Annual Financial Report

Gusbourne PLC

May 23 2024 08:00 BSTSource: RNS

RNS Number : 5386P

Gusbourne PLC

23 May 2024

Gusbourne Plc

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

Final Results for the year ended 31 December 2023 & Notice of AGM

The Board of Gusbourne Plc (AIM: GUS) is pleased to announce its audited results for the year ended 31 December 2023.

Robust net revenue growth, up 13% at £7.1m, gross profit up 30% at £4.8m and Adjusted EBITDA loss narrowed to £0.7m, a 41% reduction from the prior period.

	2023 £'000	2022 £'000	Change %
Net revenue & adjusted EBITDA
Net revenue ⁽¹⁾	7,052	6,243	13%
Gross profit	4,808	3,697	30%
Adjusted EBITDA ⁽²⁾	(669)	(1,131)	41%
Gross profit %	68.2%	59.2%

Statutory results
Net revenue⁽¹⁾	7,052	6,243	13%
Gross profit	4,808	3,697	30%
Fair value movement in biological produce	(46)	(239)
Sales and marketing expenses	(3,565)	(3,479)
Administrative expenses	(1,912)	(1,481)
Depreciation	(661)	(601)
Total Administrative expenses	(6,138)	(5,561)

Operating profit/(loss)	(1,376)	(2,103)

Reconciliation of operating profit/(loss) to adjusted EBITDA
Operating profit/(loss)	(1,376)	(2,103)

Add back;
Depreciation	661	601
Aborted planning and capital expenditure write-off	-	132
Fair value movement in biological produce	46	239
Adjusted EBITDA⁽²⁾	(669)	(1,131)

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

⁽²⁾ Adjusted EBITDA means profit/(loss)from operations before aborted planning and capital expenditure write-off, fair value movement in biological produce, interest, tax, depreciation and amortisation.

Highlights of 2023 include:

• UK wine sales growth up by 16.5% to £4.9m (2022: £4.2m), maintaining strong double-digit sales growth across our direct to consumer ("DTC") and UK Trade sales channels, in spite of the challenging macroeconomic environment in the second half of 2023.

• Net revenue* up by 13.0% to £7.1m (2022: £6.2m) with strong growth across the Group's three main distribution channels:

o UK Trade sales up by 13% (2022: 53%) to £3.5m (2022: £3.1m)

o Direct to consumer ("DTC") net revenue which includes tours and related cellar door operations in Kent, was up by 18% to £2.0m (2022: £1.7m)

o International sales up by 7% (2022: 78%) to £1.5m (2022: £1.4m)

• A five-year CAGR (compound annual growth rate) in net revenue of 41% (2022: 44%)

• Gross profit up by 30% to £4.1m (2022: £3.7m) with margin significantly improved at 68.2% (2022: 59.2%)

• Adjusted EBITDA** loss narrowed to £0.7m (2022: £1.1m)

• Ongoing success in international and UK wine competitions with an impressive number of awards for its wines, including gold medals and trophies

* Net revenue represents Revenue after deducting excise duties

** Adjusted EBITDA means profit/(loss)from operations before aborted planning and capital expenditure write-off, fair value movement in biological produce, interest, tax, depreciation and amortisation.

Jonathan White, Chief Executive Officer, said:

"2023 saw significant financial, operational and strategic progress for Gusbourne resulting in another year of double digit revenue growth. Good performances were achieved across all three of the Group's distribution channels as we continue to expand our customer base both in the UK and overseas, reinforcing the Gusbourne brand as a leading light in the dynamic and fast growing English fine wine market.

"Trading in 2024 has continued in line with our expectations. Whilst the macro-economic environment remains complex with subdued consumer confidence still causing hesitancy and cautiousness in many markets, consumer interest in Gusbourne and English wine generally continues to grow across the globe, strengthening our confidence in the Group's future prospects.

"We expect to benefit from increased supply and inventory in the year ahead as our wines produced from mature vineyard holdings have aged in the cellar, and the ongoing expansion of our international presence, with two new markets already opened in 2024. In 2023 we harvested our biggest yield to date with Chardonnay, Pinot Noir and Pinot Meunier grapes showing fine expressiveness and we expect them to produce some outstanding wines, which will be bottled during the summer of 2024, further adding to our inventory levels for sale in future years.

"I was absolutely thrilled to be appointed Chief Executive Officer in January 2024 and am excited to be leading the business at this poignant moment for the industry. I have thoroughly enjoyed my five and half years with Gusbourne and am relishing the prospect of driving this special business forward into the future, implementing our vision and growth strategy."

Annual General Meeting

The Company's annual report and accounts for the year ended 31 December 2023 will be posted to shareholders on Thursday 23 May 2024, together with notice of the Annual General Meeting to be held at 11am on Friday 14 June 2024 at the offices of Fieldfisher LLP at Riverbank House, 2 Swan Lane, London EC4R 3TT.

Watch here to see Jonathan White, CEO & Katherine Berry, CFO present full year 2023 results for the period ended 31 December 2023.

Enquiries:

Gusbourne Plc
Jonathan White	+44 (0)12 3375 8666
Phil Clark, Investor Relations
Panmure Gordon (UK) Limited (Nomad and Sole Broker)
James Sinclair-Ford / Ailsa Macmaster	+44 (0)20 7886 2500
Hugh Rich
Media:
Kate Hoare / Ben Robinson / India Spencer (Houston) gusbourne@houston.co.uk	+44 (0)20 4529 0549

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

This announcement contains inside information for the purposes of article 7 of the Market Abuse Regulation (EU) 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the publication of this announcement, this information is now considered to be in the public domain.

Note to Editors

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

The Gusbourne business was founded by Andrew Weeber in 2004 with the first vineyard plantings at Appledore in Kent. The first wines were released in 2010 to critical acclaim. Following additional vineyard plantings in 2013 and 2015 in both Kent and West Sussex, Gusbourne now has 93 hectares of mature vineyards. The NEST visitor centre was opened next to the winery in Appledore in 2017, providing tours, tastings and a direct outlet for our wines.

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

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

For more information, visit www.gusbourneplc.com

Chairman's statement

The continued expansion of the global appetite for English fine wine has once again underpinned Gusbourne's robust revenue growth, with 2023 marking another year of good progress for the Group both at home and abroad. Since our first vines were planted almost twenty years ago, Gusbourne has focused on building strong foundations with a view to driving long-term value creation for all our stakeholders, striving from the outset to establish and maintain a premium product and market position, whilst achieving international brand recognition and pursuing multiple revenue streams. The world class quality of our products remains of critical importance and the latest milestone in this journey was marked by the launch of the second vintage of our prestige sparkling wine, Fifty One Degrees North, to notable critical acclaim worldwide.

All sales channels delivered growth during the year and our gross profit increased by a very pleasing 30% on higher margins. Our DTC net revenue grew by 18% to £2.0m, driven by cellar door operations in Kent, as customers responded positively to an expanded product offering and increased Nest capacity, as well as sales online and via new membership programmes. Our UK Trade revenue grew by 13% to £3.5m as the industry continued to profile wine produced in England and we opened a number of new accounts and listings. Our international revenue grew by 7% to £1.5m as we increased our presence across 33 export markets, with distribution in more new territories planned in 2024 and beyond.

