Final Results

RNS Number : 2876N

Brulines Group PLC

09 June 2010

 



Press Release

09 June 2010

Brulines Group plc

("Brulines" or "the Group")

Final Results

Brulines Group plc (AIM:BRU), the leading provider of real time monitoring systems and data management services for the leisure and forecourt services sectors, is pleased toannounce its final results for the year ended 31 March 2010.

Highlights

·	Turnover for the year increased 4% to £19.83 million (2009: £19.07 million)
·	Recurring revenues now at 84% of turnover (2009: 79%)
·	Gross margins improved to 59% (2009: 58%)
·	Operating profit before amortisation of goodwill, share option and exceptional costs of £5.07 million (2009: £5.46 million)
·	Profit before tax  of £4.04 million (2009: £4.62 million)
·	Final dividend of 2.24 pence per share giving a full year total of 5.50 pence per share (2009: 5.35 pence per share)
·	930 new installations, of which 580 were higher value i-draughtTM
·	Partnership with Greene King Pub Partners to supply 1,400 pubs throughout the UK with  i-draughtTM beer quality and dispense monitoring system
·	Strong balance sheet and cash generation to drive further acquisitive growth

Since period end

·	Acquisition of Energy Level Systems Ltd, a provider of fuel management systems, tank gauging and lining solutions, liquefied petroleum gas and forecourt services in April 2010

·	Strategic partnership with Indigo Retail Technology in April 2010 to provide data management and wet stock analysis to Indigo's customers
·	Acquisition of Retail Forecourt Solutions Ltd ("RFS"), the UK market leader in fuel dispenser calibration, adjustment and legal verification, and a leading provider of forecourt audit and compliance services on 9 June 2010

Commenting on the final results, James Newman, Chairman of Brulines Group plc, said:  "The Group has performed well during a difficult period, integrating acquisitions made in the year and achieving significant partnerships including Greene King Pub Partners and Indigo Retail Technology.  In particular, the recent acquisitions and developments in the forecourt services division have substantially increased the services that the Group offers in this sector and positions the Group well to further penetrate this market in the coming months.

"The Group has maintained its leading market position and continued to grow despite the challenging economic conditions.  The Board is confident that the Group will be able to grow organically in all its markets and further increase this growth through selective acquisitions during the next financial year." 

- Ends -

Enquiries:

Brulines Group plc James Dickson, Chief Executive
Mark Foster, Finance Director	Tel: [phone]
[e-mail]	www.brulines.com
Cenkos Securities plc Stephen Keys / Camilla Hume [e-mail]	Tel: [phone]

Media enquiries:

Abchurch
Sarah Hollins / Joanne Shears / Mark Dixon	Tel: [phone]
[e-mail]	www.abchurch-group.com

Chairman's Statement

The last year has been a challenging one for the Group.  The core Leisure Division has been affected by difficult market conditions in the pub sector and the integration of recent acquisitions took longer and absorbed more management time than had originally been hoped.  The recently founded Forecourt Services Division has progressed well, with today's acquisition strengthening our offering, and I expect growth to be further driven in the coming year by more recent acquisitions.

Results

Despite the well documented commercial pressures affecting some of the Group's core market customers, the impact of delayed orders and the transitional costs associated with restructuring recent acquisitions, underlying trading for the full year ended 31 March 2010 is broadly as management expected.

Turnover for the year at £19.834 million was 4% ahead of the £19.067 million achieved in 2009.  Turnover in the core dispense monitoring business increased slightly with 'i-draught^TM' installations gaining momentum in the second half of the year.  Vianet, purchased at the end of 2008, contributed a full year's sales albeit at a lower level than had originally been anticipated.

The core strength of the Group is the level of contractual and recurring revenues and the proportion increased further during the year to 84%.  As a result, gross margins remained high at 59%.

Administrative overheads continue to be well controlled and only increased as a result of a full year's overheads being incurred from the previous year's acquisitions.

Market pressures in the core dispense monitoring business meant that Group operating profit before amortisation of goodwill, share option and exceptional costs reduced by 7% to £5.073 million (2009: £5.455 million). Exceptional and amortisation costs as outlined in the Financial Review were higher at £0.962 million (2009: £0.700 million) and thus reduced Group profit before tax to £4.034 million compared to £4.624 million in 2009.

Basic earnings per share is 10.89p (2009: 13.59p), impacted by the dilutive effect of the December 2008 placing funds, which are only now being invested. 

