Chapel Down Group (LSE:CDGP) — Half Year Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the CHAPEL DOWN GROUP PLC Half Year Results Investor Presentation. Situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so, and these will be available via your investor meet company dashboard. Before we begin, if I may, I would just like to play a short introductory video on behalf of the company. Welcome to Reims,

1:15 the world famous champagne region of France. And if I may, I would now like to hand you over to the executive management team from CHAPEL DOWN GROUP PLC. Andrew, Rob, good afternoon.

2:42 Good afternoon, everybody, and welcome to the presentation of our CHAPEL DOWN twenty three h one results. It's a pleasure to virtually meet again by this IMC platform. For those that I haven't yet met, my name is Andrew Carter. I'm the CEO of CHAPEL DOWN, and I've just celebrated my two year anniversary in in the role. And I'm joined by Rob Smith, as CFO. And, we're looking forward to taking you through in the next, thirty to forty minutes, an overview of our outstanding twenty three h one results, an update on our business performance, and also give you an update on the '23 harvest and the business outlook.

3:27 So at CHAPEL DOWN, you're very familiar now with our mission and our vision. Our mission is to change the way the world thinks about English wine. We are England's leading and largest winemaker, and this journey is gathering great momentum. And we are leading the dynamic growth of this English wine region. Our vision is to develop our position as the number one and most celebrated English winemaker, and in doing so, double the size of our business by 2026.

4:00 Now great businesses are built by great people. And at the outset of this presentation, I would just like to publicly thank my new executive team in their leadership of the planning and delivery of the transformational growth of this business, and my CHAPEL DOWN team of 78 passionate wine ambassadors in their day to day delivery of all these results that you will see today.

4:29 As some of you may have already seen in the press or read the release, the the first half of twenty twenty three has continued to build on the growth momentum of the CHAPEL DOWN business as we further reinforced our number one English wine brand position. We have the number one English wine power brand with record levels of brand awareness and household penetration. We have seen further record traditional Methods sparkling wine sales with traditional Methods sparkling wine net sales revenue of 5,700,000 in the first half. That's up 45% versus last year. Following the completion of our new vineyard agreement at Borton Borton Corner Farm last year, we now have contracted a total acreage of a 23 acres.

5:18 That's 415 hectares of vines. And of this, 906 acres, 367 hectares are planted. This represents circa 9% of the total UK vineyards. Our wines have continued to win international recognition in the first half with over 28 international awards, and we have enjoyed an outstanding summer of high profile sponsorships and festival events further driving brand awareness and engagement. And then most importantly, for all of us as shareholders, we are the only UK wine company that is delivering continued sustainable profitable growth with an EBITDA in the first half of 1,200,000, which was up 36% versus 2020 reflected in the strong progress that we are making against our strategic road map that we have shared with you before.

6:22 These strategic goals are being well delivered. We are growing our position as the number one English wine brand with an off trade market share of 36% and record levels of prompted brand awareness of 37%. We are fully focused now on being The UK's number wine number one winemaker with a redesigned and premiumized product range all under the one CHAPEL DOWN brand. And we are making outstanding progress in building our long term strategic strategic advantage of having a fully integrated wine business with the largest acreage under vine in The UK and a current winery at Tentaton able to process up to 2,710 tons of fruit, the equivalent to 2,500,000 bottles.

7:12 And furthermore, we have agreed planning approval for a new winery at Highland Court Farm, Canterbury. More on this later. The quality of our wines continued to grow with over 28 awards for our wines in the first half of twenty three. And our distribution growth in The UK and international continues to develop rapidly, and our growing direct to consumer business continues to represent over a quarter of our total sales. More detail will follow on the half one channel sales breakdown later in this presentation. And whilst the development of our culture and people is moving forward successfully, there is still work to be done on our business systems, hence the Amber Tick.

7:58 Whilst we have professionalized business system whilst we have actually professionalized the business systems and processes over the last two years, the implementation of a new ERP and CRM systems in '24 will further step change our business information. Now as we have noted in the past, as an executive team, we cannot control the share price in the short term. But what we as a leadership team can do is focus relentlessly on delivering our strategic plan, delivering profitable growth, and market leadership. We've always believed this will then translate into good positive shareholder returns. Therefore, we are, of course, pleased, with the recent share price strength and as well as all the positive feedback we are receiving from shareholders on the wider benefits that they receive.

8:51 In the first half, we have continued to focus on improving our communications and offers to our eight and a half thousand loyal loyal shareholders, and we will continue to focus on building these relationships and overall shareholder value over and above the significant shareholder discounts on our award winning wines. Now in a fast changing consumer world, as we have shared before, our CHAPEL DOWN brand is very much at the heart of all the key consumer trends. Consumers are drinking less but better. Our consumers are focused on the provenance and the homegrown nature of their brands and wines, and the brands that are focused on producing in balance with the environment are the winners.

9:39 Now whilst times still remain tough for consumers, they are still looking to celebrate and enjoy the big little moments with family and friends. Consumers continue to want to spend money on brand experiences, and the continued growth of social media amplifies everything that consumers experience with English wines. Our CHAPEL DOWN branding company is very well positioned to capitalize on these macro trends. Now before starting to talk to you about the CHAPEL DOWN highlights, let's give you a brief update on the English wine market. There are now over 943 vineyards and 209 wineries in this country covering over 4,000 hectares.

