Cadence Mineral Regulatory News (KDNC)

30 Mar 2007 15:39

Zest Group PLC30 March 2007 30 March 2007 Zest Group plc Preliminary Results for the year ended 30 September 2006 Zest Group plc ("Zest" or "the Group", AIM: ZEST), the independent musicpublisher, record label and production company announces its preliminary resultsfor the year ended 30 September 2006. Summary of the year • Turnover for the year ended 30 September 2006 £1.4m (2005: £nil) and a loss before taxation of £0.7m (2005: £0.4m). These financials include only a six month contribution from Greensleeves and during this period the company only released a nominal number of records. • Acquisition of international reggae publisher and record label Greensleeves Records Limited ("Greensleeves") for a consideration of £3.25m in cash and shares, completed in March 2006. • Fundraising of £2.5 million (gross) through a placing of 83,333,334 Ordinary Shares in March 2006. • Nasio Fontaine's first album was released in the US in July where he toured East and West Coasts in support of the release. The album has subsequently been released in Europe and Japan in August and September. Commenting, Steve Weltman, Chief Executive of Zest Group plc, said: "Since the acquisition of Greensleeves the Group have successfully completed anumber of commercial initiatives to leverage the revenue stream from theexisting catalogue. We also have a steady stream of new releases which shouldfeed through to benefit the business in the current year and into 2008. In linewith our strategy the Group continues to seek potential acquisitionopportunities." Chairman's Statement I am pleased to present the results of the Group for the year ended 30 September2006. During the year the Group had turnover of £1.4m (2005: £nil) and a loss beforetaxation of £0.7m (2005: (£0.4m). These financials include a six monthcontribution from Greensleeves Records Limited ("Greensleeves") and during thisperiod the company only released a nominal number of records. Furthermore,during the year the physical goods market experienced difficult conditions,particularly in the US. For the financial year ending September 2007 the Groupis scheduled to release 50 albums, compared to 22 albums for the year endingSeptember 2006. Zest completed its first acquisition on 31 March 2006, for a consideration of£3.25 million in cash and shares, for Greensleeves, the leading internationalreggae record label and music publisher. The Group also raised £2.5 million innew equity towards the financing of the acquisition. The acquisition of Greensleeves brought into the Group an established recordlabel and a comprehensive back catalogue of approximately 400 albums and 900singles and owns in whole or part 4,500 copyrights and administers a further13,500 copyrights, making Zest one of the largest independent reggae publishersand record labels in Europe. Greensleeves, which is based in the UK withoffices in New York, has an established commercial presence in a number of thespecialist reggae markets throughout the world including the USA, Japan, France,Germany, Benelux, Canada and Scandinavia. Since the acquisition was completed the management team has been working on anumber of initiatives to leverage the opportunities of the Greensleeves businessincluding exploiting the existing catalogue and expanding the distributionnetwork in both non-digital and digital formats. The first of these initiatives was to expand Greensleeves' commercial reacharound the world and the management team commenced discussions for distributionand licensing agreements across a number of new territories to which I referlater. Despite generally difficult market conditions for recorded music, thecompilation albums performed well . However, sales in the US market wereaffected by the closure of two of the major national music retailers, namelyTower Records and Musicland. During the year we concluded the recording of the new Nasio Fontaine album 'Universal Cry' and the album was successfully released on the Greensleeves labelin July 2006. The album has since been released in the following countries,USA, Japan, UK, France, Germany, Austria, Switzerland, Scandinavia, Benelux,Italy, Spain, Portugal, New Caledonia, South Africa and is currently amongst theGroup's best selling albums. Universal Cry was joined by the successful releasesof the "Waterhouse Redemption" album from Sizzla in the summer of 2006 and thecompilation album Ragga, Ragga, Ragga, which was released in March 2006. NasioFontaine is scheduled to perform for two days at the Glastonbury Festival inJune 2007 and a number of other festivals in Europe with additional shows inUSA, Africa and the Caribbean. In our publishing business there were notable successes in 2006 with songwriterDonovan Bennett, who had hit songs with Sean Paul on the multi-platinum album "The Trinity" and Rihanna's platinum album "Girl Like Me", amongst others .Donovan co-wrote the song "Break It Off" performed by Sean Paul & Rihanna whichwas