TIDMWINE
RNS Number : 0969L
Majestic Wine PLC
17 April 2018
For immediate Release 17 April 2018
Majestic Wine PLC
("Majestic" or "the Group")
Acceleration of growth plans
Majestic is pleased to announce that it intends to accelerate
growth, by materially increasing investment in new customer
acquisition.
Key points:
-- FY18 Update - trading in line with market expectations:
-- Sales on track to hit GBP500m sales target in 2019
-- FY18 adjusted EBIT expected to be in line with market expectations*
-- Balance sheet and cash flow remain strong, with FY18 net debt
expected to be reported at c.0.4x EBITDA, below our target of 0.5x
EBITDA
-- Dividend expected to be in line with market expectations for FY18*
-- New information shows investment opportunity materially bigger than previously thought:
-- The Group is currently investing around GBP12m a year in new
customer acquisition at a lifetime payback in excess of 4x,
generating GBP48m per year of future value
-- Naked Wines Mature Angel sales retention, of 85%, is higher
than the customer retention rate previously reported
-- The opportunity to invest in new customer acquisition is
materially bigger than previously thought and the Board believes
there is potential over time to double from the current level
-- Returns are trending higher as we continue to optimise our investment approach
-- Early indications show the same returns are achievable in Majestic Retail as in Naked Wines
-- As a result the group intends to increase investment in new customer acquisition in FY19:
-- We will invest an additional GBP9m to GBP12m, of which GBP7m
to GBP10m is directed at growth and GBP2m will ensure we drive
growth safely
-- This will reduce adjusted EBIT in FY19 by GBP2m to GBP3m (vs
FY18), but increase annual generation of future value from GBP48m
to GBP80m+ a year
-- The FY19 dividend is expected to be in line with current market expectations*
-- Additional financial data will be provided going forwards to
facilitate assessment of both trading and investment
performance
-- The Board expects to see significant benefits from this investment from FY21 and beyond
Rowan Gormley, CEO commented:
"We are in the fortunate position of having the option to
accelerate growth by investing in new customer acquisition.
We are starting from a good place with the core business on
track to meet our 2019 sales target of GBP500m and the market's
expectation for profits and dividend in FY18.
In the last 3 years, we have doubled sales at Naked Wines and
delivered profitability in all 3 markets - after increasing
investment in new customer acquisition.
We believe we can double the level of investment again while
maintaining the returns, driving sustained growth in shareholder
value.
On a risk / return basis, the case for accelerating investment
is clear. We can measure success in months while delivering returns
over years.
This is the right thing to do to maximise shareholder
value."
Notice of Capital Markets Days
Majestic Wine plc will host a Capital Markets Day for analysts
and investors in London this afternoon to present the Group's
future investment strategy and growth ambitions.
For US investors, Majestic will host a follow up Capital Markets
Day on 1 May 2018 at the Naked Wines USA office in Napa,
California.
For details on timing, venue and to register your interest in
attending either event please contact Gabby Clinkard on the details
below. A copy of the materials to be presented today and a CEO
letter is now available on the company's website:
www.majesticwineplc.co.uk, a webcast of the presentation will be
made available later today.
Appendix: Guidance Information
1. Naked Wines historic performance (GBPm, unaudited, restated to constant FX rates)
New customers Repeat customers Fixed costs
(as reported)
Sales Contribution Sales Contribution
------ ------------- ------ -------------
FY14 21 (8) 38 8 (7)
------ ------------- ------ ------------- ---------------
FY15 28 (8) 57 14 (9)
------ ------------- ------ ------------- ---------------
FY16 29 (10) 79 20 (10)
------ ------------- ------ ------------- ---------------
FY17 36 (13) 103 26 (11)
------ ------------- ------ ------------- ---------------
2. Naked Wine forecasting metrics
Naked FY18 Naked FY19
New customer investment GBP12-12.5m GBP16-20m
----------------- -------------------
Repeat sales retention c.85% c.85%
----------------- -------------------
New to repeat sales c.105% c.100%
conversion
----------------- -------------------
New customer margin -200 to -300bps -600 to -900bpsYoY
YoY
----------------- -------------------
Repeat contribution +70-100bpsYOY Unchanged
margin
----------------- -------------------
Fixed cost growth Flat +10-15%
----------------- -------------------
*Current analyst consensus estimates can be found below and on
www.majesticwineplc.co.uk :
FY 2018 FY 2019
Revenue GBP484.3m GBP518.0m
---------- ----------
Adjusted EBIT GBP17.9m GBP20.8m
---------- ----------
Adjusted Profit GBP16.8m GBP19.9m
Before Tax
---------- ----------
Adjusted, Diluted 17.8 pence 21.1 pence
EPS
---------- ----------
Dividend per share 5.6 pence 6.8 pence
---------- ----------
For further information, please contact:
Majestic Wine PLC Tel: 01923 298 200
Rowan Gormley, Chief Executive
Officer
James Crawford, Chief Financial Tel: 07891 206239
Officer gabby.clinkard@majestic.co.uk
Gabriella Clinkard, Public & Investor
Relations
Investec (NOMAD & Joint Broker) Tel: 0207 597 5970
Garry Levin / David Flin / David
Anderson / Carlton Nelson
Liberum (Joint Broker) Tel: 020 3100 2222
Peter Tracey / Richard Bootle
Instinctif Partners (PR Agency) Tel: 0207 457 2020 or 07931
Damian Reece / George Yeomans 598 593
About Majestic Wine PLC:
Majestic Wine plc is a quality wine specialist, with over 1m
customers in the UK, USA and Australia.
Our goal is to try to beat the market by investing in customer
relationships, rather than stores. We do that through:
-- Investing in models that compound, i.e. models that get stronger with growth.
-- Investing with discipline, because we are able to test new
opportunities before we roll them out.
-- Using data and technology to continuously improve - every
quarter we double up on our best performing investments, and cancel
the worst performers.
Our divisions:
1) Majestic Retail - The UK's largest specialist wine retailer.
We help people find wines they will love by employing highly
engaged, well trained people equipped with state of the art tools
and unique wines.
2) Naked Wines - Naked's customers in the UK, USA and Australia
crowdfund independent winemakers in exchange for preferential
prices on exclusive wines.
3) Majestic Commercial - A specialist on-trade supplier. We help
our customers make more money from their wine list by offering
national pricing and scale but local delivery and training.
4) Lay and Wheeler - A specialist fine wine merchant. We are a
trusted guide for people who love fine wine, supplying the world's
finest wines with a personal service.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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