Dividend

The Board paid a first interim dividend of 1.63 pence per share (2009: 1.55 pence) in January 2010 and a second interim dividend of 1.63 pence (2009: Nil) in April 2010.  In line with the Board's progressive dividend policy, it is recommending a final dividend of 2.24 pence (2009: 3.80 pence) per share in respect of the year ended 31 March 2010.  This gives a total dividend for the year of 5.50 pence (2009: 5.35 pence) per share.  Subject to the approval of shareholders at the Group's Annual General Meeting on 15 July 2010, the final dividend will be paid on 22 July 2010 to shareholders on the register on 18 June 2010.

Acquisitions and partnerships

During the year, the Group continued with its strategy of making selective acquisitions and partnership arrangements by utilising the skills and technologies within the Group to enter new markets where there is an opportunity to establish market-leading products and services.

In April 2010, the Boardannounced it had acquired Energy Level Systems Ltd, a provider of fuel management systems, tank gauging and lining solutions, liquefied petroleum gas and forecourt services. This acquisition, which is earnings enhancing from the outset, is another important step in developing a market-leading integrated solution for forecourt operators and underlines the Group's intention to replicate, in the forecourt market, its success in the leisure sector.

At the same time, a strategic partnership with Indigo Retail Technology was agreed to provide data management and wet stock analysis to Indigo's customers.  This partnership will initially result in the Group's Forecourt Services Division providing wet stock analysis for Indigo customers, increasing our penetration of wet stock management to 7% of all UK forecourts.

Today, the Board announces that it has also acquired Retail Forecourt Solutions Ltd ("RFS"), the UK market leader in fuel dispenser calibration, adjustment and legal verification, and a leading provider of forecourt audit and compliance services, to broaden the Group's offering in the Forecourt Services Division. 

Further acquisitions in this sector have been identified and are being pursued.  

Universe Group plc

As reported in the Interim Statement on 1 December 2009, Brulines made a preliminary approach to Universe Group plc ("Universe") relating to a potential offer for the issued share capital of that company. After a number of discussions with the Board of Universe, no agreement was able to be reached as to a recommended offer and thus it was announced on 28 May 2010 that Brulines had withdrawn its offer but remains in discussions with the Universe with regard to potential  opportunities that may exist between the two companies.  The Group continues to hold its significant shareholding in Universe, representing 11.52% of its issued share capital.   

Board and senior management

I would like to thank all my Board colleagues and staff for their continued efforts and commitment on behalf of the Group in these difficult and uncertain business conditions.

Outlook

Brulines' strategic intent remains to profitably extend its data management and support services footprint in the leisure, vending and fuel forecourt sectors, where there is considerable technical and operational overlap.

Considerable commercial and technical progress has been made in the newly acquired businesses, which should enable them to make a positive contribution to the Group's performance in the current financial year.  The recent acquisitions and business development activities in the Forecourt Services Division have substantially increased the services the Group can now offer in this sector and will enable this division to significantly increase its market penetration in the coming year.

Whilst the core Leisure Division activity slowed in the last twelve months as a result of poor market conditions, the recent success in establishing i-draught TM in the pub sector with Greene King Pub Partners and several other customers  positions the Group favourably to continue its organic growth in this market.

Despite challenging market and economic conditions, the Board is confident that the Group will be able to grow organically in all its markets and further increase this growth through selective acquisitions during the next financial year.

James H Newman

Chairman

9 June 2010

Chief Executive's Statement

Against the backdrop of the global economic downturn, the Group has made good progress in this transitional year by consolidating our market leadership in the core Leisure Division whilst developing the Forecourt Services Division where Brulines intends to replicate the success achieved in its core leisure markets.

Group profit

Trading in the Group's core beer monitoring business over the second half of the financial year, whilst challenging, has remained solid, with good progress made on the commercial development of i-draughtTM, the Group's beer quality and EPOS variance monitoring product.  The Group has successfully reduced losses associated with the acquisitions of Vianet and Edensure, both of which are now building strong momentum.

The Group revenue at £19.83 million was 4% ahead of last year, whilst on a comparable year on year basis, the core business turnover increased modestly by 0.51% to £16.76 million (2009: £16.68 million) as a consequence of installations being delayed due to the tightening of finance availability for our customers. 

The Leisure Division, incorporating Vianet, accounted for 97% of Group revenues and although Leisure revenues will grow in 2011 the share split will fall to around 75% as revenues from the Forecourt Services Division increase.

The revenue mix continued to improve towards recurring revenue as income from support service contracts was generated from the increasing installation base and the Group's move into the provision of forecourt services.  Recurring revenue currently accounts for over 80% of Group revenue and management expects this to remain between 75% - 80% for the foreseeable future. 

Gross margin has risen from 58% for 2008/9 to 59% for 2009/10 as a result of the increased recurring revenue, operational improvements, continued demand for higher margin bespoke reporting services and the impact of delayed new installations.  On a consolidated basis management anticipates that gross margins are sustainable at around 55%. 

