Naked Wines plc · LSE:WINE
Naked Wines — Majestic Wine — H1 2016/17 Earnings Presentation
48 slides from Naked Wines's earnings presentation, Nov 17, 2016
Slide 1: Interim Results Analyst & Investor Presentation
2016/7 Interim Results Analyst & Investor Presentation November 2016
Slide 2: Disclaimer
2016/2017 Interim Results Disclaimer • This Document comprises the written materials/slides for a presentation concerning Majestic Wine PLC (the “Company”) and its unaudited interim results for the 26 weeks ended 26 September 2016 (the “Interim Results”). • By reviewing this presentation you agree t
Slide 3: Overview – the plan is working
2016/2017 Interim Results Overview – the plan is working 1 2 3 Investments are Sales growth will That sales growth driving sales translate into profit is sustainable growth growth 3
Slide 4: Highlights
2016/2017 Interim Results Highlights Cash ahead Reinstating Sales up by EBIT reflects of EBIT 13.2% transformation Dividend performance 5.7% LFL in Retail Down 92.4% due to Net Debt: EBITDA of Reflects our 26.7% in Naked £9.9m in investment 1.3x confidence in the Plan 4
Slide 5: Overview – the plan is working
2016/2017 Interim Results Overview – the plan is working 1 2 3 Investments are Sales growth will That sales growth driving sales translate into profit is sustainable growth growth 5
Slide 6: Investments are driving sales growth
2016/2017 Interim Results Investments are driving sales growth THE PLAN: Grow sales Key projects on Sales growth sustainably by time and on coming through – growing budget despite setbacks customers, not stores Reiterate our goal - £500m sales in 2019 6
Slide 7: We are doing what we said we would do…£8m from CapEx to OpEx
2016/2017 Interim Results We are doing what we said we would do…£8m from CapEx to OpEx 7
Slide 8: Our Key Projects are on time and on budget
2016/2017 Interim Results Our Key Projects are on time and on budget 1,250 wines available New range rolled for Next Day Delivery out across all stores Availability 5 Star Service at increased from 67% 87% to 78% Employee 22 Stores Revamped Engagement up to 71% 8
Slide 9: We have delivered:
2016/2017 Interim Results We have delivered: £1.7m £7m +144% 194 100,000 WIGIG Definition Increase in Different Mature Sales in sales since Craft Spirit product Angels in under 2 launch Sales ranges (from the USA months 5 in Sept) 9
Slide 10: We are on track to deliver £500m sales by 2019
2016/2017 Interim Results We are on track to deliver £500m sales by 2019 – if we can sustain the current growth rate 500 Naked 450 +26.7% growth 400 £ Sales (m) 350 300 Slower growth in commercial offset 250 200 150 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Retail +5.7% LFL L&W Naked Retail & Commerci
Slide 11: Naked Wines - Sales growth strong in all markets
2016/2017 Interim Results Naked Wines - Sales growth strong in all markets, inc US, despite setbacks 140 120 Sales GBP (M) 100 H1 2017 80 AUS + 72.9% USA +22.4% 60 UK +16.1% 40 20 0 FY13 FY14 FY15 FY16 H2 FY16 + H1 FY17 The failed direct mail campaign does NOT limit growth in the US. Core partner ch
Slide 12: Lay & Wheeler – the 160 year old start up
2016/2017 Interim Results Lay & Wheeler – the 160 year old start up 12 Month rolling Sales Growth (exc. En Primeur) A new team… 30.0% 20.0% 10.0% Sales Growth % 0.0% -10.0% …with a new culture -20.0% “The 160 year old start up” -30.0% -40.0% Jun-15 Jul-15 Jan-16 Jun-16 Jul-16 Feb-16 Mar-16 Aug-15 Se
Slide 13: Overview – the plan is working
2016/2017 Interim Results Overview – the plan is working 1 2 3 Investments are Sales growth will That sales growth driving sales translate into profit is sustainable growth growth 13
Slide 14: Sales growth is sustainable
2016/2017 Interim Results Sales growth is sustainable Sales are growing Because we are Projects required to because we are improving our KPIs… drive those KPIs are retaining more on track and on customers… budget Important: “Sustainable” does not mean that growth will be uninterrupted. Sales will st
Slide 15: Reminder – our goal is SUSTAINED growth
