REG - East Imperial PLC - Interim Results
29/09/2023 07:15
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RNS Number : 0858O East Imperial PLC 29 September 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
THE UK VERSION OF REGULATION (EU) NO 596/2014 WHICH IS PART OF UK LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
29 September 2023
East Imperial Plc
(the "Group" or the "Company")
Interim Results for the Six Months Ended 30 June 2023.
East Imperial, the global purveyor of super-premium mixers, today announces
unaudited half-year results for the period ended 30 June 2023, which can be
viewed below and on the company website at www.eastimperial.com.
Anthony Burt, CEO of East Imperial, commented:
"There's little doubt that Q2 was challenging for the company, particularly
after enjoying 40% YoY growth in Q1. New funding had been earmarked for late
Q1, but unfortunately, this process took four months longer than we
anticipated and hoped. We were forced to pause all production and supply
solely through our inventory holding, and today's results reflect the impact
of our cash constraints. Nevertheless, I am extremely excited to have a
strong distribution investor and distribution partner in China, the world's
largest market. Despite the delay in funding, in markets where we had stock,
such as the APAC region, we grew 24.7% against the same period last year,
showing the brand's core strength.
With the funding now in the bank, I am very pleased that normal production and
supply have returned as the team clears the backlog of orders, focuses all
efforts on H2, restocks the supply chains and gains important momentum into
2024.
The logistics and production costs we endured throughout the peak of COVID-19
in 2021-22 continue to impact margins. Still, we're now seeing an end to the
affected inventory holding, and our margin improvement and cost
rationalisation programs have been in full swing for 2023. I anticipate we'll
return to more sustainable and acceptable margins in 1H24.
While the US remains strategically important to us, having INL Investments as
a cornerstone partner also underpins our strong APAC strategy. We will use
this relationship to gain a deeper and wider foothold in the South China
market.
I am also pleased to add Jaron Berkhemer and Frank Andreu to the US team.
Jaron will oversee all commercial aspects of our US strategy, and Frank will
head up the all-important Southeast region. Frank was, up until recently,
one of our key US competitors' top US salespersons. Frank and Jaron bring
significant category experience, proven track records and high intensity to
our US sales effort.
There have been some welcomed changes to the shareholder base as we saw the
end of nearly two years of activism that had caused an unnecessary distraction
for management. There are also changes to the board, and I am very pleased to
welcome some strong industry experience back to the board with Horace Ngai
joining. His executive experience in Asia aligns well with the new investments
and opportunities presented.
Despite the supply constraints, we have made incredible progress with key
strategic partnerships, such as Air New Zealand and Cocktail Courier. We're
now in a great position to push forward and execute our strategy to be the
only true super-premium mixer, fully funded and with a world-beating team."
Media Enquiries
Anthony Burt / Andrew Robertson - investors@eastimperial.com
(mailto:investors@eastimperial.com)
About East Imperial
Founded in New Zealand and Singapore in 2012, East Imperial produces a range
of ultra-premium mixers that sell throughout APAC, the US and EMEA. Guided by
a clear strategy to capitalise on the growing demand for premiumisation across
the beverage industry, East Imperial has sold over 33 million bottles in over
20 countries since its founding, with popular products including Old World
Tonic, Grapefruit Tonic, Yuzu Tonic and Mombasa Ginger Beer. In 2023, East
Imperial won 8 medals at the coveted Tonic & Mixers Masters Competition in
London. The company was founded on the philosophy of creating exquisite
products defined by heritage, tradition and authenticity. All products are
made from the highest quality, all-natural ingredients, reflecting East
Imperial's commitment to providing a sustainable product and minimising
environmental impacts at every stage of the manufacturing process. For more
information about East Imperial and its ultra-premium mixers, please visit
eastimperial.com.
Summary
East Imperial Plc revenues had grown strongly in Q1 of 2023; however, revenues
stalled in Q2 due to a pause in production as the business rationalised
resources and the anticipated cash injection was delayed until August 2023.
There is little doubt this caused a challenging environment in which to
operate. Still, the team has done an incredible job in a capital-constrained
period. We're pleased to see production fully return, supply channels all
operating, and the business ready for growth again.