LEISURE MARKET

The Group's core market is the leisure sector, where our primary offerings are providing operational transparency through data capture and associated services for draught beer, vending machines, and gaming machines. 

Core beer monitoring service

Despite increased lead times for capital authorisations, installations progressed satisfactorily with 930 new installations, of which 580 were higher value i-draughtTM, and a further 360 system upgrades completed, with further installations rolling into 2010/11.  The installation base mix continues to benefit from the ongoing addition of better quality pubs and i-draughtTM systems, however permanent pub closures at the bottom end of the market has meant there has only been a small increase in the overall number of installations to maintain our installation base at over 22,000 sites.  This has provided year on year growth in recurring revenue and increased margins associated with support services.

Good progress has been made on the commercial development of i-draughtTM, with new regional brewer contracts and commercial evaluation in the managed house sector.   In particular the Group was pleased to announce on 29 October 2009 that it secured a partnership with Greene King Pub Partners ("Greene King") to supply the national tenanted pub operator with i-draughtTM.

This partnership with Greene King marked Brulines' first major national order for i-draughtTM, with the pub operator rolling out i-draughtTM as their primary system in its estate, which numbers 1,400 pubs throughout the UK.

The i-draughtTM system offers pub licensees a vital tool to monitor the quality and yield of beer served, providing valuable intelligence about their business helping them to improve beer quality, manage wastage and costs on all draught products. The roll-out will enable Brulines to work in partnership with Greene King to tailor the system and ensure the data delivers exactly the information that Greene King and their licensees need to run even more efficiently and deliver enhanced quality.

I believe that for an organisation of the scale and professionalism of Greene King to have selected Brulines' product to be integrated across their pub estate is a great endorsement of i-draughtTM and adds to the momentum which is being created.

As part of its long term business strategy, the Group continues to invest in developing i-draughtTM internationally and plans to have over 100 installations across the on-trade channels in the Denver metropolitan area, USA, and now has installations in a range of pubs and bars in France. We anticipate the USA achieving breakeven in 2011/12.

Gaming machine monitoring

The Group's gaming machine telemetry and data services acquisitions Coin Metrics and Machine Insite have been successfully integrated the within the Leisure Division. These acquisitions have enabled Brulines to create a leading data capture and machine management proposition in the leisure sector. 

Brulines' product offering allows machine operators and owners to constantly monitor the financial performance of their gaming sites and assets accurately and in real time.

In a particularly difficult gaming machine market the consolidated revenue was flat at £800,000, delivering a net profit of £100,000.

Whilst this has been a difficult period for the gaming machine industry, the Group is confident that its offering, as a result of increased cross selling, will grow incrementally in its contribution to the Leisure Division. 

On 31 January 2010, at a cost of £58,700 the Group acquired the remaining 17% percent holding in Coin Metrics Limited ("CML") taking its interest to 100%. 

Business & Enterprise Committee (BEC) Report on the leased Pubco model

On 13 May 2009 the Business and Innovation and Skills Committee (BISC) published an eighty eight page report claiming that the beer ties which contract tenants to buy beer from their landlords are anti-competitive and had created a system which allows big companies to profit whilst individual landlords struggle.  Brulines was not afforded the opportunity to provide evidence for the initial BISC report but did provide evidence unreservedly for the second BISC report. 

Since the initial report was published there has been an OFT investigation, further evidence gathering, a further BISC report, strong share of voice for the anti-tie groups, and a degree of antagonism between various sides.  There has however been positive dialogue and good overall progress in establishing increased transparency and openness between landlord and tenant in the operation of the beer tie.  The Group remains confident that the beer tie will remain largely intact, especially given this progress coupled with the European Union's ten year extension to the block exemption of the beer tie.

Comments relating to the accuracy of beer flow monitoring equipment have been voiced in the public domain on several anti-tie forums and aired in representations to the BISC by those opposed to both the beer tie and certain pub companies who operate and manage such tie agreements.  Brulines believes that much of this comment is erroneous, and the commentary has been heavily influenced by lobbying from those opposed to the beer tie.

The Group has had open dialogue with the appropriate committees and industry bodies, and in our submission and accompanying evidence to the BISC's second report absolutely refuted the claims made by the anti-tie interest groups.   This included a supporting statement from Trading Standards who conducted a comprehensive assessment of our flow monitoring equipment and procedures.  This review was subject to their independent and strict standards, none of which was paid for by Brulines.

Brulines has already worked, and will continue to work voluntarily and openly with the appropriate authorities to establish what, if any, steps might be taken to improve our methodology, calibration or operating processes with a view to establishing some form of approval regardless of whether our services fall under the Weights and Measures Act. In respect of the recommendation made in the second report of the BISC, Brulines has voluntarily entered into discussion with the National Measurement Office (NMO).

