TIDMWINE
RNS Number : 8464M
Naked Wines PLC
19 September 2023
19 September 2023
Naked Wines plc
("Naked Wines" or "Group")
Full Year Results for the 53 weeks ending 3 April 2023
Foundations laid to focus on profitable growth and cash
generation
Full year highlights:
-- Total sales of GBP354m, +1% year-on-year (down 8% on a 52 week comparable basis(1) )
-- Adjusted EBIT(2) of GBP17.4m, or GBP16.3m on a 52 week
comparable basis (FY22: GBP2.0m), ahead of guidance (GBP13-17m) due
to lower new customer investment
-- Statutory loss before tax of -GBP15.0m (FY22: profit before
tax GBP2.9m) driven by non-cash goodwill impairment and inventory
provision charges
-- Inventory in line with prior guidance, GBP166m at year end
(FY22: GBP142m), net GBP10.3m provision (FY22: GBPnil)
-- Net cash(2) (ex. lease liabilities) of GBP10.3m (FY22:
GBP39.8m), total available liquidity (cash and credit facility) of
GBP49.1m (FY22: GBP39.8m)
Strategic highlights
-- Credit facility covenants revised to accommodate the destocking process
-- GBP10m p.a. of further cost savings identified, enhancing
customers lifetime value and profitability
-- Foundations laid to make profitability sustainable, growth
investment opportunities developing
-- Expect material cash generation across H2 of FY24 and FY25 as excess stock is unwound
Reported 52 wk comp. FY23 vs FY22
Group Financial Summary FY23 FY22 FY23 Reported 52 wk comp.
(GBPm) (1)
-------- ------- ----------- ------------- -------------
Total Sales(3) 354.0 350.3 343.7 1% (8)%
New 26.9 34.0 26.0 (21)% (29)%
Repeat 320.7 315.1 314.5 2% (6)%
-------- ------- ----------- ------------- -------------
New customer investment (21.4) (41.3) (20.7) (48)% (54)%
Repeat Customer contribution 86.5 86.2 84.8 -% (9)%
-------- ------- ----------- ------------- -------------
General & administrative(4) (48.0) (43.0) (48.0) 12%
Operating G&A (41.1) (38.9) (41.1) 6%
Share based payments (1.5) (1.1) (1.5) 36%
Marketing R&D (5.4) (3.0) (5.4) 80%
-------- ------- ----------- ------------- -------------
Adjusted EBIT 17.4 2.0 16.3 770% 7%
-------- ------- ----------- ------------- -------------
Adjusted items (31.6) (0.1) - n/a n/a
-------- ------- ----------- ------------- -------------
Profit/(loss) before
tax (15.0) 2.9 (617)%
-------- ------- ----------- ------------- -------------
Net cash excluding lease
liabilities 10.3 39.8 10.3
-------- ------- ----------- ------------- -------------
Nick Devlin, Group Chief Executive, commented:
"The trading environment is tough, but Naked remains highly
resilient. We have taken decisive action and have met the key goals
in our "pivot to profit" strategy. Our focus now is on delivering
profitable growth.
We recognise that the environment is likely to remain tough and
are configuring the business to be profitable and cash generative
despite challenging conditions. A leaner and more focussed Naked
will be best placed to deliver for our customers and winemakers. I
believe we can emerge from these challenges a stronger business
I want to thank our teams and winemakers for their support and
commitment over the past year. Across the board they have embraced
a program of rapid change and laid the foundations for future
profitable growth ahead"
Notes:
1) FY23: 53 weeks versus 52 weeks in the previous financial
year: All financial and non-financial information in this document
relates to our 53 week financial period ended 3 April 2023, unless
otherwise stated. Within this announcement and the Chairman's
statement, the Chief Executive's review and the Financial review,
we provide comparable 52 week constant currency financial
information to facilitate comparison with our prior financial
period, 52 weeks ended 28 March 2022. For reference, we call this
52 week constant currency measure '52 week comparable' (or simply
comparable) where it is referred to in this document. See the
reconciliation of reported results to 52 week comparable figures in
the APM section at the end of this announcement. Please note that
whilst the 53 week results from which this statement has been
extracted have been audited, the 52 week comparable numbers in the
underlying financial statements are unaudited.
2) In addition to statutory reporting, Naked Wines reports
alternative performance measures (APMs) which are not defined or
specified under the requirements of International Financial
Reporting Standards (IFRS). The Group uses these APMs to improve
the comparability of information between reporting periods, by
adjusting for certain items which impact upon IFRS measures, to aid
the user in understanding the activity taking place across the
Group's businesses. Definitions of the APMs used are given at the
end of this announcement.
3) Total Sales includes GBP6.4m (FY22: GBP1.2m) of Other sales,
which includes bulk wine disposals.
4) General & Administrative excludes adjusted items of
GBP5.1m (FY22: GBP0.1m).
Current Trading - Q1
FY24 has started off slower than expected, with Q1 revenue down
18% versus prior year. This reduction is a combination of:
-- Sales to new customers being 41% lower, the comparable period
being prior to our pivot to profitability and reduction in new
customer investment; and
-- Sales to repeat customers being 15% lower, reflecting the smaller customer base year on year
With revenue below our initial plan, we are marginally behind
our destocking plans but have taken steps to further reduce future
purchase commitments while continuing to manage costs tightly.
Guidance & Outlook
We expect full year revenue to decline 8% to 12% as the prior
period comparison eases in the second half of the year and the rate
of decline in customer base slows. Our current view on FY24 trends
are shown below:
-- Sales (52 week comparable) -8 to -12% (on constant currency)
-- New customer investment GBP23-27m
-- Repeat customer contribution GBP72-GBP80m
-- Operating G&A inc share based GBP37-GBP40m
payments
-- Marketing R&D Nil
-- Adj EBIT GBP8-12m
-- Inventory (YE) GBP145-GBP155m
-- Net cash (YE) ex. lease liabilities GBP10-30m
This guidance is provided based on FX rates of 1 GBP = 1.24 USD
and 1.74 AUD.
Naked Wines plc will host an analyst and investor conference
call at 9am BST / 4am ET / 1am PT on 19 September 2023. The
briefing will be webcast using the following link:
https://brrmedia.news/WINE_FY23
If you would like to ask a question, please dial, UK-Wide: +44
(0) 33 0551 0200 / UK Toll Free: 0808 109 0700 / USA Toll Free: 866
580 3963 - quote Naked Wines Full Year when prompted by the
operator.
Alternatively, it can be found on our website. A recording will
also be made available after the briefing on our results in the
announcements section of our investor website.
For further information, please contact:
Naked Wines plc IR@nakedwines.com
Nick Devlin, Chief Executive Officer
James Crawford, Chief Financial
Officer
Chris MacDonald
Investec (NOMAD & Joint Broker) Tel: 0207 597 5970
David Flin / Carlton Nelson /
Ben Farrow
Jefferies (Joint Broker) Tel: 0207 029 8000
Ed Matthews / Harry le May / Gill
O'Driscoll
Instinctif (Financial PR) Tel: 07917 178 920 / 07931 598
Guy Scarborough / Damian Reece 593
About Naked Wines plc
Naked Wines connects everyday wine drinkers with the world's
best independent winemakers.
Why? Because we think it's a better deal for everyone. Talented
winemakers get the support, funding and freedom they need to make
the best wine they've ever made. The wine drinkers who support them
get much better wine at much better prices than traditional
retail.
It's a unique business model. Naked Wines customers commit to a
fixed prepayment each month which goes towards their next purchase.
Naked in turn funds the production costs for winemakers, generating
savings that are passed back to its customers. It creates a
virtuous circle that benefits both wine drinker and winemaker.
Our mission is to change the way the whole wine industry works
for the better. In the last financial year, we served more than
867,000 Angel members in the US, UK and Australia, making us a
leading player in the fast-growing direct-to-consumer wine
market.
Our customers (who we call Angel members) have direct access to
293 of the world's best independent winemakers making over 1,800
quality wines in 21 different countries. We collaborate with some
of the world's best independent winemakers like Matt Parish
(Beringer, Stags' Leap) and 8-time Winemaker of the Year Daryl
Groom (Penfolds Grange).
Chairman's letter
Dear Shareholders
Firstly, an apology. The whole Board of Naked Wines regret that
your support and patience as shareholders, winemakers, Angels and
employees has not been rewarded. We are all determined to remedy
that.
I am pleased to report that the management team have recognised
the challenges very clearly, acknowledge where different actions
could have been taken and are acting decisively to steer Naked
through this period. They are highly motivated and determined to
ensure that all stakeholders are rewarded for their support.
For those of you who I have not met, I founded Naked Wines 15
years ago, was CEO for 12 years, and have rejoined the Board as
non-Executive Chairman nine weeks ago. I remain a shareholder
owning 2.7% of the Company.
As I am new to the job, I have taken the opportunity to immerse
myself in the business and I thought it may be useful to share my
first impressions...
1. Trading is tough. But Naked will come through it leaner and tougher,
2. The problems are fixable - and the management team have a good plan to do so,
3. We are determined to ensure that shareholders are rewarded for their patience.
1. Trading is tough. But Naked will come through it leaner and
tougher
Make no mistake, trading conditions are tough. As you would
expect, high inflation, higher taxes on alcohol and falling
disposable incomes has put pressure on sales and costs. Combine
that with multi-year production cycles for wine and falling new
customer acquisition and you have a perfect storm, driving
inventory build-up and pressure on cash, which has resulted in our
reporting a material uncertainty around our going concern (see note
3 for further details).
That's the bad news. The good news is that the business has
proved to be very resilient even in these tough conditions. And the
management team have taken the steps necessary to ensure that we
don't just survive - we come through this as a leaner, tougher
business, conditioned to do more with less and with some battle
scars that will remind us of hard learned lessons.
Specifically, the team have:
-- Reduced costs to ensure that we are able to invest in growth
AND deliver a healthy level of profit;
-- Reset volumes with our winemakers at a level where we can rebuild growth; and
-- Renegotiated our banking facilities to ensure that they are fit for purpose.
2. The problems are fixable - and the team have a good plan to
do so
With a clear plan on costs and inventory commitments, the team
is able to focus on our next challenge - to get sales growing
again, so that we can reward all stakeholders for their
support.
The key finding here is that we do not have a general sales
problem. Our existing customers are resilient despite the tough
conditions. In fact, the attrition rate of existing customers,
which is the number of Angels who have cancelled as a proportion of
the Angel count at the start of the year, improved by 2% in this
last year. What we do have is a new customer acquisition
problem.
The management team has a good plan to fix that, focused on
generating higher levels of new customer traffic and extending the
number of ways we service our customers to monetise that traffic
more effectively. Early evidence from testing these initiatives
looks promising, but they need to be tested at scale before we can
draw conclusions.
3. We are determined to ensure that shareholders are rewarded
for their patience
While I think that the team's plan is a good one, success is not
guaranteed.
This is not as gloomy as it sounds. If we can't improve our new
customer acquisition economics, then we still expect to have a
profitable, cash generative business, albeit smaller than the one
we have today.
Obviously, we intend to do better than that, and remain
convinced that Naked has a set of competitive advantages which have
the potential to give customers and winemakers a better deal than
they can get from anywhere else - and we intend to fulfil that
potential.
What we can promise you is that this will be done in a
disciplined way to ensure that the value created is realised.
To do that we have agreed to commit to...
-- Limit general and administrative costs to around 11% of sales
-- Maintain investment in new customer acquisition at GBP23 to
GBP27 million per annum through to March 2026 - enough to rebuild
growth, with further growth to come from increased efficiency
rather than increased spend
-- Allocate capital in a rational way, including serious
consideration of share buy backs when the liquidity outlook
improves
-- Drawing a line under our overstock issues and allowing us to
get back to sustainable growth for key winemaker partners
I would like to thank David Stead, who has served as a
non-Executive Director, Chair of the Audit Committee and Chairman,
for his many years of wise advice and leadership.
Finally, I would like to thank all of our people and our
winemakers for their hard work during a difficult time. I know it
has been tough for you and we are determined to make sure that your
support is rewarded.
Rowan Gormley
Chairman
Chief Executive's review
It has been a challenging year for Naked Wines. Ultimately
though I believe it is one in which we have undertaken important
work to stabilise the business alongside work to lay the
foundations for a future in which we deliver on our ambition of
profitable growth.
In October 2022 we took decisive action and laid out a plan to
"pivot to profit". That plan had three main elements:
1. Secure our credit facility to provide funding while we undertook a change of path;
2. Demonstrate profitability; and
3. Develop a path to sustainable, profitable growth.
Our focus over most of FY23 has been primarily on the first two
of these goals to ensure Naked was on a more secure footing and
demonstrate the underlying profitability of the business. We have
met the majority of the short-term goals we laid out with our
"pivot to profit" to create breathing space for the business to
address the core challenge of returning to profitable growth.
