REG - Naked Wines PLC - Final Results
28/08/2024 07:00
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RNS Number : 8942B Naked Wines PLC 28 August 2024
28th August 2024
Naked Wines plc
("Naked Wines" or "Group")
Full year results for the 52 weeks ended 1 April 2024
Focus moving to growth
Naked Wines is pleased to announce its full year results for the 52 weeks
ended 1 April 2024 (FY24).
FY24 highlights:
● Total sales of £290m, (18)% year-on-year ((13)% on a 52-week
comparable basis(1))
● Adjusted EBIT(1) of £5.0m (FY23 52-week comparable: £14.9m), at
the upper end of guidance range of £2-6m
● Statutory loss before tax of £16.3m (FY23: loss before tax
£15.0m) driven by non-cash goodwill impairment and inventory provision
charges of £12.2m (FY23: £28.4m)
● Inventory reduced by £13m to £132m (FY23: £145m), net £13m
provision (FY23: £11m)
● Net cash excluding lease liabilities(6) of £20m (FY23: £10m),
above guidance range of £5-15m
Post year end:
● New credit facility completed with PNC providing additional
liquidity and fewer operating constraints
● Q1 trading broadly in line with expectations
Group financial summary(1):
FY24 FY23 FY24 vs FY23 52-week comparable FY24 vs FY23 52-week comparable(2)
Total revenue(3) £290.4m £354.0m (18)%
Total adjusted revenue(3) £288.5m £350.9m (18)% £333.4m (13)%
New £23.6m £26.9m (12)% £25.2m (6)%
Repeat £264.1m £320.7m (18)% £305.2m (13%
Other £0.8m £3.3m (76)% £3.0m (73)%
Investment in New Customers £(23.3)m £(21.4)m 9% £(20.0)m 17%
Repeat Customer contribution £65.3m £86.5m (25)% £81.7m (20)%
Other contribution £(0.7)m £0.3m (333)% £0.2m (450)%
( ) £(36.3)m £(48.0)m (24)% £(47.2)m (23)%
General and administrative costs
excluding adjusted items(4)
Operating general and £(35.9)m £(41.1)m (13)% £(40.3)m (11)%
administrative costs
Share-based payments £(0.4)m £(1.5)m (73)% £(1.5)m (73)%
Marketing R&D - £(5.4)m n/a £(5.4)m n/a
Memo: statutory general and £(37.9)m £(53.1)m (29)%
administrative costs
Adjusted EBIT(5) £5.0m £17.4m (71)% £14.9m (66)%
Adjusted items(5) £(16.8)m £(31.6)m (47)%
Statutory operating loss £(11.8)m £(14.3)m (17)%
Net finance costs including loss on £(4.5)m £(0.7)m 643%
early redemption of the vendor loan
note
Statutory loss before tax £(16.3)m £(15.0)m 9%
Net cash excluding lease liabilities(6) £19.6m £10.3m 90%
Net assets £76.8m £98.7m (22)%
Inventory (including that under £144.9m £165.7m (13)%
staged payments)
Notes:
1) In addition to statutory reporting, Naked Wines reports alternative
performance measures (APMs) which are not defined or specified under the
requirements of UK-adopted international accounting standards. The Group uses
these APMs to improve the comparability of information between reporting
periods by adjusting for certain items which impact upon IFRS measures to aid
the user in understanding the activity taking place across the Group's
businesses. Definitions of the APMs used are given at the end of this
announcement.
2) Constant currency basis using current period FX rates for the translation
of the comparative period.
3) Refer to the reconciliation of reported performance to management adjusted
basis in the APM section at the end of this announcement for a reconciliation
of total revenue to total adjusted revenue.
4) Refer to the reconciliation of general and administrative (G&A) costs
in the APM section at the end of this announcement for a reconciliation of
G&A costs shown here to those reported in the income statement.
5) Refer to the reconciliation of reported performance to management adjusted
basis in the APM section at the end of this announcement for a reconciliation
of adjusted EBIT to operating loss (reported EBIT).
6) The amount of cash held less borrowings at year end excluding lease
liabilities.
Operational KPIs and Customer APMs:
Operational KPIs FY24 FY23
5* customer service 92% 92%
Product availability 91% 90%
Buy it again 91% 90%
Customer APMs FY24 FY23 FY24 vs FY23
Repeat Customer sales retention(1) 75% 76% (100)bps
Repeat Customer contribution margin 24.7% 27.0% (230)bps
Active Angels in last 12 months 723,000 867,000 (17)%
Year Forecast Payback(2) 1.3x 1.7x (0.4)x
Realised Year 1 Payback(3) 40% 39% 100bps
Notes:
1) Sales retention calculated on a 52-week basis
2) Forecast payback includes estimated value from non-Angel subscribers
recruited in the period. FY23 payback is latest forecast, original forecast
1.5x.
3) Realised Year 1 Payback is the average of Year 1 Paybacks observed for
cohorts reaching their first anniversary in the last 12 months
Rowan Gormley, non-Executive Chairman, said:
"We're making real progress turning things round. Now that the team has
addressed the cost base and liquidity issues, we can focus our attention on
the big prize…restoring Naked Wines to profitable growth. With a new
invigorated team looking at the challenge with a fresh perspective, I feel
confident that we will see Naked fulfil its potential to revolutionise the DtC
wine market"
Rodrigo Maza, CEO, said:
"I am honoured to lead Naked Wines into its next chapter and our new team is
fully focused on returning Naked to profitable growth. Over the past few
months, we have made significant strides by strengthening our financial
foundations, embedding resilient management practices, and importantly,
crystallising a robust customer proposition. This proposition not only drives
our mission to enable independently-minded wine drinkers to enjoy great wine
without the guesswork but ultimately ensures long-term engagement and a
competitive advantage."
Guidance and outlook:
Our view on headline FY25 metrics is as follows:
FY25
Revenue £240 - £270m
Revenue trend (%) (16)% - (4)%
Repeat contribution £54 - £65m
New customer investment £(22) - £(25)m
G&A £(29) - £(31)m
Adjusted EBIT excluding inventory liquidation £3 - £8m
Inventory liquidation losses £(2) - £(5)m
Adjusted EBIT including inventory liquidation £(2) - £6m
Finance charges £(1.5) - £(2)m
Closing net cash excluding lease liabilities £25 - £35m
Notes:
1) This guidance is provided based on FX rates of 1 GBP = 1.27 USD and
1.85 AUD
Analyst and investor conference call:
Naked Wines plc will host an analyst and investor conference call at 9am BST
on 28th August 2024. The briefing will be webcast using the following link:
Naked Wines Full Year 2024 Results | SparkLive | LSEG
(https://sparklive.lseg.com/NakedWines/events/7264b795-5b99-4238-b77a-da35a0730319/naked-wines-full-year-2024-results)
A recording will also be made available on the Results section of our investor
website shortly after the conference call.
For further information, please contact:
Naked Wines plc IR@nakedwines.com (mailto:IR@nakedwines.com)
Rodrigo Maza, CEO
James Crawford, CFO
Catherine Miles / Libby Bundock
Investec (NOMAD & Joint Broker) Tel: 0207 597 5970
David Flin / Ben Farrow
Jefferies (Joint Broker) Tel: 0207 029 8000
Ed Matthews / Harry le May
Instinctif (Financial PR) Tel: 07917 178 920 / 07825 189 696
Guy Scarborough / Julian Walker
About Naked Wines plc
Naked Wines is not just an online wine retailer; we're trailblazers on a
mission to enable enthusiastic wine drinkers to enjoy great wine without the
guesswork.
Founded in 2008, on the pillars of quality, choice and fair pricing, we set
out to create the most inclusive wine club in the world - dedicated to
transforming the wine-buying experience and empowering people to make their
own wine choices, and championing world-class independent winemakers. We've
proudly been delivering outstanding wines to our customers (who we call
Angels) for over 15 years.
Our business model is simple yet innovative: Naked Wines funds the production
costs for winemakers upfront, allowing them to focus on creating exceptional
wines without the financial burdens of traditional wine production, while
passing the resulting savings back to our customers.
The virtuous circle is a win-win for both wine lovers and winemakers, and
enables us to deliver superior benefits to our customers:
- Better quality wine
- More choice
- Personalised wine recommendations
- Elimination of guesswork and uncertainty
- Fair payments for all involved
Our customers have direct access to 299 of the world's best independent
winemakers and over 2,500 quality wines from 23 countries. In the last
financial year, we served more than 723,000 Angels in the US, UK and
Australia, making us a leading player in the fast-growing direct-to-consumer
wine market.
For more information visit nakedwines.com (http://nakedwines.com) or follow us
@nakedwines (https://www.instagram.com/nakedwines) .
Chairman's letter
I am pleased to report that your company is in much better shape than it was a
year ago, and that we have made substantial progress in returning Naked to
profitable growth.
This is not immediately apparent from the trading results which, although in
line with expectations, reflect the company we were, rather than the company
we are starting to become.
A tumultuous year
You will be painfully aware that Naked's prospects and share price have
suffered post-COVID, and as a result, I rejoined the Company as Chairman in
July 2023. It quickly became apparent that we needed to make some big changes
very quickly.
● Board composition:
o David Stead and Melanie Allen stood down from the Board. We thank them
both for their service;
o Jack Pailing joined the Board as a non-Executive Director - Jack has made
a very valuable contribution and we value his input; and
o We parted company with our CEO, Nick Devlin, and I stepped in as Executive
Chairman while we conducted a search for a new CEO. More on this below.
● Guardrails
To get Naked turned around, and quickly, we agreed a series of "guardrails" to
reduce trading volatility, support profitability and provide clarity on our
objectives. These guardrails are:
o Limit general and administrative costs to around 11% of revenue;
o Maintain Investment in New Customers at £23m to £27m per annum through
to March 2026 - enough to rebuild growth, with further growth to come from
increased efficiency rather than increased spend;
o Allocate capital in a rational way, including serious consideration of
share buybacks when the liquidity outlook improves; and
o Drawing a line under our overstocking issues and allowing us to get back
to profitable growth for key winemaker partners.
Foundations laid
We have spent the last six months laying a solid foundation for the future on
three fronts:
1. New management team;
2. Clearing the problems of the past; and
3. Creating a platform for the future,
New management team
We wanted to find a CEO who combined the strategic clarity required to
navigate a challenging period, the leadership skills to galvanise our team and
the humility to recognise what makes Naked Wines special and to build on that.
After a thorough search, we found that person in Rodrigo Maza (Maza to his
friends). We had the benefit of knowing Maza for a few months in his capacity
as MD of our UK business and I have worked alongside him as CEO Designate for
the past few months. I am delighted with what I see.
In addition to Maza, we have recruited Paul Calandrella to run our US
business. Paul's background is as a General Manager in REI and Amazon, and
most recently as CEO of a B2C startup. This experience gives him some strong
insights which I look forward to seeing him bring to bear at Naked.
Clearing the problems of the past
Work here has focused on three areas:
1. New credit facility and revisions to capital structure;
2. Reducing the cost base; and
3. Right-sizing inventory.
Our CFO, James Crawford, covers our funding position in detail in his review
so I won't duplicate that, except to say that Naked Wines is a well
capitalised business - but too much of our capital is still tied up in
inventory. We now have a banking facility which provides additional liquidity,
and which is sufficient to fund us through a severe but plausible downside.
On the cost base, our goal was to get costs down and to reallocate resources
to areas where we needed more depth. We have done both of those and the end
result is a business with operating general and administrative (G&A) costs
£5m lower than 12 months ago AND properly resourced to drive profitable
growth.
The inventory issue we faced requires some context. At the height of COVID,
the team in place at the time entered into a number of contracts assuming that
COVID levels of demand would persist for an extended period. This proved to be
an incorrect assumption, which took an unhelpfully long time for the team to
recognise and remedy.
This has been compounded by a US bulk market that has the highest oversupply
ever recorded. There are several reasons behind this, the main one being that
the US has had three harvests in a row without the usual natural disasters of
floods, drought, fire and frost. This has meant that Naked's ability to sell
off surplus inventory in the bulk market has been severely hampered.
What we have done about it
1. We have stopped the problem getting worse - we have negotiated with our
suppliers to reduce or cancel shipments to stop new wine coming in. We have
done this intelligently to ensure that we can maintain a competitive range and
support our strategic suppliers.
2. We have set up a separate team with the sole focus of clearing the surplus
through third-party sales.
3. Where we can do so, we are taking the opportunity to increase volumes
through our own channels, at lower margins, without cannibalising our core
proposition.
