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

0:01 Good afternoon, ladies and gentlemen. Welcome to the CHAPEL DOWN GROUP PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just 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 is appropriate to do so, and these will be available via your investor meet company dashboard.

0:34 Before we begin, as usual, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to CEO, Andrew Carter. But if I may first just play a short introductory video.

1:36 This is from CHAPEL DOWN in Kent. Nice. This is one of my favorite English sparkling roses. Yeah. That's equally as good as a as a bottle of moe or a or a bottle of vodka. Absolutely. The CHAPEL DOWN group have become the official sparkling wine of England crickets. And they're off. They race over the straight mile for this CHAPEL DOWN classified steaks. Please enjoy spraying the CHAPEL DOWN English sparkling wine all over yourself.

2:38 Andrew, good afternoon, sir. Well, good afternoon to everybody, and, welcome to the presentation of our CHAPEL DOWN twenty twenty two annual results. It's great to virtually meet you all again, via the IMC platform. For those that I haven't met, my name is Andrew Carter. I've now been CEO of the CHAPEL DOWN GROUP for the last eighteen months, and I'm joined by Rob Smith, our chief finance officer. We are really looking forward to today, to sharing an outstanding set of 20 '2 results, also sharing with you our business plans and our outlook for 2023. So without further ado, let's get into the charts, and please feel free to register questions as you have them. CHAPEL DOWN is, England's leading and largest winemaker.

3:26 Over twenty years ago, our predecessors started this business, with a mission to change the way the world thinks about English wine forever. Our journey is in full fight, and we are converting more and more champagne drinkers to English sparkling wines every year as they discover the elegance and freshness of our wines. Our vision is to build our position as the number one and most celebrated English winemaker and double the size of our business by 2026. Great businesses are built by great people, and I wanted to start by sharing with you the makeup of your new executive leadership team that is leading the CHAPEL DOWN business. This team has completely changed in the last eighteen months. Rob Smith has joined as CFO last year following thirteen years as a senior partner at PLC, and he really is moving forward the finance leadership of our business.

4:19 Liam Newton has joined as our new CMO and brings over twenty years of drinks marketing experience from Bacardi, Carlsberg, and AB InBev, and he's working closely with Tom Hepworth Bond, our sales director in the commercial leadership of our business. We now have 74 full time employees at CHAPEL DOWN with a seasonal workforce over a 150. So it is timely that Emma Allen has joined us from Shepherd Neem as our people manager. This completely new executive leadership team is, of course, rounded out by a head winemaker and operations director, Josh Donahay Spa, who I'd like to publicly congratulate on being awarded the coveted English winemaker of the year award in the twenty three annual drinks business awards. It's incredibly well deserved.

5:04 Josh now manages all of the CHAPEL DOWN operations from the vineyards to the winery to production. As you will have mostly all seen today, '22 has been an incredible year for CHAPEL DOWN as we further reinforced our number one English wine brand position. We had an excellent '22 harvest with over 2,000 tonnes of fruit picked and processed. We have seen record sparkling wine sales with 790,000 bottles of English sparkling wine sold. Our distribution in The UK and internationally has significantly increased, and it has been a fantastic year for English wine tourism with 65,000 consumers visiting our winery. Our award winning wines continue to win international recognition with over 38 awards last year.

5:54 And most importantly, we are the only major profitable UK wine company with an operating profit that has grown 51% to 1,700,000. In a fast changing consumer world, our CHAPEL DOWN brand is at the heart of key consumer trends. Whilst times are currently tough for some consumers, they are still looking to celebrate and enjoy the big little moments with families and friends that really matter. Consumers are drinking less but better. Our consumers are focused on the provenance and the homegrown nature of their brands and wines.

6:27 And the brands that are focused on producing in balance with the environment are the winners. And furthermore, consumers post pandemic continue to want to spend money on experiences, and the continued growth of social media amplifies everything that consumers experience with English wines. CHAPEL DOWN is very well positioned as a brand to capitalize on these macro trends.

6:53 As we go through today's presentation, you'll see that in 2022, we have built significant momentum on our strategic road map. These strategic priorities you see in front of you are helpful to communicate what's important to our team and other stakeholders as well as measure our progress. I know these were previously shared with you. Starting with brand. So we remain the clear leader on both awareness and conversion. We've had an excellent 2022 on brand, but with truly exciting developments coming in 2023 as you'll see through the next hour and a half. We're also focused. This is the first full year post the Curious Breweries disposable. And as you've seen, we now have a leadership team fully focused in developing an English wine vineyards. When we look at the vineyards and winery, we've had a really big year here. So land, we had a great harvest of 2,050 tons, up 45% on last year, which are were of an outstanding quality.

7:49 We also planted another 38 acres at Borley Farm next door to Kitskoti, and there's another 118 acres being planted this spring. On the winery side, also a really big year. A big investment in Tenton allow us to handle up to 2,700 tons, which will let us create up to two and a half million bottles harvest permitting. Contrast that with this year's sales of 1,400,000 bottles, and you'll see the scale that we can get to leveraging our current paid for assets. In terms of awards, you've seen these highlights in the opening video. Consistent excellence, really important, 38 in 2022. Scale, 1,400,000 bottles sold in 2022, making us the largest English wine maker. We sell through five channels, and we'll give you some deeper insight on those today. What I would add here, though, is that the distribution scale allows certain resilience for the company in periods of channel switching.

8:47 On direct to consumer, you'll see a fantastic performance in retail side of it, up 20, and in tours, a 108%, but this was offset by a normalization of ecommerce. So overall, down 1%, but remaining about 32% of the business. I'd like to reiterate here and later that our strategic intention is growing the direct to consumer part of our business in proportion of the overall sales to keep it at least 30% of net sales revenue going forward. In terms of people, culture, and system, as Andrew mentioned, the ELT, the extended leadership team, are all executive leadership team are all in place, and that that team build is now complete. In terms of 2023, systems are a big folk process a big focus for us. Excuse me. An agreement is in place to get a new ERP, and the implementation starts next month. And we plan for a c r CRM implementation to start soon after.

