20160314_Annual_Report_Cover 2.pdf 1 16/05/2016 14:54 20160314_Annual_Report_Cover.pdf 1 12/05/2016 14:07 Gusbourne PLC Report and financial statements for the year ended 31 December 2015 Gusbourne PLC Report and Financial Statements 2015 Contents STRATEGIC REPORT 4 Chairman’s statement 10 Chief Executive’s review 16 Principal risks and uncertainties DIRECTORS AND REPORT OF THE DIRECTORS 17 Board of Directors 19 Report of the Directors FINANCIAL STATEMENTS 22 Report of the independent auditors 23 Consolidated statement of comprehensive income 24 Consolidated statement of financial position 26 Consolidated statement of cash flows 27 Consolidated statement of changes in equity 28 Notes forming part of the financial statements 57 Parent company financial statements 67 Company information 2015 has been a year of continued and very pleasing progress of the Group in line with our long term “ strategic development plans ” Strategic Report Chairman’s statement Chairman’s statement I am pleased to report that we have achieved another successful year of further growth and development for the Group, in line with our long-term plans. The Gusbourne business was established over ten years ago in 2004 and has been selling its award winning English sparkling wines since 2010. Sales have continued to grow steadily in line with product availability and in 2015 increased by 9 per cent compared with 2014. Gusbourne remains one of England’s premier sparkling wine businesses and is focused at the luxury end of the market. We have continued to expand production in line with our long-term plans. In 2015 we planted an additional 75 acres of vines across our two sites in Kent and West Sussex and our total acreage under vine is now 231 acres, most of which is in Kent. We are firmly committed to producing the highest quality sparkling wines made exclusively from grapes grown in our own vineyards and ageing these wines for an extended period in order to fully realise their potential. We use best practice in establishing our vineyards and in their day-to-day management. Our winemaking process remains traditional in every way but one that is open to innovation where appropriate. The total assets of the business have increased further in 2015 as a result of capital expenditure on fixed assets and the ongoing investment in wine stocks. Total assets grew from £12,026,000 to £13,481,000 during 2015. We invested in the business through capital expenditure on vineyard establishment of £786,000 (2014: £588,000), vineyard and winery equipment of £461,000 (2014: £137,000) and freehold land and buildings of £664,000 (2014: £14,000). Our principal working capital investment has been in wine stocks following the successful 2015 harvest which has added a further £276,000 (2014: £125,000) to the carrying value of our stocks. It is important to note that our stocks are currently reflected in the balance sheet at the lower of cost and net realisable value. To the extent that net realisable values are expected to remain significantly higher than cost, this potential uplift is of course not reflected in the balance sheet and the calculation of net tangible assets per share. The anticipated underlying surplus of net realisable value over cost of these wine inventories will become an increasingly significant feature of the Group’s asset base as stocks continue to grow until the business reaches sales maturity. “We are firmly committed to producing the highest quality sparkling wines made exclusively from grapes grown in our own vineyards ” 4 Gusbourne PLC Report and Financial Statements 2015 At 31 December 2015 our net assets per share amounted to 39.6 pence (2014: 43.8 pence). Net tangible assets per share were 35.3 pence (2014: 38.2 pence). As noted above these figures are based on book values and do not reflect any potential underlying uplift in the value of our assets, including freehold land, mature vineyards, wine stocks and the Gusbourne brand itself. Our operating loss for the year amounted to £1,123,000 (2014: £966,000) which included development expenditure on sales and marketing and brand development. Highlights of 2015 include: • The planting of an additional 50 acres of vineyards, in May 2015 on our 352 acre freehold estate in Kent. This is a proven location for growing our sparkling wine grapes and with our existing 102 acres brings our total acreage under vine in Kent to 152 acres. • The planting of an additional 25 acres of vineyards on our long leasehold land in West Sussex which together with our existing acres brings our total acreage under vine in West Sussex to 79 acres. “A successful harvest in October 2015 in terms of both yield and quality which has added to our wine stocks for future resale” 5 Gusbourne PLC Report and Financial Statements 2015 Chairman’s statement continued Finally, I should like to express my sincere thanks for the dedicated efforts of our employees, our loyal customers and last but not least the support of our shareholders in helping the Company achieve another successful year of growth and development in the business. Andrew Weeber Chairman • A successful harvest in October 2015 in terms of both yield and quality which has added to our wine stocks for future resale. The harvest included the first fruit from the vines planted on our West Sussex sites in 2013. • The launch, in October 2015, of an update to our visual identity, marking a new chapter in the Gusbourne story and reflecting the rapid evolution of the Gusbourne brand. This includes refreshing all brand elements by bringing our commitment to making exceptional wines to the fore. • Another year of success in international awards. In November 2015 Gusbourne won the trophy for “English Wine Producer of the Year” from the International Wine and Spirit Competition (”IWSC”), which is the second time in three years that the Company has won this award. The IWSC also awarded Gusbourne’s sparkling and still wines with a record two ‘gold outstanding’, one gold and three silver medals. The IWSC awards completed a record year at international competitions for the Company, with Gusbourne having received 7 gold medals in total. 6 Gusbourne PLC Report and Financial Statements 2015 We use best practice in establishing our vineyards and in their day-to-day management Gusbourne remains one of England’s premier sparkling wine businesses and is focused at the luxury end of the market. In November 2015 Gusbourne won the trophy for “English Wine Producer of the Year” from the International Wine and Spirit Competition (“IWSC”) Chief Executive’s review Introduction I am pleased to report that 2015 has been a year of continued and very pleasing progress for the Group in line with our long term strategic development plans. We have planted new vineyards and extended our winemaking facilities. Year on year sales have increased and we have widened our distribution channels. We have continued to invest in the Gusbourne brand and in October 2015 launched an update to our visual identity marking a new chapter in the Gusbourne story and reflecting the rapid progress of the business. The Gusbourne sparkling wine products remain at the luxury end of the English sparkling wines market and we remain committed to maintaining this premium position. In November 2015 we were particularly pleased to win the trophy for “English Wine Producer of the Year” from the International Wine and Spirit Competition. Activities and recent developments from grapes grown in its own vineyards in Kent and West Sussex. The majority of the Group’s mature vineyards are located at its freehold estate at Appledore in Kent where the winery is also based. Additional vineyards were planted in Kent and West Sussex in May 2015 and the Group now has a total of 231 acres of vineyards. Gusbourne Wines Gusbourne is dedicated to the production of premium sparkling wines from grapes grown exclusively in its own vineyards. Our processes, both in establishing and maintaining the vineyards and in making wine, continue to follow the rigorous principles of careful site selection and attention to detail in all aspects of viticulture and wine production. An integral part of the Group’s approach is to age its traditional method sparkling wines for as long as is necessary for the wines to meet optimum maturity. The average production cycle for the wines is four years from harvest to sale. 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 Recent awards Gusbourne has a history of success at international awards and 2015 was one of the most successful years to date. In November 2015 Gusbourne won the trophy for “English Wine “Year on year sales have increased and we have widened our distribution channels ” 10 Gusbourne PLC Report and Financial Statements 2015 Producer of the Year” from the International Wine and Spirit Competition (“IWSC”), which is the second time in three years that the Company has won this award. The IWSC also awarded Gusbourne’s sparkling and still wines with a record two ‘gold outstanding’, one gold and three silver medals. The IWSC awards completed a record year at international competitions for the Company, with Gusbourne having received 7 gold medals in total. Development strategy Meeting growing customer demand for the Gusbourne wines requires careful long term planning and key elements of the Group’s development strategy include: • Continuing to produce wines of exceptional quality from grapes grown in our own vineyards; • The ongoing development and evolution of the award winning Gusbourne brand; • The further development of the Company’s distribution channels, including the promotion of exports as a significant contributor to sales; • The investment in additional plant and machinery to keep pace with production growth. 