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Universe Grp. (UNG)

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Tuesday 27 March, 2007

Universe Grp.

Final Results

Universe Group PLC
27 March 2007

27 March 2007







                               UNIVERSE GROUP PLC



                         UNAUDITED PRELIMINARY RESULTS

                      FOR THE YEAR ENDED 31 DECEMBER 2006



Universe Group PLC ('Universe' or the 'Company'), the retail and information
systems company, is pleased to announce unaudited Preliminary Results for the
year ended 31 December 2006.



KEY POINTS:



• Operating profit on continuing business, before goodwill impairment and
  non-recurring costs, £656,000  (2005: £1,526,000)

• Asset impairment adjustment and non-recurring cost totalling £6.6 million

• Loss before tax and goodwill impairment £895,000 (2005: Profit £357,000)

• New contract with major global oil company

• Restructured bank facility

• Sale of French bureaux de change

• Focus upon core HTEC business

• Placing of equity of £3.0 million



Commenting on today's results, John Scholes, Chairman of Universe said:



'Universe has taken a number of important steps taken to refocus and re-energise
the business in the last few weeks, to address many of the issues that led to
the generally disappointing performance in 2006. Since I joined the Board
earlier this year, with Paul Cooper who was appointed as Chief Executive at the
same time, we, and our fellow directors, have completed the strategic review
that the board initiated in November. Universe has been through difficult times
in the recent past, but we have put into place a sound basis from which to build
the business anew. I look forward to 2007 and beyond with great purpose and
optimism.'





For Further Information:



Universe Group plc                                              023 8068 9510

John Scholes, Chairman

Paul Cooper, Chief Executive



Charles Stanley Securities                                      020 7149 6000

Russell Cook

Anthony Noakes








Chairman's Statement



Introduction



Universe has taken a number of important steps taken to refocus and re-energise
the business in the last few weeks, to address many of the issues that led to
the generally disappointing performance in 2006. The board initiated a strategic
review in November, which has now been completed. That review included board
composition, corporate structure, financial and operational aspects, all of
which are described in more detail below.



Results and Current Trading



In 2006 we achieved an operating profit on our continuing business (pre goodwill
impairment and non-recurring items) of £0.7 million, compared to £1.5 million
the previous year. Our sales on continuing business were £11.3 million, against
£15.6 million for 2005, yielding a profit before tax on our continuing business
(pre goodwill impairment and non-recurring items) of £0.3 million.



The 2006 results were disappointing in the context of prior years. Group demands
necessitated cash restraints on HTEC, which have undoubtedly held it back.
Nonetheless, HTEC generated both cash and profits. HTEC continues to make good
progress.  The Company has won a contract with a major oil company to supply
software and services to its European petrol retailing outlets with the
opportunity to extend this contract on a global basis.



The Company is undertaking a major restructuring of its finances through a
placing of new equity to raise £3.0 million (before costs). We are also putting
in place a new bank facility to replace the exiting debt structure.  I am
confident that HTEC's operating momentum will resume in 2007, to the benefit of
both the business and our shareholders.



The Universe Team



What has impressed me most in working with Universe since joining the Board in
January 2007 is the enthusiasm and professionalism of its team. The Company is
staffed by people who are genuine enthusiasts for what they do. I am confident
that this team can take us to great success in the future.



I believe that Universe has all the ingredients to move ahead strongly from its
present position.



The addition of Paul Cooper to the executive team as CEO brings deep and
pertinent operating experience to the team. His senior roles in hardware,
software and managed services companies span start-ups, large high growth
international companies and turnarounds. His contribution to the Company will be
extensive and positive.



As part of our recent board changes, Ray Mackie has moved from being Executive
Chairman to a non-executive director role. Ray continues to support the company
both in his board role and as a significant shareholder.



Restructuring



As announced in the last AGM, the decision was taken to divest the French
bureaux de change business. That divestment has now taken place, as approved by
our shareholders at the EGM on 26 January 2007.



Also approved at that EGM was a small share placing which raised £373,000. The
proceeds from both the disposal and the placing have been used to repay the
group's overdraft with its bankers Royal Bank of Scotland Plc.



