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Connecting
everyday
wine drinkers with
the world’s best
independent
winemakers
Annual Report
and Accounts 2021
We are a bigger,
better business.
There are four things you
should know about Naked Wines.
We have had a
great year and
I am extremely
excited about our
path for growth.
Chief Executive’s review
Page 16
Connecting everyday wine
drinkers with the world’s best
independent winemakers.
Our business model
Page 28
Our approach to a more
sustainable future.
Sustainability
Page 56
To disrupt the wine industry for
the benefit of our customers,
winemakers and our people.
Our business at a glance
Page 10
NAKED WINES
LAID BARE
Throughout this report, you’ll find
a series of interviews with our
winemakers. Demonstrating
exactly what makes us so different.
Strategic report
10 Our business at a glance
14 Chairman’s letter
16 Chief Executive’s review
24 Key performance indicators
28
Our business model
34 Performance highlights
36 Financial review
42 Stakeholder engagement
47
Risk management and control environment
56 Sustainability
Governance report
64 Board of Directors
66 Governance
Financials
89 Group income statement
90
Group statement of comprehensive income
70
Directors’ Remuneration report
91
Group statement of changes in equity
80 Audit Committee report
82 Directors’ report
92 Group balance sheet
93 Group cash flow statement
83
Statement of Directors’ responsibilities
94 Notes to the financial statements
84 Independent auditor’s report
125 Company balance sheet
126 Company statement of changes in equity
127 Notes to the Company financial statements
132 Shareholder information
133 Definitions and Customer experience KPIs
134 Alternative performance measures (APMs)
1.We offer winemakers
hope, certainty and
creative freedom.
Page 2
2.
We are disrupting the
wine industry.
W i n e m a k e r
Page 4
C l a u d i a
3.
After a year we’ll never
forget, Naked is a
bigger, better business.
Page 6
4.
We have a clear
strategy for the future.
Page 8
A full bodied – rich in
content – eight pages
comes next. Please do
settle down and get stuck
in, it’s a great read...
Nick (CEO) – Napa
Naked Wines plc
Annual Report and Accounts 2021
1
1.
We offer
winemakers
hope
certainty
creative freedom
Strategic report
Governance report
Financials
We are making an impact in the wine industry.
Independent winemakers have faced several challenges;
COVID-19, the extreme California fire season of 2020,
and tariff disputes that have impacted Australian and
European producers in the past year. These factors
combined further expose the challenges in the wine
industry; but bridging that divide is what we do best,
offering advance funding and large, regular orders,
while leaving creative freedom where it belongs – with
winemakers.
Our business model
Page 28
We’ve retained our broad commitment to positively
impact the wine industry as a whole. We have supported
independent producers and our entire team is dedicated
to building a leading platform that enables winemakers to
have a viable alternative to traditional distribution models
that are failing them, and leaving them highly exposed
from the channel shift to online.
We supported 36 winemakers through our $5 million
COVID Relief Fund*, many of whom we have built-long
term relationships with. Our Australian business launched
a AUD $5 million campaign to “Stop the Squeeze” on
Aussie growers and winemakers as the impact of Chinese
wine tariffs hit hard on the Australian wine industry. We
also launched a one-off fundraising campaign to support
the struggling South African wine industry, as it faced
some of the toughest COVID-19 restrictions in the world,
including a total ban on the sale of alcohol.
Mission driven company
Page 20
93 %
o f 8 0 0
w o u l d b u y i t a g a i n
$5m
COVID Relief Fund
Supported 36 new winemakers
during the pandemic, see
page 12 for one example
9 5 %
o f 8 1 4
w o u l d b u y i t a g a i n
What our industry needs
now is support from the
outside. By consciously
drinking South African
wine, you, the Angels, will
not just help wineries but
everyone who works within
the South African wine
value chain.
Thank you so, so much.
Carmen Stevens,
Winemaker, South Africa
We are thrilled to have
your support. What
was looking like an
uncertain period for us
as small winemakers
has turned into such a
great opportunity. I am so
excited to concentrate on
winemaking and I already
have a couple of ideas for
new wines!! Angels are a
wonderful help! Thank
you so much for this
opportunity!
Jen Buck,
Winemaker, France
2
Naked Wines plc
Annual Report and Accounts 2021
* Our COVID Relief Fund was an additional $5m which we put into our wine buying plan in 2020
to buy from winemakers we hadn’t worked with before and whose sales and livelihoods had
been disrupted by the COVID-19 pandemic.
Naked Wines plc
Annual Report and Accounts 2021
3
Financials
Strategic report
Governance report
2.
O u r d i ff e r e n t i a t e d
m o d e l
s h a k e s
u p
The biggest challenges independent winemakers face is
access to capital and access to distribution and consumers
– we handle all of this. We connect the winemaker directly
with our Angels, allowing for direct feedback and ratings
which is invaluable data, used to make even better wine.
Why do we get up in the morning? Because we’re doing
our best to shake up an entire industry. Our differentiated
model provides truly sustainable benefits for Angels and
winemakers, built on the latest technology. We think that’s
pretty exciting.
content, learn about wine and meet the people behind
the wines. In a typical year, tens of thousands of Angels
meet our winemakers in person on tour, at events or in
wineries; in 2020/2021 initiatives like “Thirsty Toosdays”
have taken this connection online with great success
t h e w i n e
i n d u s
As a result, we are able to attract some of the world’s top
winemakers like Jesse Katz, Matt Parish and Daniel Baron,
as well as support the discovery of the next generation of
top winemakers.
GOur Angel members connect directly to our winemakers
and fellow members via our website and mobile app
GWe provide a platform for our members to consume
These winemakers then become part of a community
that deepens engagement and loyalty:
Our business model
Page 28
Reenen
He le n
Customer Happiness Team
y
r
t
Honestly I don’t really have enough
words – it means everything to me
to be part of such a fantastic team,
and it’s just amazing to feel so valued
and genuinely feel like my personal
development is cared about.
4
Naked Wines plc
Annual Report and Accounts 2021
Naked funding made it possible to
pay the farmers the amount they
deserve for their grapes. This enables
them to keep farming these vineyards
to still make special wines from this
unique area. The funding also allows
me to secure the grapes before these
vineyards are replaced with another
commodity. Thank you for giving me
the opportunity to present a wine from
a special area with great potential.
Winemaker
Winemaker
C l a u d ia
Our fruit goes into our wine bottles
and then direct to Naked. The stable
long-term relationship we have with
Naked allows us to concentrate on
getting the best out of our hillside vines.
We know we will sell all our wine and
have security on payments through
the growing season. When we need to
spend money on our vineyard, we know
the cash will be there. We still worry
about Mother Nature but we never
have to worry about our relationship
with Naked!
Naked Wines plc
Annual Report and Accounts 2021
5
3.
After a year we’ll
never forget, Naked
is a bigger, better
business.
We are all experiencing extraordinary times. Demand
increased rapidly in all of our markets, particularly the US.
This gives us an opportunity to leverage our new scale.
6
Naked Wines plc
Annual Report and Accounts 2021
7
How are we a
bigger, better
business?
Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Not just a larger
business, but a
permanently
better one.
GScale efficiencies improve our value offering
GEnhanced data for our winemakers
GAttractive returns on our investment
Reduced case sizes
appeal to more
demographics
We’ve optimised the customer
shopping experience over the
last 12 months through:
Subscriptions operating
at scale – Wine Genie and
Never Miss Out combined
have >180,000 subscribers
Fine Wine Club
trial successful in
the UK
New app has 4.8* rating,
with over 70% of repeat
orders being placed on
the app following the first
order on the app
FY21 has been transformational for
Naked Wines, where we have made
substantial progress towards our vision:
Our people have done extraordinary
work in supporting independent wine
producers and building our platform:
Scale –
rapidly gaining
scale
Market –
Online marketing
channel opportunity
accelerated
Lifetime Value (LTV) –
customer economics
improved
Wine –
appeal to winemakers
enhanced
c.100%
increased
capacity
3x
Increase in online
channel buyers
3.0x
5-Year Forecast Payback
(FY20: 2.6x)
53%
increase in the number
of active Angels
Scan me
to find out
more about the
COVID Relief
Fund
Scan me
to watch the
Sky News
interview
>£260m
in regular monthly deposits
from Angels in FY21 enabled
us to support the working
capital needs of our
winemakers
36
winemakers
supported through
the $5 million
COVID Relief Fund
235
winemakers in
total worked with
(FY20: 211) across
19 countries
Launched a A$5 million
“Stop the Squeeze” campaign
to support growers and
producers in Australia who
have been the collateral
damage of Australia /
China tariff disputes
Naked Wines plcAnnual Report and Accounts 2021 4. We have a unique offering for our winemakers and our
We have a
clear strategy
for the future.
customers. Our priority is to continue to improve this while
expanding our reach to further disrupt how the entire
industry works.
Enhancing the customer
proposition to improve LTV
We delivered significant value to our customers
in FY21. We are focused on enhancing the
offering for our customers, which will drive
Lifetime Value (“LTV”).
First, to enhance the customer proposition
we are focused on:
Read more about our
talented winemakers
and their stories, such
as Nina Stocker, Scott
Kelley and Johan Kruger
on pages 26, 32 and 40
Second, we will enhance Naked’s wine
quality perception through:
Increased recognition of wine quality in our
app and our marketing communications
Leading with the winemaker, rather
than the value offering
Expanding the number of winemakers
and the wine range
1. Improving the
website speed
and reliability
2. Enhancing the
core shopping
experience for
Angels
3. Extending the
scope of Never Miss
Out and rolling
out Wine Genie at
greater scale
Nakedwines.com
awarded #1 wine
club in the US for 2nd
year running
Leverage scale to
enhance value creation
Broaden and enhance the
go-to-market strategy
Operating at scale further enhances our
differentiated model. See our virtuous circle
on page 29 where:
A global network of 235 world-class
winemakers gives us the scale to commit
volumes to our winemakers and unlocks
predictable cost reductions
This attracts more winemakers to our
platform, increasing the range and volume
capacity
Ultimately, we are delivering even better
wine and value for our customers
As we grow our member base, we deliver
attractive returns on investment
Our business model
Page 28
By continuing to drive customer value by
enhancing our customer proposition and gaining
scale efficiencies, we create the opportunity
to increase investment in customer acquisition
while maintaining attractive returns. In addition
to broadening channels, we have two key areas
of focus on our go-to-market strategy for the
coming year.
Firstly, personalising the new customer offer and
improving the onboarding process. By tailoring to
individual customer needs and taste preferences,
we expect to see an improvement in the quality
of customers and improve investment efficiency.
Secondly, we will continue to spend £3 million
per year on Marketing R&D spend to expand
the channels we acquire customers through. The
results this year have been positive, and we are
confident we better understand our customers to
continue to improve the mix of marketing spend.
8
9
Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic reportNaked Wines plcAnnual Report and Accounts 2021 Our business at a glance
Where the world’s best
winemakers make their best wine
Financial Performance Summary
Sales for the year
to 29 March 2021
£340.2m
Sales growth
+68%
US sales growth
+78%
202.9
Investment in
New Customers
£50.0m
Adjusted EBIT
£(1.5)m
Loss before tax
£(10.7)m
340.2
50.0
2019/20 2020/21
2019/20 2020/21
23.5*
(1.5)
(5.4)
2019/20 2020/21
2019/20 2020/21
See information on alternative performance measure definitions on page 134.
* FY20 Investment in New Customers revised to align with updated allocation basis used in FY21. See note 6 for details.
(2.4)
(10.7)
Naked Wines supports independent
winemakers, who make exclusive wines
at preferential prices.
We pass those prices on to our customers
and customise our recommendations to
them using 28.9 million reviews.*
Our purpose
Connect everyday wine drinkers with the
world’s best independent winemakers.
Our mission
To disrupt the wine industry for the benefit of
our customers, winemakers and our people.
Our ambition
To go from impacting individuals to changing
how an entire industry works by shaping the
whole wine industry in our image.
Sales by geography
* Total number of reviews in our database.
Winemaker
Constanza Schwaderer
Thanks for your high rating
Stephen, I’m so glad this
wine ticks all the boxes:)
Angel
Stephen
Excellent nice and
dry not too heavy
886,000
active Angels
(FY20: 580,000)
28.9mreviews
20%
of Angels on subscription products
(Never Miss Out and Wine Genie)
88% Repeat Customer
sales retention
(FY20: 83%)
3.0x
5-Year Forecast Payback
(FY20: 2.6x)
£39.3mStandstill EBIT
(FY20: £9.6m)
US
48%
UK
39%
AUS
13%
10
We see potential for
market share gain in
all our geographies;
however, the opportunity
is the largest in the US
where the market is
larger than the rest of the
world in terms of size and
gross profit potential.
Source: 2020 Direct to Consumer Wine Shipping report.
$20bn
£2bn
A$2bn
Total Addressable Market
(“TAM”)
Excluding states we
cannot sell to1
Wine >$10 a bottle
Those who buy wine regularly
Those interested in wine
Naked TAM
1. There are currently seven states
which we are unable to ship to due
to regulatory restrictions
11
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report NAKED WINES
LAID BARE
Thanks to the COVID Relief Fund
we know what
tomorrow brings!
An interview with
Megan and Ryan
s
r
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l
l
e
C
e
m
y
R
i
a
n
r
o
f
i
l
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C
What kind of issues
have you had to
overcome?
Q.
A.
It was really challenging trying to navigate
operating a business without knowing
what tomorrow will bring. We have had
to remain flexible throughout the past
year due to the unforeseen circumstances,
and reacting to all of the issues created
by COVID-19 such as the large loss of
sales. We have had to change our whole
sales approach – in the past we sold to
restaurants and had a distribution arm,
but now we are so pleased to be a part
of the Naked community and interacting
with the Angels directly.
How has upfront funding
from Naked supported
your business?
Q.
A.
We have been making wine for 13 years
now, but have had to grow slowly as we
had to maintain other wine-producing
jobs, and contend with the large capital
expenses associated with the industry. This
year, with upfront funding, we are excited
to grow significantly!
Having the upfront funding allows us
to make the wines and the quantities of
these that we would like to.
What difference has
Naked made to you?
Q.
A.
Wine for us, along with food, are the things
that bring people together. It is fantastic
to have the opportunity to interact directly
with the Angels and other winemakers
through the Naked platform.
Has Naked helped you
to grow your brand and
business in other ways?
Q.
A.
Naked has given us the ability to work with
other vineyards which we wouldn’t be
able to otherwise, due to the volume and
capital requirement. Now, we are working
with a quality fruit we could never have
dreamed of working with and we are
really excited about it!
How did your journey
with Naked start?
Q.
A.
In March 2020, along with many others
around the world, we watched a large
chunk of our sales disappear overnight
with the loss of restaurant sales. A friend
shared a link to the Naked COVID Relief
Fund application. We sent in three wines
which were usually sold to restaurants
and by the glass. All of these were
selected for sharing with the Angels, and
our relationship with Naked has continued
to grow! We have now signed to produce
an exclusive brand with Naked.
What’s your biggest
highlight while you have
been working with Naked?
Q.
A.
For the last year, it was a matter of
keeping our business going. We were
terrified that we would not be able to
maintain our staff and honour contracts
with our growers – with Naked’s single
purchase we were able to achieve all of
this, which is amazing! We would not have
had this security without Naked Wines.
12
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Chairman’s letter
Huge opportunities ahead
An active year of
succession, and the
Board goes forward
well refreshed.
Ian Harding
Chairman
Naked rose to the challenge
I became Chairman in August 2020, after
serving eight years on the Board, at a very
busy time for Naked. I am delighted to report
that we successfully rose to the challenges
we encountered over an unprecedented 12
months. We coped well with the sudden step up
in demand from COVID-19 in the first quarter,
and we built on this momentum throughout
the rest of the year. As a result, the business
dramatically exceeded our expectations.
While the financial results and key
performance indicators (KPIs) that we delivered
in FY21 speak for themselves, for me the real
achievement was the sheer determination
shown by our teams in the US, UK and Australia,
and by our winemakers across the globe. I
would like to thank every single one of them for
keeping the wine flowing to our existing and
new Angels, and for continuing to push our
programme of long-term growth initiatives,
all while upholding our quality and customer
service levels. Quite frankly, it was a stunning
achievement, all delivered from the bedrooms
and back rooms of our remote working teams.
Alongside delivering these results, our teams
have continued to adapt and identify further
opportunities to fulfil our mission of disrupting
the wine industry for the good of winemakers
and consumers. Our $5 million COVID Relief
Fund offered much needed support to 36
winemakers, many of whom saw their sales
to restaurants and through tasting rooms
disappear overnight. For many this support has
made a huge difference and enabled them to
make a 2020 vintage and keep teams employed.
Equally, through a challenging year, Naked’s
commitment to give back to our communities
and those of our winemakers has remained
– with the record appeal for Carmen’s Kids a
personal highlight of the year (see page 59).
The Group has evolved beyond all recognition
over my years on the Board – from a UK-only
store-based retailer, into a US-led, fast growth
and agile direct-to-consumer (DtC) subscription
business. While the path over the past eight
years hasn’t always been smooth, I’ve relished
the opportunity to play a part in helping
Naked evolve into the business it is today. As
I prepare to step down as Chairman, I see a
company which has married clear focus and
high-quality execution to its entrepreneurial
culture and is ideally poised to exploit its huge
growth opportunity, particularly in the US. The
scale of the growth opportunities ahead are
tremendous. We are barely scratching the
surface of the addressable wine market. In
addition, we will have the trend for DtC blowing
fast in our sails for years to come. We have an
The Board and I are all
immensely proud of the
agility, resilience and
sheer determination
shown by our teams
in the US, UK and
Australia, and by our
winemakers across
the globe.
ambitious strategy for growth, coupled with a
strong team in place to execute our plans and
take advantage of these opportunities.
Focusing the Board on a set of goals
As the pandemic’s scope began to materialise,
it was important to me and the Board that the
executive team and the business were fully
supported for the challenging times ahead.
We therefore re-cast our Board agenda for
the year so that all our efforts, discussions and
decisions were relevant to just three goals,
which were as follows:
G Maximise the upside from higher demand,
so that we had a fantastic year’s trading
operationally, financially and strategically
G Exit the year in great shape and well set
up for future growth, making sure this is a
permanent step up, not just a short-term
spike
G Make some great hires to the leadership
team, so that the business is well primed for
our next phase of development and growth
I’m pleased to say that we achieved all three
goals during the year. We face the future ideally
positioned to deliver sustained growth for years
to come.
Supporting our people
and communities
During these extraordinary times, the
Company’s focus has been on keeping everyone
safe, while ensuring that our wine reaches our
customers safely and reliably. Our people and
our winemakers are the key to our success, and
we are determined to support them in every
way we can.
