Gusbourne Regulatory News (GUS)

25 June 2020

Gusbourne Plc

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

Results for the year ended 31 December 2019

The Board of Gusbourne Plc (AIM: GUS) is pleased to announce its audited results for the year ended 31 December 2019.

2019 Highlights:

· Net revenue* growth of 31% (2018: 26%);

· A successful grape harvest in 2019 with another vintage of high quality and record quantity;

· Continuing success in major wine competitions with over 70 medals at national and international competitions, where Gusbourne is judged against some of the finest wines from around the world. This included "Best English Sparkling Wine" at the International Wine Challenge held in Shanghai;

· Ongoing growth of operations at the Nest - the Company's cellar door, tour and wine tasting operation - which continued to bring many new visitors and customers to our winery and vineyards in Appledore, Kent; and

· Increased investment in the Group's asset base including vineyards, wine inventories, buildings, plant and machinery and the award winning Gusbourne brand.

Chairman's statement

I am pleased to report that Gusbourne's net revenues continued to grow in 2019, with net revenues for the year at £1,653,000 (2018: £1,261,000), an increase of 31% (2018: 26%) over the prior year and we have expanded our customer base both in the UK and overseas. The Gusbourne business was established sixteen years ago in 2004 and has been selling its award-winning English sparkling wines since 2010. Gusbourne remains one of England's premier sparkling wine businesses and is focused at the luxury end of the market. 

The Company experienced a strong start to trading in the first three months of the year, with revenue performance ahead of directors' expectations. Since the end of March 2020, the Company's distribution channels have been impacted by COVID-19, although the Company has taken steps to mitigate this impact. Details of the impact of COVID-19 on the Group are provided in the Chief Executive's review.

I am delighted to report that in June 2020 we entered into a £10.5 million asset-based lending facility with PNC Financial Services UK Ltd ("PNC"). The new facility has been used to refinance certain existing debts and provide additional liquidity and long-term finance for the Company at a competitive rate.

I should like to express my sincere thanks for the dedicated efforts of our employees, our loyal customers as well as the support of our shareholders in helping the Group achieve another successful year for the business.

Andrew Weeber

Chairman

* Net revenue represents Revenue after deducting excise duties

Chief Executive's review

I am pleased to report that 2019 has been another year of successful achievement for the Group, with net revenue increasing 31% on the prior year. We continue to widen our distribution channels both in the UK and overseas, and I am delighted to report that Gusbourne is now distributed to fifteen countries around the world. We have continued to invest further in sales and marketing through the period to help support further sales growth in the coming years.

The Gusbourne sparkling wine products are at the luxury end of the English sparkling wine market and we are committed to maintaining this premium position. We are delighted that the quality of our products has also been recognised in the United States, an important contributor to our export sales, with a number of prestigious awards for our sparkling wines.

2019 marked our second full year of operations at the Nest, which provides Gusbourne's cellar door sales facilities, tours and wine tasting operations. Situated amongst our vineyards and winery operations in Kent this facility allows us to fully engage with our customers, encouraging them to enjoy the vineyards, visit the winery and taste our wines.

Activities

Gusbourne is engaged 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 vineyards are located at its freehold estate at Appledore in Kent where the winery is also based. The Group now has a total of 231 acres of land under vine with the first plantings dating back to 2004.

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

We have continued our success in major wine competitions winning over 70 medals at national and international competitions, where we are judged against some of the finest wines from around the world. Awards received during the year include:

· 6 gold medals at the Wine GB Awards, out of 8 wines entered (highest ever awarded to one winery). In addition, Gusbourne received 'Best Prestige Cuvée' for the Blanc de Blancs 2013, 'Best Still Pinot Noir' for the Pinot Noir 2016 and 'Best Still Rosé for the Cherry Garden Rosé 2018;

· 3 gold medals at the Champagne and Sparkling Wine World Championship

· 3 gold medals and Varietal Best in Show trophy for the Guinevere 2016 at the London Wine Competition;

· 3 gold medals at the Sommelier Wine Awards a UK based competition held in May 2019;

· Gold medal at the Global Rosé Masters and Global Sparkling Wine Masters competition, a UK based competition held in September 2019;

· 2 gold medals at the Japan Wines Awards;

· In China on 6 September 2019 Gusbourne was named 'Best English Sparkling Wine' as well as overall 'IWC China Champion Sparkling Wine 2019' at the International Wine Challenge held in Shanghai; and

· On 12 October 2019 'Best recent release: Non-Champagne Sparkling Wine' at the Pinnacle Wine Awards held in Singapore.

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 promotion of the Company's cellar door operation at the Company's winery in Kent. This allows visitors to enjoy vineyard and winery tours and taste our award-winning wines and also helps to promote a closer and more direct relationship with our customers; and

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

2019 Harvest

The 2019 harvest at Gusbourne has continued the precedent set in recent years, with yet another vintage of high quality and record quantity. Conditions throughout the growing season were generally good, in particular during flowering in June and the critical ripening months of July and August. Despite less favourable weather conditions towards the end of the year the team were able to pick a healthy and ripe crop. Early indications of the resulting wine quality are high.

