BARK.L Regulatory News (BARK)

31 March 2021

The Barkby Group PLC

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

Final Results

The Barkby Group PLC, the diversified business group, announces its audited results for the period to 2 July 2020.

Charles Dickson, Executive Chairman of The Barkby Group Plc, said: 

"2020 was a transformational year for Barkby following the combination of the Dickson controlled entities and The Barkby Group Plc. Barkby has weathered the COVID-19 pandemic, largely due to the success of our highly cash generative commercial property development business. As we come out of lockdown, we believe our pubs and coffee business are poised for significant growth and a return to profitability. Both SleepHub and Verso Biosense continue to make impressive strides and we are very excited by the future of both of these businesses. Our liquidity is strong and the diversification of the business means that the Group is in a strong position to benefit from the lifting of government lockdown restrictions. We look forward to the next 12 months with confidence."

Financial Highlights

* The 2020 result was significantly impacted by COVID-19. In addition to this, the P&L included £230k of one-off acquisition costs and £293k of start-up costs for Cambridge Sleep Sciences.

** figures are for as the Dickson Controlled Entities only, acting as the consolidator, and exclude The Barkby Group 2019 Financial Result.

Operational Highlights

Reverse Takeover

Hospitality and Consumer

Commercial Property Division

Verso Biosense

SleepHub

Outlook

Annual Report

Interim Results Extension

Barkby advises that it will publish its interim results for the period ended 31 December 2020, no later than 30 April 2021.

As announced by the London Stock Exchange on 9 June 2020 and reconfirmed on 27 January 2021, AIM companies that require extra time to prepare their half-yearly reports are permitted a temporary extension of an additional one-month period, in addition to the standard three-month reporting timeframe under AIM Rule 18 of the AIM Rules for Companies. This extension is due to the continued disruption caused by the COVID-19 pandemic.

Enquiries:

Notes to editors

The Barkby Group PLC is a diversified group of high growth, high quality businesses run by an entrepreneurial and experienced management team. The existing wholly owned businesses within Barkby include; Commercial Property Development, Barkby Hospitality (comprising Barkby Pubs and Workshop Coffee) and Centurian Automotive Ltd.

In addition to these businesses, Barkby Life Sciences has invested in Verso Biosense, a digital health company aiming to transform Women's Health with precision medicine, and Barkby's subsidiary Cambridge Sleep Sciences Ltd has launched, SleepHub™, a device which improves and facilitates natural sleep.

Barkby's strategy is to accelerate and maximise opportunities within its existing businesses as well as continue to source and invest in cash generative, growth businesses with the ability to disrupt.

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

The 2020 financial year was transformational for Barkby following the combination of the Tarncourt property business and Workshop Coffee into Barkby's existing pub and automotive businesses, as well as expansion into Life Sciences business with exceptional market potential.

At the point of the Reverse Takeover, Barkby moved from the NEX market to the AIM Market in January 2020 ("AIM Admission") and raised £5m of new capital to further expand the Group. Despite facing some of the most challenging trading conditions experienced in many years, the Group has completed its initial integration and has a clear pathway to generate significant value for shareholders.

Barkby has weathered the COVID-19 pandemic largely due to the success of our highly cash generative commercial property development business and activity has resumed apace.

Our diversified structure and strategy has allowed us to support the most heavily impacted businesses without a significant increase in external bank debt since the acquisition. During the year, the Dickson family provided £2.0m of funding via the Tarncourt lending facility, which was put in place at the point of AIM Admission, and subsequently increased this facility to £5m to provide further liquidity.

Outlook

Whilst the periods of lockdown and trading restrictions have been challenging, Barkby has taken the opportunity to develop and grow the sub-Board management team, establish improved systems and processes, and prepare its own roadmap to unlocking the exciting potential across the Group.

As previously reported, our property development pipeline is well established, and several key developments are ready to build. Furthermore, we are continually exploring further opportunities for this division and are currently in legal negotiation to acquire a further development site in the South East.

Our pubs and coffee business are poised for significant growth and a return to profitability as the Government's lockdown restrictions ease. The Group's investments in SleepHub and Verso Biosense are progressing well, with the latter recently announcing an exciting product collaboration agreement with Homerton University Hospital. The diversification of the business means that the Group is in a strong position to benefit from the lifting of government lockdown restrictions, and we look forward to the next 12 months with confidence.

