GUSBOURNE PLC

Interim / Quarterly Report • Sep 28, 2017

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RNS Number : 1392S

Gusbourne PLC

28 September 2017

Gusbourne Plc

("Gusbourne" or the "Company")

Half Yearly Report

Gusbourne Plc, the English sparkling wine producer, today announces its unaudited interim results for the six months ended 30 June 2017

Highlights

·     Sales up by 42% to £378,000 (30 June 2016: £266,000)

·     Strong growth in exports to 30% of sales (30 June 2016: 6%) and now selling to 15 countries

·     Gross profit up by 128% to £214,000 (30 June 2016: £94,000)

·     Operating loss reduced by 9% to £549,000 (30 June 2016: £600,000)

·     Successful completion of Open Offer in June 2017 has raised £4.2 million (before expenses) for ongoing investment in the business.

·     Trading continues in-line with management's expectations

·     Continued success in major international wine competitions has included Gusbourne wines receiving a total of seven gold medals as well as a Platinum 'Best in Class' award at the Decanter World Wine Awards and Judges Trophy at the prestigious Texsom competition

Post period end

·     Cellar door operation at Gusbourne's winery and estate in Kent opened for business in July 2017 and is now providing tours, wine tastings and hosting of events to a growing number of visitors

·     Balance sheet strengthened through the conversion of £2.05m of bonds into equity in August 2017

Charlie Holland, Chief Winemaker and Chief Executive Officer commented:

"I am pleased to report on the solid progress made by Gusbourne during the first half of the year, as the Company continues to work towards achieving its long-term plans for sales and production growth over the coming years. We are particularly pleased with the contribution of export sales which have exceeded expectations in the first half of the year. The opening of the Nest (our cellar door operation in Kent), has been well received by visitors and provides an opportunity for visitors to learn first-hand about our vineyard and winery operations as well as our award-winning wines."

Awards

Gusbourne continues to enjoy success in major international wine competitions. In the first half of 2017 Gusbourne won seven gold medals across a number of high profile competitions. The Gusbourne Blanc de Blancs was particularly successful receiving five gold medals and awarded with the Judge's Trophy at the Prestigious Texsom competition in March 2017. Gusbourne was also awarded a Platinum 'Best in Class' medal at the Decanter World Wine Awards ("DWWA") in June 2017 for the Gusbourne Pinot Noir 2015, building on the success of the previous vintage which won this accolade in the 2016 competition.

Financials

Results for the six months ended 30 June 2017

Sales for the period amounted to £378,000 (30 June 2016: £266,000). Whilst these sales reflect an increase of 42% compared to the prior period in 2016, they continue to reflect limited stock availability of earlier year vintages. Administrative expenses of £746,000 (30 June 2016: £678,000) includes increased depreciation of £220,000 (30 June 2016: £164,000) reflecting the increased capital spend and also includes the continuing investment in the development and growth of the business, particularly the Gusbourne brand.

The operating loss for the period was reduced to £549,000 (30 June 2016: £600,000), reflecting revenues increasing at a faster rate than the planned but lower  increase in administrative costs. The loss before tax was £815,000 (30 June 2016: £696,000) after increased finance costs of £266,000 (30 June 2016: £103,000), primarily related to discount expense on outstanding deep discount bonds.

These planned losses continue to be in line with management's expectations and the long-term development strategy of the Group.

Balance Sheet

The changes in the Group's balance sheet during the year reflect expenditure on the ongoing investment in, and development of, the Group's business, net of income from wine sales. This expenditure includes the ongoing investment in the vineyards established in West Sussex and Kent between 2013 and 2015. This investment in vineyards is reflected in capital expenditure during the period of £174,000 (30 June 2016: £124,000).

In addition, the Group invested in additional plant and equipment for the vineyards and the winery during the period amounting to £270,000 (30 June 2016: £198,000) and in buildings (including Assets in the course of construction) of £490,000 (30 June 2016: £372,000).

