25th Mar 2019 09:46
LONDON (Alliance News) - Majestic Wine PLC said Monday it will incur substantial costs as it restructures and renames itself under the Naked Wines brand.
Shares in Majestic Wine were down 12% at 238.90 pence on Monday morning.
Majestic bought online wine retailer Naked Wines in 2015 for GBP70 million, with Naked Wines founder Rowan Gormley given the role of chief executive at Majestic.
The wine seller's new group transformation plan will be announced in June and will create a single model and management team, with the entire company renamed as Naked Wines PLC.
Majestic will recognise restructuring charges of as much as GBP10 million in its financial 2019 results relating to the transformation plan, which will be largely non-cash. The financial year ends on Monday.
Alongside the transformation, Majestic will also increase its spending on new customer investment to around GBP26 million in its financial 2020 year, from around GBP20 million in financial 2019. This will include spending on a new customer recruitment channel.
There could also be "substantial cash restructuring charges" from its financial 2020 year onwards.
The company intends to fund its transformation and investment by releasing value from Majestic Wine by selling assets and closing stores, and will also migrate Majestic customers to the Naked brand. This is expect to largely offset cash restructuring charges.
As a consequence of its increased investment, Majestic will review its dividend in June.
Majestic is expecting to meet its GBP500 million sales target for financial 2019 and its adjusted profit before tax is expected to be close to the current consensus of GBP11.1 million. Repeat customer contribution is predicted to be 10% to 15% higher than in financial 2018.
In financial 2018, Majestic posted a pretax profit of GBP8.3 million on revenue of GBP476.1 million.
Gormley said: "It is clear that Naked Wines has the potential for strong sustainable growth, and we will deliver the best results for our shareholders, customers, people and suppliers by focusing all our energies on delivering that potential.
"We also believe that a transformed Majestic business does have the potential to be a long-term winner, but that we risk not maximising the potential of Naked if we try to do both.
"Where we have no choice but to close stores we will aim to minimise job losses by migration into Naked.
"Therefore we have taken a decision to focus all of our capital and energies into delivering the long-term potential of Naked, and releasing value from Majestic. Our plans for doing this are well advanced, and we look forward to sharing the final details in June."
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