Final Results

29th Aug 2008 07:00



29 August 2008

Z GROUP Plc

("Z GROUP" or the "Company")

Final results for the year ended 29 February 2008

CHAIRMAN'S STATEMENT 

The Company announces its final results for the year ended 29 February 2008.

RESULTS

The loss on ordinary activities after taxation for the year amounted to £4,910,515 (2007 - loss £632,269) representing a loss per share of 20.68 pence (2007 - loss 3.12 pence).

EVENTS DURING THE YEAR

With continuing trading losses in the Company's subsidiaries which arose from the commercial failure of the OnShare product combined with the continuing decline in turnover of the principal product, ONSPEED, the Board commenced discussions to sell the operating subsidiaries of the Company to the then joint CEOs and directors of the Company, Jack Bekhor and Jamie True.

It was announced, when the interim results for the year were released on 29 November 2007, that the directors believed that shareholders interests' would be best served by securing a speedy solution to the problems of the Company and that accordingly a deal with the joint CEOs, or any other comparable solution, would be pursued by the Board as a matter of urgency. 

On 20 December 2007, the Company entered into an agreement, conditional on shareholder approval, for the sale of CallPal Limited, Net2Roam Limited, Onshare Limited and Turbodial Limited (the "Disposal Companies"), which comprised substantially all of the trading assets of the Company, to the joint CEOs.

The proposed agreement was for a cash consideration of £60,000. The CEOs would remain as part-time executive directors of the Company following Completion, but agreed to waive any remuneration due under their service agreements (other than their entitlement to receive the statutory minimum wage, which cannot legally be waived). The Board also negotiated with the CEOs further potential payments in the event of onward sale of shares and/or assets of the Disposal Companies, which has the potential to yield further sums to the Company where any of the Disposal Companies are sold, or any of the Disposal Companies sell any of their assets, within 15 months of a proposed general meeting of the Company's shareholders.

A circular dated 21 December 2007 was posted to shareholders setting out:

the background to the sale

why the directors of the Company considered the sale to be in the best interests of the Company and its shareholders

the Company's proposed "Investing Strategy" following completion

the approval of shareholders for the proposals at an extraordinary general meeting of the Company.

The general meeting took place on 7 January 2008, and the resolutions outlined in the circular to shareholders were duly passed. The results of the proxy voting on the resolutions put to shareholders were 11,755,315 of the issued shares (49.51% of the issued share capital) voting in favour of the resolutions and with no shareholders voting against the resolutions.

John Standen, Jonathan Slater and Polly Williams resigned as directors with effect from the date of the general meeting.

Also at this meeting, the shareholders approved the Company's "Investing Strategy" which is to seek high growth, profitable, cash generative businesses in the Technology, Media or Science sectors.

CHANGES IN DIRECTORS AFTER THE YEAR-END

On 18 March 2008, Ian Smith was appointed as a non-executive director of the Company and Marcus Yeoman was appointed as a part-time executive director of the Company. On the same day, Jack Bekhor and Jamie True stepped down as joint CEOs and as executive directors of the Company.

CASH POSITION

The cash position at 29 February 2008 was £1,203,118. The (unaudited) cash position at 27 August 2008, being the last practicable date prior to the publication of this document, was £1,324,682.

PROSPECTS

The directors' objective is to preserve cash resources while actively pursuing potential acquisitions, which are at various stages of discussion at this time. Under the AIM rules the Company's shares would be suspended from trading on AIM if a suitable acquisition has not been made in accordance with the stated investing strategy by 7 January 2009. The directors will keep shareholders informed of any significant developments over the coming months.