Total assets at 30 June 2017 of £18,329,000 (30 June 2016: £13,402,000) include freehold land and buildings of £5,527,000 (30 June 2016: £5,538,000), vineyards of £3,396,000 (30 June 2016: £3,072,000), inventories of wine stocks amounting to £2,386,000 (30 June 2016: £1,764,000), and £3,136,000 of cash (30 June 2016: £336,000). Intangible assets of £1,007,000 (30 June 2016: £1,007,000) arose on the acquisition of the Gusbourne Estate business on 27 September 2013.

An important aspect of the Group's balance sheet is the increasing investment in the various assets of the business. The Group's inventories are reported at the lower of cost and net realisable value. These inventories are expected to grow significantly until the Group reaches full production maturity, considering the long production cycle in relation to sparkling wine and related vineyard establishment. The anticipated underlying surplus of net realisable value over cost of these wine inventories, which is not reflected in these accounts, is expected to become an increasingly significant factor of the Group's asset base.

Financing

The Group's activities are financed by shareholders' equity, loans, other borrowings and convertible bonds. Loans, other borrowings and convertible bonds at 30 June 2017 amounted in total to £6,714,000 (30 June 2016: £3,973,000) and represent 61% of total equity (30 June 2016: 46%).

In June 2017, the Company completed an Open Offer with existing shareholders, which was underwritten by the Company's principal shareholder Lord Ashcroft KCMG PC, to raise proceeds of £4.2m (before expenses). The Company simultaneously announced a short-term loan from Lord Ashcroft KCMG PC of £1,000,000 which was offset against Lord Ashcroft KCMG PC's subscription under the Open Offer. The proceeds from this loan and the Open Offer will continue to be applied towards working capital and capital expenditure in line with the Company's long-term strategic plan. On 29 June 2017 the Company announced the completion of this Open Offer and also announced that the Share Capital Reduction to subdivide each of the Company's existing ordinary shares of 50p each into one ordinary share of 1 pence and one deferred share of 49 pence, was now effective.

On 30 June 2017, the Company announced a Conversion Offer to Bondholders to apply to convert their Bonds into new Ordinary Shares in the Company at the Issue Price of 40p. On the 1 August 2017, the Company announced that it had received final acceptances in respect of 5,136,662 Conversion Offer Shares, which represents a conversion of approximately 46 per cent of the outstanding Bonds and a Conversion Value of approximately £2.05 million, improving the strength of the Company's balance sheet through reduced borrowings. Following the admission on the 2 August, the company has 39,366,984 ordinary 1p shares trading on AIM.

The achievement of the Group's long-term development strategy will depend on the raising of further equity and/or debt funds to achieve those goals. The production of premium quality wine from new vineyards is, by its very nature, a long-term project. It takes four years to bring a vineyard into full production and a further four years to transform these grapes into Gusbourne's premium sparkling wine. Additional funding will be sought by the Company over the coming few years to fund ongoing growth in the Company's operations and asset base, in line with its development strategy.

For further information contact:

Gusbourne Plc

Andrew Weeber                                                          +44 (0)1233 758 666                            

Cenkos Securities plc

Nicholas Wells                                                             +44 (0)20 7397 8920

Note: This announcement and other press releases are available to view at the Company's website: www.gusbourneplc.com

Note to Editors

Gusbourne PLC ("the Company") is engaged, through its wholly owned subsidiary Gusbourne Estate Limited (together the "Group"), in the production and distribution of a range of high quality and award winning English sparkling wines from grapes grown in its own vineyards in Kent and West Sussex. The majority of the Group's mature vineyards are located at its freehold estate at Appledore in Kent where the winery is also based. The Group has a total of 231 acres of vineyards.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2017

			Unaudited		Unaudited		Audited
		Six months to		Six months to			Year ended
		30 June			30 June	31 December
	Notes		2017		2016		2016
			£'000		£'000		£'000
Revenue			378		266		640
Cost of sales			(164)		(172)		(423)
Gross profit			214		94		217
Fair value movement in biological assets	6		(17)		(16)		-
Fair value movement in biological produce	6		-		-		9
Administrative expenses			(746)		(678)		(1,385)
Loss from operations			(549)		(600)		(1,159)
Finance income	3		-		7		13
Finance expense			(266)		(103)		(382)
Loss before tax			(815)		(696)		(1,528)
Tax expense			-		-		-
Loss for the period attributable to
owners of the parent			(815)		(696)		(1,528)
Loss per share attributable to
the ordinary equity holders of the parent:
Basic and diluted			(3.43p)		(2.94p)	(3.2	(6.46p)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2017

