Final Results
Brulines (Holdings) PLC
19 June 2007
Press Release 19 June 2007
Brulines (Holdings) plc
('Brulines' or 'the Group')
Final Results
Brulines (Holdings) plc (AIM: BRU), the leading provider of draught alcoholic
drinks volume, quality and profit protection systems for the UK licensed
on-trade, today announces its Final Results for the year ended 31 March 2007.
Highlights
• Joined AIM in October 2006, raising net proceeds of £6.84 million
• *Adjusted profit before tax of £3.23 million (2006: £2.60 million)
• **Underlying profit before taxation for the core business up 27% at £3.45
million (2006: 2.71million)
• Group turnover increased to £16.76 million
• Maiden dividend of 3p per share recommended
• Successful roll-out of Enterprise Inns installations
• Trials of Brand Quality Monitoring ('BQM') ongoing in tenanted and managed
sectors
• Acquisitions of the trade and assets of Corporate Management Services and
majority shareholding in Coin Metrics will enhance the Group's position in
the 'gaming' machines market
*this represents profit before taxation, exceptional items and amortisation of
goodwill
**as outlined in the Financial Review herewith
Commenting on the Final Results, James Newman, Chairman of Brulines, said:
'Overall, the trading and financial performance was slightly ahead of the
Board's expectations for the year. The higher profile and increased financial
strength as a result of the flotation has provided a good base from which to
expand the Group's activities.
The acquisitions made during the last twelve months and the introduction of new
products will extend the Group's key markets into the Managed Pub sector and the
wider leisure sector, where there are significant opportunities for growth.
From this strong platform, the Board is confident that the Group will continue
to make further progress during the next year.'
- Ends -
Enquiries:
Brulines (Holdings) plc
James Dickson, Chief Executive Tel: +44 (0) 1642 358 800
james.dickson@brulines.com
Mark Foster, Finance Director
mark.foster@brulines.com www.brulines.com
RSM Robson Rhodes Corporate Finance
Neil Crawford, Corporate Finance Tel: +44 (0) 113 225 4100
neil.crawford@rsmi.co.uk www.rsmi.co.uk
Media enquiries:
Abchurch Communications
Sarah Hollins/Justin Heath/ Emma Johnson Tel: +44 (0) 207 398 7784
emma.johnson@abchurch-group.com www.abchurch-group.com
CHAIRMAN'S STATEMENT
I am delighted to report a period of significant progress for the Group, in
this, its first year as a public company and my first year as Chairman.
AIM flotation
The Group successfully floated on the AIM market in October 2006, which due to
the efforts of my colleagues on the Board and the Group's advisers, was achieved
with minimal disruption to the day to day business operations.
The primary reason for listing on AIM was to give the Group a stronger financial
base from which to significantly expand its activities. These include the
development of new products and markets as well as looking for suitable
acquisitions. I am pleased to report that we have already started to benefit
from the profile and financial strength as a result of the flotation.
Results
The Group was formed to effect the management buy-out of Brulines Limited in May
2005. Consequently, the results of the Group for the period ended 31 March 2006
reflect the results of Brulines Limited from the date of the acquisition, rather
than for a full year. The Financial Review includes a table of results for
Brulines Limited for the two years ended 31 March 2007 to enable a more
meaningful comparison of the underlying business.
Turnover for the period was significantly ahead of the corresponding period in
2006, increasing by over 50%, to £16.76 million. This was mainly as a result of
the roll-out of the Enterprise Inns contract, which commenced in October 2005,
and the replacement programme for Punch Taverns.
As anticipated, gross margins reduced due to the necessary increase in costs
ahead of the new installations. However, as expected, this improved in the
second half as service income from these installations started to be generated.
Operating profit before goodwill and exceptional items increased by 24.4% to
£3.23 million. After deducting goodwill amortisation and interest, both of
which occurred as a result of the management buy-out in May 2005, and the
exceptional costs of the flotation, profit before tax rose to £1.91 million
(2006: £1.63 million). However underlying profit before tax increased
substantially, by 27% to £3.45 million.
