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.


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