JON CLAYDON

Non-executive Chairman

29 August 2008

Further Enquiries

Z GROUP plc
Duncan Neale (Finance Director)	Tel: +44 (0) 20 7952 4043
John East & Partners Limited
Bidhi Bhoma	Tel: +44 (0) 20 7628 2200

CONSOLIDATED INCOME STATEMENT 

for the year ended 29 February 2008

	Notes	29 February	28 February
		2008	2007
		£	£
Share based payments credit / (charge)		383,667	(344,071)
Other administrative expenses		(860,830)	(400,990)
Proceeds on disposal of investments		60,000	-
Write down of investments		(4,638,803)	-
OPERATING LOSS	2	(5,055,966)	(745,061)
Finance income	3	53,404	103,973
Other income		91,231	8,819
LOSS BEFORE INCOME TAX		(4,911,331)	(632,269)
Income tax credit	4	816	-
LOSS FOR THE YEAR		(4,910,515)	(632,269)
LOSS PER SHARE (pence)
Basic and diluted	5	(20.68)	(3.12)

CONSOLIDATED BALANCE SHEET

as at 29 February 2008

	Notes	29 February	28 February
		2008	2007
			(as restated)
		£	£
ASSETS
Investments	6	-	16,991,305
Property, plant and equipment	7	10,898	137,918
Intangible assets	8	-	2,317
Other receivables	9	117,500	117,500
Non-current assets		128,398	17,249,040
Trade and other receivables	9	374,552	2,762,813
Cash and cash equivalents	10	1,203,824	1,405,766
Current assets		1,578,376	4,168,579
Total assets		1,706,774	21,417,619
EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders of the Company
Share capital	12	1,187,294	1,187,294
Share premium account		5,967,758	5,967,758
Share option reserve		700,382	1,084,049
Retained losses		(6,299,194)	(1,388,679)
Total equity		1,556,240	6,850,422
Trade and other payables	11	150,534	14,567,197
Current liabilities		150,534	14,567,197
Total liabilities		150,534	14,567,197
Total equity and liabilities		1,706,774	21,417,619

CONSOLIDATED CASH FLOW STATEMENT 

for the year ended 29 February 2008

	Year ended	Year ended
	29 February	28 February
	2008	2007
	£	£
Cash flows from operating activities
Operating loss	(5,055,966)	(745,061)
Depreciation	32,711	20,587
Amortisation	510	133
Share option expense	(383,667)	344,071
Foreign exchange movement	-	(6,175)
Write down of investments sold in the year	16,991,305	-
Decrease / (Increase) in trade and other receivables	2,388,261	(2,467,983)
(Decrease) / Increase in trade and other payables	(14,417,368)	779,839
Write down of web development costs and domain names	1,807	-
Cash used in operations	(442,407)	(2,074,589)
Interest paid	-	-
Income tax credit	816	-
Net cash (used in) operating activities	(441,591)	(2,074,589)
Cash flows from investing activities
Purchase of property, plant and equipment	(5,340)	(147,347)
Purchase of other intangible assets	-	(161)
Proceeds from the sale of property, plant and equipment	99,649	-
Interest received	53,404	103,973
Other income	91,231	8,819
Net cash from / (used in) investing activities	238,944	(34,716)
Cash flows from financing activities
Proceeds from the issue of share capital	-	52,403
Credit on issue of share expenses	-	2,500
Net cash from financing activities	-	54,903
Net (decrease) in cash and cash equivalents	(202,647)	(2,054,402)
Cash and cash equivalents at the beginning of the year	1,405,765	3,460,167
Cash and cash equivalents at the end of the year	1,203,118	1,405,765

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 29 February 2008

	Share capital	Share premium	Share based payments reserve	Retained earnings	Total
	£	£	£	£	£
Balance at 1 March 2006, as originally stated	973,529	2,322,461	-	(16,432)	3,279,558
Prior year adjustment: share based payment charge	-	-	739,978	(739,978)	-
Balance at 1 March 2006, as restated	973,529	2,322,461	739,978	(756,410)	3,279,558
Issue of equity on exercise of options	16,659	35,744	-	-	52,403
Issue of equity to purchase the 49% minority interest in Onshare Limited	197,106	3,607,053	-	-	3,804,159
Credit on share issue expenses	-	2,500	-	-	2,500
Share option charge in the year	-	-	344,071	-	344,07
Loss for the period	-	-	-	(632,269)	(632,269)
Total recognised income and expense for the period	213,765	3,645,297	344,071	(632,269)	3,570,864
Balance at 1 March 2007	1,187,294	5,967,758	1,084,049	(1,388,679)	6,850,422
Share option credit in the year	-	-	(383,667)	-	(383,667)
Loss for the period	-	-		(4,910,515)	(4,910,515)
Total recognised income and expense for the period	-	-	(383,667)	(4,910,515)	(5,294,182)
Balance at 29 February 2008	1,187,294	5,967,758	700,382	(6,299,194)	1,556,240