Despite the supply challenges, revenues in the APAC region were up 24.7%
compared to the same period last year. New Zealand was up 30.2%, mitigating
some supply challenges due to its proximity to production and showing what the
brand can do when fully supported. We expect a strong finish to the year from
both New Zealand and the wider APAC region. This demonstrates a continued
growth of market share in this region. More importantly, this market
continues to be robust globally, with the need for a premium mixer expanding
into less developed markets like South America, India and Africa.
US sales were down by 43.1%, a direct impact of production delays. We are
pleased to see the US now has appropriate inventory in the market and
sector-experienced sales resources and is making good progress in our core
states. We have retained all our key accounts with supply constraints during
the period, highlighting the strength of our relationships. The region is
positioned well to finish the year strongly and have a robust, great 2024.
Looking forward, the management is confident that the company will be able to
improve revenues as our key markets are once again adequately supplied with
inventory and ready to meet the growing demand of our busiest time of the
year.
Financial Review
Unaudited (£000) H1 2023 H1 2022
Revenue 1,255 1,284
Gross Profit 52 224
Adjusted Gross Profit 200 224
Adjusted EBITDA (1,547) (1,485)
Operating loss (1,505) (1,464)
The Group's performance in H1 2023 saw revenues slightly down by only 2.2% to
£1.26m, a surprisingly small decline given our supply issues.
The 2023 H1 adjusted gross margin of 16% reflects the normalising of the
margin to account for inventory write-offs through H1 2023. These write-offs
reflect products that, for a variety of product-life reasons, were unsellable
and attracted costs of storage and movement before being destroyed. The
normalised margins have also been held lower than what we are now seeing as we
sold through US inventory that still had a high inventory cost value
reflecting the COVID-era production, shipping and logistic costs of 2021 and
2022. While we have carried inventory in the US market, it has not always been
the correct format, adding to the inability to supply particular formats in
demand. We now have a solution to this for this coming financial year.
The inventory produced for the market now reflects the margins we expect as we
continue our margin improvement program. Reported margins for H1 2023 of 4.2%
reflect the unusually high-level write-offs for this period. Management
believes over time that a goal of a margin above 45% is achievable for a
super-premium product.
During H1 2023, underlying operating expenses decreased by 10% to £1.52m
(2022: £1.68m). After the close of H1 2023, the new management team has
constructed a program to rationalise the business's operating costs and will
see significant savings. This is part of a program of revenue growth, margin
improvement and operating cost reduction to expedite our journey to a
break-even position and profitable growth focusing on the new management team
and Board.
People costs were reduced by £0.12m while sales and marketing-related
expenses increased by £0.1m. This reflects a reallocation of resources from
support roles and using the savings to invest in sales and marketing
initiatives. We remain a lean operating organisation and anticipate further
efficiencies to help drive a lower operating cost base, including an incentive
program tightly aligned to broader business targets and stock price.
The Group generated an operating loss before exceptional costs of £1.50m in
H1 (2021: £1.46m).
Events After the Interim Period
On 14 August 2023, the company completed the first issue of 10% Secured Convertible Loan Notes to INL Investment Limited to the value of £1,466,666.67. INL Investment Limited has the right to convert the 2025 Convertible Loan Notes into Ordinary Shares at a price equal to a 20% discount to the 60-day VWAP of the Ordinary Shares as at the date of the conversion notice, subject to a minimum price per Ordinary Share of £0.01. The maturity date of the 2025 Convertible Loan Notes is the first business day, falling twenty-four months after the date of issue.
INL Investment Limited will subscribe for a further £733,333.33 of 2025 Convertible Loan Notes under the second completion of the investment. This is expected to occur on the first business day, three calendar months following the first completion, 15 November 2023.
Cash Position
As of 30 June 2023, the Group had cash balances of (£0.18m) and net assets of
£1.6m. The company raised £2.2m for a convertible note placement in August
2023. This covers working capital and finances excess operating costs as the
business moves towards a break-even position. Management continues to commit
to getting to its cashflow break-even goal as soon as possible.