9:46 The final point here and another Amber here is the shareholder benefits and return, and there's two sides to this story. We did a shareholder survey over Christmas and the start of the New Year and got 1,700 responses. So thanks for that if you're one of those that responded. And we can see the benefits are working really, really well. The key one being wine discounts of up to 33% on our traditional method sparkling wines, and this was actually used by 80% of the survey respondents in the last year and and was really, really popular. As such, we'd like to be clear that we plan to continue these discounts at the same level. The survey, though, and other interactions conveyed disappointment to the share price performance. Although this has recovered somewhat since we last spoke at the end of the first half, we recognize that the medium term performance has been disappointing.

10:33 As you'd appreciate, we can't directly control the share price. Andrew and my myself under the leadership team's role is to focus on the delivery of our strategy and in particular, doubling the size of the business to around 28,000,000 of revenue by 2026 whilst delivering the brand premiumization that allows profitability to sustain its step change improvement you've seen this year. We're also committed to improving communications to existing and potential investors, and we hope you've seen evidence of this already, including extra communications on harvest and a year end trading statement. If we continue to deliver this strategy and communicate consistently, we're really confident that the share price will ultimately take care of itself. Indeed, hopefully, the excellent revenue and profitability performance in the business in 2022 will start helping.

11:25 Before talking about the CHAPEL DOWN highlights, I'd just like to give you a brief update on the English wine market. As you can see on this chart, there are four quadrants. In the top left, it reflects the fact that there are now over 897 vineyards in The UK covering over 4,000 hectares or 10,000 acres in in old money. In 2021, in the bottom left, there were 9,000,000 bottles of sparkling and still wines produced in The UK. We're still awaiting the wine GB '22 industry data for total production, but off the back of an excellent harvest in '22, we would estimate this to be 11 to 12,000,000 bottles. Top right hand corner with respect to '22 sales, we expect that the sales of English sparkling wine market have grown by at least 20% to 7,000,000 bottles, with total English wine sales of 10,500,000 bottles in '22 given the '21 harvest impact on still wine.

12:24 However, as you look again to the bottom right, this is still only a fraction of the 223,000,000 bottles of sparkling wine sold in The UK. You can see from this chair chart that a major part of this market is Prosecco, but most importantly are the 24,000,000 bottles of champagne. We already know as well that the 22 figure is actually 29,000,000, so the opportunity to convert more champagne buyers to CHAPEL DOWN is a significant growth opportunity. In summary, the demand for English sparkling wines continues to rapidly grow, and we expect that growth to continue at at least 15% per year, but it remains broadly in line with the availability of the sparkling wine supply.

13:12 Ahead of giving you full details on '22 financials, let me give you a brief snapshot on the business and hopefully a chart that some recognize from last year. CHAPEL DOWN is the number one English wine brand.

13:28 In '22, our sparkling sales were up 53%. Our brand is the most recognized English wine brand in The UK with brand awareness of 31% amongst sparkling wine drinkers. We have significant opportunities to further grow the awareness of our brand. We are proud of a number of our high profile spark sponsorships with being England's official sparkling wine of English cricket sponsor of the boat race and have partnership deals of ASCA races and iconic institutions such as the London Philharmonic Orchestra. As you can see, we have the largest acre of acreage of vineyards in The UK with 750 lands acres of land, primarily on the North Downs Of Kent. Now this will all be fully productive for the 23 harvest, and then we have a further 156 acres on which planting will be completed in April this year.

14:22 These 906 acres will yield in the region of 2,700 tons of fruit. We have the broadest scale of distribution in The UK. We are the only brand distributed across all key retailers, and we'll discuss later in the presentation the scale of these gains in '22. And we have a rapidly growing direct to consumer business, which represents 33% of our business. It's made up of an ecommerce, business with a consumer database of 89,000 consumers. When I spoke to you last year, this figure was 50,000. That's a dramatic growth. And likewise, our social media following is up from 75,000 to 91,000. Our brand home in Tenston, Kent is flourishing, and we welcome 65,000 visitors in 2022, all falling in love with our CHAPEL DOWN brand and leaving as lifetime ambassadors.

15:20 Briefly to reiterate, our CHAPEL DOWN brand is the power brand in the English wine category. As you can see from the chart on the left hand side, we have the highest level of brand awareness, more than double our nearest competitor. On the right hand side chart, you're looking there at Nielsen off trade data, our market share in the off trade retailers. We have a strong leadership position and have extended that to a 33% market share at the end of December twenty two, a growth of 23% year on year. These sponsorship partners will continue to drive brand awareness and brand engagement. Our new agreement with English Cricket will reach a global television audience of over 80,000,000 during the course of the forthcoming Ashes summer and is a great platform on which to showcase our brand.

16:09 Likewise, many of you will have seen this year's boat race. It was a huge success in terms of brand visibility with 3,000,000 viewers, and we'd love to congratulate both Cambridge crews. Furthermore, we're delighted to share that we have a new agreement to become the official sparkling wine partner of Pub in the Park for the summer of twenty three, and our wines will continue to be enjoyed in all bars at Ascot Racecourse. Many of you are asked about the breakdown of our trade channels, and this chart gives you a fuller picture of that at the end of twenty two. As you can see, the off trade accounts for 53% of our business, and we have strong and much valued partnerships with the likes of Waitrose, Tesco, Sainsbury's, Morrisons, Majestic, and Marks and Spencer's, and we continue to extend the depth of distribution and the amount of off shelf visibility.

17:01 Our on trade business currently only represents 11% of our business, but this distribution base has trained dramatically in the last year, increasing from 440 to 1,485 outlets with the likes of Gavrosh, Savoy, Marriott Hotels, and Okemins all stock in our brand. And there is significant opportunity for further distribution growth of over 10,000 premium on trade outlets to go after. We've referenced the directly, the direct to consumer business growing rapidly, but what I'd like to just highlight is the two parts of that. As you can see on our ecommerce, our overall traffic numbers and total order numbers were down in line with macro ecommerce trends as consumers returned to shops.

