REG - Naked Wines PLC - Half-year Report
10/12/2024 07:00
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RNS Number : 4147P Naked Wines PLC 10 December 2024
10 December 2024
Naked Wines plc
('Naked Wines' or 'Group')
Half year results for the 26 weeks ended 30 September 2024
'Trading in line with guidance; strategic initiatives and testing are
generating valuable learnings and progressing according to plan'
Naked Wines is pleased to announce its results for the 26 weeks ended 30
September 2024 (HY25)
Commenting on the HY25 performance, Rodrigo Maza, CEO, said:
"Naked Wines is in a better position, both financially and strategically. We
now have robust financial foundations, and our members remain loyal and
engaged. Our strategic initiatives centred around customer acquisition and
retention are generating learnings, and we are currently experiencing solid
trading during the peak season period."
"I am pleased to welcome Dominic as our new CFO. His experience in digital and
international businesses have helped him quickly transition, and I look
forward to working with him as we focus the business on cash, profitability
and growth."
Financials HY25 HY24 vs. HY24 Constant FX
Income Statement
Total revenue £112.3m £132.3m (15)% (14)%
General and administrative costs(1) £(15.7)m £(18.6)m (16)% (15)%
Adjusted EBIT(2) - excl. inventory liquidation costs* £0.6m £2.6m (77)% (77)%
Inventory liquidation costs* £(3.7)m £(0.5)m 640% 640%
Adjusted EBIT(3) £(3.1)m £2.2m (241)% (248)%
Adjusted items(4) £(1.9)m £(10.9)m (83)% (84)%
Statutory operating loss £(5.0)m £(8.7)m (43%) (48%)
Statutory loss before tax £(5.6)m £(9.7)m (42)% (46)%
Cash and Inventory
Net cash (excl. lease liabilities)(5) £22.9m £2.8m 716% 546%
Closing inventory £139.2m £188.7m (26)% (21)%
Customer metrics
Active members in last 12 months(6) 706,000 799,000 (12)%
Customer NPS(7) 76 73 4%
5-Year forecast Payback(8) 1.0x 1.3x (0.3)x
Repeat customer sales retention 74% 72% +200bps
* Inventory liquidation costs include changes to the US stock provision,
losses on disposal and other wine liquidation costs
Notes:
1. 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.
2. Refer to the table in the APM section at the end of this announcement for a
reconciliation of adjusted EBIT excluding inventory liquidation transactions
to adjusted EBIT.
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 adjusted EBIT to operating loss (reported EBIT).
4. Refer to note 6 Adjusted items for further details.
5. Refer to the table in the APM section at the end of this announcement for
an analysis of net cash (excluding lease liabilities).
6. Active members includes all members with either an Angel or Wine Genie
membership. HY24 restated from 792k to include Wine Genie members
7. HY24 customer NPS updated for new calculation methodology, comparable to
HY25. HY24 reported score of 66 is not comparable to HY25
8. HY24 is the latest forecast, original forecast 1.5x.
Financial highlights
Trading remains in line with previously communicated guidance:
● Liquidity continues to improve, and is slightly ahead of the
Group's treasury policy target:
o Net cash (excluding lease liabilities) of £22.9m, is an increase of
£20.1m versus HY24, driven by stock reductions, partially offset by a
reduction in payables; this also includes £9.1m inflow from the early
redemption of the Vendor Loan Note
● HY25 revenue declined to £112.3m (HY24 £132.3m)
● HY25 adjusted EBIT excluding inventory liquidation and associated
costs were £0.6m
● HY25 adjusted EBIT of £(3.1)m is down on HY24 by £5.3m,
reflecting:
o +£2.9m of G&A savings from the FY24 reorganisation
o -£4.6m impact of lower sales
o -£3.7m of inventory liquidation and associated costs, including a £2.5m
increase to the US stock provision and £1.2m of losses on disposal and other
wine liquidation costs
● Statutory loss before tax of £(5.6)m (HY24: £(9.7)m), includes
£1.9m of adjusted items, £1.8m of which relates to under-absorption of
current year's winery overheads in the US
Operational highlights
Enhancements to the management team:
● Rodrigo Maza appointed as CEO in April 2024, implementing a
comprehensive strategic initiatives and testing programme, and leading the
adoption of a high performance culture
● Dominic Neary was welcomed to the Naked Wines team in November 2024
as CFO, and brings significant experience at international high growth
consumer, digital and FMCG companies
Our 'Core' members remain highly engaged: customer NPS remains excellent,
increasing to 76 (from 73 in HY24) and retention of core customers (greater
than 24 months since acquisition) has increased to 79% (from 77% in HY24).
Strategic initiatives and testing have resulted in valuable learnings and are
progressing according to plan; improvements are required in payback:
● Retention: Material improvements in retention are feeding through to
KPIs, including the impact of redesigned on-boarding flows and processes such
as ratings
● Acquisition: Customer acquisition cost increases have been a key
driver in the decline of payback to 1.0x in HY25 (HY24: 1.3x), largely
reflecting the industry-wide decline in the voucher mechanic, as well as
testing of increased volumes in the Wine Genie product. In the second half, we
are testing the redirection of some of our voucher spend into more efficient
channels such as Earned Media. Payback will benefit from this alongside
tailwinds from improvements in retention and personalisation
● Personalisation: Recently re-launched new user journeys are
delivering significant improvements in conversion, most notably the newly
launched Angel acquisition journey, where we have seen improved conversion
uplifts in the UK of between 16% and 43% across channels
Outlook
● Early peak season trading has been solid; liquidity and cash
continuing to improve
● FY25 performance is currently expected to be in line with the
guidance previously given (as detailed at the end of the CFO statement)
● US inventory, whilst in line with previously communicated plans,
remains overstocked; we are reviewing options to release capital from
inventory; some of these would drive improved cash in FY26 and FY27, but could
lead to increased liquidation costs, and result in EBIT at the lower end of
guidance
● A performance review is underway, proactively evaluating options
to maximise shareholder value; we will report back by the end of the financial
year.
Analyst and investor conference call:
Naked Wines plc will host an analyst and investor conference call at 9am
UK-time today (10 December 2024). The briefing will be webcast using the
following link: Naked Wines Half Year Results | SparkLive | LSEG
(https://sparklive.lseg.com/NakedWines/events/77dc9d7b-a4a4-4ad7-aa39-fbc6e719f35c/naked-wines-half-year-results)
A recording will also be made available on the Results section of the investor
website www.nakedwinesplc.co.uk (http://www.nakedwinesplc.co.uk) shortly after
the conference call
For further information, please contact:
Naked Wines plc IR@nakedwines.com (mailto:IR@nakedwines.com)
Rodrigo Maza, CEO
Dominic Neary, 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
Vigo Consulting (Financial PR) Tel: 0207 390 0230
Tim McCall
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 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 290 of the world's best independent
winemakers and over 2,300 quality wines from 23 countries. In the last 12
months, we served more than 706,000 members in the US, UK and Australia,
making us a leading player in the fast-growing direct-to-consumer wine market.