Outlook and Future Prospects
We continue to build a world-class team with the recent additions in the US of
Jaron Berkhemer and Frank Andreu. Both have unparalleled sector experience and
well-established relationships in our core US markets.
This week's Cocktail Courier announcement, which sees East Imperial become the
official mixer in their cocktail kits delivered to over 1,000,000 US homes, is
a testament to Jaron's business development capabilities and the power of our
brand versus other players in the US market. Management believes that
having East Imperial in the hands of this audience will drive both trial and
sales.
Having Air New Zealand, voted the world's best airline, now pouring East
Imperial on board their New York and Chicago routes and having Singapore's
newest 5-star hotel from Ascendas Hospitality Trust (A-HTRUST) is another
testament to the brand's competitiveness. In these closely contested
accounts, we secured the win without compromising on price and "buying the
business." This also demonstrated the calibre of partners the company
continues to attract and with which it continues to work. We're excited to
continue to work closely with both the partners above and expect to add to
other illustrious names over time as we extend the working relationship and
explore new opportunities together.
We were also pleased to announce our sponsorship of Tales of the Cocktail, the
US's largest annual trade conference, festival and gathering of cocktail and
spirits industry professionals in New Orleans, Louisiana. This partnership
aligns with our strategy to reach and be seen by the best in the global
on-trade as the only true super-premium mixer option available. This is
another testament to the desirability of our brand and how it is viewed in the
trade.
We are working on several other substantive opportunities and are excited to
share other material news over the coming months as we win those partnerships
and accounts.
Product-wise, we have taken the opportunity to review our SKU mix in some
regions and consolidated our offering to reflect each region's distinct
demands. This streamlines our supply chain and preserves important working
capital-the right product at the right place.
Additionally, we will still look to move production for the US once demand
reaches the critical level that makes it economically viable for us to do so.
Pleasingly, we've seen relief as freight rates have fallen since the COVID
highs, making the inflexion point for US production higher than 12 months ago.
We're now switching most customers to FOB sales terms in the shorter term to
preserve working capital and shorten the cash cycle, a key financial goal for
the new Management team.
An exciting new SKU (to be announced later) is still being added in early
2024, a world first, but overall, we're pleased to see strong growth in our
award-winning Grapefruit Soda, Yuzu Lemonade, and Yuzu Tonic. Flavours, the
Management believes, encapsulates the distinct quality of East Imperial and
sets us further apart from our competitors.
Looking into later in the year and into 1H24, we continue to see margin growth
as we move past the production pause this year and the write-offs we've
endured. We are sharply focused on margin improvement opportunities in the
medium term and on driving profitable top-line growth. These improvement
opportunities have been built into each market we are servicing, and we expect
to see the benefits appear as soon as 1H24.
With the strategic investment from INL Investments, we will see a renewed
focus on growing our position in China as the super-premium mixer for this
market. The focus for Q4 and Q1 2024 will be Macau, focusing on luxury
accommodation and exquisite dining experiences to which our products are
well suited.
There are plenty of exciting initiatives now in play. With recent changes in
the shareholder base and our team, we can rebuild shareholder value with fewer
distractions, greater core shareholder support, and a renewed, deep commitment
to financial discipline.
Principal Risks and Uncertainties
The Board reviews the principal risks and uncertainties currently faced by the
Group. The principal risks faced by the Group are set out below, and the Board
considers the risk levels to have remained the same since December 2022.
• The Group is exposed to the impact of a pandemic and the risks
relating to measures imposed by national governments to control the outbreak.
In the past, this has seen the closing of on-premise locations across multiple
key territories. The Group actively monitors the situation in all
jurisdictions and remains agile in adapting to changing market and operational
conditions.
• Regulatory changes in each market could have an adverse impact on
the Group. The Group monitors legislative and regulatory changes and alters
its business practices where and when appropriate.
• An unforeseen loss of key personnel. The Group has a continuity
program in place to ensure that The Group can minimise the disruption caused
by the potential loss of key personnel. The Company also has a Short-Term
Incentive Plan (STIP) for all employees and an Options scheme for senior team
members for motivation, reward and retention.