The good news in all of this is that the inventory is high quality and almost
all from the winemakers we expect to keep working with for the long term.
Where we have not seen a path to selling inventory before it is likely to
deteriorate, we have bitten the bullet and cleared or written off that
inventory.
I would like to thank our winemakers for their continued support through this
process. While the results of a lot of our work remain to be seen, gross
inventory (i.e. before any provisioning) has dropped 10% during FY24 and we
expect it to continue to fall significantly during FY25.
Creating a platform for the future
I have had a unique opportunity of rejoining a company I know well, after a
period of absence, and to work with a new team who are seeing the inside of
the business for the first time.
This combination has enabled us to get a degree of strategic clarity which is
hard for an incumbent team to achieve.
Maza has covered this in greater detail in his section, but the key insights
are:
● The path to maximising shareholder value lies in delivering
sustainable long-term profitable growth;
● The key to doing that is driving growth through higher retention -
customers stay longer and spend more, plus high retention makes individual
customers more valuable and therefore easier to acquire economically; and
● The key to achieving higher retention is to:
o Build on the competitive advantage of our model - £ for £ we can make
better wine than our competitors because we can fund exceptional winemakers;
o Pivot to personal - expanding our addressable market by tailoring our
proposition to a wider audience; and
o Fundamentally rethink how we demonstrate Naked's value proposition to
current and prospective customers.
The last of these points is very important. Over the years we have over-relied
on discounts, vouchers and coupons to attract new customers. Ironically, the
reason our loyal customers choose to remain loyal is none of those - it is
because we deliver great wine without the guesswork.
It is time for us to recognise that and invest the time and money required to
reorient our customer acquisition around our unique competitive advantages.
This will be hard, there are sure to be setbacks, but I am confident that it
can be done and we have the team to do it.
Lastly, I would like, on behalf of the whole Board, to extend our gratitude to
our CFO James Crawford. As announced last month, he has informed the Board
that he is stepping down as Chief Financial Officer and as a Director of the
Company in the autumn of 2024. This timing is consistent with the arrangement
agreed with James when he rejoined the Board as CFO in 2022. James has
accomplished his goal of stabilising Naked's liquidity position and adjusting
the cost base to reflect a post-COVID environment. We are deeply grateful to
James for the huge contribution he has made in growing Naked from a £40m
revenue business to a £290m revenue business and wish him the very best in
his future endeavours.
Rowan Gormley
Chairman
Chief Executive's review
I am excited and honoured to be appointed as the CEO of Naked Wines.
I could see the potential of this company before I joined, which led me to
make the leap to wine after a 17-year career in the beer industry. I could see
it during the time I acted as the UK Managing Director, when I was impressed
by the engagement customers have with our brand, the strength of our
relationships with amazing winemakers and the intense commitment of the team
to our mission. And I can see it now as I step into the CEO role.
In my opinion that potential stems from turning our strengths - our scale, our
US business structure, our high-quality and good-value wines, our unique
relationships with our winemakers and the high levels of loyalty from our
long-term customers - into enduring and ownable competitive advantages.
Having worked very closely with Rowan these past months, I've gained extremely
valuable insights and perspectives on the business and developed a shared
understanding with him and the Board as to what success looks like and the
strategy we'll follow to achieve it. It won't be easy but that alignment gives
me a lot of confidence as I embrace the challenge of getting Naked to reach
its full potential.
My priorities
I want Naked Wines to be the most admired company in our industry. It's a bold
ambition that will require us to have removed our liquidity constraints, to
build a brand that does justice to the engagement customers have with our
company, to partner with independent winemakers to amplify our portfolio and
to get the absolute best out of an incredibly talented team. The bad news is
that all these things will take time to build. The good news is that we have
a strong foundation from which to do so.
My priorities, as the CEO of the Company, are:
1. Ensuring robust foundations
Naked has had to undergo significant changes to manage the impact of the
post-COVID decline.
We have completed a lot of this work through significantly reducing our costs,
landing a fit-for-purpose banking facility and accelerating the sale of
surplus inventory in the US.
Our operating G&A costs (plus share-based payment charges) for FY25 will
be £6m lower due to a sizeable restructure of the organisation executed in
January 2024. While it's never pleasant to go through this, the process
resulted in a flatter organisation that's moving at a much higher speed, with
resources allocated to underinvested opportunities while creating space for
up-and-coming talent to develop into.
Our CFO, James Crawford, and his team have worked hard to deliver a banking
facility that matches Naked's needs. James will cover the detail in his
review, but the new facility we have agreed with PNC will provide much needed
stability for our company moving forward. I'd like to thank our finance team
for their effort and hope that the trust from both our shareholders and our
suppliers is enhanced by this development.
Finally, as Rowan mentioned, we've also set up a team in the US exclusively
focused on secondary market sales to accelerate the clearance of our surplus
inventory and, by doing so, quickly shrink the inventory on the balance sheet
saving us significant annual storage costs and derisking the implications of
any changes to our future outlook.
2. Proud to be Naked
I've also used the time I've had here to establish a new team at the helm of
Naked's ship.
I'm excited to partner with exceptional leaders on this journey, with some of
them taking on expanded responsibilities within the Company and others joining
to provide an outside perspective on how to tackle the challenges ahead. We're
all ambassadors of an incredible culture and share ambitious dreams while, at
the same time coming from very different backgrounds, both personally and
professionally. That's a powerful combination in my experience, and I'm very
happy to have this truly remarkable team in place in such a short space of
time.
Through our "Proud to be Naked" initiative we've set the foundations for a
high-performance culture to be adopted and embraced at Naked Wines with
absolute clarity on the following:
● The North Star Metrics everyone across the business should focus
on which will remain fixed throughout the year while we'll stay flexible
around the means to deliver them using the OKR methodology (which
facilitates alignment and autonomy);
● The transformation projects we're putting in place to upgrade key
customer touchpoints and ensure their experience with Naked is not only
world-class but significantly differentiated in the market, driving our
growth;
● The performance assessment process we'll follow, which considers
the results every member of the team is producing, their alignment with our
five Naked behaviours and the engagement of their teams (for those with
management responsibility); and
● An incentive plan providing a balance between reward across
near-term delivery of the performance metrics that will put us on the path to
growth and a significant value opportunity in the medium term if we achieve
significant share price appreciation.
The response that the Naked team had to these changes has been extremely
positive. Understanding our objectives and strategy, as well as how they'll be
developed and rewarded by the Company, has resulted in palpable energy and
excitement.
While growth is our main priority, we're also working on strengthening our
relationships with winemakers. These past few years have not been easy for
them, and we're truly grateful for their trust and continued support. We've
recently launched our "Winemaker Success" programme, aimed at developing our
partnership with winemakers by working together to deliver shared sales,
marketing and operations objectives. It has been positively received by
winemakers so far and it'll continue to evolve as we build it with them.
3. Get Naked back to growth
With the foundations in place and the team recruited, aligned and
incentivised, we are focusing on getting the Company back to growth, which
we'll achieve through the following areas:
Customer value proposition
While established customers often demonstrate high engagement and loyalty to
Naked, we haven't effectively communicated the value the Company delivers
them. We need to deliver a succinct summary of why we're different from other
players in the market through the consistent presentation of a trusted and
well-known brand. After months of intense effort, we now have a clear value
proposition - "enjoy great wine without the guesswork" - that distils how our
business model, technology and service policies remove the guesswork and
anxiety that wine drinkers face in traditional shopping channels. We're
working at pace to present this across every customer touchpoint we have.
Customer acquisition
We want to recruit the right customers, for the right reasons, into the right
relationships. That has required us to crystallise who our target audience is,
test how our value proposition should be presented, reevaluate our channel
mix and redesign the site experience for new customers. On the last two
points, certain channels have been very successful for Naked in the past,
which has resulted in the Company being too leveraged on some of them (e.g.
vouchers) while underinvesting in others (e.g. earned media). We're working on
redefining what an ideal channel mix looks like while gradually reallocating
resources to bring it to life. And we've set up a customer journey from our
home page that matches customers to the right type of subscription based on
how confident they feel when shopping for wine. This work should result in
improved paybacks on customer recruitment as we will reduce discounts to
customers who aren't interested in a long-term relationship with us, while
improving customer retention in those that do subscribe as customers will
have the right relationship with us from day one.
Customer retention
A significant percentage of the customers Naked acquires leave shortly after
joining, with many of them having never truly experienced our value
proposition. As stated above, we're completely redefining our onboarding
experience to ensure new customers can quickly appreciate the unique value of
Naked, encouraging them to stay longer. We're simultaneously implementing a
new approach to our communication with existing customers, moving from
promotional-driven messaging to engaging content that Naked, because of its
unpretentious approach to wine and its genuine connection with unbelievable
winemakers, is in a unique position to deliver. This work should result
in sustained improvements of our Lifetime Value (LTV). Delivering
improvements in these areas is no small feat, and we've hired experienced
professionals to guide us through this journey.
Translating actions to value
While I have absolute confidence that we are driving the right priorities to
deliver long-term value, it's important to mention that some metrics might
deteriorate before they improve. We're going to be running a significant
number of experiments as we search for the levers that, when pulled
effectively, result in sustainable, profitable growth. Some of them won't work
as anticipated and, if that happens, payback and/ or customer sales retention
KPIs may be impacted. We'll be open and transparent in sharing what's working
and what isn't, the effect this is having on our business and what we believe
the progress means for the long-term trajectory.
We start FY25 with robust foundations, with our overhead costs reduced and a
new banking facility and additional liquidity in place. Commercially, we have
clear goals, strategies in place to achieve them and a motivated team that's
fully committed to their delivery. We're in an ideal position to get the
Company growing again, and while I'm confident we can achieve just that, the
possibility of it not happening exists. So I want to make it clear to our
shareholders that, should that scenario materialise, I'll be proactive in
looking for the inorganic opportunities that deliver the highest return on
your investment, and ask for your patience while we seek to grow the value of
your Company organically in the near term. I am deeply appreciative of the
Long-Term Incentive Plan (LTIP) structure and awards our Remuneration
Committee developed to incentivise me and the entire Naked team to drive
long-term value and am committed to maximising its impact to the benefit of
our shareholders.
Rodrigo Maza
Chief Executive Officer
Financial review
Income statement
As reported 52-week comparable
FY24 FY23 YoY FY24 FY23 YoY
£m £m % £m £m %
Revenue 290.4 354.0 (18)% 288.5 333.4 (13)%
Cost of sales (178.5) (205.7) (13)% (171.2) (166.7) 3%
Fulfilment costs (54.5) (68.2) (20)% (54.6) (78.0) (30)%
Gross profit pre inventory provision 57.4 80.1 (28)% 62.7 88.7 (29)%
Inventory provision(4) (2.4) (10.3) (77)% (2.4) (10.3) (77)%
Contribution(1) 55.0 69.9 (21)% 60.3 78.4 (23)%
Advertising costs (19.0) (17.7) 7% (19.0) (16.3) 17%
General & administrative costs (37.9) (53.1) (29)% (36.3) (47.2) (23)%
Analysed as:
Operating general and administrative costs(3) (35.9) (41.1) (13)% (35.9) (40.3) (11)%
Marketing R&D
Share-based payments - (5.4) n/a - (5.4) n/a
Software as a Service costs(4) (0.4) (1.5) (73)% (0.4) (1.5) (73)%
Restructuring costs(4) (0.1) (2.3) (96)%
Other adjusted items(4) (1.3) (1.5) (13)%
(1.3)
(0.2)
(85)%
(37.9) (53.1) (29)% (36.3) (47.2) (23)%
Impairments(4) (9.9) (18.2) (46)%
Profit on disposal of asset held for sale(4) - 4.8 n/a
Operating (loss)/profit(5) (11.8) (14.3) (17)% 5.0 14.9 (66)%
Analysed as:
Adjusted EBIT 5.0 17.4 (71)%
Adjusted items (16.8) (31.6) (47)%
Operating loss (11.8) (14.3) (17)%
1. Contribution is disclosed as gross profit in the Income statement.
2. Refer to the table in the APM section at the end of this announcement for a
reconciliation of reported to 52-week comparable performance.
3. Refer to the table in the APM section at the end of this announcement for a
reconciliation of G&A costs to those reported in the income statement.
4. Refer to note 6 Adjusted items for further details.
5. 52-week comparable figures do not represent statutory operating profit
amounts.
