Gusbourne Regulatory News (GUS)

Gusbourne Plc

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

Results for the year ended 31 December 2015.

The Board of Gusbourne Plc announces the audited results for the year ended 31 December 2015.

Highlights

· Sales increased by 9% to £473,000 in line with product availability.

· Another year of success in international awards including winning the trophy for "English Wine Producer of the Year" from the International Wine and Spirit Competition ("IWSC"), which is the second time in three years that Gusbourne has won this award.

· Investment in a further 75 acres of vineyards planted in Kent and West Sussex bringing the total acreage under vine to 231 acres.

· Completion of an expanded winery building to cater for increasing production.

· A successful harvest in October 2015 both in yield and quality, including the first grapes from the vines planted on the Company's West Sussex sites in 2013.

· The launch of an update to Gusbourne's visual identity and branding

· Continuing growth in the Company's net asset base with net assets up by 19.6% to £9.4m and net tangible assets up by 22.5 % to £8.4m.

Chairman's statement

I am pleased to report that we have achieved another successful year of further growth and development for the Group, in line with our long-term plans. The Gusbourne business was established over ten years ago in 2004 and has been selling its award winning English sparkling wines since 2010. Sales have continued to grow steadily in line with product availability and in 2015 increased by 9 per cent compared with 2014. Gusbourne remains one of England's premier sparkling wine businesses and is focused at the luxury end of the market.

We have continued to expand production in line with our long‑term plans. In 2015 we planted an additional 75 acres of vines across our two sites in Kent and West Sussex and our total acreage under vine is now 231 acres, most of which is in Kent. We are firmly committed to producing the highest quality sparkling wines made exclusively from grapes grown in our own vineyards and ageing these wines for an extended period in order to fully realise their potential. We use best practice in establishing our vineyards and in their day-to-day management. Our winemaking process remains traditional in every way but one that is open to innovation where appropriate.

The total assets of the business have increased further in 2015 as a result of capital expenditure on fixed assets and the ongoing investment in wine stocks. Total assets grew from £12,026,000 to £13,481,000 during 2015. We invested in the business through capital expenditure on vineyard establishment of £786,000 (2014: £588,000), vineyard and winery equipment of £461,000 (2014: £137,000) and freehold land and buildings of £664,000 (2014: £14,000). Our principal working capital investment has been in wine stocks following the successful 2015 harvest which has added a further £276,000 (2014: £125,000) to the carrying value of our stocks. It is important to note that our stocks are currently reflected in the balance sheet at the lower of cost and net realisable value. To the extent that net realisable values are expected to remain significantly higher than cost, this potential uplift is of course not reflected in the balance sheet and the calculation of net tangible assets per share. The anticipated underlying surplus of net realisable value over cost of these wine inventories will become an increasingly significant feature of the Group's asset base as stocks continue to grow until the business reaches sales maturity.

At 31 December 2015 our net assets per share amounted to 39.6 pence (2014: 43.8 pence). Net tangible assets per share were 35.3 pence (2014: 38.2 pence). As noted above these figures are based on book values and do not reflect any potential underlying uplift in the value of our assets, including freehold land, mature vineyards, wine stocks and the Gusbourne brand itself.

Our operating loss for the year amounted to £1,123,000 (2014: £966,000) which included development expenditure on sales and marketing and brand development.

Highlights of 2015 include:

• The planting of an additional 50 acres of vineyards, in May 2015 on our 352 acre freehold estate in Kent. This is a proven location for growing our sparkling wine grapes and with our existing 102 acres brings our total acreage under vine in Kent to 152 acres.

• The planting of an additional 25 acres of vineyards on our long leasehold land in West Sussex which together with our existing acres brings our total acreage under vine in West Sussex to 79 acres.

• A successful harvest in October 2015 in terms of both yield and quality which has added to our wine stocks for future resale. The harvest included the first fruit from the vines planted on our West Sussex sites in 2013.

