Final Results

RNS Number : 4685W

Zest Group PLC

19 November 2010

 



Zest Group plc

Final Results

for the twelve months ended 30 September 2010

Chairman's Statement

I present the results of the Group for the year ended 30 September 2010. 

Zest Group Plc ("Zest" or the "Company") announced on 12 November 2010 that it was proposing to change its name and adopt a new Investing Policy ("Proposed Investing Policy"). A Circular to Shareholders setting out details of a proposed change in its Investing Policy and proposed Name Change was sent to all company shareholders.

The General Meeting ("GM") is to be held on 29 November 2010 to adopt the Proposed Investing Policy, as set out below, and change the Company's name to Rare Earth Minerals Plc.

Background

The Company was formed to build a music business by acquiring new artists together with their music publishing rights and acquiring recording and publishing companies. The Company has made progress in developing its business objectives as set out in its Admission Document. However, in the six months to 31 March 2010 the Company reported a loss before taxation of £194,000 and further reported that it was reliant on external funding. The Directors have therefore come to the conclusion that whilst Zest's existing business may be able to deliver some value (and will be retained) it does not form the basis of a sustainable business for a publicly traded company. Accordingly, the Directors believe that it is in the Company's interests to adopt a new strategy for the development of the Company as an investing company and to take advantage of opportunities outside of the music industry and also draw on the experience and success of Mr Lenigas in the natural resources sector as a means of establishing greater shareholder value, further details of which are set out below.

As an investing company, Zest will be required to make an acquisition or acquisitions which constitute a reverse takeover under the AIM Rules or otherwise implement its Proposed Investing Policy on or before the date falling twelve months from the adoption of the Proposed Investing Policy, failing which, the Company's Ordinary Shares would then be suspended from trading on AIM. In the event the Company's Ordinary Shares are so suspended and the Company fails to obtain Shareholders' consent to renew such policy, the admission to trading on AIM of the Ordinary Shares would be cancelled six months from the date of suspension and the Directors will convene a general meeting of the Shareholders to consider whether to continue seeking investment opportunities or to wind up the Company and distribute any surplus cash back to Shareholders. In making the assessment of whether or not an investing company has substantially implemented its investing policy, this is normally considered to mean that the investing company has invested a substantial portion (usually at least in excess of 50 per cent.) of all funds available to it , including funds available through agreed debt facilities, in accordance with its investing policy.

Proposed Investing Policy

The Company's proposed change in strategy and Proposed Investing Policy, which is subject to shareholder approval, is to acquire a diverse portfolio of direct and indirect interests in exploration and producing Rare Earth Minerals and/or Metals projects and assets. In light of the nature of the assets and projects which will be the focus of the Proposed Investing Policy, the Company will consider investment opportunities anywhere in the world.

The Directors have considerable experience investing, both in structuring and executing deals and in raising funds. Further details of the Directors' expertise are set out below. The Directors will use this experience to identify and investigate investment opportunities, and to negotiate acquisitions. Wherever necessary the Company will engage suitably qualified technical personnel to carry out specialist due diligence prior to making an acquisition or an investment. For the acquisitions which they expect the Company to make, the Directors may adopt earn-out structures, with specific performance targets being set for the sellers of the businesses acquired, and with suitable metrics applied.

The Company may invest by way of outright acquisition or by the acquisition of assets, including the intellectual property, of a relevant business, partnerships or joint venture arrangements. Such investments may result in the Company acquiring the whole or part of a company or project (which in the case of an investment in a company may be private or listed on a stock exchange, and which may be pre-revenue), and such investments may constitute a minority stake in the company or project in question. The Company's investments may take the form of equity, joint venture, debt, convertible instruments, licence rights, or other financial instruments as the Directors deem appropriate.

The Company may be both an active and a passive investor depending on the nature of the individual investments in its portfolio. Although the Company intends to be a long-term investor, the Directors will place no minimum or maximum limit on the length of time that any investment may be held.

There is no limit on the number of projects into which the Company may invest, nor the proportion of the Company's gross assets that any investment may represent at any time and the Company will consider possible opportunities anywhere in the world.

