UNG.L Regulatory News (UNG)

AIM: UNG

Universe Group PLC

("Universe", the "Group" or the "Company")

Final results for the year ended 31 December 2012

Universe Group PLC (AIM: UNG), a leading developer and supplier of payment and on-line loyalty systems, today announces its audited results for the year ended 31 December 2012.

Highlights

·; Strong results following introduction of new management team in 2011

·; Sales from continuing operations up 13% to £11.9m (2011: £10.5m)

·; Operating profit on continuing operations up 27% to £1.23m (2011: £0.96m)*

·; PBT on continuing operations up 47% to £1.01m (2011: £0.69m)*

·; EBITDA up 19% to £2.15 million (2011: £1.82 million)*

·; Statutory retained profit of £0.82 million (2011: loss of £1.03 million)**

·; Basic EPS from continuing operations more than doubled to 0.71p (2011: 0.30p)

·; Net cash inflow from operations up almost 2.5x to £2.08m (2011: £0.84m)

·; Equity placing at 2.3p per share raised £1.53 (net) and loan notes raised £0.2m

·; Net debt at 31 December 2012 almost eliminated, at £19,000 (2011: £1.76m)

·; Sale of Manufacturing Division in December 2012 - completed repositioning of the Group

·; Major investment programme commenced to refresh and enhance product offering

·; Solid platform established for continued progress in 2013

* From continuing operations (2011: Before exceptional costs of £0.38 million comprising restructuring costs).

** 2011 figure stated after exceptional costs of £1.64 million mainly comprising goodwill impairment of £1.23 million and restructuring costs of £0.41 million.

Unless specified otherwise, all references to operating profit and profit before tax throughout this announcement exclude the current and prior year losses from discontinued operations.

Robert Goddard, Chairman of Universe, commented:

"These results are Universe's first full financial year of trading under the new management team and I am delighted that they show double digit growth in sales, operating profit and profit before tax from continuing operations. In addition, a successful fundraising in August strengthened the Group's balance sheet and enabled us to commence a major investment phase to develop our product offering. 

We are now in a transformational phase involving the acquisition and development of new products to equip the Company to better address its existing markets and move into new ones."

For further information:

Report of the Chairman and the Chief Executive

Introduction

We are pleased to present the results of Universe's first full financial year of trading since we were appointed respectively as Chairman and Chief Executive in May 2011. 

Results from continuing operations show double digit growth in sales, operating profit and profit before tax. This encouraging trading performance was accompanied by a successful fundraising during August. Taken together, these factors have strengthened the Group's balance sheet and enabled acceleration of our investment in a number of exciting projects.

Turnaround of the business was largely complete by early 2012 and the loss-making Manufacturing Division was sold in December. This completed the Group's restructuring to become a more profitable and much more focused managed software and services business. 

We are now in a transformational phase involving the acquisition and development of new products to equip the Company to better address its existing markets and move into new ones. 

Financial Results

As stated above, the Group's Manufacturing Division was disposed of in the year. Accordingly, it is treated as a discontinued operation in the reporting of the results for the year to 31 December 2012 and in the comparative information. All the following references are in relation to the continuing operations of the Group unless otherwise stated.

Profit and loss

Sales from continuing operations for the year to 31 December increased by 13% to £11.9m against the prior period (2011: £10.5m). The Group finished the year strongly, with sales in the second half of £6.5m, 21% ahead of the first half. Whilst there was some pressure on margins in our service operations, the Group won significant incremental project work from its customers in 2012. Project work boosted turnover in the second half, although an element of this was at a lower gross margin than normally would be expected. These factors are reflected in the Group's profit margin for the year which was 37%, down slightly against 38% achieved in 2011.

Notwithstanding this, operating profit on continuing operations for the year increased to £1.23m, up 27% on the prior year (2011: £0.96m). After reduced finance costs of £0.22m, which were 22% down on the prior year (2011: £0.28m), profit before tax on continuing operations showed a 47% increase year-on-year to £1.01m (2011: £0.69m). This improvement illustrates the fundamental strength of the business.

The Group continues to benefit from brought forward tax losses and profit after tax rose to £0.82m (2011: loss of £1.03m). The 2012 result included losses of £0.19m from discontinued activities. Basic earnings per share from continuing operations more than doubled to 0.71 pence from 0.30 pence in 2011.

