LONDON--(BUSINESS WIRE)--

Chapel Down Group Plc

(`CDG' or `the Company')

EPIC: CDGP

UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30^th JUNE 2018

Chapel Down Group PLC is pleased to announce the Company’s Interim Results for the six month period ended 30^th June 2018.

Key highlights include:

• Year on year sales up 15% to £5.716m (H1 2017: £4.977m)*
  • Chapel Down Wines and Spirits sales up 19% to £3.981m (H1 2017: £3.345m)
  • Curious Drinks Ltd Beer and Cider sales are up 6% to £1.735m (H1 2017: £1.632m)
• Wines and Spirits Gross Profit up 24% at £1.572m (H1 2017: £1.271m)
• Beer and Cider Gross Profit down 2% at £0.545m (H1 2017: £0.558m)
• EBITDA of £216k (H1 2017: £235k) as we continue to reinvest in our brands, infrastructure and supply
• A Gold Outstanding medal at The International Wine and Spirits Challenge 2018 Awards for our Kit’s Coty Coeur de Cuvee 2013 along with a Gold for our Kit’s Coty Blanc de Blancs and Gold medals at The Decanter World Wine Awards for our Kit’s Coty Blanc de Blancs and Kit’s Coty Coeur de Cuvee 2013 and our still Chardonnay 2013
• Additional 102 acres of new vineyards planted on chalk terroir in Kent
• Brewery build commenced and scheduled for completion in March 2019
• In September we exchanged on an Agreement to Lease a further 388 acres of prime viticultural land adjoining our existing vineyards on the North Downs
• In September we exchanged on an Agreement to Lease a 5,000 sqft site in King’s Cross, London by the Regent’s Canal where we will, subject to planning and licencing, be opening the “Chapel Down Gin Works” an experiential bar, restaurant and Gin Works

* Total of Wine, Beer and Cider sales

Frazer Thompson, Chief Executive, said:

“The first half of 2018 has seen considerable change in the drinks industry. We have seen the collapse of Conviviality and subsequent re-birth of Matthew Clark and Bibendum at C&C. We saw a surprisingly long football World Cup and the best summer weather for decades. We have seen considerable change in grocery retail and challenges on the High Street and in Casual dining. We continue to see pubs closing. We can see there is more change to come. Yet at Chapel Down we also see more innovation and excitement and opportunity than ever before.

Whilst we have been affected by all of the market challenges in different ways, we remain completely focused on delivering solid top line growth at good margins whilst we continue to invest strongly to ensure we continue to build strong and sustainable brands that our consumers and customers love.

It is encouraging that interest in English wines – and Chapel Down in particular – has never been higher. The wine world has seen us grow the sparkling wine market and innovate and surprise with our still wines. That has enabled us to continue to improve our pricing and improve our margins with sales up 19% and gross profit up 24%. And interest is not just from the UK, but increasingly in sophisticated wine markets internationally as news of the excellence of our wines spreads. We have taken our first significant steps to grow our international business through a partnership in our most important export market - the USA. We believe we have a distinctive and compelling proposition to offer Champagne’s export markets. This year, depletions in the US have grown by 17%.

With demand for our wines continuing to exceed our ability to supply, we are greatly encouraged by the prospect of this years outstanding harvest with record yields and excellent quality fruit. Whilst all the fruit is not yet harvested, we can expect 40-60% more fruit than we have ever received at quality levels to match the best vintages ever in England. We are planting more vines on truly exceptional land to help meet future demand. We planted 102 acres of new vineyards in May and were delighted to secure a further 388 acres of prime land earlier this month which will be planted over the next three years to take our total supply acreage to 950 acres. This will be fully productive by 2024/2025. In an average year it should be producing some 2.4m bottles of wine.

And that wine needs to be better than good. It needs to be great. So we have been busy improving our winemaking and equipment and systems and were delighted to scoop five golds, ten silvers and seven bronze medals in the three major international wine awards competitions (Decanter, International Wine and Spirit Challenge and International Wine Challenge) – a testament to our people, our investment and our relentless pursuit of excellence. We will be investing further over the coming years.

