Chapel Down Group (LSE:CDGP) — Chapel Down Company Introduction & Annual 2021 results.

0:01 Good afternoon, and welcome to the CHAPEL DOWN GROUP PLC introduction and annual results investor presentation. Throughout this recorded presentation, investors are being in listen only mode. Questions are encouraged and could be submitted at any time by the q and a tab situated in the right hand corner of your screen. Just q and a, scroll to the bottom, type your question, and press send. Company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and we'll publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Andrew Carter, CEO and Richard Woodhouse, CFO. Good afternoon.

0:34 Good afternoon, everyone, and, welcome to the presentation of our CHAPEL DOWN twenty twenty one, annual results. My name is Andrew Carter. I joined, I joined CHAPEL DOWN as CEO back in September, and I'm joined today by Richard Woodhouse, CFO. We are looking forward to taking you through our 2021 annual results and to share with you a business update on performance and also our ambition to double the size of our business by 2026.

1:10 For those that are new to CHAPEL DOWN, who are we and and what do we do? We're The UK's leading and largest English winemaker. We're selling over 1,500,000 bottles of award winning sparkling and still wines. Our CHAPEL DOWN brand is the number one UK brand with the broadest distribution and highest brand awareness. Twenty years ago, my predecessor set out on a mission, to change the way the world thinks about English wines forever. And I'm really pleased to share with you today that that journey is in full flight. And we are converting more and more champagne buyers to the the the delights of English sparkling wine every day of the year. As we move forward, we sold our beer business in April 21, and our vision is to be the number one and most celebrated English winemaker, doubling the size of our business by 2026.

2:09 Before we start today's presentation, let me take you on a brief journey to Kent and to our vineyards and to our brand home in Denton.

4:15 Great. I'm gonna keep myself off the screen so that everyone can focus on the screen as we move forward to presentation, and then we'll bring ourselves back for q and a later. Throughout the presentation, please pop some questions and answers for anything you wish to wish to know in our business. Before we share with you the details of the strong 2021 performance, I'd like to give a quick snapshot of the business. CHAPEL DOWN is the number one English wine brand. In 2021, our total wine volumes were up 17% and more importantly, our sparkling volumes were up 39%. Our brand is the most recognized English wine brand in The UK with brand awareness of 28% but significant opportunities for further growth.

5:07 We are proud to support a number of iconic British institutions and events such as the boat race, Ascot and the Royal Opera House. And you would have read last week that we've just reached a new three year agreement to be the official sparkling wine of the English Cricket Board replacing the Verglico champagne. Quite a coup for the English. We have the largest acreage of vineyard in The UK. We have 750 acres of land primarily on the North Downs Of Kent. This total acreage of vineyards will be fully productive by 2023. And as is illustrated in the graphic, it will allow us to produce 2,300 tonnes of fruit and about 2,300,000 bottles of wine.

5:52 Through the presentation today, we'll also talk further about the strength of the CHAPEL DOWN balance sheet and our net assets value of GBP 31,000,000. Our net assets are primarily made up of our land, our buildings, and our stock. In line with GAAP accounting standards, these asset values are are calculated at cost, but the CHAPEL DOWN board strongly believes there is a significant upside to this asset value. As a brand, we have the broadest scale of distribution in The UK. We are the only brand distributed across all key retailers, and we are available across a number of key on trade accounts with significant opportunities for growth as we emerge from COVID. More of this as we go through the presentation.

6:40 And in 2021, we had a rapidly growing direct to consumer business. It represents 24% of our total sales, and it grew at 30% in 2021. We have a consumer database of 50,000 consumers. And on social media, we have a following of 75,000 people. And many of you will have visited our brand home at Tenston and Kent. Last year, we had 55,000 visitors on wine tours, enjoying our restaurants, and visiting our shop, falling in love with our CHAPEL DOWN brand, and becoming lifetime brand ambassadors.

7:21 I'll take you through the key financial highlights from the full year results for the twelve months to 12/31/2021. From a total group perspective, which includes the discontinued operations, our group revenues were up 9% to 16,930,000, with an adjusted EBITDA profit of 1,930,000 versus a 20,000 loss in 2020. The overall profit for, before tax was a was a profit of 790,000 in, '21 versus a loss of 7,860,000 in 2020. These, these numbers included exceptional costs associated with the disposal of curious drinks of 100,000 and 6,680,000, respectively.