10:26 That's 10,000 acres. In the 2022 YN GB annual survey, it showed that there were 12,000,000 bottles of wine produced in The UK. And as you can see on the left hand chart, 8,300,000 were sparkling wine. With respect to the sales opportunity for English wine, it's really important to look at the total UK sparkling wine market. This pie chart on the right hand side shows in 2022, total category sales were 216,000,000 bottles of sparkling wines consumed in The UK, of which the IWSR data source shows a total of nearly 7,000,000 bottles of English sparkling wine and a growth of 28%.

11:16 Now you can see from this share chart the yellow block, and that's a major part of this market is Prosecco. But most importantly, other 26,000,000 bottles of champagne, and the opportunity to convert more champagne buyers to CHAPEL DOWN remains our significant growth opportunity. English sparkling wine continues to grow strongly. It is the only segment on this chart in growth, and there is a big market in The UK alone to continue to grow into. Couple that with the growing international opportunity alongside continued domestic growth, there is no shortage in demand for English sparkling wines as we look to our future long term plans.

12:02 Now ahead of the full financial and operational details of a strong h one twenty three performance, I'd like to give you a brief snapshot on the brand. The introduction of our new CHAPEL DOWN brand design is now complete across our range of sparkling and still wines. This new more contemporary brand design and range architecture has been very well received by customers and consumers. You'll also be aware of the recent changes to our luxury kits Coty range to fully bring this under the CHAPEL DOWN brand name to ensure that we get the full halo effect of these single variety luxury wines. On the bottom row, if you look to our still wines, you will also see in the center the vibrant art based designs for our limited edition winemaker discovery still wine series.

12:56 This will be exclusively released to shareholders on Friday. However, when we look at this overall chart, our focus as a company remains on having sparkling wines at the right price points and in the right trade channels, and they account for 80% of our sales. And we will continue to focus on sparkling wine as a company moving forwards.

13:25 At Brund and our wines continue to win multiple awards with 28 major successes in half one, the highlight of which has been our CHAPEL DOWN KITS Cote D'Icout De Couvee receiving gold medals across all international competitions in the International Wine Challenge, Decanter World Wine Awards, and Wine GB, as well as the ultimate best prestige coupe trophy in the Wine GB Awards. Similarly, CHAPEL DOWN GROUP PLC, formerly known to some of you as three graces, was awarded the coveted gold medal at the IWC. I would also just like to share with you our new communications campaign, which were launched which we launched at the end of the first half of twenty three with a focus on growing both brand awareness and continuing to grow CHAPEL DOWN consumption.

14:20 For days like this and make it a moment, put CHAPEL DOWN at the heart of those special celebratory moments in life. And likewise, our crisp and fresh product based executions focus on the crisp, fresh elegance of our English wines. Most of our focus to date has been around sponsorship and awareness, but as we move forward as a brand, you will continue to see more communications in both digital and hard formats. Our sponsorship partnerships are now familiar to all of you. We continue to use these to drive brand awareness and brand engagement. Our official sparkling wine partnership of England and Wales Cricket Board reached a global television audience of over 80,000,000 during the course of Ashes.

15:10 And whilst only the rain saved the Aussies, the positive impact on our brand awareness was very clear to see. Furthermore, this year, we are proud to announce a new three year agreement with Ascot Racecourse, and likewise, an event sponsorship with Tom Carriage's pub in the park. Both of these sponsorships not only give great brand exposure, but an opportunity to sell our sparkling whys. Likewise, the boat race sponsorship continues to play a key role in our sponsorship plans in the first quarter of the year. As we move into the 2024 brand planning, we are currently reviewing a number of additional new partnership opportunities, so watch this space.

15:57 I promised to take you through the, distribution channels, on CHAPEL DOWN. We are the most widely distributed English wine brand, and this page gives you a full picture of our trading channels in the first half of twenty three. So let me walk you across this chart left to right. On the far left, you see the off trade, known to all of us as multiple grocers, multiple retailers. They've accounted for 56% of our business, and we continue to develop much valued partnerships with Waitrose, Tesco, Sainsbury's, Morrisons, Majestic, Marks, and Spencer's. And we continue to extend the depth of distribution and the amount of off shelf visibility. The launch of our sparkling rose alongside brew has been a particularly particular highlight and an important driver in h one.

16:49 Our on trade business now represents 13% of our business, and our distribution base over the last two years has increased from 445 outlets to now 2,000 outlets. And significantly 980 of these outlets are by the glass listings. There remains significant opportunity for further distribution growth with over 10,000 premium on trade outlets, the long term target. The next two columns cover our direct to consumer business, ecommerce and our Tentaton shop and and tours. They represent in total 26 of our toe 26% of our total business. Our total traffic numbers in the first half were 461,000 to our website, up 17% with an average order value of £119 and conversion rates of 2.2% outperforming industry norms.

17:47 We have a significantly growing database, including you, eight and a half thousand passionate shareholders, and a social following that has now exceeded 100,000 consumers. At our brand home, Tennyson Kent, we had 22,000 visitors in the first half, and our tourism experience were acknowledged with the five star TripAdvisor ratings. I'm sure we will talk further later about our international business, but it's a growing opportunity. During h one, this grew to 5% of our total business, primarily driven by a very successful launch into grow global travel retail airport venues such as London Heathrow, London Gatwick, and London City. We have now seeded the CHAPEL DOWN into brand into 14 international markets, and we are beginning to see some good traction in core markets like The US, Nordics, and The UAE.

