RNS Number:8668Q
Cosentino Signature Wines plc
27 March 2008
27 March 2008
Cosentino Signature Wines plc ("Cosentino", "the Company" or "the Group")
Preliminary Results for the Year ended 31st December 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, is pleased to announce its Preliminary Results for the year ended
31st December 2007.
Financial Highlights - Record financial performance
*Turnover increased 39% to US$11,014, 487 (2006: US$7,920,989)
*EBITDA increased to US$4,203,560, (2006: loss of US$3,146,416)
*EBITDA margins increased to 38.2% (2006: negative 39.7%)
*EBIT increased to US$3,371,128, (2006: loss of US$16,437,477)
*Operating profits increased to US$2,188,530, (2006: loss of US$2,769,282)
*Income before tax increased to US$315,353, (2006 loss of US$18,491,855)
*Income per share increased to US$0.01, (2006: loss of US$0.72)
Operational Highlights - Record performances
*Successful turnaround of operating business:
- Record overall annual turnover performance
- Record performance from Retail Division - 6,640 members of the WineClub
at period end (2006: 5,438)
- Record annual performance from the Wholesale Division with relationships
with key distributors strengthened
*Key management back in place following the re-appointment of Larry
Soldinger as Executive Chairman and CEO
*Board further strengthened through appointment of experienced
non-executives
*Strengthened Balance Sheet with successful refinancing of debt in August
2007 and the successful sale and leaseback of certain Company property
raising US$20.5m
Commenting on the results Larry Soldinger, Chairman said:
"We are very pleased to be able to report our record Results for 2007 along with
the Company's return to profitability. With pre IPO management back in place,
this year resulted in a quick and successful turnaround of the Company's
operations, reflecting the true strengths of our brands, reputation and
positioning in the market place.
"In 2007 we also made a significant effort to greatly improve our Balance Sheet.
As a result, we were able to repay a substantial portion of our outstanding
indebtedness and lower, as of today, the interest rates on the remainder of our
debt. by nearly half.
"2008 has continued in the same vein as 2007 and we look toward the future with
confidence."
For further information please contact:
Cosentino Signature Wines plc
Larry Soldinger, Chairman On the day: 020 7831 3113
Thereafter: +1 847 726 8100
Seymour Pierce
Jonathan Wright 020 7107 8000
Financial Dynamics
Jonathon Brill / Billy Clegg / Ed Westropp 020 7831 3113
CHAIRMAN's STATEMENT
Introduction and summary
I am very pleased to be able to report our Company's record Preliminary Results
for the year ended 31st December 2007 along with the announcement that the
Company operated profitably in 2007. The results for the year reflect the
Company's strong brand recognition, reputation and positioning in the market
place. With pre IPO management back in place, the Company has been able to once
again deliver record performances from both its Retail and Wholesale Divisions.
Financial summary
Turnover for the period was US$11.0 million (2006: US$7.9 million) representing
an increase of 39%. Earnings before interest, tax, depreciation and amortization
of US$4,203,560 were generated, relative to a loss of US$3,146,416 in the
previous year. Income per share was $0.01 relative to a loss per share of
US$0.71 in 2006. Profit before tax was US$315,353, relative to a loss of
US$18,491,885 in 2006.
Net assets at the period end were US$27.8 million (2006: US$27.8).
The Directors are not recommending the payment of a dividend for the year ended
31st December 2007.
Refinancing programme - new line of credit
In August of 2007, the Company entered into a sale and leaseback programme in
respect of certain of the Company's principal winery estates and operating
assets, which reduced Group borrowings by some US$ 20 million. Also at that
time, Cosentino secured a new line of credit that lowered interest rates from
the greater of 2% over the Prime Interest Rate (10 .25% at that time) or 9% to
the Prime Rate (currently 5.25%). This refinancing programme further
strengthened Cosentino's balance sheet, will substantially reduce our interest
costs through 2009 and has secured a strong financial platform from which the
future growth and prosperity of the business can flourish.
Market
Demand for wine in the US continues to exhibit strong growth, and demand for
luxury and ultra-premium wines exceeds the overall wine market growth. Our
target market is exclusively in the ultra-premium and luxury segments (greater
than US$14 a bottle). The continuing growth of our Wine Club membership and our
strong Retail Division specifically points to this ongoing trend.