2015 Harvest The 2015 harvest was successfully completed in October. The quality of the grapes was excellent, with optimum levels of natural sugar and acidity, both of which met our own exacting quality standards. The high quality of grapes harvested in the year bodes well for 2015 becoming another great vintage for Gusbourne. Yield volumes were good and in line with expectations and the resulting wine production has added further to our inventory levels for sale in future years. Results for the year Sales for the year, amounted to £473,000 (2014: £434,000). Whilst these sales continue to reflect limited stock availability at this time, they do represent a consecutive three year like for like growth in the sale of Gusbourne wines. Administrative expenses of £1,176,000 (2014: £968,000) reflect continuing investment in the development and growth of the business and the Gusbourne brand in particular. The operating loss for the year was £1,123,000 (2014: £966,000). The exceptional item of £115,000 within finance expenses reflects a charge to the income statement in respect of the conversion of bonds into shares on 17 June 2015 due to the amendment to the terms of the Convertible Bonds on 27 May 2015. This charge is a non-cash adjustment and does not affect the net assets of the Group as the corresponding entry is a credit to retained earnings. The loss before tax was £1,426,000 (2014: £1,151,000) after net finance costs of £303,000 (2014: £185,000). These planned losses continue to be in line with expectations and the long-term development strategy of the Group. Balance Sheet The changes in the Group’s balance sheet during the year reflect expenditure on the ongoing investment in, and development of, the Group’s business, net of income from wine sales. This expenditure includes the investment in additional vineyards planted in Kent and West Sussex in May 2015 and includes the ongoing investment in the vineyards established in West Sussex and Kent during 2013 and 2014. This investment in vineyards is reflected in capital expenditure of £786,000 (2014: £588,000). In addition, the Group invested in additional plant and equipment for the vineyards and the winery amounting to £461,000 (2014: £137,000) and in buildings of 11 Gusbourne PLC Report and Financial Statements 2015 Chief Executive’s review continued £664,000 (2014: £14,000). Total assets at 31 December 2015 of £13,481,000 (2014: £12,026,000) include freehold land and buildings of £5,198,000 (2014: £4,578,000), vineyards of £2,972,000 (2014: £2,236,000), inventories of wine stocks amounting to £1,711,000 (2014: £1,435,000), and £1,328,000 of cash (2014: £1,842,000). Intangible assets of £1,007,000 (2014: £1,007,000) arose on the acquisition of the Gusbourne Estate business on 27 September 2013. It is worth noting that the Group’s inventories are reported at the lower of cost and net realisable value and that these inventories are expected to grow significantly until the Group reaches full production maturity, bearing in mind the long production cycle in relation to sparkling wine and related vineyard establishment. The anticipated underlying surplus of net realisable value over cost of these wine inventories will become an increasingly significant factor of the Group’s asset base. The Group’s net tangible assets at 31 December 2015 amount to £8,353,000 (2014: £6,817,000) and represent 89% of total equity (2014: 87%). Net tangible assets per share at 31 December 2015 were 35.3 pence per share (2014: 38.2 pence) 12 Financing The Group’s activities are financed by shareholders equity, loans, other borrowings and convertible bonds. Loans, other borrowings and convertible bonds at 31 December 2015 amount in total to £3,952,000 (2014: £3,866,000) and represent 42% of total equity (2014: 49%). On 17 June 2015, the Company completed an open offer to existing shareholders. The total consideration was £2,525,000 of which gross cash received by the Company was £2,136,000. The Company also benefited from a reduction of £389,000 in the debt due under the Convertible Bond as a result of its conversion into equity. to achieve those goals. The production of premium quality wine from new vineyards is, by its very nature, a long term project. It takes four years to bring a vineyard into full production and a further four years to transform these grapes into Gusbourne’s premium sparkling wine. Additional funding will be sought by the Company over the coming few years to invest in vineyards, winery capacity, and stocks of wine as well as brand development, in line with its development strategy. Principal risks and uncertainties Details of these are shown on page 16. On 30 July 2015, the Company completed a placing of ordinary shares for cash proceeds of £368,000. Ben Walgate Chief Executive The cash proceeds of the Open Offer and Placing will be used for the ongoing investment in new vineyards planted in 2015, an expansion of the winery capacity and for working capital, represented primarily by the Group’s sparkling wine stocks. The achievement of the Group’s long term development strategy will depend on the raising of further equity and/or debt funds Gusbourne PLC Report and Financial Statements 2015 Key Performance Indicators Sales Investment in tangible assets Investment in vineyard establishment Investment in freehold land and buildings Investment in plant, machinery, vehicle and other equipment Investment in property, plant and equipment Increase in inventories Total investment in tangible assets Net assets Freehold land and buildings Vineyards Plant, machinery, vehicle and other equipment Total non-current assets Inventories Net working capital (current receivables less current payables) Cash Net tangible assets before debt Bonds, loans and other borrowings Net tangible assets Goodwill Net assets and equity Key balance sheet indicators Net tangible assets as a percentage of total equity Gearing (Debt as percentage of equity) Year ended 31 December 2015 £’000 Year ended 31 December 2014 £’000 473 434 786 664 473 1,923 276 2,199 588 14 145 747 125 872 At 31 December 2015 £’000 As restated at 31 December 2014 £’000 5,198 2,972 1,001 9,171 1,711 95 1,328 12,305 (3,952) 8,353 1,007 9,360 4,578 2,236 715 7,529 1,435 (123) 1,842 10,683 (3,866) 6,817 1,007 7,824 89% 42% 87% 49% Number of shares in issue 23,639,762 17,853,276 Net tangible assets per share (pence) 35.3 38.2 13 Gusbourne PLC Report and Financial Statements 2015 Gusbourne received 7 gold medals for its wines from international competitions in 2015. The 2015 harvest was successfully completed in October. The quality of the grapes was excellent and met our own exacting quality standards. Principal risks and uncertainties Financing The Group plans to raise further equity and/or debt funds in the future to fund the Group’s development strategy over the coming years, through the issue of Gusbourne PLC shares and/or the raising of debt finance. Such funding may not be achieved and additional shares may have a dilutive effect on existing shareholders. Mitigation: The Group’s senior management team has carefully developed its long term business planning processes in support of any such new investment and the Group benefits from a loyal and supportive shareholder base. Climate change The Directors believe that climatic conditions in the South of England in recent years have generally been favourable to the growing of grapes used in sparkling wine production. However grape yields can be affected by certain adverse weather patterns such as late frosts and lack of sunshine during the flowering period. These climatic impacts can be quite localised. Please also refer to the paragraph (“Crop disease”) below. Mitigation: The Group’s strategy to mitigate this risk is to monitor the micro climate in 16 its existing vineyards through the use of temperature loggers and weather stations, with particular regard to late frosts, so that appropriate action can be promptly taken with the use of specialist frost prevention equipment. The Group’s has also mitigated this risk by planting vines in both West Sussex and Kent which are each subject to separate climatic conditions. from other suppliers. This may adversely affect retail prices of English sparkling wine and the assumed levels of pricing in the Group’s development strategy may not be achieved. The English sparkling wine industry may also face stronger competition from similar overseas products, which could also adversely affect the retail prices of the Gusbourne wines. Mitigation: The Group’s strategy remains to produce the highest quality products and develop the Gusbourne brand with related support to attract and retain customer loyalty. The Group’s strategy to develop exports as a significant contribution to sales will also mitigate this competitive risk in the UK market. The strategic report on pages 4 to 16 has been approved by the Board and signed on its behalf by: Ben Walgate Chief Executive Crop disease Commercial viticulture is a farming system prone to disease pressures. The relatively cool climate of the UK can exacerbate these pressures. While there is no significant pressure from fatal diseases threatening vine growing in the UK at present, there are certain diseases which may reduce yield under adverse climatic circumstances. Mitigation: These risks can be mitigated through good husbandry and management practices. Please also refer to the paragraph “Climate change” above. Competition With the anticipated continuing growth in vineyard plantings in the South of England, the supply of English sparkling wine is likely to continue to increase and provide increased competition Gusbourne PLC Report and Financial Statements 2015 Board of Directors Andrew Weeber BSc, MB ChB, FCS, Non-Executive Chairman Member of the Audit, Remuneration and Nomination Committees After graduating from the University of Stellenbosch in 1968 with a BSC in Biochemistry & Physiology, Andrew continued to a Bachelor of Medicine and Surgery. He specialised at the University of Cape Town, and was awarded his FCS in Trauma and Orthopaedic Surgery in 1984. Andrew went on to pursue a career spanning more than 20 years practising as a consultant orthopaedic surgeon in South Africa and the United Kingdom, whilst simultaneously pursuing his entrepreneurial interests. In 1986 he co-founded, and successfully exited, the 247-bed private Vergelegen Mediclinic Hospital, near Cape Town. In 1988 Andrew’s interest in wine and biochemistry led him to acquire a 50% stake in a Robertson wine estate. He sold the estate in 1991 and moved to the United Kingdom in 1992. In the United Kingdom, he developed an orthopaedic unit within the Friarage Hospital in North Yorkshire. He oversaw its growth to a regional specialisation centre, employing 21 surgeons. During this time, Andrew was appointed to the Medical Committee of the Football Association of England. Andrew retired from medicine in 2004 and focused on his personal business interests, primarily the development of the Gusbourne Estate; a project which he had established a year earlier on his 500 acre Estate in Kent. The first vintage was released