Half Yearly Report

Armour Group plc

(AIM: AMR)

Unaudited Interim Statement

For the six months to 29 February 2012

Armour Group plc is the United Kingdom's leading consumer electronics group within the home and in-car communications and entertainment markets, committed to designing, manufacturing and distributing leading-edge audio and visual products and solutions.

Financial Headlines

·; Sales £18.0 million (2011: £23.8 million).

·; Loss before tax and exceptional items £0.8 million (2011: £0.7 million).

·; Cash utilised in operations of £0.5 million (2011: £1.6 million).

·; Basic loss per ordinary share of continuing operations 0.7p (2011: 1.2p).

Commenting on today's results, George Dexter, CEO, said:

"The Group's consumer facing markets continue to be challenging. The actions taken by the Group's management, in response to these market conditions, have mitigated the impact through downsizing the Group's cost base, repositioning Armour Home and promoting the growth of the automotive division. However, sales in the six months to 29 February 2012 were down 24% at £18 million which resulted in a loss before tax and exceptional charges of £0.8 million.

A considerable amount has already been achieved in sizing the Group for the reduced levels of consumer demand in our traditional markets and further work is ongoing to optimize the cost base and develop new sales channels. Our product development programme continues to deliver award winning, innovative products that have the potential to extend the Group's reach, targeting new markets less reliant on retail demand. We are also increasing our investment in building our international business to reduce our reliance on the UK markets that currently account for the majority of the Group's revenue.

The Board believes that the overall strategy being pursued by the Group is the correct one and it is making progress on its return to profitability. However, as announced in the Group's trading update of 2 May 2012, the Board acknowledges that the return to operational profitability is taking longer than originally anticipated and does not now expect this to happen before the 2013 financial year."

For further information please contact:

Armour Group plc Tel: 01892 502700

George Dexter, Chief Executive

John Harris, Finance Director

FinnCap, Nominated Adviser and Broker Tel: 020 7220 0500

Geoff Nash

Stephen Norcross (Sales)

Unaudited Interim Statement

For the six months to 29 February 2012

Results and Dividend

The ongoing weakness in the consumer related markets that we serve continues to have a significant adverse impact on the Group. The actions taken by the Group's management, in response to these market conditions, have mitigated the impact through downsizing the Group's cost base, repositioning Armour Home and promoting the growth of the automotive division. However, the first six months of the year have again been very challenging. Sales in the six months to 29 February 2012 were down 24% at £18 million which resulted in a loss before tax and exceptional charges of £0.8 million.

·; Sales £18.0 million (2011: £23.8 million)

·; Loss before tax and exceptional items £0.8 million (2011: £0.7 million)

·; Cash utilised in operations of £0.5 million (2011: £1.6 million)

·; Basic loss per ordinary share 0.7p (2011: 1.2p)

The Board is not recommending an interim dividend.

Operations

In the six months to 29 February 2012, the Group has reduced its year-on-year cost base by £1.8 million and increased its margin by two percentage points which is equivalent to an increase in profit of £0.3 million. However, offsetting these improvements has been the impact of the continued fall in sales volumes within the home division, which has lowered profits by £2.1 million.

There has been considerable progress in reshaping the Group's operations to meet the changing demands of the market and economic environment. Armour Automotive has continued to grow both sales and profit, focusing on expanding its non-retail sales channel. Armour Home has been significantly restructured to a much lower cost base and an increasing margin, although sales volumes have continued to fall with the business remaining in loss for the first six months.

On 15 May 2012, the Group announced a further loan from Hawk Investment Holdings Limited of £0.8 million. This is a direct consequence of the lower than anticipated level of sales in the first half of the year and the additional funding will be utilised to supplement the Group's working capital.

The Group has continued the strategy of investment in new product development as the Board believes that this will drive future sales growth. Whilst the pace of this investment has been reduced, the Group continues to launch exciting and innovative new products which are expected to support existing markets and allow the Group to develop into new channels and new geographical regions.

Armour Home

Armour Home has had a difficult six months with sales falling by 38% to £10.3 million resulting in an operating loss for the division of £0.5 million. The actions taken to focus on improving margins and re-size the division, although significant, have not fully compensated for the reduced sales volume.

Margins within Armour Home have been increased by three percentage points, which is equivalent to an increase in profit of £0.34 million. Operating costs in the period have been reduced by £1.5 million. Set against these improvements, profit has been reduced by £2.3m caused by lower sales volume.

Within retail, sales of Armour Home's consumer electronics products have declined in the first half of the year, but have demonstrated strength and resilience following the weak Christmas period. New products, combined with a strategy of concentrating on our core brands and customers, are now showing encouraging signs of reversing the downward trend.