For more information visit nakedwinesplc.co.uk (http://nakedwinesplc.co.uk)
and nakedwines.co.uk (http://nakedwines.co.uk) or follow us @nakedwines
(https://www.instagram.com/nakedwines)
Group CEO review
Overview
I articulated my observations and priorities in August during our FY24 results
presentation, and these remain unchanged:
● We now have robust financial foundations in place. We restructured
our costs, landed a fit-for-purpose credit facility in July, and we continue
the sale of our surplus inventory with the UK and Australia now returning to
normal inventory levels, and US inventories, whilst still significantly in
excess, are nevertheless down £20.5m on HY24.
● We have embedded resilient management systems. These ensure focus
and alignment, enable the adoption of a high-performance culture (with
Engagement Results improving for the first time since 2022), and drive
winemaker success.
● We are fully focused on getting Naked Wines back to sustainable
growth. We have been rolling out a comprehensive testing plan since the start
of the fiscal year to recruit the right customers for the right reasons
(Acquisition), bring them into the relationship that best suits their needs
(Personalisation), and drive their long-term engagement and activation
(Retention).
Strategic Initiatives
As shared a few months ago, we continue to see improvements from our Testing
Plan and are building learnings across a number of areas, which we are already
taking action on. In Q4 we will share more details of this and the
implications they have on the trajectory of our company.
This plan challenges the fundamental aspects of the business and, because of
that, some of our metrics are likely to be volatile during the testing phase.
Payback in H1 has been an example of this, although we see tailwinds as we
head into H2. Pleasingly, we note that early "peak season" trading has been
solid, and we are tracking in line with FY25 expectations.
Retention improvements are feeding through in our KPIs
We are increasingly confident of improvements in both our Immature and Mature
Retention (refer to Glossary for definition). Redesigned on-boarding flows are
helping customers understand Naked's value proposition from the start, and a
new engagement approach (moving from focusing on discounts to sharing relevant
information about our wines and winemakers) is reinvigorating our
relationships with members across most tenures.
A good example of this is our recently relaunched 'wine ratings'; we know that
there is a strong correlation between completion of ratings and long-term
retention and value. The new ratings process has resulted in a 94% completion
of ratings versus 63% before. We are also seeing improvement in key retention
metrics - sales retention is up 2% year-on-year, and retention of our core
customers (more than 24 months since acquisition) has improved from 77% in
HY24 to 79% in HY25.
Acquisition testing has identified significant efficiencies to reverse the
recent trend in payback
The payback metric has deteriorated in HY25 - a key driver of this has been
Customer Acquisition Cost (CAC), which has been adversely impacted by the
industry-wide decline in voucher efficiency. Naked has historically
over-invested in this area, and recent analysis and testing has identified the
opportunity to generate significant efficiencies as we re-direct investment to
more efficient channels such as earned media. Included within guidance are
identified efficiencies in H2 FY25, with incremental opportunities likely in
FY26 - these should improve payback going forward as we move away from legacy
strategies.
Finding the right channels to develop continues to be a top priority. We're
seeing early signs that our priority channels are driving a virtuous cycle,
e.g. using PR and content creators for cost effective brand wide reach, then
converting more efficiently into new members via Meta, member referral and
brand search. We've invested in more robust mechanisms to measure the
effectiveness of our efforts and remain confident in the potential of new
growth avenues.
Recently re-launched product journeys are delivering significant improvements
in conversion
Testing around Personalisation continues to show good progress, with the LTVs
of members acquired through new funnels proving to be materially above average
and the conversion gaps being actively improved upon. I'm pleased to share
that enhancements to our Angel journey as well as our check-out have produced
material conversion benefits at this early stage. As an example, we are seeing
conversion uplifts in the acquisition of new Angels across all channels,
ranging from 16% to 43% - this launch is being rolled out channel by channel
between September and January.
Current trading and performance
We are currently within our peak trading period, and results so far are
tracking in line with our expectations and overall guidance for FY25, but
December remains important to delivery. We'll provide a full trading update in
late January 2025. This will be followed by further insight into the Strategic
Initiatives outlined above and their outputs before the end of our financial
year.
Summary
Naked is in a better position, both financially and strategically, than it was
at the start of FY25. While it is still early to claim definitive wins, we are
seeing positive outputs from our experiments and Strategic Initiatives. We
have big ambitions and are focused on the execution of our strategy, with lots
of opportunities available to us to return to growth and a capable and
motivated team in place to deliver on it. We look forward to providing regular
updates on outputs and progress.
Rodrigo Maza
Group Chief Executive Officer
CFO Review
I would like to thank Maza and the team for their warm welcome since joining
as CFO in November. The business has made significant progress in the last 12
months. Some of this is clear with net cash (excluding lease liabilities) of
£22.9m, up £20.1m on HY24. Other improvements will take longer to impact
financial results fully.
Our members remain engaged and loyal:
● Customer NPS is excellent and improving at 76 (HY24: 73) - once
acquired, customers love our proposition
● Sales retention has improved a further 200 bps to 74% (vs. 72% in
HY24)
● The trend in member decline is improving, in part due to the fact
that the exceptional acquisition levels, and therefore attrition levels, from
FY21 to FY23 cohorts are naturally reducing over time
The strength of our core membership continues to improve:
● Sales from core members, who are more than 24 months old, has
increased to 74% of our business versus 67% in HY24
● Member retention of this group has increased to 79% from 77% last
year
Payback has deteriorated in the first half; actions are in hand to address
this:
The key drivers of the deterioration to 1.0x in HY25 (HY24: 1.3x) are:
● CAC (Customer Acquisition Cost) has substantially increased in the US
and the UK, although it has declined in Australia; this reflects the
increasingly inefficient cost of the voucher mechanic. Testing has identified
significant non-voucher channel opportunities which will drive down investment
levels in H2 and into FY26, resulting in significant efficiencies, some of
which will drop down to the bottom line.
● In the last 12 months, Naked Wines has been investing in higher
converting 'Wine Genie' members. Testing in the last three months has shown
that longer-term performance through this product is weaker than forecast.
Acquisition has largely pivoted back to the Angel channel.
We are stepping up our focus on profitability
Key drivers of this are: the significant opportunities highlighted above in
redirecting voucher spend, and also ongoing improvements in procurement and
arising from our tech investments
Cash and liquidity are strong
Naked Wines has made considerable progress with liquidity in the last 12
months. Net cash (excluding lease liabilities) of £22.9m is up £20.1m on
HY24. As previously communicated, the new credit facility was completed in
July 2024 and total cash and credit facility capacity at half year was £62m.
