Chapel Down Group (LSE:CDGP) — Half Year Results for the period ending 30 June 2025

0:01 Good afternoon, and welcome to the CHAPEL DOWN GROUP PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can view your questions submitted today and publish responses, but it's appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, James Pennefeather. Good afternoon to you. Thanks very much, Alex, and a big welcome to all our shareholders. And thank you for taking the time to join our H1 presentation. I'm James Pennyfeather.

0:46 I'm joined by our not so new Chief Financial Officer, Lauren Mouton, and we're going to take you through this afternoon's presentation. Please do submit any questions into the relevant box, and we'll hopefully get around to answering them at the end. But we're gonna start with a highlights video from the last six months. Great. I'm delighted to report strong performance in

2:25 the first six months of 2025. Lowen will be talking through the detail of this performance in his upcoming slides, but I wanted to call out some key highlights. Total net sales grew by 1211% and wine sales grew by 14% in the half against the backdrop in which the English sparkling wine category also grew by 10% in the off trade. The company has now had strong positive performance momentum with three consecutive quarters of growth to the end of June. Gross margin increased by 7% to 3,700,000, slightly behind volume growth due to the impact of higher cost vintages in our sales mix compared with the prior year.

3:11 And in line with our strategy, traditional method sparkling wine sales increased to 70% of our wine net sales revenue, up from 68% last year. Cash flow management is a key area of focus for CHAPEL DOWN, and I'm pleased to report that operating cash flow improved by £2,500,000 compared with prior year. Stocks of maturing wines increased by £3,700,000 to £25,600,000, mainly driven by the bottling or terage of the traditional method sparkling wine harvest from 2023, which underpins our future growth ambitions by investing in stock, which will drive future sales and premiumization. I'd like to thank the whole CHAPEL DOWN team and our partners for their strong h one performance delivery.

4:05 The structure of today's presentation is slightly different from previous CHAPEL DOWN investor presentations. I'll be introducing a new focus set of three strategic priorities for the period 2025 to 2030. I'll then highlight some of the progress we have made so far this year against those strategic priorities, and I intend to do the same at all our future update calls. Then Lowen will take you through the detail of our h one financial results before I give you an update on the current harvest and our outlook for the full year. There will then be time for q and a at the end, so please do send any questions through using the facility provided by IMC. We may not be able to get through all of these on this call, but as always, we commit to provide answers to all of them on the IMC website within two weeks.

4:55 I'd like to start with a reminder that CHAPEL DOWN is proud to be England's number one winemaker. With our fresh, crisp wines and our more approachable positioning, we are bringing a fresh approach to the world of sparkling wine, and in doing so, are creating a profitable new category. As the leading winemaker in The UK, we have a bold ambition to win an equivalent 1% share of the global champagne market by 2035. This ambition signals that our core strategic focus will be on high value traditional method sparkling wine and that the scope of our ambition is global. We're confident that we can achieve this. We have a new management team in place, and our leading shareholder, Michael Spencer, is demonstrating his support for the business by assuming the chair role for this next phase of growth.

5:46 Following the investments already made in our vineyard estate and the lending facility already in place with PNC Bank, we are well funded for the next phase of growth. And as we'll be showing you over this afternoon's presentation, we see significant opportunities for top line growth and premiumization. CHAPEL DOWN has a strong business model in an exciting and attractive emerging industry. We're the leading English winemaker with a distinctive brand proposition and clear leadership in the category, both in terms of brand awareness and distribution. We have over a thousand acres of vineyards planted, of which three quarters are in the Kent Downs, which are referred to as the new Cote De Blanc. We have an established and loyal consumer base with 50,000 visitors a year to Tenston, over a 100,000 names on our customer database and 10,000 retail shareholders.

6:42 We are a vertically integrated business with expertise at all levels of the business value chain, viticulture, winemaking, sales and marketing, and tourism. Our scale brings us benefits of distribution and cost efficiencies, and it's important to stress that CHAPEL DOWN is a profitable business at an adjusted EBITDA level. There's some exciting structural tailwinds for the English wine category. The UK is one of the largest sparkling wine markets in the world with roughly 200,000,000 bottles consumed each year. But as you can see from the pie chart, English sparkling wine is currently only 4% of total consumption of sparkling wine here in The UK. Nielsen data shows that on a weighted basis, English sparkling wine is only distributed in 50% of the off trade universe.