Evidence provided to the BISC by Titan Enterprises, the manufacturer of the flow-meter used in Brulines' flow monitoring system, confirmed that the flow-meter used by Brulines is highly accurate and reliable at measuring liquid flow to a high degree of repeatability over a sustained period of time. The high performance of the flow-meter has allowed it to be used in Weights and Measures approved third party drink dispensing systems.

Brulines always calibrates each flow-meter in situ under the same conditions as the beer is dispensed in line. This is carried out using a calibrated measuring vessel produced by a specialist manufacturer and calibrated to approved accuracy levels by a statutory Weights and Measures Authority.

Vianet - vending telemetry

Vianet, which provides market leading telemetry and data capture solutions to the vending industry, was acquired out of administration on 11 December 2008 and is now successfully integrated into the Group's Leisure Division, where there are significant synergies in terms of technology, commercial proposition and customers. The focus since acquisition has been on revamping both the commercial organisation and customer proposition, whilst ensuring the unique solutions it provides are fit for purpose in addressing the significant market which is available.

For the three months to 31 March 2009, Vianet losses were reduced to £150,000, and in this transitional year, Vianet's losses at £176,000 although materially lower as a result of increased device sales under existing contracts, had an adverse impact on Group profit.

Following a comprehensive tendering process Vianet won a contract to supply a range of vending telemetry services to the European operations of an international fast moving consumer goods company.  The contract includes the sole supply of Vianet's revolutionary cashless payment hardware which links to the vending telemetry hardware unit.  This will enable the use of Contactless Credit Card, mobile telephone Near Field Communication (NFC) payment and traditional closed-user-group cashless payment schemes.  

In addition to this significant milestone, Vianet has had a large number of enquiries and the Group anticipates that Vianet, with its globally scalable products, will make a positive contribution in 2010/11 and will in time be a major component of the Leisure Division contribution, allowing the Group to begin utilising the c.£16 million of losses which were inherited on acquisition

FORECOURT SERVICES DIVISION

The long term trend of increasing fuel prices, driven by a combination of the ongoing escalation in crude oil extraction costs, and increased taxation, means that it is becoming more important to ensure integrity and efficiency of the retail supply chain.  Leaks, evaporation, fraud, over dispense, and poor stock management can have a significant impact on forecourt profits.   Furthermore, failure to properly manage fuel stocks can result in costly environmental impacts both financially and in terms of brand damage resulting from negative publicity.

Ongoing consolidation in the fuels sector means that managers are gaining responsibility for more sites and require increased visibility and control.

The Group's Forecourt Services Division strategy helps address these issues by offering an integrated toolbox of data management, analysis, and associated services that allow managers of fuel installations to optimise return on investment both on fuel stocks and on the equipment designed to store, control and issue their fuels.

Our acquisition strategy and in-house development, utilising the Group's development and data management expertise, has enabled the Group to create many of the elements of the product portfolio required to deliver this solution to a market which the Group estimates potential annual revenues to be worth £30 million in the UK, over £200 million across Europe, and many times that globally.

Edensure was close to break even on a monthly basis during the second half of the year, and the Group is encouraged by the increased interest from other major petrol forecourt operators and is pursuing opportunities to expand its footprint in this market as part of its strategy to provide cost-effective value added command and control solutions to all sectors of the forecourt industry.

The Group has also been evaluating several opportunities to expand its footprint in the forecourt services market and on 6 April 2010 acquiredEnergy Level Systems Ltd, a provider of fuel management systems, tank gauging and lining solutions, liquefied petroleum gas and forecourt services. This acquisition which is expected to be earnings enhancing from the outset, is another important step in developing a market leading integrated solution for forecourt operators and underlines the Group's intention to replicate in the forecourt market the Group's success in the leisure sector. 

Today the Group announced the acquisition of Retail & Forecourt Solutions Ltd ("RFS").  Based in Desford, Leicestershire, RFS is the UK market leader in fuel pump calibration, adjustment and legal verification, and also a leading provider of forecourt audit and compliance services. The acquisition will take effect from 9 June 2010.

In 2000, RFS became the first company in the UK to be accredited as pump "verifiers", although they were not able to undertake adjustments as this was the province of Trading Standards officers. The step change in terms of business model for RFS came with effect from 1 January 2009, when the Weights & Measures Reform Act enabled RFS to carry out adjustments to pumps without the need for Trading Standards officers to be present.

Over-dispensing pumps can cost forecourt retailers thousands of pounds a year in fuel given away.  Our state-of-the-art Edensure wet stock loss analysis is able to identify this over-dispensing quickly and accurately, and now with RFS as part of our Group we can offer forecourt operators an integrated and responsive solution of analysis, identification, and on-site correction.

