RNS Number:4897E
Cosentino Signature Wines plc
26 September 2007
26 September 2007
Cosentino Signature Wines plc ("Cosentino", "the Company" or "the Group")
Interim results for the half year ended 30 June 2007
Cosentino Signature Wines plc, a luxury and ultra-premium wine brands producer
with operations based in the Napa Valley and Lodi regions of Northern
California, announces its Interim Results for the six months to 30 June 2007.
Highlights
Operational
* Key management back in place following the re-appointment of Larry
Soldinger as Executive Chairman and CEO and the resignations of Keith Smith,
Neville Calvert and Michael Forman from the Board. Since the end of the
period under review, Ben Soldinger and Christopher Crosthwaite were
appointed as Non-Executive Directors alongside Gregory Deman and Hal Wolken,
newly appointed Non-Executive Directors during the period.
* Strengthening of the Balance Sheet with the successful refinancing of the
Company in April 2007 and then the sale and leaseback of property following
the period end, raising US $20.5m
* Successful turnaround of operating business:
* Record overall six month turnover performance
* Record performance from Retail Division and record membership levels at
the Wine Club
* Record first half performance from the Wholesale Division with
relationships with key distributors stabilised and strengthened
Financial
* Turnover increased 62% to US$5,254,488 (2006: US$3,245,659)
* EBITDA increased 788% to US$1,915,497 (2006: US$215,596)
* EBITDA margins of 36.45% (2006: 6.64%)
* EBIT increased to US$1,341,899 from a loss in 2006 of US$(100,208)
* Loss before tax reduced by 77% to US$264,593 (2006: US$1,127,357)
* Loss per share cut by 88% to US$0.01 (2006: US$0.08)
Larry Soldinger, Chairman of Cosentino Signature Wines plc said:
"We are very pleased to be able to report our record Interim Results for the
first half of 2007. This has been a period of stabilisation, return to growth
and the re-establishing and strengthening of our relationships throughout the
industry.
"The period has seen a phenomenally rapid turnaround of the business. Our
pre-IPO philosophies are firmly back in place and I have re-assumed my former
roles of Executive Chairman and CEO and a President of US Operations as well as
a Chief Operating Officer have been appointed. Additionally, our balance sheet
has been greatly strengthened and the operating business is once again
performing at record levels. We look to the future with confidence."
For further information contact:
Larry Soldinger, Chairman On day 020 7831 3113,
thereafter +1 847 726 8100
Jonathon Brill/ Billy Clegg/ 020 7831 3113
Edward Westropp, Financial Dynamics
Jonathan Wright 020 7107 8000
Seymour Pierce
Chairman's statement
I am very pleased to be able to report our record Interim Results for the first
half of 2007. This has been a period of stabilisation, return to growth and the
re-establishing and strengthening of our relationships throughout the industry.
The market
Demand for wine in the US continues to exhibit strong growth. This is
particularly the case in our key target market segments (greater than US$14 a
bottle). The growth of our Wine Club and Retail business points to this
specifically.
Management
In February 2007, as a condition to the re-financing package referenced below
and as a requirement of our senior and senior subordinated lenders, Keith Smith,
then CEO and Executive Chairman, and Michael Forman, Non-Executive Director,
resigned from the Board. On that date I re-assumed my former roles of Executive
Chairman and CEO and new Non-Executive Board members, Hal Wolken and Greg Deman,
were also appointed.
Following the period end, on 29 August 2007, the Board appointed two further
Non-Executive Directors to the Company; Christopher Crosthwaite and Ben
Soldinger. These appointments are in line with our strategy and will further
strengthen the management of Cosentino.
One key operational appointment was also made during the period with the
appointment of a President for the US operations. Following the period end, we
recently appointed a new COO for the US operations. Both positions will report
directly to me.
Refinancing
In April 2007 the Company announced a refinancing package which comprised a two
year extension and a US$2 million increase in credit of our Secured Senior Term
Loan. Furthermore, the Company also agreed a two year extension of our US$5
million Senior Subordinated Loan. The refinancing package was then enhanced in
June by the issuance of 3,412,500 new Preference Shares, together with B
Warrants to subscribe for 3,248,800 new Ordinary Shares, through cash
subscriptions and the conversion of certain loans. Following an EGM, relevant
resolutions were passed and the refinancing completed, putting the Company back
into a healthy financial position and allowing us to drive growth in the future.