7:34 That figure of one nine seven million bottles in The UK includes less premium categories such as Prosecco and Carva, but even when compared with the global champagne market of 300,000,000 bottles based on 1999 to 2024 average sales, there's still plenty of room for growth globally. There's clear evidence that England's reputation for making high quality sparkling wines is growing as shown last year when CHAPEL DOWN's Rose was awarded best in class at the global decanter awards. This growing reputation is another clear tailwind for our industry. We have developed a new set of three high level strategic priorities for this next phase of growth from 2025 to 2030 designed to create significant shareholder value.

8:26 It's our intention to provide our shareholders with updates against each of these three objectives and associated KPIs twice a year at our results presentation. In terms of the KPIs, we're not going to share detailed KPIs today because this is a half year results presentation, and we'll be sharing detailed KPIs at our full year results. In the upcoming slides, I'd like to spend a few minutes explaining these strategic priorities in more detail. The first of these priorities is brand value enhancement. We're building a globally recognized sparkling wine brand with the same quality credentials as champagne but a more approachable positioning. Currently, the value of our brand's goodwill is not included on our balance sheet.

9:13 The second of the three strategic priorities is sustainable channel expansion. We will develop and implement repeatable growth drivers across channels, both in The UK and in key international markets. These first two strategic priorities effectively remain unchanged from our previous strategic priorities and will enable us to deliver sustained profitable top line growth as well as premiumization and an increased international footprint. The third strategic priority is disciplined capital management, and this is where there is a shift in direction as we move into the next phase of growth. During this next phase, we will increasingly leverage our existing assets, vineyards, winery, maturing wine, and engaged employees to deliver sustainable profitable growth.

10:08 In the following slides, we'll show you how we leverage our existing vineyard acreage and existing winery to deliver not only growth, but also a balance sheet which is asset based and appreciating. These three high level strategic priorities for the next phase of growth are now not expected to change for the period 2025 to 2030, and we will share an update on the progress we're making against them with you every six months. So I now want to give you an update on our first strategic priority, brand value enhancement. We have the benefit of a winemaking heritage in Tenterton that stretches back to 1977 and over twenty five years of marketing investment in the CHAPEL DOWN brand itself.

10:55 In our Kent vineyards and winery, we have a relentless drive in the pursuit of excellence. We make fresh, crisp wines with vitality and finesse, which are globally recognized for their exceptional quality and which are perfect for a broader range of celebration occasions. With CHAPEL DOWN's bold visual brand identity, established associations with icons of Brit modern British luxury, and a brand campaign to provide a fresher way to celebrate, we are proud to be the recognized leading English wine brand. According to IWSR, the global sparkling wine category is worth £26,000,000,000 of consumer spend each year. If we plot this category on a two by two grid of consumer perceptions where the x axis relates the y axis, sorry, relates to how consumers view the quality of different segments and is broadly correlated to price points.

11:51 The x axis relates to how formal and brand led this segment is. You'll see that there are some clear differences and a clear white space opportunity. At the unbranded lower quality perception end, you have Prosecco and Carver. Fremont is more formal and seen as higher quality, and then champagne at the top right hand side. Champagne represents 9% of the category volume, but 33% of the value and is the bull's eye target for CHAPEL DOWN. There is a clear opportunity to build a new brand led sparkling wine category with the same quality credentials as champagne, but with a more approachable proposition. This thinking defines how we make our wines.

12:37 Led by winemaker Josh Donahay Spire, our winemaking team is relentless in its pursuit of excellence. Our winemaking style honors the best traditions of champagne with 75% of our vineyards planted on the same band of chalk that runs through the Champagne region with the same three grapes at the heart of our wines, all of which are handpicked and gently pressed for delicacy before following the traditional method of sparkling wine production where the second fermentation and maturation take place in the bottle for added complexity of flavor. But we are redefining sparkling wine due to the cooler maritime climate that we have in Kent, which provides a longer growing season, resulting in the perfect balance between ripeness and natural acidity in our grapes.

13:27 Our winemaking team is unbound by the champagne rule book, meaning that we can use grape varieties such as early Pinot Noir when it suits us to do so. This produces exceptional fresher, crisper flavors in CHAPEL DOWN's wines, which deliver a vitality and finesse that is perfect for a broader range of celebration occasions. Our viticulture and winemaking team work incredibly hard in pursuit of quality and excellence, and I'm delighted that they have received impressive recognition for this in twenty twenty five taste competitions. 30 awards for quality have been won so far in 2025, including two golds at the International Wine Challenge and most recently, the prestigious Real Review Blind Tasting judged Kitskoti Curdecouve as the best sparkling wine of Great Britain.

