Chapel Down Group (LSE:CDGP) — Annual results for the period ended 31st December 2025

0:01 Good afternoon, and welcome to the CHAPEL DOWN GROUP PLC Annual Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the q and a tab situated on the right hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll. I will now play a video from the company.

0:59 I would now like to hand you over to CEO, James Pennyfeather. Good afternoon to you, sir. Thanks, Alex. With spring having very much arrived and an amazing English summer clearly on its way, we thought we'd start our FY twenty five annual results presentation with that lovely video to remind shareholders what a wonderful experience it is to visit our brand home in Tempton and to encourage you to book your visits down to see us in Kent. Forward bookings for this year are already strong, so please do book early. And a very warm welcome to all our shareholders who are joining this call to hear about CHAPEL DOWN's annual results for the financial year 2025. I'm James Pennyfeather, and I'm joined by Lauren Mouton, our CFO.

1:47 And today, we're representing the leadership team of this business and our 85 colleagues to take you through a reminder of our strategic objectives and value creation plan and the progress that we're making against them. We expect the presentation to take forty minutes, after which there'll be a chance for questions. Please do type in any questions, and we will try to get through all of them today. And if not, you know, we will put on on our shareholder part of our website all the answers of the questions we didn't get round to. We wanted to start by sharing the key headlines from today's results announcement. This morning, we reported strong momentum with growth of 19% in net sales revenue and 25% in adjusted EBITDA.

2:37 We have a clear valuation value creation plan, which we're gonna take you through shortly, and we're making good progress against that. And that momentum has continued into q one of twenty twenty six, giving us confidence in our full year guidance.

2:56 2025 was an exceptional year of delivery for CHAPEL DOWN. Our top line sales were almost 20,000,000 with growth of 19% and traditional method sparkling wines, which is our core strategic focus, up 28%. If you look at the three year trend, that is an equivalent 9% annual top line growth rate and strong EBITDA profit delivery, up 25% from last year to 3,700,000. Thanks to a good growing season, our 2025 harvest delivered a strong yield of exceptional quality, and the first traditional method sparkling wines from the 2025 harvest are likely to be available for sale in 2029.

3:45 We achieved our highest ever brand awareness score of 49% and grew our market share by 1% in the important off trade channel in a category which grew by 12% over the year. Underpinning our confidence in the future growth of the category is the fact that not only that sparkling wine as a category is still relatively underdeveloped compared with other markets such as France with only 40% 47% penetration compared with 78% in France. But, also, the quality perceptions are higher than ever, rising 10 percentage points in the past five years and now almost at the same level as champagne.

4:30 These are strong results, and thanks to the strength of our business model combined with exceptional work by our team and partners for which I am very grateful. One of the strengths of CHAPEL DOWN is that we are very clear about how we create value, and that is illustrated in our purpose statement. CHAPEL DOWN creates value in the world of consumers' celebrations where they are happy and happy to spend good money on a good bottle of sparkling wine to commit those happy memories to moments to memory. I have been struck by the huge amount of goodwill there is towards this category in UK amongst consumers and customers who want us to succeed, and that goodwill really rubs off on our team of 85 people who are united behind a mission to change the way the world thinks about English wine, and that gives us an energy and drive to deliver exceptional results every day.

5:29 And we've set an ambitious goal to deliver an equivalent 1% share of the global champagne market by 2035, which would effectively establish us as one of the world's great sparkling wine brands. This is an ambition we can achieve. Our first vines were planted in 1977, and we now have over a thousand acres planted. We have over twenty five years of brand building of the CHAPEL DOWN brand itself. We have 10,000 retail shareholders who are our biggest ambassadors, and we dispatched 1,000,000 bottles of traditional Method sparkling wine for the first time in 2025, effectively a naught point 4% equivalent share of champagne.

6:16 So there are five charts on this page that show the choices that have been made as the business has been built over the years. So top left shows our vineyard breakdown by grape variety. Back in the nineteen seventies, we planted Germanic still wines. As the climate conditions warmed, so we were able to ripen the champagne trio of grapes, chardonnay, pinot noir, and pinot marnier, which now make up over 80% of our planting. The next one, vineyards by sole type. Our first vines in Tendleton were planted on clay soil, but then we started to look for something that recreated the growing conditions found in the Champagne region.

7:02 And in 2008, we bought a plot of a 100 acres in the chalk terroir of Kent's Down Kent's Downs called Kitts Coty, and that soil has been the primary focus of all our recent planting. So now 75% of our land of our vineyards are planted in chalk. And lastly, on this top top row, we favor leasehold because it helps us manage cash flows and deliver better returns for our shareholders. Turning now to our NSR split first by channel and then by segment. In terms of the channel split, you can see that we have good diversification of revenues with 70% of our sales via off trade and ecommerce going for home consumption, which is where most of our target celebration occasions are taking place.