Overall, the trading and financial performance for the year was slightly ahead
of the Board's expectations at the time of the flotation. Due to the high tax
charge resulting from the disallowable flotation and amortisation costs earnings
per share is 4.9p. But for the exceptional flotation costs the earnings per
share would have been 8.3p and compares favourably to that of 2006 (5.7p).
Dividend
In line with the statement made at the time of the flotation, the Board is
recommending that its first dividend as a public company be a final dividend in
respect of the year ended 31 March 2007 at 3p per share. Subject to the
approval of shareholders at the Group's Annual General Meeting on 24 July 2007,
the dividend will be paid on 25 July 2007 to shareholders on the register on 29
June 2007.
Acquisitions
One of the Board's primary objectives for the flotation was to generate
selective acquisitions in order to extend the Group's product offering to its
existing customers and also to enter new markets aligned to the skills and
technologies within the Group.
In September 2006, we announced the acquisition of the trade and assets of
Corporate Management Services ('CMS') to integrate into our newly formed Machine
Insite Ltd subsidiary. In May 2007, we announced that we had taken a majority
shareholding in Coin Metrics Limited ('CML'), a company with an established
customer base in the amusement with prizes ('AWP') and gaming industries, using
similar technology to the Group and, therefore, a strong strategic fit with
Machine Insite.
The Board continues to explore further acquisition opportunities, which will
expand the markets we operate in and create synergies for the Group's existing
products.
Board
When I became Chairman of the Group in May 2006, as part of the flotation
process, the Group's founder, Derrick Collin, stepped down as Non-Executive
Chairman and Director. On behalf of the Board, I would like to thank Derrick
for his significant contribution to the Group over many years, as the founder,
Chairman and major shareholder.
Just prior to flotation, the Board appointed Stewart Gilliland as a
Non-Executive Director and Duncan Noble, as Operations Director, to the plc
Board.
Outlook
The higher profile and increased financial strength as a result of the flotation
has provided a good base from which to expand the Group's activities. The
acquisitions made and the introduction of new products will extend the Group's
key markets into the Managed Pub sector and the wider leisure sector, where
there are significant opportunities for growth. From this strong platform, the
Board is confident that the Group will continue to make further progress during
the next year.
James Newman
Chairman
19 June 2007
CHIEF EXECUTIVE'S REVIEW
Turnover Growth
On a comparable year on year proforma basis, core business turnover for the year
increased by 37% to £16.50 million (2006: £12.03 million) with the majority of
growth attributable to the Enterprise Inns, and Marstons installation roll-out
plans, as well as Punch Taverns' upgrade programme. As expected, the turnover
mix in the second half moved towards recurring revenue as income from support
service contracts was generated from the increasing installation base.
In the year the Group completed 4,400 new installations and 1,507 system upgrade
replacements, compared to a total of 3,652 installations in the previous year.
Market drivers
The Group continues to benefit from a number of sector and legislative factors
which have increased both the breadth and depth of our market penetration. These
points are summarised below:
• Continued sector consolidation and migration of premises from managed
and independent to the tenanted model provides good organic growth from our
existing contracts with key consolidators.
• The drive to improve the size and quality of estate has led some of
our customers, such as Enterprise and Punch, to sell on non-core pubs to other
of our customers such as Admiral and Scottish & Newcastle Pub Enterprises. The
majority of these sites already have our equipment in situ, which increases our
profile with the acquiring pub group.
• The smoking ban in England, effective from 01 July 2007, has already
had a positive impact on sales of our dispense monitoring systems as pub groups
seek to gain greater transparency on pub performance leading up to and during
the ban.
• Significant competition for the leisure pound and increasingly
discerning consumers mean that operators must continually improve the quality
and efficiency of their offering, both of which require better and faster
operational information, which we are able to provide with our new Brand Quality
Monitoring ('BQM') product range.
