UK: Majestic Wine FY profits slide

A smaller number of consumers crossing the English Channel to buy wine in northern France has forced Majestic Wine to take a one-off charge on its French retail business, sending full-year profits down by more than half.

The strength of the euro currency against pound sterling in the last few months has discouraged consumers from making the habitual "booze cruise" to pick up wine in northern France, Majestic said today (15 June).

The trend forced Majestic to take a GBP5.3m one-off impairment charge on its French Wine & Beer World business for the 12 months to the end of March and the group has closed its warehouse in Calais.

Majestic's net profits for the year fell to GBP3.26m, down from GBP11.25m a year earlier, as the problems in France eclipsed a 2.4% rise in group net sales to GBP201.8m.

Wine sales across the group have continued to rise by 2% in its new fiscal year-to-date, Majestic added, despite the ongoing recession in the UK. Online wine sales performed particularly well, growing by 16% for the year.

News of the rise comes only a week after market research group Mintel said that wine sales in the UK fell by 1% in value in 2008, to GBP9.6bn, and Majestic rival First Quench, owner of Threshers stores, reported that it has had credit lines withdrawn.

"The resilience of our core consumer business is encouraging, our market share has held steady and we are confident that Majestic is well positioned to benefit from any upturn in the economy," said Majestic CEO Steve Lewis.

He said that the firm has made "good progress" on integrating the fine wine specialist Lay & Wheeler, acquired in March for GBP6m.

Cash flow for the fiscal year fell to GBP15.5m, compared with GBP22.1m a year earlier, due to the slip in profits. Net debt rose GBP100,000 to GBP8.3m, mainly due to a GBP7m loan arranged with Barclays Bank and used to finance the Lay & Wheeler deal. 

Majestic has recommended to shareholders a final dividend of GBP0.07 per share, maintaining a total dividend for the year level with 2008, at GBP0.098.