TIDMWINE
RNS Number : 9102W
Naked Wines PLC
15 December 2023
15 December 2023
Naked Wines plc
("Naked Wines" or "Group")
Half Year Results for the 26 weeks ended 2 October 2023
Doing what we said we would
Financial highlights:
-- Total revenue GBP132.3m, (20)% at reported currency rates ((18)% constant currency)
-- Adjusted EBIT GBP2.2m, loss before tax GBP(9.7)m
-- Net cash excluding lease liabilities of GBP2.8m, total available liquidity of GBP48m
-- G&A costs excluding adjusted items reduced by 27% (26%
reduction at constant currency) to align with reduced sales
performance, further cost reductions to come
-- Inventory optimisation expected to deliver GBP40m-50m cash inflow over next 18 months
Operational highlights:
-- Business moving towards sustainable cash generation
-- Continuing to drive toward sustainable profitability; reducing costs
-- Future inventory intake significantly reduced, purchases to
end FY25 GBP60m -70m below forecast COGS
-- Repeat customers performing well with higher revenue per customer in all markets
-- Lower rates of cancellation in all markets, UK customer base stabilised
-- Rolling out testing at scale of revised new customer
recruitment model after successful initial results
Post period end:
-- Customer order patterns over peak trading months are currently in line with our forecasts
-- Net cash as of the end of November improved versus the end of
H1 at GBP7.1m, GBP53m total available liquidity
H1'24 H1'23 H1'24 Constant
Group financial summary(1) reported reported vs H1'23 currency(2)
Total revenue(3) GBP132.3m GBP165.8m (20)% (18)%
Total adjusted sales(3) GBP131.6m GBP165.8m (21)% (18)%
New GBP9.1m GBP13.4m (32)% (30)%
Repeat GBP121.8m GBP148.4m (18)% (16)%
Other GBP0.7m GBP4.0m (83)% (82)%
Investment in New Customers GBP(9.2)m GBP(11.7)m (21)% (19)%
Repeat Customer contribution GBP30.5m GBP42.2m (28)% (25)%
Other contribution GBP(0.5)m GBP(0.4)m 25% 67%
General and administrative costs(4) GBP(18.6)m GBP(25.5)m (27)% (26)%
Adjusted EBIT(5) GBP2.2m GBP4.6m (52)% (44)%
Adjusted items(5) GBP(10.9)m GBP(4.8)m 127% 163%
Operating loss GBP(8.7)m GBP(0.2)m n/m(6) n/m(6)
Net finance costs GBP(1.0)m GBP(0.1)m n/m(6) n/m(6)
---------------------------------------- ------------ ------------ ---------- -------------
Loss before tax GBP(9.7)m GBP(0.2)m n/m(6) n/m(6)
---------------------------------------- ------------ ------------ ---------- -------------
Net cash excluding lease liabilities GBP2.8m GBP22.9m
---------------------------------------- ------------ ------------ ---------- -------------
Net assets GBP88.8m GBP127.3m (30)% (30)%
---------------------------------------- ------------ ------------ ---------- -------------
Inventory (inc that under staged
payments) GBP188.7m GBP209.5m (10)% (2)%
---------------------------------------- ------------ ------------ ---------- -------------
Notes:
1) In addition to statutory reporting, Naked Wines reports
alternative performance measures (APMs) which are not defined or
specified under the requirements of UK-adopted international
accounting standards. 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.
2) Constant currency basis using current period FX rates for the
translation of the comparative period.
3) Refer to the reconciliation of reported performance to
management adjusted basis in the APM section at the end of this
announcement for a reconciliation of total revenue to total
adjusted sales
4) Refer to the reconciliation of general and administrative
(G&A) costs in the APM section at the end of this announcement
for a reconciliation of G&A costs shown here to those reported
in the income statement.
5) Refer to the reconciliation of reported performance to
management adjusted basis in the APM section at the end of this
announcement for a reconciliation of adjusted EBIT to operating
loss (reported EBIT).
6) Year-on-year variance is not meaningful due to the
denominator being broadly around zero.
Operational KPIs H1'24 H1'23
5* customer service 92% 92%
------ ------
Product availability 89% 81%
------ ------
Buy it again 91% 91%
------ ------
Net Promoter Score 66 57
------ ------
Alternative performance H1'24 H1'23 H1'24 vs
measures H1'23
Repeat Customer sales retention 72% 76% (400)bps
------ ------ ---------
Repeat Customer contribution
margin 25.0% 28.4% (340)bps
------ ------ ---------
Active Angels in last 12
months 792k 934k (15)%
------ ------ ---------
5-Year Forecast Payback(1) 1.5x 1.7x (0.2)x
------ ------ ---------
Realised Year 1 Payback(2) 38% 46% (8)%
------ ------ ---------
(1) Forecast payback includes estimated value from non-Angel
subscribers recruited in the period.
(2) Realised Year 1 Payback is the average of Year 1 Paybacks
observed for cohorts reaching their first anniversary in the last
12 months
Rowan Gormley, Executive Chairman, commented:
"We are moving towards a period of sustained cash generation. We
have taken out GBP3 million of cost with GBP10 million more to come
and expect to generate GBP40-50 million of cash from inventory over
the next 18 months. In addition we have made good progress with
testing an enhanced customer proposition to restore us to growth. I
want to thank our people, our winemakers and our customers for
their support and reiterate our determination to make sure that
they are rewarded for it."
Guidance and outlook:
As announced in our trading update on 7 November and reflecting
the outlook for the US business unit, our view on headline FY24
metrics is as follows:
Guidance(1) FY23(2)
Sales trend (52 week comparable, constant (12)% to
currency) (16)% (8)%
------------- ---------
Investment in New Customers GBP23 - GBP20.7m
26m
------------- ---------
GBP65 -
Repeat Customer contribution 70m 84.8m
------------- ---------
G&A costs including share based payments, GBP37 - GBP42.6m
excluding adjusted items 40m
------------- ---------
Adjusted EBIT (52 week comparable) GBP2 - 6m GBP16.3m
------------- ---------
Net cash excluding lease liabilities (at GBP0 - 15m GBP10.3m
year end)
------------- ---------
We also anticipate incurring one-off cash costs of the order
GBP5m in H2 to drive inventory and cost reduction initiatives
1. This guidance is provided based on FX rates of 1 GBP = 1.24 USD and 1.74 AUD.
2. FY23 reported on a 52 week comparable basis.
Analyst and investor conference call
Naked Wines plc will host an analyst and investor conference
call at 9am GMT / 4am ET / 1am PT on 15 December 2023. The briefing
will be webcast using the following link:
https://brrmedia.news/WINE_HY
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 Half Year when prompted by the
operator.
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
Rowan Gormley, Executive Chairman
James Crawford, Chief Financial
Officer
Clara Melia / Catherine Miles
Investec (NOMAD & Joint Broker) Tel: 0207 597 5970
David Flin / Ben Farrow
Jefferies (Joint Broker) Tel: 0207 029 8000
Ed Matthews / 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 (who we call
Angels) commit to a fixed prepayment each month which goes towards
their next purchase. In turn. Naked 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
792,000 Angels in the US, UK and Australia, making us a leading
player in the fast-growing direct-to-consumer wine market.
Our customers have direct access to 293 of the world's best
independent winemakers making over 2,000 quality wines in 22
different countries. We collaborate with some of the world's best
independent winemakers like Matt Parish (Beringer, Stags' Leap) and
eight-time Winemaker of the Year Daryl Groom (Penfolds Grange).
Executive Chairman's review
As you may have read, I have moved to Executive Chairman from 7
November following Nick Devlin stepping down as CEO. I'd like to
thank Nick for his leadership of Naked through the challenges of
the COVID-19 pandemic and getting a lot of the hard turnaround work
done in the period that followed.
As I step into the executive role, the key questions on my mind
are whether we can be confident that Naked Wines
1. Will be cash generative?
2. Maintains a robust core of repeat customers post COVID?
3. Can be restored to PROFITABLE growth?
1. Will Naked be cash generative?
We are moving towards a period of sustained cash generation, and
we have a net cash position and almost GBP90 million of net assets
at the half year which we believe we can bring to bear to further
improve liquidity and reduce covenant constraints as we seek a
replacement for our existing credit facility. We have:
-- Substantially completed negotiations with our suppliers to
cut commitments such that inventory spend is forecast to be GBP60
to 70 million less than expected cost of goods sold in the next 18
months;
-- Eliminated R&D spend and reduced operating G&A costs
by GBP3.1 million with over GBP10 million more to come from
initiatives from across the cost base;
-- Stabilised the subscriber base in our UK market, and seen
reduced customer attrition in both the US and Australia; and
-- Moved to testing at scale of an improved subscription recruitment model.
However, we will continue to report a material uncertainty in
our going concern assessment as trading remains volatile and we
still need to conclude some supplier discussions, but I'm confident
we have the headroom to weather any plausible future scenario from
here.
2. Do we maintain a robust core of repeat customers post
COVID?
This is a fair question given the 16% decline in Repeat Customer
sales in the period.
However, I must repeat what we said at the full year results.
New customer acquisition is tough but our customers remain loyal
and repeat customer KPIs are robust. The key facts are:
1 . Repeat sales (at constant currency) are down 16% and Active
Angels at the end of the period are down 15%. Looking at Active
Angels within the six-month period we're reporting, rather than the
last 12 months used for our normal KPI, we see that monthly sales
per subscribed customer are actually UP in all three markets,
including the US, and by about 3% across the Group.
2. Customer attrition, which impacts sales retention, is at an
all-time low of 33%
We still have a new business challenge but, whether we succeed
or not in rising to that challenge, I expect Naked Wines will
remain profitable at the adjusted EBIT level and become cash
generative in the next 12 months. The key dependency is on how well
we can perform deploying Investment in New Customers.
3. Can Naked be restored to PROFITABLE growth?
We are doing exactly what we said we would do.
Priority 1 - Ensure that we come through this stronger,
by...
-- Completing the negotiations with winemakers to allow us to
get inventory back in line by the end of FY25, generating GBP40 to
50 million of cash
-- Re ducing costs across our fulfilment operations and G&A
base to ensure that we remain profitable even if we do not succeed
in rebuilding new customer acquisition to pre-pandemic levels
-- Exploring options for a future credit facility which places fewer constraints on us
Priority 2 - Restore Naked to profitable growth, by rebuilding
new customer acquisition to pre-pandemic levels
The good news is that a lot of good work has already been done.
Between placing fewer orders and our winemakers agreeing to cut
their commitments we expect to outlay GBP50 million less cash on
inventory in FY24 than we did in FY23, and a further GBP38 million
less in FY25 versus FY24. In addition, costs have come down
substantially, with more to come.
When it comes to rebuilding growth, there are three elements to
consider:
1. Naked has been testing a number of improvements to our new
customer proposition since October last year, seeking improved
payback and helping us access a wider demographic. Right now, it
looks like at least one of the ideas is a winner, and we are
testing at scale in all three markets over the peak season. We will
have more to tell you on this next year once we have reviewed test
data over an extended period;
2. The work on costs has a compound benefit. In addition to the
direct benefit from the cost reduction, lower fulfilment costs mean
higher contribution and therefore higher LTVs. In turn this
increases the payback of all marketing and makes it easier to find
new customers due to increased viability of previously marginal
investments; and
3. Some of this is cyclical. For example, we recruit most of our
new customers by partnering with other companies who have matching
customer profiles. These companies are typically 25 to 30% down
post COVID, which in turn means that the flow of their customers to
us is down as well. This trend may recover over time but we're not
relying on it doing so.