18:46 This brand building focus and sustained investment is resulting in an exciting tipping point for the brand. This chart shows on the top line that we are hitting record levels of brand awareness in h one at 37% on the rolling twelve month number versus twenty two full year at 29%. And the bottom line shows our brand penetration, reaching 14% of all sparkling wine users consuming our brand in the last twelve months versus the full year of 22 of the 11%. This is very exciting growth and a platform for continued business growth and development as we move forwards. And finally, before handing over to Rob, one final brand metric chart, which shows the research on the left hand side, wine intelligence, which is awareness, tracker, which shows CHAPEL DOWN compared to other English wine brands and the scale of difference between CHAPEL DOWN and the rest of the brands in the marketplace.

19:52 And on the right hand chart, it highlights the reference I made to market share. In our off trade, we get reliable Nielsen based information, and we have now reached 36% market share at the fur end of the first half of twenty three, growing six percentage points. But what's really impressive is that we have driven 80% of category growth in off trade in the first six months. This is a fantastic achievement by our off trade sales team, working closely in partnership with our off trade customers. CHAPEL DOWN is the true power brand of English wine. And on that note, let us take you through some operational and financial highlights. So thank you, Andrew, and good afternoon, everyone. And as Andrew mentioned, my name is Rob Smith. I'm the CFO, and I'm pleased to be celebrating one year in role this month.

20:42 And today, I'll start with operational highlights, then move on to the financial outcomes that all of these and the work Andrew has previously covered has enabled. Starting with the vineyards. This autumn, we're gonna harvest from 750 fully productive acres for the first time, and our vineyards acreage continues to grow with a 118 new acres planted on the North Downs this spring to take us to 906 planted acres in total, which is 367 hectares. We'll also talk about sustainability and net zero in a moment. The harvest is looking very promising indeed, though we always need to be careful on detailed predictions until it's all harvested, pressed, and sitting in the tanks in the winery. So why is this so promising? Well, it's driven by good growing conditions with no frost and excellent weather around flowering in June, plus the sunshine and some rain that you've seen in September.

21:35 And because of this, we're expecting a record yield this year. And when we talk about yield, what we're talking about is tons per acre. The good news on yield is then amplified by having 750 fully productive acres, and this compares with only 508 acres in 2018, which was our previous record harvest of 2,173 tons. As such, we're confident enough to say that we're expecting a record breaking volume this year as well as very, very high quality and exceptional standards.

22:10 Last year, you will remember that we invested a significant amount to upgrade the winery at Tenston to a 2,700 ton capacity. We spent just over £1,000,000 of CapEx in 2022 to do that, and that is ready in time for this year's harvest. Obviously, we're very pleased we made that investment given the comments on harvest. Given the expected scale of the harvest, though, we are expecting to use some third party production for this year. And thinking about our vineyards and grapes next, you'll see that almost all our vineyards are in Kent, and many are in the North Downs, which we believe is the best place to grow wine in The UK, benefiting from the chalk seam that we share with the Champagne region. And here is some data on those vineyards. Let me explain this table at at at the top of the slide you see in front of you. So on the left, you see the fully productive 2023 figures. And across the horizontals, you'll see our vineyards broken down by freehold, long term leases, and long term grower contracts.

23:10 And what you see is the progression through to 1,023 acres. In the first column, you see the plant in 2223. That's a 156 acres of Borley, which is next door to Kitscote. Then in '24, we have in place the agreement to have ordered the vines for Borton Corner, and that's what makes up the 23 that Andrew referred to earlier. In 2026, Borley will be fully productive, giving us 906 acres. In 2027, Borton will also be fully productive, giving us over 1,000 acres by that time. We also wanted to show you the grapes we have planted. And you will see that they are very much traditional method sparkling dominant with only Bacchus amongst the still varieties in our top four.

23:57 Finally, in this section, I promise we say something more on sustainability, and we will say even more on this at year end if not before. Now we've always taken our sustainability responsibilities very seriously and committed to growing our business in balance of the environment. We are founding members of Sustainable Wines of GB, and we practice sustainable viticulture and improve wildlife habitats and hence biodiversity. In addition, we send our skins for anaerobic digestion to create green electricity, and we personally only use electricity only use renewable electricity ourselves. In the first half of this year, we've worked with external advisers to create a study on our current carbon footprint, and we will use this to create an ambitious plan to get to net zero quickly and without buying any offsets.

24:44 Alongside this, we will further develop our biodiversity plans. To reiterate, we not only see operating in a long term sustainable manner as the right thing to do, but simply put, it's just good business practice. Moving on to the finance section now. As you have heard, we continue to see the fantastic growth of the English wine region, and our position as the power brand, of course, has a positive impact on financials. Starting with net sales revenue at the top, this grew an impressive 21% in the first half of twenty twenty two. Now we believe this is more than just a resilient performance, but we are not complacent and we never will be, but we do feel we have great momentum as a business. The second half is a tough comparative, but we're very confident in our plan.

25:33 Gross margin, you'll see has advanced another three percentage points through to 55. Average sales price increases are the biggest component of this. Over the last eighteen months, a big step forward on gross margin percentages have been made, and gross margin will improve more incrementally from here until a new winery is in place that would create a step change in the COGS. That's the cost of goods sold, which we will reduce through increased automation, scale, and moving all production of warehousing in house.