This acquisition which will be earnings enhancing from the outset, is another important step in developing a market leading integrated solution for forecourt operators and underlines the Group's intention to replicate in the forecourt market our success in the leisure sector.

The opportunities for this expanded offering are significant, and we look forward to updating shareholders on our progress in the forecourt services market.

As well as expecting organic growth from this division, the Group will continue to pursue suitable acquisitions in order to achieve this.

STRATEGY FOR GROWTH

The Group's strategic intent is to profitably extend its data handling penetration and footprint in the leisure sector, incorporating vending and forecourt sectors where there is considerable overlap, and to achieve market leading positions using its core capabilities and market leading products.

The Group is focussed on two highly complementary divisions which are Leisure and Forecourt Services.  These divisions operate in markets in which:

·     the need for improved data and controls will grow;

·     integrated data provision is sought and can be backed up with associated services;

·     there is no other dominant competitor;

·     market leadership is available;

·     good margins are available from driving customer return on investment, and;

·     the Group's products are globally scalable.

The Group will continue to pursue organic development of its core Leisure business, including vending telemetry whilst leveraging our key competencies and broadening the Group's Forecourt Services offering through strategic acquisitions. 

The Leisure Division on its own has the products and market potential to drive growth for several years, underpinned by i-draught in the core beer monitoring business and supplemented by the vending telemetry opportunities.  The Group's strong customer and recurring revenue base provides a solid foundation for significant growth as we commercialise development products, extend into new markets and make selective acquisitions. 

For the pub and bar market the Group's ability to provide a wider range of effective operational and market data increases its value to existing customers and their own operational control within tenanted/leased and managed sectors, whilst allowing entry through similar benefits to other channels such as hotels, clubs, and independent sectors, both in the UK and internationally.   

The integration of Vianet's vending telemetry offering into the Leisure division is a natural extension of the Group's core capabilities into a growing and significant adjacent remote data capture and management market where there is an opportunity to establish market leading products and services. Vianet has leading, globally scalable products and operates in international markets with no dominant competitor.

Whilst maintaining its investment in the core Leisure market, the Group has the opportunity through selective acquisitions to establish a market leading data handling position for the Forecourt Services Division's 'information toolbox' in the forecourt sector where it has identified considerable technology, operational and commercial overlap.

With the Group well placed to sustain its organic path for growth within the Leisure sector, the Directors believe that the Group's cash generation, together with the December 2008 Placing funds and competitive debt financing, will enable the Group to take advantage of further complementary acquisition and commercial opportunities as and when they arise. 

Management and employees

The Group continues to develop the calibre of its people, management and leaders to ensure the organisation is equipped to deliver against the significant growth opportunities that are available to the Leisure and Petrol Forecourt Service divisions.

Stewart Darling as Managing Director of the Leisure Division has continued to improve the calibre of the leisure team which is making good progress in expanding from the historic leased and managed sectors into other channels of the licensed on trade both domestically and internationally. 

On 28 September 2009, Phil Maud was appointed Managing Director of the Group's Forecourt Services Division.  His knowledge and experience gained in retail forecourt management, including Morrisons Supermarkets plc where he had spent the last eight years as Director of Petrol Forecourts, will prove invaluable to the Group as it continues to expand its leading proprietary software and footprint into the UK petrol forecourt market and beyond.

We have a dedicated and ambitious management team, who are well supported by a strong workforce which is committed to the Group, our customers, and our values.  Once again I thank everyone for their contribution during the last twelve months. 

Outlook

The Group is performing well in challenging economic and trading conditions. As the Group's customers become increasingly focused on profitability and cash generation from their core operations, we believe our products will become more important to them than ever before.

The Group's investment decisions are made with a four to five year horizon whilst also committing to short term delivery of shareholder value.  Over the next five years our intent is for the Leisure Division to deliver organic growth of our core beer monitoring whilst building a similar contribution from Vianet's vending telemetry services to global markets.  The Group believes that the three year growth strategy for the Forecourt Services Division has the potential to deliver a contribution similar to Leisure.

The Group aims to become the market leader in the UK, and beyond, for the provision of telemetry, data management analysis, software and support services across the leisure, and petrol forecourt sectors, where the opportunity exists to become a 'one stop shop' provider for customers.

Despite the more difficult leisure sector trading environment, future growth prospects are encouraging and management continues to view the future with confidence.   

