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$2.288 Million Profit – a $12.050 Mil Turnaround

FLLYR: VTL Group Delivers $2.288 Million Profit – a $12.050 Million Turnaround

Audited results for the year to 30 June 2006

This report has been prepared in a manner that complies with generally accepted accounting practice and gives a true and fair view of the matters to which the report relates and is based on audited accounts.


12 months 30 June 2006 ($000) / 12 months 30 June 2005 ($000)

Operating Revenue $48,458 $42,532

Operating Expenses $43,103 $60,268

Operating Surplus/Loss before Unusual Items & Tax $5,350 -$17,736

Unusual Items - $9,186

Operating Surplus/Loss before Tax $5,350 -$8,550

Equity earnings -$3,062 -$1,149

Operating Surplus/Loss after Tax $2,288 -$9,762


Note: All comparisons in the above table relate to the 12 months ended 30 June 2006 unless otherwise stated. All figures are in New Zealand dollars unless otherwise stated.


Result Highlights

- Turnaround in net operating profit

- Group revenue 13.9% higher at $48.5 million

- Operating expenses reduced by 28% to $43.1 million

- Nathans Finance total assets increased by 26% to $172.3 million

- Shop24 continues to grow and contribute to the securing of premium vending sites.

- EBITDA* increased significantly to $17.699 million up from $967,000 for the previous reporting period.
(*Earnings before interest, taxation, depreciation, amortisation, equity earnings and unusual items.)


Commentary

VTL Group Limited (NZX: VTL) today announced an audited operating surplus after tax of $2.288 million for the 12 months ending 30 June 2006. This compares with the loss of $9.76 million in the previous corresponding period. This result was achieved on sales revenues of $48.5 million, up 13.9% on the previous twelve-month reporting period revenues of $42.5 million.

VTL Group Chairman, Gary Stevens said the latest result shows returns are beginning to flow from the development of the strategic platform for growth that the company has been investing in over the past three years.

“The VTL Group result includes the equity accounted loss of $3.036 million from our share (now 17.1%) in All Seasons. The benefits of introducing VTL’s technology and franchising programme have recently begun to have a significant impact on All Seasons earnings.

The increase in revenue shows the growth we have been achieving. The improving All Seasons trading performance means that VTL Group expects to soon be in a position to exercise its option for a controlling interest when conditions prove favourable.

VTL’s right to exercise this option stems from the work that has been done to restructure All Seasons’ business including the installation of VTL’s proprietary on-line reporting technology into their vending machines.

This technology transforms the profitability of vending machine businesses by providing a total management system which maximises sales and reduces expenses.

We have the option to convert our present holding to a controlling interest by exercising an existing convertible note .

Upon conversion VTL will consolidate All Seasons’ results into our accounts, a change that will see our annual revenues increase to almost $300 million.

It is important to recognise that control of All Seasons will give VTL direct access to some 37,000 vending machines on 10,000 sites throughout the United States, sufficient to create around 400 franchise units that All Seasons can sell to independent operators. These franchises sell for more than $US250,000 each and All Seasons is currently selling around six each month.

We currently have access to sufficient sited machines to generate franchise fees of at least NZD$180 million over the next three to five years. This income will not just come from the United States, but from the other markets in which we are operating, principally Australia and New Zealand.”

Mr Stevens said VTL has continued to build the revenue from all of its brands, 24seven, Shop24 and Nathans Finance.

“Shop24 continues to achieve sales in its own right and assists in securing major vending sites throughout the USA and Australia.

We are targeting additional high-pedestrian count sites both in Australia and the United States, similar to our existing sites: University of NSW campus in Sydney and Morrisville State College in the USA.”

Mr Stevens said that Nathans Finance continued to experience strong growth, with its total assets increasing 26% to $172.3 million during the year.

“Nathans Finance operates a quality lending book and in the year under review its bad debts remain at zero.

This company is profitable, well-managed and is continuing to enjoy growth that is well-supported by its investor base.”

Mr Stevens said that the board was pleased with what VTL Group had accomplished during the past financial year and applauds the continued outstanding contribution made by all staff.


ENDS

About VTL Group Limited

VTL Group Limited (NZX:VTL) is a global franchisor, with its franchised brands represented internationally including Australasia, North America, UK and Europe. VTL Group’s franchise model is supported by a complete management system including its leading-edge proprietary technology and financing. The company’s primary growth strategy for 24seven and Shop24 is based around purchasing quality electronic vending equipment for 24seven or the manufacturing of its Shop24 units, installing proprietary control technology and building a network of franchised owner/operators.

24seven[tm] and Shop24[tm] are marks of VTL Group Limited

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