Final Results

29 August 2012

MBL GROUP PLC

Final Results for the year-ended 31 March 2012

The Board of MBL Group plc ("MBL" or the "Group") announces itsfinal audited results for the year- ended 31 March 2012.

Key points:

·; Results impacted by the loss of the Group's major customer in April 2011 and the ensuing downsizing plan;

·; Stock, debtors and creditors associated with major customer realised and the Group is debt free with cash balances of £4.0 million at 31 March 2012;

·; Prior year and current year financials restated for discontinued operations;

·; Group revenue (including discontinued operations) decreased to £28.1 million (2011: £195.3 million);

·; Revenue from continuing operations decreased to £17.7 million (2011: £20.0 million);

·; Loss before tax from continuing operations £2.1 million (2011: £4.2 million);

·; Group loss before tax (including discontinued operations) £8.8 million (2011: £21.2 million; 2011 operating profit before exceptional items £1.5 million);

·; Group loss per share 40.8p (2011: loss 121.4p); and

·; No dividend is proposed.

* Reference to 'Group revenue, Group operating profit/loss and Group profit/loss before/after tax includes both continued and discontinued operations.

Commenting on these results, Peter Cowgill, Non-Executive Chairman of MBL, said:

"The Group experienced an immensely challenging year as it dealt with the consequences of the loss of its major customer in April 2011. The Board has stabilised the business and is focused on placing the Group on the path to a profitable recovery. The transition to direct-to-consumer sales and entering new product markets is underway. "

Extracts from the final results appear below and a full version will be available on the Company's website www.mblgroup.co.uk in early September.

Enquiries:

MBL Group plc Tel: 0161 767 1620

Peter Cowgill, Non-Executive Chairman

N+1 Brewin (Nomad and Broker) Tel: 020 3201 3710

Robert Beenstock

Bishopsgate Communications Ltd. Tel: 020 7562 3350

Nick Rome/Sam Allen

[email protected]

CHAIRMAN'S STATEMENT

As reported over the course of the year ended 31 March 2012, and in our last Interim Statement, the Group experienced an immensely challenging year as it dealt with the consequences of the loss of its major customer in April 2011, Morrisons Supermarkets plc. The customer accounted for 79% of Group turnover, as disclosed in the 2011 accounts, and had been a significant proportion of Group turnover since the acquisition of Music Box Leisure in 2004, a company which had provided category management of home entertainment products to this customer since 1996.

The sudden loss of such a major part of the Group's business created immense external pressure on the Group's operations as speculation surrounding the impact this may have led to suppliers, credit insurers, the Group's own bank and customers taking unfavourable action, particularly in regard to Music Box Leisure, the Group's largest subsidiary. This included the withdrawal of credit facilities and insurance cover, challenging the debt due to the Group and, at times, the withholding of payment of invoices due to the Group.

An immediate downsizing plan for the Group was implemented which has now largely been completed at the substantial but inevitable cost of orderly downsizing. Employee numbers have reduced by 75%, the Group has reduced its distribution locations from three to two and a number of subsidiaries have been disposed of, most notably the sale of Global Media Vault Limited and MBL Guernsey PCC Limited to Sainsbury's Supermarkets plc in October 2011.

The Group focused on realising the working capital that had been tied up within Music Box Leisure and a considerable amount of resource has been focused on reducing stock levels, managing debtor accounts and ensuring that creditors were paid in full. As at 31 March 2012, this was almost complete with ongoing activity focusing on remaining legacy stock balances which, as previously reported, the Group had been left holding at the end of the contract. The strong management of working capital that has been required has led to overhead resource being employed specifically to manage this essential task during the year.

At the year-end the Group has cash balances of £4.0 million and remained without any debt. As at August 2012, the Group has cash balances of £2.7m to manage its operations within however it continues to experience a lack of available trade credit.