In our last report, we mentioned that we were working within
some internally imposed guardrails, with the goal of making Naked a
simpler, more stable and easier to manage business. These are:
-- A mid-term planning assumption of 5% sales growth from FY25
onwards reflecting a base level that we need to create sustained
value;
-- A hard link between scale and G&A levels consistent with
a business achieving at least 5% EBIT margins implying long-term
G&A being set around 11% of sales;
-- Group Inventory levels to be back at the appropriate level by
the end of FY25 - targeting GBP115 to 130 million - and an ongoing
link to member base size embedded in future inventory commitments
policy;
-- Maintaining consistent annual new customer investment, at around GBP25 million per year
-- Near-term allocation to maximise cash performance
-- Future years to drive growth from improving quality and
retention versus increasing investment levels; and
-- When cash levels are restored to a level that removes any
uncertainty around going concern we will test any investments
against the value available from buying back company shares
provided the share price is lower than NPV.
I want to emphasise that this philosophy will continue.
And finally, I want to thank all of our customers, people,
winemakers, suppliers and shareholders for your continued support
through this challenging period. It has been painful, and there is
more to come before we can repay that support, but we are turning
the corner and it will be worth it.
We are all determined to make sure that you are rewarded for
your patience and your support.
Rowan Gormley
Executive Chairman
Financial Review
Introduction
Our performance in the first half of the year clearly shows the
level of challenge in the business but, when analysed further,
reduces this to the single critical challenge of new customer
recruitment and, in several areas, demonstrates that our
remediation plans are showing progress.
First, the headline numbers which don't yet reflect the impact
of our remediation plans.
Revenues in the period declined in all markets, and by -18% in
aggregate at constant currency (-20% at actual currency). At
constant currency, this reduction is driven by a 16% reduction in
Repeat Customer sales, in turn driven by a 15% decline in the
member base. Profitability at the adjusted EBIT level declined by
GBP2.4 million to GBP2.2 million, driven as follows:
H1'23 adjusted EBIT GBP4.6m
Reduction in Repeat Customer GBP(11.7)m
contribution
Reduction in Investment in New GBP2.5m
Customers
Change in other contribution GBP(0.1)m
Reduction in G&A GBP3.1m
Elimination of R&D investment GBP3.8m
H1'24 adjusted EBIT GBP2.2m
We incurred a net additional GBP10.9 million of costs (H1'23:
GBP4.8 million) recognised as adjusted items, the largest of these
being an GBP11.5 million impairment of assets, GBP10.8 million of
which is in the US business as a result of the lower than forecast
trading in that territory meaning cash flow forecasts do not
support the full asset base we hold for that business unit. Summing
the adjusted EBIT, adjusted items and an interest charge of GBP1.0
million results in a loss before tax for the period of GBP9.7
million (H1'23: loss of GBP0.2 million).
Our net cash position (excluding lease liabilities) decreased to
GBP2.8 million (H1'23: GBP22.9 million) as net working capital
continued to increase, but inventory levels have now stabilised and
are forecast to reduce from here. Operating cash outflow of GBP3.6
million was significantly reduced versus the GBP22.8 million
outflow in the comparable period in FY23.
So what are the other positives?
As Rowan has stated, our immediate goal is to stabilise the
business, starting with customer numbers and then translate that to
a stable revenue base. If we align the right level of costs and
inventory intake behind that we will have a profitable business
that generates cash sustainably. While we have not yet reached that
position, we can see signs of this emerging in the first half
performance.
Per Angel, our revenues in each market increased and our rate of
customer attrition declined. Taken together, these data points show
that to stabilise the revenue line it is a matter of recruiting
more new customers.
Our pivot to profitability significantly reduced our level of
investment in new customer acquisition and we are not currently
generating enough new customers to replenish those lost to
cancellations. However, we are slowly rebuilding the level of
productive spend, with our investment levels flat in the second
quarter following a 50% decline in the first quarter where the
comparator period was prior to the pivot to profit. In the UK,
where we first started the process of reducing spend, we have seen
a stable membership base over recent months. This point remains in
the future for the US and Australian businesses but the UK example
demonstrates that we are on the right trajectory, it will just take
time. Recent developments to how we recruit customers will drive
improvements in the payback on these investments and, over time,
the trend in the size of the customer base.
Our Repeat Customer contribution margins have reduced in the
first half versus the prior year, driven by a combination of
underlying reduction in all markets and a mix shift towards the
lower margin UK market where sales trends are strongest. While not
yet visible in the reported numbers, revised warehousing
arrangements in both the UK and US and, in time, lower inventory
holding levels are expected to drive a reversal in this trend in
FY25.
Our operating G&A costs* were 15% lower in the half versus
the prior year, showing the impact of the measures we have taken to
reduce spending. These measures will continue to support
profitability in the Group going forwards.
Our net cash balance (excluding lease liabilities) closed at
GBP2.8 million (with the full GBP45 million capacity of our credit
facility remaining available to us beyond this). This reduced by
GBP7.1 million during the half, a slowdown in cash consumption
versus the same period in the prior year when we consumed GBP18.6
million of cash. While we would like to be generating cash we are
now seeing the reduction in the trend of cash consumption and as we
continue to reduce inventory we see cash generation in sight.
Inventory is the biggest driver of our cash position. At the end
of H1'24 we held GBP188.7 million, below the GBP209.5 million of
H1'23, again showing that, with the changes to intake we have
agreed with winemakers, we are managing our inventory purchasing to
the lower level of sales we are generating despite the majority of
this inventory having been committed in prior years. Looking
forwards we see intake GBP60 to 70 million below forecast COGS over
the next 18 months underpinning the future cash generation that we
are targeting.
* Refer to the reconciliation of general and administrative
costs in the APM section at the end of this announcement.
New and repeat customers and our subscription KPIs
Group financial summary H1'24 Constant
* H1'24 H1'23 vs H1'23 currency(1)
New customers
New Customer sales GBP9.1m GBP13.4m (32)% (30)%
Investment in New Customers GBP(9.2)m GBP(11.7)m (21)% (19)%
5-Year Forecast Payback 1.5x 1.7x (0.2)x (0.2)x
Realised Year 1 Payback 38% 46% (8)% (8)%
Repeat customers
Repeat Customer sales GBP121.8m GBP148.4m (18)% (16)%
Repeat Customer contribution GBP30.5m GBP42.2m (28)% (25)%
Repeat Customer contribution
margin 25.0% 28.4% (340)bps (330)bps
Sales retention 72% 76% (400)bps (400)bps
Active Angels 792k 934k (15)% (15)%
Other
Other revenue GBP0.7m GBP4.0m (83)% (82)%
Other contribution GBP(0.5)m GBP(0.4)m 25% 67%
* see glossary at the end of this announcement for definitions
of APMs disclosed in this table.
New customers
Investment in New Customers was GBP9.2 million compared to
GBP11.7 million in H1'23. The reduction is entirely attributable to
the first quarter, the period prior to the shift in strategy
executed in the prior year. In the second quarter, we invested at
the same level as FY23 and in line with our "guardrail" intention
of GBP25 million per year.
5-Year Forecast Payback of 1.5x (H1'23: 1.7x) has reduced
year-on-year due to:
-- Accepting certain activities with low 5-year LTV payback but
higher near-term cash payback through liquidation of excess
inventory and improved utilisation of operational capacity;
-- Testing new digital creative at scale, where we are achieving
breakeven economics, positive short-term cash returns and broader
brand awareness; and
-- Testing, in addition to the promising improvements to our
customer proposition that Rowan referenced, a broader recruitment
approach with no requirement to subscribe to receive a discounted
first order. This approach has shown to generate a higher rate of
first time purchases (and therefore near-term cash) but lower
long-term value due to the lower level of subsequent repeat
purchases.
We saw an improvement in our ability to invest productively via
social media towards the end of the half, with 39% of our total
investment in new customers being placed in this channel during the
reported period.
Our Year 1 Payback number remains low as it reflects the actual
payback on investments made in the period H2'22 and H1'23, the
majority of which is before our pivot to profit and higher returns.
This lagging indicator is expected to improve as we report on the
higher payback spend after H1'23.
Repeat customers
Repeat Customer sales were GBP121.8 million, an 18% decrease on
the prior year (16% decrease at constant currency). With Angel
numbers reducing, this decrease masks an improvement of 3% in
monthly sales per subscribed Angel. Our sales retention metric
shows a reduction to 72% for the period compared to 76% in the same
period of FY23. This reduction is the net of a four percentage
point improvement in member retention rates year-on-year but a
reduction of 14 percentage points in the rate of increase of
revenue per retained Angel.
Alongside the reduction in sales, 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
period from 28.4% to 25.0%. Of this movement, 210 bps is due to
lower underlying gross margins, in particular in the US business as
we discounted to move excess inventory and 60 bps due to a mix
shift towards the UK business. The remainder is a function of our
fulfilment costs increasing as a % of revenue, which will improve
in FY25 as we move into revised warehouse contracts and begin to
reduce inventory level. We have not seen the activation uplift we
targeted from US discounting and believe this was due to suboptimal
execution. We will continue to experiment with different approaches
to drive cash from inventory during the final quarter.
Other revenue and contribution
Other revenue and contribution reported within adjusted EBIT
represents sales of bulk wine and disposals of cased goods on
secondary markets to reduce inventories. Disposals in this category
are of products that were not provisioned at the end of FY23. Any
sales and contribution arising from provisioned items are reported
net within adjusted items. We have been unable to dispose of the
same levels of bulk inventory as in the comparator period with
conditions in the key US market materially worsening during the
half. We are continuing to develop a range of opportunities to
dispose of excess inventory through commercial partnerships.
Segmental trends
H1'24 Constant
Segmental report * H1'24 H1'23 vs H1'23 currency(1)
US segment
Total sales GBP63.2m GBP85.2m (26)% (23)%
New Customer sales GBP5.3m GBP9.0m (41)% (39)%
Repeat Customer sales GBP57.2m GBP72.2m (21)% (18)%
Other revenue GBP0.7m GBP4.0m (83)% (82)%
-------------------------------- ---------- ----------- ---------- -------------
Investment in New Customers GBP(6.0)m GBP(7.9)m (24)% (23)%
Repeat Customer contribution GBP17.4m GBP24.8m (30)% (28)%
Repeat Customer cont. % 30.4% 34.3% (390)bps (390)bps
Other contribution GBP(0.5)m GBP(0.4)m 25% 67%
General and administrative
costs(1) GBP(5.7)m GBP(6.5)m (12)% (10)%
Adjusted EBIT GBP5.3m GBP10.0m (47)% (44)%
-------------------------------- ---------- ----------- ---------- -------------
UK segment
Total sales GBP52.4m GBP58.8m (11)% (11)%
New Customer sales GBP2.3m GBP2.7m (15)% (15)%
Repeat Customer sales GBP50.1m GBP56.1m (11)% (11)%
Investment in New Customers GBP(2.0)m GBP(1.6)m 25% 25%
Repeat Customer contribution GBP9.4m GBP11.7m (20)% (20)%
Repeat Customer cont. % 18.8% 20.9% (210)bps (210)bps
General and administrative
costs GBP(3.1)m GBP(3.7)m (16)% (16)%
Adjusted EBIT GBP4.3m GBP6.3m (32)% (32)%
-------------------------------- ---------- ----------- ---------- -------------
Australia segment
Total sales GBP16.0m GBP21.8m (27)% (19)%
New Customer sales GBP1.5m GBP1.7m (12)% (6)%
Repeat Customer sales GBP14.6m GBP20.1m (27)% (20)%
Investment in New Customers GBP(1.3)m GBP(2.1)m (38)% (35)%
Repeat Customer contribution GBP3.6m GBP5.6m (36)% (29)%
Repeat Customer cont. % 24.7% 27.9% (320)bps (320)bps
General and administrative
costs GBP(1.6)m GBP(1.7)m (6)% 0%
Adjusted EBIT GBP0.8m GBP1.8m (56)% (50)%
-------------------------------- ---------- ----------- ---------- -------------
Central G&A GBP(8.2)m GBP(13.5)m (39)% (39)%
-------------------------------- ---------- ----------- ---------- -------------
* See glossary at the end of this announcement for definitions
of APMs disclosed in this table.