• Economic factors continue to place increasing pressure on operating
financial performance in the leisure sector, which will only increase further
where Real Estate Investment Trust ('REIT') status is implemented. This
underlying pressure is expected to result in an increasing demand to understand
the true operating information and potential of a property, a service that we
can provide.
New contracts
Negotiations for our core product offering to the tenanted - leased sector have
been successfully completed with S&N Pub Enterprises and Admiral, and continue
to advance with other national and regional operators. This is expected to
increase our market share and continue to both broaden our customer base and
gain deeper penetration within existing customers' estates.
New product development
The Group is pleased with the progress of our BQM product range. This enables
the Group to remotely capture five of the seven industry recognised key success
factors for the ''perfect pint', these being temperature at the point of
dispense, line cleaning, throughput, cellar temperature, and flow rate, leaving
only cleanliness of glass and dispense technique as impractical to measure
automatically.
We believe that within the drinks and, in particular, the beer industry, quality
at the point of dispense is becoming increasingly important and that focus on
product quality is becoming more evident as pub owners and brewers compete for
market share by committing investment into beer quality improvement to enhance
the consumer experience. This is resulting in some key commercial evaluation
within both the national tenanted and managed sectors which, if successful,
could lead to significant new customers for BQM in the next twelve months. We
have already seen the first orders for this product from Punch Taverns for 100
installations.
Strategy for growth
Our primary aim is to continue to grow the UK business organically whilst
considering strategic acquisitions and additional complimentary products and
technologies. We will continue to maintain our reputation for developing
products that are accurate, robust and reliable and that are highly relevant to
the needs of our customers.
As a result of the market drivers we have identified, our current ability to
provide valuable returns to customers from dispense monitoring and AWP machine
monitoring, and the emerging potential of BQM, we expect to increase our
coverage of the tenanted - leased and managed sectors.
Customer returns on investment from our core dispense monitoring and BQM
products underpin the installation of our edisBOX communication platform in pubs
and bars. Once installed the edisBOX is capable of accepting additional products
which alone might not justify investment in a separate communication platform.
These additional products might include the monitoring of footfall, soft drinks
monitoring, fridge/freezer temperature, wines & spirits, utilities and AWP '
gaming' machines.
The Group is actively looking to develop and to add these types of products to
our installed communications platforms within existing customers.
The Group believes that our ability to provide a wider range of effective
operational and market data will increase our value to existing customers within
tenanted / leased and managed sectors, whilst allowing entry to the hotels,
clubs, and independent sectors.
During the current year we will continue to invest in evaluating international
opportunities for Dispense Monitoring, Brand Quality Monitoring and AWP
Monitoring, when they may arise.
Strategic growth acquisitions
In August 2006 we successfully acquired the customer base of Corporate
Management Services Limited (CMS) for a consideration of £110,000 and have
migrated the customers and basic data management service provision to our newly
formed subsidiary, Machine Insite Limited.
Following significant development investment we have successfully launched an
improved database and data management software with web based reporting that has
helped gain new business with SA Brain, MOTO Motorway services, Spirit and
Orchid. The new company traded profitably in its first seven months and will
continue to grow its contribution to Group profit over the coming years.
In May 2007, as part of our plan to launch revenue enhancing AWP monitoring
products such as remote data capture, the Group acquired a 66 percent holding in
Coin Metrics Limited (CML) for a consideration of £685,000, of which £622,750
was paid in cash, with the balance satisfied by the issue of 36,974 ordinary
shares.
Brulines has also entered into an option agreement with the shareholders of CML,
whereby the remaining shares in CML may be acquired on a formula based upon the
level of recurring income generated by CML in any of the three years ending 31
March 2012.
CML, established in 2005 and based in Milton Keynes, has developed the Site
Guardian system, a wireless data product that allows its customers in the
amusement and gaming (or 'AWP') industries to monitor constantly the financial
performance of their gaming sites and assets accurately and in real time. To
date, CML has sold over 4,000 Site Guardian units to 100 sites across the UK,
primarily to owners of gaming centres or family entertainment centres.