The Group has realigned its infrastructure to that suitable for a smaller volume business with the previously mentioned drastic reduction in employee numbers, renegotiation of existing service and supply contracts and disposal of excess company assets.

Up until November 2011, Music Box Leisure continued to provide category management services to a number of high street retailers but the actions outlined above, together with the widespread toughening of the home entertainment market, led the Board to the decision that Music Box Leisure's business was no longer commercially viable. In February 2012 Music Box Leisure ceased to trade.

During the period Group sales revenues, including discontinued operations, reduced by 85.6% to £28.1m and the Group incurred an operating loss of £8.8m. The reduction in sales reflects the loss of Music Box Leisure's trade and the use of the wholesale, retail and eCommerce channels to sell through surplus stock. The Group's fledgling businesses also were adversely affected by the withdrawal of Group funding to only essential investment during the downsizing period. Windsong International had a robust year and performed in line with the prior year, with every effort being made by management to protect it from the challenges affecting the wider Group.

The Group announced in March 2012 that it had committed to purchase the trade and assets of Garden Bird Supplies, Garden Centre Online and Listen 2 for £720,000. The businesses operated from a number of sites across the UK and over the last few months have been integrated into the Group's Leyland operations. Initial indications from these recently acquired businesses are positive.

The Board has stabilised the business and is focused on placing the Group on the path to a profitable recovery. As previously announced, the principal businesses of the Group now comprise Windsong International, MBL Direct, Bee.com (retail and online) and The Garden and Home Trading Company.

The transition to direct to consumer sales and entering new product markets is underway. The performance of the home entertainment market continues be reviewed by the Board and over the course of the current financial year the wholesale and retail divisions will be used to sell through the remaining Music Box Leisure stock balances.

Peter Cowgill

Non-Executive Chairman 

29 August 2012

OPERATING REVIEW

The Group experienced an exceptionally difficult year with the ramifications of the loss of the Group's major customer adversely affecting almost all of the Group's subsidiaries.

DISCONTINUED OPERATIONS

The challenging environment led to a number of the Group's subsidiaries being wound down or disposed during the financial year. For the purposes of the Financial Statements these businesses have been classified as discontinued and are described below. As a consequence, only the reported loss after tax of discontinued operations is disclosed within the Financial Statements.

Distribution

Music Box Leisure

Music Box Leisure had historically been central to the Group and as described in the Chairman's Statement, the external challenges presented to it during the year coupled with the longer term challenges that the home entertainment industry is itself facing, led the Board to conclude that this business should cease trading in February 2012.

During the year external revenue decreased by 94.8% to £9.1 million from £174.1 million. The loss of its major customer in the first month of the financial year and the consequent impact that this had on the viability of servicing its remaining customer accounts led to a larger decrease in sales than had initially been expected.

As previously reported, the company held stock balances of £12.0 million at the beginning of the year. At the time the decision to cease trading was taken the stock balance had been reduced to £0.5 million. The reduction of stock levels has been achieved by the return of stock to suppliers under existing returns agreements and its sale through the Group's other home entertainment channels of MBL Direct, Bee.com retail and Bee.com online. The stock that has been sold through the Group has inevitably been discounted and existing stock provisions of £2.3 million plus additional provisions of £0.7 million have been utilised during the year. In spite of this, the Group's gross margin remained broadly consistent with last year at 8.0% (2011: 7.5%).

The company managed the downsizing plan and unwind of working capital in very difficult circumstances. This process required a significant amount of dedicated resource throughout all departments and as a result the company incurred considerable overhead expenses, primarily in wages and salaries.

The remaining employees, property costs and commercial relationships were transferred to MBL Direct Limited in February 2012.

Digital and eCommerce

Global Media Vault ("GMV") and MBL Guernsey PCC

Global Media Vault is a digital distributor of home entertainment titles and was acquired in 2009. The Board sought to divest this business early last year and disposed GMV and another Group subsidiary, MBL Guernsey PCC Limited, to Sainsburys Supermarkets plc in October 2011.

