Naked Wines Plc · LSE:WINE
Naked Wines — FY2024 Earnings Presentation
60 slides from Naked Wines's earnings presentation, Aug 28, 2024
Slide 1: FY24 Results Presentation
FY24 Results Presentation 28thAugust 2024
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: Today's Presenters
Today’s Presenters Pivot to Our Mission to Profitability H1’22 Results Disrupt the Highlights Wine Industry Rowan Gormley Rodrigo Maza James Crawford Non-Exec Chairman Group CEO Group CFO 3 Naked Wines plc 2024 Full Year Results Presentation
Slide 4: FY24 Overview by the Non-Executive Chairman
FY24 Overview by the Non-Executive Chairman Focus on profitable Foundations laid growth • Costs rightsized • Back to basics - re-instilling disciplines • Cash being realised from inventory • Innovation - new team with new skills to solve acquisition • Long term funding facility in challenge place •
Slide 5: FY24 Highlights
FY24 Highlights James Crawford Group CFO
Slide 6: FY24 Highlights – Progress made amidst a challenging period
FY24 Highlights – Progress made amidst a challenging period Revenue Operating Total Adj EBIT Adj Items Net Cash trend G&A Inventory £5.0m £(16.8)m £19.6m £290.4m £(35.9)m £144.9m (66)% (45)% +92% (13)% (11)% (11)% • (13)% H1 • Inventory provision • £15.4m lower YoY • Inventory • (18)% H1 • £(16.5)m
Slide 7: Agenda: Improving cash and liquidity
Agenda Improving cash and Solid Core Looking forward liquidity ✓ Cash and liquidity • Repeat customer sales • FY25 guidance and KPIs steady drivers • Mix and discounting ✓ Cost actions drives margins down • Recruitment remains ✓ Inventory management challenging 7 Naked Wines plc 2024 Full Year Resul
Slide 8: Agenda: Improving cash and liquidity
Agenda Improving cash and Solid Core Looking forward liquidity ✓ Cash and liquidity • Repeat customer sales • FY25 guidance and KPIs steady drivers • Mix and discounting ✓ Cost actions drives margins down • Recruitment remains ✓ Inventory management challenging 8 Naked Wines plc 2024 Full Year Resul
Slide 9: Cash generation from adjusted profits and inventory
Cash generation from adjusted profits and inventory Cash drivers show positive impact of changes made • Inventory now dropping • Corresponding drop in payables • Angel funds reflect improving retention and customer quality SBP: Share based payments 9 Naked Wines plc 2024 Full Year Results Presentati
Slide 10: We are exiting the period of low liquidity
We are exiting the period of low liquidity Net cash by Month Apr 21 to Jul 25 £’000s • After a year of low cash levels we are now rebuilding • Peak FY25 will be the next step up as as further inventory is sold 10 Naked Wines plc 2024 Full Year Results Presentation
Slide 11: New credit facility improves liquidity and flexibility
New credit facility improves liquidity and flexibility Prior facility: New 5 year facility: Insufficient usable liquidity: PNC: Tier 1 bank • Covenanted to hold $20m cash Same headline size, $20-30m more usable • Significant exclusions and liquidity reserves • Higher advance rate Cash holding mitiga
Slide 12: Year-end position gives adequate liquidity headroom
Year-end position gives adequate liquidity headroom End FY24 proforma liquidity Supports: £37m Credit • Operating cash balances Facility • Working capital cycle • Downside trading protection £20m • Security for Angel balances Net Cash Future cash generation should provide investment optionality 12 N
Slide 13: Angel fund redemptions remain stable
Angel fund redemptions remain stable Total Angel balance (£m) and withdrawals (as a % of balance) • Continued downward trend on redemption rate • “Wine Genie” subscribers carry no balance 13 Naked Wines plc 2024 Full Year Results Presentation
Slide 14: Adjusted EBIT delivered through cost actions
Adjusted EBIT delivered through cost actions Underinvestment in growth in FY23 flattered profitability • Significant driver of repeat contribution decline • Investment rate increasing again, within guardrail Cost reductions support profitability 14 Naked Wines plc 2024 Full Year Results Presentation
Slide 15: Further cost actions have reduced our reliance on sustained sales levels