We enabled our teams to work safely at home,
and recognised their exceptional efforts by
doubling their maximum bonus award, as
set out in the Directors’ Remuneration report
on page 70. We also created a $5 million
COVID Relief Fund to buy wine from impacted
independent winemakers.
Board changes in an active
year of succession
John Walden stepped down as Chairman in
August 2020, leaving the Group with a healthy
balance sheet and strong growth momentum.
He left with our thanks and best wishes for
the future.
I was honoured to replace him as Chairman in
my final year on the Board before my scheduled
retirement at the 2021 AGM. David Stead took
on my previous role as Senior Independent
Director, while Katrina Cliffe, who was already
a member of the Remuneration Committee,
became the Committee’s new Chair. Both David
and Katrina have played key roles in the recent
transformation and refocus of Naked Wines,
and brought extensive relevant experience to
these roles.
Following James Crawford’s successful and well-
earned transition from Chief Financial Officer to
Managing Director of Naked UK, I was pleased
to welcome Shawn Tabak as our new Chief
Financial Officer. Shawn, who joined the Board
on 1st January 2021, has previously held senior
finance roles at Upwork Inc., Shutterfly and
Clean Power Finance. His experience driving
growth through a strong customer focus, and his
understanding of the online and US market, will
be highly valuable and represents a key step in
capturing the market opportunity in the US.
So, this has been an active year of succession,
and the Board goes forward well refreshed. We
continue to review our skills in a fast-changing
world, and I have no doubt that we will continue
to strengthen our skills, experiences and diversity
over the coming years.
Improving our engagement
with shareholders
Our governance goals haven’t changed this
year. We are intent on providing the right culture,
checks and balances to ensure that we deliver
our full growth potential while looking after the
best interests of all our stakeholders. Growing
successfully, safely and fairly is at the heart of all
our decisions and activities.
This Annual Report sets out in detail the various
governance structures, activities and areas of
evolution this year, but a standout for me has
been the significantly increased engagement
with our shareholders. I speak regularly with our
largest shareholders and find that they have a
very deep understanding of our industry, our
business and the DtC model.
We benefit greatly from their insights and
encouragement and their contribution over
the last year has been a great example of the
business benefits that can flow from good
governance.
Taking the Chair
We conducted an extensive search process to
find my successor, at such an important moment
in our growth journey, and I am delighted that
Darryl Rawlings joined us in April 2021 as an
Independent Non-executive Director. He will
succeed me as Chairman after the AGM in
August 2021. The Board agreed that our next
Chair must have an excellent track record of
delivering growth, innovating and scaling DtC
digital businesses in a senior leadership role. It
was also critical that they were someone who
had achieved this in the US. Darryl fits our profile
perfectly and is well equipped as Naked Wines
embarks on the next phase of its growth story.
Darryl is the founder and CEO of Trupanion Inc.,
an industry-leading, DtC, monthly subscription
business that provides medical insurance for
cats and dogs throughout the US and Canada.
Since founding the business in 2000, Darryl has
led the company’s consistent growth, which
generated $500 million in sales in 2020 and
now serves more than 860,000 enrolled pets.
Darryl brings with him extensive experience
in operating and scaling a subscription DtC
business in the US, as well as corporate
governance and public company experience
as CEO of a NASDAQ listed company.
I am confident that his appointment will add
valuable insight and mentorship for the Naked
executive team as the Group focuses on its huge
US growth opportunity.
Large opportunities ahead
We have a strong leadership team in place,
and a very healthy culture at our heart, which
will enable us to take advantage of the large
opportunities lying before us. We will continue
to do the right things for all our stakeholders;
ensuring that our teams are motivated and
rewarded, our shareholders benefit from the
value we create, our winemakers prosper, and
our Angels enjoy beautifully crafted wines.
Ian Harding
Chairman
14
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Chief Executive’s review
A bigger, better business
This year has accelerated
growth in both our business
and the markets in which we
operate. A larger, stronger
Naked business is ideally
positioned to deliver
sustained and attractive
growth in this environment
and continue to change the
wine industry for the better.
Nick Devlin
Chief Executive
We are a mission-driven company
Page 20
Our investment philosophy
Page 22
16
A bigger and better
business
FY21 has been a
breakthrough moment
for Naked Wines.
The impacts of COVID-19
have accentuated the
wine industry’s challenges
and are validating our
model.
Our people have done
extraordinary work in
supporting independent
wine producers and
building our platform.
Our medium-term growth
prospects are enhanced,
with a clear path to
>10% EBIT margin as the
business scales.
Step change in Standstill
EBIT (14% Standstill margin
in FY21) reflects the
potential future profitability
of our model.
Since day one, our mission at Naked has been
simple: to disrupt the wine industry for the
benefit of customers, our winemakers and our
people. To fully realise that ambition Naked
needs to operate at scale and FY21 has been
a breakthrough year that has seen us make
substantial progress towards that vision. Our
highly differentiated model thrived over the
past year, we had 886,000 consumers seeking
out high-quality, convenient and authentic
experiences delivered to their homes, and
235 winemakers directly connected to them.
A lot has been written about the impact
of the pandemic on e-commerce models
and certainly we have seen an uplift in our
performance. However, what has been clear
to us is that the impact of the pandemic has
served to further accentuate existing divisions
and challenges in the wine industry, and by
extension has confirmed our conviction in our
business model and opportunity.
While overall wine consumption has been
stable in our markets, the channel shift has
left many smaller growers and producers,
who are reliant on physical tasting rooms and
cellar door experiences and local on-trade
distribution, highly exposed. For many, this has
been amplified further by the impact of natural
challenges, such as the extreme Californian
fire season of 2020, and human ones, like the
tariff disputes that have impacted Australian
and European producers in the past year.
Collectively, the result is further consolidation
in the industry and at times a seemingly
inexorable wave of difficulties for the proud,
brave and maverick growers and producers
who seek their own path in the industry. I’m
incredibly proud of the work we have done this
year to support independent producers and
enable winemakers to have a viable alternative
to traditional distribution models that are
failing them. This year, we have:
G Supported 36 winemakers through our
$5 million COVID Relief Fund
G Launched a A$5 million “Stop the Squeeze”
campaign to support growers and
producers in Australia who have been
the collateral damage of Australia / China
tariff disputes
Looking to the future
G Our growth prospects have been materially
enhanced in the past year
G We are c.1% penetrated in a $20 billion US
addressable market, where our quality/price
position is a clear differentiator
G Our advantaged sourcing and direct-to-
consumer (DtC) model results in sustainably
higher margins than our competition
I don’t know if you guys know
exactly the amount of impact
that you have on the ground
and that Naked is making. We
were drawing together a
budget for this year, with the
pandemic starting and trying
to work out if we could get by
without laying people off, with
revenue down 50%. As it is,
with the orders coming in
from Naked, we’re on track for
a record year and that means
we’ve been able to employ a
bunch more people in the
community. We’re just so
grateful and it means so much
to us to be a part of this.
Sam Plunkett
Winemaker
It’s talented small producers that are the
life blood of the wine industry and I don’t
know many better than Sam Plunkett.
This note from Sam earlier this year
encapsulates the win-win model that
we strive to create at Naked.
While I am delighted with the performance
achieved this year, the most important impact
is the extent to which I believe we have built
a bigger and better business with materially
enhanced medium-term growth prospects.
The importance of the US was underlined in
the year, being 48% (FY20: 45%) of Group sales.
In this market we have a clear differentiator;
the high quality of wines that we are able to
provide to customers at significantly lower
prices than retail providers, while operating at
a much larger scale than other DtC players. At
the same time, we have materially accelerated
growth and taken market share in our longest
established UK market: proof of the growth
headroom available to Naked.
Medium-term ambition
As we head into FY22, Naked as a business
is now stronger than ever, and thanks to our
unique business model we are well positioned
to sustain growth in the year ahead, even after
a year that included higher-than-expected
order frequency and lower-than-expected
customer acquisition costs driven by the
COVID-19 pandemic-related government
restrictions and lockdowns.
While making exact predictions around the
next 12 months is not much easier than it was
last year, we are clear around the shape
of our medium-term prospects. We expect
Naked Wines to be growing sales at c.20%
p.a, underpinned by continued strong unit
economics. Equally, as the business scales,
we see a clear path to an EBIT margin in
excess of 10% at mature scale. Indeed, while
undoubtedly flattered by some of the impact
of the pandemic, our Standstill EBIT margin
in FY21 gives an indication of the potential for
this level of margin as we continue to scale
the business.
Strong performance in FY21
G Record performance and customer growth
in an unprecedented year
G Delivered high-level customer experience
despite managing rapid growth and supply
challenges owing to the pandemic
G Achieved our highest-ever Net Promoter
Score (NPS)
We delivered an exceptionally strong trading
performance in all our markets this year. I
would like to thank all our colleagues around
the globe for their dedication, without which
this would not have been possible.
From a commercial perspective, highlights
include sustained high growth in the second
half of the year and the combination of
materially increased Investment in New
Customers with above target investment
returns:
G Group revenue grew by +68% to £340.2
million, with growth of 80% in H1 and 59%
in H2
G Active Angel numbers increased by 53%,
or 300,000 subscribers, to 886,000
G Investment in New Customers increased
113% to £50.0 million with 5-Year Forecast
Payback of 3.0x vs 2.6x in the prior year
G Repeat Customer Contribution profit
increased 83% to £84.9 million driven by:
– Sales retention of 88%
– Enhanced Repeat Customer Contribution
margin of 30% (FY20: 27%) as the
benefits of scale and increased stock
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continued
velocity flowed through to our repeat
economics, partially offset by increases
in transportation and logistics rates. We
expect approximately half of this margin
accretion to be enduring
G Our statutory loss before tax for the year
of £(10.7) million is a result of broadly flat
year on year adjusted EBIT, the fair value
adjustment of our deferred consideration
from the sale of Majestic and on open
FX contracts, currency movements and
goodwill amortization
Our teams have done an incredible job
managing this growth while maintaining the
high standards we set in terms of the customer
experience. At times our operations have been
challenged by triple-digit growth rates and
we acknowledge that our availability in some
markets has not been what we would expect
in a normal year. Overall, I am delighted that
we have:
G Almost doubled our fulfilment capacity,
including opening new warehouse space in
all our markets
G Launched a full remote customer service
model while maintaining 5* feedback from
customers above 90%
G Maintained wine quality with a customer
Buy-it-Again rating average of 91%
The commitment of all our colleagues has been
critical to us achieving our highest ever Net
Promoter Score of +60.
A differentiated model driving
sustainable growth
G Our growth is sustainable and our longer-
term expectations are raised
G Our model has proven its ability to
empower winemakers, and to generate
strong consumer loyalty and attractive unit
economics
G We expect to deliver higher levels of ROI as
we further scale the business
Over the last year, we have seen across retail
categories an unprecedented acceleration
in demand moving online. The long-term
online winners will be businesses that have
differentiated offers that create sustainable
value for their consumers and for their
suppliers.
That is exactly the type of business model we
have been focused on creating at Naked since
we launched in 2008. Our 100% digital business
model works for everyone involved. The model
is revolutionary, giving both wine drinkers and
winemakers a better deal.
18
It’s wine delivery day!
I started getting deliveries to
cut down on time lingering in
the supermarket to look at
bottles, but the wine from
Naked Wines is so good I’m
going to keep this up after
the pandemic.
Jules W
New Angel
Naked pricing vs Vivino market
average (red wine)
Naked provides better value by
offering a lower price at each
quality level. The price differential
widens at higher price points.
)
$
(
e
c
i
r
p
e
g
a
r
e
v
A
80
70
60
50
40
30
20
10
0
3.6
3.7
3.8
4.0
Vivino Wine Rating
3.9
Naked Angels pay
Average price on Vivino
We have a sustainable way to make high-
quality wine at a lower cost, combined
with an efficient DtC model that is the
foundation of Naked’s quality and value
advantage. It’s a simple formula: when
consumers come to Naked they get to
enjoy better wine for their money – which
can be measured.
Signs of enduring change
The most important impact of the past 12
months is the extent to which we have built
a bigger and better business with materially
enhanced medium-term growth prospects:
G Scale efficiency in logistics and fulfilment
costs reducing the cost to get a case of
wine to our customers which both supports
margins and offers opportunities to improve
service levels
G Increased Stock Keeping Unit (SKU) scale
which enables our winemakers to drive
down production costs which can then be
shared with our members
G A larger member and revenue base which
allows us to more effectively leverage
investment in our infrastructure and core
customer proposition
During the year, we have seen evidence of our
Angels deepening their relationship with Naked
and our winemakers. Engagement between
winemakers and Angels has been at record
levels and we believe that has contributed to
us seeing a significant increase in the retention
rates across our customer cohorts. Clearly it
is too early to be definitive on the outlook as
our markets re-open fully; however, the data
we have seen so far, including in Australia
where more of the economy has been open for
longer, remains encouraging.
Bringing exciting new talent into the platform
G Our appeal to talented winemakers is
manifesting in growing relationships
G Our growth provides them with even greater
creative opportunities and earning potential
achieved a number of exciting “firsts” in FY21
The past year has not just been a breakthrough
for online from a consumer perspective.
Winemakers have recognised that a DtC
strategy is critical to the long-term success of
any wine brand and that online is a critical
component of that. The tough environment for
small and independent producers around the
world, combined with the increasing visibility of
Naked Wines, has further enhanced our appeal
to highly talented winemakers.
In the past year we have worked with more
than 60 new winemakers. Among some of the
highlights of the past year for me are:
G Agreeing Angel exclusive projects with some
of the winemakers we initially supported
via the COVID Relief Fund (Jesse Katz, Ryme
Cellars, Ana Keller, Núria Altés and Rafael de
Haan)
G Launching debut vintages with some wine
royalty from around the world (Patricia
Benitez, Daniel Baron, Josh Pfeiffer)
4.1
4.2
4.3
G With our winemaker partners we’ve
G Launching new talented winemakers
including Rudy von Strasser (founding father
of Napa’s Diamond Mountain AVA) and
Cristian Vallejo (winner of multiple awards
for best wine in Chile with Vina Vik)
G Continuing to provide a platform to some of
the best undiscovered talent in the industry
such as Jen Buck, who Angels reduced to
tears by crowdfunding over £80,000 in
one Zoom call!
Accelerating our strategy
Around 18 months ago, we set out three pillars
to our growth plan; following an exceptional
year of growth we have revisited this. Our
biggest opportunity remains the same, to
build a leading position in the US wine market.
However, in light of a year that accelerated
the pace of online migration by multiple years,
we too are accelerating our plans. We have
identified areas of our business or approach
which can be enhanced. Our FY22 strategic
initiatives are as follows:
Enhance customer proposition
While we are proud of our customer
proposition, we continue to see substantial
scope to further enhance it. We are focusing
in particular on the following areas this year:
Quality perception: As a data-led business,
we are obsessive about measuring the quality
of our wines. The Naked model gives us a
sustainable way to make better wines for
less; that is how we offer great value to our
members. Our Angels agree. However, as a
challenger model selling exclusive brands, we
recognise we have more work to do to drive
quality perception among the wider market
and influence the potential Angels of tomorrow.
Put simply, today we aren’t getting fair credit
for the quality of exclusive wine brands we are
making. Our plans to address this include:
G entering more wines for awards and critic
review to deliver third party credentialing;
G innovating our digital product to better
showcase these awards; and
G creating and sharing more content that
highlights our winemakers and their
experiences.
Finally, we continue to bring on more A-List
winemaking talent and will build out our luxury
range of wines alongside expanding offerings
from traditional “old world” wine regions to
support our specialist and quality credentials.
Easier to shop: There are other areas we can
work on to broaden the appeal of our offering,
such as making the shopping experience more
enjoyable and delivering a more relevant
offering for different demographics of
customers. In order to win these benefits,
we have added highly skilled resources to
our product management and technology
capabilities this year. We anticipate this
resulting in a faster and richer rate of
innovation and change. For example, in FY20
we launched a new app to customers which
has been very well received. In the coming
year, priorities include:
G better data-led personalisation of the
shopping experience;
G rolling out enhanced CRM and CMS
tools to enable our teams to deepen
segmentation of our communications; and
G a focus on driving overall ease and speed
of shop across missions and devices.
Scaling subscriptions: Our subscription
products have been a standout success in the
past year. We have generated over 95,000
orders through our automated ordering
products, with 19% of our customer base now
subscribed to our Never Miss Out and 2% to
our Wine Genie product. Never Miss Out is
directly responding to one customer concern
inherent to a wine business working with
smaller producers, discovering a favourite
wine and then having it sell out. By addressing
this problem, we are seeing enhanced
retention rates which deliver substantial
levels of incremental sales. We see material
scope to innovate further here and will both
extend the scope of Never Miss Out, adding
frequency options and case variants, and look
to roll Wine Genie out at greater scale.
Leverage scale to enhance value creation
As we build scale, we will deepen our
competitive moats and enhance the
appeal of Naked to all our key stakeholders.
The operating leverage in our logistics
and fulfilment costs has been apparent
immediately, but over the medium term we
will also see the benefits that increased scale
unlocks as we are able to further reduce
the costs of making high-quality wines and
reduce sourcing costs in non-wine spend.
Our bias as we look to the long term is to
share these benefits with customers in the
form of enhanced value or elevated quality,
as opposed to seeking maximum short-
term margin expansion. As our business
scales, we also enhance the economics and
appeal for our winemakers, building further
differentiation into our wine proposition.
These improvements to proposition and
economics via scale are a key element of our
long-term strategy.
Broaden and enhance our go-to-market
strategy
We see the opportunity to continue to drive
customer value via an enhanced customer
proposition and through scale efficiency, which
gives us an ideal platform to increase our long-
term investment in customer acquisition while
maintaining attractive returns.
In addition to continued work to develop new
marketing channels, we have identified two
further key areas of focus for our go to market
strategy this year.
G The first is increasing the relevance of our
initial offer and onboarding process. This
involves focusing on the personalisation
of offers (in terms of communication,
wines, subscription and economics) to New
Customers. We see substantial upside in
customer quality and investment efficiency
from better differentiating our offers
and tailoring the introduction to Naked
around each individual’s unique tastes and
preferences.
G Second, we will continue to deploy
Marketing R&D spend as we broaden our
marketing approach beyond pure direct
response advertising to encompass brand
development. We have identified clear
opportunities to support long-term growth
via improving key brand metrics – notably
awareness, brand comprehension and the
perception of wine quality. Our initial testing
this year has given us confidence that we
understand the messages required to move
these metrics and we will continue to test into
a more balanced mix of marketing spend.
In summary
I firmly believe that DtC is the future in wine
retail, and that brands should be connecting
directly with customers and creating meaningful
relationships with them. The path won’t be linear
but the direction of travel is inevitable. With more
people than ever open to the idea of buying
wine online, now is the perfect time to showcase
the amazing stories that sit behind every bottle.