Our review also considered it important to restructure our banking facilities
and move to a new bank, which supports the new team and direction of the
Company. We are pleased to announce that the Company has agreed a facility with
a new bank, including a rescheduled lending facility with repayment terms in
line with the current operations of the business. The agreement is expected to
be signed on or before 31 March 2007.



Strategic Review



On 17 November 2006, the Company announced that it had received a number of
unsolicited approaches to acquire the Company, but had received no firm
proposals.  However, in the light of the expressions of interest that had been
received, and given the continuing disappointing share price performance, the
board decided to conduct a strategic review of the business and the
opportunities available to the Company, including means of improving the
Company's balance sheet.



That review is now complete. While there have been discussions with a number of
third parties, none of those discussions have resulted in specific proposals
which have a material chance of being of interest to Universe's shareholders.
The board has therefore taken steps to focus on the operational strengths of its
key business, HTEC Limited ('HTEC'), and to strengthen the group's balance sheet
by securing a supportive banking relationship and bringing further equity
funding into the group by means of a placing to raise £3.0 million before costs.
With this backing, I am confident that we can exploit our excellent market
position to drive strong growth in the business.



Dividend



We are now very strongly focused on generating long term growth. In order to
achieve this we need to provide sufficient financial resources to deliver the
growth plan. Therefore, we do not propose paying a final dividend for the year
but will review the position regarding future dividend payments in the context
of the performance of the group.



Prospects



Universe has been through difficult times in the recent past, but we have put
into place a sound basis from which to build the business anew. I look forward
to 2007 and beyond with great purpose and optimism.



John Scholes

Chairman











Chief Executive's Report



Having taken part in the strategic review set up by the Board in 2006, I agreed
to become CEO to drive through the recommendations from that process at the
beginning of 2007.



The main elements of the future strategy are a financial restructuring, the
disposal of non core activities and a focus on growing the now unencumbered
subsidiary, HTEC, into new markets and territories.



HTEC



From the start of 2007 this is the only continuing business and it provides a
solid base for growth. HTEC already occupies a leading position in the UK
forecourt managed services market and is poised to expand into international
markets both in forecourt services and the wider retail arena.



Managed services revenues are now around 50% of turnover, enhancing the quality
of earnings of the Company from good margin contract revenue streams.



HTEC provides Mission Critical Services to a customer base including: ASDA,
Morrison, Texaco Chevron, Total Oil and BP Europe.



The HTEC product sets fall into 2 main categories:



Real Time Management Solutions:-

          On line loyalty schemes

          Virtual Back Office

          Automatic number plate recognition

          Help desk

          Field service



Payments systems:-

          Chip and PIN terminals

          Outdoor payment terminals

          EFT solutions

          Petrol EPOS and forecourt controllers



These systems give our customers unparalleled on-line power from the information
gathered and reported on.  HTEC's on-line systems for example help to prevent
'drive offs' from petrol stations by instant comparison of customer number
plates to our databases prior to authorising pump use.  Our systems also
constantly monitor customers' operational-critical equipment allowing us to
alert customers immediately of malfunctions or disruption to their facilities.
This power is encapsulated as 'Information Pays' in the new 2007 marketing
collateral.



The Board is committed to continued development and enhancement of the product
range to keep ahead of anticipated technical and legislative changes.



Infrastructure and Investment



HTEC operates from modern well-equipped premises with sufficient capacity for
growth.



To achieve the Board's growth targets, 2007 will see emphasis placed on
investment in the sales and marketing function. Together with the strategic
review's product clarification initiative this investment will take HTEC into
new markets and geographic territories. A programme of trade shows both in the
UK and Europe, product re-branding, website enhancement and new marketing
material are being put in place to support this programme.



The strategic review has at its core a growth message but also identified that
the decline in manufacturing revenue from HTEC's traditional business lines has
resulted in manufacturing overcapacity. I will be addressing this issue as our
Managed Service business grows over 2007 and 2008.



