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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Cosentino Regs | LSE:MCOZ | London | Ordinary Share | GB00B0PFWS12 | ORD 1P (REG S) |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 2.875 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMMCOZ RNS Number : 6773E Cosentino Signature Wines plc 24 December 2009 24 December 2009 COSENTINO SIGNATURE WINES PLC INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2009 CHAIRMAN's STATEMENT Introduction Following a very challenging 2008 for the entire wine industry, 2009 did not begin any better. The wine market was hit particularly hard at the end of 2008 by the economic downturn and the resulting challenges continued throughout 2009, especially in the luxury and ultrapremium wine sectors;since the end of 2008, demand has shifted to wines in the $10 to $15 price range. Winery sales to distributors in the first six months of 2009 dropped dramatically as distributors continued to struggle to get their inventories down to less than 30 days on the floor from their historic 2008 highs of seven and eight months. Wine club sales also are down from previous years as consumer credit has tightened. As sales decreased sharply at the end of 2008 and continued into 2009, management and the Board of directors concluded that the wine industry would remain hard hit throughout 2009 and into 2010. At the end of 2008, the Company moved to drastically reduce its cost base and increase efficiencies. This included the abandonment of the Company's non essential properties and equipment that were the subject of its 2007 sale and leaseback agreement. Since March 2009 the Company has been operating only in its Yountville facility in the Napa Valley, California and through new affordable leased facilities in Woodbridge, California at substantial cost savings. Financials Turnover including discontinued operations for the period was US$ 3.56 million (2008: US$ 4.49 million). Loss per share including discontinued operations was US$(0.11) [2008 $(0.01)]. Loss before tax including discontinued operations was US$(2.78) million [2008 $(0.35) million] Operations During the first six months of 2009 the global credit crunch continued to take hold and wholesale and retail sales for the Company were well below average. To counter the effect of the sharp drop in revenues the Company embarked on a significant cost cutting plan, which started in the fourth quarter of 2008 and continued throughout all of 2009. A major component of the plan was the discontinuance of the operations and closure of three of the Company's production facilities. These operations included the facilities, vineyards and equipment at the Pope Valley, Clements and Lockeford properties that were the subject of the 2007 sale and leaseback transaction. In discontinuing the operations, the leased facilities and equipment were formally returned to the lessor in February 2009. Two of the Company's brands were discontinued and all operations in these facilities, other than the winding down, ceased in 2008. The decision to close down the brands and facilities was made because the facilities were operating at significantly less than 50% of capacity and management and the Board of directors became convinced that the wine industry would not recover quickly enough in the near term in order to allow the necessary increased production levels to operate these facilities profitably. As a result, management concluded that the Company could no longer afford to produce these brands and operate these facilities. Management estimates that the closure of these properties along with the additional company-wide cost cutting measures that management put in place at the end of 2008, will save the Company approximately $4 million annually in operating costs. The focus of the Company and management in the near term will be directed to its core brand, Cosentino Winery, and its related operating facilities in Napa Valley, and newly leased production and storage facilities in Woodbridge California. Management Our management team is fully in place and all top executive positions are reporting directly to me. At the end of the six month period under review, business began to stabilize and it has continued to remain stable throughout the remainder of the year, while once again beginning to build. I again want to thank our small and tireless management team and the loyal and hard working employees of the Group for their tireless work. As we continue to deal with the challenges facing our Company and industry throughout the rest of the year, I am proud to have our strong team with me every step of the way. Current status of our Senior and Subordinated Notes and the Sale and Leaseback Agreement Although the Company is in default on its senior and subordinated notes payable and is currently operating under a forbearance agreement, the Company currently has two signed term sheets, from two separate lenders, for the refinancing of our entire current senior and subordinated debt along with the funding of the necessary working capital required to adequately run our business. Both term