Gusbourne Regulatory News (GUS)

Gusbourne Plc

(London-AIM: GUS) ("Gusbourne" or the "Company")

Results for the period ended 31 December 2013.

The Board of Gusbourne Plc announces the audited results for the 9 months ended 31 December 2013.

Chairman's statement

I am delighted to report an exciting and solid period of progress for the Group. The Gusbourne Estate business, based in Kent, was acquired by the Group through an acquisition which completed on 27 September 2013. The Group's existing business, comprising vineyards in West Sussex, have merged into the enlarged Gusbourne Estate business. The results for the acquired Gusbourne Estate business are reflected in the results for the period from 27 September 2013; accordingly sales only represent three months of activity.

The Gusbourne Estate business was started by me 10 years ago. I selected and acquired land which was ideally suited for growing vines at Appledore in Kent. My previous occupation was a consultant orthopaedic surgeon in both the UK and South Africa. However, I always maintained an active interest in wine making and held a major stake in a large South African wine estate.

From the beginning at Gusbourne Estate I have been committed to producing sparkling wine of the highest possible quality. This starts with the meticulous selection of vineyard sites and vines (in our case Burgundy clones for added complexity in the wine). It extends to every part of the production process. We produce our wines exclusively from grapes grown in our own vineyards. Most of our sparkling wines receive a minimum of three years lees ageing with the exception of the Rosé which receives a minimum of two years.

These guiding principles of quality and excellence remain uncompromised as we embark upon a new phase of development for Gusbourne Estate. I am pleased to report that we have assembled an experienced and professionally trained management team to continue these traditions and who bring a wealth of local and international experience.

At board level we are deeply saddened to report the loss of our non-executive director Andrew Wilson. His brilliant mind, incisive decision making, modesty and humour will be sadly missed.

Highlights of 2013

These include:

• The planting of an additional 44.3 acres of vineyards, in May 2013. The new vineyards are located on long leasehold land within the picturesque South Downs National Park in West Sussex. This is one of the other main vine growing areas of England and will provide a further regional dimension to our Gusbourne Estate sparkling wines. We are convinced that our Sussex sites will complement our Kent production and provide us with the opportunity to produce complex and multifaceted wines, as well as mitigating regional climatic risk. We look forward to making sparkling wine from these grapes in a few years' time.

• A very successful 2013 harvest. A late start to the growing season resulted in a later than usual harvest. The quality was excellent and the yield volumes were more than double our original expectations. The resulting wine has added considerably to our wine stocks for sale in future years and will help to satisfy the growing demand for our wines in the United Kingdom and abroad.

• Awards: Gusbourne Estate won the trophy for "English Wine Producer of the Year" from the, International Wine and Spirit Competition (IWSC) in November 2013. Gusbourne Estate's Brut Reserve 2008 also won the IWSC international trophy for "Best Bottle Fermented Sparkling Wine". It is worth noting that this later trophy was based on competition from numerous sparkling wines from around the world. We were also delighted to win a gold medal in the IWC (International Wine Challenge) for our Blanc de Blancs 2008, and a gold medal (and trophy) for our 2011 Guinevere barrel fermented Chardonnay, a still Burgundy style wine. These were proud moments for us and a rewarding conclusion to a successful year.

Long term nature of the business and its funding

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 an exquisite sparkling wine.

As pretenders to the champagne crown our products have to be at least as good and, with exacting standards and favourable climatic conditions, perhaps even better.

This is a generational business and further equity issues are planned to support additional investment in vineyards, winery capacity, stocks of wine and, most importantly, brand development. We appreciate the support our shareholders provide to us and we are proud of our AIM quote which is unique in the English sparkling wine industry.

Current trading

Currently we are trading in line with expectations and limited stock availability. Our stocks are being targeted at premium outlets both in the on and off trade to support our ongoing brand development.

In May 2014 an additional 50 acres of vineyards were planted on our estate in Kent in line with our long term development strategy.