number 10 in the US Billboard pop charts and number 10 in the digital chart(week commencing 19 March 2007). Outlook The management team has continued to make progress across a number ofoperational areas including commercial initiatives that commenced following theacquisition of Greensleeves. In October 2006, we successfully secured the first ever global agreement for thedigital distribution of the entire Greensleeves catalogue with The Orchard, theworld's leading digital distributor for independent labels. Following the agreement with The Orchard we agreed new physical goodsdistribution and licensing deals with a various distributors in a number of newmarkets for the Greensleeves label, including Australia, Brazil, China, India,Singapore, South Africa, Thailand and Vietnam. The Group is well placed to increase the output of physical product from theexisting catalogue, which will include up to 30 albums taken from the publishedcatalogue, for release during the calendar year 2007. During 2007 we areplanning further mid-priced albums in the digital format for distributionthrough The Orchard. Greensleeves celebrates its 30th Anniversary this year and we are planning therelease of a "Best of Greensleeves" two volume album in a number of majorterritories including the UK, USA, Japan, France and Germany. This album isscheduled for release later in 2007. Emerging singer/songwriter, Tara Chinn has completed her maiden album,co-written and produced by Tony Fennell who is also signed to Zest. The albumhas been mixed by Grammy award winning producer/mixer, Hugh Padgham (PhilColllins, Sting, Genesis and McFly amongst others). Zest is on schedule tolaunch the album to the international market in the summer of 2007 in Asiabefore rolling-out the album's release across other major markets and then intothe UK and US throughout 2008. Finally, the Group continues to look for potential acquisition opportunities andwe will report to shareholders on progress when it is appropriate to do so. Richard Griffiths Chairman 30 March 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 30 September 2006 Note Period ended Continuing Acquisitions Year ended 30.9.2005 operations 30.9.2006 £'000 £'000 £'000 £'000 Turnover - 1,411 1,411 - Cost of sales - (828) (828) -Gross profit - 583 583 - Amortisation of goodwill - (113) (113) -Administrative expenses (468) (657) (1,125) (355) (468) (770) (1,238) (355)Operating loss (468) (187) (655) (355) Net interest (76) 3 Loss on ordinary activities before taxation (731) (352) Taxation 22 - Loss on ordinary activities after taxation and retained loss (709) (352) Loss per ordinary share- basic 2 (0.55)p (0.66)p There were no recognised gains or losses other than the loss for the financialyear. CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2006 Note 30.9.2006 30.9.2005 £'000 £'000Fixed assetsIntangible assets 3,599 137Tangible assets 694 3 4,293 140Current assetsStocks of finished goods 422 -Debtors 2,097 351Cash at bank and in hand 55 526 2,574 877 Creditors: amounts falling due within one year (2,294) (71) Net current assets 280 806Total assets less current liabilities 4,573 946 Creditors: amounts falling due after more than one year (1,602) - Net assets 2,971 946 Capital and reservesCalled up share capital 434 205Share premium account 3,598 1,093Profit and loss account (1,061) (352)Shareholders' funds 3 2,971 946 CONSOLIDATED CASH FLOW STATEMENT For the year end 30 September 2006 Note Year ended Period ended 30.9.2006 30.9.2005 £'000 £'000Net cash outflow from operating activities 4 (834) (614) Returns on investments and servicing of financeInterest paid (83) - Interest received 7 3Net cash inflow from returns on investments and service (76) 3of finance Capital expenditure and financial investmentsPayments to acquire tangible fixed assets (694) (4)Payments to acquire intangible fixed assets - (157)Net cash outflow from capital expenditure and financial (694) (161)investment Acquisitions and disposals Purchase of subsidiary undertaking (3,478) - Cash acquired with subsidiary undertaking 273 -Net cash outflow from acquisitions and disposals (3,205) - Net cash outflow before financing (4,809) (772) FinancingIssue of shares 2,500 1,425Share issue costs (16) (127)Bank loan net of repayments 1,854 - Net cash inflow from financing 4,338 1,298 (Decrease)/increase in cash 5 (471) 526 NOTES TO PRELIMINARY ANNOUNCEMENT For the year ended 30 September 2006 1 BASIS OF PREPARATION The financial statements have been prepared under the historical cost conventionand in accordance with applicable accounting standards. GOING CONCERN The Directors have prepared cash flow forecasts for the period ending 31December 2008 which make several assumptions concerning revenue generated. The Group has secured an additional shareholder working capital facility of upto £425,000 will be provided if required. On this basis and together with otherexisting facilities available to the Group, the Group has sufficient financeavailable