14:26 In terms of our brand strategy, I've given you an insight into how we're building a brand with the same quality credentials as champagne, but I now want to talk about how we're building a brand which represents a more approachable luxury. Our brand marketing focuses on the idea that CHAPEL DOWN is a fresher way to celebrate and can be enjoyed on more everyday celebration occasions, what we refer to as big little moments. We've recently launched a new digital advertising campaign to communicate this, and I'm gonna ask Alex to show you one of the adverts now from that campaign. Thank you. These adverts will be aired on digital media, including YouTube and Facebook.

15:39 As a brand, we're also proudly associated with the best of modern British luxury. Partly thanks to the excellent weather, these associations have worked well for us in 2025. Almost 3,000,000 people walked CHAPEL DOWN on the podium after the boat race. Attendance at Royal Ascot was up 4.8% year on year, and sales of CHAPEL DOWN up 13% over that week. CHAPEL DOWN was even described as the most trending wine brand in India after magnums were presented at the end of the great summer test series, and 10,000 consumers were sampled at a successful series of pub in the park events as well. One of the marketing benefits of operating in the world of wine is that each year, there is new news of releasing our latest vintages.

16:33 The launch of the 2022 Travelers Edition in global travel retail stores helped achieve 14% consumer growth in that chapel in that channel. Two more editions of our much loved discovery series, which showcase our terroir and winemaking talent, The Orange Bacchus and Alberino were released, and I'm personally sorry to say that they are now both sold out. Rose wines are very much on trend in The UK at the at the moment, and our English rose twenty twenty four was launched at a shareholder exclusive event in Tenterton in spring and has been very well received. The results generated from this brand value enhancement strategic priority have been impressive.

17:26 The result of over two decades of investment behind the CHAPEL DOWN brand is that we have increased our important brand awareness metric to 46% from 32% back in 2022. So that's a sustained growth over the three years, and the penetration metric from 10% in 2022 to 20% now, and we've established ourselves as the brand leader within English wine. You will note that there still remains significant headroom for growth to achieve the levels of brand awareness and affinity enjoyed by leading champagne brands, which gives us confidence in our ambition to deliver sustained profitable growth over the medium term.

18:21 I'm now going to talk about the second of our strategic priorities, which is sustainable channel expansion. This strategic priority relates to expanding our distribution footprint and rate of sale. In The UK, CHAPEL DOWN already has the widest distribution of any sparkling wine English sparkling wine brand as well as a successful direct to consumer business, and we are now targeting expansion into key high value sparkling wine export markets such as The USA. CHAPEL DOWN has established strong route to market foundations with headroom for growth. In our UK b to b channels, the on and the off trade, which represents 63% of our current business, we've made significant progress during h one in growing our market footprint.

19:14 Our customers are increasingly supporting CHAPEL DOWN because we can offer solutions which grow the category and because our brand attracts high value millennial consumers who trade up from cheaper sparkling wines. There's significant room for growth in both channels. English sparkling wine remains underdistributed compared with total sparkling wine in the off trade channel, and we estimate that CHAPEL DOWN is only available in about a quarter of relevant outlets in the on trade. Our direct to consumer business is 30% of our business with a model that's highly effective at consumer acquisition, retention, and conversion. Each year, we sample about 70,000 consumers through our brand home at Tenterton or at one of our experiential events.

20:04 Once consumers are converted, and we now have almost a 100,000 of them in our online community, they are further engaged through ongoing customer relationship marketing as well as the chance to own shares. As UK wine tourism grows, we expect to grow our customer base and convert more consumers into brand loyalists. We have a significant opportunity to grow our distribution footprint internationally into the top 10 champagne export markets out of which we're currently only distributed in five, and we work with four major global travel retail partners where a channel where CHAPEL DOWN meets a key traveler need for brands with a sense of place.

20:51 We're clear on our commercial priorities over this next phase of growth. In The UK, to expand our distribution into outlets that sell champagne, to trade more consumers up into more premium expressions in our range, to expand our visibility and sales for less formal occasions in line with our big little moments campaign, and working with our customers to tap into the insights that could CHAPEL DOWN consumers over indexed towards millennials who are interested in great food and experiences as well as sparkling wine. Outside The UK, we will be building on the momentum we have in global travel retail where we are already listed in 38 outlets, activating our proven growth drivers in priority export markets such as The U. S. And Norway and seeding into the next tier of top 10 champagne markets.

21:49 During H1, we've made some great progress commercially against this sustainable channel expansion priority. We achieved new listings in both the off trade, for example, listing Rose in Tesco, Grand Reserve in Waitrose, and in the on trade where our listings were up 15%, including the Pig, the Stafford, and the Rosewood Hotel. We have supported that distribution with activity to drive rate of sale, including new gift packaging, a limited edition Royal Ascot bottle and promotion, and we participated in the first ever English wine week gondola end in Sainsbury's. We ran six shareholder dinners for over 200 shareholders, which received great feedback from attendees.

