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Universal Salvage (UVS)

  Print      Mail a friend       Annual reports

Thursday 29 November, 2001

Universal Salvage

Interim Results

Universal Salvage PLC
29 November 2001

                              UNIVERSAL SALVAGE PLC

                        Vehicle salvage and services group


  * Pre-tax profit increased by 10.4% to £3.1m (2000: £2.8m)

  * Gross margin improved from 21.8% to 24.8%

  * Earnings per share increased 11.3% to 7.9p per share (2000 restated:
    7.1p per share)

  * Interim dividend per share increased by 9.1% to 1.2p (2000: 1.1p)

  * Introduction of new initiatives for auction customers including internet
    proxy bidding

  * Continuing development of services to motor insurers and vehicle

  * Strong cash generation from operating activities

  * Continuing to improve operational efficiency

  * Capital investment in vehicle de-polluting facilities

Alexander Foster, Chairman, commented,

'I am very pleased to announce a further improvement in our trading results
for the first half of the financial year. The results reflect our continuing
success in both extending the range of services we offer to our insurance
customers and auction bidders, and the higher selling prices we have been able
to achieve.

The opportunities to grow and develop our insurance contract business remain
excellent and we are strongly focused on enhancing revenue streams. In
addition, the EU End of Life Vehicle legislation will offer many opportunities
in which Universal Salvage can participate for the first time. We are playing
an active part in the consultation process prior to the legislation being
introduced and now await definition of how it will be implemented and what the
probable revenue stream will be.'

For further information:

Universal Salvage plc  Martin Hynes, Chief Executive         Tel: 020 7448 1000

Biddicks               Katie Tzouliadis                      Tel: 020 7448 1000



I am very pleased to announce a further improvement in our trading results for
the first half of the financial year. Operating profit increased by 6.2 % to 
£3.1m (2000: £3.0m) and profit before tax rose 10.4% to £3.1m (2000: £2.8m).
The profit before tax includes £0.1m of profit on disposal of an unquoted
investment. Basic earnings per share increased by 11.3% to 7.9p (2000
restated: 7.1p) and increased by 8.5 % on a normalised basis. Net assets at 27
October 2001 rose to £22.0m from £17.7m last year and net borrowings were
unchanged at £4.2m representing gearing of 19.3% (2000: 23.9%). Turnover
reduced slightly by 1.1% in the half-year compared to the corresponding period
last year. This was more than offset by further improvements to gross margins,
which grew from 21.8 % this time last year to 24.8% currently. This reflects
our continuing success in both extending the range of services we offer to our
insurance customers and auction bidders, and the higher selling prices we have
been able to achieve at auction by focusing on vehicle presentation.

These results are particularly pleasing given the challenging circumstances
during the second quarter of the year. Immediately following the tragic events
of September 11, the Group suffered temporary disruption with a significant
reduction in the numbers attending our auctions. I am pleased to report,
however, that auction attendance has returned to expected levels and
competition for vehicles is as vigorous as ever. This half-year has also seen
a major change in the composition of our insurance customers compared to last
year and it is satisfying to see the volumes generated by those new contracts
performing in line with our projections. The second half historically has been
much stronger than the first half and the results reflect this seasonal nature
to the business. The number of vehicles we handle rises sharply after the end
of October, as the incidence of accidents increases during the darker winter


The Board is pleased to declare an increased interim dividend of 1.2p per
share (2000: 1.1p per share), which will be paid on 8 January 2002 to
shareholders on the register on 7 December 2001. This represents a 9.1%
increase over the interim dividend paid last year.


Improving the operational efficiency around our core insurance business
remains the Group's primary focus. By working closely with all the Group's
customers we continue to concentrate on removing costs from the insurance
claims process and our own internal processes.

The expansion of our Engineering Services section has assisted a number of our
insurance customers in reducing their costs of claims by using our own
engineers and reducing unnecessary duplication. The trials have been very
successful and are being rolled out to other customers.

