Interim Results
Zest Group PLC
28 June 2007
28 June 2007
Zest Group plc ('Zest' or 'the Group')
Interim Report
for the period ended 31 March 2007
Zest Group plc (AIM:ZEST), the independent music production company, record
label and music publisher announces its interim results for the six month period
ended 31 March 2007.
Chairman's Statement
I am pleased to present the results of the Group for the six months ended 31
March 2007.
During the period the Group had turnover of £1,057,000 (2006: £nil) and a loss
before taxation of £491,000m (2006: loss £204,000). These results include a six
month contribution from Greensleeves Records Limited ('Greensleeves'). There
was a loss per share of 0.28p (2006: loss per share 0.25p)
Greensleeves, the international reggae record label and music publisher which
Zest acquired at the end of March 2006, released 11 albums during the six month
period from 1 October 2006 to 31 March 2007, this was against a physical goods
market which has continued to experience difficult trading conditions as has
been widely publicised.
The work of exploiting the existing catalogue and expanding the distribution
network in both non-digital and digital formats at Greensleeves has continued
throughout the period In October 2006, the Group successfully secured the first
ever global agreement for the digital distribution of the entire Greensleeves
catalogue with The Orchard, the world's leading digital distributor for
independent labels. Further to this the Group concluded a number of new physical
goods distribution and licensing deals with distributors in a number of new
markets for the Greensleeves label, including Australia, New Zealand, Brazil,
Argentina, Singapore, South Africa, Thailand and Vietnam. Further territories
will be added in the coming months.
Further output of physical product from Greensleeves existing catalogue is
planned for release from existing material during the current calendar year in
addition to extensive promotion of our albums in digital format through The
Orchard.
As part of Greensleeves 30th Anniversary there will be a 'Best of Greensleeves'
two volume CD and digital format global release with strong marketing and
promotion in several major territories including the UK, USA, Japan, France and
Germany. Greensleeves is scheduled to release a further 26 albums during the
second half of the year.
Tara Chinn's album is now completed and entitled 'Night Racing.' At the time of
writing the artwork is being finalised and the Group's plans are to launch the
album in Asia build the story, and then promote the album in Europe and the USA.
Nasio Fontaine's records are being released through Greensleeves and a
compilation album, 'Rise Up' was released on 25th June. This album features
tracks from Nasio's four albums of which three albums have been unavailable
globally for some years.
Settlement in relation to Warranties
On 31 March 2006 the Company completed the acquisition of Greensleeves for a
consideration of £3.25 million comprising a cash payment of £3,000,000 and the
issue of 8,333,334 Ordinary Shares. On 19 June 2007, Zest announced that it had
reached a settlement with the vendors of Greensleeves Records Limited and
Greensleeves Publishing Limited in relation to the breach of certain specified
warranties given by the vendors at the time of the acquisition of Greensleeves.
The settlement comprises a payment of £433,244, plus a sum currently being
determined by an audit regarding certain record royalties. The Directors of Zest
expect this amount to be no more than £30,000.
Unsecured loan facility
The Company has received unsecured funding amounting to £500,000 and is in the
process of negotiating the formalisation of this facility into a convertible
loan agreement.
Aborted Acquisition Project
Throughout the period, the Company carried-out certain due diligence work on a
potential acquisition which the Directors believed would be entirely in line
with Zest's strategy of acquiring music and music based assets. Unfortunately
the proposed acquisition did not proceed and the Company incurred certain costs
which will fall into the second half of the current financial year.
Outlook
Zest continues to look for potential acquisition opportunities and will report
any progress to shareholders in due course.
Richard Griffiths
Chairman
27 June 2007
Zest Group plc
Profit and loss account
for the period ended 31 March 2007
(As restated) (As restated)
Six month Six month Year
period to period to to
31 March 31 March 30 September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Note
Turnover 1,057 - 1,411
Cost of sales (585) - (828)
Gross profit 472 - 583
Amortisation of goodwill (102) - (113)
Other administrative expenses (792) (245) (1,192)
Total administrative expenses (894) (245) (1,305)
Operating loss (422) (245) (722)
Net interest (69) 4 (76)
Loss on ordinary activities before tax (491) (241) (798)
Tax on loss on ordinary activities - - 22
Retained loss 3 / 4 (491) (241) (776)
Loss per share (pence) 2 (0.28) (0.29) (0.61)
Zest Group plc
Balance sheet
As at 31 March 2007
(As restated) (As restated)
31 March 31 March 30 September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Note
Fixed assets
Intangible assets 3,497 3,659 3,599
Tangible assets 699 675 694
4,196 4,334 4,293
Current assets
Stocks of finished goods and goods for 598 377 422
resale
Debtors 2,177 2,098 2,097
Cash at bank and in hand 183 1,148 55
Total current assets 2,958 3,623 2,574
Creditors: amounts falling due within one (3,190) (2,519) (2,294)
year
Net current (liabilities)/assets (232) 1,104 280
Total assets less current liabilities 3,964 5,438 4,573
Creditors: amounts falling due after more than (1,454) (1,962) (1,602)
one year
Net assets 2,510 3,476 2,971
Capital and reserves
Called up share capital 4 434 434 434
Share premium account 4 3,598 3,598 3,598
Share based payment reserve 4 97 37 67
Profit and loss account 4 (1,619) (593) (1,128)
Equity shareholders' funds 3 2,510 3,476 2,971
Zest Group plc
Cash flow statement
for the period ended 31 March 2007
Six month Six month Year
period to period to to
31 March 31 March 30 September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Note £000 £000 £000
Net cash inflow/(outflow) from operating 5 353 (341) (834)
activities
Returns on investments and servicing of finance
Interest paid (70) - (83)
Interest received 1 4 7
(69) 4 (76)
Capital expenditure and financial
investment
Payments to acquire tangible fixed assets (8) (672) (694)
(8) (672) (694)
Acquisitions and disposals
Purchase of subsidiary undertaking - (3,088) (3,478)
Cash acquired with subsidiary undertaking - 273 273
- (2,815) (3,205)
Net cash inflow/(outflow) before 276 (3,824) (4,809)
financing
Financing
Issue of shares - 2,500 2,500
Share issue costs - (16) (16)
New long term loans - 1,962 1,854
Repayment of long term loans (148) - -
(148) 4,446 4,338
Increase/ (decrease) in cash 6 128 622 (471)
Notes to the Interim Report
for the period ended 31 March 2007
1. Basis of preparation
The interim announcement has been prepared on the basis of accounting
policies consistent with those used in the annual report for the year ended
30 September 2006 except that the Company has adopted for the first time,
FRS 20 'share based payment'. The results for the period ended 31 March
2006 and the year ended 30 September 2006 have been restated to make
provisions for share based payments of £37,000 and £67,000 respectively
with the corresponding entry being to a share based payment reserve.
