Naked Wines Plc · LSE:WINE
Naked Wines — H1 FY2019 Earnings Presentation
42 slides from Naked Wines's earnings presentation, Nov 22, 2018
Slide 1: 2018/2019 Interim Results
2018/2019 Interim Results 22nd November 2018
Slide 2: Disclaimer
2018/2019 Interim Results Disclaimer • This Document comprises the written materials/slides for a presentation concerning Majestic Wine PLC (the “Company”) and its 2018/19 Interim Results. • By reviewing this presentation you agree to be bound by the conditions set out below. • No reliance may be pl
Slide 3: Steady as she goes
2018/2019 Interim Results Steady as she goes 2 1 2 3 We are doing Higher sales, what we said we Looking ahead... lower profits would 3
Slide 4: Steady as she goes
2018/2019 Interim Results Steady as she goes Group Naked Investment in EBIT revenue Repeat future value down £4m + 4.8% customer creation YoY contribution +17% Naked Wines +14.0%, up from 61% growth in new customer £3.5m of additional 11.6% in H2. investment in Naked investment Average lifetime payb
Slide 5: Steady as she goes
2018/2019 Interim Results Steady as she goes 2 1 2 3 We are doing Higher sales, what we said we Looking ahead... lower profits would a) Increasing investment in a disciplined way b) Pulling underperforming capital out c) Finishing the heavy lifting 5
Slide 6: Naked: Increasing investment in a disciplined way
2018/2019 Interim Results Naked: Increasing investment in a disciplined way 61% increase in spend Payback 4.0x – on target 6
Slide 7: Naked investment: Digital continues to grow
2018/2019 Interim Results Naked investment: Digital continues to grow Naked Wines: Digital Marketing Investment by Market H1 FY2019 vs H1 FY2018 £M 7
Slide 8: Naked Investment: Partnerships
2018/2019 Interim Results Naked Investment: Partnerships 8
Slide 9: Naked: Investment translating into sales growth
2018/2019 Interim Results Naked: Investment translating into sales growth Naked Wines Sales by Market H1 FY2019 vs H1 FY2018 £M 35 +6.9% +19.3% +18.6% 30 Total growth +14% 25 USA biggest market by sales value in H1 20 15 10 5 0 UK US Australia 9 H1 FY2018 Sales H1 FY2019 Sales
Slide 10: As a result we’re bringing in high calibre winemakers
2018/2019 Interim Results As a result we’re bringing in high calibre winemakers Edgard Carter David Seijas Caroline Dunn Made Seña, Chile’s most Sommelier at El Bulli for Won the IWSC best Shiraz iconic wine (£100 a bottle 11 years in the world for her Wolf in the UK) Blass Platinum Label Shiraz 10
Slide 11: Retail: Investing in new customer acquisition
2018/2019 Interim Results Retail: Investing in new customer acquisition • Partnerships delivered 45k new customers in H1 • On target to deliver 100k new customers by year end 11
Slide 12: Retail: Investing to build a successful subscription business: Concierge
2018/2019 Interim Results Retail: Investing to build a successful subscription business: Concierge • Almost 30k subscribers delivering c.£5m sales • Targeting over 40k members by year end 12
Slide 13: Pulling out underperforming capital
2018/2019 Interim Results Pulling out underperforming capital Naked repeat 1% improvement in contribution margin through customer increased scale efficiency e.g. new US warehouse margins Naked new customer Reduced level of discount on first orders discounts Retail £1.3m of store and admin cost elimi
Slide 14: Heavy lifting projects nearing completion with zero revenue disruption
2018/2019 Interim Results Heavy lifting projects nearing completion with zero revenue disruption Single customer view New EPOS New Website and Data tools FY2019 ✓ ✓ ✓ Franchise-Lite employee Next Day Delivery Store revamps and Model ✓ ✓ shelving - Ongoing Buy it Again ratings / Product Availability
Slide 15: Retail: Heavy lifting has moved the KPIs
2018/2019 Interim Results Retail: Heavy lifting has moved the KPIs Email collection % Service rated 5* % Availability Service levels remain Email Collection starting high. Need to address Availability continues to to reach the maximum volatility driven by 3rd improve possible under GDPR party fulfil
Slide 16: Retail: The KPIs plus the meritocracy deliver performance
2018/2019 Interim Results Retail: The KPIs plus the meritocracy deliver performance Gross profit performance by store type H1 FY2019 vs H1 FY2018 % • 51 partner stores at end of H1 (c.25% of estate) • Better inputs driving better outputs • Using “super-partners” to troubleshoot underperformers 16
Slide 17: Steady as she goes
2018/2019 Interim Results Steady as she goes 1 2 3 We are doing Higher sales, what we said we Looking ahead... lower profits would Naked investment driving quality and growth Retail Concierge proposition 17
Slide 18: Naked Wines drives growth acceleration
