12 April 2016

AIM: UNG.L

Universe Group plc

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

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2015

Universe Group plc (AIM: UNG.L), a leading developer and supplier of point of sale, payment and loyalty systems, is pleased to announce today its audited results for the year ended 31 December 2015.

Highlights

Financial

·     Continued encouraging progress including landmark convenience store contract win

·     Total revenues of £20.33m (2014: £20.75m)

·     Gross profit up 4% to £6.74m (2014: £6.49m) reflecting change in revenue profile

·     Operating profit up 18% to £2.04m (2014: £1.73m)

·     Profit before tax of £1.68m (2014: £1.75m)

·     Profit after tax up 7% to £1.50m (2014: £1.41m)

·     Operating profit per share up 11% to 0.89p (2014: 0.80p)

·     Statutory basic EPS up 1.5% to 0.66p (2014: 0.65p)

·     Strong cash generation with net cash at year end up to £2.14m (2014: £0.24m)

Operational

·     Continued expansion within the convenience store sector

-      major contract win with Conviviality Plc in October

-      acquisition of Spedi in April extends convenience retail offering

-      ongoing development of product offering

·     Two Board appointments (in May and September)

·     Board remains positive about growth prospects

Robert Goddard, Chairman of Universe, commented:

"We are pleased with the progress made over the year, particularly in expanding our presence within the convenience store sector, a key strategic focus.

Financial results show strong operating profit growth of 18% and a significant increase in profit margins. This has been supported by a combination of new product development and the winning of major new contracts, including Conviviality plc, announced in October 2015.

Universe remains well placed for further progress in 2016. We will continue to develop our established position in the petrol forecourt market and seek to achieve further strong growth in the convenience store sector.  At the same time, we will look for opportunities to enter additional retail verticals. We will continue to invest in the expansion of our product range and services so as to further enhance our offering. We also expect to tender for contracts with major new customers".

For further information:

CHAIRMAN'S STATEMENT

Introduction

The Group made encouraging progress during 2015, in particular by expanding its presence in the convenience store market, a key strategic focus. Results for the year show an 18% increase in operating profit to £2.04m (2014: £1.73m), with operating profit margins improving to 10% from 8%.  This was achieved on total revenues of £20.33m (£20.75m).  While revenues reduced by 2% year-on-year, this reflected our decision to cease a number of low margin contracts late in 2014. The benefit is reflected in improved gross profit margins, up to 33% from 31% in 2014, and an increase in gross profit to £6.74m (2014: £6.49m). 

The Group continues to generate strong cash flows from operations, which increased by 15% to £3.42m. The balance sheet remains strong, with net cash at the year-end up to £2.14m (2014: £0.24m).

Looking ahead for 2016, Universe remains well-placed to make further progress and we continue to consider opportunities for growth.

Overview

As expected, sales over the year were weighted significantly towards the second half, reflecting the timing of hardware and software deployments. At £11.50m, second half sales were 30% ahead of the first half and gross profit was 53% up.

A notable feature of the second half was the winning of a large and prestigious contract with Conviviality Plc, the UK's largest franchised off-licence and convenience store chain. This is a significant endorsement of our strategy to extend the Group's presence in the convenience store market. Secured after an international competitive tender process, it also reflects the strength of our proprietary product offering. Deployment of our products began in January 2016 and continues to date, with the roll-out of our system covering Conviviality's entire estate of over 650 stores. As well as facilitating and managing sales processing and secure payments, our software will also manage online ordering and provide an extensive reporting suite. 

The development of our product offering remains important to us and we continued to invest across our products over the year. This included the acquisition in April 2015 of Spedinorcon Limited ('Spedi'), a developer and supplier of advanced software for the convenience store market. Spedi products are used across an established estate of more than 1,500 convenience stores, mainly across the Costcutter and Londis networks. 