• The launch, in October 2015, of an update to our visual identity, marking a new chapter in the Gusbourne story and reflecting the rapid evolution of the Gusbourne brand. This includes refreshing all brand elements by bringing our commitment to making exceptional wines to the fore.

• Another year of success in international awards. In November 2015 Gusbourne won the trophy for "English Wine Producer of the Year" from the International Wine and Spirit Competition ("IWSC"), which is the second time in three years that the Company has won this award. The IWSC also awarded Gusbourne's sparkling and still wines with a record two 'gold outstanding', one gold and three silver medals. The IWSC awards completed a record year at international competitions for the Company, with Gusbourne having received 7 gold medals in total.

Finally, I should like to express my sincere thanks for the dedicated efforts of our employees, our loyal customers and last but not least the support of our shareholders in helping the Company achieve another successful year of growth and development in the business.

Andrew Weeber

Chairman

Chief Executive's review

I am pleased to report that 2015 has been a year of continued and very pleasing progress for the Group in line with our long term strategic development plans. We have planted new vineyards and extended our winemaking facilities. Year on year sales have increased and we have widened our distribution channels. We have continued to invest in the Gusbourne brand and in October 2015 launched an update to our visual identity marking a new chapter in the Gusbourne story and reflecting the rapid progress of the business.

The Gusbourne sparkling wine products remain at the luxury end of the English sparkling wines market and we remain committed to maintaining this premium position. In November 2015 we were particularly pleased to win the trophy for "English Wine Producer of the Year" from the International Wine and Spirit Competition.

Activities and recent developments

Gusbourne PLC ("the Company") is engaged, through its wholly owned subsidiary Gusbourne Estate Limited (together the "Group"), in the production and distribution of a range of high quality and award winning English sparkling wines from grapes grown in its own vineyards in Kent and West Sussex. The majority of the Group's mature vineyards are located at its freehold estate at Appledore in Kent where the winery is also based. Additional vineyards were planted in Kent and West Sussex in May 2015 and the Group now has a total of 231 acres of vineyards.

Gusbourne Wines

Gusbourne is dedicated to the production of premium sparkling wines from grapes grown exclusively in its own vineyards. Our processes, both in establishing and maintaining the vineyards and in making wine, continue to follow the rigorous principles of careful site selection and attention to detail in all aspects of viticulture and wine production. An integral part of the Group's approach is to age its traditional method sparkling wines for as long as is necessary for the wines to meet optimum maturity. The average production cycle for the wines is four years from harvest to sale.

Recent awards

Gusbourne has a history of success at international awards and 2015 was one of the most successful years to date. In November 2015 Gusbourne won the trophy for "English Wine Producer of the Year" from the International Wine and Spirit Competition ("IWSC"), which is the second time in three years that the Company has won this award. The IWSC also awarded Gusbourne's sparkling and still wines with a record two 'gold outstanding', one gold and three silver medals. The IWSC awards completed a record year at international competitions for the Company, with Gusbourne having received 7 gold medals in total.

Development strategy

Meeting growing customer demand for the Gusbourne wines requires careful long term planning and key elements of the Group's development strategy include:

• Continuing to produce wines of exceptional quality from grapes grown in our own vineyards;

• The ongoing development and evolution of the award winning Gusbourne brand;

• The further development of the Company's distribution channels, including the promotion of exports as a significant contributor to sales;

• The investment in additional plant and machinery to keep pace with production growth.

2015 Harvest

The 2015 harvest was successfully completed in October. The quality of the grapes was excellent, with optimum levels of natural sugar and acidity, both of which met our own exacting quality standards. The high quality of grapes harvested in the year bodes well for 2015 becoming another great vintage for Gusbourne. Yield volumes were good and in line with expectations and the resulting wine production has added further to our inventory levels for sale in future years.

