Final Results

5 June 2013

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

Well positioned for significant progress in the coming year

Results for the 52 weeks ended 29 March 2013

Findel, a market leader in the UK home shopping and education supplies markets, today announces its results for the 52 week period ended 29 March 2013.

Financial Summary

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

† restated for the effect of the 20:1 share consolidation on 9 April 2013

** continuing operations, following disposal of Healthcare division completed on 19 April 2013

Results Highlights

·; Total Group revenue growth of 8.0%; revenue from continuing operations** 6.5% ahead of prior year

·; Profit before tax* from total Group increased by 45% to £15.5m (FY12: £10.7m); continuing operations** increased by 53% to £12.9m (FY12: £8.5m)

·; Particularly strong performance from Express Gifts, our largest business, with 13.4% growth in revenue and 15.9% growth in operating profit*

·; Core bank debtΔ reduced by £11.6m to £120.2m

o Proceeds from the sale of the Healthcare division received upon completion post year end (April 2013) and so will further reduce borrowing in the current year

·; Strong H2 performance from Express Gifts, Kitbag and Education Supplies with H2 operating profit* from continuing operations £2.8m (14%) ahead of prior year period

·; Earnings per share for continuing operations (before adjusting for the recent share consolidation) increased to 0.15 pence (FY12: loss per share of 0.36 pence) as a result of improved operating profitability and significantly reduced exceptional items, offset by the non-recurrence of tax credits received during FY12.

Outlook

·; A good start to the current year with encouraging trends in all businesses, building on the strong H2 momentum:

o Express Gifts seeing continued growth in sales with early signs of benefits to gross margin from increased use of our Far East sourcing office

o Kleeneze rate of decline narrowing after recent management changes and revisions to the distributor offer

o Kitbag sales ahead of the same period in FY13, although end of season stock clearance impacting margin slightly

o Education Supplies experiencing growth ahead of last year in both sales and margin following new catalogue launches in April 2013 and new contract wins

·; Medium-term target of growing Group operating margin** to 7-9% from current level of 4.6%.

Roger Siddle, Group Chief Executive, commented:

"These are very encouraging results that illustrate the extent of the progress that has been made in turning around the Group's operations over the last two years. We achieved a 20% growth in total Group operating profit and 45% growth in profit before tax*.

"Given the scale of the opportunity we see in the business, we have set ourselves clear targets. Current trading remains encouraging and we are confident of making further significant progress in the coming year."

Enquiries

Findel plc 0161 303 3465

Roger Siddle, Group Chief Executive

Tim Kowalski, Group Finance Director

Tulchan Communications 020 7353 4200

Stephen Malthouse

Michelle Clarke

Notes to Editors

The Findel Group contains market leading businesses in the 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;

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

·; Kitbag - a leading retailer of sports merchandise; and

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

CHAIRMAN'S STATEMENT

I am pleased to report on another year of considerable progress against our multi-year turnaround plan, with significant improvement across all our key financial metrics. We also completed the disposal of our Healthcare division just after the end of the financial year and the proceeds from this transaction will further reduce Group borrowings in the year ahead. Your board is pleased with this improvement in performance and, given the momentum building within the Group, is confident of continuing this success.

Notwithstanding the on-going difficult economic conditions, total Group revenue grew by 8.0% to £580.6m, with continuing operations (excluding the Healthcare division) up by 6.5% to £491.2m. With the exception of Kleeneze, all businesses contributed to an increase in operating profit with total Group* operating profit 20% higher at £25.1m and operating profit from continuing operations** 20% ahead at £22.4m. Profit before tax* for the year was markedly higher through improved operating profit and tight controls on debt and associated interest charges. Profit before tax* for the total Group grew by 45% to £15.5m, whilst profit before tax** from continuing businesses grew by 53% to £12.9m. At the same time, core net debtΔ at the year end has been reduced by £11.6m to £120.2m (FY12 £131.8m), excluding the benefit of the Healthcare disposal proceeds received after that date.