James Dickson

Chief Executive

9 June 2010

Financial Review

Group trading result

In what has been a difficult general economic environment, as well as a challenging pub environment, the results of the Group for the year to 31 March 2010. Revenue increased by 4.02% with operating profit (pre intangible assets amortisation and exceptional items) of £5.073 million (2009: £5.455 million).  The results are after absorbing transitional losses of Vianet, Edensure and Coin Metrics, as well as US costs of operation, all totalling £0.403 million.  Recurring revenues have progressed to a level of 84% based on turnover mix.  Exceptional costs of £0.506 million relate to restructuring costs principally connected with the transitional integration of the 2009 acquisitions, costs associated with the investment in Universe Group Plc, disposal costs of the M2M division of Vianet Ltd and accrued acquisition costs of Energy Level Systems Ltd resulting in final Group operating profit (pre intangible asset amortisation) of £4.567 million (2009: £5.092 million).

Subsidiary performance

During the period, within the Leisure Division the core business of Brulines Limited delivered 930 new installations of which 580 were the higher priced i-draught systems, as well as 360 replacement upgrade systems.  Overall, a gross total of 1,290 installations were achieved, leaving the estate, after pub company disposals and uplifted systems awaiting re-installation elsewhere in respective customer estates, broadly in line with the year's starting point of c22,000 systems.  Whilst the Group did not achieve all the new and replacement installations we expected, a number of new i-draught installations to be rolled over have been factored into the new financial year.  The economic circumstances highlighted in the Chief Executive Officer's statement have impacted the installation traction attained, but despite this we are pleased to report the results achieved. 

The Group's machine monitoring subsidiaries of Machine Insite Limited and Coin Metrics Limited, contributed £0.8 million in revenue and increased profit of £0.1 million.  The result has been impacted by the difficult market this sector serves, but is credible in terms of the slight step forward we have made in the profit achieved.  The Group now owns 100% of Coin Metrics and further progress is expected in this business in the new financial year.

Vianet achieved revenues of £1.750 million and significantly reduced losses of £0.176 million ahead of expectations.  The transitional investment made in Vianet, and contractual wins that have resulted are expected to deliver profit for the year to March 2011.

In the Forecourt Services Division, Edensure achieved revenues of £0.5 million and reduced losses of £0.078 million, around half of that reported in March 2009.  These results are in line with market expectations as we have sought to build on the transitional investment made. The Forecourt Services Division is expected to make further progress in the year to March 2011.

Overall Group results

Overall Group results, pre amortisation of intangible assets and option costs, were a profit of £5.073m compared to £5.455 million at March 2009, but after absorbing the transitional losses as referred to above of £0.403 million.  The results are in line with market expectations and the Board believes that given the challenging environment in which the Group operates, these are a pleasing set of results.  The table below shows the performance of the Group, pre and post exceptional costs, as follows;

	FY 2010 £'000	FY 2009 £'000
Revenue	19,834	19,067
Gross Profit	11,638 (59%)	11,219 (58%)
EBIT	4,039	4,683
PBT post exceptional costs	4,034	4,624
PBT pre exceptional costs	4,540	4,987

Gross margin

Gross margin improved during the year to 59%, resulting from the improvement in recurring revenue mix to approximately 84% and the impact of lower than expected installations. Had the Group achieved the installation traction referred to above, the underlying gross margin would have been nearer the expected 55% level.

Actual Group profit

The Group pre tax profit post exceptional costs is £4.034 million (2009: £4.624 million), reflecting the comments made above.

Taxation

The taxation charge of £0.969 million represented an effective tax rate of 24.02% on the reported profit before taxation of £4.034 million post group relief and prior period adjustments.

Earnings per share

Basic earnings per share for the year ended 31 March 2010 pre exceptional costs amounted to 12.68 pence.  The reduction is impacted by not only the results, but significantly by the dilution impact of the shares issued on 29 December 2008.   On a like for like pre exceptional cost basis, EPS for 2009 would have been 13.18 pence.  Fully diluted earnings per share (pre exceptional costs), which takes account of all outstanding share options, amounted to 12.27 pence which again compares to 14.13 pence last year.  On a like for like pre exceptional cost basis, fully diluted EPS for 2009 post share issue would have been 12.54p.

Balance sheet and cash flow

The balance sheet has been significantly strengthened not only by the good trading performance achieved, but also by the improved results of the 2009 acquisitions of Vianet Limited and Edensure Limited. In addition, the remaining founder shares of Coin Metrics were acquired on 31 January 2010.

Operationally, the Group continued to generate healthy cash returns at £4.273 million. The funds generated in the year were utilised to invest in Universe, further investment in Coin Metrics, service borrowings, dividends and taxation.  The positive cash flows have meant that at the year-end we have a net cash position of £3.949 million (2009: net cash position of £4.256 million).