We are pleased to report that our wines have continued to win awards in 2014. In May we were delighted to win an International Wine Challenge gold medal for our Gusbourne Brut Reserve 2009.

Finally, I would like to thank all our staff at Gusbourne Estate. Their ongoing dedication and hard work has made 2013 a year of progress and solid achievement for the Company. We remain passionate about our wines and firmly on track towards achieving our long term goals.

Andrew Weeber

Chairman

Strategic Report

The paragraphs below have been extracted from the 'Strategic Report' section of the Company's Annual Report and Accounts, which may be found on the Company's website at www.gusbourneplc.com.

Results for the period

The results for the 9 month period ended 31 December 2013 include the results of the Gusbourne Estate business from 27 September 2013. Sales for the period, which comprise solely those of Gusbourne Estate wines from 27 September 2013, amounted to £129,000 and these are the first sales by the Group itself. Whilst these sales reflect the sale of limited stock availability at this time, they were however approximately 105 per cent higher than those made by the Gusbourne Estate business for the same period in 2012 under its previous ownership and reflect a steady like for like growth in the sale of Gusbourne wines. Administrative expenses of £832,000 for the 9 month period ended 31 December 2013 compare with £611,000 for the year ended 31 March 2013 and reflect the growth in the business following the acquisition of the Gusbourne Estate business, additional staff and transaction expenses. Transaction expenses for the period amounted to £398,000 in respect of transactions reflected in the AIM re admission on 27 September 2013 and compare with transaction expenses of £259,000 for the year ended 31 March 2013 in respect of transactions reflected in the AIM re admission on 25 October 2012.

The operating loss for the period was £636,000 (£610,000 for the year ended 31 March 2013).The loss before tax was £666,000 (£454,000 for the year ended 31 March 2013) after net finance costs of £30,000 (net finance income of £156,000 for the year ended 31 March 2013). These planned losses reflect the long term development strategy of the business.

Balance Sheet

The main change in the Group's balance sheet during the period reflected the acquisition of the Gusbourne Estate business and its related freehold land and buildings on 27 September 2013, details of which are shown in note 11 to the accounts on page 37. The acquisition cost of £7,063,000 (£7,316,000 at fair value) was satisfied by the issue of shares amounting to a cash equivalent of £1,050,000 (£1,303,000 at fair value), the issue of secured convertible bonds of £1,750,000 and cash of £4,263,000.

The other changes in the Group's balance sheet during the period reflect expenditure on the ongoing investment in, and development of, the Group's business, net of income from wine sales. This expenditure includes the establishment of additional vineyards in West Sussex at a cost of £418,000, the purchase of additional plant and equipment for the vineyards and the winery amounting to £538,000 and the planned ongoing development of the business, including transaction costs, which is reflected in the net loss for the period of £726,000.

Total assets at 31 December 2013 of £11,235,000, (£4,061,000 at 31 March 2013) include freehold land and buildings of £4,601,000 (£222,000 at 31 March 2013), inventories of wine stocks amounting to £1,310,000 (£137,000 at 31 March 2013), £1,240,000 of biological assets (£154,000 at 31 March 2013) and £1,703,000 of cash (£3,128,000 at 31 March 2013). Intangible assets of £1,007,000 (£nil at 31 March 2013) arise from the acquisition of the Gusbourne Estate business. Biological assets reflect the fair value of grape vines calculated in accordance with International Accounting Standard 41.

It is worth noting that the Group's inventories are reported at the lower of cost and net realisable value and that these inventories are expected to grow significantly until the Group reaches full production maturity, bearing in mind the long production cycle in relation to sparkling wine and related vineyard establishment. Accordingly, and in common with similar sparkling wine businesses, the anticipated underlying surplus of net realisable value over cost of these wine inventories will become an increasingly significant factor of the Group's asset base.

The Group's net tangible assets at 31 December 2013 amount to £6,124,000 (£3,817,000 at 31 March 2013) and represent 86% of total equity (100% at 31 March 2013).

