Naked Wines Plc · LSE:WINE
Naked Wines — H1 2024 Earnings Presentation
43 slides from Naked Wines's earnings presentation, Dec 15, 2023
Slide 1: HY24 Results Presentation
HY24 Results Presentation 15 December 2023
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) has been produced for discussion purposes only. The information contained in the Presentation is not intended for any other use. The Presentation is being made only to, and is only directed at, persons to whom it may lawfully be communicated (“releva
Slide 3: Introduction
Introduction Introduction Rowan Rowan Gormley Gormley Executive Executive Chairman Chairman
Slide 4: On the agenda today
On the agenda today Pivot to Our Mission to Profitability H1’22 Results Disrupt the Highlights Wine Industry Strategic Review Financial Review Looking forward Rowan Gormley James Crawford Rowan Gormley 4 Naked Wines plc 2024 Half Year Results Presentation
Slide 5: Strategic Review
Strategic Review Rowan Gormley Executive Chairman
Slide 6: We are doing what we said we were going to do…
We are doing what we said we were going to do… 6 Naked Wines plc 2024 Half Year Results Presentation
Slide 7: We said we would get Naked back on track by…
We said we would get Naked back on track by… Strengthening the Making the profit Profitable balance sheet sustainable growth • Rightsizing inventory • £3m out of costs, • Rebuild paybacks to and commitments to £10m+ to come enable growth at pre- winemakers pandemic levels • Ensure profitability at •
Slide 8: Where are we? The good news & the bad
Where are we? The good news … & … the bad • Moving towards cash generation • New customer acquisition remains tough • £40-50m of cash release to come from inventory • Costs coming down, £10m+ more to come • Existing customer base strong: Sales per customer up YoY, attrition rates down 8 Naked Wines
Slide 9: £40-50m of cash to be released from inventory by end FY25
£40-50m of cash to be released from inventory by end FY25 Group inventory balance (£m) Inventory vs COGS FY19-FY25 300 250 £40-50m cash released from 200 inventory over 2 years 150 100 50 0 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Inventory Purchases incl. Duty COGS incl. Duty 9 Naked Wines plc 2024 Half
Slide 10: Actions on cost to reduce reliance on sustained sales levels
And are taking actions on cost to reduce our reliance on sustained sales levels Breakeven Sales Breakeven GBPm Sales £m 290 280 Business as configured today requires 270 nearly £280m of sales to remain profitable at adjusted EBIT level 260 250 With cost actions in progress this will reduce to under
Slide 11: Repeat customers are performing well
Repeat customers are performing well Monthly attrition rate, 3 month average Sales Sales per Active per Active Angel Angel (£m) 14.0% 12.0% 214 212 10.0% 212 210 8.0% 208 207 6.0% 206 4.0% 204 202 2.0% H1'23 H1'24 0.0% Dec 2018 Dec 2019 Dec 2020 Dec 2021 Dec 2022 Sep 2018 Mar 2019 Sep 2019 Mar 2020
Slide 12: Reminder: Whether we fix trends in investment paybacks, we expect to be profitable
Reminder: Whether we fix trends in investment paybacks, we expect to be profitable and cash generative FY24-26 New customer acquisition Cumulative Implied Payback FY26 Sales FY26 EBIT assumption Operating Cashflow Structurally harder than pre- 1.5 - 1.75x ~£280-300m ~£10m ~£70m COVID Return to long-
Slide 13: New initiatives being tested at scale
New initiatives being tested at scale Goal – to restore Naked to profitable growth by… 1. Improving payback - by reducing variable costs 2. Converting more customers - by expanding TAM 3. Improving customer quality - by offering customers a relationship tailored to their spend, shopping and wine pre
Slide 14: Financial Review
Financial Review James Crawford Group CFO
Slide 15: Financial overview
Financial overview A strong balance sheet A solid core of the business The challenge of recruitment ● Net cash at half year ● Rate of Angel decline ● Rate of new member recruitment ● Almost £90m of net assets turning corner stabilising ● Significant destock on the ● Improving revenue per ● Promising
Slide 16: Cash consumption moderated, entering cash generation period