Overview
During FY24 the actions we have been taking to drive liquidity and
profitability, and the guardrails we have put on how we will operate, were
demonstrated in our financial performance. With net cash excluding lease
liabilities of £19.6m, having broadly doubled year-on-year, a lower cost base
supporting ongoing improved profitability (at the adjusted level) and reducing
inventory, our confidence that we are moving through our challenges is
increasing. However, having operated the business in line with our pivot to
profitability plan in FY23, the last year has also seen the impact of lower
customer recruitment, and the consequent reduction in the size of the
business, become clear in the Group's financial performance.
Revenues are 18% lower, Repeat Customer contribution is 25% lower and, as a
result, adjusted EBIT is 71% lower. Lower sales result in slower use of
inventory, which remains high versus long-term trends at £145m (including
advance payments to winemakers and net of a £13m provision balance) as
historic commitments continue to arrive. And we have borne a range of sizeable
charges reported as adjusted items totalling £16.8m, relating to the
restructuring we have undertaken on the weaker outlook for the business.
Together, this has resulted in a statutory operating loss of £11.8m, 17%
lower than the reported operating loss in the previous year of £14.3m.
FY24 basis of comparison
While FY24 has been a "normal" 52-week year, the comparator year in FY23
contained 53 weeks, which we use periodically to allow our trading periods to
always align with weeks of the year. Exchange rates, while relatively stable,
have changed with the average USD translation rate for revenues of 1.2570 in
FY24 versus
1.2063 in FY23. And we have continued to make disposals of excess inventory as
bulk commercial sales. Given these complexities, we offer two comparators to
provide insight into the trading trends in the business:
1. Reported to reported, as shown on the face of the financial statements; and
2. Comparable 52-week basis with all foreign currency balances translated
at FY24 rates, the impact of week 53 removed from the FY23 comparator and
provisioned inventory sales removed and reported net within adjusted items.
See the reconciliation of reported results to 52-week comparable figures at
the end of this announcement and note 6 Adjusted items for further
information.
The key drivers of the difference between these measures are as follows:
Reconciliation of reported results to 52-week comparable figures
FY24 FY23
Operating loss/EBIT Operating loss/EBIT
Revenue £m Revenue £m
£m £m
Reported 290.4 (11.8) 354.0 (14.3)
Adjusted items (1.9) 16.8 (3.1) 31.6
Adjusted 288.5 5.0 350.9 17.4
Less: 53rd week - - (7.2) (1.1)
Translation to FY24 FX rates - - (10.3) (1.4)
52-week comparable 288.5 5.0 333.4 14.9
1. The EBIT impact of the 53rd week of £1.1m is at a contribution level and
does not include an apportionment of fixed costs borne across the financial
year.
Drivers of Group P&L performance
In FY24 total revenue declined by 18% to £290m. On a comparable 52-week
basis, this was a 13% decline. This largely reflects an Active Angel number
decline to 723,000, a 17% decrease compared with FY23 with a corresponding
drop in sales to repeat customers of 13% on a comparable 52-week basis ((18)%
on a reported basis).
On a statutory basis, gross profit has declined by 21% to £55.0m from
£69.9m, including a net additional inventory provision charge of £2.4m
(FY23: £10.3m). Repeat Customer contribution of £65.3m has reduced by 20% on
a 52-week comparable basis and 25% reported. This trend is driven by a
reduction in Repeat Customer sales due to lower Angel numbers and a reduction
in Repeat Customer contribution margins which have moved from 26.8% in FY23 to
24.7% in FY24 on a comparable 52-week basis. This reduction reflects the
challenge of the business shrinking - with fixed warehousing costs being
amortised over fewer orders, ongoing high stock levels driving high storage
costs and the impact of some aggressive discounting undertaken to liquidate
excess inventory.
Investment in the acquisition of new customers in the year grew 17% to £23.3m
on a comparable 52-week basis (up 9% on a reported basis), broadly consistent
with the £25m "guardrail" investment level. Investment economics have
remained challenging with LTVs suppressed by lower Repeat Customer
contribution margins and cost per new member inflated by poor conversion of
marketing to new memberships.
General and administrative (G&A) costs of £37.9m were 29%, or £15.2m,
lower than the prior year. Analysed further (see reconciliation of G&A
costs in the APM section at the end of this announcement for a full
reconciliation), operating G&A costs were £36m, a reduction of 11% on a
52-week comparable basis. During the year we undertook a further restructuring
and cost reduction programme, the result being that we expect G&A to
reduce further in FY25.
Share-based payment charges (including associated social security costs) for
the year totalled £0.4m, significantly reduced from £1.5m in FY23 due
to the reduction in workforce and the phasing of costs for the transition
award in FY23 being weighted early due to the vesting schedule.
We eliminated our marketing R&D programme in the year (FY23: £5.4m) with
all new customer recruitment spending now included in our overall marketing
costs and payback calculations.
The net of the above factors resulted in adjusted EBIT of £5.0m, down from
£14.9m on a 52-week comparable basis (£17.4m on an adjusted 53-week basis).
Refer to the FY24 basis of comparison above and the reconciliation of
reported results to 52-week comparable figures at the end of this
announcement. The reduction versus FY23 can be summarised as:
FY23 to FY24 adjusted EBIT bridge
£m
FY23 adjusted EBIT 16.0
Less: week 53 impact (1.1)
52-week adjusted EBIT 14.9
Change in Repeat Customer contribution (16.4)
Increase in New Customer investment (3.3)
Change in other contribution (0.9)
Reduction in operating G&A costs 4.4
Reduction in share-based payment charge 1.1
Marketing R&D spend 5.4
FY24 adjusted EBIT 5.0
The Group's reported operating loss of £11.8m reflects the impact of £16.8m
of costs relating to adjusted items, the key components of which are set out
in the table below.
Key adjusted items
£m
FY24 Inventory provision charge (6.7)
Release of FY23 inventory provision 4.3
Net movement in US inventory provision (2.4)
Losses on provisioned inventory disposals (2.8)
Bad debt (0.2)
Impairments (9.9)
Restructuring costs (1.4)
Software as a Service investment (0.1)
For further analysis of the drivers of the current year inventory provision,
refer to the inventory outlook and action plan section below.
Impairment charges have been recognised in, principally, the US business
segment as well as Australia, as a result of reduced future trading
expectations. The US charge predominantly represents impairment of the
remaining acquired goodwill allocated to this business unit as well as
impairment of other intangible assets. Impairment in the Australian segment
largely relates to right-of-use assets.
Refer to note 6 Adjusted items for further details of all of these items.
These are adjusted as they are either material one-time charges we do
not expect to be repeated or they are non-trading related. We feel that
treating them as adjusted items provides clarity of these non-recurring events
and also a more comparable view of business trading performance.
Interest charges totalled £2.0m in the year, being the net of interest earned
on cash balances and the Majestic Wine vendor loan note prior to disposal, and
charges relating to the asset-backed lending facility with Silicon Valley Bank
and interest on right-of-use assets.
The Group's statutory effective tax rate of (27.7)% is substantially driven by
the distortionary impact of the non-tax recoverable impairment charge reported
in the year and the net impact of changes to deferred tax recognition. Current
tax of £1.3m was driven by profitable trading in the US and Australia,
including the impact of material non-deductible temporary timing differences
in the US relating to the inventory provision and 'UNICAP' inventory tax
adjustments, partially offset by corresponding deferred tax credits as set out
above.
New and repeat customers and our subscription KPIs
Note: commentary in this subsection is given on a comparable 52-week basis.
Summary new and repeat performance analysis
52-week comparable
FY24 FY23 YoY
£m £m
New Customer sales 23.6 25.2 (6)%
Investment in New Customers (23.3) (20.0) 17%
Repeat Customer sales 264.1 305.2 (13)%
Repeat Customer contribution 65.3 81.7 (20)%
Repeat Customer contribution margin 24.7% 26.8% (210)bps
Other revenue 0.8 3.0 (73)%
Other contribution (0.7) 0.2 (450)%
KPIs
Repeat Customer sales retention 75% 76% (100)bps
Active Angels 723,000 867,000 (17)%
5-Year Forecast Payback 1.3x 1.7x (0.4)x
Year 1 Payback 40% 39% 100bps
See the APM section at the end of this announcement for definitions of
alternative performance measures and reconciliations to statutory reported
figures.
New customers
Investment in New Customers was £23.3m, up from £20.0m in FY23. This
increase reflects our desire to invest at a consistent level of around £22-
£25m to reduce volatility in the business, in particular the supply chain.
Our 5-Year Forecast Payback, which is the ratio of projected future Repeat
Customer contribution we expect to earn from new customers recruited in the
year, over the investment spend related to acquiring those new customers, was
1.3x (FY23: 1.7x reported). The deterioration in this number was due to
significantly higher costs of recruiting each new member, despite an uplift of
10% in the forecast value of each member.
The uplift in cost per member is attributable to:
1. The proportion of new memberships derived from our internal data sources
e.g. reactivation of old members being significantly lower as we had generated
significant value from this source during FY23, resulting in a smaller pool of
potential new members; and
2. Lower conversion of our marketing materials into site traffic and first
orders in the partner channel. The root cause of this change is unclear and,
as Maza has stated, we have a number of projects underway to test new
approaches and rectify the trend.
We continue to assess that the business needs to be delivering at or above a
2x payback target to create value, and have invested at suboptimal returns as:
● Our reducing scale leads, in the near term, to lower efficiency in
our fulfilment operations which contain a significant level of fixed costs. As
such the marginal cost of each incremental order we generate is significantly
lower and the profitability higher, and we consider it rational to drive these
incremental orders; and
● With significant amounts of excess inventory, the cash profile of
each order we generate is higher than the contribution of the order (which is
the basis of our payback calculations). For as long as we are reducing
inventory, this effect means cash paybacks are significantly higher than our
payback measure suggests.
Repeat customers
Repeat Customer sales were £264.1m, a 13% decrease versus the prior year.
With Angel numbers continuing to decline this represents an increase of 4% in
sales per member.
Our Repeat Customer sales retention, which is the proportion of sales made to
customers who met our definition of repeat last year and placed orders again
this year, was 75% (FY23: 76%). Sales retention is driven by a combination of
customer retention and the change in sales per Angel year-on-year. The decline
in FY24 is driven by a 10% decrease in growth in sales per Angel, offset by a
6% increase in Angel retention.
Repeat Customer contribution margins have decreased further in the year from
26.8% to 24.7%. Whereas last year we saw margin compression due to fulfilment
cost increases, this year the driver was at the gross margin line which
reduced by 2.1pps. This can be analysed as:
● Deep-discount stock liquidation 1.0pps
● Mix shift away from the US 0.6pps
● UK supplier failure 0.2pps
●
Other
0.3pps
Our Year 1 Payback for the year, which is the contribution realised in this
financial year from repeat customers recruited in the prior financial year,
divided by the investment made in the prior year recruiting those customers,
was 40% (FY23: 39%) reflecting the higher payback we forecast on FY23
investments versus FY22 (1.7x versus 1.5x respectively).
Other revenue and contribution
Other revenue and contribution in the US reflect commercial disposals of
excess inventory at above cost. Disposals below cost are combined with
provisioning charges and shown as adjusted items.
Detailed analysis of each geographic segment and a full reconciliation of
reported results to 52-week comparable figures can be found in the APM
section at the end of this announcement.
Cash flow drivers
Following two years of significant cash outflows, as the business built
inventory due to historic commitments being far in excess of realised demand,
FY24 was the year where we turned the corner. During the year, the Group's net
cash excluding lease liabilities balance increased by £9.3m. The drivers of
this are:
Cash flow analysis
£m
Operating loss (11.8)
Add back: depreciation and amortisation 3.0
Add back: other non-cash amounts(1) 2.5
Add back: impairments 9.9
Change in inventory 14.9
Change in payables (3.4)
Change in Angel funds and other deferred income (1.8)
Other working capital movements (5.5)
Operating cash flow 7.8
Tax and net interest paid (4.5)
Capital expenditure (1.1)
Proceeds from early redemption of the vendor loan note 9.0
Repayments of principal under lease liabilities (2.0)
Movement in net cash excluding lease liabilities 9.2
Opening net cash excluding lease liabilities 10.3
Movement in net cash excluding lease liabilities 9.2
FX 0.1
Closing net cash excluding lease liabilities (2) 19.6
1.Other non-cash amounts is made up of movement in the US segment inventory
provision (£2.3m), share-based payment charge (£0.4m), loss on disposal of
fixed assets (£0.2m) and gain on early termination of leases (£0.4m).
