16th Nov 2015 09:00
LONDON (Alliance News) - Majestic Wine PLC Monday warned that full-year profit will be hit by increased investments under its new strategy, after profit fell sharply in the first half of its financial year following its purchase of online wine retailer Naked Wines International.
Shares in Majestic were trading down 5.7% at 292.50 pence Monday morning.
The wine maker said pretax profit in the 26 weeks ended September 28 fell by half to GBP4.3 million from GBP8.5 million in the same period the year before, although revenue grew 36% to GBP181.6 million from GBP133.8 million, boosted by the acquisition of
Naked Wines in April.
Excluding the impact of the Naked Wines acquisition, adjusted pretax profit grew 6%.
Majestic will not pay an interim dividend for the half year, having paid a dividend of 4.2p the prior year, as it is using cashflows to invest in the business and reduce the debt incurred with the purchase of Naked Wines.
Majestic said it is implementing a new three-year strategy to deliver earnings growth and improved returns on capital. The strategy will require further investments, increasing operating cost guidance for the full year to GBP4 million from GBP3 million. It is targeting sales of over GBP500 million by 2019, and said it will progressively reinstate the dividend.
The company added that profit for the full year will be hit by the increased investments, after which it expects to see "sustainable growth".
"We now have a first class team and a compelling strategy to create a real step change in the value of the business for our shareholders. The team has completed a thorough 'root and branch' review of the business, identified the key steps to be taken and the measures that will demonstrate our progress over the coming years. Alongside all this activity the new team has traded the business effectively," Chairman Phil Wrigley said in a statement.
Majestic said Buying Director Justin Apthorp is stepping down from his role, although he will remain on the board as a non-executive director. Merchandising Director Richard Weaver has been promoted to the role of director of merchandising and buying.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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