MUBL.L Regulatory News (MUBL)

9 DECEMBER 2010

MBL GROUP PLC

("MBL" or "THE GROUP")

Unaudited Interim Financial Statements for the Six Months Ended 30 September 2010

The Board of MBL Group plc, the UK distributor of home entertainment products, announces its interim results for the six months ended 30 September 2010.

Key Points

·; Sales decreased to £71.1m (2009: £78.2m)

·; Profit before tax decreased to £0.7m (2009: £3.2m)

·; EPS for the period decreased to 2.9p (2009: 13.2p)

·; Cash generation and debt free status has been maintained

·; Final dividend payment of 7.5p per share announced in July to be made in January 2011

·; Results have been affected by the impact of absorbing operating costs relating to the investment in new opportunities which will begin to generate sales in the next twelve months

·; Investment in U Explore completed in June 2010

·; Strategic Review announced previously is ongoing

·; Trading continues to be challenging and management have further revised their expectations for the year

·; Management have recognised and are committed to developing diversified income streams to form a solid basis for the future

Post Balance Sheet activities

·; eCommerce contract announced with Sainsbury's plc

·; Negotiations underway with Morrisons plc regarding the future commercial relationship following expiry of the existing contractual agreements in September 2011

·; Acquired the domain name www.bee.com to develop as a direct to consumer website

·; Trading update on the headline performance through to 31 December 2010 will be announced in late January 2011

Peter Cowgill, Chairman of MBL, commented:

"The Group's strategy has been to diversify its underlying businesses and strengthen future revenue streams to reduce the impact of the dependency on its major customer, Wm Morrisons plc, and to recognise that the growth areas for home entertainment products reside within online and digital sales.

"The Group has made significant investments in digital and online capability platforms and also in the underlying business infrastructure. The Group is now in a unique position to offer its business customers capability within the home entertainment sales markets of in-store, online and digital."

--ENDS-

Enquiries:

MBL Group plc Tel: 0161 767 1620

Peter Cowgill (Chairman)

Bishopsgate Communications Ltd Tel: 020 7562 3350

Gemma O'Hara

Siobhra Murphy

mbl@bishopsgatecommunications.com 

Brewin Dolphin Ltd (Nominated Advisor) Tel: 0845 213 4730

Mark Brady

Sean Wyndham-Quin

Chairman's Statement

The Group has experienced a difficult trading period resulting in a decrease in profit before tax for the six months ended 30 September 2010. During this period, revenue decreased to £71.1m, representing a £7.1m fall over the same period last year. Operating profit decreased by £2.5m to £0.7m and earnings per share has decreased to 2.9 pence from 13.2 pence.

The results have been affected by the impact of absorbing operating costs relating to the investment in new opportunities which will begin to generate sales in the next twelve months. This investment includes development of a 'white label' eCommerce platform and related operations, investment in an online capability for its wholesale division, the trial of a small number of retail stores and concessions and the continued investment in a digital capability.

Group Performance

A summary of the Group performance is shown in the table below:

Distribution

Sales at Music Box Leisure ("MBL") were affected during the period by shortfalls in expected sales to three main accounts. The home entertainment market in the UK has experienced a decline in year on year sales due to a lack of strength in key new release titles and the maturity of the current generation of games hardware. MBL's major customer implemented a change in the in-store proposition for home entertainment which increased the concentration of chart titles to the detriment of space historically available for back catalogue titles. As a consequence MBL has credited higher than anticipated returns from the customer which has affected revenue. The terms of the contract with this customer provide limits for returns and it is anticipated that the majority of the stock returned will revert to either the supplier or customer in due course. Gross margins fell by 0.4% to 10.1%, compared to the period to 30 September 2009. Gross margins are not expected to decline any further.

Wholesale

ESD Wholesale ("ESD") experienced a marginal increase in sales to £3.2m (2009: £3.1m) and Windsong International ("WI") performed well during the period with sales of £3.8m (2009: £0.9m) as it continued to build upon its export client base. Costs at both companies were well controlled.

Post year end, ESD has been renamed MBL Direct and will commence trading to business customers through an eCommerce platform.

Digital and eCommerce

Global Media Vault ("GMV") has continued to invest heavily in the development of its product offering and announced last month that it had launched a 'white label' physical and digital product website for Sainsbury's plc. This represents a milestone for the Group in the capabilities that it can offer to its customer base. As a consequence, the Group continued to support GMV's costs during the period and expect that the investment made to date will begin to generate revenue from November 2010.

Overheads

Administration costs have risen over the period as the Group supports the investment in new revenue streams. Additional costs were incurred during the period in project support for the implementation of a new IT system which went live in September 2010.

Investment in U Explore

The Group acquired a 15% stake in U Explore, a careers information and advice provider, for £2m in June 2010. The Board is confident that the investment will provide opportunities for the Group including the licensing of GMV's technology infrastructure and the ability to offer the Group's products to some of U Explore's customer base.

Group Strategy

The Group's strategy has been to diversify its underlying businesses and strengthen future revenue streams to reduce the impact of the dependency on its major customer, Wm Morrisons plc, and to recognise that the growth areas for home entertainment products reside within online and digital sales.

The Group has made significant investments in digital and online capability platforms and also in the underlying business infrastructure. The Group is now in a unique position to offer its business customers capability within the home entertainment sales markets of in-store, online and digital.

The two supply contracts with Morrisons are due to terminate in September 2011 and management has commenced positive discussions regarding future commercial relationships. The outcome of these discussions may not be finalised until March 2011.