The Group incurred exceptional restructuring and finance costs, primarily relating to various internal reorganisation, contract renegotiations, property restructurings and management changes undertaken during the year, of £6.7m. In addition, as previously noted, the Group recorded an exceptional charge of £4.8m at the half-year in respect of potential redress for historic PPI sales. The redress programme is largely complete and no further provision in this area is currently anticipated. After taking account of these exceptional costs the continuing operations reported a profit before tax of £1.6m (FY12: loss of £14.2m). This is the first time Findel has reported a profit before tax for 5 years.

Our largest business, Express Gifts, has had another strong year increasing the customer base by 8%, sales by 13.4% and operating profit* by 15.9%. Our improved offer in terms of value and range continues to prove attractive to our customers, and the investments we have made in the business are beginning to bear fruit.

Kleeneze, on the other hand, has declined in sales and profits during the year. We have recently made a number of senior management changes within the business and have developed a revised plan to restore appropriate levels of profitability within the business going forwards.

Although still loss-making, Kitbag has made a substantial recovery on the prior year as a result of management actions, leading to strong sales growth together with improvements in gross margin. The team continues to work to address its remaining underperforming contracts and to improve further the underlying strength of the business.

Our Education business has also made great progress with a recovery in core UK brand sales after periods of substantial decline. Current sales and margin trends overall are very encouraging.

During the year, we reviewed the position of our healthcare business NRS noting that, despite being a market leader in its sector with growth opportunities for the business, its requirement for cash and margin investment meant that these opportunities were best pursued by a new owner. We were pleased to complete the sale of NRS to LDC on 19 April 2013 for £24m.

We have maintained investment in the Group, both in terms of capital expenditure and in working capital, particularly to support the increase in customer numbers and sales at Express Gifts. The latter led to an £18.9m increase in Express Gifts' receivables book at the seasonal peak before Christmas, reflecting continuing strong sales. Despite these investments, the Group's net debt ended the year reduced by £5.5m, with an improvement in core bank debtΔ offset by an increase in the borrowings under the securitisation facility as a result of the increase in the Express Gifts receivables book.

Board changes

Our longest serving non-executive director, Mike Hawker, has decided to retire from the board at the end of the forthcoming annual general meeting. He has made a valuable contribution to the Group throughout his seven years on the board and I would like to record the board's gratitude and offer our best wishes to Mike for the future.

Employees

The strong upward trajectory in the performance of the business over the last year could not have been achieved without the tremendous hard work of our employees. The Group continues to implement a significant level of change and on behalf of all stakeholders I would like to thank all of our employees for their contribution and achievements.

Current trading

The Group has seen further growth to sales and profits in the first few weeks of the new financial year, although this is a relatively quiet period for trading in Express Gifts, Kleeneze and Kitbag. The Education Supplies business has seen encouraging early responses to its new catalogues, launched in mid-April.

Outlook

We are very pleased with the progress we have made this year. Current trading remains encouraging and, despite the continuing challenges of the external environment, we continue to be confident about the potential within the Group. We will continue to pursue our turnaround plan which is clearly demonstrating the prospects of improved shareholder value.

David Sugden

Chairman

4 June 2013

* before exceptional items

** before exceptional items and discontinued operationsΔ overall net debt excluding the securitisation facility

CHIEF EXECUTIVE'S STATEMENT

We have built on the platform for recovery created last year to establish strong momentum in our turnaround. Our actions have driven improved operating and financial performance across the majority of the Group, and have demonstrated the substance of our plans. Our focus is now on maintaining this momentum in order to achieve our profit and cash goals over the coming years. 

A strong positive trajectory

The Group entered the year with signs of recovery already showing. Our goal for the year was to build on this by focusing on our turnaround plans to establish a strong positive upward trajectory in performance, which we have achieved, with a 20% growth in total Group operating profit* and a 45% growth in profit before tax*.

Express Gifts has continued to show strong growth and improved profits. Kitbag has shown a sharp improvement in performance, although there is much still to do there. Our Education core brands have returned to growth after many years of decline. Our Healthcare business maintained its leadership position, although the recognition that the value Findel could add to the business was diminishing led to a successful disposal. Kleeneze's performance did not meet our expectations and we have taken action to address this.

Our growth in sales and profits has been achieved whilst simultaneously reducing our debt, with overall net debt reduced by £5.5m to £225.2m (FY12: £230.7m) and core bank debtΔ reducing by £11.6m to £120.2m. The Express Gifts receivables portfolio increased during the year by £13.9m. Without this growth, core bank debt would have fallen by a further £5.3m.