It is anticipated, given the strength of the Group's balance sheet, cash balances and cash generating capacity that this strong base will continue to provide an advantageous position to seek growth opportunities both through complementary acquisitions and investment in subsidiary and core company organic growth.

Mark Foster

Finance Director

9 June 2010

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2010

		Before Exceptional 2010 £000	Exceptional 2010 £000	Total 2010 £000	Post Exceptional Total 2009 £000
	Note
Continuing operations
Revenue		19,834	-	19,834	19,067
Cost of Sales		(8,196)	-	(8,196)	(7,848)
Gross profit		11,638	-	11,638	11,219
Administration and other operating expenses		(6,565)	(506)	(7,071)	(6,127)
Operating profit pre amortisation and share based payments		5,073	(506)	4,567	5,092
Intangible asset amortisation		(456)	-	(456)	(337)
Share based payments		(72)	-	(72)	(72)
Operating profit post amortisation and share based payments		4,545	(506)	4,039	4,683
Finance income		81	-	81	138
Finance costs		(86)	-	(86)	(197)
Profit before taxation		4,540	(506)	4,034	4,624
Income Tax expense	1	(969)	-	(969)	(1,184)
Profit after tax and total comprehensive income for the year attributable to the owners of the parent		3,571	(506)	3,065	3,440
Earnings per share
- Basic	3	12.68p	(1.79)p	10.89p	13.59p
- Diluted	3	12.27p	(1.70)p	10.57p	13.12p

Consolidated Balance Sheet

at 31 March 2010

	Note			2010 £000	2009 £000
Assets
Non-current assets
Goodwill				13,523	13,348
Other Intangible Assets				969	1,048
Property, plant and equipment				3,397	3,439
Investments				556	-
Total non-current assets				18,445	17,835
Current assets
Inventories				1,556	1,371
Trade and other receivables				3,785	4,646
Cash and cash equivalents				6,892	7,697
				12,233	13,714
Total assets				30,678	31,549
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables				5,804	7,038
Borrowings				448	420
Tax liabilities				302	348
Provisions				89	89
				6,643	7,895
Non-current liabilities
Borrowings				2,495	3,021
Provisions				156	232
Deferred tax				340	340
				2,991	3,593
Equity attributable to owners of the parent
Share capital				2,825	2,813
Share premium account				11,174	11,126
Shares to be issued				248	176
Own shares				(1,154)	(864)
Merger reserve				310	310
Retained profit				7,641	6,500
Total equity				21,044	20,061
Total equity and liabilities				30,678	31,549

Consolidated Statement of Changes in Equity

for the year ended 31 March 2010

	Share capital	Share premium Account	Own Shares	Share based payment reserve	Merger reserve	Profit and loss account	Total
	£000	£000	£000	£000	£'000	£000	£000
At 1 April 2008	2,434	7,024	(877)	104	310	4,263	13,258
Dividends	-	-	-	-	-	(1,203)	(1,203)
Exercised options re own shares	-	-	13	-	-	-	13
Share based payments	-	-	-	72	-	-	72
Share capital issued	379	4,102	-	-	-	-	4,481
Transactions with owners	379	4,102	13	72		(1,203)	3,363
Profit for the year	-	-	-	-	-	3,440	3,440
Profit and total comprehensive income	379	4,102	13	72	-	2,237	6,803
At 31 March 2009	2,813	11,126	(864)	176	310	6,500	20,061
At 1 April 2009	2,813	11,126	(864)	176	310	6,500	20,061
Dividends	-	-	-	-	-	(1,924)	(1,924)
Exercised options re own shares	-	-	13	-	-	-	13
Purchase of own shares	-	-	(303)	-	-	-	(303)
Share based payments	-	-	-	72	-	-	72
Share capital issued	12	48	-	-	-	-	60
Transactions with owners	12	48	(290)	72	-	(1,924)	(2,082)
Profit for the year	-	-	-	-	-	3,065	3,065
Profit and total comprehensive income	12	48	(290)	72	-	1,141	983
At 31 March 2010	2,825	11,174	(1,154)	248	310	7,641	21,044