The appropriate use of I.T. in reducing the claims process has been an
important part of our investment strategy. During the last six months we have
upgraded our online salvage management system, and our website Our main focus, however, has been on the
implementation of an integrated new system replacing our core vehicle
management and financial systems and this project is progressing well. Our
core insurance business has benefited significantly from the investment that
we have made over the last two years and we will continue to invest as and
when it is appropriate.

The trial introduction of internet proxy bidding at our salvage auctions at
the Sandwich site earlier this year has been very successful in enhancing
results at the branch. A new version of the system is about to be launched
covering breaker auctions and we anticipate this will be quickly rolled out to
all our sites during the second half of the financial year. This continues our
philosophy of broadening our marketplace by creating as many different
distribution channels as possible.

We continue to invest in order to improve operational efficiency. An
additional 10 acres at our Chester site will become operational next month.
This will increase our capacity at this site by 50%.

Capital investment has been made in our vehicle processing areas. These
facilities de-pollute all low value vehicles and enable us to maximise their
value. These will be of particular importance from January 2002, when the new
Special Waste legislation changes how salvage companies must treat scrap (and
probably breaker) vehicles. Thereafter it will become an offence to handle
such vehicles if they have not been de-polluted on licensed premises.


On 15 October 2001, the Board announced the resignation of Alastair McGill as
I.T. and Customer Services Director. Alastair decided to take early retirement
and his operational duties have been taken on by Biju Chudasama, the I.T.
Director of our main trading subsidiary. The Board would like to record their
thanks to Alastair for his contribution and wish him all the best for the


Currently, the marketplace in which we operate is mainly represented by
insurance write-off vehicles. End of Life vehicles ('ELV') have historically
represented an entirely separate and distinct market. There is no doubt that
the European Community ELV legislation will offer many opportunities in which
Universal Salvage can participate for the first time. The Board has always
maintained that we concentrate on our core insurance market. Any income that
arises out of the ELV process will be a bonus. Universal Salvage has been
playing an active part in the consultation process prior to the legislation
being introduced next year. We now await the definition of how it will be
implemented and what the probable revenue stream will be.

The opportunities to grow and develop our insurance contract business remain
excellent and we are strongly focused on enhancing revenue streams and
continuing to improve the Group's quality of earnings. This would not be
possible, however, without the efforts of all our staff and the Board would
like to thank them all for their contributions during the six months.

I look forward to reporting further progress at the year-end.

Alexander N Foster


29 November 2001

                                  Six months to   Six months to   12 months to
                                     27 October      28 October       28 April
                                           2001            2000           2001
                           Note           £'000           £'000          £'000

  Turnover                               40,374          40,813         84,217
  Cost of sales                        (30,360)        (31,907)       (65,211)
  Gross profit                           10,014           8,906         19,006
  Administrative                        (7,080)         (6,166)       (12,661)
                                          2,934           2,740          6,345
  Other operating income                    200             211            435
  Operating profit                        3,134           2,951          6,780
  Profit on sale of                         100               -              -
  unlisted investment                                                         
  Interest receivable                         5               1             24
  Interest payable                        (117)           (125)          (248)
  Profit before tax           2           3,122           2,827          6,556
  Taxation                    3           (952)           (917)        (2,000)
  Profit after tax                        2,170           1,910          4,556
  Dividends                   5           (346)           (294)        (1,131)
  Retained profit                         1,824           1,616          3,425
  Earnings per ordinary       6            7.9p            7.1p          16.9p
  share (pence) - basic                                                       
  Earnings per ordinary       6            7.7p            6.9p          16.3p
  share (pence) -                                                             
  Dividend per ordinary                    1.2p            1.1p           4.2p
  share (pence)                                                               


                                  Six months to   Six months to   12 months to
                                     27 October      28 October       28 April
                                           2001            2001           2001
                                           £000            £000           £000