Overall, this year has been one of significant progress. We aim to continue that trajectory and, given the scale of the opportunity we see in the business, we have set ourselves a goal of achieving 7-9% net operating margin for the Group, in the medium term, from 4.6%** today, whilst continuing to reduce core bank debt.

Express Gifts

Express Gifts, the largest business in the Group, has again performed strongly. The business has continued to focus on ensuring strong product value for the customer which has delivered continued growth in customer numbers, sales and cash margin. Sales for the year grew by 13.4%, profits* by 15.9%, and customer numbers were up 8% for the calendar year. Our systems implementation programme remains on track, and our new behavioural credit scoring system is now fully implemented, making the anticipated contribution this year. Bad debt indicators have remained stable, with the bad debt charge lower at 11.4% of sales versus 12.4% at the end of March 2012. 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 in the year. As a result, the operating margin for the largest business in the Group increased from 8.1% to 8.3%. The business incurred exceptional costs in FY13 totalling £4.8m in respect of potential redress for historic PPI sales. The redress programme is largely complete and no further provision in this area is currently anticipated.

We are pleased with the start to the current year, with the business seeing an encouraging level of further growth in the early weeks of FY14, after adjusting for timing differences in catalogue launches between the years.

Work continues on improving our range and cost prices. The changes made last year in our Far East sourcing operation have borne fruit, and purchases through this source now account for 8.4% of Express Gifts purchasing (up from 6.2%) with further potential beyond. In addition, our new behavioural scoring system has improved the information available to us to help manage credit risk, and so maintaining a cautious approach we have embarked on a comprehensive re-assessment of our risks, costs, prices and charges within our financial services area, with the ultimate aim of having a more flexible and personalised offering over the coming years. The major systems replacement programme remains on track and on budget.

Overall, given strong sales, customer growth and our cost and sourcing actions we continue to see significant further profit potential within Express Gifts.

Kleeneze

Kleeneze's performance has been disappointing, with sales declining 8.4% and operating profits reducing by roughly one-third as a result of a 10% reduction in active ordering distributors and a further reduction in the average size of each order. The heavy rain during the first half of the year undoubtedly contributed to a higher than anticipated distributor attrition rate, but adverse conditions also highlighted weaknesses in our offer to distributors. We have recently made management changes and restructured overhead. A new distributor and product proposition has recently been launched to coincide with the 90th year of Kleeneze, aimed at making it easier for distributors to grow their business to economically viable levels as quickly as possible. Recent trading is more encouraging, with sales since the year end still behind the prior year but with the gap narrowing.

Kitbag

Kitbag has made strong progress during the year, with sales growth of 16% and a £2.5m improvement in profits* - although it is still loss-making. This sales growth has been driven by both existing and new contracts, whilst profitability has been driven primarily by improvements in gross margin (some 1.4 percentage points versus prior year) as a result of the investments made in buying and merchandising processes, systems and people. Improved profitability has also been achieved with the effective royalty rate on contracts reduced from 18.2% of sales in FY12 to 16.2% in FY13 as a result of the restructuring or exit of certain unprofitable contracts, but there is still work to do in this area. Included within exceptional costs are around £1.3m of costs which were incurred during the year as a result of these renegotiations to a number of unprofitable contracts, which are not included within that operating loss.

The pipeline of new contracts remains strong, with the NBA, NFL, French Open tennis, Olympique Marseille FC and Tour de France contracts being signed during the year together with extensions to the existing contracts with Chelsea FC, Real Madrid, Barcelona and F1. As flagged earlier in the year, our re-launch of kitbag.com during the year made slower progress than we had hoped, although sales in our key international markets continue to grow positively.

Education Supplies

Within our Education Supplies Division we have succeeded in arresting many years of decline in the core brands and believe we have established a strong platform for the coming years. Although total sales for the division have declined during the year, largely due to the anticipated one-off shorter duration of the Sainsbury's Active Kids scheme in calendar 2012, core UK brands have grown by 1.1% versus the prior year decline of (12.9%). Despite the decline in sales, profits* have improved versus prior year to £0.9m (FY12: £0.8m), with the underlying performance stronger after the adverse net impact versus last year of c.£1.5m following the change in catalogue timings to April 2012 from January 2012. 