2016/2017 Interim Results Reminder – our goal is SUSTAINED growth Team Retention 5* Service Wine Availability Quality Customer Retention Growth in Sustained Customer LFL Sales Base Growth 15
Slide 16: Retail - We needed to improve KPIs
2016/2017 Interim Results Retail - We needed to improve 3 KPIs. Customer Service and Wine Quality are already good Team Retention % Availability % Customer Retention % 80% 90.0% 70.0% 79% 85.0% 69.5% 78% 80.0% 69.0% 77% 75.0% 68.5% 76% 70.0% 68.0% 75% 65.0% 67.5% 74% 60.0% 67.0% 73% 55.0% 66.5% 72%
Slide 17: Reminder – our goal is SUSTAINED growth
2016/2017 Interim Results Reminder – our goal is SUSTAINED growth Team Retention 77% 5* Service Wine Availability Quality 87% 78% 91% Customer Retention +4% Growth in Sustained Customer LFL Sales Base Growth +84,000 +5.7% 17
Slide 18: Majestic Retail: Higher retention drives customers, which drive sales
2016/2017 Interim Results Majestic Retail Higher retention drives customers, which drive sales Number of Active Customers Rolling 12 Months Like-for-Like sales growth Mar 2014 – Sept 2016 April 2013 – Sept 2016 850,000 8.0% 800,000 6.0% 4.0% 750,000 2.0% 700,000 0.0% -2.0% 650,000 -4.0% 600,000 -6.0
Slide 19: Naked Wines: Higher retention drives customers, which drive sales
2016/2017 Interim Results Naked Wines Higher retention drives customers, which drive sales Mature Angel Retention % Mature Angels (‘000) Total Sales £m 130 68% 330 67% 310 120 66% 290 110 65% 270 100 64% 250 63% 230 90 62% 210 80 61% 190 70 60% 170 59% 150 60 19
Slide 20: We are not claiming that nothing will go wrong. Commercial for example…
2016/2017 Interim Results Important – we are not claiming that nothing will go wrong. Commercial for example… The good news: The bad news: THE PLAN: 1. Look after Problems are Systems won’t be existing fixable and fixed until 2018 customers budgeted for 2. Accept lower growth till 2019 Lower growth
Slide 21: Overview – the plan is working
2016/2017 Interim Results Overview – the plan is working 1 2 3 Investments are Sales growth will That sales growth driving sales translate into profit is sustainable growth growth 21
Slide 22: Sales growth will translate into profit growth
2016/2017 Interim Results Sales growth will translate into profit growth Fixed cost step Cash cost lower Growing sales – change is than P&L cost flat costs = complete profit 22
Slide 23: We are expensing the fixed cost of delivering key projects
2016/2017 Interim Results We are expensing the fixed cost of delivering key projects Year 1 Year 2 Year 3 What Investment Delivery Productivity we’ve done: Team Retention: Living Wage, Share Incentives, Dead task removed New website Commercial Website Availability New App Commercial App 11.7% improv
Slide 24: Financial Review
2016/2017 Interim Results Financial Review Sales growth Costs up – but Cash flow ahead continues underlying of profit, profit growth dividend reinstated 24
Slide 25: We have sustained the sales momentum from FY16
2016/2017 Interim Results We have sustained the sales momentum from FY16 Sales Growth Naked Wines +26.7% Lay & Wheeler +27.8% Commercial +1.2% +5.0% Notes: Retail Naked Wines shown on basis of full year in both current and comparator. Lay & Wheeler shown excluding net en primeur adjustment. TOTAL +1
Slide 26: Profits have declined significantly due to investments across the business
2016/2017 Interim Results But profits have declined significantly due to investments across the business Adjusted EBIT £m 2nd half of investment plan 10.0 9.0 8.0 Sales slowdown (3.9) and margin 7.0 softening 6.0 5.0 (0.6) Marketing uplift 9.3 4.0 and fixed cost build Capability build 3.0 (3.4) 2.0
Slide 27: We are at the point of maximum investment
2016/2017 Interim Results We are at the point of maximum investment Adjusted EBIT £m Step-up 10 Underlying movement 8 Pricing, customer acquisition 6 9.3 (9.9) (2.1) Delivery, customer 4 service 6.5 (1.4) 2 (1.8) 0.7 (0.6) 0 +1.3m -2 FY16 H1 EBIT Cost Step-up Rebased EBIT Sales Growth Margin reducti
Slide 28: Where have we invested £10m?