Cashflow and financing

EBITDA grew by 19% to £2.15m (2011: £1.82m). This supported a substantial increase in net cash inflow from operating activities which was £2.08m (2011: £0.84m).

August 2012 saw the placing of equity at 2.3 pence per share, raising £1.53m after expenses. The placing was oversubscribed and attracted some new institutional investors alongside existing shareholders. In November, we also issued £0.2m of loan notes. We see these successful fundraisings in difficult macroeconomic conditions as strong endorsement of both the fundamental strength of the Group and the strategic plans for the business. 

The purpose of these fundraisings was primarily to enable investment in already-identified growth opportunities, particularly in projects to develop the Group's capabilities in payment and loyalty transaction processing, as well as enhancing our data centre. We invested £0.76m of the proceeds into our products during the year, and used finance leases to fund the £0.95m upgrade of the data centre.

Together with the enhanced cash flow from trading, a proportion of the new money has allowed the repayment of some bank loans and loans from directors. Consequently, at the year end the Group had a small net debt balance of £19,000. This contrasts with a net debt balance of £1.76m at the end of 2011 and leaves us in a strong position to invest in the business in 2013 and beyond.

Strategy & Business Model

We will position the Group for ongoing profitable growth by investing in skilled resource and in our product offering. Most important will be the creation of a complementary set of leading-edge products that will drive growth within our existing market and support our planned expansion in new related sectors. At the same time, we will add to our development and marketing teams. This will help to accelerate our product development, speed to market and customer service. We expect the financial benefits of this strategy to start to show through towards the end of 2013 and into 2014. Whilst the Board believes that this strategy will achieve best value for shareholders, it will not necessarily maximise short-term profit.

We see three broad stages in our product development and growth plan. The first is the refreshing and revitalising of existing products. This process, which we commenced in the second half of 2011, is now nearing completion. The second builds on this by marketing our upgraded portfolio to customers in our existing markets. This process has already started with both new and existing customers. The third stage is to enhance and extend our product portfolio in order to give us additional leverage in our existing markets and to enable us to enter adjacent markets. We will enter this third stage towards the end of 2013.

Not all new product development will be in-house. Where elements of our overall package are available from third parties and are of sufficient quality and/or where the required speed to market dictates it, we will buy in product platforms and customise them by incorporating our own value-adding software.

We shall develop further our already strong service culture and use it to deliver what customers need and cooperate with them closely to anticipate and help deliver their future needs.

Business & Product Development

In the second half of 2011, our principal task was to restructure the Group, focus it on its core strengths and thereby establish a firm platform from which to move forward. With that process largely completed at the beginning of 2012, our emphasis since then has been on product development and strengthening the teams so as to achieve profitable and sustainable growth in the medium to longer term. The objectives we set ourselves in 2012 were to upgrade our data centre hardware, continue to refresh our existing products and to introduce complementary new products. We are pleased to report that we have made very good progress with these objectives and the introduction of new products will continue into the coming year and beyond.

As well as positioning the Company for growth in its existing markets, we have been active in building the product sets needed to penetrate adjacent markets. This programme centres around Universe's core market-leading payment and loyalty systems and our data centre. 

Investment over the first half in our data centre hardware has ensured that this key element is fully compliant with the latest Payment Card Industry standards and able to accommodate the intended expansion of managed solutions and services. 

Around mid-year, we began strategically important product development projects to refresh and enhance our core payment and loyalty products. The management of these projects involves the creation of rigorous product 'roadmaps' aimed at ensuring that our development work reflects both customer needs and our commercial objectives, including timely delivery. Simultaneously, we are enhancing the skills of our development team so as to better meet future needs.

An especially important milestone in 2012 was the launch of our new payment terminal, "GemPAY". This new higher-performance payment terminal is being offered initially as an upgrade to customer sites with the existing Gemini models and we expect it to boost hardware sales in 2013.

Using the same hardware platform as "GemPAY", "GemPOINTS" is a scalable and secure stand-alone loyalty solution. The upgraded product is now being rolled out to existing customers. 

During the year, we also started development work on a new generation outdoor payment terminal, which will be available in 2013. It will offer enhanced features on a new, readily-customisable and future-proofed hardware platform, and will be applicable to a wide range of retail environments.

Another very significant product development during 2012 was the upgrade of our electronic funds transfer processing capability. We invested £0.54m in this during 2012 and will be developing further enhancements in 2013. 

