Universe Group plc (LON:UNG), a leading developer and supplier of retail management solutions, payment and loyalty systems, has announced its unaudited interim results for the six months ended 30 June 2021.
|·||Revenues up by 19.8% in H1 2021 at £11.70 million (H1 2020: £9.77 million)|
|·||Successful extension to payment solutions contract for a substantial UK grocery customer|
|·||Successful five-year extension of an existing contract with a major international oil and gas group for the provision of loyalty services Europe-wide.|
|·||Adjusted EBITDA of £0.32 million (H1 2020: 0.79 million)|
|·||Operating loss £0.96 million (H1 2020: £0.65 million)|
|·||Loss per share 0.39 pence (H1 2020: 0.33 pence)|
|·||Net cash outflow from operations £0.36 million (H1 2020: net inflow £0.10 million)|
|·||Net debt at 30 June 2021 £6.04 million (31 December 2020: 4.68 million); reduced to £2.30 million shortly after 30 June 2021|
|·||Current visibility of H2 2021 revenues of £10.0 million through existing recurring and repeatable revenues, augmented by the order book|
Andrew Blazye, Executive Chairman of Universe Group, commented:
“The first half of 2021 saw continued impacts from the COVID-19 pandemic, including lockdowns in the first quarter. In addition, we appointed a new senior management team who are finalising the development of a refocussed strategy. Against this background, I am delighted that we achieved revenues in excess of the same period in 2020, which was coupled with the renewal of two significant contracts.
“We were delighted to have finalised our contract with a major UK grocery customer during the first half and we have now completed a challenging, but successful roll-out process. I am very grateful to our customer services and installation teams who showed great teamwork to complete the project to the satisfaction of all. We are also pleased to report the re-signing of a contract with a major international oil and gas company for the provision of loyalty services. Additionally, our recent launch of the latest version of our RMS platform, ab-initio, has met with encouraging market response and bodes well for future revenues.
“With the arrival of a new management team, led by Neil Radley as CEO and Adrian Wilding as CFO, the business has started to develop a fresh strategic approach and a real focus on the business’ key strengths. The start of the journey is reflected in a new approach to our segmental reporting, which indicates our future focus. These changes have been made to align our efforts consistently across the business on our three key revenue segments of Payment Solutions, Enterprise Management Solutions, and Data (including Loyalty) Solutions.
“Following the revenues recognised of £11.7 million in the first half, there are further revenues of £10.0 million currently visible through existing recurring and repeatable revenue contracts and the order book to year end. We are very conscious of the need to fully execute this order book over the rest of the year.
“With a sound balance sheet showing an improving net debt position and undrawn banking facilities, we remain cautiously optimistic that we can meet the Board’s expectations in 2021 and see growth in the coming years.”
Whilst the first half, and particularly the first quarter continued to be dominated by the impact of the COVID-19 pandemic and the third lockdown impacting the Group’s ability to close new business, overall results were supported by recurring revenues and the successful extensions of an existing contract with a major UK-based supermarket and an international oil and gas company.
The supermarket contract extension required a major roll-out of payment solutions over a three-month period, the revenue being recognised in line with installation milestones.
During the period we welcomed Neil Radley as the Group’s new Chief Executive Officer and Adrian Wilding as the new Chief Financial Officer, together with a number of other senior hires.
With the arrival of a new management team, the business has started to develop a fresh strategic approach and a real focus on the business’ key strengths. The start of the journey is reflected in a new approach to our segmental reporting, which indicates our future focus. These changes have been made to align our efforts consistently across the business on our three key revenue segments of Payment Solutions, Enterprise Management Solutions, and Data Solutions and will also provide stakeholders with improved information.
Profit & Loss
Revenues for H1 2021 totalled £11.70 million (H1 2020: £9.77 million), with recurring and other revenues totalling £5.81 million (H1 2020: £5.94 million) and £5.89 million (H1 2020: £3.83 million) respectively. Excluding the impact of £3.5 million earned in respect of the roll-out of payment solutions, other revenues decreased from £3.83 million in H1 2020 to £2.39 million due to lower consultancy and bespoke development revenue generated during the first quarter 2021.
Customer retention has remained strong with recurring revenues across each segment maintaining their historic run-rates. Recurring revenues are expected to be at least sustained at similar levels going forward.
Gross profit increased by £0.22 million to £5.12 million (H1 2020: £4.90 million) and the gross margin decreased to 43.7% (H1 2020: 50.1%), primarily due to the cost of the payment solution roll-out which diluted the higher margins earned by data and payment solutions.
