Half Yearly Report

31 August 2012

Flying Brands Limited (the "Company" or the "Group")

Interim Results Announcement

For the 26 weeks ended 29 June 2012

Flying Brands Limited today announces its interim financial results for the 26 weeks ended 29 June 2012.

Summary information

About us

The Group was a multi-brand multi-channel home shopping specialist, comprising of three divisions; Garden, Gifts and Entertainment. During 2011 the Group decided to dispose of all of its trading businesses.

The first half of 2012 saw the completion of the disposal of the Gifts business and the GBS, GCO and L2 brands. The disposal of GD completed in July 2012 also resulted in the closure of the GLD business based in Jersey.

The primary focus of the Group going forward is the maximisation of the long-term value of Retreat Farm.

Financial Highlights

·; Disposal of Gifts division for £2.4m

·; Disposal of GBS, GCO & L2 for £0.8m

·; Loss from continuing operations £2.2m (26 weeks to 1.07.11: £2.0m)

·; Profit from discontinued operations £1.1m (26 weeks to 1.07.11: £0.1m)

·; Loss attributable to Group of £1.1m (26 weeks to 1.07.11: £1.7m)

Brands

The Group had previously maintained a selection of retail brands targeted towards the home shopping retail market. In line with the divestment strategy of the Group most of these brands were disposed in the first half of 2012 with the remaining GD brand disposal completing in early July.

Chairman's statement

The first half of 2012 was a period of significant change for the Company. We sold our flowers division and also disposed of our Garden Bird Supplies, Listen2 and Garden Centre Online businesses. Shortly after the end of the half-year we also sold the assets of our Gardening Direct business and announced the closure of our Growing and Live Dispatch business. We also have now received the £0.15m deferred consideration for the flowers division

The only significant asset now remaining in the Company is the freehold property at Retreat Farm in Jersey which was valued earlier this year at £3.3m. We also have a receivable of £0.625m being the deferred element of the Gardening Direct consideration. We have sufficient cash to pay our trade creditors and have no bank debt. We do however still owe £0.75m to Palatine Private Equity that is repayable at the end of this year.

Currently the Company's only income comes from the rental of various parts of Retreat Farm. We have not yet concluded our negotiations with Jersey Choice Limited in connection with the proposed lease of the greenhouses and dispatch centre at our Retreat Farm property but we do anticipate that a lease will be concluded in the near future.

Following the successful completion of the disposal programme the Board is now reviewing the future of the Company. We have had preliminary discussions about bringing other businesses into the Company and we expect to have discussions with other parties in the near future. We are also reviewing options for Retreat Farm and for the possible re-financing of the Palatine debt. There can be no certainty that any of these initiatives will come to fruition and it may be that the Board will conclude that the best way of achieving value for shareholders is by an orderly disposal of Retreat Farm and the return of cash.

Given the greatly reduced level of activity within the Company both Gerald Voisin and John Henwood have decided to resign from the board with effect from 30 September. I would like to thank both Gerald and John for their contributions over the last few years.

Stuart Dootson has also decided to step down as finance director, with effect from 31 August and Chris Knott, who is currently our group financial controller, has been appointed finance director and company secretary in his place. Stuart joined us at a very difficult time and his contribution over the last few months has been invaluable. I would like to thank Stuart for all his efforts on our behalf.

Lastly, it is my intention to step down as chairman at the end of this year once the board has been reconstituted to meet the on-going needs of the Company.

Tim TrotterChairman31 August 2012

For further information please contact:

Flying Brands Limited 01245 392 272

Chris Knott

Smithfield Consultants 020 7360 4900

John Kiely

Responsibility Statement

We confirm that to the best of our knowledge:

·; The condensed set of financial statements, which has been prepared in accordance with IAS34 Interim Financial Reporting as adopted by the EU, gives a true and fair view of the assets, liabilities and financial position as required by DTR 4.2.4R

·; The interim management report includes a fair review of the information required by DTR 4.2.7R, being an indication of important events that have occurred during the 26 weeks of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties in the remaining 26 weeks of the year

·; The interim management report includes a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first 26 weeks of the current financial year and that have materially affected the financial position or performance of the entity during the period and any changes in the related party transactions described in the last annual report that could do so.

By Order of the Board,

S S Cook S J Dootson

Chief Executive Officer Finance Director

31 August 2012 31 August 2012

Definitions

Business review

To the members of Flying Brands Limited

Cautionary statement

This business review has been prepared solely to provide additional information to shareholders to assess the Company's strategies and the potential for those strategies to succeed. The business review should not be relied on by any other party or for any other purpose

The business review contains certain forward looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking information.

This business review has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Flying Brands Limited and its subsidiary undertakings when viewed as a whole.

The Group's restructuring

During the course of the first half of this financial year the Group completed the disposal of its Gifts division to Interflora British Unit and the disposal of GBS, GCO and L2 to a subsidiary of MBL Group PLC.

As outlined in note 13, the Group sold its Gardening Direct brand to Jersey Choice Ltd on 6 July 2012.