sheets are still subject to additional due diligence by the potential lenders. Also, we have been able to reach an agreement in principle regarding our release from our 2007 sale and leaseback agreement through a court sanctioned mediation. The agreement will be contingent on our ability to obtain new financing over the next two months. This agreement is in the process of being documented. Summary Operations for the Company are now stable and we have begun to recover lost ground along with the rest of the wine industry. As a result of our quick and decisive cost cutting measures which were instituted in late 2008, the Company has been able to reduce its operating costs by nearly $4 million dollars annually. Those annual cost savings have more than compensated for the lost revenue and lower pricing that the Company and the industry are now enduring. The Board of Directors and I have been working diligently to obtain new financing for the Company in this very difficult lending environment and we now have two nonbinding signed term sheets in hand. We also have an agreement in principal settling our 2007 sale and leaseback agreement. We look forward to be in a position to make additional favourable announcements in the future. ........................ Larry J Soldinger Chairman 23 December 2009 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME +---------------------------+------+-------------+----+--------------+ | | Six months ended | Six months | | | | ended | | | 30 June 2009 | 30 June 2008 | +---------------------------+--------------------+-------------------+ | | | US$ | | US$ | +---------------------------+------+-------------+----+--------------+ | Continuing operations | | | | Re-presented | +---------------------------+------+-------------+----+--------------+ | |Note | | | | +---------------------------+------+-------------+----+--------------+ | Revenue | | | | | +---------------------------+------+-------------+----+--------------+ | Distributors | | 1,091,784 | | 844,164 | +---------------------------+------+-------------+----+--------------+ | Retail | | 1,520,362 | | 1,405,934 | +---------------------------+------+-------------+----+--------------+ | Other | | 137,972 | | - | +---------------------------+------+-------------+----+--------------+ | Total Revenues | | 2,750,118 | | 2,250,098 | +---------------------------+------+-------------+----+--------------+ | | | | | | +---------------------------+------+-------------+----+--------------+ | Cost of revenues | | (3,334,221) | | (2,131,916) | +---------------------------+------+-------------+----+--------------+ | | | | | | +---------------------------+------+-------------+----+--------------+ | Operating (loss)/profit | | (584,103) | | 118,182 | +---------------------------+------+-------------+----+--------------+ | | | | | | +---------------------------+------+-------------+----+--------------+ | Other (expense)/income | | (80,463) | | 1,813 | +---------------------------+------+-------------+----+--------------+ | Finance costs | | (882,529) | | (933,985) | +---------------------------+------+-------------+----+--------------+ | | | | | | +---------------------------+------+-------------+----+--------------+ | Loss from continuing | | (1,547,095) | | (813,990) | | operations before | | | | | | discontinued operations | | | | | | and taxes | | | | | +---------------------------+------+-------------+----+--------------+ | (Loss)/Profit from | 8 | (1,232,660) | | 459,007 | | discontinued operations | | | | | +---------------------------+------+-------------+----+--------------+ | Income tax | | (5,778) | | 139,600 | | income/(expense) | | | | | +---------------------------+------+-------------+----+--------------+ | | | | | | +---------------------------+------+-------------+----+--------------+ | Loss for the period | | (2,785,533) | | (215,383) | +---------------------------+------+-------------+----+--------------+ | | | | | | +---------------------------+------+-------------+----+--------------+ | | | | | | +---------------------------+------+-------------+----+--------------+ | (Loss)/ Earnings per | | | | | | share | | | | | +---------------------------+------+-------------+----+--------------+ | | | | | | +---------------------------+------+-------------+----+--------------+ | Number of shares | | 24,717,864 | | 22,403,451 | | outstanding, basic and | | | | | | fully diluted | | | | | +---------------------------+------+-------------+----+--------------+ | Basic and fully diluted - | | (0.06) | | (0.03) | | continuing operations | | | | | +---------------------------+------+-------------+----+--------------+ | Basic and fully diluted - | | (0.05) | | 0.02 | | discontinued operations | | | | | +---------------------------+------+-------------+----+--------------+ CONSOLIDATED STATEMENT OF FINANCIAL POSITION +--------------------------+------+--------------+--+---------------+--+--------------+ | |Note | 30 June 2009 | | 31 December | | 30 June 2008 | | | | | | 2008 | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | US$ | | US$ | | US$ | +--------------------------+------+--------------+--+---------------+--+--------------+ | ASSETS | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Non-current assets | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Property plant and | 4 | 21,456,060 | | 21,834,373 | | 21,066,334 | | equipment | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Intangible assets | | 241,216 | | 273,832 | | 6,357,396 | +--------------------------+------+--------------+--+---------------+--+--------------+ | Deferred tax assets | | | | - | | 6,711,990 | +--------------------------+------+--------------+--+---------------+--+--------------+ | Other assets | | 413,720 | | 609,500 | | 584,121 | +--------------------------+------+--------------+--+---------------+--+--------------+ | Total non-current assets | | 22,110,996 | | 22,717,705 | | 34,719,841 | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Current assets | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Inventories | | 12,868,619 | | 13,000,992 | | 16,163,562 | +--------------------------+------+--------------+--+---------------+--+--------------+ | Trade and other | | 945,041 | | 734,426 | | 1,587,148 | | receivables | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Cash - restricted | | | | - | | - | +--------------------------+------+--------------+--+---------------+--+--------------+ | Cash and cash | | 46,934 | | 66,103 | | 187,032 | | equivalents | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Total current assets | | 13,860,594 | | 13,801,521 | | 17,937,742 | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Total assets | | 35,971,590 | | 36,519,226 | | 52,657,583 | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | EQUITY AND LIABILITIES | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Equity | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Share capital | | 420,453 | | 420,453 | | 387,220 | +--------------------------+------+--------------+--+---------------+--+--------------+ | Share premium | | 91,392 | | 91,392 | | - | +--------------------------+------+--------------+--+---------------+--+--------------+ | Retained earnings | | 3,898,042 | | 6,683,575 | | 27,230,306 | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Total equity | | 4,409,887 | | 7,195,420 | | 27,617,526 | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Non-current liabilities | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Borrowings | | - | | - | | 15,000,000 | +--------------------------+------+--------------+--+---------------+--+--------------+ | Obligations under | | 2,127,559 | | 2,277,506 | | 2,252,957 | | finance leases | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Redeemable preference | | 1,217,284 | | 1,184,734 | | 1,148,920 | | shares | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Subordinated borrowings | | - | | - | | 2,500,000 | +--------------------------+------+--------------+--+---------------+--+--------------+ | Loan notes | | 587,500 | | 587,500 | | 587,500 | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Total non-current | | 3,932,343 | | 4,049,740 | | 21,489,377 | | liabilities | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Current liabilities | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Obligations in default | 5 | 18,000,000 | | 18,000,000 | | - | +--------------------------+------+--------------+--+---------------+--+--------------+ | Obligations under | | 1,273,843 | | 1,273,843 | | 1,044,621 | | finance leases | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Trade and other payables | | 8,355,517 | | 6,000,223 | | 2,506,059 | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Total current | | 27,629,360 | | 25,274,066 | | 3,550,680 | | liabilities | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Total liabilities | | 31,561,703 | | 29,323,806 | | 25,040,057 | +--------------------------+------+--------------+--+---------------+--+--------------+ | | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ | Total liabilities and | | 35,971,590 | | 36,519,226 | | 52,657,583 | | equity | | | | | | | +--------------------------+------+--------------+--+---------------+--+--------------+ STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | Share | | Share | | Retained | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | capital | | premium | | earnings | | Total | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | US$ | | US$ | | US$ | | US$ | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Balance 1 January 2007 | | 387,220 | | 43,268,657 | | (15,894,308) | | 27,761,569 | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Cancellation of share | | - | | (43,268,657) | | 43,268,657 | | - | | premium account | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | 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 | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Loss for the period | | - | | - | | (215,383) | | (215,383) | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Balance at 30 June 2008 | | 387,220 | | - | | 27,230,336 | | 27,617,526 | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Stock issued in payment of | | | | | | | | | | director | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | services | | 33,233 | | 91,392 | | - | | 124,625 | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Loss for the period | | - | | - | | (20,546,731) | | (20,546,731) | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Balance at 31 December 2008 | | 420,453 | | 91,392 | | 6,683,575 | | 7,195,420 | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Loss for the period | | - | | - | | (2,785,533) | | (2,785,533) | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | Balance 30 June 2009 | | 420,453 | | 91,392 | | 3,898,042 | | 4,409,887 | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ | | | | | | | | | | +------------------------------+---+-----------+--+--------------+--+--------------+--+--------------+ STATEMENTS OF CONSOLIDATED CASH FLOWS +-----------------------------------------+-------+-------------+---+---+--------------+ | | Six months ended | | Six months | | | 30 June 2009 | | ended | | | | | 30 June 2008 | +-----------------------------------------+---------------------+---+------------------+ | | | US$ | | | US$ | +-----------------------------------------+-------+-------------+---+---+--------------+ | | | | | | Re-presented | +-----------------------------------------+-------+-------------+---+---+--------------+ | Cash flows from operating activities | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Cash receipts from customers | | 3,335,381 | | | 4,155,204 | +-----------------------------------------+-------+-------------+---+---+--------------+ | Cash paid to suppliers | | (2,596,147) | | | (6,680,462) | +-----------------------------------------+-------+-------------+---+---+--------------+ | Cash generated from operations | | 739,234 | | | (2,525,258) | +-----------------------------------------+-------+-------------+---+---+--------------+ | Interest paid | | (515,197) | | | (918,464) | +-----------------------------------------+-------+-------------+---+---+--------------+ | Income taxes (paid) refunded | | (5,778) | | | (400) | +-----------------------------------------+-------+-------------+---+---+--------------+ | Net cash flows from operating | | 218,259 | | | (3,444,122) | | activities | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Investing activities | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Investment in intangibles | | (17,690) | | | (128,692) | +-----------------------------------------+-------+-------------+---+---+--------------+ | Interest received | | - | | | 1,814 | +-----------------------------------------+-------+-------------+---+---+--------------+ | Purchases of property plant and | | (69,791) | | | (628,685) | | equipment | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Net cash used in investing activities | | (87,481) | | | (755,563) | +-----------------------------------------+-------+-------------+---+---+--------------+ | | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Financing activities | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Proceeds from new loans raised | | - | | | 4,000,000 | +-----------------------------------------+-------+-------------+---+---+--------------+ | (Repayment of)/Proceeds from capital | | (149,947) | | | 8,901 | | leases | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Net cash (used in)/provided by | | (149,947) | | | 4,008,901 | | financing activities | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Net decrease in cash and cash | | (19,169) | | | (190,784) | | equivalents | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Cash and cash equivalents at beginning | | 66,103 | | | 377,816 | | of period | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ | Cash and cash equivalents at end of | | 46,934 | | | 187,032 | | period | | | | | | +-----------------------------------------+-------+-------------+---+---+--------------+ NOTES TO THE FINANCIAL INFORMATION General Information and Going Concern Cosentino Signature Wines plc (the "Company") and its operating subsidiaries (together the "Group") produce wines from the Northern California region of the US. 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 its wine club. The Company is a public company incorporated and domiciled in the United Kingdom and has its primary listing on the AIM Stock Exchange. The Company is currently in default with its senior and subordinated secured lenders and operating under forbearance agreements that expire on December 31, 2009. Additionally during the first six months of 2009 and during the year of 2008 the Company experienced a net loss before tax, but including discontinued operations of US$2.8 and $14.2 million, respectively. The loss included the discontinuance and abandonment of the operations and facilities associated with two of its major brands, Crystal Valley Cellars and CE2V and the related properties and equipment which are subject to a 2007 sale and leaseback agreement, to which the Company has an ongoing dispute with the lessor. Should the Company be unable to timely secure a re-financing of its senior and subordinated debt or should the Company's current senior and subordinated lenders decide not to extend their