Of this, £11m has been committed, via payment partners, to provide security
to Angel customer balances and £8m has been drawn down. The remaining £43m
is unpledged and puts the Group's liquidity slightly in excess of the position
required under our treasury policy. As such, as part of our performance
review, we are assessing whether we are likely to have potential excess funds
in the future.
Separately, we are considering the potential for making early duty payments to
help offset increased wine taxes coming into effect in 2025 - this would
impact cash levels at the end of FY25, and into FY26.
We are investigating options to speed up the proposed reduction in our
inventory
UK and Australia stock levels are now returning to normal levels. Whilst
progress has been made in the US in line with previously communicated plans,
the region continues to remain significantly overstocked. We are currently
investigating options to reduce inventory levels more quickly; some of these
would drive improved cash in FY26 and FY27, but could lead to increased
liquidation costs, and result in EBIT at the lower end of guidance.
The opportunities in the business are significant, but considerable work
remains to be done. For example, we need to step up the pace of our digital
simplification and associated effectiveness. Having only recently joined, I am
now working with the team to perform a review, with a focus on efficiency,
speed and cashflow.
Group financial summary(1):
HY25 HY24 HY25 vs HY24 Constant currency(2)
Total revenue(3) £112.3m £132.3m (15)% (14)%
Total adjusted revenue(3) £112.3m £131.6m (15)% (14)%
New £7.9m £9.1m (13)% (12)%
Repeat £102.6m £121.8m (16)% (15)%
Other £1.9m £0.7m 171% 36%
Investment in New Customers £(9.4)m £(9.2)m 2% 3%
Repeat Customer contribution £25.9m £30.5m (15)% (14)%
Other contribution £(3.8)m £(0.5)m (660)% (660)%
( ) £(15.7)m £(18.6)m (16)% (15)%
General and administrative
costs excluding adjusted items(4)
Operating general and £(14.9)m £(17.9)m (17)% (16)%
administrative costs
Share-based payments £(0.8)m £(0.7)m (14)% (14)%
Memo: statutory general and £(15.8)m £(18.7)m (16)% (14)%
administrative costs
Adjusted EBIT(5) £(3.1)m £2.2m (241)% (196)%
Adjusted items(6) £(1.9)m £(10.9)m (83)% (84)%
Statutory operating loss £(5.0)m £(8.7)m (43)% (48)%
Net finance costs £(0.7)m £(1.0)m (35)% (24)%
Statutory loss before £(5.6)m £(9.7)m (42)% (46)%
tax
Net cash excl. lease liabilities(7) £22.9m £2.8m 716% 546%
Net assets £67.3m £88.8m (24)% (19)%
Inventory (including that under £139.2m £188.7m (26)% (21)%
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. Refer to note 6 Adjusted items for further details.
7. Refer to the table in the APM section at the end of this announcement for
an analysis of net cash (excluding lease liabilities).
Drivers of Group P&L performance
In HY25 total revenue declined by 14% on a constant currency basis to £112.3m
(HY24: £132.3m). This broadly reflected the drop in active members which were
down by 12%. Active member numbers have been trending more positively since
the start of the year and were down by 6% on the start of the financial year.
Repeat Customer contribution dropped in line with Repeat Customer sales. There
was a 12% decline in New Customer sales on a constant currency basis, with
investment in the acquisition of new customers growing by 3% in HY25.
Statutory general and administrative (G&A) costs of £15.7m were down 16%
on prior year (HY24: £18.6m), reflecting the annualisation of the cost
savings implemented in FY24.
This resulted in adjusted EBIT excluding inventory liquidation and associated
costs of £0.6m (HY24: £2.6m). The adjusted EBIT including liquidation of
inventory was £(3.1)m (HY24: £2.2m). The statutory loss of £5.6m (HY24:
loss of £9.7m) includes both the £3.7m of inventory liquidation costs and
£1.9m of adjusted items.
Key adjusted items
HY25 HY24 £m
£m
Right-sizing of US inventory - 0.8
Under-absorption of current year's winery overheads (1.8) -
Impairment of non-current assets - (11.5)
Software as a Service costs incurred in the implementation of new ERP platform
- (0.2)
Fair value movement on forward foreign exchange contracts (0.1) 0.1
Refer to note 6 Adjusted items for further details of all these key adjusted
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.
Cash flow drivers
HY25 net cash excluding lease liabilities was £22.9m, up £20.1m on HY24.
There was £4.3m of net cash generation in HY25 (excluding the impact of FX),
when we typically see cash outflow in the six months ahead of peak trading.
This is a significant improvement in cash performance vs the typical cash
outflow in the first half of the financial year.
Cash flow analysis
HY25 HY24 £m
£m
Operating loss (5.0) (8.7)
Add back: depreciation and amortisation 1.1 1.6
Add back: other non-cash amounts(1) 0.6 (0.7)
Add back: impairments - 11.5
Change in inventory 0.6 (19.8)
Change in payables 1.0 3.8
Change in Angel funds and other deferred income 7.7 8.5
Change in receivables 1.8 0.2
Operating cash flow 7.8 (3.6)
Tax and net interest paid (2.4) (1.9)
Capital expenditure (0.4) (0.6)
Repayments of principal under lease liabilities (0.8) (1.0)
Movement in net cash excluding lease liabilities 4.3 (7.1)
Opening net cash excluding lease liabilities 19.6 10.3
Movement in net cash excluding lease liabilities 4.3 (7.1)
FX (1.0) (0.4)
Closing net cash excluding lease liabilities 22.9 2.8
Notes:
1 Other non-cash amounts is made up of share-based payment charge of £0.8m,
fair value movement on foreign exchange contracts of £0.1m, less movement in
inventory provision of £0.3m and fair value movement on foreign exchange
contracts of £0.1m
Net interest charges totaled £0.7m in HY25 (HY24: £1.0m), being the net of
interest receivable on cash at bank and interest payable relating to the
Group's asset-backed lending facilities in place in first half of the year, as
well as interest costs of right-of-use assets.
The Group's statutory effective tax rate of (16)% (HY24: (20)%) is
substantially driven by tax charges on overseas taxable profits and a
reduction in US deferred tax assets recognised at the half year.
Liquidity and going concern
The Group has continued to build its net cash excluding lease liabilities
position during FY25, primarily by focusing on inventory reduction. Angel
funds, which are heavily weighted to our core members who have been with the
business for more than 24 months, have remained resilient during the period,
reflecting the loyalty of our longer-term and most engaged members.
