Majestic profits swing to a loss

By Lisa Riley

Published: 22 November, 2018

Majestic Wine has reported a £200,000 pre-tax loss for the six months to 1 October, down from a £3.1million profit for the same period last year.

Revenue grew 5.4% from £217.4 million to £227.7 million, driven by the company’s online retail business Naked Wines, which saw a 14% increase from £66.4 million to £75.7 million – up from 11.6% for the previous six months.

Growth for Majestic Retail was sustained at 1.9% compared to the same period last year.

Net debt dropped by £5.5 million to £20.1 million but cash flow dived to a £7.3 million deficit, with basic earnings per share at a 0.1p deficit.

As part of its results, the wine retailer revealed plans to bolster stocks of wine in the UK to prevent the chances of Brexit supply disruption, with plans to stockpile between £5 million and £8 million of extra inventory.

The wine retailer blamed the swing to a loss in profits, which follows a promising year for the business that saw revenues rise 2.3% in the year to April 2, on ongoing investments into the business and “sluggish conditions” in its key UK market.

The company was “doing well in a tough market”, said group chief executive Rowan Gormley, adding it was on track to meet its £500 million sales target in 2019.

“We set out a plan at our capital markets day in April 2018 and we are delivering against it. That plan was to accelerate growth by investing in new customers and, so far, the plan is on track.

“In this half we have delivered growth in sales, repeat customer contribution and new customer investment. We have been investing more, and as a result profits are down. We have continued re-allocating capital to invest more efficiently.”

The company said English sporting success, good weather and the record grape harvest had led to 35% growth in English sparkling volumes via Majestic and 24% growth for English wine sold through Naked.

Now was the time to “get behind our UK winemakers,” said wine director at Naked Wines Ray O’Connor.

“There is a huge amount of potential out there, and it just needed the right conditions to exceed. Our message is a simple one to our home-grown heroes – let us see just how good the wine is you can make after such a great year.”

German wine, and to some extent Austria, also saw a boost with sales up 66% year-to-date at Majestic, while it also pointed to Rosé (a 24% increase in volume sales), North American wine (up 50% in volume) and craft beer, as strong performers.

Looking ahead, the company said it expected its full year earnings to be “flat at best amid a tough market", while investment to expand its Naked Wines division is expected to further hit profits, with investment set to be more than expected at £20 million or higher over the full year, it said.

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