26:04 This step change in COGS from a new winery will create the next step change in the GM percentages we see. We aim to sustain this GM percentage for the full year. Marketing cost was 16% of net sales revenue at 1,300,000 in the first half of the year. This is an increase in last year, and it's an area where we will continue to invest strongly. Average sales price you see there, very strong increase, 16%, and about half of that increase is from unit price increases, and about half of that is from a change in the mix into the higher priced elements around traditional method sparkling. Finally, on this slide, let me talk about net cash. And we say that we we sorry. And to say that we retain a very conservative balance sheet, and not only do we have the 1,100,000 of net cash there, we have an additional 12,000,000 of liquidity from our revolving credit facility available to us should we need it.

27:04 Talking about channels next, and all of our channels have thrived. Off trade remains the largest channel and grew 25% this year this half on the back of increased listings. You will see that Nielsen, one of the best data sources we have, gives us some encouraging data. For example, as Andrew mentioned, we own we we have 36% of the English sparkling wine market in the first year. We are clearly the leading brand. In addition, as also noted to reiterate, we accounted for 80% of all the growth in English sparkling wine in the off trade in the first half of the year. Importantly, to add to that point here, you've seen from the average sales price comments, this growth was not from excessive or additional discounting from the half one twenty twenty two comparative. It's a great position, but also gives us great momentum into the second half of the year.

27:54 On trade, you see, continues to grow driven by an impressive growth in listings, particularly by the glass, and export is coming from a lower base, hence the higher percentage. And global travel retail has been a great success, which we'll continue to build on. Export has reached 5% of sales, which we targeted originally for slightly later than we got to when we got to it earlier. This is largely due to the success of that global travel retail launch that Andrew mentioned earlier on. We continue to care to carefully monitor allocations of stock to this channel and all other channels. Ecommerce has grown 6%. Traffic per site has been a real positive up 17% to 460,000 sessions. We've done a good job of continuing to attract new customers too. Average order volume has seen some pressure, though it is up 3% to a 119 pounds.

28:43 Retail has also seen some pressure on average order volumes, but it continues to grow. The first half saw the start of the revenue for summer for our summer events come through, mainly pub in the park. These have been really successful from a brand, but also a financial perspective. Final thing in this area, tour volumes have increased, but the revenues have edged back very slightly, and that's due to a change in the mix of the tours tours sold, not of their price. In terms of category, traditional method sparkling continues to perform exceptionally strongly, up 33% by volume and 45% by value, and it's now 73% of wine sales. As we talked about at the full year, this shift in mix should be regarded as permanent.

29:28 Rose sparkling has been a great success, and that's moved from 22% of traditional method sparkling sales in the first half of twenty twenty two to 32% in 2023, which is a 135,000 bottles. We think this growth will continue. Carbonated and stills have been affected by distribution in the case of carbonated, where we strategically switched off some of our off trade locations over to sparkling rose instead. And on stills, we have chosen to strategically reduce promotional activity this year, which has impacted volumes but being beneficial to price.

30:03 Finally, moving on to the balance sheet, you'll see that stocks have increased despite the strong sales performance, up 22% on this time last year as we look to responsibly grow our traditional method sparkling library. We're able to continue to grow even if we do have any challenging harvest in the future. As noted, we remain net net cash positive at 1,100,000 with 12,000,000 available liquidity, and this is after our our first half CapEx of, again, 1,100,000. That's not a typo. That's coincidentally the same number with the Borley planting of a 118 acres being the largest cash amount at naught 900,000. We have increased working capital in line with overall sales growth, hence, the reduction in net cash from year end. Overall, you'll see our net assets have increased.

30:51 At this point, we reiterate that we strongly believe that the market value of the tangible assets is considerably higher than this UK GAAP reported value. In particular, this is stock, which is held at cost, and land and biological assets, which are also held at costs. I will also add a final clarification, which is that we do not place a value on intangible assets such as our valuable brand on the balance sheet. And that's it for the first half. So let's look forward starting with current trading and outlook for the full year.

31:22 So I'll start by saying current trading is in line with management expectations, and we expect strong double digit sales growth for the full year and sustained margins. Off trade rate of sale on both Bruton Rose sparkling wines continues to be strong. On trade distribution continues to expand with growing by the glass menu listings. International demand also remains very strong with ongoing focus management on stock allocation of traditional method sparkling wines to this channel until our production can increase to fully service the demand. Traditional method sparkling wine share for the business is set to remain at 70% going forward by value. The outstanding harvest for 2023 provides the platform for 2026 ambition.

32:10 And to reiterate, the growing conditions were very positive, exceptional quality, plus we are expecting a record breaking yield and volume, which will give us highly material larger volumes in the prior year, which was to remind you 2,050 tons and 2,000,000 bottles. We'll give a full update on the harvest when it is complete.

32:31 CapEx in first half was lower than forecast at 1,100,000 due to some rephrasing of costs, but we expect full year CapEx come in about 3,000,000. Partly that's on the vineyards, partly on the tentative brand home, partly on our production site, but we will also go live with a new cloud based ERP and CRM system to provide the data platform we need to help drive the next phase of growth. To finally confirm before I hand back to Andrew, we remain on track to double the size of the business to around 28,000,000 net sales revenue by 2026. Andrew, over to you for the strategic plans. Thanks, Rob. Looking ahead, we continue to deliver into our long term plan and the ambition that we've shared before, which was to double the size of the business from '21 to '26 to circa 28,000,000 sales.