					Unaudited			Unaudited				Audited
					30 June			30 June			31 December
		Notes			2017			2016				2016
Assets					£'000			£'000				£'000
Non-current assets
Intangibles		4			1,007			1,007				1,007
Property, plant and equipment		5			10,743			9,701				9,930
					11,750			10,708				10,937
Current assets
Biological assets		6			389			242				-
Inventories		7			2,386			1,764				2,247
Trade and other receivables					668			352				314
Cash and cash equivalents					3,136			336				1,123
					6,579			2,694				3,684
Total assets					18,329			13,402				14,621
Liabilities
Current liabilities
Trade and other payables					(558)			(765)				(252)
Finance leases					(52)			(41)				(51)
Loans and borrowings		8			(34)			(34)				(34)
					(644)			(840)				(337)
Non-current liabilities
Loans and borrowings		8			(6,524)			(2,144)				(6,322)
Finance leases					(104)			(113)				(130)
Convertible deep discount bonds					-			(1,641)				-
					(6,628)			(3,898)				(6,452)
Total liabilities					(7,272)			(4,738)				(6,789)
NET ASSETS					11,057			8,664				7,832
Issued capital and reserves attributable to
owners of the parent
Share capital					11,924				11,820				11,820
Share premium					4,751				815				815
Merger reserve					(13)				(13)				(13)
Convertible bond reserve					-				95				-
Retained earnings					(5,605)				(4,053)				(4,790)
TOTAL EQUITY					11,057				8,664				7,832

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2017

			Unaudited			Unaudited			Audited
		Six months to months to			Six months to				Year ended
				30 June			30 June	31 December
				2017			2016		2016
				£'000			£'000		£'000
Cashflows from operating activities
Loss for the year/period before tax				(815)			(696)		(1,528)
Adjustments for:
Depreciation of property, plant and equipment				220			164		357
Finance expense				266			103		382
Finance income				-			(7)		(13)
Movement in biological assets				(389)			(242)		-
Fair value movement in biological produce				-			-		(9)
Increase in trade and other receivables				(373)			(91)		(60)
Increase in inventories				(137)			(53)	.	(536)
Increase in trade and other payables				222			603		109
Cash outflow from operations				(1,006)			(219)		(1,298)
Investing activities
Purchases of property, plant and equipment,
excluding vineyard establishment				(760)			(570)		(778)
Investment in vineyard establishment				(174)			(124)		(338)
Net cash from investing activities				(934)			(694)		(1,116)
Financing activities
Repayment of bank loan				(17)			(17)		(34)
Issue of Deep Discount Bond				-			-		4,073
Draw down of short-term loan*				1,000			-		-
Repayment of Convertible Deep Discount Bond				-			-		(1,755)
Finance lease agreements entered into				-			-		53
Repayment of finance leases				(26)			(20)		(46)
Interest paid				(44)			(42)		(82)
Issue of ordinary shares				3,202			-		-
Share issue expenses				(162)			-		-
Net cash from financing activities				3,953			(79)		2,209

CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

For the six months ended 30 June 2017

				Unaudited		Unaudited			Audited
		Six months to Six months to			Six months to				Period to
			30 June				30 June	31 December
			2017				2016			2016
			£'000				£'000			£'000
Net increase/(decrease) in cash and cash equivalents			2,013				(992)			(205)
Cash and cash equivalents at beginning of period			1,123				1,328			1,328
Cash and cash equivalents at end of period			3,136				336			1,123

*Non- cash transaction

The short-term loan of £1,000,000 received in the period to 30 June 2017 was used as part settlement of monies due under the share subscription which completed on 29 June 2017.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2017

