CHILL BRANDS GROUP PLC
("Chill Brands" or the "Company" or the "Group")
Half Year Results for the Six Months Ended 30 September 2023
Chill Brands Group, the consumer packaged-goods distribution company, announces its unaudited half year results for the six months ending 30 September 2023 (the "Period").
Summary
During the Period the Company focused on the launch of its 'Chill ZERO' nicotine-free vape products and the expansion of its e-commerce marketplace on the Chill.com website, however progress in these areas only started to be reflected in sales post the Period end. In particular, the Company announced sales of its Chill ZERO products to significant retailers in both the UK and USA during Q3, leading to a notable improvement in the Company's trading performance.
The Company was sustained during the Period by funds raised in March and April 2023 with a combined total of £3.1 million (before expenses). The Company has deployed these funds for working capital purposes and to grow the distribution and sales of its products.
In addition, post the period end, over £3 million of convertible loan notes raised during the previous financial year were converted to equity. This follows the approval of the Company's prospectus, published on 30 November 2023.
Revenues recorded during the Period represent a 325% increase on the prior year interim period. This reflects initial sales of the Company's vape products, commissions earned on products sold by third-party brands on the Chill.com website, and continued sales of certain legacy products including CBD oral chew pouches. Excluding expenses related to the writing down of legacy product inventory, sales of the Company's products during the period achieved a margin of 31.9%.
Since the end of the Period the Company has experienced a sustained improvement in trading conditions driven by rapid growth in sales of its vape products. Due to this much improved sales performance and successful expansion through new distribution agreements, the Company expects to record substantially higher revenues during the second half of the financial year, reflecting the positive impact of the Company's new product focus on overall business development.
Financial Overview
During the half year Period the Company recorded revenues of £83,392 (prior interim period: £19,610), an increase on the £82,840 recorded during the prior full financial year ending 30 March 2023.
Sales of the Company's products resulted in a gross profit of £1,153 (prior interim period: loss of £30,128). The Company's profit margin for the Period was impacted by the recording of costs associated with writing-off legacy CBD inventory. Excluding obsolete inventory expenses, the Company achieved a margin on sales of 31.9%. The Company anticipates that its profit margins will improve due to the high-margin nature of its core vape product. It is further expected that unit costs
1
will improve due to economies of scale, driven by larger manufacturing runs made possible by heightened demand for the Company's products.
The Company recorded a reduced operating loss of £1,518,355 (prior interim period: £2,196,195) for the period, down 30.86% on the prior year. The loss reflects a marginal increase in administrative expenses comprising additional costs incurred by the Company related to professional fees for the preparation of the Company's prospectus (published post-Period on 30 November 2023) and the establishment of sales operations in the UK for the Company's UK launch of its nicotine-free vape products starting in August 2023.
The Company's asset position is broadly consistent with the position at the end of the prior financial year. There is a reduced cash position at 30 September 2023 as compared to 31 March 2023, in line with continued expenditure related to growth of the business, as set out above.
Since the end of the interim Period, the Company has made additional sales and received purchase orders creating near-term trade receivables. These are expected to be paid during the second half of the financial year.
Fundraising during the Period
During the Period the Company's working capital needs were met through funds raised in March and April 2023.
On 16 March 2023 the Company announced that it had raised £560,000 (before expenses) from a financial institution. The fundraise consisted of a subscription for 16,000,000 new ordinary shares of 1 pence each at a price of 3.5 pence per share.
On 3 April 2023 the Company announced that it had raised £2.6 million (before expenses) from a high net worth investor. This consisted of a subscription for 25,000,000 new ordinary shares of 1 pence each at a price of 4 pence per share for a total of £1,000,000,000, and the issue of convertible unsecured loan notes with a value of £1.6 million. The Convertible Loan Notes carry a coupon of 12% per annum for a term of three years from the date of issue on 31 March 2023, and are convertible into ordinary shares at 8 pence per share.
Conversion of Debt to Equity
On 30 November 2023 the Company published a prospectus following approval by the UK Financial Conduct Authority (FCA). The publication of this prospectus was necessary in order to facilitate the conversion of convertible loan notes issued as part of fundraising activities and an associated Open Offer to existing shareholders in 2022.
As a result of the conversion, which took place on 5 December 2023, the Company has converted in excess of £3 million current and non-current liabilities into equity.