At Naked, we have always believed that stories
about people, their dreams, motivations and
struggles, are universal and resonate far more
than a narrow focus on terroir, tannin profiles or
aromas. By connecting winemakers and wine
drinkers directly, we are building a business that
is emotionally as well as rationally differentiated,
where a personal connection, provenance and
authenticity reinforce a foundation of great-
value, high-quality wine.
I’ve never been more excited about the future
for Naked Wines.
Nick Devlin
Chief Executive
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Chief Executive’s review
continued
We are a mission-
driven company
We’ve executed at a high
level through a tough
environment.
We’ve stepped up to
support independent
winemakers through
COVID-19 while building
new relationships and
delighting customers.
We’ve broadened our
commitment to advancing
equality and inclusion in
our business and within
the wine industry.
The experiences of the
past year have led us to
take decisive action to
better understand our
environmental footprint
and how we can raise the
bar for sustainability.
Positive change
Now, more than ever, we believe
Naked has a role to play acting
as a force for positive change in
the wine industry
In a year like this, where external circumstances
have created substantial operational
challenges, it’s more important than ever for
a company to have a clear sense of identity
and mission. Our commitment to positively
transform the wine industry has enabled us
to retain focus through a demanding year,
and I’m delighted by the way our teams
instinctively continue to look for ways to
broaden that impact.
As well as providing growth and stability to
our existing winemakers, we have sought
to harness our platform and Angel base
to support winemakers and growers who
have been most impacted by forces beyond
their control this year. In the summer, we
launched our $5 million COVID Relief Fund.
This resulted in us sourcing 105 new wines from
36 new winemakers, many of whom we have
subsequently built longer-term relationships
with, having achieved high customer ratings. In
the autumn, our Australian business launched
an A$5 million campaign to “Stop the Squeeze”
on Aussie growers and winemakers as the
impact of Chinese tariffs hit hard on the
Australian wine industry. Now, more than ever,
we believe Naked has a role to play acting
as a force for positive change in the wine
industry and building long-term sustainable
relationships that benefit customers and
suppliers mutually.
Providing growth and stabilit y
to our existing winemakers
World wine rescue
As part of the COVID Relief Fund,
Naked bought rescue cases
from winemakers whose routes
to market had closed in France,
Spain and South Africa among
others.
Another dimension of this belief is that we
can play a positive role in supporting greater
equality and diversity in our industry. In FY21
we took a number of major steps to further
this, alongside doubling down on some long-
standing partnerships:
G We have launched the Naked Emerging
Vinter programme in collaboration with the
Roots Fund which will mentor an aspiring
winemaker from a minority background
each year
G We have renewed our scholarship
programme in Stellenbosch, SA and have
added a new programme for access to the
prestigious University of California, Davis, to
support new minority winemaking talent
G We have founded a charitable trust in
the UK to amplify the impact of our long-
standing partnership with Carmen Stevens
to raise money for kids in Western Cape,
SA. I’m immensely humbled by the support
of our Angels in helping us raise more than
£750,000 in our April 2021 appeal
This was another year where the challenge
of an evolving climate was ever present. We
work in an agricultural business which is reliant
on the climate so we cannot be bystanders
in the debate around climate change and
sustainability. The impact is real for our
winemakers and colleagues who have been
impacted in recent years by wildfires.
We have completed an end-to-end CO2
carbon footprint audit to identify the biggest
carbon emission drivers in our UK business
and are in the process of rolling this out for our
supply chain globally. Following this, we will be
drafting a plan to raise the bar at Naked, and
we hope to provoke conversations and wider
change in the industry.
Sustainability page 56
20
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Chief Executive’s review
continued
Our investment
philosophy
For those of you who may be looking at
Naked Wines for the first time, or are new
investors to our business, it is important that
we lay out clearly the investment philosophy
to which we subscribe. We are committed
to maximising the long-term value of the
business and believe that we best achieve that
aim through deployment of the appropriate
level of investment, subject to delivery of our
target levels of investment return. We have a
consistent bias towards building a sustainable,
high-quality business with high retention rates,
and we optimise for the long term, not the short
term. With a business model that invests up
front to acquire customers in anticipation of
future returns, our perspective on investment is
inherently fundamental to our business success
and so I believe it is worth expanding upon it
here.
While our philosophy is not changing, we
are making some changes to some of our
associated disclosures and given the criticality
of this issue it’s important to explain why we are
doing this.
From “Lifetime” to 5-Year
Forecast Payback
We originated our 20-Year “Lifetime” Payback
measure to reflect the very high levels of
retention exhibited by our loyal customer base
and to reflect our philosophical belief in a focus
on building for the long term. However, we
must acknowledge that 20 years is a long time
to predict anything over and surely if 2020 has
taught us anything it is that nothing is certain.
We have been dual publishing a 5-Year
Forecast Payback measure alongside our
20-year measure and from this point will
transition fully to the 5-year measure.
We believe this has a number of benefits:
G 5 years is a time horizon for which we
have multiple fully aged cohorts in all our
markets
G The 5-Year Forecast Payback projections
can be set against the disclosure we make
on realised payback by year for the five
most recent cohorts
G We believe it is a time horizon that
appropriately balances a tangible ability
to predict customer behaviour while
maintaining a focus on building a business
for the long term underpinned by high-
quality, highly loyal customers
It is worth noting that while we have disclosed a
Year 1 Payback measure to assist in projecting
future business performance, internally our
operational and investment decision-making
is orientated around our longer-term payback
performance. With the move to a 5-Year
Forecast Payback, this will not change. To put
it simply, where we have a choice between
optimising for short-term metrics (i.e. driving
the fastest possible payback on an investment)
and maximising value over the medium to long
term (i.e. higher 5-Year Forecast Payback), we
choose the latter.
We remain committed
to our core belief in
how we drive long-term
returns and value for
shareholders.
We are enhancing key
disclosures to make
clearer how we measure
progress against our
philosophy.
We take a well-rounded
and thoughtful approach
to capital allocation.
22
An agnostic investment
approach
While historically our investment disclosure
has focused on the direct spending to acquire
new members (either through media costs
or via subsidised first purchases), we are
philosophically agnostic in terms of our
assessment of investment opportunities.
In practice, while the business was capital
constrained and our returns from Investment
in New Customers were limited by available
capital there were limited practical investment
choices to be made. Thankfully, the business
today is in a different position and so it is
useful here to share how we view some of the
investment opportunities outside of direct New
Customer acquisition.
When reviewing opportunities to invest in
additional capability to enhance our customer
proposition and technology, we adopt
the same mindset of an evidence-based
assessment of likely investment returns and
a belief in investing to create sustainable
long-term value. In short, our perspective
is the same as for our direct New Customer
acquisition investment. We are seeking to
invest where we see opportunity to generate
additional long-term value and are minded to
focus more on returns over a 5-year horizon
than look for immediate payback.
In terms of the last 12 months, the rapid scaling
of Naked Wines’ membership base has, in the
view of the management team, had the impact
of making additional investment in a number
of areas substantially more attractive. When
we assess, for example, the business case to
invest more in digital products to accelerate
the pace of innovation in our digital customer
experience, we are considering the following
factors:
G Do we have excess identified opportunities
versus current resource levels?
G If yes, what additional opportunities would
the investment enable? In what time frame?
G What is our best evidence of the likely
value created? Where possible we seek to
validate via proof of concept testing ahead
of development
G What then is the likely annualised benefit vs
the costs – and as such the likely return on
incremental investment made through the
general and administrative cost line?
Significantly, for this along with many of the
investments we are evaluating, the benefit
of the investment is a function of either New
Customer traffic levels or Angel member
numbers. In both these areas, our baseline
has increased materially over the last year:
G Our new traffic baseline has more than
doubled, driven by our increased customer
acquisition spend
G Active Angels have increased by 53%
Therefore, the returns on investment in many
areas are now substantially more attractive
as the cost of developing a new experience
or piece of functionality is largely fixed whilst
the benefit scales with the number of New
Customers or Angels.
It is for this reason that we have chosen to
invest in the capability to build New Customer
experiences in FY22 and are investing ahead
of our prior guidance that general and
administrative costs (previously classified as
fixed costs) would grow at c.50% of the rate of
sales growth. We continue to believe that, over
the long term, Naked should achieve a large
degree of cost leverage, but it is important
not to dogmatically stick to policy when
circumstances change, and currently we see
multiple highly attractive opportunities to invest
through the cost base and deliver our target
levels of return with confidence.
Continuing to invest in
uncovering new opportunity
We invested £3 million in Marketing R&D funds
exploring ways to enhance our go-to-market
strategy in FY21. Our focus was on testing
and developing further marketing channels
which we have not previously explored in
order to discover which channels can produce
good-quality customers and attractive returns
for us. We have seen promising initial results
with some of the testing helping to support
the growth in productive investment across
the year. In particular, we have successfully
broadened our digital marketing approach
to include multiple Native ad platforms,
seen promising early results from both un-
addressed and traditional direct mail in the UK
and US and started to build an understanding
of the relationship between above-the-line
spending and the movement of our key brand
equity metrics. We will continue this approach
in the coming years, as we see Naked having
the available cash to deploy through various
marketing channels and a medium-term
opportunity to extend beyond pure direct
response investment.
Equally, we do not want to constrain growth
options or compromise existing member
experience, therefore we will invest in
rebuilding stock levels to meet the demand
expected from our higher Angel base and
future New Customers, alongside improving
the business by investing in technology and
teams to increase capability and enhance the
customer experience.
Nick and Shawn
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Key performance indicators
Measuring our performance
through enhanced disclosures
How are we doing?
What is it?
Why does it matter?
What are the key risks?
KPI
How are we doing?
What is it?
Why does it matter?
What are the key risks?
Subscription
Financial
KPI
Sales
£340.2 million
(FY20: £202.9 million)
Sales
growth
68% growth
(FY20: 13.7% growth)
The GBP value of our sales
to customers, and its change
versus the prior year
The business has the opportunity to grow at scale. We
intend to do this through continued investment in customer
acquisition through tested channels, while exploring new
channel effectiveness using Marketing R&D investment
money
G Competition
G Regulation
G Investment
Net cash
£85.1 million
(FY20: £54.7 million)
The amount of cash we are
holding, less debt at year end
Managing cash is essential to ensure that we have
sufficient funds in place to execute our exciting growth
plans over the medium term
G Financial/liquidity
G Macroeconomic event
Customer experience
KPI
How are we doing?
What is it?
Why does it matter?
Maintaining availability of our top-selling products
supports customer loyalty and maximises sales
What are the key risks?
G Business interruption
G Supply chain
G Third-party suppliers
Product
availability
90%
(FY20: 93%)
Wine quality
91%
(FY20: 91%)
5* customer
service
91%
(FY20: 91%)
The average percentage
of the products we have
defined as core range
available to our customers
during the year
The percentage of
customer ratings received
in the year indicating the
customer would buy the
product again
The percentage of
feedback ratings
received by our Customer
Happiness teams that
expressed 5* satisfaction
on a scale from 1 to 5
Ensuring our customers love our exclusive wines and
are happy to buy them again supports loyalty and
sales retention
G Business interruption
G Supply chain
G Third-party suppliers
Consistently offering 5* service supports customer
loyalty and sales retention
G Data security
G Management/key
staff
Repeat
Customer
Contribution
profit
Repeat
Customer
sales
retention
Investment
in New
Customers
£(50.0) million
(FY20: £(23.5) million)*
5-Year
Forecast
Payback
3.0x
(FY21 20 yrs: 6.2x)
(FY20: 2.6x, 20 yrs: 4.9x)
Our total investment in
acquiring New Customers in
the year. Includes both the
contribution profit/loss from
sales to New Customers
and advertising costs
The ratio of projected future
Repeat Customer Contribution
profit we expect to earn from
the new customers recruited in
the year over the Investment in
New Customers. We forecast
contribution at a customer
level using a machine learning
algorithm which weighs several
characteristics including
demographics, interactions
and transactions forecast over
a five year horizon. This is then
aggregated to a monthly, then
annual, cohort level for reporting
purposes
£84.9 million
(FY20: £46.4 million)*
The contribution earned from
sales to Repeat Customers
We invest in customers from whom we expect to receive
a payback in line with our target in future years. We are
investing significantly to take advantage of the opportunity
before us to maximise future value
G Investment
G Regulation
G Competition
G Reputation
We invest in New Customers which deliver payback at least
in line with our medium-term payback target ensuring
we create intrinsic value from our investments. Payback
is calculated utilising the history we have of customer
activity, enabling us to accurately forecast our investment
returns and eliminate poor investments. Therefore, we
are able to invest in attracting and retaining high-value
customers who fit our target customer profile. As we
stated in the FY20 Annual Report, in the current year
the business has migrated from using a 20-Year to a
5-Year Forecast Payback period for internal and external
reporting purposes. Reporting in this Annual Report is
made on both a 5-year and 20-year payback to assist user
comprehension. However, from the beginning of FY22,
Naked will only report a five year payback metric
The cost leverage we achieve as we grow will continue to
drive Repeat Customer Contribution. Not only does this
promote the long-term economics of the business, but
contribution from repeat customers also provides us with
the cash to reinvest into New Customer recruitment and to
continue to support our independent winemakers
G Investment
G Competition
G Supply risks
G Macroeconomic event
G Competition
G Supply risks
G Reputation
G Tax and duties
G Competition
G Supply risks
G Reputation
G Tax and duties
88%
(FY20: 83%)
The proportion of sales made
to customers who met our
definition of “repeat” last year
and who placed orders again
this year, calculated on a
monthly basis
Through a cultural relationship with existing Angels and
new initiatives like ‘Never Miss Out’, we strive to continually
improve our Repeat Customer sales retention rate.
This results in the improving Lifetime Value of existing
customers, which drives the long-term value of the
business
Year 1
Payback
82%
(FY20: 67%)
The contribution realised in this
financial year from customers
recruited in the prior financial
year, divided by the investment
made in recruiting those same
customers
Continuing to watch this short-term payback measure
closely gives us an early indication of the quality of the prior
year cohort recruited
G Investment
G Competition
G Supply risks
Standstill
EBIT
£39.3 million
(FY20: £9.6 million)
The Adjusted EBIT that would
be reported if investment in new
customers was reduced to the
level needed only to replenish
the current customer base lost
to customer attrition
As a subscription business that grows through marketing
to New Customers, which is expensed through the profit
and loss, we use this measure as an indicator of standstill
profitability, should we choose to invest in acquiring only
those customers necessary to replace existing customers
lost through attrition
G Includes those
reflected in the
underlying metrics
which feed into this
calculation
See page 136 for the calculation
of Standstill EBIT
Our focus on growth and attention to payback and
customer retention rates ensures that we continue to
maximise the growth in Standstill EBIT and hence the
long-term value of the business
Active
Angels
886,000
(FY20: 580,000)
The number of Angels (repeat
subscription customers) placing
an order in the 12-month period
Long-term growth will come from continued growth in the
customer base and enhanced through other initiatives and
products
G Investment
G Competition
G Regulation
See information on alternative performance measure definitions on pages 133 to 134.
* FY20 Investment in New Customers and Repeat Customer Contribution profit revised to align with updated allocation basis used in FY21. See note 6 for details.
24
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report NAKED WINES
LAID BARE
Growing
together
An interview with
Nina Stocker
When did you start
working with Naked
Wines?
Q.
A.
I have been working with Naked since
2015. I remember the date Naked asked
us to come aboard. I was 39 1⁄2 weeks
pregnant with my son and had tidied all
my work up so I could relax for a week
before I gave birth – however, I then
received an exciting, life-changing email a
few days before I was due to give birth!
Tell us about the
last year
Q.
A.
Over the past year, the growth of our
business has been phenomenal and
unexpected. At the beginning of the
pandemic, everyone was so unsure of its
impact, mainly how we would sell and
deliver our products. Naked’s ability to
navigate this on our behalf has made
us feel extraordinarily lucky; some of our
peers have not had this support, and
were greatly restricted by the closures
of restaurants and shops.
26
,
a
i
r
o
t
c
V
i
a
i
l
a
r
t
s
u
A
What kind of issues have
you had to overcome?
Q.
A.
How do you use Naked’s
upfront funding?
Q.
A.
The fear of the unknown that the
pandemic has brought, and other issues
such as Brexit, have at times been hard to
manage, particularly not knowing what
their impact would be on the business.
However, Naked helped us overcome
any related issues seamlessly.
Naked’s upfront funding allows us to pay
our growers in advance, offering them
security which they wouldn’t necessarily
receive otherwise. This is even more
important for growers impacted by
COVID-19 and the tariff hikes, and has
clearly been a huge help to them.
The changing environment here in
Australia is a large, ongoing concern for
us, like all winemakers. We are constantly
monitoring the climate, particularly the
risk droughts pose to our produce.
A bigger challenge has been the
adaptation to scaling the business.
However, these challenges are the
parts of the work I really love.
For us, upfront funding has allowed us to
grow our business beyond what would
have been possible alone. It has removed
a lot of stress from the process. The
funding and the support from Naked has
increased our ability to run the business
well, allowing us to focus on sourcing
the best grapes, making great wines the
way we want to, getting these over to the
Angels and telling our story.
What difference has
Naked made to you,
your business and your
community?
Q.
A.
This year I was a finalist for Naked
winemaker of the year. It was a huge
honour and very humbling! As a result,
Naked provided funding for a special
project. We chose to produce a new
Cabernet, and the profits we make from
this wine will be matched by Naked and
donated to the Royal Children’s Hospital
in Melbourne. This organisation is very
important to us; a close friend’s child
underwent successful treatment here and
we want to give back as much as we can
to the wonderful caregivers.
How has Naked helped
you to grow your brand
and business in other
ways?
Q.
A.
Growing a business relies on passion
and authenticity and I began to dislike
the impersonal elements of the direct-to-
consumer area of the industry. For these
reasons I was ready to step back and
focus on being a mum and raising my
two young children.
However, I went on a tour organised
by Naked, with other like-minded
winemakers who were passionate about
what they do. This reignited my passion
for producing something delicious with
the purpose of making people happy
and for celebration. Naked creates a
wonderful community, not only with
other winemakers, but with Angels too,
who truly understand what we are
trying to achieve. It’s amazing to share a
platform with peers who are on the same
page and understand the challenges
of growing a small business, as well
as being encouraged and supported
by Naked and the huge community of
Angels, while providing them with such
a great deal.
27
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Our business model
The problems
we’re solving
We have an organic, clear and compelling mission:
To disrupt the wine
industry for the benefit
of customers, winemakers
and our people.
Problems for wine drinkers
G Unhappy with their level of choice
and knowledge
G Told by the industry what to drink
and what to like
G No input in the process
G Paying too much for good-quality
wine
Problems for winemakers
G Under immense pressure to meet
stringent cost levels and unrealistic
production time limits
G Small business pains including
funding, scalability and marketing
The wine industry needs Naked
Good wine is too expensive. Despite this,
winemakers are undervalued.