NOTES TO THE FINANCIAL STATEMENTS

For year ended 29 February 2008

1. BASIS OF PREPARATION AND PUBLICATION OF NON-STATUTORY ACCOUNTS

(a) First time adoption of IFRSs

From 1 March 2007, the Company has adopted International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") in the preparation of the financial statements.

Prior to this accounting period, the Company prepared its audited annual financial statements under United Kingdom Generally Accepted Accounting Principles (UK GAAP). For periods commencing 1 March 2007, the Company is required to prepare its annual consolidated financial statements in accordance with IFRS as adopted by the EU and implemented in the UK. As the financial statements for the year to 29 February 2008 will include comparatives for the year ended 28 February 2007, the Company's date of transition to IFRS is 1 March 2006 and the comparatives need to be restated to IFRS. Accordingly, the financial information for the year to 28 February 2007 has been restated to present the comparative information in accordance with IFRS based on a transition date of 1 March 2006. Note 14 sets out how the Company's previous financial position is affected by the change to IFRS.

As at the date of approval of the financial statements, the following standards and interpretations were in issue but not yet effective: 

IFRS 3 (revised) Consolidated financial statements 

IFRS 8 Operating Segments 

IFRIC 12 Service concession arrangements 

IFRIC 13 Customer loyalty programmes 

IFRIC 14 IAS19 - The limit on a defined benefit asset, minimum funding requirements and their interaction 

IAS 1 (revised) Presentation of financial statements 

IAS 23 (revised) Borrowing costs 

IAS 27 (revised) Consolidated and separate financial statements

  The Directors do not anticipate that the adoption of these standards and interpretations in future reporting periods will have a material impact on the Company's results.

(b) Going concern

The financial statements are presented on a going concern basis. In assessing the Company's ability to continue as a going concern, the directors have taken into consideration all available information relating to the 12 month period from the date of approval of these accounts. In particular the directors have assessed expenditure, budgets and cash flow forecasts of the Company.

The budgets and forecasts have been reflected to reflect the current position of the Company as listed on AIM. The directors are actively seeking an acquisition in line with the Company's Investing Strategy which is to seek high growth, profitable, cash generative businesses in the Technology, Media or Science sectors.

The financial implications of potential transactions and the consequences of not being listed on AIM have not been included in the consideration of the going concern status of the Company at this time.

(c) Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, Including expectations of future events that are believed to be reasonable under the circumstances.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of asset and liabilities within the next financial year are discussed below.

Share-based payments

The Company issues share-based payments to certain employees. The fair value and the vesting periods use management assumptions in their calculation. While management believes that the assumptions used are appropriate, a change in the assumptions used would impact the results of the Company.

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 28 February 2007 has been extracted from the Company's financial statements to that date which have received an unqualified auditors' report but have not yet been delivered to the Registrar of Companies.

The financial information for the year ended 29 February 2008 has been extracted from the Company's financial statements to that date, which have been delivered to the Registrar of Companies. The auditors opinion on those financial statements was not qualified but contained an emphasis of matter paragraph relating to the valuation of the intangible asset.