There will be further investment in our products in 2016. Our plans include refinements to our loyalty platform, which will provide a more modular solution, alongside a series of initiatives to expand our existing product range. Our aim is to become a 'one-stop shop' for retail technology and we see this being achieved through a combination of organic growth, bolt-on acquisitions and collaboration with partners. We are pleased with the increasing awareness of HTEC's products in the convenience store market, which we intend to capitalise on over the coming year.

The Board

The Board was strengthened with two new appointments over the year. In September, we were delighted to welcome Baljit (Billy) Tank as an Executive Director with responsibility for Group Sales and Marketing. Billy joined the Group in 2013 with our acquisition of Indigo Retail Holdings Limited, which he founded and led. In May, we were pleased to appoint Andrew Blazye as a Non-executive Director. Andrew has extensive knowledge of our core markets, having over thirty years' experience in loyalty marketing, petrol retailing and payments systems.   

Staff

2015 was a busy year for the Group as we moved through the phases of developing products, winning contracts and deploying new solutions for customers. We would like to thank all our staff for their hard work, creativity and dedication over the year. Their efforts and skills underpin the Group's success in serving our existing customers and winning new ones.   

Summary and outlook

We made good progress in 2015, winning important contracts and continuing to develop our product offering. The roll-out of contracts won last year is now underway and we are working hard to ensure their successful delivery. 

We will further expand our presence in the convenience store sector and continue to develop our well-established presence in the petrol forecourt market. With our widened and enhanced product suite and strong service offering, we believe that we are well-placed to satisfy evolving customer needs in both markets. In addition, we continue to explore new retail verticals and new geographic markets. We will also invest in products and services and thereby improve further our market position. 

We are positive about our prospects for further growth and look forward to another year of good progress.

Robert Goddard

Chairman

11 April 2016

Extracts from the Strategic Report

Principal activity

The Group designs, develops and supports point of sale, payment and on-line loyalty solutions and systems for the UK petrol forecourt and convenience store markets. These solutions can be provided as a comprehensive, fully-managed offering or as discrete products to complement a wider customer solution.

Universe's solutions are delivered via the Cloud into high volume, real-time environments. Product innovation and high levels of customer care are critical to the Group's success and we continue to focus strongly on both areas. 

Organisational overview

The Group's business is directed by the Board and managed by the Executive Directors, led by Chief Executive, Jeremy Lewis. A senior management team, comprising the Chief Executive, the Chief Financial Officer, the Sales and Marketing Director and Senior Executives, is responsible for Operations, Human Resources, Development and Data Centres.

There are three Non-executive Directors.

The main operating entity is HTEC Limited. 

Strategy and business plan

We continue to invest in our products and services to ensure that they meet the current and anticipated needs of our customers. 

Our objective is to be the prime solutions partner to retailers, supplying them with our market-leading, innovative systems for point of sale, payment and loyalty operations. These systems are real-time, mission-critical and data rich and our customers rely on us to keep them trading at all times. Accordingly, effective and efficient support from our data centre teams, engineer field force and helpdesk professionals remains vital to what we do.       

In 2015 we provided new and improved product offerings to our existing customers and won new strategic accounts. We are targeting further growth in both our established market of petrol forecourts and in our newer market of convenience stores. In addition, the possibility of entry into new market verticals and geographies is under review.

A number of acquisition opportunities were considered during 2015 and we were pleased to complete the acquisition of Spedinorcon Limited, a provider and developer of retail software, in April 2015. The business is now fully integrated into the Group. 

Business and product development

The need for business and product development is constant and so 2015 was another busy year. Examples of new developments in 2015 include our new Back Office System (Calisto), Head Office System (Jupiter), advertising media screens (Iocaste) and point-to-point payment encryption layer (Perseus). We expect further sales of this enhanced product set in 2016 and beyond.

Financial review

Total sales for the year to 31 December 2015 decreased by 2% to £20.33m (2014: £20.75m) with this reduction reflecting our decision to cease some low margin service contracts inherited with the acquisition of Retail Service Team in 2013.  The benefit of exiting these contracts can be seen in both the gross profit result, which increased by 4% to £6.74m (2014: 6.49m) and the gross margin improvement to 33% (2014: 31%).