22:34 We've upgraded our visitor facilities at our brand home in Tenterton, ran a number of events, and were awarded the Travelers Choice Award from TripAdvisor for the fourth consecutive year. The third strategic priority is disciplined capital management. We have already planted the vines we need to generate sustained profitable growth until the early twenty thirties. Due to the long maturing process of our strategic traditional method sparkling wine portfolio, we require capital to invest in high quality inventories of exceptional wines to be sold in future years. Through our revolving credit facility, we carefully manage our working capital to ensure sufficient stocks are available to underpin future growth, support our premiumization ambitions, and ensure continuity of supply by mitigating against poor harvest yields.

23:36 The board will consider any requirements for additional CapEx if it would deliver sustained benefits and shareholder value through either increased revenue or structural production efficiencies. For this current phase of growth, our strategy is to leverage our existing assets. We're very fortunate to have built up an exceptional estate of vineyards, which deliver both quality and cost efficiencies through scale and which allow us to deliver sustained double digit growth into the early 2030s. I'd want to call out a few things on this slide. Firstly, you'll see that our forecast vineyards in 2027 harvest drops back some up to 1,006 acres, which is due to a forecast change in contracted vineyard acreage in one of our contract growers from that year onwards.

24:29 Secondly, we're confident that our new vineyards in Kent Downs will deliver premiumization opportunities with new single vineyard expressions like we currently have with Kitts Ooty, and we're pleased with the progress being made and scale efficiencies that we're getting from the larger vineyards that we planted on the North Downs in the past few years. With this increased acreage, there is a requirement for increased winemaking production capacity. The delay in obtaining final planning permission for a purpose built winery at the Highland Court farm site near Canterbury caused the company to review alternative options to support increased winemaking production capacity in the medium term.

25:14 This review identified a number of compelling options. The company intends to optimize its existing winemaking assets at its original Tendleton winery to become a center of excellence for the production of exceptional quality traditional methods sparkling wines. In addition, we will utilize existing spare third capacity winemaking capacity in Kent, where we produce some of our premium still wines. As a result of this decision, CHAPEL DOWN will now have access to 3,300 tons of winemaking capacity and will no longer require investment for a new winery. Any impacts on cost of goods will be nonmaterial.

26:00 Whilst the company has found the uncertainty over the planning commission for a new winery frustrating, we are very happy to have found an alternative solution that ensures quality and cost efficiency without the need for significant capital expenditure. When it comes to our sustainability agenda, we believe that doing the right thing for the environment is the right thing for CHAPEL DOWN. It also makes business sense because we know our millennial consumers want the brands they choose to be having a positive impact on the world around them. This work stream is led by our winemaker Josh Donahay Spire and is a program of continual improvement in our vineyards with a focus on carbon footprint improvement, habitat creation, and soil health improvement.

26:51 Our intent is to create a future in which people will say that the best thing that ever happened to the land was when CHAPEL DOWN chose it for their vineyards. Now to better understand our balance sheet, we have created an illustrative visual of how we invest capital to generate a return and and also bring in the impact of time. So this is very illustrative, but each black coin shown here represents an equivalent unit of cost and a gold coin, an equivalent unit of net sales revenue, both comparable to today's values. So we've assigned one equivalent unit of cost to a parcel of bay still wine that is produced during the harvest.

27:41 In the calendar year after the harvest, this can either then be sent to become traditional methods sparkling wine where it undergrows tirage, another unit of cost, then maturation and riddling, disgorging, and labeling at at at sort of almost a quarter unit of cost there. In year three, this bottle that has essentially cost two and a quarter units could be sold as brute non vintage and generate almost five units of of revenue, or it could achieve almost six units, of revenue in year five as a super premium traditional method sparkling or over 14 unit units in year seven as a luxury traditional method sparkling wine.

28:28 The second option is for the base wine to go into a touch of sparkle. You can see that whilst the costs of making this are lower than in the case of traditional method sparkling, so too is the revenue. On the plus side, it's ready for sale within a year after the harvest. The third option is to use this parcel of base wine for a still wine. Here, the costs are lowest, but so is the revenue. Like a touch of sparkle, this sale can come earlier than traditional methods sparkling. Our strategy over time is to focus more on traditional methods sparkling and to drive premiumization within that. You can see the benefits from a gross margin percent basis.