The acquisition of CML is a strong strategic fit with the Group's existing
Machine Insite business which already provides gaming machine data management
and consultancy services to operators within the pub, club and leisure markets.
Importantly, the acquisition will enable the Group to accelerate the growth of
the AWP data management business to market leadership through real time remote
download of data from AWP machines, whilst also opening up new applications and
markets for the next generation of wireless data capture systems, such as
vending.
The acquisition has strong product synergy and very little overlap between our
respective customer bases, where there are already strong relationships. This
gives us a solid platform to cross sell and also take a market leading portfolio
to a wider market.
Management and employees
During the year the Group has made good progress both in the recruitment of new
talent and in ongoing personnel development in order to strengthen the
management team at all levels.
It was particularly pleasing that the quality of our business and people
attracted two high calibre Non Executive Directors, those being James Newman and
Stewart Gilliland. James's considerable financial and non-executive experience
has been invaluable in guiding the executive team during our first year as a
public company, whilst Stewart has brought substantial industry knowledge and
has made a significant contribution to our activities. I would like to thank
them for their support during the past year.
Key organisational developments in the year have been:
• the addition of Mark Foster and Ron Colley as Group Finance Director and
Commercial and Marketing Director respectively in early 2006, which has
enhanced the depth of the management team, supporting the business as it
continues to grow;
• the key commercial operations and service functions were restructured in
October 2006 to ensure that the Group is aligned to future growth plans and
our customer partnership needs.
I am proud to say that 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. I thank everyone for their contribution during the
last twelve months.
James Dickson
Chief Executive
19 June 2007
FINANCIAL REVIEW
Pro-forma trading table
As noted in the Chairman's statement, the comparative figures for the Group for
the period ended 31 March 2006 represent the results of Brulines Limited only
from 19 May 2005, the date of the management buy-out of Brulines Limited. To
enable shareholders to review the performance of the Group in a more meaningful
way the following table compares the results of our core business for the two
years ended 31 March 2007:
FY 2007 FY 2006
£'000's £'000's
Turnover 16,499 12,035
Gross Profit 7,238 (43.9%) 5,566 (46.2%)
EBITDA 3,524 3,066
EBIT 3,296 2,681
PBT 3,445 2,711
Gross Margin
As stated at the time of the flotation, gross margin was impacted by the
increased costs related to operational set up in delivering the agreed
installation plan for Enterprise Inns roll-out programme. Gross margin in the
second half of the financial year improved from 42.7% to 45.4%, reflecting a
shift in the revenue mix towards support service income arising from an
increased installation base.
Actual Group Profit
The consolidated Group profit before amortisation of goodwill, exceptional costs
and taxation increased by 24.2% to £3.23 million (2006: £2.60 million). The
amortisation of goodwill of £0.46 million relates to the management buy-out of
Brulines Limited in May 2005. The exceptional costs of £0.68 million relate to
the costs of flotation, which were not directly attributable to the raising of
new capital for the Group with the £0.48 million balance of the costs written
off against the share premium account.
Taxation
The taxation charge of £0.91 million represented an effective tax rate of 47.9%
on the reported profit before taxation of £1.91 million. The overall taxation
charge was higher than the standard rate of corporation tax due to the
amortisation of goodwill and the flotation expenses being disallowable for
taxation purposes.
Earnings per share
Basic earnings per share for the year ended 31 March 2007 amounted to 4.9p.
However, before exceptional items, basic earnings per share amounted to 8.25p,
an increase of 43.2% over the 101/2 month period to 31 March 2006. Fully diluted
earnings per share, which takes account of all outstanding share options,
amounted to 8.1p
Balance sheet - change post flotation
The balance sheet reported at the year end reflects the full impact of the
flotation, which took place on 26 October 2006, raising £8.00 million before
costs and resulting in the repayment of all debt. Following the positive trading
cash flow during the year of £5.19 million, the Group had net cash balances of
£4.08 million at 31 March 2007 which will provide a strong base from which to
take advantage of growth opportunities.