Financing

The Group's activities are financed by its own cash resources, bank loans and convertible bonds. Bank loans and convertible bonds at 31 December 2013 amount in total to £3,720,000 (£nil at 31 March 2013) and represent 52% of total equity.

On 27 September 2013, the Group obtained a bank loan of £2,025,000 and completed a placing of ordinary shares by the Group for cash proceeds of £2,851,000. The cash proceeds from the bank loan and share placing amounted to a total of £4,876,000, of which £4,263,000 was used to satisfy the cash element of the consideration for the acquisition of the Gusbourne Estate business and its related freehold land and buildings. The remaining cash proceeds were added to the Group's existing cash resources to fund its ongoing activities.

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 Estate's premium sparkling wine. Additional funding will be sought by the Company over the coming few years to invest in additional vineyards, winery capacity, and stocks of wine as well as brand development, in line with its development strategy.

Annual General Meeting

The annual report and accounts are being posted to shareholders today, together with notice of the Annual General Meeting to be held at 10.30 a.m. on 26 June 2014 at the offices of Allen and Overy LLP, One Bishops Square, London E1 6AD. The annual report and accounts are available to view on the Company's website at www.gusbourneplc.com 

Enquiries:

Gusbourne Plc

Andrew Weeber/Ben Walgate +44 (0)20 7654 5574

Cenkos Securities plc

Nicholas Wells +44 (0)20 7397 8920

Note: This and other press releases are available at the Company's web site: www.gusbourneplc.com

Consolidated statement of comprehensive income for the period ended 31 December 2013

Consolidated statement of financial position as at 31 December 2013

Consolidated statement of cashflows for the period ended 31 December 2013

Consolidated statement of changes in equity for the period ended 31 December 2013

1 Accounting policies

Gusbourne PLC (the "Company") is a company incorporated and domiciled in the United Kingdom and quoted on the London Stock Exchange's AIM market. The consolidated financial statements of the Group for the period ended 31 December 2013 comprise the Company and its subsidiaries (together referred to as the "Group").

Basis of preparation

The financial information does not constitute the Group's statutory accounts for either the period ended 31 December 2013 or the year ended 31 March 2013, but is derived from those accounts. The Group's statutory accounts for 31 March 2013 have been delivered to the Registrar of Companies and those for 31 December 2013 will be delivered following the Company's Annual General Meeting. The Auditor's reports on both the 31 March 2013 and 31 December 2013 accounts were unqualified, did not draw attention to any matters by way of an emphasis and did not contain any statement under Section 498 of the Companies Act 2006.

The Group's consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use in the EU ("IFRS").

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.

The financial statements are presented in pounds sterling. They have been prepared on the historical cost basis except that biological assets and convertible bonds are stated at their fair value.

Going concern

The directors have reviewed the Group's cash flow forecasts and note that 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, an average of four years to transform these grapes into the Group's premium sparkling wine. Additional funding will be sought by the Group over the coming few years to invest in additional vineyards, winery capacity, and stocks of wine as well as brand development, in line with its development strategy. The directors believe that future fundraisings will be successful and have therefore prepared the financial statements on a going concern basis.

New accounting standards and changes to existing accounting standards

i. New standards and interpretations adopted in the current period:

IFRS 7 (amended) - Offsetting Financial Assets and Financial Liabilities

IFRS 13 - Fair Value Measurement

IAS 1 (amended) - Presentation of Items of Other Comprehensive Income

IAS 12 (amended) - Deferred Tax: Recovery of Underlying Assets

IAS 19 (revised) - Employee Benefits.