The combination of this improvement, the additional liquidity and reduction in
covenant limitations afforded by the new credit facility, and the expectation
of additional cash generation that is typical through the peak trading period,
has improved the Group's resilience to weather any downturn. The Board has
stress-tested a range of trading scenarios, which incorporate a range of
inventory liquidation costs and also potential early duty payments, and have a
reasonable expectation that the Group and the Company will be able to operate
within the level of their available liquidity. For this reason, and the
reasons given above, the Board considers it appropriate for the Group and the
Company to adopt the going concern basis in preparing these financial
statements.
Dominic Neary
Group Chief Financial Officer
Guidance(1)
Our view on headline FY25 metrics remain unchanged 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 and associated costs £(2) - £(5)m
Adjusted EBIT £(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
Condensed consolidated income statement
For the 26 weeks ended 30 September 2024
Continuing operations 26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
Note £'000 £'000
Revenue 5 112,301 132,339
Cost of sales (72,173) (78,939)
Fulfilment costs (21,402) (25,764)
Gross profit pre US inventory provision 18,726 27,636
Movement in US inventory provision 6* 282 1,327
Gross profit 19,008 28,963
Advertising costs (8,148) (7,440)
General and administrative costs (15,827) (18,732)
Impairment of non-current assets 6,7 - (11,539)
Operating loss(1) (4,967) (8,748)
Finance costs (802) (2,329)
Finance income 151 1,333
Loss before tax (5,618) (9,744)
Tax 8 (907) (1,930)
Loss for the period (6,525) (11,674)
Loss per share
Basic and diluted 9 (8.8p) (15.8p)
* Note reference relates to HY24.
1. Operating loss analysed as:
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
Note £'000 £'000
Adjusted EBIT(2) 5 (3,061) 2,159
Adjusted items: 6
Right-sizing of US inventory - 774
Under-absorption of current year's winery overheads (1,798) -
Impairment of non-current assets - (11,539)
Other adjusted items (108) (142)
Operating loss (4,967) (8,748)
2. Refer to the table in the APM section at the end of this
announcement for analysis of adjusted EBIT identifying inventory liquidation
transactions.
The notes to the condensed consolidated interim financial statements following
the primary statements are an integral part of these condensed consolidated
interim financial statements.
Condensed consolidated statement of comprehensive income
For the 26 weeks ended 30 September 2024
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
£'000 £'000
Loss for the period (6,525) (11,674)
Items that may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations (3,727) 1,115
Other comprehensive (loss)/income for the period (3,727) 1,115
Total comprehensive loss for the period (10,252) (10,559)
The total comprehensive loss for the period and the prior period is wholly
attributable to the equity holders of the parent company, Naked Wines plc.
The notes to the condensed consolidated interim financial statements following
the primary statements are an integral part of these condensed consolidated
interim financial statements.
Condensed consolidated statement of changes in equity
For the 26 weeks ended 30 September 2024
Share capital Share premium Capital redemption reserve Currency translation reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2024 5,550 21,162 363 6,497 43,195 76,767
Loss for the period - - - - (6,525) (6,525)
Other comprehensive loss for the period - - - (3,727) - (3,727)
Total comprehensive loss for the period - - - (3,727) (6,525) (10,252)
Credit to equity for equity-settled share-based payments - - - - 806 806
At 30 September 2024 5,550 21,162 363 2,770 37,476 67,321
At 3 April 2023 5,550 21,162 363 7,930 63,673 98,678
Loss for the period - - - - (11,674) (11,674)
Other comprehensive income for the period - - - 1,115 - 1,115
Total comprehensive income/(loss) for the period - - - 1,115 (11,674) (10,559)
Credit to equity for equity-settled share-based payments - - - - 664 664
Deferred tax on share-based payments - - - - (32) (32)
At 2 October 2023 5,550 21,162 363 9,045 52,631 88,751
The notes to the condensed consolidated interim financial statements following
the primary statements are an integral part of these condensed consolidated
interim financial statements.
Condensed consolidated balance sheet
As at 30 September 2024
30 September 2024 1 April 2024
Note £'000 £'000
Non-current assets
Goodwill and intangible assets 5,859 5,859
Property, plant and equipment 2,219 2,468
Right-of-use assets 2,063 2,794
Deferred tax assets 2,247 3,425
12,388 14,546
Current assets
Inventory staged payments to winemakers 13,223 13,273
Inventories 125,953 131,581
Trade and other receivables 8,396 10,460
Corporation tax recoverable 1,965 -
Financial instruments at fair value - 21
Cash and cash equivalents 10 29,264 31,851
178,801 187,186
Current liabilities
Trade and other payables (38,152) (38,738)
Current tax liabilities - (249)
Angel funds and other deferred income (73,948) (68,314)
Lease liabilities 10 (1,353) (1,392)
Provisions 6(b) (2,209) (1,475)
Borrowings 10 - (12,248)
Customer-funded bonds 10 (35) (35)
Financial instruments at fair value (374) (268)
(116,071) (122,719)
Net current assets 62,730 64,467
Total assets less current liabilities 75,118 79,013
Non-current liabilities
Lease liabilities 10 (1,510) (2,246)
Borrowings 10 (6,287) -
(7,797) (2,246)
Net assets 67,321 76,767
Equity
Share capital 5,550 5,550
Share premium 21,162 21,162
Capital redemption reserve 363 363
Currency translation reserve 2,770 6,497
Retained earnings 37,476 43,195
Total equity 67,321 76,767
The condensed consolidated interim financial statements of Naked Wines plc
(company registration number 02281640) have been prepared in accordance with
International Accounting Standard 34 Interim Financial Reporting, as adopted
for use in the UK.
The notes to the condensed consolidated interim financial statements following
the primary statements are an integral part of these condensed consolidated
interim financial statements.
By order of the Board,
Dominic Neary
Chief Financial Officer
9 December 2024
Condensed consolidated cash flow statement
For the 26 weeks ended 30 September 2024
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
Note £'000 £'000
Operating activities
Net cash flows from/(used in) operations 10 7,817 (3,580)
Overseas income tax paid (2,157) (511)
Net cash from/(used in) operating activities 5,660 (4,091)
Investing activities
Purchase of property, plant and equipment (358) (647)
Proceeds on disposal of property, plant and equipment 12 39
Net cash used in investing activities (346) (608)
Financing activities
Interest paid (376) (1,479)
Interest received 151 247
Repayments of principal under lease liabilities (791) (1,178)
Debt issuance costs paid (1,801) -
Other loans - 1,000
Repayment of borrowings (12,303) -
Drawdown of borrowings 8,301 -
Net cash used in financing activities (6,819) (1,410)
Net decrease in cash (1,505) (6,109)
Cash and cash equivalents at the beginning of the period 31,851 39,474
Effect of foreign exchange rate changes (1,082) 403
Cash and cash equivalents at the end of the period 10 29,264 33,768
The notes to the condensed consolidated interim financial statements following
the primary statements are an integral part of these condensed consolidated
interim 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 annual financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards.
