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DJ Chapel Down Group plc Final Results

 
TIDMCDGP 
 
 

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

 

AUDITED RESULTS FOR THE YEAR ENDED 31stDECEMBER 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 GBP10.233m (2015: GBP8.179m)* 

Chapel Down Wine sales up 22% to GBP6.791m (2015: GBP5.564m)

Beer and Cider sales in the associate company Curious Drinks Ltd

up 32% to GBP3.442m (2015: GBP2.614m)

 
    -- Wine gross profit up 30% at GBP2.888m (2015: GBP2.229m) 
 
    -- Beer and Cider gross profit in the associate company Curious Drinks 

Ltd up 39% at GBP1.099m (2015: GBP0.789m)

 
    -- Continuing EBITDA up 72% to GBP750k (2015: GBP435k)*** as we continue to 

reinvest in our brands, infrastructure and supply

 
    -- The associate company Curious Drinks Ltd raised funds of GBP1.736m 

(equating to a 9.79% economic stake) valuing the business at GBP17.74m.

**

 
    -- 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 GBP467k.***Excludes the effect of the FRS 102 Section 26 share option accounting adjustment of GBP75k (2015: GBP420k) 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 GBP1.736m 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 GBP17.736m. 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 GBP467k 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 
               FY2016  FY2015  %ageVariance  FY2016  FY2015  %ageVariance  FY2016  FY2015  %age Variance 
               GBP'000   GBP'000                 GBP'000   GBP'000                 GBP'000   GBP'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   43%     40%                   32%     30%                   39%     37% 
%age 
 
 

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 GBP750k***, compared with GBP435k*** 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 GBP6.791m. 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 GBP3.442m. 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.

 

(MORE TO FOLLOW) Dow Jones Newswires

April 21, 2017 02:00 ET (06:00 GMT)

DJ Chapel Down Group plc Final Results -2-

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 DunsmoreChairman

 

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 GBP750k*** (2015: GBP435k***).

 

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 GBP1.736m 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 ThompsonCEO

 

***Excludes the effect of the FRS 102 Section 26 share option accounting adjustment of GBP75k (2015: GBP420k) which is a non-cash item. Refer to note 1 "Basis of preparation/accounting policies" for further information.

 

Contact

 
Chapel Down Group plc     Chief Executive     01580 763 033 
Frazer Thompson           Finance Director 
Richard Woodhouse 
finnCap Ltd               Corporate Finance   020 7220 0500 
Geoff Nash/Simon Hicks    Corporate Broking 
Stephen Norcross 
 
 

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 
31STDECEMBER 
2016 
                 AuditedContinuingOperations01.01.2016 to31.12.16  AuditedDiscontinuedoperations01.01.16 to03.04.16  AuditedTotal  AuditedContinuingOperations01.01.2015 to31.12.15  AuditedDiscontinuedoperations01.01.15 to31.12.15  AuditedTotal 
 
NOTES            1                                                 2                                                 3             4                                                 5                                                 6 
                 GBP                                                 GBP                                                 GBP             GBP                                                 GBP                                                 GBP 
Turnover         6,791,014                                         539,356                                           7,330,370     5,564,724                                         2,614,254                                         8,178,978 
Cost of          (3,903,342)                                       (369,555)                                         (4,272,897)   (3,336,120)                                       (1,825,432)                                       (5,161,552) 
Sales 
                 ------------                                      ------------                                      ------------  -------------                                     -------------                                     ------------- 
Gross            2,887,672                                         169,801                                           3,057,473     2,228,604                                         788,822                                           3,017,426 
Profit 
Administrative   (2,466,688)                                       (211,950)                                         (2,678,638)   (2,091,263)                                       (802,954)                                         (2,894,217) 
expenses 
Share            (74,868)                                                                                            (74,868)      (420,286)                                                                                           (420,286) 
based 
payment 
                 -----------                                       -----------                                       -----------   -------------                                     -------------                                     ------------- 
Operating        346,116                                           (42,149)                                          303,967       (282,945)                                         (14,132)                                          (297,077) 
profit/(loss) 
Share of         (27,805)                                          -                                                 (27,805)      -                                                 -                                                 - 
income 
from 
Associate 

(MORE TO FOLLOW) Dow Jones Newswires

April 21, 2017 02:00 ET (06:00 GMT)

DJ Chapel Down Group plc Final Results -3-

Gain             -                                                 466,903                                           466,903       -                                                 -                                                 - 
on 
Disposal 
Interest         22,061                                            -                                                 22,061        18,196                                            -                                                 18,196 
                 -----------                                       -----------                                       -----------   -------------                                     ------------                                      ------------- 
Profit/(Loss)    340,372                                           424,754                                           765,126       (264,749)                                         (14,132)                                          (278,881) 
before 
tax 
Tax              (111,691)                                         (6,613)                                           (118,304)     (34,477)                                          (21,199)                                          (55,676) 
                 -----------                                       -----------                                       -----------   -------------                                     -------------                                     ------------- 
Profit/(Loss)    228,681                                           418,141                                           646,822       (299,226)                                         (35,331)                                          (334,557) 
after tax 
                 =======                                           =======                                           =======       =======                                           =======                                           ======= 
EBITDA           749,593                                           (20,232)                                          729,361       434,553                                           72,696                                            507,249 
[excl. 
share 
based 
payment 
(FRS102 
section 
26 adj)] 
Profit on        415,240                                           424,754                                           839,994       155,537                                           (14,132)                                          141,405 
ordinary 
activities 
beforetaxation 
[excl. 
share 
based 
payment 
(FRS102 
section 
26 
adj)] 
Profit/(Loss)                                                                                                        0.71                                                                                                              (0.33) 
per share 
- diluted 
(pence) 
 
 

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 31stDECEMBER 2016 
 
 
                                        Audited         Audited 
                                        12 Mths         12 Mths 
                                        31.12.16        31.12.15 
                                        GBP               GBP 
Net cash generated from                 (253,476)       (601,067) 
operating activities 
                                        -------------   ------------- 
Cash flows from investing activities 
Payments to acquire tangible assets     (1,604,830)     (1,568,301) 
Cash disposed of on deemed              (250)           - 
disposal of subsidiary 
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              (1,836,495)     (2,148,165) 
cash and cash equivalents 
Cash and cash equivalents at            3,062,023       5,210,188 
the beginning of the period 
                                        -------------   ------------- 
Cash and cash equivalents               1,225,528       3,062,023 
at the end of the period 
                                        ========        ======== 
 
 

CHAPEL DOWN GROUP PLC

 

BALANCE SHEET AS AT 31st DECEMBER 2016

 
                                  Audited           Audited 
                                  As at             As at 
                                  31.12.16          31.12.15 
                                  GBP                 GBP 
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 GBP74,868 (2015: GBP420,286) resulting in a Group pre-tax profit of GBP765,126 (2015: pre-tax loss of GBP278,881).

 

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 GBP15,903,698 which includes:

 

* Fixed assets of GBP8,802,062 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.

 

* GBP4,460,808 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 GBP765,126 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--

 
 

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(END) Dow Jones Newswires

April 21, 2017 02:00 ET (06:00 GMT)