Following the end of the period in August 2007, a sale and leaseback programme
was announced in respect of certain of the Company's principal winery estates
and operating assets, which reduced Group borrowings by some US$20 million. We
also announced at that time that we had secured a new line of credit at reduced
interest rates which also afforded the Company an additional US$5 million of
unused borrowing availability. The combined savings in annual net interest and
rental cost will result in an annual savings of US$310,000 (equivalent to a
saving of approximately 15 per cent.).
This refinancing programme further strengthened Cosentino's balance sheet,
reduced carrying costs and secured a strong financial platform from which the
future growth and prosperity of the business can flourish.
Retail Division
The first six months of 2007 saw a record period for the Retail Division in what
is traditionally a second half weighted market. The Division saw a 24% year on
year sales increase and the gross margin levels were maintained.
These record figures were driven by our increasing membership in our wine club
along with strong sales at our tasting room in the Napa Valley, which also saw
its capacity increase during the period with the addition of our Signature VIP
and private Wine Club members' tasting room addition.
The Wine Club membership also continues to increase, bringing the total
membership to a record figure of 5,920 members at the end of the period and in
excess of 6,250 at the time of this announcement.
Wholesale Division
Following an unsatisfactory period of un-coordinated relationships between the
Company's previous management and our key distributors, the first half of 2007
saw those relationships stabilised and strengthened as the result of the
confidence brought on by the return of pre IPO management. With the
relationships with key distributors back in place and available inventory on
hand, the first six months of 2007 saw record results for the period.
Financials
Turnover for the period was US$5.2 million, generating earnings before interest,
tax, depreciation and amortisation of US$1.9 million, loss before tax reduced to
US$264,593 and loss per share reduced to US$0.01. Net assets at the period end
were US$30.5 million and there was a net cash inflow from operating activities
and before movement in working capital of US$0.3 million.
Outlook
Since the period end, the operating business has continued to improve with
margins being maintained. A number of important strategic events have also taken
place, including the refinancing, sale and leaseback programme and the
strengthening of the Board. This year is set to produce another excellent
quality harvest in Napa Valley and the Central Valley and we have inventories
available for H2 distribution.
All of this means that with our original management, as enhanced by the recent
operational appointments, and our key growth drivers back in place, we look to
the future with confidence.
Larry J Soldinger
Chairman and CEO
CONSOLIDATED INCOME STATEMENTS
Six months ended Six months ended
30 June 2007 30 June 2006
US$ US$
Continuing operations
Revenue
Distributors 3,325,998 1,684,869
Retail 1,928,490 1,560,790
5,254,488 3,245,659
Cost of sales (1,298,294) (816,169)
Gross profit 3,956,194 2,429,490
Operating expenses (2,619,716) (2,529,698)
Operating profit/(loss) for the period 1,336,478 (100,208)
Other income 5,412 5,777
Finance costs (1,606,483) (1,032,926)
Loss before tax (264,593) (1,127,357)
Income tax income/(expense) 117,463 (3,000)
Loss for the period (147,130) (1,130,357)
Earnings per share
Number of shares outstanding, basic 22,470,864 13,350,864
Number of shares outstanding, fully 23,178,838 13,812,028
diluted
Loss per share, basic and fully diluted (0.01) (0.08)
CONSOLIDATED BALANCE SHEETS
Note 30 June 2007 31 December 2006 30 June 2006
US$ US$ US$
ASSETS
Non-current assets
Property plant and equipment 20,156,636 38,880,218 32,624,124
Goodwill 3 5,733,541 5,733,541 18,246,648
Deferred tax assets 4 6,787,990 6,681,990 4,294,594
Other assets 215,462 310,618 22,846
Total non-current assets 32,893,629 51,606,367 55,188,212
Non-current assets held for sale 5 18,740,815 - -
Current assets
Inventories 9,797,335 9,454,879 6,397,579
Trade and other receivables 2,035,682 638,037 1,515,495
Cash and cash equivalents 199,107 85,177 1,208,352
Total current assets 12,032,124 10,178,093 9,121,426
Total assets 63,666,568 61,784,460 64,309,638
EQUITY AND LIABILITIES
Equity
Share capital 387,220 387,220 387,220
Preference share capital 6 68,561 - -
Share premium 46,073,429 43,268,657 43,270,813
Retained earnings (16,041,438) (15,894,308) (908,416)
Total equity 30,487,772 27,761,569 42,749,617
Non-current liabilities
Borrowings 25,000,000 23,000,000 -
