Feedback Regulatory News (FDBK)

7 November 2012

Feedback plc

("Feedback" or "the Company")

Final Results for the year ended 31 May 2012

Chairman's Statement

2012 was a difficult year for everyone at Feedback plc as tough market conditions further exposed the Group's long-term weaknesses.

The structure and costs of Feedback were those of a larger Group. Without sustained growth reversing the more than 40% decline in revenues over the past few years, the business was not sustainable.

The Group's strategy, since my appointment, had been for a sales led turnaround whilst investing in new products and pushing through measures to improve operational effectiveness, all the time working within the harsh constraints of the Group's working capital requirements.

Results

The financial year started well. Half-year results showed what looked like clear indications of a recovery. Turnover to November 2011 was up 13% with the Group running at breakeven on a like-for-like basis. The multi-year implementation of an expensive new ERP system was finally completed and immediately delivered on its long-anticipated promise of enabling faster order-to-ship times and real-time management of inventory. Two loss-making product ranges were eliminated, the operational structure was simplified somewhat to reduce cost, and we started Feedback Black Box (Black Box) as a new product incubator with a promising first customer.

The cost of restructuring the Group, of following through on a number of long-term investment decisions, the impact of margins being squeezed from customers and suppliers, and the simple demands of growth, all created an increased need for working capital that was forecast to be on-going. Funds were raised from new and existing shareholders, including every member of the Board, in October 2011.

Despite the encouraging start, results for the full year, including for Feedback Instruments Limited and Feedback Inc (Feedback Instruments) up to its disposal on 23 May 2012 and allowing for the effects of its sale, are extremely disappointing.

Turnover of £7.0 million was up 11.7% from £6.3 million in the previous year. Reported loss on all activities was £1.8 million (2011: loss of £831,000) reflecting operating losses of £414,000 (2011: loss of £831,000), loss of £802,000 (2011: nil) on the sale of Feedback Instruments, £293,000 (2011: nil) write-off of intercompany debt, and an impairment of £274,000 (2011: nil) relating to property. The loss after taxation was £1.82 million (2011: £862,000).

Revenue for Feedback Instruments up to the date of its disposal grew 8% to £4.9 million, up from £4.5 million in 2011, despite extremely low order volumes for most of the second half of the year. This growth was well below management's expectations with export sales particularly disappointing. Feedback Instruments had an operating profit of £311,000 (2011: £466,000 loss) due in part to the write-back of £260,000 (2011: nil) legacy stock provisions.

The financial challenge facing Feedback Instruments that led to its disposal was funding the working capital demands of the long lead-time between receipt of order and receipt of payment and the overhead needed to maintain the minimum level workforce during the months of lean trading.

For Feedback Data, revenues of £1.9 million represent a 12% growth on the £1.7 million performance in 2011. However, losses worsened to £294,000 (2011: £23,000) largely due to the cost of restructuring the sales team and the increased investment necessary to finish two product development projects started in prior years.

The increases in revenue in both operating companies occurred in the first half of the year.

As we moved into the second half of the year, all parts of the Group suffered poor levels of sales. Feedback Instruments in particular experienced several consecutive months of extremely weak order intake that fell well below management's even short-term forecasts.

The engine of the Group had long been Feedback Instruments' export sales. When these dried to a trickle, predominantly due to the lack of product investment in prior years, the prospect of a sales led recovery evaporated and the Board then determined that to turnaround the entire Group would be impossible.

After a thorough review in early 2012 the Board concluded that given its cash burn, its weakness in terms of the age of its existing products, and the length of time needed for any new products to be developed and marketed effectively in the education sector, returning Feedback Instruments to positive cash flow and profitability would take more time and cash resources than the Group possessed or had access to.

Accordingly, and with a heavy heart given its position as the foundation stone of the Group in 1958 and the presence still on the Board of one of the founders, the decision was taken to dispose of Feedback's education business. In a difficult and, due to the lack of viable offers received, in the end distressed transaction, Feedback Instruments was sold to a subsidiary of LD Didactic GmbH for a nominal consideration in respect of the shares and a repayment of £260,000 of the Group's indebtedness.

Losses in Feedback Data (Data) also increased in the year under review; the result of its own ageing product range, postponed projects, and further restructuring costs.

The Group undertook a series of actions to preserve and maximise value for shareholders. Data was restructured to reduce headcount; hardware development, production and certain customer support functions were outsourced. The Board has determined that the Group's headquarters in Crowborough, which long-standing shareholders will remember was sold in 2007 and bought back in 2008, is now surplus to requirements and is in the process of being sold.

Notwithstanding the challenges of the current economic environment, shareholders should be aware that the single factor most responsible for the decline in the Group's long-term performance is the lack of priority given, over many years, to new product development.

In the education sector, product development is generally accepted to be a long-term strategy. The Group's education customers are reluctant to consider new products until they are available on the market, and the sales cycle is upwards of two years due to the necessary time required to incorporate new equipment into curricular activities. However, even in this context, Feedback Instruments generating approximately 90% of revenues from products developed more than 10 years ago shows a clear picture of a company resting too long on past glories.

The pace of product development in the Group has been, in the eyes of our customers and when compared with our competitors, extremely disappointing. Feedback's development teams, working with the evolving demands of the market place and rapidly changing technologies, were left behind by the quicker cycle times of larger and faster manufacturers who have bigger development budgets.

