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Universal Salvage (UVS)

  Print      Mail a friend       Annual reports

Thursday 28 November, 2002

Universal Salvage

Interim Results

Universal Salvage PLC
28 November 2002

                             UNIVERSAL SALVAGE PLC

                UK's largest vehicle salvage & services group

                                 INTERIM RESULTS
                   FOR THE SIX MONTHS ENDED 26 OCTOBER 2002

•        Operating profit of £1.4m (2001: £3.1m)

•        Profit before tax of £1.2m (2001: £3.1m - includes £0.1m profit
         on disposal of investment)

•        Turnover of £31.4m (2001: £34.6m)

•        Basic earnings per share of 3.1p (2001: 7.9p)

•        Net assets up to £24.8m (2001: £22.0m)

•        Interim dividend maintained at 1.2p per share - reflecting
         Board's confidence in group's profitability into the medium term

Commenting, Chairman, Alexander Foster, said,

'The Group's trading performance over the period reflects the lower volume of
vehicles handled as our contract with Direct Line, previously our largest
customer, went into 'run-off' at the end of June.

We have taken steps to reduce our cost-base. We believe we are well-positioned
to rebuild volumes and as a result, we have chosen to maintain a relatively
higher cost-base than current insurance contract volumes require.

We have been successful in gaining a number of new, small insurance contracts in
recent months and remain confident of securing major contracts in 2003. We are
finding that the current difficult environment for insurers has resulted in
negotiations being more protracted than has been the case in the past. Whilst
results in the second half, therefore, will be affected by this delay, your
Board remains confident of securing major contracts in 2003. Looking further
ahead, we remain greatly encouraged by the potential range of opportunities for
the Group to grow over the medium term.'

For further information:

Universal Salvage plc       Martin Hynes                T: 020 7448 1000 today
                            Jonathan Cook               Thereafter: 01234 762283

Biddicks                    Katie Tzouliadis            T: 020 7448 1000



The Group's operating profit for the six months to 26 October 2002 was £1.4m
(2001: £3.1m) and profit before tax £1.2m (2001: £3.1m, including £0.1m of
profit on disposal of an unquoted investment).  Turnover of £31.4m (2001:
£34.6m) has been restated for both periods to reflect a change in accounting
policy concerning the recharge of recovery and storage income to third parties
(see note 1 to the interim financial statements). Basic earnings per share was
3.1p (2001: 7.9p). Net assets increased from £22.0m last year to £24.8m at 26
October 2002. Net borrowings increased to £7.8m, compared to £4.2m last year,
representing gearing of 31.6% (2001: 19.3%).


The Board is pleased to declare an interim dividend of 1.2p per share (2001:
1.2p per share), which will be paid on 7 January 2003 to shareholders on the
register on 13 December 2002. This reflects the Board's continuing confidence in
the underlying profitability of the business into the medium term.


The Group's trading performance over the period reflects the lower volume of
vehicles handled as our contract with Direct Line, previously our largest
customer, went into 'run-off' at the end of June. Volumes were also affected by
the usual seasonal dip during the summer, when fewer accidents occur.

We have taken steps to reduce our cost-base to reflect the loss of the Direct
Line business and in July closed our branch at Corby.  We believe that we are
well-positioned to rebuild volumes and as a result we have chosen to maintain a
relatively higher cost-base than current insurance contract volumes require.

During the period, we reviewed our sales operations and made a number of changes
both in personnel and in the structure of our sales teams. This will make us
more effective as we rebuild insurance volumes and address new and alternative
markets. Over the last few months, we have also been holding a series of open
days at all our sites. These have been highly successful in making potential and
existing customers aware of the enhanced range of services we now offer.  In
particular, we have been able to demonstrate our new engineering services and
our specialist decontamination and processing facilities, which de-pollute,
recycle and 'densify' scrap vehicles.

Our negotiations with motor insurers are active and ongoing. Current severe
trading pressures for insurers mean that they are increasingly focusing on the
costs of the whole claims process as opposed to simply salvage prices. As a
result, a key focus in our discussions has been on the significant cost savings
we are able to deliver to the insurers' benefit. A second area of discussion has
been the impact of forthcoming vehicle crime legislation and waste legislation,
which take effect next year. We have been successful in gaining a number of new,
small insurance contracts in recent months and remain confident of securing
major contracts in 2003.  We are finding that the current difficult environment
for insurers has resulted in negotiations being more protracted than has been
the case in the past.

Whilst the insurance market is, of course, our primary focus, we are actively
extending our reach into other related markets involving 'problem vehicles'.
These include abandoned cars, end of life vehicles ('ELVs') and undamaged,
low-value vehicles.  This expansion has been made possible by the investment we
have made in our decontamination and processing facilities. During the first
half, we completed the installation of facilities at Chester and we are
currently installing units at our Sandy and Westbury branches. Our purchase of a
mobile baling unit in the summer, which 'cubes' de-polluted scrap vehicles,
enables us to control the waste processing cycle through to metal fragmentation
and thereby enhances margins.

