Brulines Group plc

("Brulines" or "the Group")

Interim 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 to announce its interim results for the six months ended 30 September 2011.

Financial Highlights

Operational Highlights

Commenting on the interim results, James Newman, Chairman of Brulines Group plc, said: "The Group has continued to trade encouragingly in what has remained a difficult economic environment.  Good progress has been made across all areas of the business, in particular in the core Leisure division with the continued roll out of iDraughtTM and contract extensions secured with a number of key customers. The Fuel Solutions division has now overcome some initial challenges and is performing closer to expectations. 

"Overall, the Board believes the Group is well positioned in all of its markets and enjoys a high level of recurring income.  Despite the macro-economic backdrop, the Board expects to maintain Brulines' resilient performance for the remainder of the financial year."

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Chairman's Statement

In light of the continued difficult economic conditions in the key sectors in which the Group operates, the Board believes that Brulines has achieved a satisfactory set of results for the six months to 30 September 2011, demonstrating the strength of our recurring revenue streams, particularly within the Leisure Division.

Results

Turnover for the past six months amounted to £11.79 million, some 3.9% lower than the same period last year (H1 2011: £12.27 million).  This decrease is largely due to pub closures and disposals which resulted in a net reduction of 660 sites in our core Leisure business installation base, although this was partially offset by delivering 361 higher value new iDraughtTM installations.  Turnover within the Fuel Solutions Division remained broadly flat compared to the same period last year, although both Edensure and RFS performed well.

Despite integration issues holding back the performance of the Fuel Solutions Division, Group gross margins remained strong at 53.0% as compared to 55.2% in H1 2011.  The Group has maintained tight control over fixed overheads, which reduced by some 7.0% on last year, and the Board continues to review these in light of the difficult trading conditions within the leisure market.

The Group's profit before amortisation, share based payments and exceptional items amounted to £1.91 million (H1 2011: £2.42 million), a decrease of 21 % over the comparable period last year.  Profit before taxation amounted to £1.62 million (H1 2011: £1.95 million).

The Group's earnings per share, before exceptional credits of £0.09 million (H1 2011: charge of £0.20 million), amounted to 3.93 pence (H1 2011: 5.43 pence).

Dividend

In line with the Group's current dividend policy and also to reflect the Board's view of the prospects for the year as a whole, the Board has declared an interim dividend of 1.67 pence per share (H1 2011: 1.67 pence per share), payable on 1 February 2012 to shareholders on the register as at 16 December 2011.  A final dividend of 3.98 pence per share was paid in respect of the year ended 31 March 2011 on 28 July 2011.

Outlook

Although the economic climate remains challenging, particularly in the pub sector, the Board believes that the Group is well placed to make progress in H2, particularly in light of:

·     a number of contract extensions, including Enterprise Inns, which was announced on 1 November 2011. In addition, the Group is in discussions with several of its other key customers in its Leisure Division over similar contract extensions;

·     the progress being made by Vianet with new sales opportunities with major international brand owners, especially following the acquisition of Lookout Solutions and the appointment of Mark Boland as Sales and Marketing Director; and

·     the recent improvement in trading within the Fuel Solutions Division following integration problems in the first half of the year.

Brulines is well positioned in all of the markets in which it operates, and the Board remains confident about the Group's prospects for the future. 

James H Newman

Chairman                                                                                   

6 December 2011

Executive Review

Satisfactory financial performance in a difficult trading environment

Despite the difficult environment, the Board is pleased to report that trading in the Group's core beer monitoring business has been robust despite some initial delays to iDraughtTM installation programmes.  The Group's Fuel Solutions Division performance was significantly held back in the first quarter by some integration matters which have now been satisfactorily resolved, with the second quarter showing a better performance, and trading positively before exceptional costs.  The resulting impact of all of these factors is that the Group's results for the six months to 30 September 2011 are moderately behind management expectations for the period. 

Nonetheless, the Board is encouraged by the headway made in reducing the losses associated with Vianet, the progress being made in the core beer monitoring business with further iDraughtTM gains notably with Enterprise Inns, and the improvements now being seen in the Fuel Solutions division moving close to contributing positively on a month by month basis.  The Group's technology business, Viatelemetry, is bringing benefits to its internal customers, protecting margin, and also growing an increasing foothold externally which the Board believes will result in this business moving towards being a profit contributor, as planned.

Overall the financial impact from the Group's trading performance has led to the following results:- 

Group turnover was £11.79 million, down by 3.9% on last half year (H1 2011: £12.27 million) resulting primarily from slower installation traction and first quarter integration matters within the Fuel Solutions division.

Gross margins remained strong at expected levels of 53.0% (H1 2011: 55.2%) underpinned overall by a blended recurring revenue rate across the Group of approximately 70%.

