REG - Chill Brands Group - AGM Statement & Trading Update

Chill BrandsAnnouncement

30/09/2024 07:00

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RNS Number : 1276G  Chill Brands Group PLC  30 September 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF REGULATION
11 OF THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS 2019/310.

30 September 2024

Chill Brands Group plc

("Chill Brands" or the "Company")

Completion of Audit, Business and Trading Update Ahead of AGM

Chill Brands Group, the consumer packaged-goods distribution company, will
hold its Annual General Meeting ("AGM") today at 3.00pm (BST). Ahead of the
AGM, the Company provides the following update on progress towards the
completion of its audit, trading, and the recovery of its assets.

Completion of the Audit and Publication of the Company's Annual Report and
Accounts

As set out in the announcement of 17 July 2024, the Company had commenced its
audit process in April 2024. This was paused by the Company during May 2024.
Since the General meeting on June 2024 and reinstatement of Callum Sommerton
as Chief Executive Officer, the Company has sought to make progress with its
audit process. Following the events of Q2 2024, which attracted significant
media attention, the Company's banking providers limited access to its
accounts pending a protracted review process. This action further delayed the
Company's ability to make operational progress and impacted the timeline for
completing its audit and publishing financial statements.

The Company has now secured new banking provisions and is working to resume
normal financial operations including the completion of its audit process.
Progress has also made towards the recovery of the Company's largest asset,
the chill.com domain name, the status of which also has an impact on the audit
process.

The Company will provide a further update on the date of publication of its
full year report and accounts, and is committed to substantively completing
the audit process during 2024.

Product Strategy Update

The UK Government is considering a Tobacco and Vapes Bill, which is expected
to become law during this parliamentary session. Irrespective of what is
contained in the legislation when the Bill is finally passed, all major
retailers have been refining their strategy with the expectation that there
will be a ban on single use disposable vapes. Consequently, Chill Brands has
experienced a notable shift in UK retailer demand from disposable vapes
towards more sustainable alternatives. The Company's Chill ZERO products are
still considered as market leaders in the zero nicotine segment and the
Company intends to introduce new products for the UK market, in line with the
expected legislation.

Previously announced efforts to expand the Company's product range in response
to these market trends have been hindered by delays in gaining access to its
funds post the General Meeting held on 4 June 2024. The Company remains
committed to developing and producing the multi-pod device exhibited at the
World Vape Show in June 2024.

The Company is also working to develop new alternative non-disposable,
multi-use products both with and without nicotine. The Company will allocate
its resources appropriately to products which are in line with market trends
and are expected to generate improved sales in the short term. Consequently,
these new products may launch ahead of the multi-pod device to capitalise on
demand expressed by retailers.

Additionally, the Company is currently collaborating with potential UK
manufacturing partners to launch a new range of e-liquids - the fluids that
are added to reuseable vaping devices to create inhalable, flavoured vapour.
The Company believes that as the UK vape market shifts back towards refillable
devices and pod systems, there is a significant opportunity to leverage its
brand in the e-liquid segment. By introducing e-liquids, Chill aims to offer a
product range that is less exposed to regulatory volatility surrounding vaping
hardware. The Company has already recorded demand from vape stores for a range
of Chill branded e-liquid products.

In line with the development and release of new products, the Company plans to
introduce a fresh approach to branding that retains the essence and appeal of
the existing Chill brand, while also aligning with anticipated regulatory
changes regarding packaging, colours, and marketing. In doing so, Chill Brands
intends to position itself as a market leader for responsible brand
positioning that will endure future regulatory changes.

Further updates regarding the launch of new products will be provided as
development efforts progress.

Business and Trading Update

UK Trading

While the Company has continued to make new sales to both existing and new
convenience store partners, its deal flow and rate of growth have been limited
since the start of the new financial year in April 2024. This is due to a
combination of factors, including a shift in sentiment regarding disposable
vapes, retailer caution surrounding incoming legislation, and the events
leading up to and immediately following the Company's General Meeting on 4
June 2024.