Administrative expenses, adjusted for the amortisation of acquired intangibles increased by 10.6% on the comparative period from 5.36 million in H1 2020 to £5.93 million in H1 2021. The increase was primarily due to one-off expenses for consultancy and costs incurred in relation to management changes totalling £0.90 million in H1 2021, offset by lower payroll costs during H1 2021 of £0.33 million. Excluding the one of charges, administrative expenses were reduced by 6.2% in the period.
Earnings before interest, taxes, share-based payments, depreciation, amortisation and acquisition costs expensed (“Adjusted EBITDA”) was £0.32 million (H1 2020: £0.79 million), with the increase in gross profit offset by the additional one-off administrative expenses referred to above.
The operating loss was 0.96 million (H1 2020: £0.65 million). Excluding the one-off charges the loss was £0.06m.
Net finance expense was £0.15 million (H1 2020: £0.19 million) and included six months of interest on the £3.50 million HSBC 4-year term loan and £1.31m HSBC trade loan as well as notional interest on the right-of-use assets.
The underlying tax credit for the period was £0.10 million (H1 2020: £0.00 million).
Loss per share for the period was 0.39 pence (H1 2020: 0.33 pence).
Balance sheet and cash flow
Current assets increased by £2.83 million to £14.59 million at 30 June 2021 from £11.77 million at 31 December 2020, reflecting an increase in trade debtors, offset by a decrease in stock, as a result of finalising the contract with a major UK grocer and commencing the roll-out of this project. Current liabilities increased by £4.31 million to £14.78 million from £10.46 million at 31 December 2020 primarily as a result of increased deferred revenue and the draw-down of unused bank facilities of £1.0 million. Both net current assets and non-current liabilities include the remainder of the HSBC £3.50 million term loan.
Of note, and subsequent to the balance sheet date at 30 June 2021, the trade loan totalling £1.31 million and £0.44 million of HSBC term loan instalments were repaid, following the conclusion of commercial arrangements in relation to the UK supermarket contract extension, reducing net debt from £6.04 million to £2.30 million by mid-July 2021.
Cash outflows from operating activities in the half year were £0.35 million (H1 2020: inflows £0.1 million). The main change is due to reduction in operating cash flows from the finalisation of commercial arrangements relating to the contract extension post June 2021.
Investment in the core business continued apace with development costs incurred totalling £0.89 million (H1 2020: £0.78 million) primarily focused on our next generation of outdoor payment terminals and developing a fuel capability for our retail systems.
Capital expenditure in the period was £0.05 million (H1 2020: £0.18 million).
Cash at 30 June 2021 was £0.62 million compared to £1.83 million at 31 December 2020
Whilst the majority of the COVID-19 restrictions have now been lifted and many of our customers are able to return to a new normal, we continue to assess the pandemic’s impact on trading in the current year. With the new fuel capability ready for our flagship retail management systems and enhanced payment solution capabilities, we look forward to closing out on several opportunities over the coming months.
The roll-out of the payment solution project for the major UK supermarket has now been completed post period end and the revenues have now been fully earned and recognised.
Existing customer relationships remain strong with the new management team already building on those relationships. It is encouraging that the Group completed revenues of £11.7 million in H1 2021, with further revenues of £10.0 million visible through existing recurring and repeatable revenue contracts and the order book. In the current market context, the Group is mindful that the final value, terms and timing of delivery of the order book, remains subject to ongoing discussions.
The business is going through a significant period of change following the restructuring of the senior management team and new hires. The work currently in train to refresh our approach and focus provides confidence in our ability to respond to an ever-increasing amount of change within the fuel and convenience retail market. We are pleased to see our first half revenues hold up despite the effects of COVID-19 and the management changes. Much work was done in the first quarter to allow the business to continue to operate effectively under the new restrictions, whilst still allowing our field engineers to be able to service our clients. I am very grateful to all our staff for the resilience they have shown.
Despite difficult market conditions, we have won significant contract renewals with major clients as well as a major payment device contract. Our recent launch of the latest version of our RMS platform, ab-initio, has met with encouraging market response and bodes well for future revenues.
We are very conscious of the need to fully execute against the order book over the rest of the year, but with a sound balance sheet showing reducing net debt and undrawn banking facilities, we remain cautiously optimistic that we can meet the Board’s expectations in 2021 and see growth in the coming years.
29 September 2021