1 Refer to the reconciliation of G&A costs at the end of
this document for reconciliation of this figure to G&A costs
reported on the face of the income statement.
Commentary on segments uses constant currency trends, given
these are reflective of the local performance.
US
The US segment saw substantial declines in New and Repeat
Customer sales as we continued to reduce the level of Investment in
New Customers due to weaker payback levels than targeted. Within
the repeat customer base, the lower level of members and a slowing
rate of increase in revenue per member led to Repeat Customer sales
falling 18%. Repeat Customer contribution fell by 28% as margins
were reduced due to excess storage costs for cased wine and some
deep discounting at the end of the half year that failed to deliver
significant incremental spend per member.
Other revenue and contribution in the US segment represents
sales of bulk wine that was not provided in FY23. A similar level
of sales were made of provided wine, with these sales reported as
adjusted items.
G&A excluding adjusted items in the US, as presented in the
table above, reduced by 10% reflecting lower headcount year-on-year
following restructuring during FY23, reduction in variable
compensation accruals and the elimination of GBP0.5 million of
R&D marketing spend versus the prior year. These G&A costs
include GBP0.6 million of legal costs associated with the
settlement of employee legal claims, which were resolved shortly
after the end of the half year. The Company anticipates
reimbursement of a proportion of these costs during the second
half.
UK
The UK segment showed the most encouraging trends in the Group
albeit still with continued reductions in sales to new and repeat
customers. Investment in New Customers increased in the half as we
began to build an improved pipeline of marketing opportunities.
Sales to new customers do not show the same uplift due to:
-- Lower first order values on customers acquired through
investments made in digital channels, where we have started to see
viable spend opportunities after an extended period where this was
not the case; and
-- Acceptance of some lower payback activities year-on-year
given payback headroom available (the UK having previously
delivered the highest paybacks in the Group).
The repeat sales reduction was driven by reduced customer
numbers, with improvements during the half as the size of the
membership base stabilised. Margins were reduced year-on-year due
to higher warehousing costs as we underutilised the committed
capacity. This will resolve in FY25 as the UK business moves onto a
new warehousing contract and partner.
G&A costs excluding adjusted items, as presented in the
table above, in the UK reduced by 16% year-on-year reflecting
action taken to reduce headcount in FY23 and reduced outlook for
variable compensation.
Australia
Australia saw a 35% reduction in Investment in New Customers
versus the prior year. New Customer sales, however, only fell by 6%
due to a new customer proposition being tested with no membership
requirement to secure advantageous pricing, resulting in higher
conversion of traffic to first orders but lower levels of new
recruits.
The decline in Repeat Customer sales reflected the reduction in
the size of the member base, with margins reducing due to high
levels of inflation in the fulfilment system, in particular final
mile delivery.
G&A costs excluding adjusted items, as presented in the
table above, remained flat in the period with some cost
efficiencies offsetting expenses relating to a study evaluating
potential fulfilment network savings which was ultimately
terminated, and increased technology operating costs.
Cash flow
Management of the Group's cash position remains a priority
across the business as we continue to manage the implications of
excess inventory. We are striving to balance this with continued
efforts to drive profitability, at times sacrificing cash
generative orders to ensure discipline around investment
decisions.
The Group consumed GBP7.1 million of cash during the period, an
GBP11.5 million reduction versus the same period in FY23,
consisting of:
H1'24 H1'23
GBPm GBPm
Operating loss (8.7) (0.2)
------ ------
Add back: depreciation and amortisation 1.6 2.0
------ ------
Add back: impairment charges 11.5 -
------ ------
Add back: other non-cash charges (0.7) 2.7
------ ------
Change in inventory (19.8) (50.9)
------ ------
Change in payables 3.8 18.5
------ ------
Change in Angel funds and other deferred
income 8.5 3.6
------ ------
Other working capital movements 0.2 1.5
------ ------
Operating cash flow (3.6) (22.8)
------ ------
Tax and net interest paid (1.9) (0.4)
------ ------
Capital expenditure (0.6) (0.6)
------ ------
Proceeds from property held for sale - 5.6
------ ------
Lease liabilities paid (1.0) (0.4)
------ ------
Movement in net cash excluding lease
liabilities (7.1) (18.6)
------ ------
The significant reduction in operating cash consumption
demonstrates the progress we have made on our inventory intake
challenge as well as the impact of improving retention on our Angel
funds balance. While inventory levels are comparable year-on-year
on a constant currency basis, we have a clear line of sight of
pending reductions with total future commitments having been
reduced by GBP30 million since the beginning of the year to GBP131
million. Over the next 18 months almost half of our non-duty COGS
will be delivered by inventory we have already paid for.
Our Angel fund balance, which typically grows on a per Angel
basis during the first half of the year as customers save towards
the holiday season, totalled GBP72 million, an 11% reduction versus
the same point of FY23 (4% at constant currency). This is a
significantly lower reduction than the reduction in the number of
Angels, reflecting the shift towards longer tenure customers who
typically hold a higher balance and continued low rates of customer
attrition. We do expect to see an acceleration in the reduction of
this balance as we recruit more new customers onto membership types
that do not require Angel funding of accounts. However, testing has
shown that the cash generated from sales to these customers means
the overall net cash impact of the different membership type is
negligible after three to six months.
Cash and going concern assessment
Our forecasts show Group net cash levels stabilising in the
near-term despite the reduced revenue outlook communicated in
November 2023, which has slowed our destocking plans. In the
medium-term we remain on track for a significant reduction in
inventory, and commensurate increase in net cash levels, over the
coming 18 months from the date of reporting these results. While
this takes place, the Group maintains an asset backed lending (ABL)
facility with Silicon Valley Bank, a division of First Citizens
Bank, for downside liquidity availability and day-to-day cash
management. As of the end of H1'24 this facility provided access to
GBP45 million of liquidity over and above our net cash excluding
lease liabilities balance of GBP2.8 million.
As a result of this ongoing reliance on the Group's ABL credit
facility and the requirement to achieve the credit facility
covenant outcomes in a period of continued volatile trading, the
scope for different outcomes to those expected from our planned
actions and the need for continued support from a range of
suppliers in the delivery of these planned actions, we continue to
report a material uncertainty around our going concern assessment.
In the meantime we have met all performance covenant requirements
to date.
We are considering the options for replacing our existing credit
facility. Having sought expert advice on the current debt market
and considering the strength of the balance sheet we believe there
may be an opportunity to secure a similar-sized facility that has
less limitation on utilisation and more flexible covenants
resulting in fewer restrictions on the actions we can take to
reduce inventory and drive our broader change agenda.
Recent trading and outlook
Since we gave an update on trading patterns on 7 November,
performance has been satisfactory. November and December are
critical trading months given the high levels of sales in advance
of the holidays. Customer order volumes in November and December to
date have been consistent with our forecast. Net cash (excluding
lease liabilities) at the end of November was GBP7.1m, up from
GBP2.8m at the half year reporting point.
James Crawford
Chief Financial Officer
Independent review report to Naked Wines plc
Conclusion
We have been engaged by Naked Wines plc ("the Company") to
review the condensed consolidated interim financial statements in
the half-yearly report for the 26 weeks ended 2 October 2023 which
comprises the condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed
consolidated statement of changes in equity, condensed consolidated
balance sheet, the condensed consolidated statement of cash flows
and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated interim
financial statements in the half-yearly report for the 26 weeks
ended 2 October 2023 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK and the AIM Rules.
Material uncertainty related to going concern
We draw attention to note 4 to the condensed consolidated
interim financial statements which indicates that a material
uncertainty exists that may cast significant doubt on the Group's
ability to continue as a going concern.
The directors' baseline case forecast, and their severe but
plausible downside scenario forecast indicate that the covenants
will be met throughout the going concern period. However, the
headroom on the severe but plausible downside scenario forecast is
limited and actual financial performance has been adverse to budget
in recent financial periods. Factoring in the potential
reoccurrence of this variance into the severe but plausible
downside scenario would result in a covenant breach. In addition,
the Group's ability to continue to generate sufficient cash flows
and complete the planned actions with external stakeholders in the
forecasted period continues to give rise to uncertainty over the
Group's ability to meet its covenants in the going concern
period.
These events and conditions, along with the other matters
explained in note 4, constitute a material uncertainty that may
cast significant doubt on the Group's ability to continue as a
going concern.
Our conclusion is not modified in respect of this matter.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly report and
consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed consolidated
interim financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
The directors have prepared the condensed consolidated interim
financial statements on the going concern basis. As stated above,
they have concluded that a material uncertainty related to going
concern exists.
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the Group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Group will continue in operation .
Directors' responsibilities
The half-yearly report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the half-yearly report in accordance with the AIM
Rules.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with UK-adopted international
accounting standards.
The directors are responsible for preparing the condensed
consolidated interim financial statements included in the
half-yearly report in accordance with IAS 34 as adopted for use in
the UK.
In preparing the condensed consolidated interim financial
statements, the directors are responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated interim financial statements in the
half-yearly report based on our review. Our conclusion, including
our conclusions relating to going concern, are based on procedures
that are less extensive than audit procedures, as described in the
Basis for conclusion section of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement. Our review has been undertaken so that we
might state to the Company those matters we are required to state
to it in this report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Matthew Radwell
for and on behalf of KPMG LLP
Chartered Accountants
20 Station Road
Cambridge
CB1 2JD
Date: 14 December 2023
Condensed consolidated income statement
For the 26 weeks ended 2 October 2023
Continuing operations 26 weeks 26 weeks ended
ended 2 October 26 September
2023 2022
Note GBP'000 GBP'000
---------------------------------------- ----- ----------------- ---------------
Revenue 5 132,339 165,775
Cost of sales (78,939) (93,342)
Fulfilment costs(1) (25,764) (32,319)
---------------------------------------- ----- ----------------- ---------------
Gross profit pre inventory provision
and winemaker cancellation costs(1) 27,636 40,114
Movement in inventory provision
and winemaker cancellation costs 6 1,327 (7,908)
---------------------------------------- ----- ----------------- ---------------
Gross profit(1) 28,963 32,206
Advertising costs (7,440) (10,036)
General and administrative costs (18,732) (27,148)
Impairment of non-current assets 6/7 (11,539) -
Profit on disposal of asset classified
as held for sale 6 - 4,814
---------------------------------------- ----- ----------------- ---------------
Operating loss(2) (8,748) (164)
Finance costs (2,329) (565)
Finance income 1,333 514
---------------------------------------- ----- ---------------
Loss before tax (9,744) (215)
Tax 8 (1,930) (258)
Loss for the period (11,674) (473)
---------------------------------------- ----- ----------------- ---------------
Loss per share 9
Basic (15.8p) (0.6p)
Diluted (15.8p) (0.6p)
---------------------------------------- ----- ----------------- ---------------
1. The Directors have reviewed their application of IAS1
Presentation of Financial Statements and have elected to disclose
fulfilment costs within gross profit, which were previously
recognised below gross profit. Comparatives have also been
re-presented and there is no impact on the loss for the period.