2. OPERATING LOSS

	Year ended	Year ended
	29 February	28 February
	2008	2007
	£	£
The Company's operating loss is shown after charging / (crediting):
Significant items:
Write down on sale of fixed asset investments	4,638,803	-
Share based payments (credit) / charge	(383,667)	344,071
Depreciation	32,711	20,587
Amortisation	510	133
Auditors' remuneration for the audit	12,000	7,850
Other services related to taxation	14,600	12,000

3. FINANCE INCOME

	Year ended 29 February 2008 £	Year ended 28 February 2007 £
Bank interest receivable	53,404	103,973
Finance income	53,404	103,973

4.  INCOME TAX CREDIT

	Year ended	Year ended
	29 February	28 February
	2008 £	2007 £
Factors affecting tax charge for period:
The tax assessed for the period is higher than the standard rate of corporation tax in the UK. The differences are explained below:
Loss on ordinary activities before tax	(4,911,331)	(632,269)
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2007: 30%)	(1,473,399)	(189,681)
Effects of:
Expenses not deductible for tax purposes	133,326	13,710
Temporary differences in the recognition of profits or losses not recognised for tax purposes	15,507	(17,159)
Losses not recognised for tax purposes	1,439,666	97,469
Adjustment in respect of previous period's income tax	(816)	-
Share based payments not recognised for tax purposes	(115,100)	95,661
Tax credit for the year	(816)	-

The Company has tax losses of approximately £419,000 (2007: £228,000) which, subject to agreement with HM Revenue & Customs, are available to carry forward against future profits of the same trade.

5. LOSS PER SHARE

	29 February	28 February
	2008	2007
	No.	No.
Weighted average number of shares:
For basic earnings per share	23,745,885	20,284,347
Dilutive effect of share options	-	-
For diluted earnings per share	23,745,885	20,284,347
Loss for the year	£(4,910,515)	£(632,269)
Earnings per share:
	pence	pence
- Basic and diluted	(20.68)	(3.12)

Due to the losses in the above years, there is no dilutive effect from the issue of share options.

6. INVESTMENTS

Cost and net book value:
	£
At 1 March 2007	16,991,305
Book value of investments sold in the year	(16,991,305)
At 29 February 2008	-

Details of the subsidiary undertaking of the company are as follows:
	Class of  share	Proportion  held	Nature of business
Z GROUP Investments Limited	Ordinary	100%	Non trading

This subsidiary undertaking is incorporated in England and Wales. 

7. PROPERTY, PLANT AND EQUIPMENT

	Computer equipment £	Furniture, fittings and equipment  £	Total  £
Cost
01 March 2006	7,589	-	7,589
Additions	4,147	147,085	151,232
28 February 2007	11,736	147,085	158,821
Depreciation
At 1 March 2006	(316)	-	(316)
Charged in the period	(2,250)	(18,337)	(20,587)
At 28 February 2007	2,566)	(18,337)	(20,903)
Cost
01 March 2007	11,735	147,085	158,820
Additions	5,341	-	5,341
Disposals	(1,371)	(147,085)	(148,456)
29 February 2008	15,705	-	15,705
Depreciation
At 1 March 2007	(2,566)	(18,337)	(20,903)
Charged in the period	(2,552)	(30,159)	(32,711)
Disposals	311	48,496	48,807
At 29 February 2008	(4,807)	-	(4,807)
Net book value
29 February 2008	10,898	-	10,898
28 February 2007	9,170	128,748	137,918
28 February 2006	7,273	-	7,273

The Company holds no assets under finance leases or hire purchase contracts (2007: none).

The Company assigned its lease on 31 Vernon Street in December 2007, and the fixtures and fittings of the Company were assigned at the same time.

8. INTANGIBLE ASSETS

	Web development	Domain names	Total
	£	£	£
Cost
01 March 2006	-	-	-
Additions	2,250	200	2,450
28 February 2007	2,250	200	2,450
Depreciation
At 1 March 2006	-	-	-
Charge for period	(94)	(39)	(133)
At 28 February 2007	(94)	(39)	(133)
Cost
01 March 2007	2,250	200	2,450
Additions	-	-	-
Write down	(2,250)	(200)	(2,450)
29 February 2008	-	-	-
Depreciation
At 1 March 2007	94	39	133
Charge for period	468	42	510
Write back	(562)	(81)	(643)
At 29 February 2008	-	-	-
Net Book Value
29 February 2008	-	-	-
28 February 2007	2,156	161	2,317
28 February 2006	-	-	-

9. TRADE AND OTHER RECEIVABLES

	29 February	28 February
	2008	2007
	£	£
Non-current
Other debtors	117,500	117,500
Current
Trade receivables	10,287	-
Prepayments	23,765	34,088
Amounts due from subsidiaries	-	2,575,821
Amounts due from related parties (Note 13)	328,534	-
Other debtors	11,966	152,904
	374,552	2,762,813

The carrying value of trade and other receivables is consistent with their book values. Trade and other receivables are unsecured.

