BARK.L Regulatory News (BARK)

30 December 2022

Barkby Group PLC

("Barkby", the "Group" or the "Company")

Final results for the year ended 2 July 2022

Barkby Group PLC, the diversified business group, announces its audited results for the period to 2 July 2022.

Charles Dickson, Executive Chairman of Barkby, commented:

"We listed on AIM in January 2020, just before the start of the COVID-19 pandemic and have had our first two years as a listed business heavily disrupted by this.

"As we emerged from this period, we have refocused our resources on scaling our existing and established real estate business, with a particular focus on ESG compliant roadside developments in the form of drive-thru's, trade counter, last mile logistics, convenience food and light industrial commercial buildings. As previously announced, we are in the process of exiting our non-core assets and businesses over the coming months in order to focus on the real estate and pubs businesses."

Operational Highlights

Real Estate

· The focus of the Group is to build and scale a high-quality, substantial portfolio of modern, ESG compliant Roadside real estate investments.

· Construction commenced at our commercial schemes at Wellingborough and Maldon.

· Wellingborough is scheduled to complete in January 2023 and it is our intention to hold the development on our balance sheet as an investment as we grow a high-quality commercial property portfolio. The total contracted rent is £234,000 per annum with contracted tenants being Greggs Plc, Formula One Autocentres Ltd, City Plumbing Supplies Holdings Ltd and C. Brewers & Sons Ltd.

· Maldon is scheduled to complete construction by April 2023, we will also hold this development on our balance sheet. The total expected rent is £268,000 per annum with contracted tenants being Costa Coffee Ltd, Formula One Autocentres Ltd, Toolstation Ltd with the remaining unit under offer.

· Sold land at Saffron Waldon for £3.5m following a series of successful planning applications since the land was acquired, resulting in a profit of £2.3m.

Barkby Pub Company

· During the year we increased our estate with the freehold acquisition of The Coach & Horses and post year end we added the tenancy of The Eliot Arms, bringing the estate to nine pubs with 75 bedrooms.

· Revenue increased by £3.3m to £6.0m, with an underlying operating loss of £0.2m excluding depreciation, amortisation, goodwill impairment and interest expense.

· The year was partially disrupted by COVID-19, especially during the important 2021 Christmas period, which was impacted by the Omicron variant.

· Underlying demand for Barkby's premium pub experience and accommodation offer remains strong despite cost of living pressures.

· Majority of our energy contracts were fixed in December 2020 until December 2023, providing protection from the energy cost pressures facing the industry.

Investments

· Due to its focus on Real Estate and pubs, Barkby is in the process of divesting of its portfolio of investment companies and expects to dispose of Workshop Coffee, Centurian Automotive and Cambridge Sleep sciences in 2023.

· Workshop Coffee, Cambridge Sleep Sciences and Centurian Automotive have been accounted for as discontinued operations generating a loss of £3.9m during the financial year.

· Barkby sold its interest in Verso Biosense for £2.6m during the year, generating a small profit.

Outlook

· Going forward, we intend to significantly scale our focused Roadside commercial property business and we are in the process of exploring potential financing solutions.

· We are seeing a significant opportunity to scale our pipeline, and are in negotiations on a number of new Roadside developments and investments. We are targeting increasing our ongoing pipeline to £200m.

· Despite input cost pressures and lower customer disposable income, we remain confident that we have a strong core portfolio to grow our pub business.

· The Group has improved liquidity following the increase in the Tarncourt facility from £5m to £12m, as also announced today.

Financial Highlights

* Continuing operations include Real Estate and Barkby Pubs. Barkby has resolved to sell Workshop Coffee, Cambridge Sleep Sciences and Centurian Automotive, therefore these businesses have been presented as discontinued operations.

** The loss after tax of £9.5m includes an impairment charge of Intangible Goodwill of £6.3m and a loss from discontinued operations of £3.9m.

Annual Report

In accordance with AIM Rule 20, the annual report is available to view on the Company's website: https://www.barkbygroup.com/investors/.

Enquiries:

Notes to editors

Barkby Group PLC is focused on commercial property development and investment, alongside its pubs business. Barkby is in the process of disposing of its Investments (comprising of Workshop Coffee, Centurian Automotive and Cambridge Sleep Sciences).

