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Chapel Down Group plc (CDGP)

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Friday 21 April, 2017

Chapel Down Group plc

Final Results

Final Results

Chapel Down Group plc

Chapel Down Group Plc
(`CDG' or `the Company')
EPIC: CDGP

AUDITED RESULTS FOR THE YEAR ENDED 31st DECEMBER 2016

Chairman’s Statement

I am delighted once again to announce a good set of results for the year ended 31 December 2016.

Key highlights:

  • Year on year sales up 25% to £10.233m (2015: £8.179m)*
    • Chapel Down Wine sales up 22% to £6.791m (2015: £5.564m)
    • Beer and Cider sales in the associate company Curious Drinks Ltd up 32% to £3.442m (2015: £2.614m)
  • Wine gross profit up 30% at £2.888m (2015: £2.229m)
  • Beer and Cider gross profit in the associate company Curious Drinks Ltd up 39% at £1.099m (2015: £0.789m)
  • Continuing EBITDA up 72% to £750k (2015: £435k)*** as we continue to reinvest in our brands, infrastructure and supply
  • The associate company Curious Drinks Ltd raised funds of £1.736m (equating to a 9.79% economic stake) valuing the business at £17.74m. **
  • 95 acres of new vineyards planted (40 acres on our new leased sites in Kent and 55 acres with contract partners)
  • Platinum medal at The Decanter World Wine Awards for our Kit’s Coty Chardonnay 2013 as well as Gold medals for our sparkling wines in two prestigious global competitions - The International Wine and Spirits Challenge 2016 and the Champagne and Sparkling Wine World Championships 2016

* Total of Wine sales and Beer and Cider sales in our assocate company Curious Drinks Ltd
** The sale resulted in Chapel Down Group PLC retaining a 49.79% voting share and a 90.21% economic share of Curious Drinks Ltd and realising a Gain on Disposal of £467k.
*** Excludes the effect of the FRS 102 Section 26 share option accounting adjustment of £75k (2015: £420k) which is a non-cash item. Refer to note 2 for further information.

Your company also continued to build its most important assets - its brands - through innovative and well executed marketing, high profile sponsorships and publicity and a differentiated and creative approach to all our activities. In addition to being cited as one of the London Stock Exchange’s 1000 companies to inspire Britain, we also joined the Walpole Group of luxury brands and retained our official CoolBrand status.

Curious Drinks – fundraising and partial disposal

Prior to 4th April 2016 Curious Drinks Ltd (“Curious Drinks”) was a 100% owned subsidiary of Chapel Down Group PLC. In April 2016, Curious Drinks Ltd raised funds of £1.736m for a 9.79% economic share and a 50.21% share of the voting rights in the business with Chapel Down Group PLC retaining the remaining 90.21% economic interest and the remaining 49.79% share of the voting rights. The ‘post money’ valuation of the Curious Drinks business was £17.736m. The sale of the 50.21% share of voting rights means there was a “deemed disposal” resulting in a Gain on Disposal for Chapel Down Group PLC of £467k as well as Curious Drinks being accounted for as an associate from 4th April 2016 onwards. The Profit and Loss Account for the year ending 31 December 2016 shows the “Continuing Operations” which includes 49.79% of the performance of Curious Drinks for the period 4th April 2016 to 31st December 2016 as a single line being the “share of income from Associate”.

Under FRS102 the results of Curious Drinks pre 4th April, which were previously consolidated on a 100% ownership basis, are now disclosed under the heading “Discontinued Operations” in the Profit and Loss Account.