I have commissioned an internal study of the carrying value of our goodwill. The
goodwill arising on the acquisition of the currency division has been written
off in the discontinued line. The remaining goodwill relates to HTEC. Our
initial calculations underpin a carrying value of £20.1 million but applying a
more challenging discount rate (the cost of money is rising) results in an
impairment of £2.8 million. This amount has been written off the carrying value,
which is now £17.3 million.



Business Focus



Our focus in 2007 is on sales of our new petrol outdoor payment systems and
loyalty systems. In the former we have a proven system, which will be taken up
as retailers upgrade their pumps to accommodate the mandated requirements of
Stage 2 Vapour Recovery. In loyalty we have systems, which can and will be sold
across borders and we will be seeking every opportunity for global, European and
national operators to buy HTEC's systems for implementation in other European
countries and beyond.



Paul Cooper

Chief Executive Officer


Unaudited Consolidated Income Statement

                                                                                                          Restated
                                                Notes                       2006                              2005
                                                              Result                                                
                                                           excluding                                                
                                                               asset          Asset                                
                                                          impairment     impairment            Total         Total
                                                                £000           £000             £000          £000
Continuing operations                                                                                             
Revenue                                                       11,346              -           11,346        15,669
Net operating costs excluding non-recurring                                                                          
  items                                                     (10,690)              -         (10,690)      (14,143)
                                                                                                           
Operating profit before non-recurring items      2.              656              -              656         1,526
Non-recurring items                              3.            (612)        (2,871)          (3,483)             -
                                                                                                           
Operating profit/(loss)                                           44        (2,871)          (2,827)         1,526

Finance costs excluding non-recurring items                    (326)              -            (326)         (546)
Non-recurring finance costs                      3.            (359)              -            (359)             -

Finance costs                                    5.            (685)              -            (685)         (546)
                                                                                                           
(Loss)/profit before taxation                                  (641)        (2,871)          (3,512)           980
                                                                                                                  
Taxation                                                           -              -                -         (119)
                                                                                                           
(Loss)/profit for the year from continuing                                                                           
  operations                                                   (641)        (2,871)          (3,512)           861
                                                                                                                    
Loss for the year from discontinued operations   4.            (254)        (2,753)          (3,007)         (623)
                                                                                                           
Loss)/profit for the year attributable to                                                                            
  equity shareholders                                          (895)        (5,624)          (6,519)           238   
                                                               
                                                                                                           
(Loss)/earnings per share (p)                                                                                       
Basic and diluted                                                                                                   
Continuing                                                                                  (5.41)            1.40
Discontinued                                                                                (4.63)           (1.01)
                                                                                                           
                                                 6.                                        (10.04)            0.39
                                                                                                           

 


 
Unaudited Statement of changes in equity
                                                                   Group
                                                                2006             2005
                                                                £000             £000
                                                                                     
At 1 January                                                  24,638           24,724
Revaluation changes                                            (131)            (170)
Deferred tax on revaluation changes                                -               60
Shares issued                                                    389              342
(Loss)/profit for the year attributable to equity                                     
  shareholders                                               (6,519)              238
Exchange differences                                            (12)             (99)
Dividends declared                                             (164)            (457)
                                                                                     
At 31 December                                                18,201           24,638
                                                                       
 


 

Unaudited Balance sheets                                              
                                             Notes                 Group
                                                                2006             2005
                                                                £000             £000
Non-current assets                                                     
Goodwill                                      8.              17,250           20,983
Development costs                                              2,655            2,533
Fonds de commerce                                                  -            2,433
Property, plant and equipment                                  1,472            2,068
Investments                                                        -                -
                                                                                     
                                                              21,377           28,017
                                                                                     
Current assets                                                                       
Inventories                                                    1,205            1,795
Trade and other receivables                                    1,793            2,744
Cash and cash equivalents                                          5              146
                                                                       
                                                               3,003            4,685
 Assets held for sale                                            854                -
                                                                       
                                                               3,857            4,685
                                                                       
Total assets                                                  25,234           32,702
                                                                       
