Investors may hope for a turnaround now that Rowan Gormley has taken the reins at Majestic Wine (MJW). Mr Gormley arrived as part of April's £70m acquisition of his own company, Naked Wines. But the results of an ongoing strategic review won't be available until half-year results are published in six months' time. For the year to March 2015 - prior to Mr Gormley's arrival - the group waived the final dividend to cover the cost of the deal, as had been expected.
Even the group calls the period "challenging". A modest increase in market share lifted like-for-like sales in UK retail stores by 1.9 per cent. But a number of one-off costs relating to the Naked Wines deal and a fiercely competitive marketplace pulled pre-tax profit down by 23 per cent. Squeezed gross margins - down 30 basis points to 22.7 per cent - and climbing distribution costs didn't help, either.
Yet Majestic's market reach could now expand eightfold, thanks to Naked Wines' established footprint in Australia and the US. Similarly, Naked Wines' well-developed online platform should boost Majestic's own limited online capabilities. However, Mr Gormley warns this will take time and money. An extra £3m could be spent in the first half of the current financial year alone, although the expansion of the store estate will slow to between 225 and 250 locations, compared with a previous target of 330.
Improving Majestic's e-commerce business is high on the agenda. Last year online sales rose by more than 12 per cent and now account for 12.1 per cent of its total UK retail sales. Mr Gormley wants the website, the newly launched mobile app and retail stores to be complimentary and "work together" so that customers are confident shopping across all channels.
Analysts at Investec Securities expect pre-tax profit of £18m for the year to March 2016, giving EPS of 19.1p, down from £20.9m and 24.1p last year.
| MAJESTIC WINE (MJW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 418p | MARKET VALUE: | £295m | |
| TOUCH: | 417-421p | 12-MONTH HIGH: | 451p | LOW: 280p |
| DIVIDEND YIELD: | 1% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 140p | NET CASH: | £11m | |
| Year to 30 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 257 | 20.3 | 23.0 | 13.0 |
| 2012 | 280 | 23.2 | 26.5 | 15.6 |
| 2013 | 274 | 23.7 | 26.9 | 15.8 |
| 2014 | 278 | 23.8 | 27.0 | 16.0 |
| 2015 | 284 | 18.4 | 20.5 | 4.2* |
| % change | +2 | -22 | -24 | -74 |
Ex-div: na Payment: na *Interim dividend only paid on 9 January 2015 | ||||
