UNG.L Regulatory News (UNG)

27 September 2016

AIM: UNG.L

UNIVERSE GROUP plc

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

INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2016

Universe Group plc (AIM:UNG.L), a leading developer and supplier of point of sale, payment and on-line loyalty systems, is pleased to announce its unaudited interim results for the six months to 30 June 2016.

Financial Highlights

· Revenues increased by 2.5% to £9.05 million (2015: £8.83 million)

· Adjusted EBITDA increased by 9.5% to £1.35 million (2015: £1.24 million)

· Operating profit increased by 30% to £0.49 million (2015: £0.38 million)

· Earnings per share increased by 82% to 0.20p (2015: 0.11p)

· Net cash inflow from operations at £0.87 million (2015: £0.93 million)

Robert Goddard, Chairman of Universe, commented:

"In the first six months of the year we successfully piloted our new generation of products in our growing customer estates. Full scale deployments will begin shortly and will continue into next year. However there is a slight delay in starting these roll-outs from what was originally envisaged and this means the financial performance in the current year will be slightly below management expectations. Our current pipeline and prospects give us confidence for continued growth.

Our new generation of products, which are designed to help our customers enhance their competitive positions, are gaining traction and we are pleased with customer reaction."

CHAIRMAN'S STATEMENT

Introduction

We report below the Company's results for the six months ended 30 June 2016.

The interim numbers show progress against the comparative figures for 2015 however, as in the prior year, results for the full year will be heavily weighted towards the second half.

The reported period has seen intense activity in readying our next generation of products for deployment with new customers and significant progress has been made. However, as can happen with new product deployments, delays have arisen as products have moved through the final phases of being made ready for client requirements. This has had the effect of extending schedules and whilst the products have been deployed in pilot sites at three large customers, commencement of the full scale roll-outs to those customers is now not expected until later in 2016, with completion in the first half of 2017.

Financial Results

Revenue for the first half increased to £9.05 million (2015: £8.83 million) with gross profit up slightly at £2.79 million (2015: £2.66 million). Gross margin rose by one percentage point to 31% (2015: 30%) mainly due to better recovery of fixed costs as turnover increased.

Administrative expenses increased slightly to £2.30 million (2015: £2.28 million), with a £0.1 million investment in the sales team offset by a comparable foreign exchange gain due to the strengthening of the Euro against Sterling. We expect that further investment in the sales team will drive growth in the second half and beyond.

The combined effect of the improvement in both revenue and gross margin was a 9.5% rise in earnings before interest, taxes, share-based payments, depreciation and amortisation ('adjusted EBITDA') to £1.35 million (2015: £1.24 million). Operating profit improved to £0.49 million (2015: £0.38 million).

Net finance expense was reduced to £0.01 million (2015: £0.08 million). This resulted mainly from a £0.05 million credit arising from the release of an over accrual for deferred consideration payable as a result of the acquisition of Indigo Retail Holdings Limited ('Indigo') in 2013.

The net tax charge of £0.03 million was lower than the charge in the prior half year due to an increase in the deferred tax asset, arising on share option gains that will provide a tax deduction in the future. As a result of the reduced tax charge, earnings per share increased substantially to 0.20p (2015: 0.11p).

Balance sheet and cash flow

The balance sheet at the end of June remained strong. Net current assets increased to £3.44 million from £2.97 million at 31 December 2015 and non-current liabilities reduced to £0.81 million from £1.09 million at the year end.

Immediately after the half year, we reviewed our software licences with Microsoft and have strengthened our position by investing £0.69 million in upgradable, perpetual licences. This capital expenditure is repayable, interest free, over three years.

After the half year end, we also settled the final tranche of contingent consideration due to the former shareholders of Indigo. Payments of £0.28 million were made.

Investment in the core business continued with capitalised development costs of £0.30 million focused on our next generation of retail systems.

Capital expenditure in the period was £0.27 million (2015: £0.32 million), including initial investment in our new internal accounting and business systems.

Cash flow from operating activities at the half year was £0.87 million (2015: £0.93 million) and the cash generated was largely reinvested into the business as product development, capital expenditure or debt repayment. Cash balances at 30 June were higher at £3.41 million compared to £3.38 million at 31 December 2015.

Products

Our products remain highly attractive within our target markets and we have continued to invest in the next generation of core products. We are also making enhancements to widen their market appeal.

We are about to start large scale deployments across three new customers. In addition, we have made significant progress in the first deployments of a cigarette-dispensing machine that will be integrated into customers' POS equipment. This prepares them for new legislation that requires 'white box' presentation of cigarettes.

Outlook

The first six months of this year saw steady progress in piloting new products in the new customer estates. We confidently expect full-scale deployments of these to begin shortly. However the delayed start means that we will be slightly below management expectations for turnover and profitability for this year. Nonetheless, we still believe that prospects for continuing growth remain encouraging.

Robert Goddard

Chairman

27 September 2016

Universe Group plc

Condensed Statement of Total Comprehensive Income (unaudited)

for the 6 months ended 30 June 2016

Universe Group plc

Condensed Consolidated Balance Sheet (unaudited)

as at 30 June 2016

Universe Group plc

Condensed Consolidated Cash Flow Statement (unaudited)

for the six months ended 30 June 2016

Universe Group plc

Notes to Condensed Consolidated financial statements for six months ended 30 June 2016

1 The interim financial statements, which are unaudited, have been prepared on the basis of the accounting policies expected to apply for the financial year to 31 December 2016 and in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRSs) as endorsed by the European Union. The accounting policies applied in the preparation of these interim financial statements are consistent with those used in the financial statements for the year ended 31 December 2015.

The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all the disclosures in IAS 34 'Interim Financial Reporting'. Accordingly, whilst the interim statements have been prepared in accordance with IFRSs, they cannot be construed as being in full compliance with IFRSs.

2 The financial information for the year ended 31 December 2015 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

3 The Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of reasonably possible changes in trading conditions show that the Group should be able to operate within the level of its facilities. After making enquiries the Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future (being a period of at least 12 months from the date of this report). Accordingly they continue to adopt the going concern basis in preparing the interim condensed financial statements.

4 The half year results were neither audited nor reviewed by the auditors. The interim financial information has been prepared on the basis of accounting policies set out in the Group's statutory accounts for the year ended 31 December 2015.

5 Turnover analysis

All turnover arises within the HTEC Solutions business segment.

6 Operating profit and adjusted EBITDA

7 Earnings per share

Earnings per share is calculated by reference to the results and the weighted average of 231,286,435 shares in issue during the period (H1 2015: 224,877,682, FY 2015: 227,995,737). Diluted earnings per share is calculated by reference to the results and the weighted average of 239,890,379 shares in issue during the period (H1 2015: 236,916,638, FY 2015: 238,022,518). The number of shares in issue at 30 June 2016 was 231,286,435.

8 Segment information

6 months ended 30 June 2016

6 months ended 30 June 2015

Year ended 31 December 2015

9 Net finance expense

10 Cash flows from operations

11 Copies of the interim report will be available from the Company's head and registered office:

Southampton International Park, George Curl Way, Southampton, SO18 2RX, and on the Company's website, www.universeplc.com.