Key Commercial Events During the Period
During the Period, the Company has focused its efforts on establishing a route to market for its nicotine-free vape products. The first inventory of Chill ZERO nicotine-free vapes was received in the US at the end of March 2023. The Company went on to establish a pilot programme, engaging with select independent stores and retail partners to assess product market fit and gather crucial sell- through data to inform future sales strategies.
2
In May 2023, the Company entered into a contract with full-service industry specialists, The Vaping Group, to provide sales, distribution and marketing services in relation to the launch of Chill ZERO nicotine-free vape products in the UK. The Company launched an extended range of large puff count devices in the UK, receiving its first inventory in early August 2023. Initial efforts focused on establishing distribution to sales to UK independent stores, with 120 outlets recorded as stocking the product within the first month of its retail debut on 7 August 2023.
The Company also directed its efforts towards the continued development of the Chill.com website on which it is building an e-commerce marketplace of wellness products containing natural, functional ingredients. These include alcohol alternatives, supplements, and products containing active ingredients such as hemp-derivatives, adaptogens and nootropics. More than 40 external brands now list their products for sale on the website, generating commissions for the Company whenever sales are made.
Subsequent Events
Significant progress has been made in the months since the end of the Period.
In the US, the Company's pilot strategy has produced sufficient data to facilitate discussions with chain retailers. This has borne fruit in the form of an initial purchase order from Smoker Friendly, the largest dedicated operator of smoke shops in the nation. All 13 existing Chill ZERO products will be stocked by Smoker Friendly stores in nine US states, providing further opportunities to develop the brand's position within the market.
In the UK, Chill ZERO vape products have been sold into more than 475 independent retail stores. The Company has also secured an initial purchase order that will see its products stocked in 150 WHSmith's travel stores in major airports, train stations and transit hubs around the UK. More recently, the Company has received a seven figure purchase order for the sale of its products into a one of the UK's top supermarket chains. This will provide further exposure to consumers in all of the leading store operator's UK stores. The Company has also received a significant purchase order that will result in the sale of its vape products to a prominent operator of UK petrol stations including those trading under major brand names including Shell, Esso and BP.
The Company has also reached agreement for its products to be sold by leading wholesalers and distributors. These include Vape Local and Flawless, between them some of the UK's largest vape category specialists with a combined reach of more than 9,000 business customers. These agreements are expected to enable Chill ZERO to further penetrate the UK market over the coming year.
Outside of the retail channel, the Company also launched its Chill ZERO products on Amazon.co.uk in late October 2023. The products are now available for purchase and next-day delivery on Amazon Prime, offering another convenient way for additional customers to purchase Chill ZERO nicotine- free vapes. Since their launch on Amazon, the products have outperformed expectations and gained first page rankings for key search terms including 'nicotine free vape'.
Sales and purchase orders received by the Company's for its Chill ZERO products have a combined gross value of more than £2.1 million (including VAT). While the Company has incurred costs related to the commencement of sales of its products by major retailers, it has taken the opportunity to structure deals that result in the recovery of slotting fees and other similar retail costs upon fulfilment of initial purchase orders which significantly exceed the costs of listing.
3
To support the growth of its sales channels, the Company has secured a supply chain financing facility from an existing major shareholder. The facility of £1,000,000 carries a monthly interest rate of 2% and has a term of one year. The funds will support the acquisition of inventory and the roll-out of products to new stores, reducing the cashflow impact of the Company's rapid expansion.
Outlook and Future Prospects
As outlined in this report, the Company has made significant progress in developing a route to market for its vape products. Since the end of the interim period, the Company has secured product listings with major UK retail chains including a leading supermarket and WHSmith in the UK, along with Smoker Friendly, the largest dedicated smoke shop chain in the US. The Company has also sold its products into more than 475 independent retail stores and established relationships with key distributors and wholesalers including Flawless and Phoenix 2 Retail.
Listings have now been secured for Chill ZERO products in more than 2,365 locations with further progress to be made in 2024 as the products reach the shelves of major retail stores. This has all been achieved within a matter of months, demonstrating demand for our products and setting the stage for a compounding effect as sales continue. As the Chill brand gains recognition and a foothold in the market, we anticipate a cascading effect that will foster additional sales and create opportunities for further expansion into new retail channels. This is already apparent in both key territories as discussions with further distributors and retailers are underway in the US and UK.
Following progress made during the first half of the financial year, the Company now benefits from a diversified base of business across four key sources of revenue:
- US retail channel sales which are expected to expand as the Company reaches agreement to sell its products into additional stores and states. The US is the largest vaping market in the world, accounting for an estimated US$8.3 billion in 2023.
