Chapel Down Group Plc

('CDG' or 'the Company')

EPIC: CDGP

UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023

Chapel Down, England's leading and largest winemaker, is pleased to report the delivery of a highly successful 2023 H1 performance, for the period ended 30th June 2023.

Andrew Carter, CEO, commented: "Our focus remains on delivering significant growth in traditional method sparkling wine sales, margins, profits and cash flow, so we are extremely pleased with the powerful momentum of the business in the first half of the year. We are continuing to deliver on our growth plans by building our leadership position in the fast-growing English traditional method sparkling wine category to deliver long-term shareholder value.

"Consumers' love for Chapel Down continues to grow with record levels of brand awareness and household penetration, as more people at home and abroad learn about our brand and our wines. This is fuelling strong and profitable growth across all our distribution channels. We have a world-class team in place, are successfully executing our premiumisation strategy to support and grow our margins and have a strong balance sheet to enable us to meet our target of doubling the size of our business by 2026."

Financial Highlights

Operational Highlights

Outlook

Chairman's Commentary

In the first half of 2023 Chapel Down, a focused wine business and the leading and largest in the sector, delivered an outstanding performance. We are pleased to confirm that we remain on track to double the size of the business between 2021 to 2026.

We have grown our leadership position in the UK market with our outstanding wines consistently winning prestigious awards. We also have the strongest brand and the deepest distribution in the English wine industry, that continues to grow. Our expanding profitability is a core strength which, along with our strong balance sheet, gives us resilience, as well as an incredible platform for further profitable growth.

We are the leading operator in the exciting and fast-growing English wine industry with c9% of all land under vine. We also remain committed to our sustainability pledge and look forward to sharing our ambitious targets and timeline to become net zero in due course.

A strong and experienced executive team, led by Andrew Carter, is in place, developing a dynamic high-performance culture and delivering exceptional results. I have every confidence we will continue to lead the way in English wine.

Finally, I would like to thank all our customers, our teams, our growers, as well as our committed, loyal and enthusiastic shareholders, without whom this progress would not have been possible.

Chief Executive's Commentary

The growth of the English wine industry continues to be very dynamic. There are now over 943 vineyards, 209 wineries and over 3,900 hectares of land under vine in the UK.  Chapel Down is the largest English winemaker and we have continued to see strong sales growth, with H1 NSR growth of 21% to £8.4m (H1 2022: £6.9m), which has further developed our category leadership position.

Gross profit margin increased by 3% points to 55% in H1 (H1 2022: 52%). The primary drivers of this improvement are the continued mix shift to traditional method sparkling wine as part of our premiumisation strategy alongside the increase in ASP.

Operating profit grew 27% to £685k, Profit before tax grew 26% to £618k and EBITDA grew 36% to £1.2m due to NSR growth, Gross margin expansion, and remaining disciplined in Overheads at £2.4m, which is 29% of NSR (H1 2022: £2.1m, 31% of NSR).

We have continued to invest in Marketing as we continue to strengthen the brand and grow brand awareness and penetration. Marketing costs were £1.3m (H1 2022: £0.8m) and 16% of NSR (H1 2022: 12% NSR).

Channel review

All our channels showed growth in the first half.

Off-trade sales grew by 25%, with our market share increasing to 36% in H1 (full year 2022: 31%) and the brand driving 80% of overall English sparkling wine category value growth (Nielsen YTD to 3rd July).

On-trade net sales grew by 20% through increased distribution in premium outlets. This is now a total of 1,997 outlets, up 40% since 31 December 2022.

A highly successful launch into Duty Free, including at London Heathrow and London Gatwick, contributed to the 90% growth in our export business. We continue to focus on building our brand in the most promising global Export markets.

Direct to Consumer sales grew 4% to £2.1m (H1 2022: £2.0m). This was supported by an E-commerce growth of 6% to £1.1m (H1 2022: £1.0m) and strong sales at summer events. Highlights of E-commerce performance were traffic to site (+17% to 460k sessions) and increased revenue from new customer acquisition (up 30% on 2022).

Tour numbers at our brand home in Tenterden increased by 4% over the course of H1, despite the mixed weather. 11,236 people enjoyed a tour of the vineyard and a tutored tasting at our brand home in Tenterden during H1 (H1 2022: 10,822), in addition to many visitors to the shop, restaurant and vineyards. We estimate that there were over 22,000 visitors to Tenterden in H1, also +4%.

Category review

Consistent with our premiumisation strategy, and as result of the strong brand metrics and sustained investment, traditional method sparkling wine continued its outstanding performance as a category, growing 45% to £5.7m net sales (H1 2022: £3.9m). Traditional method sparkling Rose is becoming a larger part of this mix, +91% by volume in H1 to 135k (H1 2022 2022: 71k) driven by consumer tastes and increased distribution.

Still wine sales have declined in H1 due to a reduction in rate of sale at the higher retail price points and the strategic decision to reduce levels of promotional activity and increase focus behind traditional method sparkling wines.  

Carbonated wine's sales variance was primarily driven by focussing distribution opportunities behind our traditional method sparkling wines with key off trade retailers.

As we look to develop ourselves as a focused wine business, spirits have played an increasingly minor strategic role, resulting in lower sales and the decision to exit this part of our business at the end of 2023.

Operational review

The Chapel Down brand continues to grow as a result of our award-winning wines and sustained investment, including excellent growth in brand awareness in H1 to 37% (full year 2022 full: 29%) and brand penetration to 14% (full year 2022: 11%) (Source: BrandVue, all sparkling wine drinkers).