Further cost actions have reduced our reliance on sustained sales levels 18% Relabel so clear not a forecast / scenario Scenario analysis shows that cost actions taken will underpin profitability in the event of further revenue decline, while ensuring we have the resource to undertake Return to Grow
Slide 16: UK and Australia inventory on track, US project continues
UK and Australia inventory on track, US project continues *Between April 2022 and March 2024, c. £13m of inventory was written off which is reflected in these balances • Stock reduction of c.£20m expected over FY25 peak trading • Inventory intake will be below COGS through FY27 • Long-term inventory
Slide 17: Agenda: Improving cash and liquidity
Agenda Improving cash and Solid Core Looking forward liquidity ✓ Cash and liquidity • Repeat customer sales • FY25 guidance and KPIs steady drivers • Mix and discounting ✓ Cost actions drives margins down • Recruitment remains ✓ Inventory management challenging 17 Naked Wines plc 2024 Full Year Resu
Slide 18: Repeat customers are performing well
Repeat customers are performing well Revenue per member is stable… …as are attrition rates Although trading has been disappointing, the sales decline is due to lower customer numbers, which in turn is due to lower new customer recruitment. The existing customer base is healthy. 18 Naked Wines plc 20
Slide 19: Repeat contribution margin reductions driven by gross margins
Repeat contribution margin reductions driven by gross margins. Fulfilment cost improvements taking shape Gross margin drivers • Mix shift towards lower margin UK • Stock clearance activity • One off supplier failure 19 Naked Wines plc 2024 Full Year Results Presentation
Slide 20: Customer base continues to decline as recruitment challenges persist
Customer base continues to decline as recruitment challenges persist, but balance of gains and declines moderating • Net reduction in members dropping -40 +323 -164 • % rate of reduction -58 is dropping 20 Naked Wines plc 2024 Full Year Results Presentation
Slide 21: Lower customer recruitment remains the key challenge
Lower customer recruitment remains the key challenge Negative drivers: As we start to lap the pivot to profit we see: ● Tested non-subscription in Aus (now stopped) ● UK trends showing increase ● Tough trends in marketing conversion ● Stabilisation at group level ● Accepting low marginal paybacks to
Slide 22: Agenda: Improving cash and liquidity
Agenda Improving cash and Solid Core Looking forward liquidity ✓ Cash and liquidity • Repeat customer sales • FY25 guidance and KPIs steady drivers • Mix and discounting ✓ Cost actions drives margins down • Recruitment remains ✓ Inventory management challenging 22 Naked Wines plc 2024 Full Year Resu
Slide 23: Guidance driven off underlying trends
Guidance driven off underlying trends Assumes (at market level): £m FY25 ● Flat trends in customer recruitment and retention Revenue 240 - 270 ● No changes to annual revenues per member ● Known cost base (SG&A and fulfilment) Revenue trend (%) (16)% - (4)% ○ Includes impact of revised warehousing Re
Slide 24: Strategic Review
Strategic Review Rodrigo Maza Group CEO
Slide 25: Working through our key priorities
Working through our key priorities… Our Mission to Disrupt the Wine Industry Robust Return to Growth Proud to Be Naked Foundations Management System Acquisition Cost Structure People Cycle Personalisation Banking Facility Winemaker Success Retention Surplus Inventory 25 Naked Wines plc 2024 Full Yea
Slide 26: About me…
About me… Simple Strategy Consistent Execution Our Mission to Disrupt the Wine Industry Effective Exploration AND Exploitation Commitment to Customer Centricity 26 Naked Wines plc 2024 Full Year Results Presentation
Slide 27: About Naked…
About Naked… Business Model: Success! Brand: Miss! Strong Retention Weak Acquisition 27 Naked Wines plc 2024 Full Year Results Presentation
Slide 28: Our objective…
Our objective… Acquisition Diversification (Optimise Voucher, Launch Earned & SEO) Payback 1.3x → 2.0x Product (Pre-COVID Levels) Personalisation (Choose Subscription Type, Frequency, Spend) & Enterprise Value Growth Opportunistic Inventory Clearance Content-Led Retention (Enhance Onboarding, Delive
Slide 29: Customer Value Proposition…
Customer Value Proposition… 29 Naked Wines plc 2024 Full Year Results Presentation
Slide 30: Customer Value Proposition… it's landing!