Retail Division
2007 was a record period for the Retail Division. The Retail division saw a 21%
year on year sales increase bringing total divisional turnover for the year to
US$4.1m with the gross margin levels increasing. These record figures were
driven by the continuing increase in Cosentino's Wine Club membership, which
ended the year with 6,640 members, up 22% from a year earlier and in excess of
6860 at the time of this announcement. Wine Club sales were complemented by
strong sales at our tasting rooms in the Napa Valley and Lodi, which also saw
capacity increases during the period with the addition of our Signature VIP and
private Wine Club members' tasting room. Cosentino's tasting rooms at the winery
are amongst the most popular visitor attractions in Napa Valley. Here people
come to learn about and taste our great wines and have the opportunity to
purchase some of our smaller production and special wines that are exclusively
offered for sale in our tasting rooms and to our wine club members. These
factors, along with the outstanding quality and popularity of the Cosentino
wines and our premier Napa Valley location, have resulted in the continuous
excellent performance in our Retail Division.
Following a very strong Christmas trading period, traditionally the peak trading
period for the Retail Division, current trading is in-line with expectations.
The Company is currently looking to take further advantage of the opportunities
available for this key division of the Company and we expect to enhance our
retail and hospitality operations during the first half of the current year.
Wholesale Division
Along with my return to the business, the Company's focus centered around the
strengthening of our key distributor relationships. As a result of this
programme, those critical relationships have been re-established and indeed
strengthened. As a result, the Wholesale Division in the year ended 31 December
2007 delivered a record performance, and saw an increase in sales of 49% year on
year over 2006 with gross margins increasing.
Total divisional turnover for the year was US$6.8m.
Careful attention has been paid to inventory management, which yielded
significant benefits during the year and helped us increase our margins. Current
trading is in line with expectations.
Management team
In February 2007, as a condition to the re-financing package referenced above,
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.
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 further strengthens Cosentino.
We are currently looking to expand and fill a number of executive and key
operational roles within the Company. To achieve our growth expectations in the
coming years, we will need a strong expanded team. We have retained a leading
industry search firm to assist us with our needs and we are patiently waiting to
select the right candidates. In a simplified executive structure, all top
executive positions will report directly to me.
The record performance from the winery has been delivered by our small and
tireless management team and the loyal and hard working employees of the
Company. I would like to take this opportunity to thank all of our colleagues
for their hard work during this exciting year of return to profitability, and I
much look forward to continuing to work with our team in 2008 and beyond.
Strategy
The strategy during the majority of 2007 was to strengthen the balance sheet and
restore profitability to the Company. This has now been achieved. The strategy
going forward is one of organic growth, through operational excellence,
continued growth of the Wine Club membership, the tasting rooms at the winery,
and increasing our distributor network. The Board will also consider enhancing
acquisitions should the right situation occur.
Outlook
Strong foundations are now back in place within the business. We now have a
strong management at the top, a first rate operational team, including three
superb winemakers headed by Mitch Cosentino, and an experienced Board, all of
whom are focussed on delivering value to shareholders through operational
excellence.
Our wines continue to be the best in class and attract numerous awards for their
quality, variety and flavour. Cosentino continues to produce excellent wines
under the guidance of Mitch Cosentino and, with the demand for ultra-premium and
luxury wines remaining high, the Cosentino brand continues to be as strong as
ever.
Our balance sheet is strong, following the re-financing, and this has now
enabled us to go back to focusing on growth, whilst growing our profitability.
We are now also focusing on strengthening the depth of our management team.
The 2007 harvest was an exceptional one and abundant for the Company. We look
forward to making some excellent wines in our new and state of the art
facilities.
Trading since period end has remained in line with the Board's expectations and
we are on track to deliver another record year for the Company. As such, the
Board looks to the future with confidence.