7:56 And as a result of that, 70 of our total sales last year were through the high margin traditional methods sparkling wine sector, which is our strategic focus. And we're growing sales and market share because we are clear about the sector of the market we are targeting. We've presented this two by two grid before, which plots all the different segments of the £26,000,000,000 global sparkling wine market. High perceived quality at the top, low perceived quality at the bottom, occasions on the x axis from informal on the left to formal occasions on the right. So you can see champagne, high perceived quality formal occasions, then you come down through Cremant and Carver to Prosecco, which is produced in a different method and more consumed on informal occasions such as brunches and girls' night out.

8:51 We're being successful targeting this white space, which is the same quality credentials as champagne, but a more approachable positioning. And, excitingly, that is the area that's attracting millennials and Gen Z, and this is why we are winning share against other categories. And here you can see our range of traditional method sparkling wines, which meet all levels of the pricing ladder from £31 for our non vintage bruit up to a £126 for our single vintage Kitts Coty Curre de Cuvee. This is an exceptional range of award winning wines, and we are confident that they stand shoulder to shoulder in quality against the very best in the world.

9:41 And let's look at the three ways that CHAPEL DOWN is differentiated. Firstly, on quality. We have the viticulture and winemaking expertise to create wines of exceptional quality that really represent a sense of place. In our case, cool climate chardonnay on chalk. One of our viticulture team, Ian Button, has spent over forty years working in in English vineyards, and our winemaker, Josh Donahay Spire, has spent over fifteen years with us. Last year, we won 30 awards for quality, and in 2024, our nonvintage rose was awarded decanter awards best in class against 268 other global sparkling roses. Secondly, on brand, we've invested in creating a brand which stands for the best in modern Britain associated with iconic institutions such as the boat race, England cricket, Royal Ascot, and Royal Philomenico Orchestra, and served at modern English events such as SoundBytes and Pub in the Park.

10:48 And thirdly, our brand plays a clear role in consumers' lives, elevating more informal occasions to become memorable celebrations, and we ensure that we have the availability to be able to be purchased for those occasions as shown here by our 36% share of a key sales channel at the off trade. So the first few slides I've presented show where we've come from, and the next few show where we are going. I'll start with our three strategic priorities. The first of which is that we've built a really strong brand and will continue to enhance it, remembering that there is no value attached to it at the moment on our balance sheet.

11:36 The second area is to leverage our position as brand leader in emerging category for commercial benefit both in The UK and internationally. And the third, which we have called disciplined capital management, reflects that the board is keen that we leverage our own existing resources as we expand over the medium term. And I'm now going to take you through the five priority value creation initiatives that we are focused on. And the first value creation initiative is called is under brand value enhancement, and that is to further increase our brand awareness behind proven growth drivers. We know that brand awareness is a key driver in consumer choice of a high value sparkling wine, and we know that we have to date driven steady growth in brand awareness, rising from 32% in 2022 to 49% in 2025.

12:32 So we intend to increase our reinvestment rates behind these proven growth drivers, leveraging our assets such as our 54,000 visitors a year to our brand name in Tentaton, the 120,000 consumers on our relationship marketing database, and, of course, our 10,000 retail shareholders. And there's still plenty of headroom for growth to get to the levels of the market leader, which has 89% brand awareness. And we also know from our data that our marketing is helping to recruit younger consumers, urban affluent millennials into the brand, which will help guarantee future growth for CHAPEL DOWN. And our marketing team has made some really impressive progress with our brand proposition and awareness.

13:20 We launched the next installment of our Fresher Way to Celebrate media campaign, which has generated strong levels of return on advertising spend. Our brand partnerships continue to perform well. Our sales at Royal Ascot grew by 13% last year, and we outperformed leading champagne brands in certain bars there. Hopefully, you saw the amazing coverage we got at this year's boat race, and we're now the official sparkling wine for the Royal Philharmonic Orchestra. And lastly, we are adding a new tasting room in Tenterton to address our tours capacity issue, which should be ready in time for the summer season. The second priority for value creation within brand value enhancement is to better leverage our single vineyard portfolio.