29:16 However, there is clearly an impact on working capital from having to mature that traditional method sparkling wine for longer before it can be sold. This requirement for working capital to build stocks after harvest is something that Lowen will now discuss in more detail. Thank you, James. I'd like to talk a bit about our maturing stocks and how we allocate capital in the next two slides. James has already explained how we generate a return across the different types of wine, how we appreciate value in the maturing traditional method sparkling expressions over time, but also have to carefully balance our cash flow as maturing stocks tie up our capital for a longer period than are still or a touch of sparkle wise.

30:05 However, these provide higher margins. Here you have an overview of our finished stock positions at the end of financial year 2022, 2023 and 2024. As we are midway through 2025 now, it is less meaningful to compare our position at half year as our harvest and bottling cycle is phased throughout the year and can vary slightly. So it's best to compare a full financial year for this exercise. As a reminder, the reported figures presented are according to IFRS accounting standards and not market value necessarily. The Board considers market value of inventory to be considerably higher than its reported IFRS value. You will note our stock value has increased from '22 to '24, which was helped by the increase in acreage and the exceptional harvest from '23.

30:54 Year's inventory outstanding increased from 2.2 times at 22 to 3.2 times at 24. This represents the stock position at year end divided by the in year cost of goods sold. You should recognize from the financial model slide that James just went through, our traditional method sparkling wines only become saleable after a few years post harvest harvest having to mature first and our super premium and luxury expressions even longer. Our store wine slightly reduced the average years outstanding across our portfolio, hence, figure has not always been more than three times. As we move towards premiumizing our mix more into traditional method sparkling wines, you can expect going forward the average year's inventory outstanding to be in the range between 2.5 to 3.5 times pending harvest yields.

31:47 It is essential that we continue to invest in maturing stocks to build reserves for: firstly, the future growth, that is demand in a few years' time, which we expect to be higher than today's demand secondly, premiumizing our sales mix to increase the proportion of traditional method sparkling sold in relation to total wine. For reference, at h one twenty five, this was 70% of wine revenue, up from 68% last year. And thirdly, to mitigate against fluctuations in harvest yields. You will note how the yields have been varying over the last three years. In years where it's an above average yield, we might need to ensure sufficient reserves are created to mitigate against possible below average yields in the future.

32:34 So what does this mean for the medium term? The board anticipates our working capital should increase naturally as our productive acreage increases with Boxley Abbey and Buckwell becoming fully productive in 2026 and 2027, which will allow additional maturing stock reserves to be added, after which case it should normalize. As stock value appreciates, this further underpins our revolving credit facility as these stocks act as maturity. So where have we allocated capital then over the last three years and where will we be spending capital over the medium term? We thought it useful to provide similar to the previous slide an overview of our balance sheet between 2022 and 2024 to understand this in more detail.

33:24 Over the last three years, we have mostly spent capital on firstly, maturing stocks as explained on the previous slide and secondly, CapEx for new plantings at Boxley Abbey and Buckwell alongside some winery enhancements and thirdly, investment towards technology. We now have a high quality asset base that creates a solid foundation to support our growth trajectory going forward with a focus over the medium term being on building on maturing stock reserves and reinvesting in existing assets. You will note in our financial review section later that whilst there has been no planting since Buckley Abbey and Buckwell, we still have some incremental development costs to finalize in '25 and '26 as it become fully productive over the next two years. However, that is not comparable to how much we have spent to date.

34:19 We will continue to fund our growth using our revolving credit facility, which as mentioned has a current limit of $20,000,000 and an accordion option to extend this by further $10,000,000 so $30,000,000 in total. We are comfortable this provides ample headroom to sustain growth in the medium term and stay within covenants. As mentioned in the previous slide, this facility is underpinned by the maturing stock valuation. And finally, to clarify, the valuation of assets in this table is also at IFRS accounting standards. Board believes the market value for tangible assets are considerably higher than the reported book value. CHAPEL DOWN also does not account for brand intangibles on its balance sheet. Now we have finished the section introducing the three strategic priorities for CHAPEL DOWN, let me talk you through the results for H1.

35:16 Firstly, let's focus on the performance by channel. We made good progress in H1 by returning to growth year on year with net sales revenue growing by 11% and wine net sales revenue by 14%. The off trade has performed particularly well with growth of 30% due to incremental listings in key retailers with Tesco and Waitrose and strong performance over the Easter period. We continue to grow faster than the wider English sparkling wine category with the retail sales value up 12% compared to 10% for the category. And we maintained our market leading position with 35% market share. We are seeing more stable stockholding at our off trade customers compared to prior year, and we expect growth to continue in H2 as we compare against retailers reducing their stock holding over the same period last year.

