Gusbourne Regulatory News (GUS)

29 September 2022

Gusbourne Plc

("Gusbourne" or the "Company")

Interim Results to 30 June 2022

Gusbourne Plc, the English sparkling wine producer, is pleased to announce its unaudited interim results for the six months ended 30 June 2022.

Continuing strong growth in net revenue in the first half with net revenue up 108% at £3.014m, and Adjusted EBITDA loss narrowed to £0.697m.

 (1) Net revenue is revenue reported by the Company after excise duties payable

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

Highlights

· Net revenue (1) up by 108% to £3.014m (30 June 2021: £1.448m)

· Gross profit up by 118% to £1.806m (30 June 2021: £0.829m)

· Adjusted EBITDA (2)  loss narrowed to £0.697m (H1 2021: £0.945m loss). Includes increased investment in sales and marketing to support sales growth but demonstrates a 26% reduction in the loss compared to the prior period, as the Company increasingly works towards a positive Adjusted EBITDA.

· UK Trade sales up by 126% at £1.346m (H1 2021 £0.596m) as UK Trade continued to recover from the prior year effects of COVID-19.

· Direct to consumer (DTC) wine sales, together with tour, tasting events and related income increased to £0.833m a 66% increase from the prior year (H1 2021: £0.502m) driven by online sales and cellar door operations in Kent.

· International sales at £0.798m (H1 2021: £0.309m) were up by 158% with Norway, USA and Japan constituting our largest overseas markets

· 2022 has been our most successful awards season to date in both international and UK wine competitions, with a total of 53 medals awarded, including seventeen gold medals and six trophies. Particular highlights include winning the Judges Selection trophy at the prestigious Texsom awards in the United States in May for the third consecutive year and trophies for 'Best Chardonnay', 'Best Pinot Noir' and back-to-back 'Winery of the Year' at the WineGB awards in September for the second year running.

· Our new prestige cuvee, Fifty One Degrees North, was launched in September 2022. Gusbourne's most exclusive offering, this wine has been designed to represent the definitive expression of modern English winemaking. This exciting new release is a seminal moment in the ongoing development and elevation of the Gusbourne brand and has been widely met with critical acclaim.

Charlie Holland, Chief Winemaker and Chief Executive Officer, commented:

"I am delighted to report strong sales growth for the first six months of 2022, with net revenue more than double the same period in 2021. We continue to enjoy strong demand for Gusbourne wines driven by the continued expansion of our customer base, both in the UK and internationally. It also reflects the luxury appeal and reputation of the Gusbourne brand, the dynamic growth of the English wine sector and the increasing demand for English wines.

I am also delighted to report the increase of £6m in our asset-based financing facilities from PNC which will provide combined lending facilities of £16.5m for a further 5 years and provide valued long term support for the Company's further growth plans.

I am very pleased the Company has been able to acquire the additional freehold land in Kent, which, will form a key part of our production expansion plans over the coming years".

Enquiries:

Gusbourne Plc

Charlie Holland +44 (0)12 3375 8666

Panmure Gordon (UK) Limited (Nomad and Sole Broker)

Oliver Cardigan +44 (0)20 7886 2500

Hugh Rich

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

Note to Editors

Gusbourne produces and distributes a range of high quality and award winning vintage English sparkling wines from grapes grown in its own vineyards in Kent and West Sussex.

The Gusbourne business was founded by Andrew Weeber in 2004 with the first vineyard plantings at Appledore in Kent. The first wines were released in 2010 to critical acclaim. Following additional vineyard plantings in 2013 and 2015 in both Kent and West Sussex, Gusbourne now has 231 acres of mature vineyards. The NEST visitor centre was opened next to the winery in Appledore in 2017, providing tours, tastings and a direct outlet for our wines.