2.See the APM section at the end of this announcement for a reconciliation of
net cash excluding lease liabilities to balance sheet captions.
The Group generates over 50% of its revenues from international operations. As
a result, the year-end balance sheet is subject to the impact of changes in
exchange rates as well as underlying movements. As shown in the table below,
reducing Angel deposits (due to fewer Angels) and lower outstanding payables
balances (due to less stock purchases) all contributed to the cash usage in
the year, offset by a reduction in inventory balances.
Key balance sheet items (£m)
Impact in the year
FY23 FX Net movement in non-cash inventory provision Underlying movement FY24
Net cash excluding lease liabilities 10.3 0.1 - 9.2 19.6
Inventory including advances to winemakers 165.7 (3.5) (2.4) (14.9) 144.9
Angel funds and other deferred income (71.3) 1.2 - 1.8 (68.3)
Trade and other payables(1) (42.4) 0.3 - 3.4 (38.7)
1. Excludes current tax liabilities
Inventory outlook and action plan
The Group has been challenged by a substantial overstock position in all
markets over the last two years and has undertaken a large-scale programme of
reducing commitments to remedy this. Our future inventory intake commitments
have reduced from £223m at the end of FY22 and £162m at the end of FY23 to
£103m at the end of FY24, with reductions achieved in all of our markets. As
a result the UK and Australian markets will be back at an appropriate stock
level during FY25.
Our overstock position in the US remains a critical challenge for the Group.
During the year we undertook an exercise to group current US inventory plus
future intake (already made and forecast) to the end of FY27, totalling $238m,
into three segments.
1. "Core inventory"- inventory needed to the end of FY27 of $198m (83% of the
US total including future intake). This is the inventory that will support
sales and an appropriate level of closing inventory at the end of FY27
and will be sold through business-as-usual activities.
2. "Provisioned inventory"- inventory expected to expire before sale in the
normal course of business of $9m (4% of the US total including future intake).
This is stock that we don't expect to sell before the wine quality
deteriorates such that it should not be sold. This stock has been provisioned
to near nil value, as set out below, reflecting a low expected recovery level
for some portions of bulk wine.
3. "Optional Inventory" - inventory saleable before expiry, but only after
FY27 of $31m (13% of the US total including future intake). This is stock that
our forecasts show will sell to our customer base before it expires albeit,
over an extended period. As such this stock does not require provisioning,
but we still intend to explore opportunistic liquidation of some of this
inventory through alternative channels. This may be as bulk or bottled goods,
potentially seeing future margin dilution but generating cash. We have
resourced a small team dedicated to this exercise. We feel this is important
as:
● The stock will tie up capital for a period of multiple years, while
incurring additional storage costs. As such, realisation below cost of goods
sold is economically rational;
● The stock creates potential risk of future expiry in the event of
changes to demand outlook; and, importantly
● The stock limits our ability over an extended period of innovating
within the range, risking detriment to our customer proposition.
We have included £2-5m of losses on these sales in the guidance for FY25,
however, as the eventual sales volume and profitability will be a function
of bulk wine markets, we will provide updates on progress alongside regular
trading commentary. Note that the profit or loss on any sales of
non-provisioned stock through alternative channels will be reported within
adjusted EBIT as other contribution, in contrast to the FY24 provisioning
which was treated as an adjusted item.
As a consequence of this analysis, and as set out in note 6 Adjusted items,
the business has made a further overstock inventory provision in its US
business unit amounting to £6.7m. At the balance sheet date, the Group's
total inventory provision and its movement since the end of the previous
financial year is set out below:
Inventory provision movement analysis
Overstock inventory provision Other inventory reserves Total
£m £m £m
Opening inventory provision 9.7 1.5 11.2
FX (0.2) - (0.2)
Additional provision during the year 6.7 0.7 7.4
Provision release (1.2) (0.6) (1.8)
Provision utilisation (3.1) (0.2) (3.3)
Net inventory reserve movement 2.4 (0.1) 2.3
Closing inventory provision 11.9 1.4 13.3
Capital allocation
The Group's policy is to test for the existence of excess capital biannually
as we update our forecasts for the business. Should it be determined that we
have excess capital, available investment opportunities will be compared with
expected returns from repurchasing the Company's shares and capital allocated
to the highest returning opportunities. At present we do not believe the
business has excess capital and no returns of capital, either as dividends or
through other mechanics, are planned at this time. We will review
this regularly during FY25 as we progress our inventory reduction and assess
the optionality afforded by the new credit facility.
New asset-backed lending facility, capital structure evolution and Angel
security
Subsequent to the end of the financial year, the Group completed a competitive
process to source a new asset-backed lending (ABL) facility to replace the
facility previously provided by Silicon Valley Bank.
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 the Group.
The principal terms of the new facility are:
● Maximum revolving advance amount of $60m, with available liquidity
based on the value of inventory held (as defined in the facility terms);
● Facility term of five years;
● Margins, depending on facility headroom, of principally the
Secured Overnight Financing Rate (SOFR) plus an applicable margin of between
2.75% and 3.25% and an unused line fee; and
● A single financial performance covenant, requiring fixed charge
cover of greater than 1.2x, but only tested if outstanding available liquidity
(as defined in the facility terms) is less than $12m.
Indicatively, the facility's financial effect, using a representative current
SOFR rate is that a representative $10m of draw down for 12 months would
amount to a total finance charge of approximately £0.8m. In addition, the
Group anticipates annualised amortisation charges of the new facility
arrangement fees of around £0.4m.
The facility has two primary purposes.
1. To provide liquidity in the event of a downside trading scenario
As we have seen in recent times, in the event that the revenue trajectory of
the business falls below the forecast level, Naked's role as a manufacturer of
wine (whether directly or through long-term commitments to winemakers) results
in excess stock and lower levels of liquidity across the Group. The facility
provides substantial additional liquidity over and above the £20m of net cash
excluding lease liabilities the Group held at the end of FY24 in case such a
scenario arises.
2. To provide security to Angels
During the process of sourcing a new credit facility, we took a broader look
at our capital structure. A key source of funding for the business comes from
our Angels who keep money on deposit which we use to fund winemakers. Our
treasury policy requires us to maintain inventory and/or cash on hand in
excess of any Angel balances to ensure these funds are not used to cover any
operating losses. While this provides the customer with asset backing, it does
not guarantee liquidity for cash refunds. By generating liquidity from the
inventory assets that Angels have funded, the facility provides greater
availability of cash to fund redemptions should it be needed. This is made
available directly through the Company's ability to draw cash from the
facility and through provision of security to payment processors whose
networks are used to make refunds.
At the unaudited management reporting period end closest to the completion
date of the facility on 8 July 2024, the Group held net cash excluding lease
liabilities of £15.3m. On completion, the facility had available liquidity of
$48.1m.
Liquidity and going concern
The Group has rebuilt its net cash excluding lease liabilities position during
the year, through a combination of generating adjusted EBIT, reducing
inventory levels and early redemption of the loan note issued on the sale of
the Majestic Wine business in 2019. The combination of this improvement, the
additional liquidity and reduction in covenant limitations afforded by the new
credit facility, and the expectation of additional material cash generation
through peak trading in the near future, has improved the Group's resilience
to weather any downturn in trading while also affording headroom for any
unexpected calls on our liquidity. As a result, we no longer report a
material uncertainty around our going concern assessment, see the Board's
going concern disclosure in note 4 of this announcement for further details.
Recent trading and outlook
Trading for the first few months of the financial year was, in aggregate,
broadly in line with the Board's expectations, with variances seen month to
month as consumer response to our marketing remains varied as we conduct
testing to deliver on our strategy of returning to profitable growth. These
dynamics continued into early Q2.
Our expectations for the year are based on continued flat KPIs year-on-year in
each market, and incorporation of known cost initiatives within fulfilment
cost and the G&A cost base. We have then flexed these to the downside
based on observed historic negative variances in trading being seen for an
extended period, and to the upside based on targeted shifts in KPIs from our
strategic initiatives. We have overlaid on this an estimated range of outcomes
from inventory liquidation activity outside of business-as-usual activities
which will be reported within adjusted EBIT for the year.
The resulting range of outcomes for the full year FY25 is as set out in the
guidance and outlook section at the front of this announcement, and includes
revenue between £240m and £270m, adjusted EBIT excluding inventory
liquidation of £3m to £8m and adjusted EBIT including inventory liquidation
of £(2)m to £6m with closing net cash excluding lease liabilities of £25m
to £35m.
James Crawford
Chief Financial Officer
Consolidated income statement
For the 52 weeks ended 1 April 2024
Continuing operations 52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
Note £'000 £'000
Revenue 5 290,412 354,045
Cost of sales (178,522) (205,739)
Fulfilment costs(1) (54,582) (68,159)
Gross profit pre movement in US inventory provision(1) 57,308 80,147
Movement in US inventory provision 6 (2,357) (10,254)
Gross profit(1) 54,951 69,893
Advertising costs (19,036) (17,690)
General and administrative costs (37,869) (53,092)
Impairment of non-current assets 7 (9,877) (18,183)
Profit on disposal of asset classified as held for sale 6 - 4,814
Operating loss² (11,831) (14,258)
Finance costs (3,359) (2,217)
Finance income 1,422 1,455
Loss on early redemption of the vendor loan note 8 (2,559) -
Loss before tax (16,327) (15,020)
Tax 9 (4,516) (2,393)
Loss for the year (20,843) (17,413)
Loss per share
Basic and diluted 10 (28.3)p (23.6)p
1. The Directors have reviewed their application of IAS 1 Presentation
of Financial Statements and have elected to disclose fulfilment costs within
gross profit, which were previously recognised below gross profit.
Comparatives have also been re-presented with no impact on the loss for the
year.
2. Operating loss analysed as:
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
Note £'000 £'000
Adjusted EBIT 4,974 17,365
Adjusted items:
Non-cash charges relating to acquisitions 6 - (1,293)
Right-sizing of US inventory 6 (5,419) (13,964)
Impairment of non-current assets 7 (9,877) (18,183)
Profit on disposal of asset classified as held for sale 6 - 4,814
Other adjusted items 6 (1,509) (2,997)
Operating loss (11,831) (14,258)
The notes to the condensed consolidated financial statements following the
primary statements are an integral part of these condensed consolidated
financial statements.
Consolidated balance sheet
As at 1 April 2024
1 April 2024 3 April 2023
Note £'000 £'000
Non-current assets
Goodwill and intangible assets 5,859 14,938
Property, plant and equipment 2,468 2,757
Right-of-use assets 2,794 5,374
Deferred tax assets 3,425 7,328
Other receivables - 10,711
14,546 41,108
Current assets
Inventory staged payments to winemakers(1) 13,273 20,239
Inventories(1) 131,581 145,427
Trade and other receivables 10,460 5,610
Financial instruments at fair value 21 30
Cash and cash equivalents 11 31,851 39,474
187,186 210,780
Current liabilities
Trade and other payables (38,738) (42,427)
Current tax liabilities (249) (1,836)
Angel funds and other deferred income (68,314) (71,314)
Lease liabilities (1,392) (2,030)
Provisions (1,475) (1,709)
Borrowings 11 (12,248) -
Customer-funded bonds 11 (35) (35)
Financial instruments at fair value (268) (290)
(122,719) (119,641)
Net current assets 64,467 91,139
Total assets less current liabilities 79,013 132,247
Non-current liabilities
Provisions - (14)
Lease liabilities 11 (2,246) (3,821)
Borrowings 11 - (29,131)
Deferred tax liabilities - (603)
(2,246) (33,569)
Net assets 76,767 98,678
Equity
Share capital 5,550 5,550
Share premium 21,162 21,162
Capital redemption reserve 363 363
Currency translation reserve 6,497 7,930
Retained earnings 43,195 63,673
Total equity 76,767 98,678
1. The Directors have reviewed the disclosure of staged payments to winemakers
in respect of inventory and have elected to disclose the amounts separately on
the face of the balance sheet. Comparatives have also been re-presented. The
amounts were previously aggregated within inventories. There is no impact on
net assets or equity.
The notes to the condensed consolidated financial statements following the
primary statements are an integral part of these condensed consolidated
financial statements.