14:11 In Kitscote, we have one of England's finest vineyards. We have never put any meaningful support behind it as a sub brand. This is something we will do be doing in 2026. Excitingly, we have two new single vineyards, Boxley Abbey and Buckwell, which are not yet in full production. Investing in building these luxury sub brands will build a premium halo for CHAPEL DOWN and help deliver further growth in our traditional method sparkling focus and average selling price. We're making good progress on this with strong growth in our luxury sparkling wine portfolio and distribute and distribution gains in the important luxury on trade markets.

14:56 Turning now to sustainable channel expansion. In The UK, we have a strong proposition to expand our distribution into outlets which serve less formal celebration occasions because we know that our brand over indexes compared with champagne on these occasions. And we are also successfully trading consumers up from lower priced sparkling wines such as entry level champagne and Prosecco rather than down trading drinkers from higher price champagne as shown by the shopper basket data, which shows that 80% of switching into CHAPEL DOWN is trade up. We're already seeing strong distribution growth in The UK as a result, including recently into some of the major multiple grocer convenience spacious such as Little Waitrose, and our English summertime campaign will celebrate homegrown flavors.

15:53 And we're making good progress in international markets with 49% growth delivered during financial year 2025. We are particularly pleased with the progress being made in traditional methods sparkling wine in The USA where our import partner, Jackson Family Wines, has reported that CHAPEL DOWN as a cool climate sparkling wine is gaining strong market interest. A PR stunt by Fred Cyriax in New York found that 67% of Americans sampled preferred the fresh, crisp taste of CHAPEL DOWN to a leading champagne brand. We're now available in 23 states there. And Norway is also proving to be a strong performer for us.

16:40 And in terms of disciplined capital management, we are clear that we have the vineyard acreage, the winery capacity, and the ERP systems we need for this next phase of growth. Our plan in this area is to continue to build maturing wine stocks to support our increasing demand, which will see a rise in working capital in the short term, which will then normalize in the medium term, resulting in sustained annual positive cash flows from the early twenty thirties. Our growth is underpinned by a revolving credit facility of £20,000,000 and an opportunity to increase this should we need. And the company continues to make progress on our sustainability program.

17:26 Not only is this the right thing to do for the planet and our values, it's also something that is valued by our target consumers too, for whom sustainability considerations are one of the differentiators between choosing CHAPEL DOWN rather than sparkling wines from another re wine region abroad. We have initiatives around reducing our carbon footprint, for example, by electrifying vehicles where possible, improving habitat creation, for example, by planting more hedgerows, and so and soil health where we are currently part of the one block challenge where we are running part of our vineyard under regenerative soil principles to build a case study for wider rollout. All three of our strategic initiatives have clear KPIs which we will track, and I look forward to updating shareholders on our progress against them during our future reporting.

18:23 So I'm now going to pass over to Loewen to take you through our financial results in more detail. Thank you, James. 2025 was an exceptional year for CHAPEL DOWN, resulting in double digit growth on the top line and adjusted EBITDA profitability. I'll now take you through some of our financial highlights in the next few slides. Firstly, let's have a look at the top line performance. Distribution gains across our trade and international channels, good momentum in H2 in e commerce and more normalized off trade retailer stockholding supported strong growth of 19% year on year. Let's have a look at each channel in a bit more detail. In the off trade, CHAPEL DOWN grew at 38% year on year.

19:12 Approximately onethree of this growth was due to lapping a period in 2024, where retailers reduced their stockholding. Positively, as mentioned in the half year results update, we continue to see much more normalized stockholding levels from retailers. Notwithstanding the lapping of a softer summer in 2024, CHAPEL DOWN sales were up 16% in value through the retailer tools according to Nielsen data, outperforming the wider English sparkling wine category growth, which was at 12%. We also extended our leading market share to 36%. Alongside increases in rate of sale, CHAPEL DOWN also increased its distribution footprint by 5%, which included the new listing of Rose in Tesco. The entree channel grew 5% year on year, although this should be considered against a difficult economic backdrop for hospitality.

20:06 As mentioned also in the half year results, '25 is lapping a period of strong pipe full in h one twenty four. H two, however, has shown good momentum with growth of 7% year on year, meaning our full year growth was 5%. The modest annual growth is also not reflective of the strong distribution gains achieved in the year. We increased the number of unique outlets by 12%, which mean CHAPEL DOWN is now listed in over 2,700 unique outlets across The UK.

20:38 We also built momentum with Buy the Glass listings, which increased 29% year on year, and CHAPEL DOWN is now now has almost six six thousand Xpression listings across the on trade in The UK. Quality of distribution was further enhanced by listings across premium and luxury hotels like The Big, The Rosewood, The Stafford, and also the Ambassador Theatre Group. International delivered strong top line growth of 49%. The successful new distribution partnership with Jackson Family Wines was the main driver behind the growth. CHAPEL DOWN's US distribution has now been expanded from 10 states and 24 to 23 states today. Other international markets are also gaining momentum, Norway through the NORA Group distribution partnership.