Obligations under finance leases 2,672,996 3,103,399 1,234,648
Loan notes 7 587,500 750,000 -
Total non-current liabilities 28,260,496 26,853,399 1,234,648
Current liabilities
Obligations under finance leases 1,072,397 915,034 581,687
Trade and other payables 3,845,903 6,254,458 2,743,686
Other loans - - 17,000,000
Total current liabilities 4,918,300 7,169,492 20,325,373
Total liabilities 33,178,796 34,022,891 21,560,021
Total liabilities and equity 63,666,568 61,784,460 64,309,638
STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
Share Preference Share Retained Total
Capital Share Premium Earnings US$
US$ capital US$ US$
US$
Balance at 24 November 2005 - - - - -
Proceeds from issuance of 387,220 - 47,862,936 - 48,250,156
ordinary shares
Costs associated with issuance - - (4,594,279) - (4,594,279)
of share capital
Loss for period - - - (15,894,308) (15,894,308)
Balance at 31 December 2006 387,220 - 43,268,657 (15,894,308) 27,761,569
Proceeds from issuance of - 4,719 230,161 - 234,880
preference shares
Conversion of debt to - 63,842 3,113,778 - 3,177,620
preference shares
Costs associated with issuance - - (539,167) - (539,167)
of preference shares
Loss for the period - - - (147,130) (147,130)
Balance at 30 June 2007 387,220 68,561 46,073,429 (16,041,438) 30,487,772
STATEMENTS OF CONSOLIDATED CASH FLOWS
Note Six months Six months
ended ended
30 June 2007 30 June 2006
US$ US$
Cash flows from operating activities
Loss for the year (147,130) (1,130,357)
Income tax profit recognised in profit or loss (106,000) -
Depreciation 573,580 315,804
Operating cash flows before movements in working capital 320,450 (814,553)
Decrease/(increase) in receivables (1,397,646) 297,859
Decrease/(increase) in inventories (342,456) (1,604,301)
Increase/(decrease) in payables (2,408,554) (1,359,976)
Net cash used in operating activities (3,828,206) (3,480,971)
Investing activities
Investment in intangibles - (291,422)
Purchases of property plant and equipment (495,657) (2,746,817)
Net cash used in investing activities (495,657) (3,038,239)
Financing activities
Proceeds from issuance of preferred shares 234,880 -
Costs related to issuance of share capital and preference (539,167) (312,633)
shares
Proceeds from new loans raised 2,000,000 6,269,770
Proceeds from issuance of convertible notes 7 3,250,000 -
Repayment of borrowings (507,920) -
Net cash provided by financing activities 4,437,793 5,957,137
Net increase/(decrease) in cash and cash equivalents 113,930 (562,073)
Cash and cash equivalents at beginning of period 85,177 1,770,425
Cash and cash equivalents at end of period 199,107 1,208,352
COSENTINO SIGNATURE WINES plc
NOTES TO THE FINANCIAL INFORMATION
1 Accounting policies
These interim financial statements for the six month ended 30 June 2007 have
been prepared on the basis of the accounting policies set out in the year ended
31 December 2006 financial statements of Cosentino Signature Wines plc.
2 Financial information
The financial information above does not constitute statutory accounts within
the meaning of Section 240 of the Companies Act 1985. The interim financial
information has not been audited by the Company's auditors. The results for the
year ended 31 December 2006 as shown in this report do not constitute statutory
accounts but are an abridged version of the company's 2006 accounts which have
been filed with the Registrar of Companies. The accounts to 31 December 2006 did
not contain any statement under section 237 (2) or (3) of the Companies Act 1985
and the auditors' report was unqualified.
3 Goodwill
During the interim and subsequent period, no events have come to the attention
of management that would indicate a change in Goodwill.
4 Deferred tax
The Company's underlying trading subsidiaries are subject to US Federal and
State corporate income tax. As inventory is sold, under current US tax
legislation, the Company is expected to obtain a deduction for tax purposes of
the differences between the tax value of the inventory and its book value. A
deferred tax asset at current US tax rates of US$6,787,990 (2006: US$4,294,594)
has been recognized in respect of this deduction as well as the result of net
operating losses through 30 June 2007.
5 Non-current assets held for sale
Due to management's subsequent sale of property, land and equipment as a result
of a sale and leaseback transaction to a third party on 15 August, 2007, the
assets that were included in the transaction have been classified as non-current
assets held for sale in accordance with IFRS 5. Consequently, the non-current
assets held for sale are presented separately in the balance sheet and measured
at the lower of carrying amount and fair value less cost to sell. For details of
the sale and leaseback transaction please see note 8 "Post balance sheet
events".