Despite much progress the trading environment remains challenging
moving into FY24 and as a result we are undertaking further actions
to ensure we fully right-size our stock levels and cost base.
We have much more to do. We have ambitious goals and in some
areas our testing has not yet unlocked the progress we need.
Equally we recognise the consumer environment remains uncertain and
the global wine industry is challenged with over-supply.
However, we are ready and motivated for the challenges ahead. We
are absolutely committed to returning Naked to profitable growth
and recognise the need for decisive action and tough near-term
decisions to get us there. We have a core business and membership
base that even in a tough environment remains incredibly robust.
That platform creates options for Naked - and as a team we are
determined to use that to establish Naked's long-term potential in
a way which creates clear value for all our stakeholders.
Recent challenges
The past year has been one of the most volatile in Naked's
history. Specifically, we have been wrestling with three key
challenges that we did not anticipate when we laid out growth plans
following the pandemic:
-- Sustained high inflation at, or near to, double digits in our
key markets, especially impacting supply chain and fulfilment
costs;
-- The severity of Apple's privacy changes on our overall marketing effectiveness; and
-- The reversion of online penetration trends in the wine
category: the direct-to-consumer (DtC) wine market in the US has
been in short-term volume decline (versus long-term expansion of
over 10% per annum).
As a consequence of these, and our failure to deliver our growth
plans, we created two new challenges for the business:
-- We have too much stock. This has not only impacted short-term
liquidity, but has created real costs that are burdening our
P&L and investment metrics; and
-- We have a supply chain built for growth and we are operating
it below capacity which has added substantial excess cost on a per
order basis.
While it is important to acknowledge that we made mistakes in
pursuit of growth, it is more important that we are committed to
ensuring that as we rebuild a better business, we take the steps to
learn from these and ensure they cannot be repeated.
Decisive action taken
Reflecting these challenges, we moved decisively to address them
and, in October, announced our pivot to profit strategy. Since
then, we have executed at pace and with a willingness to confront
tough decisions across our business.
We have been able to make crucial progress to address these
challenges:
-- Renegotiated and subsequently revised further our credit
facility with improved covenant tests to underpin liquidity in
downside scenarios;
-- Renegotiated and reduced our wine purchasing commitments and
developed the capability to sell excess wine on the bulk market. We
have done this in an orderly fashion and whilst maintaining the
support and engagement of our winemakers which is a crucial part of
our competitive advantage. As a result, forward commitments are now
below anticipated sell-through levels. Consistent with the plans
announced in October, stock levels ended the year at GBP166 million
and we confirm our guidance that our peak inventory point was in
October 2022 and that we expect to deliver cash generation from
inventory unwind from the second half of FY24; and
-- Demonstrated improving trends in Angel fund withdrawals,
reflecting the underlying high loyalty and predictable revenue
streams associated with our established member base.
In addition, we have undertaken a series of measures to deliver
on our near-term goal of demonstrating Naked's ability to trade
profitably. These measures have resulted in adjusted EBIT of
GBP17.4 million in FY23 (FY22: GBP2.0 million).
-- We have reversed the trend of rising general and
administrative (G&A) costs, with costs falling in the second
half of the year despite high levels of inflation and have
undertaken workforce reduction programmes that have reduced
non-customer service headcount by 12% during the year. As a result,
we are able to guide to flat operating G&A into FY24, despite
sustained inflationary pressure.
-- We have reduced underperforming marketing spend and reconfirm
that there will be no additional expense classed as marketing
R&D in FY24.
-- We have identified ways to recover cost inflation through our
pricing and promotional strategy. FY23 saw higher levels of
like-for-like pricing increase that I would wish to see on a
sustained basis, but our ability to pass through increases whilst
preserving retention rates reflects the work we have done to build
exclusive, quality winemaker brands with real equity.
These are important steps forward but alone will not be
sufficient to meet our goals. Notably, given the new fiscal year
has not started in line with expectations, necessitating a harder
look at plans, costs, and a challenge for the team to return Naked
to growth in FY24 whilst reinvesting more into growth and
delivering less profit next year as a result.
We are not fully satisfied with our achievements:
-- We have not met our goals in terms of new member recruitment.
Our excess adjusted EBIT versus initial guidance reflects this and
as a result we start FY24 with a smaller member base than we aimed
for. To make profits sustainable we must increase new member
recruitment and stabilise member numbers heading into FY25.
-- Payback levels have improved in each of the last three
half-year periods, and reached 1.7x in the second half of FY23,
with LTV per member acquired in FY23 25% higher than FY22. However,
we aimed to deliver a greater improvement as we cut marketing spend
and we are disappointed that we have not been able to find greater
levels of attractive investment opportunity in the last six
months.
-- As a result of our weaker performance we have recognised
substantial charges reflecting, amongst other things, impairment of
goodwill and provisioning of inventory we expect to be unable to
sell before it risks quality deterioration. As a result of these
items we are reporting a statutory loss before tax of GBP15.0
million (FY22: GBP2.9 million profit).
Looking forward
FY24 is a crucial year for Naked Wines. As a team we remain
focused on completing the job of rebuilding liquidity by delivering
cash generation in the second half of the year and underpinning the
profitability we delivered this year with additional cost focus. We
have tracked below our plans in the first part of FY24 and, as
such, are taking further measures to restructure our group buying
and inventory plans to ensure we continue to meet cash generation
goals by the end of FY25.
Alongside a focus on inventory and costs, we must turn a greater
share of attention to the third goal of our pivot to profit
strategy: the delivery of sustainable, profitable growth. Our
current challenges ultimately stem from lower levels of member
recruitment over the last 12 months and we are committed to
reversing this. Whilst I do not expect it to be easy, I believe
that Naked has the potential to combine a return to growth with
profitability and cash generation. To do so will require us to make
progress in three key areas.
1. Reset our cost base
Taking cost out of the business supports our ability to offer
leading value for money to consumers and will underpin our efforts
to build sustainable profitability. As we start to look ahead into
the next financial year, we see the possibility for considerable
further cost reduction.
We moved G&A cost from growth to decline in the second half
of FY23. However, we acknowledge we have more to do in terms of
efficiency. We have set a goal of achieving GBP10 million of annual
run rate cost reduction by the end of FY24, on top of the
elimination of the marketing R&D spend of GBP5.4 million in
FY23. Our current focus is in our fulfilment operations, and we
have preliminary indications we may be able to achieve our savings
goals from this area alone.
A large component of this will be sourced from our warehousing
where we have made significant progress through RFP and
renegotiation processes to create commercial arrangements that
better reflect the scale of the business today. Additionally, as we
move into FY25 and operate with substantially lower absolute
inventory levels, we will see further volume-based savings
especially in warehousing.
2. Increase our marketing efficiency
It is no secret that we would like to deliver higher levels of
payback than we have been able to in FY22 and FY23. Given an
advantaged customer proposition and a large TAM there is a clear
question as to why we haven't been able to sustain higher growth
rates in Naked. There are many potential reasons for our recent
challenges:
-- Consumer fundamentals have certainly been tough;
-- The long-term secular tailwind of online migration has taken
an unprecedented pause (and even step back) in the last year;
-- But equally, we should recognise that we may have
underestimated the scale of some of the barriers to moving
consumers in our addressable market online and into the Naked
proposition.
We have identified two key barriers to adoption that we believe
can be removed, and are working through a structured testing plan
to establish if we can enhance marketing efficiency by doing
so:
-- The suitability of our "Angel Piggy Bank" model for all
segments of our addressable market; and
-- The requirement of a subscription relationship to access best value from our proposition.
In addition, we expect to see results in the year from our work
to rebuild our checkout experience and add to the range of payment
options that we provide to our customers in all markets.
Our testing programme in these areas commenced in October 2022
and we are encouraged at this early stage by the results we are
seeing. We believe we may have uncovered a route to better serve
younger wine drinkers which could both expand the segments of the
market we can actively target and support enhanced payback in
channels that drive a broad range of traffic such as our parcel
insert partnerships. We are currently focused on validating our
initial findings in different markets and testing at scale before
we build these benefits into our marketing plans.
It is worth noting that, while each is individually encouraging,
if we can deliver both cost reduction and enhanced marketing
efficiency, we benefit from a multiplier effect which would
materially improve our chances of scaling customer acquisition
spend at attractive payback.
-- Variable cost savings both reduce the cost of serving the
first order (lower CAC) and enhance margins on all ongoing orders
(allowing us to convert the progress we have made on gross margin
to higher contribution margins and LTVs).
-- If we can much better monetise younger traffic that will also lift aggregate cohort LTVs.
-- The combination should increase payback, and in so doing,
make more investment opportunities viable to increase attractive
marketing opportunities, which was an area where we have been
challenged in FY23.
3. Explore new ways to drive traffic
To return to growth will require us to leverage the improvements
above to deploy additional capital to drive qualified traffic to
Naked and increase our rate of new member additions. We are testing
new strategies to invest in content creation and to develop new
campaign approaches to restore the viability of investment in key
paid digital channels. We believe that we have the team and
capabilities to translate higher allowable traffic cost into higher
levels of qualified traffic. However, we have not yet proven that
we can do that successfully in the current consumer and advertising
environment. As we start the year, this third part of our plan to
deliver sustainable profitability is a key area of focus.
What does that mean for our mid-term prospects?
We are at a place where we can reasonably lay out some scenarios
that we see as plausible for the Company over the coming years, and
share what we need to prove to deliver against these.
We continue to see Naked stabilising as a substantially larger,
and considerably more profitable, business than it was
pre-pandemic. Under a scenario where we are not able to find
sufficient attractive investment opportunities to return to growth,
we would anticipate continued profitability, a focus on cost
reduction and strong cash conversion as we unwind excess
inventory.
However, the above doesn't reflect our ambition for the
business. Our goals in the new LTIP reflect a better sense of where
we would aspire to see the business in the coming years: delivering
GBP60 million of free cash flow, achieving GBP350 million of
revenue with a 4% EBIT margin, and translating that to
significantly improved share price performance. To realise these
goals requires us to successfully extract the cost savings we have
line of sight of, enhance investment returns through our testing
plan for the proposition, and leverage that to increase investment
levels to return Naked to at least single digit top line growth in
the next three years. Against a tough backdrop for the category,
this would position Naked as a profitable, growing and cash
generative business. A return to growth will also accelerate the
timing at which we can unwind the excess inventory on the balance
sheet.
Most importantly though, after a period of high volatility we
have the opportunity to return focus to working to fulfil the
long-term potential of Naked to create long-term shareholder value
by building a better alternative for wine drinkers and
winemakers.
The steps we have taken so far mean that we can be confident in
our foundations. Under either of the scenarios outlined, we see a
business that will be profitable and cash generative, with the
potential to generate tens of millions in cash as we unwind the
excess stock on the balance sheet over the next 24 to 36 months. In
any scenario, as a management team we are entirely committed to
delivering value for all our stakeholders.
As a result of the foundations laid over the past six months, we
are well placed to win in a tough market. At this stage in Naked's
development we believe we are close to delivering something we have
not achieved before, with the potential for cash generative
profitable growth over the coming years. Together, as a leadership
team, as a company, and as a community of Angels and winemakers, we
are excited about the years ahead.
Nick Devlin
Chief Executive Officer
Financial review
Overview
In July 2022 I was asked to return to the CFO role. At this time
it was clear to both Nick and I that we should not, in the near
term at least, continue to aggressively target growth. LTVs had
fallen as cost inflation worked its way into the supply chain
reducing order profitability. Coupled with a reduction in marketing
efficiency as the pandemic tailwinds reversed, paybacks were
dropping. The original plans for FY23 contemplated investment in
additional G&A and, as a result, the Group was forecast to be
less profitable year-on-year, despite seeing little or no growth.
Naked had been built with a view to delivering profits in the event
we weren't investing to grow, and it was clear to us that we could
and should deliver that.
We quickly pivoted, reducing poor performing marketing
investments, eliminating plans to hire and undertaking changes to
our organisational structure to better align costs with our revenue
trajectory. We have focused on recruiting fewer but higher quality
Angels as it became clear that a portion of our pandemic
recruitment was low quality. We have also focused on providing
great wine and service to our existing Angels to maximise the
revenue opportunity they represent. As a result, while reported
profit before tax shows a loss of GBP15.0 million, after
recognising material provisioning against our excess inventory and
an impairment of goodwill, adjusted EBIT - which we consider to be
reflective of the underlying profitability of the business -
increased to GBP17.4 million. While total reported revenue was
marginally up, revenue on a comparable 52 week basis declined by 8%
as a result of the changes we have made in strategy and the
consequent reductions in customer recruitment and Angel
numbers.