17:47 But what we have seen is a significantly growing database, 96,000, and within that, eight and a half thousand passionate shareholders. From the 27,000 online orders in '21, we had an average order value of a £132, up from a 115 last year, and we enjoy an outstanding return in customer rate of 55. At our brand home in Kent in Tenston, we have 65,000 visitors last year enjoying the tourism experiences, and we were acknowledged with a five star TripAdvisor rating as consumers enjoyed their Michelin rated food in the Swan and also buying products in the shop. For the first time, we also pull out international as our fifth channel. Today, we have seeded the CHAPEL DOWN brand in 14 markets.

18:35 Key markets include The US, Scandinavia, Hong Kong, Japan, and UAE, but the volumes are currently only 3% of our total business. We have grown this part of our business by a 164%. It remains a strong medium to long term opportunity as we have more wines to sell outside of The UK. And of real note, we have now had our brand listed in London Heathrow, Gatwick, Luton, and City airports, and the initial rate of sales are staggering as both the departing UK and international travelers start to discover and gift English sparkling wines.

19:14 So now let's turn to the operational highlights of 2022, starting with our vineyards. In 2022, we had 596 fully productive acres and a 154 acres nearing full maturity. And for your information, those nearing full maturity, they tend to yield about 70% of the full yield. So this summer, we'll have 750 acres fully yielding. We also, in 2022, planted 38 new acres of Bawley Farm. Sustainability is really important to us, and it's also a strong ongoing focus. And already, we're founding sustainable members we're we're members of of sustainable wine GB. We're founding members there, and we also look to practice sustainable viticulture everywhere.

20:00 For example, reintroducing indigenous grasses in our vine rows. All of our packaging is recyclable, and indeed, on top of that, our glass is made from 75% recycled glass, and packaging is 80% recycled content. In addition, we send our grape skins for anaerobic digestion to convert them into green green electricity and also soil conditioner. So moving on to the harvest. As we mentioned, it's absolutely key to us, and 2022 was excellent in terms of both yield, tonnage, and quality. We actually started harvesting in August for the first time in our history. Only one day, but it was in August due to the good summer, and we have high expectations as to the quality of wines we'll create from that 2022 vintage.

20:48 Moving then on to the winery. In 2022, we made very important investments both the short and the medium term here. So we installed 17 new 50,000 liter tanks and a reinforced concrete floor for the tanks and for access, and you can see Josh, our head winemaker there in those tanks. We can now process up to 2,700 tons of grapes at Tentadan, which allow us to create about 2,500,000 bottles of wine a year. For comparative purposes, previously, we could make about 1,500,000 bottles of wine per year, and we sold 1,400,000 this year. So it's a really important expansion of our capacity at Tentadan, and it's already paid for from exist from existing cash.

21:35 Moving on then to land and the growing vineyard acreage. In here, you can see a picture of where we are today and where we'll get to in the next years. Please remember that all of these plantings can be covered by existing cash and facilities. The key points to note here, with the new plantings in 2023, we'll ultimately get to 906 acres of fully productive vineyards by 2027. These new vineyards will start making will start creating grapes, which will make still wines, which will sell in mid twenty twenty eight, and the first traditional method sparkling wines from these new plantings in 2030. The new plantings will massively expand our Borley Farm vineyard, which you'll see on the map, is next door to Kitskoti.

22:22 And so we expect these wines to be of an equal quality to the wines produced from that Kitskoti vineyard. Great news from every perspective there, of course. Our vineyards are already very focused on on the grapes which we use to create traditional methods sparkling wines. As you can see, 77% of the existing plantings go into sparkling wines, and this will actually increase to 81% of our plantings after we finish at this year. When looking for land, we aim for a mix of freehold, leasehold, and grower contracts, and you can see that mix, broken out there in in the table in the bottom left on this page. But the most important point for us when we're sourcing new land is quality. When we see a vineyard that has the potential to be among the greatest in the world, the ownership structure is less important than the quality of that vineyard, and we go after that. Quality is always key for us on the vineyard selection.

23:18 And as you'd expect, the brand that we talked about, our distribution, the channels, the vineyards, and the winemaking excellence is reflected in the financials. So let's move on to the details of our 2022 results. And we'll start with net sales revenue. So what you'll see there is net sales revenue picking up 10%, so double digit growth. And it's a good performance for us picking up from the 4% growth we talked about at the first half. Indeed, in the second half, we were up 14% on the second half of comparative period in 2021, allowing us good carry momentum into 2023. We're really pleased with our revenue growth, slightly ahead of our expectations, and with that fantastic traditional method sparkling performance leading, up 53% by value.

24:05 Net sales revenue growth was tempered a little bit though by stock availability and challenges in still and carbonated wines followed by the following the 2021 harvest, but obviously that is being offset by the traditional method sparkling performance. We're also delighted with the step change in gross margin that you see here, up six points from 49 to 55%. And this is largely driven by an average sales price being up 19% on the year, which is in turn mainly driven by the change mix in product with traditional methods sparkling now 70% of wine sales. That's about two thirds of the effect of the average sales price increase. The other one third is around unit price increases as we premiumize the brand, but also look to offset the effects of cost inflation.

24:59 That then revenue growth is accelerated through into an operating profit of 51% growth and an EBITDA of 30% growth, really outstanding growth in our profitability. The gross margin increases obviously are the primary driver of this, but that's coupled with discipline on overheads, which allows us a strong investment in marketing, which will continue into 2023 and beyond that. You'll see net cash of 3,300,000 on the balance sheet, which gives us overall a conservative balance sheet maintained there. That gives us operational and strategic flexibility going forward. At CHAPEL DOWN, we look to our business on the revenue side by both channel and by products, and that's where we'll go now.

25:45 So firstly, you see the channel analysis here. And starting with the off trade, which is around specialty retail and grocery, traditional method sparkling, of course, has driven that up 69% by value during the year, and that's also driven by 3,700 points of distribution now, up from 3,100 previously. The off trade, as you can see, is our largest channel, and we are so successful here that at the end of December twenty twenty two, we actually had a 33% moving annual total market share of English sparkling wine according to Nielsen. So 33% market share during that off trade. Next, the on trade, up 34% during the year, partly driven by the number of outlets increasing up to 1,485 as Andrew referenced earlier on. And importantly, 568 of those are by the glass listings.

26:41 By the glass is really important to us because it drives rate of sale, but it's also a means for consumers to taste our wines for the first time. As such, by the glass will be an ongoing focus. The direct to consumer parts to our business are important for both brand and margin. And to recap, we want to grow this in proportion with the overall business so that it remains at 30% of net sales revenue or higher. Overall, direct to consumer was down 1%, but this near flat performance hides two significant moves, one down and one up. So ecommerce is the down, down 23% in line with the overall change in the ecommerce marketplace, the normalizations of buying patterns we saw in 2022. We did, however, have a great q four on ecommerce led by Black Friday, up 43% on prior year at 216,000, and also Christmas corporate gifting, was up a 176% on last year at a 172,000.

27:41 So although down 23% in line with the overall ecommerce marketplace as people don't return to shops, actually, four was excellent in ecommerce. The positive flip side of this normalization of buying patterns was causing retail sales from Tentadan, which are up 20%, and tours through Tentadan, which were up over a 100%, a 108%. These revenues associated with our brand home, they're really important to us from both a brand point as you'd expect, but also a margin point. They're our best margin sales. As I said, we tend to rent look at the revenue side of the business, both channel and product, and next, therefore, we go to products. And, actually, this is a really simple story, which is the radical mix into traditional method sparkling.

28:26 Now this was, of course, planned as part of the strategic direction for the business we talked about previously, but accelerated by the 2021 harvest. And for clarity, we see this shift in mix into traditional method sparkling of about 70 of our wine sales as a permanent shift mix permanent mix shift. Traditional method sparkling, up 53% on the year, 790,000 bottles sold. You'll see carbonated and still wines remain an important part of the business, but they will stay about the 2022 level of around 30% of wine sales going forward. As you'll also see, spirits now plays a pretty minor role in our business. Finally, from the financial side of it, we'll highlight today the balance sheet.

29:14 And the first thing to note here is stocks. Stocks have increased by 2,800,000 during the year, partly because of the good harvest that we had, but also partly because of the careful management of our traditional method sparking inventory. We aim to keep about three years worth of traditional method cycling sparkling sales in stock at all times. The second point I'll bring out here is debtors because there was a movement here. The debtors movement actually is is gone to a more normal level at year end 2022 after a very low year end number in 2021, which was in turn driven by very low off trade sales in q four twenty twenty one. So therefore, the point we make here is that the levels at year end 2022 of debtors should be considered as normal going forward.

30:02 Then on to cash and borrowings, particularly net cash is the balance number in there. As you see there, net cash is 3,300,000 and therefore a very conservative position overall. That net cash is after CapEx of 2,100,000 during the year of 2022. The main parts of that were the investments we talked around in the Tenton Winery to get to $2.72700 2,700 tons of grapes and 2,500,000 bottles of wine, plus the Borley plantings in there as well. Cash flow was obviously impacted by the impact in stocks of 2,800,000 and the increase in debts of 1,400,000 plus that CapEx, but offset by our profitability to stay net cash. We also still have, as we did at half year, 12,000,000 of unused facilities at year end.

30:53 The final point we'll make here on the financial section is that we hold all stock and freehold land at cost. In addition, within the accounts, we don't assign a value to brand in those accounts. And as such, the board continues to believe that the market value of the tangible assets we have is considerably higher than that UK GAAP reported value you see here. As we move in now to the final ten minutes and final part of the presentation, I just would like to reshare our strategic road map for CHAPEL DOWN and the same key parts of the '23 plan and outlook. Our ambition is to double the size of the business by '26. And as we previously shared, there are four strategic pillars that will underpin the growth of the business.

31:40 Most importantly, the development of our number one English wine brand. We are very focused on continuing to premiumize CHAPEL DOWN brand, continuing to grow our sparkling volumes to 70% of the business, and with this, increasing the gross margin contribution. In 2023, we will uplift our brand identity and packaging, and I will share this with you shortly. We will continue to step change our distribution growth in '23, increasing off trade to 3,700 outlets with a key focus being the dual listings of both our Brut and our Rose English sparkling wines. Our target is to expand Entre to 2,200 outlets in '23 and importantly growing up by the glass listings to 800. We will continue to attract the best talent.

32:26 We will develop our high performance culture further, and we will build business systems and process to manage a new, bigger dynamic business. We will be implementing a new ERP system during '23. And finally, in the wine business, long term business growth has to be underpinned by the right scale of our operations, and we will continue to invest in leased and owned land to expand our long time term supply of grapes. And Rob will shortly update you on our exciting announcement today. So now we're gonna update you on three key parts of the '23 plan, the upgrade of our CHAPEL DOWN packaging, the continued improvements at Tenston brand home, and a summary on our vineyard acreage. In CHAPEL DOWN, we have had the foundations of a great brand with our name, logo, and heritage.

33:18 That said, in several rounds of consumer research, our consumers have consistently fed back to us that the brand identity and packaging looks just a little dated and would benefit from an upgrade to better reflect our premium positioning and quality of wines. Therefore, we are delighted to share with you as shareholders a first viewing of our new brand identity. All of the images I will show you are mocked up visuals, so please accept them in this context. But what you can see is that we have evolved the CHAPEL DOWN logo. We have improved the impact of our branding and have modernized and simplified the product descriptions.

33:54 Importantly, proudly calling out ourselves as English sparkling wine and highlighting our Tennyson Kent brand home in Providence and the traditional method that we use. During the course of all of our consumer research, we have also learned from consumers the importance of creating one strong CHAPEL DOWN brand range architecture and a clear color coding and description of our products. So I'd like to take you through how the range will look come May, June of this year. So moving from left to right along the screen, you can see firstly our CHAPEL DOWN BRUTE and our renamed Rose English sparkling wine, which will sit alongside our CHAPEL DOWN GROUP as our core premium sparkling wines offer.

34:39 Our BRUT RESERVE and our ROSE RESERVE products primarily focus in the on trade and our direct to consumer channels. We will change the name of our three graces to CHAPEL DOWN GROUP PERSERVE so consumers can clearly understand the super premium nature of this wine and its aging in a bottle for a minimum of three and a half years.

35:02 And finally, and really importantly, we are bringing our award winning kids Coty luxury sub brand under the CHAPEL DOWN brand to ensure that the luxury end of our portfolio gives the CHAPEL DOWN brand the much deserved quality halo effect that it deserves going through the whole of our range of sparkling award winning wines.

35:24 Furthermore, this premiumization of our brand identity is reflected in some of our changes to our retail pricing, which is required to offset further cost of goods increases. However, our award winning wines remain very competitive against the growing price of champagne and offer a minimum of 20 discount to the champagne brands who continue to dramatically increase prices further. Needless to say for our CHAPEL DOWN shareholders, these price changes are also offset by the price discount benefits that our shareholders enjoy. This brand identity will also be replicated on our still wines, and we will continue to produce award winning still wines. Our premium wine range on the left with our Bacchus wine, recently named the Witch Magazine English Still White wine of the year.

36:16 And, of course, on the right, our most coveted award winning luxury CHAPEL DOWN KITS COTE CHARDNERY and Bacchus wines. Separately, we are also working on a unique design uplift to our discovery series, Still Wines, which we will share with you shortly. A major focus of our brand build will be to continue to invest in our brand home at Tenston. In '23, we would target to entertain circa 70,000 consumers. We are continuing to expand both our visitor experience and our packages. Likewise, our excellent Swan restaurant recently awarded to Michelin AA rosettes will continue to offer amazingly great value dining experiences, and our opening hours will be extended to seven days a week. We have also also recently reduced the pricing of our wines in the restaurant to give consumers and shareholders the opportunity for even great value.

37:15 We are also planning the development of a new casual dining experience at the winery. And finally, we are moving forwards on the development of plans for future investment in expansion of our tourism facilities. We really look forward to welcome you in welcome welcoming you to the winery this summer so that you can see these changes.

37:36 So as we look into 2023, let's also look at something on land here. And starting off, I'd like to say that Andrew and I and the team are very pleased to announce that we have signed a new long term leasehold over a 117 plantable acres at Borden Corner with James and Lucy Thompson this week. This vineyard is gonna be planted in 2024, and we're confident it will produce outstanding wines for us in the future. This will then take us to 1,023 acres of vines. And what we wanted to do is present our land profile in one table here as we thought it would be helpful for you to see the progression to 1,023 acres of full production acres in one place. There's some key things to note here as you digest the numbers.

38:23 Firstly, you'll see that our planning is long term and done in advance of need. Investments already made in land and the winery will allow us to double the size of the business by 2026 to around £28,000,000 worth of net sales revenue.

38:39 For this summer's harvest, you'll see we have 750 acres fully productive versus last year where we had 596 acres fully productive. And beyond the land already secured, we're very focused on further opportunities to grow the scale of our vineyard acreage and great capacity through further land acquisition and also the purchase of surplus market grapes as they become available. One final comment on these assets before we move on.

39:08 There's a very significant barrier to entry here from these for competitors. So if anyone wants to come into the English wine industry, what they need is either a huge degree of patience or they need to be acquisitive. The assets are a very big barrier to entry for us, which finally leaves us going on to the 2023 current trading and outlook. And what we'd like to do here is reconfirm our 2023 outlook. Q one trading is in line with expectations and in line with budget, and we're expecting double digit revenue growth and a sustained gross margin percentage. As flagged earlier, we're expecting a shift to traditional method sparkling wines being 70% of wine sales as being permanent, and that goes for 2023 and onwards.

39:58 Our joint business partnerships are in place, and we've agreed new listings of English sparkling rose in the off trade. Our preparations for the brand launch, which Andrew showed earlier on in 2023, are also in place, and they're progressing well too. And operationally, we're gearing up ready for the growing season and a harvest, And all those activities are also progressing according to plan. It's an exciting 2023 also on the CapEx and investment side, and I just wanted to say that the investments noted here are all covered by existing cash and facilities. So vineyards, as you see as you saw, we've got a 118 new acres of Borley Farm being planted this spring, plus the 117 acres vineyard. That land will be prepared in 2023 and planted next year, spring in 2024.

40:49 We're progressing the improvements intended in visitor experience that Andrew mentioned, including the more casual dining option. We'll keep driving customer experience to make sure our visitors leave as ambassadors. And as a financial aside, I should also point out that the the CapEx intent is fantastic because it's part of the business with the fastest payback on CapEx. 2023 is also the year that we professionalize our systems, providing that platform for growth for us across the the future years with a new ERP and a new CRM system. We'll also continue to explore future opportunities for, firstly, vineyards. Secondly, a new scaled and efficient winery, and we expect to hear the results of our planning permission request on that in April, as well as '3, an expanded tourism offering.

41:36 And as we progress on these longer term conversations, we'll continue to evaluate the optimal way to deliver these opportunities, which could potentially include a future AIM listing. So, ahead of answering your questions, in summary, we are absolutely delighted with the delivery of of 2022. The CHAPEL DOWN business is completely now refocused on building our position as England's leading and largest winemaker, and we're on track to double the size of our business to 28,000,000 net sales by 2026. Our new product design has been tremendously well received by consumers and customers, and we look forward to launching that into market in May and June alongside a new digital advertising campaign.

42:26 Our sponsorship platforms will deliver significant brand exposure, notably our winning Ashes series. And we are expecting double digit revenue growth and an improved gross margin in '23. The new block the new plantings have already taken us to 906 acres, and our new land agreements take us over a thousand acres, an incredible milestone for our business. We will continue to enhance our visitor experience at the Tenston brand home. And as Rob references, we continue to plan for exciting future growth options. And without further ado, I'm gonna ask, Jake to put us back on camera, and we'll happily pick up the q and a that you've you've sent to us. Andrew, Rob, that's great. And thank you very much indeed for your presentation this afternoon. I will just bring back up your camera there.

43:18 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 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. Andrew, Rob, as you can see there in the q and a tab, we've received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. Rob, perhaps if I may hand over to you to chair the q and a session, and then I'll pick up from you at the end. Thank you. Yeah. Absolutely. Thanks, Jake, and thanks everyone for submitting questions. So we have got a lot of them. And and as Jake said, what we're gonna do is try to answer as many of them right now as we can.

44:07 If we can't, there'll be fully written up answers within the week. And occasionally, I'll group a couple of questions together, I think, because there are a couple of questions which are a little similar, but we'll we'll try and get those in the in the right order as we go. I'm gonna start, Andrew, with a question for you on still wines. I look over to this side here. It's because I'm reading the questions from my computer over here, by the way. First question from CS. Do you plan on ceasing production of certain still wines? No. Still wines are are still a very important part of our portfolio. We make some fantastic award winning still wines, particularly from our backers grapes that are specifically used in many of our still wines. Also, from a point of view of the operation side of our business, when we are producing our sparkling wines, we use the tail end of some of our great presses in the production of distilled wine.

45:00 So both operationally and from a brand point of view, it's very important. But as we went through the presentation, the focus is on developing CHAPEL DOWN into an international sparkling wine brand, and that will be at least 70% of our volume moving towards 80% as we move forward in the mid to long term. Great. And and there's another related question in terms of the product range in terms of spirits and the future of spirits. Yes. As as you as you know, we disposed of of beer back in the June of of twenty one, and we we committed to being focused solely on being England's leading winemaker. Spirits plays a circular role for us in producing the distillate from from our grape skins and also has had a role in producing, you know, ultimately very good vodka and gin.

45:53 That said, it is very much margin dilutive. The competitive nature of that market is such that they're generally standalone brands that we're competing against. And therefore, in the immediate short term, we will look to exit out of spirits. But for the course of '23, we will continue very much to supply our remaining spirit stocks, to both our, shareholders and our direct, consumer traffic through the, Tenton shop. Cool. Thanks. And then there's one I'll here on on land, which is, from s. I'm not gonna mention your full names on here. So the latest results detail a land lease for a new vineyard. Looking ahead, will we see more land being leased, or is the strategy focused on land ownership?

46:39 So the answer to that question is, broadly speaking, we have a strategy which says about 20%, of our land would be owned, about 60% leased, and about 20% on very long term grower contracts. But that that's a long term strategy in terms of what the mix we're looking for is. In terms of day by day, week by week, year by year, as I said, the most important thing is actually the quality of the vineyard. And if it's an amazing vineyard which is gonna produce amazing wines for us, actually, broadly speaking, we don't mind which of those it is, whether it's freehold, leasehold, or a long term grower contract. I'll give one example. There's one vineyard we're looking at at the moment, which is a big vineyard. It it it's it's not gonna be available as a freehold, and therefore, we are definitely gonna be discussing those leasehold elements of that there as well.

47:26 So it is much more driven by the the each individual decision by the quality of that vineyard rather than the overall twenty sixteen twenty strategy. Next question. And and there's a couple of questions here around exchanges and Aquis and AIM, Andrew, some elements of liquidity and some elements of fundraising, etcetera. Do you wanna mention anything more on that? Yeah. We understand from all of our shareholders, and and we understand as a board the the challenges that we have in sitting on the ACWIS index and the liquidity challenges that we experience. And, obviously, we experienced those during the during the summer of last year in in particular.

48:15 As a board at the moment, as we evaluate the future growth opportunities that we have beyond the doubling of the plan to '26, we are clearly looking at both new vineyards. We are looking at the potential of of building the new winery. And with that, we are looking at a number of different options around how we would, look to invest in those, in those long term initiatives. And as part of that, we are evaluating a move to AIM, and that is something that is ongoing and is a a live piece of work stream within our company. And that's really all I can say on that at this moment in time. There are other options in there as well. So Steven h, fever tree has cited glass costs as being a major inflationary impact.

49:00 Can you comment on inflation impacts from glass and other significant inflation impact areas? Yeah. I think the two the the the biggest inflationary costs that we've experienced over the last twelve months is is clearly glass. That said, we have been able to offset the, cost of those glass increases by the customer price increases that we have been able to put into the market. And we've also, in terms of our total cost of goods, seen the benefit of a of a stronger harvest, which is therefore diluted also the impact of those cost of glass in our total in our total cost makeup. Therefore, as we go into '23 with the the price increases that we put into into the market in February, We are confident that we have got all cost of goods increases offset.

49:55 And most importantly, we will continue to increase and grow our average selling price through the premiumization and the mix of of brand. So it's something we're looking at very carefully, but we feel very much in control of the management of that. Yeah. Next one on growth to the on trade from MF. It's first, congratulations. I'll skip over those. Whilst Chamblendown has some distribution within the full on trade market, there appears to be considerable growth opportunity here. What are your further plans to grow market share here, and have we set some targets for them on the trade? Yeah. Look. It's a it's a really astute observation. And, when we're looking at that trade channel, we go back to that chart where on trade is only 11% of our business, and, we've grown from 400 to, you know, the best part of 1,500 outlets.

50:48 In The UK, there are 94,000 licensed premises, and of those, there are 10,000 that are what I would call, you know, luxury stroke super premium, on trade outlets, whether they be hotels, restaurants, trend leading bars, premium bars. So we have a long term objective to be in all 10,000. In the immediate short term for '23, we're looking to increase to 2,200. And in the context of a five year plan, we are looking at 5,000 outlets. But it's not just the quantum, and as we emphasized through the presentation, what's really important in the entree is driving, first of all, advocacy of our brand through the sommelier, so working very hard with them, making sure that we are on all of the wine menu lists, and then most importantly, where we can be in available by the glass, which is the target of 800 outlets that we mentioned for '23.

51:45 When we are by the glass, we see rate of sale increases that are dramatic versus when you're just selling by the bottle. And with that goes an investment into on trade outlets, goes into all of the different closure systems that we need to work with on outlets to ensure that the pour of that English sparkling wine and CHAPEL DOWN is is a fantastic experience. But, yes, big growth opportunity in the entree. I would expect it to be over the long term circa 20% of our total trade mix, and that's part of the strategic plan that we we have going forwards. Thanks for the question. Cool. Thanks. And one more joint question. I'll give you a break and answer myself. So it's question number one from NS. Why isn't there a distinct one word name for English sparkling wine like champagne?

52:34 And there was another question there around the PDO and the future of the PDO. If you maybe explain the PDO and then your your view on that. Okay. Firstly, in terms of English sparkling wine, there have been many attempts by far more intelligent people than I in the last ten years to come up with something that would really capture the spirit of English sparkling wine in the same way that champagne and Prosecco does. Our view, and really interestingly, the consumer view though, is increasingly be proud about the fact that you're English sparkling wine, and let's not worry about the fact that we we call out English sparkling wine. Yes. It's a little bit of a mouthful, but that is what we are. And so on our new brand redesign, you'll have purposely seen that we are very much proudly calling out CHAPEL DOWN English sparkling wine to define what we are from a consumer point of view, and that's what ultimately consumers have said to us that they want.

53:29 With respect to PDOs, so, you know, the protected designation origin for those that are not aware, this really is something that really defines and protects a specific subregion in the world like champagne in terms of where your wines come from. We do have a PDO in The UK, which covers traditional sparkling wine. At this stage, I do don't believe the criteria for that are sufficiently high enough. And so as an industry at the moment and sitting as a director of wine GB, we are consulting with the whole of English wine membership to look ultimately to create a set of criteria that cover grape varietal, aging on lees, where they're grown, how the grapes are picked, which would put traditional sparkling wine PDO at the same level and above as champagne.

54:24 So that as we look to move forward and invest in land, that we are absolutely protecting the quality of our traditional sparkling wine. There has been, as you'll have read in the press, a a regional PDO developed in Sussex. Quite frankly, our belief is that is a distraction. It's done on a county boundary. The most important thing for English wine is to make sure that we have a PDO on a national basis that ensures that we protect the quality of our traditional sparkling wine as we move outside of The UK and internationally. And we would expect as a industry association to be taking something to DEFRA in the course of May time so that we can start to put that into play and then make sure we enforce the long term basis for growth of English, Spark, and Wide as we move forward.

55:13 Cool. Thanks. I'll give you a break for a couple of seconds. So, GB asks, on the d two c side, the decrease in ecommerce looks to be approximately 700,000. The increase in off trace seems to be almost exactly the same, thus d to c seems to be flat overall. Is that correct? Actually, no. The on on the d to c, what we include there is we include the ecommerce, of course, as you say. We also include the retail sales through the Tented and Brand Home as well. We include the tour income we get through Tented and Tours and, you know, the the variety of the tours we do there. Also, though, the vast majority of what you see on the accounts as other sales and other income is our income from the Swan restaurant and from other activities such as the fine wine and fine lease type activities.

56:01 So in actual fact, it's those two things which balance out. So the downside on the ecommerce is we've normalized the buying patterns. And the the the flip side of that being the upside on the retail side, the tours and the Swan restaurants and things like that, That's what cancels itself out on the d to c side. Two other quick small ones for, for me. So SH, around revaluing lands and other fixed assets. We are not planning on doing that in 2023. To do that, you have to within the accounts, you have to not only get independent valuations, then you need get them audited afterwards as well. So we do not have plans to do that in 2023. And then for and around external IT, professional parts, and ERP on CRM systems. Yes. Indeed. We are getting that external advice, and we look to sign that contract in the next one to two days and start the implementation of that next next month on the ERP side there.

57:01 Back to you, I'm afraid, though, Andrew. From SH, is labor supply an issue, particularly at harvest? And how do you manage this the agricultural labor shortages we see across Kent? In answer to the question, it's a it's a tough area for UK agriculture, but from a CHAPEL DOWN point of view, we are in a good position. We work with four different recruitment agencies across Kent. They cover both European workforce and, include the the government seasonal worker schemes. We also have our own, English workers, and increasingly, actually, we have foreign workers from the likes of Kazakhstan as well. So we're in good position on that. We would like to see the government allow more seasonal worker permits in The UK.

57:53 They currently now are increasing that number, but it's still only to around 40,000 compared to the 70,000 that the industry requires. But what also is important to understand is that the picking of our grapes, which usually obviously falls in the first two weeks of September, is very much at the end of the fruit picking, the apple picking, season. And therefore, the availability of labor for us is a challenge, but very much a manageable one. Okay. So we have, two related questions here. I'm relating them together. Hopefully, you'll find them related as well. From SS, I don't think I saw a Barker's back sorry, Barkus. Barkus sparkling in the new range and from CD.

58:39 What is the strategy to grab some of the Prosecco market? Very alert observation. We are, first of all, keeping sparkling Bacchus product. It's an important part of our portfolio in terms of taking our still Bacchus wine, carbonating it into sparkling Bacchus, and putting it into consumers at a price point, which is somewhere in the region of £18. And to the second part of the question, enables us to start taking people out of Prosecco and Carva into, our brand as a as a step. We are, though, going to be changing the name of it. It is gonna be called a a touch of sparkle from CHAPEL DOWN because we do want to ensure that as we go forward with the design of CHAPEL DOWN that our brand is associated primarily with super premium and luxury sparkling wines made in the traditional method. So you will see a slight design change on it, not dramatic, and the marketers amongst you, and I know we've got many brand managers in our shareholder following will notice. And I think you will also agree with the brand architecture treatment that we're gonna be using for that product. And, we will very shortly actually be sending you a note out on that.

59:55 Okay. Great. And somewhat related to the competitor side of it, from CS, what will Tattinger call their sparkling wine? Yeah. For those that know, Tattinger have a 120 acres in in Kent. Their first release will be in 2024, so you've got a a good another year or so to to wait for that. My understanding is they will call it Domaine Evermond by Tattinger, and everyone will be focused and looking at the quality of that wine. What's really important for us as as a group is the, you know, the Tattinger investment in The UK alongside Pommery and then alongside the '22 acquisition of Bony by Henkel Fretzinen really demonstrates the international interest in The UK wine market, and that can only be a good thing for us both mid to long term.

1:00:47 Great. PS on the tax line, given the investment we made in Tented in the winery, we got a 130% super deduction on a lot of that investment there. And therefore, we have a zero corporation tax charge. But what we do have is a deferred tax asset movement, and that's the noncash movement in the balance sheet on deferred tax. And that's the line you see in the the tax line there. That was PS. I think I had one down here which we wanted to go to. Yeah. There there are two on export. Firstly, WK. The foreign office has committed to provide English wines at their overseas embassies and residents. Have you looked into supplying them?

1:01:36 Yeah. Look. Really good point, and you'll be delighted to know we're in at least 18, British embassies. And, only this morning, I've received latest pictures from Japan and and India. As part of our seeding strategy, we use a company there to, export into embassies. Clearly, the coronation coming up, there's gonna be an awful lot of, embassy, parties going on, and they want to be celebrating with England's finest. So, yes, we are very much across that. It's part of a seed in, ongoing into international markets. Great. And NV is one for me in terms of the breakdown of tangible assets. That's broken down in the full set of accounts, which will be published around the time of the AGM, which we are planning for around the middle of June. We'll confirm that date afterwards.

1:02:25 But in that full set of accounts, there is a note on on that tangible fixed assets. And apologies. I said there was a second export one, which was 80, which is a more general one, which is what's the strategy and confidence in growing export sales? There's a huge, growing demand internationally for, English sparkling wine. The real trick here is to ensure that with what is ultimately a scarce supply, that we get the right balance between the wine that we want to sell to continue a brand leading position in The UK homeland and then starting to seed the brand for growth into the medium long term. So I think I referenced within the five year plan, our target is to try to keep international around 5% of our of our total volume, and that would increase to around 10% by 2030.

1:03:16 There is no shortage of demand. The beauty in English sparkling wine is we have a strong demand in The UK market, and we have a growing demand internationally. So it is very much about getting that right balance. Obviously, every market you launch into internationally is like a new brand launch. It requires people, and it requires investment. So the skill from previous experience for this is to make sure you do that at the right place and do it with the right amount of money and resource. Cool. Thank you. And then we've a couple of questions on this one unsurprisingly, but they're a bit of a late ones coming in. From MD as an example, what's the situation on the Bridge Winery, the the the Highland Court Winery? Yeah. Look. In terms of the winery planning application, it is in with Canterbury Council. We have a a meeting literally in in a week and a bit time, and then we will understand the field full position. We've had very strong consultation with residents, with council, and also with a number of of other parties that are involved in the site. And we think it's very strong position, but a week's a long time in politics as we all know. We're also caught up in the midst of potential forthcoming local elections.

1:04:36 So we don't wanna overpromise and overcommunicate on that today, but we will come back around just as soon as we have a decision that we feel comfortable to share. And in that context, we will also talk then about time frame and how we would propose to do that. Okay. I'll I'll take one for you because I think I I it's around accommodation from RS. Accommodation is an issue with visitors, especially making afternoon and evening of it. Any plans you either have your own or encourage us to put more accommodation? So when we talked around the Tenston brand home earlier on, you saw some of the the the plans we already have in place for 2020 around, like casual dining, longer opening hours for the Swan, more days opening, etcetera, plus general site improvements.

1:05:22 You'll also see alongside that, what we say is we're gonna lot start looking into longer term plans for Tenston and Branham as well. And we do not have an answer to what that may look like, but that that potentially is one of those options out there. So there's no promises around that, but it it it is something we have heard in the past and is possible. But remember, we are a wine business, and that will be the primary thing of what we do going forward. So, Rob, in the interest of time, I think we'll take two more questions, and then we will close for everyone if that's okay. Okay. And and those that we don't ask now, we will we will obviously go afterwards to those. So I'll I'll do one, and then I'll leave one for you. Can you provide any guidance on FY '23 revenues?

1:06:09 That was a pre submitted question from JD. Yeah. As we said during the presentation, we were looking at double digit revenue growth again this year and a sustained gross margin. That means at least the same as this year in terms of gross margin. What we'd say around q one is we are on plan on q one, which is significantly above last year. It's above last year. So I should say rather significantly, it is above last year. Then a final one, let's say, from JH, who do think is your main competitor out there? I think our main competitor out there is Moet Shandong. This is for us about taking more and more volume and consumers away from champagne.

1:06:58 That is the international opportunity, a 180,000,000 bottles of champagne sold outside of France, 30,000,000 sold in The UK. The growth opportunity for us is very much around share still from champagne as opposed to, you know, talking about our competitive brands in The UK. You know, The UK wine market is in its infancy, and we are part of growing that with a number of, you know, recognized players. And it's all about champagne and how we take some of that share from them. I appreciate that there will be other questions we haven't got to. You'll you'll understand it's been a a long day since about 07:00 this morning in terms of all of our press interviews, and, unfortunately, we now have the international ones to go.

1:07:46 So it's been a a great day for us, I think, in terms of demonstrating the progress that we've made on CHAPEL DOWN in the latest last eighteen months. We really truly appreciate all of your support and all of the interest that you show for our brand and all of the comments we receive. And, Rob and I are here to continually, receive those and and to build on what you say. This is your company. We are leading it. We will lead it and double it to 28,000,000 by 2026. Of that, I've no doubt. And with our board, we are working into future long term options for growth of which there are many. So, watch this space, and, we look forward to catching up again soon. Thank you. Thanks. Andrew, Rob, thank you very much indeed for being so generous of your time and addressing all of those questions that came in, from investors this afternoon. Of And, course, we will give you back all of the questions, post the call today, for your review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all of those responses out on the investor meet company platform.

1:08:45 Andrew, I was just going to ask you for a few closing comments, but I think you just well delivered those. So if I may, what I'll do is I'll look to redirect those on the call for feedback, which I know is particularly important to yourself and the company. So 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. This may take a few moments to complete, but 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. That now concludes today's session. So good afternoon to you all.