Performance Review

The combined business continued to perform strongly in 2016, with growth in sales and gross profit of both Wine and Beer and Cider:

     
    Wine   Beer and Cider   Combined Businesses
   

FY
2016

 

FY
2015

 

%age
Variance

 

FY
2016

 

FY
2015

 

%age
Variance

 

FY
2016

 

FY
2015

 

%age
Variance

    £’000   £’000       £’000   £’000       £’000   £’000    
Turnover   6,791   5,564   +22%   3,442   2,614   +32%   10,233   8,179   +25%
Gross profit   2,888   2,229   +30%   1,099   789   +39%   3,987   3,017   +32%
Gross profit %age   43%   40%       32%   30%       39%   37%    
           

We have made a conscious decision to continue reinvesting any surplus cash in our people, our systems, and our brands. Nonetheless the total business reported Continuing EBITDA of £750k***, compared with £435k*** in the year to December 2015.

We believe that the potential and the growth in both English wines and specialist or craft beer will continue and we want to ensure our brands are well positioned to participate in that growth. We continue to invest in planting new vineyards on the finest land on our long term leasehold land holdings in Kent and other long term partner sites.

Wine

Wine sales grew 22% in the year to £6.791m. We are confident in the positioning of our brand and seeing growth across the country, as well as developing some exciting long term export opportunities.

Our still wines (much of which can be released in the year following vintage) have been winning international accolades, as well as our sparkling. As a result we are seeing strong demand and excellent sell through. The nature of wine means that we must manage the growth rate to ensure we do not over-extend our distribution. This ensures we maintain our premium profile and good relationships with our distributors and retailers. We continue to manage our stock levels to enable consistency of supply over the longer term which is critical in the continued development of our brand.

The investment by our shareholders has enabled us to secure an exciting future. We are very pleased with the development of our vineyard sites and have planted a further 40 acres taking the total planted on our long term leased land to 122 acres since 2015. We have also added a further 55 acres which is under long term grower contracts. We continue to invest in further capacity and equipment at Tenterden, improving our systems and building our brand and team. The new storage, disgorging and dispatch warehouse in Ashford is now fully operational and releases space for further winemaking capacity at Tenterden. The relocation of our office and commercial teams to Ashford has not only improved our connectivity, but also enabled us to gain planning consent for improved visitor facilities at the former office block at Tenterden, now open as The Wine Sanctuary - a tasting and entertainment facility that also gives us more retail space in our shop.

Beer and Cider

Beer and cider sales in our associate company, Curious Drinks Ltd, rose 32% to £3.442m. Our growth has focused on premium accounts and we have been delighted by the continuing progress in top end restaurants, bars, hotels and premium off trade where the brand has good sustainable rates of sale. We are successfully attracting aspirant consumers wanting interesting, original and accessible brands. We have national distribution through Majestic and Waitrose in the off trade and a network of wholesalers including Matthew Clark that enables us to supply Curious beers in draught or bottles to the whole of Great Britain. We are supplying Mitchells & Butlers as well as a number of up and coming on trade groups looking for something truly original.

We have a unique and distinctive consumer proposition – a winemaker’s beer – which is increasingly rare in an exciting and fast-growing beer market. Our real point of difference and our appeal to a broad church of consumers give us a fantastic opportunity. We are very pleased with the top line growth and strong margins which are enabling us to re-invest in marketing and sales to build the brands. The construction of the new brewery and visitor facility in Ashford just 38 minutes from St Pancras will be a further stimulus for growth. The project is to start very shortly and we expect to be brewing on site during 2018.

Business risks and uncertainties

The uncertainty following the EU referendum has had no real impact on our business to date. We would be affected, like all agriculturally based businesses if we were not able to access EU workers for our viticulture and the expertise in winemaking available in Europe. However, maintaining and developing a strong brand with high quality people is our best defence and we will continue to invest to ensure we are well placed.

There is always a risk of a poor harvest through extreme weather events which we mitigate through maintaining the highest standards of viticulture, choosing the very best sites and utilising the latest proven advances in technology and agriculture. We source from a wide geographic area to minimise micro-climatic variations. The diversification into beer also further protects our ability to continue to grow.

Competition continues to grow in our markets of English wines and craft beers, and we continue to invest in our people, brands and distribution to ensure that the business can thrive.