In accordance with Gusbourne's strict and self-imposed detail-focussed techniques in the vineyard, the team began choosing the best quality fruit during the green harvest towards the latter part of the growing season. This was followed by rigorously selecting only the finest fruit from each vine during harvest which ultimately ensured that all of the grapes which were chosen for pressing were suitably rich, ripe and pure. Desired levels of natural sugar and acidity were present across all three of the varieties that Gusbourne grow - Chardonnay, Pinot Noir and Pinot Meunier.

The resulting wine production has added further to our inventory levels for sale in future years.

Results for the year

Net revenue for the year amounted to £1,653,000 (2018: £1,261,000), an increase of 31% (2018: 26%) over the prior year. Whilst these sales continue to reflect limited stock availability at this time, they do represent continuing like for like growth in the sale of Gusbourne wines since 2013.

Gross profit represents net revenue less cost of sales (cost of wine sold and direct selling costs). Over the last 5 years the gross profit margin has increased from 17% in 2014 to 56% in 2019 (2018: 56%) reflecting economies of scale in respect of the Group's increased production volumes.

It should be noted that the cost of sales relates to the wine sold in the current year which is primarily the wine produced from the 2014 and 2015 harvests, and the benefit of economies of scale at gross margin level will continue, for some time, to trail current year sales.

Operating expenses of £2,902,000 (2018: £2,246,000), included depreciation of £699,000 (2018: £638,000) and also included planned increased expenditure on sales and marketing costs reflecting continuing investment in the development and future growth of the business and its sales beyond the current financial year. This increased investment in future growth is not fully matched by increased revenues in the current year and is the main reason for an increased loss in Adjusted EBITDA for the year.

Adjusted EBITDA for the year was a loss of £1,285,000 (2018: £907,000). The operating loss for the year after depreciation and amortisation was £2,156,000 (2018: £1,420,000). The loss before tax was £2,601,000 (2018: £1,767,000) after net finance costs of £445,000 (2018: £347,000).

These losses continue to be in line with expectations and the long-term development strategy of the Group which is based on continuing sales growth of the Gusbourne wines, supported by increasing wine stocks, and which is planned to provide a positive cashflow during the course of the next few years.

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. The Group invested in plant and equipment for the vineyards and the winery amounting to £310,000 (2018: £698,000) and in buildings of £22,000 (2018: £74,000). Total assets at 31 December 2019 of £23,507,000 (2018: £19,727,000) include freehold land and buildings of £6,383,000 (2018: £6,488,000), vineyards of £3,144,000 (2018: £3,289,000), right of use assets of £2,068,000 (2018: £nil) inventories of wine stocks amounting to £7,463,000 (2018: £5,282,000), and cash of £1,009,000 (2018: £1,311,000). Intangible assets of £1,007,000 (2018: £1,007,000) arose on the acquisition of the Gusbourne Estate business on 27 September 2013.

IFRS 16 Leases has been adopted during in the year. The impact of this is the recognition of a "right of use" asset as at 31 December 2019 of £2,068,000 and additional lease liabilities as at 31 December 2019 of £2,123,000. The impact on the consolidated statement of income has been an increase in the loss before tax of £55,000.

As noted above, our main operating assets continue to grow, which provides further asset backing for our investors as well as support for our planned future sales growth. In particular, the cost of inventories of wine stocks has increased by 41% during the course of the year, reflecting a further successful harvest of grapes in 2019.

Intangible assets, which includes the Gusbourne brand itself, remain unimpaired at their historical amount and in accordance with the relevant accounting standards. No account has been taken with regards to any potential fair value uplift that may be appropriate.

The Group's net tangible assets at 31 December 2019 amount to £11,187,000 (2018: £13,303,000) and represent 92% of total equity (2018: 93%). Net tangible assets per share at 31 December 2019 was 24.1 pence (2018: 29.1 pence). It is important to note that these net tangible assets figures do not necessarily reflect underlying asset values, in particular in respect of the Group's inventories, which are reported at the lower of cost and net realisable value. These inventories are expected to continue growing until approximately four years after vineyard maturity. These additional four years reflect the time it takes to transform our high-quality grapes into Gusbourne's premium sparkling wine. The anticipated underlying surplus of net realisable value over cost of these wine inventories, which is not reflected in these accounts and in the net tangible assets per share quoted above, will become an increasingly significant factor of the Group's asset base as the inventories continue to grow.

Financing

The Group's activities are financed by shareholder's equity and debt which comprises loans, lease liabilities, other borrowings and deep discount bonds. At 31 December 2019 debt amounted to £10,561,000 (2018: £4,934,000) and represents 87% of total equity (2018: 34%). Excluding the impact of IFRS 16 and the resulting right of use asset and lease liability, debt would amount to £8,438,000 and represent 83% of total equity. Details of the initial and continuing recognition of leases under IFRS 16 Leases are shown in note 9.