I would like to thank all our customers, suppliers, landlords, lenders and shareholders for their continued support during what has been a testing period for all.

Finally, I would like to recognise our most important attribute, our people, who have demonstrated solidarity and commitment across the Group. Despite substantial changes within the businesses, and the impact of events outside our control, I have been hugely impressed and proud of the attitudes shown across the 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 2020 results include Real Estate and Workshop Coffee for an extended period, with the trading of the existing Barkby businesses included from 7 January 2020.

The 2020 financial year provided many highlights for The Barkby Group as it expanded its pub and automotive businesses into a larger group that now includes Real Estate, Workshop Coffee and a growing Life Sciences division.

Following AIM Admission in January 2020, Barkby had only a brief period as an enlarged Group before the COVID-19 pandemic impacted trading. It is therefore difficult to provide meaningful analysis of underlying trade during this period.

Barkby adopted a conservative approach to financial control during the pandemic, balancing cost control and cash preservation with the delivery of planned initiatives to improve our businesses. Focusing on our business planning has supported our view that the enlarged Group provides financial, strategic and operational benefits beyond the capacity of each individual business.

We have utilised the UK Government's Furlough scheme to support our workforce during the periods in which we were unable to trade and provided additional top-up payments to support team members who may not have been eligible under the scheme. We have an engaged team that is passionate and focused on delivering against targets and improving profitability in future trading periods as we deliver exceptional service to our customers.

Property Development

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

As a result of the COVID-19 pandemic, land acquisition deals have become easier with less competition from buyers. We believe this is partly driven by lower activity levels as well as a perceived uncertainty over future tenant demand and the time required to agree leases.

The UK Government has published fresh proposals for radical 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.

The COVID-19 pandemic has accelerated some of the existing underlying real estate trends, such as increased online delivery and working from home. Whilst this has added some uncertainty to tenant-demand in certain 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. Each development project is expected take approximately 18-24 months to complete, therefore many tenants adopt long-term views in their expansion strategies.

COVID-19 has resulted in delays to the commencement of some planned developments, with tenant's contracts taking longer than normal to agree commercial terms. However, there remains a strong interest in the Group's upcoming schemes from tenants.

Construction work at our Hastings development, which is anchored by Aldi Stores, Greggs and Costa Coffee, completed in June 2020 and practical completion was granted in August 2020. Hastings Borough Council completed their purchase of the site, resulting in a net balancing payment receipt to Barkby of £1.8m received post year end.

Hospitality & Consumer

Barkby Pubco

The hospitality market has been significantly impacted by COVID-19. Industry representative bodies have repeatedly highlighted the financial difficulties faced by all operators and the risk that many venues may not survive.

This has particularly hit wet-led pubs, those dependent on office-workers and businesses that promote congested use of space such as music venues, late-night bars and nightclubs.

Barkby operates premium pubs with rooms located predominantly in the Cotswolds and West Sussex. We anticipate this segment of the market to be one of the earliest to recover when trading restrictions are lifted in 2021. This is due to our large footprint properties that are able to operate in a COVID-secure way with minimal interruption. We also anticipate increased demand for domestic holidays from UK residents as a result of reduced confidence and appetite for international holiday travel alongside enforced travel restrictions.

Barkby has invested in developing its people, systems and processes so that it is ready to expand rapidly and acquire further sites. We have developed a site acquisition methodology to ensure new pubs fit our operational model and required financial returns. We will target a combination of leasehold and freehold acquisitions.

Following AIM Admission on 7 January 2020 and the impact on trading of COVID-19 it is difficult to ascertain the underlying performance of the business during this period. The consolidated financial statements include a brief period of normal trading in the months of January and February 2020, which are normally the quietest trading months of the year.

The impact of the pandemic was then experienced from early March after reports of the spread of COVID-19 and government advice to avoid social contact. This was followed by an enforced lockdown announced from 23 March 2020. Therefore, COVID-19 impacted at least 17 weeks of trading, with 15 weeks spent under enforced closure. This impacted the key spring and early summer trading periods, during which a significant portion of annual profits are normally earned.