Our wines continue to win multiple awards with 28 major successes (Silver and above) in H1, the highlight of which was Chapel Down Kit's Coty Coeur de Cuvée receiving gold medals in the International Wine Challenge, Decanter World Wine Awards and Wine GB awards, as well as the 'Best Prestige Cuvée Trophy' in the Wine GB Awards. Furthermore, Chapel Down Grand Reserve was also awarded a gold medal at the IWC.

Our new brand identity and packaging design was successfully launched in May which gives Chapel Down a more premium, modern and distinctive look. We have also invested in more premium materials and finishes to ensure our packaging lives up to the quality of our wines. Our new look wines are available now and the branding of our website, event space and brand home have also been updated.

This market leading performance has been supported by our successful sponsorships and events programme. In March, we were once again the 'Official Sparkling Wine' of The Boat Race, with the winning men's and women's teams presented with jeroboams of Chapel Down sparkling wine, which was broadcast live to a television audience of 3.7m on BBC One.  This summer, saw our partnership as the 'Official Sparkling Wine' of the England and Wales Cricket Board (ECB) heightened with The Ashes being played on home soil. The winning teams, as well as 'Player of the Match' and 'Player of the Series', celebrated with magnums of Chapel Down sparkling wine to a television audience of 17.8m (+14% on 2019, which was the last comparable Ashes home series).

This summer also saw us sign a new partnership as 'Official Sparkling Wine' of Tom Kerridge's Pub in The Park, the biggest food and music festival tour in the UK, which has given the Chapel Down brand exposure to 150k attendees. We served c25,000 attendees, as well as hosting wine masterclasses for over 1,000 consumers.

A new three-year agreement has been signed with Ascot racecourse, which will come fully into effect in 2024, and marks the first time in the 300-year history of the prestigious British racecourse that an English wine brand has become an Official Supplier.

During English Wine Week our "Chapelle en Bas" brand campaign, in the heart of France's Champagne region, generated record engagement on social media, and showed that in blind tastings Chapel Down was preferred by 60% of consumers to a best-selling branded champagne.

Our brand activities and activations have allowed us to grow our social media followers to over 100k (Year end 2022: 91k), a significant milestone for us which we will continue to build upon.

Chapel Down are strongly committed to growing our business in balance with the environment. Sustainability is very important to us and a strong, ongoing focus. We are founding members of sustainable Wine GB and practicing sustainable viticulture, reintroducing indigenous grasses in our vine rows, and trialling new mechanical weeding techniques. All our packaging is recyclable, and our glass is made from 75% recycled glass and packaging 80% recycled content. Our grape skins are sent for anaerobic digestion to convert them into green electricity and soil conditioner and 100% of the electricity we use is from renewable sources. However, this is just the start point and we want to accelerate the development of our sustainability plans and to this end we have commissioned a full Carbon Net Zero assessment in H1 and are currently developing our plans and timescale to reach our net zero carbon ambitions and further develop our biodiversity plans.

We have launched an ERP and CRM project, moving to an integrated cloud-based system, which is progressing to plan, with a go-live date in January 2024.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2023

CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2023

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE 2023

1. BASIS OF PREPARATION/ACCOUNTING POLICIES

The Company's report for the period ended 30 June 2023 was authorised for issue by the directors on 20 September 2023. The financial information does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Accordingly, this report is to be read in conjunction with the Annual Report for the year ended 31 December 2022, which was prepared in accordance with the Company's reporting standard (FRS102) that was in effect at that time.

The accounting standard requires the Company to restate its profit to attribute a notional cost of non-cash share option agreements to the business. After adopting the standard, the accounts show a decrease in profit of £86k (H1 2022: £15k) resulting in a Group pre-tax profit of £618k (H1 2022: pre-tax profit of £489k).

The Company is required to value net assets in accordance with the Company's reporting standard (UK GAAP). The assets (wine stock, land, vineyard) are held at cost which the Directors believe is considerably less than the net realisable value.

The statutory accounts for the year ended 31 December 2022, prepared under UK GAAP, have been reported on by the Company's auditors, received an unqualified audit report and have been filed with the registrar of companies at Companies House. The unaudited interim financial statements for the six months ended 30 June 2023 and 30 June 2022 have been drawn up using accounting policies and presentation adopted in the Company's full financial statements for the year ended 31 December 2022, being FRS102.

2. BALANCE SHEET REVIEW

The net asset value of the Company as at 30 June 2023 was £33,151k which includes:

•             Fixed assets held at net book value of £16,451k, including vineyard development expenditure which is capitalised at cost.

•             £15,545k of stock, which is valued at cost being the lower of cost or net realisable value.

3. PROFIT PER SHARE

The calculation of the profit per share for the year ended 30 June 2023 is based on the profit for the period of £618k and the weighted average number of shares in issue during the period of 159,253,885 exclusive of the effect of dilutive share options, and 159,742,577 inclusive of dilutive options.

4. DISTRIBUTION OF THE FULL YEAR STATEMENT

Copies of this statement will be available for collection free of charge from the Company's registered office at Chapel Down Winery, Small Hythe Road, Tenterden, TN30 7NG. An electronic version will be available on the Company's website, www.chapeldown.com.

This announcement contains inside information for the purposes of the retained UK version of the EU Market Abuse Regulation (EU) 596/2014 ("UK MAR").

Contacts

About Chapel Down

Chapel Down is England's leading wine producer with an award-winning range of sparkling and still wines. Based in Kent, in the heart of the Garden of England, Chapel Down produces wines of the highest quality and which the winemaker believes offer the best expression of England.