Final Results

Findel plc ("Findel" or "the Group")

Substantial Improvement in Financial Performance

Focus on Continued Growth and Performance Improvement

Results for the 52 weeks ended 28 March 2014

Findel, a market leader in the UK home shopping and education supplies markets, today announces its results for the 52 week period ended 28 March 2014.

Financial Summary

 * before exceptional items ** overall net debt excluding the securitisation facility

† Restated for the impact of IAS 19 "Employee Benefits" (revised 2011)

Results Highlights

· Total Group revenue growth of 4.8% to £514.7m

· Total Group profit before tax* increase of 87% to £22.0m (FY13: £11.8m)

· Improvement driven by our two largest businesses, Express Gifts and Findel Education

o Particularly strong performance from Express Gifts which recorded 9.6% growth in revenue and 41% growth in operating profit*. The division's operating margin* increased from 8.3% to 10.6%

o Findel Education has turned a corner, delivering a 6.5% increase in sales and fourfold increase in operating profit*

o Kitbag performance challenging and lower profits from Kleeneze

o Substantial increase in Group operating profit margin*, up 170bps to 6.2%

· Strengthened financial position

o Core bank debt** reduced by £23m to £97m

o Increased securitisation facility which is supporting Express Gifts' on-going growth

o Core bank facilities recently renegotiated to relax some of the restrictions and increase covenant and facility headroom from the onerous 2011 refinancing

Outlook

· Considerable progress made during FY14 and the first phase of the turnaround plan has now been completed

· Continued focus on driving growth in our two largest businesses, particularly Express Gifts, and eliminating Kitbag's losses

· Strength of our two largest businesses provides confidence that further growth in profitability and reductions in legacy core net debt can be achieved

· On track to hit medium-term ambition of growing Group operating margin in the 7-9% range

· Significant potential for additional performance improvement to deliver further value for our stakeholders

Roger Siddle, Group Chief Executive, commented:

"Over the past three years we have turned the Group around from its extremely difficult position through a clear focus on a series of 'self-help' plans. The strong results we are reporting today represent a year of transition for Findel as we make the move from a turnaround phase to one of continued growth and improvement. As we look ahead, there remains significant potential for additional performance improvement to deliver further value for our shareholders." 

Enquiries

Findel plc 0161 303 3465

Roger Siddle, Group Chief Executive

Tim Kowalski, Group Finance Director

Tulchan Communications 020 7353 4200

Stephen Malthouse

Will Smith

Notes to Editors

The Findel Group contains market leading businesses in the UK home shopping and education supplies markets. It is primarily a retailer and distributor, handling and supplying specialist products manufactured by third parties.

The Group's activities are focused in four main operating segments, together with a small overseas sourcing operation:

· Express Gifts - one of the largest direct mail order businesses in the UK

· Findel Education - one of the largest independent suppliers of resources and equipment (excluding information technology and publishing) to schools in the UK and overseas

· Kitbag - a leading retailer of sports merchandise worldwide

· Kleeneze - a leading network marketing company in the UK and the Republic of Ireland

CHAIRMAN'S STATEMENT

I am delighted to report upon another successful year for Findel. The momentum built up in the previous years has continued through the last year with a substantial improvement in profits and a further reduction in debt.

Since our refinancing in March 2011, profit before tax* has more than trebled, with core net debtΔ falling by over £37m. Express Gifts has once again provided the majority of our growth in FY14 but it is pleasing to see that our second largest business, Findel Education (Education Supplies), has also seen a significant recovery in revenue and profits. Kleeneze and Kitbag, which together account for less than a quarter of total group revenue, continue to disappoint although there are signs of improvement in recent times from Kitbag and Kleeneze remains profitable.

Overall group revenue from continuing operations grew by 4.8% to £514.7m in FY14 and group operating profit* was 43% higher at £31.9m. Profit before tax* for the year was markedly higher, through this improved operating profit and reduced interest charges, growing by 87% to £22.0m. Core net debtΔ at the year-end fell to £97.2m, a reduction of £23m, in part resulting from the sale of the Healthcare division in April 2013.

It is clear that recovery for both Kleeneze and Kitbag will take longer than originally envisaged, as discussed in the Strategic Report. This has resulted in an accounting adjustment to reduce the carrying values of those businesses by some £10.0m in aggregate. In addition, a provision of £2.8m has been taken to cover the exit costs (cash and non-cash) of a significantly unprofitable Kitbag contract. The group incurred other exceptional restructuring and finance costs of £5.9m. After taking account of these exceptional costs the continuing operations reported a profit before tax of £3.3m (FY13: £0.5m).

The recovery in the group's financial position is perhaps best illustrated through the recent improvements made to our debt facilities. We announced an increase to the securitisation facility supporting Express Gifts' receivables in January 2014 and are now able to report that our lenders have agreed significant amendments to our core debt facilities that relax a number of the onerous restrictions that were placed upon the group in 2011. Included within this is, from 2016, the removal of the prohibition on the payment of dividends although your board currently intends to continue to use the cash generated by the group to reduce debt further rather than to reinstate dividend payments.

Reporting

This year we have made a number of changes in the Annual Report intended to improve the transparency of our reporting, taking into account changes to the Corporate Governance Code, UK reporting regulations and general best practice. We have introduced a Strategic Report with further details of our strategy, objectives and the business model for each of our businesses. We have also introduced a revised Directors' Remuneration Report and a revised Audit Committee Report.

Board changes

We were pleased to welcome Francois Coumau to the Board in August 2013. His international retail, wider consumer and digital experience is proving be invaluable to the group, complementing the existing skills on the Board. As previously reported, Mike Hawker retired from the Board in July 2013.