Operating profit for the year increased by 18% to £2.04m from £1.73m in 2014, with the operating margin increasing by 25% to 10% from 8%. The achievement of a 10% operating margin has been an important target for the Group. 

Net finance costs increased by £0.39m to £0.36m (2014: income of £0.03m). This increase reflected a revision to the estimated contingent consideration due in 2016 to the vendors of Indigo (which was acquired in 2013), and results from our success in the convenience store market. Consequently, a provision of £0.22m released in 2014 was largely reversed in 2015.  As a result of these movements, profit before tax decreased by 4% to £1.68m (2014: £1.75m).

Profit after tax rose by 7% to £1.50m (2014: £1.41m). The tax charge reduced from £0.35m to £0.18m, partly as a result of prior year credits that were recognised in 2015.

Basic and diluted earnings per share respectively increased by 1.5% to 0.66p (2014: 0.65p) and by 5% to 0.63p (2014: 0.60p). However, with the year-on-year variations in finance expenses, these measures do not provide a satisfactory indication of the Group's progress in 2015. A better measure is operating profit per share, which increased by 11% over the year to 0.89p (2014: 0.80p).

Cash flow and financing

Adjusted EBITDA rose by 13% to £3.91m (2014: £3.47m). This supported a 15% increase in net cash inflow from operating activities to £3.42m (2014: £2.96m).

We continued to invest in our products in 2015, spending £0.61m on the development of our product portfolio (2014: £1.15m). The main investment was into our new Jupiter, Calisto and Iocaste products, which are attracting interest from existing and prospective customers.

Cash inflow for the year increased by 21% to £1.32m (2014: £1.09m) and net cash at 31 December 2015 stood at £2.14m (2014: £0.24m). 

Summary

As a software business operating in the fast-moving retail environment, we have continued to prosper over the past three years through focused product innovation and careful attention to customer service. In 2015 we continued to build on our strong presence in the petrol forecourt sector and have strengthened our presence in the larger market of convenience stores. A combination of customer expansion and a broadening product portfolio means that we are confident that the pleasing progress that the Group has been made so far can be continued.

Jeremy Lewis

Chief Executive Officer

11 April 2016

Consolidated Statement of Total Comprehensive Income

For the year ended 31 December 2015

Consolidated Statement of Changes in Equity

For the year ended 31 December 2015

Consolidated Balance Sheet

As at 31 December 2015

Consolidated Cash Flow Statement

For the year ended 31 December 2015

Notes

1.         General Information

The financial information set out in this document does not constitute the Company's statutory accounts for 2014 or 2015.  Statutory accounts for the years ended 31 December 2014 and 31 December 2015 have been reported on by the Independent Auditors.  The Independent Auditors' Reports on the Annual Report and Financial Statements for each of 2014 and 2015 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 2014 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2015 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 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 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 2014.  The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2014.

2.         Turnover analysis

3.         Operating Profit and adjusted EBITDA

4.         Segment information

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

5.         Earnings per share

The calculation of the basic, diluted and operating earnings per share is based on the following data:

At the year end the Group had in issue 231,286,435 ordinary shares of 1p each (2014: 220,281,758 ordinary shares of 1p each).

6.         Material non-cash transactions

During the year the Group entered into £13,000 (2013: £687,000) of finance leases for plant and equipment.

During the year the Group settled £400,000 of deferred consideration arising on the acquisition of Indigo Retail Holdings Limited in 2013 by issuing ordinary shares in the Company.

These transactions are not reflected in the cash flow statement.

7.         Report and Accounts

Copies of the Annual Report and Accounts will be sent to shareholders in May 2015 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.

8.         Annual General Meeting

The Company's Annual General Meeting is scheduled for 28 June 2016, notice of which will be sent to shareholders next month.