These had no material impact on the financial statements, but the adoption of IFRS 13 Fair Value Measurement has resulted in additional disclosure.

ii. Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group:

At the date of authorisation of these financial statements, the following standards and interpretations applicable to the Group's financial statements were in issue but not yet effective at the period end. They have not been adopted early and when they come into effect are deemed not relevant to the Group or to have no material impact on its financial statements:

IFRS 9 - Financial Instruments

IFRS 10 - Consolidated Financial Statements IFRS 11 - Joint Arrangements

IFRS 12 - Disclosure of Interests in Other Entities

IAS 19 (amended) - Defined Benefit Plans - Employee Contributions IAS 27 (revised) - Separate Financial Statements

IAS 28 (revised) - Investments in Associates and Joint Ventures

IAS 32 (amended) - Offsetting Financial Assets and Financial Liabilities

IAS 36 (amended) - Recoverable Amounts Disclosures for Non-Financial Assets

IAS 39 (amended) - Novation of Derivatives and Continuation of Hedge Accounting

Annual Improvements to IFRSs (2010-2012 Cycle)

Annual Improvements to IFRSs (2011-2013 Cycle)

Basis of consolidation

The Group's financial statements consolidate the financial statements of the Company and its subsidiary undertakings. Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The results of any subsidiaries sold or acquired are included in the Group income statement up to, or from, the date control passes. Intra-Group sales and profits are eliminated fully on consolidation.

On acquisition of a subsidiary, all of the subsidiary's separable, identifiable assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. On disposal of a subsidiary, the consideration received is compared with the carrying cost at the date of disposal and the gain or loss is recognised in the income statement. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets is recorded as goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Subsidiaries' results are amended where necessary to ensure consistency with the policies adopted by the Group.

Revenue

Revenue from the sales of goods is recognised when the Group has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Group will receive the previously agreed upon payment. These criteria are considered to be met when the goods are delivered to the buyer. Where the buyer has a right of return, revenue is recognised in the period where the goods are delivered less an appropriate provision for returns based on past experience.

Financial assets

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less.

Financial liabilities

Borrowings

Borrowings are initially recognised at fair value net of any transaction costs directly attributable to the loan. They are subsequently measured at amortised cost with interest charged to the statement of comprehensive income based on the effective interest rate of the borrowings.

Convertible deep discount bonds

Convertible deep discount bonds are redeemable at their nominal price at maturity. The bonds may be converted into the Company's shares at the holders' option and are therefore classified as compound financial instruments in accordance with the requirements of IAS 32. The debt element is calculated as the present value of future cash flows assuming the bonds are redeemed on the redemption date, discounted at the market rate for an equivalent debt instrument with no option to convert to equity. The difference between the cash payable on maturity and the present value of the debt element is recognised within equity. The discount is charged over the life of the bond to the statement of comprehensive income and included within finance expenses.

Trade and other payables

Comprises trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Redeemable preference shares

The Group's redeemable preference shares are classified as financial liabilities. The shares are redeemable at the option of the Directors of the Company or the holder of the redeemable preference shares.

Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability.

The Group's ordinary shares are classified as equity instruments.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

• the initial recognition of goodwill;

• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

• investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

• the same taxable group company; or

• different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Goodwill

Goodwill arises where a business is acquired and a higher amount is paid for that business than the fair value of the assets and liabilities acquired. Transaction costs attributable to acquisitions are expensed to the income statement.

Goodwill is recognised as an asset in the statement of financial position and is not amortised but is subject to an annual impairment review. Impairment occurs when the carrying value of goodwill is greater than the present value of the estimated future cash flows from the separately identifiable assets, termed a 'cash generating unit'. The Group prepares and approves formal long term business plans for its operations which are used in these calculations.

Brand

Brand names acquired as part of acquisitions of businesses are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group.

Brand names have been assessed as having an indefinite life and are not amortised but are subject to an annual impairment review. Impairment occurs when the carrying value of the brand name is greater than the present value of the estimated future cash flows.

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within provisions.

Freehold land is not depreciated.

Vineyard establishment represents the expenditure incurred to plant and maintain new vineyards until the vines reach productivity. Once the vineyards are productive the vines are remeasured at fair value less costs to sell and transferred to biological assets. The remaining vineyard establishment costs will then be depreciated over their expected useful economic lives.