These condensed consolidated interim financial statements have been prepared
applying the accounting policies set out in the Annual Report and Accounts for
the 52 weeks ended 1 April 2024.
The auditor's report on those accounts was not qualified and did not contain
statements under section 498(2) or (3) of the Companies Act 2006.
The condensed consolidated interim financial statements included in this
report have been prepared in accordance with International Accounting Standard
34 Interim Financial Reporting, as adopted for use in the UK. The
condensed consolidated interim financial statements are not statutory
accounts. They include the financial statements of Naked Wines plc and
entities controlled by the Company (its subsidiaries), Naked Wines plc has
control over the Naked Wines plc Share Incentive Plan Trust and the Naked
Wines Employee Benefit Trust, which have not been consolidated on the basis of
materiality.
The financial reporting period represents the 26 weeks ended 30 September 2024
and the prior period, 26 weeks ended 2 October 2023, and are presented in GBP
which is the Group's functional currency, and all values are rounded to the
nearest thousand (£'000), except when otherwise indicated.
The new accounting standards that came into effect in the current accounting
period beginning 2 April 2024, noted below, do not introduce any new
disclosures that are explicitly required in the condensed consolidated interim
financial statements.
Effective date 1 January 2024
· Non-current Liabilities with Covenants - Amendments to IAS 1
· Classification of Liabilities as Current or Non-current -
Amendments to IAS 1
· Lease Liability in Sales and Leaseback - Amendments to IFRS 16
· Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
At the reporting date, the Group has not applied the following new and revised
IFRSs that have been issued but are not yet effective.
· Lack of Exchangeability - Amendments to IAS 21
· Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (effective date
deferred indefinitely).
3. Significant estimates
Inventory provision
The Group continues to closely assess the recoverability of its inventory
holdings, especially in its US market.
In this market, the Group has continued to hold elevated inventory levels.
It has continued to assess expected levels and product mix of consumer demand
and has also continued to liquidate inventory through secondary market
activity.
As such, whilst disposals amounting to £5m of cost of goods have been
completed through secondary market channels in the period, the Group has seen
a smaller reduction in US inventory provision level from £12.5m at the end of
FY24 to £11.5m at the half year, with an inventory provision charge of £2.5m
in the period (FY24: £7.4m).
A number of critical judgements have been made in the calculation of the US
segment inventory provision analysis, including:
- Realisable volumes and value of bulk wine in the open market;
- Changing consumer consumption patterns between wine product families
resulting in changing bottling plans; and
- Estimates of future trading activity and utilisation of inventory on hand.
For both bulk and cased wine inventory in the US, the full range of reasonably
possible outcomes 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 may differ from
their estimates made at the half year, and that the magnitude of the inventory
provision in the Group's US business unit could materially change in
subsequent reporting periods. Two relevant sensitivities that are readily
quantifiable are the expected proceeds from the disposal of bulk inventory on
hand not currently 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 inventory 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 £8.7m (FY24: £7.7m)) disposal assumptions: If
management are not able to realise expected proceeds for bulk wine reaching
commercial expiry in the next 24 months, an additional £1.0m (FY24: £0.9m)
of inventory would be written off. Additionally, there is a further net £2.1m
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 either
currently expected to be used in future wine projects or has anticipated
proceeds on disposal assumed. However, if these assumptions prove to be
inaccurate, then the Company would be exposed to this additional £2.1m of
inventory write down.
Cased wine (provision of £2.8m (FY24: £4.9m)) sales volume sensitivity:
Management have forecast expected consumption of cased goods in hand at the
balance sheet date by using product level or product family level historic run
rates to calculate forward days cover and to assess the calculated SKU
consumption date against SKU family expected prime marketing life. A pro-forma
5% reduction in SKU level run rates across the cased goods inventory holding
at the half results in an additional £0.1m of cased goods inventory provision
requirement.
4. Going concern
Background and context
The Group's financial statements for the year ended 1 April 2024 were signed
on 27 August 2024. These financial statements were prepared on a going
concern basis.
Credit facility
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 the Group's
US, UK and Australian subsidiaries. The purpose of this facility is to
provide the Group with access to working capital and also to be used as a
source of security for strategic stakeholders. The Group has met all of its
credit facility covenant requirements since signature of the agreement up to
the date of the signing of these financial statements.
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 reflect Naked's recent trading
and the current macroeconomic outlook.
The Directors have prepared cash flow scenarios extending for a period of at
least 12 months from the date of the approval of these interim financial
statements ("the going concern assessment period") to assess the liquidity of
the Group.
A baseline forecast was prepared in which business unit trading KPIs were
assumed to be in line with current expectations for the remainder of FY25 and
flat year-on-year, adjusted for known one-off distortions, in the remainder of
the going concern period. The forecast anticipated continued upward pressure
on customer acquisition costs. Costs were assumed to be in line with current
underlying run rates allowing for reasonable market inflation. Liquidity was
forecast on the basis of the Group's current credit facility alongside
anticipated inventory holdings. In this scenario, the Group maintained more
than £20m of headroom above its springing covenant liquidity test of more
than $12m of facility availability and US PNC banked cash across the forecast
period, above which it does not need to measure compliance with its fixed
charge cover ratio covenant test of greater than 1.2x.
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 available mitigating
actions.
Sales performance driver:
- A 5% decline in revenue per Angel from the beginning of the base
case forecast period, described above, extending over the entire forecast
period.
Cost mitigations:
- A 10% reduction in new customer investment from the beginning of
the FY26, amounting to a saving of £1.8m across the forecast period;
- Reduction to £nil payable variable compensation in FY25,
resulting in a £1.4m P&L saving in the second half of the year and the
associated cash outflow reduction in H1 FY26; and
- A further reduction of P&L cost of £1.0m relating to FY26
variable compensation for the remainder of the forecast period.
Working capital mitigations:
- Reduction in inventory intake in FY26 of £10m in response to
lower sales expectation.
The net impact of the severe but plausible downside is to reduce the Group's
headroom to its springing covenant test to £14m in October 2025, reflecting
the phasing of inventory intake for peak trading in the following periods.
In all other periods of the assessment, the severe but plausible downside
scenario showed that the Group retained more than £20m of headroom. This
reduction in headroom still does not require the testing of the Group's fixed
charge cover ratio in the forward forecast period.
A further 'reverse stress test' scenario has also been run, deliberately
designed to identify the point at which the Group failed its banking facility
covenant. This scenario required a further 8% decline in revenue per Angel,
without any further cash or cost mitigation, before the Group would trip its
covenant commitments. In this scenario, the Group failed its covenant test
in October FY26.
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
Naked Wines has sufficient liquidity to continue trading and to meet its
minimum facility liquidity requirements, avoiding the need to assess its fixed
charge cover ratio covenant commitment.