During the year we have conducted a full re-engineering of the product selection, catalogue design/production and pricing architecture processes and have launched a further improved set of catalogues into the market, covering 20% more schools with 34% less physical catalogues. Towards the end of the financial year the business demonstrated its recovery by being awarded the Scotland Excel contract for all Scottish LEA schools, which has the potential to increase sales in the coming year by around £3m, albeit at a lower than average margin. Current trading is encouraging, with total sales ahead of prior year in response to the new catalogues.

Overseas sourcing

The Group's Far East sourcing office, based in Hong Kong, is used by the majority of the Group. The strategy for this office was changed during FY12 to focus more on serving internal customers rather than achieving stand-alone profits from focussing on external clients. Consequently, the level of external turnover fell by 15.4% to £5.5m (FY12: £6.5m) whilst the proportion of products sourced to Express Gifts increased from 6.2% of its total purchases to 8.4% during FY13, with more anticipated in future periods. As expected the office reported a nominal level of profit for FY13.

Healthcare

The Healthcare (NRS) business performed well during the year. However, it was clear that to take advantage of the strategic growth opportunities available to NRS, investment of both capital and margin would be required in the coming years. Having already received approaches for the business we concluded we should explore the disposal option for NRS. The sale to LDC was completed on 19 April 2013 for a gross consideration of £24m, and we wish the management team and the new owner every success in the future.

The disposal of NRS allows us to focus our resources on the remaining businesses in the Group. Our priorities will continue to be to unlock the remaining potential in the Group - continuing the growth in profits and profitability from Express Gifts, returning our Education business to levels of profitability much closer to its peers, continuing the recovery in Kitbag whilst maintaining growth and reversing the decline in Kleeneze's profits. We believe we have clear and realistic plans to achieve our goals.

* before exceptional items

** before exceptional items and discontinued operationsΔ overall net debt excluding the securitisation facility

FINANCE DIRECTOR'S REPORT

Group profit before tax

Group profit before tax* was £15.5m in FY13, up £4.8m on FY12, as summarised below.

* before exceptional items

The operating profit* of the continuing operations of the Group increased by £3.7m to £22.4m, with an excellent performance from Express Gifts, a significant reduction in the loss at Kitbag, stabilisation of the Education Supplies division despite the changed timing of its catalogue production, offset by lower profits from Kleeneze.

The favourable impact of both lower average net debt and sustained lower LIBOR rates resulted in net finance costs* reducing by £0.7m to £9.5m. Consequently, the Group's combined profit before tax from its continuing operations and the Healthcare division** increased by £4.8m to £15.5m.

Unallocated central costs of £0.6m represent the element of ongoing central group management costs relating to the Healthcare division. However, as that division has been classified as a discontinued operation in these results, these continuing group management costs are shown separately within continuing operations. Following the completion of the sale of Healthcare in April 2013, these costs will be reabsorbed within the other continuing business units in future periods.

Exceptional items

Total exceptional costs (including items in discontinued operations) of £11.5m (FY12: £22.9m) were incurred as set out in note 3. These principally relate to the costs and provision for PPI redress of £4.8m, together with onerous property costs, changes to senior management, systems improvement, contract renegotiation and other restructuring costs totalling £6.4m. Exceptional finance costs of £0.3m were incurred from the amortisation of costs relating to the 2011 refinancing.

Pensions

The Group has continued to make additional voluntary contributions to its defined benefit schemes totalling £3.2m in the current financial period (FY12: £3.2m) to improve the funding levels of these closed schemes. The net deficit at the end of FY13 measured in accordance with IAS19 increased to £19.7m (FY12: £13.0m) as a result of actuarial losses in the year, reflecting a further reduction in corporate bond yields used to value the schemes' liabilities.

Taxation

The Group posted a credit of £0.9m in the year in respect of taxation (FY12: £8.1m). This principally related to movements in the deferred taxation position reflecting the increased level of confidence that losses incurred in prior periods will be utilised against taxable profits in the near term.