Our strategy is firmly on track to deliver against previously announced scale and profitability ambitions. We remain fully committed to driving increasing revenue across a growing range of premium sparkling and still wine products combined with related experiential services which will help to further cement the brand's luxury positioning. Delivering EBITDA breakeven is a key priority for 2024.

The Board

We made several changes to our Board during the year to support Gusbourne's ongoing growth and execution of our detailed corporate strategy. We appointed Jonathan White as Chief Executive Officer in January 2024 after a rigorous search process. Jonathan has been at Gusbourne since 2018, most recently as Marketing Director. Simon Bradbury also joined the Board, as Chief Commercial Officer, previously our Global Sales Director. We said farewell to the retiring Paul Bentham and Andrew Weeber, as well as our previous Chief Executive and Head Winemaker Charlie Holland. I would like to thank them sincerely for their hard work and dedication in helping to establish Gusbourne as the leading fine wine producer in England.

The Gusbourne Team

I remain extremely proud of the hard work and commitment shown by the entire Gusbourne team who always

show up with a winning attitude. It was rewarding for the Board to be able to make several internal promotions over the year, including Mary Bridges as Head Winemaker and Alastair Benham as Head of Wine Operations, alongside Jonathan and Simon being promoted to the Board.

Outlook

While the macro-economic outlook in the UK remains uncertain with consumer confidence still fragile, the Board remains confident in the future success of Gusbourne, who are well positioned as a leading light in the rapidly growing English fine wine production market. We expect to continue seeing good momentum in our D2C, Corporate, Global Travel Retail and International channels, while trade sales in the UK are likely to remain cautious in the short-term. We have all the key ingredients in place for long-term success with great product, great distribution, and a great team. I very much look forward to another exciting year ahead of targeting revenue growth and adjusted EBITDA breakeven.

Jim Ormonde

Chairman

Chief Executive Officer's review

2023 was another year of significant financial, operational and strategic progress for Gusbourne. Since our foundation in 2004, Gusbourne has strived to create England's finest and most celebrated wines, by leveraging our core assets - an unrelenting focus on craft, detail and quality, an enhanced product portfolio and carefully curated distribution - and have taken advantage of the long-term investments made into land and plantings over the last 20 years. Combined with the ongoing global appetite for English wine, the result has been another year of double digit revenue growth. The Group reported £7.05m revenue, an increase of 13% compared to 2022, with all three distribution channels expanding the customer base both in the UK and overseas, reinforcing Gusbourne's brand as a leading light in the dynamic and fast growing English fine wine market.

Gross profit was up by 30% and the gross margin improved significantly to 68.2% (2022: 59.2%). This reflected an improvement in distribution channel and pricing mix (in part a result of lower growth in International sales, a lower margin channel) along with the impact of our new and wider product mix strategy. Operating costs, especially administration expenses, remain carefully managed. We continue to invest in the Gusbourne brand, with discretionary marketing investment to help support brand awareness and future sales growth. The combination of good cost discipline and significant top-line growth meant the Group achieved a material improvement in our cost to sales ratio narrowing adjusted EBITDA loss for the year to £0.7m (2022: £1.1m EBITDA loss).

I was honoured to be appointed Chief Executive Officer of Gusbourne in January 2024 and am thrilled to be leading England's foremost fine wine brand. I have thoroughly enjoyed my five and half years with Gusbourne and am excited by the prospect of driving this great business forward into the future, implementing our vision and growth strategy.

The continued success of the Group is a testament to the diligent work of the entire Gusbourne team. Their dynamism, enthusiasm and dedication are the foundation of our business and I thank them all for their ongoing efforts and continued loyalty. I have been touched by the support and commitment the team has shown me since my appointment. I would also like to take this opportunity to thank Charlie Holland for preparing such a carefully thought out succession plan across the business. I also wish to recognise the integral role Charlie performed in establishing the world class reputation Gusbourne wines now command, as well as significantly growing our business, during his ten-year tenure with the Group.

Group vision and growth strategy

The Group's vision is to continue to produce premium quality vintage wines from grapes grown in our own vineyards and to promote Gusbourne as a luxury brand. This will be achieved through our ongoing dedication to excellence in all aspects, from vineyards to winemaking, customer service and support to marketing, branding and the development of our team. It will be enhanced by our prudently chosen commercial relationships and curated distribution channels.

To deliver this, our growth strategy is based on three strategic pillars:

· Protect premium position. Gusbourne has a quality focus in everything we do, starting in the vineyard and continuing into our winemaking, distribution product range strategy and beyond. Our focus on fine wine quality has consistently been recognised by critics across the world, and resulted in a significant number of awards for our products. We are fiercely protective of our premium positioning and by nurturing and protecting it, we maintain our pricing and distribution power.

· Strengthen brand awareness. Closely associated with our premium position, is our increasing brand awareness. The strength of our brand opens up distribution opportunities and makes Gusbourne an attractive proposition for our international market partners. We have invested heavily in the Gusbourne brand and will continue to do so, through a very considered and controlled approach. We do everything we can to provide our guests at the Nest with a fantastic experience, so they become informal brand advocates and spread positive word about Gusbourne among their friends, family and professional networks. The strength of our brand, combined with the quality of our products, gives us pricing power, the ability to expand our product range and pricing hierarchy. This has underpinned the increase in our average selling price over time.

· Drive multiple revenue streams. Gusbourne has multiple levers to drive revenue growth in both the UK and overseas. The expansion of our vineyards over the last decade, and maturing of the vines, has improved productivity of the estate. With significant investment in inventory, we are now well placed to service the growing demand for our products and have expanded our international distributor network and direct sales force in the UK accordingly. However, this is not just a volume growth story. We have consistently demonstrated the ability to improve our pricing and product mix enhancements through, with the introduction of limited edition products, regular price increases and non-wine sales and other new products to our range. We have a track record of driving Direct to Consumer business, our highest gross margin channel, through our digital marketing and eCommerce capabilities. Non-wine sales are also important, provided by the regular programme of tasting and tour experiences and events offered at the Nest. During 2023, we expanded our capacity, and have driven occupancy through the burgeoning corporate sales channel. We see further opportunities to expand the Nest in Kent and to create a second world-class customer experience at our Sussex vineyard in the future.

Land

The Gusbourne business was founded in 2004 by Andrew Weeber with the first vineyard plantings at Appledore in Kent. The first wines were released in 2010 to critical acclaim. In 2013 and 2015, additional vineyards were planted in both Kent and West Sussex. At the end of 2022, the group had 93 hectares of mature planted vineyards. The Group acquired a further 55 hectares in Kent during 2022, the majority of which we plan to plant in the next few years. We also plan to plant additional vineyards on existing land in Sussex and this would give a total of approximately 152 hectares of land under vine.

