Interim Results
Zest Group PLC
29 June 2006
Zest Group plc
Interim Report
for the period ended 31 March 2006
London, 29 June 2006, Zest Group plc, the independent music production company,
record label and music publisher announces its interim results for the six month
period ended 31 March 2006.
Summary of the period
• Acquisition on 31 March 2006 of Greensleeves Records Limited
('Greensleeves') for £3.25m in cash and shares, an independent record label
and music publisher which specialises in reggae music.
• Greensleeves has a comprehensive reggae back catalogue from the 1980s
onwards. With a back catalogue of approximately 400 albums and 900 singles
on its label and is currently releasing between 15 and 20 new albums per
year and intends to continue its re-issue programme.
• Greensleeves has an established promotions office in New York to handle
the growing reggae market in the USA.
• At the time of the acquisition, Zest also raised new funds of £2.5 million
(gross) through a placing of 83,333,334 Ordinary Shares at 3p to be used in
part to finance the costs of the Greensleeves acquisition and associated
costs and provide some additional working capital
• The Group recorded a loss before and after taxation of £204,000 for the
six months ended 31 March 2006
• Update on artist rosta includes completion of the Nasio Fontaine album '
Universal Cry' and its June launch and chart success for Sean Paul where
Greensleeves publishing has interests in 8 songs on his hit album 'The
Trinity'
Commenting, Steve Weltman, Chief Executive of Zest Group plc, said:
'The key event during the period was the acquisition of Greensleeves on the last
day of the period which puts the Group in a strong position in the international
reggae market and we believe will enable us to move the Group into a profitable
position. We are in the process of reorganising the Greensleeves business and we
are continuing to look for potential acquisition targets.'
Enquiries: John Bick tel: 020 7451 9800
Chairman's Statement
I am pleased to present the results of the Company for the six month period to
31 March 2006.
During the period the Group incurred costs of £188,000 and the amortisation of
recording and publishing contracts amounted to £20,000. After accounting for
net interest receivable of £4,000, the Group recorded a loss before and after
taxation of £204,000.
On 31 March we completed the acquisition of Greensleeves Records Limited ('
Greensleeves') an established, independent record label and music publisher
which specialises in reggae music, for a consideration of £3.25 million
comprising a cash payment of £3.0 million and the issue of 8,333,334 Ordinary
Shares (valued at 3p per share). As a consequence of the acquisition, the Group
acquired a record product catalogue independently valued at £7.1 million. In
addition, Greensleeves acquired the property occupied by Greensleeves in the UK
for a consideration of £662,500.
Greensleeves is based in Isleworth, Middlesex, and has a promotions office in
New York. The company has an established presence in a number of the specialist
reggae markets throughout the world and, in particular, the UK, the USA, Japan,
France, Germany, Benelux, Canada and Scandinavia.
The acquisition of Greensleeves has made Zest one of the largest independent
reggae publishers and record labels in Europe and will enable the Group to
achieve profitability in the current year. Since the acquisition the Zest
management team has been working to maximise Greensleeves' growth potential
through the development of a number of business areas identified at the time of
Admission, as follows:
• Greensleeves owns a significant number of album masters, of which
approximately 10 per cent. have not been released in CD format. The company
intends to release the majority of these album masters in CD format as well
as making them available for electronic distribution;
• Greensleeves has a significant number of album and single masters
which have not been released as compilation albums and the Directors intend
to expand that area of the business;
• The Directors believe that there is a market for further mid-priced
albums, based on Greensleeves' existing catalogue, which it intends to
address;
• Currently Greensleeves produces a number of compilations on vinyl, a
lucrative area of the reggae and dance markets, and the Directors intend to
increase production of vinyl compilations;
• The Directors believe that Greensleeves' CDs can be manufactured at
lower cost than currently being achieved;
• During 2005, Greensleeves concluded a ring tones deal in Japan and the
Directors intend to pursue similar deals in other territories; and
• Greensleeves has concluded agreements with iTunes and Napster to
distribute catalogues electronically.
The management team has continued to make progress across a number of these
areas and the Board is confident of making further progress throughout the
year.
Zest Music and Zest Songs
During the period we concluded the recording of the new Nasio Fontaine album
'Universal Cry' for release on the Greensleeves label thereby maximizing its
commercial potential.
Tara Chin has been finalizing the recording and mixing of her debut album where
she has co-written all the songs with another Zest songwriter Tony Fennell.
Outlook
We are in the process of reorganising the Greensleeves business following its
acquisition in March and we will report to shareholders at the full year with
further progress in this area. We are encouraged by the progress of
Greensleeves' publishing, particularly its ongoing participation as a publisher
of various Sean Paul songs from his hit album 'The Trinity' on which
Greensleeves has interests in 8 songs. The album has spent 38 weeks on the
American Billboard 200 Album Chart peaking at number 7 and it has been certified
Platinum in the US for sales in excess of one million copies. New singles from
the album are also due for release in the USA and Europe.
I am pleased to say that we have completed a new distribution deal in the USA
with Ryko distribution which we believe will provide us with strong distribution
channels to all the major retail chains as well as the independent stores in
this territory.
Nasio Fontaine's new album 'Universal Cry' was released in the USA on 6 June and
UK, European and Far East releases will follow from late June through to August.
