Final Results

RNS Number : 5943L

Gusbourne PLC

29 April 2015

 



Gusbourne Plc

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

Results for the year ended 31 December 2014.

The Board of Gusbourne Plc announces the audited results for the year ended 31 December 2014.

Chairman's statement

I am pleased to report that 2014 has been a successful year of further growth and development for the Group, in line with our long-term plans. The year ended 31 December 2014 has been our first full year of trading since the acquisition of the Gusbourne Estate business on the 27 September 2013.

Our long term plans to expand the production and sales of one of England's premier sparkling wine businesses alongside further development of the Gusbourne brand remains unchanged.

We are firmly committed to producing the highest quality sparkling wines made exclusively from grapes grown in our own vineyards and ageing these wines for an extended period in order to fully realise their potential. We use best practice in establishing our vineyards and in their day-to-day management. Our winemaking process remains traditional in every way but one that is open to innovation where appropriate.

During the year we continued to invest in the business through capital expenditure on vineyard establishment of £588,000 (2013: £418,000) and on vineyard and winery equipment of £137,000 (2013: £538,000). Our principal working capital investment has been in wine stocks in respect of the successful 2014 harvest which has added a further £210,000 (2013: £290,000) to the carrying value of our stocks. Increasing stock levels are planned to be a continuing feature of our balance sheet until all vineyards reach maturity and the resulting wine stocks are available for sale, which is on average 4 years after harvest. It is important to note that our stocks are currently reflected in the balance sheet at the lower of cost and net realisable value. To the extent that net realisable values are higher than cost, which we would expect them to be in normal trading conditions, this potential uplift is of course not reflected in the balance sheet. The anticipated underlying surplus of net realisable value over cost of these wine inventories will become an increasingly significant factor of the Group's asset base.

We have also invested through the statement of comprehensive income in terms of developing our sales and marketing strategies and in further developing the Gusbourne brand.

At 31 December 2014 our net assets per share amounted to 44.1 pence (2013: 46.8 pence). Net tangible assets per share were 38.4 pence (2013: 40.2 pence). As noted above these figures are based on book values and do not reflect any potential underlying uplift in the value of our freehold land, wine inventories and brand. Our operating loss for the year amounted to £919,000 (2013: £636,000) which included development expenditure on sales and marketing and on brand development.

Highlights of 2014 include:

•              The planting of an additional 50.7 acres of vineyards, in May 2014 on our 352 acre freehold estate in Kent. This is a proven location for growing our sparkling wine grapes and with our existing 50.8 mature acres brings our total acreage under vine in Kent to 101.5 acres.

•              Our 2013 plantings on our long leasehold land in West Sussex are progressing well and we expect to harvest an initial crop from these vineyards in autumn 2015. These grapes, along with grapes from our existing mature freehold vineyard site in West Sussex, will complement those harvested in Kent to ensure Gusbourne continues to produce wine from only the highest quality grapes.

•              With good weather throughout the key stages of the growing season, the 2014 harvest was very successful and the second earliest in the Group's history. The quality was excellent and yield volumes were in line with expectations. The resulting wine production has considerably added to the Group's wine stocks for sale in future years and will help to satisfy the growing demand for our wines in the United Kingdom and abroad.

•              Awards: In May 2014 we were delighted that our key product, Gusbourne Brut Reserve 2009 won a gold medal at the prestigious International Wine Challenge (IWC) competition. Our flagship wine, Gusbourne Blanc de Blancs was awarded a silver medal at the equally prestigious Decanter World Wine Awards (DWWA 2014) for the 2009 vintage.

Finally, the talented staff at Gusbourne have worked tirelessly to meet and exceed our expectations. In the vineyards they have overseen the expansion of our estate with new plantings whilst maintaining the mature vineyards and nurturing last year's plantings to the highest possible standards. Similarly our winery staff have worked meticulously to produce and lay down our stocks for the future.

The ongoing dedication and hard work from the entire team has ensured that 2014 will be recorded as a year of progress and solid achievement for the Group. We remain passionate about our wines and firmly on track towards achieving our long term plans.

Andrew Weeber

Chairman

Chief Executive's review

I am delighted to report the continued and very pleasing progress of the Group during the year in line with our long term strategic development plans. We have increased year on year sales and further developed our distribution channels. We have invested in new vineyards, expanded winery capacity, brand development and wine stocks. The Gusbourne sparkling wine products remain at the luxury end of the English sparkling wines market and we remain committed to maintaining this premium position.