By order of the Board,
James Crawford
Chief Financial Officer
27 August 2024
Consolidated cash flow statement
For the 52 weeks ended 1 April 2024
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
Note £'000 £'000
Operating activities
Net cash flows from/(used in) operations 11 7,821 (29,981)
Overseas income tax paid (2,812) (2,020)
Net cash from/(used in) operating activities 5,009 (32,001)
Investing activities
Interest received, including interest received on the vendor loan note 1,053 737
Purchase of property, plant and equipment (1,136) (1,478)
Proceeds on disposal of property, plant and equipment 61 11
Proceeds from sale of asset classified as held for sale - 5,624
Proceeds from early redemption of the vendor loan note 9,000 -
Net cash from investing activities 8,978 4,894
Financing activities
Interest paid (2,751) (1,719)
Repayments of principal under lease liabilities (2,036) (1,532)
Debt issuance costs paid - (791)
Repayment of borrowings (16,707) -
Drawdown of borrowings - 30,464
Net cash (used in)/from financing activities (21,494) 26,422
Net decrease in cash (7,507) (685)
Cash and cash equivalents at the beginning of the year 39,474 39,846
Effect of foreign exchange rate changes (116) 313
Cash and cash equivalents at the end of the year 11 31,851 39,474
The notes to the condensed consolidated financial statements following the
primary statements are an integral part of these condensed consolidated
financial statements.
Notes to the financial statements
1. General Information
Naked Wines plc (the Company), is a public limited company and is limited by
shares. It is incorporated in the United Kingdom under the Companies Act
2006 and is registered in England and Wales. The Company is the ultimate
controlling party of the Naked Group and its ordinary shares are traded on the
Alternative Investment Market (AIM).
The Company's registered address is Norvic House, 29-33 Chapel Field Road,
Norwich, NR2 1RP, UK. The Group's principal activity is the direct-to-consumer
retailing of wine. The Company's principal activity is to act as a holding
company for its subsidiaries.
2. Basis of preparation
The financial information set out above and below does not constitute the
Company's statutory accounts for the years ended 1 April 2024 or 3 April 2023
but is derived from those accounts. Statutory accounts for FY23 have been
delivered to the registrar of companies, and those for FY24 will be delivered
in due course. The auditor has reported on those accounts and their reports
were (i) unqualified, (ii) for the year ended 1 April 2024 did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report (year ended 3 April 2023 included
reference to a matter to which the auditor drew attention by way of emphasis
without qualifying their report in respect of a material uncertainty in
respect of going concern) and (iii) did not contain any statements under
section 498 (2) or (3) of the Companies Act 2006.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of
UK-adopted international accounting standards, and as applied in accordance
with the provisions of the Companies Act 2006, this announcement does not
itself contain sufficient information to comply with UK-adopted international
accounting standards.
The condensed consolidated financial statements are presented in GBP and all
values are rounded to the nearest thousand, except when otherwise indicated.
The Group's financial reporting year represents the 52 weeks to 1 April 2024
and the prior financial year, 53 weeks to 3 April 2023.
3. Critical accounting policies, estimates and judgements
Estimates and assumptions underlying the preparation of the financial
statements are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of revision and future periods if
the revision affects both currents and future periods.
Critical accounting judgements
Going concern
In concluding on the going concern basis of the financial statements, the
Directors have made a number of judgments as set out in note 4 Going concern.
The Directors draw attention to the critical nature of these estimates and
judgements in the preparation of these financial statements.
Classification of adjusted items
A number of judgements are made in the presentation of costs and income as
adjusted items in the Annual Report and Accounts.
Key sources of estimation uncertainty
Inventory provision
During the course of the year, the Directors critically re-evaluated expected
future business trading performance, especially in respect of the Group's US
business unit. As part of this analysis, the Directors challenged the
assumptions regarding the amount of US inventory on hand which could
reasonably be expected to be sold through usual trading channels for more than
cost and before effective commercial expiry of the inventory.
As a result of this analysis, a provision of £6.7m was recorded as an
adjusted item in the Annual Report and Accounts against US business unit
inventory. On the basis of the forecast prepared for the evaluation of going
concern of the Company, and in concert with activity undertaken during the
year to reduce future inventory intake, the Directors anticipate that the
remaining cost of inventory held at the balance sheet date will be profitably
realised.
A number of critical judgements have been made in the calculation of the US
segment inventory provision analysis including:
· estimates of future trading activity and utilisation of inventory
on hand;
· estimates of the likely use before expiry of wine approaching
the end of its prime marketing life;
· realisable value of bulk wine in the open market, and
· cannibalisation and absorption of wine volumes across the
Naked range.
For both bulk and cased wine inventory in the US, the full range of reasonably
possible outcomes in the next financial year is inherently difficult to
calculate as it is dependent on key assumptions such as future expected sales
of wine and sales proceeds. The Directors highlight therefore it is possible
that outcomes within the next financial year may differ from their estimates,
and that the magnitude of the inventory provision in the Group's US business
unit could materially change in the next financial year. Two relevant
sensitivities that are readily quantifiable are the expected proceeds from the
disposal of bulk inventory in hand not used in planned wine production and the
possible value of further cased good inventory provision required following a
change in future sales versus expectation. Management have prepared their
estimates of these sensitivities based on expected disposal of necessary
volumes through secondary market channels, recent experience of realisation
values for wine disposed of on the secondary market and recent forecast sales
run rates.
Bulk wine (provision of £7.6m) disposal assumptions: If management are not
able to realise expected proceeds for bulk wine reaching commercial expiry in
the next 24 months, an additional £0.9m of inventory would be written off.
Additionally, there is a further £5.8m of remaining bulk wine at the balance
sheet date which is considered to be most at risk. This wine is expiring after
more than 24 months and is currently expected to be used in future wine
projects. However, if this assumption proves to be inaccurate, then the
Company anticipates that it would dispose of this wine on the secondary
market. For every 10% of this bulk wine disposed of in this manner, and for
which the Company could achieve expected disposal proceeds, a further £0.4m
increase in provision would be required.
Cased wine (provision of £4.9m) sales volume sensitivity: Assuming that the
Group is able to continue to realise secondary market proceeds similar to
recent experience for wine and assuming an average cost of good of these
bottles, then a 1% adverse movement in future expected sales of wine forecast
to be sold in the 36 months following the balance sheet date results in an
additional £0.5m inventory write-down.
Other sources of estimation uncertainty
Goodwill and other non-current assets carrying value
The Group assesses at the end of each reporting period whether indicators of
impairment exist and, if such indicators are identified, the Group calculates
the net recoverable amount of each asset. For goodwill, net recoverable amount
is evaluated at least annually, or more frequently if indicators of impairment
are identified.
Determining whether goodwill and other non-current assets are impaired
requires an estimation of the recoverable amount of the CGU to which the
goodwill and other non-current assets have been allocated, measured at the
higher of value in use and fair value less cost of disposal.
Management is required to make judgements regarding the timing and amount of
future cash flows applicable to the CGU, based on current budgets and
forecasts and then into perpetuity, taking into account growth rates and
expected changes to sales and operating costs as well as future maintenance
CAPEX requirements and working capital cash flows. Management is also required
to make judgements regarding the appropriate discount rate to use, reflecting
current market assessments of the time value of money and the risks specific
to the CGU.
During the first half of the year, future trading expectations, in particular
with respect to the Group's US trading segment, were revised downwards to
re-align previously anticipated growth in key performance metrics with more
recently observed stable period-on-period KPIs, most relevantly revenue per
Angel and the rate of Angel attrition. Revision to future trading forecasts
resulted in a reduction of the value in use calculation used to evaluate the
carrying value of goodwill and other non-current assets. The impairment test
undertaken at the half year resulted in a full impairment of goodwill and
other intangible assets in the US and a further impairment in Australia as a
result of an extension of a right-of-use asset.
Management highlight the assumptions used to determine the value in use of the
CGU, as set out above, as sources of estimate uncertainty with regard to the
remaining carrying value of goodwill allocated to the UK business however,
management have determined that any plausible change in these assumptions
would not lead to a material.
At the half year, management deemed the measurement of the value in use of
CGUs as a key source of estimate uncertainty however, due to the impairment of
the remaining goodwill and other intangible assets in the US at that time and
the conclusions on the UK business discussed above, at the year end, the
measurement of recoverable amounts was not deemed a significant estimate.
Deferred tax asset recognition
The Group has recognised £3.4m of deferred tax assets at the balance sheet
date after consideration of their recoverability against future profits. The
Directors note that expected recoverability is based on estimate of future
profitability and, should trading expectations move adversely in the future,
there is a risk that the value of deferred tax assets expected to be utilised
will decrease.
In the process of applying the Group's accounting policies, the Directors
consider there are no further sources of estimation uncertainty that have a
significant risk of causing a material adjustment to the carrying abouts of
assets and liabilities within the next financial year.
4. Going concern
Background and context
At the end of FY23, the Group noted that a material uncertainty existed over
the going concern assumption due to a risk of breaching one or more bank
facility covenants due to weakening profitability and reducing cash balances.
A number of actions were taken to remedy this situation, including:
· Addressing the overstock position by negotiating with suppliers
to cut inventory intake over the forthcoming financial years;
· Undertaking a further round of cost restructuring, following on
from the restructuring executed in March 2023;
· Liquidating the vendor loan note held by the Group, which had
arisen on the disposal of the Majestic Wine business in 2019; and
· Negotiating a new asset-backed lending facility (see below).
During the first half of FY24, it became apparent that forecast performance
remained too ambitious. For liquidity-planning purposes, a forecast scenario
with no further key performance indicator improvements (of the type seen
historically) was prepared. Performance in the second half of FY24 was broadly
in line with this revised forecast and the Group ended the year with net cash
excluding lease liabilities of £19.6m, around a £10m improvement from the
previous year end, as well as a lower cost base and a more reliable liquidity
baseline forecast.
Credit facility
As stated above and as set out in more detail in note 12 Events after the
balance sheet date, 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 the
inventory held by Nakedwines.com Inc, www.nakedwines.co.uk Ltd and Naked Wines
Australia Pty Ltd.
Significantly, this new facility includes:
· a higher credit advance rate on the inventory base than under
the Group's previous credit facility;
· removal of a minimum cash holding of $20m; and
· a single financial performance covenant, being a fixed charge
cover ratio of greater than 1.2x, which is only tested if outstanding
available liquidity (as defined in the facility terms) is less than $12m,
known as a 'springing covenant' test.
On completion of this agreement with PNC Bank, the Group's commitments and
obligations under its previous senior secured credit facility with Silicon
Valley Bank, a division of First Citizens Bank and Trust Company, fell away.
The Group met all its credit facility covenant requirements in the current
financial year and subsequent to the year end, under the previous facility,
up until the date of the refinancing.
Base case forecast
In assessing the appropriateness of the going concern assumption, the Board
has considered (i) the cash requirements of the business to pursue its
intended strategy, (ii) the funding available to the Group from existing cash
reserves and its credit facility, (iii) the level of security to be held
against Angel fund balances and (iv) potential variations in the cash
requirements of the Group including taking into account a severe but plausible
downside scenario that appropriately reflects Naked's recent trading and the
current macroeconomic outlook.
The Directors have prepared a series of cash flow scenarios extending for a
period of at least 12 months from the date of the approval of these financial
statements ("the going concern assessment period") to assess the liquidity of
the Group.
A base case forecast was prepared in which trading KPIs in the trading markets
were kept flat versus recent performance or, for certain recent initiatives,
forecast at rates observed from recent testing programmes. Contracted
warehouse savings were included, as were G&A savings from the initiatives
undertaken during the year along with the assumption of 50% of maximum
variable bonus payout. Inventory purchasing was assumed at the higher of
committed amounts or levels to sustain target inventory levels. Under this
scenario, the Group has sufficient liquidity to meet its new credit facility
liquidity requirement in the going concern assessment period, meaning that the
fixed charge cover ratio covenant would not need to be tested, although it
would meet the requirement of greater than 1.2x were this covenant required to
be tested.
Severe but plausible downside and reverse stress test
The Directors have then prepared a severe but plausible downside scenario
incorporating a number of sensitivities and also incorporating available
mitigating actions.
Sales performance driver:
· A 6% decline in revenue per Angel/ Wine Genie customer (a key
driver of Repeat Customer sales) versus the base case forecast described
above, also corresponding to a 6% reduction in this measure year-on-year and a
5 to 7% (depending on market) reduction in new customer traffic.
Costs saving reduction:
· A £0.8m per annum reduction in cost savings assumed for new
warehouse and distribution contracts and a £0.8m overspend on targeted
G&A savings.
