Naked Wines

Naked Wines split from Majestic Wine as part of a £95m deal with Fortress Investment Group in December 2019

Naked Wines has boosted its coffers to aid turnaround efforts at the group by cashing in early a £12m loan related to the 2019 sale of Majestic Wine.

The online wine retailer agreed the early redemption of the loan note with CF Bacchus HoldCo for a discounted price of £9.1m.

A £2.5m loss on the £11.6m book value will be included in Naked’s full-year results as an adjusted item.

CF Bacchus HoldCo was the vehicle used by Fortress Investment Group to buy Majestic from Naked for £95m in December 2019, with £78m paid in cash up front, £5m contingent on the post-Brexit performance of the acquired French business and £12m in the form of a loan note.

Naked said the move strengthened its liquidity position and provided “an additional lever for the group to balance liquidity and cost”.

The group’s net cash guidance for the year remained at £0-£15m, with the outcome dependent on performance in the next two months before the financial period ends, as well as working capital movements.

It comes as Naked continues to battle to turn around its performance following a series of profit warnings and disappointing trading, particularly in its strategically important US market.

Chairman Rowan Gormley ousted CEO Nick Devlin in December last year following another downgrade to revenues and profits, taking charge of the business and putting together a back-to-basics plan to save the struggling company.

Last week, Naked promoted new MD Rodrigo Maza to CEO designate to work alongside Gormley to implement the new plan.

Investment bank Liberum said the cash injection from the loan redemption was “a sensible development” but added the group was still walking a tightrope.

Analyst Wayne Brown said Naked’s existing £45m asset-backed lending facility with Silicon Valley Bank, which is linked to the carrying value of the group’s US inventory base, restricted its ability to act faster on inventory reduction.

“These extra funds allow for additional flexibility that could lead to further inventory reduction or help renegotiate the existing bank facility with less restrictions,” he added.

“For now, there is still a lack of clarity on what the right ‘smaller’ size of the business should or will be and when the group will return to a sustainable level of paybacks on new customer acquisition. Considering the group’s track record with cash, let’s hope they don’t burn through this too quickly.”