2. Operating loss analysed as:
26 weeks 26 weeks ended
ended 2 October 26 September
2023 2022
GBP'000 GBP'000
--------------------------------------------- ----------------- ---------------
Adjusted EBIT 5 2,159 4,609
Adjusted items: 6
Non-cash charges relating to acquisitions - (631)
Right-sizing of US inventory 774 (7,908)
Impairment of non-current assets (11,539) -
Profit on disposal of asset classified
as held for sale - 4,814
Other net adjusted items (142) (1,048)
--------------------------------------------- ----------------- ---------------
Operating loss (8,748) (164)
--------------------------------------------- ----------------- ---------------
The notes to the condensed consolidated interim financial
statements following the primary statements are an integral part of
these condensed consolidated interim financial statements.
Condensed consolidated statement of comprehensive income
For the 26 weeks ended 2 October 2023
26 weeks 26 weeks ended
ended 2 October 26 September
2023 2022
GBP'000 GBP'000
--------------------------------------------- ----------------- ---------------
Loss for the period (11,674) (473)
Items that may be subsequently reclassified
to profit or loss:
Exchange differences on translation
of foreign operations 1,115 17,714
Tax on items that may be subsequently
reclassified to the income statement - (546)
--------------------------------------------- ----------------- ---------------
Other comprehensive income for the period 1,115 17,168
The total comprehensive (loss)/profit
for the period (10,559) 16,695
--------------------------------------------- ----------------- ---------------
The total comprehensive income for the period and the prior
period is wholly attributable to the equity holders of the parent
company, Naked Wines plc.
The notes to the condensed consolidated interim financial
statements following the primary statements are an integral part of
these condensed consolidated interim financial statements.
Condensed consolidated statement of changes in equity
For the 26 weeks ended 2 October 2023
Capital Currency
Share Share redemption translation Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 28 March 2022 5,508 21,162 363 3,183 79,667 109,883
------------------------- --------- --------- ------------ ------------- ---------- ---------
Loss for the period - - - - (473) (473)
Other comprehensive
income/(loss) for
the period - - - 17,714 (546) 17,168
The total comprehensive
income/(loss) for
the period - - - 17,714 (1,019) 16,695
------------------------- --------- --------- ------------ ------------- ---------- ---------
Shares issued 42 - - - (42) -
Credit to equity
for equity-settled
share based payments - - - - 740 740
------------------------- --------- --------- ------------ ------------- ---------- ---------
At 26 September
2022 5,550 21,162 363 20,897 79,346 127,318
------------------------- --------- --------- ------------ ------------- ---------- ---------
At 3 April 2023 5,550 21,162 363 7,930 63,673 98,678
------------------------- --------- --------- ------------ ------------- ---------- ---------
Loss for the period - - - - (11,674) (11,674)
Other comprehensive
income for the period - - - 1,115 - 1,115
The total comprehensive
income/(loss) for
the period - - - 1,115 (11,674) (10,559)
------------------------- --------- --------- ------------ ------------- ---------- ---------
Credit to equity
for equity-settled
share based payments - - - - 664 664
Deferred tax on share
based payments - - - - (32) (32)
------------------------- --------- --------- ------------ ------------- ---------- ---------
At 2 October 2023 5,550 21,162 363 9,045 52,631 88,751
------------------------- --------- --------- ------------ ------------- ---------- ---------
he notes to the condensed consolidated interim financial
statements following the primary statements are an integral part of
these condensed consolidated interim financial statements.
Condensed consolidated balance sheet
As at 2 October 2023
2 October
2023 3 April 2023
Note GBP'000 GBP'000
--------------------------------------- ----- ---------- -------------
Non-current assets
Goodwill and intangible assets 7 5,859 14,938
Property, plant and equipment 2,936 2,757
Right-of-use assets 2,436 5,374
Deferred tax assets 5,410 7,328
Other receivables 11,252 10,711
27,893 41,108
--------------------------------------- ----- ---------- -------------
Current assets
Inventory staged payments to
winemakers(1) 26,918 27,217
Inventories(1) 161,750 138,449
Trade and other receivables 5,393 5,610
Financial instruments at fair
value - 30
Cash and cash equivalents 10 33,768 39,474
--------------------------------------- ----- ---------- -------------
227,829 210,780
--------------------------------------- ----- ---------- -------------
Current liabilities
Trade and other payables (46,752) (42,427)
Current tax liabilities (1,943) (1,836)
Angel funds and other deferred
income (80,245) (71,314)
Lease liabilities 10 (1,561) (2,030)
Provisions (1,584) (1,709)
Other loans 10 (1,000) -
Bond financing (35) (35)
Financial instruments at fair
value (156) (290)
(133,276) (119,641)
--------------------------------------- ----- ---------- -------------
Net current assets 94,553 91,139
--------------------------------------- ----- ---------- -------------
Total assets less current liabilities 122,446 132,247
--------------------------------------- ----- ---------- -------------
Non-current liabilities
Provisions - (14)
Lease liabilities 10 (3,772) (3,821)
Borrowings 10 (29,923) (29,131)
Deferred tax liabilities - (603)
--------------------------------------- ----- -------------
(33,695) (33,569)
--------------------------------------- ----- ---------- -------------
Net assets 88,751 98,678
--------------------------------------- ----- ---------- -------------
Equity
Share capital 5,550 5,550
Share premium 21,162 21,162
Capital redemption reserve 363 363
Currency translation reserve 9,045 7,930
Retained earnings 52,631 63,673
--------------------------------------- ----- -------------
Total equity 88,751 98,678
--------------------------------------- ----- ---------- -------------
1. The Directors have reviewed the disclosure of staged payments
to winemakers in respect of inventory and have elected to disclose
the amounts separately on the face of the balance sheet.
Comparatives have also been re-presented. The amounts were
previously aggregated within inventory. There is no impact on net
assets or equity.
The notes to the condensed consolidated interim financial
statements following the primary statements are an integral part of
these condensed consolidated interim financial statements.
The condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard
34 Interim Financial Reporting, as adopted for use in the UK.
By order of the Board
James Crawford
Chief Financial Officer
14 December 2023
Condensed consolidated statement of cash flows
For the 26 weeks ended 2 October 2023
26 weeks
ended 26 weeks ended
2 October 26 September
2023 2022
Note GBP'000 GBP'000
----------------------------------------- ----- ----------- ---------------
Operating activities
Net cash flows used in operations 10 (3,580) (22,751)
Overseas income tax paid (511) (59)
----------------------------------------- -----
Net cash (used in) operating activities (4,091) (22,810)
----------------------------------------- ----- ----------- ---------------
Investing activities
Interest received, including interest
received on the vendor loan note 247 36
Purchase of property, plant and
equipment (647) (595)
Net proceeds on disposal of property,
plant and equipment 39 10
Proceeds from sale of asset held
for resale - 5,624
----------------------------------------- -----
Net cash (used in)/from investing
activities (361) 5,075
----------------------------------------- ----- ----------- ---------------
Financing activities
Interest paid (1,479) (348)
Lease interest paid (179) (70)
Repayments of principal under lease
liabilities (999) (441)
Debt issuance costs paid - (768)
Loan advance from supplier 1,000 -
Drawdown of credit facility - 19,468
Net cash (used in)/from financing
activities (1,657) 17,841
----------------------------------------- ----- ----------- ---------------
Net (decrease)/increase in cash (6,109) 106
Cash and cash equivalents at the
beginning of the period 39,474 39,846
Effect of foreign exchange rate
changes 403 1,670
Cash and cash equivalents at the
end of the period 10 33,768 41,622
----------------------------------------- ----- ----------- ---------------
The notes to the condensed consolidated interim financial
statements following the primary statements are an integral part of
these condensed consolidated interim financial statements.
Notes to the condensed consolidated interim 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 preparation
The annual financial statements of the Group are prepared in
accordance with UK-adopted international accounting standards.
These condensed consolidated interim financial statements have
been prepared applying the accounting policies set out in the
Annual Report and Accounts for the 53 weeks ended 3 April 2023.
The auditor's report on those accounts was not qualified and did
not contain statements under section 498(2) or (3) of the Companies
Act 2006. However, it did include a reference to a material
uncertainty related to going concern being a matter to which the
auditor drew attention by way of emphasis without qualifying the
auditor's report.
The condensed consolidated interim financial statements included
in this report have been prepared in accordance with International
Accounting Standard 34 Interim Financial Reporting, as adopted for
use in the UK. The condensed consolidated interim financial
statements are not statutory accounts. The financial reporting
period represents the 26 weeks ended 2 October 2023 and the prior
period, 26 weeks ended 26 September 2022 and are presented in GBP
which is the Group 's functional currency, and all values are
rounded to the nearest thousand (GBP'000), except when otherwise
indicated.
The new accounting standards that came into effect in the
current accounting period beginning 4 April 2023, noted below, do
not introduce any new disclosures that are explicitly required in
the condensed consolidated interim financial statements.
-- Amendments to IFRS 17
-- Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2)
-- Definition of Accounting Estimates (Amendments to IAS 8)
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
-- International Tax Reform - Pillar Two Model Rules (Amendments
to IAS 12) - Application of the
exception and disclosure of that fact
-- International Tax Reform - Pillar Two Model Rules (Amendments
to IAS 12) - other disclosure
requirements
3. Significant estimates
Goodwill and non-current asset carrying value
During the period, future trading expectations, in particular
with respect to the Group's US trading segment, have been revised
downwards to realign previously anticipated growth in key
performance metrics with more recently observed stable
period-on-period performance KPIs in the market, most relevantly
revenue per Angel and the rate of Angel attrition. Revision to
future trading forecasts has resulted in a downward impact on the
value in use calculation used to evaluate the carrying value of
goodwill and other non-current assets in the Group's goodwill
impairment assessment.
The Group annually tests whether goodwill has suffered any
impairment or more frequently where indicators of impairment exist
in between these annual tests. At the half year such indications
existed, and the Group undertook an impairment assessment as part
of its half-year reporting procedures. Determining whether goodwill
and other non-current assets are impaired requires an estimation of
the recoverable amount of the asset derived from the cash
generating unit (CGU) to which the goodwill and the non-current
assets have been allocated, measured as the higher of value in use
or fair value less cost of disposal. The value in use calculation
requires an estimate of the present value of future cash flows
expected to arise from the CGU, by applying an appropriate discount
rate to the timing and amount of future cash flows.
Management is required to make judgements regarding the timing
and amount of future cash flows applicable to the CGU based on
current budgets and forecasts, and then into perpetuity, taking
into account growth rates and expected changes to sales and
operating costs.