Cost mitigation:
· Removal of non-commercial return "R&D" spend in New Customer
investment from the fourth quarter of FY25, saving £0.25m in FY25 and a
further £0.4m over the remainder of the going concern assessment period with
a total saving of £0.75m in FY26;
· A reduction in New Customer investment advertising spend by 10%
from the fourth quarter of FY25, saving an annualised sum of approximately
£2.5m (on the basis that such lower revenues per Angel would trigger
reductions in New Customer investment to maintain the economic rationale to
invest), which was assumed to reduce new customer numbers at the current
average cost per new customer; and
· Reduction to £nil in assumed variable compensation payout.
Working capital mitigation:
· Reduction in future inventory intake to reflect the lower demand
outlook beginning in the first quarter of FY26, taking into account the
current levels of inventory commitments for those periods.
Furthermore, this scenario included the latest available trading for the first
four periods of FY25 and the number of Angels and the actual closing balance
sheet position at that date.
The net impact of this severe but plausible downside scenario is that the
Group would maintain more than £11m of headroom in the going concern
assessment period versus the springing covenant test requirement of $12m
(around £9.6m) of outstanding available liquidity. This forecast also shows
that Naked meets its fixed charge cover ratio covenant across the going
concern assessment period, although consistent with the above, the level of
liquidity does not lead to this covenant being tested in the
assessment period.
The Directors believe this also provides adequate headroom against any
unexpected requirements to provide additional liquidity to trading partners
should the need arise in that period.
A reverse stress test was also performed, deliberately engineered to identify
the point at which the Group would fall below its facility-defined liquidity
covenant spring of $12m across the going concern assessment period. This
reverse stress test shows that an additional 6% reduction in revenue per
Angel (beyond the 6% reduction already incorporated into the severe but
plausible downside scenario noted above) would result in the Group not meeting
its facility-defined covenant spring of $12m in that period. At this point the
Group would also fail its fixed charge cover ratio covenant. The Board has
determined that these assumptions do not result in a plausible downside
scenario outcome.
Summary
After considering the forecasts, sensitivities and mitigating actions
available and having regard to the risks, uncertainties and challenges in
recent trading and the macroeconomic environment, in the modelled scenarios
including the severe but plausible downside scenario, Naked Wines has
sufficient liquidity to continue trading and to meet its minimum facility
liquidity requirements, avoiding the need to formally assess its fixed charge
cover ratio covenant commitment. The reverse stress test modelling has
demonstrated that a revenue per Angel decline of 12%, resulting in a
year-on-year total sales decline of 18% in FY25 is required before the Company
fails to meet both its facility liquidity and fixed charge cover ratio
commitments.
The Board believes that the flexibility afforded to it by its new financing
arrangements and the other actions put in place during FY24 and subsequent to
year end mean that the Directors have a reasonable expectation that the Group
and Company will be able to operate within the level of their available
liquidity, meet the fixed charge cover ratio covenant (if it were required to
be tested) and meet their liabilities as they fall due for the forecast
period. For these reasons, the Board considers it appropriate for the Group
and the Company to adopt the going concern basis in preparing these financial
statements.
5. Segmental reporting
IFRS 8 Operating segments requires operating segments to be determined based
on the Group's internal reporting to the Chief Operating Decision Maker
(CODM). The Board has determined that the Executive Directors of the Company
are the CODM of the business. This is on the basis that they have primary
responsibility for the allocation of resources between segments and the
assessment of performance of the segments. In line with the information
presented to the Executive Directors of the Company, the Group presents its
segmental analysis based on the three geographic locations in which the Group
operates.
Performance of these operating segments is assessed on revenue and adjusted
EBIT (being operating profit excluding any adjusted items), as well as
analysing the business between new customer, repeat customer and other lines
of business.
These are the financial performance measures that are reported to the CODM,
along with other operational performance measures, and are considered to be
useful measures of the underlying trading performance of the segments.
Adjusted items are allocated in accordance with how they are reported to the
CODM.
The table below sets out the basis on which the performance of the business is
presented to the CODM. The CODM considers that, as a single route to market
and solely consumer-facing business in three geographically and economically
diverse locations, the business comprises three operating segments. The
Group reports revenue from external customers as a single product group, being
principally wine and some spirits.
Unallocated assets include goodwill and other intangible assets held by
holding companies and unallocated impairment charges relate to impairments
recorded against these assets. These assets are unallocated for the purpose of
the segmental disclosure as these are not included in the assets and
liabilities reported to the CODM for each operating segment. For the purposes
of the geographical analysis, these assets are allocated to the UK as these
assets arose as a result of an acquisition by a UK holding company. For
impairment analysis, these assets are allocated to the relevant CGU (see note
7 Impairment for further details).
Costs relating to global Group functions are not allocated to the operating
segments for the purposes of assessing segmental performance and consequently
global costs are presented separately. This is consistent with the
presentation of those functions to the CODM.
Revenues are attributed to the countries from which they are earned. The Group
is not reliant on a major customer or group of customers.
52 weeks ended 1 April 2024 Naked Wines US Naked Wines UK Naked Wines Australia Unallocated Total
£'000 £'000 £'000 £'000 £'000
Revenue 131,133 124,411 34,868 - 290,412
Revenue associated with the US inventory impairment (1,899) - - - (1,899)
Total adjusted revenue (1) 129,234 124,411 34,868 - 288,513
Analysed as:
New Customer sales 14,213 6,312 3,109 - 23,634
Repeat Customer sales 114,196 118,099 31,759 - 264,054
Other revenue 825 - - - 825
Total adjusted revenue (1) 129,234 124,411 34,868 - 288,513
Investment in New Customers (14,456) (5,822) (2,992) - (23,270)
Repeat Customer contribution 36,735 20,678 7,843 - 65,256
Other contribution (743) - - - (743)
Total contribution after advertising costs(2) 21,536 14,856 4,851 - 41,243
General and administrative costs(3) (11,351) (6,311) (3,093) (15,514) (36,269)
Adjusted EBIT 10,185 8,545 1,758 (15,514) 4,974
Adjusted items (see note 6):
Right-sizing of US inventory (5,419) - - - (5,419)
Impairment of non-current assets (19) - (696) (9,162) (9,877)
Other adjusted items (259) (424) (307) (519) (1,509)
Operating profit/(loss) 4,488 8,121 755 (25,195) (11,831)
Finance costs (3,249) (39) (69) (2) (3,359)
Finance income 475 - - 947 1,422
Loss on early redemption of the vendor - - - (2,559) (2,559)
loan note
Profit/(loss) before tax 1,714 8,082 686 (26,809) (16,327)
Tax (2,116) (1,120) (364) (916) (4,516)
(Loss)/profit for the year (402) 6,962 322 (27,725) (20,643)
Depreciation 2,472 236 108 57 2,873
Amortisation - - - 100 100
Impairment 19 - 696 9,162 9,877
Total assets 121,701 49,895 21,808 8,328 201,732
Total liabilities 65,379 45,233 11,537 2,816 124,965
Capital expenditure 986 136 14 - 1,136
52 weeks ended 1 April 2024 US UK Australia Total
£'000 £'000 £'000 £'000
Geographical analysis
Revenue 131,133 124,411 34,868 290,412
Non-current assets excluding deferred tax assets 4,483 6,638 - 11,121
1. Total adjusted revenue is calculated as revenue excluding revenue
associated with the right-sizing of US inventory as analysed in note 6
Adjusted items.
2. Contribution after advertising costs is calculated as gross profit
(£55.0m), less advertising costs (£19.0m), excluding transactions associated
with the right-sizing of US inventory included in contribution (£5.2m) and
cancellation of winemaker contracts in Australia (reported within
restructuring costs) (£0.2m) (details in note 6 Adjusted items).
3. Refer to the table in the APM section at the end of this
announcement for a reconciliation of G&A costs to those reported in the
income statement.
53 weeks ended 3 April 2023 Naked Wines US Naked Wines UK Naked Wines Australia Unallocated Total
£'000 £'000 £'000 £'000 £'000
Revenue 171,035 137,192 45,818 - 354,045
Revenue associated with the US inventory impairment (3,110) - - - (3,110)
Total adjusted revenue (1) 167,925 137,192 45,818 - 350,935
Analysed as:
New Customer sales 17,180 6,400 3,312 - 26,892
Repeat Customer sales 147,448 130,792 42,506 - 320,746
Other revenue 3,297 - - - 3,297
Total adjusted revenue (1) 167,925 137,192 45,818 - 350,935
Investment in New Customers (15,057) (3,417) (2,937) - (21,411)
Repeat Customer contribution 50,314 24,990 11,196 - 86,500
Other contribution 255 - - - 255
Total contribution after advertising costs(2) 35,512 21,573 8,259 - 65,344
General and administrative costs(3) (12,830) (6,896) (3,561) (24,692) (47,979)
Adjusted EBIT 22,682 14,677 4,698 (24,692) 17,365
Adjusted items (see note 6):
Non-cash items relating to acquisitions - - - (1,293) (1,293)
Right-sizing of US inventory (13,964) - - - (13,964)
Impairment of non-current assets - - - (18,183) (18,183)
Profit on disposal of asset - - - 4,814 4,814
classified as held for sale
Other adjusted items - - - (2,997) (2,997)
Operating profit/(loss) 8,718 14,677 4,698 (42,351) (14,258)
Finance costs (2,155) (36) (24) (2) (2,217)
Finance income 342 - - 1,113 1,455
Profit/(loss) before tax 6,905 14,641 4,674 (41,240) (15,020)
Tax (2,275) (1,482) (1,396) 2,760 (2,393)
Profit/(loss) for the year 4,630 13,159 3,278 (38,480) (17,413)
Depreciation 1,897 353 225 38 2,513
Amortisation 1 - - 1,785 1,786
Impairment - - - 18,183 18,183
Total assets 146,629 47,626 23,139 34,494 251,888
Total liabilities 93,275 41,127 13,731 5,077 153,210
Capital expenditure 1,453 - 25 - 1,478
53 weeks ended 3 April 2023 US UK Australia Total
£'000 £'000 £'000 £'000
Geographical analysis
Revenue 171,035 137,192 45,818 354,045
Non-current assets excluding deferred tax assets and vendor loan note 7,710 15,359 - 23,069
1. Total adjusted revenue is calculated as revenue excluding revenue
associated with the right-sizing of US inventory as analysed in note 6
Adjusted items.
2. Contribution after advertising costs is calculated as gross profit
(£69.9m), less advertising costs (£17.7m), excluding transactions associated
with the right-sizing of US inventory included in contribution (£13.1m),
(details in note 6 Adjusted items).
3. Refer to the table in the APM section at the end of this
announcement for a reconciliation of G&A costs to those reported in the
income statement.
6 Adjusted items
The Directors believe that adjusted EBIT provides additional useful
information for shareholders on trends and performance. These measures are
used for performance analysis. Adjusted EBIT is not defined by IFRS and
therefore may not be directly comparable with other companies' adjusted profit
measures. It is not intended to be a substitute for, or superior to, IFRS
measurements of profit.
The Directors draw attention to the costs associated with the ongoing
restructuring of the business and, in particular, the inventory provision and
staff and other administrative restructuring charges incurred in both the
current and previous financial year. Management does not expect to report any
further inventory provision charges of a similar nature in future periods.
The adjustments made to reported loss before tax are:
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
£'000 £'000
(a) Non-cash charges relating to acquisitions - amortisation of acquired - (1,293)
intangibles
Net movement in US inventory provision (2,357) (10,254)
US cancellation of winemaker contracts - (527)
Loss on the disposal of US inventory - contribution loss(1) (2,819) (2,360)
Right-sizing of US inventory included in contribution (5,176) (13,141)
Disposal of US inventory - charitable donations - (823)
Bad debt expense (243) -
(b) Right-sizing of US inventory (5,419) (13,964)
(c) Impairment of non-current assets (9,877) (18,183)
(d) Profit on disposal of asset classified as held for sale - 4,814
Restructuring costs (1,433) (1,522)
Software as a Service costs incurred in the implementation of (57) (2,347)
new ERP platform
Legal settlement for Payment card Interchange fees - 740
Fair value movement on foreign exchange contracts and (19) 132
associated unrealised foreign currency inventory
(e) Other adjusted items (1,509) (2,997)
Total adjusted items (16,805) (31,623)
1. Contribution loss analysed as sales of £1.9m (FY23: £3.1m) less
cost of goods sold of £4.7m (FY23: £5.5m) resulting in a net contribution
loss of £2.8m (FY23: loss of £2.4m).