The Group had originally intended to continue to operate its Growing and Live Dispatch Business (GLD) from its property at Retreat Farm however, as outlined in note 13, it is in discussions regarding entering into a lease agreement for the greenhouses and dispatch centre at Retreat Farm. As a result the GLD business was discontinued on 31 July 2012.

Continuing operations

Following the completion of all of the disposals outlined in the section above and the closure of the GLD business the Group's focus now remains its freehold Retreat Farm site in Jersey.

The continuing operations relate to rental income from the lease of a glasshouse. As discussed above, the Group is in discussions to enter into a lease agreement for the greenhouses and dispatch centre previously used by the GLD business.

The Group's overheads have been reduced significantly in the first half of the year and will reduce further as a result of the closure of the Jersey GLD business. The operating costs have been reduced to a level that the Group can support until such time as a sale of Retreat Farm can be completed.

Loss for the period

The Group's loss for the period relating to continuing operations was £2.2m (26 weeks to 1.07.11: £2.0m). The profit from discontinued businesses was £1.1m (2011: £0.1m) giving a total loss attributable to the Group of £1.1m (26 weeks to 1.07.11: £1.7m). Profit from discontinued operations included a gain on the disposal of businesses of £0.7m, net of disposal costs.

Results for the first half of 2012

A summary of the key financial results is set out in the table below.

Reportable segment (loss)/profit is (loss)/profit before interest, tax and impairment of goodwill and intangible assets and other one-off charges. This is reconciled to the consolidated income statement in note 4.1.

Financial position

The Group's balance sheet as at 29 June 2012 can be summarised as set out in the table below:

Capital structure

The Group has no net bank debt (01 July 2011: £1.3m). At the present time, the Group retains clearing facilities with its bank along with an overdraft facility of £0.25m.

Post balance sheet events

After the interim period the following events occurred:

·; On 6 July 2012 the Group disposed of the assets of the Gardening Direct retail business to Jersey Choice Marketing Limited for a gross consideration of £2.833m of which £2.208m was received in cash upon completion. Payment of the remaining £0.625m will be made in cash on 30 April 2013.

·; On 31 July 2012 the Group closed its Growing and Live Dispatch Business ("GLD"). The closure resulted in the redundancy of sixteen Jersey-based staff.

·; The Company is in advanced negotiations with Jersey Choice Limited in connection with the proposed lease of the greenhouses and dispatch centre at its Retreat Farm property and anticipates that a lease will be concluded in the near future. The rental income is not expected to exceed £50,000 per annum.

·; On 20 July 2012 the Group repaid £0.25m to Palatine. This has reduced their loan to £0.75m.

Principal risks and uncertainties

The group is subject to the following material uncertainties:

·; Currently the group has modest banking facilities upon which it can call. In the event of a significant issue arising for which the Group is required to access substantial liquid funds in excess of its overdraft facility, it may not be possible to obtain additional funds as and when required.

·; The Group had entered into an agreement with Palatine to defer repayment of its £1m loan until the earlier of the disposal of GD or 31 December 2012. Following the disposal of GD, the Group repaid £0.25m of this loan, however under the terms of the agreement the balance of £0.75m is due to be repaid on 31 December 2012. If the Group does not sell Retreat Farm before this date, the deferred payment will have to be renegotiated.

·; As discussed in the Chairman's statement, the Group has had preliminary discussions about bringing in other business into the company, reviewing options for the future use of Retreat Farm and refinancing the Palatine debt. There can be no certainty that any of these discussions and reviews may come to fruition and it may be that the Board will conclude that the best way of achieving value for shareholders is by an orderly disposal of Retreat Farm.

Going concern basis

The Group continues to meet its day to day working capital requirements through its cash reserves, on-going cash flows along with an overdraft facility. The Directors have prepared detailed cash flow forecasts to support the decision to prepare the financial statements on a going concern basis.

The operating costs have been reduced to a level that the Group can support until such time as a sale of Retreat Farm can be completed.

In the event of the Group being unable to complete the disposal of Retreat Farm before 31 December 2012 the Directors believe that an agreement with Palatine can be reached to defer payment of the £0.75m they are due beyond the 31 December 2012 deadline.

The Group's forecast and projections, taking account of the uncertainties described above, show that the Group has a reasonable expectation of maintaining sufficient working capital to enable the Group to meet its liabilities as they fall due for the foreseeable future, being a period of not less than 12 months from the date of approval of this report.

Thus the directors continue to adopt the going concern basis of accounting in preparing the interim financial statements

Consolidated income statement

26 weeks ended 29 June 2012

Consolidated statement of comprehensive income

26 weeks ended 29 June 2012

Consolidated balance sheet

As at 29 June 2012

Consolidated statement of changes in equity

26 weeks ended 29th June 2012

Consolidated cash flow statement

26 weeks ended 29 June 2012

Notes to the financial statements

1 Accounting policies

1.1 Reporting entity

These Financial Statements are the unaudited Consolidated Interim Financial Statements (hereafter "the Interim Financial Statements") of Flying Brands Limited, a company registered in Jersey, and its subsidiaries (hereafter "the Group") for the 26 weeks ended 29 June 2012.