In order to support our development work, we took on additional staff and we intend to add further specialists in 2013. 

The recent appointment of a new Sales and Marketing Director marked the start of the expansion and redirection of our sales teams so as to meet higher performance targets and promote the enhanced product range.

Staff

The Group continues to benefit from the skills and dedication of its staff. They have delivered high quality product development and excellent levels of customer service. We would like to extend our thanks to all staff for their hard work and efforts during the year. It is recognised and much appreciated. 

Summary & Outlook

The Group has undergone significant change since the second half of 2011 and 2012 has been a transformational year during which the Group has put in place new products and enhancements and extensions to existing ones. This work will progress at an accelerated pace in 2013 as we move to complete the Group's overall offering and at the same time start to position ourselves in new markets.

The new product offering will include our new market-leading outdoor payment terminal, enhanced in-store payment terminals and an upgraded loyalty package, each of which will integrate with our new platform for electronic funds transfer. The Board believes that this unmatched package will be very attractive for existing and new customers within the petrol forecourt sector and also to adjacent markets, where there has already been an encouraging level of interest, although the timing of take-up is uncertain.

The high level of project work enjoyed during 2012 is unlikely to be repeated in the new financial year although the Group has already booked some business of this type and identified a number of additional good opportunities.

Accordingly, whilst the rate of progress in 2013 may not be as strong as that achieved in 2012, we do expect to see some measure of year-on-year improvement. This is despite the revenue investment in products and markets that is designed to secure sustainable profitable growth in future years.

We believe that the Group's strong current trading and healthy balance sheet, when combined with the benefits of the last 12 months of product revitalisation, provide a solid platform to further advance the strategy for the Group to become a leading player in the provision of managed payment and loyalty services to the retail industry.

Robert Goddard, Chairman

Stephen McLeod, Chief Executive Officer

3 April 2013

Consolidated Statement of Total Comprehensive Income

For the year ended 31 December 2012

Comparative information has been restated to reflect the discontinued operation, as set out in note 7.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2012

Consolidated Balance Sheet

As at 31 December 2012

Consolidated Cash Flow Statement

For the year ended 31 December 2012

Comparative information has been restated to reflect the discontinued operation, as set out in note 7.

Notes

1. General Information

The financial information set out in this document does not constitute the Company's statutory accounts for 2011 or 2012. Statutory accounts for the years ended 31 December 2011 and 31 December 2012 have been reported on by the Independent Auditors. The Independent Auditors' Reports on the Annual Report and Financial Statements for each of 2011 and 2012 were unmodified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2012 will be delivered to the Registrar in due course, and will be available from the Company's registered office at George Curl Way, Southampton International Park, Southampton, SO18 2RX and from the Company's website www.universeplc.com.

The financial information set out in these preliminary results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in these preliminary results have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2011. The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2011.

2. Operating Profit and EBITDA before exceptional items and discontinued activities

3. Segment information

The Group now has only one business segments, 'HTEC Solutions'. All material operations and assets are in the UK. 

Comparative information has been restated to reflect the discontinued operation, as set out in note 7. In 2011 £300,000 of central overheads were charged to the discontinued operation. As these costs will not be eliminated as a result of the disposal, they have been reclassified as segmental expense within the Solutions segment.4. Exceptional items - Continuing operations

5. Earnings per share

The calculation of the basic and diluted loss per share is based on the following data:

At the year end the Group had in issue 187,530,626 ordinary shares of 1p each (2011: 114,704,539 ordinary shares of 5p each).

6. Cash flows from operations

Material non-cash transactions

During the year the Group entered into £947,000 (2011: £310,000) of finance leases for plant and equipment. These transactions are not reflected above.

7. Discontinued Activities

On 20 December 2012 the Group sold the trade and fixed assets of its Contract Electronic Manufacturing business for a total consideration of £65,000. The incoming funds (net of costs) of £52,000 were added to the Group's working capital.

The comparative income statement and cash flow statement have been restated to reflect the composition of the discontinued activities at the latest balance sheet date.

8. Report and Accounts

Copies of the Annual Report and Accounts will be sent to shareholders in May 2013 and copies will also be available, free of charge, from the Company's registered office at George Curl Way, Southampton SO18 2RX and from the Company's website, www.universeplc.com.

9. Annual General Meeting

The Company's Annual General Meeting is scheduled for 25 June 2013, notice of which will be sent to shareholders next month.