On 31 May2019, Gusbourne entered into an agreement with a company controlled by Lord Ashcroft KCMG PC, a substantial shareholder in Gusbourne, to receive an unsecured loan facility of up to £2,000,000, repayable on 31 October 2019. Under the terms of the Loan Agreement, should the loan not be repaid on 31 October 2019, the loan will become repayable on demand subject to such repayment not being in breach of the Company's existing banking facilities or if such repayment caused the Company to be unable to meet its creditors as they fall due. As at the 31 December 2019 the loan had not been repaid and incurs interest of 15% per annum. The lender can use its sole discretion to exercise any warrants held in Gusbourne; the amount to be subscribed pursuant to such exercise, will be deemed to be satisfied to the extent of the amount outstanding in respect of the loan and amount of accrued but unpaid interest at the time of exercise.

On 23 December 2019, Gusbourne announced that its subsidiary Gusbourne Estate Limited entered into an agreement with Franove Holdings Limited, a company wholly owned by Paul Bentham, a Non-Executive Director of Gusbourne, to receive an unsecured short-term loan facility of £1,250,000 which is repayable on 10 December 2020. Interest is payable on repayment of the debt at 15% per annum.

Post period-end, on 1 June 2020, Gusbourne announced that its subsidiary Gusbourne Estate Limited has entered into an agreement with PNC Business Credit, a trading style of PNC Financial Services UK Ltd, for up to £10.5m of asset-based lending facilities. (the "PNC Facilities"). The PNC Facilities will primarily be used to provide working capital for the Group. It will also be used to refinance certain existing loan facilities.

The PNC Facilities will be provided on a revolving basis over a minimum period of 5 years and allow flexible drawdown and repayments in line with the Company's working capital requirements. The interest rate will be at the annual rate of 3 per cent over the Bank of England Base Rate. The facilities will be secured by way of first priority charges over the Company's inventory, receivables and freehold property as well as an all assets debenture.

On completion approximately £4.6m of the PNC Facilities was drawn down by Gusbourne Estate Limited with approximately £2.1m being used to repay the existing secured Barclays bank facilities in full, £1.3m used to part repay the existing short term loans to Franove Holdings Limited and a company controlled by Lord Ashcroft KCMG PC. The balance of £1.2m will be used for working capital. Further drawdowns will be made from time to time in line with the needs of the business.

Of the £1.3m drawdown at completion to part repay existing short-term loans, £0.8m was used to part repay a short-term loan of £1.25m received on 23 December 2019 from Franove Holdings Limited. £0.5m was used to part repay a short-term loan of £2.0m received on 31 May 2019 from a company controlled by Lord Ashcroft.

Following these repayments Franove Holdings Limited has agreed to extend the repayment date of its outstanding loan of £0.5m to 15 August 2021, at the same 15% rate of interest, with the loan becoming secured behind PNC at the same ranking as the existing outstanding deep discount bonds issued by the Company. Gusbourne Estate Limited has also agreed with Franove that in the event it seeks to repay its loans (excluding its PNC facilities) further, the repayment of the Franove Holdings Limited loan will take priority.

The remaining Lord Ashcroft loan of £1.7m has been refinanced, by a company controlled by him, with a new deep discount bond maturing on 15 August 2021 and with a coupon of 15% per annum rolled quarterly and secured behind PNC at the same ranking as the existing outstanding bonds issued by the Company.

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 continue to be sought by the Company over the coming few years to fund ongoing growth in the Company's operations and asset base, in line with its development strategy.

Going concern

The Directors believe the Group to be a going concern on the basis that it has sufficient cash available from committed facilities to continue operations for at least 12 months from the date these financial statements were approved and in addition will not breach any of its key covenants during this period.

In coming to their conclusion, the Directors have considered the Group's profit and cash flow plans for the coming period, and in the light of the outbreak of COVID-19 have run various downside "stress test" scenarios. These scenarios assess the impact of COVID-19 on the Group over the next 12 months and in particular on the Group's sales through its key distribution channels. These stress tests indicate the Group can withstand any ongoing adverse impact on revenues for at least the next 12 months.

In addition, these stress test scenarios assess the Group's potential debt requirements against the Group's £10.5m asset-based lending facility, of which c. £5.8m is undrawn on the date on which these financial statements were approved. The stress test scenarios do not show a requirement in excess of the Group's undrawn facilities nor do they show the Group breaching any of its key covenant tests on the monthly testing points which start from 31 December 2020.

The stress test scenarios also include certain cost mitigation actions, including but not limited to furloughing of certain staff, operating cost reductions and reduced capital expenditure.

Under the significant stress test scenarios, we have run the Group could withstand a material and prolonged adverse impact on revenues and continue to operate within the available lending facilities. Accordingly, the Group and the Company continues to adopt the going concern basis in preparing its Financial Statements.