In the ELV arena we are talking to local authorities and other responsible
bodies about the growing problem of abandoned cars. Approximately 350,000
vehicles were abandoned in the UK last year and this number is expected to
increase following the Government's recent clarification that owners will be
made responsible for the disposal costs of their cars. We have already signed a
contract to handle the collection and disposal of abandoned vehicles for one
local authority and expect this business to increase significantly. Our dialogue
with most of the major vehicle manufacturers also continues. As manufacturers'
responsibilities for ELVs increase over the next five years, we believe this
market should provide increasing opportunities for the Group.

Our decontamination and processing facilities have also enabled us to approach
motor dealerships. We are able to offer them an integrated service which
combines auctioning their low value trade-in and part-exchange vehicles with
disposing of any unsold or unsaleable cars through our processing facilities.
Trials with a number of motor dealerships have shown very good results. We have
been able to demonstrate improved returns as well as ensure compliance with
forthcoming hazardous waste and EU legislation. We are currently rolling this
service across all our branches and are adding other fee-based elements, such as
vehicle appraisal and logistics to our offering.


While we were very disappointed to lose the Direct Line account, your Board
remains convinced that the investment made in the business in recent years has
put the Group into a strong position to take advantage of market opportunities
over the next two to three years.

We are unique in being able to offer full national coverage and an unrivalled
range of services, from collection and inspection to vehicle auctioning,
de-pollution and processing. We are already starting to generate income streams
from our new decontamination and processing facilities, whilst the tightening of
environmental waste legislation over the next twelve months and the problem of
ELVs will provide considerable new potential sources of income.

The speed of the Group's financial recovery is obviously dependent on the rate
at which we are able to rebuild volumes. Current pressures within the insurance
industry are assisting us in our negotiations with a number of significant
insurers but signing new contracts is taking longer than we originally
anticipated.  Results in the second half, therefore, will be affected by this
delay and the outcome for the year will be below current market expectations.
Your Board, however, remains confident of securing major contracts in 2003 and
looking further ahead, we remain greatly encouraged by the potential range of
opportunities for the Group to grow over the medium term.

Alexander N. Foster


                                                                                Restated           Restated
                                                            6 months to      6 months to       12 months to
                                                             26 October       27 October           27 April
                                                                   2002             2001               2002
                                               Note               £'000            £'000              £'000

Turnover                                                         31,377           34,554             71,586

Cost of sales                                                  (23,264)         (24,540)           (51,392)

Gross profit                                                      8,113           10,014             20,194

Administrative expenses                                         (6,887)          (7,080)           (13,970)

                                                                  1,226            2,934              6,224

Other operating income                                              198              200                444

Operating profit                                                  1,424            3,134              6,668

Profit on sale of unlisted investment                                 -              100                100

Interest receivable                                                   2                5                 12
Interest payable                                                  (183)            (117)              (272)

Profit before tax                                 2               1,243            3,122              6,508

Taxation                                          3               (378)            (952)            (2,049)

Profit after tax                                                    865            2,170              4,459

Dividends                                         4               (324)            (346)            (1,415)

Retained profit                                                     541            1,824              3,044

Earnings per ordinary share (pence) - basic       5                3.1p             7.9p              16.2p

Earnings per ordinary share (pence) -
diluted                                           5                3.1p             7.7p              15.9p

Dividend per ordinary share (pence)                                1.2p             1.2p               5.0p


                                                       6 months to        6 months to        12 months to
                                                        26 October         27 October            27 April
                                                              2002               2001                2002

                                                             £'000              £'000               £'000

Profit on ordinary activities after taxation                   865              2,170               4,459
Surplus on revaluation of properties                             -                  -                 608
Total recognised gains and losses relating
to the period                                                  865              2,170               5,067


                                                                  As at            As at             As at
                                                             26 October       27 October          27 April
                                                                   2002             2001              2002

                                                Note              £'000            £'000             £'000
Fixed assets
Tangible fixed assets                                            32,092           27,891            30,483
Investments                                                         651              332               332

Current assets
Stock                                                             3,499            2,857             3,915
Debtors                                                           3,640            3,961             4,352
Cash                                                                  8                9             1,054

                                                                  7,147            6,827             9,321

Creditors: amounts falling due within one
year                                                             (7,655)          (8,840)           (9,395)

Net current liabilities                                            (508)          (2,013)              (74)

Total assets less current liabilities                            32,235           26,210            30,741

Creditors: amounts falling due after one
year                                                             (6,250)          (3,318)           (5,310)

Provision for liabilities and charges                            (1,141)            (896)           (1,128)

                                                                 24,844           21,996            24,303

Capital and reserves
Called up share capital                                           2,807            2,765             2,807
Share premium                                                     1,129              692             1,129
Capital redemption reserve                                           30               30                30
Revaluation reserve                                               4,840            4,232             4,840
Profit and loss account                                          16,038           14,277            15,497

Shareholders funds'                                6             24,844           21,996            24,303


                                                            6 months to       6 months to       12 months to
                                                             26 October        27 October           27 April
                                                                   2002              2001               2002
                                                Note              £'000             £'000              £'000

