UNG.L Regulatory News (UNG)

UNG.L

UNIVERSE GROUP PLC

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

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2012

DIRECTORATE CHANGE

Universe, which develops and supplies leading payment and on-line loyalty systems, is pleased to announce its unaudited interim results for the six months to 30 June 2012.

Highlights

·; Significantly improved results reflect benefits of restructuring completed in 2011 by new management team

·; Revenues up 6% to £6.0 million (2011: £5.7 million)

·; Operating profit before exceptional items* increased 88% to £526,000 (2011: £280,000)

·; Profit before taxation and exceptional items* almost tripled to £404,000 (2011: £135,000)

·; Profit before taxation of £404,000 (2011: loss of £235,000)

·; EBITDA up 31% to £950,000 (2011: £726,000)

·; Earnings per share of 0.35p (2011: loss of 0.20p)

·; Net cash inflow from operations of £1,355,000 (2011: £374,000)

* exceptional items nil in 2012 (2011: £370,000)

Robert Goddard, Chairman of Universe, commented:

"We are pleased that the restructuring and realignment of the Company, completed in 2011, is beginning to bear fruit, as evidenced by the revenue growth and improved profitability that we are reporting today. Pre-exceptional operating profit in the period increased by 88% and profit before tax on the same basis almost tripled.

Following the recent successful placing, we now have in place a strong platform for growth in both our traditional markets and new related markets. The Company has launched a number of initiatives designed to drive profitable growth and we are confident that we can deliver further improvements in performance."

Sophie McNulty

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report results for the six months ended 30th June 2012. These show the benefits of the significant changes the new management team have made to the Group since mid-2011. The improvements we have made to the Group's organisational and operational effectiveness have resulted in a growth in sales and a significant reduction in expenses. Together, these have helped deliver a sharp improvement in operating profitability and a return to a profit before tax. Excluding exceptional items (of which there were none in this period but £370k in the same period last year), profit before tax has almost tripled to £404k. For the remainder of this Statement comparative period profit measures are stated before exceptional items unless otherwise noted.

The recent completion of the £1,675k (gross) equity placing in August, together with the potential for a further £200k term loan which may be drawn upon in the near future, will enable the Group to accelerate the programme to refresh and re-equip its product set. We believe that these measures will enhance our competitiveness and profitability in our traditional petrol forecourt market as well as positioning us to address a wider retail environment.

The new funds will also strengthen the balance sheet and give the Group access to more‑favourable banking terms.

Profit & loss account

Revenue for the six-month period improved by 6% to £6,019k (2011: £5,659k) and gross profit grew by 3.8% to £2,026k. Reflecting the mix of business in the period, margins showed a slight reduction year-on-year to 33.7% (2011: 34.5%).

The growth in revenue and the reduction in expenses resulted in operating profits increasing by 88% to £526k (2011: £280k) and profit before tax nearly tripling to £404k (2011: £135k).

The main source of the improved profit was the Solutions Division where revenue increased by 11% to £5,367k (2011: £4,827k). This contributed to a 4% improvement in gross profit and, combined with an 11% reduction in direct operating expenses, resulted in a 40% increase in the segmental profit to £827k (2011: £592k). The growth in revenue is partly due to the first stages of an equipment renewal programme for one of our major supermarket clients together with a growing pipeline of work for our on-line loyalty solution from an existing customer. Both programmes will continue throughout the second half of 2012.

Losses in the Manufacturing Division were reduced by almost a third to £158k, from £208k in 2011. This was achieved as a result of the volume of work for the Solutions business and is despite a 22% reduction in external sales, caused by the timing of call-off orders in the previous year. The strong pipeline of intercompany work will continue in the second half of 2012 and the improving demand seen in the last quarter from external customers is likely to produce better results by the year end. As we have previously reported, the Board continues to review the strategic options for this business segment. It is also important to note that Manufacturing overheads of £117k contain an appropriate proportion of the unavoidable overall property and administrative costs of the Group.

Central costs increased to £143k (2011: £104k) although this was mainly due to the recognition of a £44k (2011: £9k) share option charge in respect of awards made earlier in the year.

Overall, the Group achieved an operating profit of 8.7% of sales. This compares with 4.9% for the first six months of 2011 and 7.1% for the whole of that year, which demonstrates the pleasing progress that has been made in restoring profitability to the core business.

Earnings before interest, taxes, depreciation and amortisation increased by 31% to £950k (2011: £726k) in the period.

Interest costs reduced to £122k (2011: £145k) and will reduce further in the second half following the retirement in August of £950k of debt.

Balance sheet and cash flow

In summary, the balance sheet at the end of June reflects the improved trading performance, stronger cash generation and, as set out below, the investments made in strengthening of our data centre capabilities.