The Board have also assessed the ability of the Group to repay its existing deep discount bonds and a short- term loan which are due for maturity in August 2021. Whilst these amounts fall due for repayment outside of the stress test scenarios referred to above the Board believe that the Group will be able to raise further equity and/or debt funds to repay or refinance these amounts as and when they fall due as well as providing additional funds for further development of the Group.

Current trading and outlook

The growing season in 2020 has started slightly later than average, but consistently warm spring weather has led to strong, even growth and high potential fruitfulness. The vines will remain subject to the normal seasonal climatic and disease risks throughout the remaining part of the growing season. Above average yields from the 2019 harvest have allowed us to increase our wine stocks for future sales.

The Company experienced a strong start to trading in the first three months of the year with revenue performance ahead of directors' expectations. However, since the end of March 2020, the Company's distribution channels have been impacted by COVID-19. The Company has engaged in a number of new sales initiatives to mitigate this impact and the directors are pleased to report increasing demand for wine in some channels, especially online.

On the production side, both vineyard and winery operations have continued to work through the lockdown with appropriate safety protocols put in place. The Company has furloughed a number of staff members, particularly in the sales function and taken various steps to reduce costs at this time.

Whilst the immediate outlook for sales remains uncertain, the directors remain confident about the Group's longer-term prospects beyond COVID-19.

We are delighted to have secured significant asset-based financing facilities from PNC and which aligns with the working capital requirements of the business. We are pleased to welcome PNC as a key stakeholder and look forward to working with them as we continue to develop our business over the coming years.

Finally, I would like to thank all our employees for their hard work, dedication, and attention to detail in applying their considerable skills and talents to the production and sale of our award-winning wines and in particular in dealing with the challenges COVID-19 brings.

Charlie Holland

Chief Executive

Key Performance Indicators

* Net revenue represents Revenue after deducting excise duties.

** Adjusted EBITDA means profit from operations/ (loss from operations) before fair value movement in biological produce, interest, tax, depreciation and amortisation.

The Directors believe that Adjusted EBITDA provides shareholders with a useful representation of the underlying earnings from the Group's business. The Directors have therefore excluded the fair value movement in biological produce on the basis that the charge is non-cash in nature and does not reflect the underlying performance of business.

Annual General Meeting

The Company's annual report and accounts for the year ended 31 December 2019 will be posted to shareholders on Monday 29 June 2020, together with notice of the Annual General Meeting to be held at 11am on Thursday 23 July 2020 at Gusbourne Estate, Kenardington Road, Appledore, Kent, TN26 2BE. In light of the compulsory government measures in force restricting public gatherings and non-essential travel measures, we are planning for the AGM this year to be run as a closed meeting. Shareholders must not attend the AGM in person and anyone seeking to attend in person will be refused entry. The Company will make arrangements for a quorum to be present to transact the formal business of the meeting. Your vote is important to Gusbourne and the Board of Directors wishes to ensure that your vote is counted at the AGM, therefore, all Shareholders are encouraged to submit their vote using the proxy form that will be enclosed with the AGM Notice.

Enquiries:

Gusbourne Plc

Charlie Holland +44 (0)12 3375 8666

Canaccord Genuity Limited

Bobbie Hilliam/Georgina McCooke +44 (0)20 7523 8000

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

Note to Editors

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

Consolidated statement of comprehensive income for the year ended 31 December 2019

Consolidated statement of financial position at 31 December 2019

Consolidated statement of cash flows for the year ended 31 December 2019

*Non-cash transaction

The short-term loan of £1,000,000 received in the year ended 31 December 2018 was used as part settlement monies due under the share subscription which completed on 11 September 2018.

Consolidated statement of changes in equity for the year ended 31 December 2019

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 2019 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 2019 or the year ended 31 December 2018, but is derived from those accounts. The Group's statutory accounts for 31 December 2018 have been delivered to the Registrar of Companies and those for 31 December 2019 will be delivered following the Company's Annual General Meeting. The Auditor's reports on both the 31 December 2018 and 31 December 2019 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 available from committed facilities to continue operations for at least 12 months from the date these financial statements were approved and in addition will not breach any of its key covenants during this period.

In coming to their conclusion, the Directors have considered the Group's profit and cash flow plans for the coming period, and in the light of the outbreak of COVID-19 have run various downside "stress test" scenarios. These scenarios assess the impact of COVID-19 on the Group over the next 12 months and in particular on the Group's sales through its key distribution channels. These stress tests indicate the Group can withstand any ongoing adverse impact on revenues for at least the next 12 months.

In addition, these stress test scenarios assess the Group's potential debt requirements against the Group's £10.5m asset-based lending facility, of which c. £5.8m is undrawn on the date on which these financial statements were approved. The stress test scenarios do not show a requirement in excess of the Group's undrawn facilities nor do they show the Group breaching any of its key covenant tests on the monthly testing points which start from 31 December 2020.

The stress test scenarios also include certain cost mitigation actions, including but not limited to furloughing of certain staff, operating cost reductions and reduced capital expenditure.