Gusbourne Wines

The Group is dedicated to the production of premium sparkling wines exclusively from its own vineyards. Our processes, both in establishing and maintaining the vineyards and in making wine, continue to follow the principles laid down by Andrew Weeber when he established Gusbourne Estate 10 years ago in 2004, including his fastidious and scientific attention to detail. An important aspect of the Group's production of traditional method sparkling wines is the extended lees ageing with an average production cycle of four years.

Towards the end of 2014 we released the 2007 Gusbourne Blanc de Blancs Late Disgorged; our very first late disgorged sparkling wine. This was met with praise from wine critics and consumers alike and was a great demonstration of the exceptional quality of our wines.

Development strategy

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

·      The establishment of further vineyards in Kent and West Sussex;

·      The expansion of the winery and storage facilities to process and store the increasing production volumes as vineyards reach maturity;

·      The further development of the Gusbourne brand; and

·      The development of exports as a significant contributor to sales.

Results for the year

The results for the year ended 31 December 2014 include the results of the Gusbourne  Estate business from 1 January 2014, the first full year of trading since the acquisition of Gusbourne Estate on 27 September 2013. Sales for the year, which comprise solely those of Gusbourne wines, amounted to £434,000 (2013:£129,000). Whilst these sales reflect the sale of limited stock availability at this time, they were  however approximately 56 per cent higher than those made by the Gusbourne Estate business and the Group in the comparative  12  month period in 2013 and reflect a steady like for like growth in the sale  of Gusbourne wines. Administrative expenses of £918,000 for the year ended 31 December 2014 compare with £832,000 for the 9 month period ended 31 December 2013 and reflect the growth in the business following the acquisition of the Gusbourne Estate business in September 2013, additional staff and investment in sales, marketing and  brand development.

The operating loss for the year was £919,000 (£636,000 for the period ended 31 December 2013). The loss before tax was £1,104,000 (£666,000 for the period ended 31 December 2013) after net finance costs of £185,000 (£30,000 for the period ended 31 December 2013). These planned losses are in line with the long-term development strategy of the Group.

Balance Sheet

The main changes in the Group's balance sheet during the year reflect expenditure on the ongoing investment in, and development of, the Group's business, net of income from wine sales. This expenditure includes the establishment of additional vineyards in Kent and West Sussex at a cost of £588,000, the purchase of additional plant and equipment for the vineyards and the winery amounting to £137,000 and the planned ongoing development of the business, which is reflected in the net loss for the period of £1,044,000.

Total assets at 31 December 2014 of £12,073,000, (£11,235,000 at 31 December 2013) include freehold land and buildings of £4,578,000 (£4,601,000 at 31 December 2013), inventories of wine stocks amounting   to £1,435,000 (£1,310,000 at 31 December 2013), £1,237,000 of biological assets (£1,240,000 at 31 December 2013) and £1,842,000 of cash (£1,703,000 at 31 December 2013). Intangible assets of £1,007,000 (£1,007,000 at 31 December 2013) arise from the acquisition of the Gusbourne Estate business in 2013. Biological assets reflect the fair value of grape vines calculated in accordance with International Accounting Standard 41.

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

The Group's net tangible assets at 31 December 2014 amount to £6,864,000 (£6,124,000 at 31 December 2013) and represent 87% of total equity (86% at 31 December 2013).

Financing

The Group's activities are financed by its own cash resources, bank loans and convertible bonds. Bank loans and convertible bonds at 31 December 2014 amount in total to £3,866,000 (£3,720,000 at 31 December 2013) and represent 49% (2013 - 52%) of total equity.

On 11 November 2014, the Group completed a placing of ordinary shares for cash proceeds of £1,788,000. The cash proceeds of the placing will be used to support the ongoing development and expansion of the business.