36:08 There was good momentum in the on trade growing by 3%, although the modest increase does not fully reflect the 15% increase in distribution to unique outlets. Channels comparing against a particularly strong H1 twenty twenty four, which included significant pipeline fall into newly secured national accounts, which was not repeated in H1 twenty twenty five. The distribution gains provide solid foundations for growth going forward though. Key premium accounts were also secured through buy the glass listings, including the Pig, the Rosemuth Hotel and Michelin starred restaurants, the ninth and Meadowsuite. Export delivered 17% growth as we executed on our new partnership for The U. S. And Nordic markets. You can also now find CHAPEL DOWN backers being served in Virgin Atlantic clubhouse.

36:57 Global travel retail, which includes duty free, remains an important part of this channel and underlying retail sales value was up by 14% year on year. Our direct to consumer or DTC channel showed a modest decline of seven percent. However, this was mostly due to the different phasing of consumer events between '25 and '24 and not repeating certain shopper initiatives in e commerce this year. DTC remains an important channel for CHAPEL DOWN, and we are confident in the long term growth potential. Traditional method sparkling revenue grew by 17% and is now 70% of our total wine net revenue mix as we continue to drive premiumization across our wine portfolio. This is one of our key strategic objectives in the medium term.

37:52 While net sales revenue grew by 11%, our gross profit increased by 7% as a result of a lower gross margin percentage than prior year. There were few key contributing factors here. As we exited the less profitable spirit business in '24, we had a gross margin increase in h one this year. This was offset by channel mix changes, especially the DTC and product mix changes, most notably a higher portion of still wines being sold. A planned reduction in average selling price of a touch of sparkle to drive trial amongst consumers diluted margin by 40 basis points, 50 basis points related to the planned unwinding of certain non wine initiatives. However, the biggest dilution of 110 basis points came from sales to the of the '22 vintage.

38:42 If you recall, this vintage was harvested and produced during the above average inflationary period where energy transport and labor costs increased significantly year on year. We expect gross margin to improve marginally in H2 as our product mix premiumizes over the festive period. Bringing it together in the full p and l overview, strong net sales revenue growth of 11% delivered $3,700,000 in gross profit, a seven percent increase on prior year. This was offset by an increase of 8% in administrative expenses due to incremental marketing activities and headcount to underpin our growth. As James mentioned earlier, our marketing investments are driving growth in consumer awareness and penetration.

39:33 Trading operating margin showed an improvement of 10%, however, as expected, was still a loss of $300,000 in H1. Traditionally, our main trading period is in H2, in which we expect to see greater leverage of overheads and thus profitability to improve. However, the decrease in fair value movement in biological produce year on year meant we had an operating loss of 300,000 compared to an operating profit last year of 200,000. As a reminder, this is a critical accounting adjustment for viticultural profits and calculated as the estimated market value of the grapes less the vintage growing cost.

40:18 This may change once the harvest is finalized. As expected, interest costs increased as we utilized more of the revolving credit facility to fund future growth. Adjusted EBITDA decreased 23% as a result of the lower fair value movement in biological produce. However, if you exclude this noncash item, adjusted EBITDA has increased 26%, reflecting good progress on increasing profitability year on year. Now over to the balance sheet. You will notice our net asset value decreased by 7% compared to H1 twenty twenty four. The main drivers were the $1,300,000 fair value loss in biological assets in H2 last year alongside the loss in H1 twenty twenty five.

41:08 As profitability improves in H2, you would expect this value to increase. Positively, our stocks, inclusive of biological produce, have increased 15% year on year, aligned to our strategy to build maturing stocks for future demand. The increase was supported by the triage of exceptional 2023 harvest. Over to net debt, you will notice a different table to previous presentations. We thought it helpful to talk about our net debt movements on a twelve month basis. We believe this is more relevant given the phasing of our revenue, harvest and production costs that could vary slightly year on year. We have also split out the different usages of the revolving credit facility to make it easier to understand in which areas of the business we invested in.

41:59 You can also you can find this information on our income and cash flow statements in the results. Firstly, underlying cash flow represents reported net cash flows used in operating activities, excluding working capital movements and exceptionals, but includes cash lease payments. We view this as indicative of how cash generative underlying business operations are. You will note this was positive over the last twelve months, albeit marginal as we had softer than expected revenue in H2 last year. The remaining $5,500,000 movement in debt over the twelve months included investment in maturing stocks and working capital of GBP 1,200,000, 2,300,000 in CapEx, which supported the development of our new vineyards and enhancements made at our Tenterden Winery, interest cost of $700,000 due to expected increased debt levels to fund these investments and exceptional cost and other smaller adjustments totaling $1,400,000 mostly coming from H2 last year as a result of the one off strategic review of which the final payments were made in H1 this year. We do not expect any further costs relating to this initiative.