We have also been very encouraged by the results of our Chapel Down gin and vodka launch. In a crowded marketplace, we have a distinctive product, beautifully packaged (it won a highly prestigious D&AD accolade) and well priced. We have seen success not only in top end London bars and restaurants such as All Bar One, Mr. Foggs and Mark Hix but also in Majestic and more recently, Tesco. Although sales reached £300k in the first half, we are seeing further opportunities for growth in the second half and we will be building on the success of Chapel Down’s spirits through the creation of an exciting experiential bar, restaurant and Gin Works at Kings Cross, London just 38 minutes by train from our new brewery in Ashford.

In the beer market, Curious beers and cider have maintained the highest standards of quality and we have continued to invest in our people and marketing as we build out our new brewery at a highly visible site in the centre of Ashford. The new brewery will give us greater control over our growth and also bring improved margins and a highly visible point of difference. Gareth Bath joined last October as MD for beer and cider, and his energy and enthusiasm have been crucial to developing the brand and ensuring our positioning has not been compromised as we carefully manage our growth. Sales growth of 6% in a very competitive beer market, despite the disruption caused by the hiaitus at Matthew Clark and Bibendum will improve as we continue to invest in getting the brand message and sampling extended. The new brewery will be a big and highly visible step forward in the brand’s journey. We have blue chip listings in Majestic, Waitrose and Tesco and high class on trade business with M&B and others supported by Matthew Clark. It is important that we continue to invest in the highest quality consumer marketing to ensure that the beer and cider are vital brands for our retail partners. It’s a differentiated product that tastes great. We are confident of its future success.

I am privileged to work with fantastic people – curious, fearless and relentless – but more importantly a great team. It’s the quality of those people, the excellence of our brands, the excitement of operating in growth markets and the support of an outstanding Board that makes us especially motivated about Chapel Down’s prospects for the future. The Company is changing gear as we build our brands and invest for the future.

We will continue to work to build a better business that excites consumers and investors.”

Performance Review

The combined business continued to perform well in the first half of 2018, with growth in sales and gross profit of the combined businesses:

We made a conscious decision to continue reinvesting any surplus cash in our people, our systems and our brands. As a consequence, the total business reported EBITDA of £216k, compared with £235k in the six months to June 2017.

Wines and Spirits gross margins remain very healthy at 39% (H1 2017: 38%).

Beer margins have declined following the forced change of our brewing partner in 2017 which has also limited our scope for short term volume growth whilst developing the brand and managing supply. At 31% gross margin from contracted out brewing, we are satisfied with its performance.

Wines and Spirits

Wines and Spirits sales grew 19% in the first half, to £3.981m due to improved wine pricing and £0.3m of Spirits sales being a 2,745% increase on the first half to June 2017. Wine volumes were in line with 2017 reflecting the limited stock availability in 2018.

With a strong programme of sponsorships and support – The Boat Races, London Symphony Orchestra, Royal Opera House and The Donmar – as well as high social media engagement and extraordinary PR presence, our brands continue to thrive.

Beer and Cider

Our growth has been focused on premium accounts and we see continuing progress in top end restaurants, bars, hotels and premium off-trade. We have national distribution through Majestic and Waitrose in the off trade now augmented by Tesco, and a network of wholesalers including Matthew Clark (which had a significant disruption in the first half of our financial year).

Beer and cider sales rose 6% to £1.735m in the first half. Gross profit fell by 2% due to changes in supply and relaunch of bottles and gross margins were therefore down to 31%. We expect gross profit to rise significantly when the new brewery opens.

Outlook

We operate in three exciting markets – English wines, premium craft beer and premium gin/vodka. We expect all three markets to continue to out-perform the drinks industry. We are well funded and will continue to invest and look to make the most of these opportunities over the coming years.

We have a growing experiential attraction at Tenterden and a new brewery to open next year only 38 minutes from Kings Cross where we are developing an exciting new Gin Works.

We are looking forward to the biggest and best quality harvest in English wines’ history.

We have invested wisely in developing good brands and outstanding people.

We have a highly supportive Board to guide us and a small army of engaged and enthusiastic shareholders.

Our tangible assets are strong and supportive of the business: land – and high quality vined land in particular – continues to appreciate. We have wine stock, equipment, vineyards and freehold winery and buildings and a new freehold brewery being built just 38 minutes from Central London. And of course, our brand assets are more valuable than ever.

We enjoy the custom and support of our many passionate and engaged shareholders who continue to spread the word with energy and enthusiasm.

Thank you for your faith, your continued encouragement and your enthusiastic support. It makes a difference!

Contact

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

Notes:

1. Represents the consolidated unaudited results for Chapel Down Group Company and English Wines Plc for the period 01.01.18 to 30.06.18 and the share of loss from the Associate, Curious Drinks Limited, for the period 01.01.18 to 30.06.18.

2. Represents the consolidated unaudited results for Chapel Down Group Company and English Wines Plc for the period 01.01.17 to 30.06.17 and the share of loss from the Associate, Curious Drinks Limited, for the period 01.01.17 to 30.06.17.

3. Represents the consolidated audited results for Chapel Down Group Company and English Wines Plc for the 12-month period to 31.12.17 and the share of loss from the Associate, Curious Drinks Limited, for the period 01.01.17 to 31.12.17.

CHAPEL DOWN GROUP PLC

1. BASIS OF PREPARATION/ACCOUNTING POLICIES

The Company’s interim report for the six months ended 30^th June 2018 were authorised for issue by the directors on 27th September 2018. The interim financial information, which is unaudited, does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Accordingly, this report is to be read in conjunction with the Annual Report for the year ended 31 December 2017, which was prepared in accordance with the Company’s reporting standard (FRS102) that was in effect at that time.

The accounting standard requires the Company to restate its profit to attribute a notional cost of non-cash share option agreements to the business. After adopting the standard, the accounts show a decrease in profit of £21,093 (H1 2017: £37,434) resulting in a Group pre-tax loss of £307,142 (H1 2017: pre-tax loss of £54,531).

The Company is required to value net assets in accordance with the Company’s reporting standard (UK GAAP). The assets (wine stock, land, vineyard) are held at cost which the Directors believe is considerably less than the realisable value.

The statutory accounts for the year ended 31 December 2017, prepared under UK GAAP, have been reported on by the Company’s auditors, received an unqualified audit report and have been filed with the registrar of companies at Companies House. The unaudited interim financial statements for the six months ended 30 June 2017 and 30 June 2018 have been drawn up using accounting policies and presentation adopted in the Company’s full financial statements for the year ending 31 December 2017 being FRS102.

2. BALANCE SHEET REVIEW

The net asset value of the Company as at 30^th June 2018 was £35,040,251 which includes:

• Fixed assets of £11,353,705 includes the 2015 market value of the sites at Tenterden and Kit’s Coty as well as the vineyard development expenditure at Kit’s Coty, Court Lodge, Street Farm, Scurms and Bokes Farm which is capitalised at cost.

• £5,137,140 of stock is valued at cost being the lower of cost or net realisable value.

3. PROFIT PER SHARE

The calculation of the loss per share for the six months to 30 June 2018 is based on the loss for the period of £328,235 and the weighted average number of shares in issue during the period of 148,984,821.

4. DISTRIBUTION OF THE INTERIM STATEMENT

Copies of this statement will be available for collection free of charge from the Company’s registered office at Chapel Down Winery, Small Hythe Road, Tenterden TN30 7NG. An electronic version will be available on the Company’s website, www.chapeldown.com.

--ENDS--

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Chapel Down Group plc

Source: Chapel Down Group plc