Products

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

2022 saw the launch of the inaugural vintage of our prestige sparkling wine, Fifty One Degree's North, a wine that represents the pinnacle of the Gusbourne range and is positioned alongside the world's finest sparkling wines. The response from the wine critics has been extremely positive and in 2023 we released the second vintage, the 2016 during the year to further rave review.

Gusbourne also produce a growing range of premium vintage English still wines which continue to win prestigious international awards and are so sought after, that they are only available to customers on strict allocations. We anticipate further expanding the range and supply of our still wines, which along with other comparable still fine wines produced around the world, are commercially released with less ageing in our cellars.

Recent awards

Gusbourne has received a record number of awards, gold medals and trophies for its wines, winning more gold medals and trophies than ever before. . Pleasingly, the breadth of awards extends across our range of still and sparkling wines, and across multiple vintages too, highlighting the continued and consistent excellence of our winemaking over many years. Highlights include:

• Four trophies, including retaining Estate Winery of the Year at the Wine GB awards

• Collecting the Vintage English Sparkling Wine Trophy at this year's International Wine Challenge, along with eleven other medals

• Thirteen medals, including two golds, at the Decanter World Wine Award

• Five gold medals at the Champagne and Sparkling Wine World Championships

• Blanc de Noirs and Blanc de Blancs of the Year in the England 2022 Special Report

• Two Editor's Choice listings in Wine Enthusiast and four wines scoring over 94 points

• A Judges' Selection and Platinum award at the Texsom Awards in the USA

We were also thrilled that the Nest was recognised as UK Cellar Door of the year at the Decanter Retailer Awards during 2023.

Distribution: Three sales channels

Gusbourne has three main sales channels, UK Trade, International and Direct to Consumer, which all have

delivered significant growth during the year.

• UK Trade

UK Trade continued its strong progress with net revenue up by 13% (2022: 53%). The Group has established new trade accounts across premium hotels and restaurants, further strengthening its already high penetration to Michelin star restaurants and 5-star hotels.

• International

Our wines were distributed to 33 countries around the world in 2023 as we grew the Gusbourne brand globally, working with specialist distribution partners. International sales have continued to thrive and grew by 7% (2022: 78%). The brand has seen particularly strong momentum in the Nordics, Japan and the USA. Continued investment in sales and marketing has enabled us to develop and grow existing markets and expand into exciting new territories with significant growth potential. The Group expects to add further countries in 2024 and beyond.

• Direct to Consumer

Both wine sales and tour and tasting events based on our cellar door operations in Kent have continued to deliver strong growth, with net revenue up 18% for 2023 compared to 2022.

DTC wine sales grew by 26% reflecting our ongoing investment in digital marketing through the creation of rich and engaging content, compelling wine offers and new and exciting product releases. DTC remains a key strategic

direction for Gusbourne as we continue to develop our digital and physical presence. Tour and tasting events at Gusbourne's successful cellar door facility in Kent (the Nest), are now in their seventh full year of operation. Situated amongst our vineyards and winery operations in Kent, this facility offers an immersive experience allowing us to fully engage with our customers, encouraging them to enjoy the vineyards, visit the winery and taste our wines in a beautiful setting. We continue to improve and expand these services, having carried out reconfiguration of space at the Nest, providing capacity for more visitors to have a unique and unforgettable experience. During 2023 we also launched two new membership programmes which we expect to thrive in 2024 and beyond.

2023 Harvest

In 2023 we harvested our biggest yield to date. Following the warm growing season of 2022, the vines emerged from winter in great health. Good weather during the flowering period led to an abundance of fruit and the team's careful management of the vines throughout the summer, which included a rigorous quality-controlling green harvest, meant that the fruit quality and quantity was very good. Harvest was completed under sunny skies and earlier than in typical years, before the wet weather of autumn arrived. Chardonnay, Pinot Noir and Pinot Meunier grapes show fine expressiveness and are expected to produce some outstanding wines, which will be bottled during the summer of 2024, further adding to our inventory levels for sale in future years.

The English wine market

The English wine market remains highly dynamic and has continued to see significant growth, in terms of supply, demand by UK consumers and demand in international markets. This is an exciting time for English wines, with brands like Gusbourne at the forefront of the creation of a fine wine market and establishing wines from the UK on the global stage.

Data from WineGB, the industry body for the English wine trade, reports plantings have increased by 70% over the last five years, with Chardonnay, Pinot Noir and Pinot Meunier the most significant varietals. Sparkling wines account for approximately 70% of total production and still wines 30%.

Sales of UK wine in the UK market are over nine million bottles, with a growing presence of UK wines in the exports markets. Key exports markets for the industry are Norway, USA, Sweden, Japan and Hong Kong. Gusbourne has a strong presence in all of these markets, with significant further growth potential ahead.

Current trading and outlook

The macro-economic environment remains complex with consumer confidence still affected by inflationary pressures and causing hesitancy in many markets. At the same time, consumer interest in Gusbourne wine and English wine generally continues to grow across the globe. Against this backdrop, we remain confident about Gusbourne's future prospects and expect to deliver another year of good growth across all our distribution channels. Gusbourne has the benefit of increased supply and inventories from the expansion of the land planted in recent years, maturity of the vines and the ongoing expansion of its international presence, with two new markets already opened in 2024. The increased revenue base combined with anticipated improvement in gross margin and cost discipline is expected to see the Group deliver EBITDA breakeven for the current financial year. Longer-term, increases in production from new vineyards are expected to drive further revenue growth and margin improvement through scale.

Jonathan White

Chief Executive

Chief Financial Officer's review

Net revenue and adjusted EBITDA - 5 year summary

Years ended 31 December	2019 £'000	2020 £'000	2021 £'000	2022 £'000	2023 £'000
Net revenue*	1,653	2,109	4,191	6,243	7,052
Cost of sales	(735)	(879)	(1,847)	(2,546)	(2,244)
Gross profit	918	1,230	2,344	3,697	4,808
Sales and marketing expenses	(1,389)	(1,478)	(2,460)	(3,479)	(3,565)
Administration expenses **	(814)	(1,073)	(1,336)	(1,349)	(1,912)
Adjusted EBITDA (loss)/profit***	(1,285)	(1,321)	(1,452)	(1,131)	(669)
Aborted planning and capital expenditure write-off	-	-	-	(132)	-
Fair value movement in biological produce	(172)	(221)	(704)	(239)	(46)
EBITDA****	(1,457)	(1,542)	(2,156)	(1,502)	(715)

Net revenue annual growth %	31.1%	27.6%	98.7%	49.0%	13.0%
Net revenue 5 year CAGR	30.7%	34.8%	45.6%	44.3%	41.1%
Gross profit %	55.5%	58.3%	55.9%	59.2%	68.2%
Sales and marketing %	84%	70%	59%	56%	51%
Administration expenses %	49%	51%	32%	22%	27%
Adjusted EBITDA (loss)/profit %	-78%	-63%	-35%	-18%	-9%

* Net revenue represents Revenue after deducting excise duties

** Excluding depreciation

*** Adjusted EBITDA means profit/(loss)from operations before aborted planning and capital expenditure write-off, fair value movement in biological produce, interest, tax, depreciation and amortisation.