Right from the beginning, Gusbourne's intention has always been to produce the finest English sparkling wines. Starting with carefully chosen sites, we use best practice in establishing and maintaining the vineyards and conduct green harvests to ensure we achieve the highest quality grapes for each vintage. A quest for excellence is at the heart of everything we do. We blind taste hundreds of samples before finalising our blends and even after the wines are bottled, they spend extended time on their lees to add depth and flavour. Once disgorged, extra cork ageing further enhances complexity. Our winemaking process remains traditional, but one that is open to innovation where appropriate. It takes four years to bring a vineyard into full production and a further four years to transform those grapes into Gusbourne's premium sparkling wine.

We are one of England's most awarded wine producers. Highlights include:

· Three times winner of the International Wine & Spirits Challenge (IWSC) English Wine Producer of the Year, having won the award in 2013, 2015 and 2017- a unique achievement

· Back-to-back winner of 'Winery of the Year' at the WineGB Competition in 2021 and 2022

· Trophies for 'Best English Still Red Wine', 'Best English Still White Wine' and 'Best English Still Wine' at Wine GB awards 2022

· Trophy for 'Best Vintage English Sparkling Wine' at the 2022 International Wine Challenge

· Shortlisted for 'Best Sparkling Wine Producer' at the 2022 International Wine and Spirits Competition

· Awarded 'Judges Selection' trophy at the Texsom 2020-2022

Gusbourne's luxury brand enjoys premium price positioning and is distributed in the finest establishments both in the UK and abroad. Our wines can be found in leading luxury retailers, restaurants, hotels and stockists, always being aware that where we are says a lot about who we are.OPERATIONS AND FINANCIAL REVIEW

Results

Net revenue for the period amounted to £3.014m (H1 2021: £1.448m), an increase of 108% on the corresponding period last year.   

Net revenue by distribution channel is shown in the table below.

Operating expenses for the six months, excluding depreciation, amounted to £2.503m (H1 2021: £1.774m), included planned increased expenditure on sales and marketing costs of £1.801m (H1 2021: £1.153m) reflecting continuing investment in the growth of the business and its sales beyond the current financial period. Sales and marketing costs, which are largely discretionary, continue to represent a relatively high proportion of net revenues during this planned growth phase of the business but are now declining as a percentage of net revenue from a peak of 84% in FY 2019 to 59% in FY 2021. Sales and marketing costs represented 59.8% of H1 2022 net revenue (H1 2021 79.6%).

Adjusted EBITDA for the six months was a loss of £0.697m (H1 2021: £0.945m). The operating loss for the period after depreciation and amortisation was £1.178m (H1 2021: £1.472m loss). The loss before tax was £1.374m (H1 2021: £1.922m loss) after net finance costs of £0.196m (H1 2021: £0.450m). Finance costs have reduced in 2022 following the restructuring of the balance sheet in 2021. These adjusted EBITDA losses continue to be in line with expectations and the long-term growth strategy of the Group is intended for adjusted EBITDA to become positive within the coming years.

Balance Sheet

The Group's balance sheet reflects the long-term nature of the sparkling wine industry. The production of premium quality wine from new vineyards is, by its very nature, a long-term project of at least ten years. It takes around two years to select and prepare optimal vineyard sites and order the appropriate vines for planting. It takes a further four years from planting to bring a vineyard into full production and a further four years to transform these grapes into Gusbourne's premium sparkling wine. This requires capital expenditure on vineyards and related property, plant and equipment as well as significant working capital to support inventories over the long production cycle.

The total assets employed in the business at 30 June 2022 was £26.893m (H1 2021: £23.586m) represented by:

• 362 acres of Freehold land and buildings of £6.178m (H1 2021: £6.199m) - with buildings at cost less depreciation.

• 231 acres of mature vineyards of £2.785m (H1 2021: £2.931m) - at cost less depreciation

• Plant, machinery and other equipment of £1.481m (H1 2021: £1.411m) - at cost less depreciation

• Right of use assets (under IFRS 16) of £1.953m (H1 2021: £1.999m).

• Biological assets of £0.756m (H1 2021: £0.541m).