2018/2019 Interim Results Naked Wines drives growth acceleration H1 FY19 Underlying Sales Growth H2 FY18 H1 FY18 Naked Wines +11.6% +10.9% 14.0% (9.4%) -7.9% +8.9% Lay & Wheeler Commercial (2.0%) -7.9% -3.4% Retail 1.9% +1.8% +2.0% TOTAL 4.8% +3.7% +4.2% 18
Slide 19: We are investing as planned
2018/2019 Interim Results We are investing as planned Drivers of Adjusted EBIT movement H1 FY2019 vs H1 FY2018 £M Investment in Naked Wines Growth, Retail Concierge and Margin reduction, partnerships fulfilment cost shift, admin savings 7.3 (3.5) 2.5 (0.8) Inflation, growth (2.6) and control investm
Slide 20: Naked investment increased in £ and quality
2018/2019 Interim Results Naked investment increased in £ and quality Naked Wines New Customer Investment H1 FY2019 vs H1 FY2018 £M • First order losses flat on sales +28% • Investment growth all in marketing • Higher quality customers 20
Slide 21: Naked: FY19 H1 payback likely to increase from a conservative 4.0x
2018/2019 Interim Results Naked: FY19 H1 payback likely to increase from a conservative 4.0x Period of Measurement → H1 FY17 FY17 H1 FY18 FY18 H1 FY19 (No Easter) ← Period of Recruitment FY17 H1 3.6x 4.2x 4.2x 4.3x 4.2x FY17 4.5x 4.7x 4.9x 4.8x FY 18 H1 5.1x 5.8x 5.6x FY18 4.7x 4.5x FY 19 H1 Increas
Slide 22: Naked: Investments continue to drive growth in repeat customer contribution
2018/2019 Interim Results Naked: Investments continue to drive growth in repeat customer contribution Naked Wines Adjusted EBIT H1 FY2019 vs H1 FY2018 £M 8 0.6 7 (3.0) 6 1.9 5 4 4.6 (0.9) 3 3.2 2 1 - FY2018 Adj. Growth in Increased Change in Change in Fixed FY2019 Adj. EBIT Angels Contribution Inves
Slide 23: Retail: Concierge Sales drive growth, offseting Easter phasing and other trading
2018/2019 Interim Results Retail: Concierge Sales drive growth, offseting Easter phasing and other trading Retail Sales Drivers Smaller orders H1 FY2019 vs H1 FY2018 £M More discounted 30k members at orders (partnerships) the end of H1 ( ) ( ) No Easter in April and “shadow” following Easter in Marc
Slide 24: Retail: EBIT declines driven by investment in concierge, fulfilment costs and discounts
2018/2019 Interim Results Retail: EBIT declines driven by investment in concierge, fulfilment costs and discounts Retail EBIT Drivers H1 FY2019 vs H1 FY2018 £M Concierge recruitment ( ) ( ) ( ) Admin staff and in-housing ( ) ( ) No Easter • Cost shift to online • Higher new customer discounts • Gros
Slide 25: Retail: Channel shift changing cost footprint
2018/2019 Interim Results Retail: Channel shift changing cost footprint Sales growth by order channel H1 Operating cost drivers H1 H1 FY2019 £M Including Includes store Concierge labour +33.7% 1.1 (1.3) 1.0 0.8 (3.0%) Costs reducing due to: ● Store labour optimisation ● Admin savings, e.g. website i
Slide 26: Retail: Positioned for sales growth in H2
2018/2019 Interim Results Retail: Positioned for sales growth in H2 Spend Per Month per Repeat Customer FY2019 vs FY2018 £ +4.5% Repeat Customers +93% Concierge customers New partnership customers +55% 26
Slide 27: Net debt lower despite investment reducing cash flow in the period
2018/2019 Interim Results Net debt lower despite investment reducing cash flow in the period H1 FY2019 H1 FY2018 YoY £m £m % Adjusted EBIT 2.9 7.3 (60%) Add back D&A* 3.1 3.0 +3% Financing charges ● £0.4m Adjusted EBITDA 6.0 10.3 (42%) ● 30% lower YoY Capital expenditure (4.1) (1.6) +156% Fixed char
Slide 28: Financial outlook for FY2019
2018/2019 Interim Results Financial outlook for FY2019 Naked Naked Retail Retail investment margin growth channel growing improvement drivers mix & margins Minimum of £6m Market mix and More customers: Ongoing increase in increase YoY cost efficiencies • Online national fulfilment • Concierge costs
Slide 29: Steady as she goes:
2018/2019 Interim Results Steady as she goes: 2 1 2 3 We are doing Higher sales, what we said we Looking ahead... lower profits would Naked: Plan announced in April: No change Retail: Coming to end of three year plan... What next? 29
Slide 30: We will reorient around US and growth
2018/2019 Interim Results We will reorient around US and growth Large market Growing quickly 2x price advantage DTC market +13% $16 $8 US is now the largest Naked Wines business by sales value 30
Slide 31: There is a role for experiential retail
2018/2019 Interim Results There is a role for experiential retail 1 2 3 We’re well Face to face retail Wine is well suited equipped to has to create more to a face to face deliver: people, value than an customer data, capability & online shop experience spirit. 31
Slide 32: Conclusion
2018/2019 Interim Results Conclusion • The plan is working • Initiatives are working • Investment accelerating • Running hard to stand still The seismic shifts in retail will create winners and losers – we intend to be one of the winners 32
Slide 33: QUESTIONS?