**** EBITDA means profit from operations/(loss from operations) before interest, tax, depreciation and amortisation.

Net revenue by distribution channel - 5 year summary

Years ended 31 December		2019		2020		2021		2022		2023	2023		2022
		£'000		£'000		£'000		£'000		£'000	% Growth		% Growth
Net revenue
Direct to Consumer (DTC)*	299		586		1,016		1,185		1,489			25.7		16.5
UK Trade	934		721		1,997		3,058		3,454			12.9		53.2
UK Wine Sales	1,233		1,307		3,013		4,243		4,943			16.5		40.8
International	292		634		781		1,391		1,494			7.4		78.0
Net wine sales	1,525		1,941		3,795		5,634		6,437			48.5		48.5
Tour and related income (DTC)*	71		90		309		525		525			0.0		69.9
Other Income	57		78		87		84		90			7.5		-3.4
Total net revenue	1,653		2,109		4,191		6,243		7,052			13.0		49.0

Percentages of total net revenue
Direct to Consumer (DTC)	22.4%		32.1%		31.6%		27.4%		28.6%
UK Trade	56.5%		34.2%		47.6%		49.0%		49.0%
International	17.7%		30.1%		18.6%		22.3%		21.2%
Other Income	3.4%		3.7%		2.1%		1.3%		1.3%
Total	100.0%		100.0%		100.0%		100.0%		100.0%

* DTC total net revenue £2,014,000 (2022: £1,710,000), 18% growth versus prior year (2022: 29%)

Net revenue

Net revenue for the year was up by 13% (2022: 49%) to £7.05m (2022: £6.24m, 2021: £4.19m, 2020: £2.11m and 2019: £1.65m), reflecting continued robust sales growth across our three main distribution channels:

• UK Trade sales grew by 13% to £3.45m. UK Trade sales represent 49% (2022: 49%) of net revenue. The Company continues to establish new trade accounts across premium hotels and restaurants and open new business through the fast growing corporate and partnerships channel;

• Direct to consumer net revenue which includes tours and related cellar door operations in Kent grew by 18% to £2.01m DTC represents 29% (2022: 27%) of net revenue for the year. DTC wine sales grew by a 26%, the strong growth was driven by investment in digital marketing and direct wine sales arising from our tour and experience; and

• International sales grew by 7% (2022: 78%) to £1.49m (2022: £1.39m) and represented 21% of total net revenue (2022: 22%).

Gross profit

The gross profit increased by 30% to £4.1m (2022: £3.7m), with gross profit margin on net revenue up to 68.2% (2022: 59.2%), largely due to distribution channel and pricing mix factors. Gross profit margin is one of the main KPI's of the Group which it aims to maintain and enhance, and which derives from a number of key variables:

· The historic cost of wine inventories, based on production costs up to four years prior to sale;

· The sales distribution mix, with DTC generally at higher margins at gross profit level than the other two main channels;

· The product distribution mix with more premium product offerings now being introduced and further enhancing overall gross margins;

· Selected inflationary price adjustments to recover the Group's own increasing costs, where and when appropriate; and

· Direct distribution costs.

These variables are monitored and optimized as part of the Group's forward planning to maintain and enhance its gross profit margins.

Adjusted EBITDA loss

The Group narrowed its adjusted EBITDA operating loss for the year to £0.7m (2022: £1.1m). This was after charging sales and marketing expenses of £3.6m (2022: £3.5m) and administrative expenses of £1.9m (2022: £1.3m).

Administrative expenses have increased by over £0.5m due to inflationary increases and planned discretionary spend. Sales and marketing expenses have remained consistent with the previous year and continue to include key planned elements of discretionary investment spend to support the ongoing brand development and the potential longer-term sales growth of the Group.

Sales and marketing costs as a percentage of net revenue has continued to decline in recent years and represented 51% of net revenue for the year, down from 56% in 2022. It is expected that these costs will continue to decline as a percentage of net revenue over the coming years.

Finance expenses

Finance expenses for the year amounted to £1.6m (2022: £0.5m) and reflect the interest expense on the Group's long-term secured debt from PNC of £1.1m (2022: £0.5m), together with the full amortisation of bank transaction costs, £0.5m (2022 £0.0m), following the notice given to PNC to end the agreement.

Tax

The Group reported a tax credit of £38,000 (2022: £73,000) relating to research and development tax credits. At 31 December 2023, the Group had tax loses available to carry forward of £23.2m (2022: £20.7m).

Earnings per share

The Group reported a basic loss per share of 4.89 pence (2022: 4.17 pence).

Key Performance Indicators

Balance Sheet assets* - 5 year summary

Years ended 31 December	2019	2020	2021	2022	2023
	£'000	£'000	£'000	£'000	£'000

Assets

Freehold land and buildings

6,383

6,263

6,134

7,830

7,937

Right of use assets

2,068

2,022

1,976

1,930

2,587

Vineyards

3,144

3,004

2,858

2,712

2,569

Plant, machinery and other equipment

1,636

1,504

1,375

1,726

1,772

Other receivables

Total non current assets

13,321

12,831

12,375

14,214

14,865

Inventories

7,463

9,325

10,638

12,579

15,546

Trade and other receivables

707

869

1,275

1,291

1,836

Trade and other payables

(752)

(769)

(1,118)

(1,500)

(1,880)

Working capital

7,418

9,425

10,795

12,370

15,502

Total operating assets

20,739

22,256

23,170

26,584

30,367

Cash

1,009

262

3,128

269

Goodwill

1,007

Total assets

22,755

23,525

27,305

27,860

31,445

Balance Sheet liabilities and equity*

Years ended 31 December	2019	2020	2021	2022	2023
	£'000	£'000	£'000	£'000	£'000

Debt

PNC Business Credit (Asset finance facilities)

6,613

9,326

12,373

16,627

Other bank debt

2,058

Deep discount bonds

3,001

5,132

Short term debt

3,379

544

1,500

Lease liabilities

2,123

2,108

2,094

2,078

2,763

Total debt

10,561

14,397

11,420

14,451

20,890

Equity

12,194

9,128

15,885

13,409

10,055

Total liabilities

22,755

23,525

27,305

27,860

31,445

* Excluding trade and other payables

Balance Sheet

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

The total assets employed in the business at 31 December 2023 was £31.4m (2022: £27.9m) represented by the following principle operating assets:

Fixed assets

· 196 hectares of Freehold land and buildings of £7.9m (2022: £7.8m) - with buildings at cost less depreciation

· 93 hectares of mature vineyards of £2.6m (2022: £2.7m) - at cost less depreciation

· Plant, machinery and other equipment of £1.8m (2022: £1.7m) - at cost less depreciation

· Right of use assets (under IFRS 16) of £2.6m (2022: £1.9m)

Inventories

Inventories at 31 December 2023 at the lower of cost and net realisable value amounted to £15.5m (2022: £12.6m). These inventories represent wine in its various stages of production from wine in tank from the last harvest to the finished products which take around four years to produce from the time of harvest. These additional four years reflect the time it takes to transform our high-quality grapes into Gusbourne's premium sparkling wine. An important point to note is that these wine inventories already include the wine (at its various stages of production) to support sales planned for at least the next four years. The anticipated underlying surplus of net realisable value over the cost of these wine inventories, which is not reflected in these accounts, will become an increasingly significant factor of the Group's asset base as these inventories continue to grow.