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

Chairman's Statement

I am pleased to report that Barkby has enjoyed a record year in terms of revenue and EBITDA, with the

Group benefitting from the easing of COVID restrictions and a resulting swing back to EBITDA profitability.

Strategic Focus

We listed on AIM in January 2020, just before the start of the COVID-19 pandemic and have had our first two years as a listed business heavily disrupted by this.

As we emerged from this period, we refocused our resources on scaling our existing and established real estate business, with a particular focus on ESG compliant roadside developments in the form of drive-thru's, trade counter, last mile logistics, convenience food and light industrial commercial buildings. To streamline this focus, we are in the process of exiting our non-core assets and businesses over the coming months.

Our property development business has been active, with our Wellingborough development nearing completion and construction under way at Maldon. We have also exchanged contracts to acquire land for a 30,000 sq ft development in Swindon. During the year we sold a residential development site in Saffron Walden for £3.5m, realising a profit of £2.3m.

Our pub business has now grown to nine sites, including the acquisition of the freehold of The Coach & Horses in Chiselhampton and the post period end acquisition of the tenancy of The Eliot Arms. This pub has been sympathetically refurbished and offers customers a high-class drinking, dining and sleeping experience.

Due to wider macroeconomic factors, we have significantly increased the cost of capital assumption used in our impairment tests. This has resulted in the intangible goodwill that arose on the acquisition of our pub business being written down, despite a positive performance from the underlying business in the year.

Outlook

Despite further economic challenges, we believe there is a strong opportunity to expand our commercial property expertise to become a successful Roadside real estate asset manager. This strategy would see Barkby retain its own commercial property developments on balance sheet as well as identifying buying opportunities in the changing UK property investment market.

Underlying demand for our traditional pub experience also remains strong, despite cost of living and input cost pressures. We believe there will be good opportunities to acquire further pubs that are within our operating criteria, and are considering the future strategy for Barkby Pubs.

Finally, I would once again like to recognise our most important attribute, our people, who have demonstrated solidarity and commitment across the group. Despite substantial changes within the business, and the impact of events outside our control, I have been hugely impressed and proud of the attitudes shown across all Barkby teams. I have full belief and confidence in our teams and their ability to deliver the group's potential for success.

Business and Financial Review

The commercial property development pipeline progressed significantly during the year, with two schemes now under construction and the completion of the sale of a residential site for £3.5m.

Barkby has traditionally maintained a development pipeline of at least £30m gross development value. We are now looking to significantly scale our focused Roadside commercial property business and aim to increase our pipeline to £200m over the next 12 months.

As we are in the process of restructuring the Group, including the disposal of Centurian Automotive, Workshop Coffee and Cambridge Sleep sciences, we have also reviewed our support functions to ensure they are appropriate for the group going forward.

Our pub business acquired one new site during the year and has subsequently signed a tenancy agreement for the Eliot Arms in South Cerney. This brings the total number of pubs operated to nine. Transaction levels have remained in line with expectations; however we have had to balance rising input costs, labour market shortages and selling prices against a delicate background of consumer confidence.

Property Development

Barkby Real Estate sources and develops commercial property schemes predominantly based in the South-East of England. Barkby specialises in roadside developments including mixed-use trade and retail parks with retail warehouses, logistics, storage, industrial, leisure and quick food service.

COVID-19 caused delays to the commencement of some planned developments, with tenants taking longer than normal to agree commercial terms. More recently, land acquisition and development deals

have now been impacted by macroeconomic conditions, including an increase in interest rates, inflation and concerns that the UK will experience a short recession. However, this has created some excellent acquisition opportunities and there remains a strong interest in the Group's upcoming schemes from tenants.

The Government has published proposals for reform of the land use planning system. The most significant changes aim to improve the slow and complex system of local development plans. We believe that future legislation has the potential to reduce development timeframe and associated costs.

COVID-19 accelerated some of the existing underlying real estate trends, such as increased online delivery and working from home. Demand for logistics space has also been significant. Whilst this has generated changes in tenant demand in some sectors, others have remained relatively insulated or seen growth.

Due to our flexible, tenant-led approach, Barkby can focus its activity to match tenant demand. We have

seen a shift away from traditional retail parks, however demand from trade and quick service food tenants has been robust.