As reported 52 week comparable
FY23 FY22 YoY FY23 FY22 YoY
GBPm GBPm % GBPm GBPm %
--------------------------- --------- ------- ------ -------- ------- -----
Revenue 354.0 350.3 1% 343.7 373.2 (8)%
Cost of sales (205.7) (208.6) (1)% (181.7) (219.8) (17)%
--------- ------- ------ -------- ------- -----
Gross profit pre inventory
provision(3) 148.3 141.7 5% 162.0 153.4 6%
Inventory provision (10.3) - n/a - - n/a
--------------------------- --------- ------- ------ -------- ------- -----
Gross profit 138.1 141.7 (3)% 162.0 153.4 6%
--------------------------- --------- ------- ------ -------- ------- -----
Contribution(1) 69.9 79.1 (12)% 81.2 85.4 (5)%
Advertising costs (17.7) (34.1) (48)% (17.0) (37.1) (54)%
General & administrative
costs (53.1) (43.1) 23% (48.0) (44.8) 7%
Analysed as:
Operating general and (41.1) (38.9) 6% (41.1) (40.4) 2%
administrative costs(2)
Marketing R&D
Share based payments (5.4) (3.0) 80% (5.4) (3.3) 64%
Software as a Service (1.5) (1.1) 36% (1.5) (1.1) 36%
costs(3)
Restructuring costs(3) (2.3) - n/a - - n/a
Other adjusted items(3) (1.5) - n/a - - n/a
(1.3) (0.1) n/a - - n/a
--------- ------- ------ -------- -------
(53.1) (43.1) 23% (48.0) (44.8) 7%
--------------------------- --------- ------- ------ -------- ------- -----
Impairments (18.2) - n/a - - n/a
Profit on disposal of
asset held for sale(3) 4.8 - n/a - - n/a
--------------------------- --------- ------- ------ -------- ------- -----
Operating (loss)/profit (14.3) 1.9 (853)% 16.3 3.5 366%
-------- ------- -----
Analysed as:
Adjusted EBIT 17.4 2.0 770%
Adjusted items (31.6) (0.1) n/a
--------- -------
Operating (loss)/profit (14.3) 1.9 (853)%
--------------------------- --------- ------- ------
Note 1. Contribution is calculated as gross profit less
fulfilment costs per the Income statement. 2. Refer to the table in
the APM section at the end of this announcement for a
reconciliation of G&A costs to those reported in the Income
statement. 3. Refer to note 5 Adjusted items for further
details.
At the outset of the year, we were operating with an excess
level of stock and future stock commitments which consumed cash. We
have been working with our winemakers and supply chain partners to
balance our own liquidity requirements with the support and
purchases they rely on, by continuing to fund and purchase some
stock as we simultaneously seek to unwind this position in an
orderly fashion. We closed the year with GBP165.7 million of
inventory (net of a GBP10.3 million provisioning charge), GBP39.5
million of cash and cash equivalents and GBP10.3 million of net
cash excluding lease liabilities. Our rate of cash consumption has
slowed with GBP45.3 million of net cash excluding lease
liabilities* consumed during FY22, GBP16.9 million during the first
half of FY23 and GBP12.6 million during the second half of FY23.
See reconciliation of net cash excluding lease liabilities in the
APM section at the end of this announcement.
Our credit facility, which we renegotiated during the year to
reflect the pivot to profit strategy and ensure accessibility in
the event of a downturn, remained accessible on the same terms
following the takeover of Silicon Valley Bank by First Citizens
Bank. Subsequent to year end we agreed a further amendment to this
facility in light of the more challenging current trading
conditions to enable us to incur further costs, should we need to,
in order to reduce inventory commitments and operating expenses
further.
Our FY23 performance was achieved against a difficult market
backdrop due to increased inflationary pressure within our supply
chain and low consumer confidence. These challenges are continuing
into FY24 and trading in the early part of the year has been slower
than we had planned. As a result we are continuing to review our
inventory intake commitments to ensure we remain on track to reduce
stock levels and further reviewing our cost structure. We are
executing against a range of opportunities to drive cost out of our
fulfilment operations while continuing to expand our customer
recruitment strategy to penetrate the considerable addressable
market that we operate in. In the near-term we will take a more
aggressive approach to payback decisions focusing more heavily on
cash returns while we plot a pathway back to revenue growth.
* Net cash excluding lease liabilities is a change in naming
convention only from net cash as previously used by management. The
calculation of this measure remains consistent with previous
disclosures (see the APM section at the end of this
announcement).
FY23 basis of comparison
FY23 has been a 53 week year, which we use periodically to allow
our trading periods to always align to weeks of the year. Exchange
rate movements have also been substantial, with the average USD
translation rate for revenues of 1.206 in FY23 versus 1.368 in
FY22. To add further complexity, we have made some disposals of
excess inventory as bulk commercial sales which have not been
undertaken at scale previously.
Given these complexities, we offer two comparators to provide
insight into the trading trends in the business:
1. Reported to reported, as shown on the face of the financial statements, and
2. Comparable 52 week basis with all foreign currency balances
translated at FY23 rates, the impact of week 53 removed and
provisioned inventory sales removed and reported net within
adjusted items. See note 5 Adjusted items for further
information.
The key drivers of the difference between these measures are as
follows:
FY23 FY22
----------------- -------------
Sales EBIT Sales EBIT
GBPm GBPm GBPm GBPm
Reported 354.0 (14.3) 350.3 1.9
Adjusted items (3.1) 31.6 - 0.1
------------------------ ------ --------- ------ -----
Adjusted 350.9 17.4 350.3 2.0
Less: 53rd week (7.2) (1.1)(1) - -
Translation to FY23 FX
rates - - 22.9 1.5
------------------------ ------ --------- ------ -----
52 Weeks comparable 343.7 16.3 373.2 3.5
------------------------ ------ --------- ------ -----
Note 1: The EBIT impact of the 53rd week of GBP1.1 million is at
a contribution level and does not include an apportionment of fixed
costs borne across the financial year.
Drivers of Group P&L performance
In FY23 our total sales grew by 1% to GBP354.0 million. On a
comparable 52 week basis this was an 8% decline. This reflects:
-- Lower sales to new customers as a result of reduced levels of investment; and
-- An Active Angel number decline to 867,000, a 10% decrease compared to FY22.
Our revised strategy has moved us in the direction of higher
quality customers as evidenced by the 52 week comparable drop in
sales to repeat customers being a more moderate 6% decline.
Repeat Customer contribution of GBP86.5 million is marginally
ahead on a 53 week basis and reduced by 9% on a 52 week comparable
basis. This trend is driven by a reduction in Repeat Customer sales
due to lower Angel numbers and a reduction in Repeat Customer
contribution margins which have moved from 27.7% in FY22 to 27.0%
in FY23. This reduction reflects increased transportation and
warehousing costs not being fully offset by our price increases, in
particular in the UK and Australian markets.
Our investment in the acquisition of new customers in the year
fell 48% to GBP21.4 million on a 53 week basis (down 54% on a 52
week basis) as part of our shift in strategy. By focusing the lower
spend on the best returning investments we improved our 5-Year
Forecast Payback to 1.7x, up from 1.5x reported last year. This
higher quality recruitment is supported by higher first order price
points resulting in a 29% decline in New Customer sales on a 52
week basis.
Operating G&A costs were GBP41.1 million (see reconciliation
of G&A costs in the APM section at the end of this announcement
for further details), an increase of 2% on a 52 week comparable
basis. During the year, in light of the focus on profitability and
significant inflation being seen in salaries, we undertook a
restructuring program seeking to generate improved efficiency and
reduce our total staffing expense. The effect of this is only fully
reflected during FY24 with the final steps having completed in
March 2023.
We invested GBP5.4 million into our marketing R&D program in
the year (FY22: GBP3.0 million), experimenting with above the line
advertising in our UK and US markets to drive enhanced brand
awareness and earlier stage consideration of Naked for new
customers. Whilst these initiatives showed early promise, they were
not generating material payback levels and have been paused while
we focus on driving profitability and reducing cash consumption.
Any future above the line spending will be included in our overall
marketing costs and payback calculations.
Share based payment charges (excluding associated social
security costs) for the year totalled GBP1.6 million, increased
from GBP1.3 million in FY22 because of the awards of options made
under the "transition scheme" announced during the year.
The net of the above factors results in adjusted EBIT of GBP17.4
million, or GBP16.3 million on a 52 week comparable basis. The
increase versus FY22 can be summarised as:
GBPm
FY22 adjusted EBIT 3.5
Reduced Investment in New Customers 23.9
Change in Repeat Customer contribution (8.0)
Change in other contribution 0.1
Increase in G&A costs (0.7)
Increase in share based payment charge (0.4)
Increased marketing R&D spend (2.1)
---------------------------------------- ------
52 week adjusted EBIT 16.3
Plus: week 53 impact 1.1
---------------------------------------- ------
FY23 adjusted EBIT 17.4
---------------------------------------- ------
Reported operating loss of GBP14.3 million reflects the impact
of GBP31.6 million of costs across a range of adjusted items. Refer
to note 5 Adjusted items for further details. These are adjusted as
they are either material one-time charges we do not expect to be
repeated or they are non-trading related. We feel that treating
them as adjusted items provides clarity of these non-recurring
events and also a more comparable view of business trading
performance. The key components of these items are:
GBPm
Right-sizing of US inventory (14.0)
Impairment of goodwill, property, plant and
equipment and right-of-use assets (18.2)
Restructuring costs (1.5)
Gain on sale of ex-Majestic store 4.8
Amortisation of acquired intangibles (1.3)
Interchange fee litigation settlement 0.7
Software as a Service investments (2.3)
Revaluation of FX contracts 0.1
--------------------------------------------- -------
Interest charges totalled GBP0.8 million in the year, being the
net of interest earned on cash balances and the Majestic Wine
disposal vendor loan note, and charges relating to the asset backed
lending arrangement with Silicon Valley Bank and interest on IFRS
16 leases.
The Group's statutory effective tax rate (ETR) of (15.9)% is
substantially driven by the distortionary impact of the non-tax
recoverable impairment charge reported in the year and the net
impact of changes to deferred tax recognition. Current tax of
GBP4.6 million was driven by profitable trading in the US and
Australia, including the impact of material non-deductible
temporary timing differences in the US relating to the US inventory
provision and US 'unicap' inventory tax adjustments, partially
offset by corresponding deferred tax credits as set out above.
52 week comparable
-----------------------------
FY23 FY22 YoY
GBPm GBPm
New Customer sales 26.0 36.5 (29)%
Investment in New Customers (20.7) (44.6) (54)%
Repeat Customer sales 314.5 335.4 (6)%
Repeat Customer contribution 84.8 92.8 (9)%
Repeat Customer contribution margin 27.0% 27.7%
Other revenue 3.2 1.3 146%
Other contribution 0.2 0.1 100%
KPIs
Repeat Customer sales retention 78% 80% (200)bps
Active Angels 867,000 964,000 (10)%
5-Year Forecast Payback 1.7x 1.5x 0.2x
Year 1 Payback 39% 68% (29)%
Standstill EBIT (5.8) 21.2 (27.0)
------------------------------------- -------- -------- ---------
See the APM section at the end of this announcement for
definitions of alternative performance measures and reconciliations
to statutory reported figures.
New and repeat customers and our subscription KPIs
Note: commentary in this subsection is given on a comparable 52
week basis.
New customers
Investment in New Customers was GBP20.7 million compared to
GBP44.6 million in FY22. This halving of investment reflects the
change in strategy implemented during the year to improve paybacks
versus FY22 levels (currently forecast at 1.4x) and drive
profitability in preference to growth.
We have reduced spending in all our markets and most channels,
and increased prices to new customers as we know this drives higher
quality recruitment. Our largest decrease was in the UK, where we
saw a significant deterioration in customer quality. Our reduction
has meant increasing our promotional offer prices significantly,
while advertising spend has focused on the most efficient areas,
and given an increased average price for first orders, the
reduction in New Customer sales is less severe than the reduction
in investment, albeit still significant.
In the US market, we have moved the majority of our first order
offers to 12-bottle cases to increase prices and sell additional
inventory. The US is also the most advanced in testing our new
recruitment journey, which has provided additional support to New
Customer sales. As a consequence of these changes, our revenues
from new customers reduced by 29%.
Our 5-Year Forecast Payback, which is the ratio of projected
future Repeat Customer contribution we expect to earn from new
customers recruited in the year, over the investment spend related
to acquiring those new customers, was 1.7x (FY22: 1.5x reported).