in 2010 to critical acclaim and received numerous awards. This firmly established Gusbourne Estate’s position at the forefront of premium English wine. Andrew is a key opinion leader in the English wine industry, and is closely involved with the English Wine Producers Association. Andrew has held several board memberships, including 6 years at the 15,000 acre Alpheus Williams & Son Timber Corporation, until its successful acquisition by the SAPP 1 Group. Ben Walgate BSc, Director and Chief Executive Since university, Ben’s career has been focussed on the wine industry. After a summer spent working in the vineyards and cellars of Western Europe, Ben returned to England to study Viticulture (grape growing) and Oenology (winemaking) for two years at Plumpton College. After Plumpton College, Ben ran his own business, involving the importation and sale of rare and unusual wines into the UK. This provided him with direct experience of the wine wholesale and retail market in the UK. Following the disposal of this business Ben took over the management of one of the UK’s oldest vineyards, replanting and rejuvenating the 40 plus year old vineyards. The refurbishment of the winery and winemaking procedures increased both quantity and quality of wine produced. Ben was instrumental in developing the Group’s initial business strategy (under the Shellproof PLC banner) which included the establishment of the Company’s vineyards in Sussex and the acquisition of the Gusbourne Estate business in 2013. Paul Bentham, Non-Executive Director Member of the Audit, Remuneration and Nomination Committees Paul is the founder and currently the Non-Executive Chairman of Retail Merchant Group Ltd. With a background in card payment services and retail banking projects he was the founder and previously the Executive 17 Gusbourne PLC Report and Financial Statements 2015 Board of Directors (continued) Matthew has worked in the markets for high end real estate developments, private members clubs and financial services for over a decade. Chairman of Cardsave UK Ltd. He is also engaged in various commercial and residential property projects, including investment-grade office and warehouse sites. Ian Robinson BA FCA, Non–Executive Director Chairman of the Audit Committee and member of the Remuneration and Nomination Committees Ian is currently non–executive Chairman of Jaywing Plc, an AIM listed digital marketing and consulting business, and a non-executive director of TLA Worldwide Plc, an AIM listed athlete representation and sports marketing business. He is non- executive Chairman of LT Pub Management Plc, a privately owned pub and leisure asset management business. He is also a director of a number of other privately owned businesses. Previously he was chief financial officer of Carlisle Group’s UK staffing and facilities services operations. He has held other senior financial appointments both in the UK and overseas. He is a Fellow of the Institute of Chartered Accountants in England & Wales, having trained with Peat, Marwick, Mitchell & Co (now KPMG) in London. Lord Arbuthnot PC, Non–Executive Director Chairman of the Remuneration and Nomination Committees and member of the Audit Committee James practiced as a barrister for over ten years, and then became a Conservative Member of Parliament from 1987 to 2015, when he stood down in order to pursue other challenges. During his time in Parliament he served as Pensions Minister and Minister for Defence Procurement. From 1997 to 2001 he was Opposition Chief Whip, and from 2005 to 2014 he chaired the Defence Select Committee. Matthew Clapp Non–Executive Director Member of the Audit, Remuneration and Nomination Committees Matthew is a non-executive director of Shutdown Maintenance Services Ltd, a director of MDC Consulting Limited and a committee member for The Square Mile Salute, an annual fundraising event, designed to promote philanthropy in the city of London and raise money for a selection of charities. 18 Gusbourne PLC Report and Financial Statements 2015 Report of the Directors for the year ended 31 December 2015 The Directors present their report together with the audited financial statements for the year ended 31 December 2015. Results and dividends The consolidated statement of comprehensive income is set out on page 23 and shows the result for the year. No dividend was declared (December 2014: £Nil). Principal activities The principal activities of Gusbourne PLC (“the Company”) and its subsidiaries (“the Group”) comprise the production, sale and distribution of English sparkling wine. Review of the business and future developments A review of the business together with an indication of future developments is given in the Chairman’s statement on pages 4 to 6 and in the Chief Executive’s review on pages 10 to 13. Principal risks and uncertainties are shown on page 16. Post balance sheet events There have been no significant events to report since the date of the balance sheet. Directors Corporate governance The Directors of the Company during the year were as follows: Andrew Weeber (Non-Executive Chairman) Ben Walgate (Chief Executive) Lord Arbuthnot PC (appointed 6 July 2015) (Non-Executive Director) Paul Bentham (Non-Executive Director) Matthew Clapp (appointed 6 July 2015) (Non-Executive Director) Ian Robinson (Non-Executive Director) The beneficial interest of Directors who held office at 31 December 2015 in the share capital of the Company are shown below: Ordinary shares Dec 2015 Dec 2014 Andrew Weeber 11.5% 10.9% Ben Walgate 0.4% 0.3% Lord Arbuthnot PC 0.1% - Paul Bentham 3.6% 3.4% Matthew Clapp 0.1% - Ian Robinson 0.5% 0.5% The Remuneration Committee comprises Lord Arbuthnot PC (Chairman since 10 March 2016), Andrew Weeber, Paul Bentham (Chairman to 10 March 2016), Matthew Clapp (member since 10 March 2016) and Ian Robinson and meets at least twice a year and at such other times as the Chairman of the Committee requires. The Committee considers all material elements of the remuneration policy to ensure that remuneration is sufficient to attract, retain and motivate Executive Directors and senior management of the quality required to manage the Group successfully. This is performed with reference to independent remuneration research and professional advice. The Committee recommends to the Board the framework for the remuneration packages of the individual Executive Directors. The Board is then responsible for implementing the recommendations although no Director is involved in deciding his own remuneration. The Directors are not permitted to vote on their own terms and conditions of remuneration. The Audit Committee comprises Ian Robinson (Chairman), Andrew Weeber, Lord Arbuthnot PC (member since 10 March 2016), Paul Bentham and Matthew 19 Gusbourne PLC Report and Financial Statements 2015 Report of the Directors continued Clapp (member since 10 March 2016) and meets at least twice a year and at such other times as the Chairman of the Committee requires. The external auditors attend for part or all of each meeting. The Committee is responsible for reviewing a wide range of matters, including half- year and annual results before their submission to the Board, and for monitoring the controls that are in force to ensure the integrity of information reported to shareholders. The Committee advises the Board on the appointment of external auditors and on their remuneration for both audit and non-audit work, and discusses the nature, scope and results of the audit with the external auditors. The Committee keeps under review the cost effectiveness and the independence and objectivity of the external auditors. The Audit Committee is further responsible for ensuring that the ethical and compliance commitments of management and employees are understood throughout the Group. The Committee has considered that in light of the present size of the Group that a separate internal audit function is not currently required. The Committee’s position on the internal audit function is reviewed regularly, at least once a year. The Nomination committee comprises Lord Arbuthnot PC 20 (Chairman since 10 March 2016), Andrew Weeber, Paul Bentham (Chairman to 10 March 2016), Matthew Clapp (member since 10 March) and Ian Robinson and meets at least twice a year. The Committee is responsible for reviewing the composition and structure of the Board and for making recommendations to the Board for its consideration and approval. of all the Group’s Directors. Neither the insurance nor the indemnity provides cover where the Director has acted fraudulently or dishonestly. Financial risk management The Group’s objectives and policies relating to financial risk management are fully explained in Note 3 on pages 35 to 37. Substantial shareholdings Directors’ responsibilities Current shareholdings in excess of 3%: Shareholder Shareholding Lord Ashcroft KCMG PC 64.4% Andrew Weeber Paul Bentham 11.5% 3.6% At 31 December 2015 the ultimate controlling party of the Company is Lord Ashcroft KCMG PC. Charitable and political donations During the year, the Group made charitable and political donations of £Nil (December 2014: £Nil). Directors’ third party indemnity provisions The Group maintains appropriate insurance to cover Directors’ and Officers’ liability. The Group provides an indemnity in respect The Directors are responsible for preparing the strategic report, director’s report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements and the Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that year. The Directors are also required to prepare financial Gusbourne PLC Report and Financial Statements 2015 statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and accounting estimates that are reasonable and prudent; • state whether the Group and the Company financial statements have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Directors are not aware of any relevant audit information of which the auditors are unaware. A resolution to reappoint BDO LLP as auditors will be proposed at the next annual general meeting. By order of the Board Ian Robinson Secretary and Non-Executive Director Date: 19 May 2016 Website publication The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. Auditors All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company’s auditors for the purpose of their audit and to establish that the auditors are aware of that information. The 21 Gusbourne PLC Report and Financial