• Inventories at 31 December 2021 at the lower of cost and net realisable value amounted to £10.423m (H1 2021: £9.533m). These inventories represent wine in its various stages of production from wine in tank from the last harvest to the finished products which take around four years to produce from the time of harvest. These additional four years reflect the time it takes to transform our high-quality grapes into Gusbourne's premium sparkling wine. An important point to note is that these wine inventories already include the wine (at its various stages of production) to support sales planned for the next four years. The anticipated underlying surplus of net realisable value over the cost of these wine inventories, which is not reflected in these accounts, will become an increasingly significant factor of the Group's asset base as these inventories continue to grow.

• Other working capital (representing trade and other receivables less trade and other payables) of £0.542m (H1 2021: negative £0.225m)

• Cash of £1.768m (H1 2021: £0.190m)

• Intangible assets of £1.007m (H1 2021: £1.007m) arose on the acquisition of the Gusbourne Estate business on 27 September 2013. 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.

Financing

At 30 June 2022 the Group's total assets of £26.893m (H1 2021: £23.586m) were financed by:

• Shareholder's equity of £14.529m (H1 2021: £7.209m)

• Long term secured debt from PNC of £10.294m (H1 2021: £8.305m). As at 30 June 2022 the PNC facilities were provided on a revolving basis over a minimum period of 5 years from June 2020 and allowed flexible drawdown and repayments in line with the Company's working capital requirements. The interest rate was at the annual rate of 2.75 per cent (H1 2021: 2.75 per cent) over the Bank of England Base Rate.

On 15 August 2022 Gusbourne announced that its wholly owned subsidiary, Gusbourne Estate Limited, had entered into an amended and restated agreement with PNC Financial Services UK Limited ("PNC") to increase its existing £10.5 million 5-year asset-based lending facilities by an additional £6 million to provide the Company with a total £16.5 million asset-based lending facilities at a competitive rate (the "New PNC Facilities"). The New PNC facilities have been made available to the Company for a minimum period of 5 years to 12 August 2027. The interest rate will be at the annual rate of 2.50 per cent over the Bank of England Base Rate. Further details are shown in notes 8 and 10.

• Lease liabilities under IFRS 16 of £2.070m (H1 2021: £2.101m).

• Short term secured debt of £nil (H1 2021: £5.971m). On 29 October 2021 the Company's short-term debt was repaid or converted into equity. Further details of this are shown in note 8.

Current trading and outlook

Current trading continues to reflect year on year net revenue growth although at lower growth rates than H1, with H1 performance having benefited from a strong recovery from the prior year adverse effects of COVID-19 on trading.

We look forward to significant further business development and growth in the coming years based on our luxury market positioning, an increasing new product range, further development of our DTC cellar door operations and increased supply over the longer term with planned new plantings.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2022

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2022

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

At 30 June 2022

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2022

CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

For the six months ended 30 June 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2022

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1 Basis of preparation

Statement of compliance

The interim financial statements in this report have been prepared in accordance with UK adopted international accounting standards that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2021 and are consistent with the accounting policies expected to apply in its financial statements for the year ended 31 December 2022. As permitted, this interim report has been prepared in accordance with the AIM Rules for Companies and does not seek to comply with IAS 34 "Interim Financial Reporting".

Statutory information

The financial information for the six months ended 30 June 2022 has not been subject to an audit nor a review in accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board. The comparative financial information presented herein for the year ended 31 December 2021 does not constitute full statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group's annual report and accounts for the year ended 31 December 2021 have been delivered to the Registrar of Companies. The Group's independent auditor's report was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. 

The consolidated financial statements have been prepared on a going concern basis in accordance with UK adopted international accounting standards.

The Board of the Company continually assesses and monitors the key risks of the business. The Board continues to consider the Group's profit and cash flow plans for at least the next 12 months and run forecasts and downside "stress test" scenarios. These risks have not significantly changed from those set out in the Company's Annual Report for the period ended 31 December 2021. In addition, these 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.

The stress test scenarios also include certain cost mitigation actions, including but not limited to, 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.

2 Revenue

3 Loss from operations

Loss from operations has been arrived at after charging:

4 Finance expense

5 Property, plant and equipment