33:23 We've previously shared with you this strategic road map that is anchored around four pillars, very much the pillar of developing the number one English sparkling wine brand, continuing to develop the largest scale of international distribution, ensuring that we have the top talent in the wine industry, a high performance culture, and the right business systems, and ensuring that we begin to build the right scale of grapes and winery operations to underpin our long term growth beyond 2026.

33:59 This chart and the green boxes really reflect all that has been achieved and that we've shared today in terms of the first half of of twenty twenty three. And I just wanted to spend a moment and and talk to you as we move into the second half. I'll give you a brief update on where we are with the remainder of the strategic plan. Those those are the boxes highlighted in blue. We've already talked into communications campaign that will work in the second half of the year. From a point of view upgrading upgrading the Tentham visitor experience, we're beginning to work on some immediate upgrades for the spring of twenty twenty four. And then as we'll come on to the longer term upgrades, I'll link to the expansion and change of our winery.

34:44 We've already referenced the growing momentum in on trade, and and you can see how as we move into the Christmas period that we will continue to increase our distribution to reach those levels of 2,200 outlets by the end of the year. We spent a lot of time there talking about harvest. It's a very exciting time, and we started picking this week in earnest. And for the next five to six weeks, we will be bringing home significant volumes of grapes and delivering a record breaking harvest. Rob and the finance team are very focused on our enterprise resource planning system and our customer relationship marketing system, which will be into play for the beginning of, twenty four first half. And then importantly, let us just also come on and reference into where we are with progress on the new winery.

35:36 You'll have all read and seen that, the new purpose built winery at Highland Court Farm outside of Canterbury, has received planning approval. Alongside this winery plan, we also continue to explore future opportunities for further vineyard growth, and we are looking at an expanded tourism offering at our Tenetton site as we relocate a major part of our winery operations.

36:01 We continue to plan towards a harvest of 25 for our new winery. And as a board, we're continuing to evaluate the optimal way to deliver these growth opportunities with a listing on AIM now under active consideration.

36:22 Therefore, in closing, I would just like to summarize. It's been an excellent start to 2023, and it is a confident outlook for the full year with good reason. We have the power brand in English sparkling wine. We have seen record traditional method sparkling wine sales. We now have over 1,000 acres of vineyards. Our wines continue to win awards with 28 international awards in the first half. It's been an outstanding summer of events and a lot of fun along the way. We continue to let to deliver sustained, profitable growth day in, and this year's harvest is expected to be of exceptional quality, a record breaking volume and yield, and materially larger than last year and the previous record 2,018 harvest.

37:08 And finally, to reiterate, we forecast double digit growth and sustained margin for the full year. We would like to thank you all for your continued support. And now we're gonna take as many of your questions as we can fit in in the remaining twenty minutes, so we'll come back onto camera and answer those. Andrew, Rob, that's great. And thank you very much indeed for your presentation this afternoon. If I may, we'll just bring back up your camera there. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the team can take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

37:54 Andrew, Rob, we did receive a number of pre submitted questions ahead of today's event. And as you can see there in the q and a tab, we've also received a number of questions throughout your presentation this afternoon. Now given the significant attendance on today's call, you may not be able to answer every single question, but, of course, you will be able to review them all post the meeting. But if I may, just for now, just hand back to you just to read out those questions and give your responses where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Yeah. Thanks very much for that. And what we'll do, let me just say a couple of things, firstly. I will I will be looking at the questions and reading them out. Some of them I'll be answering myself, some handing over to Andrew. I will say your initials so you'll know when we're answering your question rather than your names.

38:40 I'll also tend to bunch some of the questions together because they're on similar topics to to make it easier to to get that in place. Sometimes you'll see me looking off the left of your screen. That that's because I'm reading the questions. So don't don't read too much into that. And to give Andrew a break, I'm gonna start with a couple of questions, which which I think I I I will take straight away to get get us going. So first, from PS, please explain why the average sale price is low compared to the retail sales price typically well above £20. And the reason for that, it's different in different channels. So the average sales price we achieve in retail at Tentadan is the same as the the price that the ultimate consumer is paying. But, obviously, through things like the off trade and the on trade, the sales price of consumer, your sales will be paying includes the the the margin within that, within that channel, and hence, the average sales price we record here is the sales price that we as CHAPEL DOWN receive rather than you and others as consumers pay, and hence, therefore, it is lower.

39:47 Moving on to the next one, initials RS. Good initials. Cognizant of current economic situation in The UK is increased debtors position of concern. No. We always do, obviously, monitor debtors. We do a month review with our sales teams. We don't have any significant debtor concerns or any significant debtor issues at present. We obviously remain vigilant to that, and we'll ongoing keep keep looking at that. But at the moment, touch wood, we are okay on that front. So I'm gonna go to my first grouping of a couple of questions here for you, Andrew, and they are about exports and with a bit of a flavor of some international wine fairs in there as well. And it's three questions I'll group together.

40:37 The first was a pre submitted question, which is does CHAPEL DOWN intend to market its products if it's not done so already outside The UK at wine fairs in The EU or countries further afield such as The USA? I'll combine that with CB who asks a bit of a Croatian theme. As the leader, I assume the BA carry your stock as Croatia Airlines do and taking the products to wine fairs in Croatia and further afield. That was CB. And we also have a related question from AT. Drinks is ultimately all about distribution. A bigger partnership that can put this into Asia like Suntory with whiskey brands. Is that something you'd look at when production warrants it?

