has added another seven acres to the site and
provided us with additional disaster recovery facilities. At our Sandwich and
Sandtoft branches, we have laid further areas of concrete in compliance with
hazardous waste legislation and, during the year, we also completed our tractor
replacement programme.

We completed the installation of decontamination and processing facilities at
our Chester branch in the first half of the year, and, in the second half,
installed units at our branch at Sandy. These facilities are fully on stream and
will reduce costs and improve revenue opportunities for each branch. Last
summer, we purchased a mobile baling unit. This crushes scrap vehicles,
following their decontamination, and makes the disposal of metal more efficient.
Importantly, the baling unit also enables us to enhance margins. The increased
flexibility these processing facilities and baling unit provide us with is not
to be underestimated. As volumes rebuild, significant further benefits will
accrue.

Our investment in IT continues, with our project to replace our core vehicle
management systems reaching its final stages. A number of important elements
were successfully introduced during the year. In March, our new buyer
registration system went live. This provides us with an integrated database
containing profiles of all our customers, together with their buying patterns
and related data. The database provides us with a very useful tool through which
we can improve and refine our marketing to our increasingly varied customer
base. We expect to complete the first stage upgrade of our vehicle management
systems this year.

Following this, we intend to focus IT investment on enhancing online links with
our insurance customers and other vehicle suppliers. We believe that there is
also scope to improve communication with our buyers. Our internet site,
www.universal-salvage.com, continues to attract a large number of visitors and
has been updated throughout the year.

Prospects

Over the difficult year that we have just completed, the Board has resolutely
continued to invest in areas it believes will provide increasing and reliable
long-term growth.

As we stated at the half year, the speed of our recovery is dependent upon the
rate at which we win new contracts. Whilst this process is taking longer than we
first anticipated, the business has been strengthened in key areas to drive it
forward effectively and we are encouraged by the new business we have secured in
all areas.

Volumes are now being rebuilt around our enhanced service offering that is
widening our income streams and broadening our customer base. This will reduce
reliance on particular customers and a single income stream. There are
substantial opportunities to grow both within our core business and in
complementary areas. We will be maximising all our efforts to capitalise on
these opportunities. I remain confident of the Group's prospects over the
medium-term and expect the coming year to confirm an improving trend in our
earnings.

Alexander N Foster
Chairman


GROUP PROFIT AND LOSS ACCOUNT
for the 53 weeks to 3 May 2003

                                            53 weeks to    52 weeks to
                                                  3 May       27 April
                                                   2003           2002
                                                              Restated
                                    Note          £'000          £'000


Turnover                               1         61,266         72,030

Cost of sales                          1        (46,390)       (51,392)
                                             ----------     ----------
Gross profit                                     14,876         20,638

Administrative expenses                         (13,899)       (13,970)
                                             ----------     ----------
Operating profit                       2            977          6,668

Profit on sale of unlisted investment                 -            100

Interest receivable                                   8             12
Interest payable                                   (421)          (272)
                                             ----------     ----------
Profit on ordinary activities          3            564          6,508
before taxation

Tax on profit on ordinary              4           (260)        (2,049)
activities                                   ----------     ----------

Profit on ordinary activities                       304          4,459
after taxation

Dividends                              5           (687)        (1,415)
                                             ----------     ----------
Retained (deficit)/profit                          (383)         3,044
                                             ----------     ----------

Earnings per Ordinary share            6            1.1p          16.2p
(pence) - basic

Earnings per Ordinary share            6            1.1p          15.9p
(pence) - diluted

Dividend per Ordinary share            5            2.5p           5.0p
(pence)


GROUP BALANCE SHEET
at 3 May 2003
                                                     As at       As at
                                                     3 May    27 April
                                                      2003        2002
                                          Note       £'000       £'000

Fixed assets
Tangible fixed assets                               31,676      30,483
Investments                                            651         332

Current assets
Stock                                                2,121       3,915
Debtors                                              2,831       4,352

Cash at bank and in hand                                11       1,054
                                                ----------  ----------
                                                     4,963       9,321
                                                ----------  ----------
Creditors: amounts falling due
within one year                                     (5,606)     (9,396)
                                                ----------  ----------
Net current liabilities                               (643)        (75)
                                                ----------  ----------
Total assets less current liabilities               31,684      30,740

