Interim results 2017
Universe Group plc (AIM: UNG.L), a leading developer and supplier of point of sale, payment and on-line loyalty systems, is pleased to announce its unaudited interim results for the six months to 30 June 2017.
• Revenues £8.70 million (H1 2016: £9.05 million)
• Gross profit margin improved from 30.8% to 31.8%
• Adjusted EBITDA £0.96 million (H1 2016: £1.35 million)
• Operating profit £0.22 million (H1 2016: £0.49 million)
• Earnings per share 0.11p (H1 2016: 0.20p)
• Net cash inflow from operations increased by 52% to £1.32 million (H1 2016: £0.87 million)
• Period of continued heavy research and development in our next generation EPOS product suite
• Administrative expenses increased by 11% as a result of further investment in our EPOS product management team and the enlarging of our sales teams ahead of major next generation product launches
• Solution implementations continuing although some still in extended pilot to perfect functionalities working in close partnership with clients
Robert Goddard, Chairman of Universe, commented:
"We have made good progress in further developing our next generation of EPOS products, with live solution implementations underway and others moving through extended pilot phases to fully meet customer expectations. This is set to continue in the second half of the year. The financial results for the full year are, as in past years, second half weighted and this year's result is more than usually dependent on a small number of high value projects. Delays to these would mean that the company performs materially below current market expectations in the current financial year. Our product developments and the positive response these are receiving from existing and new customers give us confidence in the long-term prospects for the Group."
We report below the Company's unaudited results for the six months ended 30 June 2017. The interim numbers are marginally down as compared to the comparative figures for 2016. However, as in the prior year, results for the full year will be heavily weighted towards the second half. In particular, continuing delays in certain planned customer deployments are now expected to continue into the second half. Further, the precise timing of securing a small number of high-value new projects remains uncertain, albeit the Company remains confident of ultimately securing these contracts. If these projects are not deployed or secured, respectively, on a timely basis then the Directors anticipate that the Company will report results materially below current market expectations.
During the period, we have continued to invest in our next generation point-of-sale, back office and head office software products (EPOS), which we fully expect will provide a solid platform from which to drive future growth in both the fuel and convenience store market places.
Revenues for the first half were £8.70 million (H1 2016: £9.05 million), producing a gross profit of £2.77 million (H1 2016: £2.79 million).
The dip in revenues due to delayed customer deployments is reflected in the decline in revenues from hardware and software licences to £1.06 million (H1 2016: £1.81 million). This drop has been mitigated in part by a strong performance from our services and installation team where revenues are up 14% to £3.89 million (H1 2016 £3.40 million).
Whilst revenues dipped, we maintained gross profit with a small improvement in gross margin to 31.8% (H1 2016: 30.8%) due to a change in sales mix from hardware and software licences to higher margin service and installations.
Administrative expenses were up in the period to £2.54 million (H1 2016: £2.30 million), but in line with the second half of 2016. This was largely due to increased spending on sales and marketing and product management resource in the second half of 2016 as we seek to capitalise on the investment in our new EPOS product suite.
Earnings before interest, taxes, share-based payments, depreciation and amortisation ('adjusted EBITDA') was £0.96 million (H1 2016: £1.35 million). Operating profit reduced to £0.22 million (H1 2016: £0.49 million).
Net finance expense was £0.05 million (H1 2016: £0.01 million). This is up on the prior period which benefited from a £0.05 million credit arising from the release of an over-provision of contingent consideration payable as a result of the acquisition of Indigo Retail Holdings Limited in 2013.
The underlying tax charge for the period was £0.01 million (H1 2016: £0.03 million). However, an adjustment relating to the prior year of £0.09 million resulted in a net credit for the period of £0.08 million. Earnings per share for the period were 0.11 pence (H1 2016: 0.20 pence).
Balance sheet and cash flow
The balance sheet at the end of June remained strong. Net current assets decreased to £4.17 million from £4.33 million at 31 December 2016 and non-current liabilities reduced to £0.70 million from £0.90 million at the year end.
Investment in the core business continued with capitalised development costs of £0.69 million (2016: H1 £0.30 million, 2016 H2 £0.66 million) which was focused on development of our next-generation EPOS system.
Capital expenditure in the period was £0.26 million (H1 2016: £0.27 million).
Cash flow from operating activities for the half year was £1.32 million (H1 2016: £0.87 million) and the cash generated was largely reinvested into the business as product development, capital expenditure or debt repayment. Cash balances at 30 June 2017 were £3.41 million compared with £3.41 million at 31 December 2016.
Our new EPOS product suite is being well received. We continue to work closely with our clients to add functionality to the core undertakings and are confident that these will soon gain wider market acceptance.
The first six months saw steady revenues with improving gross margins. The balance of the year, and our ability to hit expectations rests upon the successful completion of a small number of key, high value, solution implementations and we are fully focussed on these. However, there can be no certainty that they will be delivered before the year end. Despite the difficulty in forecasting these in the short term, we are confident that the long-term prospects for the Group look encouraging.
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