Unaudited:	Share capital	Share premium	Merger reserve	Convertible bond reserve	Retained earnings	Total attributable to equity holders of parent
	£'000	£'000	£'000	£'000	£'000	£'000
31 December 2015	11,820	815	(13)	95	(3,357)	9,360
Comprehensive loss for the period	-	-	-	-	(696)	(696)
	______	______	______	______	_____	______
30 June 2016	11,820	815	(13)	95	(4,053)	8,664
	______	______	______	______	______	______
Comprehensive loss for the period	-	-	-	-	(832)	(832)
Convertible bond reserve transferred to retained earnings at redemption	-	-	-	(95)	95	-
	______	______	______	______	_____	______
31 December 2016	11,820	815	(13)	-	(4,790)	7,832

Unaudited:
Share issue	104	4,098	-	-	-	4,202
Share issue expenses	-	(162)	-	-	-	(162)
Comprehensive loss for the period	-	-	-	-	(815)	(815)
	______	______	______	______	_____	______
30 June 2017	11,924	4,751	(13)	-	(5,605)	11,057
	______	______	______	______	______	______

NOTES TO THE ACCOUNTS

For the six months ended 30 June 2017

1      Statement of accounting policies

The interim financial statements have been prepared in accordance with the recognition and measurement principles as adopted by the EU, applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2016 and are consistent with the accounting policies expected to apply in its financial statements for the year ended 31 December 2017.

The financial information for the six months ended 30 June 2017 has not been subject to an audit nor a review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board.  The comparative financial information presented herein for the year ended 31 December 2016 does not constitute full statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The Group's annual report and accounts for the year ended 31 December 2016 have been delivered to the Registrar of Companies. The Group's independent auditor's report was unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. 

Basis of preparation

The Board of the Company continually assesses and monitors the key risks of the business. These risks have not significantly changed from those set out in the Company's Annual Report for the period ended 31 December 2016. The Board has reviewed forecasts and remains satisfied with the Company's funding and liquidity position. On the basis of its forecast and available facilities and cash balances held on the balance sheet, the Board has concluded that the going concern basis of preparation continues to be appropriate.

2      Loss from operations

Loss from operations has been arrived at after charging:

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2017		2016		2016
		£'000		£'000		£'000
Depreciation of property, plant and equipment		220		164		357
Staff costs expensed to consolidated
statement of income		104		127		220

3      Finance income and expenses

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2017		2016		2016
		£'000		£'000		£'000
Finance income
Amortisation of bank loan incentive		-		7		13
Total finance income		-		7		13
Finance expense
Interest payable on borrowings		45		42		82
Amortisation of bank transaction costs		2		3		5
Discount expense on convertible bond		-		58		78
Discount expense on deep discount bond		219		-		122
Settlement amount in excess of carrying value at
redemption		-		-		95
Total finance expense		266		103		382

4      Intangibles

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2017		2016		2016
		£'000		£'000		£'000
Goodwill		777		777		777
Brand		230		230		230
		1,007		1,007		1,007

5      Property, plant and equipment

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2017		2016		2016
		£'000		£'000		£'000
Freehold land and buildings		5,527		5,538		5,543
Plant, machinery and motor vehicles		1,249		1,077		1,119
Vineyard establishment		1,650		1,956		1,472
Mature vineyards		1,746		1,116		1,784
Computer equipment		24		14		12
Assets in the course of construction		547		-		-
		10,743		9,701		9,930

6      Biological assets

Biological assets represent grapes growing on the Group's vines. Once the grapes are harvested they are deemed to be Biological produce and transferred to inventories.

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2017		2016		2016
		£'000		£'000		£'000
Crop growing costs		406		258		488
Fair value of grapes harvested and transferred
to inventories		-		-		(497)
Fair value movement in biological assets		(17)		(16)		-
Fair value movement in biological produce		-		-		9
Fair value of biological assets at the reporting date		389		242		-

The fair value of biological assets at the reporting date is determined by reference to estimated market prices less costs to sell. The estimated market price for grapes used in respect of 2017 is £2,000 (30 June 2016: £2,000) per tonne. The fair value is subject to a discount factor of 50% due to the grapes, as at the reporting date, being approximately 3 months away from being ready for harvest.

