13th Jun 2005 07:00
Majestic Wine PLC13 June 2005 13 June 2005 PRELIMINARY RESULTS Majestic Wine PLC ("Majestic"), the UK's largest wine warehouse chain with 122stores, today announces its preliminary results for the year ended 28 March2005. Highlights • Profit before exceptional gain, tax and amortisation increased by 23.9% to £13.2m (2004: £10.6m). • Operating profit up by 21.6% to £12.7m (2004: £10.4m). • Total sales up 9.6% to £162.5m (2004: £148.3m). Like for like UK sales up 8.3%. • Sales in the first ten weeks of the current year to 6 June have been encouraging, with UK like for like sales up 7.0%. • Final dividend of 4p net per share, bringing the total dividend to 5.5p net per share, a third higher than the 2004 dividend after restating for the four-for-one division implemented on 9 August 2004. • Good growth in number of customers on the database who have made purchases in the last twelve months, up 8.9% to 354,000. • Average bottle of wine purchased at Majestic is now £5.51 (2004: £5.40). Average spend per transaction has risen to £113 (2004: £107). • Seven new stores opened during the financial year and two re-sited. 122nd store in Sanderstead near Croydon opened post year end, with several more new stores at advanced stages of negotiation. Commenting on the results Tim How, Chief Executive of Majestic said: "We operate in an expanding market where consumers continue to show a stronginterest in a greater choice of better quality wines. We believe that theprospects for the future growth of Majestic are very good." For further information, please contact: Tim HowMajestic Wine PLC Tel: 01923 298200 Tim Thompson / Nicola Cronk Tel: 020 7466 5000Buchanan Communications High resolution images are available for the media to download free of chargefrom www.vismedia.co.uk Chairman's Statement I am proud to announce, in this my final report to shareholders beforeretirement, our twelfth consecutive year of record profits. Profit before the exceptional gain, tax and amortisation of goodwill increasedby 23.9% to £13.2m from £10.6m last year. Total Group sales grew 9.6% to£162.5m underpinned by an increase of 8.3% in like for like UK sales. This excellent performance could only have been achieved with the expertise andgreat commitment of all our staff. I would like to thank them all for theirconsiderable efforts in making this year so successful. Dividend We are recommending for approval by shareholders at the Annual General Meeting afinal dividend of 4 pence net per share payable on 5 August 2005 to shareholderson the register on 1 July 2005. This brings the total dividend to 5.5 pence netper share, a third higher than the 2004 dividend after restating for thefour-for-one division implemented on 9 August 2004. Board Changes Tony Mason our trading director since 1989 retired from the Board on 28 March2005. Tony had been working part time since January 2003 in preparation forthis planned retirement. I would like to thank Tony for his significantcontribution to the Group's success over the last sixteen years. I am retiring from Majestic at the Annual General Meeting on 5 August 2005.Simon Burke who has served on our Board since March 2000 as a non-executiveDirector will succeed me as non-executive Chairman. Simon, a very experiencedretailer, is currently Chairman of the Irish supermarket chain Superquinn andwas previously Chief Executive of the Virgin Retail Group and Chairman ofHamleys PLC. Current Trading Sales growth in the first ten weeks of the financial year from 29 March to 6June has been encouraging with like for like UK sales up 7.0%. We remain confident for the future growth of Majestic. John ApthorpChairman13 June 2005 Review of Operations The year has seen a further substantial increase in operating profit to £12.7m,up 21.6% from £10.4m last year. Total sales increased by 9.6% to £162.5m. This sales growth and an increase inour gross profit percentage, coupled with our ongoing focus on controllingcosts, has led to an increase in operating margin percentage to 7.8% up from7.0% last year. We also recorded an exceptional gain of £0.1m on the sale ofresidential flats. Group cash flow was strong with net funds rising to £7.8m at the year end from£4.4m last year. Trading The number of customers on our database who have made purchases in the lasttwelve months has shown good growth up 8.9% to 354,000. We continue to see anencouraging trend for our customers to trade up to better quality wines with theaverage bottle price of still wine purchased at Majestic rising from £5.40 overthe year to £5.51. The average spend per transaction is now £113 up from £107last year. We saw good sales growth in wines from Bordeaux, Italy, South Africa, NewZealand, Chile and Argentina. In addition Champagne and rose wine sales grewstrongly. We have appointed a new buyer to help further our expansion into thefine wine market and sales of still wine retailing at £20 or more have grown by50% on last year to 2.3% of UK retail sales. We have five distinct promotional periods supported by the mailing of ourdetailed