Current liabilities                                                                  
Trade and other payables                                     (3,412)          (3,272)
Current tax liabilities                                        (296)            (390)
Short term borrowings                                        (3,140)          (2,621)
                                                                       
                                                             (6,848)          (6,283)
                                                                                     
Liabilities directly associated with                           (154)                -
assets classified as held for sale
                                                                                     
                                                             (7,002)          (6,283)
                                                                                     
Non-current liabilities                                                              
Medium term borrowings                                          (31)          (1,454)
Deferred tax liabilities                                           -            (327)
                                                                       
                                                                (31)          (1,781)
                                                                       
Total liabilities                                            (7,033)          (8,064)
                                                                       
Net assets                                                    18,201           24,638
                                                                       
Equity                                                                               
Share capital                                                  3,281            3,147
Shares to be issued                                                -               39
Share premium                                                 10,117            9,823
Revaluation reserve                                                -              131
Other reserves                                                 8,603            8,603
Translation reserve                                            (181)            (169)
Profit and loss account                                      (3,619)            3,064
                                                                       
Total equity                                                  18,201           24,638
                                                                       
 


Unaudited Group Cash Flow Statements                                                                  
                                                                                                              Restated
                                                                                                2006              2005
Cash flows from operating activities:                                                                         
Operating profit/(loss)                                                                                       
  - Continuing                                                                               (2,827)             1,526
  - Discontinued                                                                             (2,680)             (623)
Depreciation and amortisation                                                                    629               933
Loss on disposal of fixed assets                                                                                    55
Impairments                                                                                    5,624                 -
Movement in working capital:                                                                                          
  Decrease in inventories                                                                        590               641
  Decrease in receivables                                                                         97               261
  Increase/(decrease) in payables                                                                375             (991)
Interest paid                                                                                  (326)             (465)
Dividends paid                                                                                 (255)             (305)
Tax paid                                                                                        (94)                 -
                                                                                                                      
Net cash inflow from operating activities                                                      1,133             1,032
                                                                                                                      
Cash flows from investing activities:                                                                                 
Purchase of tangible fixed assets                                                               (79)             (294)
Purchase of intangible fixed assets                                                            (366)             (856)
Disposal of fixed assets                                                                          --               515
                                                                                                                      
Acquisitions and disposals                                                                         -               191
                                                                                                                      
Net cash outflow from investing activities:                                                    (445)             (444)
                                                                                                                      
Cash flow from financing activities:                                                                                  
Capital elements of lease payments                                                             (166)             (432)
Repayment of loans                                                                             (979)             (945)
Issue of shares net of expenses                                                                  389               342
Other new loans                                                                                    -               290
                                                                                                                      
Net cash outflow from financing:                                                               (756)             (745)
                                                                                                                      
Decrease in cash and cash equivalents:                                                          (68)             (157)
Cash and cash equivalents at beginning of year                                                 (393)             (217)
Exchange differences                                                                            (12)              (19)
                                                                                                                      
Cash and cash equivalents at end of year                                                       (473)             (393)
                                                                                                                      
 

 



Notes



1.    Financial Information



These statements do not constitute accounts as defined by section 240 of
the Companies Act 1985.



The financial information for the full preceding year is based on the
statutory accounts for the financial year ended 31 December 2005 as adjusted to
International Financial Reporting Standards.  These statements have been
prepared on the going concern basis. The Directors consider this to be
appropriate in the context of the matters referred to in this announcement, and
in particular the placing of new equity to raise £2.8 million after expenses and
new bank facilities to replace our existing debt structure.  Nonetheless the
going concern basis is dependent upon the passing of the Resolutions at the EGM
referred to in the announcement.



The Company's financial statements have been prepared under the historic
cost convention modified by property revaluations on a going concern basis and
in accordance with applicable International Financial Reporting Standards (IFRS)
as adopted for use in the EU and as applied in accordance with the Companies Act
1985.



