Naked Wines Plc · LSE:WINE
Naked Wines — H1 2018 Earnings Presentation
49 slides from Naked Wines's earnings presentation, Nov 23, 2017
Slide 1: Ready to put our foot on the gas and accelerate growth
2017/18 Interim Results Analyst & Investor Presentation November 2017 Ready to put our foot on the gas and accelerate growth
Slide 2: Disclaimer
2017/2018 Interim Results Disclaimer • This Document comprises the written materials/slides for a presentation concerning Majestic Wine PLC (the “Company”) and its unaudited Interim results for the 26 weeks ended 2 October 2017 (the “Interim Results”). • By reviewing this presentation you agree to b
Slide 3: Reminder: 2 years into a 3 year plan and we are on track
2017/2018 Interim Results Reminder: 2 years into a 3 year plan and we are on track: 11 2 2 3 3 FY2016 FY2017 FY2018 FY2019 Test and learn Prove the model Heavy Lifting Processes and Infrastructure Roll Out Back the winners 3
Slide 4: Context: We are operating in a tough market
2017/2018 Interim Results Context: We are operating in a tough market Weak UK consumer demand Higher input prices UK competition tough Global supply challenges Expect the short term to be tough 4
Slide 5: Ready to accelerate growth
2017/2018 Interim Results Ready to accelerate growth 1 2 3 We have the Profits Foundations investment UP SOLID opportunities to GROW Group Adjusted EBIT up Coming to the end of the Restored ROIs £6.9m because: heavy lifting Continue to grow our Naked profitable AND Key ongoing projects o
Slide 6: Ready to accelerate growth
2017/2018 Interim Results Ready to accelerate growth 1 2 3 We have the Profits Foundations investment UP SOLID opportunities to GROW 6
Slide 7: Group profit growth driven by Naked Wines
2017/2018 Interim Results Group profit growth driven by Naked Wines Group Adj EBIT (Underlying) FY18 H1 vs FY17 H1 GBP m 9 8 0.1 0.7 1.3 7 6 5 (and flattered by £1.3m of 4 investment phasing 6.0 7.3 to be spent in H2) 3 2 1 0.6 0.8 0.4 - FY17 H1 Adj EBIT Retail Commercial Naked Wines NW spend L&W PL
Slide 8: Naked Wines profit driven by the USA
2017/2018 Interim Results Naked Wines profit driven by the USA Naked Wines EBIT FY18 H1 Total: £4.7m Naked USA now the most profitable part of Naked Wines 8
Slide 9: That growth has been driven primarily by growth in contribution
2017/2018 Interim Results That growth has been driven primarily by growth in contribution 6 Naked Wines EBIT (Underlying) FY18 H1 vs FY17 H1 5 GBP m 0.3 4 3 3.2 4.7 2 1 0 3.8 -1 -2.5 -2 -3 FY17 H1 EBIT Mature Angel Contribution Change in spend Change in Fixed Costs FY18 H1 EBIT 9
Slide 10: We have grown Mature Contribution despite lower investment in marketing
2017/2018 Interim Results We have grown Mature Contribution DESPITE lower investment in marketing 30 Mature Angel Contribution FY13-FY18 H1 GBP m 25 20 FY18 H1 Mature 15 Angel contribution is 33.3% or £3.8m 10 higher 5 0 FY13 FY14 FY15 FY16 FY17 FY18 H1 Full year Contribution hasn’t grown because we
Slide 11: Because we've built a real community
2017/2018 Interim Results .. Because we’ve built a real community 11
Slide 12: Ready to accelerate growth
2017/2018 Interim Results Ready to accelerate growth 1 2 3 We have the Profits Foundations investment UP SOLID opportunities to GROW 12
Slide 13: We are coming to the end of the heavy lifting
2017/2018 Interim Results We are coming to the end of the heavy lifting New Majestic Data tools to Website on give single Naked Platform customer view NFC now shipped 154 of 210 stores 170,000 next day now have shelving orders Product Launched Availability now 84% Franchise - Lite 13
Slide 14: Ongoing heavy lifting projects are on track