In a traditional model, winemakers have
to buy their grapes, manufacture their
product, bottle, label and market their
goods – all before they get paid. Small
producers are often forced into cutting
corners and squeezing costs to achieve
ever-diminishing margins, meaning quite
often the quality of the grape is sacrificed.
At Naked, we build strong relationships
with our winemakers. We agree orders
in advance, with a fixed fee per bottle, so
they have certainty of our commitment.
Winemakers can be paid an advance
upfront, empowering them to buy better-
quality grapes. Naked also provides
product data from our Angel base and
the benefits of a scale producer for
commodities like dry goods (bottles, corks,
etc.), allowing winemakers the creative
freedom to focus on what they do best –
making amazing wine.
The solution
Naked Wines provides an ecosystem that
connects everyday wine drinkers with the
world’s best independent winemakers.
This community gives consumers insight
into the wines they drink and who is
making them, while winemakers can use
the product data and feedback to make
even better-quality wines.
We believe that the best results come from
connecting consumers and producers. This
gives our Angels access to the information
and insights they desire, and a real sense
of connection to the winemaking process.
Our virtuous
circle, and
the benefits
of scale
Building a bigger,
better business unlocks
scale economies
Naked can share
efficiencies with
winemakers and offer
better value to customers,
while generating
attractive margins.
4
886,000
active Angels
1
Our subscribers (Angels)
generate a stream of
cash and product data
The larger the Angel
base, the more cash
we receive from monthly
subscription payments.
Scale
economics
235
winemakers
3
1,500+
beautiful
wines
2
Winemakers focus
on creating beautiful
wines and we handle
the rest – resulting in
preferential prices
This offers our Angels
beautiful wines which
drives higher retention.
We use this money
to back independent
winemakers to make
wine exclusively for us;
the data enables them
to make better wine
The more Angel funds
we have, the more
winemakers we can
onboard and offer them
larger volumes and
longer contract terms.
28
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Our business model
continued
Our
differentiated
model
Our model is hard to replicate
Our ecosystem is well established and the barriers
to entry are high. Over Naked’s 12 years we have:
Become well established
Our winemakers operate at scale, benefiting
from an established and optimised network of
marketing partners, and a large base of loyal,
engaged customers.
Unrivalled tech
We own unique and valuable technology and
data that enables warehouse and fulfilment
providers, class leading customer service,
and social interactions with winemakers.
Made sustained investment
It takes time and sustained investment to recruit
winemakers, produce wine, build a distribution
network and recruit customers.
An advantageous model
We operate in large and growing markets, with
access to exclusive wines and winemakers.
Great people with
relevant experience
G Experienced Board (tech, innovation,
retail, US, M&A, marketing)
G Strengthened team in the US
G Winemakers, wine buyers and data
analysts driving the relevant parts of
the business
Strong leadership
and culture
G Innovative culture – nimble, disruptive
G Analytical – data-based decision-
making and accountability
G Lean teams
G Community-focused (raised £750,000
for Carmen’s Kids)
Deep relationships with:
G Our 235 independent
winemakers
G Our 886,000 Angels
G Marketing partners
G Distribution networks
Our
critical
assets
Strong capital position
G Well funded with £85 million
available cash
G Investing for growth to drive
future value
9 8 %
o f 1 42
w o u l d b u y i t a g a i n
Data led
G 28.9 million ratings and reviews
from customers
G Understanding of customer
characteristics which improves
targeted advertising
G Tech platform
30
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report NAKED WINES
LAID BARE
Control
&
freedom.
I’ll drink
to that!
An interview with
Scott Kelle y
Pinot Noir
superstar
y
e
l
l
a
V
e
t
t
e
m
a
l
l
i
W
S
U
,
n
o
g
e
r
O
We’re really stoked that
you’ve signed with Naked
until 2024. Tell us why
Naked Wines?
Q.
A.
Naked Wines offers me the platform to
introduce really incredible wines that
no one would otherwise consider, in an
authentic way. I think Naked is the most
authentic company of its kind, finding
winemakers, backing them, and bringing
their stories and wines to the world.
We have been able to hire people locally,
increasing employment opportunities
in our community, particularly during
harvest. Some of our best growers, who
we invest in and have long-term contracts
with, have been able to expand their
operations and grow their businesses as a
result of the returns from our relationship
with Naked.
Naked has also allowed us to leverage
growers and contracts, giving us the
ability to explore different regions,
broadening our purchase of fruit within
Oregon. This is helping us grow our winery
and wholesale brand. Oregon planted
acreage is relatively small and wouldn’t
get the coverage it has without Naked.
Hi Scott, how did your
journey with Naked
Wines begin?
Q.
A.
In 2013, I decided to leave a large-scale,
corporate winery after 16 years, to go
out on my own. I had previously worked
with Naked’s head of winemaking and he
approached me about this new model for
winemakers who were tired of corporate
winemaking. Winemakers in the corporate
world spend a lot of time on the road
selling or in meetings, which for most of
us is the opposite of what we enjoy. We
want to be in the vineyard and in the cellar
making wine! Sounds silly but I wanted
to drive the forklift, work the crush pad,
dig tanks and fill barrels like I did when I
first got into the business. Naked Wines
has allowed me to get back to my roots
of hands-on winemaking and focusing
on the craft! The rest is history, I have now
been with Naked for 7 years, since the
2014 Vintage.
What would you say is
your biggest success over
the past year?
Q.
A.
The ability to expand our offering into
Chardonnay has been a huge success
over the last year. I am really excited to
see what the Angel reception will be to
the Oregon Chardonnay, and to introduce
them to the different things we can do
from Oregon.
The way that wines are introduced
through the Naked platform, through real
stories and cutting out the middle man,
has enabled these exciting varieties to be
hugely successful. Naked has allowed me
to showcase my passions for winemaking
and accelerate some of the creative things
I have been working on, beyond what I
could achieve working alone.
This year has been tough in
so many ways. What kind of
challenges have you had to
overcome?
Q.
A.
Our challenge has been growing too
fast! There are more grapes in Oregon
than there are facilities to make wine. To
solve this, we have put in place long-term
contracts with Naked and our growers to
ensure the consumption of produce.
These contracts have made a huge
difference to our cash flow, with the
guarantee of income and the ability to
efficiently manage our working capital.
32
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Performance highlights
Enhancing our offering to both
winemakers and wine drinkers
What we’ve done
Enhancing our New Customer
offer
We have diversified our introductory offer,
including a reduced case size and a luxury
proposition.
Why we’ve done it
To better demonstrate the range of our
products while appealing to a larger
customer base.
The results so far
We see substantial upside in customer
quality and investment efficiency from better
differentiating our offers – for example,
by reducing the initial trial case from 12
bottles to 6, we have seen efficiencies in the
cost to acquire New Customers. We know
there is further work to be done to tailor the
introduction to Naked around each individual’s
unique tastes and preferences, and we will
focus our efforts on that this year.
What we’ve done
Developing our online platform
We have delivered new and improved features
and functionality to our website and app.
Why we’ve done it
To improve customer experience. We have
been able to utilise the customer data and
insights to inform our online features and
capabilities.
The results so far
Our new app has 4.8* rating, with over 70%
of repeat orders being placed on the app
following the first order. There has been
a 6% to 12% increase in the New Customer
funnel conversion by market.
What we’ve done
Brand positioning and awareness
We’ve made significant investments in making
our brand simpler, easier to understand
and more appealing. We launched our new
brand positioning line “Where the world’s best
independent winemakers make their best
wine”, invested in winemakers and revamped
our look and feel.
Why we’ve done it
We want to ensure we have a brand fit for the
next stage of our growth journey, matching our
aspiration to be known as a place where great
winemakers make fantastic wines that appeal
to a wide audience of wine drinkers.
The results so far
Our brand metrics have increased significantly
in all markets, particularly in the US. We are
now either the #1, #2 or #3 best known online
wine brand in all of our markets, and scores on
key drivers of consideration like wine quality
and value for money increased by between
4% and 16%.
What we’ve done
Investment in New Customers
We have significantly increased our Investment
in New Customers (+113%).
Why we’ve done it
There has been a shift towards online wine
purchasing. We want to take advantage of this
opportunity and drive intrinsic value.
The results so far
We have increased our Investment in New
Customers to £50 million at a 3.0x 5-Year
Forecast Payback. We have increased global
digital investment by over three times in the
last year.
What we’ve done
Diversifying advertising
opportunities
We have explored new advertising
opportunities, such as increased investment
in digital and native, and tested traditional
channels like TV and radio in the US and
Australia.
Why we’ve done it
We are exploring different pools of opportunity
to source high-quality customers, as well as
building the brand among a larger audience.
The results so far
Global native investment increased by five
times in the last year through scaling our current
native channels and onboarding two native
partners. This has been particularly successful in
the US, with native now representing 25% of all
order volumes. There has been an encouraging
response to our initial TV test in the US, with
response rates at or above expectations, and
a path to achieving payback at or in line with
other channels. 1 in 5 people remembered
seeing the ad and the campaign, which drove
us to become the #1 recognised online wine
brand in our target cities.
34
What we’ve done
Boosting technology capabilities
We have introduced the Product Model, a way
of working that delivers incremental change
without large-scale disruption. We have also
invested in a transformation programme to
move our core technology systems to a more
scalable, flexible and resilient framework,
preparing us for the next phase of our growth
journey.
Why we’ve done it
To better support growth in the business and
the associated priorities, so that we are fast,
agile and scalable.
The results so far
The new and improved features we have
delivered over the past year have contributed
significantly to our core goals of: gaining New
Customers, increasing Lifetime Value (LTV)
through our customer initiatives such as our
subscription offerings Never Miss Out and
Wine Genie; and delivering internal efficiency
initiatives in critical areas such as wine
buying and warehouse management and
delivery. While the technology transformation
investment will reap the primary benefits of
scale, flexibility and resilience over the next 2 to
5 years, there are several shorter-term benefits
that we are seeing in terms of performance.
What we’ve done
Expanding our range
We have added more than 60 new winemakers
to our portfolio over the last year, 36 via the
COVID Relief Fund.
Why we’ve done it
To increase our range and volume capacity
of high-quality wines from some of the best
independent winemakers across the world,
ultimately delivering even better value for our
loyal Angels.
The results so far
We have launched debut vintages with
some talented winemakers from around
the world. We have leveraged our platform
to support independent winemakers that
were heavily impacted by the pandemic,
and have subsequently agreed exclusive
projects with a number of these following
high customer ratings. We have received
third party recognition for the quality of our
products, including #1 wine club in the US for
the second year running.
What we’ve done
Enhanced our subscription
offering
We have invested in both developing and
promoting our two auto shipment products –
Never Miss Out and Wine Genie.
Why we’ve done it
Both products fulfil a real need for customers –
to not miss out on some of their favourite wines,
or themed cases, which are often in limited
supply, and to get their wine shipped to them
without having to lift a finger.
The results so far
Both products have been big hits with our
Angel base. 1 in 5 of our Angels are now signed
up to one of these products, previously 1 in 6.
What we’ve done
Connecting our community
through the pandemic
Virtual events to engage our customers in
innovative and compelling ways.
Why we’ve done it
To continue to engage our community in the
absence of the ability to physically go out and
meet them, maintaining customers’ ability
to explore our wines with the people who
make them.
The results so far
We have hosted 10 virtual wine tastings
through our virtual tour, allowing Angels and
winemakers to continue to build personal
engagement. We have held 26 Thirsty
Toosdays, which was a light-hearted way
to keep our community connected. On our
website and app there have been 2.8 million
customer posts, an increase of 2.5x on last year,
with engagement being a key contributor to
LTV. Finally, we are also really proud that we
have achieved our highest ever net promoter
score rating.
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Financial review
Strong growth, particularly
in our US business
Introduction
I joined Naked Wines as Chief Financial Officer
in December 2020 and took my place on the
Company’s Board in January 2021 to replace
James Crawford who moved to head up our
UK business.
Shift to online wine purchasing
drives growth
Naked Wines delivered strong growth in
FY21. Growth accelerated in all three of our
geographies, particularly in the US, which is
our largest market opportunity and where
our offering is most differentiated.
Many online businesses have benefited
from COVID-19 as consumers adapted to
government restrictions and lockdowns over
the past year. The wine sector also shifted
towards online, resulting in a larger customer
base for Naked, higher customer retention,
and more frequent purchases. Ultimately, we
think the Naked model, in particular the value
proposition we deliver to our consumers and our
winemakers, will drive differentiation and win
market share.
Our Angel subscriber base increased 53% over
the last year, resulting in economies of scale
that have reinforced our competitive position,
enhancing our appeal to both customers and
top winemaking talent. Additionally, the scale
drove an increase in contribution margins across
the business. Repeat Customer Contribution
profit was £84.9 million, an 83% increase over
the prior year.
FY21
£ million
340.2
(204.7)
135.5
40%
(58.3)
17%
77.2
23%
(42.3)
12%
(36.4)
11%
(1.5)
1.0
(0.5)
FY20
£ million
202.9
(125.3)
77.6
38%
(35.0)
17%
42.6
21%
(19.8)
10%
(25.2)
12%
(2.4)
(0.5)
(2.9)
YoY
%
+68%
+63%
+75%
+160bps
+67%
(10)bps
+81%
+170bps
+114%
+270bps
+44%
(175)bps
(37)%
(300)%
(82)%
Naked Wines is disrupting the
wine industry for the benefit
of consumers and independent
winemakers, and this is an
exciting time to join Naked.
The Company’s differentiated
business model delivers
superior value to wine
consumers in an online
wine market with
significant opportunity.
Shawn Tabak
Chief Financial Officer
Total sales
Cost of sales
Gross profit
Gross profit margin
Fulfilment costs
% of total sales
Contribution profit
Contribution profit margin
Advertising costs
% of total sales
General and administrative costs1
% of total sales
Adjusted EBIT
Finance income / (charges)
Adjusted loss before tax
1 G&A costs reported here are as per the income statement excluding £3.6m of acquisition related amortisation costs, £2m of
fair value adjustments relating to open FX contracts and £0.7m of PLC company foreign exchange revaluations (see note 7 for
further information on these items). In FY21, G&A costs now include £1.0m of share-based payment charges, previously reported
as adjusted items (FY 2020: £1.0m) and £3.0m of expenditure in Marketing R&D.
See information on alternative performance measure definitions on pages 133 to 134.
36
This increase in Repeat Customer Contribution
profit helped fund an increase in Investment in
New Customers to £50.0 million, a 113% increase
over the prior year, and delivering a 5-Year
Forecast Payback for the FY21 cohort of 3.0x.
Adjusted EBIT loss of £1.5 million was relatively
flat with the prior year, despite the increased
investment spend.
Strong FY21 performance
The Group delivered total sales growth of +68%
to £340.2 million, driven by 78% growth in the US,
which now represents 48% of the total business.
We saw a shift towards online wine purchasing
in all our markets, as consumers adapted their
purchasing habits following the COVID-19
related government restrictions and lockdowns.
Total sales growth included an increase in
Repeat Customer sales of 63% to £283.9 million.
Gross profit was £135.5 million, with a gross
profit margin of 40%, a 160 basis point increase
over the prior year. The increase in margin was
due to a mix shift to the US, and product mix as
we optimised the range to preserve quality of
service during the peak of COVID-19.
Fulfilment costs were £58.3 million, remaining
flat at 17% of total sales. In FY21, fulfilment costs
benefited from lower stock levels and increased
scale efficiencies, slightly offset by increases in
transportation and logistics rates.
Contribution profit was £77.2 million, with a
Contribution profit margin of 23%, a 170 basis
point increase over the prior year, driven by
Gross profit margin improvements.
Advertising costs were £42.3 million,
representing 12% of total sales, a 270 basis
point increase over the prior year. In FY21, we
increased our investment across all channels
and geographies, particularly digital channels
in the US and UK markets. Please note that the
vast majority of advertising costs are focused
on acquiring New Customers, the New and
Repeat Customer breakdown on the next
page for additional details and note 6 to the
accounts, segmental reporting.
Total general and administrative costs
(previously named fixed costs) were £36.4
million, representing 11% of total sales, a 175
basis point decrease over the prior year.
The cost increase reflects additional roles
to support the growth of the Group.
Adjusted EBIT was a loss of £(1.5) million
relatively flat with the prior year, driven by
gross profit growth offset by advertising costs
to drive intrinsic value through New Customer
cohorts and an increased level of general
and administrative costs.
Repeat Customers
Repeat Customer sales were £283.9 million,
63% growth over the prior year, reflecting
the growing customer base, and increased
frequency of Angel orders, which was even
higher during COVID-19 related government
restrictions and lockdowns.
We saw an increase in our subscription offers
Never Miss Out and Wine Genie, designed
and personalised to enhance our Angels’
experience. Approximately 20% of our Angels
have signed up to these programmes which
drives incremental value.
Repeat Customer sales retention was 88%, a
565 basis points increase over the prior year,
driven by higher customer retention, and an
increase in the frequency of Angel orders. We
had 886,000 active Angels at the end of FY21,
a 53% increase over the prior year.
As New Customers converted to Angels more
quickly than usual, combined with the early
recruitment of these customers, the FY21
cohort contributed £27.3 million to the FY21
Repeat Customer Contribution profit, which
far exceeds the usual first year payback.
Repeat Customer Contribution profit was
£84.9 million, a £38.5 million or 83% increase
over the prior year. Repeat Customer
Contribution margin was 30%, a 320 basis
point increase over the prior year, driven by
increased scale efficiencies, product mix and
the geographic mix shift with significant growth
in our higher-margin US business. We expect
approximately half of the increase to be an
enduring uplift.
Adjusted EBIT loss of £(1.5) million equals
Repeat Customer Contribution profit of £84.9
million, less Investment in New Customers of
£50.0 million and general and administrative
costs of £36.4 million.
The statutory loss before tax of £(10.7)million
(FY20: £(5.4)million) is driven by:
G adjusted trading performance as set out
above;
G the change in fair value net of settlement
of deferred contingent consideration;
G fair value adjustments to open foreign
exchange contracts and PLC foreign
currency balances and;
G flat year on year charge for the amortization
of acquired intangible assets.
KPIs and disclosures
We have completed a review of our disclosures
and considered investor feedback. We have
enhanced our reporting to give a 5-Year
Forecast Payback measure and expanded
trading disclosure within our statutory financial
statements. Our segmental reporting analysis
(IFRS 8) is now reported on a geographical
basis in line with the markets in which we
operate as well as analysing sales and profit
between New and Repeat Customers. We
have also included more detailed disclosures
around the two primary components within
Investment in New Customers, being New
Customer Contribution profit/loss from
sales to New Customers and advertising
costs. Lastly, we have renamed fixed costs to
general and administrative costs, which we
think more accurately reflect the costs which
are included in this line.