(a) Amortisation of acquired intangibles
These items reflect costs of customer acquisition from prior to the purchase
of the Naked Wines business. In order to reflect the cost of current new
customer acquisition in its adjusted EBIT, the Group includes the expenses of
all ongoing customer acquisitions in its adjusted profit measures but removes
the amortisation cost of those customers acquired before acquisition by Naked
Wines plc. These acquired assets were fully amortised as at the end of the
previous financial year and do not appear in the income statement for the 52
weeks ended 1 April 2024.
(b) Right-sizing of US inventory
As a result of management's US inventory right-sizing exercise strategy
commencing in the prior financial year, the Group recorded a net charge of
£5.2m in the 52 weeks ended 1 April 2024 (FY23: charge of £13.1m),
reflecting the release and utilisation of the inventory provision created in
the prior financial year and a contribution loss where inventory that was
provided against that has been sold on the secondary market as part this
right-sizing exercise for less than historic cost of goods.
The Group also recognised a £0.2m write off of a trade receivable relating to
a bulk wine customer.
In the previous financial year, management considered these provisions and
charges to be one-off in nature as amounts relate to purchases made on the
basis of continued expected growth following the COVID pandemic and based on
the Group's previous strategy of customer acquisition. As a result of the
strategic shift from customer acquisition to short-term profitability and cash
generation, this charge forms part of the one-off exercise undertaken in the
year to better align purchasing and inventory management going forwards,
whilst still ensuring the Group holds sufficient inventory to meet customer
demand.
Management has concluded it is appropriate to include the provision and write
off within adjusted items to provide a more consistent basis with the
comparative adjusted EBIT APM.
(c) Impairment of non-current assets
The Group has recognised impairments to non-current assets of £9.9m (FY23:
£18.2m). Refer to note 7 Impairment for details.
(d) Profit on disposal of asset classified as held for sale
In the previous financial year, the sale of the asset classified as held for
sale was completed. The profit arising on the sale is the difference between
the proceeds of £5.85m less commissions and costs of £0.23m and the carrying
value of the asset of £0.81m.
(e) Other adjusted items
Restructuring costs
The Group undertook a restructuring program seeking to generate improved
efficiency and reduce costs. Following this review, one-off termination
payments and associated costs were incurred in all three markets.
Software as a Service cost
During the previous and current financial year, the Group incurred upfront
configuration and implementation costs relating to the development of a new
ERP system. As material non-recurring expenditure, these costs have been
disclosed as an adjusted item.
Legal settlement in relation to Payment card Interchange fees
In the previous financial year, Naked Wines was part of a class action group
that brought proceedings against Visa and Mastercard for engaging in
anti-competitive conduct in relation to arrangements for setting and
implementing multilateral Payment card interchange fees. This amount was net
of costs and was in full and final settlement of the claim.
Fair value movement on foreign exchange contracts and associated unrealised
foreign currency inventory
The Group commits in advance to buying foreign currency to purchase wine to
mitigate exchange rate fluctuations. UK-adopted international accounting
standards require us to mark the value of these contracts to market at each
balance sheet date. As this may materially fluctuate, we adjust this, and
associated foreign currency inventory revaluation, so as to better reflect our
trading profitability.
7 Impairment
As a result of an impairment review of the carrying value of all non-current
assets, an impairment charge of £9.9m (FY23: £18.2m) has been recognised in
the income statement. An analysis of this charge by segment and asset type is
set out below, along with the calculated value in use of each cash generating
unit (CGU).
Goodwill Other intangible assets Property, plant and equipment Right-of-use assets Total CGU value
£'000
£'000
£'000
£'000
£'000
in use(1)
£'000
Naked Wines US(2) 8,128 1,034 - 19 9,181 64,753
Naked Wines UK - - - - - 56,546
Naked Wines Australia(2) - - 11 685 696 (447)
At 1 April 2024 8,128 1,034 11 704 9,877 120,852
1. The value in use of each CGU is calculated after a full allocation of
corporate costs necessarily incurred to generate the cash flows of the
operating businesses and in accordance with IAS 36 Impairment of Assets
2. For the US and Australia segments, value in use relate to those
calculated at the HY24 (see US and Australia segment analysis below for
further details)
Goodwill Other intangible assets Property, plant and equipment Right-of-use assets Total CGU value
£'000
£'000
£'000
£'000
£'000
in use(1)
£'000
Naked Wines US 16,433 - - - 16,433 69,710
Naked Wines UK - - - - - 21,739
Naked Wines Australia 1,643 - 58 49 1,750 (2,086)
At 3 April 2023 18,076 - 58 49 18,183 89,363
1. The value in use of each CGU is calculated after a full allocation of
corporate costs necessarily incurred to generate the cash flows of the
operating businesses and in accordance with IAS 36 Impairment of Assets
Impairment reviews were initially conducted at HY24 on a value in use basis at
a CGU level as management identified indicators of impairment at that time and
this resulted in impairment charges being recorded in the US and Australia
segments. At year end, whilst trading was broadly in line with forecasts in
these markets, management concluded that further confirmatory evidence was
required before a re-evaluation of the carrying value of the impaired assets
should be performed. As such each non-current asset has been individually
assessed on a fair value less cost of disposal basis and no further impairment
charges have been recognised.
At both half year and year end, the UK segment had sufficient value in use to
support the carrying value of goodwill and other non-current assets and, as
such, no impairment charge has been recognised in relation to this segment.
8 Loss on early redemption of the vendor loan note
On 12 February 2024, the Directors accepted an offer of £9.0m from CF Bacchus
Holdco Limited for early redemption of the vendor loan note. The £12.0m
vendor loan note arising as part of the Group's disposal of the Majestic group
of companies was due to be paid in December 2024. The vendor loan note was
initially measured at fair value of £9.0m and subsequently measured at
amortised cost. At the date of redemption, the amortised cost on the balance
sheet was £11.6m and this resulted in a loss on early redemption of £2.6m.
9 Tax
(a) Tax charge
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
£'000 £'000
Current tax
UK tax - -
Overseas tax (958) (4,198)
Adjustment in respect of prior periods (329) (377)
Current tax charge (1,287) (4,575)
Deferred tax
Origination and reversal of temporary differences (3,468) 1,085
Adjustment in respect of prior periods (189) 560
Effect of change in tax rate on prior period balances 428 537
Deferred tax (charge)/credit (3,229) 2,182
Total tax charge for the year (4,516) (2,393)
(b) Tax reconciliation
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
£'000 £'000
Loss before tax (16,327) (15,020)
Tax credit at the standard UK corporation tax rate of 25% (FY23: 19%) 4,082 2,854
Adjustments in respect of prior periods (518) 183
Disallowable expenditure (1,978) (1,926)
Overseas income tax at higher rates 72 (588)
Fixed asset differences - 60
Change in unrecognised deferred tax assets (6,495) (3,054)
Share-based payments (107) (138)
Change in tax rate on prior period deferred tax balances 428 263
Foreign exchange - (47)
Total tax charge for the year (4,516) (2,393)
Effective tax rate (27.7)% (15.9)%
Deferred tax balances have been calculated at the substantively enacted rate
at which they are expected to reverse.
The chancellor has confirmed an increase in the corporation tax rate from 19%
to 25% with effect from 1 April 2023 which received Royal Assent on 10 July
2021.
10 Loss per share
Basic loss per share is calculated by dividing the profit attributable to
ordinary shareholders by the weighted average number of ordinary shares in
issue of the Company, excluding 163,856 (FY23: 220,137) shares held by the
Naked Wines plc Share Incentive Plan Trust and the Naked Wines Employee
Benefit Trust (which have been treated as dilutive share-based payment
awards).
The dilutive effect of share-based payment awards is calculated by adjusting
the weighted average number of ordinary shares in issue to assume conversion
of all dilutive potential ordinary shares. Share options granted over
5,508,413 (FY23: 3,382,710) ordinary shares have been excluded from the
calculation as they are anti-dilutive. There are no outstanding share awards
that are potentially dilutive at the year end.
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
Basic and diluted loss per share (pence) (28.3)p (23.6)p
Loss for the purposes of basic loss per share calculation (£'000) (20,843) (17,413)
Weighted average number of ordinary shares used as the denominator in 73,770,908 73,663,498
calculating basic and diluted loss per share
Total number of shares in issue 74,004,135 74,004,135
As noted above, the denominator for the purposes of calculating both basic and
diluted loss per share has been adjusted to exclude the shares held by the
Naked Wines plc Share Incentive Plan Trust and the Naked Wines Employee
Benefit Trust.
If all the Company's share option schemes had vested at 100%, the Company
would have 75,738,744 issued shares. See note 12 Events after the balance date
for details of the 2024 Long-Term Incentive Plan.
There have been no transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of authorisation of
these financial statements.
11 Notes to the cash flow statement
(a) Cash flows from operations
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
£'000 £'000
Cash flows from operations
Loss for the year (20,843) (17,413)
Adjustments for:
Tax expense 4,516 2,393
Net finance costs, including the loss on the early 4,496 762
redemption of the vendor loan note
Depreciation and amortisation 2,973 4,299
Impairment of non-current assets 9,877 18,183
Loss on disposal of fixed assets 253 327
Net gain arising on early termination of right-of-use assets (444) -
and associated lease liability
Intangible assets previously capitalised under former - 253
accounting policy
Profit on sale of asset classified as held for sale - (4,814)
Fair value movement on foreign exchange contracts (13) 109
Inventory provision movement 2,357 10,254
Share-based payment charges 365 1,604
Operating cash flows before movements in working capital 3,537 15,957
Decrease/(increase) in inventories 14,886 (28,770)
Decrease in Angel funds and other deferred income (1,814) (6,193)
(Increase)/decrease in trade and other receivables (5,414) 3,501
Decrease in trade and other payables (3,374) (14,476)
Net cash flows from/(used in) operations 7,821 (29,981)
(b) Analysis of movement in net cash and changes in liabilities arising from
financing activities
3 April 2023 Cash flows Non-cash movements(1) 1 April 2024
£'000 £'000 £'000 £'000
Cash and cash equivalents 39,474 (7,507) (116) 31,851
Borrowings:
Borrowings net of issuance costs (29,131) 16,707 176 (12,248)
Customer-funded bonds (35) - - (35)
Lease liabilities (5,851) 2,036 177 (3,638)
(35,017) 18,743 353 (15,921)
Total net cash 4,457 11,236 237 15,930
28 March 2022 Cash flows Non-cash movements(1) 3 April 2023
£'000 £'000 £'000 £'000
Cash and cash equivalents 39,846 (685) 313 39,474
Borrowings:
Borrowings net of issuance costs - (29,673) 542 (29,131)
Customer-funded bonds (35) - - (35)
Lease liabilities (3,567) 1,532 (3,816) (5,851)
(3,602) (28,141) (3,274) (35,017)
Total net cash 36,244 (28,826) (2,961) 4,457
1. Non-cash movements relate to lease additions and foreign exchange
movements.
12 Events after the balance sheet date
On 1 April 2024, the Company granted participants rights over 4,208,325 shares
to staff under an LTIP award (the 2024 LTIP award). At the end of the
financial year, offer and acceptance had not been confirmed for the
significant majority of this award. Subsequent to the year end, acceptance of
the award was received from participants and, on the basis of the documented
vesting conditions, the Directors estimate that approximately 3,200,000
ordinary shares will vest at the end of the award scheme on 31 March 2027.
Had all of the shares granted been accepted during the financial year under
review and, based on the closing share price on 1 April 2024, the estimated
number of shares vesting under the 2024 LTIP award would not have resulted in
a material change in recognised deferred tax assets on 1 April 2024.
Under the award conditions, beneficiaries of the scheme were required to waive
any existing rights to awards under the 2021 LTIP award and the 2022 LTIP
transition scheme. Assuming full acceptance of all outstanding shares offered
under the 2024 LTIP scheme at the end of the reporting period, and the
associated waiving of previously awarded rights, if all of the Company's share
awards had vested at 100%, the Company would have 78,127,733 issued shares.
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 the inventory held by
Nakedwines.com Inc, www.nakedwines.com (http://www.nakedwines.com) Ltd and
Naked Wines Australia Pty Ltd. The facility is secured against the assets of
the Group.
The principal terms of the new facility are:
• Maximum revolving advance amount of $60m, with available
liquidity based on the value of inventory held (as defined in the facility
terms);
• Facility term of five years;
· Margins, depending on facility headroom, of principally the
Secured Overnight Financing Rate (SOFR) plus an applicable margin of between
2.75% and 3.25% and an unused line fee; and
• A single financial performance covenant requiring fixed charge
cover of greater than 1.2x, but only tested if outstanding available liquidity
(as defined in the facility terms) is less than $12m.