Management estimates the appropriate discount rate using pre-tax
rates that reflect current market assessments of the time value of
money and the risks specific to the individual CGU.
The Group's impairment test at the balance sheet date results in
a partial impairment of goodwill and other non-current assets, see
note 7 Impairment of non-current assets for further details of
results of this assessment. The Directors note the period-on-period
decline in value in use, in particular in the US segment, and
highlight the key assumptions driving the impairment assessment as
set out above as a key source of estimate uncertainty with regard
to the continuing carrying value of goodwill. The Directors also
highlight that as a result of the decline in headroom above
carrying value in the year resulting in the impairment charge
reported, should the key assumptions used to calculate the value in
use of goodwill move adversely in a future period, there is a risk
that carrying value of goodwill may become further impaired, see
note 7 Impairment of non-current assets for calculated sensitivity
analysis.
Inventory valuation and impairment provision
An implication of the Group's pivot to profit strategy announced
in the previous financial year and also as a result of ongoing
trading pressure, in particular in the Group's US segment, is the
reassessment by the Directors of required inventory holding levels
and future buying commitments. As a result of this review, a number
of winemakers, brands and products were delisted, and plans made to
exit certain quantities of inventory at less than historic cost. On
the basis of this evaluation, the Group holds a provision of GBP9.7
million in its US segment at the balance sheet date against
delisted winemakers and for the disposal of bulk wine where
anticipated proceeds are less than carrying value. In addition, the
Group also holds a further inventory provision of GBP0.9 million
across its UK and Australian segments against specifically
identified wines where net realisable value is estimated to be less
than cost. On the basis of the forecast prepared for the evaluation
of going concern of the Group, the Directors anticipate that the
remaining cost of inventory held at the balance sheet date will be
profitably realised.
A number of critical judgements have been made in the
calculation of the US segment inventory provision analysis
including:
-- estimates of the likely use before expiry of wine approaching
the end of its prime marketing life;
-- planned evolution of range and winemaker portfolio;
-- cannibalisation and absorption of wine volumes across the Naked range; and
-- realisable value of bulk wine in the open market.
The Directors highlight that in the event that their estimates
prove to be inaccurate, the magnitude of the inventory write off
could change. A sensitivity assumption that is readily quantifiable
is the average expiry life of wine. Management have prepared their
estimated wine marketing expiry date from the experience of the
life cycle of wine over time in the Naked US market and examination
of customer feedback of wines as they age from first release.
However, if every wine's expected expiry date was reduced by six
months, the amount of wine expiring, and hence requiring write off,
within the Group's forward review period would increase by GBP3
million. Reducing this assumption by a further six months to 12
months in total would increase the write-off by a further GBP3
million.
4. Going concern
Position adopted at year end 3 April 2023
The Group's financial statements for the year ended 3 April 2023
were signed on 18 September 2023. Those financial statements were
prepared on the basis that the Group was a going concern although
there was a material uncertainty in respect of going concern. In
arriving at this conclusion, the Directors had reviewed the Group's
updated cash flow forecasts along with severe but plausible
downsides and a reverse stress test. Having considered these
forecasts, sensitivities and mitigating actions, and having regard
to the risks, uncertainties and challenges in recent trading and
the macroeconomic environment, the Directors concluded that a
material uncertainty existed with regards to going concern. This
material uncertainty related 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 Asset Backed Lending
(ABL) facility in order to meet its minimum cash covenant in the
going concern period.
Update to position
Subsequent to the issue of the FY23 financial statements and the
update to guidance provided at that time on 19 September 2023,
trading in the UK and Australian markets in the second quarter was
broadly in line with the forecasts supporting the prior issued
guidance, and at a Group level cash balances remain close to the
forecasts, reflecting the Group's ability to continue to move
inventory intake to reflect demand outlook. However, trading in the
US during the second quarter and subsequently in October was weaker
than anticipated. In particular, expectations of year-on-year
revenue per Angel growth from repeat customers were not met, along
with associated repeat contribution margins being below forecast.
Despite this, the Group remained within the parameters of its
previous severe but plausible downside scenario.
As disclosed as an event after the balance sheet date in the
FY23 financial statements, on 22 August 2023 the Group also
concluded a further amendment to its credit facility, moving the
facility defined adjusted EBITDA covenant threshold from a trailing
three-month basis to an ongoing trailing 12-month basis from the
beginning of FY25. The first revised measurement period will be for
the covenant reporting period ending June 2024. The amendment also
increases the size and specificity of the non-recurring expense
add-back in the calculation of the facility defined adjusted EBITDA
measure.
Base case forecast
In response to the decline in trading performance of the US
business since the last forecast, and in order to assess the
appropriateness of the going concern assumption, the Directors
reviewed, and revised downwards, their previously prepared baseline
forecast to reflect and anticipate the emerging trading across the
Group, in particular in the US. The Directors considered (i) the
cash requirements of the business to pursue its intended strategy,
(ii) the funding available to the Group from its existing cash
reserves and the ABL facility and (iii) potential variations in
cash requirements taking into account severe but plausible downside
scenarios.
In particular, the Directors' revised baseline forecast
reflected:
-- The latest number of repeat customers in all markets at the balance sheet date;
-- A conservatively higher customer acquisition cost in the
outlook period based on recent trends;
-- A downward revised revenue per Angel outlook versus the
previous forecast but in line with recent history; and
-- The impact of the testing at scale of the revised new
customer recruitment model on revenue, gross margin, associated
variable cost forecasts and customer deferred revenue balances.
This updated forecast formed the basis of the revised market
guidance, issued on 7 November 2023.
Under this base case scenario, the Group has sufficient
liquidity and profitability to meet its ABL credit facility
covenant commitments for a period of more than 12 months from the
date of signing these interim financial statements.
Severe but plausible downside forecast
The Directors note that in recent times the Group has revised
its revenue and profit outlook downwards multiple times but as set
out above, believe that their current baseline forecast now
represents a conservative view of future trading prospects.
Nevertheless, the Directors have also considered several severe
but plausible changes in assumptions and have combined them into a
single severe but plausible downside scenario:
- The observed value uplift seen in testing of the revised new
customer recruitment model does not endure over time and in FY25
these customers are no more valuable than Angel customers;
- Despite a mix towards more long-tenured Angels in the Angel
base, FY25 repeat revenue per Angel remains flat year-on-year;
- 50% of the US and UK fulfilment cost savings contracted and
forecast into the base case in FY24 and FY25 are not realised;
- The automatic reduction to nil of variable compensation in FY25 in the downside scenario.
Together, these downside assumptions result in a 5% reduction in
repeat sales and a 10% reduction in repeat contribution in FY25,
allowing for a conservative FY24 sales and margin assumption. In
this scenario, all banking covenants continue to be met. Facility
defined adjusted EBITDA covenant compliance is at its narrowest
across the second and third quarter of FY25 with the point of
narrowest covenant compliance occurring in December 2024 with a
credit facility defined EBITDA covenant figure of GBP5.2 million,
after factoring in the elimination of variable compensation costs
due to underperformance. This shows cover of 1.3x to the covenant
before restoring to 1.6x by year end. Headroom above the credit
facility minimum cash covenant is greater than GBP12 million across
the forecast period to the end of FY25.
However, the Directors acknowledge that during the course of the
first half of FY24, performance was adverse to forecast on some but
not all trading metrics. Factoring in the potential recurrence of
this variance into the severe but plausible scenario outlined above
would result in a covenant breach. The Directors note in particular
the limited facility defined adjusted EBITDA covenant headroom in
the second and third quarter of FY25, and that a decline in the
severe but plausible downside scenario contribution in the first
half of FY25 of approximately 7%results in a breach of the facility
defined adjusted EBITDA covenant in September 2024. The Group
continues to remain compliant with its minimum cash covenant
requirement across this period in this scenario.
Reverse stress test
An additional reverse stress test was also performed, being a
downside scenario deliberately engineered to identify the point at
which a covenant breaks, based on a total sales decline rather than
a contribution decline in the scenario above. This reverse stress
test assumes an additional reduction in repeat customer purchase
frequency versus the severe but plausible downside scenario,
resulting in a total sales decline in FY25 of 2% below the severe
but plausible downside scenario, highlighting further the narrow
headroom between a severe but plausible downside scenario and a
reverse stress test covenant breach. In this reverse stress test
scenario, the Group is not able to meet its facility defined
adjusted EBITDA covenant in December 2024.
Recognising these risks, the Directors have commenced mitigating
cost saving actions, most significantly including an initiative
targeting general and administrative (G&A) cost savings well in
excess of those included in the forecasts. The Directors have
indicated an intent to run the business with G&A costs below
11% of revenue, which would indicate an additional year-on-year
cost reduction of around GBP5 million and which would support
increased EBITDA. The Directors also note that the level of new
customer investment in FY25 in all scenarios remains broadly flat
and which is, at constant currency, GBP2 million above the FY24
anticipated level of new customer investment and a total of GBP5
million higher than the FY23 achieved level of new customer
investment. As such, they would expect to be able to reduce
lower-returning investments in the case of a worst-case scenario,
whilst minimising the on-going impact on future investment
return.
Other material assumptions reflected in the above scenarios
In addition to the trading downside risk set out above, the
Directors draw attention to projects currently in progress to
maintain future working capital requirements and the ongoing
requirement for cooperation from external stakeholders. This
includes, most significantly, the work the Group is currently
undertaking with its winemakers to realign future inventory intake
commitments and inbound destinations to accelerate the Group's
destocking process. At the time of writing, these initiatives are
ongoing, so management has incorporated these uncertainties into
the medium-term forecast.
Access to the Group's Asset Backed Lending Facility
The Directors also draw attention to their ongoing need to
continue to access the anticipated level of the Group's ABL
facility to the end of the third quarter of FY25, in order to
support the Group's forecast available credit. This is determined
by the level and carrying value of the Group's US inventory, in
turn determined by (amongst other factors) the US secondary market
prices for bulk and bottled wine, as well as maintenance of the
existing level of supplier waivers (to include wine held at their
facilities within the facility borrowing base calculation).
The Directors highlight that by the end of the third quarter of
FY25, their base case and severe but plausible downside forecasts
show the Group holding the facility required minimum cash and usual
operating cash requirements with no drawdown on the facility and,
as such, the uncertainty around the anticipated level of the
Group's ABL facility falls away at this point. The Directors also
note that, at this point, the ABL facility then provides the Group
with an additional source of working capital in excess of daily and
facility covenant needs.
Notwithstanding the potential for medium-term improvements in
the Group's cash position, delivery of required plans and the
several factors influencing the level of availability of the
Group's ABL facility give rise to additional uncertainties which
might impact on the Group's forecast cash flows over the forecast
period.
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 the continued existence of a
material uncertainty over the assumption of going concern, which
may cast doubt over the Group's ability to continue as a going
concern, and therefore its ability to realise its assets and
discharge its liabilities in the normal course of business.
The material uncertainty continues to reflect the factors
disclosed in the FY23 going concern assessment. These factors are
the Group's ability to generate sufficient future cash flows while
trading in a volatile environment, successful completion of planned
initiatives to optimise working capital requirements and the
continued reliance on external stakeholders in order to achieve
these objectives, and maintaining access to the forecast level of
credit in the ABL facility. These factors together are necessary
for the Group to meet its credit facility covenant requirements in
the going concern period, of more than 12 months from the date of
the signing of these condensed consolidated interim financial
statements.
