Majestic Wine FY profit hit by Naked Wines acquisition

Majestic Wine posted a big drop in full-year profit despite a surge in revenue, as the acquisition of Naked Wines hit profitability.

In the year ended 28 March, pre-tax profit tumbled 74.5% to £4.7m while revenue pushed up to £402.1m from £284.5m. The company said the decline in profits reflects substantial non-cash charges relating to the Naked Wines acquisition.

Adjusting for these and other non-recurring items, pre-tax profit would have been £15m, down from £21.6m in the prior year as a result of previously committed investment costs, the investments related to its plan to drive growth in the original Majestic Retail business and interest on its debt facilities.

Chief executive Rowan Gormley said: "We have taken the first step on a long journey - it was a good start but it is just the first step. Early signs are that the plan is starting to work. Strong sales figures reflect the hard work being done on the ground by the whole team.

“The management re-organisation is now complete, I am delighted with the teams we have in place across the group. At Naked Wines we had a belter of a year - breaking through the £100m sales barrier and delivering a maiden profit. We still have lots to do and although we are on course to deliver our three year plan, it won't be without challenges.”

Majestic reiterated its goal of achieving £500m sales by 2019.

The company said it has decided not to pay a dividend for this financial year as it is still in the early stages of the transformation plan. The board reckons shareholder interests are best served by investing in the business while deleveraging the balance sheet post the acquisition of Naked Wines.

Still, Majestic said it plans to reinstate the dividend in the first half of 217 and has put in place a new policy of a base of around 35% of adjusted earnings being returned to shareholders each year subject to no major changes in outlook. In addition, it intends to pay special dividends if management determine that excess cash is available that cannot be better used strengthening the balance sheet or reinvesting into the group.

Liberum said the results were ahead of expectations, with the three-year strategy on track.

“The prelim results highlight steady progress being made with the group on-track to meet its medium term targets,” the brokerage said.

"The Majestic Wine business has seen positive LFL sales growth for the first time in four years, and Naked Wines continues to be the key engine of sales growth. Moreover its highly accretive investment strategy is now contributing to group profits and with debt falling quickly the re-instatement of a dividend policy will be well received.”

At 0900 BST, shares were up 5.3% to 461.10p.