8:09 We disposed the beer inside the business in April 21, and the focus of the business is now entirely on the exciting wines and spirits business. Wines and spirits is, performance is reflected in the continuing operations, which we'll now come on to. We saw strong sales growth in the, in the wine in the continuing in the wines and spirits business with 25% growth in revenues, reflecting a 17% increase in volume to, over 1,500,000, bottles. And with the same in the same period, we saw an increase in sparkling mix from 42% to 49% by volume. The effect of that can be seen in the in the gross margin where we've moved from 39% in 2020 to 42% in '21.

9:03 And, again, that's that that flows through the gross profit, which increased 37% to 7,050,000, with a respective 31% increase in EBIT adjusted EBITDA to 2,110,000. As we've mentioned earlier, we have we have a strong balance sheet with net assets of 31,100,000. Included within there is 14,400,000 of land and buildings, planted vineyards, and plants and machinery, which is all in in the books at cost under, UK GAAP standards. Stock at 12,600,000 includes bottled stock and stock, which in line with UK GAAP is reported at lower stock on net realizable value.

9:50 As Andrew alluded to earlier, they got the board confident that there is a considerably higher, value there in terms of the net realizable value of those assets. We have a strong cash position, at the end of twenty one. Net cash of 6,400,000 versus net debt of 7,400,000 at the end of twenty twenty. The swing of 13,800,000, is down to the crowdfunding in June 21, 6,900,000, and the reduction in debt of 7,200,000 relating to the disposal of jurisprudence in April 21. In addition to that, we have a 15,000,000, financing asset backed financing facility with PLC, of which only 3,000,000 is drawn down to debt.

10:44 Great. Thank you, Richard. And, as we go through, we'll get to the questions at the end. But I see a quick, message there from Gavin B. Thank you for that. When we compare to 2019, volume growth in '21 was 64%, and, and our value growth was 62%.

11:04 Underpinning the financial highlights, a series of operational highlights. We've seen continued growth in our brand awareness and affinity through advertising, social media engagement, and sponsorship partnership. Our off trade revenues grew by 19%, our wine revenues by 23%, and we see our market share increase to 46% of the branded sparkling market in The UK. We we had a new listing on Tesco with our group, CHAPEL DOWN GROUP N. V, and we continue to build strong business partnership with the likes of WEDROUP, M and S, Sainsbury's, Majestic. We've already referenced the flourishing, growth and of our direct to consumer business. It's also worth pointing that we, relaunched the website shop during January 22, and we're seeing far better consumer journey time through the site.

11:58 Our tours, as mentioned, recommenced, and we're looking back to pre pandemic levels, and we'll talk about the outlook for '22 later. On the international stage, wines continue to receive premium recognition. We received a platinum medal for our Rosebud MV, gold medal for our kids co chair, the World Wine twenty twenty one awards. These were just two awards amongst many during the course of the year. And also many of you many of you be aware that the government is reviewing the alcohol duty, system within The UK. A series of proposals were made initially by the government in October of last year. And one of those proposals is that a reduction will take place in sparkling wine duty, which will put us on a level playing field with still whites, I. A reduction from £2.86 to £2.33 per bottle of sparkling wine.

12:52 We continue to be in ongoing consultation with the government and the wine associations, but this will be implemented in February 23. 'twenty one harvest, as previously reported, was a challenging year. Our industry yields were down 30% and our CHAPEL DOWN yields were down 23%. This impacts availability, still wine stops for 22%. However, we have significant stops of our sparkling wines, which will enable us continued growth momentum during the course of '22.

13:28 Since my arrival, in September, I have put in place the new dynamic and ambitious executive leadership team, and I would just briefly like to introduce that team to you. As previously announced before Christmas, Rob Smith will join as our new CFO from PricewaterhouseCooper, where he's been leading the finance has been the lead lead finance transformation partner for the last thirteen years. During the summer, he will work through a handover of Richard and will begin in September. Our viticulture winemaking team is led by Josh Donahay Spa, who has been our head winemaker for the last ten years. He's got significant international and domestic winemaking and viticultural experience. I passionately believe in growing a high performance team and culture, and we have just appointed our first people director, Tamsin Webster.

14:20 We now have a team of 60 people at CHAPEL DOWN. And at the peak of harvest, we have a seasonal workforce for a 150 people. It's the right time to put this key role in place as we move forward. Many of you will know Mark Harvey. He has been with the business for five years and played a key role in the development of the CHAPEL DOWN brand. In his role as chief marketing officer, he will lead the development of our marketing plans and our Tentherm brand home experience team. And finally, Tom Hepworth Bond joins as sales director from Chase Distillery and prior to that, the vendor, where he has an outstanding track record for building win win customer partnerships. I'd like just to take some time to talk about the English wine market.