A 10% increase in the estimated market price of grapes to £2,200 per tonne would result in an increase of £39,000 in the fair value of biological assets at the reporting date. A 10% decrease in the estimated market price of grapes to £1,800 per tonne would result in a decrease of £39,000 fair value of biological asset (at the reporting date in the fair value of the grapes harvested in the year.

7      Inventories

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2017		2016		2016
		£'000		£'000		£'000
Finished goods		100		157		96
Work in progress		2,286		1,607		2,151
		2,386		1,764		2,247

8      Loans, borrowings and finance leases

		Unaudited		Unaudited		Audited
		30 June		30 June		31 December
		2017		2016		2016
		£'000		£'000		£'000
Current liabilities
Bank loans		34		34		34
		34				34
Non-current liabilities
Bank loans		2,110		2,144		2,127
Deep discount bonds		4,414		-		4,195
Total loans and borrowings		6,524		2,144		6,322

The bank loan of £2,025,000 carries interest at an annual rate of 3% over Barclays Bank plc base rate and is due for repayment in full in September 2018. It is secured by way of a fixed charge over the Group's land and buildings at Appledore, Kent and a floating charge over all other property and undertakings.

Other bank loans of £119,000 carry a fixed interest rate of 6% per annum secured against certain items of plant and equipment. This loan is repayable via monthly instalments over 5 years.

The deep discount bond was issued on 2 September 2016 for a subscription price of £4,073,034. The bond is redeemable on 15 August 2021 and attracts a coupon rate of 9% per annum which is rolled up annually.  The bond is secured by a fixed charge over the Group's land and buildings at Appledore, Kent. The final redemption amount of the deep discounts bonds is £6,266,868.

On 30 June 2017, the Company announced a Conversion Offer to Bondholders to apply to convert their Bonds into new Ordinary Shares in the Company at the Issue Price of 40p. On the 1 August 2017, the company announced it received final acceptances in respect of 5,136,662 Conversion Offer Shares, which represents a conversion of approximately 46 per cent of the outstanding Bonds and a Conversion Value of approximately £2.05 million. The final redemption amount of the deep discounts bonds following the conversion is £3,390,046.

9      Share capital

	Ordinary shares of 50p each	Deferred shares of 49p each	Ordinary shares of 1p each
	Number	Number	Number	£'000
At 1 January 2017	23,639,762	-	-	11,820
Subdivision of Ordinary shares of 50p each	(23,639,762)	23,639,762	23,639,762	-
Issued for cash during the period	-	-	10,506,560	105
At 30 June 2017	-	23,639,762	34,146,322	11,925

On 29 June 2017 each ordinary share of 50 pence each in the capital of the Company was divided into one ordinary share of 1 pence and one deferred share of 49 pence. The ordinary shares of 1 pence each have the same rights as the previous ordinary shares of 50 pence each. The deferred shares of 49 pence each have no rights attached to them.

On 29 June 2017, by way of an Open Offer announced by the Company on 6 June 2017, the Company issued 10,506,560 ordinary shares of 1 pence each at a price of 40 pence per share.

10    Post balance sheet events

On 20 July 2017, the Company announced the issue and allotment of 42,000 new ordinary shares of 1p each in the Company to Charlie Holland, Chief Executive Officer, and 42,000 new ordinary shares of 1p each to Jon Pollard, Chief Operating Officer. The admission occurred on the 25 July 2017. On 30 June 2017, the Company announced a Conversion Offer to Bondholders to apply to convert their Bonds into new Ordinary Shares in the Company at the Issue Price of 40p. On the 1 August 2017, the Company announced it received final acceptances in respect of 5,136,662 Conversion Offer Shares, which represents a conversion of approximately 46 per cent of the outstanding Bonds and a Conversion Value of approximately £2.05 million. Following the admission on the 2 August, the company has 39,366,984 ordinary 1p shares trading on AIM.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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