Consolidated Cash Flow Statement

for the year ended 31 March 2010

	Note	2010 £000	2009 £000
Cash flows from operating activities
Profit for the year		3,065	3,440
Adjustments for
Interest receivable		81	138
Interest payable		(86)	(197)
Income tax expense		969	1,184
Amortisation of intangible assets		456	337
Depreciation		391	321
Profit on sale of property, plant and equipment		(41)	(1)
Share based payments		72	72
Operating cash flows before changes in working capital and provisions		4,907	5,294
Change in inventories		(185)	(196)
Change in receivables		861	(628)
Change in payables		(1,234)	(24)
Change in provisions		(76)	(71)
		(634)	(919)
Cash generated from operations		4,273	4,375
Income taxes paid		(1,015)	(1,596)
Net cash generated from operating activities		3,258	2,779
Cash flows from investing activities
Interest payable		86	197
Interest received		(81)	(138)
Proceeds on disposal of property, plant and equipment		62	5
Purchases of property, plant and equipment		(371)	(218)
Purchases of intangible assets		(377)	-
Purchase of subsidiary undertakings		-	(1,054)
Purchase of minority shareholdings		(175)	-
Purchase of investment		(556)	-
Cash acquired with subsidiary		-	215
Net cash used in investing activities		(1,412)	(993)
Cash flows from financing activities
Repayments of borrowings		(498)	(438)
Dividends paid	2	(1,924)	(1,203)
Options exercised/Purchase of own shares		(290)	13
Issue of ordinary share capital		60	4,481
Net cash used in financing activities		(2,652)	2,853
Net (decrease)/increase in cash and cash equivalents		(805)	4,639
Cash and cash equivalents at beginning of period		7,697	3,058
Cash and cash equivalents at end of period		6,892	7,697

Notes to the financial statements

1. Taxation

Analysis of charge in period

	2010 £000	2009 £000
Current tax expense
- UK corporation tax on profits of the period	1,067	1,347
- Amounts in respect of prior periods	(98)	(111)
	969	1,236
Deferred tax expense:
- Temporary differences	-	(52)
Income tax expense	969	1,184

Reconciliation of effective tax rate

The tax for the period is lower (2009: lower) than the standard rate of corporation tax in the UK (28%).  The differences are explained below:

	2010 £000	2009 £000
Profit before taxation - Continuing operations	4,034	4,624
Profit before taxation multiplied by rate of corporation tax in the UK of 28% (2009: 28%)	1,130	1,295
Effects of:
Other expenses not deductible for tax purposes	90	25
Goodwill amortisation	117	84
Sch 23 deduction	(34)	-
Depreciation in excess of capital allowances	(11)	(29)
Loss utilisation	-	(80)
Adjustments for prior years	(98)	(111)
Rate difference	(3)	-
Research and development	(185)	-
Other timing differences	(37)	-
Total tax expense	969	1,184

2. Ordinary dividends

	2010 £000	2009 £000
Final dividend for the year ended 31 March 2009 of 3.80p (year ended 31 March 2008: 3.55p)	1,040	837
1st interim dividend paid in respect of the year of 1.63p (2009:1.55p)	441	366
2nd interim dividend paid in respect of the year of 1.63p (2009:nil)	443	-
Amounts recognised as distributions to equity holders	1,924	1,203

In addition, the directors are proposing a final dividend in respect of the year ended 31 March 2010 of 2.24p per share.  If approved by shareholders, it will be paid on 22 July 2010 to shareholders who are on the register of members on 18 June 2010.

3. Earnings per share

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share are calculated on the basis of profit for the year after tax divided by the weighted average number of shares in issue in the year plus the weighted average number of shares which would be issued if all the options granted were exercised

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

	2010			2009
	Earnings £000	Basic earnings per share	Diluted earnings per share	Earnings £000	Basic earnings per share	Diluted earnings per share
Profit attributable to equity shareholders	3,065	10.89p	10.57p	3,440	13.59p	13.12p

	2010 Number	2009 Number
Weighted average number of ordinary shares	28,153,878	25,319,392
Dilutive effect of share options	1,439,036	1,450,902
Diluted weighted average number of ordinary shares	29,592,914	26,770,294

4. Exceptional items

	2010 £000	2009 £000
Restructuring and corporate finance costs	506	363
	506	363

The above costs relate to costs incurred in restructuring the subsidiary entities including integration and organisational restructuring and corporate finance fees in respect of potential acquisitions during the year.

5. Basis of preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Sections 434 and 435 of the Companies Act 2006.

The consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet at 31 March 2010 and the consolidated cash flow statement have been extracted from the Group's financial statements upon which the auditors opinion is unqualified and does not include any statement under section 498(2) or 498(3) of the Companies Act 2006. Those financial statements have not yet been delivered to the Registrar.

The statutory accounts for the year ended 31 March 2009 have been delivered to the registrar, contained an unqualified audit report and did not include a statement under section 237(2) or 237(3) of the Companies Act 1985.

The audited accounts will be posted to all shareholders in due course and will be available on request by contacting the Company Secretary at the Company's Registered Office.

6. Annual General Meeting

The Annual General Meeting will be held on 15 July 2010 at 9:00am at the offices of Grant Thornton UK LLP, No.1 Whitehall Riverside, Leeds, LS1 4BN.

- Ends -

 

END

 

 

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