15:06 The emergence of the English wine region over the last twenty years is gathering huge momentum. As a result of global warming, we have the perfect climate for growing grapes. Our temperatures are only one degree cooler than champagne during the growing season, and our slightly longer growing season results in wines that are fresher fresher, elegant, and crispy in style. The majority of our vineyards are planted on the same band of chalk that runs up from the Champagne region under the channel through the White Cliffs Of Dover and into the North Downs Of England. Our viticulture and winemaking team has significant domestic and international experience. And what we're finding each year with increased scale comes increased quality of winemaking process.

15:51 But also every year, we're learning more and more about how to produce world class award winning sparkling and still wines. With the unpredictable impact of global warming, arguably, climate is now better suited to producing sparkling wines than the Champagne region itself. Let's focus in on the growth of the English wine markets. There are now 800 vineyards covering over 9,000 acres in The UK. In 2020, there were 7,100,000 bottles sold, growing at 29% year on year. We're currently waiting on the YNGB industry data for 2021, but we expect this sort of level of market growth to have continued. However, the really important fact about this chart is that that is only a fraction of the 200,000,000 bottles of sparkling wine sold in this country.

16:43 You can see from the right hand side of this chart that Prosecco accounts for 69% of volume, but the important piece is champagne. 20,000,000 bottles in 2020, reportedly growing to the best part of 28,000,000 in 2021. This is the opportunity for CHAPEL DOWN to convert more and more champagne drinkers into English wine. Annual wine intelligence survey shows significant growth in the consumer awareness of English sparkling wine with 73% now aware of the category. You can also see from this chart, though, that only 19% are buying compared to 47% of champagne. What's more, the momentum behind other categories is declining as consumer interest in English sparkling wine continues to grow.

17:34 CHAPEL DOWN GROUP PLAYED the power brand in the English wine category. We've got the highest level of branded awareness. We've got continued high levels of conversion to purchase. And as we build the scale of the brand, we have the biggest number of consumers in The UK.

17:52 In fact, if you were to look at the top 10 champagne brands in this country, CHAPEL DOWN effectively would already be number eight if labeled as champagne. And you can see the scale of opportunity for growth when you start to look at the top end champagne brands on this page.

18:11 For those of you that are new to the brand, I'd just like to take some time and also to re remind everybody around the products in our CHAPEL DOWN range, but also the scalable proposition that we have across all price tiers in the marketplace. On the top row, we have our sparkling portfolio. It's counting for 49% of our wine sales in '21, with the top end of the portfolio being our luxury offering from Kids Coty. Moving to the right, you can see our super premium sparkling range, which is made up for three braces, roast bruit and our new on trade exclusive vintage reserve bruit. We launched this into the trade in April to support solely the on trade channel, and I'll talk to you a little bit more about that shortly.

18:58 The heart of our brand is CHAPEL DOWN route MB. It's staged in bottle and tank for two to three years, and the English Sparkling Rose is our pink expression of this fruit. Our complete focus is on premiumizing our range and growing our gross margins. And in March 2022, we have increased our customer pricing and our consumer pricing online to deliver this. The prices on this chart reflect the new retail prices in the market from the March 1. Finally, have in terms of sparkling, our sparkling backers price product there on the right that was launched two years ago and is targeted at £20 price point from most to 15 to encourage consumers to switch into English wines

19:40 from the higher end Prosecco and Carver. Ascgill wines accounted for 51% of volumes in 2021. Most importantly here on the right hand side of the page is the core range, our Flin Dry, our Bacchus and our English Rose. These wines are now priced at £15 with occasional pricing promotion burst to 12.

20:02 We have a winemaker series that we're beginning to develop, which gives us opportunity to innovate with new varieties, techniques, and avail is exclusively available to our ecommerce and shop consumers. And at the top end of the range is our Kits Koti super premium still wines, where, in my opinion, Kits Koti Chardonnay, the most outstanding white wine being produced in The UK.

20:26 The quality of the wines grown and produced by Josh and the team are reflected in the array of awards that we have won over the past couple of years. Most importantly, as I rehighlighted earlier is the platinum award medal received for our rose brew in the twenty twenty one decanter worldwide wine awards, a really big coup for English wine. But, you know, don't take my word for it here. Let's take the words of the wine critics and the experts across the country. People like Victoria Moore from the Telegraph. People like worldwide guru, Oz Clarke, just to highlight a couple of names on this chart singing the praises and quality of our sparkling wine. Now I know most of you on the call will be avid watches of Saturday Morning Kitchen on BBC one. But for those that missed the call on, missed the program on Saturday, please take a quick listen to this.