This was achieved due to higher forecast LTVs as we have focused on
higher quality customers, with the cost of each recruited Angel
flat year-on-year.
We would like to be investing more in new customer recruitment,
but our current marketing mechanics and market conditions don't
support this while driving acceptable payback. We have accepted
payback lower than our 2x target during the year for two
reasons:
-- Our reducing scale leads, in the near-term, to lower
efficiency in our fulfilment operations which contain a significant
level of fixed costs. As such the marginal cost of each incremental
order we generate is significantly lower and the profitability
higher, and we consider it rational to drive these incremental
orders; and
-- With significant amounts of excess inventory, the cash
profile of each order we generate is higher than the contribution
of the order (which is the basis of our payback calculations). For
as long as we are reducing inventory, this effect means cash
paybacks are significantly higher than our payback measure
suggests.
Repeat customers
Repeat Customer sales were GBP314.5 million, a 6% decrease. With
Angel numbers reducing as a result of the lower level of
recruitment, this represents an increase of 4.3% in sales per
Active Angel.
To support repeat revenues, we have continued to drive our
"Never Miss Out", "Wine Genie" and "Fine Wine Club" propositions,
with over 25% of our Angel subscribers having adopted an average of
1.7 of these each. Our Repeat Customer sales retention, which is
the proportion of sales made to customers who met our definition of
"repeat' last year and placed orders again this year, was 78%
(FY22: 80%). Sales retention can be separated into customer
retention and the change in sales per Angel year-on-year. The
reduction we have seen this year is due to early FY22 having high
rates of purchase due to the tail end of the COVID-19 pandemic,
which were not sustained into the following year leading to a
reduction in sales per retained Angel and consequently lower sales
retention.
Our Repeat Customer sales performance reflects the
lower-than-average rate of retention in the US, with contribution
trends better than revenue as we have been able to realise price
increases offsetting inflating fulfilment costs and lower volume
throughput. In the UK, Repeat Customer sales have been driven by a
well-executed promotional strategy and higher fulfilment
effectiveness year-on-year. In Australia, trends have mirrored the
US and UK, albeit lagged slightly due to seasonality and the timing
of COVID.
However, significant increases in fulfilment costs due to price
inflation and under-utilisation of committed capacity, have
substantially eroded contribution margins, despite price increases
being introduced.
Repeat Customer contribution margins have decreased in the year
from 27.7% to 27.0%. The majority of this is due to fulfilment cost
increases in the UK and Australian markets not being fully
recovered through price. In our largest market, the US, we achieved
a 0.5% improvement in our contribution margin supported by price
and mix improvements ahead of cost inflation.
Our Year 1 Payback for the year, which is the contribution
realised in this financial year from repeat customers recruited in
the prior financial year, divided by the investment made in the
prior year recruiting those customers, was 39% (FY22: 68%)
reflecting the high acquisition costs and low expected LTVs and
payback from our FY22 customer recruitment.
Standstill EBIT is our measure of the adjusted EBIT which we
would report if we had invested, at latest reported economics, in
new customers to only replenish Repeat Customer contribution lost
to attrition. In the year, our Standstill EBIT was GBP(5.8)
million. This metric remains negative due to the very low Year 1
Payback we are recording from the FY22 recruitment. With paybacks
improving we expect this metric to improve and converge towards
adjusted EBIT through FY25. The calculation of Standstill EBIT can
be found in the APM section at the end of this announcement.
Other revenue and contribution
Other revenue and contribution in the US reflect commercial
disposals of excess inventory at above cost. Disposals below cost
are combined with provisioning charges and shown as adjusted
items.
Detailed analysis of each geographic segment and a full
reconciliation of reported results to 52 week comparable figures
can be found in the APM section at the end of this
announcement.
KPI review
As the business has matured and our focus has shifted to
profitable growth, we intend to undertake a review of our KPIs and
APMs during FY24 with the goal of simplifying the explanation of
the business drivers and ensuring they are the most relevant
measures to determine success against our plans.
Balance sheet and cashflow
During the year our goals changed to focus on profitability at
the expense of growth. Achieving this meant a reduction in
Investment in New Customers and a consequent reduction in revenues
versus prior plans. As a result, the Group has consumed less
inventory than would previously have been forecast, requiring cash
consumption to fund higher levels of stock. To mitigate this,
during the year we reduced the stock intake we had originally
agreed with our winemakers by GBP15 million, the majority of the
reduction being in the US division where we have the longest supply
chain.
During the year the Group's net cash excluding lease liabilities
balance reduced by GBP29.5 million. The drivers of this are:
GBPm
Operating loss (14.3)
Add back: depreciation and amortisation 4.3
Add back: other non-cash charges 7.8
Add back: impairments 18.2
Change in inventory (28.8)
Change in payables (14.5)
Change in Angel funds and other deferred income (6.2)
Other working capital movements 3.5
------------------------------------------------------ -------
Operating cash flow (30.0)
Tax and net interest paid (3.2)
Capital expenditure (1.5)
Proceeds from sale of investment property 5.6
Lease liabilities paid (1.3)
------------------------------------------------------ -------
Net movement in net cash excluding lease liabilities (30.4)
------------------------------------------------------ -------
Opening net cash excluding lease liabilities 39.8
Net movement in net cash excluding lease liabilities (30.4)
FX 0.9
------------------------------------------------------ -------
Closing net cash excluding lease liabilities 10.3
------------------------------------------------------ -------
The Group generates over 50% of its revenues from international
operations. As a result, the year-end balance sheet is subject to
the impact of changes in exchange rates as well as underlying
movements. As shown in the table below, additional inventory,
reducing Angel deposits (due to fewer Angels) and lower outstanding
payables balances (due to less stock purchases) all contributed to
the cash usage in the year.
Impact in the year
--------------------------------
Non-cash
FX inventory Underlying
Key balance sheet Items (GBPm) FY22 adj provision Movement FY23
-------------------------------------- ------- ------ ----------- ----------- -------
Net cash excluding lease liabilities 39.8 0.9 - (30.4) 10.3
Inventory 142.4 4.8 (10.3) 28.8 165.7
Angel funds and other deferred
income (76.0) (1.5) - 6.2 (71.3)
Trade and other payables* (54.6) (1.4) - 13.6 (42.4)
-------------------------------------- ------- ------ ----------- ----------- -------
* Excludes current tax liabilities
We expect to continue reducing the level of inventory on hand
over the next 24 months, rebuilding our cash reserves. Our future
inventory intake commitments have reduced from GBP223 million at
the end of FY22 to GBP162 million at the end of FY23, with
reductions achieved in all of our markets.
The Group's policy is to test for the existence of excess
capital bi-annually as we update our forecasts for the business.
Should it be determined that we have excess capital, available
investment opportunities will be compared to expected returns from
repurchasing the Company's shares and capital allocated to the
highest returning opportunities. At present we do not believe the
business has excess capital and no returns of capital, either as
dividends or through other mechanics, are planned at this time.
Failure and acquisition of Silicon Valley Bank (SVB)
One of the Group's banking partners, SVB, was closed by
regulators on 10 March 2023. SVB provided 50% of the Group's credit
facility with the other 50% coming from Bridge Bank. The operations
of SVB, including the Group's credit facility, were transferred to
First Citizens Bank on 28 March 2023. This event did not impact our
day-to-day operations and no loss has occurred to the Group because
of the failure of SVB. We have also not seen any change in the
level of withdrawals made from our Angel fund because of the
failure of SVB.
Recent trading and outlook
Trading in the first quarter of FY24 has been significantly
slower year-on-year with total revenues 18% lower than the
comparable period in FY23. This reduction is a combination of:
-- Sales to new customers being 41% lower, the comparable period
being prior to our pivot to profitability and reduction in new
customer investment; and
-- Sales to repeat customers being 15% lower, reflecting the smaller customer base year-on-year.
We have provided updated guidance for FY24 at the start of this
announcement. This guidance reflects a balanced view of current
trends in the business as seen in the first quarter, expected cost
improvements and inventory commitment reductions we will deliver
during the year. Our primary goal is to invest in new customers to
stabilise and then grow our repeat customer revenues. We believe
this requires an investment level of around GBP27 million, albeit
recent improvements in our customer attrition trends could reduce
this. As we continue to operate below this run rate, we expect to
see repeat customer revenues continue to decline during FY24,
however the rate of decline is expected to reduce considerably
during the year. With new customer investment targeted to be GBP23
to GBP27 million, revenue trends from new customers should begin to
stabilise during the year as the comparator periods begin to
include the prior year reductions in investment levels. In
aggregate we now believe total revenues are likely to decline by 8
to 12% in the year.
Repeat Customer contribution margins remain under pressure,
especially in the UK where we will continue to face
underutilisation of warehouse capacity into early FY25. Group-wide,
we will continue to realise benefit from our FY23 price increases
in FY24, as well as assessing opportunities to continue to increase
prices and support margins while retaining strong value
credentials. We have line of sight of GBP10 million of fulfilment
cost savings that will predominantly be reflected in Repeat
Customer contribution margins. We expect to see the full impact of
these in FY25 and will provide further updates on our progress
towards these important initiatives during our half-year reporting.
The net of these movements is expected to be a Repeat Customer
contribution margin that is relatively consistent with FY23,
delivering Repeat Customer contribution of GBP72 to GBP80
million.
Elimination of marketing R&D spend will generate a GBP5
million cost saving year-on-year. Our operating G&A base should
be slightly lower year-on-year despite inflationary salary
adjustments having been made. In the event we see revenue and
Repeat Customer contribution at the low end of our guided range we
would expect to pursue cost savings in variable compensation and
other areas of discretionary spending.
The net of all this would be an expected adjusted EBIT of GBP8
to GBP12 million for the year, with the lower end underpinned by
cost actions as required.
Through additional reductions in stock intake we continue to
target closing inventory of approximately GBP145 to GBP155 million
at the end of FY24, delivering cash generation in the second half
of the year and closing net cash excluding lease liabilities of
GBP10 to GBP30 million.
Liquidity and going concern
With trading performance in the first quarter below expectations
we have undertaken a comprehensive reforecast process for the year,
resulting in a delay to the publication of these results. As at the
date of publication we are trading broadly in line with this
revised forecast. The reforecast process resulted in a revised
baseline outlook as described above, in which the Group would
expect to comfortably meet all borrowing covenants over the next 12
months and retain significant headroom to the cash balances
required to run the business. As such the Directors feel the going
concern treatment remains appropriate.
In assessing our going concern position the Board also reviewed
a downside scenario with adverse trends to the baseline. This
downside scenario, which forecasts a sales decline for the year of
17%, also shows the Group meeting all borrowing covenants and
having sufficient liquidity to operate the business. To increase
headroom to the adjusted EBITDA covenant in our borrowing agreement
in this downside scenario we have agreed with our banking syndicate
that certain costs associated with reducing inventory levels and
operating costs would be excluded from our covenant calculations,
as well as measuring covenant EBITDA on a rolling 12-month basis
from the beginning of FY25 to provide additional flexibility as to
when certain costs were incurred. The Board recognises that this
cash flow forecast relies on:
-- Trading performance which is currently volatile and impacted
by the challenging macroeconomic environment;
-- The delivery of a number of cash and cost improvement actions
which will, in part, require the cooperation of strategic
suppliers; and
-- Access to a forecast level of borrowing from the Group's asset backed lending facility.
As a result, there remains a risk that a combination of these
assumptions could result in a reduction in actual cash flows which
would result in the business being unable to meet its covenant
commitments. As such these factors give rise to a material
uncertainty that may cast significant doubt over the going concern
assumption of the financial statements. Refer to note 3 for further
details.