We have particularly strong experience in roadside retail developments, which has been the focus of recent developments and we believe provides a strong pipeline of opportunities.

Each development project takes approximately 18-24 months to complete, therefore many tenants adopt long-term views in their expansion strategies.

Barkby follows a capex light business model to de-risk the development process and ensure clear financial visibility over the lifecycle of each scheme. Barkby does not purchase land speculatively, it acquires land under purchase agreements that are subject to obtaining the required planning consents for the scheme.

Our tenant-led approach built on established relationships with a broad range of national occupiers and other key tenants. This gives clear visibility of potential tenant's geographical growth strategies and allows Barkby to confirm tenant interest in a proposed scheme at an early stage.

A pre-let threshold of 70 per cent is targeted before commencing construction. By way of example, typical tenants of Barkby schemes include Aldi Stores Limited, Greggs Plc, Costa Limited, MKM Building Supplies Limited, Travis Perkins plc, Halfords Group Plc.

In line with its tenant-led approach, Barkby adopts a pro-active approach to land acquisitions. This approach can require a land-assembly of multiple parcels of land and often includes off-market purchases.

Once a contracted development site has been obtained, planning applications are submitted and prospective tenants execute 'agreement to lease' documentation. After planning has been granted and the future tenants are legally committed to the scheme developments are often forward funded with institutional buyers, who fund costs incurred to date and commit to fully fund construction through to completion via monthly payments. The scheme is then built on a fixed price contract. In some instances, development finance is used before selling the completed scheme.

The completed scheme is then delivered to the tenant to fit out at practical completion. Previously, Barkby would sell the scheme to an institutional buyer at this point. However, Barkby is now focusing on retaining its developments and building a portfolio of high quality roadside retail investments. Barkby's projects target a gross development value of between £3.0m and £20.0m and a minimum EBITDA margin of 20 per cent on each project. Barkby has traditionally maintained a development pipeline totalling at least £30m gross development value. We are now looking to significantly scale our focused Roadside commercial property business and will aim to increase our pipeline to £200m over the next 12 months.

Revenue and costs are recognised across the life of each scheme and can often span multiple financial

periods. Following the acquisition of land, successful planning applications and contractual engagement

with tenants during the financial year we recognised an uplift in the value of our development investment properties by £1.2m.

We also sold land at Saffron Waldon following a series of successful planning applications since the land was acquired. The sale was completed for £3.5m, resulting in a profit of £2.3m.

Barkby Pubs

Barkby operates premium pubs with rooms located in the Cotswolds, Oxfordshire and West Sussex. This segment of the market maintains a traditional commitment and passion for high quality pub experiences, therefore our customer transaction levels and gross spend has remained robust, alongside the demand for stays in attractive properties that are located in areas of natural beauty.

Barkby Pubs' proposition is led by excellence in food and service, showcasing the best of English produce, alongside a passion for creating memories and delivering incredible hospitality. Barkby Pubs seeks to create premium individual pubs with accommodation to address the trend away from branded pubs and large hotels. Barkby offers market-leading pub food and exemplary service, providing classic and sophisticated modern British cuisine with seasonal and artisan ingredients alongside local produce.

Our focus is to maintain the individual character and uniqueness of each location, whilst implementing operational best practice. In the next 12 months, we are focused on improving labour planning and efficiency as well stock control processes and reporting systems. These activities are expected to increase the underlying profitability across the estate.

Following the opening of the Coach & Horses during the year and the Eliot Arms since year end, Barkby

Pubs now operates nine premises, with a total of 75 rooms. Each pub has its own website to take bookings, display menus, advertise upcoming events and promote their unique atmosphere. Marketing is managed centrally with regular newsletters and local media as well as increased social media presence and digital storytelling to create an authentic connection with our customers.

COVID-19 continued to impact this financial year, with the Omicron variant having a significant impact on the key Christmas trade period. However, there have not been any further lockdowns or enforced closure for some time and therefore trade is returning to more normalised levels. The rural location of our pubs has provided some insulation from the industrial action and train strikes that have impacted city-centre venues.

Geopolitical and macroeconomic factors have had a significant impact on input costs, with increases in food and utility costs, alongside a shortage of hospitality workers, especially in relation to skilled back of house roles. At the same time, cost of living pressures have limited the extent to which consumer prices can be increased, and we have maintained our commitment to quality and value in our menu and pricing decisions.