Larry J Soldinger
Chairman and CEO
COSENTINO SIGNATURE WINES PLC
CONSOLIDATED INCOME STATEMENT
Twelve months Twelve months
ended ended
31 December 31 December
2007 2006
Continuing operations US$ US$
Revenue Note
Distributors 6,802,893 4,556,980
Retail 4,083,640 3,364,009
Other 127,954 -
------------ ------------
11,014,487 7,920,989
Cost of sales (2,804,199) (3,489,986)
------------ ------------
Gross profit 8,210,288 4,431,003
Operating expenses (6,021,758) (7,200,285)
------------ ------------
Operating profit/(loss)
for the period 2,188,530 (2,769,282)
Gain of the sale of fixed
assets 4 1,139,240 (37,497)
Other income/(expense) 43,358 (11,446)
Restructuring costs - (1,095,887)
Goodwill impairment - (12,523,365)
Finance costs (2,641,775) (2,054,378)
Issuance cost written off
on early redemption of
preference shares (414,000) -
------------ ------------
Profit/(loss) before tax 315,353 (18,491,855)
Income tax/(expense)
income 3 (113,928) 2,375,606
------------ ------------
Profit/(loss) for the
period 201,425 (16,116,249)
============ ============
Earnings per share 5
Basic and fully diluted 0.01 (0.72)
COSENTINO SIGNATURE WINES PLC
CONSOLIDATED BALANCE SHEET
Note 1 December 31 December
2007 2006
ASSETS US$ US$
Non-current assets
Property plant and equipment 21,443,169 38,880,218
Goodwill 5,733,541 5,733,541
Deferred tax assets 3 6,571,990 6,681,990
Other assets 219,370 310,618
-------------- --------------
Total non-current assets 33,968,070 51,606,367
Current assets
Inventories 14,270,100 9,454,879
Trade and other receivables 942,787 638,037
Cash - restricted 123,147 -
Cash and cash equivalents 254,669 85,177
-------------- --------------
Total current assets 15,590,703 10,178,093
-------------- --------------
Total assets 49,558,773 61,784,460
============== ==============
EQUITY AND LIABILITIES
Equity 4
Share capital 387,220 387,220
Share premium account - 43,268,657
Retained earnings 27,445,689 (15,894,308)
-------------- --------------
Total equity 27,832,909 27,761,569
Non-current liabilities
Borrowings 4 13,500,000 23,000,000
Obligations under finance
leases 2,115,534 3,103,399
Redeemable preference shares 1,119,634 -
Loan notes 4 587,500 750,000
-------------- --------------
Total non-current liabilities 17,322,668 26,853,399
Current liabilities
Obligations under finance
leases 808,392 915,034
Trade and other payables 3,594,804 6,254,458
-------------- --------------
Total current liabilities 4,403,196 7,169,492
-------------- --------------
Total liabilities 21,725,864 34,022,891
-------------- --------------
Total liabilities and equity 49,558,773 61,784,460
============== ==============
COSENTINO SIGNATURE WINES PLC
SUMMARISED CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve months Twelve months
ended ended
31 December 31 December
2007 2006
US$ US$
Cash flows from Operating activities
Profit/(loss) for the year 201,425 (16,116,249)
Goodwill impairment - 12,523,365
Gain on the sale of property
plant and equipment (1,139,240) -
Income tax expense/(profit)
recognised in profit or loss 110,000 (2,387,396)
Finance costs recognised in
profit or loss 555,306
Depreciation 597,468 767,696
------------- -------------
Operating cash flows before
movements in working capital (230,347) (4,657,278)
Decrease/(increase) in
receivables (304,750) 903,650
Decrease/(increase) in
inventories (4,815,221) (4,661,149)
Increase/(decrease) in payables (2,659,653) 2,240,473
------------- -------------
Net cash used in operating
activities (8,009,971) (6,174,304)
Investing activities
Investment in intangibles 91,248 (317,867)
Proceeds from the sale of
property plant and equipment 19,786,155 -
Purchases of property plant and
equipment (1,807,334) (6,118,018)
------------- -------------
Net cash provided by/(used in)
investing activities 18,070,069 (6,435,885)
Financing activities
Costs related to issuance of
share capital (130,085) (314,789)
Proceeds from new loans raised 5,500,000 12,000,000
Proceeds from issuance of
convertible notes 3,250,000 750,000
Proceeds from issuance of
preference shares 234,880 -
Repayment of borrowings (15,000,000) -
Repayment of borrowings, related
parties (2,234,880) (866,506)
Repayment of capital leases (1,094,507) -
Advances to related parties - (88,458)
Finance costs related to new
borrowings (292,867) (555,306)
------------- -------------
Net cash (used in)/provided by
financing activities (9,767,459) 10,924,941
Net increase/(decrease) in cash
and cash equivalents 292,639 (1,685,248)
Cash and cash equivalents at
beginning of period 85,177 1,770,425
------------- -------------
Cash and cash equivalents at end
of period 377,816 85,177
============= =============
COSENTINO SIGNATURE WINES PLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Share Retained
capital premium earnings Total
US$ US$ US$ US$
Balance at 1
January 2006 387,220 43,268,657 221,941 43,877,818
Loss for period - - (16,116,249) (16,116,249)
-------- --------- ---------- ---------
Balance at 31
December 2006 387,220 43,268,657 (15,894,308) 27,761,569
Cancellation of
share premium
account (43,268,657) 43,268,657 -
Costs
associated with
cancellation of
share premium
account (130,085) (130,085)
Income for the
period 201,425 201,425
-------- --------- ---------- ---------
Balance at 31
December 2007 387,220 - 27,445,689 27,832,909
======== ========= ========== =========
COSENTINO SIGNATURE WINES PLC
Notes to the financial statements for the period ended 31 December 2007
1.Group information
The Group sells ultra-premium and luxury wines to fine dining restaurants
through third party wholesale distributors and directly to consumers at its wine
tasting rooms and through the trading company's wine club.
