Universe

Thus far, turnaround tale Universe, the retail and loyalty systems counter recommended by Growth Company Investor at 7.25p this summer, has proven a share price disappointment.

Early signs encouraged, with the restructured company reporting improved trading under new management as well as a rise in pre-tax profits from £177,000 to £447,000 for the half to June. However, in a subsequent November update Universe, whose HTEC subsidiary is widely lauded as an industry leader in supplying petrol forecourt technology, warned second-half sales would only be slightly higher than the first half’s £6.2m, with second-half profits likely to be less than those made at the interim.

A combination of minor customer delays and increased investment in Universe’s new Jet Wash, Air Tower and Vacuum System (JAV) offerings were behind the alert, though management reported a strong pipeline of orders based on growing demand for Universe’s services. They maintained that December ’07 figures would still show significant improvement over 2006. The warning appears to have reflected timing issues in the main – sales from delayed projects should flow into 2008 – and as Charles Stanley’s Ben Archer notes, ‘a successful JAV roll-out will offer the potential for upgrades in due course’.

Downgraded 2007 estimates point to sales of £13.1m, pulled back from £14m, and profits of £800,000, culled from £1.3m and producing earnings of 0.53p. For 2008, Archer now sees profits of £1.3m, reduced from an earlier £1.6m. For now, we regard Universe’s alert as a blip, though the company can ill afford further slip-ups. Hold.

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