2.    Operating profits on continuing operations before non-recurring items

                                                                                       2006           2005
                                                                                       £000           £000
                                                                                                          
        Revenue                                                                      11,346         15,669
        Cost of sales                                                                (7,911)       (10,517)
                                                                                              
        Gross profit                                                                  3,435          5,152
        Administrative expenses                                                      (2,779)        (3,626)
                                                                                             
        Operating profit on continuing operations before                               656          1,526
        non-recurring items                                                                   


3.    Non-recurring items


                                                                                                      2006
                                                                                                      £000
                                                                                                          
      Results excluding non-current asset impairment                                                      
      Write off HTEC non RoHS compliant stock that after 1 July 2006 cannot be                             
        used in some manufactured products                                                             267
      Group restructuring costs                                                                        345
                                                                                              
                                                                                                       612
                                                                                                          
                                                                                                        
      Non-current asset impairment                                                                        
      Impairment of HTEC Goodwill                                                                    2,811
      Impairment of property to be sold in 2007                                                         60
                                                                                              
                                                                                                     2,871
                                                                                                        
      Finance costs                                                                                       
      Accelerated amortisation of loan issue costs                                                     254
      Bank fees                                                                                        105
                                                                                              
                                                                                                       359
                                                                                                        



4.    Discontinued operations



On 29 December 2006 the Group agreed to dispose of Bellword Sarl, which
carried out the Group's remaining foreign currency operations.  The disposal was
approved at an extraordinary general meeting  on 26 January 2007 and completed
on 30 January 2007 on which date control of Bellword Sarl passed to the
acquirer.



The discontinued operations reported a loss in 2006 of £254,000, which
has been included in the 2006 consolidated income statement



A loss of £2,753,000 arose on the impairment of the assets and
liabilities of Bellword Sarl prior to its disposal, being the contracted
proceeds of disposal less the carrying amount of the subsidiary's net assets and
attributable goodwill.





5.    Finance costs

                                                                                         2006         2005
                                                                                         £000         £000
                                                                                                          
        Interest payable on bank loans and overdrafts                                     300          421
        Interest payable on finance leases                                                 26           44
        Amortisation of loan issue costs                                                    -           81
        Non-recurring finance costs                                                       359            -
                                                                                              
                                                                                          685          546



       Details of 2006 non-recurring items are included in note 3.





6.    Loss Per Share



The loss per share is calculated by reference to the weighted average of
64,973,000 ordinary shares in issue during the year (2005: 61,506,000).  The
number of ordinary shares in issue at 31 December 2006 was 65,622,396 (2005:
62,927,345).





7.    Dividend



The Board is not recommending payment of a final dividend (2005: 0.25p).





8.    Goodwill

                                             2006         2006        Total         2005         2005        Total
                                             HTEC   Master-change                   HTEC   Master-change          
                                             £000         £000         £000         £000         £000         £000
                                                                                                                  
        Cost at 1 January                  20,061          922       20,983       20,061          922       20,983
        Impairment                        (2,811)        (922)      (3,733)            -            -            -
                                                                                                                  
        Cost at 31 December                17,250            -       17,250       20,061          922       20,983
                                                                                                                  




Goodwill has been tested for impairment in accordance with IAS 36 by
discounting estimated future cash flows. The Group prepares cash flow forecasts
derived from the most recent financial forecasts approved by the Directors. The
discount rate used is the Group's estimated weighted average cost of capital.
Management has concluded that the carrying value of HTEC Goodwill after
carrying out this impairment review is £17.25 million.





9.    Events after the balance sheet date



An EGM was held on 26 January 2007 to:

1)     agree to the sale of Bellword Sarl to Prime Bureau Limited, of
which R.Mackie is a Director and shareholder; and

2)     agree to a placing of 6,225,000 new ordinary 5p shares at 6p per
share;



On 26 January 2007 Company placed 6,225,000 new ordinary shares at 6
pence per share.



On 28 January 2007 the sale of Bellword Sarl was completed.





10.   Report and Accounts



Copies of the Annual Report and Accounts will be sent to shareholders in
April 2007 and copies will also be available, free of charge, from the Company's
registered office at George Curl Way, Southampton International Park,
Southampton, SO18 2RX.




                      This information is provided by RNS
            The company news service from the London Stock Exchange