None of this is to say that Feedback products are not excellent pieces of engineering. They are. Indeed, the Company has built a strong reputation for designing and building robust products that continue to provide value even after many years in the field.

Developing new products is always a risk-based activity. However, for too many years the operating companies failed to make enough wise choices - leaving decisions in the hands of engineers, and not listening to end users or feeling the pulse of the market - which left customers looking elsewhere for the innovation that would drive their own growth.

Given the time needed to develop new products for our established markets, Feedback Black Box Company (Black Box) was an attempt to leverage Feedback's engineering reputation and inject urgency and revenue into the Group with a completely outsourced business model. But with start-up revenues of only £186,000 (2011: nil) and losses of £128,000 (2011: nil), despite much promise, Black Box was closed as part of the cost cutting programme immediately after the sale of Feedback Instruments.

People

In October 2011, David Marks left the Company after giving over 30 years' service in all parts of the business. He joined the main Board in 2009 after spending time as Managing Director of Feedback Instruments Limited, and more latterly held the role of Group Operations Director.

We have recently also seen the departure, on health grounds, of David Barton. David worked tirelessly for the Company from his appointment as a non-executive director in 2007 until his withdrawal in October 2012.

I would like to thank the two Davids and all my other colleagues across the Group's operations for their commitment and hard work during what continues to be an extremely difficult year.

Outlook

After 54 years in operation, 2012 has been Feedback's annus horribilis and this has forced a complete re-evaluation of the business.

With the distressed sale of Feedback Instruments, Feedback is left with annual revenues of approximately £2 million. These revenues are predominantly derived from low-growth products which are sold into a competitive market. The cost base of the remaining business is difficult to bare and the potential for organic growth is limited. The Group's continued poor performance has resulted in it relying on its banking and other loan facilities and has meant a significant amount of management time has been focused on cash management.

In such a challenging environment the Board continue to consider all viable strategic opportunities to maximise value for shareholders, including the potential disposal of the remaining operating businesses.

In the meantime, the Group is seeking to minimise its cash burn from on-going operations.

Nick Shepheard

Chairman

Consolidated Statement of Comprehensive Income

for the year ended 31 May 2012

Consolidated Statement of Changes in Equity

for the year ended 31 May 2012

Consolidated Balance Sheet

at 31 May 2012

Consolidated Cash Flow Statement

for the year ended 31 May 2012

1. ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with those IFRS standards and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (October 2012). The accounting policies have been consistently applied to all the years presented.

These consolidated financial statements have been prepared under the historical cost convention.

During the period the Group disposed of its Feedback Instruments Limited and Feedback Inc subsidiaries and is in negotiations to dispose of its property (held by Brickshield Limited). For these reasons the results of these subsidiaries have been disclosed as discontinued.

The financial information set out above does not comprise the Company's statutory accounts for the periods ended 31 May 2012 or 31 May 2011. Statutory accounts for 31 May 2011 have been delivered to the Registrar of Companies and those for 31 May 2012 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was unqualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2012 or for 2011.

2. GOING CONCERN

As highlighted in the Chairman's statement, the cost base of the Group's remaining business is difficult to bare and the potential for organic growth is limited. The Group is reliant on its banking and other loan facilities and a significant amount of management time is focused on cash management. The Board continue to consider all viable strategic opportunities to maximise value for shareholders including the disposal of the remaining operating businesses. In the meantime, the Group is seeking to minimise its cash burn from on-going operations.

The current situation and outlook cast significant doubt on the Group's ability to continue as a going concern. Based on current plans however, the Directors consider that the Group is a going concern and have prepared the Group financial statements on a going concern basis. The financial statements therefore do not include any adjustments that would result if the Group was unable to continue as a going concern. In the event the Group ceased to be a going concern, the adjustments would include writing down the carrying value of assets, including intangible assets and inventories, to their recoverable amount and providing for any further liabilities that might arise.

3. SEGMENTAL REPORTING

The directors have determined the operating segments based on the management reports that are used to make strategic decisions. The Group's business is analysed below between the Feedback Instruments segment and the Data segment. The Feedback Instruments segment primarily relates to the former subsidiary companies Feedback Instruments Limited and Feedback Incorporated which were disposed of in the year. The Data segment relates to the subsidiary company Feedback Data Limited. Details of these companies are included in the Directors' Report.

On 23 May 2012 the Group disposed of its Feedback Instruments business. For this reason the results shown below disclose the results of the Feedback Instruments business for the period to 23 May 2012.

Reported segments' assets are reconciled to total assets as follows:

Reported segments' assets are reconciled to total assets as follows:

4. OTHER OPERATING EXPENSES

5. LOSS PER SHARE

Basic earnings per share is calculated by reference to the loss on ordinary activities after taxation of £1,819,000 (2011: £862,000) and on the weighted average of 123,679,889 (2011: 109,146,746) shares in issue.

6. PROPERTY, PLANT AND EQUIPMENT

7. INTANGIBLE ASSETS

8. INVENTORIES

9. OTHER PAYABLES

10. PUBLICATION OF ANNOUNCEMENT AND REPORT AND ACCOUNTS

A copy of this announcement will be available at the Company's registered office (Park Road, Crowborough, East Sussex TN6 2QR) and on its website - www.fbk.com.

This announcement is not being sent to shareholders. The Annual Report will be posted to shareholders shortly and will be made available on the website.

For further information contact: