Chapel Down Group (LSE:CDGP) — Full year results investor presentation

0:01 Good afternoon, ladies and gentlemen, welcome to the CHAPEL DOWN GROUP PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. 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 at any time and press send. Given the significant attendance on today's call, the company will not be able to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish those responses on the Investor Meet company platform. Before we begin, we'd like to submit the following poll. If you give that your kind attention, I'm sure the company would be most grateful. And we'd now like to play a very short introductory video from the company. This is from Chapel Down in Kent. Nice.

1:27 This is one of my favorite English sparkling roses. Yeah. That's equally as good as a as a bottle of moly or a bottle of volleyball. 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 yourselves.

2:28 I'd now like to hand over to the management team from CHAPEL DOWN. Good afternoon, Andrew and Rob. Good afternoon, and, welcome to the presentation of our CHAPEL DOWN twenty twenty three annual results. Time flies, and, it's a pleasure to meet again via the IMC platform. For those attending for the first time and, we haven't been introduced, my name is Andrew Carter. I'm the CEO of CHAPEL DOWN, and I'm joined by Rob Smith, our CFO. And we're looking forward to sharing with you an outstanding set of 23 annual results, updating you on our business performance and outlook, and then looking to take take you through some plans for '24, and really importantly, finishing with a q and a session. And, we'll look to get to as many questions as we can in the time that is left at the end of this presentation.

3:25 CHAPEL DOWN is, England's leading and largest winemaker, and our mission is to change the way the world thinks about English wine forever. Our vision is to be the leading and most celebrated English winemaker, and our journey is in full flight. 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. Great businesses are built by great people, and I wanted to start by thanking my executive leadership team who are driving the growth of your business. You all know Rob Smith, our CFO, who continues to step change the finance leadership of the business. And during the course of the year, many of you will have met Liam Newton, our CMO, Tom Hepworth Bond, our sales director, and, of course, our head winemaker and ops director, Josh Donahay Spark.

4:18 But I'd also like to take the opportunity today to introduce Denise Claxton, our new people manager, previously worked for Liberty Wines, and she manages the welfare and development of our 82 full time employees and seasonal workforce of a 180 workers. 2023 has been a strong year for CHAPEL DOWN as we further reinforced our position as the number one English wine brand. We have seen record sparkling wine sales with 870,000 bottles of traditional Method sparkling wine sold, and our wines continue to be awarded and recognized internationally with over 28 awards in 2023. We had a record breaking harvest of 3,811 tonnes from our 750 productive acres of vineyards.

5:06 And by the end of spring this year, we will have a 23 acres, that's 414 hectares of planted vineyards. '23 was an outstanding summer of events and sponsorships, and this contributed to our highest level levels of prompted brand awareness of 39%. And now we have one in seven households drinking CHAPEL DOWN wines. And most importantly, we're the only major profitable UK wine company with an operating profit that has grown 81% to 2,450,000. This is in part driven by changes to our accounting treatments of the value of our grapes due to the AIM listing, and Rob will detail this out later in the presentation. The macro environment within which CHAPEL DOWN continues to operate is an ever changing one, but our CHAPEL DOWN brand is at the heart of the key consumer trends.

6:03 Our consumers are focused on the provenance and homegrown nature of the brands and wines. Consumer confidence is starting to improve, and consumers are looking to celebrate and enjoy those big little moments with family and friends. Consumers are drinking less but better. The brands with authentic and sustainable values are the winners. And furthermore, consumers continue to want to spend money on experiences, and the continued growth of social media amplifies everything that consumers experience with English wines. We are very well positioned as a brand to capitalize on these macro trends. Before talking about CHAPEL DOWN highlights, let's take a look at this chart that gives you a brief update on the English wine market. The demand opportunity for English sparkling wine remains very strong.

6:52 Sales of English sparkling wine are circa 7,000,000 bottles according to IWSR, but they remain a small share of the total sales of English sparkling wines shown on the left side of this chart, 216,000,000 bottles of sparkling wines sold in The UK alone. Now the most relevant market opportunity is that 26,000,000 bottles of champagne in the orange segment, And that's based and based on our '23 sales, if you look on the right hand side, CHAPEL DOWN is now ranked as the eighth biggest brand along some illustrious champagne brands. The opportunity to convert more champagne buyers to CHAPEL DOWN is a significant UK and international growth opportunity.

7:38 Here we see our future growth projection for the supply side of planted vineyards and wine production, which is a combination of the current data from YN GB and CHAPEL DOWN forecasts. After this, we'll talk a little about demand projections too. We forecast the planted land will continue to grow from the 4,400 hectares, which is about 10,000 acres that YN GV data shows today. The current planted land is made up of 943 individual vineyards in The UK, and the current average vineyard size is thus rather small. In contrast to this current position, we think that much of the future net growth in planted acres will come from larger and more productive vineyards, which is one of the key reasons that we forecast production to grow slightly faster than the planted vineyard acreage overall.

8:28 As a note to understanding the planning and capital cycle, vineyards become fully productive about three years after planting. On the production side, you'll see the impact of the exceptional 2023 harvest here. It is estimated by Wine GB that over 20,000,000 bottles of English wines were produced in 2023, of which 14,000,000 were traditional method sparkling. Truly exceptional. We forecast that in 2024, we will revert to a more normalized harvest, fitting the long term growth far profile. Although this, as ever, is partially dependent on the growing conditions we encounter in 2024. The 8% production CAGR you see here is more like 14% if we went back to 2022 and thus neutralized for that exceptional 2023 figure.

9:17 By 2030, we forecast that total production will be above 35,000,000 bottles, of which nearly 25,000,000 will be traditional method. As mentioned, let's now talk about some demand forecasts. Planted and productive acreage from the previous slide are shown as the dotted green lines here using the left hand scale. Total wine production is a darker brown line, and traditional method sparkling production, the lighter brown wine line. Then we see sparkling wines available for sale in blue. There is a lag here from production as the wine ages in the bottle, and hence, you see the blip upwards in 2026, which reflects that 2023 exceptional harvest. Finally, we see a forecast demand line as the light brown line.

10:04 You will see that the forecast stock levels do not grow much faster than demand and are about two years stock cover to account for the aging and the mitigation of any more challenging future harvests. A complete dataset doesn't exist, but we estimate English sparkling demand overall is currently growing at approximately 20% domestically and a little faster in the export markets. We forecast that this will moderate slightly to about a 12 and a half percent growth over this same period as sparkling wine continues to take market share from champagne domestically and export markets continue to grow. Our CHAPEL DOWN brand is the number one brand, as you know, in the English sparkling wine category. During the course of 2023, the introduction of our new CHAPEL DOWN brand design was completed with a focus on the development of our chapel icon and a premiumization of our wines across our premium, super premium, and luxury wine segments.

11:03 Price increases enable us to continue to grow gross margins on our sparkling wines, but importantly, we maintain a strong competitive position against the fast rising prices of champagne. The International Wine Challenge and Decatur Gold Medal Awards achieved by our sparkling wines reflect the excellent quality of our wines produced by Josh and the winemaking team.

11:29 Our brand is strongly positioned at the heart of our plans with brand awareness and household penetration at record levels. Our new advertising campaign, inspiring fresher ways to celebrate, is driving strong brand metrics. And alongside our sponsorship agreements of England and Wales Cricket Board, the annual boat race, and our groundbreaking new agreements with Ascot Racecourse are all building and growing brand penetration. During the twenty three summer, we were involved in 10 pub in the park festivals. These not only drive brand trial with consumers, but they also drove revenues of over £200,000. Our still wines portfolio was also relaunched in 2023 and continues to play an important role in the CHAPEL DOWN portfolio.

12:17 At the luxury end of our still wines, the quality of Kitts Coty Chardonnay and Bacchus continued to win multiple awards, and our premium still wines are much lauded by critics and our consumers. Still wine remains a competitive marketplace in which to operate, not helped by the considerable duty increases by government in 2023. So as we move forward, our focus remains on making these wines as accessible as possible, and the scale of the '23 harvest will make an important ongoing £15 retail price point attainable throughout 2024. Rounding out the portfolio, I would also like to take the opportunity today to update you on our touch of sparkling wine. Last year, we sold over 180,000 bottles of a Touch of Sparkle, our great tasting carbonated white wine, which is an excellent alternative to Prosecco and offers a price point to allow specific groups of consumers to access English sparkling wine.

13:19 It's strategically important that we continue to offer this fun fizz proposition to consumers, but equally important that this product is distinguished from our traditional method, English sparkling premium and luxury wines. Therefore, in the coming year, this product will be differentiated via a vibrant, exciting new design. You will also see that we're gonna look to launch a new rose variant of touch of sparkle. It's a great Thursday evening barbecue or book club wine, and at an ongoing £18 price point with discounted price promotions at key periods through the year, it has an important role to play in the portfolio.

13:58 Our wines continue to be the most widely distributed for any English wine brand. This gives you a fuller picture of the trading channels at the end of twenty twenty three. The off trade accounts for 50% of our business, and we have strong and much valued partnerships with Waitrose, Tesco's, Sainsbury's, Morrisons, Majestic, Marks, and Spencer's, and continue to extend the depth of distribution and the amount of off shelf visibility. Our on trade business currently now represents 12% of our total business, and our distribution base has increased in the year to over 1,900 outlets, but with significant opportunity for further distribution growth with 5,000 premium on trade outlets to the midterm target.

14:45 We've previously referenced our rapidly growing direct to consumer business. And on the right hand side, you see the two channels representing 33% of our total business. It was another strong year for ecommerce with a significant growing database of a over a 100,000 people. We took 32,000 orders, and we have 20,000 regular buying customers, an average order value of £116, and an outstanding returning customer rate of 62%. This obviously includes all our shareholders, and we thank you for your custom. At our brand home, Tenston Kent, we had 61,000 visitors last year, and our tourism experiences were acknowledged with five star TripAdvisor ratings as consumers enjoyed Michelin rating food in the Swan restaurant and buy products in the shop.

15:33 International, in the middle of this chart, is a growing opportunity. Today, we have seeded the CHAPEL DOWN brand in 14 international markets, and in 23, the sales value has grown from three to 5% of our total business. We believe there is opportunity to grow international to 10% of our business in the midterm. We now have our brand listed in London Heathrow, Gatwick, Luton City airports, and the rate of sale is a major success as both the departing UK and international travelers start to discover and gift English sparkling wines. It is also worth noting that this distribution will be rolled out to a total of 14 duty free UK outlets in '24, and the brand is also available in Dubai duty free.

16:20 This strong 23 brand performance is reflected in the resulting brand metrics. And on the right hand side of this chart, you can see our brand leading market share with 35% in the off trade. And on this chart, excuse me, you can see our record levels of brand awareness at 39%. Brand affinity, and household penetration of 14%. With continued brand investment and distribution scale, these metrics will continue to develop, and the pathway is long and full of growth opportunities. When you consider the Moet Chandon awareness level of 90% and household penetration of 24%, you get a sense of the scale of opportunity for growth with our fast growing brand.

17:08 So now let's focus on the 2023 operational highlights. Starting with our vineyards. In 2023, we had 750 fully productive acres of vineyards. With the 118 acres planted at Boxley Abbey last spring, we now have 906 acres in total planted, which for a sense of scale is roughly eight and a half percent of all UK vineyards. As you have heard, the 2023 harvest was truly exceptional with a record of 3,811 tons of grapes, producing 3,400,000 bottles of wine, of which about 70% will be traditional method sparkling wines, which will predominantly be sold from the 2026 and will thus underpin our medium term targets.

17:54 Our winery operates at a full capacity to manage that 2023 harvest, but given the scale of it, we also did use some third party some third parties processing. We'll update you on the winery later in the presentation, the new winery. Here you see the location of our vineyards and the focus on the chalk soils, which is the perfect terroir for making traditional method sparkling wines. Our total vineyards in 2024 will reach 1,023 acres or 414 hectares as we plant the next outstanding English vineyard, Buckwell Farm, in spring of twenty twenty four. Looking at the breakdown of vineyard acreage, moving down the table, you can see the breakdown of our freehold, leasehold, and grower contracts.

18:42 By 2026, as mentioned, we will have 906 acres or 367 hectares of fully productive vineyard, and this will increase to a 23 by 2027. Whilst we look at this table, I would also like to reiterate that when looking for new vineyard sites, whilst we want to broadly maintain the current mix of freehold, leasehold, and grower contracts, by far the most important criteria for future vineyard selection is quality and potential and not ownership structure. Simply put, we want the greatest vineyards in The UK for CHAPEL DOWN. Sustainability has long been at the heart of our plans. As you know, we are founding members of Sustainable Wine GB, and we're committed to delivering our long term growth ambitions and to spark sustainability leadership in the English wine sector.

19:33 Our immediate goal is to develop best in class environmental frameworks and sustainability measures to ensure that we can develop plans that benefit both the business and the environment in which we operate. What does this mean in practice? Well, we always look to practice sustainable viticulture. We are farmers. For example, reintroducing indigenous grasses in our vineyards through in between our vine rows and using mechanical weeding of the vines. All of our vineyards have now been fully mapped and biodiversity plans in place to encourage wildlife habitat. All our packaging is recyclable. Our glass is currently made from 75% recycled glass and our packaging content of 80%. This is just the start, and we will go further.

20:20 Our waste grape skins are sent for anaerobic digestion to convert them into green electricity. And at Tenston, we are using 100% renewable electricity. Really excitingly, in '23, we completed our carbon footprint assessment across the total business and also also have a full understanding of the major sequestration offset that we are seeing from our vineyards. We have already identified a number of initiatives to further reduce carbon emissions and increase efficiency alongside vineyard planting and our ecosystem to ensure we maximize sequestration. Our sustainability plans and timelines to establish a net zero position are being further developed, and we will communicate these through the second half of twenty twenty four.

21:10 Our people and culture are at the heart of our business. We now employ 82 passionate wine ambassadors across our vineyards, operations, commercial, and our retail and tourism business.

21:23 The four behaviors on the right hand side of this chart are at the at the heart of our high performance culture, and I'd like to publicly thank all of my team for their great work in '23. It was particularly rewarding to see this acknowledged by our place in the Sunday Times best places to work in the 2023 list.

21:48 Let me now take you through the strong financial performance for the group. Firstly, as many of you will have noted, we floated on AIM in December 2023, a move which reflected our increased maturity, but also our ambitious growth plans. To confirm, our shares remain entirely inheritance tax free. The move to AIM means we need to adopt IFRS as our accounting standard, which is in line with our international peers. Except where stated in these transition years, the number you will see there for a prepared on an IFRS basis, including restated prior year comparatives. Before we go through the 2023 financial performance, though, I'd like to explain the three main IFRS adjustments and their high level impacts. Firstly, we will now net retro, which is the planned promotional price support to customers in trade channels from revenue rather than included as a marketing costs.

22:41 Our main revenue number, therefore, becomes revenue net of both duty and retro. Secondly, and the biggest impact is the fair value adjustment on biological produce. In other words, grapes. When we harvest, we will now put the grape juice into wine stocks at market value and not historic cost. If market value per ton is greater than harvest cost per ton, we will then book a viticulture profit in the year of harvest. And correspondingly, we will book a viticulture loss if market value per ton is less than harvest cost per ton. As such, stocks and hence future cost of goods sold will now have the great to sell them into stocks at market value, whereas previously it's historic cost. If we assume that in most years, a small viticultural profit is booked, this will slightly increase the value of stocks held, which in turn slightly increases COGS and reduces gross margin when that mine is sold.

23:35 So in effect, it brings forward some of the financial effects of a profitable harvest at the time of harvest rather than the time of sale. Finally, we put leases and their associated liability on the balance sheet. For us, this is mainly the long term vineyard leases we have. So on to the numbers. And starting with sales revenue, net of duty and retro, this showed great momentum in the year, up 15% to 17,200,000. Gross margin increased once more to 52%, primarily driven by a strong ASP, which is the average selling price, which was up 13%, and it was spread broadly across both sparkling, Atos, and Still's, Atos being a touch of sparkle. The fair value movement is highly significant due to the size of the 2023 harvest as well as the outstanding location of scale of our vineyards plus our outstanding viticulture and winemaking teams.

24:31 We will cover this in the outlook session, but to be clear at this point, we do not expect a harvest or a viticulture profit of this scale in 2024. On the cost side, marketing was up 13%, broadly in line with overall revenue growth as we continue to invest in our brands, and the overheads growth largely reflects further building out of our front office sales teams. You will also see that there were significant exceptional costs this year, 779,000 on the AIM listing and 456,000 on building our new scalable cloud based technology and data platform, which will benefit us greatly in 2024 and beyond. The technology spend is accounted for as a p and l exceptional item rather than a capitalized fixed asset, which is more traditional in line with current market practice and mandatory accounting standards for cloud based IT systems.

25:23 Operating profit and EBITDA both show exceptional growth driven by strong trading, but also the fair value adjustments to biological produce, partially offset by the exceptional items. Let us then break down that performance by looking at how our product categories performed. Please note that the revenue numbers on the next two slides are gross of retro in this transition year to allow us to present a like for like comparative number. Traditional method sparkling wine remains our core focus, as you can see, continues to grow strongly driven by both average selling prices and volume broadly equally. In particular, the rose category goes from strength to strength, up 47% in 2023 with more distribution and growth to come in 2024. There is a clear, strong consumer demand for rose wines in The UK and beyond.

26:13 A touch of sparkle grew 7%, was the focus of our Black Friday offer where it performed exceptionally well. It was a more difficult year for steel wines with strong competition and an unwelcome increase in duty during the year, and hence revenue was down 7%. Tours performed well, and we were proud to welcome 61,000 people to attend to the year. On a final note, and as previously flagged, we have now exited our spirits category. Continuing the breakdown now, let's look at performance by channel. Firstly, the trade channels. The off trade remains our largest channel and grew a creditable 9%. The off trade is a channel where we have the best third party sales data available. And as you saw earlier, we had a 35% market share in 2023 according to Nielsen, making us the largest English sparkling wine brand.

27:04 The on trade was up 26% as distribution grew during the year, which will also benefit us in 2024, and in particular, the glass distribution, which grew even more strongly. This is important for us as by the glass both increases rate of sale, but also encourages sampling among new consumers. By the glass listings will remain a strong focus for us. And finally, on the trade channels, as Andrew mentioned, exports 67% growth was primarily driven by the highly successful phased launch into duty free during 2023. It's a fantastic market, but also a great driver of brand awareness given the significant footfall on those sites. Secondly, then the direct to consumer channels, which overall grew 11% and were 32% of the business.

27:52 As we grow, we aim to continue to keep direct to consumer at approximately 30% of the business as this is so important to

27:59 us for brand and margin. Let me call out ecommerce in particular because that had a great year, up 18% with a particularly pleasing number of new customers as you can see. Then on to the balance sheet. Stocks have grown 44% to 22,600,000. This is partly due to increased volumes of wine stock as a result of the exceptional harvest, but also partly the noncash movement from the fair value adjustments that we have seen. You should note that the 2023 vintage will begin to be sold as a touch of sparkling steels in 2024, but this 2023 traditional method sparkling vintage is sold predominantly from 2026. We have moved to a small net debt balance due to the increase in working capital stock as well as growth CapEx.

28:47 A quick note on the nonstop working capital noted here, essentially debt is less creditors. This actually decreased during the year helping cash flow, and this was mainly driven by an increase in year end creditors since the AIM and technology spend was heavily weighted to q four. You will see that we have significant available liquidity via our unused revolving credit facility. And finally, I'd like to reiterate that the board believes that the market value of our tangible assets is considerably higher than their reported value and to note that although we consider the brand to be hugely valuable and hard to replicate asset, it is not assigned a value on the balance sheet. I'm now gonna hand back to Andrew for the outlook section. So as we move into the final part of the presentation, let me reconfirm the plans and outlook.

29:35 Our 2024 plans continue to build into our long term business plan to be the leading and most celebrated English winemaker. We have further refined our four strategic growth pillars. The first on the left there, to grow and make the best award winning wines. We have clearly the best vineyards and wines in England. And as we've referenced today, the planting of Buckhorn Farm in the North Downs Of Kent will take our overall planted acreage to a 23 acres. That's 414 hectares. With respect to the development of our new winery, whilst there has been frustrating delays due to planning approvals, as previously announced, we plan to have a new purpose built winery operational in time for the 2026 harvest. This is subject to final planning approval, which we hope to be granted at a judicial review next month.

30:25 Our second pillar around the continued development of our UK lead in sparkling wine brand, We're continuing to further invest in communications, sponsorships, and events to build our range of premium and luxury sparkling wine alongside continued upgrades to our Tenston brand home and development of further new product development. The third pillar being the continued development of our UK distribution base, flourishing direct to consumer business, and the continued focused international expansion of CHAPEL DOWN wines. And finally, given the importance of growing our business in an environmentally sustainable way, we have separated out this key part of our future strategic plan, and we'll update you on our carbon net zero ambition and sustainability plans in the second half of twenty four.

31:12 All of this will naturally be underpinned by the continued development of our high performance team and culture and the continued professionalization of our business systems and process. To give you a flavor of twenty four summer, new activities will include a number of brand films, which will further reinforce the quality credentials and provenance of our award winning wines. We will be looking at an exclusive Royal Ascot Brute limited edition bottle to build on our partnership with Ascot and will be available primarily to our shareholders. We will be taking our CHAPEL DOWN brand experience to town with the opportunity for London based corporates to book CHAPEL DOWN tastings. These will be bookable via our website, so we look forward to you supporting us on this part of the business.

31:59 There will also be new Travelers exclusive bottles for the growing duty free segment, and we have a continued personalization offer running through our e e ecom. And what better way to tell your partner that you love them?

32:14 With respect to our outlook for 2024, we're we forecast continued double digit revenue growth weighted towards the second half of the year where we return to normalized profitability levels. Rob has outlined the impact of the fair value adjustment on this year's operating profit. And in '24, we expect to see a return to normalized levels of profitability with an increased proportion of still wine and a touch of sparkling our sales mix as a consequence of the exceptional '23 harvest, a more typical harvest yield in '24 in terms of fair value, and continued brand investment and support. As just referenced, there will be positive development with respect to new plantings and progression of the new winery development.

33:01 Post final winery planning approvals, the growth capital funding mix will be finalized, but the company is in advanced discussions to extend and increase its existing RCF to be drawn when required as part of the overall mix of funding for our investment plans. So in closing, 2023 has been an excellent year for the CHAPEL DOWN business. And as a name listed company, we are confident about the future outlook for the growth of the English wine sector. We have the most recognized brand. We have the most widely distributed products and the vineyard acreage covering over a thousand acres, which ensures we are well placed to deliver our midterm growth ambitions to 2026, but as importantly, our longer term ten year aspirations.

33:49 We would like to thank all of our shareholders for your continued passionate support of our CHAPEL DOWN business. And on that note, we're going to close and pause for your questions, which out of the corner of my eye, I see a flooding in. Thank you. That's great. Andrew, Rob, thank you once again for updating investors. If I may, I'll just bring back up your camera as well. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But as Andrew will take a few moments to review your questions, I'd like to remind you that recording of

34:18 this presentation along with a copy of the slides and the published Q and A will be available via your Investor Meet company dashboard. Rob, Andrew, a number of questions as you quite rightly said given the attendance on today's call, no surprise. If I may just hand back to you just to read out the questions where it's appropriate to do so, and I'll pick up from you at the end. Great. Thank you very much. And and as we've been going through, I have been trying my best to monitor these as they come, and I noticed that some have been answered already. What we're gonna do is what we've done previously as well, though, is that some questions will group together so we can cover off more of them because they're on very similar topic and themes. And I'll say the initials of the person answering on the whole just so you know we're talking about your questions as we get there. If you see me glancing down to the left, not I'm getting distracted. That's where all the questions are, which is why I need to to read them as we go forward.

35:08 And as we said, we will write written answers to those that we don't get to today. So let's start with where a lot of the the business starts, Andrew, around land and the investments. I've got a couple of questions which I'm gonna group together for you here today. The first one is a pre submitted one, which is about the expansion of the strategies to complete with powerful competitors such as LBMH buying up the prime land in The UK. So that's one question on land. It's about, other people buying. The next one, another presubmitted with compatible land in Southeast England and limited supply competing for it against other producers. How do we plan to mitigate this? So similar, but more general. Next one question, a presubmitted.

35:53 What plans are there to keep increasing the acreage of vineyards? And then the final one on this section is thoughts on Tattinger, starting to acquire and develop acreage. So a lot of questions on land and investments, both domestic and international, if you'd like to start off there. Great. Thanks, Rob. Firstly, when we look at the market as as we spoke earlier, there's now 10,000 acres, that's about 4,000 hectares of land planted to Vine in The UK. The major part of that is in in Kent, Sussex, and and Hampshire. There's been a lot of work done in terms of the suitability of land in The UK that is available for for vineyards. And, actually, a lot of those studies have suggested that there could be anything up to a 100,000 acres of of agricultural land across Southeast Of England that would be suitable.

36:49 We don't expect it to grow to that level as as Rob outlined earlier. But the point being, the the availability of good land is there, and there is a lot of land currently planted to arable and fruit that will become available. So what is the implication of that? And I guess it's addressing the question and concern that land is very scarce and that the pricing of land will change dramatically. It's our view that that won't be the the case. With respect specifically to the the French, it's, it's a much exaggerated, Daily Mail like international invasion of the UK. Only 3% of the total, vineyards in The UK are currently under foreign ownership.

37:36 Clearly, we have Tattinger up the road in in Kent from us with a 170 acres. We we have seen Henkel by Bony, again, a small 60 acre company. And more recently, we have seen US companies enter into the market. But whilst there is international interest in The UK and there will be into the midterm without any doubt, there isn't a huge invasion going on, and therefore, there isn't a dramatic change in terms of the pricing

38:07 of of land. I think Rob pointed out earlier as well, the balance of owned land, leased land, and grower land. We continue to watch that. It continues to evolve. Strategically, we would like to have 20% of our land owned, but the most important driver for us is actually making sure we've got the right the right quality of of land. Cool. Thanks, Andrew. And you you actually answered a new question we had there from AMP around increasing competition for vineyards throughout the same time. And whilst you're on land, there's just one more I'd add to it, which is for myself, give Andrew's throat a quick break, which is, n v. What is the average life of leases for all the leasehold land?

38:52 It varies. The new leases we take out tend to be thirty years with potential five or ten year extensions built in. The average outstanding currently is is not far off about twenty years. So it's quite a long term set of leases we have on those lands. So next then, we're trying to do this logically in terms of how the wine business works. We're gonna talk about harvest and and what we get off those land. And some of that is is around this year and how we're doing this year. So I'm gonna start with the pre submitted

39:23 one. How is this year's wet weather affected this year's harvest?

39:27 Similar to that is, in the teeth of global warming, kind of like vineyard climate, how do we cope with wetter and stormier weather? And the final one I'll group into this one, it's been great to hear our initiatives, given the scenes changing and the weather is more erratic. What plans are in place to do with the world below average yield should that happen in the coming years? So a couple on current and then one on future years. Great. Yeah. Look. First of all, let us reassure everyone. It's been a pretty wet winter as, all of us know, and a lot of the farmers on the call will, definitely know. But our but our vineyards are in great shape. The vineyards are dormant through January, February, March, and so all of the wet weather has done on our vineyards is ensure that the the soil is getting a very good soaking ahead of key growth periods. So no concern, about the rain.

40:25 It's meant that our people in the in the vineyards doing all of the pruning, which is the main task that happens through that first quarter have been getting very wet, but the actual vineyards and the vines are in great shape. What we are currently seeing is across the across The UK, because it's been milder, we are seeing the buds appear slightly earlier. So as you know, when those those buds come out, usually, it's towards the end of April. They have actually been now starting to appear over the last two weeks. That does give us a small extra risk of frost. But, however, the long term forecast and the weather is not for us to get any cold spouts, but also our vineyards are in such great positions, and that's why we selected them that they all have a relatively low frost risk anyway across the north down. So we are as confident as you can be that, that our vines are in, great shape.

41:23 We will look forward to the budding fully happening first week of May. And then as we look forward, we've moved towards sort of Wimbledon week, second week of June where we start to see all the flowering. And then through that summer period, that's obviously when we look to hopefully get lots of sunshine to support the growth of the the vines and the the grapes. Great. Thanks. And to then round out the theme around vineyards is a final one just from NS. How do you deal with vineyard pests and diseases, Andrew? Yeah. Conscious as well. I will talk about pests, though. I didn't fully answer the bit about yields and protection. Just a just a reminder, what we're always looking to do is have over just over two years of stock. So in the case that we do have a poor harvest, that we've always got a protection against that in terms of stocks.

42:17 23 has been an exceptional harvest, and of that 3,800 tons, that's given us opportunity to lay down, you know, 3,400,000 bottles of wine, of which a major part are traditional sparkling. So we, you know, we have to manage that risk through our stock level, but we're we're comfortable with how that looks and and are happy about the risk management there. Specifically, with respect to pests and disease, You know, we have a an incredible team in our in our vineyards. Head of viticulture, Richard Lewis, senior vineyard managers, Ian Button and Tom Wilkinson. Them and their teams do a great job. They understand those vineyards clearly better than anyone. They've been doing it for between twenty and thirty years.

43:04 And therefore, we do constantly look for any potential pest concern or anything that happens through a change in the balance of the humidity and sunshine, and, that treatment happens on a daily basis. We minimize use of sprays, but, clearly, there are times when we look to use those to ensure that our vineyards have the best opportunity to maximize quality through the summer. So rest assured that is an ongoing daily task for our vineyard team. Okay. Great. Thanks. And and sorry. I forgot about the other question there. So we have now the next cluster is around what we might call new product development, and and they're gonna pull all of these out together, and you're gonna answer the future questions which haven't been asked yet on new product development at the same time, I am certain.

43:52 So question number one is a pre submitted question on, do you see the new entry to the English sparkling wine sector such as Severin being good for CHAPEL DOWN or dilute to marketplace? We also have a question from JS. Great figures of Pinot Noir. Any chance for CHAPEL DOWN GROUP PINOT Noir reappearing? Twenty six and twenty eight go together. So d a, will you bring back Bacca's sparkling wine? And 28, answer the question, is a touch of sparkle made from Bakkis grapes? So those two, I think, go together very well. And then final on 33 from AMP again. Have you had any thoughts about a premium organic or even biodynamic wine?

44:40 Great. Those sort of questions reflect the passion of the team out there in terms of our shareholders and understanding of our business. I mean, MPD at the moment is a small part of what we have done. You'll see that just in this presentation alone, we're we're reintroducing a a Chardonnay wine, and we're also reintroducing a new pink touch of sparkle sparkling for next year. Within that, we're also constantly looking at limited editions on the luxury end as we look to build brand, limited edition brands, limited edition products like royal ascot. But they are classically sort of product extensions. What we're doing in terms of NPD is assessing what we believe the biggest opportunities are.

45:27 It's clearly commercially sensitive. I'm I'm not gonna go too much into it today, but give you a sense of area. You know, no alcohol. Low alcohol is a is a massively growing part of The UK market. 30% of people don't drink. So understanding what offer we can bring to that through CHAPEL DOWN is is an important focus point. I think the point around Severin, you know, there are new grapes that we're constantly looking at. Clearly, that has got quite a long projection out in terms of time frame, but we are looking at different grapes. To the question of will you launch a Pinot Noir and red, our primary focus is around how we continue to add value in our MPD and grow gross margin. And, therefore, most of the focus will be sparkling, and most of the focus will be on the super premium luxury side.

46:20 But we will continue to look at Pinot Noir. And when we believe that we can make a Pinot Noir that can hold a $25.30 pound price point against some very big competition from New Zealand or France, we will look at that. But our our current view is that a lot of the English wines out there still don't deliver to that level of value, but we will look at that in the in the future. Specific question just to clear up on A Touch of Sparkle. So a touch of sparkle originally started as sparkling Bacchus wine, so a 100% Bacchus and then carbonated. What we have done over the last two years is actually found that we get a better quality of wine through a blend of Bacchus and and Chardonnay for a touch of sparkler. So a touch of sparkle will continue to have a blend of of Bacchus and Chardonnay as as its as its base.

47:12 Great stuff. And the no low alcohol wines, RM jumped in with a quick question on that as well. Do you wanna quickly say that as well when we talk about NPD? Do we have any plans for no and low alcohol? Oh, I I did cover it. I did mention Sorry. I didn't question. But I no. I did cover it, and I and I think it's something we need to look at. An obvious thing when you take alcohol out of wine, you've gotta be very careful that you don't just end up with a very expensive grape juice without the mouthfeel and and and the texture of wine. I'm sure many on the call have have drunk the the Guinness Zeros and the Heineken Zeros, which have been multi million projects over years. It is something that we need to look at in wine and understand how we best deliver that.

48:02 Okay. Right. We're gonna quickly go to brand now. There's a lot of questions for you today, Andrew. Great. A brand question on sponsorship. Yeah. It's from AT. It's quite a long question, but let me just quickly summarize. How do we get away from solely sports sponsorship, which is great. But how about, you know, hookups with people such as, you know, there's some examples here around hookups, people like Lenny Kravitz, influencers like Don Perry on you know, for people like Don Perry on Mohit with Kate Moss, Natalie Portman, etcetera. Yeah. I think it's a very important point. When Liam and the the marketing team are looking at how we develop brand, We are looking across all different parts of of the mix, and we're in that marketing mix. One area that is is very important in drinks brands and increasingly important is is influencer and is personality.

48:58 So we are, first of all, looking at that to understand if we believe that could bring anything further to CHAPEL DOWN. And, clearly, there are a lot of pros and cons about using personality to to help you develop your your brand and a longer conversation for another day. But I think the principle of what activation platforms do we look at, we will continue to look at platforms whether they be sports, arts, literature, food, gastro areas, which we think are most suitable to both the CHAPEL DOWN consumer and the consumer occasion, and then really importantly, deliver the right return on investment. And to date, we've been very focused on making sure that whichever properties we we work with deliver the right return on on the marketing spend. Great. And we have one more on channels, then I'm gonna break my sequence of trying to go through why that's because, obviously, that's why why you're getting off, and I'll do a couple of the finance ones. It's a pre submitted one. It's about the on trade.

49:56 Poor representation of English wines in restaurants. I hardly ever seen English selection. What can we do about this? Yeah. I think it's a it's a growing market, and we are taking the on trade with us, and it's a a slow journey. So, you know, I think as we as we pointed out, we're now in around 2,000 outlets. I think we are seeing some great examples of where it's working, particularly in the top end of the of the market. So, clearly, if you're in the RIPS or you're in the Savoy, you're getting a great experience. But, similarly, as we now come down, we're starting to see, you know, growing focus from mainstream retailers. So for example, Mitchell and Butler, you know, All Bar One or Miller Carter Restaurants, we have great, relationship and presence with.

50:45 What we are about to go live with is a really extensive listing with Green King pubs, and, Green King have seen and understood the need to have English wine brands on their on their menus and and in their fridges. It's a journey of education. Experience for thirty years would suggest the entree is always a relatively slow one, but I feel we've accelerated it quite dramatically over two years. We've gone from 400 outlets to 2,000. We believe we wanna get to 5,000 outlets in the midterm. It's about peep people feet on the ground. It's about education. It's about bringing sommeliers down to, down to Tentaton, because, ultimately, we're competing against every other wine region in the world, but it is our homeland. And, you know, the the key parts of the on trade are really starting to get it. And, know, one thing you can always do for us as shareholders is take a picture of the menu and send that through to us. Believe me, that will get to our salespeople, and, they will be first on our list for a call.

51:46 Do you believe that that does happen? It does work. Ronnie Ronnie Todd Young particularly. Thank you. Anyway, carry on. So I'll I'll I'll do a couple just quickly on the winery now to give you a break, and then you can jump in if I've missed anything, and then I'll do a couple on on finance. So firstly, by RS, how is the move to Canterbury going considering coming to the AGM? Wonder where it will be? And also on a similar topic, AMP. No. Sorry. Wrong wrong number 34. RM, how critical is paying for the new winery given the mention of judicial review, which can be costly? So let me just quickly do that, and then Andrew can jump in with anything extra. So the the the new winery is just East Of Canterbury on the A 2 down there next to a town called Bridge.

52:35 It's very important to the company to get that. As you see, the the but the scale of it, but also the cost efficiencies will get through that that winery to take that step as part of our overall growth. It's absolutely vital for us to get a new winery up and running. We have one planning approval on it twice, and there is a judicial review onto the process on the May the eighth and ninth at the High Court in London. We are confident that we get a good result there, but that is not CHAPEL DOWN involved in it. That is Canterbury Council versus the complainant of it. So we are not directly involved in that, but May the eighth and ninth are the crucial days on that. Associated with that, there was a question on fundraising for paying for the growth areas and equity debt mix as AT.

53:31 Wanna use the opportunity to bring on and increase the ratio with equity raise rather than take on expensive debt. And in reality, the reason we haven't mentioned anything on this yet is we are waiting, obviously, for the outcome of the judicial review to see what happens on that area. We have a lot of options around fundraising both on equity. And as we mentioned, we don't use our RCF at the moment on that. And so we will we will address the the funding mix question after we understand exactly where we are with the winery going forward. So you will hear about that in the future on that. So, let's then move on, to m and a. So we have a question on that, Andrew, from GS.

54:22 Regarding m and a, do you see any opportunity or risk in either direction? Do you see this as merging as a feature in this sector? Everything we're focused on as a business at this stage is on our, organic, growth plan. Clearly, as this market matures and we've shared and spoken about this before, there will be consolidation in this market. It's very much in its infancy. I think what's really important for us when we look at the marketplace is outside of ourselves and iTimbo in terms of scale players, there are a whole host of of other players in in the market in that next tier down. And most of those companies are either owned by individuals or they're owned by families. So I think it's unlikely that those those companies will become available for sale in the near term.

55:17 But, clearly, as, you know, category leader, we have great relationships with those businesses. I sit with a lot of those companies on the wine GB board, and we are always, talking about potential for for future opportunity. I think with respect to the the the tail end of English wine, there are an awful lot of producers out there that really are only only have land between five and ten acres, and most of their wine will be sold from their own cellar door. Our view over time is that a lot of those businesses that currently believe they may be able to produce and and make their own brand, I think inevitably quite a lot of those businesses over time will also decide they're just gonna sell their grapes. And and therefore, one thing that will emerge on this market in the midterm is some form of negotiation model more developed as it is in France where grapes will become available for sale. And clearly, again, subject to the quality of those grapes, we're always gonna be interested in being able to purchase those.

56:20 Okay. I'm gonna do a couple of quick ones on forecast. So we have GL asking about growth rates over the next five years. We had AT talking also about sales areas, and we had a question on profitability, AW. And so, essentially, we we we have not put out our own growth forecasts on these areas into the public domain, partly due to the fact that it's very hard to do that, not understanding having certainty about the winery right now on those areas. We are not currently planning on doing so afterwards either. We do have research we are covered by research analysts who put forth their own forecasts into the market, though, and and and they cover our forecasts.

57:12 So let's finish with a couple of questions on macro areas. Firstly, on ASP, and then we'll finish on just your view on the what you think the biggest threat is to it, and then we will close out there. So on ASP, PS, I've bought some CHAPEL DOWN wine direct from Unals from supermarkets, and I'm shocked by the ASP. Given the high margin you achieve, Are you selling to the big supermarkets for a fiver? No. We're not, but I I'll let Andrew say that. And then question 20, looks like it's been deleted by the the the person who submitted it. We So went to that. So let let's stick with that question on ASP and and why the disparity between what the price you see and the price that we declare there.

58:04 Yeah. I'm not sure I fully understand the question, so apologies. But let me let me give you a sense of our ASP. So our average selling price into customers, clearly, we track this. It's driven by the the price into each retail channel, into each customer. It's based from what the ongoing retail price is minus VAT, minus duty, and then minus a percentage of margin that that retailer or on trade wholesaler would take. And that is effectively then the revenue that we get into our business, and that reflects the average selling price of a of a bottle of sparkling. To Rob's description earlier, when we're on promotion, that now is funded through the the retrospective discount payment, and that sits above NSR.

58:52 There will be up there will be times when the supermarkets in particular will run their own category promotions, and this would be classically the buy six and get 25% off. That's not something that's funded by a supplier, but that's funded by customers to drive footfall into their stores. Really importantly, and most importantly, what we try to do with our pricing strategy is whether it's off trade, on trade, our shareholder pricing, our direct to consumer pricing, we constantly look to mirror, our pricing and our promotions, slots across each channel. Call it defensible pricing. It's at the heart of any good drinks business where you've got to have a set of pricing that you can justify within channels but across channels. And that's something that with the commercial team, we're very focused on, and, you know, we're very happy with that.

59:43 I think with respect to the growth of that ASP, clearly, at the moment, as consumers are slightly more sensitive to price, you know, we are constantly working with our retailers to ensure that we get the right balance between on and off promotional slots, the amount of visibility, but fundamentally, we are always consistent to the fact that we're about building brand, and you don't build brand by stacking it high and selling it cheap. Okay. So we're gonna finish with a quick question on a threat, which will then go into the summary on where we are. So it's from CC. Excellent positive presentation and outlook. Thank you. What do you see as the biggest threat coming in the next twelve months? Thanks, Christopher. That's really encouraging to hear the feedback. I appreciate it. I think when we are looking at threats, clearly, we we're managing the risks that we've talked about through our vineyard.

1:00:38 We are managing commercial risks through our customer base. We're not sitting here believing that we have much risk or threat in our underlying plan, and that's not to say that we're arrogant. We're constantly looking at it, but we believe we're in a growing category. We've got the best brand. We've got the broadest distribution, and we've got the best award winning wines. And therefore, we feel very confident about our plan. We are constantly looking at that plan and the mix of volumes that we sell on our promotion, our rate of sales during tougher times. And in terms of threats, our biggest threat is making sure that we, stay friends with the man up in the sky in terms of the weather.

1:01:25 Okay. I think that's all we have time for today. We are now out of time. So there were a couple of questions that weren't answered there. And and as said, they will be on the the website following this presentation in a week or so. Back to Rob. That's great. Andrew, Rob, thank you once again for updating investors. I was gonna ask you for closing comments, but, Andrew, think you delivered those, very well. So thank you to you both for your time, this afternoon. Could I please ask investors not to close this session as we're now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations? This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of CHAPEL DOWN, we'd like to thank you for attending this afternoon's presentation, and wish you all a very pleasant afternoon.

1:02:12 Thank you. Thank you, guys. Cheers.