Results for the year

Sales for the year amounted to £473,000 (2014: £434,000). Whilst these sales continue to reflect limited stock availability at this time, they do represent a consecutive three year like for like growth in the sale of Gusbourne wines. Administrative expenses of £1,176,000 (2014: £968,000) reflect continuing investment in the development and growth of the business and the Gusbourne brand in particular.

The operating loss for the year was £1,123,000 (2014: £966,000). The exceptional item of £115,000 within finance expenses reflects a charge to the income statement in respect of the conversion of bonds into shares on 17 June 2015 due to the amendment to the terms of the Convertible Bonds on 27 May 2015. This charge is a non-cash adjustment and does not affect the net assets of the Group as the corresponding entry is a credit to retained earnings. The loss before tax was £1,426,000 (2014: £1,151,000) after net finance costs of £303,000 (2014: £185,000).

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

Balance Sheet

The changes in the Group's balance sheet during the year reflect expenditure on the ongoing investment in, and development of, the Group's business, net of income from wine sales. This expenditure includes the investment in additional vineyards planted in Kent and West Sussex in May 2015 and includes the ongoing investment in the vineyards established in West Sussex and Kent during 2013 and 2014. This investment in vineyards is reflected in capital expenditure of £786,000 (2014: £588,000).

In addition, the Group invested in additional plant and equipment for the vineyards and the winery amounting to £461,000 (2014: £137,000) and in buildings of £664,000 (2014: £14,000). Total assets at 31 December 2015 of £13,481,000 (2014: £12,026,000) include freehold land and buildings of £5,198,000 (2014: £4,578,000), vineyards of £2,972,000 (2014: £2,236,000), inventories of wine stocks amounting to £1,711,000 (2014: £1,435,000), and £1,328,000 of cash (2014: £1,842,000). Intangible assets of £1,007,000 (2014: £1,007,000) arose on the acquisition of the Gusbourne Estate business on 27 September 2013.

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. 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 2015 amount to £8,353,000 (2014: £6,817,000) and represent 89% of total equity (2014: 87%). Net tangible assets per share at 31 December 2015 were 35.3 pence per share (2014: 38.2 pence)

Financing

The Group's activities are financed by shareholders equity, loans, other borrowings and convertible bonds. Loans, other borrowings and convertible bonds at 31 December 2015 amount in total to £3,952,000 (2014: £3,866,000) and represent 42% of total equity (2014: 49%).

On 17 June 2015, the Company completed an open offer to existing shareholders. The total consideration was £2,525,000 of which gross cash received by the Company was £2,136,000. The Company also benefited from a reduction of £389,000 in the debt due under the Convertible Bond as a result of its conversion into equity.

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On 30 July 2015, the Company completed a placing of ordinary shares for cash proceeds of £368,000.

The cash proceeds of the Open Offer and Placing will be used for the ongoing investment in new vineyards planted in 2015, an expansion of the winery capacity and for working capital, represented primarily by the Group's sparkling wine stocks.

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

Key Performance Indicators

Ben Walgate

Chief Executive

Annual General Meeting

The Company's annual report and accounts for the year ended 31 December 2015 are being posted to shareholders today, together with notice of the Annual General Meeting to be held at 12 pm on 20 June 2016 at the offices of Cenkos Securities PLC at 6.7.8 Tokenhouse Yard, London EC2R 7AS. 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)12 3375 8666

Cenkos Securities plc

Nicholas Wells +44 (0)20 7397 8900

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

Consolidated statement of comprehensive income for the year ended 31 December 2015

Consolidated statement of financial position at 31 December 2015

Consolidated statement of cash flows for the year ended 31 December 2015

Consolidated statement of changes in equity for the year ended 31 December 2015

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 year ended 31 December 2015 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 year ended 31 December 2015 or the year ended 31 December 2014, but is derived from those accounts. The Group's statutory accounts for 31 December 2014 have been delivered to the Registrar of Companies and those for 31 December 2015 will be delivered following the Company's Annual General Meeting. The Auditor's reports on both the 31 December 2014 and 31 December 2015 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 and the Company's 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 produce is stated at fair value.