Over the last two years, the TV stand market has changed dramatically. Unit sale prices of the basic range product, typically metal and glass stands, have fallen precipitously removing any meaningful profit for Armour Home. Strategically, Armour Home has withdrawn from the entry level market, which accounts for a significant part of the reported 38% fall in the division's sales, and has refocused its product offering within the TV stand category on higher value, design led product that delivers improved profit margins both to Armour Home and its retail customers. At the forefront of this repositioning has been the Alphason "Design First" range (www.alphasondesigns.com), which was launched towards the end of last year to excellent market reviews and has delivered the expected improvement in margins. However, the underlying trend in the TV stand market continues to be one of significantly reduced demand across all price points.

The home automation channel remains subdued in line with the home building and construction markets. Armour Home's operations in this sales channel have been reorganised in terms of people, product and direction with the strategy again being on core brands and customers. As part of the changes, Armour Home has discontinued the distribution of three third party brands and, in the case of the largest of these, introduced its own range of in-ceiling speakers under the Q Install name (www.qinstall.co.uk), which forms part of the award winning Q Acoustics speaker brand. The disruption caused by these changes has undoubtedly lowered sales in the first half of the year. However, with the new products recently launched establishing themselves in the market, and with a series of new products to be launched in the coming months, sales into this channel are expected to improve in the second half of the year.

In addition to new product development, investment has been made to increase Armour Home's international footprint. Launch and promotion of new products through Armour Nordic and Armour Asia continues but, in addition, direct sales representation has now been established in mainland Europe and Australia. This expansion is at an early stage but is part of the strategy to dilute the divisions' exposure to UK retail and is expected to strengthen the division's sales base in due course.

Armour Home has gone through considerable change over the last 12 months with two businesses merged into one, approximately £3 million of annualised cost removed and its operations significantly remodeled. These changes will take time to bed-down and will undoubtedly require further refinement over the coming months, but the fundamentals are now right for the business to make a progressive recovery with an expected return to profit in the year ending August 2013.

Armour Automotive

Armour Automotive has made good progress in the six months to 29 February 2012. Sales of £7.2 million were up 5% on last year and the underlying operating profit increased 141% to £0.6 million. The driver for the division continues to be its non-retail sales, which are more than compensating for the weak consumer demand.

The margin percentage of the division was unchanged in the period with operating profit increased through a combination of improved sales volume adding £0.1 million and £0.3 million coming from lower operating costs.

Sales into the retail market were down 4% year-on-year, which reflects the continuing weakness in consumer confidence and demand. The introduction of new products, such as the Dension range of smart interconnects, has gone some way towards offsetting the general decline in market demand. Looking forward, new products will be important in returning this retail sales channel to growth and there are a number of new products planned for launch in the second half of the year.

In contrast to the retail sales channel, Armour Automotive has delivered further growth through its non-retail sales into the commercial and leisure vehicle, and the GPS/GSM antennae, markets. Sales have increased by 23% through securing new business with new customers and the expansion of existing relationships throughout its non-retail customer base, which bodes well for the future.

Armour Automotive remains on a positive growth path and this is anticipated to continue for the foreseeable future as new business and new products come on stream in the second half of the year and into 2013.

Outlook

Overall, the trading performance of the Group continues to be adversely affected by the weak UK economic environment, particularly in the Group's core UK retail sales channels. Despite an anticipated boost to the UK consumer electronics market from the forthcoming London Olympics, consumer demand and confidence is expected to remain subdued with no significant improvement in the near term.

A considerable amount has already been achieved in sizing the Group for the reduced levels of consumer demand in our traditional markets and further work is ongoing to optimize the cost base. The Group's product development programme continues to deliver award winning, innovative products that have the potential to extend the Group's reach, targeting new markets less reliant on retail demand. Strategically, the Group is also increasing investment in its international business to reduce reliance on the UK markets currently served.

The Board believes that the overall strategy being pursued by the Group is the correct one and it is making progress on its return to profitability. However, as announced in the Group's trading update of 2 May 2012, the Board acknowledges that the return to operational profitability is taking longer than originally anticipated and does not now expect this to happen before the 2013 financial year.

Bob Morton George Dexter

Chairman Chief Executive

28 May 2012

CONSOLIDATEDSTATEMENT OF COMPREHENSIVE INCOME

For the six months to 29 February 2012

* See note 1

CONSOLIDATEDSTATEMENT OF FINANCIAL POSITION

At 29 February 2012

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the six months to 29 February 2012 (unaudited)

For the six months to 28 February 2011 (unaudited)

For the twelve months ended 31 August 2011

CONSOLIDATEDSTATEMENT OF CASH FLOWS

For the six months to 29 February 2012

Notes to the Interim Financial Statements

1. Basis of Preparation

These interim financial statements have 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 IFRS").