2016/2017 Interim Results Where have we invested £10m? Breakdown of cost step-up £m CapEx Trend £m Capability 14 12.0 Customer experience Customer acquisition 12 10.0 10 Full year 8.0 4.0 Increased quality Half Year US Direct Mail 8 6.0 9.9 6 4.0 Capability 4.3 Esp. USA 4 2.0 1.1 2 0.0 0.5 Costs ste
Slide 29: Retail investments are beginning to pay back
2016/2017 Interim Results Retail investments are beginning to pay back Metric H1 change YoY Indicative Impact1 New # new and £2.6m of Contribution; Customers reactivated +18% c.4.7% LfL sales customers growth 1ppt = £300k Repeat / Loyal 2nd Shop Rate Flat contribution growth / 0.5% LfL each Customer
Slide 30: Retail profit reduced by investment plan and gross margin reduction
2016/2017 Interim Results Retail profit reduced by investment plan and gross margin reduction Adjusted EBIT £m 5% sales growth at constant Margin margin reduction – 10 vouchering, Retail portion 9 pricing of plan – 1.9 (1.6) headcount, 8 R&M 7 (0.7) Shouldn’t recur – 6 contract (3.1) terminations, 5
Slide 31: Naked Wines profitability impacted by step-up in spend and fixed cost
2016/2017 Interim Results Naked Wines profitability impacted by significant step-up in spend and fixed cost Adjusted EBIT £m More Mature Angels Quality focus 3 (0.1) 2 Finishing build out 1.9 of management 1 team – especially in USA 0.6 (4.2) - -1 H1 FY17 Investment KPIS (2.8) -2 Growth Investment:
Slide 32: Naked Wines: Top line growth driven by mature sales
2016/2017 Interim Results Naked Wines: Top line growth driven by mature sales Rolling 12 months Sales £m 140 120 Mature Angels 100 New Business 80 Goal is to sustain new business at a level to support or accelerate mature growth 60 40 Additional investment has focused on quality not quantity 20 Fail
Slide 33: Commercial: Impacted by Retail refocus
2016/2017 Interim Results Commercial: Impacted by Retail refocus Rolling 12 month sales growth year on year £m 16 14 • Trading margin down 1.6% 12 10 • Additional 0.8% margin Commercial 8 Retail reduction due to higher costs 6 4 • Retail is not taking Commercial sales, Retail growth in small 2 busin
Slide 34: Underlying cash ahead of EBIT, Dividend reinstated
2016/2017 Interim Results Underlying cash ahead of EBIT, Dividend reinstated H1 FY17 H1 FY16 £m £m Adjusted EBIT 700 9,198 • Cashflow remains positive despite FX 258 (141) drop in profitability Add back depreciation and amortisation 3,268 3,214 Less capex (1,608) (2,580) • Net debt of £25.1m (report
Slide 35: Financial Review
2016/2017 Interim Results Financial Review Sales growth Costs up – but Cash flow ahead continues underlying of profit, profit growth dividend reinstated 35
Slide 36: Outlook
2016/2017 Interim Results Outlook Well prepared Will continue It is early days for Christmas, to test and – we are only business learn – more one year into a climate cautiously three year plan uncertain Cautiously optimistic – reinstating dividend 36
Slide 37: Overview – the plan is working
2016/2017 Interim Results Overview – the plan is working 1 2 3 Investments are Sales growth will That sales growth driving sales translate into profit is sustainable growth growth 37
Slide 38: Appendices
