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Aggressive alcohol promotions by supermarkets are giving independent retailers a tough time. But Majestic Wine is bearing up to the challenge.
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The wine merchant unveiled healthy results, driven by strong trading in fine wine. Sales in the category increased by 25 per cent over the year, as the group targeted affluent consumers by devoting more store-space to bottles costing over £20. It plans to roll out this differentiating concept to another 10 stores this year. The group also saw good growth in online sales, which climbed 17 per cent and now account for 7.9 per cent of UK retail revenues.
But higher alcohol duties and adverse currency movements are starting to bite. The weak pound, in particular, is piling pressure on its cost base, as the group sources more than half of its wine from euro-denominated countries. Trading at its warehouses in France also suffered, with sales down 8.8 per cent as UK consumers stayed at home.
Chief executive Tim How - who will retire after the next shareholders' meeting - said the group might have to raise prices by 10 per cent to recoup rising costs. Broker Numis expects 2009 earnings of 19.2p per share.
Majestic Wine (MJW) |
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|---|---|---|---|---|
| ORD PRICE: | 200p | MARKET VALUE: | £123.4m | |
| TOUCH: | 198-202p | 12-MONTH HIGH: | 390p | LOW: 195p |
| DIVIDEND YIELD: | 5% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 80p | NET DEBT: | 0% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 148 | 10.7 | 11.8 | 4.12 |
| 2005 | 163 | 12.9 | 13.6 | 5.50 |
| 2006 | 172 | 14.2 | 15.0 | 7.00 |
| 2007 | 191 | 16.2 | 16.8 | 8.50 |
| 2008 | 197 | 16.7 | 17.9 | 9.80 |
| % change | +3 | +3 | +7 | +15 |
Ex-div: 16 Jul Payment: 15 Aug |
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These results were respectable given the challenging trading conditions, and a modest forward PE ratio of 10 times fails to reflect the intrinsic defensive qualities of the shares. Good value.
Last IC view: Good Value, 13 Nov 2007, at 326p.
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-IC-1.5.4a-prod - 31/10/2008 13:11:34 - carlos.princz
