Hey Simon,
just a guess:
If you select the "Geographic View" Tab in the Output Menu in MIKE 21, do you see some sort of "fishnet" on top of your model domain? If not, i guess that the coordinates of your area output do not fit your model domain. This might happen, if you "reuse" an old *.m21/*.m21fm-File and you change the model domain (e.g. the extent). The coordinates in the "Output specification" Tab do not change automatically and need to be changed to fit the new model domain.
Hope this helps!