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Majestic’s Naked ambition

The wine retailer is looking to focus solely on its subscription wine service
June 13, 2019

The days of nipping down the offie may soon be over. Majestic Wines (WINE) has announced that it is in “advanced discussions” to sell its Majestic retail and commercial business, allowing management to focus on growing Naked Wines, its online wine retailer.

IC TIP: Sell at 293p

Naked Wines has a different operating model from from the traditional retailer. It uses revenues from subscribers and repeat customers – known as “Angels” – to fund working capital and winemakers, inverting the traditional model of the producer making wine in anticipation of demand. Management says this allows it to make better quality wines and sell them more cheaply.

Now the focus is on building the customer base. Naked increased investment in customer acquisition by £5m to £19.1m. In turn, repeat customer contributions rose £6m to £39.8m on a margin of 26.1 per cent, a 90 basis point increase on the previous year. The US was the strongest region, with sales up 21 per cent. 

Should the sale go ahead, the group will rebrand as “Naked Wines PLC” and use the proceeds to pay down debt and accelerate growth. All being well, management also plans to return money to shareholders and has promised a special dividend of 5.2p, making the total payout equal to last year’s.

Bloomberg consensus forecasts point to adjusted EPS of 14.2p for the year to April 2020, a drop from this year’s 14.7p.

MAJESTIC WINE (WINE)  
ORD PRICE:293pMARKET VALUE:£211m
TOUCH:293-295p12-MONTH HIGH:495pLOW: 214p
DIVIDEND YIELD:0.7%PE RATIO:na
NET ASSET VALUE:151p*NET DEBT:14%
Year to 1 AprilTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201528418.420.54.2
20164024.73.5nil
2017465-1.5-4.15.1
20184768.310.97.2
2019**506-8.5-13.32.0
% change+6---72
Ex-div:na   
Payment:na   

*Includes intangible assets of £45m, or 63p a share

**Interim dividend