MUBL.L Regulatory News (MUBL)

9 December 2011

MBL GROUP PLC

(AIM: MUBL)

("MBL" or "THE GROUP")

Unaudited Interim Financial Statements for the Six Months Ended 30 September 2011

The Board of MBL Group plc, the UK distributor of home entertainment products, announces its interim results for the six months ended 30 September 2011.

Key Points

·; Sales decreased to £15.7m (2010: £71.1m)

·; Loss before tax of £7.2m (2010: profit £0.7m)

·; Loss per share for the period of 43.9p (2010: profit 2.9p)

·; Total current assets of £9.3m (2010: £33.9m)

·; Settlement in principle agreed with Wm Morrisons plc regarding contract termination

·; Debt free status has been maintained

·; No dividend payment is proposed (2010: 7.5p per share)

·; Business downsizing continuing

Post Balance Sheet activities

·; Global Media Vault Limited and MBL Guernsey PCC Limited sold to Sainsbury's Supermarkets plc for £1m

A trading update on the headline performance up to 31 December 2011 will be announced in late January 2012.

Peter Cowgill, Chairman of MBL, commented:

"The Group has experienced a challenging six months in which it has been managing the repercussions of the sudden loss of 79% of its business. During this period, a substantial downsizing has occurred and post the period end two subsidiaries, Global Media Vault and MBL Guernsey PCC, have been sold and the activities of one subsidiary, Outnow Home Entertainment, have been discontinued.

The Board is committed to stabilising the business following the damaging events of earlier this year and we shall provide an update on headline performance in late January 2012."

--ENDS-

Enquiries:

MBL Group plc Tel: 0161 767 1620

Peter Cowgill, Non-Executive Chairman

Brewin Dolphin Limited Tel: 0845 213 4729

Mark Brady

Sean Wyndham-Quin

Bishopsgate Communications Ltd. Tel: 020 7562 3350

Deepali Schneider

Natalie Quinn

mbl@bishopsgatecommunications.com

Chairman's Statement

The Group has experienced an extremely challenging trading period following the loss of its major customer in April 2011. During this period, revenue decreased to £15.7m, representing a £55.4m fall over the same period last year. Group performance has been adversely affected by the sell through of excess stock through the Distribution, Wholesale and eCommerce divisions. Operating profit decreased by £7.9m to a loss of £7.2m and earnings per share has decreased to a loss of 43.9 pence from a profit of 2.9 pence.

Group Performance

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

Distribution

Music Box Leisure ("MBL"), has experienced a very difficult period. Following the announcement that Wm Morrisons plc had served six months notice to terminate its supply contract with MBL (which comprised 79% of Group turnover), major working capital issues were created mainly as a result of the loss of supplier confidence and the removal of credit insurance and bank support. This rendered the Company financially unable to support this contract during the notice period and management were obliged to negotiate an immediate withdrawal from the notice period in early April.

During the following six months, MBL substantially downsized its operations and attempted to unwind the working capital position relating to this customer. The suddenness of the withdrawal, however, left MBL in a position in which it was incurring the significant payroll and overhead costs which previously supported this customer. MBL managed a gradual reduction in overhead costs in line with the requirement to administer the ongoing stock returns relating to this contract combined thereafter with statutory employment notice periods. This has significantly impacted the financial results in the period. Following reductions in stock levels MBL has consolidated operations into a single property. At the date of termination, the Group held stock balances valued at £6.1m directly relating to this customer. Discussions regarding the transfer of this stock to the customer were unsuccessful. MBL has however reduced this stock balance to £0.9m through negotiated returns to suppliers and the sale of stock at a discount through its own wholesale, online and retail channels. The loss on sale relating to this stock has been £1.4m. An agreement to settle all outstanding matters relating to this customer has been reached in principle which will result in a £0.57m payment to MBL.

As previously announced we have down-scaled the remaining operations of MBL and continue to focus on servicing the customers who have remained with the Company.

Wholesale

MBL Direct ("MBLD"), a wholesaler to the independent retail sector, experienced a fall in sales to £2.5m (2010: £3.2m) and Windsong International ("WI"), an exporter of CDs and DVDs, performed well with an increase in sales to £5.4m (2010: £3.8m). The market in which MBLD operates continues to experience difficult trading conditions. Costs at both companies continue to be well controlled.

Digital and eCommerce

Global Media Vault ("GMV"), a digital and online distributor of home entertainment titles, experienced growth in sales to £0.9m (2010: £0.3m). The growth was attributable to its online distribution through MBL Guernsey PCC. As announced in the Preliminary Statement, a strategic decision to divest this business had been made and the business was sold in October 2011.

The Group's online capability through the Bee.com website generated sales of £0.3m (2010: £nil) and in the period has been used predominantly as a channel for the clearance of excess stock.

Outnow Home Entertainment ("Outnow"), an online DVD rental business, experienced a difficult trading period. Sales within the period were £0.3m. The business was acquired in February this year but unfortunately the Group's working capital challenges following the loss of its major contract in April meant that the financial support required to develop this company was not available. In November 2011, the Group announced that an insolvency process would commence relating specifically to Outnow.