Forward-Looking Statements
Certain statements in this interim report are forward-looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable and achievable, it can give no assurance that these
expectations, nor the timing of these expectations, will prove accurate or
correct. Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by these
forward-looking statements. It undertakes no obligation to update any
forward-looking statements, whether due to new information, future events or
otherwise.
Statement of Directors' responsibilities
The Directors are responsible for preparing the half-yearly financial report
in accordance with applicable laws and regulations.
The Directors confirm to the best of their knowledge:
a) The interim consolidated financial statements have been prepared in
accordance with International Accounting Standard 34 'Interim Financial
Reporting', as adopted by the United Kingdom; and
b) The Management Report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties they face.
On behalf of the Board
Anthony Burt,
Chief Executive Officer & Founder
East Imperial plc
EAST IMPERIAL PLC
Interim Results
For the Six Months Ended 30 June 2023
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2023
(unaudited) (unaudited)
6 months to 6 months to
30 June 2023 30 June 2022
Note £000 £000
Continuing operations
Revenue 1 1,255 1,284
Cost of sales (1,203) (1,060)
Gross Profit 52 224
Administrative Expenses (1,523) (1,682)
Other Operating Income 8 15
Adjusted EBITDA (1,547) (1,485)
Depreciation (8) (9)
Depreciation - Right of use Asset (34) (7)
Amortisation - (5)
Share Based Payments - -
Operating (loss) (1,505) (1,464)
Finance Income - 0
Finance Costs (446) (16)
(Loss) before tax (1,951) (1,481)
Income tax - -
(Loss) for the year (1,951) (1,481)
Other Comprehensive Income
Items that may be subsequently reclassified to profit or loss:
Foreign exchange differences on consolidation 365 168
365 168
Total Comprehensive (Loss) for the Year (1,586) (1,313)
Loss attributable to :
Owners of the company (1,586) (1,313)
Earnings per share (EPS) Pence Pence
Basic EPS (0.47) (0.80)
Condensed Consolidated Statement of Financial Position
For the six months ended 30 June 2023
(unaudited) (audited)
30 June 31 December
2023 2022
Assets £000 £000
Non - Current Assets
Intangible assets 2,218 2,219
Property, Plant and Equipment 74 86
Right of Use Assets 508 589
Total Non-Current Assets 2,801 2,894
Current Assets
Cash and Cash Equivalents (181) 129
Trade and Other Receivables 152 459
Inventories 1,069 1,697
Total Current Assets 1,041 2,285
Total Assets 3,841 5,179
Liabilities
Current Liabilities
Trade and Other Payables 1,671 1,365
Lease Liability (S/T) - 79
Total Current Liabilities 1,671 1,444
Net Current Assets/(Liabilities) (630) 841
Non-Current Liabilities
Provisions 65 38
Lease liability 503 508
Total Non-Current Liabilities 568 546
Net Assets 1,603 3,189
Equity attributable to owners of the parent
Share Capital 3,382 3,382
Share premium 6,974 6,974
Share option reserve 290 290
Reverse acquisition reserve 5,039 5,039
Foreign exchange reserve 527 163
Retained Earnings / (Losses) (14,610) (12,660)
Total Equity 1,603 3,189
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2023
Share Share Convertible Share Option Forex Acquisition Retained Total
Capital Premium Loan Reserve Reserve Reserve Earnings Equity
£000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2022 3,057 4,033 - 248 48 5,039 (9,006) 3,419
Loss for the year - - - - - - (1,481) (1,481)
Forex retranslation difference - - - - 168 168
Total comprehensive income - - - - 168 - (1,481) (1,313)
Issue of shares 325 3,077 3,402
Share issue costs (136) (136)
Convertible loan settled
Balance at 30 June 2022 3,382 6,974 - 248 216 5,039 (10,487) 5,372
Balance at 31 December 2022 3,382 6,974 290 163 5,039 (12,659) 3,189
Loss for the year - - - - - - (1,951) (1,951)
Forex retranslation difference - - - - 365 - - 365
Total comprehensive income - - - - 365 - (1,951) (1,586)
Share Based Payments - - - - - - - -
Balance at 30 June 2023 3,382 6,974 - 290 528 5,039 (14,610) 1,603
The above condensed consolidated statement should be read in conjunction with
the accompanying notes.