Under the significant stress test scenarios, we have run, the Group could withstand a material and prolonged adverse impact on revenues and continue to operate within the available lending facilities. Accordingly, the Group and the Company continues to adopt the going concern basis in preparing its Financial Statements.

The Board have also assessed the ability of the Group to repay its existing deep discount bonds and a short-term loan which are due for maturity in August 2021. Whilst these amounts fall due for repayment outside of the stress test scenarios referred to above the Board believe that the Group will be able to raise further equity and/or debt funds to repay or refinance these amounts as and when they fall due as well as providing additional funds for further development of the Group.

The financial statements do not include any adjustments should the going concern basis of preparation be inappropriate.

New accounting standards and changes to existing accounting standards

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

• IFRS 16 Leases

IFRS 16 Leases

The Group has entered into a number of long term leases in respect of land and buildings in West Sussex on which the Group has planted vineyards. The leases have a remaining life of 43 and 50 years. The Group has assessed the leases under IFRS 16 and a right of use asset and lease liability have been recognised in the consolidated statement of financial position for the first time in respect of its current operating leases. The Group has reviewed its leases and decided to account for IFRS 16 on the modified retrospective approach using a single discount rate for leases with similar characteristics.

The Group has performed a quantitative assessment based on the current leases in place and a right of use asset and associated lease liability of

£1,488,000 has been recognised on adoption of IFRS 16 with a further amount of £626,000 recognised on leases entered into during the period. The impact on the consolidated statement of income has been an increase in the loss before tax of £55,000. No amounts have been restated in prior periods.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless this is not readily determinable, in which case The Group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

Right-of-use assets are initially measured at the amount of the lease liability.

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the leases. When The Group revises its estimate of the term of any lease (because, for example, it re- assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

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

The majority of the group's revenue is derived from selling goods with revenue recognised at a point in time when control of the goods has transferred to the customer. This is generally when the goods are delivered to the customer. However, for export sales, control might also be transferred when the goods are dispatched by the Group or delivered either to the port of departure or port of arrival, depending on specific terms of the contract with a customer. There is limited judgement needed in identifying the point control passes: once physical delivery of the products to the agreed location has occurred, the group no longer has physical possession, usually will have a present right to payment and retains none of the significant risks and rewards of the goods in question.

All of the Group's revenue is derived from fixed price contracts and therefore the amount of revenue to be earned from each contract is determined by reference to those fixed prices.

For all contracts there is a fixed unit price for each product sold. Therefore, there is no judgement involved allocating the contract price to each unit ordered in such contracts (it is the number of units multiplied by the fixed unit price for each product sold). Where a customer orders more than one product line, the Group is able to determine the split of the total contract price between each product line by reference to each product's standalone selling prices (all product lines are capable of being, and are, sold separately).

Revenue from vineyard tours and tastings is recognised on the date on which the tour or tasting takes place.

Net revenue is revenue less excise duties. The Group incurs excise duties in the United Kingdom and is a production tax which becomes payable once the Group's products are removed from bonded premises and are not directly related to the value of revenue. It is not included as a separate item on invoices issued to customers. Where a customer fails to pay for the Group's products the Group cannot reclaim the excise duty. The Group therefore recognises excise duty as a cost of the Group.

Financial assets

Debt instruments at amortised cost

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. The financial assets meet the SPPI test and are held in a 'hold to collect' business model and therefore classified at amortised cost.

Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for trade receivables. The historical loss rates are adjusted for current and forward looking information relevant to the Group's customers.

For trade receivables, which are reported net, such expected credit losses are 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.

Deep discount bonds

Deep discount bonds are redeemable at their nominal price at maturity. The discount is charged over the life of the bond to the statement of comprehensive income and included within finance expenses.

Warrants

Warrants issued to shareholders as part of an equity fund raise are accounted for as equity instruments. Details of Warrants are shown in note 10.

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:

Freehold buildings 4% per annum straight line Plant, machinery and motor vehicles

5-25% per annum straight line Computer equipment

33% per annum straight line

Mature vineyards 4% per annum straight line

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

Agricultural produce is accounted for under IAS 41 Agriculture. Harvesting of the grape crop is ordinarily carried out in October. The grapes 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. 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. 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, with any fair value gain or loss shown in the consolidated statement of comprehensive income.

Bearer plants are accounted for under IAS 16 and are held at cost.

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, including depreciation on right of use assets and interest on lease liabilities, 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 - year ended 31 December 2018

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. During the year ended 31 December 2018 £88,000 in respect of operating leases was capitalised as part of inventory.

Leased assets - year ended 31 December 2019

All leases are accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets and leases with an expected full term of 12 months or less.

Lease liabilities are measured at the present value of the unpaid contractual payments over the expected lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used.

On initial recognition, the carrying value of the lease liability also includes amounts expected to be payable under any residual value guarantee; the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to exercise that option; and any penalties payable for

terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for lease payments made at or before commencement of the lease and initial direct costs incurred.

Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease term.