Retail

During the period, retail sales increased to £0.5m (2010: £0.2m) and the existing stores were rebranded to Bee.com with a new retail proposition being introduced. A further three stores have opened during the period. Retail generated a loss whilst supporting the costs of new store openings and the change in proposition.

Overheads

Distribution costs have reduced in line with the loss of the Group's major customer. Administration costs have increased during the period due to the increase in the operations of GMV, Outnow and the retail stores and impairment charges of £0.7m have been recognised in relation to the sale of GMV.

Group Strategy

The Group has experienced a challenging six months in which it has been managing the repercussions of the sudden loss of 79% of its business. During this period, a substantial downsizing has occurred and post the period end two subsidiaries, Global Media Vault and MBL Guernsey PCC, have been sold and the activities of one subsidiary, Outnow Home Entertainment, have been discontinued. The downsizing is now fundamentally complete and the Group is focusing upon the ongoing business.

The Group's principal undertakings moving forward are the business to business operations of Windsong International, MBL Direct and servicing the remaining customers within Music Box Leisure and the direct to consumer operations of Bee.com retail and online. In the current circumstances the Board is taking a cautious view towards further expansion into retail and would, in any event, seek relatively short lease commitments.

The Board is committed to stabilising the business following the damaging events of earlier this year.

Funding position

The working capital of the Group has been significantly reduced during the period with stock balances reducing by £10.3m, debtors' balances by £11.7m and creditors' balances by £16.0m. The working capital release has supported the costs of the significant downsizing that has had to be managed throughout this period.

At 30 September 2011, the Group had a positive cash balance of £1.6m and remains without any third party financing. The Group remains in the position of securing the majority of its product supplies through the payment of cash in advance. It is considered, by the Directors, that the Group has sufficient working capital available to manage the business through this difficult year.

Dividends

The Group does not propose the payment of a dividend (2010: 7.5 pence per share).

Future outlook

The performance of the Group for the first half of the financial year has been challenging and the loss incurred has been consistent with management's expectations, given the unfortunate circumstances of the period.

The Group will provide an update on headline performance in late January 2012.

Peter Cowgill

Chairman

9 December 2011 

Condensed Consolidated Statement of Total Comprehensive Income

For the period ended 30 September 2011

Condensed Consolidated Statement of Financial Position

As at 30 September 2011

Unaudited Condensed Consolidated Statement of Changes in Equity

For the period ended 30 September 2011

Consolidated Statement of Cash Flows

For the period ended 30 September 2011

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 2011 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 2011.

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 2011 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) included an emphasis of matter relating to the assumption that the going concern basis was appropriate 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 2011 and 30 September 2010 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 2011.

The consolidated financial statements of the Group for the year ended 31 March 2011 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.

Going concern

The financial report has been prepared on a going concern basis, which the Directors believe to be appropriate for the following reasons.

As per the Chairman's statement, back in April 2011 the Group lost its major customer which accounted for 79% of the Group's revenue. Following this, the Group rationalised the business in order to mitigate as far as possible the effects of the contract loss. As part of the new business strategy the Group has implemented rationalisation measures to significantly reduce the Group's overhead costs.

The Group meets its working capital requirements through cash payments made in advance to suppliers following the loss of credit terms with a number of key suppliers. The Group had a cash balance of £1.6m as at 30 September 2011 and currently does not have a bank overdraft or loan facilities.

The Directors have prepared cash flow forecasts to 31 March 2013 taking into account the revised strategy for the Group. These forecasts show the Group to be cash positive throughout the next 15 months and make a number of assumptions around revenue and profitability of the remaining business activity.

2. Unaudited segmental analysis

Consolidated statement of comprehensive income for period ended 30 September 2011:

The five main operating segments are Distribution, Wholesale, eCommerce and Digital, Retail and Other.

Consolidated statement of comprehensive income for period ended 30 September 2010:

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

In the prior period and prior year comparatives 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 and 79% in the year ended 31 March 2011. In the current period there is a net sales credit in relation to the customer representing returns of product under the terms of the customer contract.

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 level of losses incurred in the period ending 30 September 2011. A deferred tax asset has not been recognised in the statements due to an uncertainty that the asset will crystallise at a later date.

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 2010: 17,296,068; year ended 31 March 2010: 17,296,068).

5. Provisions

During the period, provisions were created in relation to the ongoing restructuring of the Group's operations.

6. Related party 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 sales on normal commercial terms to Cabletower Limited for £19,076 (2010: £nil).

During the period, Music Box Leisure made purchases, on normal commercial terms, from Cabletower Limited and Media Sales Direct Limited of £304,981 (2010: £842,352).

At 30 September 2011, Music Box Leisure Limited owed these companies in aggregate £nil (2010: £55,630). James Allan, brother of Trevor Allan (Director of MBL Group plc), is a shareholder and director of Cabletower Limited and Media Sales Direct Limited, and also a shareholder of MBL Group plc.

7. 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 2011