We have worked hard to maintain good communication and work in a collaborative way with our employees, suppliers and landlords during this difficult time.

The pub business made an operating loss of £0.5m during the 25 week period from the reverse takeover until the year end.

After the year end, Barkby added The Harcourt Arms to its portfolio on a leasehold basis. The Harcourt Arms is a 17th century village pub that holds 2 AA Rosettes and 5 AA Gold Stars. The property has been fully refurbished to the highest standards and provides nine high-quality letting rooms and one master suite.

We continue to look for premium pubs with rooms in our target geographies and are in negotiations on several potential sites. It is our intention to grow the portfolio to 12 pubs by the end of the 2023 financial year.

Workshop Coffee

Workshop Coffee is a speciality coffee roaster that operates through multiple sales channels including wholesale, direct to consumers via an online webshop and subscription service, and four coffee shops located in central London.

As with Barkby's pub business, Workshop Coffee was also significantly impacted by the COVID-19 pandemic. Independent coffee shops, hotels and other hospitality customers have been forced to close during the national lockdown periods, impacting Workshop's wholesale revenues.

As working-from-home became a requirement, home delivery sales increased significantly. This created a strong market opportunity for Workshop with its existing Webshop, subscription customers and strong digital presence.

With significant reductions in London footfall, we remain cautious about reopening our retail stores. Two of the four units were re-opened after the year-end, with reduced trading hours and a focus on cost control. We will monitor the number of workers, shoppers and tourists returning to central London before re-opening our coffee shops.

Workshop made sales of £2.9m in the 15 months to June 2020 (12 months to March 2019: £2.3m) and generated an Operating loss of £0.8m (12 months to March 2019: £0.8m).

Gross margin was 38% due to a lower proportion of the sales mix coming from retail sales, where the operating model generates higher margins.

Centurian Automotive

Centurian Automotive is a Luxury and Supercar automotive dealership with a fast growing and differentiated online digital presence.

Centurian distinguishes itself within the Automotive industry with its innovative customer journey and customisable product.

Centurian's client base has been established over 14 years and boasts a substantial, loyal customer list as well as engaging with new and aspirational future clients through its social media platforms.

Trading trends have been impacted by COVID-19 due to changes in consumer behaviour alongside enforced trading restrictions. However, out of the crisis has come an advancement in innovation, with new online used car advertising platforms emerging to compete with established websites and the launch of home-delivery services.

Centurian sales and cash flow remained robust despite the trading restrictions. The business generated sales of £4.0m in the 25 week period from the date of the reverse take over until the year end. An average margin of 6.5% was made on car sales, compared with a typical reported UK average of 4.9%. Centurian generated a net loss for the 25 week period of £153k.

Life Sciences

Cambridge Sleep Sciences

During the year, Barkby acquired the intellectual property rights to develop a device that delivers scientifically formulated sounds to improve and facilitate natural sleep. The "SleepHub" product was subsequently launched in November 2020.

The importance and benefits of sleeping patterns continue to be an area of focus in health and wellness. The market is relevant to both those with sleeping dis-orders as well as people wanting improvements in every-day sleep.

Since launch, SleepHub has received positive reviews in major publications including The Telegraph, The Daily Mail and Metro. SleepHub has also featured in magazines such as Ideal Home alongside a number of health and wellbeing titles.

We have recently established sales partnerships with British Airways, Virgin Atlantic, the Defence Portal and Blue Light Card and have a pipeline of additional sales partners lined up. SleepHub is due to launch on Amazon in March, following the completion of a distribution agreement with Softline UK.

We have also engaged with several major sports teams and brands who recognise the benefits of sleep for elite performance athletes, with trials commencing over the coming months.

There are significant opportunities in the Healthcare space and CSS intends to carry out additional clinical studies within the coming year to clinically validate the benefits of our technology. We are also specifically looking at trialling the device in disease areas where insomnia is a significant symptom. We have seen some positive early sleep improvement signals in patients with Parkinsons Disease and have entered into a collaboration agreement with Parkinson's Concierge to explore this further.

Cambridge Sleep Sciences incurred development, marketing and administrative costs totalling £293k during the period.