Creditors: amounts falling due
after one year                                      (6,694)     (5,309)

Provision for liabilities and charges               (1,044)     (1,128)
                                                ----------  ----------
Net assets                                          23,946      24,303                                                  
                                                ----------  ----------
Capital and reserves
Called up share capital                              2,811       2,807
Share premium                                        1,151       1,129
Capital redemption reserve                              30          30
Revaluation reserve                                  4,791       4,840
Profit and loss account                             15,163      15,497
                                                ----------  ----------
Equity shareholders' funds                   7      23,946      24,303
                                                ----------  ----------



GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the 53 weeks to 3 May 2003

                                            53 weeks to    52 weeks to
                                                  3 May       27 April
                                                   2003           2002
                                                  £'000          £'000
Profit on ordinary activities after
taxation for the period                             304          4,459

Surplus on revaluation of properties                  -            608
                                             ----------     ----------
Total recognised gains and losses since
the last annual report                              304          5,067
                                             ----------     ----------



GROUP CASH FLOW STATEMENT
for the 53 weeks to 3 May 2003

                                            53 weeks to    52 weeks to
                                                  3 May       27 April
                                                   2003           2002
                                    Note          £'000          £'000
                                             ----------     ----------

Net cash inflow from operating         8          6,466          8,374
activities                                   ----------     ----------

Returns on investment and
servicing of finance
Interest received                                     8             12
Interest paid                                      (408)          (221)

Interest element of finance lease                    (2)            (3)
rentals                                      ----------     ----------

Net cash outflow from returns on
investment and servicing of
finance                                            (402)          (212)                                                 
                                             ----------     ----------
Taxation
Corporation tax paid                               (691)        (2,104)
                                             ----------     ----------
Capital expenditure and financial
investment

Payments to acquire tangible fixed               (4,591)        (7,222)
assets

Receipt of grants towards land                       20            621
development

Receipts from sales of tangible                      28              8
fixed assets

Receipt from sale of unlisted                         -            100
investment                                   ----------     ----------

Purchase of own shares by the
Universal 

Salvage plc 2000 Employees' 
Share Trust                                        (319)             -
                                             ----------     ----------
                                                 (4,862)        (6,493)
                                             ----------     ----------
Equity dividends paid                            (1,392)        (1,185)
                                             ----------     ----------
Net cash outflow before                            (881)        (1,620)
financing                                    ----------     ----------

Financing

Issue of Ordinary share capital                      26            964

Capital element of finance lease
rental payments                                     (18)           (16)

Bank and other loans drawndown                    1,302          1,320
                                             ----------     ----------
Net cash inflow from financing                    1,310          2,268
                                             ----------     ----------
Increase in cash                       9            429            648
                                             ----------     ----------


NOTES TO THE PRELIMINARY RESULTS

 1. Basis of preparation

    Subject to the matter referred to in the paragraph below, the accounting
    policies adopted are consistent with those in the most recently published
    set of financial statements dated 27 April 2002.

    As part of the regular review of accounting policies, and cognisant of the
    convergence of UK Accounting Standards with International Accounting
    Standards, a change has been made in respect of turnover and cost of sales
    classification. In previous financial statements, the amounts recharged to
    insurers for recovery and storage when collecting vehicles from garages on
    their behalf have been included within turnover and cost of sales. It is the
    Board's view that these recharges do not represent revenue as the amounts
    recharged are not fees for services rendered. Previous period's figures have
    been restated to reflect this change, which has no impact on profit or net
    assets. The consequences of this change have been to reduce turnover and
    cost of sales in the 53 weeks to 3 May 2003 by £8,892,000 (52 weeks to 27
    April 2002: £12,951,000).

 2. Operating profit

    Operating profit is stated after charging non-recurring charges totalling
    £605,000 (2002: £711,000). These one-off items, charged within
    administrative expenses, arise from costs of reorganising continuing
    operations and from costs relating to abortive site acquisitions resulting
    from planning permission issues. In addition to these costs, additional
    depreciation of £383,000 has been charged to operating profit following a
    review of the estimated useful lives of certain fixed assets.