The Board believes that the flexibility afforded to it by its new financing
arrangements and the generation of net cash since the beginning of the current
financial year mean that the Directors have a reasonable expectation that the
Group will be able to operate within the level of their available liquidity
and meet their liabilities as they fall due for the forecast period. For
this reason, the Board considers it appropriate to adopt the going concern
basis in these condensed consolidated interim 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.
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.
All revenue is recognised at a single point in time when it is probable that
the economic benefits will flow to the Group and the revenue can be reliably
measured. Specific to the Group, the performance obligations of the Group
are deemed to be fulfilled when the product is delivered to our customer or
Angel, typically within one to three days following dispatch, which is when
the customer obtains control of their purchase and there is reasonable
certainty regarding the recovery of the consideration.
The Group is subject to seasonal fluctuations resulting in varying profits
over the full year period. The Group experiences increased sales in the
third quarter which covers the holiday period, accounting for around 40% of
total revenue compared to around 20% in each of the other quarters.
Included within Angel funds and other deferred income is deferred income of
£6.5m (1 April 2024: £3.1m). These balances represent value of funds
received in advance, but the order is yet to be fulfilled or delivered. This
will be recognised as revenue when the order is fulfilled or delivered, which
is expected to occur over the next six months.
26 weeks ended Naked Wines US Naked Wines UK Naked Wines Australia Unallocated Total
30 September 2024
£'000 £'000 £'000 £'000 £'000
Total segment revenue 51,989 47,513 13,964 - 113,466
less intercompany revenue (1,165) - - - (1,165)
External revenue 50,824 47,513 13,964 - 112,301
Analysed as:
New Customer sales 4,245 2,317 1,296 - 7,858
Repeat Customer sales 44,699 45,196 12,668 - 102,563
Other revenue 1,880 - - - 1,880
Revenue 50,824 47,513 13,964 - 112,301
Investment in New Customers (4,747) (3,513) (1,183) - (9,443)
Repeat Customer contribution 15,069 7,437 3,372 - 25,878
Other contribution(1) (3,545) (232) - - (3,777)
Total contribution after advertising costs(2) 6,777 3,692 2,189 - 12,658
General and administrative costs(3) (3,781) (2,093) (1,149) (8,696) (15,719)
Adjusted EBIT 2,996 1,599 1,040 (8,696) (3,061)
Adjusted items:
Under-absorption of current (1,798) - - - (1,798)
year's winery overheads
Other adjusted items (2) (189) (2) 85 (108)
Operating profit/(loss) 1,196 1,410 1,038 (8,611) (4,967)
Finance costs (674) (102) (25) (1) (802)
Finance income 147 4 - - 151
Profit/(loss) before tax 669 1,312 1,013 (8,612) (5,618)
Tax (551) (77) (179) (100) (907)
Profit/(loss) for the period 118 1,235 834 (8,712) (6,525)
Depreciation 1,016 84 - - 1,100
Total assets 112,929 48,328 20,139 9,793 191,189
Total liabilities 56,905 52,110 12,087 2,766 123,868
Capital expenditure 220 138 - - 358
Geographical analysis US UK Australia Total
£'000 £'000 £'000 £'000
Revenue 50,824 47,513 13,964 112,301
Non-current assets excluding deferred tax assets 3,460 6,681 - 10,141
1. Other contribution constitutes loss on inventory liquidation and
associated transactions
2. Contribution after advertising costs is calculated as gross profit
(£19.0m), less advertising costs (£8.1m), excluding transactions associated
with the under-absorption of current year's winery overheads (£1.8m) (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.
26 weeks ended Naked Wines US Naked Wines UK Naked Wines Australia Unallocated Total
2 October 2023
£'000 £'000 £'000 £'000 £'000
External revenue 63,924 52,372 16,043 - 132,339
Revenue associated with the US inventory impairment (707) - - - (707)
Total adjusted revenue (1) 63,217 52,372 16,043 - 131,632
Analysed as:
New Customer sales 5,336 2,313 1,462 - 9,111
Repeat Customer sales 57,172 50,059 14,581 - 121,812
Other revenue 709 - - - 709
Total adjusted revenue (1) 63,217 52,372 16,043 - 131,632
Investment in New Customers (5,953) (2,036) (1,258) - (9,247)
Repeat Customer contribution 17,448 9,384 3,632 - 30,464
Other contribution (468) - - - (468)
Total contribution after advertising costs(2) 11,027 7,348 2,374 - 20,749
General and administrative costs(3) (5,749) (3,070) (1,607) (8,164) (18,590)
Adjusted EBIT 5,278 4,278 767 (8,164) 2,159
Adjusted items:
Right-sizing of US inventory 774 - - - 774
Impairment of non-current (1,681) - (696) (9,162) (11,539)
Assets
Other adjusted items - - - (142) (142)
Operating (loss)/profit 4,371 4,278 71 (17,468) (8,748)
Finance costs (2,292) (14) (21) (2) (2,329)
Finance income 792 - - 541 1,333
Profit/(loss) tax 2,871 4,264 50 (16,929) (9,744)
Tax (2,067) 306 (169) - (1,930)
Profit/(loss) for the period 804 4,570 (119) (16,929) (11,674)
Depreciation 1,235 127 112 57 1,531
Amortisation - - - 100 100
Impairments 1,681 - 696 9,162 11,539
Total assets 147,571 60,246 24,901 23,004 255,722
Total liabilities 93,753 54,568 15,131 3,519 166,971
Capital expenditure 636 - 11 - 647
US UK Australia Total
£'000 £'000 £'000 £'000
Geographical analysis
Revenue 63,924 52,372 16,043 132,339
Non-current assets excluding deferred tax assets and the vendor loan note 5,248 5,983 - 11,231
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
(£29.0m), less advertising costs (£7.4m), excluding transactions associated
with the right-sizing of US inventory included in contribution (£0.8m),
(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 adjustments made to reported loss before tax are:
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
£'000 £'000
Net movement in US inventory provision - 1,327
Loss on the disposal of US inventory - contribution - (553)
loss(1)
(a) Right-sizing of US inventory - 774
(b) Under-absorption of current year's winery overheads (1,798) -
(c) Impairment of non-current assets - (11,539)
Restructuring costs - 36
Software as Software as a Service costs incurred in - (248)
the implementation of new ERP platform
Fair value movement on foreign exchange contracts (108) 70
and associated unrealised foreign currency inventory
(d) Other adjusted items (108) (142)
Total adjusted items (1,906) (10,907)
1. Contribution loss analysed as sales of £nil (HY24: £0.7m) less
cost of goods sold of £nil (HY24: £1.3m) resulting in a net contribution
loss of £nil (HY24: loss of £0.6m).
