Zoetic Interntnl PLC - COVID-19 Update
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
("Zoetic" or the "Company" or the "Group")
Oil & Gas Division
The steep fall in oil & gas prices has inevitably put considerable pressure on margins at the Company's
The Board is supportive of the operator's proposal, although its consequence is to remove the sole revenue stream of Zoetic's oil & gas division. A considerable amount of progress had been made since September last year in reducing this division's overheads and ceasing unnecessary expenditure, but certain liabilities do remain, including an outstanding bank facility. This was originally drawn down as
In the circumstances, Zoetic is exploring the aid packages that are being made available by the US federal and state governments in response to the Covid-19 outbreak and the Company is working with its bank to apply for loans to cover its short term operating costs, including payroll, rent, utilities and loan interest. Further details will be announced in due course.
In addition to this, the Board is examining the feasibility of selling certain assets from its oil & gas division, in part to reduce ongoing liabilities and to generate short term cash. Given macro-economic difficulties worldwide, it is unrealistic to expect a high value from these assets, but the Board believes it may be possible to obtain part-payment for any sale upfront and the balance on a deferred basis in addition to retained overrides.
As part of the reorganisation of the Group put in place in the period since September last year, the oil & gas and CBD divisions in the US operate as distinct entities and so challenges in oil & gas should not necessarily impact the core CBD business. Zoetic has provided a guarantee to the loan facility referred to above however.
As previously announced, Zoetic anticipates lower revenue in its CBD division during the Covid-19 crisis, particularly in its US operation where sales are more dependent on stores. However, the Company's plans with its distribution partner and outsourced manufacturing remain intact and all parties are determined to launch its contract to distribute smokable products and chew pouches with a US national distributor when the time is right.
Pending that launch, the operating costs of the US CBD division, which now amount to around
The management team are implementing a number of initiatives to generate cash, including the launch of a low cost subscription service for Chill products. Cost controls also continue to be tightened. However, the immediate focus is to sell the Company's inventory of almost 3 million feminised hemp seeds. This represents Zoetic's most valuable asset and this is the time of year when growers typically make their purchases, albeit made considerably more challenging by the Covid-19 outbreak.
Furthermore, as with the oil & gas division, the Company is applying for loans under the US Covid-19 aid arrangements to cover the short term operating costs of the CBD division. As Zoetic's interests in the US are held in two distinct subsidiaries with separate operations, it is necessary to make a further application for this division and not include it within the oil & gas application. Further details will be announced when the Company has more clarity on the loan terms.
"The unprecedented, and in many ways, unpredictable consequences we face from the Covid-19 crisis continue to present challenges but, as a management team, we are resolved to take all actions necessary in pursuit of our business plan. As I said in our previous update, we know it will not be easy but we are fortunate to be entering this period as much more streamlined and focused business. We should all be prepared address further hurdles in the coming weeks and months but it is important also to remember that our two CBD brands and our inventory of feminised hemp seeds are significant assets for the business and that will remain the case throughout this difficult time. The ongoing support of our shareholders, and particularly the significant investment by Ox Distributing and the Schrader family last week, matches our own confidence.
"We have prepared the business to operate on a much restricted cost base but, equally, we remain fully capable of continuing to build our revenue opportunities."
This information is provided by RNS, the news service of the
Quick facts: Zoetic International PLC
Market Cap: £9.57 m
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