The Directors may offer new Ordinary Shares by way of consideration as well as cash, thereby helping to preserve the Company's cash for working capital and as a reserve against unforeseen contingencies including by way of example, and without limit, delays in collecting accounts receivable, unexpected changes in the economic environment and unforeseen operational problems. The Company may in appropriate circumstances, issue debt securities or otherwise borrow money to complete an investment. There are no borrowing limits in the Articles. The Directors do not intend to acquire any cross-holdings in other corporate entities that have an interest in the Ordinary Shares.

There are no restrictions in the type of investment that the Company might make nor on the type of opportunity that may be considered other than set out above.

As the Ordinary Shares are traded on AIM this provides a facility for Shareholders to realise their investment in the Company. The attention of Shareholders is drawn to "Risk Factors" set out below. In addition, the Directors may consider from time to time other means of facilitating returns to Shareholders including dividends, share repurchases, demergers, and schemes of arrangements or liquidation.

The Company will provide an update on its investing activities at the same time that it publishes its audited annual results for the year ending 30 September 2011 and as otherwise required by the AIM Rules. The Company has no current plans to publish any regular estimate of net asset value or updates on the investments.

Name Change

In accordance with article 104 of the Articles, the Directors have passed a resolution to change the name of the Company to Rare Earth Minerals Plc conditional upon the passing of the Resolution by the Shareholders to adopt the Proposed Investing Policy.

Subject to the change of name of the Company becoming effective, the new website address of the Company will be www.rareearthmineralsplc.com.

Risk Factors

Any investment by the Company as part of the Proposed Investing Policy will carry a high degree of risk. These risks and uncertainties are not the only ones facing the Company and additional risks and uncertainties not presently known or which are currently deemed immaterial may also have a material adverse effect on the Company's business, results of operations or financial condition.

If any or a combination of the risks materialise, the Company's business, financial condition, operational performance and share price could be materially and adversely affected to the detriment of the Company and the Shareholders.

GM Business

The business to be considered at the GM is as follows:

Adoption of the Proposed Investing Policy - to be proposed as an Ordinary Resolution

We are asking Shareholders to approve and adopt the Proposed Investing Policy. In particular, the Company is seeking the authority of Shareholders to acquire direct and indirect interests in exploration, development and producing Rare Earth Minerals and/or Metals projects and assets. In light of the nature of the assets and projects which will be the focus of the Proposed Investing Policy the Company will consider investment opportunities anywhere in the world. The intention is to acquire a widely distributed mix of Rare Earth Minerals and Metals development and producing assets.

If the Resolution is passed and the Proposed Investing Policy is adopted, the name of the Company will change to Rare Earth Minerals Plc.

FINANCIAL RESULTS

The Group's loss for the year is £284,000 (2009: £283,000).

OUTLOOK

The Board considers that the Resolution for the adoption of the Proposed Investing Policy is in the best interests of the Company and its Shareholders as a whole. The Board will be voting in favour of the Resolution and they unanimously recommend that Shareholders should vote in favour of it as well.

The Board acknowledges this exciting period for the Company as it proceeds to change its investment strategy this year and commence evaluating new investment opportunities as they arise.

The Directors would like to take this opportunity to thank our shareholders for their continued support.

Richard Griffiths

Executive Chairman
19 November 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
			2010	2009
	Note		£'000	£'000
Administrative expenses
- (impairment) / reversal of impairment of       advance payments to artists			(1)	60
- other administrative expenses			(283)	(347)
Total administrative expenses			(284)	(287)
Loss from operations			(284)	(287)
Finance income			-	4
Loss before taxation			(284)	(283)
Taxation	2		-	-
Loss for the year from continuing activities			(284)	(283)
Loss after taxation and loss attributable to the equity holders of the company			(284)	(283)
Other  comprehensive income			-	-
Total comprehensive expenditure for the period			(284)	(283)
Loss per ordinary share (pence)	3		(0.06)p	(0.2)p
Basic and diluted

