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Majestic Wine PLC (WINE)

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Thursday 23 November, 2017

Majestic Wine PLC

Half Year Results

RNS Number : 2874X
Majestic Wine PLC
23 November 2017
 

For Immediate Release                                                                                                                                  23 November 2017

 

 

 

 

Majestic Wine PLC

 

("Majestic" or the "Group")

 

Half Year Results for the 26 weeks ended 2 October 2017

 

 

Ready to accelerate growth

 

·      Adjusted PBT(2) up £6.7m to £6.8m from breakeven in H1 2017. Statutory PBT £3.1m (H1 2017: £4.4m loss)

·      Naked Wines profitable in all three geographic markets

·      Majestic Retail growing profitably, despite a tough market

·      Sales up 5.7%, (4.2% underlying) on track to hit £500m sales target by 2019 and current market expectations(3)

·      Interim dividend increased by 33.3% to 2.0p per share (H1 2017: 1.5p)

 

 

H1 2018

£'000

 

 

 

% YoY

Underlying (4)

% YoY

Revenue

217,361

205,640

+5.7%

+4.2%

Adjusted EBIT(1)

 7,337

700

NM

NM

Adjusted PBT(2)

6,771

51

NM

 

Profit/(loss) before tax

3,079

(4,404)

 

 

Basic EPS

2.4p

(6.1p)

 

 

Adjusted EPS

7.9p

0.7p

NM

 

Dividend per share

 2.0p

1.5p

+33.3%

 

Free Cash Flow(5)

3,565

2,832

+25.9%

 

Reported net (debt)

(25,640)

(25,090)

+2.2%

 

 

Rowan Gormley, Group Chief Executive, commented: 

 

"The plan is on track.

Two years in and profits are growing, our foundation is solid and we are ready to accelerate growth. We have the opportunities to invest in new customers and a team excited to focus on what they do best. It's time to put our foot on the gas.

 

In this half, Naked Wines has demonstrated the quality of its model, people and management, by achieving profitability in all three geographical markets. It has become a disciplined business committed to continuous improvement.

 

The focus on empowering our wonderful store teams in Majestic Retail has finally borne fruit, with improved staff engagement flowing through into improved customer engagement, which means improved loyalty and retention.

 

The team have worked like demons and I am dead proud of every one of them."

 

Outlook:

 

We expect full year results to be in line with current market expectations.  Looking further out, we aim to increase the rate of sales growth in the medium term, by steadily increasing our investment in new customer acquisition.

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Majestic Wine PLC will host an analyst and investor briefing on Thursday 23 November 2017 at 8.45am at the offices of Instinctif, 65 Gresham Street, London, EC2V 7NQ. To attend please contact Gabby Clinkard on the details below.

A webcast will be made available after the meeting on our investor website: http://majesticwineplc.co.uk/investor-centre/results-centre/

Press Images are available on: http://majesticwineplc.co.uk/media-centre/images-logos/

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Notes:

(1) Adjusted EBIT is operating profit adjusted for amortisation of acquired intangibles, acquisition costs, share based payment charges, restructuring costs, net fair value movement through P&L on financial instruments and adjusting en primeur results to reflect profits on orders rather than on wine fulfilment               

(2)  Adjusted PBT is defined as Adjusted EBIT less net finance charges

(3)  Analyst consensus estimates can be found on www.majesticwineplc.co.uk

(4)  Underlying movement (a) includes en primeur revenues in year of order not year of fulfilment (b) is calculated using constant FX rates   for translation of the comparative period and (c ) IT costs reallocated to PLC (A reconciliation between Reported and Underlying results by segment for H1 2017 is included in the Additional unaudited information)

(5)  Free cash flow is defined as cash generated from operations less capital expenditure and excluding cash Adjusted items

 

A summary of adjustment and underlying calculations are shown in the additional unaudited information at the end of this document.

 

For further information, please contact:

Majestic Wine PLC

Rowan Gormley, Chief Executive Officer

James Crawford, Chief Financial Officer

Gabriella Clinkard, Public & Investor Relations

 

Tel: 01923 298 200

 

 

Tel: 07891 206239

[email protected]

Investec (NOMAD & Joint Broker)

Garry Levin / David Flin / David Anderson / Carlton Nelson

 Tel: 0207 597 5970

 Liberum (Joint Broker)

 Peter Tracey / Richard Bootle

 Tel: 020 3100 2222

Instinctif Partners (PR Agency)

Damian Reece / George Yeomans

Tel: 0207 457 2020 or 07931 598 593

 

 

About Majestic Wine PLC:

Majestic Wine PLC is a leading wine specialist, operating in four separate divisions, each with the fundamental goal of delivering sustained growth in shareholder value by doing the right thing for the Group's customers, suppliers and people:

•Majestic Retail - The UK's largest specialist wine retailer, with 210 branches in the UK and 2 in France. We help people find the wines they will love through over 1000 highly trained, specialist store team members. Reported sales for the year ended 3 April 2017 were £262.2m.

•Naked Wines - Funds independent winemakers to make exclusive wines at preferential prices which we pass onto customers. Naked Wines currently has 177 winemakers in 16 countries and 371,000 Mature Angels (Customers). Reported sales for the full year ended 3 April 2017 were £144.3m.

•Majestic Commercial - A specialist on-trade supplier who aims to support businesses to make their wine lists more profitable, with the unique advantage of running their supply chain through Majestic Retail stores. Reported sales for the year ended 3 April 2017 were £46.6m.

•Lay and Wheeler - A specialist fine wine merchant. Lay & Wheeler aims to be a trusted guide for people who love fine wine, supplying the world's finest wines with a personal service. Reported sales for the year ended 3 April 2017 were £12.3m.

 Chief Executive's Review

We are ready to accelerate growth.

 

Two years into our three year transformation plan, I am pleased to report that:

1.    Profits are up,

2.    We have a solid foundation for growth, and,

3.    We have increased our opportunities to invest in new customer acquisition

 

1.    Profits up

 

Adjusted EBIT is up £6.6m to £7.3m. Reported PBT is back in the black at £3.1m vs a £4.4m loss in H1 2017. This was driven by Naked Wines achieving profitability in all three geographical markets, and continued profitable sales growth in Majestic Retail.

 

 

H1 FY 2018

H1 FY 2017

 

Sales

£'000

Adjusted EBIT

£'000

Sales

£'000

Adjusted EBIT

£'000

Naked Wines

67,794

4,720

58,980

(2,775)

Majestic Retail

120,640

4,592

117,880

3,459

Commercial

22,636

1,033

23,430

1,623

Lay & Wheeler

6,291

392

5,350

276

Central Costs

-

(3,400)

-

(1,883)

Total

217,361

7,337

205,640

700

A reconciliation between Reported and Underlying results by segment for H1 2017 is included in the additional unaudited information at the end of this document.

Naked Wines

Naked Wines is now profitable in all three geographical markets. We've made particular progress in the USA (our largest market) where sales were up 9.9% and Adjusted EBIT increased by £5.2m, from a loss this time last year.

 

So what has driven the profit improvement in all three of Naked Wines geographies?

 

The biggest single factor has been growth in the customer base, which in turn has driven growth in contribution from Mature Angels by £3.8m, a 33.3% increase from H1 2017.