Condensed Consolidated Statement of Cashflows
For the six months ended 30 June 2023
(unaudited) (unaudited)
6 months to 6 months to
30 June 2023 30 June 2022
£000 £000
Cashflows from operating activities
(Loss) for the year (1,951) (1,481)
Adjusted for:
Foreign Exchange differences on retranslation 365 167
Depreciation, amortisation and impairments 42 21
407 188
Decrease/(increase) in trade and other receivables 322 (77)
Increase/(decrease) in trade and other payables 551 (252)
Other decreases/(increases) in net working capital 628 (74)
1,501 (403)
Net cash flows from operating activities (43) (1,696)
Cashflows from investing activities
Acquisition of property, plant and equipment 6 (149)
Net cash flows from investing activities 6 (149)
Cashflows from financing activities
Increase/(decrease) in debt (2) -
Lease Payments (38) -
Proceeds from issue of ordinary shares, net of allowable issue costs - 3,266
Net cashflows from financing activities (40) 3,266
Net increase/(decrease) in cash and cash equivalents (77) 1,421
Foreign exchange differences to cash and cash equivalents
on consolidation - -
Cash and cash equivalents at beginning of the half-year (104) 142
Cash and cash equivalents at end of the half-year (181) 1,563
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2023
Basis of preparation and accounting policies
These condensed consolidated interim financial statements have been prepared
in accordance with International Accounting Standard 34 'Interim Financial
Reporting'. They do not constitute statutory accounts as defined in s434 of
the Companies Act 2006.
The condensed unaudited consolidated financial statements should be read in
conjunction with the audited consolidated annual financial statements for the
year ended 31 December 2022, which have been prepared in accordance with IFRS
endorsed for use in the United Kingdom.
The condensed consolidated interim financial statements for the period ended
30 June 2023 have not been audited or reviewed in accordance with the
International Standard on Review Engagements 2410 issued by the Auditing
Practices Board.
The principal accounting policies adopted in preparing the condensed
consolidated financial statements are unchanged from those applied to the
Group's financial statements for the year ended 31 December 2022. They are
consistent with those expected to be applied in the financial statements for
the year ended 31 December 2023.
Adjusted EBITDA has been calculated consistently with the method applied in
the financial statements for the year ended 31 December 2022. Operating profit
is adjusted for several non-cash items, including amortisation, depreciation,
and the share-based payment charge, which recognises the fair value of share
options granted. The intention is for Adjusted EBITDA to provide a comparable,
year-on-year indicator of underlying trading and operational performance.
The Directors have assessed the Group's activities, the financial position of
the Group, and their identification of any material uncertainties and the
principal risks to the Group. The impact of the capital raise has also been
reflected in the Directors' assessment. The Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the next twelve months. Therefore, the Directors consider it
appropriate to adopt the going concern basis of accounting in preparing the
condensed consolidated interim financial statements
The preparation of financial statements in accordance with IFRS requires the
use of estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the year to date. Although these
estimates are based on management's best knowledge of the amount, events or
actions, the actual results may ultimately differ from those estimates.
In preparing these unaudited condensed consolidated interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those that applied to the audited consolidated financial
statements for the year ended 31 December 2022.
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2023
1. Revenue by region
Type % Revenue by Country of Destination (unaudited) 6 months to 30 June 2023 (unaudited) 6 months to 30 June 2022
£000 £000
Beverage distribution 100 New Zealand/Australia 761 537
United States 240 422
European Union 187 198
Asia 62 102
Pacific Islands 5 25
2. Earnings per share
(unaudited) (unaudited) 6 months to 30 June 2022
6 months to 30 June 2023
£000
£000
Loss
Loss used to calculate basic and diluted EPS (1,586) (1,313)
Number of shares
Weighted average number of shares for the purpose of basic earnings per share 336,821,108 165,704,112
Basic loss per share (pence) (0.47) (0.80)
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