James Crawford
Chief Financial Officer
Group income statement
For the 53 weeks ended 3 April 2023
53 weeks 52 weeks
ended ended
3 April 28 March
Continuing operations 2023 2022
Note GBP'000 GBP'000
---------------------------------------- ----- ---------- ----------
Revenue 354,045 350,263
Cost of sales (205,739) (208,542)
---------------------------------------- ----- ---------- ----------
Gross profit pre inventory provision 148,306 141,721
Inventory provision (10,254) -
Gross profit 138,052 141,721
Fulfilment costs (68,159) (62,601)
Advertising costs (17,690) (34,131)
General and administrative costs (53,092) (43,085)
Impairment of goodwill, property,
plant and equipment and right-of-use
assets (18,183) -
Profit on disposal of asset classified
as held for sale 4,814 -
---------------------------------------- ----- ---------- ----------
Operating (loss)/profit (14,258) 1,904
Analysed as:
Adjusted EBIT 17,365 1,995
Adjusted items: 5
- Non-cash charges relating to
acquisitions (1,293) (1,321)
- Right-sizing of US inventory (13,964) -
- Impairment of goodwill, property,
plant and equipment
and right-of-use assets (18,183) -
- Other adjusted items 1,817 1,230
---------------------------------------- ----- ---------- ----------
Operating (loss)/profit (14,258) 1,904
Finance costs (2,217) (111)
Finance income 1,455 1,080
---------------------------------------- ----- ----------
(Loss)/profit before tax (15,020) 2,873
Tax 6 (2,393) (490)
(Loss)/profit for the year (17,413) 2,383
---------------------------------------- ----- ---------- ----------
(Loss)/earnings per share 7
Basic (23.6)p 3.3p
Diluted (23.6)p 3.2p
---------------------------------------- ----- ---------- ----------
Group balance sheet
As at 3 April 2023
3 April 28 March
2023 2022
GBP'000 GBP'000
--------------------------------------- ---------- ----------
Non-current assets
Goodwill and intangible assets 14,938 33,516
Property, plant and equipment 2,757 2,544
Right-of-use assets 5,374 3,370
Deferred tax assets 7,328 5,402
Other receivables 10,711 10,114
---------------------------------------- ----------
41,108 54,946
--------------------------------------- ---------- ----------
Current assets
Inventories 165,666 142,444
Trade and other receivables 5,610 9,161
Financial instruments at fair value 30 324
Cash and cash equivalents 39,474 39,846
---------------------------------------- ---------- ----------
210,780 191,775
Assets classified as held for sale - 810
210,780 192,585
--------------------------------------- ---------- ----------
Current liabilities
Trade and other payables (42,427) (54,621)
Current tax liabilities (1,836) -
Angel funds and other deferred income (71,314) (76,003)
Lease liabilities (2,030) (991)
Provisions (1,709) (2,011)
Bond financing (35) (35)
Financial instruments at fair value (290) (476)
(119,641) (134,137)
--------------------------------------- ---------- ----------
Net current assets 91,139 58,448
---------------------------------------- ---------- ----------
Total assets less current liabilities 132,247 113,394
---------------------------------------- ---------- ----------
Non-current liabilities
Provisions (14) (122)
Lease liabilities (3,821) (2,576)
Borrowings (29,131) -
Deferred tax liabilities (603) (813)
---------------------------------------- ----------
(33,569) (3,511)
--------------------------------------- ---------- ----------
Net assets 98,678 109,883
---------------------------------------- ---------- ----------
Equity
Share capital 5,550 5,508
Share premium 21,162 21,162
Capital redemption reserve 363 363
Currency translation reserve 7,930 3,183
Retained earnings 63,673 79,667
---------------------------------------- ----------
Total equity 98,678 109,883
---------------------------------------- ---------- ----------
Group cash flow statement
For the year ended 3 April 2023
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
Note GBP'000 GBP'000
------------------------------------- ----- --------- ----------
Operating activities
Net cash flows used in operations 8 (29,981) (40,929)
Overseas income tax paid (2,020) (2,189)
(32,001) (43,118)
------------------------------------- ----- --------- ----------
Investing activities
Interest received, including interest
received on the vendor loan note 737 486
Purchase of property, plant and
equipment (1,478) (1,681)
Purchase of intangible assets - (253)
Proceeds on disposal of property,
plant and equipment 11 7
Proceeds from sale of asset held
for resale 5,624 -
------------------------------------- ----- ----------
4,894 (1,441)
------------------------------------- ----- --------- ----------
Financing activities
Interest paid (1,719) (6)
Lease interest paid (233) (105)
Repayments of principal under lease
liabilities 8 (1,299) (845)
Debt issuance costs paid 8 (791) -
Movement in customer funded bonds 8 - 5
Drawdown of borrowings 8 30,464 -
26,422 (951)
------------------------------------- ----- --------- ----------
Net decrease in cash 8 (685) (45,510)
Cash and cash equivalents at the
beginning of the year 8 39,846 85,148
Effect of foreign exchange rate
changes 8 313 208
Cash and cash equivalents at the
end of the year 8 39,474 39,846
------------------------------------- ----- --------- ----------
Notes to the financial statements
1. General Information
Naked Wines plc, (the Company) is a public limited company and
is limited by shares. It is incorporated in the United Kingdom
under the Companies Act 2006 and is registered in England and
Wales. The Company is the ultimate controlling party of the Naked
Group and its ordinary shares are traded on the Alternative
Investment Market (AIM).
The Company's registered address and principal place of business
is The Union Building, 51-59 Rose Lane, Norwich, NR1 1BY. The
Group's principal activity is the direct-to-consumer retailing of
wine. The Company's principal activity is to act as a holding
company for its subsidiaries.
2. Basis of accounting
The financial information set out above does not constitute
statutory accounts within the meaning of section 435(1) and (2) of
the Companies Act 2006 nor contain sufficient information to comply
with the disclosure requirements of International Financial
Standards (IFRS) but are derived from those statements.
The consolidated financial statements comprise the financial
statements of the Group as at 3 April 2023 and are presented in GBP
and all values are rounded to the nearest thousand (GBP'000),
except when otherwise indicated.
The auditor has reported on the underlying accounts from which
this financial information has been drawn and their report is
unqualified, did not draw attention to any matters by way of
emphasis and did not contain any statements under section 498 (2)
or (3) of the Companies Act 2006 but did include a section
highlighting a material uncertainty that may cast significant doubt
on the Group and Company's ability to continue as a going concern.
Further details are provided in the going concern section of this
announcement.
The financial statements of Naked Wines plc for the year ended 3
April 2023 were authorised for issue by the Board of Directors on
18 September 2023 and the balance sheet was signed on behalf of the
Board by James Crawford, Chief Financial Officer.
The Group's financial reporting year represents the 53 weeks to
3 April 2023 and the prior financial year, 52 weeks to 28 March
2022.
3. Going concern
Background and context
Like many online retail businesses, Naked Wines has been
severely impacted by COVID-19, rising inflation and falling
consumer confidence. Lockdowns in all markets saw customers moving
online which generated significant revenue growth for the Group and
required significant investment in both operational capacity and
inventory.
Naked Wines emerged from the COVID-19 pandemic almost double the
size of pre-pandemic levels. However, expectations of the level of
ongoing new customer acquisition have not been met and the level of
business performance has been below the Directors' expectations. In
particular, the number of new customers acquired and the return on
investment in new customers have been below expectations which in
turn has led to a fall in the repeat customer base. These changes
have led to reduced expectations of the future sales and cash flow
for the Company versus previously prepared financial plans.
In response to these challenging macroeconomic conditions, Naked
changed strategy to "pivot to profit", (refer to the Chief
Executive's review for further details) focusing on short-term
profit generation over long-term customer expansion and with a
recognised near-term increase in cash investment in inventory.
Alongside this pivot to profit, the Company commenced a
comprehensive review of the business which included a suite of
further actions:
-- Removing unnecessary costs from the business that had been
introduced to support a business with significantly higher growth
levels;
-- Identifying several operational savings and cost efficiencies across the Group;
-- Undertaking a project to remove excess inventory from the
business whilst continuing to support independent winemakers;
and
-- Piloting and trialling new customer propositions.
These actions are ongoing, with progress already being made to
remove unnecessary costs and identify efficiencies. Achievement of
the Group's forecasts will, in part, require the alignment and
cooperation of strategic suppliers in order to achieve the Board's
planned outcomes. If the outcome of these key strategic initiatives
is not as anticipated by the Board, subsequent performance may be
significantly different to that set out in the Company's financial
plans.
Borrowing facilities
The Group has an asset backed lending (ABL) facility of up to
$60 million and as at the year-end $36.75 million (FY22: $nil) had
been drawn down. The Group met all its credit facility covenant
requirements in the current financial year, despite the material
uncertainty noted regarding going concern in the FY22 Annual Report
and Accounts relating to the Group's ABL credit facility profit
covenant.
Following the Group's renegotiation of its senior secured
lending facility covenants in October 2022 which addressed the
underlying cause of the material uncertainty, the Group has three
principal negative pledge covenant commitments, defined within the
credit facility. These covenants, in effect for periods starting
after 26 September 2022 for the remaining duration of the agreement
to 30 March 2025, relate to:
1) A facility defined minimum balance sheet current asset to current liability ratio test;
2) A facility defined minimum qualified cash balance of $20
million to be held by loan parties with the lender group at all
times; and
3) A facility defined measure of EBITDA business profitability.
As set out more fully in note 9 Events after the balance sheet
date, on 22 August 2023 the Group concluded a further amendment to
its credit facility, moving the facility defined adjusted EBITDA
covenant threshold from a trailing three to a trailing 12-month
basis from the beginning of FY25 as well as increasing the size and
specificity of the non-recurring expense add back in the
calculation of the facility defined adjusted EBITDA measure.
Effective from 27 March 2023, the Group's credit facility was
acquired as part of the loan portfolio purchased by First Citizens
Bank & Trust Company as part of their acquisition of Silicon
Valley Bridge Bank, N.A, previously Silicon Valley Bank. The
Directors have received written confirmation from First Citizens
Bank & Trust Company that First Citizens Bank has assumed all
the liabilities and obligations of Silicon Valley Bridge Bank,
formerly Silicon Valley Bank, associated with this facility. The
administrative agent and issuing lender for the facility is now
Silicon Valley Bank, a division of First Citizens Bank & Trust
Company. As a result of the sale and purchase agreement of Silicon
Valley Bridge Bank to First Citizens Bank and the confirmation of
the transfer of all the liabilities and obligations in relation to
the Company's credit facility to First Citizens Bank, the Directors
have a reasonable expectation that the Group's lending facility
provides the security of funding necessary to support its going
concern assumptions.
Base case
In assessing the appropriateness of the going concern
assumption, the Board has considered (i) the cash requirements of
the business to pursue its intended strategy, (ii) the funding
available to the Group from existing cash reserves and ABL facility
and (iii) potential variations in the cash requirements of the
Group taking into account severe but plausible downside scenarios
that appropriately reflect the current uncertain macroeconomic
outlook and post year-end trading.
The Directors have prepared cash flow forecasts extending for
more than 12 months from the date of the approval of these
financial statements to assess the liquidity of the Group. The
first of these forecasts, prepared ahead of the end of the
financial year in the final quarter of FY23, was based on
expectations formed by trading experience at the time and
anticipated future trends. It also included cost savings and
efficiencies that the Group is already benefiting from, as well as
additional cost and cash savings expected to be implemented over
the going concern period including working capital improvements.
Under this base case scenario (the "Original Baseline"), the Group
had sufficient liquidity over this period and meets its credit
facility covenant commitments.
Trading in the first quarter of FY24, beginning in April 2023,
was below expectations with total revenues 18% lower than the
comparable period in FY23. This reduction was a combination of:
-- Sales to new customers being 41% lower, the comparable period
being prior to our pivot to profit and reduction in new customer
investment; and
-- Sales to repeat customers being 15% lower, reflecting the
smaller customer base year-on-year.
As a result, management revised its original plan for FY24 and
FY25. This revised plan (the "Revised Baseline") took into account
emerging trends in new customer acquisition and the rate of growth
of revenue per Angel, partially offset by an improvement in mature
Angel attrition and resulted in lower forecasts for sales,
profitability and cash flow generation versus the original plan for
FY24 and FY25.
Sensitivities and reverse stress test
The Directors have considered several downside scenarios against
both the Original Baseline and the Revised Baseline. The scenarios
applied to the Original Baseline are:
-- Increased year-on-year repeat customer attrition of between
10% and 30% (based on the level, by market, of the worst
experienced attrition rate over a three-month period in recent
history);
-- Sustained lower level of new customer acquisition spend
resulting in 15% year-on-year decline in Investment in New
Customers; and
-- A decline in repeat customer activation of 10% versus the Original Baseline.
The Directors also prepared a further severe but plausible
downside customer activation scenario modelling the impact of a 10%
decline in repeat customer activation versus the Revised
Baseline.
Under each downside scenario individually the forecasts show all
covenant requirements being met. In the most severe downside
scenario, being the 10% repeat customer activation downside versus
the Revised Baseline, the most sensitive covenant was the $20
million minimum cash requirement where headroom fell to GBP4
million, rising to GBP10 million with application of a contingency
plan (see below), in excess of this covenant requirement at the
lowest point of the forecast.
A reverse stress test of the Revised Baseline downside scenario
was also performed, being the downside scenario deliberately
engineered to identify the point at which a covenant breaks. This
reverse stress test shows that an additional 2% reduction in repeat
customer activation (beyond the 10% severe but plausible downside
scenario noted above) results in the Group not meeting its minimum
cash covenant, reflecting the relatively high degree of sensitivity
over downside modelling in this scenario.