 

In addition, investment in New Customer Acquisition has fallen by £3.2m (40.3%) from H1 2017, of which we estimate £1.3m is due to timing and will reverse in H2 2018.

 

It is important to note that the growth in contribution from Mature Angels is consistent with the pattern of the last 5 years, despite the cut in marketing investment in New Customer Acquisition. This is because we were able to improve efficiency of our marketing investment through our ongoing test and learn programme.

 

Majestic Retail

The transformation of Majestic Retail is now flowing through to profit. The investments made to improve our customer proposition and the capabilities of the business are delivering higher sales while one-off transformation and double-running costs are now coming out. (Read on for more detail)

 

Majestic Commercial

As we stated in our results announcements, we intend to restore Majestic Commercial to growth from 2018 onwards. Our first priority has got to be the much bigger Retail business. As a result, adjusted EBIT fell 36.4% from H1 2017 to £1.0m.

 

Lay and Wheeler

The new management team at Lay & Wheeler continue to delight us with ongoing growth in sales and profits, showing what great leadership can achieve in a 160 year old business.

 

2.    Solid Foundations

We are coming to the end of the heavy lifting part of the Majestic Retail transformation plan.

 

The big projects are on time and on budget. This calendar year alone we have...

- Launched a new website, improving customer interaction and functionality, delivering better performance

- Completed the majority of store refits,

- Dramatically improved stock availability, and,

- Given our stores the customer data tools they need to build customer engagement and retention.

 

There are still more projects to come over the next 12 months - a new EPOS system and Accounting Systems.

 

More importantly, we now feel like we are getting real traction with the transformation plan at a fundamental level.

 

For the past two years, we've been saying that sales growth was heading in the right direction but customer retention and team retention haven't improved as much as we hoped.  We finally feel like we are achieving real and sustained change, by empowering store managers to be entrepreneurs, rather than a traditional retail command and control environment.

 

This has largely been driven by our Franchise-Lite project, which we kicked off in earnest six months ago. There is still more work to do to fully tap the potential of this in our stores, but already some of our KPIs are moving in the right direction.

 

Group KPI

Definition

Majestic Retail

Naked Wines

Commercial

Lay & Wheeler

Repeat customer retention

% of repeat customers from 12 months ago that are still repeat customers, as measured from our customer databases

 

64.5%

 

(H1 2017: 68.4%)

 

70.1%

 

(H1 2017: 67.8%)

 

74.6%

 

(H1 2017: 76.3%)(1)

 

96.0%

 

(H1 2017: 93.2%)

Product availability

% of targeted range available in stores / on websites as indicated by our inventory reporting

 

84.3%

 

(H1 2017: 78.3%)

 

87.5%

 

(H1 2017: 83.6%)

 

87.2%

 

(H1 2017: 85.0%)

 

N/A

 

 

Proportion of 5-star service ratings

% of service ratings scoring 5* in last 2 months as recorded by websites / apps / telephone feedback

 

88.6%

 

(H1 2017: 86.6%)

 

90.2%

 

(H1 2017: 90.0%)

 

87.9%

 

(H1 2017: N/A)

 

N/A

 

(H1 2017: 92.1%)

Wine quality (Buy it Again Ratings)

% of "Yes" scores in the last 12 months as recorded by websites / apps

 

89.4%

 

(H1 2017: 90.9%)

 

90.9%

 

(H1 2017: 91.0%)

 

 

 

N/A

 

 

 

N/A

Team retention

% of key staff (e.g. store managers) as of 12 months ago still working per payroll records

 

81.1%

 

(H1 2017: 77.0%)

 

84.3%

 

(H1 2017: 90.0%)

 

60.4%

 

(H1 2017: 75.0%)

 

100.0%

 

(H1 2017: 81.0%)

 (1) This was incorrectly stated as 85.7% in the H1 2017 results announcement.

 

What has not worked

We like to tell you the things that haven't worked so you don't have to waste your time looking for them.

 

Firstly, Majestic Commercial is still in a holding pattern while we focus on the much larger Majestic Retail business. Last year, we said we would turn to it in earnest in 2018 and that remains the case. We thank the team there for their patience and hard work in the interim.

 

Secondly, Retail Customer Retention has fallen. We are confident that with Team Retention and Customer Engagement moving in the right direction, we will see an improvement in this KPI.

3.    We have the investment opportunities to grow

We have restored Return on Investment (ROI) in Naked Wines to 98% (H1 2017: 48%) through disciplined investment in new customer acquisition and reduced investment in under-performing direct mail in the USA.  

 

We intend to revert to growing investment in New Customer Acquisition. Over the last five years this has grown on average by around 20% a year (with H1 2017 being an outlier) and we believe that we can continue to grow investment at that rate, or higher, in the future from the level established this year.

 

Although it is apparent that the opportunities for growth appear to be strongest in;

-      Naked Wines rather than Majestic Retail,

-      Digital rather than traditional channels, and,

-      The USA rather than the UK,

…it is important to note that we will invest wherever we see the best risk/return ratio, and are agnostic about where we can achieve that.

  

4.    Summary and Outlook

We are ready to put our foot on the gas and accelerate growth.

Two and a half years ago I said the reason I became Group CEO was because I saw the chance to grow shareholder value by driving growth in Naked Wines and restoring Majestic Retail's entrepreneurial spirit.

 

To get to this point we have had to do a lot of heavy lifting - unglamorous projects that don't get seen by our customers or investors, but build a solid platform for the growth phase.

 

Now, we have the investment opportunities to grow and a management team who can now focus on what they do best.

 

Naked Wines has demonstrated the quality of its model, people and management, by doubling sales since the acquisition and achieving profitability in all three geographical markets. It has become a disciplined business committed to continuous improvement.

 

The focus on empowering the wonderful people in Retail has finally borne fruit, with improved staff engagement flowing through into improved customer engagement, which means improved loyalty and retention.

 

We expect full year results to be in line with current market expectations.  Looking further out, we aim to increase the rate of sales growth in the medium term, by steadily increasing our investment in new customer acquisition.

 

Rowan Gormley

Group Chief Executive

23 November 2017

 

 

Financial Review 

1.    Group Trading Overview: Sales growth converting to profitability

Sales growth has translated strongly into profitability. Growing sales and gross margin improvement as our mix shifts towards the USA have driven the majority of our profit growth. We have also removed inefficiencies as the transformation projects in Majestic Retail are coming to an end and we eliminated underperforming marketing spend in Naked Wines. Sales growth of 5.7% was driven by a 4.2% underlying increase and 1.2% of currency translation improvements due to the weakening of sterling against the US dollar in particular. Due to the elimination of duplicated costs and inefficient investments this sales growth translated into Adjusted EBIT of £7.3m, up from £0.7m in H1 2017. Retranslating the prior period performance to current exchange rates adds an additional £0.3m to our underlying growth in adjusted EBIT, bringing total growth in this measure to £6.9m, predominantly due to the revised currency translation impact on the prior period's losses in the USA. Finance charges have reduced by £0.1m (12.8%) reflecting the lower average debt balance over the course of the period resulting in Adjusted PBT of £6.8m (H1 2017: £0.1m).