current forbearance agreements before the Company is able to re-finance those obligations the Company's ability to continue as a going concern could be in doubt. The Company currently has two signed term sheets, from two separate lenders, for the refinancing of its entire current senior and subordinated debt along with the funding of the necessary working capital required to adequately run its business. Both term sheets are still subject to additional due diligence by the potential lenders. The Company also has an agreement in principle regarding the release of its 2007 sale and leaseback agreement through court sanctioned mediation. The agreement will be contingent on the Company's ability to obtain new financing by 28 February 2010. This agreement is in the process of being documented. Based on the current status and the quality and constructiveness of negotiations with potential lenders and leasing parties, the directors believe the negotiations in securing refinancing for the group and in securing favorable settlement of any outstanding lease obligations will be successful. The directors believe that such refinancing will provide additional liquidity and allow the Company to continue operating. In the light of these actions, cost cutting measures implemented by management and management's focus on the group's core brand, the directors consider it appropriate to adopt the going concern basis in preparing the accounts. This condensed consolidated interim financial information was approved for issue on 23 December 2009. 1. Basis of presentation The condensed consolidated interim financial information for the six months ended 30 June 2009 has been prepared in accordance with IAS 34, 'Interim Financial Reporting'. The condensed consolidated interim financial information should be read in conjunction with the annual financial statement for the year ended 31 December 2008, which have been prepared in accordance with IFRS. 2. Accounting policies Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2008, as described in those annual financial statements. The results of operations for the six months ended June 30, 2008 have been re-presented to adjust the accounts for the effect of the discontinuance of operations as more fully discussed in Note 8. Tax expense in the interim periods is accrued using the tax rate that would be applicable to expected total annual earnings or losses. The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2009 but are not currently relevant for the group. +----------------------------------+----------------------------+ | Standard | Details of amendment | +----------------------------------+----------------------------+ | IFRS 2, Share Based Payments | Amendments to vesting | | | conditions and | | | cancellations | +----------------------------------+----------------------------+ | IFRS 7 Financial Instruments: | -Presentation of finance | | Disclosures | costs | | | -Amendment dealing with | | | improving disclosures | | | about Financial | | | Instruments | | | -Amendments enhancing | | | disclosures about fair | | | value and liquidity risk | +----------------------------------+----------------------------+ | IFRS 8, Operating Segments | New standard on segment | | | reporting (replaces IAS | | | 14) | +----------------------------------+----------------------------+ | IAS 1, Presentation of Financial | -Amendments to structure | | Statements | of Financial Statements | | | -Current/non-current | | | classification of | | | derivatives | +----------------------------------+----------------------------+ | IAS 8 Accounting Policies, | Status of implementation | | Changes in | guidance | | Accounting Estimates and Errors | | +----------------------------------+----------------------------+ | IAS 10 Events after | Dividends declared after | | the Reporting Period | the end of the reporting | | | period | +----------------------------------+----------------------------+ | IAS 16 Property, Plant and | -Recoverable amount | | Equipment | -Sale of assets held for | | | rental | +----------------------------------+----------------------------+ | IAS 18 Revenue | -Costs of originating a | | | loan | +----------------------------------+----------------------------+ | IAS 19 Employee Benefits | -Curtailments and negative | | | past service cost | | | -Plan administration costs | | | -Replacement of term 'fall | | | due' | | | -Guidance on contingent | | | liabilities | +----------------------------------+----------------------------+ | IAS 20 Accounting for Government | -Government loans with a | | Grants and Disclosure | below-market rate | | of Government Assistance | of interest | | | -Consistency of | | | terminology with other | | | IFRSs | +----------------------------------+----------------------------+ | IAS 23 Borrowing Costs | -Amendment requiring | | | capitalisation only model | | | -Components of borrowing | | | costs | +----------------------------------+----------------------------+ | IAS 27 Consolidated and Separate | Amendment dealing with | | Financial Statements | measurement of the cost of | | | investments when adopting | | | IFRS for the first