On completion of this agreement with PNC Bank, the Group's commitments and
obligations under its previous senior secured credit facility with Silicon
Valley Bank, a division of First Citizens Bank, fell away.
Indicatively, the facility's financial effect, using a representative current
SOFR rate which cannot be predicted in the future and average facility margins
which may not be representative of actual final applicable margins, is that a
representative $10m of drawdown for 12 months would amount to a total interest
and unused line fee payable of approximately £0.8m. In addition, the Group
anticipates amortisation charges of the new facility arrangement fees of
around £0.4m.
Glossary of definitions, alternative performance measures (APMs) and key
performance indicators (KPIs)
Definitions
5* customer service The percentage of feedback ratings received by our Customer Happiness teams Customer experience KPI
that expressed 5* satisfaction on a scale of 1 to 5.
5-Year Forecast Payback The ratio of projected future Repeat Customer contribution we expect to earn Investment measure
from the new customers recruited in the year, divided by the Investment in New
Customers. We forecast contribution at a customer level using a
machine-learning algorithm that weighs several characteristics including
demographics, interactions and transactions forecast over a five-year horizon.
This is then aggregated to a monthly, then annual, cohort level for reporting
purposes. As this is an undiscounted forward-looking estimate it cannot be
reconciled back to reported financial results.
5-Year Lifetime Value (LTV) The future Repeat Customer contribution we expect to earn from customers Investment measure
recruited in a discrete period of time. We calculate this future contribution
using a machine-learning model. Collecting data for a number of key customer
characteristics including retention, order frequency and order value along
with customer demographics and non-transactional data, the machine-learning
algorithms then predict the future (lifetime) value of that customer.
Active Angel An Angel that is an active subscriber who has placed an order in the past 12
months.
Adjusted EBIT Operating profit adjusted for amortisation of acquired intangibles, APM
acquisition costs, impairment of non-current assets, restructuring costs and
fair value movement through the income statement on financial instruments and
revaluation of funding cash balances held and any items that are either
material one-time charges we do not expect to be repeated or are non-trading
related. A reconciliation to operating profit can be found on the face of the
consolidated income statement.
Adjusted EBITDA Adjusted EBIT plus depreciation and amortisation, but excluding any APM
depreciation or amortisation costs included in adjusted items e.g.
amortisation of acquired intangibles.
AGM Annual General Meeting
Angel A customer who deposits funds into their account each month to spend on the
wines on our website.
Company, Naked or Naked Wines Naked Wines plc
Contribution A profit measure equal to gross profit. We often split contribution into that APM
from new and repeat customers as they can have different levels of
profitability. A reconciliation of operating profit to contribution is shown
in note 5 Segmental reporting.
DtC Direct-to-consumer
EBIT Operating profit as disclosed in the consolidated income statement. APM
EBITDA EBIT plus depreciation and amortisation. APM
Group Naked Wines plc and its subsidiary undertakings
Investment in New Customers The amount we have invested in acquiring new customers during the year Investment measure
including contribution profit/loss from New Customer sales and advertising
costs.
Definitions
LTIP Long Term Incentive Plan
Marketing R&D Expenditure focused on researching and testing new marketing channels and
creative approaches, with the aim of opening up significant new growth
investment opportunities.
Net cash excluding lease liabilities The amount of cash we are holding less borrowings excluding lease liabilities. APM
New customer A customer who, at the time of purchase, does not meet our definition of a
repeat customer; for example, because they are brand new, were previously a
repeat customer and have stopped subscribing with us at some point or cannot
be identified as a repeat customer.
New Customer sales Revenues derived from transactions with customers who meet our definition of a
new customer. A reconciliation of revenue to New Customer sales is shown in
note 5 Segmental reporting.
Other revenue Revenue from stock optimisation activities.
Other contribution The profit or loss attributable to sales meeting the definition of other Investment measure
revenue.
Product availability The average percentage of products we have defined as core to the portfolio Customer experience KPI
that is available to our customers throughout the year.
Repeat customer A customer (Angel) who has subscribed and made their first monthly
subscription payment.
Repeat Customer contribution The profit attributable to sales meeting the definition of Repeat Customer Investment measure
sales after fulfilment and service costs. A reconciliation of adjusted EBIT to
Repeat Customer contribution is shown in note 5 Segmental reporting.
Repeat Customer contribution margin Repeat Customer contribution as a percentage of Repeat Customer sales. Investment measure
Repeat Customer sales Revenue derived from orders placed by customers meeting our definition of a
repeat customer at the time of ordering. A reconciliation of total sales to
Repeat Customer sales is shown in note 5 Segmental reporting.
Repeat Customer sales retention The proportion of sales made to customers who met our definition of repeat Investment measure
last year and who placed orders again this year, calculated on a monthly basis
and summed to calculate the full year retention.
SIP Share Incentive Plan
Standstill EBIT The adjusted EBIT that would be reported if Investment in New Customers was Investment measure
reduced to the level needed only to replenish the portion of the customer base
that was lost to attrition during the period. As a result of fluctuations in
Year 1 Payback and Repeat Customer sales retention experienced during and post
the COVID disrupted periods, standstill EBIT became a less effective
performance indicator. As such, this investment measure is no longer used by
management for internal performance evaluation.
Total addressable market (TAM) TAM represents the available market which Naked sees as a revenue opportunity
which it could serve.
Wine Genie A customer who signs up to receive tailor-made cases at the frequency of their
choice. This type of customer does not deposit funds into an account.
Wine quality - The percentage of "Yes" scores given by customers in the year indicating that Customer experience KPI
"Buy it again" ratings the customer would buy the product again.
Year 1 Payback A short-term payback measure showing the actual return in this financial year Investment measure
of our investment in the prior year.
Alternative performance measures (APMs)
Reconciliation of reported results to 52-week comparable figures
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
Reported Adjusted items Adjusted Reported Adjusted items Adjusted 53rd week Constant FX 52-week comparable
£m £m £m £m £m £m £m £m £m
Sales Group
New Customer sales 23.6 - 23.6 26.9 - 26.9 (0.9) (0.8) 25.2
Repeat Customer sales 264.1 - 264.1 320.7 - 320.7 (6.2) (9.3) 305.2
Other revenue 2.7 (1.9) 0.8 6.4 (3.1) 3.3 (0.1) (0.2) 3.0
290.4 (1.9) 288.5 354.0 (3.1) 350.9 (7.2) (10.3) 333.4
Naked Wines US
New Customer sales 14.2 - 14.2 17.2 - 17.2 (0.4) (0.7) 16.1
Repeat Customer sales 114.2 - 114.2 147.4 - 147.4 (3.3) (6.1) 138.0
Other revenue 2.7 (1.9) 0.8 6.4 (3.1) 3.3 (0.1) (0.2) 3.0
131.1 (1.9) 129.2 171.0 (3.1) 167.9 (3.8) (7.0) 157.1
Naked Wines UK
New Customer sales 6.3 - 6.3 6.4 - 6.4 (0.4) - 6.0
Repeat Customer sales 118.1 - 118.1 130.8 - 130.8 (1.6) - 129.2
124.4 - 124.4 137.2 - 137.2 (2.0) - 135.2
Naked Wines Australia
New Customer sales 3.1 - 3.1 3.3 - 3.3 (0.1) (0.2) 3.0
Repeat Customer sales 31.8 - 31.8 42.5 - 42.5 (1.3) (3.3) 37.9
34.9 - 34.9 45.8 - 45.8 (1.4) (3.5) 40.9
Contribution after advertising costs Group
Investment in New Customers (23.3) - (23.3) (21.4) - (21.4) 0.7 0.7 (20.0)
Repeat Customer contribution 65.3 - 65.3 86.5 - 86.5 (1.7) (3.1) 81.7
Repeat contribution margin (%) 25% - 25% 27% - 27% - - 27%
Other contribution (5.9) 5.2 (0.7) (12.9) 13.2 0.3 (0.1) - 0.2
36.1 5.2 41.2 52.2 13.2 65.4 (1.1) (2.4) 61.9
Naked Wines US
Investment in New Customers (14.5) - (14.5) (15.1) - (15.1) 0.7 0.5 (13.9)
Repeat Customer contribution 36.7 - 36.7 50.3 - 50.3 (1.2) (2.1) 47.0
Repeat contribution margin (%) 32% - 32% 34% - 34% - - 34%
Other contribution (5.9) 5.2 (0.7) (12.9) 13.2 0.3 (0.1) - 0.2
16.3 5.2 21.5 22.3 13.2 35.5 (0.6) (1.6) 33.3
Naked Wines UK
Investment in New Customers (5.8) - (5.8) (3.4) - (3.4) - - (3.4)
Repeat Customer contribution 20.7 - 20.7 25.0 - 25.0 (0.1) - 24.9
Repeat contribution margin (%) 18% - 18% 19% - 19% - - 19%
14.9 - 14.9 21.6 - 21.6 (0.1) - 21.5
Naked Wines Australia
Investment in New Customers (3.0) - (3.0) (2.9) - (2.9) - 0.2 (2.7)
Repeat Customer contribution 7.8 - 7.8 11.2 - 11.2 (0.4) (0.9) 9.9
Repeat contribution margin (%) 25% - 25% 26% - 26% - - 26%
4.8 - 4.8 8.3 - 8.3 (0.4) (0.7) 7.2
General and administrative Naked Wines US (11.9) 0.5 (11.4) (13.6) 0.8 (12.8) - 0.5 (12.3)
Naked Wines UK (6.7) 0.4 (6.3) (6.9) - (6.9) - - (6.9)
Naked Wines Australia (3.2) 0.1 (3.1) (3.6) - (3.6) - 0.3 (3.3)
Unallocated (16.1) 0.5 (15.5) (28.9) 4.2 (24.7) - - (24.7)
Group (37.9) 1.5 (36.3) (53.1) 5.0 (48.0) - 0.8 (47.2)
Other costs Profit on sale of asset - - - 4.8 (4.8) - - - -
Impairment (9.9) 9.9 - (18.2) 18.2 - - - -
Naked Wines US 4.5 5.7 10.2 8.7 14.0 22.7 (0.6) (1.1) 21.0
EBIT
Naked Wines UK 8.1 0.4 8.5 14.7 - 14.7 (0.1) - 14.6
Naked Wines Australia 0.8 1.0 1.8 4.7 - 4.7 (0.4) (0.3) 4.0
Unallocated (25.2) 9.7 (15.5) (42.4) 17.6 (24.7) - - (24.7)
Group (11.8) 16.8 5.0 (14.3) 31.6 17.4 (1.1) (1.4) 14.9
Repeat Customer contribution margin
Naked Wines US Naked Wines UK Naked Wines Australia Group
52 weeks ended 1 April 2024
Repeat Customer sales £m 114.2 118.1 31.8 264.1
Repeat Customer contribution £m 36.7 20.7 7.8 65.3
Repeat Customer contribution margin % 32.1% 17.5% 24.5% 24.7%
53 weeks ended 3 April 2023
Repeat Customer sales £m 147.4 130.8 42.5 320.7
Repeat Customer contribution £m 50.3 25.0 11.2 86.5
Repeat Customer contribution margin % 34.1% 19.1% 26.4% 27.0%
General and administrative costs reconciliation
52 weeks ended 53 weeks ended
1 April 2024
3 April 2023
£m £m
G&A costs per income statement (37.9) (53.1)
Add back/(deduct) adjusted items (see note 6):
Amortisation of acquired intangibles - 1.3
Disposal of US inventory - charitable donations - 0.8
Disposal of US inventory - bad debt expense 0.2 -
Restructuring costs 1.3 1.5
Software as a Service costs 0.1 2.3
Legal settlement for Payment card Interchange fees - (0.7)
Fair value movement on open foreign exchange contracts - (0.1)
G&A costs as per note 5 Segmental reporting (36.3) (48.0)
Add back marketing R&D spend - 5.4
Add back share-based payment charges including related social 0.4 1.5
security costs
Operating G&A costs (35.9) (41.1)
Net cash excluding lease liabilities
1 April 2024 3 April 2023
£m £m
Cash and cash equivalents 31.9 39.5
Borrowings:
Borrowings net of issuance costs (12.3) (29.2)
Customer-funded bonds - -
Net cash excluding lease liabilities 19.6 10.3
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