Universe Group plc (LON:UNG) Chief Executive Officer Jeremy Lewis caught up with DirectorsTalk for an exclusive interview to discuss what the Group does, the key markets & key customers, the highlights of the last 6 months, the development of EPOS products and why it’s more attractive than their competitors
Q1: First off, for those that don’t know, can you explain for us what Universe Group does?
A1: We’re a UK based software business, we write software, put it onto hardware and then sell systems into retailers to help them do their point of sale payment and loyalty schemes and we focus specifically on two retail verticals, petrol forecourts and convenience stores.
Our market share is approximately 50% in the forecourt area so we’re on about 3,500 out of 8,000 gas stations and we’ve just started moving into convenience stores where we’re currently on about 2,000 out of 56,000 convenience stores.
Q2: What are the key markets and who are the key customers?
A2: The customers, as you would expect, on the convenience side are the major chains so Londis, Budgens, Costcutter and Nisa’s of this world and on the petrol side, most of the forecourts in the UK are actually owned by large groups which are not household names such as Certas, MRH and MFG, who between them have anything between 200 and 500 gas stations each. So, those are actually the clients we serve into and our focus is really staying with those particular verticals because there’s a lot of growth for us to have there. It’s worth bearing in mind that of course we could take our technology and sell it into other verticals such as hospitality or pharmacy’s however the low hanging fruit is in our current areas so we’ll focus on that.
I would say, for anyone that’s new to Universe Group, if you go to our website there’s actually a 3.5-minute animation on the home page which explains what all of our products are doing and shows how they sit together. It’s a good, quick, easy way of getting up the kerb and understanding who we are.
Q3: Can you talk me through the highlights of the last 6 months?
A3: We had revenues just under £9 million for the first 6 months which was in line with the previous year and we managed to improve our gross profit margin a little bit so it’s now sitting at 31.8%. We have been investing in expanding our development workforce and adding to our sales teams, our total headcount by the way is 250 people and we’re all based down in our headquarters in Southampton. Our operating profit came out at just over £200,000 versus circa £400,000 the previous year.
The key takeaway for these results is as in all the previous years and will be the same for the next couple of years, our business is very second-half weighted so we do about a third of our business in the first half and two thirds in the second half. The reason for that is whilst we’re not actually a seasonal business because we’re selling in mission-critical, real-time systems into retailers but what tends to happen is that retailers don’t like playing with their IT systems over the key selling period which is the Christmas period. So, they never do anything past November which means we’re extremely busy from August through to November to put all the systems in.
Cash generation has been very strong, Universe Group are net cash at any given moment of about £3 million sitting on the balance sheet and we’ve been generated at least £1.5 million of cash in the first half, all of which we invested into additional R&D and capex and to additional products.
Q4: What can you tell us about the development of the next generation of EPOS products?
A4: Well, we’ve been very busy for about 3 years now working on our next generation EPOS product and I’m pleased to say that it’s now live in the marketplace with two customers, one is a main deployment and one is a pilot deployment. The key thing when you’re building an EPOS system is you have to be absolutely reliant so you have to have all the capabilities that the client wants, he wants to be able to push promotions down there, he wants to have links all the way through to his suppliers, it needs to be robust, your payment systems need to be secure, your loyalty system needs to be on tap 24/7. All of that is extremely important and the thing that sometimes takes the time is when we go in and install systems into a retailer, what you’re really doing is getting into the plumbing of their ERP systems and their accounting systems. It’s quite a intrical operation to do that and that sometimes takes a little more time than previously planned.
Now we’ve got the product out there, we’re extremely pleased with it and we will be doing some customisation with existing clients as we go forward from this point. I think it sets us there for being able to sell this into additional clients as we move into the earlier part of 2018 so we’re pleased where we’ve got to with that product.
Q5: What is it that makes Universe Group plc’s products more attractive than its competitors?
A5: It’s about product innovation and it’s about customer service so it’s not just all around the product. As I said a little bit earlier, you simply cannot have a point of sale system or a payment system fail because as a retailer you can’t trade and if you can’t trade, you’ve got all the costs and none of the revenues. So, we have invested extremely heavily around 35 engineers pre-positioned in vans all up and down the UK so we can get on site when we need to very very quickly and we have a 70-man onshore UK based customer support unit which works 24/7 for 365 to ensure that the customer is always able to trade.
In terms of the actual products themselves, we use the very latest technology stacks for all of our products, we make it as modular as possible, we’ve invested very heavily in development and testing capabilities so we make sure that we’re launching products right at the optimum moment. We work very closely with clients to bespoke the systems and give them all the capabilities that they want.
The only area where we don’t really compete with competitors is on price, we are not the cheap option, we tend to think of ourselves are the ‘Stella Artois’ of this space. We can charge a little bit more because of the robustness and that’s how we like to keep it.
