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Majestic Wine shares flow higher as turnaround plan bites

The firm has been under pressure to kickstart growth and in September issued a profit warning

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The firm reinstated an interim dividend of 1.5p a share, underlining future confidence

Shares in wine merchant Majestic plc (LON:MJW) flowed a little higher as it told investors its turnaround plan was working and it unveiled a 13% increase in sales in the first half.

The firm has been under pressure to kickstart growth and in September issued a profit warning, forecasting pre-tax earnings before interest for the full year to April 2017 would be lower than market expectations.

In the latest six months to September 26, revenue was £205mln (2015: £181.6mln). The loss for the period was £4.4mln, compared to a profit of £4.3mln in the same period last year.

The loss recognised £4.5mln of adjusted items, largely relating to the group's acquisition of online retailer Naked Wines in 2015.

The firm reinstated an interim dividend of 1.5p a share, underlining future confidence.

Chief executive Rowan Gormley said: "Now that we have built a solid platform for future growth, future cost growth will be much lower.

"We are reiterating our commitment to hitting our goal of delivering £500m sales by 2019, and we believe that will translate into healthy profit growth now that the step change in investment is complete."

The period saw a 26.7% increase in sales at Naked and a 5.7% rise like-for-like in the retail division. Majestic commercial was up 1.2%

Its Lay & Wheeler fine wine group was firmly back in growth, with a 27.8% increase in sales, due largely to the huge positive impact of a new management team.

House broker Liberum rates shares a 'buy' and targets 380p.

"The dynamic model being created is a far cry from the old Majestic," it says.

The transition towards a 'return on investment' focus via opex driven growth was always going to create a short, albeit sharp decline in these first half results, it notes.

"There are signs of positive momentum which, should they continue, drive outperformance."

Shares added 1.08% to 305p.

Quick facts: Majestic Wine PLC

Price: 259 GBX

AIM:WINE
Market: AIM
Market Cap: £188.62 m
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