In the period to disposal GMV continued to trade but was inevitably focused on serving one customer whilst the sale process was underway, Sainsbury's Entertainment, in light of the imminent sale to this customer. As a consequence sales growth activity was restricted. Sales for the period for the two combined companies to disposal were £0.9 million compared to sales of £1.2 million in 2011.

CONTINUING OPERATIONS

A number of the Group's continuing operations were also affected by the challenges experienced by Music Box Leisure. In particular, the requirement to sell through surplus stock attributable to its major customer contract and the focus on generating and preserving cash balances.

Wholesale

MBL Direct ("MBLD")

MBLD is a wholesaler primarily to independent and internet retailers. The independent retail sector has experienced very tough trading conditions in recent years and this continues to prevail.

External revenue at MBLD decreased to £4.5 million from £8.3 million. MBLD's sales were affected by the focus on the disposal of surplus Group stock throughout the year. MBLD competes on stock availability and price and is reliant on its ability to purchase stock at favourable margins to remain competitive. The loss of the Group's purchasing volume affected MBLD although a small, core business continues to exist.

In February 2012, the remaining assets of Music Box Leisure were transferred into MBLD, including remaining stock balances of £0.5 million. MBLD will concentrate on strengthening its ongoing business this year as well as continuing to realise the legacy stock balances.

Windsong International Limited ("WI")

WI is well known throughout the industry as an exporter of specialist and rare title CDs and DVDs.

WI experienced another consistently good year with its external sales increasing from £9.0 million to £10.3 million. Management tried as far as possible to protect WI from the wider disruption in the Group and the company was not affected by the sell through of surplus stock. As a consequence, gross margins at WI remained unchanged.

Digital and eCommerce

MBL 2010 Limited ("Bee.com")

Bee.com is an online direct-to-consumer website which predominantly sells home entertainment products.

The challenges facing the Group in the financial year led to a prioritisation of investment and as a result plans to promote and advertise the website were placed on hold. Instead, the site was used as a channel to sell through the surplus stock within the Group.

In the financial year to March 2012, revenue was £0.5 million which represents an increase to last year's sales of £0.3 million. Gross margins remained low due to the competitive nature of online home entertainment retailing.

Management remains cautious to the investment that would be required to promote the site as a home entertainment retailer and is reviewing its future use in line with the introduction of new product categories.

Retail

The Group operates four retail stores which are branded 'Bee.com'. All of the stores are on short term leases. The stores sell new and pre owned home entertainment products and some associated merchandise. The proposition also offers the customer the facility to trade in used home entertainment products. During the year the retail stores were also used as a channel to sell surplus stock from within the Group. Sales revenue remained broadly consistent with 2011 at £2.1 million, although gross margins reduced as a consequence of the sale of Group stock. There are no plans to open any additional stores.

The Board maintains a cautious approach to all future activities and continues to review the conditions within the home entertainment industry. At the year end, the Group announced the acquisition of three businesses which further underpins the strategy to transition the Group into the direct-to-consumer market. Two of these businesses, Garden Bird Supplies and Garden Centre Online, take the Group into new product areas which are less susceptible to the longevity and commercial challenges facing our traditional market of home entertainment.

The Group has experienced a year of tremendous pressure and uncertainty and has thankfully emerged from the turmoil in a stable position with new businesses providing a platform to build upon. The Group's employees have displayed an immense amount of loyalty during the difficult last eighteen months. I would like to thank the team for their overwhelming hard work and commitment to ensuring that the Group survived.

Trevor Allan

Chief Executive

29 August 2012

FINANCIAL REVIEW

Summary of results

Key Financial Points

The Financial Statements have been prepared to separately present the financial performance of the Group's continuing operations and discontinued operations. The prior year accounts have been restated to provide a comparable position. The Segmental Analysis in the Notes to the Financial Statements presents the Group's consolidated revenue streams.