2017/2018 Interim Results Ongoing heavy lifting projects are on track EPOS IT update Accounting Systems New Till systems to be Replacing 20 year old To be rolled out in FY2019 rolled out across the systems with modern to get consistency across estate in FY2019 giving resilient systems the Group sing
Slide 15: Building confidence that the Retail transformation is sustainable
2017/2018 Interim Results Building confidence that the Retail transformation is sustainable +4.1 +2.0 -3.9 +7.4% +2.0% ppts ppts ppts 5 star Repeat Sustained Team Customer Customer LFL sales Retention service base Retention growth Email capture rate % Franchise-Lite “From Command and Control culture
Slide 16: Key to engagement – The Store Meritocracy: Inputs
2017/2018 Interim Results Key to engagement – The Store Meritocracy INPUTS SERVICE WINE RECOMMENDATIONS CUSTOMER ENGAGEMENT 16
Slide 17: Key to engagement – The Store Meritocracy: Output
2017/2018 Interim Results Key to engagement – The Store Meritocracy OUTPUT GROSS PROFIT GROWTH 17
Slide 18: Store League Table
2017/2018 Interim Results Key to engagement – The Store Meritocracy Store League Table SAILING NAILING Input Score - Store Behaviours FAILING AILING Output Score - Gross Profit 18
Slide 19: Store League Table – Scatter Graph
2017/2018 Interim Results Key to engagement – The Store Meritocracy Store League Table – Scatter Graph Week 32 (6 weeks after Franchise – Lite launch) Sailing Nailing Input Score - Store Behaviours Failing Ailing 19 Output Score - Gross Profit
Slide 20: What does this mean in practice?
2017/2018 Interim Results What does this mean in practice? FROM... TO... Stores had to ask for £500 Frugal Fund consent Everyone treated the same Meritocracy - the best managers get more responsibility and opportunity Focus on sales Focus on Gross Profit Focus on Outputs Focus on Inputs e.g. sales e
Slide 21: What has not worked..
2017/2018 Interim Results What has not worked.. 1. Commercial 2. Retail Customer Retention No progress until 2018 when we have Confident that with Team Retention and the systems to support growth engagement moving in right direction, this will come 21
Slide 22: Ready to accelerate growth
2017/2018 Interim Results Ready to accelerate growth 1 2 3 We have the Profits Foundations investment UP SOLID opportunities to GROW 22
Slide 23: ROI has been restored to 98% = 4.5x LTV return
2017/2018 Interim Results ROI has been restored to 98% = 4.5x LTV return Naked Wines Return on Investment % 140% How… 120% 1. We did not repeat the Direct Mail campaign we ran last year 100% 2. Our 3 key disciplines continue to 80% deliver a. Test and learn 60% b. Continuous improvement c. Active ca
Slide 24: The Naked investment pipeline has been growing
2017/2018 Interim Results The Naked investment pipeline has been growing ...and will continue to grow 16 Investment in New Customer Acquisition GBP m 14 12 10 Ignoring last year’s 8 blip, investment has grown at 6 around 20% a year 4 2 0 FY13 FY14 FY15 FY16 FY17 FY18 H1 Full year Note: Investment in
Slide 25: Financial Review
2017/2018 Interim Results Financial Review We have continued to do what we said we would do: “Deliver “Reallocate “Translate sales “Return surplus sustainable sales underperforming growth to profit cash to growth by growing capital while growth” shareholders” the customer base” restoring ROI” 25
Slide 26: Group Sales driven by growing the customer base
2017/2018 Interim Results Group Sales driven by growing the customer base Sales Growth Customer Growth (Underlying) Naked Wines +10.9% +16.0% Lay & Wheeler +8.9% +2.7% Commercial -3.4% -1.8% Retail +2.0% +7.4% TOTAL +4.2% 26
Slide 27: Sales growth translated into profitability