(a) Right-sizing of US inventory
During the first half of the prior year, the Group recorded a net credit of
£0.8m reflecting the utilisation of the inventory provision created in FY23
and a contribution loss where inventory that was provided against that has
been sold on the secondary market as part the right-sizing exercise for less
than historic cost of goods.
(b) Under-absorption of current year's winery overheads
As a result of a reduction in the expected volume of wine to be produced by
the Group's US business unit in the year, the Group is unable to allocate all
of the associated wine production overhead costs into the wine produced. Per
the relevant accounting standard (IAS 2 Inventories), unallocated overheads as
a result of low production must be expensed to the income statement in the
period in which they are incurred. The charge reported at the half year
includes both the under-absorption of incurred production costs to date and a
provision for the remainder of an onerous third-party production cost relating
to current year production.
(c) Impairment of non-current assets
Management have assessed whether indicators of impairment exist for the
remaining non-current assets on the balance sheet, and whether indicators
exist that previously booked impairments may be reversed. At the end of the
current period, management found no evidence of further impairments required,
nor any reversals of previously booked impairments required. The Group has
therefore recognised an amount of £nil to the impairments to non-current
assets (HY24: £11.5m).
(d) Other adjusted items
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.
Restructuring costs
Restructuring costs in the current period was £nil. In the first half of
the prior year, there was a release of the previous year's provision no longer
required.
Software as a Service cost
During the prior year, the Group provided for implementation costs relating to
the development of a new ERP system.
7 Impairment of non-current assets
Management have determined that no indicators of impairment existed at the
balance sheet date and as such no impairment review has been performed. In the
prior year, impairment indicators were identified and an impairment review
undertaken. As a result of this review, the carrying value of assets held in
Naked Wines US and Naked Wines Australia were reduced to their recoverable
amount through recognition of an impairment charge of £11.5 million against
goodwill, other intangibles, property, plant and equipment and right-of-use
assets. This charge was recognised within adjusted items in the income
statement and is analysed by segment and asset type as set out below:
Goodwill Other intangible assets Property, plant and equipment Right-of-use assets Total CGU value in use *
£'000 £'000 £'000 £'000 £'000 £'000
Naked Wines US 8,128 1,034 - 1,681 10,843 64,753
Naked Wines UK - - - - - 52,709
Naked Wines Australia - - 11 685 696 (447)
8,128 1,034 11 2,366 11,539 117,015
* The value in use of each CGU is calculated after a full allocation of
corporate costs necessarily incurred to generate the cash inflows of the
operating business units and in accordance with IAS36 Impairment of assets.
8 Tax
Tax for the 26 weeks ended 30 September 2024 is charged at an effective tax
rate of (16.1)% (HY24: (19.8)%) representing the best estimate of the Group's
expected annual effective tax rate, applied to the profit before tax of the
period. The effective tax rate is substantially driven by tax charges on
overseas taxable profits and a reduction in the US deferred tax assets
recognised at the balance sheet date.
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
£'000 £'000
Current tax (183) (544)
Deferred tax
Change in UK deferred tax asset recognition (177) 429
Change in US deferred tax asset recognition (551) (1,768)
Other deferred tax movements 4 (47)
Deferred tax (724) (1,386)
Total tax charge for the period (907) (1,930)
Effective tax rate (16.1)% (19.8)%
9 Loss per share
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares in
issue of the Company, excluding 137,298 (HY24: 180,161) 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 830,701
(HY24: 6,855,248) 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.
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
Basic and diluted loss per share (pence) (8.8)p (15.8)p
Loss for the purposes of basic earnings per share calculation (£'000) (6,525) (11,674)
Weighted average number of ordinary shares used as the denominator in 73,844,059 73,770,908
calculating basic earnings 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 78,727,032 issued shares (HY24: 74,624,159).
10 Notes to the cash flow statement
(a) Cash flows from operations
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
£'000 £'000
Cash flows from operations
Loss for the period (6,525) (11,674)
Adjustments for:
Tax expense 907 1,930
Net finance costs 651 996
Depreciation and amortisation 1,100 1,631
Impairment of non-current assets - 11,539
Profit/(loss) on disposal of fixed assets (9) 1
Profit on early termination of leases (1) -
Fair value movement on foreign exchange 126 (70)
contracts
Inventory provision movement (282) (1,327)
Share-based payment charges 806 664
Operating cash flows before movements in working capital (3,227) 3,690
Decrease/(increase) in inventories 576 (19,842)
Increase in customer funds and other deferred income 7,704 8,515
Decrease in trade and other receivables 1,790 235
Increase in trade and other payables 974 3,822
Net cash flows from/(used in) operations 7,817 (3,580)
(b) Analysis of movement in net cash and changes in liabilities arising from
financing activities
1 April 2024 Cash flows Non-cash movements(1) 30 September 2024
£'000 £'000 £'000 £'000
Cash and cash equivalents 31,851 (1,505) (1,082) 29,264
Borrowings:
Borrowings(2) (12,468) 12,303 165 -
Borrowings(3) - (8,301) 379 (7,922)
Issuance costs 220 1,801 (386) 1,635
Borrowing, net of issuance costs (12,248) 5,803 158 (6,287)
Customer-funded bonds (35) - - (35)
Lease liabilities (3,638) 791 (16) (2,863)
(15,921) 6,594 142 (9,185)
Total net cash/(borrowings) 15,930 5,089 (940) 20,079
3 April 2023 Cash flows Non-cash movements(1) 2 October 2023
£'000 £'000 £'000 £'000
Cash and cash equivalents 39,474 (6,109) 403 33,768
Borrowings:
Borrowings (29,516) - (932) (30,448)
Issuance costs 385 - 140 525
Borrowing, net of issuance costs (29,131) - (792) (29,923)
Other loans - (1,000) - (1,000)
Customer-funded bonds (35) - - (35)
Lease liabilities (5,851) 1,178 (660) (5,333)
(35,017) 178 (1,452) (36,291)
Total net cash/(borrowings) 4,457 (5,931) (1,049) (2,523)
1. Non-cash movements relate to lease additions and foreign exchange
movements.
2. Borrowings held with Silicon Valley Bank, repaid on 8 July 2024.
3. Borrowings held with PNC Bank, National Association, drawn down on 8
July 2024.
11 Borrowings
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.
12 Events after the balance sheet date
There were no post balance sheet events that have a material impact on the
financial position and performance of the Company.
Glossary of definitions, alternative performance measures (APMs)
and key performance indicators (KPIs)
Definitions
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 member An active subscriber who has placed an order in the last 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.
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.
Immature Angel An Angel who has had an account for less than three months.
Definitions
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.
Mature Angel An Angel who has had an account for more than three months.
Member A subscriber with an Angel or Wine Genie membership.