Going concern

The Directors believe the Group to be a going concern on the basis that it has sufficient cash to continue operations for at least 12 months from the date these financial statements were approved.

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 year:

• Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41*

* This has been early adopted

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

• Annual improvements to IFRSs 2010-2012 Cycle

• Annual improvements to IFRSs 2011-2013 Cycle

• IFRS 16 Leases

• IFRS 9 Financial Instruments

• IFRS 15 Revenue from Contracts with Customers

• Clarification of Acceptable methods of Depreciation and Amortisation: Amendments to IAS 16 and IAS 38

• Equity Method in Separate Financial Statements (Amendments to IAS 27)

• Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28)

• Annual improvements to IFRSs 2012-2014 Cycle

• Disclosure initiative: Amendments to IAS 1

• Recognition of deferred tax assets for unrealised losses - Amendments to IAS 12

• Disclosure initiative: Amendments to IAS 7

The Group is currently assessing the impact of these standards on the financial statements.

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 and the ability to use its power over the investee to affect the amounts of the Group's returns and which generally accompanies interest of more than one half of the voting rights. 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 year 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.

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.

Intangible Assets

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 recoverable amount which is the higher of the value in use and fair value less disposal costs. The present value of the estimated future cash flows from the separately identifiable assets, termed a 'cash generating unit' is used to determine the fair value less cost of disposal to calculate the recoverable amount. 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.

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 accumulated cost is transferred to mature vineyards and depreciated over the expected useful economic life of the vineyard. Vineyard establishment is not depreciated.

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:

The carrying value of property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

Biological assets and produce

Following the early adoption of Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) the financial statements have been restated to reflect that bearer plants such as grape vines are no longer included within the classification of biological assets under IAS 41 Agriculture. In accordance with the amendments biological assets held by the Group are now accounted for under IAS 16 PPE and held at cost. The biological assets have been transferred to plant, property and equipment as at 1 January 2014 at deemed cost, being their fair value less costs to sell at that date. This is in line with the transitional guidance which permits the transfer to be at the deemed cost of the historic fair value under the old IAS 41.

The impact of this early adoption is shown in note 24.

Harvesting of the grape crop is ordinarily carried out in October. Prior to harvest the costs of growing the grapes are carried forward in inventory. Upon harvest the grapes become agricultural produce and are therefore measured at fair value less costs to sell in accordance with IAS 41 with any fair value gain or loss shown in the consolidated statement of comprehensive income. The fair value of grapes is determined by reference to estimated market prices at the time of harvest. This measurement of fair value less costs to sell is the deemed cost of the grapes that is transferred into inventory upon harvest.

Under IAS 41, the agricultural produce is also valued at the end of each reporting period.

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 included in inventory 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.

Leased assets

Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an "operating lease"), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.

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 year relate are set out below.

Fair value of biological produce

The Group's biological produce is measured at fair value less costs to sell at the point of harvest. The fair value of grapes is determined by reference to estimated market prices at the time of harvest. 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 including past purchase transactions.

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 fair value less costs of disposal 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 11.

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.

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

Finance leases

Trade and other payables

In addition, at the Company level: Intercompany loans.

The carrying amounts are a reasonable estimate of fair values because of the short maturity of such instruments or their interest bearing nature.

Liquidity risk

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

The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:

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.

Credit risk also arises from credit exposure to trade customers included in trade and other receivables. Trade receivable balances are monitored on an ongoing basis to ensure that the Group's bad debts are kept to a minimum.

Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in note 15.

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, consolidated statement of financial position and consolidated statement of cash flows.

All operations are conducted in the United Kingdom.

The Directors do not consider the Group place's reliance on any major customers.