Statements 2015 Report of the independent auditors for the year ended 31 December 2015 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GUSBOURNE PLC We have audited the financial statements of Gusbourne PLC for the year ended 31 December 2015 which comprise the group and parent company statement of financial position, the group statement of comprehensive income, the group and parent company statements of cash flows, the group and parent company statements of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with sections Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the Directors are responsible for the preparation of 22 the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/ auditscopeukprivate. Opinion on financial statements In our opinion: the financial statements give a true and fair view of the state of the Group’s and the parent Company’s affairs as at 31 December 2015 and of the Group’s loss for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • • • • Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the parent Company financial statements are not in agreement with the accounting records and returns; or • • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Geraint Jones (senior statutory auditor) For and on behalf of BDO LLP, statutory auditor London Date: 19 May 2016 the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Gusbourne PLC Report and Financial Statements 2015 Consolidated statement of comprehensive income for the year ended 31 December 2015 Year ended 31 December 2015 £’000 As restated Year ended 31 December 2014 £’000 Note 473 434 (325) (361) 148 73 (71) Revenue Cost of sales Gross profit Fair value movement in biological produce 13 (95) Administrative expenses (1,176) (968) Loss from operations Finance income Finance expenses Exceptional items Total finance expenses Loss before tax Tax expense 5 8 8 9 (1,123) 22 (210) (115) (325) (1,426) - (966) 38 (223) - (223) (1,151) 60 Loss for the year attributable to owners of the parent (1,426) (1,091) Total comprehensive loss attributable to owners of the parent (1,426) (1,091) Loss per share attributable to the ordinary equity holders of the parent: 10 Basic and diluted (pence) (6.83) (7.00) The notes on pages 28 to 55 form part of these financial statements. 23 Gusbourne PLC Report and Financial Statements 2015 Consolidated statement of financial position at 31 December 2015 December 2015 £’000 As restated December 2014 £’000 As restated 1 January 2014 £’000 Note 11 12 13 14 15 16 18 17 17 18 19 1,007 9,171 10,178 - 1,711 264 1,328 3,303 13,481 (169) (41) (34) (244) (2,161) (133) (1,583) - (3,877) (4,121) 1,007 7,529 8,536 - 1,435 213 1,842 3,490 12,026 1,007 6,964 7,971 - 1,310 251 1,703 3,264 11,235 (336) (324) - - - - (336) (324) (2,025) (2,025) - (1,841) - (3,866) (4,202) - (1,695) (60) (3,780) (4,104) 9,360 7,824 7,131 Assets Non-current assets Intangibles Property, plant and equipment Current assets Biological produce Inventories Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Finance leases Loans and borrowings Non-current liabilities Loans and borrowings Finance leases Convertible deep discount bonds Deferred tax liabilities Total liabilities Net assets 24 Gusbourne PLC Report and Financial Statements 2015 Issued capital and reserves attributable to owners of the parent Share capital Share premium Merger reserve Convertible bond reserve Retained earnings Total equity December 2015 £’000 Note As restated December 2014 £’000 As restated 1 January 2014 £’000 21 22 22 22 22 11,820 8,927 815 (13) 95 815 (13) 95 (3,357) 9,360 (2,000) 7,824 7,612 346 (13) 95 (909) 7,131 The financial statements on pages 23 to 55 were approved and authorised for issue by the Board of Directors on 19 May 2016 and were signed on its behalf by: Andrew Weeber Ben Walgate Non-Executive Chairman Chief Executive The notes on pages 28 to 55 form part of these financial statements. 25 Gusbourne PLC Report and Financial Statements 2015 Consolidated statement of cash flows for the year ended 31 December 2015 31 December 2015 £’000 31 December 2014 £’000 Note (1,426) (1,151) 12 8 8 13 12 12 21 267 - 325 (22) 95 (56) (371) (137) (1,325) (1,137) (786) 14 9 180 (4) 223 (38) 71 38 (195) 12 (864) (159) (588) 5 33 (1,900) (709) 170 181 (24) (74) 2,504 (46) 2,711 - - - (72) 1,788 (4) 1,712 (514) 139 1,842 1,703 1,328 1,842 Cash flows from operating activities Loss for the year before tax Adjustments for: Depreciation of property, plant and equipment Profit on disposal of property, plant and equipment Finance expense Finance income Fair value movement in biological produce (Increase)/decrease in trade and other receivables Increase in inventories (Decrease)/increase in trade and other payables Cash outflow from operations Investing activities Purchases of property, plant and equipment, excluding vineyard establishment Investment in vineyard establishment Sale of property, plant and equipment Interest received Net cash from investing activities Financing activities Drawdown of bank loan Finance lease agreements Repayment of finance leases Interest paid Issue of ordinary shares Share issue expenses Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The notes on pages 28 to 55 form part of these financial statements. 26 Gusbourne PLC Report and Financial Statements 2015 Consolidated statement of changes in equity for the year ended 31 December 2015 1 January 2014 Shares issued As restated comprehensive loss for the year Total comprehensive loss for the year Share capital £’000 7,612 1,315 - - 346 469 - - - - - - - - Share premium £’000 Merger reserve £’000 Convertible bond reserve Retained earnings £’000 (13) 95 (909) As restated 31 December 2014 8,927 815 (13) 95 1 January 2015 Shares issued Shares issued on conversion of bond Share issue expenses Comprehensive loss for the year Total comprehensive loss for the year 31 December 2015 8,927 2,893 - - - - 815 (13) 95 (2,000) - - - - - - - - - - - - - - - 11,820 815 (13) 95 Total attributable to equity holders of parent £’000 7,131 1,784 - (1,091) (1,091) (1,091) (2,000) (1,091) 7,824 - 115 (46) 7,824 2,893 115 (46) (1,426) (1,426) (1,357) (3,357) (1,357) 9,360 27 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements for the year ended 31 December 2015 Gusbourne PLC (the “Company”) is a company incorporated and domiciled in the United Kingdom and quoted on the London Stock Exchange’s AIM market. The consolidated financial statements of the Group for the year ended 31 December 2015 comprise the Company and its subsidiaries (together referred to as the “Group”). Basis of preparation The 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 Company’s financial statements are presented on pages 57 to 65. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s financial statements. The financial statements are presented in pounds sterling. They have been prepared on the historical cost basis except that biological produce is stated at fair value. Going concern The Directors believe the Group to be a going concern on the basis that it has sufficient cash to continue operations for at least 12 months from the date these financial statements were approved. The Directors have reviewed the Group’s cash flow forecasts and note that the achievement of the Group’s long term development strategy will depend on the raising of further equity and/or debt funds to achieve those goals. The production of premium quality wine from new vineyards is, by its very nature a long term project. It takes four years to bring a vineyard into full production and, an average of four years to transform these grapes into the Group’s premium sparkling wine. Additional funding will be sought by the Group over the coming few years to invest in additional vineyards, winery capacity, and stocks of wine as well as brand development, in line with its development strategy. The Directors believe that future fundraisings will be successful and have therefore prepared the financial statements on a going concern basis. New accounting standards and changes to existing accounting standards i. New standards and interpretations adopted in the current year: • Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41* * This has been early adopted 1 Accounting policies 28 Gusbourne PLC Report and Financial Statements 2015 1 Accounting policies (continued) ii. Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group: • Annual improvements to IFRSs 2010-2012 Cycle • Annual improvements to IFRSs 2011-2013 Cycle • • • • Clarification of Acceptable methods of Depreciation and Amortisation: IFRS 16 Leases IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers Amendments to IAS 16 and IAS 38 • Equity Method in Separate Financial Statements (Amendments to IAS 27) • Sale or contribution of assets between an investor and its associate or joint venture (Amendments to IFRS 10 and IAS 28) • Annual improvements to IFRSs 2012-2014 Cycle • Disclosure initiative: Amendments to IAS 1 • Recognition of deferred tax assets for unrealised losses - Amendments to IAS 12 • Disclosure initiative: Amendments to IAS 7 The Group is currently assessing the impact of these standards on the financial statements. Basis of consolidation The Group’s financial statements consolidate the financial statements of the Company and its subsidiary undertakings. Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities and the ability to use its power over the investee to affect the amounts of the Group’s returns and which generally accompanies interest of more than one half of the voting rights. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The results of any subsidiaries sold or acquired are included in the Group income statement up to, or from, the date control passes. Intra-Group sales and profits are eliminated fully on consolidation. On acquisition of a subsidiary, all of the subsidiary’s separable, identifiable assets and liabilities existing at the date of acquisition are recorded at their fair values reflecting their condition at that date. On disposal of a subsidiary, the consideration received is compared with the carrying cost at the date of disposal and the gain or loss is recognised in the income statement. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets is recorded as goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Subsidiaries’ results are amended where necessary to ensure consistency with the policies adopted by the Group. 