We continue to incur significant non-cash charges relating to the Naked Wines acquisition amounting to £3.9m, which we eliminate from our adjusted profit measures as they are non-cash and do not reflect the trading performance of the business. We also adjust a net £0.2m credit relating to share based payments and mark to market on FX contracts, both of which are non-cash and considered to distort trading performance due to volatility in either share price or exchange rate. After recognising these items we reported Profit before Tax for the period of £3.1m (H1 2017: £4.4m loss)

The £6.9m improvement in the underlying Adjusted EBIT has been generated by a combination of levers:

●     Gross profit from sales growth    £2.3m

●     Gross margin improvement          £2.4m

●     Marketing phasing                            £1.3m

●     Cost movement                                 £0.9m

 

We expect sales growth and cost efficiency to continue into H2 2018. The Group gross margin improvement is driven in equal parts by business unit mix and underlying improvement in Naked Wines gross margins. The latter will cease as the mix of New Customer to Mature Angel sales rebalances in H2 2018. Combining these continuing trends with a step up in marketing investment in H2 year on year we remain comfortable with market expectations.

In reviewing business unit performance the Board uses a constant currency presentation to enable accurate understanding of local dynamics, and separately tracks the impact to the group of currency translation versus the constant rate presentation. Furthermore, prior year underlying measures for Central Costs are adjusted within each business unit to include certain IT costs which were previously reported as part of Naked Wines and Majestic Retail in H1 2017. A schedule reconciling the reported H1 2017 results to the underlying version is included in the additional unaudited information at the end of this document and the business unit commentary that follows in this financial review is on that basis unless otherwise stated.

2. Naked Wines: Sustained growth in Mature Angels and efficient recruitment restores ROI and demonstrates innate profitability

We segment the Naked Wines business into two groups of customers - New Customer Acquisition and the Mature Angel customer base. The £7.3m increase in Adjusted EBIT can be attributed to (i) a £3.8m increase in Mature Angel Contribution (gross profit less fulfilment costs), (ii) a reduction of £3.2m in the total costs relating to New Customer Acquisition (gross profit less fulfilment costs and marketing), and (iii) a reduction of £0.3m in our administration cost base as we stabilised the team and reduced the level of Naked Wines shared overhead.

Looking down the income statement for the business, underlying sales growth of 10.9% to £67.8m vs H1 2017 was driven by:

●     Mature Angel sales growing 22.7%. We grew our closing Mature Angel numbers by 15.6%  compared to the prior period, more of whom are in the higher spending US market

●    Sales to new customers declining 23.4% as we eliminated investment in recruitment marketing in channels and partners that were not delivering a return

 

This sales performance means that the revenues generated out of Naked Wines in the last 12 months are double the level reported when the business was acquired in April 2015.

Gross margin improved by 250bps, a combination of the smaller proportion of low margin sales to new customers, and an improvement of over 100bps in the average gross margin on Mature Angel sales, driven by mix shift to the USA and a reduction in the use of sales agents to trigger orders following a review of their performance. The combination of sales increase, margin improvement and increased efficiency in our fulfilment operations resulted in contribution from Mature Angels increasing by £3.8m.

Marketing spend for New Customer Acquisition reduced by 46.3% compared to H1 2017. This resulted in a 10.6% reduction in the number of new Mature Angels coming into the business, but a significant reduction in the cost per new Mature Angel.

We measure the performance of Naked Wines on the amount we have invested in growing the base of Mature Angels and the return on that investment (ROI) which is measured as the recurring contribution per Mature Angel divided by the cost of acquiring each Mature Angel. The amount of spend directed at growth in Mature Angels was reduced to £0.5m this year vs £1.9m in H1 2017. However the ROI on this investment was 98% compared to 48% in H1 2017. The product of growth spend and ROI is the amount of contribution added in the period to the next year's results, and stands at £0.5m this year vs £0.9m last year. We expect to recoup this reduction in H2 2018 as we have an investment plan more weighted to the second half.

3. Retail: Sales growth plus cost efficiency equals strong profit growth

Majestic Retail grew reported sales by 2.3% (2.0% underlying), a slowdown compared to the rate of growth last year. Despite increasing our Repeat customer base to 510,000 people, (H1 2017: 475,000) price increases, precipitated by weaker sterling raising input costs, resulted in a total volume reduction. It is however reassuring that we continue to grow revenue in an extremely competitive market.

Gross margin was 35bps higher year on year. This was the net of:

·      Trading margin (the difference between the price we sell and the cost we buy at) down 28bps:  Whilst we recovered the bulk of the cost increases due to weaker currency we reduced certain prices to ensure we remained competitive on a number of key value lines.

·      Lower selling costs in store year on year generating 63bps of improvement  

The remaining cost base increased £0.1m, just 0.5%, despite ongoing inflationary pressures and the addition of a half year of costs relating to our National Fulfilment Centre. As a reflection of coming to the end of the 'heavy lifting' part of the transformation plan, dual-operating costs are being eliminated from the cost base. For example, we have delivered considerable savings through re-negotiating costs as diverse as print media and insurance, we incurred no contract termination costs of the type recognised in H1 2017, and we have started to reflect the impact of national fulfilment and shelving in our store resourcing and operations.

The result of this is an increase in Adjusted EBIT of 22.7% to £4.6m at H1 2017


4. Commercial: Sales decline impacted profitability

We have described the slow-down in the Commercial business over the past two reporting periods and the trends have continued to be disappointing. Sales declined 3.4%, driven by poor retention and sales performance from our existing account base. Looking at our KPIs it is easy to see the high level of staff turnover. As a result it takes time for account relationships and processes to be re-established. As these handovers are taking place we have not delivered the price changes needed to recoup the input cost pressures resulting in trading gross margins declining by 65bps vs H1 2017  and lower cost recovery causing a further 82bps decline, resulting in gross margin of 14.7% (FY17: 16.2%). With distribution and admin costs increasing £0.1m in the half the business delivered adjusted EBIT of £1.0m, £0.6m lower versus the prior period comparative.

The account management team has stabilised but, as Rowan has already stated, it will require long-term fixes and implementation of a set of new systems before we have the division working as we would like.

 

5. Lay & Wheeler: Continued growth with focus on margins

Sales grew by 8.9% despite the strong comparative (28% reported in H1 2017) and elimination of certain low margin sales which improved our trading gross margin by 107bps. However, other selling costs reflected in our total cost of sales offset this improvement, resulting in higher gross profit of £0.1m year on year. Other costs were broadly flat so this dropped through to the adjusted EBIT line delivering a 42.0% improvement year on year.
 

6. Central costs: Increased by reallocations and additional staff

We moved our IT development function, previously part recognised in each of Naked Wines, Retail and Commercial, into our central costs this year which increased reported Central costs by £0.8m. We have also invested in building out our central digital marketing team which has developed a pipeline of high returning activity.

As a result of these changes, we report £3.4m of central costs versus H1 2017 of £2.7m on an underlying basis.  Excluding the reallocated IT costs, H1 2017 central costs were £1.9m last year.
 

7. Adjusted items: Reducing in size and scope

We use a range of adjusted performance measures to describe our results, as we believe these measures support clearer understanding of the value accruing to our shareholders. Items we eliminate from our adjusted profits are:

·      Substantial non-cash charges relating to the Naked Wines acquisition which are reducing on a planned schedule and would otherwise distort our trading performance

·      En-primeur sales shipped this year where orders and cash were taken in prior years, as this is a better measure of our sales team performance

·      Credits (and charges) due to marking-to-market our FX contracts which fluctuate in value daily

·      Other share based payment charges which are non-cash and distort underlying performance as they are impacted by share price fluctuation in the period prior to the award

 

To ensure our shareholders can calculate the value of each share they own we provide a disclosure, in our earnings per share notes, of the full number of shares that would be in issue if all share awards were to vest.