2016/2017 Interim Results Appendices 38
Slide 39: H1 2016/17 Results Summary
2016/2017 Interim Results H1 2016/17 Results Summary H1 2017 H1 2016 % YoY % YoY £m £m Reported Underlying Sales 205.6 181.6 +13.2% +10.6% Adjusted EBIT1 0.7 9.2 -92.4% -92.5% Non-cash charges relating to acquisitions (5.4) (5.3) 1.0% 1.0% En Primeur Impact (0.3) (0.1) -112.2% -112.2% Other adjusted
Slide 40: Group structure
2016/2017 Interim Results Group structure Market size £2.2bn £17bn £2.0bn £0.7bn (UK) (Global) Sales for the year to March 2016 £244.0m £104.3m* £45.6m £10m % increase +5.5% +27.3% +7.9% +10.0% % of the Group 60.7% 25.5% 11.3% 2.5% Proposition We help people find wines Making great wine an We make y
Slide 41: A reminder: The Retail Plan
2016/2017 Interim Results A reminder: The Retail Plan 41
Slide 42: Business Unit Detail: Majestic Retail
2016/2017 Interim Results Business Unit Detail: Majestic Retail Underlying* H1 2017 H1 2016 YoY % £’000 £’000 Revenue 117,880 112,282 5.0% Gross Profit 27,481 27,734 -0.9% Gross Margin 23.3% 24.7% -1.4pp Distribution costs (13,646) (12,546) 8.8% Admin Costs (10,377) (7,876) 31.7% Adjusted EBIT 3,458
Slide 43: Business Unit Detail: Majestic Commercial
2016/2017 Interim Results Business Unit Detail: Majestic Commercial Underlying* H1 2017 H1 2016 YoY % £’000 £’000 Revenue 23,430 23,146 1.2% Gross profit 3,793 4,298 -11.7% Gross Margin 16.2% 18.6% -2.4pp Distribution Costs (1,598) (1,474) 8.4% Admin Costs (572) (557) 2.7% Adjusted EBIT 1,623 2,267
Slide 44: Business Unit Detail: Lay & Wheeler
2016/2017 Interim Results Business Unit Detail: Lay & Wheeler Underlying* H1 2017 H1 2016 YoY % £’000 £’000 Revenue 6,992 5,472 27.8% Gross Profit 1,713 1,508 13.6% Gross Margin 24.5% 27.6% -3.1pp Distribution Costs (509) (435) 17.0% Admin Costs (928) (920) 0.9% Adjusted EBIT 276 153 80.6% * Underly
Slide 45: Central costs & Group Excluding Naked Wines
2016/2017 Interim Results Central costs & Group Excluding Naked Wines Underlying* H1 2017 H1 2016 YoY % £’000 £’000 Central costs Administrative costs (1,883) (1,045) 80.2% Adjusted EBIT (1,883) (1,045) 80.2% Group excluding Naked Wines Revenue 148,302 140,900 5.3% Gross profit 32,987 33,540 -1.6% G
Slide 46: Naked Wines & Group Including Naked Wines
2016/2017 Interim Results Naked Wines & Group Including Naked Wines Proforma H1 2017 H1 2016 YoY % £’000 £’000 Naked Wines Revenue 58,980 46,544 26.7% Gross profit 20,220 16,478 22.7% Gross Margin 34.3% 35.4% -1.1pp Distribution costs (9,328) (7,363) 26.7% Administrative costs (13,667) (8,476) 61.2%
Slide 47: Glossary
2016/2017 Interim Results Glossary Group and KPI definitions Customer Retention % of repeat and loyal customers from 12 months ago that are still repeat and loyal customers, as measured from our customer databases Product Availability % of targeted range available in stores/on websites as indicated
Slide 48: Glossary (cont.)
2016/2017 Interim Results Glossary (cont.) Majestic Retail, Commercial and Lay & Wheeler Nurture Customer A customer who has shopped once Active Customer A customer who has made a purchase in the last year Repeat Customer A customer who has shopped more than twice in the last year Reactivation React