21:20 So first is obviously English, and we've got an English sparkling rose because spice gentle spice like this and bubbles, really good match. So this is from CHAPEL DOWN in Kent. Nice. And it's made in the same way as champagne, so it gets its bubble in the bottle. From this kind of classic champagne grapes, but also Pinot Blanc as well. So it this is one of my favorite English sparkling roses. £27, which is not cheap, but champagne's now moving into the thirties and forties.

21:51 So for my money yeah. That's equally as good as a as a bottle of moe or a or a bottle of moe. So Which is obviously French as well. Me. Yes. And it's Saint George's Day. Saint George's Day, and also this one has got that cut like, it's a really lovely pale pink. And as you know, do like color coding my food and wine choices. Pink fizz? I don't. I don't. I don't just like pink fizz. Any excuse. Any excuse. Really?

22:25 Okay. I'd now like to just reshare with you our sponsorship partnerships. I've already referenced some earlier in the presentation. Fantastic coverage this year in the boat race live wise with London Symphony Orchestra. But most importantly, just want to focus on our new sponsorship partnership with English Grip Court. We will be the official staff in wine of English Cricket that will enable us to support winning podium moments for England and for men's and women's cricket both internationally and domestically. And we're expecting to reach a TV audience number of over 20,000,000 during the course of the summer, a really great platform on which to showcase our brand. Earlier in the deck, we showed you a business snapshot. There were quite a lot of questions before today to get a better understanding of how our business splits across trade channel.

23:19 So in the spirit of opening this, I really wanted to share this chart with you to give you a sense of our '21 sales breakdown.

23:26 Our off trade accounts for 54% of our business and we have outstanding relationships with key retailers. In April 2021, our group was listed by Tesco and we have a platform for future growth for other products in the range. Specifically, our line revenues grew by 23% and our market share increased to 46% of retail. Our on trade only accounts for 10% sales.

23:53 As we emerge from the pandemic, this really is a huge growth opportunity. We have great listings with our wholesalers in terms of group to market, and we're very focused on building brand distribution in the top end of the entree across luxury hotel groups, trend leading premium bars and national on trade.

24:14 Our e commerce business as referenced earlier now is 24% of the business and growing at 30%. Here's some of the key numbers underpinning that. Our orders are orders were up at 40,000 people. We've got database of 50,000. Within that, we've got eight and a half thousand passionate shareholders ordering from us. Linked to this, our average order value is a £115, and we have a fantastic return in customer rate of 32%.

24:42 As referenced, our e commerce business is supported by excellent shareholder benefit scheme that we have in place. Our gold and platinum share discounts give up to 33 of our wines. So if you are if you hold more than 2,000 shares, you're able to get significant discount on our wines by buying directly. And our brand home in Tenton, as we referenced, 55,000 visitors enjoy magnificent wine tours and and tremendous, rated food in the Swan Restaurant. As we move into the final part of the presentation, I wanted to share my ambition and the strategic road map for CHAPEL DOWN, which I have built with the board over the last six months since I started.

25:27 Our ambition is to double the size of our business by 2026, and we have four strategic pillars which will underpin the growth of our business. Most importantly, our brand. It starts with the brand. As English wine continues to grow, we will continue to be the brand leader of the category, leading the growth of this dynamic English sparkling wine category.

25:51 We will continue to sell both sparkling and still wines, but we will be very focused on premiumizing our CHAPEL DOWN brand and growing our sparkling volumes to serve 70% of the business within this five year period. With this will come increased gross margin and significant contribution to business profitability and growth. We will continue to step change our leading distribution position. Our ambition is to grow off trade to 2,005 outlets and to continue to grow on trade to 10,000 outlets by the end of twenty six. Our e commerce will continue to grow share of business and with it the lifetime brand value of those consumers.

26:34 I haven't referenced yet international today. International is a real growing opportunity for us. Today, we have seeded the CHAPEL DOWN brand in 12 markets and are working with distributors in each of those marketplaces. However, our volumes only currently represent 1% of our total business as we focus most of our scarce volumes and growth on The UK homeland. We have the opportunity to grow this in 2022.

27:02 And in the context of our five year plan, we would look to grow share of business to 5% by 2026. Business is all about brands, and it's all about people. And we will continue to attract the top the best talent. We'll continue to build our high performance culture during the coming years. But really importantly, we also need to build our business systems and process. As our business gets bigger, we need to make sure we have the right processes to manage a bigger dynamic business. To that end, we'll be looking to put a new ERP system in place for H1 twenty twenty three. However, in the wine business and everyone on the call will appreciate this, long term business growth has to be underpinned by the right scale of our operations.