- UK retail channel sales, where the Company is making rapid progress through sales into major supermarkets, convenience store chains and other outlets. The UK has seen an immense rise in the popularity of vaping with the domestic market generating estimated revenues of more than GBP£3 billion in 2023.
- Sales of Chill products online via our own website, Amazon.co.uk and other e-commerce sites. The Company is confident that these channels will also provide a cost-effective means of entering additional European markets during the 2024 calendar year.
- Sales of third-party brands on the Chill.com website. As more brands join the site and additional user traffic is attracted by means of new marketing campaigns, the Company expects sustained growth in the revenue generated by its e-commerce marketplace model.
The establishment of these new revenue centres comes with its own set of costs that will require careful financial management. The expansion of retail sales channels, for instance, requires expenditure on store listing fees, merchandising, compliance, and product sampling. While these are the inevitable costs of building a consumer products brand, the Company continues to take every opportunity to carefully structure deals that provide upside from the first order rather than relying on future reorders to create financial value.
4
Based on sales made and purchase orders received to date, the Company expects to record a material increase in revenues for the full financial year.
The Company's Board is proud of the progress achieved this year. Chill Brands is experiencing substantial growth with the diversification of its product offerings, expansion into new markets, and the development of a business model that is expected to deliver recurring revenue with healthy profit margins. Efforts made during the Period have propelled the Company into a much stronger position than at the outset of 2023 and Chill Brands is now positioned favourably for continued success.
This interim financial report was approved by the Board of Directors on 11 December 2023 and signed on its behalf by:
Callum Sommerton
Chief Executive Officer, Chill Brands Group plc
5
Chill Brands Group PLC
Consolidated Statement of Comprehensive Income (Unaudited)
For the six months ended 30 September 2023
Unaudited six | |||
Unaudited six | months | ||
months ended | ended 30 | Audited year | |
30 September | September | ended 31 | |
2023 £ | 2022 £ | March 2023 £ | |
Revenue | 83,392 | 19,610 | 82,840 |
Cost of sales | (56,776) | (49,738) | (61,798) |
Obsolete inventory expense | (25,463) | - | (227,901) |
Gross (loss) profit | 1,153 | (30,128) | (206,859) |
Administrative expenses | (1,519,508) | (1,249,219) | (2,636,115) |
Share expenses for options granted | - | (916,848) | (1,126,846) |
Operating Loss | (1,518,355) | (2,196,195) | (3,969,820) |
Finance income | 60,553 | 8,282 | 24,159 |
Finance cost | (111,036) | - | (323,556) |
Other income | - | - | 6,203 |
Loss on ordinary activities before taxation | (1,568,838) | (2,187,913) | (4,263,014) |
Taxation on loss on ordinary activities | - | - | - |
Loss for the period from continuing activities | (1,568,838) | (2,187,913) | (4,263,014) |
Loss for the period from discontinued activities | (13,698) | (14,749) | (24,877) |
Loss for the period | (1,582,536) | (2,202,662) | (4,287,891) |
Other comprehensive income | |||
Items that may be re-classified subsequently to profit or | |||
loss: | 23,143 | ||
Foreign exchange adjustment on consolidation | 324,591 | (24,241) | |
Total comprehensive loss for the | |||
period attributable to the equity holders | (1,559,393) | (1,878,071) | (4,312,132) |
Earnings (loss) per share attributed to equity | |||
holders | (0.56) | (0.89) | |
Attributable to continuing activities | (1.75) | ||
Attributable to discontinued activities | (0.01) | (0.01) | (0.01) |
Total | (0.57) | (0.90) | (1.76) |
6
Chill Brands Group PLC
Consolidated Statement of Financial Position (Unaudited)
At 30 September 2023 and 2022
Unaudited six | Unaudited six | ||
months ended | months ended | Audited year | |
30 September | 30 September | ended 31 | |
2023 £ | 2022 £ | March 2023 £ | |
Non-Current Assets | 36,510 | ||
Tangible assets | 54,621 | 42,612 | |
Right of use lease asset | 244,879 | 269,855 | 210,216 |