The core beer monitoring business continued to generate strong operational cash flow of £1.3 million in H1 2011, despite being held back by the timing of debtor and creditor movements which impacted the overall Group cash generation.  With a combination of the Group's own cash and the utilisation of an overdraft facility for the acquisitions of 2010-11, the Group had cash balances of £0.14 million, an overdraft of £1.19 million, and overall net debt of £3.27 million at 30 September 2011.  The Group continues to be cash generative which provides a strong financial base for both operations and development.

Core beer monitoring service customers and contracts

The core Leisure business delivered 387 new installations in the first half, of which 361 were the higher value iDraught^TM (H1 2011: 595 installations, of which 533 were iDraught™). These installations have taken iDraught™ penetration to near 9% of the active installation base which, factoring in pub closures and disposals, fell by a net 660 sites in H1 2012.  These numbers should be put in the context of a total installation base of over 19,000.

On 1 November 2011, the Group announced that it had secured a new long-term agreement with Enterprise Inns, which also included the roll-out of iDraught™ into 500 Enterprise pubs as well as the introduction of the Group's Nucleus Smart Till™ EPOS systems.  The Group is also in advanced discussions with other key customers concerning contract extensions and iDraught™ trials.  These developments will consolidate the strong recurring revenues for the core Leisure business, which in the first six months of the current year accounted for over 80% of its turnover.

The Group is pleased with the launch of its Nucleus Smart Till™ EPOS system which, together with its iDraught™ system, is enabling pub companies and their licensees to deliver data necessary for them to improve quality and efficiency in their business; both vital during these difficult trading conditions. The Board believes that this combination of systems will drive the growth of the business in the medium term.

Whilst the turnover in the core Leisure business decreased in comparison with the corresponding period last year, the trading performance of the business was maintained at a similar level to last year due largely to the fixed overheads of the business being carefully controlled and monitored.

Whilst the Board does not expect any easing of the challenging trading conditions in the pub market, it believes that the significant level of recurring income enjoyed by the business will enable it to maintain its resilient performance.

Vending Telemetry Solutions

Vianet has continued to make progress in the first half of the current year, particularly in developing existing contracts and also in progressing significant new sales opportunities with major international brand owners.  In addition, the acquisition of Lookout Solutions, announced on 26 October 2011, enables the enlarged business to create a one-stop shop for vending telemetry, contactless payment processing and vending management software solutions.

The Board was pleased to have been able to announce on 16 November 2011 that Vianet had entered into a contract with Visa Europe to provide contactless payment technology in its vending machines.  This contract demonstrates the potential for contactless payments in the vending industry, where Vianet believes that there is significant growth potential.

Fuel Solutions Division

Fuel Solutions has had a mixed performance in the first half of the year, with trading in the first three months significantly held back by unforeseen integration problems, especially in the ELS business, which has resulted in management changes being made. The Board is satisfied that these problems have been resolved without any material ongoing legacy issues.  Trading has been progressively less affected by these integration issues as the year has developed; during the second quarter new business was gained and this trend looks set to continue, Christmas season apart, through to the fourth quarter.

Against that background, the Board is optimistic that the division will achieve breakeven for H2 and provide a significant profit contribution in 2012/13.

The Board believes that this division provides the market's only end-to-end solutions for forecourt operators, allowing them to maximise their return on their fuel stocks and assets. As such, the prospects for Fuel Solutions remain very attractive.

Management and employees

The Group continues to invest in and develop the calibre of its people and management to take advantage of the growth opportunities that exist in its target markets.

In October 2011, Mark Boland, the founder of Lookout Solutions, was appointed Sales and Marketing Director for the enlarged Vianet business with a view to driving this part of the Group forward and establishing it as a leading provider of vending solutions.

Outlook

The Group's strategic intent is to continue its drive to secure market leading positions using its core capabilities and products, through growth in iDraught™, Nucleus Smart Till™ and its integrated vending solutions in the Leisure Division, as well as through expansion of the Fuel Solutions division's end-to-end fuel asset management solutions.

The Group is in the second year of a five year strategic plan to achieve a market leading position in each of its chosen fields; the core Leisure business has already reached this level and the Board believes that the Group has the ability to achieve this position within the vending and fuel solutions markets in the medium term.

Despite the current challenging conditions, the Board considers that the opportunities for growth in each of its areas of operation are encouraging and continues to view the future with confidence and, looking to 2012, believes the prospect of further contract wins could well mark the turning point for growth.

 

Consolidated Statement of Comprehensive Income

For the six months ended 30 September 2011

Consolidated Balance Sheet

At 30 September 2011

Summarised Consolidated Cash Flow Statement

For the six months ended 30 September 2011

Statement of changes in equity

6 months ended 1 October 2010

12 months ended 31 March 2011

6 months ended 30 September 2011