  Profit on ordinary                      2,170           1,910          4,556
  activities after taxation                                                   

  Prior year adjustment       4               -           (593)          (593)

  Total recognised gains                  2,170           1,317          3,963
  and losses relating to                                                      
  the period                                                                  

                                               As at         As at       As at
                                          27 October    28 October    28 April
                                                2001          2000        2001
                                  Note         £'000         £'000       £'000

  Fixed assets 
  Tangible fixed assets                       27,891        23,259      25,717
  Investments                                    332           336         332
  Current assets                                                              
  Stock                                        2,857         2,643       3,973
  Debtors                                      3,961         3,983       3,975
  Cash                                             9             9           8
                                               6,827         6,635       7,956
  Creditors: amounts falling                 (8,840)       (9,253)     (9,624)
  due within one year                                                         
  Net current liabilities                    (2,013)       (2,618)     (1,668)
  Total assets less current                   26,210        20,977      24,381
  Creditors: amounts falling                 (3,318)       (2,631)     (3,870)
  due after one year                                                          
  Provision for liabilities                    (896)         (655)       (824)
  and charges                                                                 
                                              21,996        17,691      19,687
  Capital and reserves                                                        
  Called up share capital                      2,765         2,693       2,709
  Share premium                                  692            92         263
  Capital redemption reserve                      30            30          30
  Revaluation reserve                          4,232         4,232       4,232
  Profit and loss account                     14,277        10,644      12,453
  Shareholders' funds                7        21,996        17,691      19,687


                                   Six months to  Six months to   12 months to
                                      27 October     28 October       28 April
                                            2001           2000           2001
                            Note           £'000          £'000          £'000

  Net cash inflow from         8           5,000          3,018          7,005
  operating activities                                                        

  Returns on investment                                                       
  and servicing of finance

  Interest received                            5              1             24
  Interest paid                            (110)          (128)          (249)
  Interest element of                        (2)            (3)            (5)
  finance lease rentals                                                       
  Net cash outflow from                    (107)          (130)          (230)
  returns on investment                                                       
  and servicing of                                                            
  Corporation tax paid                     (585)          (242)        (1,629)
  Capital expenditure                                                         
  Payments to acquire                    (3,097)        (1,723)        (5,089)
  tangible fixed assets                                                       
  Receipts from sales of                       -              -             22
  tangible fixed assets                                                       
  Receipt from sale of                       100              -              -
  unlisted investment                                                         
  Purchase of own shares                       -          (336)          (332)
                                         (2,997)        (2,059)        (5,399)

  Equity dividends paid                    (851)          (671)          (967)
  Net cash                                   460           (84)        (1,220)
  before financing                                                            
  Issue of share capital                     485             13            200
  Capital element of                         (8)            (7)           (14)
  finance lease rental                                                        
  Bank and other loans                     (563)            248          1,519
  (repaid)/taken out                                                          
  Net cash                                  (86)            254          1,705
  (outflow)/inflow from                                                       
  Increase in cash             9             374            170            485

as at 27 October 2001

1. Basis of preparation
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year
ended 28 April 2001. The interim financial statements do not constitute full
statutory accounts and are unaudited. They have, however, been reviewed by the
auditors and their report is set out below. Full year figures have been
extracted from the Annual Report and Accounts for that year which received an
unqualified audit opinion and have been filed with the Registrar of Companies.

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

3. Taxation
Taxation has been provided at an anticipated effective rate of 30.5% (2000:
31%). The tax charge includes a provision in respect of the sale of the
unlisted investment at a rate of 30%.

4. Prior year adjustment
The Group 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 for that year describes the full deferred tax policy.

This results in a prior year adjustment to the interim results to increase the
deferred tax provision and decrease brought forward reserves by £593,000. In
addition there was a prior year six months increase in the provision and
overall tax charge of £41,000 as a result of implementing FRS 19. The actual
net tax charge for the current six months includes a charge of £72,000 in
respect of the full provision basis. The total provision for deferred tax at 27
October 2001 is £896,000 (2000 restated: £655,000).