41:31 So exports, wine fairs, distribution. Well, okay. Let's try and answer those as briefly as we can. Great questions. Look. The first thing, just to remind everyone, international only 5% of our business. We currently only have so much stock that we wish to put into international. The way we work with international is we work with distributor generally in each each market. Obviously, The US is a different market. There you have a three tier system where you sell to an importer. They then sell to the distributor who sent to the retailer. But in in each in each market, we look to choose the best distributor that we can to to market our our brands. In terms of market selection, we're focused on the priority markets for champagne, where we believe is the biggest sparkling wine volume opportunity. So we've talked about those before, but they are the likes of The US, The Nordics, Japan, Hong Kong, UAE, and and then parts of Europe.

42:31 In terms, therefore, of how we support a distribution launch into an international market, there is a big focal point around being at the right trade fairs. So international trade fairs like, Probein in in Germany, next week, Cannes for the global travel retail show are the type of markets that we, would look to attend shows in. But, clearly, on a local basis, our distributor would manage the right, wine shows, as well. I think there's a question in there around market selection. I'd love to be, looking to build somewhere like Croatia, but that obviously will become more of a a second tier priority for us. Specifically on airlines, and I do get asked a lot about airlines and cruises from shareholders that are on those airlines and cruises. Let me let me just briefly touch on that.

43:21 First of all, on on airlines, they tend to be, very competitive tender pitches, to get onto the likes of the BA or Virgin. We do obviously like or would like to be on all of those major airline carriers, but we won't just do it at any expense. And I would say at this stage in the category evolution, there are some brands and some companies effectively selling their product below cost, and I don't believe that's in shareholder interest at this stage, and, ultimately, it's a marketing exercise, and we can do that in in different ways. That's not to say we won't be on VA and Virgin in the future, but at this point in time, we have limited availability there. Likewise, on cruise, that is a target area for us, alongside the the major airport hubs, which we talked about earlier that we're in.

44:10 We do want to be on on the major cruises, and that's something we're continuing to to explore. I'm hoping that's broadly covered it off. I think the only other point, it was a very good long term strategic point, is as we grow through a five to ten year plan, would we look to be part of a bigger wine or spirits company across several markets? Clearly, at the right point in our evolution, that's something we would look at. But at this stage, it's too premature given the amount and scale of volume that we have to sell. So I hope that gives you a flavor. Definitely, you could spend an hour talking about international. And for us, mid to long term, huge opportunity. But short term, we need to make sure we manage the investment and the level of focus there. Okay. So I'm gonna give you one more, then I'll give you a quick break. And this is around competitors, but particularly around some of the piece in the press around global wine markets and volumes.

45:06 And, again, I'm gonna group three questions for you here, Andrew. So this is one of the pre submitted ones. I'm not sure who did who submitted this. You wanna be the biggest and best vineyard in The UK. The shareholder wanna help you sustain it. But as a growing industry, there's always the risk of new entrants, new methods. How are you ensuring that your growth isn't sacrificing any of the nimbleness and agility that got you to this position? So that's the first element for you to consider. And the second two are quite closely related. This is j w. There is far too much wine worldwide. Why would anyone buy your wine rather than cheaper from abroad? And then '22, which is SM, very similar. Global wine consumption is reportedly down quite significantly in France and Italy.

45:55 Does this trend pose a risk to CHAPEL DOWN? Great. Let's let's just answer the first point, if we could. When we look at global wine markets, we are looking at some very, very large mainstream wine markets in which we see, you know, Portugal destroying wine. We see the French, getting rid of wine stops, and we see an oversupply challenge in Australia due to the fact they no longer have the demand in in in China. There are some serious structural issues, in still wine, and those structural issues in still wine tend to be in that 5 to £10 price point. They are happening around us, but let's be absolutely clear. Firstly, our focus is on sparkling wine where we continue to see huge category growth across the world, and we are in particularly following in with champagne.

46:50 And champagne have a scarcity of supply, and we are very well positioned against the French as we move forward in the mid to long term to grow sparkling wine. So there is a lot of press, a lot of noise about worldwide excess of supply of wine. Let's remember where that sits relative to the to the categories that we're we're playing in. I think from a a UK landscape point of view, and I'm sure we'll probably answer some other questions about the competitive context on this in a moment. Clearly, there are two very large players in The UK, ourselves and Nightimba. And then there are a whole lot of other players that are out there in both, if you like, mid tier and then at the small end of things. In what is a very dynamic and growing market, there will continue to be consolidation, and there will continue to be change and and innovation.

47:40 I think the biggest area of innovation, a question I was referring to, is in the area of method. We are very focused on all of our, traditional sparkling wines being used to buy, produce using the champagne traditional method. There clearly is a shamat method that is out there and that, in particular, MDCV are are talking about where, you know, the wines are made through one fermentation in tank as opposed to the traditional method, first fermentation, six months in tank, and then over eighteen months to three years on secondary fermentation, Surlat in bottle. That is a very different thing. It results in a very different quality product and a very different, price point. As this market continues to mature, our focus will be on making CHAPEL DOWN the premium super premium brand in in in this UK wine market, and that will be reflected both by brand and by price point, but ultimately by that production method and the quality of our wines.