The Group’s business model is to invest in
new cohorts of customers and earn a return
on that initial investment over the lifetime of
the customer. The Group incurs two costs
to acquire customers which make up the
Investment in New Customers; we offer a
discount on the first case of wine to New
Customers and therefore typically incur a loss
on the first case, and we incur advertising
costs to acquire those customers. As customers
subscribe to become an Angel and purchase
additional cases of wine, the Group recognises
this as Repeat Customer sales. The Group
provides the following KPIs, to help investors
understand business trends and the economics
of New and Repeat Customers.
New and Repeat Customer breakdown
New Customers
Investment in New Customers was £50.0 million,
including New Customer Contribution loss of £7.7
million and advertising costs of £42.3 million.
5-Year Forecast Payback for the FY21
cohort was 3.0x, a 0.4x increase over the
prior year. We benefited from lower customer
acquisition costs in the first half of the year
during the initial COVID-19 related government
restrictions and lockdowns. Customer
acquisition costs normalised as the year
progressed.
We continue to have confidence in the quality
of the FY21 cohort, with customers more likely
to buy goods online, and customer retention,
order frequency and community engagement
metrics in line with expectations.
New Customer sales
New Customer Contribution loss
Advertising costs
Investment in New Customers
Repeat Customer sales
Repeat Customer Contribution profit
Repeat Customer Contribution margin
KPIs
Repeat Customer sales retention
Active Angels (Repeat Customers)
5-Year Forecast Payback2
Year-1 Payback
Standstill EBIT
FY21
£ million
56.4
(7.7)
(42.3)
(50.0)
283.9
84.9
29.9%
88%
886k
3.0x
82%
39.3
FY20
£ million1
29.2
(3.8)
(19.8)
(23.5)
173.7
46.4
26.7%
83%
580k
2.6x
67%
9.6
YoY
%
+93%
+105%
+114%
+113%
+63%
+83%
+320bps
+565bps
+53%
+0.4x
+1,480bps
+309%
1 Following a review of the allocation method for fulfilment costs in the current year, we have reallocated costs in the FY20
comparative figures on a consistent basis. This has resulted in a £0.7m movement of costs from Repeat to New Customer costs,
which we think more accurately reflects the basis on which these costs arose.
2 As previously stated, we have shifted from the 20-year payback (FY21: 6.2x and FY20: 4.9x) to a 5-year payback, and will
remove the longer-term metric from our disclosures going forward.
37
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continued
US Segment
UK Segment
Australia Segment
£ million
Total sales
FY21
161.7
FY20
90.9
YoY %
+78%
£ million
Total sales
FY21
133.1
FY20
80.0
YoY %
+66%
£ million
Total sales
FY21
45.5
FY20
32.0
YoY %
+42%
Investment in New
Customers
Repeat Customer
Contribution profit
Repeat Customer
Contribution margin
Adjusted EBIT
(33.4)
(14.7)
+128%
47.9
23.9
+100%
33%
+417bps
37%
2.0
Investment in New
Customers
Repeat Customer
Contribution profit
Repeat Customer
Contribution margin
(11.1)
(5.9)
+88%
27.3
15.7
+74%
22% +193bps
24%
10.9
Investment in New
Customers
Repeat Customer
Contribution profit
Repeat Customer
Contribution margin
1.4
+43%
Adjusted EBIT
6.0
+81%
Adjusted EBIT
(5.5)
(2.9)
+89%
9.7
6.8
+44%
25%
0.9
24%
+137bps
1.3
-24%
Total UK sales were £133.1 million, growth
of 66%, also driven by an increase in
awareness and demand for our offering and
increased order frequency from our Repeat
Customer base.
Adjusted EBIT was £10.9 million, and includes
Repeat Customer Contribution profit of £27.3
million, Investment in New Customers of £11.1
million, and general and administrative costs
of £5.3 million.
The UK segment is our most mature business
and has the highest sales retention among
the Group.
Total Australia sales were £45.5 million, growth
of 42%, also driven by an increase in demand
for our offering and increased order frequency
from our Repeat Customer base.
Adjusted EBIT was £0.9 million, and includes
Repeat Customer Contribution profit of £9.7
million, Investment in New Customers of £5.5
million, and general and administrative costs
of £3.3 million.
The Australian segment was least impacted
by COVID-19 and lockdowns in FY21. We
continue to see better year-on-year mature
customer retention in Australia, even as the
restrictions lifted and the economy returned
toward normal.
Total US sales were £161.7 million, growth of
78%, driven by an increase in awareness and
demand for our offering and increased order
frequency from our Repeat Customer base.
US Adjusted EBIT was £2.0 million, and includes
Repeat Customer Contribution profit of £47.9
million, Investment in New Customers of £33.4
million, and general and administrative costs
of £12.5 million.
The US segment has the largest market
opportunity, the highest growth and the highest
Repeat Customer Contribution margin in
the Group, which increased 420 basis points
to 37% due to increase in gross margin due
to range optimisation and increased scale
efficiencies. The US segment benefits from the
US market’s 3-tier distribution system, which
results in higher wine prices for consumers.
Naked’s unique model means that it is able to
deliver better value wine to customers and still
maintain beneficial gross margins.
Standstill EBIT
Our calculated Standstill EBIT, the Adjusted
EBIT which we would report if we had only
invested in New Customers to replenish the
current customer base rather than for growth,
increased 309% to £39.3 million. This increase
is predominantly driven by a £38.5 million
increase in Repeat Customer Contribution
profit in the year.
This measure is enhanced by the higher order
frequency we saw in the year. This trend is
unlikely to continue in FY22 as customers revert
to historic behaviours, therefore this measure
will show a high replenishment cost required
to maintain the existing Repeat Customer
Contribution profit. After FY22, we expect
this measure to again reflect the underlying
profitability of the business.
Financing costs and tax
Interest income was £1.0 million, an increase
of £1.5 million over the prior year. This income
is derived from our cash held on deposit with
a range of banks and the non-cash amortised
interest income on the loan note created as
part of the disposal of the Majestic business.
Total tax credit was £0.6 million, a reduction
of £1.9 million over the prior year, with the
statutory tax rate of (5.9)%. In FY21, we incurred
a write-down of the fair value of the deferred
contingent consideration from the disposal
of the Majestic business, on which we have
not recognised a deferred tax asset and we
continued to follow the established Group
policy of not recognising deferred tax assets in
UK Group companies while they remain likely
to continue to be loss making.
Cash and cash flow drivers
Cash at 29 March 2021 was £85.1 million
(30 March 2020: £54.7 million). We seek
to maintain sufficient cash and liquidity to
operate the business, given the seasonality
in our inventory purchasing cycle and our
sales. We allocate capital between organic
and inorganic growth investments, such that
we deliver returns in excess of our weighted
average cost of capital (WACC) and internal
hurdle rate. If we identify that we have excess
capital, above what is needed to run the
business and invest in growth opportunities,
this will be returned to shareholders.
Given this capital philosophy, we are focused
on utilising our capital to invest in growth. This
includes investments in customer acquisition,
as well as in our customer proposition and
our go-to-market strategy, and investing in
inventory to increase availability, deliver our
growth plans, and our strategic objectives
38
We are focused on executing against our
strategic initiatives and continuing to drive
growth and intrinsic value in the business. Our
priorities are i) to invest in New Customers at
attractive payback; ii) to enhance the customer
proposition to improve LTV; iii) to leverage
our scale to enhance value creation; and iv)
to broaden and enhance our go-to-market
strategy, driving growth.
Our FY22 guidance is as follows:
G Total Group sales expected to be in the
range of £355 million to £375 million.
Please note we will lap strong comparatives
with FY21.
G We will continue to invest in the market
opportunity, particularly in the US.
Investment in New Customers is expected to
be in the range of £40 million to £50 million.
We will continue to have a disciplined and
data-driven approach toward investing,
with a focus on profitable growth and
intrinsic value.
G Repeat Customer Contribution profit is
expected to be in the range of £85 million
– £90 million with the margin expected to
decline slightly as we expect around half of
the increase in FY21 to be enduring, while
sales retention is expected to be in the mid-
70%’s, below our long-term average of 83%.
G We expect general and administrative costs2
to increase over FY21 as we invest in the
strategic initiatives outlined in this report.
General and administrative expenses are
expected to be in the range of £46 million
to £49 million.
We have a sufficient amount of cash
available to execute against our FY22 Plan,
which includes Investment in New Customer
acquisition subject to our returns criteria,
inventory purchases to meet our plans, and
investment in strategic initiatives and building
operational capacity to support this.
1 FY20 non acquisition adjusted items have been revised
vs disclosed in the prior year to align with the inclusion of
share based payment charges within adjusted EBIT in FY21.
2 General and administrative cost guidance excludes
amortisation.
around enhancing the customer proposition.
As a result of the significant investment
opportunities we see before us, we are not
proposing any distributions or returns of capital
to shareholders at this time.
We generated £30.6 million of free cash flow,
with an Adjusted EBIT loss of £1.5 million and
a net working capital inflow of £32.3 million.
This net working capital inflow was driven by
increases in deferred income of £28.2 million
and trade payables of £15.6 million, offset by an
increase in inventory holdings of £9.2 million.
Adjusted items relating to non-acquisition items
totalled a charge of £6.5 million, an increase of
£7.7 million from £1.2 million credit in FY201.
Brexit
The UK’s exit from the European Union
has included plans to mitigate potential
issues arising from new procedures and
arrangements now in force. Delays at ports
could limit our range, so we communicate
regularly with freight forwarders and
winemakers to make sure they can provide the
required documents to ensure smooth passage
at the border. In advance of the end of the
Brexit transition period, we had hedged our
foreign currency requirements ahead of our
usual policy to bridge the transition period and
avoid any potential exchange rate shocks.
Looking ahead, there are potential legislation
changes which could impact labelling.
However, no changes will be required until
September 2022 at the earliest, so we will work
with winemakers to ensure they are registered
correctly and able to comply with any changes.
Outlook
We delivered a strong trading performance
through FY21 in all geographies, particularly
in the US, driven by demand for our direct-
to-consumer wine subscription model and
an accelerated shift in consumer behaviour
towards online wine purchases.
We have seen a continued strong performance
in our Repeat Customer base in the first two
months of FY22, with total sales +8% year on
year on a constant currency basis. Repeat
Customer sales grew over 30%, which has been
partially offset by the normalisation of New
Customer sales given the strong comparative
in the prior year and lower level of investment
spend. Performance for the first two months
of the year versus the same period in FY20
has significantly increased, with total sales
+96%, Repeat Customers sales +107% and
New Customer sales +30%, on a constant
currency basis.
39
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report NAKED WINES
LAID BARE
Naked Wines allows me to
tell my
story
An interview with
Johan Kruger
Q.
A.
Q.
A.
Q.
A.
Q.
A.
How long have you
been working with
Naked Wines?
What has surprised
you about working
with Naked?
Has upfront funding
from Naked supported
your business?
Q.
A.
I have been working with Naked since
2015. I am astounded by the success that
winemakers can achieve through Naked.
It has been an amazing experience for
me personally and a fantastic business
adventure.
My family has grown alongside my
business with three sons born since I’ve
joined Naked. Each of my sons, Mattias,
Maxime and Lucas, now have a reserve
named after them for which I have won
awards. My family, my business, and my
relationships with Naked and the Angels
have all evolved together.
My relationship with Naked has provided
me with the means to help my peers
who were not able to sell their incredible
wines. Naked enabled these South
African winemakers – through the South
African rescue case – as well as fulfilment
companies, to sell and distribute wines to
Angels at fantastic prices throughout the
pandemic when they otherwise would
have not been able to. I doubt another
company would go to the lengths that
Naked did to support winemakers in need,
while giving Angels bang for their buck.
This help undoubtedly prevented job
losses.
The upfront funding has allowed me to
invest time and money in accessing and
developing old vines that would otherwise
be ripped down. This has resulted in
several wines being produced that have
achieved very high Angel ratings, and I
am very humbled by the Angel funding
that supported this project. The support
goes beyond my business, we are
able to share the love with the farming
community that grow our grapes too.
Why is working with
Naked different?
What’s your biggest highlight
over the past year?
The highlight of the past year has been
the response to the pandemic by my
colleagues and by Naked. Naked has
made up for the lack of physical vineyard
tours by organising interactive tastings
with Angels. I have loved meeting people
who are so willing to participate, and their
warmth, in the absence of a tour where
you can physically meet one another. It’s
great to get feedback offered by Angels in
these tastings too.
How have the
government restrictions
impacted you?
Q.
A.
For the large part of the year the South
African government has imposed
restrictions on the export of wines, as well
as a local ban on alcohol sales. This has
resulted in surplus wine stuck in tanks at
wineries and bottles at the ports. Naked
Wines account for around 95% of my
exports and therefore I have been able to
largely avoid the issues common to other
winemakers who are now unable to sell
their produce to the restaurants and shops
in the country. I am very lucky to be in this
position working with Naked.
Marketing and funding are important, but
I believe it is the stories that sell wine, and
the Naked platform allows this. I stumbled
across unused old vines Cinsaut, planted
in 1952, making them the third oldest
Cinsaut vines in South Africa. The owners
had sentimental attachment to the vines
and therefore had not pulled them out. I
was able to revive this gem of a find and
I produced 600 bottles this year. Naked
has allowed me to expand my range
of wines which would not have been
possible alone.
,
h
c
s
o
b
n
e
l
l
e
t
S
a
c
i
r
f
A
h
t
u
o
S
40
41
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Stakeholder engagement (inclusive of s.172 Companies Act 2006 disclosures)
Our stakeholders are
helping us to grow faster
Section 172(1) statement and
statement of engagement
In accordance with the Companies Act 2006
(the “Act”) (as amended by the Companies
(Miscellaneous Reporting) Regulations 2018),
the Directors must describe how they have had
regard to the matters set out in section 172(1) of
the Act, when performing their duty to promote
the success of the Company.
Each of the Directors is mindful of their duties
under section 172 of the Act to run the Company
for the benefit of its shareholders, and in doing
so, to take into account the long-term impact of
any decisions on stakeholder relationships and
the impact of its activities on its reputation.
Set out below are examples of how the
Directors have considered the matters set
out in section 172(1) of the Act in their decision-
making throughout the reporting period.
Step change for growth of the
DtC channel
Deep in Naked Wines’ ethos is the principle
that growth is the engine that benefits all our
stakeholders and the Company has seen that
brought to life in the last 12 months, a period
which has represented a step change in scale
with enduring benefits for our business and
shareholders.
The most important consequence of the
pandemic has been the rapid acceleration of
demand online for wines, most notably in the
US market, which is where the Board believes
the Group will add the most substantial value
in the future. The trend toward shopping online
has been apparent for years. The pandemic
has combined this with a period of time where
people have been more frequently at home,
looking for safer and more convenient ways
to buy the things they want. In the US many
customers simply did not know that they could
order wine online to be delivered to their door
until COVID-19 motivated them to search for
other channels to purchase wine through. This
is evidence of consumer recognition that DtC
models offer genuinely better convenience
and value and it is within this segment that the
Company continues to thrive.
This step change has resulted in the Company’s
sales growing substantially this year. Naked
Wines has delivered very strong revenue
growth from new and existing customers this
year across its three markets and particularly in
the US. Management and the Board have seen
little evidence of the trend reversing.
42
Looking ahead, the Board is of the view that
the Company is ideally positioned to continue
to grow in the US with favourable market
conditions, positive customer retention and
order patterns, ongoing heightened consumer
awareness and the benefits of scale enhancing
our business economics. This supports
the Company’s decisions to open further
customer acquisition channels and scale its
existing channels as marketing effectiveness
is enhanced by an expanded addressable
consumer base willing to buy online.
Given this outlook the Board believes there
remains substantial growth headroom
whilst maintaining strong investment returns.
Consequently, the Board took the decision to
continue to invest aggressively in growth and to
expand our share of the online market in all our
three markets.
COVID Relief Fund and other
initiatives to support our
communities
During the reporting period, the Company took
a number of steps to serve our communities
and support the wine industry throughout the
COVID-19 pandemic.
In the summer of 2020, as demand from
on-premises retailers collapsed for quality
independent winemakers, we launched a $5
million COVID Relief Fund aimed at assisting
impacted winemakers and growers. This
resulted in Naked Wines sourcing 105 new
wines from 36 new winemakers, a number of
which have now become permanent in the
range following high customer ratings.
We have also supported other communities
that have been affected by the pandemic. In
the UK, we donated £115,000 to meals for the
NHS, and 715 cases of wine to NHS workers.
In the US, our “Cellar Cru” red blend project
raised $127,000 for the Kenwood Volunteer
Firefighters’ Association and our collaboration
with star winemaker Daryl Groom on DRG
“Wine with Heart” has raised a further £31,000
this year.
Living by our pledge to support diversity and
the underprivileged in the wine industry, we
have been acutely aware of the challenges
minorities face in entering the wine industry.
Alongside our sponsorship of the South African
winemaking scholarship, we have partnered
with The Roots Foundation to launch a full
winemaking scholarship to University of
California Davis and have recently launched
a mentor programme to support new minority
winemaking talent in the US.
Other initiatives that we have undertaken to
support our communities during this difficult
year have been:
G Fed over 1,000 key workers and in need
locals in partnership with local restaurants
in California
G Recognised hundreds of key workers as part
of our Nominate a Hero campaign
G Worked with our winemakers in Australia
and the US to manufacture hand sanitiser
for those in need
Capital allocation and excess capital
The Company publicly re-stated its capital
allocation policy in November 2020 in
connection with the release of its half-year
results, where we indicated that we continue to
believe that the Company will create the most
value for our shareholders by investing in high
return growth opportunities. This approach has
served us well, providing us with the confidence
to scale up during the course of 2021.
At this point in time, with such a high degree
of growth opportunity and with the continued
global macroeconomic uncertainty, we see our
balance sheet as a strategic asset, allowing
us to be focused on realising the growth
opportunities present in a time of disruption.
Consequently, the Company is not planning
any distributions or returns to shareholders at
this time. We will, however, remain committed
to returning surplus cash to our shareholders
in the most efficient way, should the
circumstances arise in the future.
Investor relations
The Company continues to outsource the
investor relations function and is supported by
Equitory with respect to this activity. Equitory is
an investor relations management company
supporting small to medium cap companies.
The decision to outsource the investor relations
function was taken in October 2018 as the
Group felt a third party provider would be
better suited to deliver a better service to our
capital markets stakeholders. In addition to
having the services of Equitory to draw on, the
Board and Committees Chairmen, the CEO, the
CFO and Company Secretary are all engaged
in day-to-day investor relations management
and engagements as and when necessary.