Cash flow

The Group's operating cash outflow flow for the year was £3.5m (2022: £2.9m) This represented an Adjusted EBITDA loss of £0.7m (2022: £1.1m loss) and net working capital outflows (mostly an increase in wine inventories) of £2.9m (2022: £1.8m).

Capital expenditure was £1.5m for 2023 (2022: £2.5m) and included the additional lease in the right to use asset (£0.8m) purchase of plant and machinery (£0.4m) and building improvements (£0.3m). The capital expenditure was financed by the Group's own cash resources and the working capital was financed by additional drawings from the PNC facility.

Financing and net debt

At 31 December 2023 the Group's total assets of £31.4m (2022: £27.9m) were financed by:

· Shareholder's equity of £10.6m (2022: £13.4m)

· Secured debt from PNC of £16.6m (2022: £12.4m). The PNC facilities are provided on a revolving basis over a minimum period of 5 years to 12 August 2027 and allow flexible drawdown and repayments in line with the Group's working capital requirements. On 15 August 2022 these asset -based lending facilities were extended by an additional £6.0m from the existing £10.5m to £16.5m. The interest rate is at the annual rate of 2.50% per cent over Bank of England Base Rate). The Group gave notice to terminate the agreement in 2023 and therefore the £16.6m creditor is £16.3m debt and £0.3m accelerated loan cost amortisation.

· Short term unsecured debt of £1.5m (2022: £0.0m).

· Lease liabilities under IFRS 16 of £2.7m (2022: £2.1m).

At 31 December 2023, the Group's net debt (PNC facility less Cash, excluding IFRS16 lease liabilities) amounted to £18.1m (2022:£12.1m). In January 2024 the Group subsequently issued a Deep Discount Bond for £20.0m, repaid the PNC facility and the short-term loan of £1.5m.

Katharine Berry

Chief Financial Officer

Consolidated statement of comprehensive income for the year ended 31 December 2023

		Year ended 31 December	Year ended 31 December
		2023	2022
	Note	£'000	£'000
Revenue		7,665	6,858
Excise duties		(613)	(615)
Net revenue		7,052	6,243

Cost of sales		(2,244)	(2,546)

Gross profit		4,808	3,697

Fair value movement in biological produce		(46)	(239)

Administrative expenses		(6,138)	(5,561)

Loss from operations		(1,376)	(2,103)
Finance expenses		(1,627)	(496)

Loss before tax		(3,003)	(2,599)
Tax credit		38	74

Loss and total comprehensive loss for the year attributable to owners of the parent		(2,965)	(2,525)

Loss per share attributable to the ordinary equity holders of the parent:
Basic (pence)	4	(4.89)	(4.17)
Diluted (pence)	4	(4.88)	(4.15)

Consolidated statement of financial position at 31 December 2023

	Note	31 December 2023 £'000	31 December 2022 £'000
Assets
Non-current assets
Intangibles		1,007	1,007
Property, plant and equipment	5	14,865	14,198
Other receivables		-	16
		15,872	15,221
Current assets
Biological Produce	6	-	-
Inventories	7	15,546	12,579
Trade and other receivables		1,836	1,291
Cash and cash equivalents		71	269
		17,453	14,139
Total assets		33,325	29,360

Liabilities
Current liabilities
Trade and other payables		(1,880)	(1,500)
Lease liabilities	9	(251)	(84)
Loans and borrowings	8	(18,127)	-
		(20,258)	(1,584)
Non-current liabilities
Loans and borrowings	8	-	(12,373)
Lease liabilities	9	(2,512)	(1,994)
		(2,512)	(14,367)
Total liabilities		(22,770)	(15,951)

Net assets		10,555	13,409

			31 December		31 December
			2023		2022
	Note	£'000		£'000
Issued capital and reserves attributable to owners of the parent
Share capital	10	12,192		12,191
Share premium		21,190		21,144
Merger reserve		(13)		(13)
Share option reserve		71		7
Retained earnings		(22,885)		(19,920)
Total equity		10,555		13,409

Consolidated statement of cash flows for the year ended 31 December 2023

		31 December		31 December
		2023		2022
	£'000		£'000
Cash flows from operating activities
Loss for the year before tax	(3,003)		(2,599)
Adjustments for:
Depreciation of property, plant and equipment	661		601
Sale of property, plant and equipment	(14)		(28)
Finance expense	1,627		496
Fair value movement in biological produce	46		239
Equity share options issued	64		7
(Decrease)/Increase in trade and other receivables	(491)		74
Increase in inventories	(2,742)		(2,049)
Increase in trade and other payables	380		385
Cash outflow from operations	(3,472)		(2,874)

Investing activities
Purchases of property, plant and equipment, excluding vineyard establishment	(1,485)		(2,502)
Sale of property, plant and equipment	16		28
Net cash used in investing activities	(1,469)		(2,474)

Financing activities
Revolving facility repayments	(4,829)		(4,547)
Revolving facility drawdowns	8,570		7,620
Financing Agreements entered into	792		-
Loan issue costs	-		(66)
Repayment of lease liabilities	(223)		(101)
Issue of short term loan facility	1,500		-
Interest paid	(1,114)		(456)
Issue of ordinary shares	52		46
Share issue expense	(5)		(7)
Net cash from financing activities	4,743		2,489

Net increase/(decrease) in cash and cash equivalents	(198)		(2,859)

Cash and cash equivalents at the beginning of the year	269		3,128

Cash and cash equivalents at the end of the year	71		269

Consolidated statement of changes in equity for the year ended 31 December 2023


				Share		Total attributable
	Share	Share	Merger	option	Retained	to equity
	capital	premium	reserve	reserve	earnings	holders of parent
	£'000	£'000	£'000	£'000	£'000	£'000
1 January 2022	12,190	21,103	(13)	-	(17,395)	15,885
Comprehensive loss for the year	-	-	-	-	(2,525)	(2,525)
Share issue	1	48	-	-	-	49
Share issue expenses	-	(7)	-	-	-	(7)
Equity share options issued	-	-	-	7	-	7
31 December 2022	12,191	21,144	(13)	7	(19,920)	13,409

1 January 2023	12,191	21,144	(13)	7	(19,920)	13,409
Comprehensive loss for the year	-	-	-	-	(2,965)	(2,965)
Share issue	1	51	-	-	-	52
Share issue expenses	-	(5)	-	-	-	(5)
Equity share options issued	-	-	-	64	-	64
31 December 2023	12,192	21,190	(13)	71	(22,885)	10,555

1 Accounting policies

Gusbourne PLC (the "Company") is a company incorporated and domiciled in the United Kingdom and quoted on the London Stock Exchange's AIM market. The consolidated financial statements of the Group for the year ended 31 December 2023 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 UK adopted international accounting standards. The Company's financial statements are presented on pages 82 to 88.