Net cash inflow from operating income              7              3,221             5,000              8,374

Returns on investment and servicing of
Interest received                                                     2                 5                 12
Interest paid                                                     (181)             (110)              (221)
Interest element of finance lease rentals                           (1)               (2)                (3)

Net cash outflow from returns on investment
and servicing of finance                                          (180)             (107)              (212)

Corporation tax paid                                              (487)             (585)            (2,104)

Capital expenditure
Payments to acquire tangible fixed assets                       (3,184)           (3,097)            (7,222)
Receipt of grants towards land development                           -                 -                621
Receipts from sales of tangible fixed assets                         -                 -                  8
Receipt from sale of unlisted investment                             -               100                100
Purchase of own shares                                            (319)                -                  -
                                                                (3,503)           (2,997)            (6,493)

Equity dividends paid                                           (1,057)             (851)            (1,185)

Net cash (outflow)/inflow before financing                      (2,006)               460            (1,620)

Issue of share capital                                                -               485                964
Capital element of finance lease rental
payments                                                            (9)               (8)               (16)
Bank and other loans taken out/ (repaid)                            858             (563)              1,320

Net cash inflow/(outflow) from financing                            849              (86)              2,268

(Decrease)/increase in cash                        8            (1,157)               374                648


1.     Basis of preparation

Subject to the matter referred to in the paragraph below, 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 27 April 2002. 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.

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 we re-charged 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 re-charges do not represent revenue as the amounts re-charged are not fees
for services rendered.  Previous periods' 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 six months to 26 October 2002 by £4,667,000 (six months to 27 October
2001: £5,820,000, 12 months to 27 April 2002: £12,943,000)

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% (2001:
30.5%). The tax charge last year included a provision in respect of the sale of
the unlisted investment at a rate of 30%.

4.     Dividend

It has been proposed that an interim dividend of 1.2 pence per share (2001: 1.2
pence per share) will be paid on 7 January 2003 to shareholders registered on 13
December 2002.

5.     Earnings per share

Earnings per share has been calculated on the profit on ordinary activities
after taxation divided by the weighted average number of ordinary shares,
excluding shares held by the ESOP Trust, of 27,824,880 (2001: 27,411,504) in
issue during the period. The number of shares in issue as at 26 October 2002,
excluding shares held by the ESOP Trust, was 27,824,880.

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

6.     Reconciliation of movement in shareholders' funds

                                                     6 months to        6 months to       12 months to
                                                      26 October         27 October           27 April
                                                            2002               2001               2002
                                                           £'000              £'000              £'000

Opening shareholders' funds                               24,303             19,687             19,687

Revaluation of properties                                      -                  -                608

Retained profit for the period                               541              1,824              3,044
Issue of ordinary share capital                                -                485                964

Closing shareholders' funds                               24,844             21,996             24,303

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

                                                      6 months to        6 months to       12 months to
                                                       26 October         27 October           27 April
                                                             2002               2001               2002
                                                            £'000              £'000              £'000
Operating profit                                            1,424              3,134              6,668
Depreciation of tangible fixed assets                       1,306                990              2,117
Loss on disposal of fixed assets                                -                 20                 20
Decrease in stock (excluding transfers
between fixed assets and stock)                               685              1,030                356
Decrease/(increase) in debtors                                712                 14              (377)
Decrease in creditors                                        (906)              (188)              (410)

Net cash inflow from operating activities                   3,221              5,000              8,374

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

                                                       6 months to        6 months to       12 months to
                                                        26 October         27 October           27 April
                                                              2002               2001               2002
                                                             £'000              £'000              £'000                
(Decrease)/increase in cash in the period                  (1,157)                374                648

Cash outflow from repayment of leases                           9                   8                 16
Cash (inflow)/outflow from (increase)/decrease
in bank loans and mortgages                                  (858)                563            (1,320)
Movement in net debt                                       (2,006)                945              (656)
Opening debt                                               (5,837)             (5,181)           (5,181)

Closing debt                                               (7,843)             (4,236)            (5,837)

9. Analysis of closing debt

                                               6 months to          6 months to         12 months to
                                                26 October           27 October             26 April
                                                      2002                 2001                 2002
                                                     £'000                £'000                £'000

Cash at bank and in hand                                 8                    9                1,054

Bank overdraft                                     (1,583)                (701)              (1,472)
Finance leases                                        (18)                 (35)                 (27)
Bank loans and mortgages                           (6,250)              (3,509)              (5,392)

                                                   (7,843)              (4,236)              (5,837)

10.      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 766500. Fax: 01234 762204.



We have been instructed by the company to review the financial information which
comprises the Group profit and loss account, Group statement of total recognised
gains and losses, Group balance sheet as at 26 October 2002, Group statement of
cash flows, comparative figures and associated notes.  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

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.

This report has been prepared for and only for the company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or in to whose
hands it may come save where expressly agreed by our prior consent in writing.

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 26 October 2002.

Chartered Accountants

                      This information is provided by RNS
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