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 year was 18 (December 2014: 17). Directors' remuneration was as follows:

Ben Walgate is the highest paid director. Fees in respect of Ian Robinson and Andrew Wilson (deceased) 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 £4,049,000 (December 2014: £2,340,000)

10 Loss per share

Basic earnings per ordinary share are based on a loss of £1,426,000 (December 2014: £1,091,000) and 20,889,716 ordinary shares (December 2014: 15,592,073) of 50 pence each, being the weighted average number of shares in issue during the year. There is no adjustment to be made for diluted earnings per ordinary share.

11 Intangibles

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

The brand value is the fair value of the brand name acquired as part of the acquisition of Gusbourne Estate in September 2013, and separately identified as an intangible.

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

Given the long term nature of vineyard establishment and wine production the Group's management prepare long term cash flow forecasts for up to 9 years, and then apply a discount rate to determine the present value of the future cash flows of the cash-generating unit to arrive at the fair value less costs of disposal. Where this amount is lower than the carrying value of the brand and 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. A growth rate of 2% has been applied over the term of the long term cash flow forecasts. The growth rate used is based on the long term average growth rate of the UK economy.

12 Property, plant and equipment

Following the early adoption of "Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41" the Group's grape vines are no longer classified as biological assets. Accordingly the vines have been transferred to plant, property and equipment as at 1 January 2014 at a deemed cost of £1,240,000. The comparative figures for the year ended 31 December 2014 have been restated to reflect this change in policy resulting in a net charge to the consolidated statement of comprehensive income of £50,000 representing depreciation for 2014.

Within property, plant and equipment are assets with a carrying value of £185,000 (2014: £nil) held under finance leases.

13 Biological produce

The fair value of biological produce was:


The fair value of grapes harvested is determined by reference to estimated market prices less cost to sell at the time of harvest. The estimated market price for grapes used in respect of the 2015 harvest is £2,000 per tonne (2014: £2,000 per tonne).

A 10% increase in the estimated market price of grapes to £2,200 per tonne would result in an increase of £29,000 in the fair value of the grapes harvested in the year. A 10% decrease in the estimated market price of grapes to £1,800 per tonne would result in a decrease of £29,000 in the fair value of the grapes harvested in the year.

14 Inventories

During the year £299,000 (December 2014: £334,000) was transferred to cost of sales.

Prior to harvest, the costs of growing the grapes are included in inventory. Upon harvest, the Group is required to value agricultural produce at fair value less costs to sell in line with IAS 41: Agriculture. A fair value loss of £95,000 (2014: £71,000 loss) was recorded during the year and included within the consolidated statement of comprehensive income. This measurement of fair value less costs to sell is the deemed cost of the grapes that is transferred into inventory upon harvest.

15 Trade and other receivables

Trade and other receivables are due within 1 year apart from £50,000 (December 2014: £50,000) included within other receivables which is due in more than 1 year.

As at 31 December 2015 trade receivables of £22,000 (2014: £17,000) were past due but not impaired. They relate to customers with no default history. The ageing analysis of these receivables is as follows:

16 Trade and other payables

Book values are approximate to fair value at 31 December 2015 and 31 December 2014.

17 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, shown at a cost of £4,976,000 (2014: £4,356,000) within property, plant and equipment and a floating charge over all other property and undertakings.

Other bank loans of £170,000 are at a fixed interest rate of 6% secured against certain items of plant and equipment. This loan is repayable via monthly instalments over 5 years.

18 Finance Leases

Finance leases comprise hire purchase agreements which the Group has used to purchase various items of plant, machinery and motor vehicles. The carrying value of the assets acquired held under these finance leases amounts to £185,000 (2014: £nil) and are shown within property, plant and equipment (note 12).

19 Convertible bonds

Convertible bonds represent the debt element of a deep discount convertible 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 bond into Gusbourne PLC ordinary shares at a price of 66 pence per share.