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

Key Performance Indicators
	Year ended 31 December 2014 £'000	Period 1 April to 31 December  2013 £'000
Sales	434	129
Capital expenditure
Investment in vineyard establishment	588	418
Other capital expenditure	159	653
Total capital expenditure	747	1,071
	At 31 December 2014 £'000	At 31 December 2013 £'000
Total assets	12,073	11,235
Net tangible assets	6,864	6,124
Total equity	7,871	7,131
Net tangible assets as per cent of total equity	87%	86%
Gearing	49%	52%

Ben Walgate

Chief Executive

Annual General Meeting

The annual report and accounts are being posted to shareholders today, together with notice of the Annual General Meeting to be held at 11 a.m. on 18 June 2015 at the offices of Cenkos Securities PLC, 6.7.8 Tokenhouse Yard, London EC2R 7AS. The annual report and accounts are available to view on the Company's website at www.gusbourneplc.com 

Enquiries:

Gusbourne Plc

Andrew Weeber/Ben Walgate                            [phone]

Cenkos Securities plc

Nicholas Wells                                                    [phone]

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

Consolidated statement of comprehensive income for the period ended 31 December 2014

	Note	Year ended 31 December 2014 £'000	Period 1 April to 31 December 2013 £'000
Revenue		434	129
Cost of sales		(361)	(78)
Gross profit		73	51
Change in fair value of biological assets	14	(74)	145
Transaction expenses - stamp duty land tax	11	-	(211)
Transaction expenses - other	11	-	(187)
Other administrative expenses		(918)	(434)
Total administrative expenses		(918)	(832)
Loss from operations	5	(919)	(636)
Finance income	8	38	29
Finance expense	8	(223)	(59)
Loss before tax		(1,104)	(666)
Tax expense	9	60	(60)
Loss for the year/period attributable to owners of the parent		(1,044)	(726)
Total comprehensive loss attributable to owners of the parent		(1,044)	(726)
Loss per share attributable to the ordinary equity holders of the parent:	10
Basic (pence)		(6.70)	(6.88)
Diluted (pence)		(6.70)	(6.88)

Consolidated statement of financial position at 31 December 2014

	Note	December 2014 £'000	December 2013  £'000
Assets
Non-current assets
Intangibles	12	1,007	1,007
Property, plant and equipment	13	6,339	5,724
Biological assets	14	1,237	1,240
		8,583	7,971
Current assets
Inventories	15	1,435	1,310
Trade and other receivables	16	213	251
Cash and cash equivalents		1,842	1,703
		3,490	3,264
Total assets		12,073	11,235
Liabilities
Current liabilities
Trade and other payables	17	(336)	(324)
		(336)	(324)
Non-current liabilities
Loans and borrowings	18	(2,025)	(2,025)
Convertible deep discount bonds	19	(1,841)	(1,695)
Deferred tax liabilities	20	-	(60)
		(3,866)	(3,780)
Total liabilities		(4,202)	(4,104)
Net assets		7,871	7,131

	Note	December 2014 £'000	December 2013 £'000
Issued capital and reserves attributable to owners of the parent
Share capital	22	8,927	7,612
Share premium	23	815	346
Merger reserve	23	(13)	(13)
Convertible bond reserve	23	95	95
Retained earnings	23	(1,953)	(909)
Total equity		7,871	7,131

Consolidated statement of cash flows for the year ended 31 December 2014

	Note	December 2014 £'000	Period 1 April to 31 December 2013 £'000
Cash flows from operating activities
Loss for the year/period before tax		(1,104)	(666)
Adjustments for:
Depreciation of property, plant and equipment	13	130	36
Profit on disposal of property, plant and equipment		(4)	(8)
Finance expense	8	223	59
Finance income	8	(38)	(29)
Movement in biological assets	14	74	(302)
		(719)	(910)
Decrease in trade and other receivables		38	44
Increase in inventories		(195)	(17)
Increase in trade and other payables		12	130
Cash outflow from operations		(864)	(753)
Income taxes paid		-	-
Investing activities
Purchases of property, plant and equipment, excluding vineyard establishment	13	(159)	(653)
Investment in vineyard establishment	13	(588)	(418)
Acquisition of Gusbourne Estate business	11	-	(4,263)
Sale of property, plant and equipment		5	35
Interest received		33	29
Net cash from investing activities		(709)	(5,270)
Financing activities
Bank loan	18	-	2,025
Redemption of redeemable preference shares		-	(50)
Interest paid		(72)	(19)
Issue of ordinary shares	22	1,788	2,851
Share issue expenses		(4)	(209)
Net cash from financing activities		1,712	4,598
Net increase/(decrease) in cash and cash equivalents		139	(1,425)
Cash and cash equivalents at the beginning of the year/period		1,703	3,128
Cash and cash equivalents at the end of the year/period		1,842	1,703