Shareholders and institutional investors
Who engaged
How we engaged
Outcomes
G The outcome of the voting at the 2020 AGM is set out at
the bottom of this section
G At the AGM in 2020 the Company sought shareholder
approval on the adoption of a new set of Articles of
Association, which was overwhelmingly supported by
the shareholders
G All other resolutions, including the special resolution on
the disapplication of pre-emption rights, were approved
As a result of these consultations:
G The Board continued to have fruitful discussions on
capital allocation in light of feedback received from
institutional investors
G The Company successfully recruited Darryl Rawlings as
a new Non-Executive Director in April 2021. Darryl will
take over the Chairmanship role at the end of the AGM
in August this year
Board
CEO
CFO
Company
Secretary
Board
Chairman
CEO
CFO
Annual General Meeting (AGM)
Remains the primary method of engagement with our
private shareholders, through both the distribution of the
Annual Report and attendance at the meeting.
Although we could not hold a physical AGM last year due to
government-imposed restrictions on travel, shareholders
were given an opportunity to put questions to the Directors
in advance of the meeting. We are hoping to re-engage
with our shareholders face-to-face and look forward to
welcoming them at the AGM in August this year.
Institutional investors engagement
G We engage regularly with our institutional investors and
seek their views on matters relating to remuneration,
capital allocation and compliance with best practice on
corporate governance
G During the year, the interim Chairman worked closely
with institutional investors on the recruitment of a new
Chairman
G The Chairman, CEO and CFO also engaged through
institutional shareholder letters and a number of investor
conversations
G The CEO and the CFO made presentations to the
institutional shareholders and analysts following the
release of both the year end and half year results
G Due to the government-imposed restrictions on travel,
we had to carry out virtual roadshows this year. We look
forward to resuming physical roadshows once travel
restrictions are lifted
Chairman
Senior Independent
Director
Remuneration
Committee Chair
G During the year, shareholders were able to engage
directly with the Chairman, the SID and the Remuneration
Committee Chair
G The SID wrote to the top 10 shareholders to introduce
himself in the new role and to establish a direct line
of communications where the shareholders felt it
necessary to approach him directly
43
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Stakeholder engagement
continued
Employees
Suppliers
Who engaged
How we engaged
Outcomes
Who engaged
How we engaged
Outcomes
CEO
CFO
MDs of subsidiaries
We continue to consider our employees as one of our most
important stakeholder groups and are engaged with them
on a daily basis. This engagement takes place through:
G Sharing of information relating to the business through
regular communications (e.g. mid and year end results etc)
G Company updates
G Giving employees a say each year in the selection of our
sponsored charities
G Annual employee engagement surveys
G Consultation with specific groups or individual to ensure
that their views are be taken into account in making
decisions about matters that affect them
G Participation in the Company’s share scheme
G Disclosure of gender pay gap and pay comparison
Even as all of our staff have worked from home for the
vast majority of the year, we have continued our regular
engagement initiatives remotely in 2021.
G The communications have enabled employees to have
a common awareness of the financial and economic
factors affecting performance of the Company
G The employee Company updates have enabled senior
management to discuss with staff, in an open forum,
the status of the Company and receive direct input and
suggestions from employees
G Share scheme participation has aligned interests of
shareholders and staff and allowed staff to hold a stake
in the business
G Extended eligibility of annual Share Incentive Plan (SIP)
awards to all staff
G We have created a Global Services working group to
allow staff who work across all three markets to be
directly engaged
G Equipped staff with kit to sustainably and successfully
work remotely creating more flexible future work
pattern options
G Moved people reward and praise framework to a
remote model
G Feedback from the engagement survey has allowed
staff to provide direct input into the employee benefit
structure and work environment. Management has
responded to this input by:
– Building a flexible working environment around the
needs of work and personal pressures of working
from home
– Providing salary benchmarking and policy
transparency in the UK
– Offering continued training to employees
44
CEO
CFO
MDs of subsidiaries
Supply chain teams
G Our business model continues to seek out and support the
world’s best independent winemakers. We support and
invest in winemakers through advance commitment and
funding of purchasing of wine
G We follow best practice to make sure we are looking after
our suppliers
G Our Responsible Supplier Policy encourages our supplier
network to conduct their business in line with the same
principles embraced by Naked Wines
G During an exceptionally challenging period, our
platform has supported over 235 independent
winemakers
G Developed multi-functional team to plan, monitor
and manage potential disruption in the supply chain
post-Brexit
G Leveraged strong relationships and active dialogue with
winemakers and the Wine Standard Board
G Engaged additional shippers to diversify risk post-Brexit
and in light of COVID-19
G Suppliers are required to adhere to relevant Group
policies and to comply with our Responsible Supplier
Policy and Anti-Modern Slavery questionnaire
G We continue to have a zero-tolerance attitude towards
modern slavery in our supply chain and continue to
work and engage with our suppliers to address this risk
G We have reviewed and updated the terms upon which
we contract with winemakers in the UK
G Material contracts are subject to internal controls and
rigorous cost management governance and a summary
of key terms is provided to the Board for approval
Customers
Who engaged
How we engaged
Outcomes
CEO
MDs of subsidiaries
G The Naked Wines business model effectively makes our
customers our partners, with a mutual investment in
winemakers
G Our tasting tours give Angels access to the world’s best
independent winemakers
G Our websites enable our customers to give us and our
winemakers feedback directly
G We implement ongoing enhancements to customer
helplines with dedicated Customer Happiness teams
for each business
G Alignment of interests in producing best-quality wine
at the best price
G Held a number of virtual wine tastings to allow
customers to get a better understanding of our products
and have an opportunity to meet and engage with the
winemakers
G By knowing who made their wine and that they played
a part in making it, we give customers a closer sense of
connection with their wine
G Started offering six-pack boxes of wine in some of our
markets
G Better use of customer data to drive wine
recommendations to our Angels (feedback leading to
update of product range)
G Worked with research partners to test our brand
positioning to make sure that we engage with our
customers in the most meaningful and engaging ways
G Our Customer Happiness Teams across the Group
achieved overall 91% 5* service feedback
G Assist customers with any requests or questions relating
to the way we control and process their personal data
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continued
Risk management and control environment
Principal risks and uncertainties
Regulators and government
Who engaged
How we engaged
Outcomes
Company Secretary
CFO
Group FD
Head of Assurance
G Continued our preparations for Brexit and ongoing
consideration after the end of the transition period on
1 January 2021
G Legal and regulatory landscape is risk assessed as part
of our risk management framework
G Ongoing engagement with regulators through
correspondence or meetings to discuss various key issues
pertaining to the business
G Ensure that our Group tax policy is reviewed annually
and published on our website
G The Company keeps up to date with and seeks ways to
maintain strict compliance with state legislation relating
to distribution and sale of alcohol in the US
G Since our business is in the US, the UK and Australia, the
impact of Brexit on the Group has been modest. The
UK team continues to monitor regulatory changes to
ensure the most efficient compliance with new laws and
regulation
G Appropriate regulation is considered in all Board
decision-making
G Adapting to regulatory and best policy changes during
2020 and beyond
G Joined the Wine and Spirit Trade Association (WSTA)
in the UK for further Brexit insight and to support
government campaigning
G Reviewed and updated our tax policy as part of the
Group’s risk management process
Community and environment
Who engaged
How we engaged
Outcomes
Board
CEO
Sustainability teams
G Established a sustainability focus group and project teams
G Ongoing commitment to wider community regarding
responsible drinking and marketing of alcohol
G Ongoing commitment to wider community regarding
ethical behaviour/responsible corporate citizenship
G Various sustainability initiatives that look at impacting
the community and to changing how an entire industry
works
G Compliance around sale and marketing of alcohol
G Reviewed, updated and published our Modern Slavery
Statement
G Rollout of Group’s Code of Conduct on annual basis
G Published Gender Pay Gap Report
Outcome of voting at AGM 2020
No
Type
Nature
1
2
3
4
5
6
7
8
9
Ordinary
Receipt of the Strategic report, Directors’ report, Auditor’s report and financial statements of the Company
Ordinary
Re-election of retiring Director – Justin Apthorp
Ordinary
Re-election of retiring Director – David Stead
Ordinary
Re-election of retiring Director – Katrina Cliffe
Ordinary
Appointment of auditor
Ordinary
Authorisation to Board to fix auditor’s remuneration
Ordinary
Directors’ authority to allot securities
Special
Special
Disapplication of pre-emptive rights
Amend Articles of Association of the Company
10
Ordinary
Remuneration report (advisory)
46
% in favour
100.00
92.67
99.99
99.99
99.99
99.99
81.98
79.98
83.00
90.79
Risk
The Board reviews the effectiveness of the risk
management processes and manages the
evolving risk environment as it approves key
decisions, budgets and operating plans. The
key elements of our risk management control
system and processes are as follows:
G The management team of each business
segment has responsibility for its own local
risk register and reviews it periodically
G The risks identified by the business segments
are assigned a mitigation strategy, a local
risk owner and mitigation actions
G The most material risks are presented to
the Board or Audit Committee during the
year and progress updates of the local
risk registers are provided to the Audit
Committee on a regular basis
G An assessment and aggregation of the risks
identified by the business segments is carried
out once a year by the Group General
Counsel for the purpose of identifying the
most significant Group risks
G The Board determines the principal risk items
for the Group following a recommendation
by the Audit Committee once a year
G Responsibility to maintain the risk registers,
as well as to implement and monitor
mitigating actions, lies with the Executive
Directors and the local management teams
The Board is satisfied that, through the
processes set out above, it is able to effectively
identify, assess and manage the risks. The
Board relies on the assurances provided
through the periodic reports presented to
the Board and Audit Committee and, in this
instance, acts as the third line of defence, with
the management team as the second line, and
the risk control owners as the first.
Characterisation of key risks
The Board considers both strategic and
operational risks and for each risk considers
the likelihood of its occurrence and the scale of
adverse impact it could have on the business.
Using the process set out above, the Board
believes that it has undertaken a robust
assessment of the principal risks which threaten
the implementation of the strategy and the
long-term viability of the Group and is satisfied
that appropriate mitigation plans are in place.
Strategic risks are those which could threaten
the long-term success of the business model
and will typically unfold over an extended
period of time. Strategic risks are reviewed
periodically by the Board as part of its ongoing
development process.
Risk impact assessment
When considering the potential impact of
our key risks, we have linked them to the
key performance objectives that they are
likely to impact if crystallised. We have not
undertaken specific stress testing for every
risk but, as part of our overall impact analysis,
as well as our going concern assessment,
we have considered the likely magnitude of
the realisation of major risks on the balance
sheet and cash flow forecasts. These forecasts
are based on detailed budgeting which is
prepared for the next fiscal year with revisions
done mid-year, together with a forward view
of the subsequent 24 months (forecasts for
36 months). Based on its assessments, the
Board believes that the Group is well placed
to withstand the impact of realisation of
reasonably foreseeable risks over the forecast
period through a combination of the mitigation
in place, the strong balance sheet we closed
FY21 with and our ability to make adjustments
to our plans, should they be required.
The strategic risks which the Board deems
most significant are:
1. Changes in customer behaviour
2. Customer acquisition cost
3. Competition
4. Regulatory framework
Operational risks arise from the possible
occurrence of specific events. They will typically
have an impact on the business and its
performance which is either immediate or will
play out over a relatively short period of time.
Operational risks may arise from external or
internal causes.
The mitigation for externally driven operational
risks is normally in the form of a contingency
plan, and insurance cover is also taken out to
protect against such risks where appropriate.
The operational risks due to external causes
which the Board deems most significant are:
5. Cyber security attack
6. Financial
7. Business interruption
Management seeks to put in place active
mitigation for internally driven operational
risks, balancing cost and risk as appropriate.
The operational risks due to internal causes
which the Board considers most significant are:
8. Ineffective management of inventory
9. Failure of a key IT system
10. Dilution of business culture
11. Failure to comply with regulation,
including tax
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continued
COVID-19, Brexit, climate change and
sustainability
One of the consequences of the COVID-19
pandemic has been the rapid acceleration
of demand online in the wine category (most
notably in the US market). Whilst COVID-19
has had a significant impact on the way
in which the businesses in the Group have
operated in the last year, it has represented
a step change in scale for our DtC model
and reshaped our addressable market,
particularly in the US.
Similarly, the Group has not been materially
impacted by Brexit due to its preparations
during the year, the implementation of the
free trade agreement between the UK and
the European Union and the fact that the
Group does not have trading operations in
the European Union.
1. Business interruption, mitigated through
having multiple sites for key activities; and
The Board recognises that climate change
creates potential risk for the Group. Indeed,
within this financial year wine producers in
the US and Australia have had to contend
with difficult fire seasons.
The Board has considered climate change
as part of the Group’s risk management
process. However, the Board is of the view
that the risk of climate change is embedded
within the key risks listed in this report and, as
such, has decided not to list climate change
as a standalone risk. In particular, the Board
recognises that we are exposed to climate
change risks in at least two of the areas listed:
2. Supply risks, mitigated by having a diverse
and geographically dispersed sourcing and
supply chain network.
We are also mindful that the consumer is
becoming increasingly passionate about
buying from companies that strive to operate
sustainably whether with regard to climate
impact or other sustainability initiatives. We
are committed to growing our business in a
sustainable way and continue to seek ways
to quantify and reduce our environmental
impact. Please refer to our sustainability
report for details of our initiatives in this area.
Approach to managing risk
Our approach to managing risks consists of:
Top down – Key risks that threaten
the Strategic Plan or could have an
operational impact
Bottom up – Territory-level key risks
Check that they are broadly consistent
Identify key risks across the whole
Group = Global risks
Since 2019, we have used the residual risk
rating after the application of relevant
controls and mitigating actions.
The risks listed on the following pages are
the principal strategic and operational
risks identified by the Board this year.
While they are not the only ones facing our
business, they are the most significant when
considering both the likelihood of the risk
materialising as well as the overall impact
on the business, after taking into account
the mitigating effect of the implemented
controls.
Risk impact
Risk impact measures the impact the
materialisation of the risk would have on
the business and is primarily measured in
financial consequences as follows:
Control effectiveness
The inherent risk is then mitigated through
the application of controls which are rated
according to the effectiveness thereof as
follows:
3
Very high
> £2m
3 Controls in place, tested and operative
2 Moderate Between £500k and £2m
1 Minimal
< £500k
2
1
Limited or untested controls
No/inoperative/untested controls
Risk likelihood
Risk likelihood measures the possibility/
probability of the risk materialising and is
rated as follows:
Residual risk
The residual risk (e.g. the inherent risk
divided by the control effectiveness) is then
rated as follows:
3 High
2 Moderate
1
Remote
> 20%
5-20%
< 5%
1
3
6
2
4
7
5
8
Low risk
Medium risk
9 High risk
Inherent risk
The inherent risk (e.g. the risk impact
multiplied by the risk likelihood) is the level
of risk prior to the application of the controls
and mitigating actions.