On 27th May 2015 the Company, Mr A C V Weeber and Mrs C Weeber entered into a variation of the Bond. The variation of the Bond allows for the conversion to take place as part of an Open Offer of Gusbourne PLC at the issue price of the Open Offer. On 17 June 2015, as part of the Open Offer announced by the Company on 28th May 2015, £339,846 of the bonds plus accrued discount of £49,043 were converted into 777,778 50 pence ordinary shares at a price of 50 pence per share. As a result of the amendment to the terms of the Convertible Bonds on 27 May 2015, this conversion of bonds into shares resulted in a charge to the consolidated statement of income of £115,000 and is shown within finance costs as an exceptional item. This charge is a non-cash adjustment and does not affect the net assets of the Group as the corresponding entry is to retained earnings.

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.

20 Operating lease commitments

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

The Group has entered into a number of long term leases in respect of land and buildings in West Sussex. The Group has planted vineyards on the leased land.

The leases have lives of 47 years (2014: 48 years) and include various terms including regular break clauses at the Group's option.

21 Share capital

On 17 June 2015 Gusbourne PLC issued 5,050,738 ordinary shares of 50 pence each at a price of 50 pence per share. 4,272,960 of these shares were issued for cash and 777,778 shares were subscribed for by way of the conversion of Bonds into shares.

On 30 July 2015 Gusbourne PLC issued, for cash, 735,748 ordinary shares of 50 pence each at a price of 50 pence per share.

The shares were fully subscribed and paid up.

22 Reserves

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

23 Related party transactions

At 31 December 2015 £nil (31 December 2014 - £1,493,000) 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.

SUSD Limited ("SUSD") provided architectural and project management services to the Group during the year amounting to £63,615. There was no balance due to SUSD as at 31 December 2015. Lord Ashcroft, KCMG PC the Company's controlling shareholder, is also the controlling shareholder of SUSD through his interest in SUSD Asset Management (Holdings) Limited, SUSD's ultimate parent company.

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 year Anne Street Partners Limited charged the Company in total £70,000 (December 2014 - £62,473). Of this, £10,000 was in relation to directors fees (December 2014 - £22,473) and £60,000 relates to management services (December 2014 - £40,000). At 31 December 2015 an amount of £nil inclusive of VAT (December 2014 - £77,000) was due to Anne Street Partners Limited. The amount due to Anne Street Partners Limited as at 31 December 2014 was shown within trade and other payables.

On 27th May 2015 the Group, Mr Andrew Weeber, Non-Executive Chairman, and Mrs C Weeber entered into a variation of the Bond. The variation of the Bond allows for the conversion to take place as part of an Open Offer of Gusbourne PLC at the issue price of the Open Offer. On 17 June 2015, as part of the Open Offer announced by the Company on 28th May 2015, £339,846 of the bonds plus accrued discount of £49,043 were converted into 777,778 50 pence ordinary shares at a price of 50 pence per share. As a result of the amendment to the terms of the Convertible Bonds on 27 May 2015, this conversion of bonds into shares resulted in a charge to the consolidated statement of income of £115,000 and is shown within finance costs as an exceptional item. This charge is a non-cash adjustment and does not affect the net assets of the Group as the corresponding entry is to retained earnings.

Included within other payables at 31 December 2015 is an amount of £1,862 due from Andrew Weeber, Non-Executive Chairman (December 2014 - £431 due to Andrew Weeber). The amount of £1,862 has been received by the Group since 31 December 2015.

24 Early adoption of Agriculture: Bearer Plants:Amendments to IAS 16 and IAS 41

Following the early adoption of Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) the financial statements have been restated to reflect that bearer plants such as grape vines are no longer included within the classification of biological assets under IAS 41 Agriculture. In accordance with the amendments biological assets held by the Group are now accounted for under IAS 16 PPE and held at cost.

The tables below presents a summary of the qualitative effects of the above change in accounting policy.

The effect on earnings per share was immaterial and is therefore not presented.

Effects on consolidated statement of financial position

1 January 2014

Effects on consolidated statement of financial position

31 December 2014

Effects on consolidated statement of comprehensive income

31 December 2014