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

In coming to their conclusion the Directors have considered the Group's loss and cash flow based on the Group's approved 3 year plans for the period of at least 12 months from the date these financial statements were approved.

The Group's major shareholder proposed in 2023, to replace the existing PNC borrowing facility with a new and enlarged facility on very similar terms and conditions to the PNC borrowing facility. The Group gave notice to close down the PNC facility in December 2023. In January 2024 the Group issued a Deep Discount Bond for £20.0m, repaid the PNC facility and the short-term loan of £1.5m.

The Directors have considered a scenario in which the only cash available is from the new agreed facility and planned but not yet committed capital expenditure is deferred. As at 31 December 2023 £18.0m was available to the Group, of which £0.3m was unutilised; represented by cash in hand and at bank of £0.1m and undrawn funds from the Group's asset-based lending facility of £0.2m. In January 2024 the PNC debt and short-term loan were replaced with a Deep Discount Bond for £20.0m. Under this scenario the available lending facilities and cash held at bank, cover working capital requirements without the need for an increased lending facility.

In coming to their going concern conclusion, and in the light of the uncertainty due to current economic conditions, the Directors have also run various downside "stress test" scenarios. These scenarios assess the impact of potential worsening economic conditions on the Group over the next 12 months and in particular a reduction of 10% of gross sales from that included within the Group 3-year plan. These stress tests indicate the Group can withstand this ongoing adverse impact on revenues and cashflow for at least the next 12 months. Under this scenario the directors have modelled the impact of certain additional cost mitigation actions, in relation to variable and discretionary costs. The directors believe that sufficient cost savings could be achieved from reducing sales and marketing and administrative costs; no expansion of winery and vineyard costs and reducing capital expenditure to enable the Group to continue as a going concern for the next 12 months. Under this scenario, the Group could continue to operate within the available lending facilities and cash held at bank without the need for an increased lending facility.

IFRS 16 Leases

The Group has entered into a number of long term leases in respect of land and buildings in West Sussex on which the Group has planted vineyards. The leases have a remaining life of 41 and 46 years. In 2023 the Group entered into a long term lease agreement on a storage building, the lease has a remaining life of 5 years.

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

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

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the leases. When the Group revises its estimate of the term of any lease (because, for example, it reassesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value

of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.

Basis of consolidation

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

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

Revenue

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

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

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

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

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

Financial assets

Debt instruments at amortised cost

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

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

For trade receivables, which are reported net, such expected credit losses are recognised within administrative expenses in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Cash and cash equivalents

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

Financial liabilities

Borrowings

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

Warrants

Warrants issued to shareholders as part of an equity fund raise are accounted for as equity instruments. See note 11 for details.

Trade and other payables

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

Share capital

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

Deferred taxation

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

the initial recognition of goodwill;

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

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

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

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

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

the same taxable group company; or

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

Intangible Assets

Goodwill

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

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

Brand

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

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

Property, plant and equipment

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

Freehold land is not depreciated.

Vineyard establishment represents the expenditure incurred to plant and maintain new vineyards until the vines reach productivity. Once the vineyards are productive the accumulated cost is transferred to mature vineyards and depreciated over the expected useful economic life of the vineyard. Vineyard establishment is not depreciated.

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

Freehold buildings

Plant, machinery and motor vehicles

Computer equipment

Mature vineyards

4% per annum straight line

5-33% 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

Agricultural produce is accounted for under IAS 41 Agriculture. Harvesting of the grape crop is ordinarily carried out in October. The grapes are therefore measured at fair value less costs to sell in accordance with IAS 41 with any fair value gain or loss shown in the consolidated statement of comprehensive income. The fair value of grapes is determined by reference to estimated market prices at the time of harvest. Generally there is no readily obtainable market price for the Group's grapes because they are not sold on the open market, therefore management set the values based on their experience and knowledge of the sector including past purchase transactions. This measurement of fair value less costs to sell is the deemed cost of the grapes that is transferred into inventory upon harvest.

Under IAS 41, the agricultural produce is also valued at the end of each reporting period, with any fair value gain or loss shown in the consolidated statement of comprehensive income. Bearer plants are accounted for under IAS 16 and are held at cost.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs, including depreciation on right of use assets and interest on lease liabilities, incurred in bringing the inventories to their present location and condition. Grapes grown in the Group's vineyards are included in inventory at fair value less costs to sell at the point of harvest which is the deemed cost for the grapes.

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

Leased assets

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

Lease liabilities are measured at the present value of the unpaid contractual payments over the expected lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used. On initial recognition, the carrying value of the lease liability also includes amounts expected to be payable under any residual value guarantee; the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to exercise that option; and any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

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

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

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

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

Exceptional items

Exceptional items are those which, by virtue of their nature, size or incidence, either individually or in aggregate, need to be disclosed separately to allow full understanding of the underlying performance of the Group.

Share based payments

The Group has issued share options to certain employees, in return for which the Group receives services from employees. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense, the Group recognise the options at their fair value at the grant date to establish the relevant fair values for PSP & CSOP options.

The total amount to be expensed is determined by reference to the fair value of the options granted including any market performance conditions (for example the Group's share price) but excluding the impact of any service or non-market performance vesting conditions (for example the requirement of the grantee to remain an employee of the Group).

Non-market vesting conditions are included in the assumptions regarding the number of options that are expected to vest. The total expense is recognised over the vesting period. At the end of each period the Group revises its estimates of the number of options expected to vest based on the non-market vesting conditions. It recognises the impact of any revision in the income statement with a corresponding adjustment to equity.

Changes to International Financial Reporting Standards

The following standards have been amended and adoption is mandatory for periods beginning on or after 1 January 2023, with early adoption permitted, none of these standards would materially affect the Annual Report and Accounts: IFRS 17 Insurance Contracts; Amendments to IFRS 17 - Initial Application of IFRS 17 & IFRS 9 - Comparative Information; Amendments to IAS 1 and IFRS Practice Statement 2 - Making Materiality Judgements - Disclosure of Accounting Policies; Amendments to IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates; Amendments to IAS 12 - Income Taxes - Deferred Tax related to Assets and Liabilities arising from a Single Transaction; Amendments to IAS 12 - Income Taxes - International Tax Reform - Pillar Two Model Rules.

2 Critical accounting policies

Estimates and judgements

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

There were no areas of judgement in the year. Where estimates and assumptions have been used these are outlined below.

Fair value of biological produce

The Group's biological produce is measured at fair value less costs to sell at the point of harvest. The fair value of grapes is determined by reference to estimated market prices at the time of harvest. Generally there is no readily obtainable market price for the Group's grapes because they are not sold on the open market, therefore management set the values based on their experience and knowledge of the sector including past purchase transactions. Refer to note 6 which provides information on sensitivity analysis around this.