Early reaction from radio plays of the new songs has been encouraging and
Nasio commenced touring the USA in June and this continues through July with
European dates to follow.
Finally we are continuing to look for potential acquisition targets and will
report to shareholders on progress when it is appropriate to do so.
Richard Griffiths
Chairman
29 June 2006
Zest Group plc
Profit and loss account
for the period ended 31 March 2006
Six month Period from Period from
period incorporation incorporation
to to to
31 March 31 March 30 September
2006 2005 2005
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Note
Administrative expenses (208) (151) (355)
Operating loss (208) (151) (355)
Interest receivable and similar income 4 - 3
Loss on ordinary activities before and 3 / 4 (204) (151) (352)
after tax
Loss per share (pence) 2 (0.25) (0.46) (0.66)
Zest Group plc
Balance sheet
As at 31 March 2006
31 March 31 March 30 September
2006 2005 2005
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Note
Fixed assets
Licence agreements 117 154 137
Record product catalogues 3,542 - -
Tangible assets 675 - 3
4,334 154 140
Current assets
Stocks of finished goods and goods for 377 - -
resale
Prepaid royalties 453 153 302
Debtors 1,645 28 49
Cash at bank and in hand 6 1,148 335 526
Total current assets 3,623 516 877
Creditors: amounts falling due within one (2,519) (93) (71)
year
Net current assets 1,104 423 806
Total assets less current liabilities 5,438 577 946
Creditors: amounts falling due after more than (1,962) - -
one year
Net assets 3,476 577 946
Capital and reserves
Called up share capital 4 434 184 205
Share premium account 4 3,598 544 1,093
Profit and loss account 4 (556) (151) (352)
Equity shareholders' funds 3 3,476 577 946
Zest Group plc
Cash flow statement
for the period ended 31 March 2006
Six month Period from Period from
period incorporation incorporation
to to to
31 March 31 March 30 September
2006 2005 2005
(Unaudited) (Unaudited) (Audited)
Note £000 £000 £000
Net cash outflow from operating 5 (341) (239) (614)
activities
Returns on investments and servicing of finance
Interest received 4 - 3
4 - 3
Capital expenditure and financial
investment
Payments to acquire tangible fixed assets (672) - (4)
Payments to acquire intangible fixed - (154) (157)
assets
(672) (154) (161)
Acquisitions and disposals
Purchase of subsidiary undertaking (3,088) - -
Cash acquired with subsidiary undertaking 273 - -
(2,815) - -
Net cash outflow before financing (3,824) (393) (772)
Financing
Issue of shares 2,500 845 1,425
Share issue costs (16) (117) (127)
New long term loans 1,962 - -
4,446 728 1,298
Increase in cash 6 622 335 526
Zest Group plc
Notes to the Interim Report
for the period ended 31 March 2006
1. Basis of preparation
The Interim Report was approved by the Directors on 28 June 2006. The Interim
Report has been prepared using accounting policies consistent with UK generally
accepted accounting practice, full details of which were set out in the
Company's annual report and accounts for the period ended 30 September 2005.
The Interim Report is unaudited 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 £204,000 (period ended 30 September 2005: £352,000, period
ended 31 March 2005: £151,000) and on the weighted average number of ordinary
shares in issue during the period of 81,952,382 (period ended 30 September 2005:
53,279,921, period ended 31 March 2005: 33,085,472).
The impact of share options at 31 March 2005, 30 September 2005 and
31 March 2006 is anti-dilutive.
3. Reconciliation of movement in equity shareholders' funds
Six month Period from Period from
period incorporation incorporation
to to to
31 March 31 March 30 September
2006 2005 2005
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Total recognised loss for the period (204) (151) (352)
Issue of shares 2,734 728 1,298
Net movement in equity shareholders' funds 2,530 577 946
Equity shareholders' funds at start of 946 - -
period
Equity shareholders' funds at end of 3,476 577 946
period
4. Share capital and reserves
Share Share Profit and loss
capital premium account
£000 £000 £000
On incorporation - - -
Issue of shares to founders 128 38 -
Shares issued 77 1,183 -
Costs related to share issue - (128) -
Loss for the period - - (352)
At 30 September 2005 205 1,093 (352)
Shares issued on acquisition of 229 2,521 -
Greensleeves
Costs related to share issue - (16) -
Loss for the period - - (204)
At 31 March 2006 434 3,598 (556)
5. Reconciliation of operating loss to cash flows from operating activities
Six month Period from Period from
period incorporation incorporation
to to to
31 March 31 March 30 September
2006 2005 2005
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Operating loss (208) (151) (355)
Depreciation - - 1
Amortisation 20 - 20
Movement in debtors (103) (181) (351)
Movement in creditors (50) 93 71
Net cash outflow from operating activities (341) (239) (614)
6. Reconciliation of net cash flow to movement in net (debt) / cash
Six month Period from Period from
period incorporation incorporation
to to to
31 March 31 March 30 September
2006 2005 2005
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Increase in cash 622 335 526
Cash flow from increase in debt (1,962) - -
Change in net cash from cash flows (1,340) 335 526
Opening net cash 526 - -
Closing net (debt) / cash (814) 335 526
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 period ended 30 September 2005 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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