29 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 1 Accounting policies (continued) 30 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. Gusbourne PLC Report and Financial Statements 2015 1 Accounting policies (continued) 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). 31 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 1 Accounting policies (continued) 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. 32 Gusbourne PLC Report and Financial Statements 2015 1 Accounting policies (continued) 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 Plant, machinery and motor vehicles Computer equipment Mature vineyards 4% per annum straight line 5-20% per annum straight line 33% per annum straight line 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 Following the early adoption of Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) the financial statements have been restated to reflect that bearer plants such as grape vines are no longer included within the classification of biological assets under IAS 41 Agriculture. In accordance with the amendments biological assets held by the Group are now accounted for under IAS 16 PPE and held at cost. The biological assets have been transferred to plant, property and equipment as at 1 January 2014 at deemed cost, being their fair value less costs to sell at that date. This is in line with the transitional guidance which permits the transfer to be at the deemed cost of the historic fair value under the old IAS 41. The impact of this early adoption is shown in note 24. Harvesting of the grape crop is ordinarily carried out in October. Prior to harvest the costs of growing the grapes are carried forward in inventory. Upon harvest the grapes become agricultural produce and are therefore measured at fair value less costs to sell in accordance with IAS 41 with any fair value gain or loss shown in the consolidated statement of comprehensive income. The fair value of grapes is determined by reference to estimated market prices at the time of harvest. This measurement of fair value less costs to sell is the deemed cost of the grapes that is transferred into inventory upon harvest. Under IAS 41, the agricultural produce is also valued at the end of each reporting period. Inventories Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Grapes grown in the Group’s vineyards are included in inventory at fair value less costs to sell at the point of harvest which is the deemed cost for the grapes. 33 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 1 Accounting policies (continued) Weighted average cost is used to determine the cost of ordinarily interchangeable items. Leased assets Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the Group (a “finance lease”), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased property and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to the consolidated statement of comprehensive income over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor. Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an “operating lease”), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis. The Group makes certain estimates and judgements regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates. The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year relate are set out below. Fair value of biological produce The Group’s biological produce is measured at fair value less costs to sell at the point of harvest. The fair value of grapes is determined by reference to estimated market prices at the time of harvest. Generally there is no readily obtainable market price for the Group’s grapes because they are not sold on the open market, therefore management set the values based on their experience and knowledge of the sector including past purchase transactions. 2 Critical accounting estimates and judgements 34 Gusbourne PLC Report and Financial Statements 2015 2 Critical accounting estimates and judgements (continued) 3 Financial instruments - risk management Impairment reviews The Group is required to test annually whether goodwill and brand names have suffered any impairment. The recoverable amount is determined based on fair value less costs of disposal calculations, which requires the estimation of the value and timing of future cash flows and the determination of a discount rate to calculate the present value of the cash flows. Further information is set out in note 11. Useful lives of plant, property and equipment The charge in respect of depreciation is calculated based on management’s estimate of an asset’s useful economic life and its residual value at the end of that life. An increase in the useful life or residual value would result in a decreased depreciation charge in the statement of consolidated income. The Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. Principal financial instruments The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: Bank loans Convertible debt Trade receivables Cash and cash equivalents Finance leases Trade and other payables In addition, at the Company level: Intercompany loans. The carrying amounts are a reasonable estimate of fair values because of the short maturity of such instruments or their interest bearing nature. Liquidity risk The Group closely monitors and manages its liquidity risk. Cash forecasts are regularly produced and sensitivities run for different scenarios. 35 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 3 Financial instruments - risk management (continued) The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities: Up to 3 months £’000 Between 3 and 12 months £’000 Between 1 and 2 years £’000 Between 2 and 5 years £’000 Over 5 years £’000 Total £’000 269 18 - 287 40 53 - 93 14 - 71 2,149 - 2,338 85 4,487 - - - - 323 2,291 2,338 4,952 Up to 3 months £’000 Between 3 and 12 months £’000 Between 1 and 2 years £’000 Between 2 and 5 years £’000 Over 5 years £’000 88 11 27 57 35 84 - 47 111 - 105 2,199 - - 1,880 - Total 126 176 2,038 2,304 Total £’000 145 198 2,421 1,880 4,644 - - - - - At 31 December 2014 Trade and other payables Loans and borrowings Convertible deep discount bonds Total At 31 December 2015 Trade and other payables Finance leases Loans and borrowings Convertible deep discount bonds 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. 36 Gusbourne PLC Report and Financial Statements 2015 3 Financial instruments - risk management (continued) 4 Segmental information Credit risk Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions and the risk of default by these institutions. The Group reviews the creditworthiness of such financial institutions on a regular basis to satisfy itself that such risks are mitigated. The Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of the cash and cash equivalents as shown in the consolidated statement of financial position. Credit risk also arises from credit exposure to trade customers included in trade and other receivables. Trade receivable balances are monitored on an ongoing basis to ensure that the Group’s bad debts are kept to a minimum. Further disclosures regarding trade and other receivables, which are neither past due nor impaired, are provided in note 15. Interest rate risk The Group’s main debt is exposed to interest rate fluctuations. The Group considers that the risk is not significant in the context of its business plans. Should there be a 0.5% increase in the bank’s lending rate, the finance charge in the statement of comprehensive income would increase by £10,000. The Directors consider the Group to have only one operating segment. Details of the sole operating segment are shown in the consolidated statement of comprehensive income, consolidated statement of financial position and consolidated statement of cash flows on pages 23 to 26. 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 2015 £’000 As restated Year ended 31 December 2014 £’000 Depreciation of property, plant and equipment Profit on disposal of property, plant and equipment Staff costs expensed to consolidated statement of income 267 - 232 180 (4) 255 37 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 6 Auditor’s remuneration 7 Staff costs Auditor’s remuneration - Audit: consolidation and parent - Audit: subsidiaries Staff costs (including Directors) comprise: Wages and salaries Social security contributions and similar taxes Year ended 31 December 2015 £’000 Year ended 31 December 2014 £’000 30 10 40 26 9 35 Year ended 31 December 2015 £’000 Year ended 31 December 2014 £’000 480 46 526 471 45 516 The average number of employees of the Group, including Directors, during the year was 18 (December 2014: 17). Directors’ remuneration was as follows: Andrew Weeber Ben Walgate Lord Arbuthnot PC Paul Bentham Matthew Clapp Ian Robinson Andrew Wilson Salaries £’000 Fees £’000 Year ended 31 December 2015 £’000 Year ended 31 December 2014 £’000 50 80 - 10 - - - 140 - - - - - 10 - 10 50 80 - 10 - 10 - 150 50 80 - 15 - 15 7 167 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. 38 Gusbourne PLC Report and Financial Statements 2015 7 Staff costs (continued) 8 Finance income and expense Key management personnel costs were as follows: Short term employment benefits Social security contributions Finance income Amortisation of bank loan incentive Interest received on bank deposits Total finance income Finance expense Interest payable on borrowings Amortisation of bank transaction costs Discount expense on convertible bond Exceptional item (note 19) Total finance expense Year ended 31 December 2015 £’000 Year ended 31 December 2014 £’000 150 16 166 167 17 184 Year ended 31 December 2015 £’000 Year ended 31 December 2014 £’000 13 9 22 74 5 131 115 325 14 24 38 72 5 146 - 223 39 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 9 Taxation 40 Current tax expense Current tax on profits for the year Total current tax Deferred tax expense Origination and reversal of temporary differences Total deferred tax Total tax (Income)/expense Year ended 31 December 2015 £’000 Year ended 31 December 2014 £’000 - - - - - - - (60) (60) (60) Year ended 31 December 2015 £’000 Year ended 31 December 2014 £’000 Loss on ordinary activities before tax (1,426) (1,151) Loss on ordinary activities at the standard rate of corporation tax in the UK for the year of 20.25% (December 2014: 21.49%) (289) (247) Effects of: Expenses not deductible for tax purposes Unprovided deferred tax movements on short term temporary differences Unrecognised losses carried forward Effect of changes in tax rate in prior years 77 (127) 318 21 29 (111) 362 27 Tax charge/(credit) for the year - (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 £4,049,000 (December 2014: £2,340,000) Gusbourne PLC Report and Financial Statements 2015 10 Loss per share Basic earnings per ordinary share are based on a loss of £1,426,000 (December 2014: £1,091,000) and 20,889,716 ordinary shares (December 2014: 15,592,073) of 50 pence each, being the weighted average number of shares in issue during the year. There is no adjustment to be made for diluted earnings per ordinary share. 