3 March 2021

The Barkby Group PLC

("Barkby", the "Group" or the "Company")

Trading Update

The Barkby Group PLC (AIM:BARK), the diversified business group, provides the following update on trading for the six months ended 31 December 2020.

Commenting Charles Dickson, Executive Chairman said;

"Barkby has weathered the COVID-19 pandemic largely due to the success of our highly cash generative commercial property development business and activity has resumed apace. As we come out of lockdown, our pubs and coffee business are poised for significant growth and a return to profitability. The Group's investments in SleepHub and Verso Biosense are performing well.  Our liquidity is strong and the diversification of the business means that the Group is in a strong position to benefit from the lifting of government lockdown restrictions. We look forward to the next 12 months with confidence."

Current trading, post period end

Operational Highlights for the six months ended 31 December 2020

Financial Highlights for the six months ended 31 December 2020

Charles Dickson, Chairman of Barkby, said:

"Over the last 12 months our primary focus has been the wellbeing of our staff and customers and I would like to thank our team for their unwavering commitment during this unprecedented period. Despite the obvious challenges that the second half of the year presented, the team worked hard to position the business appropriately and we are looking forward to the future with confidence as the economy begins to unlock."

"Barkby has weathered the COVID-19 pandemic largely due to the success of our highly cash generative commercial property development business and activity has resumed apace. I am delighted to today announce the exchange of contracts for the sale of our development site at Saffron Walden."

"During the period, we took the opportunity to make a number of operational improvements in our pub business, which we expect to lead to higher margins once lockdown restrictions are lifted. As we come out of lockdown, our pubs and coffee business are poised for significant growth and a return to profitability.

"The Group also continues to deliver on its strategy of investing in growth businesses with the ability to disrupt and the investments in SleepHub and Verso Biosense are performing well and are on track. I am particularly excited about the potential of both businesses to supplement Group earnings for FY2022."

"Our liquidity is strong and the diversification of the business means that the Group is in a strong position to benefit from the lifting of government restrictions. I look forward to the next 12 months with increasing confidence."

Current Trading

Barkby Group's trading has been significantly impacted by COVID-19 trading restrictions and national lockdown periods. Despite substantial Government support via the furlough scheme, business rates relief and a reduction in VAT for hospitality businesses, as well as a proactive approach to cost control and supplier negotiations, the trading businesses all recognised EBITDA losses during the period, with the exception of Centurian Automotive, which has traded ahead of management expectations.

The diversification of the Group provided a degree of support to the impacted businesses. Completion of the Hastings property development generated positive cashflow for the Group in the summer of 2020 of £1.8m. The property development pipeline has experienced inevitable delays due to COVID-19 but it is pleasing today to announce the exchange of contracts for the sale of development at Saffron Walden for £2.85m, with net proceeds of £1.0m expected to be received by the Company. With the acquisition of the license and launch of the SleepHub product, we have further diversified into the consumer electronics and wellness market. The development of some sales channels has been slower than expected due to COVID-19, especially with physical retail, but we have seen a recent uptick in sales as product awareness grows.

We currently face unprecedented trading uncertainty, including significant risk of a prolonged economic downturn and permanent changes in consumer behaviour. It is therefore important that the Group remains adaptable to market conditions and modifies its business models as required.

Commercial Property Development 

Construction work at our development at Hastings, which is anchored by Aldi Stores, Greggs and Costa Coffee, completed in June 2020 and practical completion was granted in August 2020. Hastings Borough Council completed their purchase of the site, resulting in a net balancing payment receipt of £1.8m.

COVID-19 has resulted in delays to the commencement of other developments, with tenant contracts taking longer than normal to agree commercial terms. That said, there remains a strong interest in the Group's upcoming schemes from tenants, as outlined below:

Saffron Walden

The land was acquired by the Company in 2010 and is still held at book cost. A series of successful planning applications have been made since the land was acquired, and the site now has planning permission for the construction of 35 residential units. We have exchanged contracts to sell the site for c.£2.85m which will result in a profit on sale of £1.8m, which is expected to be recognised in the current financial year. Completion of the sale is expected during the summer of 2021.

Wellingborough

On 9 July 2020 we obtained planning permission for a 20,000 sq. ft. mixed use retail and trade scheme. After further discussions with the local planning authority, we are likely to make a further planning application to add a drive-thru fast-food restaurant on the front of the site to meet a pre-identified requirement from a national branded operator. Construction is due to start in autumn 2021.

Maldon

We exchanged contracts on a development site in Maldon, Essex. We have entered into legal negotiations with four prospective tenants who will sign pre-let agreements for occupation at completion of the re-development. We are proposing to develop a 15,400 sq. ft. mixed-use retail and trade scheme at the site and we are working to submit a planning application shortly. We are planning to start construction in the autumn.

Huntingdon

We submitted a planning application for a 30,000 sq. ft trade scheme at Huntingdon last year and have subsequently amended the application to take into account the change in tenant requirements. We expect to get planning this year and start on site in around 12 months.