 3. Continuing activities

    All items dealt with in arriving at profit on ordinary activities before
    taxation relate to continuing activities.

 4. Taxation

    The tax charge represents an effective rate of 46.1% (2002: 31.5%). The
    higher effective rate of tax has arisen from the increased proportion,
    relative to profit, of disallowed expenses and depreciation on non-tax
    qualifying assets.

 5. Dividend

    A final dividend of 1.3 pence per Ordinary share (2002: 3.8 pence per
    Ordinary share), making a total for the period of 2.5 pence per Ordinary
    share (2002: 5.0 pence per Ordinary share), is proposed to be paid, subject
    to shareholder approval, on 18 September 2003 to shareholders on the
    register on 15 August 2003. The proposed final dividend amounts to £362,000
    (2002: £1,067,000).

 6. Earnings per share

    Earnings per share has been calculated on the profit on ordinary activities
    after taxation for the period of £304,000 (2002: £4,459,000) divided by the
    weighted average number of Ordinary shares, excluding the shares held by the
    Universal Salvage plc 2000 Employees Share Trust, of 27,839,000 (2002:
    27,575,000).

    The diluted earnings per share has been calculated on the profit on ordinary
    activities after taxation for the period of £304,000 (2002: £4,459,000)
    divided by the weighted average number of Ordinary shares taking into
    account all dilutive potential Ordinary shares of 28,224,000 (2002:
    28,024,000).

 7. Reconciliation of movement in equity shareholders' funds

                                             53 weeks to   52 weeks to
                                                   3 May      27 April
                                                    2003          2002
                                                   £'000         £'000

    Opening equity shareholders' funds            24,303        19,687
    Revaluation of properties                          -           608
    Retained (deficit)/profit for the               (383)        3,044
    period
    Issue of Ordinary share capital                   26           964
                                             -----------     ---------
    Closing equity shareholders' funds            23,946        24,303
                                             -----------     ---------


 8. Reconciliation of operating profit to net cash inflow from continuing
    operating activities

                                                     53 weeks to   52 weeks to
                                                           3 May      27 April
                                                            2003          2002
                                                           £'000         £'000

            Operating profit                                 977         6,668
            Depreciation of tangible fixed assets          3,038         2,117
            (Profit)/loss on disposal of fixed                (1)           20
            assets
            Decrease in stock (excluding transfers
            between fixed assets and stock)                2,107           356
            Decrease/(increase) in debtors                 1,521          (377)
            Decrease in creditors due within one          (1,176)         (410)
            year
                                                     -----------     ---------
            Net cash inflow from operating                 6,466         8,374
            activities                               -----------     ---------

 9. Reconciliation of net cash flow to movements in net debt

                                                 53 weeks to   52 weeks to
                                                       3 May      27 April
                                                        2003          2002
                                                       £'000         £'000

        Increase in cash in the period                   429           648
        Cash outflow from repayment of leases             18            16
        Cash inflow from increase in bank loans
        and mortgages                                 (1,302)       (1,320)

                                                 -----------     ---------
        Movement in net debt in the period              (855)         (656)

        Net debt at 27 April 2002                     (5,837)       (5,181)
                                                 -----------     ---------
        Net debt at 3 May 2003                        (6,692)       (5,837)
                                                 -----------     ---------

10. Analysis of net debt

                                                 As at           As at
                                                 3 May        27 April
                                                  2003            2002
                                                 £'000           £'000

    Cash at bank and in hand                        11           1,054
    Bank overdraft                                   -          (1,472)
    Finance leases                                  (9)            (27)
    Bank loans and mortgages                    (6,694)         (5,392)
                                           -----------      ----------

                                                (6,692)         (5,837)
                                           -----------      ----------

11. Report and accounts and preliminary announcement

    The Board of Directors approved the report and accounts and this preliminary
    announcement on 25 June 2003. The auditors have completed their audit for
    the 53 weeks ended 3 May 2003 and the preliminary announcement represents an
    extract from these audited accounts, upon which the auditors have issued an
    unqualified opinion. The report and accounts will be posted to shareholders
    on 13 August 2003. Further copies can be obtained from the Company's
    registered office at Acrey Fields, Woburn Road, Wootton, Bedfordshire, MK43
    9EJ.


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