time. | +----------------------------------+----------------------------+ | IAS 28 Investments in Associates | -Required disclosures when | | | investments in associates | | | are accounted for at fair | | | value through profit or | | | loss | | | -Impairment of investment | | | in associate | +----------------------------------+----------------------------+ | IAS 29 Financial Reporting | -Description of | | in Hyperinflationary Economies | measurement basis in | | | financial statements | | | -Consistency of | | | terminology with other | | | IFRSs | +----------------------------------+----------------------------+ | IAS 31 Interests in Joint | Required disclosures when | | Ventures | interests in jointly | | | controlled entities are | | | accounted for at fair | | | value through profit or | | | loss | +----------------------------------+----------------------------+ | IAS 32 Financial Instruments: | Certain financial | | Presentation | instruments will be | | | classified as equity | | | whereas, prior to these | | | amendments, they would | | | have been classified as | | | financial liabilities | +----------------------------------+----------------------------+ | IAS 36 Impairment of Assets | Disclosure of estimates | | | used to | | | determine recoverable | | | amount | +----------------------------------+----------------------------+ | IAS 38 Intangible Assets | -Advertising and | | | promotional activities | | | -Unit of production method | | | of amortization | +----------------------------------+----------------------------+ | IAS 39 Financial Instruments: | -Reclassification of | | Recognition | derivatives into or out of | | and Measurement | the classification of at | | | fair value through profit | | | or loss | | | -Designating and | | | documenting hedges at the | | | segment level | | | -Applicable effective | | | interest rate on cessation | | | of fair value hedge | | | accounting | +----------------------------------+----------------------------+ | IAS 40 Investment Property | -Property under | | | construction or | | | development for future use | | | as investment property | | | -Consistency of | | | terminology with IAS 8 | | | -Investment property held | | | under lease | +----------------------------------+----------------------------+ | IAS 41 Agriculture | -Discount rate for fair | | | value calculations | | | -Additional biological | | | transformation | | | -Examples of agricultural | | | produce and products | | | -Point-of-sale costs | +----------------------------------+----------------------------+ The following new standards, amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 January 2009 and have not been early adopted. - Revised IAS 27 Consolidated and Separate Financial Statements (effective 1 July 2009) - IFRS 3 (revised) Business Combinations (effective 1 July 2009) - IAS 27 Consolidated and Separate Financial Statements (effective 1 July 2009) - IAS 39 Financial Instruments: Recognition and Measurement (Amendment): Eligible Hedged Items The adoption of these standards, amendments and interpretations is not expected to have a material impact on the Group's loss for the period or equity. The adoptions may affect disclosures in the Group's financial statements. 3. Financial information The comparative figures for the year ended December 31, 2008 were derived from the statutory accounts for that year which have been delivered to the Registar of Companies. Those accounts received unqualified audit report which did not contain statements under sections 498(2) or (3) (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations) of the Companies Act of 2006. 4. Property plant and equipment and intangible assets +--------------------------------------+-----------------+---------------+ | | Property plant | Intangible | | | and equipment | assets | +--------------------------------------+-----------------+---------------+ | Six months ended 30 June 2008 | | | +--------------------------------------+-----------------+---------------+ | Opening net book amount as at | 20,821,607 | 6,355,103 | | 1 January 2008 | | | +--------------------------------------+-----------------+---------------+ | Additions | 628,685 | 128,692 | +--------------------------------------+-----------------+---------------+ | Disposals | - | - | +--------------------------------------+-----------------+---------------+ | Depreciation and amortisation | ( 383,958) | ( 126,399) | +--------------------------------------+-----------------+---------------+ | Closing net book amount as at | 21,066,334 | 6,357,396 | | 30 June 2008 | | | +--------------------------------------+-----------------+---------------+ | | | | +--------------------------------------+-----------------+---------------+ | Six months ended 30 June 2009 | | | +--------------------------------------+-----------------+---------------+ | Opening net book amount as at | 21,834,373 | 273,832 | | 1 January 2009 | | | +--------------------------------------+-----------------+---------------+ | Additions | 237,524 | - | +--------------------------------------+-----------------+---------------+ | Disposals and abandonments | (150,311) | - | +--------------------------------------+-----------------+---------------+ | Depreciation and amortisation | (465,526) | (32,616) | +--------------------------------------+-----------------+---------------+ | Closing net book amount as at 30 | 21,456,060 | 241,216 | | June 2009 | | | +--------------------------------------+-----------------+---------------+ 5. Borrowings +-----------------------+--+----------------+---+---------------+ | | | 30 June 2009 | | 31 December | | | | US$ | | 2008 | | | | | | US$ | +-----------------------+--+----------------+---+---------------+ | Loan from PRI (i) | | 12,000,000 | | 12,000,000 | +-----------------------+--+----------------+---+---------------+ | Loan from CSW (ii) | | 3,000,000 | | 3,000,000 | +-----------------------+--+----------------+---+---------------+ | Loan from CSW (iii) | | 3,000,000 | | 3,000,000 | +-----------------------+--+----------------+---+---------------+ | | | 18,000,000 | | 18,000,000 | +-----------------------+--+----------------+---+---------------+ (i) PRI Line of Credit On December 1, 2005, the Company, VGI and CSEL entered into a $15,000,000 credit facility arrangement with Physician Reciprocal Insurers ("PRI") which was subsequently increased to $18,000,000, having a maturity date of March 31, 2007 at December 31, 2006. The credit facility is secured by all of the assets of the Company. Interest originally accrued at the "prime rate" as published in the Wall Street Journal plus 2.0%, adjusted at the end of each quarter. On March 31, 2007, the credit facility was converted to a $20,000,000 two-year term loan, PRI advanced an additional $2,000,000, the maturity date was extended to March 31, 2009 and PLC granted 1,182,677 A warrants to PRI. In June 2007 PLC granted an additional 170,989 A warrants to PRI. During August 2007 in conjunction with the sale of the property and equipment, the Company paid down US$13,000,000 of the outstanding debt under the credit facility, converted the term loan to a non-revolving US$ 12,000,000 line of credit, extended the maturity date to 31 December 2009 and lowered the interest rate from the prime rate plus 2% to the prime rate. In May 2008, the Company entered into an additional loan agreement with CSW Sub Lender L.P. and agreed to a floor of 6% on the interest rate accruing on the PRI loan. In 2009, the Company defaulted on the PRI Loan. The Company and PRI are currently operating under a forbearance agreement that expires on December 31, 2009 (see Note 1). At the time of the re-finance in March 2007, the Company believes that the interest rate obtained of prime plus 2% was a premium to its then prevailing market rate for secured borrowings. The premium was offset in equal amounts by the warrants issued to the lender in consideration for the re-finance. The Company thus treated the fair value of the loan notes as approximating its nominal value. The directors consider the carrying amount of CSW Loan to approximate its fair value as of June 30, 2009. (ii) CSW Loan In June 2006, the Company entered into a loan agreement with CSW Lender, LP ("CSW") and borrowed an amount of $5,000,000. The loan is secured by a second mortgage on all of the Company's real estate, initially accrued interest at the prime rate plus 2% and had an extended maturity date of March 31, 2007. In August 2007, the company paid the loan down $2,000,000, and the interest rate was reduced to the prime rate on the $3,000,000 balance. The maturity date was also extended to December 31, 2009. In May 2008, a floor of 6% was placed on the interest rate in conjunction with the closing of the loan agreement with CSW Sub. In 2009, the Company defaulted on the CSW Loan. The Company and CSW are currently operating under a forbearance agreement that expires on December 31, 2009 (see Note 1). The directors consider the carrying amount of CSW Loan to approximate its fair value given the assumptions noted above. (iii) CSW Sublender Loan In May 2008, the Company entered into an additional line of credit agreement with CSW Sub amounting to $5,000,000, with an interest rate of 12% and a maturity date of December 31, 2009. The loan is secured by all of the Company's assets, but is junior to the secured interest of PRI and CSW. The Company borrowed $3,000,000 during 2008 under this line of credit. In 2009, the Company defaulted on this loan and the Company and CSW Sub are currently operating under a forbearance agreement that expires on December 31, 2009 (see Note 1). The directors consider the carrying amount of the CSW Sublender Loan to approximate its fair value. 6. Preference shares, warrants and options At 30 June 2009, 208,268 (2008:332,972) options were outstanding under the Cosentino Signature Wines plc 2005 Equity Compensation Plan with exercise prices ranging from GBP0.245 to GBP1.25. Of these options, 84,286 (2008:27,972) 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. 7. Seasonality The retail and wholesale sales for wines are subject to seasonal fluctuations with peak demand in the third and fourth quarter. This is due to seasonal harvest activities and holiday periods. For the six months ended 30 June 2009, the level of retail and wholesale sales represented 35% (six months ended 30 June 2008: 39%) of the annual level retail and wholesale sales in the year ended 31 December 2008. 