Consolidated statement of changes in equity for the year ended 31 December 2014

	Share  capital £'000	Share premium £'000	Merger reserve £'000	Convertible bond reserve	Retained earnings £'000	Total attributable to equity holders of parent £'000
1 April 2013	4,000	266	(266)	-	(183)	3,817
Shares issued	3,612	80	-	-	-	3,692
Equity recognised on issue of convertible bonds	-	-	-	95	-	95
Excess of fair value over nominal value of shares Issued	-	-	253	-	-	253
Comprehensive loss for the year	-	-	-	-	(726)	(726)
Total comprehensive profit/ (loss) for the year	-	-	-	-	(726)	(726)
31 December 2013	7,612	346	(13)	95	(909)	7,131

1 January 2014	7,612	346	(13)	95	(909)	7,131
Shares issued	1,315	469	-	-	-	1,784
Comprehensive loss for the year	-	-	-	-	(1,044)	(1,044)
Total comprehensive profit/ (loss) for the year	-	-	-	-	(1,044)	(1,044)
31 December 2014	8,927	815	(13)	95	(1,953)	7,871

 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 2014 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 2014 or the period ended 31 December 2013, but is derived from those accounts.  The Group's statutory accounts for 31 December 2013 have been delivered to the Registrar of Companies and those for 31 December 2014 will be delivered following the Company's Annual General Meeting.  The Auditor's reports on both the 31 December 2013 and 31 December 2014 accounts were unqualified, did not draw attention to any matters by way of an emphasis and did not contain any statement under Section 498 of the Companies Act 2006.

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

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

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

Going concern

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

The Directors have reviewed the Group's cash flow forecasts and note that the achievement of the Group's long term development strategy will depend on the raising of further equity and/or debt funds to achieve those goals. The production of premium quality wine from new vineyards is, by its very nature a long term project. It takes four years to bring a vineyard into full production and, an average of four years to transform these grapes into the Group's premium sparkling wine. Additional funding will be sought by the Group over the coming few years to invest in additional vineyards, winery capacity, and stocks of wine as well as brand development, in line with its development strategy. The Directors believe that future fundraisings will be successful and have therefore prepared the financial statements on a going concern basis.

New accounting standards and changes to existing accounting standards

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

·      IFRS 10 Consolidated Financial Statements

·      IFRS 12 Disclosure of Interests in Other Entities

·      IAS 27 Separate Financial Statements

·      Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)

·      Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

·      Recoverable amounts disclosures for non-financial assets (Amendments to IAS 36)

These had no material impact on the financial statements.

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

At the date of authorisation of these financial statements, the following standards and interpretations applicable to the Group's financial statements were in issue but not yet effective at the year end. They have not been adopted early and when they come into effect are deemed not to have a material impact on its financial statements:

·      Annual Improvements to IFRSs 2010-2012 Cycle

·      Annual Improvements to IFRSs 2011-2013 Cycle

·      Accounting for Acquisitions of Interests in Joint Operations: Amendments to IFRS 11

·      Clarification of Acceptable Methods of Depreciation and Amortisation: Amendments to IAS 16 and IAS 38

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

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

·      Annual Improvements to IFRSs (2012-2014 Cycle)

·      Disclosure Initiative: Amendments to IAS 1

·      IFRS 15 Revenue from Contracts with Customers

·      IFRS 9 Financial Instruments

The following standards and interpretations have not been adopted early and when they come into effect will have an impact on the Group's financial statements:

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

The amendments change the financial reporting for bearer plants, such as grape vines.

It requires that bearer plants should be accounted for in the same way as property, plant and equipment in IAS 16 Property, Plant and Equipment, because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41.

Basis of consolidation

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

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

Revenue

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

Financial assets

Loans and receivables

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

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

Cash and cash equivalents

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

Financial liabilities

Borrowings

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

Convertible deep discount bonds

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

Trade and other payables

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

Share capital

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

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

Deferred taxation

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

·      the initial recognition of goodwill;

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

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

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

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

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

·      the same taxable group company; or

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

Intangible Assets

Goodwill

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

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

Brand

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

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

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs.

Freehold land is not depreciated.