When the Group revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at a revised discount rate that is implicit in the lease for the remainder of the lease term. The carrying value of lease liabilities is similarly revised if any variable element of future lease payments dependent on a rate or index is revised. In both cases, an

equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining lease term.

Right-of-use assets are reviewed regularly to ensure that the useful economic life of the asset is still appropriate based on the usage of the asset. Where the asset has reduced in value the Group considers the situation on an asset-by-asset basis and either treats the reduction as an acceleration of depreciation or as an impairment under IAS 36 'Impairment of Assets'. An acceleration of depreciation occurs in those cases where there is no opportunity or intention to utilise the asset before the end of the lease.

2 Critical accounting policies

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.

There were no areas of judgement in the year. Where estimates and assumptions have been used these are outlined 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. Refer to note 6 which provides information on sensitivity analysis around this.

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. Management does not believe that any reasonably possible change in a key assumption would result in impairment.

Lease interest rates

When calculating the lease liability and related right-of-use asset under IFRS 16 'Leases', unless stipulated clearly when taking on the liability the Group uses an incremental borrowing rate calculation to determine the relevant rate. Consideration is taken over the term of the lease and any specific risks relating to the assets acquired by an individual lease.

Fair value measurement

A number of assets and liabilities included in the Group's financial statements require measurement at, and/or disclosure of, fair value.

The fair value measurement of the Group's financial and non-financial assets and liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):

• Level 1: Quoted prices in active markets for identical items (unadjusted)

• Level 2: Observable direct or indirect inputs other than Level 1 inputs

• Level 3: Unobservable inputs (i.e. not derived from market data).

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur.

• Intangibles

• Biological Produce (Note 6)

For more detailed information in relation to the fair value measurement of the items above, please refer to the applicable notes.

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

Deep discount bonds 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

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The liquidity risk of the Group is managed centrally by the group treasury function. Budgets are set and agreed by the board in advance, enabling the Group's cash requirements to be anticipated.

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.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. The expected loss rates are based on the Group's historical credit losses experienced over the three-year period to the period end. Trade receivable balances are monitored on an ongoing basis to ensure that the Group's bad debts are kept to a minimum. The maximum trade credit risk exposure at 31 December 2019 in respect of trade receivables is £344,000 (2018: £213,000) and due to the prompt payment cycle of these trade receivables, the expected credit loss is negligible at £13,000 (2018: £3,000).

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 Loss per share

Basic earnings per ordinary share are based on a loss of £2,601,000 (December 2018: £1,767,000) and ordinary shares 45,848,874 (December 2018: 38,265,254) of 1 pence each, being the weighted average number of shares in issue during the year.

Diluted earnings per share are based on a loss of £2,601,000 and ordinary shares of 45,848,373 and no dilutive warrant options.

5 Property, plant and equipment

Within property, plant and equipment are assets with a carrying value of £27,000 (2018: £79,000) held under hire purchase contracts and shown within other borrowings.

Right of use assets comprise land leases on which vines have been planted and property leases from which vineyard operations are carried out. These assets have been created under IFRS 16 - Leases. £1,488,000 of the additions shown in the table above relate to leases in place as at 1 January 2019 with the remaining £626,000 relating to a new lease entered into during the year.

6 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 2019 harvest is £2,300 per tonne (2018: £2,300 per tonne).

A 10% increase in the estimated market price of grapes to £2,530 per tonne would result in an increase of £134,000 (2018: £132,000) in the fair value of the grapes harvested in the year. A 10% decrease in the estimated market price of grapes to £2,070 per tonne would result in a decrease of £134,000 (2018: £132,000) in the fair value of the grapes harvested in the year.

A fair value loss of £172,000 (2018: £125,000 gain) 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.

As a result of the adoption of IFRS16 in the year the fair value loss is £55,000 higher than if IFRS 16 had not been adopted.

The fair value of biological produce is categorised as a level 3 recurring fair value measurement.

7 Inventories

During the year £547,000 (December 2018: £449,000) was transferred to cost of sales.

8 Loans and borrowings

The bank loan of £2,025,000 carries interest at an annual rate of 3% over Barclays Bank plc base rate and is due for repayment in full on 15 November 2021. It is secured by way of a fixed charge over the Group's land and buildings at Appledore, Kent, shown at a cost of £5,390,000 (2018:£5,390,000) within property, plant and equipment and a floating charge over all other property and undertakings.

Other bank loans of £34,000 carry a fixed interest rate of 6% per annum secured against certain items of plant and equipment. This loan is repayable via monthly instalments over 5 years from January 2016.

The redemption amount of the deep discount bonds is £3,390,000, redeemable on 15 August 2021. Accrued discount of £240,000 (2018: £239,000) has been charged to the statement of comprehensive income during the year.