Laurel Powers-Freeling has indicated to us that due to personal commitments she intends to step down from the Findel Board at our AGM on 18 July 2014. We would like to thank Laurel for her significant contributions to the Board and the group. A search for a replacement non-executive director is underway.

Employees

The return of the group to financial stability and the substantial returns that have resulted for investors in our 2011 refinancing have been achieved through a considerable team effort involving all of our employees. In this context it is particularly pleasing that the performance share plan awards granted to 35 of our key employees in 2011 with very demanding performance targets (requiring at least a doubling of the rights issue share price) are expected to vest as to 38% of the 1.5m shares awarded. A well-earned reward for the considerable effort that these individuals have put in.

On behalf of the board and the shareholders I would like to thank all of our employees for their remarkable achievement over the last three years and for their continuing efforts to further build the company.

Current trading

The early weeks of the financial year are relatively quiet trading periods for most of our businesses, with the change in timing of the Easter holiday period distorting comparisons with prior year in particular for Findel Education, whose new catalogues were launched at the end of April. Overall group performance remains in line with our expectations. A fuller update on trading will be given at our AGM when a more significant portion of the trading year will have passed.

Outlook

Considerable progress has been made during FY14 and the first phase of our turnaround plan has now been completed generating a substantial recovery in shareholder value and underlying profitability since FY11. The strength of our two largest businesses give us confidence that further growth in profitability and reductions in legacy core net debt can be achieved.

David Sugden

Chairman

 * before exceptional items

** before exceptional items and discontinued operations

Δ overall net debt excluding the securitisation facility

CHIEF EXECUTIVE'S REPORT

It has been another successful year, with a substantial improvement in financial performance. The Group is now moving from a turnaround phase to one of continued growth and performance improvement. As such, our focus is on maintaining the strong trajectory of the Group to deliver further value for our stakeholders.

Substantial improvement in financial performance

The group entered the year with strong momentum, and we have built on that to deliver a substantial improvement in financial performance. Operating profit* has grown by 43% (FY13: £22.3m, FY14:£31.9m), operating margin* has grown from 4.5% to 6.2% and profit before tax* has grown by 87% (FY13: £11.8m, FY14:£22.0m). At the same time total net debt has fallen by 8.1% (FY13: £225.2m, FY14: £207.0m) and 'Core' net debt, that is debt other than the securitisation facility supporting Express Gifts receivables book, has fallen 19.1% (FY13: £120.2m, FY14: £97.2m).

This financial improvement has been driven by our two largest businesses, Express Gifts and Findel Education. Express Gifts has again shown a year of strong top- and bottom-line growth. Findel Education, after a number of years of decline, has now turned a corner and delivered a much-improved sales and profit performance. Kitbag has experienced a difficult year and the financial performance has deteriorated. Management actions continue to address this unsatisfactory situation. Kleeneze has also had difficulties and we are engaging more closely with senior distributor leaders to address this.

During the year we were able to reach agreement with our lenders to increase our securitisation facility from £105m to £130m, and have recently reached agreement on amending a number of the more constraining conditions placed on our lending facilities at the time of the refinancing in March 2011. These movements are a pleasing mark of confidence in our performance and provide an overall improvement in our balance sheet structure.

Express Gifts, the largest business in the group, has again performed strongly. The business's continued focus on ensuring strong product value for the customer has again delivered growth in sales, profits and customer numbers. Sales for the year grew by 9.6%, operating profit* by 41%, and customer numbers were up 8.3% for the calendar year. Bad debt charges were once again lower, at 10.2% of sales versus 11.4% for March 2013. Trading since the start of the financial year remains encouraging.

The business has seen the benefit of the work it has done, together with our Far East sourcing operation, on improved buying, ranging and sourcing with an increase during the year in product gross margins. With the FCA taking over responsibility for regulating the provision of consumer credit from 1 April 2014, significant work was also undertaken on a comprehensive review of our financial services activities which has led to changes in both structure and processes in order to improve effectiveness whilst ensuring regulatory compliance with guidelines published by the FCA.

Overall we continue to see significant potential within Express Gifts and a key priority for the future will be to deliver that potential.

Our Education Supplies Division (Findel Education) has now turned a corner after a number of years of decline, with sales growth of 6.5% (FY13: £103.2m, FY14: £109.9m) and strong operating profit* growth of £3.3m (FY13:£0.8m, FY14:£4.1m). This improvement has been delivered across the business, with UK brands growing at 3.6%, our international export business recovering with growth of 17%, and our support for the Sainsbury's Active Kids' programme returning to a more typical scale after last year's reduction to accommodate the Paralympic Games sponsorship. Further evidence of Education's competitive strength is highlighted by the business winning further contracts in new local authority areas and the receipt of a number of prestigious customer service awards. Trading conditions towards the latter half of the year proved more challenging, with a number of uncertainties affecting school budgets. Those conditions continue, although the timing of Easter holiday means that early comparisons with prior year are also distorted, with a shift in trading patterns and a delay in the launch of our new catalogues until schools had returned after the break. The business is maintaining its focus on performance with a number of ongoing projects aimed at improving service whilst reducing costs with the aim of achieving peer-comparable returns.

Kitbag suffered from a significant fall in traffic for a number of partners whose sporting performance, particularly during the first half of the financial year, failed to match prior seasons. This, coupled with operational issues linked with the introduction of a new payments system, led to a significant increase in first half losses* of £2.2m, and a total first half loss* of £2.9m. Although the trading and financial performance improved during the second half the overall result is a significant deterioration in losses* versus the prior year. (FY13: (£1.7m), FY14: (£4.1m)). Work continues on the turnaround plan. During the year new contracts were won with Borussia Dortmund, the National Hockey League and the Ryder Cup (for on-course retail at this year's event at Gleneagles) together with a major motorsport contract and significant renewals achieved with Real Madrid and The Open Golf Championship, although the scale of the FC Barcelona contract was reduced significantly. Progress has been made on the restructuring of unattractive contracts. During and after the financial year-end, agreement was reached on the renegotiation or termination of three major unprofitable contracts, resolving the majority of the business's difficult contracts. This will give rise to benefits in the current and future years, although an exceptional provision of £2.8m has been taken to cover exit arrangements, of which around half represents cash to be paid out in future periods. Overall these actions, together with the advent of non-annual events such as the World Cup and the Ryder Cup in 2014 give grounds for anticipated reduction in operating losses* in the current year. Current trading is within our range of expectations during a typically volatile period.