Transition to International Financial Reporting Standards (IFRS)
As an AIM listed company, the Group will adopt IFRS for the year ending 31 March
2008. The impact of IFRS is considered to be minimal with no material effects
other than that amortisation of goodwill will not occur. The Interim Results
for the six months ended 30 September will be prepared under IFRS.
Mark Foster
Finance Director
19 June 2007
Consolidated profit and loss account
for the year ended 31 March 2007
Before
Exceptional Exceptional Total Period ended
Year ended Year ended Year ended 31
31 March 2007 31 March 2007 31 March 2007 March 2006
Note £'000 £'000 £'000 £'000
Turnover 16,756 - 16,756 11,076
Cost of Sales (9,462) - (9,462) (5,901)
Gross Profit 7,294 - 7,294 5,175
Administrative Expenses (4,063) (681) (4,744) (2,577)
Operating profit before
amortisation of goodwill 3,231 (681) 2,550 2,598
Amortisation of goodwill (463) - (463) (432)
Group operating profit 2,768 (681) 2,087 2,166
Net interest (payable) (179) - (179) (540)
Profit on ordinary activities
before taxation 3 2,589 (681) 1,908 1,626
Tax on profit on ordinary
activities 1 (913) - (913) (627)
Profit on ordinary activities
after taxation 1,676 (681) 995 999
Basic earnings per share (p) 2 8.25 (3.35) 4.90 5.76
Diluted earnings per share (p) 2 8.10 (3.29) 4.81 5.76
There are no recognised gains or losses other than those shown in the profit and
loss account above.
Reconciliation of movement in shareholders' funds
for the year ended 31 March 2007
Year ended Period ended
31 March 31 March
2007 2006
£'000 £'000
Opening shareholders' funds 2,734 -
Profit for financial period 995 999
New shares issued 673 1,735
Premium on shares allotted during the period 6,966 -
Shares to be issued 32 -
Own shares (152) -
Closing shareholders' funds 11,249 2,734
Consolidated balance sheet
as at 31 March 2007
31 March 31 March
2007 2006
£'000 £'000
Fixed assets
Intangible assets - goodwill 8,767 9,382
Tangible assets 487 281
9,254 9,663
Current assets
Stocks and work in progress 1,288 920
Debtors 2,893 6,238
Bank balances 4,079 2,650
8,260 9,808
Creditors: Amounts falling due within one year (6,265) (7,698)
Net current assets 1,995 2,110
Total assets less current liabilities 11,249 11,773
Creditors: Amounts falling due after one year - (9,024)
Provision for liabilities and charges - (15)
Net assets 11,249 2,734
Equity shareholders' funds
Called up share capital
- ordinary shares 2,408 1,735
Share premium 6,966 -
Shares to be issued 32 -
Profit and loss account 1,994 999
Own shares (152) -
11,249 2,734
Consolidated cash flow statement
for the year ended 31 March 2007
Year ended Period ended
31 March 31 March
2007 2006
Note £'000 £'000
Net cash inflow from operating activities
Operating profit before exceptionals 2,768 2,166
Exceptionals (681) -
Operating profit after exceptionals 2,087 2,166
Depreciation and amortisation 655 722
Profit on sale of tangible assets - (213)
Increase in stocks (368) (269)
Decrease/ (increase) in debtors 3,352 (5,005)
(Decrease)/ increase in creditors (565) 5,085
Other - share based payment 32 -
Net cash inflow from operating activities 5,193 2,486
Returns on investment and servicing of finance (179) (540)
Taxation (640) (462)
Capital expenditure and financial investment (397) 494
Acquisitions and disposals (270) (12,486)
Net cash inflow/ (outflow) before financing 3,707 (10,508)
Financing
Repayment of bank funding (5,678) (322)
Bank funding - 6,000
Loan note funding - 4,265
Repayment of finance leases (24) (292)
Repayment of loan note (4,215) (50)
Issue of ordinary share capital 7,639 1,735
Increase in cash 4 1,429 829
Notes to the preliminary announcement
1. Tax on profit on ordinary activities
The charge for tax is based on the profit for the year and comprises:
Year ended Period ended
31 March 31 March
2007 2006
£'000 £'000
United Kingdom corporation tax 934 612
Deferred tax: net of originating timing differences (21) 15
913 627
Tax charge for March 2007 is impacted by:
Tax on ordinary activities at 30% 573
Adjusted for:
Flotation expenses 182
Goodwill amortisation 139
Other tax matters 40
Deferred tax (21)
Tax charge 913
2. Earnings per share
The calculations of earnings per share are based on the following results and
numbers of shares in issue.