21:28 And global travel retail has also performed well. CHAPEL DOWN is now in 40 key travel hubs across The UK, and key food and beverage operator wins included the listing of Bacchus on Virgin Atlantic and a selection of wines on Seadream Yacht Club. Direct to consumer, which is almost one third of our business, showed a modest gain of 1% for the full year. However, prior year comparators still included some of the discontinued spirit sales. If these are excluded, DTC growth was 3%. Our ecommerce channel performed really well in H 2 on the back of strong summer trading and a successful Black Friday campaign, which meant a 6% increase across the wider DTC business in H 2. Our brand home continues to receive over 50,000 visitors a year and consistently receives award from the travel and hospitality industry, including the coveted TripAdvisor Travelers' Choice Award for the fourth consecutive year.

22:28 Over some key trading periods in the year, we operate at full capacity across tours and experiences. This has been one of the inhibiting factors in growing our revenue. As James mentioned earlier, we are in the process of building a new tasting room to be operational by the summer. This should increase our food pool capacity for tours and experiences. You will also note the strong performance for traditional method sparkling wines for which revenue increased 28%. Higher margin traditional method sparkling remains the core strategic focus for CHAPEL DOWN in the longer term, and as expected, traditional method sparkling accelerated its proportion of overall revenue in h two, meaning on a full year basis, it now accounted for 74% of the overall wine revenue.

23:17 As a reminder, due to the long maturity cycle, we continue to invest behind future demand for maturing traditional method sparkling wines, as you will note in the upcoming slides on the balance sheet review with the increase in stock values.

23:36 Gross margin, as expected, temporarily reduced in '25 in 2025. This was caused by a few factors. Firstly, an increase in revenue mix towards the off trade channel. Secondly, slightly lower average selling prices for TMS in the year. However, this was in line with the broader promotional changes across the wider English sparkling wine and champagne categories. And finally, the most dilutive most notable dilution was from the sale of the higher cost 22 vintage traditional method sparkling wines. You will recall these wines were made during a period of severe macro inflation pressure subsequent to the COVID pandemic and the conflict in Ukraine. In 2026, however, we will be selling more of our lower cost 23 vintage traditional method sparkling wines, meaning you can expect an improvement in gross margin compared to '25.

24:32 Diluted factors were partially offset by the improvement to product mix. As mentioned earlier, traditional method sparkling is now making up a larger proportion of our overall revenue, meaning meaning as the mix increases further, it should have an accretive impact on gross margin.

24:53 Bringing this all together into the p and l. The strong top line growth combined with good cost control and overheads resulted in strong underlying operating profit improvement of 39% and adjusted EBITDA growth of 25%. Firstly, I want to point out that the noncash fair value adjustment to biological produce resulted in a gain of nearly 600,000 pounds due to the high quality above average yield of twenty twenty five. This compares to a lower than average yield in 2024, which resulted in a loss. The gain in '25 also led to a profit before tax position, which compares to a loss in the prior year. As you can see, this adjustment is highly volatile.

25:40 And due to the volatility of this noncash adjustment, going forward, we will be we will present adjusted EBITDA excluding the fair value to biological produce. This is a change from prior years. However, by by excluding this volatile noncash adjustment, we believe this better reflects the underlying profitability comparison year on year. Now regarding the cost base. In the year, we invested 11% of net sales revenue into marketing initiatives that increased brand awareness by seven percentage points in the year to 49% and further increasing consumer purchase. For 2026, the Board has taken the decision to increase marketing investment levels to between 13.514.5% to further increase market share and reinforce gross margin.

26:33 Other overheads increased 12% as we continue to invest modestly in headcount and operational support to underpin future growth. Overheads as a percentage of net sales revenue has improved from just under 30% in 2024 to twenty eight percent in 2025. Depreciation increased only marginally at 3% due to the limited productive assets being capitalized, with our two new vineyards becoming productive in 2026 and 2027, respectively. Share based payment expense compares to a gain in '24 when certain vesting criteria was not met. An exceptional items were for the final expenses relating to the 2024 strategic review.

27:24 As mentioned in half year results, there are no more expenses expected regarding this review.