Kleeneze's performance has again deteriorated, with sales declining 5.5% and operating profits* reducing by around a third. Actions taken by management have slowed the rate of decline as a whole versus the prior year and the sales productivity of distributors has increased, but the number of active distributors has fallen by 27% during the year. The business has achieved some success with initiatives designed to improve the attractiveness of the proposition to customers, although unexpected high levels of demand for certain new or promoted product lines has led to recent stock availability issues and a subsequent reduction of service levels leading to significant further performance deterioration. Plans to address service and recruitment issues have been developed with senior distributor leaders and have been launched in earnest over the last month to coincide with a new catalogue. Nonetheless Kleeneze remains profitable* with attractive cash characteristics.

Summary

Over the past three years we have turned the Group around from its extremely difficult position through a clear focus on a series of 'self-help' plans. As we move into the next phase of the Group's development, we aim to enter our 7-9% medium term operating margin target range in the current financial year and to continue to drive the Group forward over the coming year and beyond. To do this, most importantly we will focus on ensuring that Express Gifts continues to grow and further improve profitability. Findel Education has made good progress in moving towards peer-comparable returns, but there is further to go. Kleeneze needs to be stabilised and the turnaround of Kitbag needs to be delivered. In summary, the year has been another one of considerable progress but there remains significant potential for additional performance improvement to deliver further value for our stakeholders.

Express Gifts

Business model and key trends

Express Gifts, our core credit-based home shopping business, is one of the largest direct mail order businesses in the UK offering online and via catalogue, a broad range of home and leisure items, clothing, toys and gifts. As well as offering a number of exclusive products, including a variety of own-brand ranges, its comprehensive in-house personalisation facilities and focus on value supported by a flexible credit offer distinguish Express Gifts from other UK retailers.

Using the brands of Studio and Ace, Express Gifts has 1.4m active home shopping customers, predominantly women aged between 30 and 60 shopping for themselves or for their families. The customer base is spread across the UK, with a bias towards the lower socio-demographic groups. About half of our customer base will use our credit facilities to make their purchases, and those who do will typically have an average balance of around £240 that is repaid over a nine month period. The account operates in a similar fashion to a credit card, with the customer required to pay a minimum balance each month but beyond that able to pay the amount they choose including making full payment. Marketing to customers is predominantly paper based through catalogues, statements, direct mail and newspaper inserts with some TV and digital activity. Over 50% of orders, however, are placed via the internet with 36% of these orders in FY14 placed via a mobile or tablet device. Average basket sizes for internet shoppers are typically larger, taking advantage of items only available on our web site. We anticipate continued migration to the web for orders and therefore carefully monitor the effectiveness of all our marketing channels.

The business has c.600 suppliers. Goods are either shipped from suppliers to our own warehouses and then on to customers, or shipped directly from suppliers. Our primary warehouse is a highly automated facility in Accrington. Over the last two years an increased focus has been placed on sourcing product directly from low-cost sources, and our own Far East sourcing office (Findel Asia Sourcing Ltd) has been re-focussed on buying for Group companies, especially Express Gifts, rather than external customers. As a result, the proportion of Express Gifts purchases sourced through FASL has risen to 12% this year from 8% last year.

Over recent years the consumer environment has generally been recognised as challenging, with a noted shift towards customers being increasingly value-conscious. In 2011, we put in place a clear strategy to regain Express Gifts' value position, and re-set price accordingly. This strategy has been, and continues to be, highly successful. At the same time in 2011, the business embarked on a multi-year investment programme to overhaul its infrastructure and systems, some of which was more than 20 years old. Over the next financial year the programme will allow Express Gifts increased flexibility in competing in an increasingly dynamic retail marketplace.

2014 Performance and Progress

Express Gifts has continued its strong performance in FY14 through maintaining focus on improving range and value - giving the customers more of what they want. As a result, customer retention has grown to 61% (FY13: 59%), and customer numbers have grown by 8.3%. Sales rose 9.6% (FY14: £288.2m, FY13 £263.0m) with 86% of that additional growth coming from existing customers i.e. customers who had shopped with the business the prior year. A continued focus on buying and merchandising processes, supplier rationalisation and negotiation (recognising the success suppliers have experienced as the result of Express Gifts growth) and the work outlined above with our own Far Eastern sourcing operation, has meant that this growth has been delivered with improved product margins.

During the year the business has also undertaken a comprehensive assessment of its financial services operations, led by a new management team. This has resulted in a new organisation structure and a number of revised processes aimed at improving effectiveness and responding to the guidance issued by the Financial Conduct Authority in advance of its taking over responsibility for consumer credit legislation on 1 April 2014. Exceptional restructuring costs totalling some £0.8m were incurred in relation to this. There have also been a number of adjustments to customers' charges, minimum payments and fees. Overall, the reduced credit risk implied by increased sales from existing customers, sustained tight credit standards and improved processes, together with the benefits from our now fully operational behavioural scoring system, has ensured that the bad debt charge has continued to fall - from 11.4% of sales in March 2013 to 10.2% in March 2014. As noted at the half year, in response to a thematic review for medium-sized businesses published by the Financial Conduct Authority, the business incurred exceptional costs in FY14 totalling £2m in respect of potential redress for historic PPI sales which is anticipated to be sufficient to resolve this issue.