Intangible assets | 1,201,062 | 1,370,160 | 1,209,424 |
Total Noncurrent Assets | 1,482,451 | 1,694,636 | 1,462,252 |
Current Assets | 622,197 | ||
Inventories, net | 765,644 | 464,028 | |
Trade and other receivables | 391,879 | 414,055 | 447,367 |
Cash and cash equivalents | 1,954,306 | 1,822,322 | 3,767,426 |
Other current assets | - | 53,720 | - |
Total Current Assets | 2,968,382 | 3,055,741 | 4,678,821 |
Total Assets | 4,450,833 | 4,750,377 | 6,141,073 |
Non-Current Liabilities | |||
Loans, excluding current maturities | 1,426,168 | 3,147,151 | 4,034,726 |
Right of use lease liability, net of current portion | 114,341 | 204,266 | 149,755 |
Total Noncurrent Liabilities | 1,540,509 | 3,351,417 | 4,184,481 |
Current Liabilities | 3,179,164 | ||
Current maturities of loans | 10,000 | 468,893 | |
Trade and other payables | 294,937 | 354,556 | 540,641 |
Current portion of right of use lease liability | 135,949 | 74,602 | 68,386 |
Total Current Liabilities | 3,610,050 | 439,158 | 1,077,920 |
Total Liabilities | 5,150,559 | 3,790,575 | 5,262,401 |
Net Assets | (699,726) | 959,802 | 878,672 |
Equity | 2,876,153 | ||
Share capital | 2,451,153 | 2,611,153 | |
Share premium account | 11,718,000 | 10,421,550 | 10,923,000 |
Share based payments reserve | 4,516,608 | 4,751,130 | 4,516,608 |
Compound loan note equity component reserve | 419,168 | - | 419,168 |
Shares to be issued reserve | - | 16,941 | 1,079,256 |
Foreign currency translation reserve | 259,930 | 585,368 | 236,536 |
Retained loss | (20,489,585) | (17,266,340) | (18,907,049) |
Total Equity | (699,726) | 959,802 | 878,672 |
7
Chill Brands Group PLC
Consolidated Statement of Changes in Equity
For the six months ended 30 September 2023
Compound | ||||||||
Share Based | Loan Note | Foreign Currency | ||||||
Equity | ||||||||
Share Capital | Share Premium | Payment | Component | Shares To Be | Translation | Retained Loss | ||
£ | Account £ | Reserve £ | Reserve £ | Issued Reserve £ | Reserve £ | £ | Total £ | |
At 31 March 2022 | 2,120,700 | 10,298,440 | 3,389,762 | - | 89,517 | 260,777 | (14,619,158) | 1,540,038 |
Comprehensive income for the period | ||||||||
Loss for the period | - | - | - | - | - | - | (4,287,891) | (4,287,891) |
Other comprehensive income | ||||||||
Translation adjustment | - | - | - | - | - | (24,241) | - | (24,241) |
Total comprehensive loss for the | ||||||||
period attributable to the equity holders | - | - | - | - | - | (24,241) | (4,287,891) | (4,312,132) |
Issue of warrant and options | - | - | 1,126,846 | - | - | - | - | 1,126,846 |
Shares to be issued | - | - | - | 1,072,743 | - | - | 1,072,743 | |
Shares issued in the period | 490,453 | 799,471 | - | - | (83,004) | - | - | 1,206,920 |
Equity component of compound | ||||||||
financial instrument | - | - | - | 419,168 | - | - | - | 419,168 |
Cost relating to share issues | - | (174,911) | - | - | - | - | - | (174,911) |
At 31 March 2023 | 2,611,153 | 10,923,000 | 4,516,608 | 419,168 | 1,079,256 | 236,536 | (18,907,049) | 878,672 |
Comprehensive income for the period | ||||||||
Loss for the period | - . | - | - | - | - | (1,582,536) | (1,582,536) | |
Other comprehensive income | ||||||||
Translation adjustment | - | - | - | - | 23,394 | - | 23,394 | |
Total comprehensive loss for the | ||||||||
period attributable to the equity holders | - | - | - | - | 23,394 | (1,582,536) | (1,559,142) | |
Shares issued in the period | 265,000 | 795,000 | - | (1,060,000) | - | - | - | |
Termination of shares to be issued | - | - | - | (19,256) | - | - | (19,256) | |
At 30 September 2023 | 2,876,153 | 11,718,000 | 4,516,608 | 419,168 | - | 259,930 | (20,489,585) | (699,726) |
8
Chill Brands Group PLC
Consolidated Statement of Cash Flows
For the six months ended 30 September 2023
Unaudited six | Unaudited six | Audited year | |
months ended 30 | months ended 30 | ended 31 March | |
September 2023 £ | September 2022 £ | 2023 £ | |
Cash Flows From Operating Activities | |||
Loss for the period | (1,582,536) | (2,202,662) | (4,287,891) |
Adjustments for: | 112,055 | ||
Depreciation and amortisation charges | 70,541 | 132,779 | |
Impairment provision | 25,463 | - | 227,901 |
Promotional product in lieu of fees | 5,538 | - | 41,818 |
Imputed interest on convertible loan notes | 111,036 | - | 177,722 |
Share expenses for options granted | - | 925,472 | 1,126,846 |