Customer Value Proposition… it’s landing! Ren Rojas With Naked Wines nothing holds me back because I know that if I absolutely don’t like it I will have lost nothing by trying it. David Dellar Love these independent winemakers. Well done for bringing them to the public. Sue Stamp A great concept and
Slide 31: Growth Levers…
Growth Levers… Acquisition Personalisation Retention Get the right customers Get customers into the Effectively onboard through the door… relationship that’s customers and deliver for the right reasons! right… for them! value… beyond deals! 31 Naked Wines plc 2024 Full Year Results Presentation
Slide 32: Voucher… presenting our CVP in a compelling way
Voucher… presenting our CVP in a compelling way ● New parcel creative presents Naked as a solution to a user problem ● Tests are at early stages of data collection in US and AUS ● Directional improvements to sign up conversion rates (50- 100% improvements), though lower response rates Before: 32 Nak
Slide 33: SEO… still early days but showing promising signs
SEO… still early days but showing promising signs Technical SEO: A single update to page titles doubled the Content SEO: Targeting high volume keywords to meet high number of pages being indexed by search engines. intent customers where they are, and bring our CVP to life. 103% 13% Average no of pag
Slide 34: Wine Genie… better fit for those less confident around wine
Wine Genie… better fit for those less confident around wine Proportion of our target customers by age group 34 Naked Wines plc 2024 Full Year Results Presentation
Slide 35: Personalisation… bringing orders in while reducing cancellations
Personalisation… bringing orders in while reducing cancellations This is VERY early data from a pilot of a radically different new customer journey enabling a customer to personalise their subscription… It’s unusual to see lower cancellation combined with higher order rates - we need to see how this
Slide 36: Personalisation… letting customers choose is driving our LTV
Personalisation… letting customers choose is driving our LTV Historically we have brought all Angel customers onboard on a standard $40 subscription. We are now seeing signs we can bring in customers who are more likely to be higher spending ● Historically 100% of customers were subscribed at $40 mo
Slide 37: Onboarding… channeling customers to retention-driving actions
Onboarding… channeling customers to retention-driving actions Clear set of indicators of future customer value identifiable in our data: - App usage - Engagement with winemakers - Wine ratings - Referring a friend Example result: +50% uplift achieved in 30 day app usage following initial testing 37
Slide 38: Our timeline…
Our timeline… Testing: Results: Forecast: Now End FY25 FY26 38 Naked Wines plc 2024 Full Year Results Presentation
Slide 39: Our commitment…
Our commitment… Transparent & Focused & Responsible & Scientific Disciplined Pragmatic Impactful Testing, Clear Guardrails on SG&A, MKT Open to Alternative Paths and Consistent Comms Investment, Capital, Stock to Value Creation 39 Naked Wines plc 2024 Full Year Results Presentation
Slide 40: Our thanks… CFO Succession
Our thanks… James has been with the Company for over 10 years, as both CFO and Managing Director. CFO Succession H1’22 Results During his tenure, Naked has grown annual revenues Highlights from £40m to £290m – his leadership and expertise has played a valuable role in navigating the Group through pe
Slide 41: Wrapping up…
Wrapping up… ● Robust financial foundations in place ● Systems embedded ○ to ensure focus and alignment on top priorities ○ to embed a high-performance culture ○ to drive Winemaker engagement ● Fully focused on getting back to sustainable growth: ○ Customer Value Proposition crystallised ○ Tests act
Slide 42: Q&A
Q&A Q&A 42 Naked Wines plc 2024 Full Year Results Presentation
Slide 43: Appendix
Q&A Appendix 43 Naked Wines plc 2024 Full Year Results Presentation
Slide 44: Credit Facility - Headline Terms
Credit Facility - Headline Terms On 8 July 2024, the Group entered into a 60-month senior secured revolving credit facility with PNC Bank, National Association, as administrative agent and lender for up to $60m of credit based on global inventory levels. The facility is secured against the assets of
Slide 45: Commitments significantly lower than COGS
Commitments significantly lower than COGS 45 Naked Wines plc 2024 Full Year Results Presentation
Slide 46: Sales Retention
Sales Retention Sales retention components over time 46 Naked Wines plc 2024 Full Year Results Presentation
Slide 47: Investment trends
Investment trends Investment by Channel by FY YoY Investment by Channel by Market 47 Naked Wines plc 2024 Full Year Results Presentation
Slide 48: Contribution by cohort
Contribution by cohort NW Group Contribution by Cohort 100.0 90.0 11.2 80.0 6.9 27.9 70.0 16.7 4.1 34.1 60.0 8.3 50.0 19.4 7.3 22.4 9.6 40.0 5.1 11.6 3.9 12.6 14.9 10.2 11.1 8.5 30.0 5.0 7.4 12.0 8.1 7.1 5.9 5.9 3.9 10.7 8.6 5.7 20.0 6.8 4.7 4.4 8.0 6.4 9.6 5.1 2.7 6.1 4.4 3.6 7.3 5.1 4.9 4.1 3.4 6.