1
3
6
2
4
7
5
8
Low risk
Medium risk
9 High risk
Strategic risk
Customer acquisition cost
Sustained increase in acquisition cost across
all channels, resulting in lower than expected
profitability
Performance objectives
G Revenue
G Investment in new customers
G Payback
Changes in customer
behaviour
leading to reduced appetite for wine
consumption
Performance objectives
G Relevant KPI revenue general and
administrative costs
G Product availability
Likely causes
– Over-dependency and reliance on
individual marketing partners
– Media providers assert greater power
– Weakening of the repeat customer metrics
Likely impact
– Higher acquisition costs decrease margins
and hence profitability
– Investment in customer acquisition fails to
drive sufficient additional new customer
growth
– Investment in customer acquisition could
potentially not produce the desired return
on investment and result in wasted cash and
excess stock
– Material changes in investment
performance can result in substantial stock
variances
Likely causes
– Channel shift to online purchases which
has been partly contributed by COVID-19
may not continue as a result of easing of
lockdown restrictions
– Macroeconomic event leading to increased
cost of wine
– World or regional event resulting in closure/
disruption to supply of goods and restrictions
on travel
– Trade barriers or tax tariffs increasing the
cost of wine
– Our assumptions prove to be wrong and the
trend to online reverses
Likely impact
– Uneconomic marketing decisions and
investments
– Increase in costs as a result of tariff changes,
– Liquidity impact, resulting in constrained
customs costs, transport delays etc
growth or damage to customer experience
– Reduced profitability impacting investor
Controls/mitigation
– Investments are constantly monitored and
capital redeployed if they are not producing
the target returns
– Detailed deal-level reporting, monthly
performance reviews
– Diversify the customer acquisition mix by
opening up new channels of investment
Risk impact
Risk likelihood
Inherent risk
3
2
6
Control
effectiveness
Residual risk
1
6
confidence and our ability to access finance
– Restricted business environment due to
uncertainty and reduced demand
– Bulk withdrawal of funds by Angels
– Disruption to supply chain
Controls/mitigation
– Scenario planning for supply chain changes
and development of mitigation strategies
with key partners including the rephasing
of inbound stock movements as a result of
changing market demand
– Ability to reduce marketing costs to match
customer demand with stock supply so
to continue to meet customer service
expectations
Risk impact
Risk likelihood
Inherent risk
3
2
6
Control
effectiveness
Residual risk
2
3
48
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Risk management and control environment
continued
Strategic risk
Regulatory framework
Non-compliance with core legal and regulatory
requirements relevant to the wine industry
Performance objectives
G Revenue
G Product availability
G Customer contribution
Likely causes
– Changes in licensing and tax regulations
– Increased scope of legislative and regulatory
provisions – data protection, advertising,
distribution, consumer law
– Mobile operating system privacy changes
have limited the effectiveness of online paid
media campaigns
– Potential increased governance oversight in
respect of alcohol consumption
– Age verification/signature requirements for
alcohol delivery
Likely impact
– Failure to comply with changes to the US
three-tier system of wine distribution results
in a diminished ability to trade in our biggest
growth market
– Reduced ability to operate efficiently
that could result in increased costs
– Impact on our ability to communicate with
customers limiting recruitment, retention
and engagement
– Restrict current business practices and
require considerable management time
resolving regulatory enquiries
– Reputational risk, fines/penalties and
increased compliance costs
Controls/mitigation
– We monitor regulatory developments
routinely in all our markets to ensure that we
identify potential changes, assess these and
take appropriate action
– We maintain current licences for all states,
businesses and premises operated by us
and procure advice from licensing experts to
assist with the maintenance thereof
– We endeavour to pay all taxes and duties
on time and in full in respect of all taxes and
licensing fees
– We maintain all appropriate documentation
as evidence of our compliance with licensing
conditions and regulations
– In the US our regulatory teams continue
to work closely with the winemaking and
planning teams to ensure our winery
operations and contracts are compliant with
the latest US regulations
– We have put in place the necessary
management and control functions to
ensure that we comply with data protection
legislation (e.g. General Data Protection
Regulation and California Consumer
Privacy Act)
– We maintain tight Service Level Agreements
with our carriers and be clear on our
expectations on areas such as legal
compliance for delivery of alcohol
– We are implementing with third-party
providers a technical solution to meet age
verification requirements
Risk impact
Risk likelihood
Inherent risk
3
1
3
Control
effectiveness
Residual risk
3
1
Competition
Threat from new or existing competitor
Performance objectives
G Revenue
G Customer contribution
G Investment in new customers
G Repeat customer sales retention
Likely causes
– Threats range from the discounters, where
wine can be used as a loss leader, to a
range of more tailored online retailers
and subscription offerings
– New entrant into the DtC wine market
with access to significant funding and the
patience to build a large market share
– Large players entering the market
challenging or threatening to disrupt our
growth
– Third party using the mark “Naked Wines”
or passing itself off copying the Group’s
brand look and feel
Likely impact
– Persistent aggressive competitive pressure
could impact on our ability to grow sales and
our customer base and/or our margin
– New entrant impacts on sales forecasts
resulting in stock overhang and constrained
liquidity
Controls/mitigation
– Our buying and marketing teams continually
monitor our competitors’ activity
– We are focused on delivering a unique
selling proposition which is more aligned
with consumer tastes than our competitors,
e.g. crowd funded winemakers making
wine exclusively for Naked Wines resulting in
better value for money, better service and
more engagement with the winemakers
– Trade barriers to entry, especially in the US
market where three-tier wine distribution
legislation requires a vertically integrated
operation in order to make DtC sales
– We have appropriate teams and advisors
in place to handle third-party use of our
intellectual property and will take steps to
oppose or prevent it
Risk impact
Risk likelihood
Inherent risk
3
2
6
Control
effectiveness
Residual risk
2
3
Operational risk (external)
Controls/mitigation
– Ongoing investment in back-end technology
systems and processes
– Dedicated systems security resources in
place to provide assurance across multiple
businesses in the Group
– Third-party Cloud-hosted systems used to
support maximum availability
– Continuing to formalize and improve our
disaster recovery plans so that the business
can recover from any interruptions with
minimal impact
Financial
Inability to collect the principal and interest
arising from vendor loan note issued as part
of the disposal of the Majestic Wine businesses
Performance objectives
G Cash
G Investment in new customers
Likely causes
– Failure to receive the ongoing interest and/or
principal of the 2024 vendor loan note issued
to the purchaser of the Majestic businesses
Likely impact
– Expected realisation of disposal of Majestic
– The main trading websites and network
Wine is less than expected
are protected by a firewall with frequently
updated anti-virus software
– We have an experienced and dedicated IT
team and use external consultants where
we need to, ensuring that we have a good
balance of skills and experience in the team
– We have doubled the limit of our Group’s
cyber security insurance cover from £5
million to £10 million
– Increased size of Cyber Security team
globally
Risk impact
Risk likelihood
Inherent risk
3
2
6
Control
effectiveness
Residual risk
2
3
Controls/mitigation
– We are regularly in contact and have
an open and ongoing dialogue with
the management of Majestic Wine
– The vendor loan note contains financial
covenant conditions and the VLN holder has
ongoing covenant confirmation reporting
obligations to Naked
Risk impact
Risk likelihood
Inherent risk
3
2
6
Control
effectiveness
Residual risk
2
3
Cyber security attack
Failure of IT systems to deal with a data
security/data breach occurrence
Performance objectives
G Revenue
G Customer contribution
G Product availability
G Repeat customer sales retention
G Investment in new customers
G IT systems, whether procured from third
parties or built internally, are tested for
security from attack. We also undertake
periodic penetration testing exercises to
provide ongoing assurance
Likely causes
– Systems become unfit for purpose as we
grow and complexity increases
– Failure to successfully upgrade or maintain
core IT systems
– Access to internet and malicious incidents
are prevalent and on the increase
– Poor systems access control
– Reliance on in-house developed systems
with risk of loss of intellectual capital if key
staff leave
– Reliance on, and exposure to, third-party
provider software and systems
– Disaster recovery systems and processes
not performing effectively
Likely impact
– Failure could lead to significant costs
and/or restrictions in our ability to operate
the business
– An unauthorised or malicious attack
could result in the loss of data and/or
customer confidence in the business,
impacting trading
– Downtime could affect our ability to
trade online, impacting business and
customer loyalty
– Loss of personal data/sensitive business
information could impact the business and
result in fines and reputational damage
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continued
Operational risk (external)
Operational risk (internal)
Controls/mitigation
– Develop clear guidelines and expectations
for how to handle situations related to
natural disasters and public safety power
shutdowns
– Diversifying mix of suppliers where there
is exclusive or material reliance on single
contractor
– Looking at implementing alternative
solutions aimed at tackling potential single
point of failure in our supply chain
– In the US, we have installed power
generators in office and winery to deal with
power outages
– We have Cloud-based VPN set up
– Grape contracts include a smoke taint clause
– Working with suppliers to spread production
over more than one facility
– All teams are able to work remotely
– Internal and third-party warehousing either
has multiple sites or is operated by a third
party with access to backup capacity
– We have procured inventory for additional
growth (above budgeted growth)
– Business interruption insurance cover
in place
Risk impact
Risk likelihood
Inherent risk
3
1
3
Control
effectiveness
Residual risk
3
1
Ineffective management
of inventory
Particularly relevant during a period of
significant growth
Performance objectives
G Revenue
G Product availability
G Customer contribution
G Repeat customer sales retention
G Liquidity
Likely causes
– Supplier capacity/production constraints
– Misalignment of demand and production
plans leading to inventory shortfall/
overhang
– Warehouse fails to deliver capacity or
innovation (e.g. automation) creating delays
and disruption
– Natural disasters or climate change result
in impact on affected regions constraining
wine production and supply in line with
forecast demand
Likely impact
– If a supplier’s business fails or is impacted
by supplier-related risks (e.g. climate
change, natural disasters), our ability to
meet customer product expectations and/or
operate with our current cost structure could
be impacted
– Long-term commitments to inventory
could result in a prolonged over or under
stocked position, particularly in the US which
has to give long-term stock purchasing
commitments and has a long production
lead time.
Business interruption
Loss of site/interruptions to head office or site
operations due to an unforeseen event
Performance objectives
G Revenue
G Repeat customer sales retention
G Payback
G Customer contribution
G Investment in new customers
Likely causes
– Unforeseen event (e.g. natural disasters –
extreme weather, flooding, fire, including as
a result of climate change etc) affecting the
Group’s sites or operations
– Material contractual non-performance or
breach by one of our key suppliers
– Unexpected and sudden withdrawal
from the market of main partner in our
supply chain
– Failed crops in wine-producing regions
– Systems infrastructure failure and power
outages
– Protracted lockdown restrictions preventing
staff to return to working in an office
environment
Likely impact
– Ongoing performance of our operations
– Negative impact on the Group’s profitability
or liquidity
– Reduced customer demand
– Fire damage/smoke taint impacts yearly
production
– Prolonged remote working results in
operating inefficiencies
– In the US, we are reliant on a single national
warehouse, disruption to which may
impact on the ability of the business to fulfil
customer demand
– In the UK, we are reliant on a single
warehouse and carrier
– Reputational damage
– Angels lose confidence in the business
Controls/mitigation
– Large investment in backend systems and
processes is under way
– Critical systems are backed up regularly,
hosted on third-party data centres with
appropriate backup/redundancy
– Disaster recovery systems are tested
regularly
– We have an experienced and dedicated IT
team, and use external consultants where
we need to
Risk impact
Risk likelihood
Inherent risk
3
2
6
Control
effectiveness
Residual risk
2
3
Controls/mitigation
– Wine supply
– Embed tighter governance with
winemakers and suppliers to ensure on
time and in full deliveries
– Ensure diversification of wine across
countries and winemakers
– Encourage winemakers to embed strong
grower–winery relationships
– Increase finished good stock forward
cover target from 2–3 to 3–4 months
– Increase inventory planning resource to
enable greater nimbleness on volume
planning and phasing
– Retain flexibility with winemakers and
suppliers to re-phase incoming stock and
work in progress inventory
– Warehouse automation:
– Develop in-house datasets to improve
operating efficiency and effectiveness
– Commit dedicated internal resource to
lead warehouse automation improvement
project
– Invest in best-in-class inventory
management system and examine
opportunities to improve demand
planning tools
Risk impact
Risk likelihood
Inherent risk
3
2
6
Control
effectiveness
Residual risk
2
3
Operational risk (internal)
Failure of a key technology
system
Including ineffective processes, global
functionality and/or performance
Performance objectives
G Revenue
G Sales to new customers
G Repeat customer sales retention
G Customer contribution
G Cash
Likely causes
– Systems become unfit for purpose as we
grow and complexity increases
– Reliance on in-house developed systems
with risk of loss of intellectual capital if key
staff leave
– Reliance on, and exposure to, insufficiently
robust third-party provider software and
systems
– Failure to successfully upgrade or replace
core technology systems
– Disaster recovery systems not performing
effectively
– Staff no longer have the required skillset as
the business grows in size and complexity
– Loss of data or breach caused by technical
or human error leading to breach of data
protection laws
Likely impact
– As a pure online wine retailer, we are heavily
reliant on our core technology systems
– Downtime could affect ability to trade online
impacting business and customer loyalty
– Loss of personal data/sensitive business
information could result in fines and
reputational damage
– Loss of shareholder/investor confidence
impacting on the value of the business
– Loss of customer confidence and resultant
loss of New Customer acquisition and decline
in repeat customer retention (including a
material outflow of Angel funds)
– Threat to our standing as an authentic
producer of high-quality wine
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continued
Operational risk (internal)
Dilution of business culture
Performance objectives
G Revenue
G Investment in new customers
G Repeat customer retention
Likely causes
– Considerable growth in new staff
recruitment as a result of the continued
growth of the business
– Ongoing remote working reduces the
collegiate bond between staff
– Increased staff turnover due to continuous
rapid changes in the business
Likely impact
– Slowing sales and profitability as a result
of reduced customer appeal due to the
loss of the Naked culture within customer
engagement
– Increased operational friction resulting in
slower business operation and change
– Breakdown of systems, processes or controls
following staff turnover
– Turnover of key staff could lead to continued
change in processes and strategy leading to
poor execution
Controls/mitigation
– Business culture is actively maintained and
embedded in the way Naked Wines behaves
as a company
– Emphasis of the Naked culture acts as a
natural attractor of likeminded new talent
– We pay market-competitive remuneration
and where possible maintain backup within
each functional team
– We have a business that focuses on staff
welfare and culture
– Regular staff satisfaction surveys which
are reported back to staff and which
are acted on
– We offer all staff the opportunity to
participate in share scheme compensation
to align staff motivations and encourage
staff retention
– Emphasis on staff support during the
COVID-19 pandemic, as a result of which
no member of staff has been furloughed
because of COVID-19
Regulatory compliance
Legal, regulatory and tax compliance,
especially in the complex US market
Performance objectives
G Revenue
G Customer contribution and investment
in new customers
G Payback
Likely causes
– Risk of change in legal and tax rules,
especially in the US
– Increased compliance focus of fiscal
authorities in all our markets in the face of
post-COVID government deficits
– Existing third-party software may not be
able to meet our compliance/tax needs as
we continue to grow
– Failure to comply with new post-Brexit tax
and duty regulations
– Increased focus of state and local fiscal
authorities in the US as we become a bigger
and more visible business
– Large-scale data protection breach
Likely impact
– Potential fines
– Not being able to respond to tax audits in a
timely and adequate manner
– Not being able to pay taxes when due might
lead to fines
– Cash flow
– Reputational damage
Controls/mitigation
– In-house legal resources in our key markets
to ensure sufficient capability to meet
ongoing regulatory burden
– Recruited a dedicated senior global and US
tax resource
– We work with outside legal, accounting and
tax experts to navigate and best respond to
inquiries and regulatory developments
– We continue to invest in third-party software
and systems where this will benefit our
regulatory and tax reporting requirements
– It is the Group’s policy not to engage in
aggressive or seemingly aggressive tax
planning strategies
– Annual review of the Group’s tax strategy by
the Audit Committee
Risk impact
Risk likelihood
Inherent risk
2
2
4
Control
effectiveness
Residual risk
2
2
Risk impact
Risk likelihood
Inherent risk
3
1
3
Control
effectiveness
Residual risk
2
1.5
The main elements of the control function
include:
G The Board’s approval of the overall
strategy taking into account the purpose
and objectives of the business, interests of
shareholders, the direction of the business
and the risk register
G The Board’s approval of the supporting
budgets and plans. There is a robust
budgeting and planning process in support
of the approved strategy. The approved
plans and budgets are monitored and
reported monthly with variance reports,
comparisons against previous years and
including forecasts of expected performance
over the remainder of the financial period.
Budgets are adjusted mid-year with a
forward-looking position taken with regards
to the following 24 months
G The Audit Committee’s review of the financial
and accounting policies and controls,
including the work of the internal assurance
function and overall compliance with internal
policies, processes and legislation
G The Board’s consideration and approval
of key policies and dividend policy, among
others
G The Company’s system of assessment, which
is applied to all investment opportunities,
includes defined financial hurdles and
controls which any opportunity must meet.
This system is managed directly by the CEO
and the CFO
G Ongoing post-investment reviews take place
to check the delivery of anticipated returns
on investments
Internal controls
The Group has an effective governance
framework which includes a system of both
financial and non-financial controls, which
are regularly reviewed and monitored by the
Board, the Audit Committee and management.
While it cannot provide absolute assurances
against material misstatement or loss, the
Board has ultimate responsibility for the
Group’s system of controls.
The governance framework, including internal
controls and processes, are summarised
below. The Board has considered the internal
controls and considers them to be appropriate
given the size, complexity and risk profile of the
Group.
A Head of Assurance was appointed during
FY21. Activities undertaken during this time
include the development of a detailed risk
and control framework and development of
associated new internal controls. Identified
deficiencies in internal controls are presented
to the Audit Committee and flagged as
pending until satisfactorily resolved.
Annual reviews of each business segment
are undertaken to ensure that a minimum
standard of control is applied across the
Group. Any significant breaches of controls are
investigated and corrective actions identified
and implemented. To further strengthen
our legal and fiscal compliance controls,
a dedicated resource is located in the US
allowing local management and compliance
with regulations and alcohol licensing.
The Group General Counsel overseas the
regulatory control environment for the UK and
the Group as a whole.
In addition to the required regulatory
statements, during the reporting period we
have also drafted or reviewed the following
policies and documents:
G Statement of Authority
G Share Dealing
G Compliance Checklist
G Standard contractual terms and conditions
G Standard Non-Disclosure Agreement
G Privacy
G Risk Management
G Non-Audit Services
G Tax Strategy
G Fraud Checklist
G Treasury Policy
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Our approach to a more
sustainable future
Introduction
We started the year with a deeper
understanding of how to make a
material difference in the twenty
two areas of impact that we
have identified as part of our
sustainability programme.
1
Responsible
drinking
2
Deal with
our waste
5
Ethics and
transparency
4
Treating our
people right
3
Supply chain
management
Level 3 initiatives
Tax strategy
Giving back
1
5
2 3
Responsible sourcing
5
4
Modern slavery
Climate change risks
Benefits
Water
Level 4 initiatives
Training
Rights of local communities
1 4
4 5
2
2
4 5
5
5
3 4
5
5
3
3 4
2
5
2 3
4
3
Level 1 initiatives
Responsible drinking
Ethical behaviour
Sustainable winemaking
Responsible marketing
People
Level 2 initiatives
Health and safety
Diversity and equality
Recycling
Energy consumption
Remuneration
Privacy
Transparency and reporting
Human and worker protection
56
We recognise that we have four principal
stakeholder groups who both support and are
driving us to accelerate and expand our work
on environmental sustainability:
Our staff
As a value-driven business,
environmental responsibility is a
key issue for many of our staff.
Investors
As an AIM listed company, we are
conscious of the increasing scrutiny
by the investment community of
ESG performance, particularly from
institutional investors.
Customers
Given the nature of our product and our
customer profile, climate change and
protection of the environment are a key
concern of many of our customers; and
Suppliers
We try to work with suppliers that share
our goals and aspirations in terms of
sustainable objectives
Adopting and building on the practices we laid
out in last year’s report, and firmly embedding
them into the culture of the re-sized Group, has
allowed us to focus our efforts on previously
under-invested areas of sustainability.
During the year, we have engaged 3Keel as
consultants to help assess a more operational
strategy to tackle issues like climate change
and packaging. 3Keel conducted research
and engaged colleagues from all three
markets, although the project was primarily
run out of the UK. This support provided us
with guidance on priority issues to address
and, more importantly, gave us the confidence
to make material progress in areas we
have more control over and could turn
into immediate actions. We have recently
recruited a Sustainability Lead to support the
implementation of our initiatives and execute
the plan.
The results and proposals have led us to focus
on three key areas:
Optimising bottle weights
Reviewing and reducing our average bottle
weights will provide direct material savings
and reduction in logistics emissions.
Committing on climate
We are looking to play an important role in
supporting climate action with science-based
targets set to mobilise and focus the business.
Embarking on sustainability with our
winemakers
Any meaningful approach to sustainability
must explore how improvements can be
identified and adopted by winemakers
and growers.
The initiatives that we have undertaken and
prioritised during the year are summarised
in the following pages.
Level 1 initiatives
Sustainable winemaking
The result of the carbon footprint analysis
carried out last year showed us four key areas
that we can tackle to significantly reduce
greenhouse emissions (GHG). The numbers
below show the percentage impact that each
area can have on the GHG in our supply chain.
A
D
B
C
A. Cultivation
B. Winemaking
C. Glass bottles
D. Imports
28%
17%
24%
14%
We are committed to decarbonisation through
science-based targets, not just carbon
offsetting. Whilst our decarbonisation plan is
not fully formed, there are many signs that our
winemakers are keen to drive these changes.
For example, when we suggested that one
of our winemakers, David Tofterup, make a
carbon offset donation for the use of 1,800
heavier than average glass bottles which he
produced for our Fine Wine Club, his response
was to do it for the entire production of the
6,600 bottles of the wine (not just the bottles
we bought). Examples like these that tell us we
have the partnerships and influence to make
a difference to the way the wine sector tackles
sustainability challenges.
We are excited to engage our winemakers and
draw on their passion and experience in this
area. Here’s what Franck Massard has to say
about sustainability.
Growing sustainably
To support our winemakers and growers we
have outlined a structure where we aim to help
them grow sustainably.
Renewable
energy
Biodiversity in
the vineyard
Sustainably
Naked
Building climate
resilience
Adopting
best practice
standards
Demonstrably
low carbon
Innovating
on waste
I’ve been making wines for so
many years, which has brought
me closer to nature. I try to eat
and drink as organically as
possible so in the next two years
I’m aiming for all of my wines
to be organic. It’s not just about
organic wines, I try to encourage
biodiversity in the vineyard. In my
vineyard in the Priorat, we’ve built
ponds for the amphibians and
we’ve planted over 20 different
types of plants, many of which
are aromatic plants which can
pollinate, so they are great for the
bees and many other insects.