Outlook

Progress has continued in the first quarter and we are pleased with the growth in wine exports - in particular the USA. Beer growth has been maintained and the opening of new facilities in Tenterden, the launch of further Kits Coty premium wines and the consumer and trade interest in both our wines and beers is very exciting. We remain appropriately optimistic about continuing growth in sales in 2017. We believe that the 2016 harvest will provide the quality of fruit from which we can seek to create more international award winning wines in the years to come. The exciting growth of our beer and cider in a vibrant artisanal market sector is also encouraging for our associate company.

Our assets are supportive of the business: land – and high quality vined land in particular – continues to appreciate; our brand assets are more valuable than ever; and our balance sheet remains strong. We enjoy the custom and support of our many new shareholders who are spreading the word on our behalf with energy and enthusiasm. Thank you for your faith, your continued encouragement and your enthusiastic support.

John Dunsmore
Chairman

Chief Executive’s Commentary

“Chapel Down has enjoyed another excellent year of growth. In a highly competitive trading environment your company has continued to invest in the value of its brands, its vineyards and winery and its people as we build a healthy, sustainable and innovative drinks company with an exciting future both at home in the UK and in sophisticated drinks markets abroad. With sales growth of 25% across the combined businesses - sales up 22% on wine and up 32% on beer and cider in our associate company - we are investing the proceeds to build the business whilst delivering growth of 72% in continued adjusted EBITDA at £750k*** (2015: £435k***).

English wines, which are now being internationally recognised for their consistent excellence, have been the bedrock of our business. Demand is continuing to rise and we are developing a very strong brand to ensure we continue to maximise the potential that is being created through the consumer and trade excitement around cool climate wines. Wth distribution in Marks & Spencer, Waitrose, Sainsbury, Tesco and Majestic, as well as hundreds of bars and restaurants serviced by our merchant partners, Chapel Down is able to capitalize on the increased excitement. We have recently seen the launch of Chapel Down in the USA to both critical and public acclaim with initial sales at twice our anticipated level. The potential for export in sophisticated wine markets is exciting. Our investment in Great British events and institutions is helping to bring our brand to a broader International consumer. The London Symphony Orchestra, The Donmar, Royal Opera House, The Boat Races and Royal Ascot are more than just great events to be at. They are perfect compliments for our brand: Exciting, English and aspirational.With the further development of our widely acclaimed Kits Coty super-premium range, we are also ensuring that the quality standards are kept high.

We have also built a long term supply of world class fruit and invested further in our modern and efficient winery to ensure that the quality and value we can deliver to the market will be second to none. We directly planted a further 40 acres of new vineyards in 2016 and we now own and/or manage some 233 acres of vined land and continue to have long term contracts with our high quality group of contracted growers. We’ve added a further 55 acres of contracted vineyards to this list which enables us to source from a wider geographic area and offset some localized risks of adverse weather events.

“Craft” beers are growing very fast, driven by more flavoursome beers that are the antidote to bland international brands that have become overly dominant. There is a vibrancy and excitement to the UK beer market, fuelled by spectacular success in the USA which is spreading internationally. With sales growth of 32% this year, in our associate company Curious Drinks Ltd, we are extremely well positioned to benefit from the boom. We have a unique and distinctive proposition rather than just a cool design, amusing name or extreme flavour. In order to make the most of the opportunity, the Company decided to raise further funds to allow the development of an exciting new brewery in the centre of Ashford on a highly visible freehold site adjacent to the international railway station. Once again, we have exceeded our own high expectations via crowd-funding, raising £1.736m and we will be building during 2017 and 2018 to further develop our UK and international business and the brand. With hundreds of pubs and bars stocking the beer and national availability through Majestic and Waitrose, further growth in sales and brand awarenesss will help to maximize the value of the business.

Whilst we have continued to win awards and plaudits for our wines and beers, we have also developed our tourism and hospitality experience at the Tenterden site and whilst we will be extending that expertise to our new brewery, we will be developing the facilities further at Tenterden too. Our new Wine Sanctuary will be an industry leading tourism facility for the 50,000 visitors who come to Tenterden to learn more about our wines.