2.Financial information
The financial information included in the above statements is an abridged
version of the Company's accounts for the period ended 31 December 2007 and does
not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. The financial statements have not yet been approved by the
Board and the Auditors' Report has yet to be signed. Therefore, these financial
statements have not yet been delivered to the Registrar of Companies.
3.Deferred tax
The Company recognizes deferred tax in respect of all timing differences that
have originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax or a right to pay less tax
in the future have occurred at the balance sheet date.
Given the Company's track record of growth and profitability and its future
prospects, management believe taxable profits will more likely than not be
available to utilize existing tax losses. Consequently, the Company has recorded
in the current year a reduction of its deferred tax asset of US$110,000 as a
result of current year profits. The deferred tax asset has been computed using a
tax rate of 40% on ordinary income and 20% on capital transactions.
4.Restructuring
Loan notes
During February 2007 an entity controlled by an executive director loaned
US$3,000,000 to the Company in the form of a convertible long term note
subordinate to existing senior and senior subordinated debt. The note bore
interest at the US Prime Rate or 10% per annum, matured on 8 February 2012 and
was automatically converted to preference shares at a rate of one share per US$
during June 2007.
Borrowings
During March 2007 the Group refinanced and extended its loan obligations
amounting to US$23,000,000 to 31 March 2009. As part of the loan refinancing,
the Company issued 1,353,666 A warrants to purchase ordinary shares of the
Company at an exercise price of 24.75 pence per ordinary share. Further, as part
of the sale and leaseback transaction described below, the maturity on these
borrowings was subsequently extended to 31 December 2009.
Sale and leaseback
During August 2007 the Company sold land, land improvements, buildings and
equipment in a sale and leaseback transaction for US$20,500,000 resulting in a
gain, net of transaction costs, of US$1,139,240. The Company accounts for the
leases resulting from this transaction as operating leases. There is an option
to purchase all, but not less than all, of the assets covered under the lease
starting on the fifth anniversary date of the lease. The option price is 110% of
the sales price for the land, land improvements and buildings plus 100% of the
sales price of the equipment.
Loan refinancing
Also during August 2007 and utilising the proceeds from the above described sale
and leaseback, the Company paid down US$13,000,000 of borrowings to its senior
lender, US$2,000,000 to its senior subordinated lender and retired US$386,000 of
obligations under certain outstanding capital leases. The Company also entered
into an agreement with its senior lender 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 balance of old term loan was then converted to
the existing borrowings under the new working capital credit facility. During
the period subsequent to August 2007, the Company borrowed an additional
US$3,500,000 under the new credit facility.
Share capital
In June 2007 the Company issued 3,412,500 preference shares which consisted of
234,880 shares issued in respect of cash subscriptions and 3,177,620 shares
issued through the conversion of the subordinated convertible long term note.
Each preference share accrues a 10% annual cumulative dividend and is redeemable
in 2012 at US$1.00 per preference share. The terms of the preference shares
further provide that the 3,177,620 preference shares issued through debt
conversion are entitled to a priority right of redemption relative to the
remaining preferred shares on any early redemption. Preference shares carry a
priority with regard to the Company's residual assets and do not carry the right
to vote. The redeemable preference shares are classified as financial
liabilities. During November 2007, the Company redeemed 2,000,000 preferred
shares.
Share premium
On 25 September 2007 the Company, with Court approval, cancelled the share
premium account and transferred all balances to the retained earnings account.
5.Earnings per share
The calculation of the earnings per share is based on the income for the period
after the effect of taxes and is calculated using the basic and fully diluted
weighted average number of ordinary shares issued and outstanding during the
period. As of 31 December 2007 basic and fully diluted ordinary shares
outstanding were 22,470,000 and 24,795,000, respectively. Basic and fully
diluted ordinary shares issued and outstanding as of 31 December 2006 were
22,470,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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