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The UK’s largest winemaker has announced it will conduct a strategic review of the business that could result in a sale of the company.
Chapel down said it will examine options to secure funding to underpin its growth plans.
Its strategy includes investing in new vineyards, a new purpose-built winery to be operational for the 2026 harvest and the development of its brand home at Tenterden.
It stated: “Considering the timeline of these investments, the board believes that it is now appropriate to review the full range of long-term funding options that support this plan.”
As part of the review, the board will consider all alternatives, including investment from existing shareholders, investment from new shareholders or a sale of the company.
It said it remains on-track to deliver double digit sales growth in 2024 and retains a strong balance sheet with significant headroom to its existing debt facility of £12m. It has also reached agreement in principle to extend and increase this facility.
Rothschild & Co is acting as lead financial adviser to the company in relation to the strategic review.
Chapel Down shares have fallen 3.9% to 63p this morning and are down by more than 14% so far in 2024.
Morning update
Agricultural supplies player Wynnstay has posted a sharp drop in profits after suffering “difficult” trading conditions.
It said this challenging trading environment was driven by a combination of factors. The winter months were some of the wettest on record for the UK and the prolonged rains significantly disrupted the sowing season, affecting sales of winter and spring seed as well as fertiliser and other inputs.
Farmer spending patterns were also reined in as a result of weaker farmgate prices for certain products, especially milk, and general uncertainty over new governmental support schemes.
The group’s labour, distribution and packaging costs were also higher, albeit management initiatives helped to mitigate much of their effects.
First half revenue decreased significantly due to the result of reduced soft commodity prices, including for fertiliser, after the previous sharp increases. This deflation accounted for an estimated 86% of the year-on-year revenue decrease.
Overall revenue for the six months to 30 April decreased by 19.7% to £328.5m. An estimated £69m of this reduction resulted from the normalisation of soft commodity prices, including for fertiliser, from their previously elevated levels. The remainder reflected lower activity levels, in line with market trends.
However, trading in April and May was ahead of the prior year and the outlook for farmgate prices, especially milk, looks more favourable.
Adjusted operating profit reduced by 19.3% to £4.7m.
Gross profit down slightly at £40.2m from £41.7m, reflecting lower activity, however unit margins across categories were broadly maintained.
Steve Ellwood, executive chairman of Wynnstay Group plc, said: “Trading conditions in the first half of the financial year were significantly tougher than in the comparable period last year. The seed planting season was disrupted by persistent rain and wider farmer sentiment was weakened by suppressed farmgate prices and continuing uncertainty over governmental support polices. This was reflected in farm spending and investment patterns.
“We managed trading pressures as effectively as possible and broadly maintained margins across our product categories. We also continued to make progress with our major investment programmes.
“Spring trading over April and May has been ahead of last year and we anticipate more favourable farmgate prices, especially for milk, in the second half of the year. The Group continues to benefit from a strong balance sheet and good cash flow, which will support our investment and growth plans. Our expectations for the full year remain unchanged.”
On the markets this morning, the FTSE 100 has edged up 0.1% to 8,286.7pts.
Risers include Glanbia, up 8.9% to €18.95, Hilton Food Group, up 1.6% to 914.6p and British American Tobacco, up 0.8% to 2,555p.
Fallers include Ocado, down 4.1% to 299.7p, Wynnstay, down 2.5% to 380.4p and Bakkavor, down 2.1% to 139p.
Yesterday in the City
The FTSE 100 opened the week strongly, rising 0.5% to 8,281.6pts.
Britvic was amongst the notable risers, climbing a further 7.1% to 1,172p on expectations of a further bid from Carlsberg after news broke of the brewers previous rejected bids on Friday.
Also on the up were Naked Wines, up 3.9% to 63.3p, PZ Cussons, up 3.8% to 104.6p, Pets at Home, up 3.3% to 310.8p, Associated British Foods, up 2.1% to 2,519p, British American Tobacco, up 1.9% to 2,535p and FeverTree, up 1.8% to 1,081p.
Fallers yesterday included Glanbia, down 4.9% to €17.40, Kerry Group, down 3% to €75.50, Virgin Wines, down 2.2% to 44p, Bakkavor, down 1.4% to 142p, Greencore, down 1.2% to 167.8p and Sainsbury’s, down 0.8% to 260.2p.
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