5. Dividend
It has been proposed that an interim dividend of 1.2 pence per share (2000: 1.1
pence per share) will be paid on 8 January 2002 to shareholders registered on 7
December 2001.

6. Earnings per share
Earnings per share has been calculated on the profit on ordinary activities
after taxation divided by the weighted average number of shares of 27,411,504
(2000: 26,911,195) in issue during the period. The number of shares in issue as
at 27 October 2001 was 27,653,917.

Diluted earnings per share is based on the profit for the period and all
dilutive potential ordinary shares.

7. Reconciliation of movement in shareholders' funds

                                Six months to     Six months to    12 months to
                                   27 October        28 October        28 April
                                         2001              2000            2001
                                        £'000             £'000           £'000

Opening shareholders' funds            19,687            16,655          16,655
Prior year adjustment                       -             (593)           (593)
Retained profit for the period          1,824             1,616           3,425
Issue of ordinary share capital           485                13             200
Closing shareholders' funds            21,996            17,691          19,687

8. Reconciliation of operating profit to net cash inflow from continuing
operating activities
                                Six months to         Six months to 12 months to
                                   27 October            28 October   28 April
                                         2001                  2000       2001
                                        £'000                 £'000      £'000

  Operating profit                      3,134                 2,951      6,780

  Depreciation of                         990                   778      1,688
  tangible fixed assets                                                       
  Amortisation and                          -                     -         90
  write off of goodwill                                                       
  Loss on disposal of                      20                    16         38
  fixed assets                                                                
  Decrease/(increase)                   1,030                   444    (1,022)
  in stock (excluding                                                         
  transfers between                                                           
  fixed assets and                                                            
  Decrease/(increase)                      14                 (220)      (212)
  in debtors                                                                  
  Decrease in creditors                 (188)                 (951)      (357)

  Net cash inflow from                  5,000                 3,018      7,005
  operating activities                                                        

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

                                                       Six      Six         12 
                                                    months   months     months
                                                        to       to         to
                                                        27       28   28 April
                                                   October  October
                                                      2001     2000       2001
                                                     £'000    £'000      £'000

Increase in cash in the period                         374      170        485
Cash outflow from repayment of leases                    8        7         14
Cash outflow/(inflow) from decrease/(increase) in
bank loans and mortgages                               563    (248)    (1,519)
Movement in net debt                                   945     (71)    (1,020)
Opening debt                                       (5,181)  (4,161)    (4,161)
Closing debt                                       (4,236)  (4,232)    (5,181)

10. Analysis of closing debt

                              Six months to      Six months to     12 months to
                                 27 October         28 October         28 April
                                       2001               2000             2001
                                      £'000              £'000            £'000

Cash at bank and in hand                  9                  9                8
Bank overdraft                        (701)            (1,390)          (1,074)
Finance leases                         (35)               (50)             (43)
Bank loans and mortgages            (3,509)            (2,801)          (4,072)
                                    (4,236)            (4,232)          (5,181)

11. Interim Report

Copies of this Interim Report will also be available from the Company Secretary
at the registered office of Universal Salvage plc: Acrey Fields, Woburn Road,
Wootton, Bedfordshire MK43 9EJ. Tel: 01234 762283. Fax: 01234 762204.


We have been instructed by the company to review the financial information for
the six months ended 27 October 2001 which comprises Group profit and loss
account, Group statement of total recognised gains and losses, Group balance
sheet, Group statement of cash flows and the related notes numbered 1 to 10. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/
4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of Group management and
applying analytical procedures to the financial information and underlying
financial data and based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 27 October 2001.

Arthur Andersen
Chartered Accountants
180 Strand

29 November 2001


a d v e r t i s e m e n t