8. Discontinued Operations In the fourth quarter of 2008, the Group abandoned its operations and discontinued the production of two of its three main brands, CE2V and Crystal Valley Cellars, along with its custom crush business which was being operated out of its Lockeford facility. These operations were primarily conducted from the facilities and equipment at the Pope Valley, Clements and Lockeford facilities and vineyards that were the subject of the 2007 sale leaseback transaction. In discontinuing the operations, the leased facilities and equipment were formally returned to the lessor in February 2009 after the Company had completed the removal of its property and equipment that had not been included in the sale leaseback transaction. The brands were discontinued in October 2008 and all operations in these facilities, other than the winding down, ceased in 2008. The decision to abandon the brands and facilities was made as the facilities were operating at significantly less than 50% of capacity and because of the general economic decline that was being experienced in the United States, convinced management and the board of directors that the wine industry would not recover in 2009 and perhaps would begin to recover only slowly in 2010. As a result, management concluded that the Company could no longer afford to produce these brands and operate the returned facilities. Management believes that all Company efforts should be directed to its core brand, Cosentino Winery, and its related facilities in Napa Valley, California. Because the returned facilities were operating at significantly less than full capacity, the costs to maintain these facilities and brands had become uneconomic as of the fourth quarter of 2008. The results of discontinued operations in respect of CE2V, Crystal Valley Cellars and the custom crush business consisted of the following for the six months ended: +--------------------------------------+--------------+--+--------------+ | | 30 June, | | 30 June, | | | 2009 | | 2008 | +--------------------------------------+--------------+--+--------------+ | | | | | +--------------------------------------+--------------+--+--------------+ | Net Sales | 812,252 | | 2,236,061 | +--------------------------------------+--------------+--+--------------+ | Cost of Sales | (607,906) | | (738,287) | +--------------------------------------+--------------+--+--------------+ | Gross Profit | 204,346 | | 1,497,774 | +--------------------------------------+--------------+--+--------------+ | Operating Expenses | (153,335) | | (1,038,737) | +--------------------------------------+--------------+--+--------------+ | Income from discontinued operations | 51,011 | | 459,007 | | before taxes | | | | +--------------------------------------+--------------+--+--------------+ | Income taxes | - | | - | +--------------------------------------+--------------+--+--------------+ | Costs to settle obligations of | (1,141,093) | | - | | discontinued operation | | | | +--------------------------------------+--------------+--+--------------+ | Loss on abandoned assets | (142,578) | | - | +--------------------------------------+--------------+--+--------------+ | (Loss) Income from discontinued | (1,232,660) | | 459,007 | | operations | | | | +--------------------------------------+--------------+--+--------------+ 9. Events After the Balance Sheet Date and Contingent Liabilities During the first six months of 2009, the Company was sued by a number of creditors as a result of being unable to pay amounts due within agreed-upon terms. All lawsuits have since been settled, allowing the Company extended payment terms, or dismissed, with the exception of two minor lawsuits to which the Company disputes the amount of the claims. The Company is subject to certain other legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated. In the opinion of management, the Company does not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on its consolidated financial condition or operating results. In August 2007 the Company entered into a sale and leaseback transaction relating to land, land improvements, buildings and equipment. The Company has been in a dispute regarding these leases, has made no rental payments since September 2008 and returned the properties and equipment to the lessor in February, 2009. The lessor filed a lawsuit against the Company in early 2009. In December 2009, through a court supervised mediation, the Company and the lessor came to an agreement in principal to settle all outstanding obligations. The settlement is contingent upon the Company closing on its refinancing (see Note 1). The Company believes that any further disclosures regarding this pending settlement would be seriously prejudicial to the outcome of any settlement agreement. This information is provided by RNS The company news service from the London Stock Exchange END IR ILFVRFRLVFIA
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