Pre Post Period ended
exceptional Exceptional exceptional 31 March
2007 2007 2007 2006
£'000 £'000 £'000 £'000
Profit after tax (£) 1,676 681 995 999
Basic earnings per share (p) 8.25 (3.35) 4.90 5.76
Diluted earnings per share (p) 8.10 (3.29) 4.81 5.76
Weighted average number of shares for basic
earnings per share 20,307,028 20,307,028 20,307,028 1,734,505
Weighted average number of shares for
diluted earnings per share 20,687,820 20,687,820 20,687,820 1,734,505
3. Exceptional items
The exceptional costs of £680,724 incurred in the year to 31 March 2007
represent the costs relating to the Company's admission to AIM.
4. Reconciliation of net cash flow to movement in net funds/(debt)
Year ended Period ended
31 March 31 March
2007 2006
£'000 £'000
Increase in cash during the period 1,429 829
Decrease/ (increase) in overdraft during the period 5,678 (5,678)
Net funds acquired - 1,659
Cash flow from lease financing and repayment of debt 24 292
Change in net debt resulting from cash flows 7,131 (2,898)
New hire purchase and finance leases - (154)
Movement in net debt during period 7,131 (3,052)
Opening net debt (3,052) -
Closing net funds/(debt) 4,079 (3,052)
5. Analysis of net (debt)/funds
At At
01 April 31 March
2006 Cash flow 2007
£'000 £'000 £'000
Bank balances and deposits 2,650 1,429 4,079
Overdrafts (878) 878 -
1,772 2,307 4,079
Debt due after one year (4,800) 4,800 -
Hire purchase and finance lease creditors (24) 24 -
(4,824) 4,824 -
(3,052) 7,131 4,079
6. Post balance sheet events
On 10 May 2007, the Company acquired a 66 percent shareholding in Coin Metrics
Limited for a consideration of £685,000, of which £622,750 was paid in cash with
the balance satisfied by the issue of 36,974 ordinary shares of 10p each in the
Company.
7. Basis of preparation
This preliminary announcement was approved by the Board on 19 June 2007. The
financial information in this preliminary announcement does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
It has been prepared using accounting policies that are consistent with those
adopted in the statutory accounts for the year ended 31 March 2007. The year
end report is also presented and prepared in a form consistent with that which
had been adopted in the annual accounts for the year ended 31 March 2007, having
regard to the accounting standards applicable to such accounts.
The financial information for the year ended 31 March 2007 and for the period
ended 31 March 2006 has been derived from the statutory accounts for those
periods. The statutory accounts for the ten month period ended 31 March 2006
have been delivered to the Registrar of Companies and received an audit report
which was unqualified and did not contain statements under s237(2) or (3) of the
Companies Act 1985. The group accounts for the year ended 31 March 2007, on
which the auditors issued an unqualified report which did not contain a
statement under s237(2) or (3) of the Companies Act 1985, were approved by the
directors on 19 June 2007 and will be delivered to the Registrar of Companies
following the Annual General Meeting.
8. Distribution to shareholders
The Annual Report and Financial Statements will be posted to shareholders
shortly and will be available to the public at the Company's registered office:
EDIS House, Wellington Court, Preston Farm Business Park, Stockton on Tees, TS18
3TA.
This information is provided by RNS
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