2017/2018 Interim Results Sales growth translated into profitability Group EBIT (Underlying) FY18 H1 vs FY17 H1 GBP m 8 Minimal expected uplift year on year in Combination of: H2 7 - Mix shift to Naked Wines 0.9 - Reduction in Naked Wines 6 new business 1.3 5 4 Elimination of: 2.4 • Low ROI marketin
Slide 28: Naked Wines: Sales growth delivered, despite lower growth in new Angels
2017/2018 Interim Results Naked Wines: Sales growth delivered, despite lower growth in new Angels Naked Sales (Underlying) FY18 H1 vs FY17 H1 GBP m • Significant reduction in new business 80 sales as we drove efficiency in New 70 Customer Acquisition 60 • Lower number of new Angels offset by 50 impr
Slide 29: Naked Wines: All markets now profitable and growing
2017/2018 Interim Results Naked Wines: All markets now profitable and growing Naked Wines Sales (Underlying) FY18 H1 vs FY17 H1 GBP m 80 70 Sales EBIT margin 60 growth EBIT % movement YoY 50 AUS +34.6% 3.1% +6.4 ppts 40 USA +9.9% 9.0% +20.2 ppts 30 UK +3.5% 7.2% +2.3 ppts Total +10.9% 7.0% +11.1 ppt
Slide 30: ..due to high retention of customers
2017/2018 Interim Results ..due to high retention of customers 40 Naked Wines Total Contribution from Mature Angels GBP m 35 30 25 20 15 10 5 0 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 30
Slide 31: Retail: Price driven sales growth in a tough market
2017/2018 Interim Results Retail: Price driven sales growth in a tough market Retail Sales (Underlying) FY18 H1 vs FY17 H1 GBP m Prices have risen, in line with 126 the market, but we have maintained key price points 124 122 3.8 5.5 120 0.7 118 Volume impact would have been much greater if we hadn’t
Slide 32: Retail profits grew despite continued margin pressure
2017/2018 Interim Results Retail profits grew despite continued margin pressure Retail EBIT (Underlying) FY18 H1 vs FY17 H1 Trading margin weaker by 30bps GBP m 60bps improvement due to reduced 5.0 5,000 costs of selling 4.8 4,800 0.1 4.6 4,600 0.4 2% sales growth, all LfL 4.4 4,400 4.2 4,200 0.5% c
Slide 33: Returning cash: 33% dividend increase supported by free cash flow improvement
2017/2018 Interim Results Returning cash: 33% dividend increase supported by free cash flow improvement H1 2018 H1 2017 YoY 29% increase in cash flow driven by £m £m % improved profitability: Adj EBIT 7.3 0.7 NM • Retained minimal CapEx level Addback D&A 3.1 3.3 (6.1%) Adj EBITDA 10.4 4.0 160.0% Lev
Slide 34: H2 FY18 Financial Guidance
2017/2018 Interim Results H2 FY18 Financial Guidance Remain in line with current FY18 Consensus Range*: market expectations of: • FY2018 Sales: - Mid single-digit Group Sales growth £480.7m - £486.1m - Marketing phasing reversal - c. £3m increase in Group costs YoY • FY2018 EBIT: £16.1m - £18.1m * A
Slide 35: Conclusion - this is what we have been waiting for
Conclusion - this is what we have been waiting for Two years ago, we said that we thought we could create a business that could So we are now ready to start the grow profits sustainably, even in tough growth phase of the plan that we love markets, because: - and we are good at. • Naked Wines is alre
Slide 36: Appendices
MajesticWineplc Appendices
Slide 37: Naked Wines Detail
2017/2018 Interim Results Naked Wines Detail 26 weeks ended 26 weeks ended % 2 Oct 2017 26 Sept 2016 YoY variance £’000 £’000 £’000 P&L New customers (to maturity) Breakout Sales 11,971 15,637 (3,666) -23.4% Contribution exc Marketing (477) (6) (471) NM Marketing (4,243) (7,905) 3,662 -46.3% New cus
Slide 38: Return on Investment and Lifetime Value calculations
2017/2018 Interim Results Return on Investment and Lifetime Value calculations Reminder: To illustrate that: ROI (Return on Investment) is - If a customer: the recurring additional - Cost £100 to acquire contribution (net of replenishment - Buys 5 x a year costs) per year, generated by this - Makes
