Majestic Wine toasts first-half profit rise with hike in dividend

Investors will drink to that
Investors will drink to that (Source: Getty)

Majestic Wine had plenty to toast this morning as it unveiled a steep rise in first-half profit, while sales rose more than five per cent.

So it duly hiked its dividend by a third to 2p per share, and shares rose more than eight per cent on the news in early trading.

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The figures

The wine specialist, which has 210 wine warehouses across Britain as well as a couple in France, said adjusted profit before tax rose £6.7m to £6.8m in the 26 weeks ended 2 October, after it broke even this time last year.

Naked Wines, which funds independent winemakers to make wines at preferential price, proved a hit over the period, coming up profitable in all three of its geographic markets. It posted adjusted earnings before interest and tax of £4.72m compared with a loss of £2.78m a year ago.

Majestic Retail also recorded profitable growth, despite a tough market.

Sales rose 5.7 per cent, which Majestic said put it on track to hit its £500m sales target by 2019, and kept it on course with current market expectations.

Interim dividend has been increased by a third to 2p per share.

It is expecting full-year results to be in line with current expectations.

Why it's interesting

With the profitable turn, Majestic is now setting its sights on ramping up growth, with boss Rowan Gormley saying now was the time "to put our foot on the gas".

Looking ahead, the firm is planning to increase the rate of sales growth in the medium-term, by gradually upping investment in new customer acquisition.

Gormley told City A.M.: "There's an assumption that Majestic is a boring old retailer that's not going anywhere, but we can build the customer base and build customer loyalty."

"The supermarkets have retreated to the cheap end to compete with Aldi and Lidl, so there's very few people looking after the people who want to spend £6-£10 a bottle, which is largely who we cater for."

In August, Majestic said store managers will start getting a bigger cut of what their branch makes, as it rolled out a "franchise-lite" model to give staff more control, and more incentives.

Under the plans, the managers of Majestic Wine branches will get the chance to become partners, giving them greater control over the day-to-day running of stores. It expects that programme to reach around half of its 210 branches over the next year.

Following yesterday's Budget announcement that alcohol duty will be frozen, Gormley said: "Father Christmas Phil came through with a last minute Christmas present for the consumers. It would have been rather Scroogey to put duty up again."

He added that he supported a minimum pricing approach, similar to what the Scottish government is doing, rather than a duty.

What the company said

Rowan Gormley, chief executive, said:

Two years in and profits are growing, our foundation is solid and we are ready to accelerate growth. We have the opportunities to invest in new customers and a team excited to focus on what they do best. It's time to put our foot on the gas.

In this half, Naked Wines has demonstrated the quality of its model, people and management, by achieving profitability in all three geographical markets. It has become a disciplined business committed to continuous improvement.

The focus on empowering our wonderful store teams in Majestic Retail has finally borne fruit, with improved staff engagement flowing through into improved customer engagement, which means improved loyalty and retention.

Read more: Winers: English and Welsh wine industries call for Budget duty freeze

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