Investment in Verso Biosense Ltd (formerly known as Vivoplex)

Our female health investment has now been rebranded to Verso Biosense ("Verso"). Verso has continued to make good progress since Barkby's initial investment of £2.0m in January 2020.

Engineering breakthroughs have led to major improvements in chip sets, monitoring functions, electronics and garment design. The team will move into a clinical study in Q2 2021 and are looking to sign up commercial and clinical partners during the first half of 2021.

The discovery of novel, new data in the uterine environment for the very first time has huge potential to unlock meaningful patient data, changing diagnostic paradigms and optimising treatments across IVF/fertility, endometriosis, fibrosis, menopause and oncology. The broadening of disease areas that Verso's wireless powered battery free uterine monitoring platform can address has shown the commercial opportunity to be very significant.

A further investment of £500,000 was made in August 2020 in the form of a Convertible Loan Agreement.

COVID-19 Pandemic, Liquidity and Going Concern

The Barkby Group PLC is a diversified group of high growth businesses run by an entrepreneurial and experienced management team. The group structure aims to combine stable, cash generative businesses with growth potential alongside high growth opportunities with exceptional market potential and the ability to disrupt.

In the second half of the financial year and since the reporting date, Barkby's hospitality and consumer division was impacted by the COVID-19 pandemic due to its impacts on consumer behaviour as well as enforced trading restrictions. Barkby has weathered the COVID-19 pandemic largely due to the support of its cash generative commercial property development business.

The Board has managed cash tightly through all three national lockdowns and has increased cash headroom by refinancing the £3.5 million Tarncourt facility into a new £5 million facility with an expiry date of 30 June 2023. Furthermore, the Group has taken a £0.45 million loan secured against the freehold of the Wellingborough site from James Dickson, a significant shareholder in the Company. The Group currently has net cash available of c. £1.5 million as at March 2021. In addition, the Board have taken the steps of consulting with their major shareholders regarding a potential equity raise should current restrictions remain in place beyond Spring and our shareholders have confirmed their continued support should this become necessary.

Despite the Board's optimism that the road map out of lockdown is on track, and view that its businesses are well positioned to perform well from June 2021, we are still in a period of significant economic uncertainty. The Board has therefore prepared a profitability and cash flow forecast to June 2022 for each business incorporating assumptions that reflect a severe but plausible downturn scenario. This scenario assumes limited trading until the end of June 2021, and therefore that the Group will continue to manage its cash burn at its current rate.

A key feature of Barkby's businesses is that it has a low fixed cost base. The property development business has predominantly flexible costs. Centurian operates from a unique showroom setting that carries a lower cost than typical car dealerships. The hospitality businesses have engaged closely with landlords and brewers and agreed rent reductions to compensate for restricted trade. The Group's workforce is predominantly comprised of employees on flexible contracts and the ongoing support of the Furlough scheme is confirmed until September 2021.

During the COVID-19 pandemic, Barbky's diversification has been a significant strength enabling financial and operational support across the Group. Barkby benefited from its diversity, with longer-term property development projects providing positive cash flow to support the most impacted businesses. As we come out of lockdown, management considers that the pubs and coffee business are well positioned for a return to profitability and that the Group is in a strong position to benefit from the lifting of government lockdown restrictions. Based on its profitability and cash flow forecasts for each business incorporating 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 The Barkby Group Plc for the period ended 2 July 2020 were authorised for issue in accordance with a resolution of the directors on 31 March 2021. The 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 activities consist of real estate development, 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 The Barkby Group Plc (or "the Group") have been prepared in accordance with International Financial Reporting Standards ('IFRS'), as issued by the International Accounting Standards Board (IASB).

In accordance with IFRS 3, these financial statements have been prepared as a reverse acquisition of The Barkby Group Plc by the Dickson Controlled Entities, see note 32 for more details. Therefore, although these consolidated financial statements have been issued in the name of The Barkby Group Plc, the legal acquirer, the Group's activity is in substance, the continuation of the financial information of the Dickson Controlled Entities, to which the comparative financial information presented, for the year ended 31 March 2019 (the accounting period end for the Dickson Controlled Entities) relates. The consolidated financial statements comprise the results of the Dickson Controlled Entities for the full year, and the results of The Barkby Group Plc from 7 January 2020, the date of the reverse acquisition.