The Directors have identified a contingency plan to improve cash
generation should evidence of this downside scenario become
apparent, including further working capital management and
promotional sales and margin opportunities. Management believes
that together, these actions add an additional
2% headroom between the severe but plausible downside scenario
and reverse stress test. The modelled breach in the reverse stress
test, including the identified additional mitigation, occurs 17
months after the balance sheet date in the second quarter of
FY25.
In addition to the trading sensitivity disclosed above,
compliance with the minimum cash covenant is reliant on being able
to continue to access the anticipated level of the Group's ABL
facility, where the level of available credit (the 'facility
borrowing base') is determined by the level and carrying value of
the Group's US inventory. The Directors highlight the key source of
estimation uncertainty over inventory valuation and also the
requirement to maintain the existing level of supplier waivers (to
include wine held at their facilities within the facility borrowing
base calculation) in order to support the Group's forecast
available credit. Together, these factors give rise to additional
uncertainty over the level of the ABL facility available to be
drawn down across the forecast period.
Given experienced trading volatility and the macroeconomic
conditions increasing the uncertainty over future forecasts, the
Directors note that forecast variances of more than 4% outside of
the currently severe but plausible downside scenario would result
in a breach of the Company's minimum cash holding covenant and
whilst the Company's credit provider has proven to be responsive to
accommodating the needs of the business, any further covenant
amendments, should they be required, will be subject to
negotiation.
This assessment is linked to a robust assessment of the
principal risks facing the Group and the reverse stress test
reflects the potential impact of these risks being realised.
Summary
After considering the forecasts, sensitivities and mitigating
actions available and having regard to the risks, uncertainties and
challenges in recent trading and the macroeconomic environment, the
Directors note that a material uncertainty exists that may cast
significant doubt over the Group's ability to continue as a going
concern and therefore, it may not be able to realise its assets and
discharge its liabilities in the normal course of business.
The material uncertainty with regards to going concern relates
to the Group's ability to generate sufficient future cash flows
while trading in a volatile environment, successful completion of
planned actions and maintaining access to the forecast level of ABL
facility in order to meet its minimum cash covenant in the going
concern period.
The financial statements have been prepared on a going concern
basis, whilst noting the material uncertainty above.
4. Segmental reporting
IFRS 8 Operating segments requires operating segments to be
determined based on the Group's internal reporting to the Chief
Operating Decision Maker (CODM). The Board has determined that the
Executive Directors of the Company are the CODM of the business.
This is on the basis that they have primary responsibility for the
allocation of resources between segments and the assessment of
performance of the segments. In line with the information presented
to the Executive Directors of the Company, the Group presents its
segmental analysis based on the three geographic locations in which
the Group operates.
Performance of these operating segments is assessed on revenue
and adjusted EBIT (being operating profit excluding any adjusted
items), as well as analysing the business between new customer and
repeat customer lines of business.
These are the financial performance measures that are reported
to the CODM, along with other operational performance measures, and
are considered to be useful measures of the underlying trading
performance of the segments. Adjusted items are allocated in
accordance with how they are reported to the CODM.
The table below sets out the basis on which the performance of
the business is presented to the CODM. The CODM considers that, as
a single route to market and solely consumer-facing business in
three geographically and economically diverse locations, the
business comprises three operating segments. The Group reports
revenue from external customers as a single product group, this
being principally wine and some spirits.
Costs relating to global Group functions are not allocated to
the operating segments for the purposes of assessing segmental
performance and consequently global costs are presented separately.
This is consistent with the presentation of those functions to the
CODM.
Revenues are attributed to the countries from which they are
earned. The Group is not reliant on a major customer or group of
customers.
53 weeks ended 3 April Naked Naked Naked
2023 Wines US Wines UK Wines Australia Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- ----------------- ------------ ---------
Revenue 171,035 137,192 45,818 - 354,045
Revenue associated
with the US inventory
impairment (3,110) - - - (3,110)
Total adjusted sales
(1) 167,925 137,192 45,818 - 350,935
---------- ---------- ----------------- ------------
Analysed as:
New Customer sales 17,180 6,400 3,312 - 26,892
Repeat Customer sales 147,448 130,792 42,506 - 320,746
Other revenue 3,297 - - - 3,297
Total adjusted sales
(1) 167,925 137,192 45,818 - 350,935
---------- ---------- ----------------- ------------ ---------
Investment in New Customers (15,057) (3,417) (2,937) - (21,411)
Repeat Customer contribution 50,314 24,990 11,196 - 86,500
Other contribution 255 - - - 255
------------------------------- ---------- ---------- ----------------- ------------ ---------
Total contribution
after advertising costs(2) 35,512 21,573 8,259 - 65,344
General and administrative
costs(3) (12,830) (6,896) (3,561) (24,692) (47,979)
Adjusted EBIT 22,682 14,677 4,698 (24,692) 17,365
Adjusted items (see
note 5):
Non-cash items relating
to
acquisitions - - - (1,293) (1,293)
Right-sizing of US
inventory (13,964) - - - (13,964)
Impairment of goodwill,
property, plant and
equipment and right-of-use
assets - - - (18,183) (18,183)
Other adjusted items - - - 1,817 1,817
Operating profit/(loss) 8,718 14,677 4,698 (42,351) (14,258)
Finance costs (2,155) (36) (24) (2) (2,217)
Finance income 342 - - 1,113 1,455
------------------------------- ---------- ---------- ----------------- ------------ ---------
Profit/(loss) before
tax 6,905 14,641 4,674 (41,240) (15,020)
Tax (2,275) (1,482) (1,396) 2,760 (2,393)
------------------------------- ---------- ---------- ----------------- ------------ ---------
Profit/(loss) for
the year 4,630 13,159 3,278 (38,480) (17,413)
------------------------------- ---------- ---------- ----------------- ------------ ---------
Depreciation 1,897 353 225 38 2,513
Amortisation 1 - - 1,785 1,786
Impairment - - - 18,183 18,183
------------------------------- ---------- ---------- ----------------- ------------ ---------
Total assets 146,629 47,626 23,139 34,494 251,888
Total liabilities 93,275 41,127 13,731 5,077 153,210
------------------------------- ---------- ---------- ----------------- ------------ ---------
53 weeks ended 3 April
2023 US UK Australia Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- ----------------- ------------ ---------
Geographical analysis
Revenue 171,035 137,192 45,818 354,045
Non-current assets excluding
deferred tax assets 7,710 26,070 - 33,780
------------------------------------------- ---------- ----------------- ------------ ---------
1. Total adjusted sales are calculat ed as revenue excluding
revenue associated with the right-sizing of US inventory a s
analysed in note 5 Adjusted items.
2. Contribution after advertising costs is calculated as gross
profit, less fulfilment and advertising costs, excluding
transactions associated with the right-sizing of US inventory
included in contribution (details in note 5 Adjusted items).
3. Refer to the table in the APM section at the end of this
announcement for a reconciliation of G&A costs to those
reported in the income statement.
52 weeks ended 28 Naked Naked Wines Naked
March 2022 Wines US UK Wines Australia Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- ------------ ----------------- ------------ ---------
Revenue
New Customer sales 17,556 11,342 5,137 - 34,035
Repeat Customer sales 138,665 135,617 40,777 - 315,059
Other revenue 1,169 - - - 1,169
157,390 146,959 45,914 - 350,263
------------------------------ ---------- ------------ ----------------- ------------ ---------
Investment in New Customers (23,225) (13,495) (4,583) - (41,303)
Repeat Customer contribution 46,648 28,225 11,342 - 86,215
Other contribution 77 - - - 77
------------------------------ ---------- ------------ ----------------- ------------ ---------
23,500 14,730 6,759 - 44,989
General and administrative
costs(1) (14,939) (6,614) (3,879) (17,562) (42,994)
Adjusted EBIT 8,561 8,116 2,880 (17,562) 1,995
Adjusted items (see
note 5):
Non-cash items relating
to acquisitions - - - (1,321) (1,321)
Other adjusted items - - - 1,230 1,230
Operating profit/(loss) 8,561 8,116 2,880 (17,653) 1,904
Finance costs (91) (9) (11) - (111)
Finance income - 1 - 1,079 1,080
------------------------------ ---------- ------------ ----------------- ------------ ---------
Profit/(loss) before
tax 8,470 8,108 2,869 (16,574) 2,873
Tax (1,384) (568) (326) 1,788 (490)
------------------------------ ---------- ------------ ----------------- ------------ ---------
Profit/(loss) for
the year 7,086 7,540 2,543 (14,786) 2,383
------------------------------ ---------- ------------ ----------------- ------------ ---------
Depreciation 1,113 264 230 50 1,657
Amortisation 1 - - 1,900 1,901
------------------------------ ---------- ------------ ----------------- ------------ ---------
Total assets 122,278 41,622 24,912 58,719 247,531
Total liabilities 63,495 45,203 20,126 8,824 137,648
------------------------------ ---------- ------------ ----------------- ------------ ---------
52 weeks ended 28
March 2022 US UK Australia Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- ------------ ----------------- ------------ ---------
Geographical analysis
Revenue 157,390 146,959 45,914 350,263
Non-current assets excluding
deferred tax assets 4,919 44,261 364 49,544
------------------------------------------ ------------ ----------------- ------------ ---------
1. Refer to the table in the APM section at the end of this
announcement for a reconciliation of G&A costs to those
reported in the income statement.
5 Adjusted items
The Directors believe that adjusted EBIT provides additional
useful information for shareholders on trends and performance.
These measures are used for performance analysis. Adjusted EBIT is
not defined by IFRS and therefore may not be directly comparable
with other companies' adjusted profit measures. It is not intended
to be a substitute for, or superior to, IFRS measurements of
profit.
In the year, the adjustments made to operating profit are:
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
GBP'000 GBP'000
--------------------------------------------------- --------- ----------
Non-cash charges relating to acquisitions
- amortisation of acquired intangibles (1,293) (1,321)
US inventory provision (10,254) -
US cancellation of winemaker contracts (527) -
Sale of US inventory - contribution loss
(see glossary of definitions in the APM
section at the end of this announcement) (2,360) -
--------------------------------------------------- --------- ----------
Right-sizing of US inventory included
in contribution (13,141) -
Disposal of US inventory - charitable
donations (823) -
--------------------------------------------------- --------- ----------
Right-sizing of US inventory (13,964) -
Impairment of goodwill, property, plant
and equipment and right-of-use assets (18,183) -
Profit on disposal of asset classified
as held for sale 4,814 -
structuring costs (1,522) -
Software as a Service costs incurred in
the implementation of new ERP platform (2,347) -
Legal settlement for Payment card Interchange
fees 740 -
Fair value movement through the income
statement on foreign exchange contracts
and associated unrealised foreign currency
inventory 132 1,091
Foreign exchange movements on plc company
bank balances - 139
Other adjusted items 1,817 1,230
Total adjusted items (31,623) (91)
--------------------------------------------------- --------- ----------
Amortisation of acquired intangibles
These items reflect costs of customer acquisition from prior to
the purchase of the Naked Wines business. In order to reflect the
cost of current new customer acquisition in its adjusted EBIT, the
Group includes the expenses of all ongoing customer acquisitions in
its adjusted profit measures but removes the amortisation cost of
those customers acquired before acquisition by Naked Wines plc.
Right-sizing of US inventory
As a result of the Group's pivot to profit strategy in the
current financial year, management has engaged in a rigorous review
of inventory holdings and concluded that in the US business unit,
as a result of the revision to future sales and growth forecasts,
an inventory right-sizing exercise was required.
On the basis of this evaluation, the Group has recorded a charge
of GBP14.0 million in the year in order to allow the US business to
consolidate its inventory holdings around wine and winemakers core
to the Group's mission to connect everyday wine drinkers with the
world's best independent winemakers.
As a result of this decision, a number of winemakers, brands and
products have been delisted, winemaker commitments cancelled, and
plans made to exit certain quantities of inventory at less than
historic cost. Where inventory that has been sold on the secondary
market as part this right-sizing exercise for less than historic
cost of goods, these transactions are reported net within adjusted
items as part of adjusted performance measures and are disclosed as
sale of US inventory - contribution loss.
Right-sizing of US inventory continued
Management considers these provisions and charges to be one-off
in nature as amounts relate to purchases made on the back of
continued expected growth following the COVID-19 pandemic and based
on the Group's previous strategy of customer acquisition. As a
result of the strategic shift from customer acquisition to
short-term profitability and cash generation, this impairment
charge forms part of the one-off exercise undertaken in the year to
better align purchasing and inventory management going forwards
whilst still ensuring the Group holds sufficient inventory to meet
customer demand.
Management has concluded it is appropriate to include the
inventory impairment within adjusted items to provide a more
consistent basis with the comparative adjusted EBIT alternative
performance measure.