The Group experienced a devastating trading environment during the year with Group sales reducing by 85.6% to £28.1 million (2011: £195.3 million). As described in both the Chairman's Statement and Operating Review, the Group was focused on surviving the repercussions of the loss of its major customer.

The Group experienced a complete withdrawal of external support for its operations and focused on the conversion of working capital balances into cash. A downsizing plan was implemented which also sought to ensure that the skills required to manage the realisation of working capital balances were retained. The costs associated with the downsizing plan, wind down of Music Box Leisure and the impact of the Group's uncertainty resulted in an operating loss £8.8 million (2011: loss £21.2 million; profit pre exceptional items £1.5 million).

Trading results 

* 'Operating profit adjusted' is operating profit before exceptional costs

Cash flow, working capital and borrowing facilities

The Group has generated a net £0.5 million in cash over the year with the Group's operating loss and the cost of implementing restructuring plans being largely offset by cash flows generated of £9.5 million from working capital realisation, the sale of assets and a corporation tax repayment.

At the year-end cash balances were £4.0 million (2011: £3.5 million). In August 2012 cash balances were £2.7 million, following the acquisition of three new businesses. The Group continues to be challenged by the lack of available supplier credit but is in a position to fund its operations for the foreseeable future.

Taxation

The Group successfully secured an advanced repayment of corporation tax during the year relating to the March 2012 accounts. The Group's effective tax rate was (15.27)% compared to (1.29)% in 2011.

Earnings per share

Basic and diluted loss per share for the year was 40.8p (2011: 121.4p).

Lisa Clarke

Financial Director

29 August 2012

Consolidated Statement of Comprehensive Income

for year ended 31 March 2012

Consolidated Statement of Financial Position

at 31 March 2012

Consolidated Statements of Cash Flows

for year ended 31 March 2012

Notes to the Financial Statements

for the year ended 31 March 2012

1. Source of Information

The preliminary financial statements for the financial year ended 31 March 2012 were approved by the Board of Directors on 28 August 2012. The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered following the Company's Annual General Meeting.

The auditors, KPMG Audit Plc, have reported on those accounts; their report for 2012 was unqualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation. The report for 2011 was (i) unqualified, (ii) included a reference to matters which the auditors drew attention by way of emphasis of matter without qualifying their report, it drew attention to a material uncertainty in relation to the going concern of the Group due to loss of the Groups major customer and the embryonic stage of the resulting Group reorganisation and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2. Operating segments

The segments dislosed below reflect the Group's management and internal reporting structure. During the year, the following subsidiaries were disposed or ceased trading and have been classified as discontinued operations within these Financial Statements:

- Music Box Leisure Limited

- Global Media Vault Limited

- MBL Guernsey PCC Limited

- Outnow Home Entertainment Limited

Consolidated statement of comprehensive income for the year ended 31 March 2012

Consolidated statement of comprehensive income for the year ended 31 March 2011

3. Exceptional Items

The following exceptional items were charged to the Statement of Comprehensive Income during the financial year:

4. Earnings per Share

The calculation of basic earnings per share has been calculated on the loss after tax of £7,065,000 (2011: £20,991,000) and the weighted average number of shares in issue during the year of 17,296,068 shares of 75p each (2011: 17,296,068 shares of 75p each).

The calculation of diluted earnings per share is identical to that used for the basic loss per share.

The adjusted earnings per share, as disclosed below, was calculated using the profits after tax for the financial year having added back exceptional items (after adjusting for the effect of tax) calculated with reference to the basic and diluted weighted average share in issue during the year.

5. Discontinued operation

6. Annual report

The Annual Report will be posted to shareholders in early September. Copies of the Annual Report will be available from the MBL Group plc, Unit 9 Enterprise Court, Lancashire Enterprise Business Park, Centurion Way, Leyland, PR26 6TZ and can be downloaded from the Company's website at www.mblgroup.co.uk.