The principal accounting policies used in preparing these interim financial statements are those expected to apply to the Group's Consolidated Financial Statements for the year ending 31 August 2012 and are unchanged from those disclosed in the Group's Annual Report for the year ended 31 August 2011. The financial information for the six months ended 29 February 2012 and 28 February 2011 is unaudited and does not constitute statutory financial statements for those periods. The comparative financial information for the six months ended 28 February 2011 has been restated in regard to the loss arising from discontinued operations in accordance with IFRS 5: Non-current assets held for sale and discontinued operations and the audited financial information for the twelve months ended 31 August 2011. The effect of this restatement is:

·; To reduce the previously stated exceptional items of £1.1 million by £473,000, and

·; Reflect the £473,000 loss as that arising from discontinued operations, net of a taxation credit of £105,000, which has reduced the previously stated taxation credit from £617,000 to £512,000.

There is no impact on the loss for the financial period for the six months ended 28 February 2011. The exceptional costs and loss arising from discontinued operations are shown in notes 3 and 5 respectively in these interim financial statements.

The comparative financial information for the twelve months ended 31 August 2011 has been derived from the audited statutory financial statements for that year. These financial statements were approved by shareholders at the Annual General Meeting and have been delivered to the Registrar of Companies. The Auditors' Report on those financial statements was unqualified, did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and did not include a statement under section 498(2) or 498(3) of the Companies Act 2006.

The Board of Directors approved this interim report on 28 May 2012.

2. Business Segments

The Group operates in the following main business segments:

Armour Automotive: The design, manufacture and supply of products for the in-vehicle communications and entertainment market;

Armour Home: The design, manufacture and supply of products into the Hi-Fi, home theatre, home entertainment and office furniture markets;

Armour Asia: The sale of Armour Automotive and Armour Home products into Asian markets and provision of supplier support services, including quality control, to the UK businesses;

Central operations: The provision of Group-wide support services including finance and future product concepts to the other business segments within the Group.

3. Exceptional items

In response to the economic environment, the Group has implemented a restructuring programme, particularly within the Armour Home division. The exceptional costs incurred are shown below:

4. Taxation

The taxation credit for the six months to 29 February 2012 is based on the effective taxation rate, which is estimated will apply for the year ending 31 August 2012.

5. Discontinued Operations

In the previous year, in response to customer indicated demand, the Group set-up a Chinese manufacturing facility. Due to the subsequent curtailment of demand, continued operation of this facility which required a steady and reliable production volume, was no longer viable. Consequently, the facility was closed. The costs of setting up and then terminating this discontinued operation, and the associated tax credit, are shown below:

6. Loss per Ordinary Share

The basic loss per ordinary share is calculated using the weighted average number of ordinary shares in issue during the financial period of 93,627,496 (28 February 2011: 65,845,333 and 31 August 2011: 79,850,588).

The diluted loss per ordinary share is calculated using the weighted average number of ordinary shares in issue during the financial period of 93,627,496 (28 February 2011: 65,845,333 and 31 August 2011: 79,850,588). The effect of the exercise of options on the weighted average number of ordinary shares in issue is nil for all periods.

The weighted average number of ordinary shares held by the Armour Employees' Share Trust of 3,424,000 (28 February 2011: 3,424,000 and 31 August 2011: 3,424,000) are not included in either the weighted average, or diluted weighted average, ordinary shares in issue during the financial period.

The underlying loss per ordinary share is also shown calculated by reference to the loss before discontinued operations, exceptional items and share-based payments. The Directors consider that this gives a useful additional indication of underlying performance.

7. Net Cash from Operations

*EBITDA is defined as (loss)/profit before interest, taxation, depreciation, amortisation and share-based payments.

8. Reconciliation of Net Cash Flow to Movement in Net Debt

Net debt incorporates the Group's loans, borrowings and bank overdrafts less cash and cash equivalents. A reconciliation of the movement in the net debt is shown below:

9. Copies of Interim Report

Copies of this interim report are being sent to shareholders and will also be made available upon request to members of the public at the Company's Registered Office, Lonsdale House, 7-9 Lonsdale Gardens, Tunbridge Wells, Kent, TN1 1NU. This interim report can also be viewed on the Group's website: www.armourgroup.uk.com.

ABOUT ARMOUR

Armour Group is the United Kingdom's leading consumer electronics group within the home and in-car communications and entertainment markets, committed to designing, manufacturing and distributing leading-edge audio and visual products and solutions.

Armour Group has two principal operating divisions, Armour Home and Armour Auto, and now employs 200 people in the UK, Scandinavia and Hong Kong.

The Group possesses a strong brand portfolio, which is underpinned by innovative product development and investment in proprietary technology.

An unrivalled distribution capability ensures that products are supplied direct to retail outlets throughout the UK, direct to consumer where required and to customers in 66 countries worldwide. Armour Group is also a leading supplier of audio and visual technology to many non-retail customers including vehicle manufacturers, hotel chains, house builders and custom installers.

The Group's strength is based on 5 fundamentals:

·; Strong recognised brands

·; Quality product portfolio

·; Structured programme of product innovation

·; Unrivalled distribution into the UK's retail electronics market

·; First class customer service