43:17 Going forward, we expect the mix of capital investments to shift more towards maturing stocks as we build reserves to meet future demand and mitigate against fluctuations in harvest yield. Regarding the valuation of the assets, as we have already mentioned, CHAPEL DOWN does not account for brand intangibles in its accounts, and the Board believes the market value of tangible assets is considerably higher than its reported IFRS book value. Great. Thank you, Lern, for taking us through the H1 financial results. Before I get into the full year outlook, I wanted to take the time to thank the 85 employees of the CHAPEL DOWN team for the effort and energy that they put into every day for the company, whether they work in Kent or in our London office.

44:08 In the first half of this year, we've relaunched our company purpose, ambition, and values alongside our exciting mission to change the way the world thinks about English wine. I'm constantly inspired by the great working culture that CHAPEL DOWN the CHAPEL DOWN team has as shown in this photograph taken as the sunset over our new vineyard in Buckwell near Wye earlier in the summer. So I'm gonna start, first with the the harvest outlook. I'm pleased to report that the warm summer this year has provided ideal growing conditions in our vineyards, and our head winemaker Josh Donahay Spire is forecasting a high quality vintage at above average yield.

45:01 It's important to note that this forecast is still subject to harvest conditions in the critical coming three weeks, and we expect to provide an update on this in October. In terms of trading outlook, the Board remains confident in delivering strong sales growth and a return to full profitability for the full year. The Op Trade, our largest channel, is particularly encouraging with strong underlying sales growth. Marginal improvement on gross margins is expected in H2 as our mix premiumizes over the festive period. And I'd like to remind shareholders that CHAPEL DOWN is an attractive investment proposition as we create a profitable new category, which brings a fresh approach to the world of sparkling wine with an ambition to win an equivalent 1% share of the global champagne market by 2035.

46:01 So thank you again for joining this H1 results presentation. I'm now going to hand back to Lauren who's going to lead the question and answer session. But actually, I I think that I've got those I've got the first few questions to answer. So maybe I'll go ahead. And I think, Alex, if you could put learn and me on screen, please. You are on screen. Fantastic. That's great. So I've got some some questions here that have been pre submitted. The first one is, is CHAPEL DOWN considering moving into fortified or dessert wines? We wouldn't rule this out, but the CHAPEL DOWN winemaking proposition is to create exceptional fresh and crisp wines with vitality and finesse.

46:57 And we're currently not certain, that our climate conditions are such that we could create that, in UK. The second question, are there any plans to produce half or mini bottles? I, for one, would buy loads apparently. So we we have looked at this, and we don't believe that the demand is sufficient for there to be a positive business case, from this at the moment. There's also a quality angle because maturation in a half bottle is much faster, and we can lose some of the fresh, crisp flavors, for which our our wines are are so revered. I have another question that came in.

47:43 What has happened to the share price over the past year? Obviously, we can't directly control the share price, but what I can say is that the management team and I are fully focused on delivering against our new strategy to deliver sustained profitable growth into the twenty thirties. One question that came in, why can't I find any mention of CHAPEL DOWN on the Jackson Family Wines website? The website lists many non US wineries, but doesn't mention CHAPEL DOWN. And we have looked into this actually, and the the Jackson Family Wines consumer facing website is focused on their wholly owned winery brands.

48:32 So those the ones that they themselves are not their agency brands. Josh, Tom, and James McClain were out in The US two weeks ago, and I I'm delighted to say that the the Jackson Family, Wine Salesforce are fully committed to, the growth, of CHAPEL DOWN there. And I'm told as well that during that week, we got listings in six Michelin starred restaurants as well, which is a great start. Another question, are there any plans for existing CHAPEL DOWN tourism site? That's a great question. We get 50,000 visitors per year.

49:18 We do intend to enhance the visitor experience to improve football and dwell time without significant CapEx. And this year, we've already made some improvements to our tourism facilities, which hopefully you will have seen if you have recently visited. I think we have we have one question that came in for Lauren, which I'm going to ask him. Are there any future plans for shareholder dividends to be declared? If not, what financial thresholds would have to be achieved for that to be contemplated? Look. I I think in the in the presentation, we we have our medium term strategy is not clear. It's to drive brand enhancement, sustainable channel expansion, and disciplined capital management.

50:08 This will require, of course, capital and cash, and we'll be funding those investments in maturing stocks through the and existing assets through our debt facility. The board believes that this is the best way to maximize shareholder return over the over this medium term period. Whilst I can't commit to a specific date to when to expect the dividend, similar to what we disclosed in the '20 after the '24 results, it's not in our attention to declare dividend this year. If there's any other questions, you can just remind us of those on the right hand side of your screen.

50:53 K. So got a couple here. So in in terms of The US tariffs and potential expansion there, how will they impact expansion into US markets? And which overseas markets present the biggest opportunities for CHAPEL DOWN? It's a great question. We the tariffs of 10% do not dampen at all our enthusiasm for the opportunity that there is in The US. It's the number one champagne export market globally. We have a great distribution partner in Jackson Family Wines, we are finding that the tariffs haven't materially impacted our launch into that market.

51:40 In terms of overseas markets that present the biggest opportunity, as I said earlier, of the top 10 global champagne markets, Chappell Down is currently only in five of those. So, our big priority markets at the moment are The US, Norway, and, The UAE, but there are a number of markets in the top 10 such as Japan, Australia, where we are not currently distributed. So there is plenty of opportunity there. We have a a question from GT. What has been the most surprising or challenging lesson for you personally since stepping into the CEO role?

52:29 And I think a a great question. I think that the the surprise was a a pleasant surprise, which is that the underlying strategy of the business was very strong. And on the these the the brand value enhancement, the sustainable channel expansion sides, really, that that existing strategy will continue. And the, yeah, the the the the one change in strategic direction is around how we're going to be managing capital for this next phase of growth. Do you want to ask it?

53:15 Yeah. There's a question here that says that asks what is the write off on the discontinued new winery project. So the good news is the the amount of there's no write off expected on our p and l going forward. There's nothing being capitalized against that, and the amount of expenditure to date has not been material. Okay. There's a question here. You do not appear to be pushing sales of still wines. Are you looking to promote sparkling wines at the expense of the still wines? It's my opinion that you will sell more sparkling wines if you promote, the still wines. So I I wanna make clear that our long term core strategic focus is traditional method sparkling.

54:10 However, we highly value our our Still Wines portfolio. We think they are a a great opportunity to expand our brand is, and also to showcase our winemakers and and and vineyards winemakers' talents and the quality of our vineyards, and and that does not change moving forwards. However, you know, we we have planted, in the past five years, 280 new acres of vineyards, which are with traditional methods, sparkling, grapes. So our focus, our core strategic focus will inevitably be more on traditional methods sparkling moving forward. But, yeah, we will still very much, be ensuring that the still wine portfolio remains part of our mix.

55:10 There's a question here. Why are productive acres down? I am not sure if if this is related to '24 to '25 where, you know, it has increased from 739 acres to 777. I presume this is because of from '23 to '24, which it went down slightly by 11 acres. And James alluded to that earlier where some of the third party contract growers that we have does change their acreage from time to time, which is not significant, but it does fluctuate. So, of course, we we try to give the best view on what a productive acreage is at the point in time, which which we believe is by twenty seven one thousand and six acres, up from 777 today.

56:11 It's a question. When are you going to give free bottles as dividends as our shareholders are down 50% since buying shares? I I would remind shareholders that if, that that if you become gold shareholders, then you you do receive, very generous, benefits in terms of visits to Tenston, but also on on discounts on our wine portfolio as well. There was a question in here on what is the target margin percentage for next financial year. We we are not giving guidance at this point for next financial year.

57:00 However, as we mentioned for h two this year, we expect a marginally improved gross margin compared to h one. Okay. We've got time probably for one more. Okay. So does disciplined capital management mean there will be not be forays into other areas such as beer cider spirits, London outlets, and new winery seen while I have been a shareholder? For this phase of growth, we have the vineyards we need. We have the winemaking capacity we need to deliver double digit growth into the twenty thirties. So the answer to that is we have a very focused strategy with premium and premiumizing traditional method sparkling wine at its heart.

57:54 So sounds like that is the end of the questions. With those questions that we haven't been able to get to, we will get those answers onto the IMC website within the next two weeks or before. And I wanted to thank everyone for joining this CHAPEL DOWN twenty twenty five h one results presentation to hear about our three new strategic priorities as we create a profitable new category by bringing a fresh approach to the world of sparkling wine with a bold ambition to win an equivalent 1% share of the global champagne market by 2035. I'd like to thank Loewen for all the work he has done in preparing the presentation and Mark and Alex from IMC for coordinating today's delivery.

58:45 I wish everyone a good evening and hope to meet you all at one of our future shareholder events. Thank you. Thank you. Fantastic, James Lawn. Thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will 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, and good afternoon to you all.