 

The range and magnitude of these adjusted items continues to reduce. We categorise these as:

 

a.    Acquisition related items (charge of £3.9m vs £5.4m in H1 2017): Having vested the first tranche of earn-out shares these are now fully expensed, resulting in a reduction in the acquisition related share based payment charge from £3.3m to £1.9m in the half. Similarly the shortest lived intangibles we recognised on acquisition (hiring costs and IT assets) have been fully amortised, reducing the charge from £2.2m to £1.9m in the half.

b.    Other items (credit of £0.2m vs credit of £1.0m in H1 2017): We recognised no acquisition or restructuring costs in the half vs £0.2m in H1 2017. Revaluation of FX contracts, used to stabilise our product purchase costs, generated a gain of £0.9m (H1 2017 £1.6m). Our non-acquisition related share based payment charge increased to £0.6m versus £0.2m in H1 2017 as we made a significant LTIP award in July 2016 that is now generating a full 6 months of expense in the period, as well as having made additional smaller awards since. The adjustment for timing of en primeur sales reduced to £0.2m from £0.3m.

 

8. Taxation

Tax for the six month period represents an adjusted effective rate (defined as current period charge divided by adjusted PBT) of 22% based on a current period charge of £1.5m. Net movements in deferred tax are £0.1m, resulting in a reported effective tax rate of 49%.
 

9. Financing costs, cashflow and net debt: Costs reducing as average net debt balance reduces.

Financing costs reduced by 12.8% to £0.6m, as we carried a lower average balance on our revolving credit facility. Net debt at the end of H1 2018 was £25.6m, £0.5m higher year on year and unchanged versus the end of FY17.

During H1 2018, the business generated free cash flow of £3.6m, 48.6% of adjusted EBIT, impacted by higher inventory build in the USA and the UK. This cash flow was utilised to pay interest of £0.5m, income tax of £0.4m and dividends of £2.6m resulting in the small reduction in reported net debt to £25.6m (FY17 year end £25.7m).

Since the announcement of our transformation plan in 2015, we have a stated target of net debt at 0.5x EBITDA.  With profitability improving and the business generating cash we remain on track to achieve this with period end net debt of 0.95x EBITDA.
 

10. Dividend

Our policy is to pay out c.35% of adjusted earnings in the year. Based on our outlook for the year the Board has approved an interim dividend payment of 2.0p per share, a 33% increase on H1 2017. The dividend will be payable on 22 December 2017 to shareholders on the register at 1 December 2017. The ex-dividend date is 30 November 2017.

James Crawford

Group Chief Financial Officer

23 November 2017

 

INDEPENDENT REVIEW REPORT TO MAJESTIC WINE PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 2 October 2017 which comprises the statement of comprehensive income, the balance sheet, the statement of changes in equity, the cash flow statement and related notes 1 to 8. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 2 October 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

 

Deloitte LLP

Statutory Auditor

St Albans, United Kingdom

23 November 2017

Unaudited consolidated income statement

 

 

Note

26 weeks ended           2 Oct 2017

26 weeks ended             26 Sept 2016

53 weeks ended
3 Apr 2017

 

 

 

 

 

 

 

£'000

£'000

£'000

 

 

 

 

 

Revenue

 

217,361

205,640

465,444

Cost of sales

 

(158,676)

(152,693)

(343,837)

Gross profit

 

58,685

52,947

121,607

Distribution costs

 

(27,288)

(25,081)

(55,646)

Administrative expenses

 

(28,154)

(31,986)

(67,018)

Other operating income

 

402

365

811

Operating profit/(loss)

 

3,645

(3,755)

(246)

Net finance charge

 

(566)

(649)

(1,222)

Profit/(loss) before taxation

 

3,079

(4,404)

(1,468)

 

 

 

 

 

Analysed as:

 

 

 

 

Adjusted profit before taxation

 

6,771

51

12,877

Adjusted items:

 

 

 

 

 - Non cash charges relating to acquisitions

4

(3,857)

(5,443)

(11,267)

 - Other adjusted items

4

165

988

(3,078)

Profit/(loss) before taxation

 

3,079

(4,404)

(1,468)

 

 

 

 

 

Taxation

5

(1,503)

419

(1,227)

Profit/(loss) for the period

 

1,576

(3,985)

(2,695)

 

 

 

 

 

 

 

 

 

 

Earnings/(loss) per share

 

 

 

 

Basic

6

2.4p

(6.1p)

(4.1p)

Diluted

6

2.2p

N/A

N/A

Adjusted basic

6

7.9p

0.7p

17.7p

Adjusted diluted

6

7.4p

0.7p

16.3p

 

The results are all derived from continuing operations.

Unaudited consolidated statement of comprehensive income

 

 

26 weeks ended          2 Oct 2017

26 weeks ended          26 Sept 2016

53 weeks ended
 3 April 2017

 

£'000

£'000

£'000

 

 

 

 

Profit/(loss) for the period

1,576

(3,985)

(2,695)

Other comprehensive (losses)/income

 

 

 

Currency translation differences

(207)

1,476

1,780

Other comprehensive (losses)/income

(207)

1,476

1,780

 

 

 

 

Total comprehensive income/(losses) for the period

1,369

(2,509)

(915)

 

The total comprehensive income for the period and the prior periods is wholly attributable to the equity holders of the parent company, Majestic Wine PLC.

Other comprehensive income relates to foreign currency translation differences on consolidation of foreign currency subsidiaries.  These gains and losses are recycled to the income statement in the event of the disposal of a foreign currency subsidiary.

Unaudited consolidated statement of changes in equity

 

 

Share capital

Share premium

Capital reserve - own shares

Capital redemption reserve

Currency translation reserve

Retained earnings

Total shareholders' funds

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

At 28 March 2016

5,307

20,441

(17)

363

2,058

81,062

109,214

Total comprehensive income /(losses) for the period

 -

-

-

-

1,476

(3,985)

(2,509)

Shares issued

1

58

-

-

-

-

59

Share based payment charges - ongoing

-

-

-

-

-

167

167

Share based payment charges - acquisition related

-

-

-

-

-

3,062

3,062

Deferred taxation

-

-

-

-

-

47

47

At 26 September 2016

5,308

20,499

(17)

363

3,534

80,353

110,040

Total comprehensive income for the period

-

-

-

-

304

1,290

1,594

Shares issued

1

6

-

-

-

-

7

Share based payment charges - ongoing

-

-

-

-

-

432

432

Share based payment charges - acquisition related

 

-

-

-

-

3,611

3,611

Dividends paid

-

-

-

-

-

(1,062)

(1,062)

Deferred taxation

-

-

-

-

-

(50)

(50)

At 3 April 2017

5,309

20,505

(17)

363

3,838

84,574

114,572

Total comprehensive (losses) /income for the period

-

-

-

-

(207)

1,576

1,369

Shares issued

45

52

-

-

-

(43)

54

Share based payment charges - ongoing

-

-

-

-

-

490

490

Share based payment charges - acquisition related

-

-

-

-

-

1,813

1,813

Dividends paid

-

-

-

-

-

(2,564)

(2,564)

Deferred taxation

-

-

-

-

-

(22)

(22)

At 2 October 2017

5,354

20,557

(17)

363

3,631

85,824

115,712

Unaudited consolidated balance sheet

 

 

2 Oct 2017

26 Sept 2016

3 April 2017

 

 

£'000

£'000

£'000

 

 

 

 

 

Non current assets

 

 

 

 

Goodwill and intangible assets

 

49,610

54,154

51,447

Property, plant and equipment

 

66,561

69,103

68,011

En primeur purchases

 

2,315

1,772

1,841

Prepaid operating lease costs

 

1,791

2,033

1,905

Deferred tax assets

 

1,264

1,135

1,696

 

 

121,541

128,197

124,900

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

110,649

99,297

94,834

Trade and other receivables

 

15,125

15,743

14,973

En primeur purchases

 

3,716

2,558

3,030

Financial instruments at fair value

 

230

3,428

-

Cash and cash equivalents

 

11,878

11,495

23,007

 

 

141,598

132,521

135,844

 

 

 

 

 

Total assets

 

263,139

260,718

260,744

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

(64,775)

(79,489)

(56,019)

En primeur deferred income

 

(4,653)

(3,182)

(3,937)

Deferred Angel income

 

(30,986)

(23,506)

(28,406)

Bank overdraft

 

(11,804)

(3,169)

(12,537)

Provisions

 

(232)

(241)

(235)

Deferred lease inducements

 

(645)

(430)

(437)

Bond financing

 

(157)

(2,411)

(2,619)

Financial instruments at fair value

 

(179)

-

(1,090)

Current tax liabilities

 

(1,318)

-

(185)

 

 

(114,749)

(112,428)

(105,465)

Non-current liabilities

 

 

 

 

En primeur deferred income

 

(2,729)

(2,080)

(2,122)

Deferred lease inducements

 

(1,841)

(2,391)

(2,215)

Provisions

 

(865)

(695)

(829)

Bank loan

 

(23,112)

(28,415)

(33,512)

Bond financing

 

(2,445)

(2,590)

-

Deferred tax liabilities

 

(1,686)

(2,079)

(2,029)

 

 

(32,678)

(38,250)

(40,707)

 

 

 

 

 

Total liabilities

 

(147,427)

(150,678)

(146,172)

 

 

 

 

 

Net assets

 

115,712

110,040

114,572

 

 

 

 

 

Shareholders' funds

 

 

 

 

Called up share capital

 

5,354

5,308

5,309

Share premium

 

20,557

20,499

20,505

Capital reserve - own shares

 

(17)

(17)

(17)

Capital redemption reserve

 

363

363

363

Currency translation reserve

 

3,631

3,534

3,838

Retained earnings

 

85,824

80,353

84,574

Equity shareholders' funds

 

115,712

110,040

114,572

 

We confirm to the best of our knowledge that: 

 

(a) the condensed consolidated interim financial statements have been prepared in accordance with IAS 34: 'Interim Financial Reporting', as adopted by the European Union, and

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

- an indication of the important events that have occurred during the first 26 weeks of the financial year and their impact on the condensed consolidated interim financial statements, 

- a description of the principal risks and uncertainties for the remaining 26 weeks of the financial year; and

- material related party transactions in the first 26 weeks of the year and any material changes in the related party transactions described in the last annual report.

By order of the Board

James Crawford
Chief Financial Officer
23 November 2017

Unaudited consolidated cash flow statement

 

 

Note

26 weeks ended           2 Oct 2017

26 weeks ended          26 Sept 2016

53 weeks ended          3 April 2017

 

 

£'000

£'000

£'000

 

 

 

 

 

Net cash generated by operating activities

 

 

 

 

Cash generated by operations

8

5,183

4,167

9,127

Foreign exchange differences

 

(46)

258

315

UK income tax paid

 

(605)

(1,620)

(3,354)

Overseas income tax paid/(received)

 

184

(250)

(591)

Net cash generated by operating activities

 

4,716

2,555

5,497

 

 

 

 

 

Cashflows from investing activities

 

 

 

 

Purchase of property, plant and equipment

 

(1,255)

(1,564)

(3,311)

Purchase of intangible fixed assets

 

(362)

(44)

(190)

Purchase of prepaid lease assets

 

-

-

(22)

Proceeds from sale of non-current assets

 

-

-

21

Net cash outflow from investing activities

 

(1,617)

(1,608)

(3,502)

 

 

 

 

 

Cashflows from financing activities

 

 

 

 

Interest paid

 

(468)

(416)

(874)

Issue of ordinary share capital

 

54

59

66

Draw down of borrowings

 

-

4,000

9,000

Repayment of borrowings

 

(10,517)

-

(2,371)

Loan arrangement fees paid

 

-

(68)

(88)

Equity dividends paid

 

(2,564)

-

(1,062)

Net cash (outflow)/inflow from financing activities

 

(13,495)

3,575

4,671

 

 

 

 

 

Net (decrease)/increase in cash

 

(10,396)

4,522

6,666

Cash and cash equivalents at beginning of year

 

10,470

3,804

3,804

Cash and cash equivalents at end of year

 

74

8,326

10,470

    

Notes to the unaudited financial statements

 

1.      General information

 

Majestic Wine PLC is a public limited company ("Company") and is incorporated in the United Kingdom under the Companies Act 2006.  The Company's ordinary shares are traded on the Alternative Investment Market ("AIM").

 

The address of the registered office is Majestic House, The Belfry, Colonial Way, Watford WD24 4WH  The Group's principal activity is the retailing of wines, beers and spirits.  The Company's principal activity is to act as a holding company for its subsidiaries.

 

2.      Basis of preparation

 

The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the accounting policies set out in the annual report for the year ended 3 April 2017.  The condensed set of financial statements included in this interim report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.  The condensed financial statements are not statutory accounts.  The financial reporting period represents the 26 week period ending 2 October 2017 and the prior period, 26 weeks to 26 September 2016.

 

Going concern

The Directors have, at the time of approving the interim financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis of accounting in preparing the interim financial statements. 

 

3.      Segmental reporting

 

IFRS 8 requires operating segments to be determined based on the Group's internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been determined to be the Board as they are primarily responsible for the allocation of resources to segments and the assessment of performance of the segments.

 

The Group's operating segments are organised into four distinct business units, each operating in a separate segment of the overall wine market.  Retail is a customer based wine retailer, selling wine, beer and spirits from stores across the UK, and online, and also incorporates the Group's French business.  Commercial is a Business to Business ("B2B") wine retailer selling to pubs, restaurants and events.  Lay & Wheeler is a specialist in the fine wine market and also provides cellarage services to customers.  Naked Wines is a customer funded international online wine retailer. 

 

Performance of each operating segment is based on Sales, Adjusted EBIT (being operating profit less any Adjusted Items) and Adjusted PBT (being profit before taxation less any Adjusted Items.)  These are the financial performance measures that are reported to the CODM, along with other operational performance measures, and are considered to be useful measures of the underlying trading performance of each segment.  Adjusted Items are not allocated to the operating segments as this reflects how they are reported to the Board.

 

The revenue and profits of the Lay & Wheeler operating segment as presented to the CODM are recognised on the receipt of orders, cash receipts and payments in relation to en primeur campaigns.  The segment performance is reviewed in this way as resources utilised in generating these sales are expensed as incurred.  This differs from the revenue recognition policy required under IAS 18 where revenue is recognised on delivery of the wine to the customer, which may be up to two years after

the original order and payment.  As a result a reconciling item is presented between the total operating segments revenue and results and the IFRS statutory measure.

3.      Segmental reporting (continued)

 

Costs relating to centralised group functions are not allocated to operating segments for the purposes of assessing segmental performance and consequently these are presented as a separate segment. 

 

Inter-segment transactions are conducted on an arm's length basis.  The Group is not reliant on a major customer or group of customers.

 

All activities are continuing.

 

 

 

26 weeks ending 2 October 2017

Retail

Commercial

Naked Wines

L&W

Unallocated

Group

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Third party revenue

120,640

22,636

67,794

7,614

-

218,684

Movement in en primeur sales

-

-

-

(1,323)

-

(1,323)

Reported third party revenue

120,640

22,636

67,794

6,291

-

217,361

 

 

 

 

 

 

 

Segment result - Adjusted EBIT

4,592

1,033

4,720

392

(3,400)

7,337

Net finance costs

-

-

-

-

(566)

(566)

Adjusted profit/(loss) before taxation

4,592

1,033

4,720

392

(3,966)

6,771

Adjusted items:

 

 

 

 

 

 

 - Non cash items relating to acquisitions

 

 

 

 

(3,857)

 - Other adjusted items

 

 

 

 

 

165

Profit before taxation

 

 

 

 

 

3,079

 

 

 

 

 

 

 

Depreciation

2,444

-

172

53

-

2,669

Amortisation

316

-

1,834

164

-

2,314

 

 

 

 

 

 

 

Geographical analysis

 

UK

Rest of Europe

US

Australia

Group

Reported third party revenue

 

173,044

4,321

27,267

12,729

217,361

Non-current assets

 

118,823

127

2,504

87

121,541

 

 

3.      Segmental reporting (continued)

 

26 weeks ending 26 September 2016

Retail

Commercial

Naked Wines

L&W

Unallocated

Group

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Third party revenue

117,880

23,430

58,980

6,992

-

207,282

Movement in en primeur sales

-

-

-

(1,642)

-

(1,642)

Reported third party revenue

117,880

23,430

58,980

5,350

-

205,640

 

 

 

 

 

 

 

Segment result - Adjusted EBIT

3,459

1,623

(2,775)

276

(1,883)

700

Net finance costs

-

-

-

-

(649)

(649)

Adjusted profit/(loss) before taxation

3,459

1,623

(2,775)

276

(2,532)

51

Adjusted items:

 

 

 

 

 

 

 - Non cash items relating to acquisitions

 

 

 

 

(5,443)

(5,443)

 - Other adjusted items

 

 

 

 

988

988

Profit/(loss) before taxation

 

 

 

 

(6,987)

(4,404)

 

 

 

 

 

 

 

Depreciation

2,510

-

91

56

-

2,657

Amortisation

564

-

-

47

2,160

2,771

 

 

 

 

 

 

 

Geographical analysis

 

UK

Rest of Europe

US

Australia

Group

Reported third party revenue

 

168,921

4,323

23,790

8,606

205,640

Non-current assets

 

122,057

2,861

3,208

71

128,197

 

3.   Segmental reporting (continued)

 

53 weeks ending 3 April 2017

Retail

Commercial

Naked Wines

L&W

Unallocated

Group

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Third party revenue

262,200

46,628

144,341

14,715

-

467,884

Movement in en primeur sales

-

-

-

(2,440)

-

(2,440)

Reported third party revenue

262,200

46,628

144,341

12,275

-

465,444

 

 

 

 

 

 

 

Segment result - Adjusted EBIT

13,345

2,541

1,417

980

(4,184)

14,099

Net finance costs

 

 

 

 

(1,222)

(1,222)

Adjusted profit/(loss) before taxation

13,345

2,541

1,417

980

(5,406)

12,877

Adjusted items:

 

 

 

 

 

 

 - Non cash items relating to acquisitions

 

 

 

 

(11,267)

(11,267)

 - Other adjusted items

 

 

 

 

(3,078)

(3,078)

Profit/(loss) before taxation

 

 

 

 

(19,751)

(1,468)

 

 

 

 

 

 

 

Depreciation

4,982

-

362

106

-

5,450

Amortisation

1,201

-

4,096

321

-

5,618

 

 

 

 

 

 

 

Geographical analysis

 

UK

Rest of Europe

US

Australia

Group

Reported third party revenue

 

377,398

7,658

58,347

22,041

465,444

Non-current assets

 

119,414

2,845

2,544

97

124,900

 

4.   Adjusted items

 

 

26 weeks ended               2 Oct 2017

26 weeks ended              26 Sept 2016

53 weeks ended            

 3 April 2017

 

£'000

£'000

£'000

 

 

 

 

Non-cash charges relating to acquisitions

 

 

 

Amortisation of acquired intangibles

(1,947)

(2,160)

(4,321)

Acquisition related share based payment charges

(1,910)

(3,283)

(6,946)

 

(3,857)

(5,443)

(11,267)

Other adjusted items

 

 

 

Acquisition costs

-

31

(53)

Restructuring costs

-

(205)

(819)

Fair value movement through P&L on foreign exchange contracts

915

1,624

(957)

En primeur adjustment

(163)

(261)

(517)

Share based payment charges

(587)

(201)

(732)

 

165

988

(3,078)

 

 

 

 

Total adjusted items

(3,692)

(4,455)

(14,345)

 

5.   Taxation

Tax for the six month period is charged at an adjusted effective tax rate (the ratio of the current tax charge to the adjusted profit before taxation) of 22.0% (2017: 30.0%) representing the best estimate of the average annual effective tax rate expected for the full year, applied to the profit before taxation of the period.

 

6.   Earnings per share

 

Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue of the Company, excluding 3,067,028 (2016: 4,920,863) contingently returnable shares issued as a result of the acquisition of Naked Wines (which have been treated as dilutive share options) and 143,543 (2016: 3,934) held by Employee Share Trusts.

 

The dilutive effect of share options is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all dilutive potential ordinary shares.  These comprise contingently returnable shares and share options granted to employees where the exercise price is less than the average market price of the Company's Ordinary Shares during the year.  Share options granted over 260,408 (2016: 331,200) ordinary shares have not been included in the dilutive earnings per share calculation because they are anti-dilutive at the period end.

 

Adjusted earnings per share is calculated by excluding the effect of Adjusted items (see note 4). This alternative measure of earnings per share is presented so that users of the financial statements can better understand the Group's underlying trading performance.

 

 

26 weeks ended

2 Oct 2017

26 weeks ended

26 Sept 2016

53 weeks ended      

3 April 2017

 

 

£'000

£'000

£'000

 

 

 

 

 

Earnings/(loss) per share

 

 

 

 

Basic earnings per share

 

2.4p

-6.1p

-4.1p

Diluted earnings per share

 

2.2p

N/A

N/A

Adjusted basic earnings per share

 

7.9p

0.7p

17.7p

Adjusted diluted earnings per share

 

7.4p

0.7p

16.3p

 

 

 

 

 

 

Note

26 weeks ended

2 Oct 2017

26 weeks ended

26 Sept 2016

53 weeks ended     

 3 April 2017

 

 

£'000

£'000

£'000

 

 

 

 

 

Profit/(loss) for the period

 

1,576

(3,985)

(2,695)

Add back adjusted items:

 

 

 

 

 - Non-cash charges relating to acquisitions

4

3,857

5,443

11,267

 - Other adjusted items

4

(165)

(988)

3,078

Adjusted profit after taxation

 

5,268

470

11,650

 

 

 

 

 

 

 

26 weeks ended

2 Oct 2017

26 weeks ended

26 Sept 2016

53 weeks ended      

3 April 2017

 

 

 

 

 

Weighted average number of shares in issue

 

66,940,255

65,843,853

65,848,467

Dilutive potential ordinary shares:

 

 

 

 

Employee share options and contingently returnable shares

4,554,269

4,670,778

5,598,621

Weighted average number of shares for the purpose of diluted earnings per share

 

71,494,524

70,514,631

71,447,088

 

 

 

 

 

Total number of shares in issue

 

71,375,986

70,775,262

70,778,262

 

If the Group's share option schemes had vested at 100% the Company would have 75,182,557 (H1 2017: 75,175,929. FY2017: 74,913,212) issued shares. 

 

7.   Dividend

 

 

 

26 weeks ended  

2 Oct 2017

26 weeks ended

26 Sept 2016

53 weeks ended

3 April 2017

 

 

£'000

£'000

£'000

 

 

 

 

 

Equity dividends paid and proposed

 

 

 

 

Final dividend

 

2,564

-

2,548

Interim dividend

 

-

-

1,062

Total Equity dividends paid and proposed

 

2,564

-

3,610

 

An interim dividend of 2.0 pence (H1 2017: 1.5 pence) per share was approved by the Board of Directors on 20 November 2017. This has not been included as a liability as at 2 October 2017.

 

8.   Notes to the cash flow statement

 

 

 

26 weeks ended  

2 Oct 2017

26 weeks ended

26 Sept 2016

53 weeks ended    

 3 April 2017

 

 

£'000

£'000

£'000

Cash generated by operations

 

 

 

 

Operating profit/(loss)

 

3,645

(3,755)

(246)

Add back:

 

 

 

 

 - Depreciation and amortisation

 

4,983

5,428

11,301

 - Profit on disposal of property, plant and equipment

 

-

-

(6)

 - Impairment of prepaid operating leases

 

-

-

(38)

 - Fair value movement on foreign exchange contracts

 

(1,141)

(1,624)

957

 - En primeur movement in income statement

 

163

261

517

 - Share based payment charges

 

2,497

3,483

7,678

Operating cashflows before movements in working capital

 

10,147

3,793

20,163

Increase in inventories

 

(16,812)

(15,436)

(9,787)

Increase in customer funds in deferred income

 

2,620

3,487

8,044

Increase in trade and other receivables

 

(824)

(4,741)

(4,876)

Increase/(decrease) in trade and other payables

 

10,052

17,064

(4,417)

Cash generated by operations

 

5,183

4,167

9,127

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

Cash and cash equivalents

 

11,878

11,495

23,007

Bank overdraft

 

(11,804)

(3,169)

(12,537)

Total cash and cash equivalents

 

74

8,326

10,470

Additional unaudited information

 

1.   Segmental reporting - additional information

 

A more detailed analysis of the underlying year on year segmental results is shown below.  These numbers exclude adjustments for en primeur and use a constant rate of foreign exchange. 

 

 

Retail

 

26 weeks ended  

2 Oct 2017

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

 

 

Underlying

As Reported

Constant FX

IT Costs

Underlying

 variance

 

£'000

£'000

£'000

£'000

£'000

 

UK revenue

116,319

113,557

-

-

113,557

2.4%

France revenue

4,321

4,323

350

-

4,673

-7.5%

Total revenue

120,640

117,880

350

-

118,230

2.0%

Gross profit

28,561

27,481

101

-

27,582

3.5%

Gross margin

23.7%

23.3%

28.9%

-

23.3%

0.4ppts

Distribution costs

(14,963)

(13,645)

(16)

-

(13,661)

9.5%

Administrative costs

(9,006)

(10,377)

(115)

314

(10,178)

-11.5%

Adjusted EBIT

4,592

3,459

(30)

314

3,743

22.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

26 weeks ended 

 2 Oct 2017

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

 

 

Underlying

As Reported

Constant FX

IT Costs

Underlying

 variance

 

£'000

£'000

£'000

£'000

£'000

 

Total sales

22,636

23,430

-

-

23,430

-3.4%

Gross profit

3,331

3,793

-

-

3,793

-12.2%

Gross margin

14.7%

16.2%

-

-

16.2%

-1.5ppts

Distribution costs

(1,295)

(1,598)

-

-

(1,598)

-19.0%

Administrative costs

(1,003)

(572)

-

26

(546)

83.7%

Adjusted EBIT

1,033

1,623

-

26

1,649

-37.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lay & Wheeler

 

26 weeks ended  

2 Oct 2017

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

 

 

Underlying

As Reported

Constant FX

IT Costs

Underlying

 variance

 

£'000

£'000

£'000

£'000

£'000

 

Sales on management basis

7,614

6,992

-

-

6,992

8.9%

En primeur

(1,323)

(1,642)

-

-

(1,642)

-19.4%

Total sales

6,291

5,350

-

-

5,350

17.6%

Gross profit

1,856

1,713

-

-

1,713

8.3%

Gross margin

24.4%

24.5%

-

-

24.5%

-0.1ppts

Distribution costs

(548)

(509)

-

-

(509)

7.7%

Administrative costs

(916)

(928)

-

-

(928)

-1.3%

Adjusted EBIT

392

276

-

-

276

42.0%

 

 

1.   Segmental reporting - additional information (continued)

 

 

Naked Wines

 

26 weeks ended  

2 Oct 2017

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

 

 

Underlying

As Reported

Constant FX

IT Costs

Underlying

 variance

 

£'000

£'000

£'000

£'000

£'000

 

Total sales

67,794

58,980

2,151

-

61,131

10.9%

Gross profit

25,100

20,221

866

-

21,087

19.0%

Gross margin

37.0%

34.3%

40.3%

-

34.5%

2.5ppts

Distribution costs

(10,482)

(9,329)

(442)

-

(9,771)

7.3%

Administrative costs

(9,898)

(13,667)

(695)

510

(13,852)

-28.5%

Adjusted EBIT

4,720

(2,775)

(271)

510

(2,536)

286.1%

 

 

 

 

 

 

 

 

Naked Wines - Sales and Adjusted EBIT by geography

 

26 weeks ended 
2 Oct 2017

Underlying

£'000

26 weeks ended
26 Sept 2016

As Reported

£'000

26 weeks ended
26 Sept 2016

Constant FX

£'000

26 weeks ended
26 Sept 2016

IT Costs

£'000

26 weeks ended
26 Sept 2016

Underlying

£'000

variance

 

Total sales

 

 

 

 

 

 

UK

27,798

26,864

-

-

26,864

3.5%

US

27,267

23,424

1,383

-

24,807

9.9%

Aus

12,729

8,692

768

-

9,460

34.6%

Total sales

67,794

58,980

2,151

-

61,131

10.9%

Adjusted EBIT

 

 

 

 

 

 

UK

2,014

1,327

-

-

1,327

51.8%

US

2,447

(2,519)

(268)

-

(2,787)

187.8%

Aus

390

(313)

(3)

-

(316)

223.4%

Central Costs

(131)

(1,270)

-

510

(760)

82.8%

Adjusted EBIT

4,720

(2,775)

(271)

510

(2,536)

286.1%

 

 

 

 

 

 

 

 

Central Costs

 

26 weeks ended  

2 Oct 2017

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

 

 

Underlying

As Reported

Constant FX

IT Cost Reallocation

Underlying

 variance

 

£'000

£'000

£'000

£'000

£'000

 

Administrative costs

(3,400)

(1,883)

-

(850)

(2,733)

24.4%

Adjusted EBIT

(3,400)

(1,883)

-

(850)

(2,733)

24.4%

Net finance charge

(566)

(649)

-

-

(649)

-12.8%

Adjusted loss before taxation

(3,966)

(2,532)

-

(850)

(3,382)

17.3%

 

 

 

 

 

 

 

 

1.            Segmental reporting - additional information (continued)

 

Group

 

26 weeks ended  

2 Oct 2017

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

26 weeks ended

26 Sept 2016

 

 

Underlying

As Reported

Constant FX

IT Costs

Underlying

 variance

 

£'000

£'000

£'000

£'000

£'000

 

Total sales

218,684

207,282

2,501

-

209,783

4.2%

Gross profit

58,848

53,208

967

-

54,175

8.6%

Gross margin

26.9%

25.7%

38.7%

-

25.8%

1.1ppts

Distribution costs

(27,288)

(25,081)

(458)

-

(25,539)

6.8%

Administrative costs

(24,223)

(27,427)

(810)

-

(28,237)

-14.2%

Adjusted EBIT

7,337

700

(301)

-

399

NM

Net finance charge

(566)

(649)

-

-

(649)

-12.8%

Adjusted profit/(loss) before taxation

6,771

51

(301)

-

(250)

NM

 

 

 

                                 Group

 

 

26 weeks ended 2 Oct 2017

 

26 weeks ended 26 Sept 2016

 

 

Revenue

Gross profit

 

Revenue

Gross profit

 

 

£'000

£'000

 

£'000

£'000

Underlying

 

218,684

58,848

 

209,783

54,175

En primeur adjustment

 

(1,323)

(163)

 

(1,642)

(261)

Constant FX

 

-

-

 

(2,501)

(967)

Reported

 

217,361

58,685

 

205,640

52,947

 

 

2.   Cash flow analysis

 

26 weeks ended      

2 Oct 2017

26 weeks ended    

26 Sept 2016

53 weeks ended    

3 April 2017

 

£'000

£'000

£'000

 

 

 

 

Adjusted EBIT

7,337

700

14,099

Add back depreciation & amortisation

3,036

3,268

6,695

Adjusted EBITDA

10,373

3,968

20,794

 

 

 

 

Working capital movement

 

 

 

 - Inventories

(16,812)

(15,436)

(9,787)

 - Trade and other receivables

(824)

(4,741)

(4,876)

 - Customer funds and deferred income

2,620

3,487

8,044

 - Trade and other payables

9,826

17,162

(4,509)

Working capital movement

(5,190)

472

(11,128)

 

 

 

 

Capex

(1,618)

(1,608)

(3,523)

Free cash flow

3,565

2,832

6,143

 

 

 

 

 

 

 

 

Reconciliation to statutory cash flow

 

 

 

Free Cash Flow

3,565

2,832

6,143

Cash Adjusted items

-

(273)

(539)

Capex

1,618

1,608

3,523

 Cash generated by operations

5,183

4,167

9,127

 

3.   Naked Wines Business Split

 

 

 

 

26 weeks ended      

2 Oct 2017

26 weeks ended    

26 Sept 2016

YoY

  % variance

 

 

 

£'000

£'000

£'000

 

P&L

 

New customers (to maturity)

 

 

 

 

Breakout

 

Sales

11,971

15,637

(3,666)

-23.4%

 

 

Contribution exc Marketing

(477)

(6)

(471)

NM

 

 

Marketing

(4,243)

(7,905)

3,662

-46.3%

 

 

New customer Contribution

(4,720)

(7,911)

3,191

-40.3%

 

 

 

 

 

 

 

 

 

Mature Angels

 

 

 

 

 

 

Sales

      55,823

           45,494

10,329

22.7%

 

 

Repeat Customer Contribution

       15,096

           11,322

3,774

33.3%

 

 

 

 

 

 

 

 

 

Fixed costs

(5,656)

(5,947)

291

-5%

 

 

 

 

 

 

 

 

 

EBIT

          4,720

(2,536)

7,256

286.1%

 

 

 

 

 

 

 

Customer

 

Opening Mature Angels

    363,389

    299,717

63,672

21.2%

 Numbers

 

New Mature Angels

      71,960

      80,459

(8,499)

-10.6%

 

 

Attrition

(64,132)

(58,968)

(5,164)

8.8%

 

 

Closing Mature Angels

    371,217

    321,208

50,009

15.6%

 

4.    Glossary

Adjusted EBIT

Adjusted EBIT is operating profit adjusted for amortisation and impairments of acquired intangibles and goodwill, acquisition costs, share based payment charges, restructuring costs, net fair value movement through P&L on financial instruments and adjusting en primeur results to reflect profits on orders rather than on wine fulfilment

Adjusted PBT

Adjusted PBT is defined as Adjusted EBIT less net finance charges

Annual Contribution

Number of Orders per year x Contribution per Mature Angel

Contribution

Sales less product costs, costs of fulfilling the sale e.g. branch staff, credit card fees etc.

Contribution per New Mature Angel

Contribution after subtracting all direct costs that are associated with maintaining that Angel (E.g Delivery, Customer Service, Cost of Sales, Returns etc)

Free Cash Flow

Free cash flow is defined as cash generated from operations less capital expenditure and excluding cash Adjusted items 

Growth Spend

The proportion of total investment which is spent on growing the total Angel base

Investment in New Customer Acquisition

Marketing investment in recruiting new customers plus any contribution whether positive or negative up to Mature Angel status

Mature Angel

A subscription customer for four months or more

Naked Wines ROI

The recurring contribution per Mature Angel divided by the cost of acquiring each Mature Angel

[C-(AxN)]/N where C = Annual Contribution, A = Attrition rate, N = Cost per New Angel

Repeat Customer

A customer who has shopped more than once in the last year

Repeat Customer Retention

% of repeat customers from 12 months ago that are still repeat customers, as measured from our customer databases

Repeat Customer Attrition

(1 - Repeat Customer Retention %)

Return on Investment (ROI)

The  recurring additional contribution (net of replenishment costs) per year, generated by this period's acquisition cost

Trading Margin

The difference between the price we sell and the cost we buy at

Underlying Results

Underlying results (a) includes en primeur revenues in year of order not year of fulfilment (b) is calculated using constant FX rates for translation of the comparative period and (c ) IT costs reallocated to PLC (A reconciliation between Reported and Underlying results by segment for H1 2017 is included in the Additional Unaudited information)

 


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