Depreciation is provided on all other items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:

Freehold land and buildings 4% per annum straight line

Plant, machinery and motor vehicles 5-20% per annum straight line

Computer equipment 33% per annum straight line

Biological assets and produce

Biological assets consist of grape vines and are included in the statement of financial position at fair value less costs to sell. The determination of the fair value of grape vines requires significant management judgement and, amongst others, the following factors are considered: discount rate, the productive life and yield of the vines, notional rents for land (to allow comparability between freehold and leasehold vineyards) and expected sales prices. Detailed explanations of the methods employed to value the vines are described in note 14. Gains and losses arising from changes in fair value are included in the income statement in the period in which they arise.

Harvesting of the grape crop is ordinarily carried out in October. The costs of growing the grapes are capitalised in the period in which they are incurred. Grapes that are used in production of the Group's own wine are included at fair value in wine inventory. The fair value of grapes is determined by reference to market prices at the time of harvest.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Grapes grown in the Group's vineyards are transferred into inventory from biological assets at fair value less costs to sell at the point of harvest which is the deemed cost for the grapes.

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate fair value of the consideration given. The related transaction expenses are recognised in the statement of comprehensive income as incurred.

The acquiree's identifiable assets, liabilities and contingent liabilities are recognised at their fair value at the acquisition date.

2 Critical accounting estimates and judgements

 The Group makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period relate are set out below.

Biological assets valuation

Biological assets are stated at fair value which requires the use of certain unobservable inputs in the Group's valuation model. The techniques and assumptions used are set out in note 14.

Fair value of biological produce

The Group's biological produce is measured at fair value at the point of harvest. This is based on a deemed market value less costs to sell. Generally there is no readily obtainable market price for the Group's grapes because they are not sold on the open market, therefore management set the values based on their experience and knowledge of the sector.

Business combinations

Assets and liabilities acquired and consideration given are recognised and measured at fair value. This requires a degree of judgement by management, for example, the fair value of inventory is measured as estimated selling prices less deductions for estimated costs to bring the items to a saleable state and selling costs, discounted to present values.

Impairment reviews

The Group is required to test annually whether goodwill and brand names have suffered any impairment. The recoverable amount is determined based on value in use calculations, which requires the estimation of the value and timing of future cash flows and the determination of a discount rate to calculate the present value of the cash flows. Further information is set out in note 12.

Useful lives of plant, property and equipment

The charge in respect of depreciation is calculated based on management's estimate of an asset's useful economic life and its residual value at the end of that life. An increase in the useful life or residual value would result in a decreased depreciation charge in the statement of consolidated income.

Convertible debt

The equity element of convertible debt is calculated by reference to a market rate for a similar, non-convertible, bond. A higher rate would result in a greater proportion of the instrument being recognised as equity on the statement of financial position.

3 Financial instruments - risk management

The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

Bank loans

Convertible debt

Trade receivables

Cash and cash equivalents

Trade and other payables

Liquidity risk

The Group closely monitors and manages its liquidity risk. Cash forecasts are regularly produced and sensitivities run for different scenarios.

Capital risk management

The Group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares and increase or decrease debt.

Credit risk

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions and the risk of default by these institutions. The Group reviews the creditworthiness of such financial institutions on a regular basis to satisfy itself that such risks are mitigated. The Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of the cash and cash equivalents as shown in the consolidated statement of financial position.

Interest rate risk

The Group's main debt is exposed to interest rate fluctuations. The Group considers that the risk is not significant in the context of its business plans. Should there be a 0.5% increase in the bank's lending rate, the finance charge in the statement of comprehensive income would increase by £10,000.

4 Segmental information

The directors consider the Group to have only one operating segment. Details of the sole operating segment are shown in the consolidated statement of comprehensive income, statement of financial position and consolidated statement of cash flows

All operations are conducted in the United Kingdom. Loss from operations has been arrived at after charging:

5 Loss from operations

Loss from operations has been arrived at after charging:

6 Auditor's remuneration

7 Staff Costs

The average number of employees of the Group, including Directors, during the period was 8 (March 2013: 3). Directors' remuneration was as follows:-

Ben Walgate is the highest paid director. Fees in respect of Ian Robinson and Andrew Wilson are payable to Anne Street Partners Limited under the terms of agreements dated 8 October 2012.