Other trading costs remained under tight control, increasing by much less than the growth in sales despite above-inflationary increases in postage and utility costs and additional headcount in the year.

Overall, the operating margin* for the largest business in the group increased from 8.3% to 10.6%. The year has started well and by continuing to focus closely on the needs of our customer base whilst maintaining tight operational control, we see significant continued scope for further improvements in performance going forwards.

Findel Education (Education Supplies)

Business model and key trends

Our Education Supplies division is one of the largest independent suppliers of resources (excluding IT, utilities and publishing) to schools and other educational establishments in the UK, with an estimated 8% share of the UK educational supplies market (Source: BESA 2012). The division's international unit exports to over 120 countries worldwide.

It operates through a range of brands, marketed both via printed catalogues and through a variety of e-procurement/internet solutions. These brands are either primarily focused upon servicing the operational requirements of the school with products such as stationery and janitorial materials, or with a range of general and specialist products to support the institution's curricular needs - particularly for primary and early years. In addition, there are a range of specialist brands aimed at sports, science and students with learning disabilities. It continues to be a partner of Sainsbury's by fulfilling orders for its successful Active Kids Scheme.

The business sources products from around 800 suppliers, and has two warehouses - one in Nottingham and one in North London. Although both warehouses carry similar ranges, our Nottingham operations is more focused on curricular and international sales, whilst London is more focused on school operational needs. A proportion of product is supplied directly to customers by suppliers. Sales channels include a salesforce focused on the South-east (where the business is strongest), telephone, web, post and fax - many schools still using authorisation systems and methods where paper output is generated.

In the short term the education sector is undergoing a period of change which has led to some disruptions and changes to school spending patterns, as evidenced by the final quarter's trading. The material scale of schools switching to become academies has led to new approaches to purchasing in those schools, to changes in their financial budgeting and discipline and, for new academies, uncertainties in the scale and timing of budget release from local authorities. New policies, such as the change in the primary school national curriculum in 2014 and the provision of free school meals, have also caused disruption as schools re-allocate their budgets given funding uncertainties. Over the longer term the market is anticipated to grow steadily, with projections for rising pupil numbers offset by restrictions on available government funding. This pupil growth will be particularly pronounced in London and the South-east, where we are well placed to capitalise on this trend.

2014 Performance and Progress

As a result of a comprehensive re-engineering and turnaround exercise, performance in FY14 was substantially improved over the prior year. Overall the business grew by 6.5%, with UK brands growing by 3.6%, our international business recovering to grow at 17% and a return to more normal scale of our support for the Sainsbury's Active Kids' programme after its reduction last year due to the Paralympics. Operating profit* grew 415% to £4.1m.

In addition, the business demonstrated its growing competitive strength by winning or renewing further local authority contracts, after the success in late FY13 in winning the Scotland Excel contract. A significant renewal was achieved in Northern Ireland, together with winning two new contracts in the South and West - Hampshire County Council and City of Bristol. The business also gained recognition of its improved customer service with the winning of three prestigious awards - European Call Centre and Customer Service Award for Best Improvement Strategy, UK Customer Experience Award for Business Change and Transformation, and Call Centre North West Award for Best Customer Experience Programme. Uncertain market trends have continued into this financial year, in which early comparisons with prior year are also distorted by Easter being later, meaning a shift in trading patterns and a delay in the launch of our new catalogues until schools had returned after the break. Recent trading reflects these uncertain trends though the peak sales periods are yet to come.

Our second largest business has turned a corner - but still has more to do. The business is focused on continuing to improve efficiency and customer service, with a number of projects underway, and is now well placed for continued progress and growth to benchmark levels of profitability.

Kitbag

Business model and key trends

Kitbag is a specialist sports retailer selling club-branded replica kits, leisurewear and souvenirs as well as sports-branded playing and training wear. It operates through its own online platform Kitbag.com, and also manages officially-licensed club or organisation retail outlets including online, mail order and physical stores on a white-label basis.

Its partners are a wide range of leading names in sports, including Manchester United, Chelsea, Manchester City and Real Madrid in football in addition to organisations such as the Wimbledon Championship, the Tour de France, Ryder Cup, NBA, and the NFL. Typically these partnerships are structured so that the club receives a royalty from Kitbag, usually with a fixed minimum payment, and Kitbag then operate retailing and potentially licensing operations. The business therefore operates a range of websites serving customers all over the world, and has over 70 language variations of its online stores. Deliveries to all customers are managed from a central warehouse near Manchester. The business has c.375 suppliers, although the largest by far - unsurprisingly given their position in the sports world - are Nike and Adidas. Kitbag's capability to manage both online and multi-channel partner needs (where Kitbag can operate all official retail operations including on-line, mail order, event retail, stadium stores and in-town stores and concessions as well as managing product licensing) is a key factor in its ability to maintain and secure new contracts with leading football clubs and other major sports organisations.

The structure of a number of legacy contracts has however failed to balance risk/reward appropriately, with in some instances sales failing to offset minimum fixed payments resulting in losses. The priority for the business has therefore been to renegotiate or exit these underperforming contracts whilst improving trading and buying/merchandising performance to control stock and improve margins.

2014 Performance and progress

The first half of FY14 saw a serious deterioration in Kitbag's performance, with a significant sales shortfall and fixed royalty payments resulting in a fall in profitability. Demand from fans of a number of major partners was significantly down - manifested by falls in traffic from the club's own websites to our shops - as a result of combinations of poor sporting performance, absence of football transfer activity, managerial changes or general disaffection. This was compounded by initial difficulties with the launch of a new payments mechanism aimed at increasing international payment options, resulting in deterioration of customer conversion for a period. Although these issues were corrected in time for a much improved December and beyond, the performance for the year showed a significant deterioration on the prior year, with sales falling by 5.2%. As a result, we have re-assessed the timetable for Kitbag's return to profitability and have reduced the accounting carrying value for Kitbag arising from the group's acquisition of the business in October 2006 by £6.2m by way of an exceptional impairment charge.