27:51 Our long term business growth needs to be underpinned by a scale of ambition in our operation capability. Today, CHAPEL DOWN currently has seven fifty acres of grapes, and we will plant a further 150 acres across '22 and '23. This acreage will enable us to double the size of our business by 2026.

28:16 The investment cost of planting these additional vines of $2,700,000 is built into our plant and will be fully funded from cash. Our full five year ambition here is completely funded from a capital point of view to my current net cash balances and for long term loan facilities that we have against the assets with PLC.

28:40 However, during the course of the next eighteen months, we will also continue to review a combination of opportunities to further build our grape availability and our production capacity beyond 2026. We have briefed out in the marketplace an ongoing land search with Knight Frank to source more acreage and vineyard. We have the ability as the market continues to mature to purchase surface market grapes. We strongly believe as category leader, there will be opportunity for us to buy grapes moving forwards. And really importantly, we will continue to review all strategic partnerships that will further build our position of scale in the market.

29:23 Furthermore, our ambition for long term growth will also be underpinned by the building of a new winery in Kent. This winery will will be built to deliver long term growth potential. We have started a preplanning process with the local councils in Kent. We moved into full planning during the summer of twenty twenty two. Our aim is to have planning completed by early twenty three and have the wind rebuilt and in place in time for the twenty twenty four hours. In closing, I'd like to give you a brief update on our 2022 trading outlook. We've had a good trading performance in q one, notably strong year on year growth on sparkling wines.

30:11 We've implemented price increases across all channels from the March 1, and we've offset any inflationary cost pressures that the business is facing around dry goods, labor, energy and transport. We have agreed off trade joint business plans for the full calendar '22 with all of our key partners. We have kicked off our reinvigoration of the on trade. The entree is showing exciting, opportunities as we come out of COVID and move into what is gonna be a very celebratory summer in spite of the current challenges that we're facing in the environment of for the consumer. We launched our CHAPEL DOWN LITTLE RESERVE group specifically for the entree to offset any comparative across channels to our retail group pricing, but also to be able to grow profitability through that channel.

31:05 Post COVID, like most business, Q1 e commerce business performance is lower compared to 2021 as we're seeing consumers increasingly return to retail stores. However, that said, we're seeing a growth in our average order value in the course of Q1. I've referenced the new partnership with English Cricket Board, and we're seeing a strong return of visitor numbers to Tenston brand brand home. We have excellent forward bookings for the seller at nearly 80% capacity, and our team at Tenston are continuing to make cycles of everybody that comes through their brand home gate. The executive leadership team forms are complete. The team will be fully operational from the September 1.

31:53 And then finally, as we look towards the full year for '22, as referenced earlier, total wine volumes will be lower due to the availability of still wines for the 2021 harvest. However, we can forecast continued full year 2022 revenue growth and higher growth gross profitability resulting from both the growth of sparkling wine sales in our business and the benefits of price increase in the second half of the year. So before we open up for answering any questions, let me just summarize what we've been through today. CHAPEL DOWN business now is completely refocused on building its position as England's leading and largest winemaker. We've seen strong 21 top line, hot wine and spirits revenue growth of 25% and our sparkling volumes are up 39%.

32:45 We have a very profitable UK wine business with opportunity for further premiumization and gross margin percentage growth. We've got the biggest brand in The UK and we have the broadest distribution channels. Our volumes are underpinned by the largest in yard acreage with seven fifty acres that will all be fully productive by 2023 and we will plant further 150 acres to underpin our volume forecast in the five year plan. We have the new executive leadership team in place, and we have ambitious plans to develop a new winery for harvest twenty twenty four. Therefore, in closing, I hope you feel the same level of confidence that we do as a board and as a business and our business ambition to be able to double the size of CHAPEL DOWN business in the next five years and have more and more champagne drinkers converted to the Delights and our spectacular award winning sparkling wines.

33:46 That's fantastic. Andrew Richards, thank you very much indeed for the presentation. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated in the right hand corner of your screen. But just while the team take a few moments to review those questions submitted today, I'd like to remind you the recording of the presentation, along with a copy of the slides and the published Q and A, can be accessed via your investor dashboard. Andrew, Richard, we've received a number of questions both presubmitted and during today's meeting from investors, and thank you to all the investors that submitted those. Richard, if I may just hand back to you to run through the q and a. If you could just, read out the question even who it's from, that'd be fantastic. Thank you. Submitted previous meeting, and then we'll pick up on some of the ones that we submitted to. Yeah. Many many thanks for all the questions and engagement, everyone. It's it's really great to see, and we will try to get as many of these done in the next twenty five minutes as as possible.