In FY12, the Group posted a one-off credit of £4.9m in respect of adjustments to earlier periods' liabilities, together with a credit of £2.9m from deferred tax movements that again related to the increased use of prior period losses.

Earnings per share and dividends

On 9 April 2013, following approval from shareholders, a twenty for one share consolidation was completed. This was based on every 20 existing ordinary shares being consolidated into 1 new ordinary share.

The net impact of the £4.5m growth in profit before tax*, the £11.4m reduction in exceptional items, offset by the £7.3m reduction in taxation credit described above, resulted in profit after tax from continuing operations being £8.5m higher at £2.5m (FY12: loss after tax of £6.1m).

This equates to a basic earnings per share from continuing operations of 2.9 pence per consolidated share (FY12: loss per share of 7.1 pence).

As previously reported, the terms of the Group's credit facilities prohibit the payment of dividends for so long as those facilities are in place. This is consistent with the board's belief that the Group should improve its liquidity and invest in its operations rather than paying dividends for the time being.

Summary balance sheet

2013 2012 Change

£000 £000 £000

Fixed assets 137,081 139,906 (2,825)

Net working capital 198,880 200,690 (1,810)

External net debt (225,153) (230,659) 5,506

Other net liabilities (10,337) (5,800) (4,537)

Consolidated net assets amounted to £100.5m at the period end (FY12: £104.1m), largely reflecting the actuarial losses suffered in respect of the pension liabilities together offset by other gains in the income statement during the period. These net assets are equivalent to 118p per consolidated share (FY12: 123p 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 £1.4m into an escrow account to satisfy the estimated value of NRS' debt to the Findel Group Pension Fund. An adjustment to the cash element will be made once that debt has been finalised.

The Healthcare division was classified as being a disposal group held for sale at the 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 (2012: £4.6m), reflecting the improved trading performance and focus upon cash generation during FY13.

As a result of the classification of the Healthcare division as being held for sale at the 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:

Cash in hand

2013 2012

£000 £000

Held for sale 6,058 -

Rest of group 27,965 33,099

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

2013 2012 Change

£000 £000 £000

External bank borrowings 154,176 164,921 10,745

Core bank debt 120,153 131,822 11,669

Securitisation drawings 105,000 98,837 (6,163)

* before exceptional items

** before exceptional items and discontinued operationsΔ overall net debt excluding the securitisation facility

Findel plc

Group Financial Information

Consolidated Income Statement

Period ended 29 March 2013

Consolidated Statement of Comprehensive Income

Period ended 29 March 2013

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

Consolidated Balance Sheet

At 29 March 2013

Consolidated Cash Flow Statement

Period ended 29 March 2013

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

Consolidated Statement of Changes in Equity

Period ended 29 March 2013

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 29 March 2013 or 30 March 2012, but is derived from those financial statements. Statutory financial statements for 2012 have been delivered to the Registrar of Companies, and those for 2013 will be delivered in due course. The financial statements were approved by the Board of directors on 4 June 2013. 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 30 March 2012 except as stated below.

Going concern basis

In determining whether the group's financial statements for the period ended 29 March 2013 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. Although at certain times the level of headroom reduces to a level which is less than the directors would regard as desirable in the long term, the directors believe it to be sufficient and have identified controllable mitigating actions that could be implemented if required.

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

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, prior to the sale 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;

·; 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;

·; 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;

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

·; 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;

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

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.

2013

Revenue

*Results relating to the Healthcare segment relate to discontinued operation.

2012

Revenue

*Results relating to the Healthcare segment relate to discontinued operation.

2013

Profit after tax

*Results relating to the Healthcare segment relate to discontinued operation.

2012

Loss after tax

*Results relating to the Healthcare segment relate to discontinued operation.

3. Exceptional items

In the prior period cost of sales included costs associated with new divisional management's turnaround plans such as dealing with stock obsolescence.

Restructuring costs in the current period of £3,975,000 (2012: £7,583,000), of which £163,000 (2012: £174,000) related to discontinued operation, relate to further management changes, redundancies and costs associated with remedying legacy poor systems and controls.

Costs of £1,311,000 have been incurred in relation to contracts that have become loss making. The costs were unavoidable and include impairments of property plant and equipment related to the contracts in question.