These condensed consolidated interim financial statements have
been prepared on a going concern basis, whilst noting the material
uncertainty above.
5. 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.
All revenue is recognised at a single point in time when it is
probable that the economic benefits will flow to the Group and the
revenue can be reliably measured. Specific to the Group, the
performance obligations of the Group are deemed to be fulfilled
when the product is delivered to our customer or Angel, typically
within one to three days following dispatch, which is when the
customer obtains control of their purchase and there is reasonable
certainty regarding the recovery of the consideration.
Included within Angel funds and other deferred income is
deferred income of GBP6.3 million (3 April 2023: GBP3.5 million).
These balances represent value of funds received in advance, but
the order is yet to be fulfilled or delivered. This will be
recognised as revenue when the order is fulfilled or delivered,
which is expected to occur over the next six months.
The Group is subject to seasonal fluctuations resulting in
varying profits over the full year period. The Group experiences
increased sales in the third quarter which covers the holiday
period, accounting for around 40% of total revenue compared to
around 20% in each of the other quarters.
26 weeks ended 2 October Naked Naked
2023 Wines Wines Naked
US UK Wines Australia Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- -------- ----------------- ------------ ---------
Revenue 63,924 52,372 16,043 - 132,339
Revenue associated with
the US FY23 inventory
impairment (707) - - - (707)
Total adjusted sales
(1) 63,217 52,372 16,043 - 131,632
Analysed as:
New Customer sales 5,336 2,313 1,462 - 9,111
Repeat Customer sales 57,172 50,059 14,581 - 121,812
Other revenue 709 - - - 709
Total adjusted sales
(1) 63,217 52,372 16,043 - 131,632
--------- -------- ----------------- ------------
Investment in New Customers (5,953) (2,036) (1,258) - (9,247)
Repeat Customer contribution 17,448 9,384 3,632 - 30,464
Other contribution (468) - - - (468)
-------------------------------- --------- -------- ----------------- ------------ ---------
Total contribution after
advertising costs(2) 11,027 7,348 2,374 - 20,749
General and administrative
costs(3) (5,749) (3,070) (1,607) (8,164) (18,590)
Adjusted EBIT 5,278 4,278 767 (8,164) 2,159
Adjusted items:
Right-sizing of US inventory 774 - - - 774
Impairment of non-current
assets (10,842) - (696) - (11,539)
Other adjusted items - - - (142) (142)
Operating (loss)/profit (4,790) 4,278 71 (8,306) (8,748)
Finance costs (2,292) (14) (21) (2) (2,329)
Finance income 792 - - 541 1,333
-------------------------------- --------- -------- ----------------- ------------ ---------
(Loss)/profit before
tax (6,290) 4,264 50 (7,767) (9,744)
Tax (2,068) 306 (169) - (1,930)
-------------------------------- --------- -------- ----------------- ------------ ---------
(Loss)/profit for the
period (8,398) 4,570 (119) (7,767) (11,674)
-------------------------------- --------- -------- ----------------- ------------ ---------
Depreciation 1,235 127 112 57 1,531
Amortisation - - - 100 100
Impairments 10,842 - 696 - 11,539
-------------------------------- --------- -------- ----------------- ------------ ---------
Total assets 147,571 60,246 24,901 23,004 255,722
Total liabilities 93,753 54,568 15,131 3,519 166,971
-------------------------------- --------- -------- ----------------- ------------ ---------
26 weeks ended 2 October
2023 US UK Australia Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- --------- -------- ----------------- ------------ ---------
Geographical analysis
Revenue 63,924 52,372 16,043 132,339
Non-current assets excluding
deferred tax assets 5,248 17,234 - 22,482
------------------------------------------- -------- ----------------- ------------ ---------
1. Total adjusted sales are calculated as revenue excluding
revenue associated with the right-sizing of US inventory a s
analysed in note 6 Adjusted items.
2. Contribution after advertising costs is calculated as gross
profit (GBP28,963k) less advertising costs (GBP7,440k), excluding
transactions associated with the right-sizing of US inventory
included in contribution (GBP774k) (details in note 6 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.
26 weeks ended 26 September Naked Naked
2022 Wines Wines Naked
US UK Wines Australia Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- ----------------- ------------ ---------
Revenue 85,209 58,808 21,758 - 165,775
-------------------------------- -------- -------- ----------------- ------------ ---------
Revenue associated with
the US FY23 inventory
impairment - - - - -
-------------------------------- -------- -------- ----------------- ------------ ---------
Total adjusted sales(1) 85,209 58,808 21,758 - 165,775
-------------------------------- -------- -------- ----------------- ------------ ---------
Analysed as:
New Customer sales 8,989 2,666 1,698 - 13,353
Repeat Customer sales 72,238 56,142 20,060 - 148,440
Other revenue 3,982 - - - 3,982
-------------------------------- -------- -------- ----------------- ------------ ---------
Total adjusted sales
(1) 85,209 58,808 21,758 - 165,775
-------------------------------- -------- -------- ----------------- ------------ ---------
Investment in New Customers (7,938) (1,632) (2,148) - (11,718)
Repeat Customer contribution 24,840 11,719 5,601 - 42,160
Other contribution (364) - - - (364)
-------------------------------- -------- -------- ----------------- ------------ ---------
Total contribution after
advertising costs (2) 16,538 10,087 3,453 - 30,078
General and administrative
costs(3) (6,513) (3,738) (1,675) (13,543) (25,469)
Adjusted EBIT 10,025 6,349 1,778 (13,543) 4,609
Adjusted items:
Non-cash items relating
to acquisitions - - - (631) (631)
Right-sizing of US inventory (7,908) - - - (7,908)
Profit on disposal of
asset classified as
held for sale - - - 4,814 4,814
Other net adjusted items - - - (1,048) (1,048)
Operating profit/(loss) 2,117 6,349 1,778 (10,408) (164)
Finance costs (549) (14) (2) - (565)
Finance income - - - 514 514
-------------------------------- -------- -------- ----------------- ------------ ---------
Profit/(loss) before
tax 1,568 6,335 1,776 (9,894) (215)
-------------------------------- -------- -------- ----------------- ------------ ---------
Tax (169) (884) (297) 1,092 (258)
-------------------------------- -------- -------- ----------------- ------------ ---------
Profit/(loss) for the
period 1,399 5,451 1,479 (8,802) (473)
-------------------------------- -------- -------- ----------------- ------------ ---------
Depreciation 777 127 118 - 1,022
Amortisation 1 - - 1,022 1,023
Impairments - - - - -
-------------------------------- -------- -------- ----------------- ------------ ---------
Total assets 171,341 63,509 30,043 57,708 322,601
Total liabilities 100,376 60,550 23,676 10,681 195,283
-------------------------------- -------- -------- ----------------- ------------ ---------
26 weeks ended 26 September
2022 US UK Australia Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- ----------------- ------------ ---------
Geographical analysis
Revenue 85,209 58,808 21,758 165,775
Non-current assets excluding deferred
tax assets 4,014 50,126 283 54,423
------------------------------------------ -------- ----------------- ------------ ---------
1. Total adjusted sales are calculated as revenue excluding
revenue associated with the right-sizing of US inventory as
analysed in note 6 Adjusted items.
2. Contribution after advertising costs is calculated as gross
profit (GBP32,206k) less advertising costs (GBP10,036k), excluding
transactions associated with the right-sizing of US inventory
included in contribution (GBP7,908k) (details in note 6 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.
6. Adjusted items
The Directors believe that the adjusted EBIT measure provides
additional useful information for shareholders on trends and
performance. 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.
The adjustments made to reported operating profit are:
26 weeks
ended 26 weeks ended
2 October 26 September
2023 2022
GBP'000 GBP'000
------------------------------------------------- ----------- ---------------
Non-cash charges relating to acquisitions
- amortisation of acquired intangibles - (631)
Movement in the US inventory provision
created as part of FY23
adjusted items 1,327 (7,545)
US cancellation of winemaker contracts - (363)
1,327 (7,908)
Disposal of US inventory provided for
as part of FY23 adjusted
items - contribution loss reported within
gross profit before
inventory provision (553) -
Right-sizing of US inventory included
in contribution 774 (7,908)
Impairment of non-current assets (11,539) -
Profit on disposal of asset classified
as held for sale - 4,814
Restructuring costs 36 (1,174)
Software as a Service costs incurred
in the implementation of new
ERP platform (248) (1,435)
Fair value movement through the income
statement on foreign
exchange contracts and associated unrealised
foreign currency
inventory 70 1,551
Foreign exchange movements on plc company
currency bank
balances - 10
Other net adjusted items (142) (1,048)
Total adjusted items (10,907) (4,773)
------------------------------------------------- ----------- ---------------
Amortisation of acquired intangibles
These items reflect costs of customer acquisition from prior to
the purchase of the Naked Wines business. 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. These
acquired assets were fully amortised as at the end of FY23 and do
not appear in the income statement for the period 26 weeks ended 2
October 2023.
Right-sizing of US inventory
As a result of management's US inventory right-sizing exercise
strategy commencing in the prior financial year, the Group recorded
a net credit of GBP0.8 million in the 26 weeks ended 2 October 2023
(GBP7.9 million charge in the 26 weeks ended 26 September 2022),
reflecting the release and utilisation of the inventory provision
created in the prior financial year and a contribution loss where
inventory that was provided against that has been sold on the
secondary market as part this right-sizing exercise for less than
historic cost of goods.
In FY23 management considered these provisions and charges to be
one-off in nature as amounts relate to purchases made on the basis
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 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.
Right-sizing of US inventory (continued)
Management concluded it is appropriate to include the inventory
provisions and charges created in the prior period within adjusted
items to provide a more consistent basis with the comparative
adjusted EBIT alternative performance measure.
In the 26 weeks ended 2 October 2023, any further inventory
provisions made are reported as part of trading performance.
Impairment of non-current assets
Please refer to note 7 Impairment of non-current assets for
details.
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 and as such is reported in the prior year comparative
figures only.
Restructuring costs
In the previous financial year, the Group undertook a
restructuring program 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 previous financial year and the 26 weeks ended 2
October 2023, 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.
Fair value movement on foreign exchange contracts and associated
unrealised foreign currency inventory
The Group commits in advance to buying foreign currency to
purchase wine to mitigate exchange rate fluctuations. UK-adopted
international accounting standards require us to mark the value of
these contracts to market at each balance sheet date. 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 26 weeks ended 26 September 2022, 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. No material
foreign currency balances were held at the balance sheet date and
as such no similar adjustment is reported as an adjusted item in
the current year.
7. Impairment of non-current assets
a) Management have determined that indicators of impairment
existed at the balance sheet date and as such an impairment review
has been performed. As a result of this review, the carrying value
of assets held in Naked Wines US and Naked Wines Australia have
been reduced to their recoverable amount through recognition of an
impairment charge of GBP11.5 million against goodwill, other
intangibles, property, plant and equipment and right-of-use assets.