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

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

Freehold buildings	4% per annum straight line
Plant, machinery and motor vehicles	5-20% per annum straight line
Computer equipment	33% 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

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

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

Inventories

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

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

Business combinations

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

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

Operating Leases

Payments under operating leases are expensed to the income statement on a straight-line basis over the period of the lease.

2              Critical accounting estimates and judgements

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

Biological assets valuation

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

Fair value of biological produce

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

 Impairment reviews

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

Useful lives of plant, property and equipment

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

3              Financial instruments - risk management

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

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

Principal financial instruments

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

                Bank loans

                Convertible debt

                Trade receivables

                Cash and cash equivalents

                Trade and other payables

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

Liquidity risk

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

Capital risk management

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

Credit risk

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

Interest rate risk

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

4              Segmental information

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

All operations are conducted in the United Kingdom.

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

5              Loss from operations

Loss from operations has been arrived at after charging:

	Year ended December 2014 £'000	Period 1 April to 31 December 2013 £'000
Depreciation of property, plant and equipment	130	36
Profit on disposal of property, plant and equipment	(4)	(8)
Staff costs (see note 7)	516	201

6              Auditor's remuneration

	Year ended 31 December 2014 £'000	Period 1 April to 31 December 2013 £'000
Auditor's remuneration
- Audit: consolidation and parent	26	27
- Audit: subsidiaries	9	7
Auditor's remuneration: services relating to corporate finance transactions	-	132
	35	166

7              Staff costs

	Year ended 31 December 2014 £'000	Period 1 April to 31 December 2013 £'000
Staff costs (including Directors) comprise:
Wages and salaries	471	188
Social security contributions and similar taxes	45	13
	516	201

The average number of employees of the Group, including Directors, during the year was 17 (December 2013: 8). Directors' remuneration was as follows:

			Year ended 31 December 2014 £'000	Period 1 April to 31 December 2013 £'000
	Salaries £'000	Fees £'000
Andrew Weeber	50	-	50	13
Ben Walgate	80	-	80	60
Paul Bentham	15	-	15	5
Ian Robinson	-	15	15	30
Andrew Wilson	-	7	7	15
	145	22	167	123

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

The Directors are considered to be key management.

	Year ended 31 December 2014 £'000	Period 1 April to 31 December 2013 £'000
Key management personnel costs were as follows:
Short term employment benefits	167	123
Social security contributions	17	8
	184	131

8              Finance income and expense

	Year ended 31 December 2014 £'000	Period 1 April to 31 December 2013 £'000
Finance income
Amortisation of bank loan incentive	14	-
Interest received on bank deposits	24	29
Total finance income	38	29
Finance expense
Interest payable on borrowings	72	19
Amortisation of bank transaction costs	5	-
Convertible deep discount bond charge	146	40
Total finance expense	223	59

9              Taxation

	Year ended 31 December 2014 £'000	Period 1 April to 31 December 2013 £'000
Current tax expense
Current tax on profits for the year	-	-
Total current tax	-	-
Deferred tax expense
Origination and reversal of temporary differences	(60)	60
Total deferred tax	(60)	60
Total tax (Income)/expense	(60)	60

	Year ended 31 December 2014 £'000	Period 1 April to 31 December 2013 £'000
Loss on ordinary activities before tax	(1,104)	(666)
Loss on ordinary activities at the standard rate of corporation tax in the UK for the year of 21.49% (December 2013: 23.25%)	(237)	(155)
Effects of:
Expenses not deductible for tax purposes	62	77
Unprovided deferred tax movements on short term temporary differences	(113)	(67)
Unrecognised losses c/f	325	81
Effect of changes in tax rate in prior years	23	4
Tax charge for the year	(60)	60

No deferred tax asset has been recognised on unutilised taxable losses due to the lack of certainty over the taxable profits being available against which deductible temporary differences can be utilised. The unutilised tax losses carried forward are £2,153,260 (December 2013: £833,000)

10           Loss per share

Basic earnings per ordinary share are based on a loss of £1,044,000 (December 2013: £726,000) and 15,592,073 ordinary shares (December 2013: 10,548,391) of 50 pence each, being the weighted average number of shares in issue during the year. There is no adjustment to be made for diluted earnings per ordinary share.

