Majestic Wine (WINE)

Thursday, 14th June 2018 09:24 - by Rajan Dhall

I have been following this company for some time now as their turnaround has been nothing short of a miracle. Since the lows of 2017 the share price has risen 47% and for a mature company in the UK retail space I feel that is good going. This morning the company released its latest annual results and the notable highlights were: 

·      Group reported sales up 2.3% (+4.0% underlying(1),(7))  driven by 11.3% underlying sales growth in Naked Wines

·      £9.8m improvement in Profit Before Tax (PBT) to £8.3m (FY17: £1.5m loss) and underlying adjusted PBT up 63.0% to £17.2m 

·      Final dividend of 5.2 pence per share, bringing total dividend to 7.2 pence per share, +41.1% vs FY17

Despite this the company is not as upbeat as you would expect about its forward guidance. In comments following the release of the report the group chief executive said '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 '. Many major market commentators are predicting more trouble for the retail sector, but as this problem goes mainstream I will be looking for bargains. 

Looking at the weekly chart now, it's hard to see that there is enough volume and conviction to push this company back the the 485p area or even to 500p. You can see in last weeks price action the market tried to get the share price up but it was swiftly rejected the move. The volume profile over on the left hand price is showing the value area just above the 420p level and this may be where price ends up. All in all the company have done a solid job stabilising the business but in this market it feels like investors need more, they need expectations to exceed in order for prices to rise dramatically and this is the reason we may see some sideways action here.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.