34:42 If I could just start and go through some of the free ones and give Richard a little time then just to answer some of the ones on the right hand side. First question that came in was could the company comment on any expected changes in the EBITDA margin on sparkling wine due to changes in alcohol duty? I think I outlined that during the course of the presentation. A bottle of sparkling wine will go down from $2.86 to $2.33 in terms of duty, so 53 p per bottle. So I'm sure you'll get your calculators out and work out what that that looks like. However, we will be looking to invest part of that cost saving in marketing. And, inevitably, we will be also looking to build consumer sales at point of purchase with customers.

35:29 It's also just network letting you know our still wines will increase in duty from $2.23 to $2.33 for 12% ABV strength. Hopefully, answers that point. We are members of the the Wines of Great Britain. I'm very close to the Wines Spirit Trade Association. We're having ongoing conversations with government about the implementation of this duty. A question came in around the impact of The UK's exit from the EU. As you can see, with respect to sales, this has little impact. I think the delights for us have been an English brand. Most of the control of our cost of goods in terms of our materials, but, of course, our grapes is all English centric. We do face some minor challenges in terms of import of bottles and import labels through the the period, but we've managed those. And what we now ensure is that we're carrying a significant stock of materials to ensure that we can, set against any issues in the supply chain. So in answer to that question, very little impact of of of Brexit.

36:36 The question and several of them, around the significant cost cost pressures that are currently arising in the inflationary environment. I've looked to be as open as I I can on that. We have had cost increases primarily across glass. The market's experiencing energy surcharges at the moment, and also we have a a a pressure on packaging. Vineyard harvest label will also slightly increase, but what we've looked to do with our customers is to be able to pass on the major part of those cost pressures through our customer price increases. We've worked very closely with them, and the resulting retail price changes still mean that our pricing of our English sparkling wine is still very competitive to champagne.

37:24 So as of now, English brewed non vintage will be priced at £28 or £27 spent on retail up on shelf. That still is at least 20%, 25% below where the champagne guys have had to move their ongoing pricing to. So we think we've got the right balance between managing consumer pricing in the marketplace, but also making sure that we're continuing to grow the profitability of our business through what is a very pressured situation on cost. Richard, would you answer the next question for me, please? So if not already covered, please provide an overview of how our funds have been deployed from the last fundraising. We covered covered some of this in the future CapEx, but there's within the wind out expenditure, we have 2,700,000, which we've highlighted already, for the passing of a 150 acres over the course of 2223.

38:20 This year, we will also be expanding our production capacity at Tensington with the addition of additional tanks and of further sort of concrete area to to support and house those tanks. At the same time, we will also be developing vineyard facilities at the numerous sites that we have across Kent. So the the there are plans there to use use the funds over the course of the next two years, and as we outlined in the share of a document last year. Great. Thank you, Richard. There's also, a lot of questions around the cost of living crisis and CHAPEL DOWN being a premium brand and how we expect this cost of living crisis to impact us and what steps are we taking to to mitigate this.

39:13 I think it's it's fair to say every business is dealing with cost of living pressures and levels of disposable impact income impacts. During challenging times, the premium drinks category has been incredibly resilient. I've been fortunate enough to work in drinks for thirty years, and I've seen a number of different low points. And during those low points, really importantly, consumers, in spite of the pressure, still want to be able to go out. They still want to be able to have some fun, and we see strong, we saw strong levels of resilience of of premium drinks during recessionary times over history. I think in terms of CHAPEL DOWN, when we look at the price of a bottle of CHAPEL DOWN at £28, it is a luxury, but it's an affordable luxury.

40:00 And I think as we go through this summer, we're fully expecting that consumers will continue to buy our brand in spite of the challenges. That said, we will continue to monitor ongoing rate of sales with the data we get from retailers. We'll also continue to monitor our approach promotion promotional pricing levels to make sure that they're working relative to the market and to to champagne. But I I think it's a really important reflection of the CHAPEL DOWN brand strength that we're able now to take price increases in the market during these challenging times. I will ask you one more question, and then we'll put a look to the right of the of the screen and pick up some of those. There's a question around our website, 17 different wines for sale.