The Directors are considered to be key management.

8 Finance income and expense

9 Taxation

No deferred tax asset has been recognised on unutilised taxable losses due to the lack of certainty over the taxable profits being available against which deductible temporary differences can be utilised. The unutilised tax losses carried forward are £833,000 (March 2013: £235,000)

10 Loss per share

Basic earnings per ordinary share are based on an equity loss of £726,000 (March 2013: £454,000) and 10,548,391 ordinary shares (March 2013: 8,000,003) of 50 pence each, being the weighted average number of shares in issue during the period. There is no adjustment to be made for diluted earnings per ordinary share.

11 Business combinations

On 27 September 2013 Gusbourne Estate Limited, a wholly owned subsidiary of the Group, acquired the Gusbourne Estate business and related freehold property for a total consideration of £7,316,000. The principal reason for this acquisition was to invest in, and further develop, the Gusbourne Estate business including, in particular, its award winning Gusbourne brand to take advantage of further anticipated market growth in this sector of the wine industry.

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

Transaction costs of £187,000 and Stamp Duty Land Tax of £211,000 in connection with the acquisition have been recognised in the statement of comprehensive income. The acquisition of the Gusbourne Estate business generated post acquisition revenue of £129,000 and profits before interest and tax of £39,000.

The fair value of the Group's shares issued in consideration for the acquisition has been based on the acquisition date share price of £0.67 per share. The convertible bond was also fair valued at the date of acquisition.

The main factors leading to the recognition of goodwill are the presence of intangible assets, such as the workforce of the acquired entity, which do not qualify for separate recognition, and synergies resulting from material cost savings and sharing of expertise and systems which will enable future growth.

12 Intangibles

The carrying value of goodwill is allocated to the following cash-generating units:

Goodwill is the premium paid to acquire the Gusbourne Estate business over the fair value of its net assets.

The Group's management prepare long term cash flow forecasts for 13 years, and then applies a discount rate to determine the present value of the future cash flows arising from the cash-generating unit to arrive at a recoverable amount. Where the recoverable amount is lower than the carrying value of goodwill allocated to the cash-generating unit an impairment charge is made. The discount rate used is 17% based on the Group's estimated weighted cost of capital. No growth rate has been applied over the term of the long term cash flow forecasts. This is a level 3 fair value hierarchy.

13 Property, plant and equipment

14 Biological assets

The fair value of biological assets at the balance sheet date was:

The Group owns bearer biological assets in the form of grape vines, which are cultivated on land owned by the Group. The grapes produced from these vines are used in the production of the Group's own wines.

The total area of vines at December 2013 amounted to 104.8 acres (March 2013: 7.7 acres) of which approximately 58.5 acres (March 2013: 7.7 acres) can be classified as mature (i.e. four years after planting). The average peak productive life of grape vines is estimated to be 25 years.

The fair value of mature grape vines was calculated by discounting the net cash flows thereof over their remaining lives at a pre-tax discount rate of 17% (March 2013: 17%). The net cash flows were calculated with reference to grape varieties, expected yields, estimated future market value of grapes and estimated future production costs based on anticipated costs and third party sale prices achieved. Future prices are adjusted for inflation.

Planting expenditure is carried forward at cost in the statement of financial position with property, plant and equipment until the vines reach maturity, at which point they are re-measured at fair value and re-classified as biological assets.

Fair value

The fair value of vines is determined based on a level 3 valuation method, that is, using valuation methods that include inputs that are not based on market data. The significant unobservable inputs used in the discounted cash flow model developed to value the vines are the discount rate, yields and fair value of grapes.

For example, a 10% increase in the discount rate to 18.7% would result in a decrease in fair value of the biological assets by £103,500. In addition cashflows are projected over a number of years and based on estimated harvest yields. Yields are based on an average of the performance of the Group's vines over previous harvests.