	Loss £'000	Weighted average number of shares	Loss per  ordinary share pence
Year ended 31 December 2014	(1,044)	15,592,073	(6.70)
Period ended 31 December 2013	(726)	10,548,391	(6.88)

11           Business combinations

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

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

Net assets at the acquisition date	Book value £'000	Fair value adjustment £'000	Fair value £'000
Property, plant and equipment	4,369	-	4,369
Biological assets	1,074	-	1,074
Inventories	641	225	866
Brand	-	230	230
Total net assets	6,084	455	6,539

Fair value of consideration paid:	£'000
Cash	4,263
Shares	1,303
Convertible bond - present value of debt element	1,655
Convertible bond - equity element	95
Total consideration	7,316
Goodwill	777

Transaction costs of £187,000 and Stamp Duty Land Tax of £211,000 in connection with the acquisition have been recognised in the statement of comprehensive income in the period ended 31 December 2013.

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

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

12           Intangibles

	Goodwill £'000	Brand £'000	Total £'000
Cost
At 1 January 2014 and 31 December 2014	777	230	1,007
Impairment losses
At 1 January 2014 and 31 December 2014	-	-	-
Net book value
At 31 December 2013 and 31 December 2014	777	230	1,007

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

		December 2014 £'000	December 2013 £'000
Gusbourne Estate		777	777

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

The Group's management prepare long term cash flow forecasts for up to 12 years, and then apply a discount rate to determine the present value of the future cash flows of the cash-generating unit to arrive at the fair value less costs of disposal. Where this amount is lower than the carrying value of goodwill allocated to the cash-generating unit an impairment charge is made. The discount rate used is 17% based on the Group's estimated weighted cost of capital. A growth rate of 3% has been applied over the term of the long term cash flow forecasts.

13           Property, plant and equipment

	Freehold Land and Buildings £'000	Plant, machinery and motor vehicles £'000	Vineyard establishment £'000	Computer equipment £'000	Total £'000
Cost
At 1 April 2013	222	108	40	3	373
Acquisition of the Gusbourne Estate business	4,289	80	-	-	4,369
Additions	99	538	418	16	1,071
Disposals	-	(40)	-	-	(40)
At 31 December 2013	4,610	686	458	19	5,773
At 1 January 2014	4,610	686	458	19	5,773
Additions	14	137	588	8	747
Disposals	-	(1)	-	-	(1)
At 31 December 2014	4,624	822	1,046	27	6,519

	Freehold land and buildings £'000	Plant, Machinery and motor Vehicles £'000	Vineyard establishment £'000	Computer equipment £'000	Total £'000
Accumulated depreciation
At 1 April 2013	-	25	-	1	26
Depreciation charge for the year	9	26	-	1	36
Depreciation on disposals	-	(12)	-	-	(12)
At 31 December 2013	9	39	-	2	50
At 1 January 2014	9	39	-	2	50
Depreciation charge for the year	37	85	-	8	130
Depreciation on disposals	-	-	-	-	-
At 31 December 2014	46	124	-	10	180
Net book value
At 31 December 2013	4,601	647	458	17	5,723
At 31 December 2014	4,578	698	1,046	17	6,339

14           Biological assets

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

	Vines £'000
At 1 April 2013	154
Arising on acquisition of Gusbourne Estate business	1,074
Fair value of grapes harvested and transferred to inventory	(290)
Crop growing costs	157
Change in fair value due to price, yield and maturity	145
At 31 December 2013	1,240

At 1 January 2014	1,240
Fair value of grapes harvested and transferred to inventory	(210)
Crop growing costs	281
Change in fair value due to price, yield and maturity	(74)
At 31 December 2014	1,237

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

The total area of vines at December 2014 amounted to 155.5 acres (December 2013: 104.8 acres) of which approximately 58.5 acres (December 2013: 58.5 acres) can be classified as mature (i.e. four years after planting). The average peak productive life of grape vines is estimated to be 25 years.

The fair value of mature grape vines was calculated by discounting the net cash flows thereof over their remaining lives at a pre-tax discount rate of 17% (December 2013: 17%).

The net cash flows were calculated with reference to the following significant assumptions

	December	December
	2014	2013
i) Average remaining life of grape vines	25 years	25 years
ii) Average yield per acre of mature vineyards	3.0 tonnes per acre	3.0 tonnes  per acre
iii) Market price of grapes	£2,000 per tonne	£2,000 per tonne
iv) Annual rate of inflation to cost and revenue inputs	3%	3%
v) Vineyard maintenance costs	£2,710 per acre	£2,710  per acre

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

Fair value

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

For example, a 10% increase in the discount rate to 18.7% would result in a decrease in fair value of the biological assets by £103,200. In addition cashflows are projected over a number of years and based on estimated harvest yields. Yields are based on an average of the performance of the Group's vines over previous harvests.

