£70m Naked deal causes hangover for Majestic

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MAJESTIC Wines said pre-tax profits fell 22.5 per cent last year to £18.4m.

The wine seller said the reduced figures reflects a number of exceptional, one-off costs related to the deal to acquire Naked Wines and changes in members of the senior leadership team.

Majestic warned that investments needed in the enlarged business would dampen future profits, sending shares down nearly 3 per cent this morning.

It said that despite the challenging backdrop of a fiercely competitive environment it continued to grow market share, by 0.1 per cent to its highest ever level at 4.3 per cent, while UK like for like sales grew by 1.9 per cent. Total revenues hit £284.5m in the year ending Marfch 2015.

Majestic Wine bought Naked Wines in April in a deal worth up to £70m.

Rowan Gormley, chief executive, said: “I have only been group chief executive for ten weeks but it is clear to me that the enlarged Majestic Group has excellent future prospects.

“Majestic Wine has many unique competitive advantages, especially its incredible staff.

“When combined with Naked Wine’s digital strengths, and both businesses ability to source exclusive and exciting wines for their customers, we are uniquely placed to build a fast growing international leading wine specialist.

“Whilst my review of the business is ongoing it is obvious that we need to make investments to reinvigorate Majestic Wine.

“These investments will initially suppress profit in the short term but I am confident we can rebuild momentum in this excellent business.

“At the same time we aim to maintain the international growth trajectory of Naked Wine and crystallise the benefits of having the two businesses in the same group.

“I am confident that we will create significant value for our shareholders over the medium term.”

Analysts at Charles Stanley said the full-year results constitute a profit warning only 10 weeks after the acquisition of Naked Wines.

They said: “We note that the new CEO is looking to make quick and decisive actions in a number of other areas to put Majestic on the right trajectory for renewed success.

“Having said that, we still believe that the transformation of Majestic will likely be a highly complex endeavour.

“In that respect, we are disappointed that the FY15 results contain no meaningful discussion of synergies between Majestic and Naked Wines in areas such as logistics and sourcing.”