27:35 In this slide, I will talk you through some key balance sheet and cash flow metrics. Let's start with the balance sheet. The net asset value per share increased 2% to 19.3p per share. This might seem modest. However, as a reminder, our assets are valued according to IFRS accounting standards and might not reflect potentially higher market values. The board believes for some of these assets, the market values to be higher than our book values at year end. And, again, to remind everyone, as per James' earlier point, there's no value accounted for in our balance sheet for brand intangibles. Stocks increased 15% due to the higher 25 harvest yield.

28:24 The higher tonnage will deliver approximately 2,600,000 bottles of wine in 2026, an increase of approximately 53% from '24 harvest. This will support our strategic priority to increase our maturing stocks of traditional method sparkling wines, some of which can take up to seven years post harvest before becoming saleable. Increasing on cheering stocks in a controlled manner also mitigates mitigates against years where we might have a lower yield harvest. Other working capital remained largely flat as we continue to manage our customer and supply payment terms efficiently.

29:08 Now let's look at how we allocated capital in the year. Firstly, underlying cash flow improved 55% year on year to almost £400,000. This compares to underlying operating profit growth of 38%, as mentioned earlier in the P and L slide. This means CHAPEL DOWN improved its conversion of underlying profits into cash for the year. However, we need to continue investing ahead to underpin future growth. For this, we use our GBP 20,000,000 facility with PNC Bank. We also have a pre agreed accordion option to extend this facility by a further 10,000,000, subject to credit approval. In the year, we increased our net debt by £3,300,000, resulting in a closing position of 12,400,000 at year end.

30:02 Most of the funding from our revolving credit facility was used to invest in maturing traditional method sparkling wines to underpin future growth and CapEx. The latter mostly used for the finalization of our newly planted vineyards, Boxley Abbey and Buckwell. These vineyards will be productive in '26 and '27 respectively, after which only minimal CapEx would be required on an ongoing basis. Interest was expected to increase as we utilize more of our RCF facility, and as mentioned earlier, exceptionals related to historic initiatives for which there should not be any further expenses going forward. In closing, as we demonstrated in 2025, we remain disciplined in our capital allocation and laser focused to execute against our strategic investment priorities, being maturing stocks to underpin future growth and investment into existing high quality assets.

31:01 We will do so whilst continuing to deliver profitable growth and improve our underlying cash flow.

31:08 Thanks, Len. And now it's time to finish with our twenty twenty six outlook. CHAPEL DOWN has made a strong start to financial year '26, trading well ahead of the same period in the prior year across all key channels and delivering gross margin improvement in line with management ex expectations. The board has taken the decision to increase discretionary investment into marketing initiatives that will strengthen the brand, capture further market share, and reinforce gross margin. For 2026, the board expects marketing spend as a percent of net sales to be between 13 and a half and 14 and a half percent.

31:55 In f y twenty five, that was 11%. New partnerships and initiatives are planned for financial year twenty six to amplify brand visibility and consumer engagement. Whilst we're not seeing any immediate impacts on trading from The Middle East Wall, our proportion of sales in that region is small, and UK Easter activity generated sales in line with management expectations, we do remain alert to the impact that a rise in fuel and energy costs might have on consumer confidence and disposable income levels as well as on input costs for our viticulture and winemaking operations. Looking ahead, we remain focused on delivering on delivering sustained double digit growth.

32:43 The board currently expects financial year twenty six results to be in line with market expectations.

32:55 Right. And now I'd like to invite Alex to put us back on screen for us to go through the Q and A. Some questions were pre submitted, kindly, beforehand. So, again, those are on bits of paper. So we will read from those and then the others are online. So we have quite a few questions to get through, and we will try and get through all of them before the end. So first question, I personally believe that and we've had a couple of questions actually about marketing, but I personally believe that the return on investment of the current marketing campaign is not bringing the correct returns. Can you please share data on this matter?

33:40 Because

33:42 we now use digital media for a lot of our marketing, we can actually see what the return is that we're getting on our marketing spend, and it's positive. Last year, we were getting a return on advertising spend of between eight and ten based on those digital met metrics, which is well above industry norms. And, actually, the results of our marketing can be seen in those brand awareness scores, which have risen from in in 2022,

34:13 that was 32% of UK sparkling wine drinkers were aware of CHAPEL DOWN. That's risen up to 49%. And why that that is so important is because when you ask consumers when they're choosing high value sparkling wine, why they choose a, you know, a certain household brand to drink or to purchase, the number one reason for choosing is because they're aware of the brand already. So this is this is a critical KPI for us, and we're making good progress in this area. The second question, are you able to provide a percentage and numbers of the three levels of shareholders? So Rebecca, our shareholder manager, a number of you would have been in touch with.

