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Majestic Wine swings to profit in full-year results despite “challenging” retail climate

Last updated: 03:47 14 Jun 2018 EDT, First published: 02:54 14 Jun 2018 EDT

Majestic Wine store
The group also hiked its final dividend to 5.2p per share from 3.6p

Majestic Wine PLC (LON:WINE) has swung to a profit in its full-year results but warned that a “challenging” UK retail market was likely to continue and possibly worsen through next year.

The AIM-listed wine seller reported a pre-tax profit of £8.3mln, up from a £1.5mln loss the year before, while revenues climbed to £476.1mln from £465.4mln previously.

READ: Majestic Wine shares jump as it invests in growth plans although earnings will be hit

The group also hiked its final dividend to 5.2p per share from 3.6p last year.

The growth in profit was driven primarily by the company’s Naked Wines division, which saw its adjusted earnings before interest and tax (EBIT) rise 571.2% to £8.7mln while revenues jumped 11.3% to £156.1mln.

In its outlook, Majestic’s chairman Greg Hodder said the short-term UK market remained “tough”, however the company expected to achieve £500mln in sales by 2019 and to meet its expectations for the next financial year.

Rown Gormley, group chief executive, added: “Looking forward, we expect the U.K. market to remain tough, possibly even tougher than last year.  Certainly trading since year end has been harder than the prior year in the UK.  Despite this, we expect to hit FY19 market expectations”.

In April, Majestic announced that it planned to accelerate growth by materially increasing investment in new customer acquisition, though it warned that it might reduce next year’s profits by up to £3mln.

In a note to clients, analysts at Liberum commented that the increased customer acquisition spend was “absolutely the right thing to do from a capital allocation perspective” and that there were now signs that the rate of cash return seen at Naked Wines could be achieved across the whole company.

In early morning trading Thursday, Majestic Wine shares were down 0.1% at 449.5p.

--Adds broker comment and share price-- 

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