Slide 39: H1 2018 Results Summary
2017/2018 Interim Results H1 2018 Results Summary H1 2018 H1 2017 Reported Underlying £’000 £’000 % YoY % YoY Revenue 217,361 205,640 +5.7% +4.2% Adjusted EBIT 7,337 700 NM NM Adjusted PBT 6,771 51 NM Profit before tax 3,079 (4,404) Basic EPS 2.4p (6.1p) Adjusted EPS 7.9p 0.7p NM Dividend per share
Slide 40: Group Strategy
Group Strategy Our Goal is medium term growth in shareholder value, …by delivering sustainable volume led sales growth, …by growing our customer base, …by… 1. Investing in acquiring new customers, which we can afford to do because we … 2. Retain existing customers, by generating extreme customer loy
Slide 41: Group Overview
Group Overview A Company that can grow, even in tough markets: Market size £2.2bn £17bn (Global) £2.0bn £0.7bn (UK) Sales for the year to 3 April 2017 £262.2m £144.3m £46.6m £12.3m % increase +5.4% +26.3% +0.8% +36.2% % of the Group 56% 31% 10% 3% Adjusted EBIT £13.3m £1.4m £2.5m £1.0m Description T
Slide 42: Business Unit Detail: Naked Wines
2017/2018 Interim Results Business Unit Detail: Naked Wines Underlying H1 2018 H1 2017 YoY % £’000 £’000 Revenue 67,794 61,131 10.9% Gross profit 25,100 21,087 19.0% Gross Margin 37.0% 34.5% 2.5ppts Distribution costs (10,482) (9,771) 7.3% Administrative costs (9,898) (13,852) -28.5% Adjusted EBIT 4
Slide 43: Business Unit Detail: Naked Wines by geography
2016/2017 Interim Results Business Unit Detail: Naked Wines by geography Underlying H1 2018 H1 2017 YoY % £’000 £’000 Sales UK 27,798 26,864 3.5% US 27,267 24,807 9.9% Aus 12,729 9,460 34.6% Total sales 67,794 61,131 10.9% Adjusted EBIT UK 2,014 1,327 51.8% US 2,447 (2,787) 187.8% Aus 390 (316) 223.
Slide 44: Business Unit Detail: Majestic Retail
2017/2018 Interim Results Business Unit Detail: Majestic Retail Underlying H1 2018 H1 2017 YoY % £’000 £’000 Revenue 120,640 118,230 2.0% Gross Profit 28,561 27,582 3.5% Gross Margin 23.7% 23.3% 0.4ppts Distribution costs (14,963) (13,661) 9.5% Admin Costs (9,006) (10,178) -11.5% Adjusted EBIT 4,592
Slide 45: Business Unit Detail: Majestic Commercial
2017/2018 Interim Results Business Unit Detail: Majestic Commercial Underlying H1 2018 H1 2017 YoY % £’000 £’000 Revenue 22,636 23,430 -3.4% Gross profit 3,331 3,793 -12.2% Gross Margin 14.7% 16.2% -1.5ppts Distribution Costs (1,295) (1,598) -19.0% Admin Costs (1,003) (546) 83.7% Adjusted EBIT 1,033
Slide 46: Business Unit Detail: Lay & Wheeler
2017/2018 Interim Results Business Unit Detail: Lay & Wheeler Underlying H1 2018 H1 2017 YoY % £’000 £’000 Revenue 6,291 5,350 17.6% Gross Profit 1,856 1,713 8.3% Gross Margin 24.4% 24.5% -0.1ppts Distribution Costs (548) (509) 7.7% Admin Costs (916) (928) -1.3% Adjusted EBIT 392 276 42.0% 46
Slide 47: Central PLC costs & Group
2017/2018 Interim Results Central PLC costs & Group Underlying H1 2018 H1 2017 YoY % £’000 £’000 Central costs Administrative costs (3,400) (2,733) 24.4% Adjusted EBIT (3,400) (2,733) 24.4% Group Revenue 218,684 209,783 4.2% Gross profit 58,848 54,175 8.6% Gross Margin 26.9% 25.8% 1.1ppts Distributi
Slide 48: Glossary
2017/2018 Interim Results Glossary Group and KPI definitions Repeat Customer % of repeat and loyal customers from 12 months ago that are still repeat and loyal customers, as measured from our Retention customer databases Product Availability % of targeted range available in stores/on websites as ind
Slide 49: Glossary (cont.)
2017/2018 Interim Results Glossary (cont.) Majestic Retail, Commercial and Lay & Wheeler Nurture Customer A customer who has shopped once Active Customer A customer who has made a purchase in the last year Repeat Customer A customer who has shopped more than once in the last year Loyal Customer A cu