AGM Statement & Trading Update

Chill Brands Group PLC

30 September 2024

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF REGULATION 11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310.

30 September 2024

Chill Brands Group plc

("Chill Brands" or the "Company")

Completion of Audit, Business and Trading Update Ahead of AGM

Chill Brands Group, the consumer packaged-goods distribution company, will hold its Annual General Meeting ("AGM") today at 3.00pm (BST). Ahead of the AGM, the Company provides the following update on progress towards the completion of its audit, trading, and the recovery of its assets.

Completion of the Audit and Publication of the Company's Annual Report and Accounts

As set out in the announcement of 17 July 2024, the Company had commenced its audit process in April 2024. This was paused by the Company during May 2024. Since the General meeting on June 2024 and reinstatement of Callum Sommerton as Chief Executive Officer, the Company has sought to make progress with its audit process. Following the events of Q2 2024, which attracted significant media attention, the Company's banking providers limited access to its accounts pending a protracted review process. This action further delayed the Company's ability to make operational progress and impacted the timeline for completing its audit and publishing financial statements.

The Company has now secured new banking provisions and is working to resume normal financial operations including the completion of its audit process. Progress has also made towards the recovery of the Company's largest asset, the chill.com domain name, the status of which also has an impact on the audit process.

The Company will provide a further update on the date of publication of its full year report and accounts, and is committed to substantively completing the audit process during 2024.

Product Strategy Update

The UK Government is considering a Tobacco and Vapes Bill, which is expected to become law during this parliamentary session. Irrespective of what is contained in the legislation when the Bill is finally passed, all major retailers have been refining their strategy with the expectation that there will be a ban on single use disposable vapes. Consequently, Chill Brands has experienced a notable shift in UK retailer demand from disposable vapes towards more sustainable alternatives. The Company's Chill ZERO products are still considered as market leaders in the zero nicotine segment and the Company intends to introduce new products for the UK market, in line with the expected legislation.

Previously announced efforts to expand the Company's product range in response to these market trends have been hindered by delays in gaining access to its funds post the General Meeting held on 4 June 2024. The Company remains committed to developing and producing the multi-pod device exhibited at the World Vape Show in June 2024.

The Company is also working to develop new alternative non-disposable, multi-use products both with and without nicotine. The Company will allocate its resources appropriately to products which are in line with market trends and are expected to generate improved sales in the short term. Consequently, these new products may launch ahead of the multi-pod device to capitalise on demand expressed by retailers.

Additionally, the Company is currently collaborating with potential UK manufacturing partners to launch a new range of e-liquids - the fluids that are added to reuseable vaping devices to create inhalable, flavoured vapour. The Company believes that as the UK vape market shifts back towards refillable devices and pod systems, there is a significant opportunity to leverage its brand in the e-liquid segment. By introducing e-liquids, Chill aims to offer a product range that is less exposed to regulatory volatility surrounding vaping hardware. The Company has already recorded demand from vape stores for a range of Chill branded e-liquid products.

In line with the development and release of new products, the Company plans to introduce a fresh approach to branding that retains the essence and appeal of the existing Chill brand, while also aligning with anticipated regulatory changes regarding packaging, colours, and marketing. In doing so, Chill Brands intends to position itself as a market leader for responsible brand positioning that will endure future regulatory changes.

Further updates regarding the launch of new products will be provided as development efforts progress.

Business and Trading Update

UK Trading

While the Company has continued to make new sales to both existing and new convenience store partners, its deal flow and rate of growth have been limited since the start of the new financial year in April 2024. This is due to a combination of factors, including a shift in sentiment regarding disposable vapes, retailer caution surrounding incoming legislation, and the events leading up to and immediately following the Company's General Meeting on 4 June 2024.

Despite this, the Company continues to maintain a strong presence in independent stores and major UK retail chains. Discussions for expanding its UK distribution footprint are ongoing with existing partners, though it is expected that further uptake by major retailers will focus on newly developed reusable products, rather than the current range of Chill ZERO nicotine-free disposable vapes. The Company will continue to sell its disposable products in the United States and plans to expand sales into Europe and parts of the Middle East.

In line with the strategy to broaden its market presence, the Company is seeking to expand its reach by partnering with alternative retailers outside of the convenience store channel. To support this effort, Chill will be exhibiting at the upcoming UK Pharmacy Show, where the Company aims to strengthen its position within the vaping category. Pharmacies and health-focused retail outlets have demonstrated strong demand for the brand, and the Board sees significant potential to further capitalise on opportunities in this sector. Pharmacists, with their strong focus on smoking cessation, represent a key partner in promoting the Company's nicotine-free vaping products to adult smokers and vape users.

US Trading

Following the constitution of the new board on 4 June 2024, the Company has undertaken a comprehensive review of its US operations. Following this review, the Company expects to make annualised cost savings exceeding $650,000, without compromising its ability to service existing US retail customer accounts. These savings will enable the Company to operate more efficiently while continuing to deliver value to its partners and customers in the region.

The retail sales performance of Chill ZERO products has remained stable since the start of this financial year. The Company's existing retail partners continue to gradually expand the number of stores offering Chill ZERO products, while also presenting the range to new retailers. In line with its growth strategy, the Company continues to seek a US sales lead to further drive its expansion in the US market.

Recovery of the Company's assets

As announced on 25 July 2024, the Company filed a complaint in the U.S. District Court for the District of Colorado seeking the recovery of its assets. Earlier this month, an amended complaint was submitted.

A judge has now been appointed to the case, and it has been agreed between the parties and ordered by the Court that the defendants must not sell, transfer, or assign the registration of the domain name, nor take any action to encumber or alter the status quo in connection with the domain, until otherwise ordered.

As of the date of this announcement, the Company maintains operational control of the website linked to the domain, with the exception of the payment processor connected to the US-facing section of the site.

The Company remains hopeful for a resolution in the near future and will provide further updates when appropriate.

Callum Sommerton, Chief Executive Officer of Chill Brands, said:

"2024 has been an incredibly challenging year for the Company, marked by regulatory headwinds in the vaping industry and significant corporate challenges. Despite these hurdles, there is cause for cautious optimism. We continue to add products and brands to the Chill.com website, develop new proprietary products, and prepare for exciting distribution opportunities with our retail partners.

While I am naturally very disappointed by the delays and restrictions on our progress, I remain highly motivated to restore trading and return to the positive momentum we had achieved. The Board and I are committed to overcoming these obstacles and driving the company forward for the benefit of all shareholders."

-ENDS-

About Chill Brands Group

Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is an international consumer packaged goods company focused on the development, marketing and distribution of wellness and recreational products. The Company's proprietary nicotine-free vapour products cater to the rapidly growing market for tobacco alternatives and are distributed by some of leading retail stores in the US and UK. Chill Brands also operates the chill.com e-commerce website, on which it is building a marketplace of products from third-party brands.

Publication on website

A copy of this announcement is also available on the Group's website at https://chillbrandsgroup.com/news-and-media/news/

Media enquiries:

Chill Brands Group plc Harry Chathli, Chairman	[phone]
Allenby Capital Limited (Financial Adviser and Broker)	[phone]
Nick Harriss/Nick Naylor/Lauren Wright (Corporate Finance) Kelly Gardiner (Equity Sales)

 

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