Other revenue Revenue from stock optimisation activities.
Other contribution The profit or loss attributable to sales meeting the definition of other Investment measure
revenue.
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.
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.
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 prior year comparable figures(1)
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
Reported Adjusted items Adjusted Reported Adjusted items Adjusted Constant FX Adjusted
£m £m £m £m £m £m £m £m
Sales Group
New Customer sales 7.9 - 7.9 9.1 - 9.1 (0.1) 9.0
Repeat Customer sales 102.6 - 102.6 121.8 - 121.8 (1.2) 120.6
Other revenue 1.9 - 1.9 1.4 (0.7) 0.7 0.7 1.4
112.3 - 112.3 132.3 (0.7) 131.6 (0.6) 131.0
Naked Wines US
New Customer sales 4.2 - 4.2 5.3 - 5.3 (0.1) 5.2
Repeat Customer sales 44.7 - 44.7 57.2 - 57.2 (1.0) 56.2
Other revenue 1.9 - 1.9 1.4 (0.7) 0.7 0.7 1.4
50.8 - 50.8 63.9 (0.7) 63.2 (0.4) 62.8
Naked Wines UK
New Customer sales 2.3 - 2.3 2.3 - 2.3 - 2.3
Repeat Customer sales 45.2 - 45.2 50.1 - 50.1 - 50.1
47.5 - 47.5 52.4 - 52.4 - 52.4
Naked Wines Australia
New Customer sales 1.3 - 1.3 1.5 - 1.5 (0.1) 1.4
Repeat Customer sales 12.7 - 12.7 14.6 - 14.6 (0.2) 14.4
14.0 - 14.0 16.0 - 16.0 (0.3) 15.8
Contribution after advertising costs Group
Investment in New Customers (9.4) - (9.4) (9.2) - (9.2) 0.1 (9.1)
Repeat Customer contribution 25.9 - 25.9 30.5 - 30.5 (0.4) 30.1
Repeat contribution margin (%) 25% - 25% 25% - 25% - 25%
Other contribution (5.6) 1.8 (3.8) 0.3 (0.8) (0.5) 0.7 0.2
10.9 1.8 12.7 21.5 (0.8) 20.7 0.4 21.2
Naked Wines US
Investment in New Customers (4.7) - (4.7) (6.0) - (6.0) 0.2 (5.8)
Repeat Customer contribution 15.1 - 15.1 17.4 - 17.4 (0.2) 17.2
Repeat contribution margin (%) 34% - 34% 30% - 30% - 31%
Other contribution (5.3) 1.8 (3.5) 0.3 (0.8) (0.5) 0.7 0.2
5.1 1.8 6.9 11.8 (0.8) 11.0 0.0 11.0
Naked Wines UK
Investment in New Customers (3.5) - (3.5) (2.0) - (2.0) - (2.0)
Repeat Customer contribution 7.4 - 7.4 9.4 - 9.4 - 9.4
Repeat contribution margin (%) 16% - 16% 19% - 19% - 19%
Other contribution (0.2) - (0.2) - - - - -
3.7 - 3.7 7.3 - 7.3 - 7.3
Naked Wines Australia
Investment in New Customers (1.2) - (1.2) (1.3) - (1.3) 0.1 (1.2)
Repeat Customer contribution 3.4 - 3.4 3.6 - 3.6 - 3.6
Repeat contribution margin (%) 27% - 27% 25% - 25% - 25%
2.2 - 2.2 2.4 - 2.4 0.1 2.5
General and administrative Naked Wines US (3.8) - (3.8) (5.6) (0.1) (5.7) 0.1 (5.6)
Naked Wines UK (2.3) 0.2 (2.1) (3.1) - (3.1) - (3.1)
Naked Wines Australia (1.2) 0.1 (1.1) (1.6) - (1.6) - (1.6)
Unallocated (8.6) (0.1) (8.7) (8.4) 0.2 (8.2) - (8.2)
Group (15.9) 0.2 (15.7) (18.7) 0.1 (18.6) 0.1 (18.5)
Other Impairment - - - (11.5) 11.5 - - -
EBIT Naked Wines US 1.2 1.8 3.0 4.4 0.9 5.3 0.7 5.9
Naked Wines UK 1.4 0.2 1.6 4.3 - 4.3 - 4.3
Naked Wines Australia 1.0 - 1.0 0.1 0.7 0.8 - 0.8
Unallocated (8.6) (0.1) (8.7) (17.5) 9.3 (8.2) - (8.2)
Group (5.0) 1.9 (3.1) (8.7) 10.9 2.2 0.7 2.8
Alternative performance measures (APMs)
For the 26 weeks ended 30 September 2024
Please note due to rounding principles, numbers presented in £m may not sum
to the totals provided. This can also lead to individual amounts being rounded
to zero.
Repeat Customer contribution margin
Naked Wines US Naked Wines UK Naked Wines Australia Group
£m £m £m £m
26 weeks ended 30 September 2024
Repeat Customer sales £m 44.7 45.2 12.7 102.6
Repeat Customer contribution £m 15.1 7.4 3.4 25.9
Repeat contribution margin % 33.8% 16.4% 26.8% 25.2%
26 weeks ended 2 October 2023
Repeat Customer sales £m 57.2 50.1 14.6 121.8
Repeat Customer contribution £m 17.4 9.4 3.6 30.5
Repeat contribution margin % 30.4% 18.8% 24.7% 25.0%
General and administrative costs reconciliation
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
£m £m
G&A costs per income statement (15.8) (18.7)
Add back adjusted items (see note 6):
Restructuring costs - -
Software as a Service costs - 0.2
Fair value movement on open foreign exchange 0.1 (0.1)
contracts
G&A costs per segmental reporting in note 5 (15.7) (18.6)
Add back share-based payment costs 0.8 0.7
Operating G&A costs (14.9) (17.9)
Net cash excluding lease liabilities
30 September 2024 2 October 2023
£m £m
Cash and cash equivalents 29.3 33.8
Borrowings and other loans:
Credit facility net of issuance costs (6.3) (29.9)
Other loans - (1.0)
Total borrowings and other loans (6.3) (30.9)
Total net cash excluding lease liabilities 22.9 2.8
Inventory liquidation and associated transactions
26 weeks ended 26 weeks ended
30 September 2024
2 October 2023
£m £m
Adjusted EBIT before inventory liquidation and associated transactions 0.6 2.6
less inventory liquidation and associated transactions:
Net loss on inventory disposal after inventory (0.8) (0.5)
provision release(1)
US inventory provision (2.5) -
Winemaker contract cancellation payments (0.4) -
Adjusted EBIT (3.1) 2.2
1. In HY24, a further amount of net credit of £0.8m relating to
inventory disposal after inventory provision release has been reported within
adjusted items.
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