 

Despite this, the Company continues to maintain a strong presence in
independent stores and major UK retail chains. Discussions for expanding its
UK distribution footprint are ongoing with existing partners, though it is
expected that further uptake by major retailers will focus on newly developed
reusable products, rather than the current range of Chill ZERO nicotine-free
disposable vapes. The Company will continue to sell its disposable products in
the United States and plans to expand sales into Europe and parts of the
Middle East.

In line with the strategy to broaden its market presence, the Company is
seeking to expand its reach by partnering with alternative retailers outside
of the convenience store channel. To support this effort, Chill will be
exhibiting at the upcoming UK Pharmacy Show, where the Company aims to
strengthen its position within the vaping category. Pharmacies and
health-focused retail outlets have demonstrated strong demand for the brand,
and the Board sees significant potential to further capitalise on
opportunities in this sector. Pharmacists, with their strong focus on smoking
cessation, represent a key partner in promoting the Company's nicotine-free
vaping products to adult smokers and vape users.

US Trading

Following the constitution of the new board on 4 June 2024, the Company has
undertaken a comprehensive review of its US operations. Following this review,
the Company expects to make annualised cost savings exceeding $650,000,
without compromising its ability to service existing US retail customer
accounts. These savings will enable the Company to operate more efficiently
while continuing to deliver value to its partners and customers in the region.

The retail sales performance of Chill ZERO products has remained stable since
the start of this financial year. The Company's existing retail partners
continue to gradually expand the number of stores offering Chill ZERO
products, while also presenting the range to new retailers. In line with its
growth strategy, the Company continues to seek a US sales lead to further
drive its expansion in the US market.

Recovery of the Company's assets

As announced on 25 July 2024, the Company filed a complaint in the U.S.
District Court for the District of Colorado seeking the recovery of its
assets. Earlier this month, an amended complaint was submitted.

A judge has now been appointed to the case, and it has been agreed between the
parties and ordered by the Court that the defendants must not sell, transfer,
or assign the registration of the domain name, nor take any action to encumber
or alter the status quo in connection with the domain, until otherwise
ordered.

 

As of the date of this announcement, the Company maintains operational control
of the website linked to the domain, with the exception of the payment
processor connected to the US-facing section of the site.

The Company remains hopeful for a resolution in the near future and will
provide further updates when appropriate.

 

Callum Sommerton, Chief Executive Officer of Chill Brands, said:

"2024 has been an incredibly challenging year for the Company, marked by
regulatory headwinds in the vaping industry and significant corporate
challenges. Despite these hurdles, there is cause for cautious optimism. We
continue to add products and brands to the Chill.com website, develop new
proprietary products, and prepare for exciting distribution opportunities with
our retail partners.

While I am naturally very disappointed by the delays and restrictions on our
progress, I remain highly motivated to restore trading and return to the
positive momentum we had achieved. The Board and I are committed to overcoming
these obstacles and driving the company forward for the benefit of all
shareholders."

-ENDS-

About Chill Brands Group

Chill Brands Group plc (LSE: CHLL, OTCQB: CHBRF) is an international consumer
packaged goods company focused on the development, marketing and distribution
of wellness and recreational products. The Company's proprietary nicotine-free
vapour products cater to the rapidly growing market for tobacco alternatives
and are distributed by some of leading retail stores in the US and UK. Chill
Brands also operates the chill.com e-commerce website, on which it is building
a marketplace of products from third-party brands.

Publication on website

A copy of this announcement is also available on the Group's website
at https://chillbrandsgroup.com/news-and-media/news/

Media enquiries:

 Chill Brands Group plc                                      +44 (0)20 4582 3500

 Harry Chathli, Chairman
 Allenby Capital Limited (Financial Adviser and Broker)      +44 (0) 20 3328 5656
 Nick Harriss/Nick Naylor/Lauren Wright (Corporate Finance)

Kelly Gardiner (Equity Sales)

 

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