10. CASH AND CASH EQUIVALENTS

	29 February	29 February		28 February	28 February
	2008	2008		2007	2007
	£	Fixed interest rate thereon		£	Weighted variable interest rate thereon
Current account	43,614	0.00%		9,876	0.00%
Deposit accounts	1,160,210	5.65%		1,395,890	3.91%
	1,203,824			1,405,766

11. TRADE AND OTHER PAYABLES

Amounts falling due within one year	29 February 2008 £	28 February 2007 £
Bank overdraft	705	-
Trade creditors	22,171	94,052
Amounts due to subsidiaries	70,000	14,337,876
Corporation tax	-	111,678
Other taxation and social security	7,054	11,608
Accruals and deferred income	38,638	11,983
Provisions	11,966	-
	150,534	14,567,197

The carrying value of trade and other payables is consistent with their book values. Trade and other payables are unsecured. It is the Company's policy to settle trade and other payables within normal credit terms.

12. SHARE CAPITAL 

	29 February 2008 £	28 February 2007 £
Authorised
100,000,000 ordinary shares of £0.05 each	5,000,000	5,000,000
	5,000,000	5,000,000
Allotted, called up and fully paid
	29 February 2008 £	28 February 2007 £
At 1 March	1,187,294	973,529
Subscriber shares	-	-
Issue of additional shares:
Share for share agreement	-	-
AIM listing	-	-
Allotted under share option scheme (333,172 shares)	-	16,659
Allotted on acquisition of the 49% minority interest in Onshare Limited (3,942,134 shares)	-	197,106
At 29 February	1,187,294	1,187,294

13. RELATED PARTY TRANSACTIONS

The only key management personnel of the Company are the Directors. Details of the compensation of the key management personnel, as required by IAS 24 "Related Party Disclosures", are disclosed in the Remuneration Report within the Annual Report and Accounts, which have been posted to shareholders and are available on the Company's website www.zgroupplc.com. 

During the year Directors fees of £1,500 (2007: £18,000) were paid to Computer Marketing Services Limited of which Ian Smith is a Director and controlling shareholder. During the year Directors fees of £37,452 (2007: £40,000) were paid to Standen Consult Limited of which John Standen is a Director and controlling shareholder.

As detailed in the Chairman's Statement, Jack Bekhor and Jamie True purchased the trading subsidiaries of the Company on 7 January 2008 (the "MBO"). Jack Bekhor and Jamie True remain related parties of the Company in their capacity as significant shareholders of the Company. A summary follows of the movements in the debt due to and from these related parties up to 29 February 2008:

	Year ended 29 February 2008	Year ended 28 February 2007
	£	£
Opening debt due from / (to) related parties	590,447	(987,181)
Cash forwarded by the Company to the related parties	4,512,109	1,877,894
Cash forwarded by the related parties to the Company	(4,757,361)	(817,698)
Other re-charges from the related parties	332,552	517,432
Other re-charges from the Company	(20,205)	-
Loan waiver to ex-subsidiary	(329,008)	-
Closing debt due from related parties	328,534	590,447

It is anticipated that this closing debt of £328,534 will be paid to the Company when R&D tax credits estimated at £328,534 are received by Net2Roam Limited and OnShare Limited, as these credits are due to the Company under the terms of the MBO agreement.

14. EXPLANATION OF TRANSITION TO ADOPTED IFRSs

The Company's financial statements for the year ended 28 February 2008 will be the first financial statements that comply with International Financial Reporting Standards (IFRS). The Company's financial statements prior to and including 28 February 2007 had been prepared in accordance with Generally Accepted Accounting Principles in the United Kingdom (UK GAAP).