Nonetheless, much positive progress has been made during the year. Contracts have been won or renewed with Borussia Dortmund, the National Hockey League, the Ryder Cup, Real Madrid, The Open Golf Championship and a major motorsport team, although the scale of the contract with Barcelona has reduced significantly. Progress has been made on the restructuring of unattractive contracts. During and after the financial year-end, agreement was reached on the renegotiation or termination of three major unprofitable contracts resolving the majority of the business's difficult contracts. This will give rise to benefits in the current and future years, although a charge of £2.8m has been taken to cover transitional and exit arrangements, of which around half represents cash to be paid out in future periods. Recent trading is within the range of our expectations given the typical volatility of the period (partner success and varied timing of kit launches in particular potentially affecting sales) and upcoming sports events in 2014, including the Ryder Cup (where Kitbag will also operate onsite retail) and the World Cup will give a boost to sales. There are therefore reasons to expect significant improvements in Kitbag performance in the coming year.

Kleeneze

Business model and key trends

Kleeneze is a leading network marketing company, specialising in supplying a wide range of household and health & beauty products to customers through a network of independent distributors across the UK and the Republic of Ireland.

The business sells through its self-employed distributors via catalogues, who in turn develop their own end-customer bases. Orders are generated from, and delivered to, the end customers by the distributors who also collect payment at the time of delivery.

The range of goods on offer is largely general household material, especially kitchen, bathroom and garden, together with some electrical items. The business deals with around 100 suppliers, although buying is closely coordinated with Express Gifts due a significant commonality of supply base. The business also shares a distribution facility with Express Gifts.

The main cost element within the business is distributor commissions. A distributor receives commission on their own direct sales, but - subject to detailed conditions around their own performance - can also receive further compensation based on the performance of other distributors they have brought into the network. Distributor commissions therefore are linked to sales, which provides the business with some profit protection when sales are falling.

2014 Performance Review

Revenue for the year fell by 5.5% to £46.5m, with the gross profit margin falling from 69.2% to 66.8% in part due to promotional activity around product and catalogue sales. Trading costs reduced by 7.1% to £29.8m. The operating profit* reduced by £0.7m to £1.3m. The continuing decline within Kleeneze has also led us to reduce its carrying value, arising from the group's acquisition of the business in October 2006, by £3.8m through an exceptional impairment charge.

Work undertaken during the year to improve the proposition had a good effect, with a marked increase in sales per ordering distributor. However, in recent months high levels of unexpected demand for newly introduced or promoted product has led to stock availability issues with a knock-on impact on service levels, restraining sales and recruitment and leading to a significant further deterioration. A significant fall in the absolute number of active distributors during the year was due to the withdrawal of the Break Free recruitment channel (where distributors could join for free with a small number of catalogues). It has also become clear that the mix of recruits between those who are seeking a very short term earnings increase and those who are looking for a significant longer-term opportunity, coupled with insufficient activity within the network on new distributor training, has led to a continued strong decline in overall distributor numbers. However, the business has seen an increased level of productivity arising amongst its motivated, longer term network of distributors. New incentives for distributors were brought in as a pilot in March 2014 together with an improved order management process to address stock availability issues. These measures have been launched in earnest over the last month in conjunction with a new catalogue and we are closely monitoring results. The business remains profitable* with attractive cash generation characteristics.

 * before exceptional items

Finance Director's Review

Group profit before tax

Group profit before tax* was £22.0m in FY14, up £10.2m on FY13, as summarised below.

* from continuing operations before exceptional items

** element of ongoing central group management costs of FY13 relating to the former Healthcare division. These costs have been reabsorbed within the other business units in FY14

The operating profit* of the continuing operations of the group increased by £9.6m to £31.9m, with an excellent performance from Express Gifts and substantial growth from the Education Supplies division, offset by a disappointing performance from Kitbag and lower profits from Kleeneze.

The favourable impact of lower average net debt following the sale of the Healthcare division in April 2013 resulted in net finance costs* reducing by £0.6m to £9.9m as restated for the effects of IAS 19 "Employee Benefits" (revised 2011). Consequently, the group's profit before tax increased by £10.2m to £22.0m.

Exceptional items

Total exceptional costs (excluding items in discontinued operations) of £18.7m (FY13: £11.3m) were incurred as set out in note 3. The recovery periods for both Kleeneze and Kitbag will be longer than originally envisaged, which has resulted in an accounting non-cash adjustment to reduce the carrying values of those businesses by some £10.0m in aggregate. An onerous contract provision of £2.8m was created within Kitbag in relation to a loss-making contract that is to be terminated with effect from June 2015. Other exceptional costs principally relate to the additional costs and provision for PPI redress of £2.0m, onerous property costs of £0.8m, and restructuring costs relating to changes to senior management and systems improvements totalling £2.7m.

Pensions

The group has continued to make additional voluntary contributions to its defined benefit schemes totalling £3.2m in the current financial period (FY13: £3.2m) to improve the funding levels of these closed schemes. Following the results of the triennial actuarial valuation of the schemes as at April 2013, the company has agreed a revised schedule of contributions for the next 10 years, within which £4.1m will be paid in during FY15 and £2.5m in each of FY16 and FY17. The net deficit at the end of FY14 measured in accordance with IAS19 reduced to £8.6m (FY13: £19.7m) as a result of actuarial gains in the year, reflecting an increase in corporate bond yields used to value the schemes' liabilities.