Impairment reviews

The Group is required to test annually whether goodwill and brand names have suffered any impairment. The recoverable amount is determined based on fair value less costs of disposal calculations, which requires the estimation of the value and timing of future cash flows and the determination of a discount rate to calculate the present value of the cash flows. Management does not believe that any reasonably possible change in a key assumption would result in impairment.

Fair value measurement

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

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

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

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

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

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

· Biological Produce (Note 6)

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

3 Financial instruments - risk management

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

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

Principal financial instruments

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

Bank loans

Trade receivables

Cash and cash equivalents

Finance leases

Trade and other payables

In addition, at the Company level:

Intercompany loans.

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

Liquidity risk

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

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

The following table sets out the contractual maturities (representing undiscounted contractual cash flows) of financial liabilities:

At 31 December 2022	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
Trade and other payables	1,146	354	-	-	-	1,500
Loans and borrowings	201	603	804	14,317	-	15,925
Lease liabilities	25	74	99	298	3,887	4,383
Total	1,372	1,031	903	14,615	3,887	22,808

At 31 December 2023	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
Trade and other payables	1,413	467	-	-	-	1,880
Loans and borrowings	16,627	1,500	-	-	-	18,127
Lease liabilities	71	214	285	733	3,787	5,090
Total	18,111	2,181	285	733	3,787	25,097

Capital risk management

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

Credit risk

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

Credit risk also arises from credit exposure to trade customers included in trade and other receivables.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables. The expected loss rates are based on the Group's historical credit losses experienced over the three-year period to the period end. Trade receivable balances are monitored on an ongoing basis to ensure that the Group's bad debts are kept to a minimum. The maximum trade credit risk exposure at 31 December 2023 in respect of trade receivables is £1,167,000 (2022: £957,000) and due to the prompt payment cycle of these trade receivables, the expected credit loss is negligible at £13,000 (2022: £8,000).

Interest rate risk

The Group's main debt is exposed to interest rate fluctuations. The Group considers that the risk is not significant in the context of its business plans. The Group moved to a fixed interest rate with the issue of the Deep Discount Bond in January 2024.

4 Loss per share

Basic earnings per ordinary share are based on a loss of £2,965,000 (December 2022: £2,525,000) and ordinary shares 60,637,465(December 2022: 60,595,919) of 1 pence each, being the weighted average number of shares in issue during the year.

	Loss £'000			Weighted average number of shares		Loss per Ordinary share pence
Year ended 31 December 2023		(2,965)	60,637,465		(4.89)
Year ended 31 December 2022		(2,525)	60,595,919		(4.17)

Diluted earnings per share are based on a loss of £2,965,000 and ordinary shares of 60,637,465 and no dilutive warrant option.

	Loss £'000	Diluted number of shares		Loss per Ordinary share pence
Year ended 31 December 2023	(2,965)	60,637,465	(4.89)
Year ended 31 December 2022	(2,525)	60,595,919	(4.17)

5 Property, plant and equipment

	Freehold Land and Buildings £'000	Plant, machinery and motor vehicles £'000	Right of use asset £'000	Mature Vineyards £'000	Computer equipment £'000	Total £'000
Cost
At 1 January 2022	6,896	3,611	2,114	3,637	118	16,376
Additions	1,824	645	-	-	33	2,502
Disposals	-	(65)	-	-	-	(65)
At 31 December 2022	8,720	4,191	2,114	3,637	151	18,813

At 1 January 2023	8,720	4,191	2,114	3,637	151	18,813
Additions	249	370	812	5	49	1,485
Disposals	-	(26)	-	-	-	(28)
At 31 December 2023	8,969	4,535	2,926	3,642	198	20,270

	Freehold land and buildings £'000		Plant, Machinery and motor Vehicles £'000	Right of use asset £'000	Mature vineyards £'000	Computer equipment £'000	Total £'000
Accumulated depreciation

At 1 January 2022	762	2,269		138	779	85	4,033
Depreciation charge for the year	128	311		46	146	16	647
Depreciation on disposals	-	(65)		-	-	-	(65)
At 31 December 202	890	2,515		184	925	101	4,615

At 1 January 2023	890	2,515		184	925	101	4,615
Depreciation charge for the year	142	353		155	148	18	816
Depreciation on disposals	-	(26)		-	-	-	(26)
At 31 December 2023	1,032	2,842		339	1,073	119	5,405

Net book value
At 31 December 2022	7,830	1,676		1,930	2,712	50	14,198
At 31 December 2023	7,937	1,693		2,587	2,569	79	14,865

Right of use assets comprise land leases on which vines have been planted and property leases from which vineyard operations are carried out. These assets have been created under IFRS 16 - Leases.

Depreciation on right of use assets is included in the cost of inventory, therefore £155,000 (2022: £46,000) transferred into stock in the year.

6 Biological produce

The fair value of biological produce was:

	December 2023 £'000	December 2022 £'000
At 1 January	-	-
Crop growing costs	1,934	1,830
Fair value of grapes harvested and transferred to inventory	(1,888)	(1,591)
Fair value movement in biological produce	(46)	(239)
At 31 December	-	-

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 2023 harvest is £2,800 per tonne (2022: £3,000 per tonne).

A 10% increase in the estimated market price of grapes to £3,080 per tonne would result in an increase of £199,000 (2022: £159,000) in the fair value of the grapes harvested in the year. A 10% decrease in the estimated market price of grapes to £2,520 per tonne would result in a decrease of £199,000 (2022: £159,000) in the fair value of the grapes harvested in the year.

A fair value loss of £46,000 (2022: £239,000 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.

7 Inventories

	December 2023 £'000	December 2022 £'000
Finished goods	925	1,249
Work in progress	14,621	11,330
Total inventories	15,546	12,579

During the year £1,678,000 (December 2022: £1,858,000) was transferred to cost of sales.

8 Loans and borrowings

	December 2023 £'000	December 2022 £'000

Current liabilities
Bank loans	16,627	-
Short-term loans	1,500	-
Total non current loans and borrowings	18,127	-
Non-current liabilities
Bank loans	-	12,541
Unamortised bank transaction costs	-	(168)
Total non current loans and borrowings	-	12,373

The bank loan of £16,627,000 with PNC Business Credit shown above includes early repayment fees and associated costs of £336,000.

In August 2022 the Group entered into an amended and restated agreement with PNC Financial Services UK Limited with a total £16.5 million asset-based lending facilities. These PNC facilities have been made available to the Group for a minimum period of 5 years to 12 August 2027. The interest rate is at the annual rate of 2.50% (2022: 2.50%) over Bank of England Base Rate. In December 2023 the Group gave notice to PNC Financial Services UK Limited to repay the balance in January 2024. The PNC facilities are secured by way of first priority charges over the Group's inventory, receivables and freehold property as well as an all assets debenture.