Termination of options | (19,256) | - | - |
Shares issued as compensation | - | - | 40,739 |
Foreign exchange translation adjustment | (19,795) | 56,066 | 1,157 |
Operating cash flow before working capital | (1,367,495) | ||
movements | (1,150,583) | (2,538,929) | |
Decrease (increase) in inventories | (183,632) | (129,350) | (30,029) |
Decrease (increase) in trade and other receivables | 49,950 | 232,424 | 288,864 |
Increase(decrease) in trade and other payables | (245,704) | (436,057) | (234,692) |
Net Cash outflow from Operating Activities | (1,746,881) | (1,483,566) | (2,514,786) |
Cash Flows From Investing Activities | |||
Cash paid for intangible assets | - | (593,912) | (639,192) |
Net Cash generated from/(used in) Investing | - | ||
Activities | (593,912) | (639,192) | |
Cash Flows From Financing Activities | - | ||
Net proceeds from issue of shares | 372,363 | 2,004,013 | |
Loans made by the Company | - | 3,083,932 | 4,693,504 |
Payments of lease liability | (60,244) | (38,838) | (66,173) |
Repayment of long-term debt | (9,323) | (9,572) | (18,859) |
Net Cash Generated from Financing Activities | (69,567) | 3,407,885 | 6,612,485 |
Net increase in cash and cash equivalents | |||
As above | (1,816,448) | 1,340,249 | 3,458,507 |
Cash and cash equivalents at beginning of | 3,767,426 | ||
period | 420,045 | 420,405 | |
Foreign exchange adjustment on opening | 3,328 | ||
balances | 62,028 | (111,486) | |
Cash and cash equivalents at end of period | 1,954,306 | 1,822,322 | 3,767,426 |
9
CHILL BRANDS GROUP PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended 30 September 2023
NOTE 1 - GENERAL INFORMATION
Chill Brands Group PLC ("the Company") and its subsidiaries (together "the Group") are involved in the development, production and distribution of consumer packaged goods products including nicotine-free vapour products. The Company, a public limited company incorporated and domiciled in England and Wales, is the Group's ultimate parent company. The Company was incorporated on 13 November 2014 with Company Registration Number 09309241 and its registered office and principal place of business is 27/28 Eastcastle Street, London W1W 8DH. The Company's US offices are located at 1601 Riverfront Drive, Grand Junction, Colorado 81501.
NOTE 2 - ACCOUNTING POLICIES
Basis of preparation
The interim condensed unaudited consolidated financial statements for the period ended 30 September 2023 have been prepared in accordance with IAS 34 Interim Financial Reporting. The comparative figures for 31 March 2023 are extracted from the Group's audited accounts to that date. The comparative figures for the period ended 30 September 2022 are unaudited.
The condensed unaudited consolidated interim financial statements of the Group have been prepared on the basis of the accounting policies, presentation, methods of computation and estimation techniques used in the preparation of the audited accounts for the period ended 31 March 2023 and expected to be adopted in the financial information by the Group in preparing its annual report for the year ending 31 March 2023.
The financial information in this statement relating to the six months ended 30 September 2023 and the six months ended 30 September 2022 has neither been audited nor reviewed by the auditors pursuant to guidance issued by the Auditing Practices Board. The financial information presented for the year ended 31 March 2023 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for the year ended 31 March 2023 have been filed with the Registrar of Companies.
The financial information of the Group is presented in British Pounds Sterling ("£").
NOTE 3 - INCOME TAX EXPENSE
No tax is applicable to the Group for the period ended 30 September 2023. No deferred income tax asset has been recognised in respect of the tax losses carried forward, due to the uncertainty as to whether the Group will generate sufficient profits in the foreseeable future to prudently justify this.
10
Attention: This is an excerpt of the original content. To continue reading it, access the original document here. |
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Chill Brands Group plc published this content on 28 December 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 December 2023 09:13:35 UTC.