Taxation

The group posted a charge of £2.6m in the year in respect of taxation (FY13: credit of £1.1m). The effective pre-exceptional tax rate for the year was 24.6%.

Earnings per share and dividends

The adjusted earnings per share for the year increased from 12.13p in FY13 to 19.56p in FY14. The basic earnings per share from continuing operations was 0.78p per consolidated share (FY13: 1.87p).

No dividend will be paid in respect of FY14 (FY13: nil). The prohibition contained within the banking facilities on the payment of dividends will be relaxed from April 2016 onwards, although your board currently intends to continue to use the cash generated by the group to reduce debt further rather than to reinstate dividend payments.

Summary balance sheet

Consolidated net assets amounted to £111.6m at the period end (FY13: £100.5m), largely reflecting the actuarial gains in respect of the pension liabilities plus other gains in the income statement during the period. These net assets are equivalent to 132p per share (FY13: 118p per share).

Discontinued operations

A conditional agreement was reached on 19 March 2013 to sell the Healthcare division to LDC, and was completed on 19 April 2013. The gross consideration payable upon completion was £24.0m, comprised a cash payment of £22.6m to Findel Plc and a payment of £1.3m into an escrow account to satisfy the value of NRS' debt to the Findel Group Pension Fund.

The Healthcare division was classified as being a disposal group held for sale at the prior period end. Full details of the results of the Healthcare division and its assets and liabilities are set out in note 4.

Cash flow and borrowings

Net cash from operating activities was an inflow of £14.6m (FY13: £14.6m), reflecting the continued improved trading performance and focus upon cash generation during FY14.

As a result of the classification of the Healthcare division as being held for sale at the prior period end, cash and borrowings attributable to that division are shown on the balance sheet within the "assets held for sale" caption, rather than against the normal cash caption. This is summarised as follows:

 External net debt at the year-end was therefore as follows:

The securitisation facility supporting Express Gifts' receivables was increased from a maximum advance of £105m to £130m in January 2014. In May 2014, significant amendments to our core debt facilities were agreed that relax a number of the onerous restrictions that were placed upon the group in 2011. Included within this is, from 2016, the removal of the prohibition on the payment of dividends, although it is the board's current intention to continue to use the cash generated by the group to reduce debt further rather than to reinstate dividend payments.

Findel plc

Group Financial Information

Consolidated Income Statement

52 week period ended 28 March 2014

The accompanying notes are an integral part of this consolidated income statement.

Consolidated Income Statement

52 week period ended 29 March 2013*

The accompanying notes are an integral part of this consolidated income statement.

* restated for the impact of IAS 19 'Employee Benefits (revised 2011), see note 1.

** Earnings per share figures for 2013 have been restated to show the figures as if the twenty for one share consolidation which took place on 9 April 2013 took place at 1 April 2012. The figures have also been restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011) (see note 1).

Consolidated Statement of Comprehensive Income

52 week period ended 28 March 2014

* restated for the impact of IAS 19 'Employee Benefits (revised 2011), see note 1.

The total comprehensive income for the period is attributable to the equity shareholders of the parent company Findel plc.

Consolidated Balance Sheet

at 28 March 2014

* restated for the impact of IAS 19 'Employee Benefits (revised 2011), see note 1.

The accompanying notes are an integral part of this consolidated balance sheet.

Consolidated Cash Flow Statement

52 week period ended 28 March 2014

* restated for the impact of IAS 19 'Employee Benefits (revised 2011), see note 1.

The split of cash between continuing operations and assets held for sale is as follows:

The accompanying notes are an integral part of this consolidated cash flow statement.

Consolidated Statement of Changes in Equity

52 week period ended 28 March 2014

The total equity is attributable to the equity shareholders of the parent company Findel plc.

Findel plc

Notes to the Group Financial Information

1. Basis of preparation of consolidated financial information

The financial information set out herein does not constitute the company's statutory financial statements for the periods ended 28 March 2014 or 29 March 2013, but is derived from those financial statements. Statutory financial statements for 2013 have been delivered to the Registrar of Companies, and those for 2014 will be delivered in due course. The financial statements were approved by the Board of directors on 3 June 2014. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Copies of the company's statutory financial statements will be available on the Group's corporate website. Additional copies will be available upon request from Findel plc, 2 Gregory Street, Hyde, Cheshire, SK14 4TH.

The Group financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use within the European Union and in accordance with the accounting policies included in the Annual Report for the period ended 29 March 2013 except as stated below.

Restatement in respect of IAS19 'Employee Benefits (Revised 2011)'

The group adopted IAS19 'Employee Benefits' (revised 2011) on 30 March 2013 consistent with the standard's effective date. The group has applied the standard retrospectively in accordance with the transition provisions. The impact on the group has been in the following areas:

· The new standard requires post-employment scheme administrative expenses to be recognised either in other comprehensive income, where specific to the management of plan assets, or in operating profit for all other costs. This has resulted in a reclassification of £150,000 of administrative expenses from other comprehensive income to trading costs for the current period (2013: £121,000). As a consequence operating profit for the period ended 28 March 2014 has reduced by £150,000 (2013: £121,000).

· The new standard requires that the return on plan assets recognised in the income statement is calculated in a manner consistent with the interest charge on the liabilities, i.e. with reference to the discount rate applied to the liabilities. Prior to the revision, the expected return on assets was recognised through the income statement. There is no change to determining the discount rate; this continues to reflect the yield on high-quality corporate bonds. The net impact on the group's results for the period ended 28 March 2014 is an increased finance expense of £1,288,000 and an associated reduction in the tax charge of £296,000 (2013: increased finance expense of £1,016,000 and an associated reduction in the tax charge of £244,000).