35:02 She has gone through the detail. We have 10% of our shareholders are platinum shareholders, 67% are gold shareholders. So remember, if you are a platinum or a gold shareholder, you're able to get 33% off wines and free tours. And silver shareholders, that's 23% of our shareholder base. The third question, are there any plans to develop the Tenston site for overnight accommodation? This would be extremely popular in the area and encourage visitors from further afield to attend. We don't have any active plans to develop the site for overnight accommodation.

35:47 It's quite a constrained site actually. It's obviously where our our winery is. We've looked into this. We think it's too much of a stretch as well from, you know, our core strategic focus, which is on production and sales of our traditional methods and sparkling. Talking of winemaking facilities, what are the strategic plans regarding these facilities? I believe the planned new off-site winemaking and bottling facilities are now not planned to progress. Yeah. That's correct. I think in, September or October last year, we we announced that, you know, we looked at different options, for our winemaking production capacity in the medium term to accommodate the additional grapes coming from the new vineyards that have been planted over the last five years at Boxley Abbey and Buckwell.

36:41 And we decided not to move forward with a new winery, but instead, we are optimizing our existing winemaking assets at our original Temstone Winery, making that a center of excellence for the production of traditional methods sparkling wines, and that can be achieved without significant CapEx. And in addition, we're using existing spare third party winemaking capacity in Kent to produce some of our premium still wines. So we have the capacity that we need in winemaking now, to accommodate us over that medium term and deliver sustained double digit growth into the early twenty thirties at the top line. Is further land acquisition for vine planting in the growth plan for future years, or is the plan to consolidate existing acreage?

37:34 We're not planning on planting any new vineyards in the medium term. Currently, we have over a thousand acres of vineyards of which 777 are in full production at the moment. And as we get those into full production over the next couple of harvest, that gives us enough vineyards to be able to more than double our existing sales of traditional method sparkling wine. So if you remember, our our ambition is to get to, you know, 1% equivalent share of global champagne market by 2035. Last year, we dispatched 1,000,000 bottles of traditional method sparkling for the first time ever, which is equivalent to naught point 4%. So you can see how the the upside potential based on the vineyard that we have already planted, some of which aren't yet in full production.

38:28 There's a a question again on a slight marketing question. Does the company sponsor organizations like Planned Parenthood? So I'll I'll talk a little bit about our sponsorship budget. That is spent on associating with iconic British institutions, which are linked with celebration at the boat race, England cricket, Royal Ascot, Royal Philharmonic Orchestra. But we do also support local Kent causes, and that tends to be arranged locally. Associated to that, has the company made donations to any politician, political party, or election candidates? We haven't made any donations, but we were, last Christmas, one of the sponsors, one of the local Kent sponsors of our local MPs Christmas cards, which were very well received and got good branding for CHAPEL DOWN well.

39:30 We've had a few questions about the share price and whether that is reflective of the valuation of the company. Clearly, it's, you know, at at a lower level than it was this time last year. And comments as has the brand lost its way in the market? Is the marketing strategy correct? I think we would absolutely, as a board, agree that the current valuation of of our shares isn't where we believe the true valuation of the company is. In terms of what our brokers are saying around the markets, it's the consumer stock valuations as a sector have come under pressure recently.

40:18 And what our focus is on a lead is as a leadership team is to focus on delivering the quality, delivering sustained profitable growth over the medium term and into the twenty thirties. And our belief is that this will drive the long term valuation to to where we think it should be. Got a couple of questions now for for Lauren. Lauren, the first one is, could you outline how the business is progressing towards consistent profitability and positive cash generation, and what key milestones we should look for along the way? Yeah. So thanks for the question. I think it's quite a fundamental one actually around, you know, linking to our strategy over the medium and longer term.

41:04 But just just to firstly remind everyone, you know, where we are on our journey as CHAPEL DOWN towards 1% of globe global champagne equivalent market share. Over the last few years, we've invested quite heavily in high quality assets, most notably our our vineyards, technology, winery upgrades. And over the next the next phase that we're moving into now is the conversion phase. And during this phase, we will be focusing on investment in our maturing traditional method sparkling wine stocks, and we will be stock building in order to underpin future growth. So as our demand keeps growing, we need to be investing into stocks today for what we will be selling in three, four, five years time from from today. And that's that's why you might you will be seeing, you that the stocks balance sheet position increasing and further investment in the medium term happening on that front.