As required by IFRS 1, the impact of the transition from UK GAAP to IFRS is explained below. The accounting policies set out above have been applied consistently to all periods presented in this interim financial information and in preparing an opening IFRS balance sheet at 1 March 2006 for the purposes of transition to IFRS.

IAS 1 - Presentation of Financial Statements. The form and presentation in the UK GAAP financial statements has been changed to be in compliance with IAS 1. 

IAS 7 - Cash Flow Statements. The IFRS Cash Flow Statement, prepared under IAS 7, presents cash flows in thee categories: cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. Other than the reclassification of cash flow into the new disclosure categories, there are no significant differences between the Company's Cash Flow Statement under UK GAAP and IFRS. Consequently, no cash flow reconciliations are provided. Purchases of tangible fixed assets under UK GAAP have been reclassified to purchases of intangible assets and purchases of property, plant and equipment under IFRS.

There is no change to the reported losses in the year ended 28 February 2007 as a result of the transition to IFRS.

 

Reconciliation of Balance Sheet at 1 March 2006

	Notes	1 March	Transition	1 March
		2006	to IFRS	2006
		(UKGAAP)		(as restated)
		£	£	£
ASSETS
Investments		13,187,145	-	13,187,145
Property, plant and equipment	a	7,273	-	7,273
Other intangible assets	a	-	-	-
Non-current assets		13,194,418	-	13,194,418
Trade and other receivables		412,327	-	412,327
Cash and cash equivalents		3,460,168	-	3,460,168
Current assets		3,872,495	-	3,872,495
Total assets		17,066,913	-	17,066,913
EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders of the Company
Share capital		973,529	-	973,529
Share premium account		2,322,461	-	2,322,461
Share option reserve		739,978	-	739,978
Retained losses		(756,413)	-	(756,413)
Total equity		3,279,555	-	3,279,555
Trade and other payables		13,786,542	-	13,786,542
Short-term provisions		816	-	816
Current liabilities		13,787,358	-	13,787,358
Total liabilities		13,787,358	-	13,787,358
Total equity and liabilities		17,066,913	-	17,066,913

Reconciliation of Balance Sheet at 28 February 2007

	Notes	28 February	Transition	28 February
		2007	to IFRS	2007
		(UKGAAP)		(as restated)
		£	£	£
ASSETS
Investments		16,991,305	-	16,991,305
Property, plant and equipment	a	140,074	(2,156)	137,918
Other intangible assets	a	161	2,156	2,317
Other receivables		117,500		117,500
Non-current assets		17,249,040	-	17,249,040
Trade and other receivables		2,762,813	-	2,762,813
Cash and cash equivalents		1,405,766	-	1,405,766
Current assets		4,168,579	-	4,168,579
Total assets		21,417,619	-	21,417,619
EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders of the Company
Share capital		1,187,294	-	1,187,294
Share premium account		5,967,758	-	5,967,758
Share option reserve		1,084,049	-	1,084,049
Retained losses		(1,388,679)	-	(1,388,679)
Total equity		6,850,422	-	6,850,422
Trade and other payables		14,567,197	-	14,567,197
Short-term provisions		-	-	-
Current liabilities		14,567,197	-	14,567,197
Total liabilities		14,567,197	-	14,567,197
Total equity and liabilities		21,417,619	-	21,417,619

 

Notes to the reconciliation of Balance Sheets

(a) Classification of website costs

Website development cost is included within intangibles under IFRS rather than tangible assets as is the norm under UK GAAP. The effect of this is to reclassify website development cost of £2,156 at February 2007 from tangible assets to intangible assets. Total net assets remain unchanged by this adjustment. There is no adjustment at March 2006, because no website development costs had been incurred up to that date.

15. DIVIDENDS

No dividends were paid or are proposed in respect of the year ended 29 February 2008.

16. REPORT AND ACCOUNTS

Copies of the Annual Report and Accounts have been sent to all shareholders and are available from the Company's registered office 31 Vernon Street, London W14 0RN and on the Company's website www.zgroupplc.com  

ENDFR ILFLDTEITFIT

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