to allow it to continue in business for a period of at least twelvemonths. On this basis the accounts have been prepared on a going concern basis. Theaccounts do not include any adjustments that would result if the assumptionsdetailed above are not met. The principal accounting policies of the Group are set out below. BASIS OF CONSOLIDATION The consolidated profit and loss account and balance sheet include the financialstatements of the company and its subsidiary undertakings made up to 30September 2006. The results of subsidiaries sold or acquired are included in theprofit and loss account up to, or from the date control passes. Intra-groupsales and profits are eliminated fully on consolidation. TURNOVER The total turnover of the Group for the period has been derived from itsprincipal activity. Revenue is recognised to the extent that it is probable that the economicbenefits will flow to the Group and the revenue can be reliably measured. Thefollowing specific recognition criteria must also be met before revenue isrecognised: - sale of goods: revenue is recognised when thesignificant risks and rewards of ownership of the goods have passed to the buyerand can be reliably measured. Revenue is measured at fair value after makingprovision in respect of expected future returns of goods and service supplied bythe Group prior to the balance sheet date - royalty and other income: all royalty and otherincome is recognised when it has been earned and can be reliably measured. ADVANCES In the ordinary course of business the Group pays advances and other expensesrecoupable from future royalties to performing artists, songwriters, producersand third party repertoire owners. The amounts paid are carried at cost lessrecoupment and less an allowance for any unrecoupable amounts. The allowance isbased on past revenue performance, current popularity and projected revenue.Advances are recoupable during the business operating cycle. All advances aretherefore reported as current assets, including advances recoupable more than 12months after the balance sheet date. DEFERRED TAXATION Deferred tax is recognised on all timing differences where the transactions orevents that give the Group an obligation to pay more tax in the future, or aright to pay less tax in the future, have occurred by the balance sheet date.Deferred tax assets are recognised when it is more likely than not that theywill be recovered. Deferred tax is measured using rates of tax that have beenenacted or substantially enacted by the balance sheet date. GOODWILL Goodwill arising on consolidation, representing the excess of the fair value ofthe consideration given over the fair values of the identifiable net assetsacquired, is capitalised and is amortised over 20 years on a straight linebasis. IMPAIRMENT The Group's goodwill is subject to impairment testing. For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generatingunits). As a result, some assets are tested individually for impairment andsome are tested at cash-generating unit level. Goodwill is allocated to thosecash-generating units that are expected to benefit from synergies of the relatedbusiness combination and represent the lowest level within the Group at whichmanagement controls the related cash flows. An impairment loss is recognised for the amount by which the asset's orcash-generating unit's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell and value in use, based on an internal discounted cash flowevaluation. Impairment losses recognised for cash-generating units, to whichgoodwill has been allocated, are credited initially to the carrying amount ofgoodwill. Any remaining impairment loss is charged pro rata to the other assetsin the cash generating unit. With the exception of goodwill, all assets aresubsequently reassessed for indications that an impairment loss previouslyrecognised may no longer exist. INTANGIBLE FIXED ASSETS Recording and publishing agreements are included at cost and amortised on astraight line basis over their expected useful economic life. TANGIBLE FIXED ASSETS AND DEPRECIATION Tangible fixed assets are stated at cost, net of depreciation and any provisionfor impairment. Depreciation is calculated to write down the cost lessestimated residual value of all tangible fixed assets by equal annualinstalments over their estimated useful economic lives. The periods generallyapplicable are: Freehold buildings 50 yearsComputer equipment 4 yearsFixtures and fittings 3 to 10 years STOCKS OF FINISHED GOOD Stocks of finished goods are stated at the lower of cost and net realisablevalue, after making allowance for obsolete and slow moving items. FOREIGN CURRENCIES Transactions in foreign currencies are translated at the rate ruling at the dateof the transaction. Monetary assets and liabilities in foreign currencies aretranslated at the rates of exchange ruling at the balance sheet date. PENSIONS The pension costs charged against profits represent the amount of thecontributions payable