Further opportunities

We are currently in legal negotiation to acquire a further development site in the South East. We are also exploring opportunities to significantly expand the real estate side of our business, which we believe is core to the Group's business and where we see significant growth opportunities.

Barkby Pubs

Following the first national lockdown in March 2020, Barkby's pubs re-opened as soon as permitted on Saturday 4 July 2020. Trade built quickly over the first few weeks, returning to normal levels from the middle of July. In August, like-for-like sales increased significantly, supported by the UK Government's Eat Out to Help Out scheme. Busy trade in the earlier days of the week, alongside good summer weather and strong demand for accommodation due to staycations resulted in year-on-year growth of +21% in August and +24% in September, with good year-on-year growth across all pubs, even after the Eat Out to Help Out scheme ended.

Following his appointment in March 2020, our Operations Director Rupert Bagnall made several new General Manager appointments and the operational improvements implemented by his new team were reflected in strong trading results. The key to success is people and we have high quality General Managers supporting our plan to run premium quality pubs with rooms. 

We experienced reduced trade in the October to December quarter due to more severe trading restrictions introduced in October followed by a second national lockdown in November. Despite being permitted to re-open in December, the ongoing trading restrictions alongside weak consumer demand as COVID-19 rates increased, resulted in particularly low sales and profitability during the normally busy festive period.

Overall, it is difficult to extrapolate the underlying performance of the pubs business over the six-month period as the impact of consumer confidence and enforced restrictions has made it difficult to build any period of normalised trade. The entire period suffered from some form of restriction, however Q2 was far worse than Q1 in terms of trading restrictions. We did benefit from a reduced cost base as a result of the furlough scheme and local grants alongside the support of our suppliers, including periods of reduced rent from our landlords.

We added the lease of the Harcourt Arms at Stanton Harcourt, a pub refurbished by its owner over four years. The Group's short term strategy remains to increase its portfolio to c.12 pubs under a combination of leasehold and freehold acquisitions. We are currently assessing the acquisition of a further leasehold interest and we anticipate further acquisition opportunities will arise as a result of the COVID-19 pandemic. We will look to take advantage of good opportunities where we find them, but we will be proceeding cautiously as short-term trading conditions remain uncertain.

Given the recent Government guidance of 17^th May for reopening our business we will be in a strong position to benefit from restricted international travel, staycations, pent up demand for hospitality and changing consumer behavior.

Workshop Coffee 

Wholesale revenues have been significantly impacted as independent coffee shops, hotels and other hospitality customers have been forced to close during the national lockdown periods. Wholesale revenues were down by 55% on the same period last year. However there has been a substantial increase in online sales, which increased 118% on the same period last year. This was predominantly driven by hardware and coffee subscriptions as an increasing number of consumers prepare and drink premium coffee at home.

With significant reductions in London footfall, we were cautious about reopening our retail stores. We re-opened two of our four units during the period, with reduced trading hours and a focus on cost control. Despite lower rents, the retail units did not return to profitability due to the low number of London workers, shoppers and tourists returning to central London. Despite taking mitigating actions including a review and implementation of a substantial cost saving plan, margins were lower in the six-month period to 31 December 2020 due to the reduction in revenue share from higher margin retail coffee sales.

A large number of the Workshop team have been on full or partial furlough during the period. All retail landlords have agreed to reduced or zero rent whilst shops are closed and we are in negotiations to agree further reduced rents going forward.

Centurian Automotive

In response to lockdown restrictions, a contactless test drive procedure was implemented, including personalised videos sent to customers before site visits. A "click and collect" sales model proved to be effective and in many cases produced faster purchase decisions. We have also invested in our digital marketing and social media platforms, which has aided the revenue growth.

A significant portion of sales and revenue has been generated by upgrading cars with Centurian body kits. This was particularly impactful for the range of Ford Rangers, which produce the highest sales margin. We continue to review our stock holding to maximise sales and profits, without incurring significant stocking finance charges. This has been difficult as sales trends were impacted by the various lockdowns.

Centurian was profitable at the EBITDA level for the six months to 31 December 2020 however given the uncertainty around consumer behavior we will continue to monitor performance carefully.

Life Sciences

Cambridge Sleep Sciences Ltd ('CSS')

SleepHub was launched in November 2020 and as of 28 February 2021 a total of 327 units have been sold. SleepHub delivers scientifically formulated sounds to aid sleep, delivered through a patent protected base unit and pair of specifically tuned speakers.

Since launch, SleepHub has gained positive reviews from major publications including The Telegraph, The Mail and Metro. SleepHub has also featured in magazines such as Ideal Home alongside a number of health and wellbeing titles.

Due to COVID-19, the bricks & mortar retail channel remains closed and e-commerce partnership agreements have been delayed. We are therefore currently selling SleepHub directly from our website. Our UK online-only launch has allowed us to build reviews, positive customer feedback and prove the concept to sales partners. We are now moving to start selling in volume via multiple channels and partnerships in other regions. We will also benefit from traditional retail channels as physical stores start to reopen when national lockdowns are eased.