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY

	Share capital	Share premium	Share based payment reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000
At 1 October 2008	434	3,598	166	(4,059)	139
Share based payments	-	-	11	-	11
Transactions with owners	-	-	11	-	11
Loss for the year	-	-	-	(283)	(283)
Total comprehensive expenditure for the year	-	-	-	(283)	(283)
At 30 September 2009	434	3,598	177	(4,342)	(133)
Share based payments	-	-	38	-	38
Issue of share capital	30	270	-	-	300
Transactions with owners	30	270	38	-	338
Loss for the year	-	-	-	(284)	(284)
Total comprehensive expenditure for the year	-	-	-	(284)	(284)
At 30 September 2010	464	3,868	215	(4,626)	(79)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
			2010	2009
			£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment			-	1
			-	1
Current assets
Trade and other receivables			17	12
Cash and cash equivalents			306	5
Total current assets			323	17
Total assets			323	18
LIABILITIES
Current liabilities
Trade and other payables			402	151
Total liabilities			402	151
EQUITY
Share capital			464	434
Share premium			3,868	3,598
Share based payment reserve			215	177
Retained earnings			(4,626)	(4,342)
Total capital deficiency attributable to equity holders of the Company			(79)	(133)
Total equity and liabilities			323	18

CONSOLIDATED CASH FLOW STATEMENT

			2010	2009
			£'000	£'000
Cash flows from operating activities
Loss after taxation			(284)	(283)
Adjustments for:
Depreciation of property plant and equipment			1	-
Equity settled share based payments			38	11
Finance income			-	(4)
(Increase)/decrease in trade and other receivables			(5)	121
Increase in trade and other payables			251	94
Net cash inflow/(outflow) from operating activities from			1	(61)
Cash flows from investing activities
Finance income			-	4
Net cash inflow from investing activities			-	4
Cash flows from financing activities
Proceeds from issue of share capital			300	-
Net cash inflow from financing activities			300	-
Net change in cash and cash equivalents			301	(57)
Cash and cash equivalents at 1 October			5	62
Cash and cash equivalents at 30 September			306	5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1             bAsis of preparation

The Group financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).  The Company's shares are listed on the AIM market of the London Stock Exchange. 

The principal accounting policies of the Group, which have been applied consistently, are set out in the annual report and financial statements.

2             segmental information

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.

The chief operating decision maker reviews financial information for and makes decisions about the Group's performance as a whole, as the Group has not traded during the period.

Subject to further acquisitions the Group expects to further review its segmental information during the forthcoming financial year.

3         Taxation - continuing operations

There is no tax credit on the loss for the current or prior year.

The tax assessed for the year differs from the standard rate of corporation tax in the UK as follows:

				2010	2009
				£'000	£'000
Loss before tax	`			(284)	(283)
Loss multiplied by standard rate of corporation tax in the UK of 28% (2009: 28%)				(80)	(79)
Effect of:
Disallowable expenses				1	1
Deferred tax asset not recognised				79	78
Current tax charge for year				-	-

The Group has tax losses in the UK, subject to Her Majesty's Revenue and Customs approval, of approximately £3,763,000 (2009: £3,482,000) available for offset against future operating profits.  The Group has not recognised any deferred tax asset in respect of these losses, which would amount to £1,016,000 (2009: £974,000) due to there being insufficient certainty regarding its recovery.

4         LOSS PER SHARE

The calculation of the basic loss per share is calculated by dividing the consolidated loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

					2010	2009
					£'000	£'000
Loss attributable to equity holders of the Group
Continuing operations					(284)	(283)
Discontinued operations					-	-
					(284)	(283)

					2010	2009
					Number	Number
Weighted average number of shares for calculating loss per share					443,208,091	173,619,050

5             POST BALANCE SHEET EVENT

On 7 October 2010 the Company issued 420,000,000 ordinary shares of 0.01p each for £630,000 proceeds before share issue costs of £2,500, £300,000 of these proceeds had been received before 30 September 2010.

6             publication of non-statutory accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

The summarised consolidated statement of financial position at 30 September 2010 and the summarised consolidated statement of comprehensive income,  consolidated statement of changes in equity,  consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2010 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006.

The accounts for the year ended 30 September 2010 will be posted shortly to shareholders and laid before the company at the Annual General Meeting the date of which will be advised shortly. Copies will also be available from Zest Group plc's Registered Office: Princes House Suite 3B, 38 Jermyn Street, London, SW1Y 6DN and via the website (www.zestmusic.com) in accordance with AIM Rule 26.

Enquiries:

Zest Group Plc David Lenigas [phone] W.H. Ireland James Joyce [phone]

 

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