TIDMEISB
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 AMED. 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
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 (GBP000) 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 GBP1.26m, 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 GBP1.52m (2022: GBP1.68m). 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 GBP0.12m while sales and
marketing-related expenses increased by GBP0.1m. 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 GBP1.50m in H1 (2021: GBP1.46m).
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 GBP1,466,666.67. 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 GBP0.01. 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
GBP733,333.33 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 (GBP0.18m)
and net assets of GBP1.6m. The company raised GBP2.2m 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 6 months
to to
30 June 30 June
2023 2022
Note GBP000 GBP000
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 GBP000 GBP000
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 Share Convertible Option Forex Acquisition Retained Total
Capital Premium Loan Reserve Reserve Reserve Earnings Equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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 6 months
to to
30 June 30 June
2023 2022
GBP000 GBP000
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 (2) -
debt
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 (unaudited) (unaudited)
of Destination 6 6
months to months to
30 30
June 2023 June 2022
GBP000 GBP000
Beverage New
distribution 100 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
GBP000
GBP000
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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IR SEMEEAEDSESU
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