MajesticWinepic QUESTIONS?
Slide 34: APPENDICES
2018/2019 Interim Results APPENDICES 34
Slide 35: Business Unit Detail: Naked Wines
2018/2019 Interim Results Business Unit Detail: Naked Wines Underlying H1 FY2019 H1 FY2018 YoY % £’000 £’000 Revenue 75,663 66,377 14.0% Gross profit 29,617 24,538 20.7% Gross margin 39.1% 37.0% +2.1pp Distribution costs (12,765) (10,228) 24.8% Administrative costs (13,580) (9,694) 40.1% Adjusted EB
Slide 36: Business Unit Detail: Naked sales by geography and Customer Group
2018/2019 Interim Results Business Unit Detail: Naked sales by geography and Customer Group Underlying H1 FY19 H1 FY18 YoY % £’000 £’000 Sales UK 29,725 27,798 6.9% USA 31,744 26,615 19.3% Aus 14,194 11,964 18.6% Total sales 75,663 66,377 14.0% Revenue by Customer Group New customers 10,282 8,010 28
Slide 37: Business Unit Detail: Majestic Retail
2018/2019 Interim Results Business Unit Detail: Majestic Retail Underlying H1 FY2019 H1 FY2018 YoY % £’000 £’000 Revenue 122,949 120,669 1.9% Gross profit 27,822 28,358 (1.9%) Gross margin 22.6% 23.5% -0.9pp Distribution costs (15,940) (14,752) 8.0% Administrative costs (8,604) (9,009) (4.5%) Adjust
Slide 38: Business Unit Detail: Majestic Commercial
2018/2019 Interim Results Business Unit Detail: Majestic Commercial Underlying H1 FY2019 H1 FY2018 YoY % £’000 £’000 Revenue 22,190 22,636 (2.0%) Gross profit 3,572 3,544 0.8% Gross margin 16.1% 15.7% +0.4pp Distribution costs (1,618) (1,508) 7.3% Administrative costs (854) (1,003) (14.8%) Adjusted
Slide 39: Business Unit Detail: Lay & Wheeler
2018/2019 Interim Results Business Unit Detail: Lay & Wheeler Underlying H1 FY2019 H1 FY2018 YoY % £’000 £’000 Revenue 6,897 7,614 (9.4%) Gross profit 1,894 1,856 2.0% Gross margin 27.5% 24.4% +3.1pp Distribution costs (616) (548) 12.5% Administrative costs (976) (916) 6.4% Adjusted EBIT 302 392 (22
Slide 40: Central PLC costs & Group
2018/2019 Interim Results Central PLC costs & Group Underlying H1 FY2019 H1 FY2018 YoY % £’000 £’000 Central costs Administrative costs (5,020) (3,400) 47.6% Adjusted EBIT (5,020) (3,400) 47.6% Group Revenue 227,699 217,296 4.8% Gross profit 62,905 58,296 7.9% Gross margin 27.6% 26.8% +0.8pp Distrib
Slide 41: Glossary
2018/2019 Interim Results Glossary Definitions Contribution A profit measure between gross profit and EBIT, calculated as gross profit less the costs of fulfilling and servicing (e.g. credit card fees, delivery costs, customer facing staff costs) and marketing expenses. We often split contribution i
Slide 42: Glossary (cont.)
2018/2019 Interim Results Glossary (cont.) Alternative Performance Measures Underlying a) includes En primeur revenues in year of order not year of fulfilment; (b) is calculated using constant FX rates for translation. EBIT Operating profit as disclosed in the Group income statement. Adjusted EBIT O