40:51 Is this number likely to change? And, you know, how do we manage our wine portfolio? I think I demonstrated during the course of the presentation the focus skews for us in in in terms of our wines. We will continue to innovate and and look at new wines, and we won't hesitate to produce, smaller products in the range at high levels of margin if we think that that contributes to the overall premiumization of the brand. My personal experience of working on the Penhold's brand over many years is a real ability once you have a power brand like we have in CHAPEL DOWN to be able to have a brand that stretches from entry point all the way through to the top end luxury market. Okay, Richard. So we, look to take a couple of questions up the side here. Yeah.

41:38 First one, sales growth is solid but continues to underperform other UK producers such as Knight and Burr and Gospel. I think it's worth pointing out kind of relative scale of that, particularly with Gospel on where they they were sequoted on the end market. Their trading update for last year was 4,000,000 sales. They're a quarter of the size of of ourselves. So it's no wonder that that the growth may be a bit higher, but we, believe that couldn't believe the strength of our our brand and the growth that we're seeing, and that we can continue that over the five year period through to '26. I think I would just also add to that point. There's some great brands out there. English sparkling wine is in is is flourishing, but, you know, let's not forget where the competition is. The the competition is is champagne.

42:25 You know, English sparkling wine in its totality in 2020 was four and a half million bottles. It probably will have grown to about six or so in '21. It is still a very small share of the total sparkling and total champagne market. So we're the category leader. We're the biggest brand. I think we have a very different business model compared to the the two brands we've just talked about in that we're producing scale. We're producing both still and sparkling wise. Another one here from Steven. Are you able to address the share price performances to see this equity raise and how you see this going forward? I think, as we've indicated in the presentation, we we have a very strong balance sheet, where we have the net assets. So, the net realizable value is considerably higher than than the live bearing balance sheet.

43:20 We're also a growing and strong brand. So from from our perspective, the we we think the substantial caps of upside for the business through to '26 and particularly with those with the plans to double the size of the business over that period of time. Question from Philip w around can you talk in detail about the work being done in customer acquisition marketing for your ecommerce side of things? Philip, that's that's probably a detailed one to to come back to you. But, effectively, we drive customer acquisition into our ecommerce WW chapter down site through three ways. One is through paid media.

44:07 One is through working with email of our current database. And then the third one is organic. In terms of the work we do on the the paid side of things, we have a a combination of us working into pay per click style approaches through social media advertising, and we constantly evaluate that in real time on a daily, weekly basis through our ecommerce side as to what is making consumers want to go on and and buy our product. We're then able to get a real time sense of return on investment against how we're spending money to drive purchase through our website. I think it's also worth just reiterating the fact that our shareholders are a very, very key part of our ecommerce business.

44:56 We have eight and a half thousand shareholders, and they're regularly a lot of them are regularly buying from our site. There's probably half out there that we actually think we could do a lot more with, and and we will do through 2022. But through being a gold and platinum shareholder, I. More than 2,000 shares, we are able to get 33% discount on our line. So not only are we talking to people on this call as investors, we're also talking to you as consumers. So you know, please make sure you're well stocked coming into the, the Maybank holiday weekend. Next one for you, Rich. Well, good. Yeah. Good morning from Nicole here. Will there be any efforts attracting price sensitive consumers with an entry level sparkling wine, or is your focus on your premium buyers?

45:45 Yeah. We're predominantly focused on the premium, super premium end of the category. Category. As far as in back, it's priced at £20, and we've seen real strong growth on that in the in the first couple of years as people come out of that top end card of Prosecco and realize, actually, there's a there's an English brand which they can enjoy. It's something we'll continue to look as to how big we can expand that volume ultimately relative to our product because, naturally, the grapes that we're using are either going into our Swine or they're going into our Sparkling Swine. There will be a portfolio decision we'll continue to make, over the coming, over the coming months. One from Simon here. Please, can you talk about the early impact of price increases on volume?

46:38 At at at this point in time, literally, our price increases have only been at retail level in the market for about three to four weeks. But in terms of looking at our weekly rate of sale data, which we do across all key retailers and across ecommerce, we are not seeing any dramatic drop off in our pricing due to the price increase. We are going into a promotional period. It's probably worth pointing out to the group's understanding here that when we're looking at our promotional pricing, we've got two levels of potential pricing. One is a a deeper promotional price. One is a a more shallow one. Again, we're looking constantly to work out how can we best drive greater sale at the right price points to ultimately maximize profit. CHAPEL DOWN, in my opinion, is too lowly priced in the market compared to the quality of the wines that we have. But we have to make sure that we get the right level of price increase and manage an overall growth in both freight sale and value, most importantly, value, and work with our category partners and customer partners to understand what that looks like.

