Companies: BRU   

Brulines, whose technology allows pubs to monitor beer flow, increased first-half profits despite the distractions of a regulatory investigation into an acquisition.

During the six months to September, Brulines completed 1,100 new installations and 580 system upgrades and now has over 19,000 units installed in more than 20 pub estates. Over 60% of Brulines’ sales consist of recurring revenues, though due to an exceptionally bountiful comparable period, half-year sales fell by 12.7% to £8.1m. However, margins strengthened to 49.8%, helping to lift pre-tax profits by 58% to £2.2m.

The upgrades are crucial, as Brulines’ long-term strategy is to migrate customers from the standard beer-flow monitoring to higher-margin ‘brand quality management’, which allows pub groups to monitor more complex information about the beer flowing from their taps. This part of the business is building slowly and interest from pub groups remains high, although significantly, it is not yet included in forecasts.

During the period Brulines bought a majority shareholding in Coin Metrics, which performs a similar data capture role for gambling machines. This adds strength to its existing operations in the area, which monitor around 25,000 gambling machines across 30 customers in the pub and leisure markets.

In November, the Office of Fair Trading cleared the acquisition of Brulines' only real competitor in the beer monitoring space, profitable Nucleus Data. In the wake of this, house broker Cenkos raised its forecasts for next year to pre-tax profits of £5.2m and 14.2p of earnings. This year, Cenkos is looking for profits of £4.2m and 11.5p of earnings, placing Brulines on a forward p/e of 11.4, falling to 9.3 next year. Though 22% down on our July recommendation price of 169.5p, the shares should not be sold.

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Brulines	AIM	£30.4m	126.00p	-1.50p
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