This charge is recognised within adjusted items in the income
statement and is analysed by segment and asset type as set out
below:
Other Property, CGU value
intangible plant Right-of-use in use
Goodwill assets and equipment assets Total *
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- ------------ --------------- ------------- -------- ----------
Naked Wines US 8,128 1,034 - 1,681 10,843 64,753
Naked Wines UK - - - - - 52,709
Naked Wines Australia - - 11 685 696 (447)
----------------------- --------- ------------ --------------- ------------- -------- ----------
8,128 1,034 11 2,366 11,539 117,015
----------------------- --------- ------------ --------------- ------------- -------- ----------
* The value in use of each CGU is calculated after a full
allocation of corporate costs necessarily incurred to generate the
cash inflows of the operating business units and in accordance with
IAS36 Impairment of assets.
Key assumptions
Cash flow assumptions
The primary determinants of cash flow are expected sales and the
cost of sales of those goods, the level of expenditure on the
acquisition of new customers and other associated costs which
relate to the cash flows of the operating business units.
During the 26 weeks ended 2 October 2023 future trading
expectations, in particular with respect to the Company's US
trading segment, have been revised downwards to realign previously
anticipated growth in key performance metrics with more recently
observed stable KPI performance metrics in the market, most notably
revenue per Angel and the rate of Angel attrition.
The impact of the changes in future trading expectations versus
previous forecast estimates, along with adverse movement in the
discount rate driven by the external interest rate environment, has
given rise to a reduction in value in use in the US, resulting in
the reported additional impairment charge. The value in use in
Australia has improved since the year end, however, is still
insufficient to support the carrying value of non-current assets
and an additional impairment charge has been recorded at the half
year due to an increase in the carrying value, principally due to
the extension of an IFRS16 lease, leading to an increased ROU asset
carrying value.
The cash flows used in the value in use calculation are pre-tax
cash flows based on the latest management forecasts in respect of
the following five years, the first 12 months of which being the
latest Board approved forecasts and which aligns with the forecast
used in the preparation of the going concern analysis, as set out
in accounting policy note 4 Going concern, amended only to align
with the requirements of IAS 36 Impairment of Assets. An estimate
of capital expenditure required to maintain these cash flows is
also made.
Discount rate and long-term growth rate assumptions
The pre-tax discount rate and terminal growth rates used are as
set out below:
2 October 2023 3 April 2023
------------------------ ------------------------
Discount Terminal Discount Terminal
rate growth rate rate growth rate
Naked Wines US 18.2% 1.0% 17.3% 1.0%
Naked Wines UK 18.8% 2.0% 17.9% 1.0%
Naked Wines Australia 20.1% 1.0% 19.1% 1.0%
------------------------ --------- ------------- --------- -------------
The long-term growth rate assumptions used are not considered to
be higher than the long-term industry average. These rates have
been reviewed in the 26 weeks ended 2 October 2023 and have been
revised for the UK segment to more accurately reflect current
business performance expectations, market assumed long-term
inflation and industry growth assumptions. Management recognise
that a long-term growth rate of 1% is below that which a stable
business would expect however, the Directors believe that this is
an appropriate level for the US and Australian businesses at the
present time. The Directors will reassess the long-term growth rate
applied in each market in future periods as the actions currently
being undertaken translate into a more stable trading
performance.
The discount rate applied to the cash flows of each market is
calculated using a pre-tax rate based on the weighted average cost
of capital (WACC) which would be anticipated for a market
participant investing in each of the Group's markets. Management
believe it is appropriate to use a country specific pre-tax WACC
for the testing of the Naked Wines goodwill and intangible assets
based on the difference in the observed risk-free rate between the
US and other industrialised economies and their different headline
corporate income tax rates. The Group has considered the impact of
the current economic climate in determining the appropriate
discount rate to use in impairment testing.
Sensitivity to further impairment charges
The key assumptions used in the recoverable amount estimates are
the discount rates applied and the forecast cash flows.
The Group has performed a sensitivity analysis for the UK
segment and the table below sets out the level at which,
independently, fluctuations in the key assumptions result in the
carrying value of these assets being equal to the segment
recoverable amount, defined as its value in use:
2 October 2023 3 April 2023
------------------------- -------------------------
Breakeven Breakeven Breakeven Breakeven
discount cash flow discount cash flow
rate sensitivity rate sensitivity
Naked Wines
UK 295.8% (88.6)% 223.1% (71.9)%
The Directors believe that the carrying value of the US
segment's remaining right-of-use assets and property, plant and
equipment represent their expected recoverable amount as they have
an intrinsic value as part of the core trading business. As such,
any plausible adverse movement in key assumptions would not be
expected to result in further impairments.
No sensitivities have been performed for the Australia segment
as the goodwill allocated to this CGU, as well as the carrying
value of property, plant and equipment and right-of-use assets, has
been fully impaired.
See also note 3 Significant estimates, drawing attention to the
assessment of the valuation of goodwill and other non-current
assets as a key source of estimation uncertainty.
Note also that consistent with the operating segments of the
business, being the three geographical markets in which the Group
operates, the Directors recognise these operating segments as the
cash generating units of the business.
b) Reconciliation of the carrying amount of goodwill, other
intangibles, property, plant and equipment and right-of-use
assets
Property,
Other intangible plant and Right-of-use
Goodwill assets equipment assets Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- ----------------- ----------- ------------- ---------
Cost
At 3 April 2023 31,541 28,487 5,652 9,237 74,917
Additions - - 647 527 1,174
Disposals - - (230) (435) (665)
Foreign currency 497 - 120 127 744
At 2 October
2023 32,038 28,487 6,189 9,456 76,170
------------------ --------- ----------------- ----------- ------------- ---------
Accumulated amortisation, depreciation and
impairments
At 3 April 2023 (17,737) (27,353) (2,895) (3,863) (51,848)
Charge for the
year - (100) (472) (1,059) (1,631)
Impairments (8,128) (1,034) (11) (2,366) (11,539)
Disposals - - 177 323 500
Foreign currency (314) - (52) (55) (421)
At 2 October
2023 (26,179) (28,487) (3,253) (7,020) (64,939)
------------------ --------- ----------------- ----------- ------------- ---------
Net book value
At 2 October
2023 5,859 - 2,936 2,436 11,231
------------------ --------- ----------------- ----------- ------------- ---------
At 3 April 2023 13,804 1,134 2,757 5,374 23,069
------------------ --------- ----------------- ----------- ------------- ---------
8. Tax
Tax for the 26 weeks ended 2 October 2023 is charged at an
effective tax rate of (19.8)% (26 weeks ended 26 September 2022:
(120.0)%) representing the best estimate of the Group's expected
annual effective tax rate, applied to the profit before tax of the
period. The statutory effective tax rate of (19.8)% is
substantially driven by the distortionary impact of the non-tax
recoverable impairment charge and the net impact of changes to
deferred tax asset recognition.
26 weeks
ended 26 weeks ended
2 October 26 September
2023 2022
GBP'000 GBP'000
----------------------------------------------- ----------- ---------------
Current tax (544) (2,026)
----------------------------------------------- ----------- ---------------
Deferred tax
Change in UK deferred tax asset recognition 429 -
Change in US deferred tax asset recognition (1,768) -
Other deferred tax movements (47) 1,768
(1,386) 1,768
----------------------------------------------- ----------- ---------------
Total tax charge for the period (1,930) (258)
----------------------------------------------- ----------- ---------------
Unrecognised deferred tax assets are re-assessed at each
reporting date and are considered for the probability that future
taxable profits would be available against which such losses can be
used. Projections of taxable profits are based on the Group's Board
approved forecasts which are the same as the projections used for
going concern. These forecasts are then projected forwards, on a
risk adjusted basis, for a further two financial years to a total
of five financial years using the forecasts, before discounting,
prepared as part of the Group's goodwill and non-current asset
impairment assessments. In concluding on the recognition of the
deferred tax asset, the Board have taken into consideration the
material uncertainty over going concern (see note 4 Going concern).
The assessment period for recognition of deferred tax assets is
determined by the period over which the asset is expected to unwind
or, for recognition of brought forward losses, has been limited to
the forecast period set out above as management believes profit
forecasts beyond this time frame carry with them a high degree of
forecast uncertainty.
The forecasts show that it is more likely than not that future
profits will be available against which GBP9.7 million of the
brought forward losses in the UK can be offset. Therefore, in the
26 weeks ended 2 October 2023, a total deferred tax asset of GBP2.4
million has been recognised, an increase of GBP0.4 million since
the year end. Deferred tax on losses of GBP13.7 million (53 weeks
ended 3 April 2023: GBP16.7 million) have not been recognised in
these financial statements, of which GBP11.6 million relates to
pre-April 2017 losses in the UK on the basis that there is
insufficient evidence of suitable future taxable profits against
which to recover any deferred tax asset created.
In addition, the Group has not recognised deferred tax assets of
GBP3.6 million (53 weeks ended 3 April 2023: GBP1.8 million) on
inventory provisions in the US and has not recognised GBP0.6
million (53 weeks ended 3 April 2023: GBP0.6 million) of deferred
tax assets in Australia due to uncertainty over future profits
being available against which these deferred tax assets can be
recovered.
9. Loss per share
Basic loss 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
180,161 shares (26 September 2022: 233,227 shares) held by the
Naked Wines plc Share Incentive Plan Trust.
The diluted loss per share is the same as the basic loss per
share in the current and comparative periods as the inclusion of
any potential ordinary shares in the diluted loss per share
calculation would be anti-dilutive.
26 weeks
ended 26 weeks ended
2 October 26 September
2023 2022
Loss per share
Basic loss per share (15.8p) (0.6p)
Diluted loss per share (15.8p) (0.6p)
-------------------------------------- ----------- ---------------
26 weeks
ended 26 weeks ended
2 October 26 September
2023 2022
GBP'000 GBP'000
-------------------------------------- ----------- ---------------
Loss for the period (11,674) (473)
-------------------------------------- ----------- ---------------
26 weeks
ended 26 weeks ended
2 October 26 September
2023 2022
-------------------------------------- ----------- ---------------
Weighted average number of shares
in issue 73,770,908 73,469,797
Dilutive potential ordinary shares:
Employee share options - -
-------------------------------------- ----------- ---------------
Weighted average number of shares
for the purpose of diluted earnings
per share 73,770,908 73,469,797
Total number of shares in issue 74,004,135 74,004,135
-------------------------------------- ----------- ---------------
If the Company's share option schemes had vested at 100% the
Company would have 74,624,159 (26 September 2022: 78,114,778)
issued shares.
