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AIMprospector

Universe sets up to attack new markets Universe Group is a retail technology business with a strong position in fuel forecourts. Universe technology encompasses point-ofsale (checkout terminals), payment switches (charging a card) and loyalty schemes.

Universe Group has been a listed plc for sixteen years. In December 2014, Universe announced that its HTEC subsidiary had won the contract to design and build Morrisons’ ‘Match & More’ points scheme. This was an extension of the existing relationship between the companies and was described by Universe as supporting “market forecasts for the Group in the current financial year and beyond”. I can think of no other AIM company of similar scale that has delivered such a high profile service to a FTSE100 firm. Universe boasts a number of other large forecourt customers such as Walmart (Asda), Exxon, Valero (Texaco) and independents MRH and MFG.

supplying Asda for 20 years The value of Universe’s service is reflected in the long-term relationships that it enjoys with customers. The group has been supplying Asda for 20 years. The Morrisons relationship is fifteen years old. Away from petrol retail, Universe, through its recent acquisition of Spedi, provides stock level and pricing software mainly to the Londis and Costcutter chains. 8

The Spedi acquisition takes Universe into a new ‘vertical’ (a distinct market sector). Convenience retail represents an opportunity for Universe to replicate the sale, payment software and loyalty deals that it has delivered to forecourts.

opportunity for Universe to replicate the sale, payment software and loyalty deals There are twice as many convenience stores in the UK as there are petrol forecourts. Universe plans for this market to deliver much of the profit growth at the group in coming years. The pharmacy sector has also been highlighted as an opportunity, as its semi-franchised nature has deterred larger competitors. 2014 results, released in April, showed the significant progress made in the year. Universe reported organic sales growth of 16%. Overall group revenues increased 31%, aided by a full year contribution from a June 2013 acquisition. Counting expenditure on product development as an operating cost, cash inflow for the year from operating activities was £1.8m. Current assets approximately matched liabilities and there was a cash balance of £2.1m.

The reliance on a small number of customers reduced, with the top three Group accounts being responsible for 59% of group revenues in the year, down from 63% in 2013. For 2015, Universe is targeting sales to new forecourt customers, expansion across the forecourt portfolios of existing customers and progress in the convenience store sector. The company admits that dividends are some way off, with cash being prioritised for acquisitions. Consensus forecast is for a modest increase in turnover this year, leading to 0.7p of EPS. Profit growth will be considerable if Universe can replicate its forecourt success in the convenience space.

dividends are some way off Universe Group (LON:UNG) FOR Strong market position Acquisitions bring growth opportunity AGAINST Unproven away from forecourts No dividend Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high

£17m 7.0p:7.5p 10.1 0 4.5p:8.5p

www.aimprospector.co.uk

May 2015 AIM Prospector  
May 2015 AIM Prospector  

Featuring nine AIM-quoted companies: Christie Group, EMIS, Fairpoint, H&T, Keywords Studios, Miton Group, NAHL, SCISYS and Universe Group.