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

15           Inventories

	December 2014 £'000	December 2013 £'000
Finished goods	126	171
Work in progress	1,309	1,139
Total inventories	1,435	1,310

During the year £334,000 (December 2013: £66,000) was transferred to cost of sales.

16           Trade and other receivables

	December 2014 £'000	December 2013 £'000
Trade receivables	107	66
Prepayments	28	19
Other receivables	78	166
Total trade and other receivables	213	251

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

17           Trade and other payables

	December 2014 £'000	December 2013 £'000
Trade payables	192	173
Accruals	72	86
Other payables	59	54
Total financial liabilities, excluding loans and borrowings classified as financial liabilities measured at amortised cost	323	313
Other payables - tax and social security payments	13	11
Total trade and other payables	336	324

Book values are approximate to fair value at 31 December 2014 and 31 December 2013.

18           Loans and borrowings

	December 2014 £'000	December 2013 £'000
Bank loans	2,025	2,025
Total loans and borrowings	2,025	2,025

The bank loan of £2,025,000 is at an interest rate of 3% over Barclays Bank plc base rate and is due for repayment in full in September 2018. It is secured by way of a fixed charge over the Group's land and buildings at Appledore, Kent, shown at a cost of £4,356,000 within property, plant and equipment and a floating charge over all other property and undertakings.

19           Convertible bonds

	£'000
Present value of debt element at issue on 27 September 2013	1,655
Equity element	95
Nominal value of bond at issue date	1,750
Present value of debt element at 1 January 2014	1,695
Discount expense for the year	146
Fair value of debt element at 31 December 2014	1,841
Equity element at 31 December 2014	95
Total carrying value at 31 December 2014	1,936

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

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

20           Deferred tax liabilities

	£'000
At 1 January 2014	60
Reversal of timing differences	(60)
At 31 December 2014	-

21           Operating lease commitments

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

	December 2014 £'000	December 2013 £'000
Operating leases which expire:
Within one year	47	15
Within two to five years	189	61
More than five years	2,015	663
	2,251	739

22           Share capital

Ordinary shares of 50p each

	Number	£'000
Issued and fully paid
At 1 April 2013	8,000,003	4,000
Issued for cash during the year	5,280,367	2,640
Issued as consideration for acquisition	1,944,444	972
At 31 December 2013	15,224,814	7,612
Issued for cash during the year	2,628,462	1,315
At 31 December 2014	17,853,276	8,927

On 11 November 2014 Gusbourne PLC issued 2,628,462 50 pence ordinary shares at a price of 68 pence per share. The shares were fully subscribed and paid up.

23           Reserves

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

Reserve	Description and purpose
Share Premium	The share premium account arose on the issue of shares by the Company at a premium to their nominal value. Expenses of share issues are charged to this account.
Merger reserve	The merger reserve arose on the business combination and is the difference between the nominal value of the shares issued and the market value of the shares acquired.
Convertible bond reserve	The convertible bond reserve is the equity element of the bonds as disclosed in note 20.
Retained earnings	The retained earnings represent cumulative net gains and losses recognised in the Group's statement of consolidated income.

24           Related party transactions

 At 31 December 2014 £1,493,000 (31 December 2013 - £1,500,000) of cash and cash equivalents were held on deposit at British Caribbean Bank Limited ('BCBL'), a related party. BCBL is a wholly owned subsidiary of Waterloo Investment Holdings Limited ('WIHL'). Lord Ashcroft, KCMG PC, is a controlling shareholder in both the Company and WIHL.

Anne Street Partners Limited is considered a related party by virtue of the fact that Ian Robinson, a director of Gusbourne PLC, is also a director of Anne Street Partners Limited. During the year Anne Street Partners Limited charged the Company in total £62,473 (December 2013 - £137,500). Of this, £22,473 was in relation to directors fees (December 2013 - £45,000) and £40,000 relates to management services (December 2013 - £92,500). At 31 December 2014 an amount of £77,000 inclusive of VAT (December 2013 - £111,000) was due to Anne Street Partners Limited and is shown within trade and other payables.

 

END

 

 

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