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As the one standalone wine producer listed in London, Chapel Down (LSE:CDGP) is a uncommon UK inventory. Nevertheless, it’s additionally a small one with a £66m market cap, so doesn’t get a lot consideration from institutional buyers.
Certainly, Chapel Down has attracted only one share value goal from its home dealer. But it surely’s value noting that that is 57p, an attractive 47% above the present value.
So, would possibly this penny inventory be value a glance?
Stable gross sales development
Consider it or not, England is at the moment the world’s fastest-growing wine area. Because the local weather shifts, the South is beginning to turn out to be much like the Champagne area in France.
Based mostly in Kent within the Backyard of England, Chapel Down has over 1,018 acres of vineyards, roughly 9% of the UK’s complete. It produces a spread of glowing and nonetheless wine and sells bottles by way of off-trade, on-trade (bars, eating places, inns, and so forth), e-commerce, and export.
Yesterday (29 January), the winemaker reported a constructive buying and selling replace for 2025. For the primary time, it dispatched over 1m bottles of conventional methodology glowing wines, and there was gross sales development throughout all 4 channels.
| Channel | Income | Yr-on-year change |
|---|---|---|
| Off-trade | £9.37m | +38% |
| On-trade | £2.57m | +5% |
| Worldwide | £1.01m | +49% |
| E-commerce | £3.86m | +3% |
Chapel Down stated export development was sturdy as a consequence of its new distribution settlement with Jackson Household Wines within the US. In the meantime, the model now has 36% share of the off-trade English glowing wine market. Development right here was pushed by new listings, promotional campaigns, and the lapping of retailer destocking in 2024.
All this drove income 19% larger to £19.4m, barely larger than market expectations. Adjusted EBITDA of £4m to £4.5m was likewise above what was anticipated (£3.5m).
Chapel Down additionally does winery excursions and advantageous eating, and this introduced in simply over £2.2m final yr. Truly, I’ve been desirous to tour the Kent winery for some time, so I’ll hopefully get spherical to that this yr.
The corporate referred to as its 2025 harvest “world-class” after the nice and cozy summer time.
We’re seeing a generational shift into English Glowing Wine as Millennials, preferring a lighter, brisker, crisper type of wines, are more and more adopting the class. Customers are actually selecting Chapel Down all year long and for a broader vary of celebration events than different excessive worth glowing wines, which supplies us a major alternative for future sustained top-line development.
CEO James Pennefather.
One to think about?
As for negatives, one is that the corporate isn’t but worthwhile, because it nonetheless works in the direction of delivering “sustained worthwhile development within the medium time period“. So this clearly will increase the chance, particularly with the UK hospitality sector struggling.
On the finish of 2025, the corporate had internet debt of £12.4m. That was up from £9.2m the yr earlier than, primarily as a result of cultivation prices of 118 acres of latest vines planted since 2023. However these vines ought to clearly underpin years of future development, whereas the agency nonetheless has “important headroom” on its £20m revolving credit score facility, in keeping with administration.
Trying forward, Chapel Down is aiming to seize 1% of the equal of the worldwide Champagne market by 2035. That will equate to round 3m bottles, suggesting a major development alternative forward.
Whereas intriguing, this penny inventory continues to be a bit dangerous for me. However given Chapel Down’s sturdy model, rising gross sales, and over £25m value of wine inventory sitting in cellars, extra adventurous buyers would possibly wish to take into account taking a small stake.