47:49 Chris here, what contingency is built in for possible poor harvest this year, coming few years due to climate, etcetera, in terms of both plant quality and quantity increases? I think the important thing to remember here is the the the scale two things. One one is about the location of the vineyards and how we spread risk that way. One of the clearly, the the bigger big risks are frost damage or from disease pressure. By by spreading vineyards out across Kent, we are able to mitigate some of those some of those risks. We've also consciously built up our stocks, particularly in sparkling wine over the last four years, which enables us to to ride any reduction in harvest as we had last year.

48:40 Question from team on b. Thank you for that. Please clarify your plans to improve the environmental sustainability of of Jack O'Ganon operations. We're totally focused on growing our business in balance with the environment. We are the founding member of Sustainable Wines of Great Britain, and we're on a journey to improve every aspect of our business with respect to our sustainable position. We currently practice sustainable viticulture and land management across all of our vineyards. We have a whole array of techniques in terms of how we're continuing to grow natural grasses between vineyards, how we look to use any forms of herbicide, which we completely reduced over the last two years.

49:25 Our packaging is recyclable. Our glass and our cartons are about 80% at this moment in time from recyclable materials. We need to continue to strive our suppliers to improve that position. And really importantly, a 100% of our energy is currently from renewable resources. But that's not to put those numbers up there and be at just too loudly because we, like every other company, are on a journey, and we need to do more and more. And in building the new winery, a big focus of that would be to ensure that improves the long term sustainability of our of our operations and and our carbon footprint. I have a question here from Jerry.

50:10 You mentioned you're looking into double turnover by 2026. How do you see EBITDA progressing over the same period? From a board perspective, as I said earlier, we really believe we've got the ability to to double that top line. Question then will be for us, how much of that we want to reinvest in the brand? How much do we want to reinvest into overhead? How much do we wanna reinvest in the land to build them beyond the next five year period. So we would come back to you and and talk about more detailed profit forecast after we've done more work around that. I'm picking up another question here from Lin M. Which markets do you expect to focus on to grow the international business?

51:01 From a from a point of view of our international business, we're really focused on the big export champagne markets. Again, in terms of scale opportunity, there's a 160,000,000 bottles of champagne exported around the world. Key markets for us are The US. Scandinavia is a big English wine market in which we're already listed and done very well. Then there's opportunity across parts of Asia, Japan, Southeast Asia, and even my good old friends down in Australia are actually our English sparkling wine. So I'd really like to give that a nudge at some future points as well. Okay. We'll take one more question just before we, wrap up. We've got one from Mark here.

51:49 Wine production is, I believe, roughly half and half split between sparkling still. Is the split likely to change? Yes. So hopefully, pick that up through the the presentation as we move forward. Strategically, we want to grow our premium sparkling wines, and so we'll continue to put more of our wines in a great percentage of volumes into sparkling. Also, specifically in the course of the the the twenty two year that we're in with a lower volume of stills, you will see a 5% of sparkling wine sold during during the the course of 2022. And with that will be increased gross profitability and margin improvement. That's fantastic. Thank you both for your presentations answering so many questions. Of course, the company will be able to review all questions submitted today, we'll publish responses where appropriate to do so on the investor meet company platform.

52:43 Andrew, perhaps before redirecting investors to provide you with their feedback, which I do know is important to you, could I please ask you for a few closing comments, please? Yes. Look. Thank you very much for for joining us on the on the call today. Hopefully, we've been able to convey to you the key messages, and and those messages are quite simply that in Chapegoat, we we have the number one English wine brand. It's a fast growing English sparkling wine market. We have the broadest distribution footprint. We've got the largest vineyard acreage. We've got all what we need to now continue to double this business and to continue a whole set of exciting conversations with our shareholders as we move forward as to then how we continue beyond the five year horizon to grow this business even more.

53:32 Our whole business is focused about how we get champagne bars drinking more and more English sparkling wine. The quality of our wines are second to none now in this world. We have the emergence of wine region. It's no longer emerging. It's emerged. And we have the real ability to create something very, very exciting here, and, I'm looking forward to leading that. And I hope this is the first to defer many, shared communications that we have going forwards. But thanks for your time today. Fantastic. Andrew Richard, thank you indeed for updating investors today. Can I please ask investors not to close this session as you will be automatically redirected to provide your feedback and so the management team can understand your views and expectations? It's gonna take a few moments to complete, and I'm sure it's great valued by the company.

54:20 On behalf of the management team, CHAPEL DOWN GROUP PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you very much, and good afternoon to you all.