On 31 May 2019, Gusbourne entered into an agreement with Lord Ashcroft KCMG PC, a substantial shareholder in Gusbourne, to receive an unsecured loan facility of up to £2,000,000, repayable on 31 October 2019. Under the terms of the Loan Agreement, should the loan not be repaid on 31 October 2019, the loan will become repayable on demand subject to such repayment not being in breach of the Company's existing banking facilities or if such repayment caused the Company to be unable to meet its creditors as they fall due. The loan has not been repaid and incurs interest of 15% per annum. The lender can use its sole discretion to exercise any warrants held in Gusbourne, to the amount to be subscribed pursuant to such exercise will be deemed to be satisfied to the extent of the amount outstanding in respect of the Loan and amount of accrued but unpaid interest at the time of exercise.

On 23 December 2019 a subsidiary of Gusbourne PLC, Gusbourne Estate Limited entered into an agreement with Franove Holdings Limited, a company wholly owned by a Non-Executive Director of Gusbourne Plc to receive an unsecured short term loan facility of £1,250,000. The loan is repayable on 10 December 2020 and carries interest at an annual rate of 15% per annum.

An analysis of the maturity of loans and borrowings is given below:

9 Lease liabilities

The Group has reviewed its leases and decided to account for IFRS 16 on the modified retrospective approach using a single discount rate for leases with similar characteristics. The Group is using the methodology to set the right of use asset equal to the lease liability on adoption of IFRS 16.

During the period the Group accounted for 6 leases under IFRS 16. The lease contracts provide for payments to increase each year by inflation or at a fixed rate and on others to be reset periodically to market rental rates. The leases also have provisions for early termination. The weighted average Incremental Borrowing Rate used to calculate the lease liability was 4.25%.

The undiscounted lease payments payable under the leases as at 1 January 2019 were £2,944,000. The difference of £1,456,000 between this and the IFRS 16 lease liability recognised on 1 January 2019 of £1,488,000 relates to the effect of discounting using the incremental borrowing rate.

In applying the modified retrospective approach, The Group has taken advantage of the following practical expedients:

• A single discount rate has been applied to portfolios of leases with reasonably similar characteristics;

• Initial direct costs have not been included in the measurement of the right-of-use asset as at the date of initial application.

• For the purposes of measuring the right-of-use asset hindsight has been used. Therefore, it has been measured based on prevailing estimates at the date of initial application and not retrospectively by making estimates and judgements (such as the term of leases) based on circumstances on or after the lease commencement date.

During the period an interest charge of £87,000 arose on the lease liability in respect of land leases. This interest cost has been added to growing crop costs on the basis that the lease liability solely relates to the production of grapes.

The Groups leases include break clauses. On a case-by-case basis, The Group will consider whether the absence of a break clause exposes the Group to excessive risk. Typically factors considered in deciding to negotiate a break clause include:

• The length of the lease term;

• The economic stability of the environment in which the property is located; and

• Whether the location represents a new area of operations for the Group.

At both 31 December 2019 and 2018 the carrying amounts of lease liabilities are not reduced by the amount of payments that would be avoided from exercising break clauses because on both dates it was considered reasonably certain that the Group would not exercise its right to exercise any right to break the lease.

10 Share capital

The Deferred shares of 49 pence each have no rights attached to them.

On 17 September 2019 the Company issued 44,459 new ordinary shares of 1p each pursuant to an exercise of Warrants. All Warrants were exercised at 60p per share.

On 27 September 2019 the Company issued 175,776 new ordinary shares of 1p each pursuant to an exercise of Warrants. All Warrants were exercised at 60p per share.

On 7 October 2019 the Company issued 195,001 new ordinary shares of 1p each pursuant to an exercise of Warrants. All Warrants were exercised at 60p per share.

On 22 October 2019 the Company issued 178,367 new ordinary shares of 1p each pursuant to an exercise of Warrants. All Warrants were exercised at 60p per share.

On 29 October 2019 the Company issued 213,333 new ordinary shares of 1p each pursuant to an exercise of Warrants. All Warrants were exercised at 60p per share.

Gusbourne PLC has Warrants to subscribe for 2,036,517 Ordinary shares of 1 pence each in issue. These Warrants are exercisable at any time by the Warrant Holder, with an exercise price of 75 pence per share until 31 July 2021.

Unexercised Warrants as at 31 December 2019 amount to 2,036,517 Ordinary Shares of 1 pence each.

11 Related party transactions

Deacon Street Partners Limited is considered a related party by virtue of the fact that Lord Ashcroft KCMG PC, the Company's ultimate controlling party, is also the ultimate controlling party of Deacon Street Partners Limited. During the year Deacon Street Partners Limited charged the Company in total £84,000 (December 2018 - £78,107). Of this £84,000 relates to management services (December 2018 - £78,107). There was £84,000 due to Deacon Street Partners Limited as at 31 December 2019 (December 2018 - £18,000).

Devonshire Club Limited is considered a related party by virtue of the fact that Lord Ashcroft KCMG PC, the Company's ultimate controlling party, is indirectly a shareholder of the parent company of Devonshire Club Limited. During the year the Company sold wine to Devonshire Club Limited amounting to £4,537 (December 2018 - £10,131). A balance due from Devonshire Club Limited of £nil (2018: £2,219) is shown within trade receivables.