Cash consumption moderated, entering cash generation period FY24 H1 FY23 H1 £m £m Group Inventory balance Operating loss (8.7) (0.2) 200 add back: Depreciation and Amortisation 1.6 2.0 175 Add back: Impairment 11.5 - 150 Add back: Other non-cash charges (0.7) 2.7 125 Change in inventory (19.8) (50.9
Slide 17: Angel fund redemptions remain stable, ABL replacement commencing
Angel fund redemptions remain stable, ABL replacement commencing Total Angel balance (£) and withdrawals (as a % of balance) £90 Total Angel balance (£m) and withdrawals (as a % of balance) 30% £80 25% £70 Commencing process to replace ABL ● Debt advisor appointed £60 20% £50 ● Preliminary view that
Slide 18: Actions on cost to reduce reliance on sustained sales levels
And are taking actions on cost to reduce our reliance on sustained sales levels Breakeven Sales Breakeven GBPm Sales £m 290 280 Business as configured today requires 270 nearly £280m of sales to remain profitable at adjusted EBIT level 260 250 With cost actions in progress this will reduce to under
Slide 19: Revenue decline rate is turning corner in line with trends in members
Revenue decline rate is turning corner in line with trends in members 1,000,000 Trends in membership 80% YoY Total Sales trend 900,000 70% 2% 60% 800,000 0% FY23 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY25 Q1 FY25 Q2 FY25 Q3 FY25 Q4 50% -2% 700,000 -4% 40% 600,000 -6% 30% 500,000
Slide 20: Revenue per angel improvement in all markets is not assumed in H2
Revenue per angel improvement in all markets is not assumed in H2 UK Rev per Angel USA Rev per Angel AUS Rev per Angel +3% -6% -1% +3% +4% +3% H1 H2 H1 H2 H1 H2 FY23 FY24 FY23 FY24 FY23 FY24 ● Consistent revenue per Angel increases across geographies in H1 ● H2 forecast supporting guidance consisten
Slide 21: Margins will rebuild due to our cost initiatives
Margins will rebuild due to our cost initiatives Drivers of Repeat Contribution Margin decline YoY Total G&A Costs by type (£m) 29.0% 28.4% 30 28.5% 28.0% 25 27.5% 20 27.0% -1.5% 26.5% 15 26.0% -0.6% 10 25.5% -0.6% 25.0% 25.0% -0.5% 5 -0.2% 24.5% 24.0% 0 HY23 US GM% UK GM% GM Market mix AUS VCs% Oth
Slide 22: Lower customer recruitment remains the key challenge
Lower customer recruitment remains the key challenge Last 12 month new members New Members, Investment and Payback 1,600,000 2.9x 2.8x 3.1x 4.0x 1400k 2.5x 2.3x 2.2x 2.0x 1.8x 1.7x 1.7x 1.2x 1.4x 1.5x 1,400,000 1200k 2.0x UK 1000k £27.7m £23.9m 0.0x 1,200,000 US 800k £22.5m £20.7m AUS 600k -2.0x £11
Slide 23: Testing is showing uplifts in value of traffic in certain segments
Testing is showing us considerable uplifts in value of traffic in certain segments of the market Repeat Contribution per Signup - under 35s While we have promising data for nearly 12 months, important to understand the long-term retention characteristics of these customers 1 31 61 91 121 151 181 211
Slide 24: Guidance and Current Trading
Guidance and Current Trading Guidance FY24 FY23 Trading in Q3 broadly on Sales trend (52 week comparable, constant currency) (12)% to (16)% (8)% plan to forecast underpinning guidance Investment in New Customers £23 - 26m £20.7m Repeat Customer contribution £65 - 70m £84.8m Anticipate H2 cash one- o
Slide 25: Financial overview
Financial overview A strong balance sheet A solid core of the business The challenge of recruitment ● Net cash at half year ● Rate of Angel decline ● Rate of new member recruitment ● Almost £90m of net assets turning corner stabilising ● Significant destock on the ● Improving revenue per ● Promising
Slide 26: We said we would get Naked back on track by…
We said we would get Naked back on track by… Strengthening the Making the profit Profitable balance sheet sustainable growth • Rightsizing inventory • £3m out of costs, • Rebuild paybacks to and commitments to £10m+ to come enable growth at pre- winemakers pandemic levels • Ensure profitability at •
Slide 27: Q&A
Q&A
Slide 28: Appendices
naked: et \ Appendices
Slide 29: Income statement
Income statement Group (£m) Constant HY24 HY23 YoY% currency New Customer sales 9.1 13.4 (32)% (30)% Repeat Customer sales 121.8 148.4 (18)% (16)% Other Revenue 0.7 4.0 (83)% (64)% Total Sales 131.6 165.8 (21)% (18)% Investment in New Customers (9.2) (11.7) (21)% (19)% Repeat Customer Contribution 3
Slide 30: Payback progression
Payback progression Constant currency 30 Naked Wines plc 2024 Half Year Results Presentation
