Naked Wines proposes share buyback of up to £5.7 million at 27% premium
The UK-listed online wine retailer has proposed repurchasing between £2 million and £5.7 million of shares at 80 pence each. The final amount will depend on pre-Christmas trading, while full-year revenue, adjusted EBITDA and net cash guidance remain unchanged.
Tender offer and timetable
Naked Wines plans to return between £2 million and £5.7 million to investors through a tender offer, according to a regulatory filing released on Friday, November 6. The online wine seller said year-to-date trading remained consistent with its full-year targets.1
The company is offering to repurchase ordinary shares at a fixed price of 80 pence each, 27% above the closing price of 63 pence on Thursday, November 5. The ultimate size of the offer will depend on performance during the peak pre-Christmas sales period, the most consequential part of its financial year.1
The offer will have a minimum value of approximately £2 million and could reach about £5.7 million, representing as many as 7.1 million shares. That maximum would equal approximately 10.72% of issued shares, excluding treasury shares. The board expects to determine the final number on December 8, when shareholders are scheduled to consider the proposal at a general meeting in London; completion is expected on December 16.1
Naked Wines said its continuing cash generation had created surplus capital that could be returned to shareholders. After considering the share price and its capital-allocation criteria, the board chose a tender offer. It intends to accept tenders worth about £5.7 million if trading is at or above the midpoint of net cash guidance, or target approximately £4 million if trading falls in the lower half of that range.1
Guidance, margins and customer trends
In an unaudited update ahead of results for the 26 weeks ended September 28, which are due on December 11, Naked Wines maintained full-year revenue guidance of £158 million to £175 million, although sales are expected to be lower than in the previous year. It also reiterated adjusted EBITDA guidance of £7.6 million to £9.0 million and net cash guidance, excluding lease liabilities, of £34 million to £42 million. The cash forecast precedes the proposed tender and will be revised after any repurchase.1
Customer acquisition remained subdued, but the company said newly recruited customers were of higher quality and acquisition payback was moving toward its 24-month objective. Member retention increased to 79% from 76% a year earlier, while gross margin rose to 21.7% from 19.5%, assisted by price increases. At the half-year end, net cash excluding lease liabilities was £34.0 million, compared with £33.4 million at the end of the previous financial year, despite the customary inventory increase before holiday trading.1
Because Naked Wines sells directly to consumers and provides independent winemakers with upfront funding, its retention, margin and cash figures can offer an indication of conditions in the wider drinks sector. The combination of improved margins and repeat purchasing suggests premium online wine sales may become more profitable even amid softer demand, while restrained customer recruitment indicates that expansion remains selective.1
Ownership safeguards and board process
The company also outlined measures intended to manage changes in ownership under UK takeover rules. Shareholders regarded as acting in concert currently hold about 28.09% of voting rights. Chapters Group AG and Monega Kapitalanlagegesellschaft mbH, acting for the Truffle Fund, have each undertaken to tender at least their basic entitlement. The measure is designed to leave the group with approximately 29.94% of voting rights after the transaction, below the 30% threshold and without requiring a waiver under Rule 9 of the Takeover Code.1
Jan-Hendrik Mohr, a Naked Wines non-executive director and chief executive of Chapters Group AG, participated in board discussions about the tender but was excluded from decisions concerning its size and price because of that relationship. The board considers the tender and associated repurchase to be in the interests of the company and its shareholders as a whole, and recommends approval of the necessary resolution.1
Next steps
A circular containing the full offer terms was due to be sent to shareholders and published on the company’s website on November 6. The general meeting will take place on December 8 at Panmure Liberum’s London offices. The tender is scheduled to close on December 10, with its result expected on December 11. Following publication of the half-year results, Naked Wines plans to hold an investor presentation on December 15.1
Sources
Written by the Dionysus editors from the sources above.