11 Intangibles Weighted average number of shares Loss per ordinary share pence Loss £’000 Year ended 31 December 2015 (1,426) 20,889,716 (6.83) As restated at year ended 31 December 2014 (1,091) 15,592,073 (7.00) Cost At 1 January 2015 and 31 December 2015 777 230 1,007 Goodwill £’000 Brand £’000 Total £’000 Impairment losses At 1 January 2015 and 31 December 2015 - - - Net book value At 31 December 2014 and 31 December 2015 777 230 1,007 The carrying value of goodwill and the brand is allocated to the following cash-generating units: Gusbourne Estate December 2015 £’000 December 2014 £’000 1,007 1,007 The brand value is the fair value of the brand name acquired as part of the acquisition of Gusbourne Estate in September 2013, and separately identified as an intangible. Goodwill is the premium paid to acquire the Gusbourne Estate business over the fair value of its net assets. 41 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 11 Intangibles (continued) Given the long term nature of vineyard establishment and wine production the Group’s management prepare long term cash flow forecasts for up to 9 years, and then apply a discount rate to determine the present value of the future cash flows of the cash-generating unit to arrive at the fair value less costs of disposal. Where this amount is lower than the carrying value of the brand and goodwill allocated to the cash-generating unit an impairment charge is made. The discount rate used is 17% based on the Group’s estimated weighted cost of capital. A growth rate of 2% has been applied over the term of the long term cash flow forecasts. The growth rate used is based on the long term average growth rate of the UK economy. 12 Property, plant and equipment Freehold Land and Buildings £’000 Plant, machinery and motor vehicles £’000 Vineyard establishment £’000 Mature Vineyards £’000 Computer equipment £’000 Total £’000 Cost As restated at 1 January 2014 Additions Disposals As restated at 31 December 2014 At 1 January 2015 Additions Disposals 4,610 14 - 4,624 4,624 664 - 686 137 (1) 822 822 461 (15) 458 588 - 1,240 - - 19 8 - 7,013 747 (1) 1,046 1,240 27 7,759 1,046 786 - 1,240 - - 27 12 - 39 7,759 1,923 (15) 9,667 At 31 December 2015 5,288 1,268 1,832 1,240 42 Gusbourne PLC Report and Financial Statements 2015 12 Property, plant and equipment (continued) Freehold land and buildings £’000 Plant, Machinery and motor Vehicles £’000 Vineyard establishment £’000 Mature vineyards £’000 Computer equipment £’000 Total £’000 Accumulated depreciation At 1 January 2014 As restated depreciation charge for the year Depreciation on disposals As restated at 31 December 2014 At 1 January 2015 Depreciation charge for the year Depreciation on disposals At 31 December 2015 9 37 - 46 46 44 - 90 Net book value At 31 December 2014 At 31 December 2015 4,578 5,198 39 85 - 124 124 163 (1) 286 698 982 - - - - - - - - - 50 - 50 50 50 - 100 1,046 1,832 1,190 1,140 2 8 - 10 10 10 - 20 17 19 50 180 - 230 230 267 (1) 496 7,529 9,171 Following the early adoption of “Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41” the Group’s grape vines are no longer classified as biological assets. Accordingly the vines have been transferred to plant, property and equipment as at 1 January 2014 at a deemed cost of £1,240,000. The comparative figures for the year ended 31 December 2014 have been restated to reflect this change in policy resulting in a net charge to the consolidated statement of comprehensive income of £50,000 representing depreciation for 2014. Within property, plant and equipment are assets with a carrying value of £185,000 (2014: £nil) held under finance leases. 43 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 13 Biological produce The fair value of biological produce was: At 1 January Crop growing costs Fair value of grapes harvested and transferred to inventory Fair value movement in biological produce At 31 December 2015 £’000 - 384 (289) (95) - 2014 £’000 - 281 (210) (71) - The fair value of grapes harvested is determined by reference to estimated market prices less cost to sell at the time of harvest. The estimated market price for grapes used in respect of the 2015 harvest is £2,000 per tonne (2014: £2,000 per tonne). A 10% increase in the estimated market price of grapes to £2,200 per tonne would result in an increase of £29,000 in the fair value of the grapes harvested in the year. A 10% decrease in the estimated market price of grapes to £1,800 per tonne would result in a decrease of £29,000 in the fair value of the grapes harvested in the year. Finished goods Work in progress Total inventories December 2015 £’000 December 2014 £’000 130 1,581 1,711 126 1,309 1,435 During the year £299,000 (December 2014: £334,000) was transferred to cost of sales. Prior to harvest, the costs of growing the grapes are included in inventory. Upon harvest, the Group is required to value agricultural produce at fair value less costs to sell in line with IAS 41: Agriculture. A fair value loss of £95,000 (2014: £71,000 loss) was recorded during the year and included within the consolidated statement of comprehensive income. This measurement of fair value less costs to sell is the deemed cost of the grapes that is transferred into inventory upon harvest. 14 Inventories 44 Gusbourne PLC Report and Financial Statements 2015 15 Trade and other receivables Trade receivables Prepayments Other receivables Total trade and other receivables December 2015 £’000 December 2014 £’000 111 79 74 264 107 28 78 213 Trade and other receivables are due within 1 year apart from £50,000 (December 2014: £50,000) included within other receivables which is due in more than 1 year. As at 31 December 2015 trade receivables of £22,000 (2014: £17,000) were past due but not impaired. They relate to customers with no default history. The ageing analysis of these receivables is as follows: 16 Trade and other payables < 3 months 3 to 6 months > 6 months Trade payables Accruals Other payables Total financial liabilities, excluding loans and borrowings classified as financial liabilities measured at amortised cost Other payables - tax and social security payments Total trade and other payables Book values are approximate to fair value at 31 December 2015 and 31 December 2014. December 2015 £’000 December 2014 £’000 13 7 2 22 13 4 - 17 December 2015 £’000 December 2014 £’000 25 92 27 144 25 169 192 72 59 323 13 336 45 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 17 Loans and borrowings 18 Finance Leases 46 Current liabilities: Bank loans Non current liabilities Bank loans Total loans and borrowings December 2015 £’000 December 2014 £’000 34 34 - - 2,161 2,195 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 £4,976,000 (2014: £4,356,000) within property, plant and equipment and a floating charge over all other property and undertakings. Other bank loans of £170,000 are at a fixed interest rate of 6% secured against certain items of plant and equipment. This loan is repayable via monthly instalments over 5 years. The minimum lease payments under finance leases fall due as follows: Within 1 year 2-5 years More than 5 years Future value of finance lease payments Present value of finance lease liabilities Of which: Within 1 year 2-5 years More than 5 years December 2015 £’000 December 2014 £’000 46 152 - 198 (24) 174 41 133 - 174 - - - - - - - - - - Gusbourne PLC Report and Financial Statements 2015 18 Finance Leases (continued) Finance leases comprise hire purchase agreements which the Group has used to purchase various items of plant, machinery and motor vehicles. The carrying value of the assets acquired held under these finance leases amounts to £185,000 (2014: £nil) and are shown within property, plant and equipment (note 12). 19 Convertible bonds Present value of debt element at 1 January Converted into shares during the year Discount expense for the year Present value of debt element at 31 December Equity element at 31 December Total carrying value at 31 December 2015 £’000 1,841 (389) 131 1,583 95 1,678 2014 £’000 1,695 - 146 1,841 95 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. On 27th May 2015 the Company, Mr A C V Weeber and Mrs C Weeber entered into a variation of the Bond. The variation of the Bond allows for the conversion to take place as part of an Open Offer of Gusbourne PLC at the issue price of the Open Offer. On 17 June 2015, as part of the Open Offer announced by the Company on 28th May 2015, £339,846 of the bonds plus accrued discount of £49,043 were converted into 777,778 50 pence ordinary shares at a price of 50 pence per share. As a result of the amendment to the terms of the Convertible Bonds on 27 May 2015, this conversion of bonds into shares resulted in a charge to the consolidated statement of income of £115,000 and is shown within finance costs as an exceptional item. This charge is a non-cash adjustment and does not affect the net assets of the Group as the corresponding entry is to retained earnings. The bond is classified as a compound financial instrument containing an element of debt and equity. The debt element is calculated as the present value of future cash flows assuming the bond is redeemed on the redemption date, discounted at the market rate for an equivalent debt instrument with no option to convert to equity. A rate of 9% has been used. The difference between the cash payable on maturity and the present value of the debt element is recognised in equity. The discount is charged over the life of the bond to the statement of comprehensive income and included within finance expenses. 