price lists to our customer database. For this summer's promotionswhich started in May we mailed 345,000 price lists. In addition, for the firsttime we sent a further 38,000 promotional leaflets to less frequent customers.We will also be mailing a new promotional flyer to 300,000 customers in lateJune. Customer Service Our success is built upon the excellent customer service that our high qualitystaff deliver. We recruit primarily at graduate level and place great emphasison training in wine knowledge, customer service and operational management. We have become a gold sponsor of the Wine and Spirit Education Trust (WSET) andall retail staff sit the Advanced Certificate after about six months in theCompany. We encourage staff to further their wine knowledge and are sponsoring80 staff through their studies for the WSET Diploma in 2005. We were delightedthat seven members of staff received WSET "Awards of Excellence" in January 2005for outstanding papers in their Advanced Certificate and Diploma examinations.This achievement reflects the success of our recruitment and training programme,which is recognised as being one of the best in the wine industry. Apart from customer service we differentiate ourselves from the competition bythe range and depth of stock held at each store and by offering free delivery tocustomers backed by a dedicated van at each of our stores. During the year we sourced a replacement to our EPOS system that gives greatersecurity, stability and flexibility, has enhanced functionality and is Chip &PIN enabled. The new system is being supported with upgraded hardware in allstores including touch screens and thermal printers. The rollout to all ourstores has now been successfully completed and we are pleased with theenhancements to customer service the new system is delivering. The total costof the project was around £0.6m. New Stores We opened seven new stores during the financial year in Inverness, CoventGarden, Chippenham, Marlborough, High Wycombe, Ruislip and Horsham. In additionwe re-sited our stores in Cambridge and Nottingham. We are pleased with thesales achieved at all these stores. The total capital spend on the store rollout programme was £5.1m. We purchasedfive freeholds during the year bringing the total number to 25 including two yetto open. In addition we spent £0.8m in refurbishment of the existing estate. Since the year end we have opened our 122nd store in Sanderstead near Croydon.We are opening in Derby and Tunbridge Wells later in 2005 and have several morenew stores at advanced stages of negotiation. Internet We have seen another year of good growth in the number of orders placed on ourwebsite, majestic.co.uk, which now represent 4.5% of UK retail sales. Over 97%of all orders received via the website are delivered by van from the neareststore. We continue to enhance the site and have in the last year launched our investorinformation pages. Recently we have switched our "en primeur" service to afully web based platform backed by real time stock updates. Customers can nowplace "en primeur" orders online in the knowledge that their requests will befulfilled. Corporate Sales Sales to corporate customers continue to show growth and account for 28% of UKsales. We see good opportunities to grow our corporate sales and have increased theregional sales team to eleven. They source new restaurant, hotel and businessaccounts with all subsequent logistics handled by the nearest Majestic store. In addition to the regional structure, our central London team based in adedicated depot near King's Cross sell to larger corporate customers in the Cityand West End. Wine and Beer World We were pleased to achieve like sales growth of 1.5% in the first ten months ofthe year as trading conditions were difficult given the fall in the number of UKshoppers visiting the French channel ports. In February and March the tradingsituation deteriorated as a result of serious disruption to the Calais port.The resulting reduction in day crossing traffic caused a sales downturn, suchthat the total year's like sales were down by (0.7)%. The Calais port returnedto normal operations at the beginning of April. We continue to see strong growth in the pre-ordering of wines before travellingto France for collection from our stores. Customers may order via our website,wineandbeer.co.uk, or over the telephone and together these account for around18% of sales. Future Prospects We operate in an expanding market where consumers continue to show a stronginterest in a greater choice of better quality wines. We believe that theprospects for the future growth of Majestic are very good. Tim HowChief Executive13 June 2005 Group Profit & Loss AccountFor the year ended 28 March 2005 Year to Year to 28.03.05 29.03.04 £000 £000 Turnover 162,517 148,261Cost of sales (128,436) (118,065) Gross profit 34,081 30,196 Distribution costs (13,103) (12,134)Administrative costs (8,760) (8,056)Other operating income 440 405 Operating profit 12,658 10,411 Profit on disposal of fixed assets 88 396 Profit on ordinary