to defined contribution schemes in respect of theaccounting year. FINANCIAL INSTRUMENTS Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the entityafter deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including sharecapital) are equivalent to a similar debt instrument, those financialinstruments are classed as financial liabilities. Financial liabilities arepresented as such in the balance sheet. Finance costs and gains or lossesrelating to financial liabilities are included in the profit and loss account.Finance costs are calculated so as to produce a constant rate of return on theoutstanding liability. Where the contractual terms of share capital do not have any terms meeting thedefinition of a financial liability then this is classed as an equityinstrument. Dividends and distributions relating to equity instruments aredebited direct to equity. 2 LOSS PER SHARE The calculation of the basic loss per share is based on the loss on ordinaryactivities after tax of £709,000 (period ended 30.9.2005 £352,000) divided bythe weighted average number of ordinary shares in issue during the year of127,911,287 (period ended 30.9.2005 53,279,921). The impact of the shareoptions on the loss per share is anti-dilutive. 3 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Year ended Period ended 30.9.2006 30.9.2005 £'000 £'000 Loss for financial year (709) (352)Issue of ordinary share capital (net of issue costs) 2,734 1,298Net increase in shareholders' funds 2,025 946Shareholders' funds brought forward 946 -Shareholders' funds carried forward 2,971 946 4 RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES Year ended Period ended 30.92006 30.9.2005 £'000 £'000 Operating loss (655) (355)Depreciation 12 1Amortisation 113 20 Increase in stocks (64) -Increase in debtors (562) (351)Increase in creditors 322 71Net cash outflow from operating activities (834) (614) 5 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/(DEBT) Year ended Period ended 30.9.2006 30.9.2005 £'000 £'000(Decrease)/increase in cash for the year and change in net fundsresulting from cashflows (471) 526Bank loans advanced 1,854 -Net funds brought forward 526 -Net (debt)/funds carried forward 1,909 526 6 ANALYSIS OF CHANGES IN NET debt At 1.10.2005 Cash flow 30.9.2006 £'000 £'000 £'000Cash at bank and in hand 526 (471) 55Bank loans - 1,854 1,854 526 1,383 1,909 7 ACQUISITIONS On 31 March 2006 the Company acquired the entire issued share capital ofGreensleeves Records Limited for a consideration of £3.25 million settledthrough the payment of £3 million in cash together with the issue of 8,333,334Ordinary Shares at 3.0p each. Professional fees amounted to £478,000. . The assets and liabilities of Greensleeves Records Limited acquired were asfollows: Fair value Fair value Book value adjustment £'000 £'000 £'000Tangible fixed assets 9 - 9Stocks 358 - 358Debtors 1,221 (37) 1,184Cash at bank 273 - 273Trade creditors (1,582) 50 (1,532)Other creditors (90) (9) (99)Taxation - (40) (40) 189 (36) 153Satisfied by: Cash consideration payable to vendors 3,000Share consideration payable to vendors 250Costs of transaction 478 3,728Goodwill 3,575 Goodwill arising on the acquisition of Greensleeves Records Limited has beencapitalised. The directors have not completed all of their acquisition enquiries in relationto the valuation of provisions, accrued costs and taxation and consequently thebook values of the assets and liabilities acquired are considered to be theirprovisional values. These fair values will be finalised in the 2007 FinancialStatements. The subsidiary undertaking acquired during the year made the followingcontribution to, and utilisation of, Group cash flow: £'000 Net cash inflow from operating activities 45Capital expenditure and financial investment (710)Net new loans 449Decrease in cash (216) The summarised results of Greensleeves Records Limited for the period ended 31March 2006, the date of acquisition, are as follows: £'000 Turnover 1,798Operating profit 144Profit before and after taxation 146 In the year ended 31 September 2006, Greensleeves Records Limited made a lossafter taxation of £73,000 (2005: £119,442). 8 PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The balance sheet at 30 September 2006 and the profit and loss account, cashflow statement and associated notes for the year then ended have been extractedfrom the Group's financial statements. Those financial statements have not yetbeen delivered to the Registrar. 9 REPORT AND ACCOUNTS The Group's annual report and financial statements will be posted toshareholders shortly. Further copies will be available on request from theCompany's Registered Office: Kitwell House, The Warren, Redlett, Hertfordshire,WD7 7DU. Enquiries: Steve Weltman, Chief Executive +44 (0) 207 451 9800Zest Group plc John Bick +44 (0) 7917 649362 Tim Cofman/Nicola Rayner +44 (0) 121 616 2101W.H. Ireland www.zestmusic.com This information is provided by RNS The company news service from the London Stock Exchange