Revenue increased by £3.3m to £6.0m in 2022, with an underlying operating loss of £0.2m excluding depreciation, amortisation, goodwill impairment and interest expense (2021: loss of £0.1m). This is predominantly due to the impact of new site openings, which take a period of time to reach maturity and generate target operating profits. The results have also been impacted by spikes in input costs and disruption in labour, resulting in the temporary employment of agency workers. There is a clear plan to achieve target operating margins in the coming period.

We continue to look for premium pubs with rooms in our target geographies. It is our intention to grow the portfolio to 20 pubs by the end of the 2025 financial year.

Investments

Barkby's diversification has provided elements of value across the Group, especially during the disruption caused by COVID-19. However, the Board believes that there are improved immediate opportunities in the property development business and has therefore intends to focus Group resources to maximise these opportunities.

Due to its focus on Real Estate and pubs, Barkby is in the process of divesting of its portfolio of investment companies. Its investment in Verso Biosense was disposed of during the financial year, and it expects to dispose of Workshop Coffee, Centurian Automotive and Cambridge Sleep Sciences in 2023.

As a result of this decision, Workshop Coffee, Cambridge Sleep Sciences and Centurian Automotive have been accounted for as a disposal group and their financial result has been presented as discontinued operations in the Profit & Loss account. The disposal group generated a loss of £3.9m during the financial year.

Barkby also sold its interest in Verso Biosense for £2.6m during the year, generating a small profit.

Liquidity and Going Concern

Following the impact of COVID-19 and a re-assessment of strategic focus and opportunities, Barkby Group's strategy is now focused on the opportunities that it believes are the most cash generative in the long term, Real Estate and Barkby Pubs. This significantly reduces the cash investment previously required by the early-stage growth business Cambridge Sleep Sciences, and the cash outflows of Centurian Automotive and Workshop Coffee. Accordingly, Cambridge Sleep Sciences, Centurian Automotive and Workshop Coffee have been presented as discontinued operations. The continuing operations of Real Estate and Barkby Pubs generated positive Profit After Tax of £690,000 during the period excluding a one-off charge for impairment of goodwill.

The Board has managed cash tightly despite the disruption caused by COVID-19 over the last two accounting periods. Cash headroom has been increased by refinancing the £5m Tarncourt facility into a new £12m facility with an extended expiry date of 30 June 2024, as also announced today.

The Group has net cash available of c. £7m, including the revised Tarncourt facility, as of December 2022. In addition, the Board have taken the steps of consulting with major shareholders regarding a potential equity raise and our major shareholders have confirmed their continued support should this become necessary.

Going forward, it is our intention to retain our property developments. This will strengthen the Group's Balance Sheet with high quality investment property assets and provide a reliable and recurring cash flow going forward. This also gives Barkby the opportunity to sell these assets to generate positive cash flow if required.

Despite significant progress being made, the disposal of the discontinued operations has not yet completed, therefore the board has prepared a profitability and cash flow forecast to December 2023 that includes all Group companies and reflects a severe but plausible downturn scenario. We expect all discontinued operations to be fully disposed of by the end of the current financial year.

A key feature of Barkby's businesses is that they have a low fixed cost base. Our Real Estate Business and Group function is predominantly flexible costs with no central premises and limited fixed overheads. Our pub workforce is predominantly comprised of employees on flexible contracts.

Barkby is in the process of a strategic restructuring, which will result in its focus being solely on its most cash generative business units. In addition, Barkby will hold its commercial property developments going forward, providing a reliable source of recurring income and cash flow, as well as high quality investment property assets with equity value that can be unlocked via sale if needed. Despite the disruption of the last few years and the current macro-economic uncertainty, management considers that Barkby's pub business is well positioned for a return to profitability and that the Group is in a strong position to benefit from long term customer loyalty and demand. Based on its profitability and cash flow forecasts that incorporate assumptions that reflect a severe but plausible downturn scenario the directors consider going concern basis of preparation to be an appropriate basis for the preparation of these financial statements.

