Shares in troubled Majestic Wine (WINE) bounced 5 per cent on release of half-year results, a minor retracement from the September sell-off, when the retailer's shares lost a quarter of their value after it announced the Naked Wines business (where Majestic funds independent winemakers to make exclusive wines at preferential prices) had made a serious mis-step.
Now the dust has settled, chief financial officer James Crawford explains that an initial mail-based marketing campaign in the US had shown encouraging returns, so it went national. But the wider rollout failed to generate the same results, leading the company to project that first-half costs would be higher than anticipated and full-year profit would be £4m below expectations. As a consequence, broker Peel Hunt has revised down estimates, and now expects pre-tax profit of £9.5m for the year ending March 2017, giving EPS of 9.6p (from £12m and 12p) compared with £14.5m and 14.6p in FY2016.
Mr Crawford chalks up the experience to "one bad investment" and wants investors to realise Naked Wines' sales still grew by 26.7 per cent during the first half. Back on home turf, Majestic Retail sales grew by 5.7 per cent on a like-for-like basis, but the commercial division - essentially the trade supply operation - only managed a 1.2 per cent improvement.
| MAJESTIC WINE (WINE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 316p | MARKET VALUE: | £223m | |
| TOUCH: | 315-317p | 12-MONTH HIGH: | 485p | LOW: 273p |
| DIVIDEND YIELD: | 0.5% | PE RATIO: | na | |
| NET ASSET VALUE: | 155p* | NET DEBT: | 23% | |
| Half-yearto 26 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 182 | 4.3 | 2.7 | 0.0 |
| 2016 | 206 | -4.4 | -6.1 | 1.5 |
| % change | +13 | - | - | - |
Ex-div: 24 Nov Payment: 23 Dec *Includes intangible assets of £54.2m, or 74p a share | ||||