47 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 20 Operating lease commitments The future aggregate minimum lease payments under non-cancellable operating leases are as follows: Operating leases which expire: Within one year Within two to five years More than five years December 2015 £’000 December 2014 £’000 61 283 3,140 3,484 47 189 2,015 2,251 The Group has entered into a number of long term leases in respect of land and buildings in West Sussex. The Group has planted vineyards on the leased land. The leases have lives of 47 years (2014: 48 years) and include various terms including regular break clauses at the Group’s option. Issued and fully paid At 1 January 2014 Issued for cash during the year At 31 December 2014 Bond converted into shares during the period Issued for cash during the year At 31 December 2015 Ordinary shares of 50p each Number £’000 15,224,814 2,628,462 17,853,276 777,778 5,008,708 23,639,762 7,612 1,315 8,927 389 2,504 11,820 On 17 June 2015 Gusbourne PLC issued 5,050,738 ordinary shares of 50 pence each at a price of 50 pence per share. 4,272,960 of these shares were issued for cash and 777,778 shares were subscribed for by way of the conversion of Bonds into shares. On 30 July 2015 Gusbourne PLC issued, for cash, 735,748 ordinary shares of 50 pence each at a price of 50 pence per share. The shares were fully subscribed and paid up. 21 Share capital 48 Gusbourne PLC Report and Financial Statements 2015 22 Reserves The following describes the nature and purpose of each reserve within equity: 23 Related party transactions Reserve Share Premium Merger reserve Description and purpose 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. 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 19. Retained earnings The retained earnings represent cumulative net gains and losses recognised in the Group’s statement of consolidated income. At 31 December 2015 £nil (31 December 2014 - £1,493,000) of cash and cash equivalents were held on deposit at British Caribbean Bank Limited (‘BCBL’), a related party. BCBL is a wholly owned subsidiary of Waterloo Investment Holdings Limited (‘WIHL’). Lord Ashcroft, KCMG PC, is a controlling shareholder in both the Company and WIHL. SUSD Limited (“SUSD”) provided architectural and project management services to the Group during the year amounting to £63,615. There was no balance due to SUSD as at 31 December 2015. Lord Ashcroft, KCMG PC the Company’s controlling shareholder, is also the controlling shareholder of SUSD through his interest in SUSD Asset Management (Holdings) Limited, SUSD’s ultimate parent company. Anne Street Partners Limited is considered a related party by virtue of the fact that Ian Robinson, a director of Gusbourne PLC, is also a director of Anne Street Partners Limited. During the year Anne Street Partners Limited charged the Company in total £70,000 (December 2014 - £62,473). Of this, £10,000 was in relation to directors fees (December 2014 - £22,473) and £60,000 relates to management services (December 2014 - £40,000). At 31 December 2015 an amount of £nil inclusive of VAT (December 2014 – £77,000) was due to Anne Street Partners Limited. The amount due to Anne Street Partners Limited as at 31 December 2014 was shown within trade and other payables. On 27th May 2015 the Group, Mr Andrew Weeber, Non-Executive Chairman, and Mrs C Weeber entered into a variation of the Bond. The variation of the Bond allows for the conversion to take place as part of an Open Offer of Gusbourne PLC at the issue price of the Open Offer. On 17 June 2015, as part 49 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 23 Related party transactions (continued) 24 Early adoption of Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41 of the Open Offer announced by the Company on 28th May 2015, £339,846 of the bonds plus accrued discount of £49,043 were converted into 777,778 50 pence ordinary shares at a price of 50 pence per share. As a result of the amendment to the terms of the Convertible Bonds on 27 May 2015, this conversion of bonds into shares resulted in a charge to the consolidated statement of income of £115,000 and is shown within finance costs as an exceptional item. This charge is a non-cash adjustment and does not affect the net assets of the Group as the corresponding entry is to retained earnings. Included within other payables at 31 December 2015 is an amount of £1,862 due from Andrew Weeber, Non-Executive Chairman (December 2014 - £431 due to Andrew Weeber). The amount of £1,862 has been received by the Group since 31 December 2015. Following the early adoption of Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) the financial statements have been restated to reflect that bearer plants such as grape vines are no longer included within the classification of biological assets under IAS 41 Agriculture. In accordance with the amendments biological assets held by the Group are now accounted for under IAS 16 PPE and held at cost. The tables below presents a summary of the qualitative effects of the above change in accounting policy. The effect on earnings per share was immaterial and is therefore not presented. 50 Gusbourne PLC Report and Financial Statements 2015 24 Early adoption of Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41 (continued) Effects on consolidated statement of financial position 1 January 2014 Assets Non-current assets Intangibles Property, plant and equipment Biological assets Current assets Biological produce Inventories Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Finance leases Loans and borrowings Previously Notes reported Adjustments Restated financial position 1,007 - 1,007 a. a. 5,724 1,240 7,971 - 1,310 251 1,703 3,264 11,235 (324) - - (324) 1,240 (1,240) - - - - - - - - - - - 6,964 - 7,971 - 1,310 251 1,703 3,264 11,235 (324) - - (324) 51 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 24 Early adoption of Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41 (continued) 1 January 2014 (continued) Previously Notes reported Adjustments Non-current liabilities Loans and borrowings Finance leases Convertible deep discount bonds Deferred tax liabilities Total liabilities Net Assets (2,025) - (1,695) (60) (3,780) (4,104) 7,131 - - - - - - - Issued capital and reserves attributable to owners of the parent Share capital Share premium Merger reserve Convertible bond reserve Retained earnings Total equity 7,612 346 (13) 95 (909) 7,131 - - - - - - Restated financial position (2,025) - (1,695) (60) (3,780) (4,104) 7,131 7,612 346 (13) 95 (909) 7,131 Effects on consolidated statement of financial position 31 December 2014 Assets Non-current assets Intangibles Property, plant and equipment Biological assets Previously Notes reported Adjustments Restated financial position 1,007 - 1,007 a, b c 6,339 1,237 8,583 1,190 7,529 (1,237) (47) - 8,536 52 Gusbourne PLC Report and Financial Statements 2015 24 Early adoption of Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41 (continued) 31 December 2014 (continued) Previously Notes reported Adjustments Current assets Biological produce Inventories Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Finance leases Loans and borrowings Non-current liabilities Loans and borrowings Finance leases Convertible deep discount bonds Deferred tax liabilities Total liabilities - 1,435 213 1,842 3,490 12,073 (336) - - (336) (2,025) - (1,841) - (3,866) (4,202) - - - - - (47) - - - - - - - - - - Restated financial position - 1,435 213 1,842 3,490 12,026 (336) - - (336) (2,025) - (1,841) - (3,866) (4,202) Net Assets 7,871 (47) 7,824 Issued capital and reserves attributable to owners of the parent Share capital Share premium Merger reserve Convertible bond reserve Retained earnings Total equity 8,927 815 (13) 95 (1,953) 7,871 - - - - 8,927 815 (13) 95 (47) (47) (2,000) 7,824 53 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the financial statements continued 24 Early adoption of Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41 (continued) Effects on consolidated statement of comprehensive income 31 December 2014 Revenue Cost of sales Gross profit Change in fair value of biological assets Fair value movement in biological produce Administrative expenses Loss from operations Finance income Finance expense Loss before tax Tax expense Previously Notes reported Adjustments 434 (361) 73 - - - Restated financial position 434 (361) 73 d d b (74) 74 - - (918) (919) 38 (223) (1,104) 60 (71) (50) (47) - - (47) - (71) (968) (966) 38 (223) (1,151) 60 Loss for the year attributable to owners of the parent (1,044) (47) (1,091) Total comprehensive loss attributable to owners of the parent (1,044) (47) (1,091) 54 Gusbourne PLC Report and Financial Statements 2015 24 Early adoption of Agriculture: Bearer Plants: Amendments to IAS 16 and IAS 41 (continued) Effects on consolidated statement of cashflows 31 December 2014 Previously reported Adjustments Cash outflow from operations (864) Net cash from investing activities (709) Net cash from financing activities 1,712 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 139 1,703 1,842 - - - - - - Restated financial position (864) (709) 1,712 139 1,703 1,842 Explanation of changes to previously reported loss attributable to owners of the parent a. Transfer of Biological Assets (Vines) to property, plant and equipment as at 1 January 2014. b. Depreciation of £50,000 for the year ending 31 December 2014. c. As a. above and net of fair value adjustments per d. below. d. Reversal of “Change in fair value of biological assets” of £74,000 and inclusion of “fair value movement in biological produce” of £71,000. 55 Gusbourne PLC Report and Financial Statements 2015 56 Gusbourne PLC Report and Financial Statements 2015 Parent company financial statements 57 Gusbourne PLC Report and Financial Statements 2015 Company balance sheet at 31 December 2015 Assets Non-current assets Investments Other receivables Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Non-current liabilities Non-current liabilities: Convertible deep discount bond Total liabilities Net assets Issued capital and reserves attributable to owners Share capital Share premium Convertible bond reserve Retained earnings Total equity December 2015 £’000 Note As restated December 2014 £’000 As restated 1 January 2014 £’000 3 4 4 5 6 7 8 8 8 - 11,897 - 9,122 - 7,772 8 1,061 12,966 13 1,752 10,887 51 1,609 9,432 (72) (172) (170) (1,583) (1,655) (1,841) (2,013) (1,695) (1,865) 11,311 8,874 7,567 11,820 8,927 815 95 (1,419) 11,311 815 95 (963) 8,874 7,612 346 95 (486) 7,567 The financial statements were approved and authorised for issue by the Board on 19 May 2016 and were signed on its behalf by Ian Robinson. Ian Robinson Secretary and Non-Executive Director The notes on pages 61 to 65 form part of these financial statements 58 Gusbourne PLC Report and Financial Statements 2015 Statement of cash flows for the year ended 31 December 2015 Cash flows from operating activities Loss for the year before tax Adjustments for: Finance expense Finance income Decrease in trade and other receivables (Decrease)/Increase in trade and other payables Cash outflow from operations Investing activities Interest received Increase in other receivables - Intercompany loan Net cash from investing activities Financing activities Issue of ordinary shares Share issue expenses Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year The notes on pages 61 to 65 form part of these financial statements. 