Chapel Down: Half-year profit almost wiped out as wine maker blames ‘one-off factors’
English wine producer Chapel Down has blamed ‘one-off factors’ for its pre-tax profit almost being wiped out during the first half of its financial year.
The Kent-headquartered company, which is listed on AIM, said the fall from £2.4m to £40,000 in the in the six months ended 30 June was due to a ‘difficult macroeconomic environment’, a fall in the value of its produce and ‘tough comparatives’ from 2023.
In a separate announcement, Chapel Down announced that chief executive Andrew Carter will step down in the first half of 2025.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) at the company fell by 58 per cent, to £1.3m, from £3.2m in 2023.
Net sales fell by 12 per cent, primarily driven by a 36 per cent decline in off trade – which refers to wine bought by off-premise consumption, at places like supermarkets and liquor stores – due to a lack of re-stocking and the difficult comparative base of the King’s coronation.
Exports, bar and restaurant sales, and ecommerce sales, however, all had double-digit growth.
The company’s share price dropped by nearly 15 per cent after the results were announced.
“It doesn’t take too many sales to make our share price fall… If you actually look at how many trades have been, there’s very few, but it’s a very illiquid market and stock,” chief executive Andrew Carter told Morning Wire.
He added that the underlying financial situation remained positive despite the one-off costs: “We remain very confident in the long term future and therefore the market cap of the company… It’s important with a set of results like this to read below the headline.”
Chapel Down said its profit was affected by a reduction in sales of sparkling wine, a higher cost of goods sold and a reduction in the fair value price of its produce.
The fair value – or sale price – of Chapel Down’s produce fell by 54 per cent in 2024, to £773,000.
Net debt rose to £5.8m, from £1.3m in 2024, “driven by the full planting of the new Buckwell vineyard and the in-year costs of the 2023 harvest”, the company said.
It said it has repaid the fixed-term portion of its revolving credit facility, which “attracted the highest interest rate”. A £12m facility remains, “of which £5.1m is undrawn”, the company added.
The wine producer expects to sign a new facility in the third quarter of the year.
The company said it was confident in its second-half performance due to strong underlying consumer demand, planned promotional activities and distribution wins.
Chapel Down boss cites ‘one-off’ factors
Chief executive Carter said: “Chapel Down continues to be the market leader in the English wine industry, with the leading brand, the deepest distribution and internationally celebrated wines.
“2024 has seen continued strategic and operational progress with robust trading, particularly in the on-trade, export and direct-to-consumer channels which shows continued, strong consumer demand.
“In the first half, this has been offset by some challenges in the off-trade, predominantly caused by one-off factors.
“Chapel Down is fortunate to benefit from an exceptional team, committed to the delivery of our strategic plans and profitable growth, and I thank them for their contribution to Chapel Down’s continued success.”
No update on acquisition
In June, Chapel Down announced that it was conducting a review to look at long-term growth, as part of which the company might be put up for sale.
The winemaker said it was the right time to review long-term funding options to support its growth strategy.
“We are [still] in a strategic review to fund our long term growth,” Carter told Morning Wire. “The review we announced on the 25th of June… is still ongoing and as soon as we have an update, we’ll provide [the market] with that in due course.”
There is no certainty that a sale will be announced.