Total costs of £4,800,000 (2012: £nil) have been incurred in relation to PPI redress in the period.

The prior year impairment of £8,400,000 related to a write down of goodwill allocated to the Education Supplies CGU.

The group incurred exceptional finance costs of £283,000 (2012: £3,396,000) in the period in respect of fees and other costs associated with amendments to its credit facilities in March 2011. This includes £147,000 (FY12: £1,309,000) of costs in relation to the group's derivative financial instruments taken out as part of the refinancing.

4. Discontinued operation

On 19 March 2013, the Board announced it had entered into a conditional agreement with Pimco 2927 Limited to dispose of its Healthcare Division through the sale of Nottingham Rehab Limited ("NRS"). 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. An adjustment to the cash element will be made once that debt has been finalised.

Whilst NRS operates in a growing market with both favourable demographics and an increasing outsourcing opportunity through the transfer of service provision from the public to the private sector, there were few synergies between NRS and the rest of the Group, and consequently the Board believes 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.

At 29 March 2013 completion of the deal was conditional upon shareholder approval and NRS was classified as a disposal group held for sale. Shareholder approval was obtained on 8 April 2013 and consequently the deal was completed on 19 April 2013.

A gain on disposal of £331,000 will be recognised within discontinued operations in the consolidated income statement for the period ended 28 March 2014.

An assessment has been made as to recoverable amount for the assets of NRS that have been classified as held for sale using fair value less costs to sell. As a result of this review, no impairment was identified.

.

*Expenses includes £163,000 (2012: £174,000) of exceptional items.

The major classes of assets and liabilities of NRS as at 29 March 2013 were as follows (note, 2012 is provided for comparison only):

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

5. Tax expense/(income)

The tax expense/(income) in the consolidated income statement is disclosed as follows:

6. Earnings/(loss) per share

*Adjusted to remove the impact of exceptional items.

*Adjusted to remove the impact of exceptional items.

*Adjusted to remove the impact of exceptional items.

Diluted earnings per share figures have not been disclosed for either period as there are no potentially dilutive options.

The earnings per share attributable to the convertible ordinary shareholders is £nil (FY12: £nil)

7. Related party transactions

Trading transactions

There were no related party transactions to be disclosed for the period to 29 March 2013 or to 30 March 2012. 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 arm's 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.

8. Contingent liabilities

The company's largest subsidiary, Express Gifts, is regulated by the FCA as an insurance intermediary and as such is permitted to sell insurance products. Following concerns raised by the underwriter of one of those products, an extended warranty product, Express Gifts has commenced a review of its sales process to assess whether there were any deficiencies that could have resulted in that product being mis-sold. Express Gifts' sale of this particular product was not subject to the FCA's rules and the level of complaints received has remained extremely low. Nonetheless, at the current time, it is not possible to evaluate the extent of the mis-selling (if any), nor the potential level of redress that might be required if any future proactive customer redress exercise was required. Furthermore, it is not possible to quantify how much of such redress would be recoverable from the underwriter of the product.

9. Post balance sheet event

Sale of Nottingham Rehab Limited

The sale of Nottingham Rehab Limited was completed on 19 April 2013. Full details of the disposal have been included within note 4 above.

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 1 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 will 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.

By order of the board

R W J Siddle T J Kowalski

Chief executive Finance director

4 June 2013 4 June 2013

Principal risks and uncertainties

There are a number of risks and uncertainties that could impact the performance of the group over and above the treasury risks considered above. Group and divisional management, through the budgeting, forecasting and monthly review of actual results, review business risks and seek to mitigate these risks as far as possible, as described in the Corporate Governance Report. The risks relate to three key areas of review by the group being those specific to the group's divisions, economic and regulatory risks, and operational risks.

Risks specific to the group's divisions

The business of the Express Gifts Division is seasonal, and is more heavily weighted towards the second half of the financial year. In addition the division is reliant on credit scoring techniques in the recruitment of new customers.

In the Education Supplies Division, the September and March "Back-to-School" periods account for much of the market's annual sales and profits. The group is focused on delivering a high quality of service and being well prepared for managing peak demand in all of its businesses.

