Top story

Majestic Wine (WINE) has posted a full year pre-tax profit of £8.3m after reported a loss of £1.5m last year as the improved performance of its Naked Wines business boosted the bottom line.

The wine retailer reported group revenues up 2.3% in the year to £476.1. On an underlying 52 week basis full year revenue of £477.7m was up 4%.

Reported profit before tax bounced back up to £8.3m from a loss of £1.5m last year, while adjusted underlying profit before tax jumped 63% to £17.2m.

Naked Wines was a key driver of profit growth with adjusted underlying EBIT six times higher than in the previous financial year.

The online wine business posted underlying sales growth of 11.3%, having “grown considerably” in the US and Australia. Majestic added that its digital customer acquisition channel has provide it can deliver “high quality new customers” in addition to its traditional partner channel.

Its Majestic Retail arm of UK stores and online business delivered underlying sales growth of 1.9%, though profitability was flat as improved cost controls were offset by foreign exchange pressures on margin.

The group said Majestic Retail’s focus on customer retention rather than opening new stores has been successful and projects such as Franchise-Lite and store refits are showing “positive initial signs”.

Majestic Commercial saw revenues fall 5.4% in the period as the division has been in a “holding pattern” up until the appointment of a new MD, Olivia Fitzgerald, in April 2018.

Lay & Wheeler, delivered flat results, after turning around a business that was “stuck in the past”.

Group CEO Rowan Gormley commented: “We are making headway despite headwinds. This past year we have: delivered profitable growth, despite a tough UK market, which is a testament to our people, our international positioning and the robustness of our model; achieved greater efficiency throughout the business; and paid down our debt to below our target gearing level, and extended our access to borrowing should we need it.”

Looking forward, we expect the UK market to remain tough, possibly even tougher than last year. Certainly trading since year end has been harder than the prior year in the UK. Despite this, we expect to hit FY19 market expectations.”

He said Majestic is advantaged by being able to generate growth with profitable customer acquisition, that 20% of its business is in high growth markets of the US and Australia, 45% of its business is online and that it is completely projects to eliminate unproductive work.

“If the UK is headed for a retail crisis, as some commentators are suggesting, then we are planning for a great crisis. We founded Naked Wines during the financial crisis of 2008 and proved that investing in acquiring customers and generating loyalty through great products and service, will drive profitable growth even in a tough market.”

Despite the “tough” UK outlook, the board expects to achieve £500m in sales by 2019 and continue to meet market expectations for the 2018/19 financial year.

Morning update

Consumer goods gropu PZ Cussons (PZC) has issued a pre-close trading update for the year to 31 May 2018.

As indicated by its interim results in January, PZ Cussons said performance has been hampered by tough trading conditions in the UK and Nigeria. In a trading update in March it reported that trading conditions in these two markets remained difficult and that as a result it expected profit before tax for the full year to be in the range of £80m to £85m.

This morning it said that during the last few months of the year, performance in the UK has been in line with our revised expectations and, whilst trading conditions in Nigeria have tightened further, meaning profit before tax will be at the bottom end of this range.

In its key market of Nigeria higher oil prices have contributed to increased foreign exchange reserves and a relatively stable exchange rate regime, but liquidity has not flowed down into the economy. In addition, wage inflation has continued to remain well behind the significant cost inflation of recent years, resulting in consumer discretionary income under pressure with subdued buying levels.

As a result, the usual peak season uplift has not materialised resulting in volumes, prices and margins being impacted across most areas of its Nigerian portfolio.

Results in the group’s other markets remain “robust” with performance in Australia, Indonesia and the group’s beauty division ahead of the prior year.

It is also undertaking a number of initiatives to improve efficiency in the group, including reducing its costs and improving the speed at which new products come to market, portfolio optimisation to restore margin and a re-prioritisation of NPD to focus on fewer, bigger projects.

PZ Cussons warned it expects macro conditions will remain challenging with general elections in Nigeria and Indonesia falling in the second half of the new financial year in addition to volatile commodity costs.

“Against this backdrop, we believe the initiatives outlined above, together with management actions being undertaken, will strengthen the group’s brand portfolio to better withstand the subdued levels of consumer confidence and higher levels of competitive intensity which are being faced in most markets.”

Final results for the year ended 31 May 2018 will be announced on 24 July.

NWF Group, the fuels, food and feed specialist distribution business, has also issued a trading update for the financial year ending 31 May 2018 stating that it was significantly ahead of current market expectations and the prior year.

The fuels division had an “excellent” year, performing particularly strongly in the cold extended winter conditions.

In food, the business has been challenged by the on-take of significant new business, recruitment of new staff and the reorganisation required to accommodate new customers at its Wardle site, meaning performance has been lower than anticipated as new customers and employees bed in.

In the feeds division, performance has improved as anticipated due to the delivery on the investment made in prior years and improved trading conditions in the dairy market, where farmers are benefiting from improved milk prices.

CEO Richard Whiting commented: “NWF has delivered an outstanding performance reflecting the focus on service across the group, particularly from the Fuels business during the challenging winter conditions experienced earlier this year.

“It is also positive to demonstrate a return on the investment made in the prior year and to report a lower level of net debt.”

On the markets this morning, the FTSE 100 has fallen 0.4% to 7,673.7pts.

Majestic Wine is down 1.4% to 443.7p having opened at 440p. PZ Cussons has slumped 6.8% this morning to 217p and NWF Group is up 6% to 211p.

Elsewhere, risers include Premier Foods (PFD), up 2.1% to 40.1p, Nichols (NICL), up 1.1% to 1,547.4p and TATE & Lyle (TATE), up 1.1% to 649.8p.

Fallers so far include Pets at Home (PETS), down 3.6% to 121.6p, PayPoint (PAY), down 1.8% to 1,012p, Dairy Crest (DCG), down 1.3% to 504.5p and Greencore (GNC), down 1.2% to 177.9p.

Yesterday in the City

The pound slid in value yesterday as UK inflation remained flat despite a spike in oil prices.

The Office for National Statistics said the consumer price index stabilised at a year-long low of 2.4%, the lowest figure since March 2017, despite rising energy prices.

The pound dropped as low as $1.3319 soon after the announcement, before ending the day at $1.3393, 0.2% down for the day.

The FTSE ended the day flat at 7,703.7pts.

One of the index’s biggest movers was takeaway service Just Eat (JE), which slumped 4.7% to 810p on the news online delivery rival Deliveroo plans to sign up 5,000 more eateries and launch its own delivery fleet.

British American Tobacco (BATS) was up 1% to 3,716 after delivering a bullish trading statement yesterday despite economic headwinds.

Other FTSE 100 risers included Diageo (DGE), up 1.1% to 2,775.5p, Reckitt Benckiser (RB), up 1% to 6,009p and Ocado (OCDO), up 1% to 1,075.5p

Also on the up were Fevertree Drinks (FEVR), up 2% to 3,189p, AG Barr (BAG), up 1.9% to 691p and McBride (MCB), up 1.5% to 137.2p.

Tate & Lyle (TATE) slumped 4% back to 643p after being downgraded by broker Jefferies after its recent share price rise had returned the sugar substitute producer to a more normal valuation.

Other fallers included Greencore (GNC), down 2.7% to 180p, B&M European Value Retail (BME), down 1.6% to 415p, McColl’s (MCLS), down 2% to 225p and Marks & Spencer (MKS), down 0.6% to 302.5p.

Topics