Silverwood Brands PLC Annual report For the year ended 31 December 2023

RNS Number : 4482U

Silverwood Brands PLC

28 June 2024

 

28 June 2024

SILVERWOOD BRANDS PLC

AQSE: SLWD

("Silverwood" or "the Company")

AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023

 

Silverwood Brands plc, a holding company established to invest primarily in branded consumer businesses, is pleased to announce its audited results for the year ended 31 December 2023.

Business review

 

Our trading year ending December 2023 was a period covering a drive for growth in our brands, the due diligence and investigation of new acquisitions and the frustrations of dealing with the Lush team.

 

Whilst we will repeat some of the information provided in our Trading Update of 1st May 2024 we will also endeavour to provide details of how we perceive our brands and business.

 

The year saw the first full year of trading for our existing brand portfolio of Balmonds, Nailberry and Sonotas (our Japanese business comprising SteamCream and Cigarro).

 

We would note that our underlying brands performed in line with our expectations - that is, we do not expect a simple tidy linear pattern when growing these smaller brands. On a month to month basis, even a year to year basis, we expect a bumpy ride. However, over the longer term we expect a picture of profitable growth.

 

Our teams remain committed to the task of delivering that growth and we continue to be impressed by their efforts.

 

Balmonds

 

As mentioned in our report for the previous financial year, "Balmonds enjoyed some well-placed press coverage during the year which gave a pleasant boost to sales. This may prove difficult to replicate…."

 

Annoyingly we were unable to replicate the boost we enjoyed in 2022 and sales fell by approximately 20% on a year on year basis. We would note that 2023 still achieved a substantial uplift against 2021, which is in line with the bumpy growth patterns we expect and represents strong growth over the two year period.

 

Sales and brand contribution history has been:

 

	2023 £	2022 £	2021 £	2020 £
Sales	2,456,758	3,062,027	1,408,905	1,420,500
Net Profit/(Loss)	(131,158)	282,646	(296,700)	(91.618)

 

Whilst a rebranding project has proved disruptive, we believe it will help build sales in the long term. The new look and packaging have been well received by those customers who have seen it and also by buyers from retail chains we are targeting. Now we need to convert that response to sales.

 

Additional work has gone in to supporting a medical device license application for Balmonds' Skin Salvation balm. If granted, we believe skin salvation will be the first petroleum-free 100% natural emollient for the prevention and treatment of eczema & psoriasis. This will allow for more effective marketing around the benefits of this product.

 

Nailberry

 

Nailberry continues to attract new customers and open new sales channels. This has resulted in sales growth over the prior year.

 

Sales and brand contribution history has been:

	2023 £	2022 £	2021 £
Sales	2,933,329	2,399,121	2,172,797
Net Profit/(Loss)	1,093,743	551,861	847,870

 

Sonotas

 

Our acquisition of Sonotas in January 2023 added Steamcream and Cigarro brands to the Silverwood Brands portfolio.  In addition to the brands, Sonotas brings a growth platform to the group that provides direct market access to Japan, the world's 3rd largest beauty market and proximity to the globally fastest growing beauty region of Asia.

 

Through Sonotas, we have continued to expand our capabilities in Japan with the acquisition in March 2024 of Cosme Science, a beauty R&D and manufacturing business. Cosme Science has 40 years of experience and more than 2,000 formulations to draw from.   Additionally, the nearly 7,000 sq m facility is only 7 years old and complete with new, modern fit out.

 

We also acquired a small skincare brand, Dr Baeltz, as part of the Cosme Science purchase.

 

As per earlier announcements, Cosme Science (including Dr Baeltz) generated revenue of Yen 1.6bn (approx. £8.4m) and ebitda of Yen 123m (approx. £650k) in the year ending March 2023.

 

We believe that having a significant presence in Japan provides Silverwood with a strategic advantage for building brands as well as sourcing new opportunities such as the Cosme Science transaction.

 

Sonotas's business model is similar to that of Silverwood Brands in that Sonotas is run as a platform to provide R&D and product, sales channels development and back office support to its brands..  Branding, marketing and direct sales roles are unique to each brand.  Sonotas's P&L is inclusive of all its brands in addition to cost centres such general R&D, IT, finance and other costs such as those occurred with the Cosme Science transaction.

 

	30 June 2023 K¥	30 June 2022 K¥	30 June 2021 K¥
	Unaudited	Unaudited	Unaudited
Sales	1,160,908	1,103,804	1,116,958
Pre-tax result	143,203	(8,327)	49,039

The figures above are reported to 30 June, the Sonatas financial year-end.

We are working on a process to align financial year ends across the group.

 

Steamcream

 

In 2023 the Japan Steamcream team focused on rebuilding from the Covid related dip, primarily hitting our retail store portfolio.  In May 2023, we chose to temporarily exit all retail stores to work on growing our wholesales and digital channels. 

 

Cigarro

 

Cigarro's growth slowed in 2023 with some frustrating supply problems out of China early in the year that took nearly 6 months to solve by replacing several suppliers.  Supply issues have been resolved and we forecast renewed growth in the coming year.