The comparative figures for the period ended 29 March 2013 have been restated accordingly. The equivalent credits and associated taxation impacts of the income statement charges noted above have been recognised in other comprehensive income, and consequently there is no overall net balance sheet effect. Since the impact of the restatement for the consolidated balance sheet at the opening date of the comparative period is £nil, a balance sheet at 30 March 2012 has not been presented.

Share consolidation

On 9 April 2013, following approval from shareholders, a twenty-for-one share consolidation was completed. The share consolidation was based on every 20 existing ordinary shares being consolidated into one new ordinary share, with the fractional entitlements arising from the share consolidation being aggregated and sold in the market on behalf of the relevant shareholders and donated to charity.

Following the share consolidation, shareholders still hold the same proportion of the company's ordinary share capital as before the share consolidation (save in respect of fractional entitlements). Other than a change in nominal value the shares carry equivalent rights under the Articles of Association to the existing ordinary shares.

Going concern basis

In determining whether the group's financial statements for the period ended 28 March 2014 can be prepared on a going concern basis, the directors considered all factors likely to affect its future development, performance and its financial position, including cash flows, liquidity position and borrowing facilities and the risks and uncertainties relating to its business activities in the current challenging economic climate. The financial position of the group, its cash flows, liquidity position and borrowing facilities and the key risks and uncertainties are set out in further detail below.

The directors have reviewed the trading and cash flow forecasts as part of their going concern assessment, including reasonable downside sensitivities which take into account the uncertainties in the current operating environment including amongst other matters demand for the group's products, its available financing facilities, and movements in interest rates.

Taking into account the above uncertainties and circumstances, the directors formed a judgement that there is a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future.

Accordingly, they continue to adopt the going concern basis in preparing the group's annual consolidated financial statements.

2. Segmental analysis

Operating segments

The board has considered the information that is presented to them on each of the trading divisions. In view of this, information on reporting segments has been amended accordingly. For management purposes, until the disposal of the Healthcare division on 19 April 2013 the group was organised into six operating segments:

· Express Gifts - direct mail order businesses in the UK, offering online and via catalogue a broad range of home and leisure items, clothing, toys and gifts supported by a flexible credit offer;

· Education Supplies - supplier of resources and equipment (excluding information technology and publishing) to schools and educational establishments in the UK;

· Kitbag - retailer of sports leisurewear and official football kits both through its own online operation, kitbag.com, as well as a number of partnership relationships with football clubs and other sports organisations whereby Kitbag manages a range of retail, online and/or mail order channels;

· Kleeneze - marketing company, specialising in supplying household and health & beauty products to customers through a network of independent distributors across the UK and the Republic of Ireland;

· Overseas Sourcing - sourcing office based in Hong Kong supplying importing services to various group companies and a small number of external customers; and

· Healthcare - operator of outsourced Integrated Community Equipment Services ("ICES") contracts for NHS trusts and local authorities, and supplier of rehabilitation and care equipment to the public and private sectors via catalogue and the internet.

Segment information about these operating segments is presented below.

Inter segmental trading and profitability is not included in the information provided to the CODM and consequently is not disclosed below. Revenue for each reportable segment reflects sales to external customers only. Reportable segmental profits are adjusted for inter segment profits and as such are stated using costs to the group.

In the current period the information presented to the CODM has been modified so that exceptional items are now shown against the operating segment to which they relate. Consequently the analysis below has been amended to reflect this change for both the current and prior periods.

* restated for the impact of IAS 19 'Employee Benefits (revised 2011), see note 1.

3. Exceptional items

Restructuring costs in the current period of £2,739,000 (2013: £3,975,000) of which £nil (2013: £163,000) related to the discontinued operation, relate to management changes, redundancies and costs associated with rectifying poor systems and controls.

A charge of £2,768,000 (2013: £1,311,000) has been recognised in the current period in relation to the costs of exiting a loss making contract. The costs were unavoidable and include impairments of property, plant and equipment and unamortised license fees.

Costs of £798,000 have been provided in the current period in respect of onerous lease provisions (2013: £1,108,000).

A further £2,000,000 of costs were provided in relation to PPI redress during the period (2013: £4,800,000) bringing the provision to £2,407,000 (2013: £3,369,000)

Impairment of other intangible assets relates to a write down of indefinite lived brand names allocated to the Kleeneze and Kitbag CGUs. Impairment testing for goodwill and indefinite lived brand names is discussed in note 7 below.

Loss on disposal of subsidiary relates to the sale of the group's healthcare division (Nottingham Rehab Limited), which was completed on 19 April 2013. Pension settlement cost relates the buyout of members of the Findel Education section of the Findel Group Pension Fund that were employed by NRS, which took place as a result of the sale of the business.

The tax impact of exceptional items was a credit of £2,817,000 (2013: £2,616,000 credit)

4. Discontinued operation

On 19 April 2013, the group completed the disposal of its Healthcare Division through the sale of Nottingham Rehab Limited ("NRS"). NRS was classified as a disposal group held for sale in the financial statements for the period ended 29 March 2013. NRS' results for the period from 30 March to 19 April 2013 and for the period ended 29 March 2013 have been presented to show the discontinued operation separately from continuing operations.

The gross consideration payable upon completion was £24.0 million, comprised of a cash payment of £22.6 million to Findel Plc and a payment of £1.4 million into an escrow account to satisfy the estimated value of NRS' debt to the Findel Group Pension Fund. This valuation was completed in August 2013 and a further £0.1m was paid to Findel plc (being the excess over the value of NRS's debt to the Findel Group Pension Fund).

There were few synergies between NRS and the rest of the Group, and consequently the Board believed that Findel's cash resources were better employed in developing the remainder of the Group and that NRS' interests were best served under a new owner.