Impairment of goodwill, property, plant and equipment and
right-of-use-assets
As a result of the Company's decision to focus on short-term
profitability and cash generation over long-term growth, an
impairment of GBP18.2 million has been recognised in the FY23
income statement. This represents a partial impairment of the
goodwill allocated to the US business and a full impairment of the
goodwill, property, plant and equipment and right-of-use assets in
the Australian business.
Profit on disposal of asset classified as held for sale
In May 2022, the sale of the asset classified as held for sale
was completed. The profit arising on the sale is the difference
between the proceeds of GBP5.85 million less commissions and costs
of GBP0.2 million and the carrying value of the asset of GBP0.8
million.
Restructuring costs
The Group undertook a restructuring program in FY23 seeking to
generate improved efficiency and reduce costs. Following this
review, one-off termination payments and associated costs were
incurred in the US and the UK.
Software as a Service cost
During the year, the Group incurred upfront configuration and
implementation costs relating to the development of a new ERP
system. Under the change of accounting policy, these costs are
reported as incurred in the income statement. As material
non-recurring expenditure, the costs relating to the configuration
of the ERP platform have been disclosed as an adjusted item.
Legal settlement in relation to Payment card Interchange
fees
Naked Wines were part of a class action group that brought
proceedings against Visa and Mastercard for engaging in
anti-competitive conduct in relation to arrangements for setting
and implementing multilateral Payment card Interchange fees. This
amount is net of costs and is in full and final settlement of the
claim.
Fair value movement on foreign exchange contracts and associated
unrealised foreign currency inventory
We commit in advance to buying foreign currency to purchase wine
to mitigate exchange rate fluctuations. International accounting
standards require us to mark the value of these contracts to
market. As this may materially fluctuate, we adjust this, and
associated foreign currency inventory revaluation, as to better
reflect our trading profitability.
Foreign exchange movements on plc company bank accounts
In the prior year, the parent company held foreign currency cash
balances, which it used to fund its US and Australian businesses.
The revaluation of the foreign currency balances held were reported
as adjusted items so as not to distort the picture of the
underlying business cost base.
6 Tax
(a) Tax charge
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
GBP'000 GBP'000
--------------------------------------- --------- ----------
Current tax
UK tax - 4
Overseas tax (4,198) (2,011)
Adjustment in respect of
prior periods (377) 27
Current tax charge (4,575) (1,980)
----------------------------------------- --------- ----------
Deferred tax
Origination and reversal of temporary
differences 1,085 1,077
Adjustment in respect of
prior periods 560 64
Effect of change in tax rate on
prior period balances 537 349
Deferred tax credit 2,182 1,490
----------------------------------------- --------- ----------
Total tax charge for the
year (2,393) (490)
----------------------------------------- --------- ----------
(b) Tax reconciliation
The tax charge for the year differs from the standard rate of
corporation tax in the UK of 19% (2022: 19%). The reasons for this
are detailed below:
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
GBP'000 GBP'000
------------------------------------ --------- ----------
(Loss)/profit before tax (15,020) 2,873
-------------------------------------- --------- ----------
Tax charge at the standard
UK corporation tax rate
of 19% (2022: 19%) 2,854 (546)
Adjustments in respect
of prior periods 183 91
Disallowable expenditure (1,926) (485)
Overseas income tax at
higher rates (588) (44)
Income not taxable - 12
Fixed asset differences 60 -
Change in unrecognised
deferred tax assets (3,054) 475
Share based payments (138) 141
Change in tax rate on prior period
deferred tax balances 263 (134)
Foreign exchange (47) -
Total tax charge (2,393) (490)
-------------------------------------- --------- ----------
Effective tax rate (15.9)% 17.1%
-------------------------------------- --------- ----------
Deferred tax balances have been calculated to the substantively
enacted rate at which they are expected to reverse.
The chancellor has confirmed an increase in the corporation tax
rate from 19% to 25% with effect from 1 April 2023 which received
Royal Assent on 10 July 2021.
7 (Loss)/earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue of the Company, excluding
220,137 (2022: 145,557) shares held by the Naked Wines plc Share
Incentive Plan Trust and the Naked Wines Employee Benefit Trust
(which have been treated as dilutive share based payment
awards).
The dilutive effect of share based payment awards is calculated
by adjusting the weighted average number of ordinary shares in
issue to assume conversion of all dilutive potential ordinary
shares. Share awards granted over 3,382,710 (2022: nil) ordinary
shares have been excluded from the calculation as they are
anti-dilutive. All other outstanding share awards have been
included in the calculation as they are potentially dilutive at the
year end.
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
(Loss)/earnings per share
Basic (loss)/earnings per share (23.6)p 3.3p
Diluted (loss)/earnings per share (23.6)p 3.2p
------------------------------------------- --------- ----------
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
(Loss)/earnings for the purpose of basic
earnings per share calculation (GBP'000) (17,413) 2,383
------------------------------------------- --------- ----------
Weighted average number of ordinary shares
used as the denominator in calculating
basic earnings per share 73,663,498 73,172,727
Dilutive potential ordinary shares:
Employee share awards 520,030 1,803,937
-------------------------------------------- ----------- -----------
Weighted average number of ordinary
shares and potential ordinary shares
used as the denominator in calculating
diluted earnings per share 74,183,528 74,976,664
Total number of shares in issue 74,004,135 73,439,132
-------------------------------------------- ----------- -----------
As noted above, the denominator for the purposes of calculating
both basic and diluted earnings per share has been adjusted to
exclude the shares held by the Naked Wines plc Share Incentive Plan
Trust and the Naked Wines Employee Benefit Trust.
If all the Company's share awards had vested at 100%, the
Company would have 77,370,058 issued shares.
There have been no transactions involving ordinary shares or
potential ordinary shares between the reporting date and the date
of authorisation of these financial statements.
8 Notes to the cash flow statement
(a) Reconciliation of profit to cash flows from operations
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
GBP'000 GBP'000
-------------------------------------------- --------- ----------
Cash flows from operations
Operating (loss)/profit (14,258) 1,904
Add back/(deduct):
Depreciation and amortisation 4,299 3,558
Impairment of goodwill, property, plant
and equipment and right-of-use assets 18,183 -
Loss on disposal of fixed assets 327 18
Intangible assets previously capitalised
under former accounting
policy 253 -
Profit on sale of asset held for resale (4,814) -
Fair value movement on foreign exchange
contracts 109 (1,212)
US segment inventory provision 10,254 -
Share based payment charges 1,604 1,311
-------------------------------------------- ----------
Operating cash flows before movements
in working capital 15,957 5,579
Increase in inventories(1) (28,770) (61,174)
(Decrease)/increase in Angel funds and
other deferred income (6,193) 3,582
Decrease/(increase) in trade and other
receivables 3,501 (1,779)
(Decrease)/increase in trade and other
payables (14,476) 12,863
Net cash flows used in operations (29,981) (40,929)
-------------------------------------------- --------- ----------
1. Increase in inventories is calculated as the GBP movement in
the balance sheet of GBP23.3 million (FY23 inventory of GBP165.7
million less FY22 inventory of GBP142.4 million), plus the non-cash
inventory provision of GBP10.3 million and after adjusting for FX
of GBP4.8 million.
(b) Cash and cash equivalents
3 April 28 March
2023 2022
GBP'000 GBP'000
--------------------------- -------- ---------
Cash and cash equivalents 39,474 39,846
---------------------------- -------- ---------
(c) Analysis of movement in net cash and changes in liabilities
arising from financing activities
28 March Non-cash 3 April
2022 Cash flows movements(1) 2023
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- ----------- -------------- ---------
Cash and cash equivalents 39,846 (685) 313 39,474
----------------------------- ---------- ----------- -------------- ---------
Borrowings:
Borrowings, net of issuance
costs - (29,673) 542 (29,131)
Customer funded bond (35) - - (35)
Lease liabilities (3,567) 1,299 (3,583) (5,851)
Net liabilities arising
from financing activities (3,602) (28,374) (3,041) (35,017)
Total net cash/(borrowings) 36,244 (29,059) (2,728) 4,457
----------------------------- ---------- ----------- -------------- ---------
1. Non-cash movements relate to lease additions and foreign exchange movements.
9 Events after the balance sheet date
On 22 August 2023, the Directors concluded an amendment to the
principal covenant obligations of the Group's asset backed lending
facility. This amendment moves the facility defined adjusted EBITDA
covenant commitment threshold from a trailing three to a trailing
12-month basis from the beginning of FY25 and increases the size
and specificity of the non-recurring expense add-back in the
calculation of the facility defined adjusted EBITDA covenant
commitment. The amendment also documented as a post-close
completion obligation the inclusion of the Group's Australian
businesses as loan parties to the agreement. These revised covenant
obligations come into effect for periods beginning after 2 October
2023.
The introduction of the revised covenant commitments has no
financial effect on the operation of the credit facility. However,
the Directors believe that the revised profit covenant test
provides the Company with greater latitude in the unwind of the
Group's excess inventory and management of its operating cost
base.
There were no other events after the balance sheet date that had
a material impact on the financial position and performance of the
Group.
Glossary of definitions, alternative performance measures
(APMs)
and key performance indicators (KPIs)
Definitions
--------------------- -------------------------------------------------- ------------
5* customer service The percentage of feedback ratings received Customer
by our Customer Happiness teams that experience
expressed 5* satisfaction on a scale KPI
of 1 to 5.
5-Year Forecast The ratio of projected future Repeat Investment
Payback Customer contribution we expect to earn measure
from the new customers recruited in the
year, divided by the Investment in New
Customers. We forecast contribution at
a customer level using a machine learning
algorithm that weighs several characteristics
including demographics, interactions
and transactions forecast over a five-year
horizon. This is then aggregated to a
monthly, then annual, cohort level for
reporting purposes. As this is an undiscounted
forward-looking estimate it cannot be
reconciled back to reported financial
results.
--------------------- -------------------------------------------------- ------------
5-Year Lifetime The future Repeat Customer contribution Investment
Value (LTV) we expect to earn from customers recruited measure
in a discrete period of time. We calculate
this future contribution using a machine
learning model. Collecting data for a
number of key customer characteristics
including retention, order frequency
and order value along with customer demographics
and non-transactional data, the machine
learning algorithms then predict the
future (lifetime) value of that customer.
Active Angel An Angel that is an active subscriber
who has placed an order in the past 12
months.
--------------------- -------------------------------------------------- ------------
Adjusted EBIT Operating profit adjusted for amortisation APM
of acquired intangibles, acquisition
costs, impairment of goodwill, restructuring
costs and fair value movement through
the income statement on financial instruments
and revaluation of funding cash balances
held and any items that are either material
one-time charges we do not expect to
be repeated or are non-trading related.
A reconciliation to operating profit
can be found on the face of the Group
income statement.
--------------------- -------------------------------------------------- ------------
Adjusted EBITDA Adjusted EBIT plus depreciation and amortisation, APM
but excluding any depreciation or amortisation
costs included in our adjusted items
e.g. amortisation of acquired intangibles.
--------------------- -------------------------------------------------- ------------
AGM Annual General Meeting
--------------------- -------------------------------------------------- ------------
Angel A customer who deposits funds into their
account each month to spend on the wines
on our website.
--------------------- -------------------------------------------------- ------------
CAGR Compound annual growth rate. The year-on-year
growth rate required for a number of
years for a value to grow from its beginning
balance to its ending balance.
--------------------- -------------------------------------------------- ------------
Company, Naked Naked Wines plc
or Naked Wines
--------------------- -------------------------------------------------- ------------
Contribution A profit measure between gross profit
and EBIT, calculated as gross profit
less the costs of fulfilling and servicing
(e.g. credit card fees, delivery costs,
customer-facing staff costs). We often
split contribution into that from new
and repeat customers as they can have
different levels of profitability. A
reconciliation of operating profit to
contribution is shown in note 4 Segmental
reporting.
--------------------- -------------------------------------------------- ------------
DtC Direct-to-Consumer
--------------------- -------------------------------------------------- ------------
EBIT Operating profit as disclosed in the APM
Group income statement.
--------------------- -------------------------------------------------- ------------
EBITDA EBIT plus depreciation and amortisation.
--------------------- -------------------------------------------------- ------------
Free cash flow Cash generated by operating activities APM
less capital expenditure and before adjusted
items and tax. A reconciliation of this
metric is provided in the APM section
at the end of this announcement.
--------------------- -------------------------------------------------- ------------
Group Naked Wines plc and its subsidiary undertakings
--------------------- -------------------------------------------------- ------------
Investment in New The amount we have invested in acquiring Investment
Customers new customers during the year including measure
contribution profit/loss from New Customer
sales and advertising costs. Please note
that we have updated the description
of this term to elaborate on its components,
however the underlying calculation has
not changed.