Notes to the financial statements

Note 1. Company information

The consolidated financial statements of Barkby Group Plc for the year ended 2 July 2022 were authorised for issue in accordance with a resolution of the directors on 29 December 2022. Barkby Group Plc is a public limited company incorporated and domiciled in the UK. The company's number is 07139678 and the registered office is located at 115b Innovation Drive, Milton, Abingdon, Oxfordshire OX14 4RZ.

The Group's principal continuing activities consist of real estate investment and development and Barkby Pubs. During the year ended 2 July 2022, the Group decided to dispose of its Investments businesses consisting of Workshop Coffee (a speciality coffee roaster), Centurian Automotive (a premium used car dealership) and Cambridge Sleep Sciences, (manufacturer of SleepHub) which are therefore shown as discontinued activities in these financial statements consumer and hospitality businesses and life sciences.

Note 2. Significant accounting policies

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

New or amended Accounting Standards and Interpretations adopted

The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the International Accounting Standards Board ('IASB') that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Basis of preparation

These consolidated financial statements of Barkby Group Plc (or "the Group") have been prepared in

accordance with UK adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006.

Accounting periods

The financial statements have been prepared covering the financial year ended 2 July 2022, in accordance with the Group's new policy of drawing up financial statements to the nearest Saturday to the Group's accounting reference date of 30 June. Previously, the Group drew up financial statements to the nearest Thursday to 30 June. As a result the financial year consists of a 52 week and 2 day period (prior year: 52 weeks). The change to a Saturday was as a result of outsourcing the accounting for the Pub business, aligning the operational week with the outsourcer's existing process.

Therefore, the Group's consolidated financial statements cover the financial year from 2 July 2021 to 2 July 2022, with comparative financial information covering the financial year (52 weeks) 3 July 2020 to 1 July 2021.

Historical cost convention

The financial statements have been prepared under the historical cost convention, except for certain assets and liabilities that are held at fair value and are detailed in the Group 's accounting policies. The consolidated financial statements are presented in Pounds Sterling, which is Barkby Group Plc's functional and presentation currency and all values are rounded to the nearest thousand (£'000s) unless otherwise stated.

Critical accounting estimates

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.

Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Barkby Group Plc ('company' or 'parent entity') as at 2 July 2022 and the results of all subsidiaries for the period then ended. Barkby Group Plc and its subsidiaries together are referred to in these financial statements as the 'Group'.

Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses incurred by the Group are only attributed to the non-controlling interest to the extent to which they can be recovered from those parties.

Discontinued operations

The Group classifies disposal group as held for sale if their carrying values will be recovered principally through a sale transaction rather than through their continuing use. Disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of a disposal group, excluding finance costs and income tax expense.

The criteria for classifying a disposal group as held for sale is regarding as having been met only when a sale is highly probably and the disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be reversed. Management must be committed to the plan to sell the asset and the sale is expected to be completed within one year from the date of classification.

A disposal group qualifies as discontinued operations of it is a component of an entity that either has been disposed of, or is classified as held for sale and:

• Represents a separate major line of business

• Is part of a single co-ordinated plan to dispose of a separate major line of business.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss and comprehensive income. All other notes to the financial statements include amounts for continuing operations unless otherwise stated.

Following decisions of the Board in June 2022, the Group issued a Trading and Strategy update announcing that the Board had resolved to sell the Workshop Coffee, Cambridge Sleep Sciences and Centurian Automotive businesses. The Group has therefore committed to a plan to sell these businesses, which are available for immediate sale and programmes to locate buyers for each business have been initiated. The directors expect to sell the businesses within the next financial year (ended 30 June 2023).

As a result of this announcement the financial results of the businesses being disposed of our presented as discontinued operations in the statement of profit or loss and total comprehensive income, with their assets and liabilities being presented as assets of disposal groups held for sale and liabilities of disposal groups held for sale in the consolidated statement of financial position.

In addition, the comparative information in the statement of profit or loss and total comprehensive income has been re-stated to show these businesses as discontinued for the year ended 1 July 2021.

Note 3. Post Balance Sheet Events

Tarncourt Facility

As also announced today, the Group agreed to re-finance the existing Tarncourt Facility from £5m to £12m with expiry being extended from 30 June 2023 to 30 June 2024.

The Board considers that no other material post balance sheet events occurred between the end of the period and the date of publication of this report.