The excess of proceeds over the value of assets disposed of was £261,000. This has been offset by a pension settlement cost of £500,000, relating to the buyout of members of the Findel Education section of the Findel Group Pension Fund that were employed by NRS, which took place as a result of the sale of the business, and resulted in a loss on disposal of £239,000 being recognised in the consolidated income statement.

Results of discontinued operation

* 2013 expenses includes £163,000 of exceptional items.

The major classes of assets and liabilities of NRS at disposal on 19 April 2013 and at 29 March 2013 were as follows:

The above figures include goodwill, intangible assets, deferred tax, corporation tax liabilities and intercompany liabilities settled on completion.

Net cash flows from/ (used in) discontinued operation

The earnings per share from discontinued operation has been disclosed in note 6 below.

5. Tax expense

* restated for the impact of IAS 19 'Employee Benefits (revised 2011), see note 1.

6. Earnings per share

Earnings per share figures for 2013 have been restated to show the figures as if the twenty for one share consolidation which took place on 9 April 2013 took place at 1 April 2012. The figures have also been restated to reflect the adoption of IAS 19 Employee Benefits (revised 2011) (see note 1).

* Adjusted to remove the impact of exceptional items.

* Adjusted to remove the impact of exceptional items.

* Adjusted to remove the impact of exceptional items.

The earnings per share attributable to convertible ordinary shareholders is £nil.

7 Goodwill and other intangible assets

(a) Goodwill

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. After recognition of impairment losses, the carrying amount of goodwill has been allocated as follows:

The amount of goodwill that is tax deductible is £2,367,000 (2013: £2,541,000).

(b) Other intangible assets

Brand names, which arise from the acquisition of businesses, are deemed to have an indefinite life, and therefore are subject to annual impairment tests, on the basis that they are expected to be maintained indefinitely and are expected to continue to drive value for the group.

The amortisation period for customer relationships, which arose from the acquisition of businesses, is between 2 and 20 years. Management do not consider that any customer relationships are individually material.

Brand names acquired in a business combination are allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. After recognition of impairment losses, the carrying amount of brand names has been allocated as follows:

(c) Impairment testing

The group tests goodwill and indefinite lived brand names for impairment annually, or more frequently if there are indicators of impairment. The recoverable amounts of the Express Gifts, Education Supplies, Kitbag and Kleeneze CGUs are determined from value in use calculations.

Significant judgements, assumptions and estimates

In determining the value in use of CGUs it is necessary to make a series of assumptions to estimate the present value of future cash flows. In each case, these key assumptions have been made by management reflecting past experience and are consistent with relevant external sources of information. The key assumptions are as follows:

Operating Cash flows

Management has prepared cash flow forecasts for a three year period derived from the approved budget for financial year 2014/15. These forecasts include assumptions around sales prices and volumes, specific customer relationships and operating costs. A key assumption in relation to the operating profit forecasts for the Education CGU is that the business's operating profit margin will improve to be in line with its competitors by the end of the forecast period.

Risk adjusted discount rates

The pre-tax rates used to discount the forecast cash flows are between 12.5% and 18.1% (2013: 12.7% and 17.1%). These discount rates are derived from the group's weighted average cost of capital as adjusted for the specific risks related to each CGU.

Long term growth rate

To forecast beyond the detailed cash flows into perpetuity, a long term average growth rate of 2.5% (2013: 2.5%) has been used. This is not greater than the published International Monetary Fund average growth rate in gross domestic product for the next five year period in the territories where the CGUs operate.

Results

The estimated recoverable amounts of the Express Gifts and Education Supplies CGUs exceed their carrying values by approximately £23,200,000 and £8,300,000 respectively and as such no impairment was necessary.

The carrying amount of the Kleeneze CGU was determined to be higher than the recoverable amount and an impairment loss of £3,800,000 was recognised. The impairment loss was fully allocated to indefinite lived brands and is included in exceptional items. Following the impairment loss recognised, the recoverable amount is equal to the carrying amount. Therefore, any adverse movement in a key assumption would lead to a further impairment. Sensitivity analysis is included below.

The carrying amount of the Kitbag CGU was determined to be higher than the recoverable amount and an impairment loss of £6,170,000 was recognised. The impairment loss was fully allocated to indefinite lived brands and is included in exceptional items. Following the impairment loss recognised, the recoverable amount is equal to the carrying amount. Therefore, any adverse movement in a key assumption would lead to a further impairment. Sensitivity analysis is included below.

Sensitivity analysis

The results of the group's impairment tests are dependent upon estimates and judgements made by management, particularly in relation to the key assumptions described above. A reasonably possible change in key assumptions could lead to the carrying value of the Education Supplies CGU exceeding its recoverable amount and could also result in further impairment losses being necessary in both the Kleeneze and Kitbag CGUs. Sensitivity analysis to potential changes in operating cash flows and risk adjusted discount rates has therefore been reviewed.

The table below shows the risk adjusted discount rate and forecast operating cash flow assumptions used in the calculation of value in use of the Education Supplies CGU and the amount by which each assumption must change in isolation in order for the estimated recoverable amount to equal the carrying value:

The table below shows the risk adjusted discount rate and forecast operating cash flow assumptions used in the calculation of value in use for the Kleeneze and Kitbag CGUs and the impact of changes in these key assumptions on the level of impairment loss required:

8. Related party transactions

There were no related party transactions to be disclosed for the period to 28 March 2014 or to 29 March 2013.

Transactions between the company and its subsidiaries, which are related parties of the company, have been eliminated on consolidation and are not discussed in this note. All transactions and outstanding balances between the group companies are priced on an arms-length basis and are to be settled in the ordinary course of business.

Compensation of key management personnel

The remuneration of the directors including consultancy contracts and share-based payments, who are the key management of the group, is summarised below.