The Dickson Controlled Entities previously prepared standalone financial information for the year ended 31 March 2019. The Dickson Controlled Entities did not in the past form a legal group. As a result, the combined financial information was prepared by aggregating financial information of the Dickson Controlled Entities. The financial information included as comparatives within these consolidated financial statements does not constitute statutory accounts, but has been prepared under IFRS and in accordance with the group accounting policies disclosed.

Accounting periods

The financial statements have been prepared covering the financial period ended 2 July 2020, in accordance with the Group's policy of drawing up financial statements to the nearest Thursday to the Group's accounting reference date of 30 June.

The accounting reference date changed in the financial period. The Dickson Controlled Entities' previous accounting reference date was 31 March, and The Barkby Group Plc's and Centurian Automotive Limited's were 31 May.

Therefore, the Group's consolidated financial statements cover the financial period from 1 April 2019 to 2 July 2020, with comparative financial information (of the aggregated Dickson Controlled Entities) covering the financial year ended 31 March 2019, and the Company's financial statements cover the financial period from 1 June 2019 to 2 July 2020, with comparative financial information covering the financial period from 1 January 2018 to 31 May 2019.

Historical cost convention

The financial statements have been prepared under the historical cost convention, except for, where applicable, deferred contingent consideration and derivative financial instruments that have been measured at fair value.

The consolidated financial statements are presented in Pounds Sterling, which is The Barkby Group Plc's functional and presentation currency and all values are rounded to the nearest thousand (£'000s) unless otherwise stated.

Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of The Barkby Group Plc ('company' or 'parent entity') as at 2 July 2020 and the results of all subsidiaries for the period then ended. The 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.

During the financial period ended 2 July 2020, The Barkby Group Plc acquired the share capital of Tarncourt Ambit Limited, Tarncourt Ambit Properties Limited and Workshop Trading Holdings Limited, which together with its subsidiary undertaking Workshop Trading (London) Limited, are called the Dickson Controlled Entities.

After the transaction the shareholders of the Dickson Controlled Entities owned 86% of the share capital of the new combined entity. As a result this transaction is considered to be a reverse takeover.

These financial statements therefore consist of the consolidated financial statements of the Dickson Controlled

Entities, which are considered to acquire The Barkby Group Plc and its subsidiary, Centurian Automotive Limited with effect from 7 January 2020, together with the company only financial statements of The Barkby Group Plc.

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.

Note 3. Post Balance Sheet Events

CBILS Loan

In July 2020, the Company borrowed £1m from HSBC under the UK Government's Coronavirus Business Interruption Loan Scheme. The loan provides extra liquidity to support, in particular, the Group's Hospitality and Consumer division after a period of severe disruption due to Covid-19.

Further investment in Verso Biosense (VivoPlex)

In August 2020, the Group invested a further £500,000 into Verso Biosense (then VivoPlex) via a Convertible Loan Agreement "CLA". The CLA has a term of 36 months and an interest rate of 8%, which is non-compounding, and, if payable, will accrue daily. The CLA will convert to equity at a 20% discount to the lowest price paid by investors.

Practical completion of Hastings development

The Group's Hastings development complete in August 2020. This resulted in the invoicing of the Group's amounts recoverable under contracts asset recognised at 2 July 2020 (contract asset of £4,898,000) and the subsequent collection of the resultant receivables.

New lease arrangement

In September 2020, the Company entered into a new six year lease for The Harcourt Arms, a village pub with 125 covers and 10 rooms to let. The resultant Right-of-use asset was recognised at £679,000, with a lease liability of £669,000 and a dilapidations provision of £10,000 also being recognised.

Settlement of deferred consideration

In September 2020, the Company and Turf to Table Limited agreed an amendment to the deferred consideration payable to Turf to Table Limited from the Company's acquisition of pub asset and trade in 2018. The total payment agreed was £115,000, of which £60,000 was satisfied by the issuance of 260,869 ordinary shares by the Company (at 23p per share), with the balance of £55,000 being paid in cash. The balance previously recognised as a deferred consideration payable at 2 July 2020 was £150,000, with the difference being taken to profit or loss in the financial year ended 1 July 2021.