Changes in these estimates could materially impact estimates of future cashflows used in the assessment of the fair values.

15 Subsidiaries

The principal subsidiaries of Gusbourne PLC, all of which have been included in these consolidated financial statements, are as follows:

Gusbourne Estate Limited is involved in the production, sale and distribution of English sparkling wine. Gusbourne Wines Limited is dormant.

16 Inventories

17 Trade and other receivables

Trade and other receivables are due within 1 year apart from £50,000 (March 2013: Nil) included within other receivables which is due in more than 1 year.

18 Trade and other payables

Book values are approximate to fair value at 31 December 2013 and 31 March 2013.

19 Loans and borrowings

The bank loan of £2,025,000 is at an interest 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.

20 Convertible bonds

Convertible bonds represent the debt element of a deep discount bond issued to Mr A C V Weeber and Mrs C Weeber as part of the consideration for the acquisition of the Gusbourne Estate business on 27 September 2013. The Bond is secured by a fixed charge over the group's land and buildings at Appledore, Kent. The Bond is redeemable on 27 September 2017 and attracts a coupon rate of 7.5% per annum which is rolled up annually. From 27 September 2015 until the 26 September 2016 the holders of the Bond can convert some or all of the bonds into Gusbourne PLC ordinary shares at a price of 66 pence per share.

In accordance with the requirements of IAS 32 the Bond is classified as a compound financial instrument containing an element of debt and equity. The debt element is calculated as the present value of future cash flows assuming the Bond is redeemed on the redemption date, discounted at the market rate for an equivalent debt instrument with no option to convert to equity. A rate of 9% has been used. The difference between the cash payable on maturity and the present value of the debt element is recognised in equity. The discount is charged over the life of the bond to the statement of comprehensive income and included within finance expenses.

21 Redeemable preference shares

On 26 September 2013 Gusbourne PLC redeemed 99,999 redeemable preference shares of fifty pence each against the proceeds of the new ordinary share issue (note 23). The shares were redeemable at the option of the Directors of the Company or the holder of the redeemable preference shares.

22 Deferred tax liabilities

23 Share capital

On 27 September 2013 Gusbourne PLC (formerly Shellproof PLC) issued 5,280,367 50 pence ordinary shares. The shares were fully subscribed and paid up. A further 1,944,444 were issued to the vendor of Gusbourne Estate as part of the consideration for the acquisition on the same date. Further details in respect of the acquisition can be found in Note 11.

24 Reserves

The following describes the nature and purpose of each reserve within equity:

25 Related party transactions

At 31 December 2013 £1,500,000 (31 March 2013 - £3,009,000) of cash and cash equivalents were held on deposit at British Caribbean Bank Limited ('BCBL'), a related party. BCBL is a wholly owned subsidiary of Waterloo Investment Holdings Limited ('WIHL'). Lord Ashcroft, KCMG PC, is a controlling shareholder in both the Company and WIHL.

On 27 September 2013 Gusbourne PLC redeemed 99,999 redeemable preference shares of fifty pence each from Lord Ashcroft KCMG PC for the amount of £50,000.

Anne Street Partners Limited is considered a related party by virtue of the fact that Ian Robinson, a director of Gusbourne PLC, is also a director of Anne Street Partners Limited. During the period Anne Street Partners Limited charged the Company in total £137,500 (March 2013 - £83,769). Of this, £45,000 was in relation to directors fees (March 2013 - £33,769) and £92,500 management services (March 2013 - £50,000). At 31 December 2013 an amount of £111,000 inclusive of VAT (March 2013 - £60,000) was due to Anne Street Partners Limited and is shown within trade and other payables.

Included within other receivables at 31 December 2013 is an amount of £41,000 due from Andrew Weeber, Non-Executive Chairman. This represents net amounts received by Andrew Weeber on behalf of the Group in respect of trading items post acquisition of the Gusbourne Estate business on 27 September 2013. These amounts have been received by the Group since 31 December 2013.