10. Notes to the cash flow statement
26 weeks
ended 26 weeks ended
2 October 26 September
2023 2022
Note GBP'000 GBP'000
-------------------------------------------- ------ ----------- ---------------
Cash flows from operating activities
Loss for the period (11,674) (473)
Adjustments for:
Depreciation and amortisation 1,631 2,045
Impairment of non-current assets 7 11,539 -
Loss on disposal of fixed assets 1 53
Intangible assets previously capitalised
under former
accounting policy - 249
Profit on sale of asset held for
resale - (4,814)
Net finance costs 996 51
Fair value movement on foreign
exchange contracts (70) (1,551)
Inventory provision movement (1,327) 7,545
Share based payment charges 664 740
Tax expense 1,930 258
-------------------------------------------- ------
Cash flows before movements in
working capital 3,690 4,103
Increase in inventories (19,842) (50,578)
Increase in customer funds in deferred
income 8,515 3,643
Decrease trade and other receivables 235 1,534
Increase trade and other payables 3,822 18,547
Net cash flows used in operating
activities (3,580) (22,751)
-------------------------------------------- ------ ----------- ---------------
3 April Non-cash 2 October
2023 Cash flows movements 2023
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ----------- ----------
Cash and cash equivalents 39,474 (6,109) 403 33,768
----------------------------- --------- ----------- ----------- ----------
Borrowings:
Credit facility net
of issuance costs (29,131) - (792) (29,923)
Other loans - (1,000) - (1,000)
Customer funded bond (35) - - (35)
Lease liabilities (5,851) 999 (481) (5,333)
(35,017) (1) (1,273) (36,291)
Total net cash/(borrowings) 4,457 (6,110) (870) (2,523)
----------------------------- --------- ----------- ----------- ----------
28 March Non-cash 26 September
2022 Cash flows movements 2022
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ----------- ----------- -------------
Cash and cash equivalents 39,846 106 1,670 41,622
----------------------------- --------- ----------- ----------- -------------
Borrowings:
Credit facility net
of issuance costs - (18,700) (25) (18,725)
Customer funded bond (35) - - (35)
Lease liabilities (3,567) 441 (767) (3,893)
(3,602) (18,259) (792) (22,653)
Total net cash/(borrowings) 36,244 (18,153) 878 18,969
----------------------------- --------- ----------- ----------- -------------
11. Borrowings
On 31 March 2022, the Group entered into a 36-month senior
secured credit facility with Silicon Valley Bank as administrative
agent and issuing lender for up to $60 million of credit based on
the inventory held by Nakedwines.com Inc. The facility is secured
against the assets of the Group.
The Group has three substantive financial condition covenants in
relation to this credit facility.
a) A facility defined minimum balance sheet current ratio test;
b) A facility defined minimum qualified cash balance of $20
million to be held by loan parties at all times;
c) A facility defined adjusted EBITDA profit test.
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, see note 12 Events
after the balance sheet date. 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.
The Group has met all of its covenant conditions in all periods
up to and including the reporting date.
12. Events after the balance sheet date
As set out in note 11 Borrowings, on 22 August 2023 the Group
concluded an amendment to its asset backed lending facility with
Silicon Valley Bank which also documented as a post-close
completion obligation the inclusion of the Group's Australian
businesses as loan parties to the agreement. This post-close
obligation was completed on 26 October 2023 and the Group's
Australian businesses are now part of the credit facility loan
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 non-current assets,
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 APM
amortisation, 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.
-------------------- ------------------------------------------------ ------------
Company, Naked Naked Wines plc
or Naked Wines
-------------------- ------------------------------------------------ ------------
Contribution Gross profit as disclosed in the Group
income statement. 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
5 Segmental reporting.
-------------------- ------------------------------------------------ ------------
EBIT Operating profit as disclosed in the APM
Group income statement.
-------------------- ------------------------------------------------ ------------
EBITDA EBIT plus depreciation and amortisation. APM
-------------------- ------------------------------------------------ ------------
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.
-------------------- ------------------------------------------------ ------------
Definitions
--------------------- --------------------------------------------- ------------
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 5 Segmental reporting
.
--------------------- --------------------------------------------- ------------
Other revenue Revenue from stock optimisation activities.
--------------------- --------------------------------------------- ------------
Other contribution The contribution attributable to sales Investment
meeting the definition of other revenue. measure
--------------------- --------------------------------------------- ------------
Product availability The average percentage of products Customer
we have defined as core to the portfolio experience
that is available to our customers KPI
throughout the year.
--------------------- ---------------------------------------------
Realised Year 1 A payback measure based on the average Investment
Payback of Year 1 Paybacks observed for cohorts measure
reaching their first anniversary in
the last twelve months
--------------------- --------------------------------------------- ------------
Repeat customer A customer (Angel) who has subscribed
and made their first monthly subscription
payment.
--------------------- --------------------------------------------- ------------
Repeat Customer The contribution attributable to sales Investment
contribution meeting the definition of Repeat Customer measure
sales. A reconciliation of adjusted
EBIT to Repeat Customer contribution
is shown in note 5 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
sales orders 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 5 Segmental reporting.
--------------------- --------------------------------------------- ------------
Repeat Customer The proportion of sales made to customers Investment
sales retention who met our definition of "repeat" measure
last year and who placed orders again
this year, calculated on a monthly
basis and summed to calculate the full
year retention.
--------------------- --------------------------------------------- ------------
Total addressable TAM represents the available market
market (TAM) which 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 experience
ratings that the customer would buy the product KPI
again.
--------------------- ---------------------------------------------
Year 1 Payback A short-term payback measure showing Investment
the actual return in this financial measure
year of our investment in the prior
year.
--------------------- --------------------------------------------- ------------
Alternative performance measures (APMs)
Reconciliation of reported performance to management adjusted basis
26 weeks ended 26 weeks ended 26 September
2 October 2023 2022
------------------------------- --------------------------------------------------
At
Adjusted Adjusted constant
Reported items Adjusted Reported items Adjusted FX currency
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------- --------- --------- --------- --------- --------- ------ ---------
Sales Group
New Customer sales 9.1 - 9.1 13.4 - 13.4 (0.4) 13.0
Repeat Customer sales 121.8 - 121.8 148.4 - 148.4 (4.1) 144.3
Other revenue 1.4 (0.7) 0.7 4.0 - 4.0 (0.1) 3.9
132.3 (0.7) 131.6 165.8 - 165.8 (4.6) 161.2
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Naked Wines
US
New Customer sales 5.3 - 5.3 9.0 - 9.0 (0.3) 8.7
Repeat Customer sales 57.2 - 57.2 72.2 - 72.2 (2.3) 69.9
Other revenue 1.4 (0.7) 0.7 4.0 - 4.0 (0.1) 3.9
63.9 (0.7) 63.2 85.2 - 85.2 (2.7) 82.5
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Naked Wines
UK
New Customer sales 2.3 - 2.3 2.7 - 2.7 - 2.7
Repeat Customer sales 50.1 - 50.1 56.1 - 56.1 - 56.1
52.4 - 52.4 58.8 - 58.8 - 58.8
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Naked Wines
Australia
New Customer sales 1.5 - 1.5 1.7 - 1.7 (0.1) 1.6
Repeat Customer sales 14.6 - 14.6 20.1 - 20.1 (1.8) 18.3
16.0 - 16.0 21.8 - 21.8 (1.9) 19.9
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Contribution
after
advertising
costs Group
Investment in New
Customers (9.2) - (9.2) (11.7) - (11.7) 0.3 (11.4)
Repeat Customer contribution 30.5 - 30.5 42.2 - 42.2 (1.4) 40.8
Repeat contribution
margin (%) 25% - 25% 28% - 28% - 28%
Other contribution 0.3 (0.8) (0.5) (0.4) - (0.4) 0.1 (0.3)
21.5 (0.8) 20.7 30.1 - 30.1 (1.0) 29.1
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Naked Wines
US
Investment in New
Customers (6.0) - (6.0) (7.9) - (7.9) 0.1 (7.8)
Repeat Customer contribution 17.4 - 17.4 24.8 - 24.8 (0.8) 24.0
Repeat contribution
margin (%) 30% - 30% 34% - 34% - 34%
Other contribution 0.3 (0.8) (0.5) (0.4) - (0.4) 0.1 (0.3)
11.8 (0.8) 11.0 16.5 - 16.5 (0.6) 15.9
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Naked Wines
UK
Investment in New
Customers (2.0) - (2.0) (1.6) - (1.6) - (1.6)
Repeat Customer contribution 9.4 - 9.4 11.7 - 11.7 - 11.7
Repeat contribution
margin (%) 19% - 19% 21% - 21% - 21%
7.3 - 7.3 10.1 - 10.1 - 10.1
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Naked Wines
Australia
Investment in New
Customers (1.3) - (1.3) (2.1) - (2.1) 0.1 (2.0)
Repeat Customer contribution 3.6 - 3.6 5.6 - 5.6 (0.5) 5.1
Repeat contribution
margin (%) 25% - 25% 28% - 28% - 28%
2.4 - 2.4 3.5 - 3.5 (0.4) 3.1
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
General
and Naked Wines
administrative US (5.6) (0.1) (5.7) (6.5) - (6.5) 0.2 (6.3)
Naked Wines UK (3.1) - (3.1) (3.7) - (3.7) - (3.7)
Naked Wines Australia (1.6) - (1.6) (1.7) - (1.7) 0.1 (1.6)
Unallocated (8.4) 0.2 (8.2) (15.2) 1.7 (13.5) - (13.5)
Group (18.7) 0.1 (18.6) (27.1) 1.7 (25.5) 0.3 (25.2)
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Profit on
Other sale of
items property - - - 4.8 (4.8) - - -
Impairment (11.5) 11.5 - - - - - -
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Naked Wines
EBIT US 6.1 (0.8) 5.3 2.1 7.9 10.0 (0.5) 9.5
Naked Wines UK 4.3 - 4.3 6.3 - 6.3 - 6.3
Naked Wines Australia 0.8 - 0.8 1.8 - 1.8 (0.2) 1.6
Unallocated (19.9) 11.7 (8.2) (10.4) (3.1) (13.5) - (13.5)
Group (8.7) 10.9 2.2 (0.2) 4.8 4.6 (0.7) 3.9
------------------------------- --------- --------- --------- --------- --------- --------- ------ ---------
Repeat contribution margin
Naked
Wines Naked Wines Naked Wines
US UK Australia Group
------------------------------- ------ ------- ------------ ------------ --------
26 weeks ended 2 October
2023
Repeat Customer sales GBPm 57.2 50.1 14.6 121.8
Repeat Customer contribution GBPm 17.4 9.4 3.6 30.5
Repeat contribution margin % 30.4% 18.8% 24.7% 25.0%
------------------------------ ------- ------- ------------ ------------ ------
26 weeks ended 26 September
2022
Repeat Customer sales GBPm 72.2 56.1 20.1 148.4
Repeat Customer contribution GBPm 24.8 11.7 5.6 42.2
Repeat contribution margin % 34.3% 20.9% 27.9% 28.4%
------------------------------ ------- ------- ------------ ------------ ------
General and administrative costs reconciliation
26 weeks
ended 26 weeks ended
2 October 26 September
2023 2022
GBPm GBPm
-------------------------------------- ----------- ---------------
G&A costs per income statement (18.7) (27.1)
Add back adjusted items:
Amortisation of acquired intangibles - 0.6
Restructuring costs - 1.2
Software as a Service costs 0.2 1.4
Fair value movement on open foreign
exchange contracts (0.1) (1.6)
G&A costs per segmental reporting
in note 5 (18.6) (25.5)
Add back marketing R&D spend - 3.8
Add back share based payment costs 0.7 0.7
Operating G&A costs (17.9) (21.0)
-------------------------------------- ----------- ---------------
Net cash excluding lease liabilities
2 October 26 September
2023 2022
GBPm GBPm
----------------------------------- ---------- -------------
Cash and cash equivalents 33.8 41.6
Borrowings and other loans:
Credit facility net of issuance
costs (29.9) (18.7)
Other loans (1.0) -
Customer funded bond - -
-----------------------------------
Total net cash excluding lease
liabilities 2.8 22.9
------------------------------------ ---------- -------------
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END
IR USUUROWUUAUA
(END) Dow Jones Newswires
December 15, 2023 02:00 ET (07:00 GMT)
Grafico Azioni Naked Wines (LSE:WINE)
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Grafico Azioni Naked Wines (LSE:WINE)
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