Slide 49: Payback progression
Payback progression 49 Naked Wines plc 2024 Full Year Results Presentation
Slide 50: Income Statement
Income Statement Group (£m) 52-week comparable FY24 FY23 YoY% New Customer sales 23.6 25.2 (6)% Repeat Customer sales 264.1 305.2 (13)% Other Revenue 0.8 3.0 (73)% Total Sales 288.5 333.4 (13)% Investment in New Customers (23.3) (20.0) 17% Repeat Customer Contribution 65.3 81.7 (20)% Repeat Customer
Slide 51: Balance Sheet
Balance Sheet Group (£m) Reported FY24 FY23 YoY% Total non-current assets 14.5 41.1 Inventory 144.9 165.7 (13)% Cash and cash equivalents 31.9 39.5 Other current assets 10.4 5.6 Total current assets 187.2 210.8 Trade and other payables (38.7) (42.4) (9)% Angel Funds and other deferred income (68.3)
Slide 52: Working Capital Analysis
Working Capital Analysis Group (£m) Impact in the year Net movement in non-cash inventory Underlying FY23 FX adj provision movement FY24 Net cash excluding lease 10.3 0.1 - 9.2 19.6 liabilities Inventory excluding advances 165.7 (3.5) (2.4) (14.9) 144.9 to winemakers Angel Funds and other deferred (
Slide 53: Country Segmental data - US
Country Segmental data - US US Segment (£m) 52-week comparable FY24 FY23 YoY% New Customer sales 14.2 16.1 (12)% Repeat Customer sales 114.2 138.0 (17)% Other Revenue 0.8 3.0 (73)% Total Sales 129.2 157.1 (18)% Investment in New Customers (14.5) (13.9) 4% Repeat Customer Contribution 36.7 47.0 (22)%
Slide 54: Country Segmental data - UK
Country Segmental data - UK UK Segment (£m) 52-week comparable FY24 FY23 YoY% New Customer sales 6.3 6.0 5% Repeat Customer sales 118.1 129.2 (9)% Total Sales 124.4 135.2 (8)% Investment in New Customers (5.8) (3.4) 71% Repeat Customer Contribution 20.7 24.9 (17)% Repeat Customer Contribution margin
Slide 55: Country Segmental data - Australia
Country Segmental data - Australia Australia Segment (£m) 52-week comparable FY24 FY23 YoY% New Customer sales 3.1 3.0 3% Repeat Customer sales 31.8 37.9 (16)% Total Sales 34.9 40.9 (15)% Investment in New Customers (3.0) (2.7) 11% Repeat Customer Contribution 7.8 9.9 (21)% Repeat Customer Contribut
Slide 56: Country Segmental data - Central
Country Segmental data - Central Central (£m) 52-week comparable FY24 FY23 YoY% General and administrative costs (15.6) (24.7) (37)% Adjusted EBIT (15.6) (24.7) (37)% 56 Naked Wines plc 2024 Full Year Results Presentation
Slide 57: 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 58: 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 59: 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 60: 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