--------------------- -------------------------------------------------- ------------
LTIP Long Term Incentive Plan
--------------------- -------------------------------------------------- ------------
Marketing R&D Expenditure focused on researching and
testing new marketing channels and creative
approaches, with the aim of opening up
significant new growth investment opportunities.
--------------------- -------------------------------------------------- ------------
Net cash excluding The amount of cash we are holding less APM
lease liabilities borrowings at year end excluding lease
liabilities.
--------------------- -------------------------------------------------- ------------
New customer A customer who, at the time of purchase,
does not meet our definition of a repeat
customer; for example, because they are
brand new, were previously a repeat customer
and have stopped subscribing with us
at some point or cannot be identified
as a repeat customer.
--------------------- -------------------------------------------------- ------------
New Customer sales Revenues derived from transactions with
customers who meet our definition of
a new customer. A reconciliation of total
sales to New Customer sales is shown
in note 4 Segmental reporting.
--------------------- -------------------------------------------------- ------------
Other revenue Revenue from stock optimisation activities.
--------------------- -------------------------------------------------- ------------
Other contribution The profit or loss attributable to sales Investment
meeting the definition of other revenue. measure
--------------------- -------------------------------------------------- ------------
Product availability The average percentage of products we Customer
have defined as core to the portfolio experience
that is available to our customers throughout KPI
the year.
--------------------- --------------------------------------------------
Repeat customer A customer (Angel) who has subscribed
and made their first monthly subscription
payment.
--------------------- -------------------------------------------------- ------------
Repeat Customer The profit attributable to sales meeting Investment
contribution the definition of Repeat Customer sales measure
after fulfilment and service costs. A
reconciliation of adjusted EBIT to Repeat
Customer contribution is shown in note
4 Segmental reporting.
--------------------- -------------------------------------------------- ------------
Repeat Customer Repeat Customer contribution as a percentage Investment
contribution margin of Repeat Customer sales. measure
--------------------- -------------------------------------------------- ------------
Repeat Customer These are the revenues derived from orders
sales placed by customers meeting our definition
of a repeat customer at the time of ordering.
A reconciliation of total sales to Repeat
Customer sales is shown in note 4 Segmental
reporting.
--------------------- -------------------------------------------------- ------------
Repeat Customer The proportion of sales made to customers Investment
sales retention who met our definition of "repeat" last measure
year and who placed orders again this
year, calculated on a monthly basis and
summed to calculate the full year retention.
--------------------- -------------------------------------------------- ------------
SIP Share Incentive Plan
--------------------- -------------------------------------------------- ------------
Standstill EBIT The adjusted EBIT that would be reported Investment
if Investment in New Customers was reduced measure
to the level needed only to replenish
the portion of the customer base that
was lost to attrition during the period.
A calculation of this metric is provided
in the APM section at the end of this
announcement.
--------------------- -------------------------------------------------- ------------
Total addressable TAM represents the available market which
market (TAM) Naked sees as a revenue opportunity which
it could serve.
--------------------- -------------------------------------------------- ------------
Wine quality - The percentage of "Yes" scores given Customer
"Buy it again" by customers in the year indicating that experience
ratings the customer would buy the product again. KPI
--------------------- --------------------------------------------------
Year 1 Payback A short-term payback measure showing Investment
the actual return in this financial year measure
of our investment in the prior year.
--------------------- -------------------------------------------------- ------------
Alternative performance measures (APMs)
Reconciliation of reported results to 52 week comparable
figures
FY23 FY22
---------------------------------------------------- ---------------------------------------------------
Adjusted 53rd 52 week Adjusted Constant Comp-
Reported items Adjusted week comparable Reported items Adjusted FX arable
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Sales Group
----------------
New Customer sales 26.9 - 26.9 (0.9) 26.0 34.0 - 34.0 2.5 36.5
Repeat Customer sales 320.7 - 320.7 (6.2) 314.5 315.1 - 315.1 20.3 335.4
Other revenue 6.4 (3.1) 3.3 (0.1) 3.2 1.2 - 1.2 0.1 1.3
354.0 (3.1) 350.9 (7.2) 343.7 350.3 - 350.3 22.9 373.2
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Naked Wines
US
New Customer sales 17.2 - 17.2 (0.4) 16.8 17.6 - 17.6 2.2 19.8
Repeat Customer sales 147.4 - 147.4 (3.3) 144.1 138.7 - 138.7 18.3 157.0
Other revenue 6.4 (3.1) 3.3 (0.1) 3.2 1.2 - 1.2 0.1 1.3
171.0 (3.1) 167.9 (3.8) 164.1 157.5 - 157.5 20.6 178.1
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Naked Wines
UK
New Customer sales 6.4 - 6.4 (0.4) 6.0 11.3 - 11.3 - 11.3
Repeat Customer sales 130.8 - 130.8 (1.6) 129.2 135.6 - 135.6 - 135.6
137.2 - 137.2 (2.0) 135.2 146.9 - 146.9 - 146.9
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Naked Wines
Australia
New Customer sales 3.3 - 3.3 (0.1) 3.2 5.1 - 5.1 0.3 5.4
Repeat Customer sales 42.5 - 42.5 (1.3) 41.2 40.8 - 40.8 2.0 42.8
45.8 - 45.8 (1.4) 44.4 45.9 - 45.9 2.3 48.2
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Contribution
after
advertising
costs Group
----------------
Investment in New
Customers (21.4) - (21.4) 0.7 (20.7) (41.3) - (41.3) (3.3) (44.6)
Repeat Customer contribution 86.5 - 86.5 (1.7) 84.8 86.2 - 86.2 6.6 92.8
Repeat contribution
margin (%) 27% - 27% - 27% 27% - 27% - 28%
Other contribution (12.9) 13.2 0.3 (0.1) 0.2 0.1 - 0.1 - 0.1
52.2 13.2 65.4 (1.1) 64.3 45.0 - 45.0 3.3 48.3
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Naked Wines
US
Investment in New
Customers (15.1) - (15.1) 0.7 (14.4) (23.2) - (23.2) (3.1) (26.3)
Repeat Customer contribution 50.3 - 50.3 (1.2) 49.1 46.6 - 46.6 6.1 52.7
Repeat contribution
margin (%) 34% - 34% - 34% 34% - 34% - 34%
Other contribution (12.9) 13.2 0.3 (0.1) 0.2 0.1 - 0.1 - 0.1
22.3 13.2 35.5 (0.6) 34.9 23.5 - 23.5 3.0 26.5
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Naked Wines
UK
Investment in New
Customers (3.4) - (3.4) - (3.4) (13.5) - (13.5) - (13.5)
Repeat Customer contribution 25.0 - 25.0 (0.1) 24.9 28.2 - 28.2 - 28.2
Repeat contribution
margin (%) 19% - 19% - 19% 21% - 21% - 21%
21.6 - 21.6 (0.1) 21.5 14.7 - 14.7 - 14.7
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Naked Wines
Australia
Investment in New
Customers (2.9) - (2.9) - (2.9) (4.6) - (4.6) (0.2) (4.8)
Repeat Customer contribution 11.2 - 11.2 (0.4) 10.8 11.3 - 11.3 0.6 11.9
Repeat contribution
margin (%) 26% - 26% - 26% 28% - 28% - 28%
8.3 - 8.3 (0.4) 7.9 6.7 - 6.7 0.4 7.1
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
General
and Naked Wines
administrative US (13.6) 0.8 (12.8) - (12.8) (14.9) - (14.9) (1.6) (16.5)
----------------
Naked Wines UK (6.9) - (6.9) - (6.9) (6.6) - (6.6) - (6.6)
Naked Wines Australia (3.6) - (3.6) - (3.6) (3.9) - (3.9) (0.2) (4.1)
Unallocated (28.9) 4.2 (24.7) - (24.7) (17.7) 0.1 (17.6) - (17.6)
Group (53.1) 5.0 (48.0) - (48.0) (43.1) 0.1 (43.0) (1.8) (44.8)
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Profit on
Other sale of
costs property 4.8 (4.8) - - - - - - - -
----------------
Impairment (18.2) 18.2 - - - - - - - -
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
Naked Wines
EBIT US 8.7 14.0 22.7 (0.6) 22.1 8.6 - 8.6 1.4 10.0
----------------
Naked Wines UK 14.7 - 14.7 (0.1) 14.6 8.1 - 8.1 - 8.1
Naked Wines Australia 4.7 - 4.7 (0.4) 4.3 2.9 - 2.9 0.1 3.0
Unallocated (42.4) 17.6 (24.7) - (24.7) (17.7) 0.1 (17.6) - (17.6)
Group (14.3) 31.6 17.4 (1.1) 16.3 1.9 0.1 2.0 1.5 3.5
------------------------------- --------- --------- --------- ------ ----------- --------- --------- --------- --------- -------
General and administrative costs reconciliation
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
GBPm GBPm
------------------------------------------------- --------- ----------
G&A costs per income statement (53.1) (43.1)
Add back/(deduct) adjusted items:
Amortisation of acquired intangibles 1.3 1.3
Disposal of US inventory - charitable donations 0.8 -
Restructuring costs 1.5 -
Software as a Service costs 2.3 -
Legal settlement for Payment card Interchange
fees (0.7) -
Fair value movement on open foreign exchange
contracts (0.1) (1.1)
Plc company foreign exchange revaluations - (0.1)
G&A costs per note 4 Segmental reporting (48.0) (43.0)
Add back marketing R&D spend 5.4 3.0
G&A costs per the calculation of the APM
Standstill EBIT (42.6) (40.0)
Add back share based payment charges including
social security costs 1.5 1.1
Operating G&A costs (41.1) (38.9)
------------------------------------------------- --------- ----------
Free cash flow
52 weeks
53 weeks ended
ended 28 March
3 April 2023 2022
GBPm GBPm
------------------------------------------ -------------- ----------
Adjusted EBIT 17.4 2.0
Add back depreciation and amortisation
(excludes adjusted amortisation of
acquired intangibles) 3.3 2.3
------------------------------------------- -------------- ----------
Adjusted EBITDA 20.7 4.3
Intangible assets previously capitalised
under former accounting policy 0.3 -
Add back share based payment charges 1.6 1.3
Cash flows before movements in working
capital 22.6 5.6
------------------------------------------- -------------- ----------
Working capital movement
Inventories (29.4) (61.2)
Angel Funds and other deferred income (6.2) 3.6
Trade and other receivables 3.5 (1.8)
Trade and other payables (14.5) 12.9
Repayments of principal under lease
liabilities (1.3) (0.8)
Working capital movement (47.9) (47.3)
------------------------------------------- -------------- ----------
Pre-tax operating cash flow (25.3) (41.7)
Capital expenditure (1.5) (1.9)
Free cash flow (26.8) (43.6)
------------------------------------------- -------------- ----------
Reconciliation to statutory cash
flow statement
Free cash flow (26.8) (43.6)
Cash adjusted items (6.0) -
Capital expenditure 1.5 1.9
Repayments of principal under lease
liabilities 1.3 0.8
Net cash flows from operating activities (30.0) (40.9)
------------------------------------------- -------------- ----------
Net cash excluding lease
liabilities
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
GBPm GBPm
--------------------------------- --------- ----------
Cash and cash equivalents 39.5 39.8
Borrowings:
Credit facility net of issuance
costs (29.2) -
Customer funded bond - -
--------------------------------- --------- ----------
Net cash excluding lease
liabilities 10.3 39.8
---------------------------------- --------- ----------
Standstill EBIT
53 weeks 52 weeks
ended ended
3 April 28 March
2023 2022
GBPm GBPm
--------------------------------------------- --------- ----------
Standstill EBIT is calculated as:
Repeat Customer contribution (a) 86.5 86.2
Less: replenishment spend (e) (49.7) (25.0)
Less: G&A costs(1) (42.6) (40.0)
(5.8) 21.2
--------------------------------------------- --------- ----------
(a) Repeat Customer contribution 86.5 86.2
(b) Repeat Customer sales retention 77.6% 80.4%
(c) Repeat Customer contribution lost to
attrition (a x (1-b)) 19.4 16.9
(d) Year 1 Payback 39.0% 67.5%
(e) Spend to replenish lost Repeat Customer
contribution (c/d) 49.7 25.0
---------------------------------------------- --------- ----------
1. Refer to general and administrative costs reconciliation
above. Adjusted items and marketing R&D spend included within
G&A costs are excluded in the calculation of the Standstill
EBIT due to these costs being one-off or non-recurring
transactions.
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END
FR NKFBDNBKBNCD
(END) Dow Jones Newswires
September 19, 2023 02:00 ET (06:00 GMT)
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