On 18 June 2018, the company lent £50,000 to a director as an interest free loan, repayable by instalments from July 2019. The loan will be repaid in full by May 2024. The balance due from the director as at 31 December 2019 was £47,500 (December 2018 - £50,000).

On 2 September 2016, the Company issued deep discount bonds with a subscription price of £4,073,034 together with 2,036,517 separable warrants to subscribe for Ordinary shares at an exercise price of 75 pence per share. On 30 June 2017 the Company offered Bondholders the opportunity to convert their bonds into new Ordinary shares at an Issue price of 40p. The company announced, on 1 August 2017, that it received final acceptances of 5,136,662 Conversion Offer Shares, raising £2,055,000 and resulting in a reduction of the final redemption amount of the deep discount bonds to £3,390,000.

Details of related parties who subscribed for the deep discount bonds and warrants are shown in the table below:

On 5 September 2018, the Company issued, for cash, 6,221,699 new ordinary shares of 1 pence each with 6,221,699 separable warrants to subscribe for 1 pence Ordinary shares at an exercise price of 60 pence each. The warrants lapsed on 25 October 2019.

Details of related parties who subscribed for warrants are shown in the table below:

12 Subsequent events

FINANCING

On 1 June 2020, Gusbourne announced that its subsidiary Gusbourne Estate Limited has entered into an agreement with PNC Business Credit, a trading style of PNC Financial Services UK Ltd, for up to £10.5m of asset-based lending facilities. (the "PNC Facilities"). The PNC Facilities will primarily be used to provide working capital for the Group. It will also be used to refinance certain existing loan facilities.

The PNC Facilities will be provided on a revolving basis over a minimum period of 5 years and allow flexible drawdown and repayments in line with the Company's working capital requirements. The interest rate will be at the annual rate of 3 per cent over the Bank of England Base Rate. The facilities will be secured by way of first priority charges over the Company's inventory, receivables and freehold property as well as an all assets debenture.

On completion approximately £4.6m of the PNC Facilities was drawn down by Gusbourne Estate Limited with approximately £2.1m being used to repay the existing secured Barclays bank facilities in full, £1.3m used to part the existing short term loans to Franove Holdings Limited and a company

controlled by Lord Ashcroft KCMG PC. The balance of £1.2m will be used for working capital. Further drawdowns will be made from time to time in line with the needs of the business.

Of the £1.3m drawdown at completion to part repay existing short-term loans, £0.8m was used to part repay a short-term loan of £1.25m received on 23 December 2019 from Franove Holdings Limited. £0.5m was used to part repay a short-term loan of £2.0m received on 31 May 2019 from a company controlled by Lord Ashcroft.

Following these repayments Franove Holdings Limited has agreed to extend the repayment date of its outstanding loan of £0.5m to 15 August 2021, at the same 15% rate of interest, with the loan becoming secured behind PNC at the same ranking as the existing outstanding deep discount bonds issued by the Company. Gusbourne Estate Limited has also agreed with Franove that in the event it seeks to repay its loans (excluding its PNC facilities) further, the repayment of the Franove Holdings Limited loan will take priority.

The remaining Lord Ashcroft loan of £1.7m has been refinanced, by a company controlled by him, with a new deep discount bond maturing on 15 August 2021 and with a coupon of 15% per annum rolled quarterly and secured behind PNC at the same ranking as the existing outstanding bonds issued by the Company.

COVID-19

In line with the FRC's guidance that COVID-19 should be treated as a non- adjusting post balance sheet event given our year-end and the development of the pandemic after that date, we have performed a re-assessment (but not adjustment) of the carrying value of the reported assets and liabilities.

Intangibles

The Group has goodwill and brand assets which if downside scenarios were applied may result in impairments. Although there is short term uncertainty of future trading as a result of COVID-19, if such a downturn is temporary the future cash flow models would not include the major impacted year of 2020 and as a result at this stage the Directors do not consider it appropriate to model any impairment until there is a clearer picture of longer-term trading. The directors remain confident about the Group's long-term prospects beyond Covid-19.

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, including operating lease rentals, 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. There is no indication that the net realisable value of the Group's inventories has reduced as a result of COVID-19 and the Directors do not consider that there is any impairment of the Group's inventories.

Right of use asset

Right of use assets relate to land and property leases on which some of the Groups vineyards are planted. The Group expects to continue to use these leases and do not consider these to be impaired.

Trade receivables

The Group supply's a wide range of customers including restaurants, bars, hotels and other hospitality providers, at the date of these financial statements there had been no specific issues identified in the recoverability of the amounts due from the Group's customers as at 31 December 2019. There is however an increased risk associated with the trading of our customers and their ability to meet their obligations following the impact of COVID-19 on their business. The Group's credit loss provision as at 31 December 2019 was £13,000 representing 4% of outstanding trade receivables. For illustration, if the Group's estimated credit loss provision were to increase to 20% of outstanding trade receivables, the credit loss provision would be £65,000.