48:39 Okay. I'm gonna take a couple, and then, Andrew, you're coming back with m and a and Hambleton if you want to start thinking about that. So first off, AT, you you start firstly asking Andrew about his experiences from the Chase business, but I'm gonna ignore that because Andrew will talk all day about his experiences there and how he relates that to CHAPEL DOWN, but maybe he'll mention that at the end. You can then go on those as I don't get the logic of having the market value. I think you're referring to the assets here higher than reported gap. Please explain this. Stock and land should be revisited every couple of years. As to UK gap, we are on UK GAAP, not IFRS, has at the lower of cost of net realizable value. And therefore, it pegs things like stock at the lower value of there, which is why we why we say the net realizable value is higher than on on that from from stock, which is the biggest impact.

49:36 And on land, again, it it's historic cost or net realizable value. And, again, historic cost is lower, which is why we hold those at historic costs. And just by by but in and building, and that's all due to our aquis list. And so maybe just to absolutely clarify, that's not our choice. That's driven by the index we currently sit on. Exactly. Exactly. Yes. Thank you. And then GB, you asked a similar question. Your stock is 15,500,000 at cost. Annual sales, 9,300,000. Gross margin. You're you're asking it's it's a long question, but you're asking about how many years of stock do we hold. And and and the answer is different on different categories. So still wine, it it's less than three years because you tend to sell that in the following year.

50:25 Now some of the luxury still wines, we do have a longer category. Traditional method sparkling wines at the premium, we aim for three years of stock in there. But at the luxury end, actually, it's much more than that, and and it's actually closer probably to seven to eight years of stock in there in terms of of that that luxury end of the sparkling. So it varies. Overall, probably on average, it is probably three three and a bit years worth of stock we have in place. And on your lighter note at the end, GB, yeah, we have noted a little bit of sometimes people were having in the past problems pulling the corks out some of the old ones. We've changed the depth of the the cork in the tradition with the sparkling to make that easier. So I'm hoping that problem will be fixed for you and others going forward.

51:14 Right. So m and a and Hambledon. And, again, there is a grouping of questions. If you've asked a question on m and a and Hambledon, I don't read it out now just because there's a few of them. But let me give you a flavor of those. Presubmitted one, does CHAPEL DOWN GROUP have any plans for consolidation? It's one of them. AT again. Quite a long question. Five year milestones, with duty free, but then you go on to Hamilton takeover. Large wine producers will start to want to access The UK market. If you execute production scale, is there any reason this can't be a multi $100,000,000 brand as we have seen in the tequila and gin spaces? Private equity, larger institutions who can't hold Aqua shares to get to 500,000,000 market cap.

52:05 Question sorry. Moving then to the next one, PT. Congratulations on a great first half. Thank you. Appreciate you can't say too much in this form. Do you have any plans to accelerate our growth through inorganic activities? And then the final one I'll read out now. But again, you know, if you have asked a question on this related topic, it's it's purely just the volume, which means I'm not reading it. Thank you for the presentation. With the recent Hamilton Vineyard acquisition in mind, we'll CHAPEL DOWN consider any consolidation opportunities in the market. So there's something for you to chew on. Great. Thank you. And no no great surprise to receive that flurry of questions. And and equally, I'm sure on your part, it's no great surprise that I'm slightly restricted on what I can talk to you about. But let's first of all, you know, we we are in a very dynamic and competitive and fast growing English sparkling wine market.

52:58 The the beauty of the market and in terms of being a long term enterprise is that there are serious barriers to entry, and therefore, that is inevitably going to result in a flurry of inorganic activity as this market continues to develop. Specifically around consolidation of UK players and our role in that, do we believe that consolidation is inevitable? Yes. And do we continue to lead and look at that every opportunity that comes across our desk? Yes. Of course, we will. We're the category leader, and therefore, we'll continue to look at every opportunity, as they arise. Secondly, specific to within that consolidation, Hamilton.

53:45 For anyone on the call that's not aware of this, Hambledon, were effectively purchased by a consortium made up of Berry Brubber Rudd and Simpington, Vineyards. Earlier this week, it was announced. And there's been a a a long conversation ongoing for a long period of time given that Hambleton as a company had had some financial pressures, and they were looking at options to to resolve that. From our point of view, I think what is positive from a CHAPEL DOWN point of view is you'll have read numbers of, of 22,000,000 asset value. You'll probably also have read loans of 10 and therefore potentially implied enterprise value of 32. I believe that the, you know, the multiples that were were paid, for that business based on the fact that they have 200 acres, fifth the size of CHAPEL DOWN, and also a very, smaller smaller turnover, albeit private companies, so numbers not totally fully available, suggests that, where we sit as a as a CHAPEL DOWN company that we have a lot of value that we are sitting on both in terms of brand and, our vineyards and assets. So positive story in my in my mind that we have seen that sort of money and that sort of activity with Hamilton.

55:02 And then the third part that constantly keeps coming into this is the international interest. And, again, we've talked a bit about this before, but, you know, by brief recap, we have Tattinger with a 120 acres in Kent launching in October 24. We have Henkel Frexinet that purchased Bony in February of of twenty one. We also have Pommery in the market. And as you will also have recently seen since we last spoke that Jackson's, Winery Estates of the US have have purchased 60, acres in in Essex, with regard to, in the first instance, making premium chardonnay and have approached the CEO of Gusborn to run that. So, yes, there's lots of activity. It makes for great dinner table conversation.