The Education Supplies Division could be adversely affected if a local authority were to withdraw "Approved Supplier" status. The group is focused on maintaining appropriate quality of service to ensure it retains this supplier status and retains and wins new contracts.

Economic and regulatory risks

The group may be negatively affected by the impact of the economic downturn on consumer spending or the ability of its customers to service their debts.

The impact of the sustained reductions in government spending on education may adversely impact the performance of the Education Supplies Division and may in turn have a material adverse effect on the group's business. The continued or prolonged withdrawal of credit insurance traditionally provided to the group's suppliers could have an adverse effect on the group's business. In addition the failure of the group to meet its debt obligations or comply with the terms of its credit facilities could have a similar impact.

Interruptions in the availability or flow of stock from third party product suppliers or defaults by tenants on sub-let properties could have an adverse effect on the group's business.

To mitigate this risk, the group purchases products from a wide variety of domestic and international third party product suppliers.

The group's operations may be adversely affected by legal, regulatory and other developments in countries in which it operates. The group is subject to a range of legal and regulatory requirements originating from the UK (particularly the Consumer Credit Act and Data Protection), the other countries in which it operates and in the European Union, particularly in areas of consumer protection, product safety, competition, provision of credit, selling of financial services and extended warranties, copyright royalties, levies, health and safety, taxation, environment, labour and employment practices (including pensions). The group manages these risks in conjunction with third party professionals, where appropriate.

Deteriorating markets and reputational risks could result in the impairment of goodwill, intangible assets (including brands) and property, plant and equipment, which may adversely affect the group's financial position. The group focuses on maintaining the highest quality of service to mitigate against any impairment in the value of its businesses.

Operational risk

The group is dependent on its senior management. The group has entered into employment contracts and taken other steps to encourage the retention of these individuals, and to identify and retain additional personnel. The group's business may be affected by the default of third parties in respect of monies owing by them to the group. However the majority of amounts owed to the group comprise small balances spread across a large number of accounts and active consideration of credit risk is carried out throughout the group.

The group has funding risks relating to its defined benefit pension schemes. Whilst these schemes are closed to both new members and additional accruals, they remain subject to risks regarding the relative amount of each of the scheme's assets, which is affected by the value of investments held by the scheme and the returns derived from such investments, as compared to its liabilities, which are affected by changes in life expectancy, inflation and future salary increases. To improve the funding of these schemes the group has agreed funding plans with the schemes' trustees and as a result makes additional contributions to the schemes.

The group may fail to keep up with advances in internet technology. Furthermore information technology systems failure or disruption could impact the group's day-to-day operations. The group relies heavily on its information technology systems to record and process transactions and manage its operations as well as to enable its customers to purchase products on-line and over the phone. The group has seen significant growth in the proportion of its home shopping sales which are derived from the internet, and these now represent over 50% of the total sales of the Home Shopping Division. The group is focused on investing appropriately in its information technology systems and progressively developing its e-commerce capabilities.

The group is dependent on third parties for outsourcing functions. The group carries out extensive reviews of any potential outsourcing partner. Loss of, or disruption to, the group's distribution centres and administrative sites would have a material adverse effect on the group's business. The group has established disaster recovery procedures designed to minimise the impact of any such disruption. The group also carries insurance cover against the potential loss of key facilities.

Financial risk

The group is reliant on the continued provision of credit facilities, and the ability to refinance them as they fall due, to support its operations as it seeks to reduce its net borrowings to a more appropriate level. The current facility agreements which mature in March 2016 include various financial covenants which, if not complied with, would enable the lenders to seek immediate repayment of amounts outstanding under the outstanding credit facilities.

Directors' responsibility statement pursuant to the Disclosure and Transparency Rules 4.1.12

We confirm to the best of our knowledge:

1. the annual announcement, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole; and

2. the Chairman's Statement, the Chief Executive's Report and the Finance Review includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

The names and functions of the Directors of the Company are:

Mr D A Sugden Chairman

Mr R W J Siddle Chief Executive

Mr T J Kowalski Group Finance Director

Mr P B Maudsley Managing Director, Home Shopping

Mr E F Tracey Senior Independent Director

Mr W Grimsey Non-Executive Director

Mr M L Hawker Non-Executive Director

Mrs L C Powers-Freeling Non-Executive Director