 

Nailberry Japan

 

Sonotas brought Nailberry to Japan in October of 2023 and work continues to build brand awareness.

 

 

Portfolio of gems

 

We believe we have assembled a portfolio of gems. Although these are small brands today we believe that they all have the potential to be much larger. That's our challenge. With great management teams, determined focus, ambitious plans, some time and a few lucky breaks we can build these small brands to be much larger. We continue to search for more gems to add to our collection.

 

Silverwood

 

Our holding company is primarily a cost centre where we endeavour to manage a lean operation.

 

We incur various expenses to investigate new opportunities and this year we incurred large costs around the Lush transaction. We recovered most of these costs.  We have retained an upside through our settlement agreement with the vendors should the Lush stake which was unwound from our business be sold.

 

Some of these costs, we believe, were due to the unnecessary delay caused by our previous advisors, VSA Capital, in returning their shares. We are seeking advice on the recoverability of these excess costs.   

 

We wish to highlight below a number of areas of cost incurred in the year which do not directly relate to the underlying operations of the group.

 

Acquisition costs.

We incurred over £300,000 of net fees in acquisition costs over the period. As explained earlier, we recovered £300,000 relating to the Lush unwind process. Whilst we will incur costs on future acquisitions, we will always endeavour to restrict these to a minimum.

 

Impairment costs

We have made an impairment against our holding in Ginger Teleporter following the decision to reduce our focus to health & beauty.

 

Recognition of post combination remuneration.

As previously reported, we negotiated performance related components to each of the brand purchases we have made. This allowed us to match market conditions, whilst, it derisking the purchase by deferring a large element to the future and making these dependent on performance. This also aligned the founders/shareholder management with all shareholders.

 

Non-cash post combination remuneration costs are recorded as costs. This year these amounted to £4.58m.

 

Our hope is that we do pay these amounts as the full purchase prices we pay after allowing for these earn out amounts are usually a greatly reduced multiple of achieved results should the pre-agreed performance criteria be met.

 

All future payments are contracted to allow for settlement in shares.

 

Finance costs

We have reported a finance cost for the year of £748k. This is mostly a non-cash charge relating to the loan from Castlenau Group.

 

We are fortunate to have Castlenau Group Limited ("Castelnau")  as a shareholder, and one that shares our long term view on building businesses.

 

Following the year end, Castlenau agreed to convert the majority of its loan position into ordinary shares in the Company. This was completed on 29 January 2024 at a price of 54p per share.

 

At the same time, the Company completed a £1.0 million subscription from Andrew Gerrie, also at 54p per share, and Silver Americum Limited, a company in which Mr Gerrie and his wife each hold separate 20% interests, agreed to provide an unsecured convertible loan of £0.5 million to the Company.

 

Aquis.

Recently the Aquis exchange has suffered from severe liquidity issues with numerous investors withdrawing from the market and selling down shares where they could.

 

This has obviously affected valuations.

 

Whilst we have a long term view and believe the immediate answer is to focus on our business we will continue to monitor all opportunities or changes our Aquis listing leads us to.

 

Lush

Again, we repeat our previous announcements about this transaction, we were very disappointed with the reaction of the Lush management team to our position, and we have taken the pragmatic approach of withdrawing from the acquisition due to the aggressive stance adopted by Lush. Our previous announcements covered the details of this.

 

We have now effected an unwinding of the transaction via a capital reduction which was approved by the court on 16 April 2024 and completed on 30 April 2024.

 

The attempted transaction consumed a huge amount of management time and focus, along with associated costs. Much of this fee cost was reimbursed by Andrew Gerrie and Alison Hawksley. We now wish them good luck in their endeavours to achieve a sale of their Lush shares.

 

Group

Group numbers show a consolidated pre-tax loss for the 2023 financial year.

 

Q1 2024 - Trading Update

Trading in our brands since our December year end has been as expected.

 

Future Prospects

 

Our existing portfolio of businesses holds wonderful potential for profitable growth.

 

The addition of Cosme Science in Japan provides a great under pinning to our ambitions in Asia and introduces various new avenues of growth.

 

We have reviewed numerous additional opportunities and believe we will continue to find exciting ventures to enhance our business.

 

In summary, we have suffered some frustrations in the year under review, however, we have also enjoyed some improvements and exciting additions.

 

We remain optimistic about the future.

 

Shareholder online meeting

 

We are planning to hold a shareholder webinar following the announcement of our 2023 full year results with a focus on Q&A with the management team. Further details will be announced in due course.

 

Financial key performance indicators

 

For our portfolio of controlled brands we are focused on financial indicators of:

 

Revenue

We have identified some exciting smaller brands which we believe can grow to be larger businesses. Obviously, revenue growth is key measurement here.

EBITDA

These businesses need to maintain a profitable business model as they grow. EBITDA will give us a guide for this and should represent a cash generation proxy.

Profit After Tax

Profitable business models don't stop at EBITDA so we will also look for true bottom line profitability.