31 December 2015 £’000 Note As restated 31 December 2014 £’000 2 (525) (477) 4 5 246 (8) 5 (100) (382) 146 (24) 37 3 (315) 8 (2,775) (2,767) 24 (1,350) (1,326) 2,504 (46) 2,458 1,788 (4) 1,784 (691) 143 1,752 1,609 1,061 1,752 59 Gusbourne PLC Report and Financial Statements 2015 Statement of changes in equity for the year ended 31 December 2015 7,567 1,784 (477) (477) 8,874 8,874 2,893 115 (46) (525) (456) 11,311 Share premium £’000 Convertible bond reserve Retained earnings £’000 Total attributable to equity holders £’000 As restated 1 January 2014 Shares issued Comprehensive loss for the year Total comprehensive loss for the year Share capital £’000 7,612 1,315 - - As restated 31 December 2014 8,927 815 346 469 - - 95 - - - 95 (486) - (477) (477) (963) 8,927 2,893 - - - - 815 95 (963) - - - - - - - - - - - 115 (46) (525) (456) (1,419) 11,820 815 95 1 January 2015 Shares issued Shares issued on conversion of bond Share issue expenses Comprehensive loss for the year Total comprehensive loss for the year 31 December 2015 60 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the company financial statements for the year 31 December 2015 1 Accounting policies The following principal accounting policies have been applied: Basis of preparation The parent company financial statements are the first financial statements prepared under International Financial Reporting Standards (IFRS) as adopted by the European Union. The company’s transition date to IFRS was 1 January 2014. In preparing these results, certain exemptions, allowed by the IFRS I, First Time Adoption of IFRS, have been taken. These are: - Use of deemed costs for investments in subsidiaries. Information on the impact of the first time adoption is given in note 11. The Company’s accounting policies are aligned with the Group’s accounting policies as described in note 1 of the Group’s consolidated financial statements. Additional accounting policies are noted below. Investment in subsidiaries The company has an investment in two subsidiaries. Investments are valued at cost, less allowances for impairment. Impairment reviews are performed annually. Credit risk The Company is exposed to credit risk in respect of the loans recoverable from other Group companies amounting to £11,897,000 (2014: £9,122,000) and will only be repaid once the Group companies are profitable. 2 Loss for the financial year In accordance with Section 408 of the Companies Act 2006, the Company has not presented its own income statement in these financial statements. The Company results for the year include a loss after tax and before dividends payable of £525,000 (2014: £477,000) which is dealt with in the consolidated financial statements of the Group. 3 Investments The following were the subsidiary undertakings at the end of the year: Name Country of incorporation Gusbourne Estate Limited England and Wales Gusbourne Wines Limited England and Wales Proportion of ownership interest at 31 December 2015 100% 100% Gusbourne Estate Limited is involved in the production, sale and distribution of English sparkling wine. Gusbourne Wines Limited is dormant. 61 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the company financial statements continued 4 Other receivables Non-current assets Amounts due from group undertakings 11,897 9,122 December 2015 £’000 December 2014 £’000 5 Trade and other payables: amounts due within one year Current assets Other receivables Prepayments and accrued income Total current assets Trade payables Accruals and deferred income 1 7 8 4 9 13 11,905 9,135 December 2015 £’000 December 2014 £’000 2 70 72 112 60 172 6 Convertible bonds Details of the Convertible bonds are shown in note 19 in the Group’s financial statements. 7 Share Capital Details of the share capital of the Company are included in note 21 to the consolidated financial statements. 8 Reserves Details of the nature and purpose of each reserve within equity are shown in note 22 to the Group’s financial statements. 9 Ultimate controlling party In the opinion of the Directors the ultimate controlling party at 31 December 2015 is Lord Ashcroft KCMG PC. 62 Gusbourne PLC Report and Financial Statements 2015 10 Related party transactions At 31 December 2015 £nil (31 December 2014 - £1,493,000) of cash and cash equivalents were held on deposit at British Caribbean Bank Limited (‘BCBL’), a related party. BCBL is a wholly owned subsidiary of Waterloo Investment Holdings Limited (‘WIHL’). Lord Ashcroft, KCMG PC, is a controlling shareholder in both the Company and WIHL. Anne Street Partners Limited is considered a related party by virtue of the fact that Ian Robinson, a director of Gusbourne PLC, is also a director of Anne Street Partners Limited. During the year Anne Street Partners Limited charged the Company in total £70,000 (December 2014 - £62,473). Of this, £10,000 was in relation to directors fees (December 2014 - £22,473) and £60,000 relates to management services (December 2014 - £40,000). At 31 December 2015 an amount of £nil (December 2014 – £77,000) was due to Anne Street Partners Limited. On 27th May 2015 the Group, Mr Andrew Weeber, Non-Executive Chairman, and Mrs C Weeber entered into a variation of the Bond. The variation of the Bond allows for the conversion to take place as part of an Open Offer of Gusbourne PLC at the issue price of the Open Offer. On 17 June 2015, as part of the Open Offer announced by the Company on 28th May 2015, £339,846 of the bonds plus accrued discount of £49,043 were converted into 777,778 50 pence ordinary shares at a price of 50 pence per share. As a result of the amendment to the terms of the Convertible Bonds on 27 May 2015, this conversion of bonds into shares resulted in a charge to the consolidated statement of income of £115,000 and is shown within finance costs as an exceptional item. This charge is a non-cash adjustment and does not affect the net assets of the Group as the corresponding entry is to retained earnings. 63 Gusbourne PLC Report and Financial Statements 2015 Notes forming part of the company financial statements continued 11 Transition to IFRS Balance sheet as at 1 January 2014 Previously reported Adjustments Restated financial position - 7,772 51 1,609 1,660 9,432 - - - - - - - 7,772 51 1,609 1,660 9,432 Assets Non- current assets Investments Other receivables Current assets Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables (170) - (170) Non-current liabilities Convertible deep discount bonds (1,790) 95 (1,695) Total liabilities (1,960) 95 (1,865) Net Assets 7,472 95 7,567 Issued capital and reserves attributable to owners of the parent Share capital Share premium Convertible bond reserve Retained earnings Total equity 7,612 346 - (486) 7,472 - - 95 - 95 7,612 346 95 (486) 7,567 64 Gusbourne PLC Report and Financial Statements 2015 11 Transition to IFRS (continued) Balance sheet as at 31 December 2014 Assets Non- current assets Investments Other receivables Current assets Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Non-current liabilities Previously reported Adjustments Restated financial position - 9,122 13 1,752 1,765 10,887 - - - - - - - 9,122 13 1,752 1,765 10,887 (172) - (172) Convertible deep discount bonds (1,936) 95 (1,841) Total liabilities (2,108) 95 (2,013) Net Assets 8,779 95 8,874 Issued capital and reserves attributable to owners of the parent Share capital Share premium Convertible bond reserve Retained earnings Total equity 8,927 815 - (963) 8,779 - - 95 - 95 8,927 815 95 (963) 8,874 Following the transition to IFRS by the Company the Balance Sheet as at 1 January 2014 and 31 December 2014 has been restated as shown above. The only change to the Company’s balance sheet is the recognition of the equity element in respect of the Convertible bond amounting to £95,000 which is shown within equity as Convertible bond reserve rather than as a liability in non-current liabilities. There are no changes to the Company’s income statement or cashflows resulting from the transition to IFRS. 65 Gusbourne PLC Report and Financial Statements 2015 66 Gusbourne PLC Report and Financial Statements 2015 Company information Country of incorporation of parent company Solicitors Brabners LLP 55 King Street Manchester M2 4LQ Bankers Barclays Bank PLC 30 Tower View Kings Hill Kent ME19 4UY Registrars Capita Registrars Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU England and Wales Legal form Public limited company Directors A C V Weeber (Non-Executive Chairman) B J Walgate (Chief Executive) Lord Arbuthnot PC (Non-Executive Director) P G Bentham (Non-Executive Director) M D Clapp (Non-Executive Director) I G Robinson (Non-Executive Director) Secretary and registered office I G Robinson 7 Cowley Street London SW1P 3NB Company number 08225727 Auditors BDO LLP 55 Baker Street London W1U 3EU Nominated adviser and broker Cenkos Securities PLC 6.7.8 Tokenhouse Yard London EC2R 7AS 67 Gusbourne PLC Report and Financial Statements 2015 Designed and printed by Northpoint Printing Ltd This document is printed on Revive 100 White Silk, a fully certified FSC® paper containing 100% de-inked post-consumer waste. The pulp used to produce this product is bleached using a Totally Chlorine Free (TCF) process. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled. 68 Gusbourne PLC Report and Financial Statements 2015 69 Left to right: Ben Walgate (Chief Executive), Charlie Holland (Winemaker), Jon Pollard (Vineyard manager), Andrew Weeber (Chairman) Gusbourne PLC Report and Financial Statements 2015 20160314_Annual_Report_Cover 2.pdf 1 16/05/2016 14:55 Gusbourne PLC Kenardington Road Appledore Kent, TN26 2BE England gusbourneplc.com gusbourne.com Gusbourne PLC Report and Financial Statements 2015