Slide 31: Contribution to adjusted EBIT bridge
Contribution to adjusted EBIT bridge Contribution to adjusted EBIT bridge 35 30.5 30 25 20 -9.2 15 10 5 2.2 -18.7 -0.4 0 (£m) Repeat Customer Investment in G&A Costs Other Contribution Adjusted EBIT Contribution New Customers 31 Naked Wines plc 2024 Half Year Results Presentation
Slide 32: Payback reduced due to strategic testing
Payback reduced due to strategic testing HY Payback bridge 1.8x 1.7x 1.6x 0.3x 1.5x 1.4x (0.3x) 1.2x (0.2x) 1.0x 0.8x 0.6x 0.4x 0.2x 0.0x FY23 HY Payback CAC - strategic changes CAC - underlying LTV per joiner FY24 HY Payback 32 Naked Wines plc 2024 Half Year Results Presentation
Slide 33: Sales retention drivers analysis
Sales retention drivers analysis HY Sales Retention components over time HY HY23 HY24 100.0% Retained Angel retention 63% 67% 90.0% 80.0% Growth in sales per Retained Angel 20% 6% 70.0% 60.0% Sales Retention 76% 72% 50.0% 40.0% 30.0% 20.0% Change YoY HY23 HY24 10.0% 0.0% Retained Angel retention 3%
Slide 34: Contribution by cohort
Contribution by cohort 50.0 NW Group Contribution by Cohort 45.0 2.6 40.0 FY24 1.7 FY23 35.0 20.7 8.9 FY22 7.9 30.0 FY21 0.9 4.5 FY20 25.0 10.0 FY19 11.4 4.8 20.0 1.2 7.1 FY18 0.7 FY17 15.0 0.5 6.2 5.0 5.6 4.1 4.3 FY16 0.7 6.1 3.8 3.5 2.9 2.9 FY15 10.0 5.2 4.3 3.0 0.6 4.0 3.1 3.1 2.3 2.1 4.9 2.7 FY1
Slide 35: Angel membership drivers
Angel membership drivers Change in Angel Base 2,500 53% Cancels as a 50% % of Opening Closing Angels by Market 2,000 1,350 plus new 1,000 828 Angels 44% 129 800 132 1,500 397 105 93 600 391 335 39% 1,000 915 264 243 873 128 400 (1,027) (870) 707 665 592 (563) (169) 200 395 405 500 338 329 0 0 FY21 F
Slide 36: Country Segmental Data - US
Country Segmental Data - US US Segment (£m) Constant HY24 HY23 YoY% Currency New Customer sales 5.3 9.0 (41)% (39)% Repeat Customer sales 57.2 72.2 (21)% (18)% Other Revenue 0.7 4.0 (83)% (82)% Total Sales 63.2 85.2 (26)% (23)% Investment in New Customers (6.0) (7.9) (24)% (23)% Repeat Customer Cont
Slide 37: Country Segmental Data - UK
Country Segmental Data - UK UK Segment (£m) HY24 HY23 YoY% New Customer sales 2.3 2.7 (15)% Repeat Customer sales 50.1 56.1 (11)% Total Sales 52.4 58.8 (11)% Investment in New Customers (2.0) (1.6) 25% Repeat Customer Contribution 9.4 11.7 (20)% Repeat Customer Contribution margin 18.8% 20.9% (210)b
Slide 38: Country Segmental Data - Australia
Country Segmental Data - Australia Australia Segment (£m) Constant HY24 HY23 YoY% Currency New Customer sales 1.5 1.7 (12)% (6)% Repeat Customer sales 14.6 20.1 (27)% (20)% Total Sales 16.0 21.8 (27)% (19)% Investment in new customers (1.3) (2.1) (38)% (35)% Repeat Customer Contribution 3.6 5.6 (36)
Slide 39: Country Segmental Data - Central
Country Segmental Data - Central Central (£m) HY24 HY23 YoY% General and administrative costs (8.2) (13.5) (39)% Adjusted EBIT (8.2) (13.5) (39)% 39 Naked Wines plc 2024 Half Year Results Presentation
Slide 40: Glossary of terms
Glossary of terms Alternative performance measures Adjusted EBIT Operating profit adjusted for amortisation of acquired intangibles, acquisition costs, impairment of goodwill, restructuring costs, fair value movement through the income statement on financial instruments and revaluation of funding ca
Slide 41: Glossary of terms (continued)
Glossary of terms (continued) Investment measures 5-Year Forecast Payback The ratio of projected future Repeat Customer contribution we expect to earn from the new customers recruited in the year, divided by the Investment in New Customers. We forecast contribution at a customer level using a machin
Slide 42: Glossary of terms (continued)
Glossary of terms (continued) Customer experience KPIs 5* customer service The percentage of feedback ratings received by our Customer Happiness teams that expressed 5* satisfaction on a scale of 1 to 5. Product availability The average percentage of products we have defined as core to the portfolio
Slide 43: Glossary of terms (continued)
Glossary of terms (continued) Definitions AGM Annual General Meeting Angel A customer who deposits funds into their account each month to spend on the wines on our website. CAGR Compound annual growth rate. The year-on-year growth rate required for a number of years for a value to grow from its begi