Capital expenditure of £526k was incurred in the period as we upgraded our data centre hardware to ensure compliance with the latest Payment Card Industry ("PCI") standards and to accommodate the expansion of managed solutions and services. Of the £526k expenditure, £465k has been funded by finance leases at interest rates of 8%. Capitalisation of product development was limited to £127k as our development team worked on the specific customer deployment phases for the GemPAY terminal and the expansion of our existing on-line loyalty programmes.

We began strategically important product development projects in the latter part of the period and these will continue throughout the remainder of 2012.

The recently completed fundraising allows us to plan more confidently and in certain areas, to accelerate the completion of those projects to enable the capture of already-identified market opportunities.

Cash from operating activities at the half year increased significantly to £1,355k (2011: £374k). This was partly as a result of significant payments in advance which were being held as deferred income in the balance sheet. These prepayments will be released to income in the second half of the year, which will impact upon the conversion of EBITDA to operating cash.

The strong cash generation has allowed a winding down of the invoice discounting facility that previously had provided much of our short-term working capital requirements. As a result, borrowings due within one year stood at £521k at the end of the period compared to £1,137k at the same time last year and comprised monthly repayments due on term loans and finance leases. Since the reporting date, the Group has been able to retire £950k of expensive debt. The recent equity placing together with the asset finance arrangements available to the Group have left Universe with a significantly improved funding structure.

Directorate Change

The Board would like to take this opportunity to announce the departure of Non-executive Director, John Scholes, from the Company. Following 12 months of profitable trading and the recent successful placing, John feels that this is an appropriate moment to step down from the Board. The Board thanks him for his commitment and long service to the Company and wishes him well in his many other endeavours. He remains a significant and supportive shareholder of the Company.

Outlook

The Board is pleased with the progress the Company is making and Universe's enhanced trading, improved cash-generation and strengthened balance sheet provide a very solid platform for on-going growth, both in its traditional markets as well as in adjacent and complementary areas.

As we have previously indicated, the Board believes that the skills developed by the Group in serving the very demanding petrol station forecourt industry equip it well to address other retail markets. Early stage planning is now underway to exploit selected growth opportunities and we are currently engaging with existing and prospective customers towards this end. The Directors are confident that the Group will continue to improve its performance and remain optimistic about the prospects for the full year.

Robert Goddard

Chairman

13th September 2012

Universe Group plc

Condensed Statement of Total Comprehensive Income (unaudited)

for the 6 months ended 30th June 2012

Universe Group plc

Condensed Consolidated Balance Sheet (unaudited)

as at 30th June 2012

Universe Group plc

Condensed Consolidated Cash Flow Statement (unaudited)

for the six months ended 30th June 2012

Universe Group plc

Notes to Condensed Consolidated financial statements for six months ended 30th June 2012

1 The annual financial statements of the company for the year ended 31st December 2011 were prepared in accordance with International Financial Reporting Standards (IFRSs). The condensed set of financial statements has been prepared using accounting policies consistent with International Financial Reporting Standards. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. While the financial figures included in this interim report have been computed in accordance with IFRSs applicable to interim periods, this interim report does not contain sufficient information to constitute an interim financial report as that term is defined in IAS 34. The IFRSs that will be effective in the financial statements for the year to 31st December 2012 are still subject to change and to the issue of additional interpretation(s) and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period that are relevant to this interim financial information will be determined only when the IFRS financial statements are prepared at 31st December 2012.

2 The financial information for the year ended 31st December 2011 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 Losses from exceptional items in the six months ended 30th June 2011 were in respect of reorganisation costs of £370k. Losses from exceptional items in the year ended 31st December 2011 were in respect of reorganisation costs (£407k) and goodwill impairment (£1,234k).

4 The Directors believe the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. 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. Accordingly they continue to adopt the going concern basis in preparing the interim condensed financial statements.

5 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 31st December 2011.

6 Operating profit and EBITDA before exceptional items

7 Earnings per share is calculated by reference to the results and the weighted average of 114,704,539 shares in issue during the period. The number of shares in issue at 30th June 2012 was 114,704,539.

8 Segment information

6 months ended 30th June 2012

6 months ended 30th June 2011

Year ended 31st December 2011

9 Cash flows from operations

10 Post balance sheet events

At a General Meeting on 16th August 2012 the Group completed a placing of 72,826,087 ordinary shares at 2.3 pence each. Net proceeds of £1,572k were raised to fund the Group's development.

On 24th August 2012 the Group repaid the outstanding balance of £750k on the term loan provided by the Group's bankers.

On 31st August 2012 the Group repaid the outstanding balances on the Directors loans provided by John Scholes and Malcolm Coster. The total amount repaid was £200k.

On 12th September 2012 John Scholes resigned from the Universe Board of Directors.

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.