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Naked Wines gears up for growth

The group plans to plough its disposal proceeds into the online wine retailing opportunity
November 21, 2019

In early August, Majestic Wine - as it was then known - announced the sale of its retail and commercial assets for more than £100m. The group was looking to raise money to fuel its transition into a pure-play online wine retailer, a move it cemented a little over a week later when it changed its name to Naked Wines (WINE). Now the end of the transformation is in sight, and chief executive Rowan Gormley has seen fit to step down, making way for “a different set of leadership skills” in current chief operating officer Nick Devlin.

IC TIP: Sell at 248p

Management expects to realise £111m in the calendar year from its disposals, leaving the group with roughly £50m of cash on the balance sheet to fuel its growth. To that end, it is investing heavily in customer acquisition, increasing the related spend by 29 per cent to £10.3m in the period. Management is expecting this outlay to be returned 3.8 times over the average lifetime of its customers and is targeting investment of £20m-£25m for the full year, with an expected return of 3.8-4 times. Underlying sales grew 13 per cent at the group level, led by 17 per cent growth from the US. Hardly breakneck, but still a respectable achievement.

Bloomberg consensus forecasts are for adjusted EPS of 12.7p in the March 2020 full year, down from 14.7p in FY2019. 

NAKED WINES (WINE)   
ORD PRICE:248pMARKET VALUE:£ 181m
TOUCH:246-248.5p12-MONTH HIGH:379pLOW: 214p
DIVIDEND YIELD:0.01%PE RATIO:NA
NET ASSET VALUE:143p*NET DEBT**:21%
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201875.7-5.1-0.12.00
2019†87.5-6.2-9.0nil
% change+16---
Ex-div:na   
Payment:na   
*Includes intangible assets of £41m, or 56p a share **Does not include IFRS 16 lease liabilities of £5m  †The group will pay a special dividend of 5.2p per share after it completed the disposal of Majestic Wine