42:04 If you then fast forward a little bit in a few years' time, you know, working capital should start normalizing where demand and supply is more comparable. And that's really the point where you should start seeing more free cash flow dropping through less utilization of our net debt facility. Regarding profitability, the key metrics that we consider is adjusted EBITDA. That adjusted EBITDA improved 25% from last year and roughly about 7% on average over the last three years. Adjusted EBITDA normalizes profitability by excluding noncash and volatile adjustments like the fair value adjustment to biological produce, share based payments, or exceptionals.

42:56 So that's a measure to focus on, and, you know, we expect to improve that measure over the coming years as as our top line growth grows as well as we could leverage overall our cost base. And I think the next one the next question we got is, as the business continues to grow, how are you thinking about funding that growth, and should shareholders expect the current strategy to be supported through existing resources? So in 2024, we agreed a 20,000,000 facility with PNC Bank as a revolving credit facility with pre agreed terms that we believe is beneficial to the company to be able to extend that by further £10,000,000 subject to credit approval upon application.

43:52 So as I mentioned in the previous question or rather previous answer to the question, the focus for us now in the medium term is around building maturing stocks, which we intend to to leverage our RCF facility for. And at the end of last year, our balance on net debt was £12,400,000. So you can see that there is reasonable headroom available in in this facility in order for us to to execute on our our growth trajectory. Just maybe also linking to the previous answer where I did mention in the medium term, we should see, you know, higher free cash flows once working capital normalizes. That also would mean that we'd be less reliant on on using our RSA facility to fund growth.

44:39 Okay. Thanks, Len. So we're getting through quite a lot of questions. The the twelfth one is, is future growth more about premium pricing and brand strength or increasing production volumes, and how does that impact mark margins? Well, hopefully, that that has been explained when we took you through the value creation plan in the medium term where our five value creation initiatives are around brand marketing, premiumization, both of which should, improve margins, internationalization, increasing our footprint across The UK, and then doing that with disciplined capital management. So hope hopefully, that's that description I gave earlier has has helped answer that. And likewise, the the next question was over the next twelve months, what would you point to as as proof things are moving in the right direction?

45:41 And, well, first of all, I'd say that I think things are moving in the right direction as shared by our f y twenty five results that we we've announced this morning. But secondly, the KPIs against our three strategic priorities, we've we will be tracking and reporting against to shareholders moving forward. So that that's how we're going to be demonstrating the progress there. So we've got through the pre submitted questions now. There there are a few that have come in online, for which many thanks. There are two questions at the start about formats. Are CHAPEL DOWN looking to sell in 20 c l bottles or bring back Bacchus wine in a box?

46:28 When it comes to format extensions, there are two considerations for us. First of all, can we deliver the CHAPEL DOWN quality through them? And secondly, is there enough of a market, and can we make it at the scale that we need from a cost of goods point of view? And that's really the the business case side. So we are looking at format extensions continually, currently, indeed, at the moment, but we would only do that if we think we can do it if the the the size of the opportunity is big enough to be and to be able to make a decent gross margin from it. The next question is one for learn around.

47:13 Do you have a date yet for the AGM, and will it be in person again at Tenston? So do we have a date? We will announce the date for the AGM in May. The AGM will be in June, and, yes, it will be in person in Tenston. Great. And, Lauren, what what are the length of the leases on the lands that we grow on? So we aim to get more than twenty years closer to twenty five years on our our leases, which is what we've been managing to achieve on a majority of them. The average leases, we haven't disclosed yet because we haven't for end of last year, that's coming out in our annual report. But if you go on more or less the average from twenty four being more or less consistent for twenty five, It's it's about seventeen years that we've got left outstanding on average across all of those leases.

48:07 Great. There's a question here. Do you have a breakdown of the number of bottles that's still ling and premium versus nonpremium, not value at cost as per accounts, and how that has changed over the recent years? Lauren, I think you've probably got some of that data. We can probably address this one more properly with online putting the numbers against the question. We can address that one later and putting the numbers again. Okay. Great. I mean, what I what I do know is in 2025, I think we sold 1,800,000 bottles. Yes. A million were traditionally on the sparkling, and then about 800,000 has has split between still and a touch of sparkle. A question here on, can you please tell us more about how we should interpret the impressive plus nine percent three year CAGR quoted.

49:02 Now that that's that is a great point, actually. The that statistic that we shared of the the 9% CAGR, that basically means if if you strip look back over the past three years, on average, since 2022, every year, our top line has grown by 9% on average. So, actually, in 2024, our top line went back a little bit because of a a one off retailer destocking exercise, but the underlying trajectory of net sales revenue is at 9% based on, between 2022 and 2025. Will there become a point where CHAPEL DOWN phase out still wines and concentrate on sparkling only? So traditional method of sparkling is our core strategic focus. However, we really value our still wine portfolio because it gives us more visibility and footprint on shelf in Waitrose Majestic, for example. It also really showcases our winemaking team and viticulture team's expertise as well. And you should certainly look out for some really interesting discovery series additions coming out later this year from the the amazing 2025 harvest.