The Group decided to replace the existing PNC borrowing facility with a new and enlarged facility on very similar terms and conditions to the PNC borrowing facility. The Group gave notice to close down the PNC facility in December 2023.

In November 2023 the Group entered into a short-term unsecured loan facility of £1.5m with Moongate Holdings Group Limited. The term of the loan was one year and the interest rate is at the annual rate of 2.50% over Bank of England Base Rate.

In January 2024 the Group subsequently issued a Deep Discount Bond for £20.0m, repaid the PNC facility and the short-term loan of £1.5m.

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

	December 2023 £'000	December 2022 £'000
Bank and other loans:
Within 1 year	18,127	-
1-2 years	-	-
2-5 years	-	12,373

9 Lease liability

During the period the Group accounted for seven (2022: six) leases under IFRS 16. The lease contracts provide for payments to increase each year by inflation or at a fixed rate and on others to be reset periodically to market rental rates. The leases also have provisions for early termination. The weighted average Incremental Borrowing Rate used to calculate the lease liability was 4.25% and for new 2023 lease 6.68%.

	Land & Buildings £'000
Net carrying value - 1 January 2023	2,078
	792
Interest	116
Payments	(223)
Net carrying value - 31 December 2023	2,763

	December 2023 £'000	December 2022 £'000
The lease payments under long term leases liabilities fall due as follows:
Current lease liabilities	251	84
Non current lease liabilities	2,512	1,994
Total liabilities	2,763	2,078

During the period an interest charge of £116,000 (2022: £85,000) arose on the lease liability in respect of land and property leases (2022: only land leases). This interest cost has been added to growing crop costs and wine stocks on the basis that the lease liability solely relates to the production of grapes and wine.

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

· The length of the lease term;

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

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

At both 31 December 2023 and 2022 the carrying amounts of lease liabilities are not reduced by the amount of payments that would be avoided from exercising break clauses because on both dates it was considered reasonably certain that the Group would not exercise its right to exercise any right to break the lease.

10 Share capital

	Deferred shares of 49p each	Ordinary shares of 1p each
	Number	Number	£'000
Issued and fully paid
At 1 January 2022	23,639,762	60,731,705	12,190
Issued in the year	-	42,282	1
At 31 December 2022	23,639,762	60,773,987	12,191
Issued in the year	-	71,306	1
At 31 December 2023	23,639,762	60,845,293	12,192

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

On 16 January 2023 the Company issued 2,174 new ordinary shares of 1p each pursuant to an exercise of Warrants. All Warrants were exercised at 75p per share.

On 1 September 2023 the Company issued 7,838 new ordinary shares of 1p each pursuant to an exercise of Warrants. All Warrants were exercised at 75p per share.

On 3 November 2023 the Company issued 61,294 new ordinary shares of 1p each pursuant to an exercise of Warrants. All Warrants were exercised at 75p per share.

Unexercised Warrants at 31 December 2023 amounted to of 3,888,671 (2022: 3,959,977) Ordinary Shares of 1 pence each. The warrants have a final exercise date of 16 December 2024 at 75p per Ordinary Share. The warrants are accounted for as a derivative financial liability measured on inception at fair value through the profit or loss. On inception, the fair value of the warrants was deemed to be £nil and thus no fair value was recognised.

11 Related party transactions

Deacon Street Partners Limited is considered a related party by virtue of the fact that Lord Ashcroft KCMG PC, the Company's ultimate controlling party, is also the ultimate controlling party of Deacon Street Partners Limited. During the year Deacon Street Partners Limited charged the Company £35,000 (December 2022 - £70,000) in relation to management services. There was £40,000 due to Deacon Street Partners Limited as at 31 December 2023 (December 2022 - £44,000).

Jaywing PLC is considered a related party by virtue of the fact that Ian Robinson, a director of Gusbourne PLC is also a Non-Executive Director of Jaywing PLC. During the year Jaywing PLC charged the Company £103,000 (December 2022: £108,000) in relation to marketing services and £359,000 in relation to third party digital advertising (December 2022: £352,000). There was £76,000 due to Jaywing PLC as at 31 December 2023 (December 2022: £36,000).

On 18 June 2018, the company lent £50,000 to a director as an interest free loan, repayable by instalments from July 2019. The loan was repaid in September 2023. The balance due from the director as at 31 December 2023 was £nil (December 2022 - £22,000).

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

Warrants exercisable at 75 pence each
Name	Held as at 31 December 2023 Number	Held as at31 December 2022 Number
Lord Ashcroft KCMG PC*	2,660,158	2,660,158
Andrew Weeber	179,566	179,566
Paul Bentham**	121,083	121,083
Ian Robinson	15,801	35,801
Jim Ormonde	-	19,788
Mike Paul	-	10,607
Lord Arbuthnot PC	-	7,345
Matthew Clapp	4,816	4,816
Jon Pollard	3,171	3,171
Charlie Holland	2,770	2,770
	2,987,365	3,045,105

* via Belize Finance Limited, a related party of Lord Ashcroft KCMG PC

**via Franove Holdings Limited, a related party of Paul Bentham

Directors' remuneration was as follows:

	Year ended 31 December	Year ended 31 December
	2023	2022
	£'000	£'000
The total emoluments of all Directors during the year was:
Emoluments (including benefits)	451	312
Contributions to defined contribution pension plans	17	13
Total	468	325

	Year ended 31 December	Year ended 31 December
	2023 £'000	2022 £'000
Total emoluments for all directors excluding
pension contributions:
J Ormonde	61	59
A Weeber	-	-
M Paul	44	48
K Berry	132	-
J Pollard	86	77
C Holland	128	116
Lord Arbuthnot PC	-	-
M Clapp	-	12
I Robinson	-	-
Total	451	312

	Year ended 31 December 2023 £'000	Year ended 31 December 2022 £'000
Pension contributions
K Berry	6	-
J Pollard	6	6
C Holland	5	7
Total	17	13

The emoluments of the highest paid Director
during the year were:	138	123

The total emoluments for K Berry, J Pollard and C Holland include benefits to the value of £nil (2022: £nil), £1,000 (2022: £1,000) and £2,000 (2022: £1,000) respectively.

12 Post balance sheet events

On 19 January 2024, the Group entered into an agreement with a company associated with Lord Ashcroft (Moongate Holdings Group Limited) for the issue of a new £20.0m long-term secured deep discount bond ("DDB") to support the Company's working capital and ongoing growth.

The subscription price of the DDB is £20m. The subscription proceeds of £20.0m was used to repay the existing PNC Facility amounting to £16.3m, repay the short-term unsecured Loan of £1.5m, related fees and expenses of £0.6m and the remaining proceeds will be used for working capital and to support the ongoing growth strategy of the Company.

The DDB was issued at a discount of 7.75% per annum on quarterly rests. The nominal amount is £26.3m which is payable on the final redemption date of 12 August 2027. The DDB is secured over land, properties and stock, with a full fixed and floating security over the assets of both the Company and Gusbourne Estate Limited.

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