These Interim Financial Statements have been prepared under IFRS applying the accounting policies published in the Group's IFRS Financial Statements for the 52 weeks ended 30 December 2011, published on 27 April 2012.

1.2 Basis of preparation

The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements including in this Interim Report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.

These Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements for the 52 weeks ended 30 December 2011 (hereafter "the Annual Report and Accounts"), as they provide an update of previously reported information. They were approved for issue by the Board of Directors on 27 April 2012.

The comparative figures for the 52 weeks ended 30 December 2011 are not the Company's statutory accounts for the financial year. These accounts have been reported on by the Company's auditors and delivered to both the UK Financial Services Authority and the Jersey Financial Services Commission. The report did not contain a statement under section 498(2) or (3) for the Companies Act 2006 however, did contain a modified opinion with an emphasis of matter over going concern.

1.3 Significant accounting policies

The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements.

1.4 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions which any of the group's other components. An operating segment's operating results, for which discrete financial information is available, is reviewed regularly by the Group's Board to make decisions about resources to be allocated to the segment and assess its performance.

Segment results that are reported to the Group Board include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly one-off charges, interest and income tax assets and liabilities.

1.5 Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the Interim Financial Statements.

4 Segmental analysis

During the period ended 30 December 2011 the Directors had taken the decision to market for sale all the brands owned by the Group. This included the reportable divisions of Garden, Gifts and Entertainment. The Gifts and Entertainment divisions were disposed of on 30 April 2012 along with the GBS and GCO brands within the Garden division. The remaining GD brand in the Garden division was disposed of in early July 2012.

The four reportable segments, as described below, are the Group's strategic business units. These business units offered different products and services and were managed separately because they required different business strategies.

For each strategic business unit the Group's Board continues to review high level internal management reports on a monthly basis. The following summary describes the operations in each of the Group's reportable segments:

The Group reported on Greetings Direct and Dealtastic separately as these had been abandoned or discontinued during previous periods. The Group has, for the first time, reported Rental Income separately. In previous years the Rental Income was included within the Gifts division.

The accounting policies of the reportable segments are the same as described in note 1. Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before interest and tax, as included in the internal management reports that are reviewed by the Group's Board.

Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these sectors. Inter-segment pricing is determined on an arm's length basis.

4.1 Segmentation by primary divisions

Segment results

4 Segmental analysis…(continued)

5 Taxation

The interim tax charge has been estimated based on a full year forecast tax rate of nil% for underlying tax (2011: 0%).

6 Dividends

No interim dividend (2011: nil) is proposed due to the performance of the Group in the first half of 2012.

7 Earnings per share

Basic

Basic earnings per share is calculated by dividing the (loss)/profit attributable to the equity holders of the Company by the weighted average number of Ordinary shares in issue during the period, excluding Ordinary shares purchased by the Company and held as treasury shares.

7 Earnings per share…(continued)

Diluted

Diluted earnings per share are calculated by adjusting the weighted average number of Ordinary shares outstanding to assume conversion of all dilutive potential Ordinary shares. The Company has one category of dilutive potential Ordinary shares: LTIP awards.

The calculation is performed for the LTIP awards to determine the number of Ordinary shares that could have been acquired at fair value (determined as the average market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share awards. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share awards.

For the purposes of calculating diluted earnings per share the LTIP share awards have been assumed to be non-dilutive as the terms of the LTIP are not likely to be satisfied in the foreseeable future.

8 Related party

All material related third party transactions were consistent with those disclosed in the 2011 Annual Report and Accounts.

9 Results of all discontinued operations

On 21 February 2012 the Group entered into a sale agreement to dispose of its Gifts division to Interflora British Unit. This disposal competed on 30 April 2012 (note 10).

On 30 March 2012 the Group entered into a sale agreement to dispose of GBS, GCO and L2 to The Garden and Home Trading Company Limited (a subsidiary of MBL Group PLC) and certain intellectual property of GCO to Williams Commerce Limited. The disposal was completed on 30 April 2012 (note 11).

On 6 July 2012 the Group completed the disposal of the remaining GD brand. The GLD business, which the Group had intended to retain at 30 December 2011, was closed on 31 July 2012. As a result of this closure this business has been classified as discontinued in the Interim Financial Statements.

The continuing operations relate to the lease of part of the Retreat Farm site.

The results of operations in these discontinued brands are as follows:

10 Disposal of the trade and assets of the Gifts Division

As referred to in note 9, on 30 April 2012 the Group sold the trade and assets of the Gifts division to Interflora British Unit for a total cash consideration of £2,400,000.

The division was shown as discontinued in the 2011 Annual Report and Accounts and its assets classified as held for sale.

Results of operations from the discontinued operations of the Gifts division

Cash flow from discontinued operations of the Gifts division

Effect of disposal on the financial position of the Group was as follows: