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Majestic holding off on shareholder payout

Published:  07 July, 2016

The chairman of Majestic wine has announced that the group will not be paying a shareholder dividend this financial year in order to balance the books following the acquisition of Naked Wines.

Chairman Phil Wrigley said that the group is still in the early stages of their three-year transformation plan, adding that shareholder interests were "best served" by investing in the business to counteract associated costs in the acquisition of Naked Wines.

The plan is to reinstate the dividend in H1 2017.

Majestic's financial year 2016 results showed a slide in profits before tax to £15m (year ending March 28), down from £21.6m the previous year.

This slide in adjusted profits have been attributed to costs relating to the acquisition the Naked Wine business and investments made in the course of its three-year plan to reform the retail section of the business.

In the group's Annual Report and Accounts 2016 released this morning (July 7), Wrigley said: "The board has decided not to pay a dividend for this financial year. We are still in the early stages of the transformation plan, and the board believe that shareholder interests are best served by investing in the business while deleveraging the balance sheet post the acquisition of Naked Wines.

"We plan to reinstate the dividend in H1 2017 and have put in place a new policy of a base of circa 35% of adjusted earnings being returned to shareholders each year subject to no major changes in outlook. In addition, we intend to pay special dividends if management determines that excess cash is available that cannot be better used strengthening the balance sheet or reinvesting into the group."

Despite reporting the first full year of growth in the retail division in four years, (reported sales increased 41.3% to £402.1m), adjusted profits before taxes declined 30.3% to £15m for the same period.

In its report released today, Majestic said it had made a "positive start" to three-year turnaround plan with +4.8% like for like sales performance in the retail division, the first full year of growth in four years (2015: -0.1%).

The Naked Wines arm of the business posted strong sales in the year to March 2016 at £104.3m, comprising 25% of the group's sales.

Majestic Wine posted sales of £324m in the same period, accounting for 60.7% of group sales.

Majestic's Commercial business took sales of £45.6m (11% of group sales) and Lay & Wheeler took £10m (2.5%)

On translating sales into profit, Wrigley said: "Reported profit before tax at £4.7m reflects substantial non-cash charges relating to the Naked Wines acquisition. Adjusting for these and other non-recurring items profit before tax was £15.0m, down from £21.6m in the prior year as a result of previously committed investment costs, the investments related to our plan to drive growth in the original Majestic Retail and Commercial businesses and interest on our debt facilities.

"It is encouraging to see early signs that the transformation plan is working but I should emphasise that this is a three-year long exercise, and there remains much to do before we can safely say that the Group is back on the growth trajectory we are aiming for."

The company said it is on track to deliver £500m in sales by 2019.