Our people are the vital difference. In an industry that requires passion, professionalism and customer centric thinking, we remain meticulous about who we hire and how we train.

In the vineyards we continue to improve the quality of the wines we make through the management of our own vineyards and the spread of good practice with our partner vineyards. We apply the most modern viticultural techniques to ensure we get the finest fruit. Every year we get a little better.

In the winery, the fruit is made into the best possible wine through the expertise of a talented young winemaking team able to use the latest technology and equipment. In a highly competitive market, both vineyard and winery teams are constantly challenged to surprise and delight, and that spirit is reflected in the innovative new wines and products that we have created to ensure we remain at the forefront of consumers’ minds.

They find us thanks to the constant stream of excitement about the company and its brands generated by the hard work, enthusiasm, energy and creativity of the whole team. This is reflected in the feedback we receive as consumers continue to have such positive experiences with the brand - whether that’s in our shop, on the phone, in our restaurant or at an event. I would like to thank them for their continuing support and loyalty.

Finally, we are delighted to have such a supportive and enthusiastic group of shareholders. The energy and excitement that is created by our growing band of shareholders is something the whole team appreciate. I hope you continue to enjoy your investment.”

Frazer Thompson
CEO

***Excludes the effect of the FRS 102 Section 26 share option accounting adjustment of £75k (2015: £420k) which is a non-cash item. Refer to note 1 “Basis of preparation/accounting policies” for further information.

Contact

Chapel Down Group plc

Frazer Thompson

Richard Woodhouse

   

Chief Executive

Finance Director

   

01580 763 033

finnCap Ltd

Geoff Nash/Simon Hicks

Stephen Norcross

Corporate Finance

Corporate Broking

020 7220 0500

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/201.

DRAFT

 
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST DECEMBER 2016
   

Audited
Continuing
Operations
01.01.2016 to
31.12.16

 

Audited
Discontinued
operations
01.01.16 to
03.04.16

 

Audited
Total

 

 

Audited
Continuing
Operations
01.01.2015 to
31.12.15

 

Audited
Discontinued
operations
01.01.15 to
31.12.15

 

Audited
Total

 

NOTES   1   2   3   4   5   6
    £   £   £   £   £   £
Turnover   6,791,014   539,356   7,330,370   5,564,724   2,614,254   8,178,978
Cost of Sales   (3,903,342)   (369,555)   (4,272,897)   (3,336,120)   (1,825,432)   (5,161,552)
    ------------   ------------   ------------   -------------   -------------   -------------
Gross Profit   2,887,672   169,801   3,057,473   2,228,604   788,822   3,017,426
Administrative expenses   (2,466,688)   (211,950)   (2,678,638)   (2,091,263)   (802,954)   (2,894,217)
Share based payment   (74,868)       (74,868)   (420,286)       (420,286)
    -----------   -----------   -----------   -------------   -------------   -------------
Operating profit/(loss)   346,116   (42,149)   303,967   (282,945)   (14,132)   (297,077)
Share of income from Associate   (27,805)   -   (27,805)   -   -   -
Gain on Disposal   -   466,903   466,903   -   -   -
Interest   22,061   -   22,061   18,196   -   18,196
    -----------   -----------   -----------   -------------   ------------   -------------
Profit/(Loss) before tax   340,372   424,754   765,126   (264,749)   (14,132)   (278,881)

Tax

  (111,691)  

(6,613)

 

(118,304)

 

(34,477)

 

(21,199)

 

(55,676)

    -----------   -----------   -----------   -------------   -------------   -------------
Profit/(Loss) after tax   228,681   418,141   646,822   (299,226)   (35,331)   (334,557)
    =======   =======   =======   =======   =======   =======
                         

EBITDA [excl. share based payment (FRS
102 section 26 adj)]

  749,593   (20,232)   729,361   434,553   72,696   507,249
                         

Profit on ordinary activities before
taxation [excl. share based payment (FRS
102 section 26 adj)]

  415,240   424,754   839,994   155,537   (14,132)   141,405
                         
Profit/(Loss) per share – diluted (pence)           0.71           (0.33)

 

Notes:

1. Represents the audited results for Chapel Down Group Company and English Wines Plc for the year 01.01.16 to 31.12.16 and the share of income from the Associate, Curious Drinks Ltd, for the period 04.04.16 to 31.12.16.

2. Represents the Discontinued Operations being the Curious Drinks Ltd audited results for the period from 01.01.16 to 03.04.16.

3. Represents the total of notes 1 and 2 above.

4. Represents the consolidated audited results for Chapel Down Group Company and English Wines Plc for the 12 month period to 31.12.15 which are now disclosed under Continuing Operations.

5. Represents the Curious Drinks Ltd audited results for the 12 month period to 31.12.15 which are now disclosed under Discontinued Operations.

6. Represents the total of notes 4 and 5 above being the Chapel Down Group Plc audited results for the 12 month period to 31.12.15.

CHAPEL DOWN GROUP PLC

CONSOLIDATED CASH FLOW FOR THE YEAR ENDED 31st DECEMBER 2016
     
Audited Audited
12 Mths 12 Mths
31.12.16 31.12.15
 
£ £
Net cash generated from operating activities (253,476) (601,067)
------------- -------------
Cash flows from investing activities
Payments to acquire tangible assets (1,604,830) (1,568,301)
Cash disposed of on deemed disposal of subsidiary (250)

-

Interest received 22,061 18,196
Investment in Associate - -
------------- -------------
Net cash from investing activities (1,583,019) (1,550,105)
------------- -------------
Cash flows from financing activities
Issue of ordinary share capital - 3,007
------------- -------------
Net cash used in financing activities - 3,007
------------- -------------
Net (decrease)/increase in cash and cash equivalents

(1,836,495)

(2,148,165)

 
Cash and cash equivalents at the beginning of the period

3,062,023

5,210,188

 
------------- -------------
Cash and cash equivalents at the end of the period

1,225,528

3,062,023

======== ========
 

CHAPEL DOWN GROUP PLC

BALANCE SHEET AS AT 31st DECEMBER 2016

           
Audited Audited
As at As at
31.12.16 31.12.15
 
£ £
Fixed assets 8,802,062 7,203,368
Current assets 9,654,755 10,378,126
Creditors due within one year (2,424,615) (2,306,678)
Creditors due after one year (128,504) (306,323)
------------ ------------
Net assets 15,903,698 14,968,493
------------ -------------
 
Called up share capital 5,051,510 5,051,510
Share premium account 8,554,912 8,554,912
Revaluation reserve 1,183,283 1,073,650
Profit and loss reserve 1,113,993 288,421
-------------- ----------------
Shareholders’ funds 15,903,698 14,968,493
========= =========
 

1. BASIS OF PREPARATION/ACCOUNTING POLICIES

The Company’s report for the year ended 31 December 2016 was authorised for issue by the directors on 21st April 2017. The financial information 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 2016, 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 £74,868 (2015: £420,286) resulting in a Group pre-tax profit of £765,126 (2015: pre-tax loss of £278,881).

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 2016, prepared under UK GAAP, have been reported on by the Company’s auditors, received an unqualified audit report and will be posted to shareholders in May 2017.

2. BALANCE SHEET REVIEW

The net asset value of the Company as at 31st December 2016 was £15,903,698 which includes:

• Fixed assets of £8,802,062 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 and at Court Lodge, Boxley which is capitalised at cost.

• £4,460,808 of stock is valued at cost being the lower of cost or net realisable value.

3. PROFIT PER SHARE

The calculation of the profit per share for the year ended 31 December 2016 is based on the profit for the period of £765,126 and the weighted average number of shares in issue during the period of 107,309,560.

4. DISTRIBUTION OF THE FULL YEAR 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--


a d v e r t i s e m e n t