Chapel Down Reports Strong H1 Revenue Growth and Strategic Winery Pivot

Product mix: leaning harder into Traditional Method Sparkling

• Traditional Method Sparkling net sales revenue rose 17% to £5.2m and now makes up 70% of wine sales (H1 2024: 68%).
• Still and other wines increased 9% to £2.2m.
• Spirits have been fully exited – £0 in H1 2025 vs £0.1m in H1 2024 – consistent with the wine-first strategy.

Margins and profit: short‑term pressure, H2 tailwinds

Gross profit rose to £3.7m, but margin slipped to 46.1%. The squeeze came from three places: the events calendar phasing and lower non-wine contribution; higher costs embedded in the 2022 harvest sparkling wines; and a slightly higher proportion of still wine following the exceptional 2023 harvest.

Adjusted EBITDA fell 23% to £1.2m, but that is largely the flip side of a lower FV biological produce uplift (£0.2m vs £0.8m last year). Strip that out and Adjusted EBITDA improved 26% to £1.0m, showing healthier underlying trading. Management expects a marginal gross margin improvement in H2 as the sales mix premiumises into the festive period.

Strategic pivot: no new winery, capital discipline front and centre

The decision to halt the new-build winery is, in my view, pragmatic. It reduces execution and planning risk, preserves balance sheet flexibility and keeps focus on the core brand. Optimising Tenterden for sparkling – where Chapel Down is strongest – and tapping existing third‑party capacity for still wines should support growth without a big capex bill.

There are trade-offs. Using third-party capacity introduces some operational dependency, and investors should watch cost of goods and quality consistency. Management, however, guides that the cost impact will be immaterial and that total medium‑term capacity of 3,300 tonnes is sufficient to meet growth plans.

Balance sheet, cash and funding: inventory heavy, liquidity available

Stock rose 17% to £25.6m as the company bottled the standout 2023 harvest and continued cultivation. This is normal for a sparkling-led model – inventory is the flywheel for future revenues – but it ties up cash. Operating cash outflow improved to £0.4m from £2.9m, helped by working capital phasing, yet finance costs stepped up to £0.4m.

Net debt (excluding leases) increased to £11.3m. Chapel Down has a £20m Revolving Credit Facility (RCF – a flexible bank line) with an accordion option to £30m, which management says provides sufficient support to build maturing stocks and reinvest in existing assets. Net assets stand at £32.2m, or £0.19 per share, and the Board notes that IFRS book values understate the market value of tangible assets.

Governance and brand: new leaders, same direction

There is fresh leadership with CEO James Pennefather and CFO Louan Mouton, plus the appointment of Michael Spencer as Non‑Executive Chair and Simon Litherland as Independent NED. The core strategy remains intact, sharpened into three priorities: brand value enhancement, sustainable channel expansion, and disciplined capital management. The long‑term ambition is bold – win an equivalent 1% share of the global Champagne market by 2035.

Outlook and my view: positioned for a profitable festive season

The summer weather has been kind. The winemaker is forecasting a high‑quality, above‑average vintage, subject to harvest conditions. Trading since July has remained robust, especially in Off‑Trade, and the Board reiterates confidence in delivering strong sales growth and a return to full profitability for FY 2025.

Positives

• Clear retail leadership – 35% off‑trade share – and new listings driving velocity.
• Mix shift towards Traditional Method Sparkling supporting brand premiumisation.
• Pragmatic capex stance – Tenterden optimisation and third‑party capacity reduce risk.
• Inventory build positions the business for multi‑year growth.

Watch‑outs

• Gross margin still below last year, with inflation flowing through recent vintages.
• Higher net debt and rising finance costs are a headwind if trading softens.
• DTC contribution eased to 30% – H2 execution on events and ecommerce will matter.
• Harvest risk remains until grapes are in the press – October update will be key.

What could move the share price next

• October harvest outcome and any update on yield and quality.
• Peak season trading – especially supermarket sell‑through and festive premium ranges.
• Early signs from the US and Norway distributors as shipments build.
• Confirmation of full‑year profitability and any guidance on FY 2026 margin trajectory.

Bottom line: this is a solid half from Chapel Down. The sales engine is working, the brand is gaining ground, and the winery pivot swaps grand projects for cash discipline. If H2 margins tick up as guided and the harvest lands well, the setup for a profitable year looks credible.