55:48 I'm I'm sure, clearly, I'm not not gonna talk anymore about it at this point in time, only to say that our primary focus is on our organic plan. You know, we have the ability to double this business by 2026 organically. Beyond that, we are then looking at the growth opportunities that we have with new winery, with new vineyards, and Tenston as a tourism facility. And clearly, a board, if there is organic opportunity to explore over and above that, we will look at that too. Cool. Right. I'm gonna, answer a couple, give you a break, and then I'm gonna ask you about AIM and fundraising, Andrew. So let me start off at NS. You ask how long are the long leases?

56:34 Typically, the the leases we have on leasehold vineyards are thirty years, and we look to also have an option in there to extend for five to ten years on those leases as well. So they are long leases, and none of those are due to imminently come to an end in the next sort of fifteen or so years there. The next question couple of questions on ERP systems. Always happy to talk about ERPs. Question, can you share what CRM ERP systems you're moving on to and rationale and benefits for that. And then another question, which is expand on plans to change ERP. How's the critical move going forward? So, we're moving to a cloud based ERP and CRM system based around Microsoft Dynamics, Business Central, and CE systems.

57:27 We'll go live on those on the January 1 next year. And really, the rationale is partly our current ERP is out of support, and and therefore, we have to move off that ERP. We wanted to move to a cloud based system really around the data model, the data analytics you can get off that to help drive insight, to help drive better decisions through the business. So that's the real business case for it, and first of January is the date we are gonna move on to it. Now AIM and fundraising have an awful lot of questions on there, so I am, again, not gonna read out all of them. But, essentially, let me give you a quick flavor of a couple of them. Would it make sense to move to AIM to create a shareholder base?

58:14 NV, could you give any more details regarding the move to AIM? And and there are a number of others on there. Associated with that, there's some fundraising questions around Highland Court, how will that be funded. For example, we have on that And and a couple of others. I I I won't miss them all. No. Thank you for that. And and look, I'm I'm conscious that we're drawing to a close as well. So let me let me be brief, but try to give you a flavor of where we are. You know, as as a a board, we're continuing to evaluate what is the optimal way to deliver exciting growth plans. And we talked about that in the announcement today, and you will have also noticed ultimately the change of tonality in our wording, and that's that we are actively considering a move to AIM.

59:10 At this point, I can't give you any further detail on that, and, hopefully, you'll you'll understand why. But, clearly, as a board, we see the advantages that AIM will bring, in terms of opening up the future opportunity for for further investors to come into our into our, business and brand. But I can say no more than that, unfortunately, at this moment in time. And I think in terms of where we are with respect to the funding of the winery project, where we will have the final plan and approval and everything ready to go by the, the the middle of, of of October. At that that point, clearly, we also need to be coming back with a sense of how do we intend to to fund that in terms of the the future balance of of of funding option.

1:00:01 It's very much live conversations. It's clearly a big part of what we're doing for the strategic long term, and it's been part of our conversations as a board over the last few months. And, you know, this is clearly very close to finalization, but, I'm not gonna be able to share any more on that today. Cool. And I'm gonna finish with one question, which is sort of brings us back to what it's all about, which is the products. And they are a number of questions around the future of the products, particularly around still wines, where we continue to make still wines, and how will that look? Will we make a red wine? Will we make an ice wine? Will we make a demi second? There are about five different questions I've consolidated into that. So Great. Know, maybe let's talk about the products at the end. Okay. Look. Absolute focus on sparkling wine. We see that as as 80% of our business.

1:00:50 For those that know a company and the process of winemaking well, they will know that as we take our grapes and we press our grapes to make our sparkling wines at the tie, the tail, the end of the product, we use different grapes then for our still wines. And that's very much a operationally effective and efficient winemaking process, but also it delivers wonderful taste in, still wines. So from a company and brand point of view, we will always continue to have sparkling and still. The focus will be on sparkling with 80% of our wines. In terms then of innovation, we have a raft of different innovation things that we continue to look at. We want to remain focused. So, yes, we will look at lower alcohol wines.

1:01:36 We'll even potentially look at no alcohol wines, ice wines we have looked at in the past, limited consumer opportunity. And just generally, we continue in our sparkling wines to continue to look at levels of of sugar and dosage. So, yes, lots of innovation and lots of thoughts around how we do things, but, you know, it's on, on my shoulders, I think, to make sure that we stay focused as a company. We've been in place before where, you know, arguably went too too too wide in too many categories. We're not going to be doing that this time around. We want to be England's number one and most celebrated winemaker, and that's where we believe future shareholder value lies. Now I'm sorry. There's nothing more frustrating if you've asked a question and we haven't got to it. Rest assured, over the next two days, Rob and I will, in between all the various investor fund meetings that we have, get to answer your questions.

1:02:31 You know, in closing, I would just like to say a big personal thanks on behalf of Rob and I to all our shareholders. You know, it's truly an exciting time for the English sparkling wine market and for CHAPEL DOWN, you know, and we're really looking forward to continuing to build this business momentum. And I know many of you are coming through Tentherton. We look forward to seeing you there soon. Or if you're in London and you wanna pop into our new commercial head office, we're very open to seeing you. So thanks for your time today. Sorry we're slightly overrun, but we look forward to catching up shortly. Andrew Andrew, Rob, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations?

1:03:19 This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of CHAPEL DOWN GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good evening to you all.