50:31 Ah, here's a go. So why were the results released a month later than last year? Is it going concern related? I note the accordion option is subject to lender approval. So, Lauren, what would you like to say on that? Good news. There's absolutely no going concern issues whatsoever. I think it was purely due to having enough time in order to finalize the audit as well as availability and capacity around making sure that we can we can move through that efficiently and address all the technical points. So going concern is absolutely not an issue whatsoever. Yeah. I think it's fair to say that we'd planned at the start of the year to to that this would be the date. Around capacity and and timing of Easter as well was a consideration.

51:23 Should you consider including brand value of CHAPEL DOWN as an intangible asset on the balance sheet, thereby increasing balance sheet value of the group? Unfortunately, we can't do that. So IFRS prohibits us from capitalizing internally generated brands. So if we were to, in theory, have acquired the CHAPEL DOWN brand, then, yes, that would have been on our balance sheet. But because we've made the CHAPEL DOWN brand, we can't capitalize it on our balance sheet. So that's we don't make the rules. That's IFRS accounting rules. Okay. There is a a comment on touch of sparkle and the branding, which of which many thanks. I will pass that on to to the marketing team. A question, how much was spent on the external winery which has been abandoned?

52:15 I I think that can be seen in in last year's part of last year's exceptional costs. So and that that and, sorry, and and the other things as well. So and the strategic review. So that that was a a 24 cost and not not relevant to 2025 results. And and also just to say there's no there's no liability further liability for any of those costs. Yeah. There's there's a question around get the gross margins in different retailers. Obviously, I I can't really comment on on that apart from to say that we we are, as this category leader, partnering with the big big retailers both in the the off trade and the on trade to make sure that CHAPEL DOWN gets the visibility on shelf and sort of key celebration occasion as well.

53:25 There's a a question here. Is there any opportunity to consider vegan and or organic production in the future? I think what I'm gonna do on that is is get more detail on on so because I think we we actually have made some progress in this area in the last couple of years, but rather than tell you something that isn't a 100% correct, we'll we'll put that actual technical answer in in in the comments online. Some more thoughts around doing partnerships with hotels and taxis in the Chabadan area to to encourage people to stay overnight and get to the winery more easily.

54:10 Absolutely. I'll I'll pass that through to our Tenston team because I know we have some already, but it it it's a it's a great point. What are the expected rises in cost for processing additional production from new vineyards? Will this affect margins? Yeah. So whilst I can't give exact cost increase on on this call, it's safe to say that, you know, with the with the largest state, we should get some further operational leverage where a larger portion of our fixed cost gets divided into a larger estate. So, yes, in theory, we should get some some larger benefit in the longer term. And our new vineyards are all big scale vineyards Mhmm. As well. So historically, we might have had five acres here, 10 acres there. Now that we've had four big vineyards, all of which are over a 100 acres each, and that that obviously helps with with efficiency too.

55:15 So I think and we've got so some really great inputs here, which I'm going to I'm gonna pass on to the marketing team. I'm gonna end up with take the the final question before we close, which is any further thoughts on a CHAPEL DOWN low alcohol wine as the market is growing? And, certainly, the no low alcohol as of roundabout naught to naught point 5% ABV market is growing. Also, the English marketing wine category is growing as well, and and and we're going to focus on that. We we don't believe that we could do zero alcohol in a way that's consistent with our winemaking philosophy. However, you know, the the technology is evolving fast, and we're certainly keeping a close ear to the ground on that and doing regular tastings of what is available in the market.

56:15 Do watch this space later in the year as as well for not low no. Midrange, but we will it we've got something interesting coming in our discovery series later in the year as well. So with that, I am going to thank all our shareholders for some great questions. We've ended up having more time than normal for the q and a. I hope that was useful for you. I wanted to to thank Alex from IMC for organizing this presentation, to thank my wider team of 85 employees here at CHAPEL DOWN for delivering some phenomenal results in FY '25.

57:03 And thank you to our shareholders, not only for coming on this call, but for your ongoing support for CHAPEL DOWN on this fantastic journey that we're going on to unlock our ambition to become 1% equivalent of the global champagne market by 2035. So thank you, everyone, and I hope you enjoy the rest of this sunny weather and come down and visit us soon in Tetherton. Fantastic, James. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you