Cash at year end

We need cash to support our growing businesses, to absorb the bumps we encounter and to cover our central costs.

For our investment positions we will look for similar KPI's within the reported data from the underlying businesses. This will allow us to assess the carrying value of our investment positions.

 

The Directors of the Company accept responsibility for the contents of this announcement.

 

ENQUIRIES:

 

Silverwood Brands plc:

Andrew Gerrie                                                                  [e-mail]

Paul Hodgins

 

Peterhouse Capital Limited                                        [phone]

(AQSE Corporate Adviser)

 

 

Consolidated Statement of Comprehensive Income

				2023	2022
				£	£
Revenue				11,202,566	3,667,488
Cost of sales				(3,062,983)	(1,398,229)
Gross profit				8,139,583	2,269,259
Other operating income				26,799	30,119
Administrative expenses				(9,099,105)	(2,559,358)
Deemed cost of listing				-	(2,665,094)
Acquisition costs, acquisition related contingent consideration and earn outs				(3,482,615)	(2,832,049)
Loss from operations				(5,798,565)	(5,757,123)
Finance income				41,649	25,588
Finance expense				(805,786)	(160,085)
Fair value gains/(losses)				-	(120,703)
Loss before tax				(6,562,702)	(6,012,323)
Tax expense				471,528	(23,403)
Loss for the period				(6,091,174)	(6,035,726)

 

Items that are or may be reclassified subsequently to profit or loss.
Exchange loss arising on translation on foreign operations		(421,716)	-
		(421,716)	-
Other comprehensive income for the period, net of tax		(421,716)	-
Total comprehensive income		(6,512,890)	(6,035,726)
Loss for the period attributable to:
Owners of the parent		(6,040,462)	(6,035,726)
Non-controlling interests		(50,712)	-
		(6,091,174)	(6,035,726)
Total comprehensive income for the period attributable to:
Owners of the parent		(6,462,178)	(6,035,726)
Non-controlling interests		(50,712)	-
		(6,512,890)	(6,035,726)
Earnings per share
Basic and diluted loss per share (pence)		(2.33)	(37.5)
Basic and diluted loss per share  - post capital contribution (pence)		(19.38)	(37.5)

 

 

Consolidated Statement of Financial Position

		2023	2022
		£	£
Assets
Non‑current assets
Property, plant and equipment		199,306	45,490
Intangible assets		23,594,130	5,973,797
Other non‑current investments		80	216,802,081
Trade and other receivables		101,943	-
		23,895,459	222,821,368
Current assets
Inventories		1,727,768	401,132
Trade and other receivables		3,293,618	968,021
Cash and cash equivalents		2,799,380	2,055,143
		7,820,766	3,424,296
Total assets		31,716,225	226,245,664

 

Liabilities
Non‑current liabilities
Trade and other liabilities		1,996,367	-
Loans and borrowings		1,264,449	13,947
Deferred tax liability		1,799,191	657,535
		5,060,007	671,482
Current liabilities
Trade and other liabilities		6,099,082	5,858,054
Loans and borrowings		5,368,149	1,529,265
Provisions		286,282	-
		11,753,513	7,387,319
Total liabilities		16,813,520	8,058,801
Net assets		14,902,705	218,186,863

 

Issued capital and reserves attributable to owners of the parent
Share capital		3,250,018	24,202,969
Share premium reserve		22,795,826	201,467,075
Shares to be issued		831,450	831,450
Reverse takeover reserve		(4,797,432)	(4,797,432)
Share based payment reserve		6,110,807	3,257,875
Foreign exchange reserve		(421,716)	-
Retained earnings		(12,815,536)	(6,775,074)
		14,953,417	218,186,863
Non-controlling interest		(50,712)
TOTAL EQUITY		14,902,705	218,186,863

 

 

Company Statement of Financial Position

		2023	2022
		£	£
Assets
Non‑current assets
Other non‑current investments		34,381,407	14,254,164
Trade and other receivables		170,216	218,007,377
		34,551,623	232,261,541
Current assets
Trade and other receivables		1,462,557	362,264
Cash and cash equivalents		38,027	1,249,007
		1,500,584	1,611,271
Total assets		31,939,424	233,872,812
Liabilities
Non-Current liabilities
Trade and other liabilities		1,967,349	-
		1,967,349	-
Current liabilities
Trade and other liabilities		6,857,301	7,535,493
Loans and borrowings		5,204,659	1,511,713
Provisions		286,282	-
		12,348,242	9,047,206
Total liabilities		12,348,242	9,047,206
Net assets		21,736,616	224,825,606
Issued capital and reserves attributable to owners of the parent
Share capital		3,250,018	24,202,969
Share premium reserve		22,795,826	201,467,075
Shares to be issued		831,450	831,450
Share based payment reserve		3,445,713	592,781
Retained earnings		(8,586,391)	(2,268,669)
TOTAL EQUITY		21,736,616	224,825,606

 

The Company's loss for the year was £6,091,174 (2022: loss for the 13-month period £6,035,726)

 

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