We have recently established sales partnerships with British Airways, Virgin Atlantic, the Defence Portal and Blue Light Card and have a strong pipeline of additional potential sales partners. SleepHub is due to launch on Amazon in March, following the completion of a distribution agreement with Softline UK. We have also engaged with several major sports teams and brands who recognise the benefits of sleep for elite performance athletes, a number of which will be trialing the device over the coming months.

From an International perspective, SleepHub launches via distribution partners in Spain, Portugal, and France in Q1, with Germany and the Netherlands following in Q2. A launch in the USA is planned in Q3.

We are exploring licensing opportunities for the IP of SleepHub. We have had discussions with several potential partners and see this as a significant revenue source as we develop the IP further. We have signed a letter of intent with a major global electronics brand regarding a potential license and hope to progress this in the second half of 2021.

CSS is currently developing a second generation of SleepHub products and expects these to be available in Q3 2021. These will likely include wireless earbuds, our own App and further technology enhancements to the product experience.

There are significant opportunities in the Healthcare space and CSS intends to carry out additional clinical studies within the coming year to clinically validate the benefits of our technology. We are also specifically looking at trialing the device in disease areas where insomnia is a significant symptom. We have seen some positive early sleep improvement signals in patients with Parkinsons Disease and have entered into a collaboration agreement with Parkinson's Concierge to explore this further.

Verso Biosense Ltd (formerly known as Vivoplex)

Our female health investment, Verso Biosense, has continued to make excellent progress since the Summer. Engineering breakthroughs have allowed us to progress further than we hoped, resulting in major improvements in next generation chip sets, monitoring functions, electronics and garment design. We will be moving into a clinical study in Q2 2021 and looking to sign up commercial and clinical partners as we progress during the first half of the year.

The discovery of novel, new data in the uterine environment for the very first time has huge potential to unlock meaningful patient data, changing diagnostic paradigms and optimising treatments across IVF/fertility, endometriosis, fibrosis, menopause and oncology. The broadening of disease areas that our wireless powered battery free uterine monitoring platform can address has shown the commercial opportunity to be very significant

As part of this process, the company's Board decided to change the name of the company from Vivoplex to Verso Biosense and also change all the branding, along with strengthening the senior management team to lead the business through its next stage of growth. 

The Verso team are targeting further clinical studies over the rest of this year as they begin to broaden out applications of our platform, both in terms of next generation functionality and sensing capabilities but also looking for application into broader female health diseases.

The team at Verso Biosense are working extremely hard and have made huge progress. Our first clinical study in Q2 2020 will be a significant milestone as we capture and interpret our novel data platform.

Liquidity

We have managed cash tightly through all three national lockdowns and have increased cash headroom by refinancing the current £3.5m Tarncourt facility into a new £5m facility with Tarncourt, with an expiry of 30 June 2023 (the "Revised Facility Agreement").

Furthermore, the Group has taken a £450k loan secured against the freehold of the Wellingborough site from James Dickson, a significant shareholder in the Company and CEO of Workshop Coffee (the "Wellingborough Loan Agreement").

The Group currently has net cash available of c.£1.4m as at 28 February 2021. The Board have taken the steps of consulting with their major shareholders regarding a potential equity raise should current restrictions remain in place beyond Spring and our shareholders have confirmed their continued support should this become necessary.

Related Party Transactions

The Company is entering into the Revised Facility Agreement with Tarncourt Investments LLP, a company ultimately controlled by Charles Dickson, a Director of the Company. Accordingly, entering into the revised facility agreement constitutes a related party transaction under Rule 13 of the AIM Rules for Companies. The independent Directors, having consulted with the Company's nominated adviser, finnCap Ltd, consider that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

The Company is entering into the Wellingborough Loan Agreement with James Dickson, a significant shareholder in the Company and a director of Workshop Trading Holdings Limited, a wholly owned subsidiary of the Company. Accordingly, entering into the Wellingborough Loan Agreement constitutes a related party transaction under Rule 13 of the AIM Rules for Companies. The independent Directors, having consulted with the Company's nominated adviser, finnCap Ltd, consider that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Enquiries:          

Notes to editors

The Barkby Group PLC is a diversified group of high growth, high quality businesses run by an entrepreneurial and experienced management team. The existing wholly owned businesses within Barkby include; Commercial Property Development, Barkby Hospitality (comprising Barkby Pubs and Workshop Coffee) and Centurian Automotive Ltd.

In addition to these businesses, Barkby Life Sciences has invested in Verso Biosense, a digital health company aiming to transform Women's Health with precision medicine, and its subsidiary Cambridge Sleep Sciences Ltd has launched, SleepHub™, a device which improves and facilitates natural sleep.

Barkby's strategy is to accelerate and maximise opportunities within its existing businesses as well as continue to source and invest in cash generative, growth businesses with the ability to disrupt.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.