The Group has also been focusing on the direct to consumer market and post year end has commenced a trial with a major retailer to install concessions within its retail estate. The trial is still ongoing and is an extension of a few standalone stores which the Group has opened under the brand 'Big'. Whilst the trials continue, and may or may not prove successful, the intention is for the Group's knowledge of the consumer market to develop.

Finally, the Group has recently acquired the domain name www.bee.com and recruited an experienced team to develop and operate a direct to consumer website. The website will initially sell home entertainment products but will gradually extend into other product lines. The website commenced low profile trading in December 2010.

Funding position

The Group seeks to manage cash effectively and at 30 September 2010 had a positive balance of £2.6m. Working capital has increased in line with expectations and the Group continues to operate comfortably through the use of its cash deposits and a sales invoice banking facility. MBL has experienced stable levels of cover from credit insurers but continues to have to pay in advance of terms when necessary to maintain continuity of supply. Despite this, MBL did not have any requirement to revise its sales finance facility during the period.

Dividends

The Group announced at the year end that it intends to pay a final dividend of 7.5 pence to shareholders which will be paid on 21 January 2011. In line with previous years, the Group does not intend to pay an interim dividend and the Board will consider the final dividend at the end of this financial year.

Trading Update

Following the Trading Update announced on 7 October 2010 overall revenue and profitability for the Group continues to perform behind forecasts. As a consequence, profitability for the year to 31 March 2011 is expected to be materially behind revised expectations.

Future outlook

The performance of the Group for the first half of the financial year has been disappointing and has been affected by both the dependency it currently has on one major customer and the toughening trading environment.

It is difficult to predict the outcome of the current contract negotiations with MBL's major customer but the Board remains optimistic that a satisfactory outcome can be achieved. Management also remain committed to the diversification strategy which is already underway.

The Group is currently in the most important trading period of the year and I look forward to issuing a trading update on the headline performance to 31 December 2010 at the end of January 2011.

Peter Cowgill

Chairman

9 December 2010 

Condensed Consolidated Statement of Total Comprehensive Income

For the period ended 30 September 2010

Condensed Consolidated Statement of Financial Position

As at 30 September 2010

Unaudited Condensed Consolidated Statement of Changes in Equity

For the period ended 30 September 2010

Condensed Consolidated Statement of Cash Flows

For the period ended 30 September 2010

Notes

1. Basis of preparation

MBL Group Plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. The half-year financial report for the 6 month period to 30 September 2010 represents that of the Company and its subsidiaries (together referred to as the 'Group').

This half-year financial report is an interim management report as required by DTR 4.2.3 of the Disclosure and Transparency Rules of the UK's Financial Services Authority and was authorised for issue by the Board of Directors on 9 December 2010.

With the exception of complying with the timetable requirement of two months to announce, the half-year financial report is prepared in accordance with the EU endorsed standard IAS 34 'Interim Financial Reporting'. The comparative figures for the year ended 31 March 2010 are not the Group's statutory accounts for that financial year. Those accounts have been reported on by the Group's Auditor and delivered to the Registrar of Companies. The Report of the Auditor was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 of the Companies Act 2006.

The information contained in the half-year financial report for the 6 month period to 30 September 2010 and 30 September 2009 is unaudited.

As required by the Disclosure and Transparency Rules of the UK's Financial Services Authority, the half-year financial report has been prepared by applying the same accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 March 2010.

The Group's policy is to maintain the ability to continue as a going concern, in order to provide returns to the shareholder and benefits to other stakeholders. Accordingly the going concern basis has been adopted in preparing these interim results.

The consolidated financial statements of the Group for the year ended 31 March 2010 are available upon request from the Company's registered office at MBL Group plc, Unit 9 Enterprise Court, Lancashire Enterprise Business Park, Centurion Way, Leyland, Lancashire, PR26 6TZ.

2. Unaudited segmental analysis

The four main operating segments are distribution, wholesale, eCommerce and Digital and Other. These are unchanged since the last report with the exception being the digital segment which has now been renamed eCommerce and Digital.

In all three periods one customer represented more than 10% of the Group's revenues. The revenue from this customer is disclosed within the Distribution segment and represented 82% of total Group revenues in the half year ended 30 September 2010 (2009: 78%; year ended 31 March 2010: 78%).

3. Income tax

The income tax charge has been estimated by the Group based on adjustments to tax payable in respect of previous years and the tax rate for the year ending 31 March 2011.

4. Earnings per share

The calculation of the basic earnings per share is based on the profit after taxation divided by the weighted average number of shares in issue, being 17,296,068 (period ended 30 September 2009: 17,162,735; year ended 31 March 2010: 17,207,520).

5. Related parties transactions and balances

Transactions and balances with related parties during the period are shown below. Transactions were undertaken in the ordinary course of business. Outstanding balances are unsecured and will be settled in cash.

During the period, Music Box Leisure Limited made purchases on normal commercial terms with Cabletower Limited, Media Sales Direct Limited and Sales Media Solutions Limited of £842,352 (2009: £725,933). At 30 September 2010, Music Box Leisure Limited owed these companies in aggregate £55,630 (2009: £783,895). James Allan, brother of Trevor Allan (Director of MBL Group plc), is a shareholder and director of Cabletower Limited, Media Sales Direct Limited and Sales Media Solutions Limited, and also a shareholder of MBL Group plc.

6. Director's responsibility statement

We confirm that to the best of our knowledge:

• With the exception of complying with the timetable requirements of two months to announce the half year financial report, the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;

• The interim management report includes a fair review of the information required by:

a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first 6 months of the financial year and their impact on the condensed set of financial statements; and a description of principal risks and uncertainties for the remaining 6 months of the year; and

b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 6 months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

On behalf of the Board

Lisa Clarke

9 December 2010