6 Preference shares, warrants and options
At 30 June 2007, 65,268 (2006:561,164) options were outstanding under the
Cosentino Signature Wines plc 2005 Equity Compensation Plan with an exercise
price of #1.25. Of these options, 27,972 (2006:0) were vested at the end of the
interim period.
During the period no options have become exercisable due to the conditions
attached to the options. No charge has been made to the profit and loss account
for any options granted.
On 30 March 2007, the Company by resolution of the Board of Directors,
authorized the issue of A Warrants to subscribe for 1,182,677 ordinary shares in
the capital of the Company and representing 5 per cent of the fully diluted
equity share capital. These warrants were issued to the Company's senior lenders
as part of a refinance of existing long term and new borrowings on 30 March
2007. Each A Warrant entitles the holder to subscribe for one
Ordinary Share at a subscription price of 24.75pence per share, exercisable on
or before 30 March 2012.
On 05 June 2007, the Company by resolution of the Board of Directors, authorized
the issue of up to 4,000,000 preference shares, 3,248,800 B Warrants
representing 12 per cent of the fully diluted equity share capital and an
additional 170,989 of A Warrants.
On June 29, 2007, 3,412,500 preference shares were issued along with the above
mentioned warrants which consisted of 234,880 shares issued in respect of cash
subscriptions and 3,177,620 shares issued through debt conversions. Each
preference share accrues a 10% annual cumulative dividend and is redeemable at
29 June 2012 at US$1.00 per preference share. Each B Warrant entitles the holder
to subscribe for one Ordinary Share at a subscription price of 24.75pence per
share, exercisable on or before 29 June 2012.
7 Loan notes
In January 2007 an entity controlled by a former non-executive director of the
Company advanced US$250,000 to the company on a long term basis and subordinate
to existing and future senior and senior subordinated debt. A convertible
subordinated promissory note for US$62,500 was issued against this advance to an
unrelated party as agreed to on 09 February 2007. The note bore an interest rate
at the prime rate of interest and was converted into 62,500 preference shares on
29 June 2007. In addition the Company issued 59,501 B Warrants upon conversion
of the note to preference shares.
On 09 February 2007, the Company issued a convertible subordinated promissory
note of US$3,000,000 to MCOZ Preferred LLC, an entity controlled by an executive
director of the Company. The note bore interest at 10% per annum. On 29 June
2007, US$234,880 of the note was redeemed and the balance of US$2,765,120 was
converted into 2,765,120 shares of preferred stock and the Company issued
2,632,475 B Warrants at an exercise price of 24.75 pence per share to MCOZ
Preferred LLC.
On 09 February 2007, the long term loan from an executive director of the
Company amounting to US$350,000 was converted into a long term convertible note.
The convertible note was subordinate to existing and future senior and senior
subordinated debt and bore interest at the prime rate of interest. The note was
converted into 350,000 shares of the Preferred Stock at a conversion price of
US$1 per share of preferred stock on 29 June 2007. Further 333,211 B Warrants
were issued to the holder of the note.
Costs related to this conversion which amounted to US$539,166 have been netted
against the proceeds.
8 Post balance sheet events
On 7 August 2007, the Company issued 400,000 options to a management employee
pursuant to an employment agreement to purchase ordinary shares of the Company
under the terms and conditions of its Equity Compensation Plan. The market
value of the option price on the date of grant was #0.25 and the options vest
pro rata over three years commencing on the first anniversary date of employment
and expire ten years from the date of grant.
On 15 August 2007, the Company entered into a sale and leaseback transaction
with VinREIT LLC. According to the agreement VinREIT LLC purchased property,
land and equipment from the Company at a purchase price of US$20,500,000, which
resulted in a gain to the
Company, net of transaction costs, of US$1,112,531. As of 30 June 2007, the net
book value of the assets sold was US$18,740,815. The initial annual rent for
the leaseback of the sold assets is 8.7% of the purchase price. The rent will
increase annually by 2.0 % of the base year's rent. The lease term is ten years
with two five year renewal options. The Company has an option to repurchase all
of the property, land and equipment commencing on the fifth anniversary date of
the lease.
On 15 August 2007, the Company paid down US$13,000,000 of borrowings to its
senior lender, PRI, US$2,000,000 to its senior subordinated lender, CSW, and
retired US$385,788 of obligations under certain outstanding capital leases. The
Company also entered into an agreement with PRI whereby a new working capital
credit line of US$12 million was established, bearing interest at the US Prime
rate and maturing on 31 December 2009. The remaining US$7 million dollars of
the old term loan with PRI was then converted to existing borrowings under the
new working capital credit facility.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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