The interim report has been neither audited nor reviewed by the Group's
auditors and does not constitute statutory accounts within the meaning
of Section 240 of the Companies Act 1985.
2. Loss per share
The loss per share is calculated on the loss on ordinary activities
after taxation of £491,000 (period ended 31 March 2006: £241,000, year
ended 30 September 2006: £776,000) and on the weighted average number of
ordinary shares in issue during the period of 173,619,050 (period ended
31 March 2006: 81,952,382, year ended 30 September 2006: 127,911,287).
The impact of share options at 31 March 2007, 31 March 2006 and 30
September 2006 is anti-dilutive.
3. Reconciliation of movement in equity shareholders' funds
(As restated) (As restated)
Six month Six month Year
period to period to to
31 March 31 March 30 September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Total recognised loss for the period (491) (241) (776)
Share based payment 30 37 67
Issue of shares (net of issue costs) - 2,734 2,734
Net movement in equity shareholders' (461) 2,530 2,025
funds
Equity shareholders' funds at start 2,971 946 946
of period
Equity shareholders' funds at end of 2,510 3,476 2,971
period
Notes to the Interim Report (continued)
for the period ended 31 March 2007
4. Share capital and reserves
Share based
payment Profit and loss
Share capital Share premium reserve account
£000 £000 £000 £000
At 1 October 2005 (Audited) 205 1,093 - (352)
Loss for the period - - - (776)
Share based payment - - 67 -
Share placing(net of issue costs) 229 2,505 - -
At 30 September 2006 (Audited-as 434 3,598 67 (1,128)
restated)
Loss for the period - - - (491)
Share based payment - - 30 -
At 31 March 2006 Unaudited 434 3,598 97 (1,619)
Share options
The fair value of options granted was determined using the Black-Scholes
valuation model. There are two different tranches of options granted.
Significant inputs into the outstanding share options calculations are as
follows:
Date of Date first exercisable
original grant
Grant Market price At 31 March 2007
price at issue date Number Fair value
07 March 2005 After 07 March 2008 3.00p 3.00p 5,100,000 1.92p
06 March 2006 After 06 March 2009 3.25p 3.25p 3,825,000 2.08p
• 100% volatility based on expected share price
• a risk free interest rate of 4.50% to 4.75%.
In total £30,000 of share based expense has been included in the profit and
loss account in the period ended 31 March 2007 (period ended 31 March 2006:
£37,000, year ended 30 September 2006: £67,000).
Notes to the Interim Report (continued)
for the period ended 31 March 2007
5. Reconciliation of operating loss to cash flows from operating activities
(As restated) (As restated)
Six month Six month Year
period to period to to
31 March 31 March 30 September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Operating loss (422) (245) (722)
Depreciation 3 - 12
Amortisation 102 20 113
Movement in stocks (176) - (64)
Movement in debtors (80) (103) (562)
Movement in creditors 896 (50) 322
Share based payment 30 37 67
Net cash inflow / (outflow) from 353 (341) (834)
operating activities
6. Reconciliation of net cash flow to movement in net cash / (debt)
(As restated) (As restated)
Six month Six month Year
period to period to to
31 March 31 March 30 September
2007 2006 2006
(Unaudited) (Unaudited) (Unaudited)
£000 £000 £000
Increase / (decrease) in cash 128 622 (471)
Cash flow from increase/ (decrease) in debt 148 (1,962) (1,854)
Change in net cash from cash flows 276 (1,340) (2,325)
Opening net (debt) / cash (1,799) 526 526
Closing net debt (1,523) (814) (1,799)
7. Publication of non-statutory accounts
The financial information set out in this Interim Report does not
constitute statutory accounts as defined in section 240 of the Companies
Act 1985. The figures for the year ended 30 September 2006 have been
extracted from the statutory financial statements. The auditors' report on
those financial statements was unqualified and did not contain a statement
under section 237(2) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 55 minutes ago Softcat
- 1 hour ago Rathbones Group
- 1 hour ago Coral Products
- 1 hour ago Burberry Group
- 2 hours ago Primary Health Properties