activities before interest and taxation 12,746 10,807 Net interest receivable/(payable) 144 (148) Profit on ordinary activities before taxation 12,890 10,659 Taxation (4,347) (3,461) Profit on ordinary activities after taxation 8,543 7,198 DividendInterim - paid (950) (701)Final - proposed (2,550) (1,893) Retained profit for the year 5,043 4,604 Basic earnings per share 13.6p 11.8pDiluted earnings per share 13.2p 11.3pUnderlying earnings per share 14.0p 11.7pDiluted underlying earnings per share 13.6p 11.3p Group Statement of Total Recognised Gains and LossesFor the year ended 28 March 2005 Year to Year to 28.03.05 29.03.04 £000 £000 Profit for the year attributable to members of the parent company 8,543 7,198Currency translation differences on foreign currency netinvestments 71 (101)Total gains and losses relating to the year 8,614 7,097 Balance SheetsAs at 28 March 2005 Group Company 28.03.05 29.03.04 28.03.05 29.03.04 £000 £000 £000 £000 Fixed assetsIntangible fixed assets 6,135 6,505 - -Tangible fixed assets 29,347 24,528 - -Investments - - 12,021 12,021 35,482 31,033 12,021 12,021 Current assetsStocks 27,798 23,577 - -Debtors 6,199 6,058 10,086 8,346Cash at bank and in hand 7,840 4,376 - - 41,837 34,011 10,086 8,346 Creditors:Amounts falling due within one year (40,240) (33,873) (2,550) (1,896)Net current assets 1,597 138 7,536 6,450 Total assets less current liabilities 37,079 31,171 19,557 18,471 Creditors:Amounts falling due after more than oneyear - - (2,000) (2,000)Provision for liabilities and charges (297) (342) - -Net assets 36,782 30,829 17,557 16,471 Capital and reserves Called up share capital 4,776 4,701 4,776 4,701Share premium account 6,750 5,764 6,750 5,764Revaluation reserve 22 22 - -Capital Reserve - own shares (407) (242) - -Profit and loss account 25,641 20,584 6,031 6,006Equity shareholders' funds 36,782 30,829 17,557 16,471 Group Cash Flow StatementFor the year ended 28 March 2005 Year to Year to 28.03.05 29.03.04 £000 £000 Net cash inflow from operating activities 16,896 12,845 Returns on investments and servicing of financeInterest paid (12) (34)Term loan interest - (175)Interest received 145 69 133 (140)TaxationUK corporation tax paid (3,416) (2,490)Overseas corporation tax paid (927) (482) (4,343) (2,972)Capital expenditurePayments to acquire tangible fixed assets (7,709) (5,804)Receipts from sales of tangible fixed assets 764 1,181Net cash outflow from capital expenditure (6,945) (4,623) Equity dividends paid (2,846) (1,921)Net cash inflow before financing 2,895 3,189 FinancingIssue of Ordinary Share capital 516 828Receipt for exercise of share options satisfied by QUEST 9 164Repayment of bank loan - (4,300)Increase/(decrease) in cash for the year 3,420 (119) NOTES TO THE GROUP CASH FLOW STATEMENTFor the year ended 28 March 2005 Reconciliation of operating profit to net cash flow from operating activities Year to Year to 28.03.05 29.03.04 £000 £000 Operating profit 12,658 10,411 Depreciation charges 2,183 1,978Amortisation charge 370 370Loss/(profit) on disposal of tangible fixed assets 58 (18)Increase in stocks (4,221) (2,745)Increase in debtors (231) (1,503)Increase in creditors 5,810 3,726(Decrease)/increase in provisions (45) 133Deferred bonus payable in shares 314 493Net cash inflow from operating activities 16,896 12,845 Analysis of net funds Term Arrangement Cash Loan Fees Total £000 £000 £000 £000 As at 31 March 2003 4,567 (4,300) 53 320Cash outflow (119) - - (119)Exchange differences (72) - - (72)Repayment of term loan - 4,300 - 4,300Amortisation of loan arrangement fees - - (53) (53)At 29 March 2004 4,376 - - 4,376Cash inflow 3,420 - - 3,420Exchange differences 44 - - 44Net funds at 28 March 2005 7,840 - - 7,840 Reconciliation of net cash flow to net funds Year to Year to 28.03.05 29.03.04 £000 £000Increase/(decrease) in cash 3,420 (119)Amortisation of loan arrangement fees - (53)Repayment of term facility - 4,300Exchange differences 44 (72)Movement in net funds 3,464 4,056Net funds at 29 March 2004 4,376 320Net funds at 28 March 2005 7,840 4,376 NOTES TO ACCOUNTS 1. These results which have been extracted from the full audited accounts for the year to 28 March 2005 do not amount to full accounts within the meaning of Section 240 of the Companies Act 1985. 2. The auditors have issued an unqualified report in the full accounts which will be distributed to shareholders and delivered to the Registrar of Companies in due course. The comparative figures for the year to 29 March 2004 have been taken from but do not constitute the Company's statutory financial statements for that financial year. Those financial statements have been reported on by the auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified. Further copies of the Preliminary Results are available at the Company's Registered Office: Majestic Wine PLC Majestic House Otterspool Way Watford WD25 8WW 3. A final dividend of 4p net on each Ordinary Share will be payable on 5 August 2005 to shareholders on the register on 1 July 2005. 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