Franck Massard
Winemaker
People
Never has there been a year where the
goodwill and Naked spirit has been called
upon to the extent it was. When it became
clear that COVID-19 was leading to national
lockdowns, we took rapid action to get
everyone across the global business working
from home, where possible. Our principal
priority was to protect our colleagues and
partners and put their safety at the centre
of everything.
One of the ways we did this was to apply
suppression methods to manage the increased
demand from new customers and ensure that
we could continue to safely ship, pick, pack and
deliver customers’ favourite wines. This was
particularly relevant in the UK and US due to the
warehouse demands (moving to a larger UK
warehouse in the summer eased the pressure).
We adapted well and took the opportunity
to introduce a personalised workplace
fitting to measure how people felt about the
quality of their work station and environment.
Engagement was high (81%) and this led
to a further investment in home-working
equipment, laptops for all employees and the
creation of a working group to explore the
future ways of working that would best suit the
team in the coming months and years.
In spite of COVID-19, our employee
engagement scores and retention have
maintained the high levels we have come to
expect. We are delighted that both are higher
than they have been in recent years, with a
global staff retention of 86% and that we’ve
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Sustainability
continued
had the opportunity to continue to grow the
team, helping talented people whose careers
have been adversely affected by the economic
consequences of COVID-19.
In the UK, we remain committed to paying the
real living wage as an accredited company.
Colleagues at the lower end of the pay scale
are given a clear pathway to progressing skills
and reaching a destination salary significantly
above the real living wage. In California, where
the minimum wage is $13/hour, starting pay
for entry-level roles is $17.50/hour. In Sydney,
where the minimum wage is A$19.84, our
entry-level roles start at A$23.
Gender pay gap
With growth in our Technology team, we have
the opportunity to bring more women into
technology roles and we are pleased to say
that we have doubled the number of women
in these roles in the last 12 months and will
continue progress in this area with the aim of
reducing the gender pay gap.
Ethical behaviour
We are committed to strong, ethical and fair
business dealings, and promote a corporate
culture which is non-sectarian, non-political
and which is socially and environmentally
responsible. Doing the right thing guides
everything we do at Naked Wines. Our Code
of Conduct highlights the importance for us
of behaving morally, legally and ethically and
serves as a guide to the values.
The Code of Conduct incorporates policies
on confidentiality, conflicts of interest, price-
sensitive information and share dealing, use
58
of company funds and resources, bribery,
corruption and fraud, political activities,
modern slavery and human trafficking,
and whistleblowing.
The Code of Conduct is shared with and
applies to all employees of the business. In
addition, a number of employees must certify
each year that they understand and adhere
to the Code of Conduct.
Responsible drinking
We try to ensure that our products are
enjoyed responsibly – not because we
are told to, but because we recognise that
alcohol abuse continues to be a challenge
for societies across the globe and we want to
make a difference.
To give customers even greater control over
the digital advertising of alcohol they are
shown, we have added information to our
website FAQs which helps them switch off
adverts through social media platforms.
Colleagues who attend the alcohol
awareness induction training have recently
provided feedback suggesting improvements
to the information we share on the website.
This will include more sign-posting for
those looking specifically for support with
problematic drinking.
In addition to educating and supporting our
customers, winemakers and employees,
we have strong links with national
wellbeing services and have a number of
employees with experience in the field of
drug and alcohol abuse working in people
management roles. Our charitable donations
(funds and time) also help vulnerable groups
in this area.
We continue to support The Drinks Trust,
formerly The Benevolent, a drinks industry
charity that exists to support members of the
UK drinks industry facing a variety of difficult
circumstances including serious illness,
disability, debt or family crisis.
Level 2 initiatives
Diversity and equality
One of our key objectives has been to look for
sustainable ways for Naked Wines to support an
inclusivity agenda. As such, our intent is that all
of our diversity and equality initiatives must be
ongoing and sustained; we want to make them a
first step in supporting lasting change.
We are conscious that as a company we currently
do not have the most diverse leadership team and
as such we feel that it would be valuable to have
a specialist partner support us in improving the
current situation. Having reviewed a number of
options, we have engaged Exponential to assist us
in the organisation’s current workplace diversity,
equity, inclusion and anti-racism practices. The
outcome of this assessment will lead to a full
recommendation plan, which will allow us to
develop and implement an Equality, Diversity and
Inclusion programme. We expect this will include:
G Training for People/HR, managers, US/UK/AUS
leadership teams and the Global leadership
team
G Consulting on recruitment and hiring
procedures
G Guidance and assistance implementing
communications and marketing strategy to
customers and our supply chain
G Creating an Employee Culture and Diversity
Team to:
– Sponsor and complement any external
consultant recommendations
– Guide, contribute to and promote
organisational “buy-in” and participation
in the EDI and anti-racism plan
We have embarked on a number of other
initiatives to support diversity within the wine
industry, which are detailed below.
Scan me
to find out
more online
Scholarship for students in South Africa
We have extended our scholarships for
underprivileged winemaking students in
Stellenbosch, South Africa. We will be funding
two students per year through the Naked
Wines Bursary, which we started in 2018 to
mark Naked Wines UK’s 10th birthday.
Partnership with the Roots Fund
We have signed a partnership with the Roots
Fund (therootsfund.org) to launch a new fully
paid scholarship for a winemaking degree at
the prestigious UC Davis in California.
Scan me
to find out
more online
Women in Leadership – US social media
campaign
In March 2021, to celebrate Women’s History
Month, we took part in “Women in Wine:
The Female Future” with Naked winemakers
leading the way. Moderated by Wine Business
Monthly’s Erin Kirshenmann, six of the world’s
leading independent winemakers discussed
their biggest goals for the future and hopes for
women entering the industry.
Scan me
to find out
more online
Carmen’s Kids
Carmen’s Kids is an initiative founded by South
African winemaker Carmen Stevens, which
we have supported since 2016. Over the past
five years, Angels have donated £1,593,158 to
feed regular nutritious meals to 65,291 hungry
children in South Africa.
We will be continuing our work in partnership
with Carmen Stevens in South Africa to support
underprivileged kids in the Western Cape (and
are looking at ways to amplify our fundraising
efforts this year).
65,291
nutritious meals for hungry
children in South Africa
£1,593,158
donated by Naked Angels over
the past five years
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Energy consumption
Streamlined Energy and Carbon
Reporting (SECR)
Under the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018, we are
mandated to disclose our UK energy use and
associated greenhouse gas (“GHG”) emissions.
Specifically, we are required to report those
GHG emissions relating to natural gas,
electricity and transport fuel, as well as an
intensity ratio, under the SECR Regulations.
Energy and Greenhouse Gas Report
We have appointed Carbon Footprint Ltd, a
leading carbon and energy management
company, to independently assess our
GHG emissions in accordance with the UK
Government’s ‘Environmental Reporting
Guidelines: Including Streamlined Energy and
Carbon Reporting Guidance’.
The GHG emissions have been assessed
following the ISO 14064-1:2018 standard and
using the 2020 emission conversion factors
published by Department for Environment,
Food and Rural Affairs (Defra) and the
Department for Business, Energy & Industrial
Strategy (BEIS). The assessment follows the
location-based approach for assessing
Scope 2 emissions from electricity usage. The
operational control approach has been used.
The following tables summarise the GHG
emissions for the reporting year. This is the
second year Naked Wines has assessed
its emissions. The baseline year, and this
year’s assessment results are provided for
comparison.
The first table contains information relating to
the mandatory disclosure of UK SECR-required
elements only. It should also be noted that
the electricity has been estimated using the
average kWh per m2 floor area benchmark,
in line with the previous year.
Element
Direct emissions (Scope 1) – natural gas
Indirect emissions from purchased electricity (Scope 2)
Total tCO2e (Scope 1 & 2)
Other indirect emissions (Scope 3) – grey fleet travel and
hired vehicles
Overall Gross Total1
Intensity metric: Tonnes of CO2e per employee
Intensity metric: Tonnes of CO2e per £M turnover
Total energy consumption2 (kWh)
Baseline year
2019/20 (tCO2e)
0.00
Current year
2020/21 (tCO2e)
0.00
57.55
57.55
5.57
63.12
0.34
0.87
52.49
52.49
0.00
52.49
0.28
0.46
247,913
225,152
1 Naked Wines’ direct emissions from UK building energy (Scope 1 & 2) & grey fleet/hire vehicles (Scope 3).
2 Naked Wines’ direct emissions from UK building energy (Scope 1 & 2) & grey fleet/hire vehicles (Scope 3).
In addition to the mandatory UK-based disclosure, we have voluntarily chosen to report
our full global footprint within this report. The table below includes the SECR required
information, together with additional voluntary information.
Scope
Activity
Scope 1
Site gas
Site diesel
Site LPG
Scope 1 Sub Total
Scope 2
Electricity generation
Scope 2 Sub Total
Scope 3
Sea freight
Rail freight
Well-to-Tank fuel emissions
Lorry freight (outsourced)
Outsourced sites – energy use
Home-workers3
Flights
Electricity transmission & distribution
Rail travel
Hire cars
Taxi travel
Ferry travel
Scope 3 Sub Total
Total tonnes of CO2e
Tonnes of CO2e per employee
Tonnes of CO2e per £M turnover
Total Energy Consumption (kWh)
Global (excl. UK)
tCO2e
49.34
9.90
5.45
64.70
193.91
193.91
1,695.73
2,033.17
1,004.62
670.12
0.00
95.52
14.41
9.11
<0.01
0.00
0.04
<0.01
5,522.72
5,781.33
38.54
27.91
785,031†
UK only
tCO2e
0.00
0.00
0.00
0.00
52.49
52.49
2,103.99
0.00
554.90
0.00
179.45
0.00
0.00
4.52
0.53
0.36
0.08
0.00
2,843.83
2,896.32
15.66
21.76
225,152
† Includes building energy consumption and hire car usage for global sites/operations (excl. UK).
3 Home-workers emissions only relates to US and Australia staff. Data was not obtained for UK staff.
Human and worker protection
In 2021 Naked Wines in the UK was awarded
30th place in the ‘100 Best Large Companies to
Work For’ category, which showcases the very
best in workplace engagement.
Naked Wines has been an accredited Disability
Confident Employer since October 2018. As
a Disability Confident Employer we have
demonstrated that we: (i) have undertaken and
successfully completed the Disability Confident
self-assessment; (ii) are taking all of the core
actions to be a Disability Confident Employer;
and (iii) are offering at least one activity to get
the right people for our business and at least
one activity to keep and develop our people.
Level 3 initiatives
Giving back
In April 2020, we launched our COVID
Relief Fund, putting up $5 million to support
winemakers in difficulty outside the Naked tent.
Stop the Squeeze
The tariffs on Australian wine imports
imposed by China at the end of last year
were an especially crushing blow to Australian
independent winemakers and came on the
back of an already tough year.
Leaving the politics to one side, our attention
was directed towards the people affected and
we publicly announced three key commitments.
They are designed to support quality Australian
independent winemakers and positively
influence Australia’s wine industry and market
at large:
G Certainty for winemakers: We will honour
the commitments we have made to all our
independent Australian winemakers. We
won’t drop contracts with our winemakers
and their growers to take advantage of
cheaper sources (we never would).
G Fair prices for all: We will continue delivering
fair prices to winemakers and customers so
that everybody wins. This principle has been
central to our unique business model since
the Company was founded.
G AUD$5 million Winemaker Rescue Fund:
We launched our Winemaker Rescue Fund
in December 2020 to support talented
Australian independent winemakers
impacted by the new tariffs. This fund
offered them a new home on which to
sell their wines at a fair price, with a direct
connection to our network of more than
100,000 Australian and over 750,000 global
customers.
What $5M
funding
means for...
Simon
‘Sorby’ Adams
Simon was instrumental (firstly as
Senior, then Chief Winemaker) at
Yalumba for twenty years.
These two programs were
destined to be served in
restaurants, but due to the
pandemic, they were stuck with
80% of their inventory.
Wines we are bringing on...
Sorby Adams Jellicoe Barossa
Cabernet Sauvignon 2017, $16.99
Sorby Adams Jellicoe Barossa
Shiraz 2017, $16.99
McKahn Family Cellars
Charles McKahn
Due to COVID, McKahn Family
Cellars had the tough decision
to shut their tasting room
permanently.
On top of that, their wholesale
accounts have completely dried up
due to restaurant closures.
With our funding, we are able
to help them out by introducing
angels to their stellar red blend.
Wines we are bringing on...
McKahn Family Cellars Morning
Glass Amador Red Blend 2018,
$24.99
Cillar de Silos
Amelia Aragon
Northern Spain is the food capital
of Spain. Santander has one of the
highest concentration of Michelin
stars in the world. And where there’s
good food, there’s good wine.
So when restaurants closed – the
local premium wineries of Northern
Spain found themselves in a terrible
spot. No government help, furlough,
or parachute cheques to help out.
We have literally kept Amelia’s
business alive by helping them
through the Covid fund.
Wines we are bringing on...
Cillar de Silos Torresilo Ribera del
Duero 2018, $36.99
Marta & Miguel
When Covid hit, the top restaurants
who proudly stocked their wines all
closed overnight.
Small quality producers like
Valdaya rely almost entirely on
restaurants to keep them afloat.
Valdaya was about to close down
entirely, before Naked came in and
bought one third of their entire
production in one go.
Wines we are bringing on...
Valdaya Ribera del Duero 2018,
$29.99
Eternum Viti Toro 2017, $14.99
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Volunteer days
This year has been challenging for colleagues
to take advantage of the volunteer day and in
the UK we decided to partner with OnHand,
an app that helps to support volunteering. We
have 50 colleagues who are currently part of a
trial with OnHand and volunteering in different
ways, an hour or so at a time. This can be in
the form of food drops, companionship calls
and youth mentoring. As we emerge out of
the COVID-19 restrictions, we look forward to
a wider variety of volunteering opportunities
being available.
Nominate a Hero
While it may have been challenging for our
teams to get out and volunteer, this year gave
Naked the opportunity to show the world how
strong our desire to make a difference to the
lives of others really is.
In the UK, our Nominate a Hero campaign
helped to say thank you to key workers doing
their bit to take care of the whole country. We
asked customers to tell us about anyone who
deserved a treat to receive six bottles of wine
or a personalised thank-you message from
one of our winemakers – over 800 customers
benefitted.
Meals for NHS
The UK business also donated over £115,000 to
Meals for NHS, a UK charity initiative feeding
front-line workers, and in the United States
our US business fed over 1,000 key workers
and in need locals in partnership with local
restaurants in California.
Contributions to charities
To date, Angels have helped Daryl and Colby
Groom contribute a lifetime $1.6 million in
fundraising dollars to support heart health
and health advocacy charities, including The
Children’s Heart Foundation, the American
Heart Association, and more. Thanks to Angel
donations of over $100,000 back in 2019, Colby
Groom has since co-founded the Liam Ward
Research Project – in partnership with The
Children’s Heart Foundation – to help cure
those born with congenital heart disease. The
project funds continued research into self-
growing, self-expanding biodegradable heart
valves. The 2020 vintage is set to raise $64,000
more for heart-health charities.
Many of our winemakers stepped up during
the COVID-19 pandemic, with winemakers
in Australia working with us to manufacture
hand sanitiser for those in need.
Set up our own charity
During the year, we set up the Naked Wines
Charitable Trust in the UK as a registered
charity. The Naked Wines Charitable Trust
is focused on disadvantaged people and
communities – both in winemaking regions,
and in the UK. The charity aims to create a
more stable wine industry which may be
through donating to charities whose aim is
supporting basic needs in that local area, or
supporting charities that provide educational
support. As a registered charity, we will be
able to claim Gift Aid and hence provide
an enhanced level of support on all eligible
future donations to our chosen charities.
Responsible sourcing/
Modern slavery
Each year, we send suppliers a survey which
serves as an audit to ensure that we are
complying with the Modern Slavery Statement.
The results not only tell us that our suppliers
are following the guidelines we set out in our
responsible supplier policy and take issues
relating to modern slavery seriously, it also
helps us to identify the communities that might
need the most help and support. We then use
this information to guide us when deciding
which communities to support through giving
initiatives so we can help to strengthen those
communities and improve working conditions.
Level 4 initiatives
Training
Investing in future talent also continues with our
sponsorship of another colleague embarking
on his MBA studies at the UEA in Norwich,
albeit remotely.
Having been sponsored through
the completion of my CIMA
accountancy studies when I
first joined Naked Wines in
2015, I was looking to build
on these foundations and
develop the leadership skills
and understanding needed for
the next step in my career. I am
extremely grateful to have been
selected and offered a place on a
fully funded Part-Time Executive
MBA at UEA.
I am joined on the programme
by a diverse range of leaders
from different businesses where
we have been able to share
experiences and ideas from our
careers so far while developing
knowledge and skills in a range
of topics such as economics,
operations, strategy, digital
technologies and big data and
marketing.
The programme’s practical nature
has allowed me to apply theory
and research taught to projects
and initiatives I am involved in in
the workplace, to develop a wider
and deeper understanding.
Matt Buxton
Group Commercial Finance Manager
Two former wine advisors in the US have
successfully progressed their careers with
Naked Wines since joining.
Sean has progressed from advising customers
on the best wines for their taste buds to logistics
coordinator – he’s recently been promoted to a
senior role and is now taking his first steps into
managing his own team. Sean made use of his
$500 personal pathway budget to complete
WSET 3.
Laura, another former wine advisor, took an
opportunity in our planning team and has
recently secured the role of Wine Portfolio
Manager, a key member of the buying team.
She’s used her personal pathways on a
number of different wine education courses to
help her progress.
For me, I’ve had a few different
roles, starting with Wine Advisor
and moving to wine production
coordinator and most recently
moving from Senior Analyst,
Transportation Planning to
Transportation Manager. Before
coming on board to Nakedwines I
had completed my CSW (Certified
Specialist of Wine) and was able to
continue my education through
personal pathways to complete
my WSET 3.
I have held a few other roles after
becoming a Wine Advisor. I was a
merchandiser, then demand planner
and most recently Wine Portfolio
Manager on the Wine Buying team.
Thanks to personal pathways, over
the course of my 6 years with the
company, I’ve been able to earn
my Certified Specialist of Wine
and California Wine Appellation
Specialist. I’ve also had the
opportunities to take blind tasting
intensive classes with MWs and
Master Sommeliers at San Francisco
Wine School, Compline in Napa and
La Compagnie des Vins Surnaturels
in New York City.
Beyond our financial contributions through
scholarships we will also be working with the
Roots Fund to create a mentoring programme
for promising winemakers and wine business
owners of colour. This represents a $500,000
multi-year relationship to support diversity in
the wine industry. The vision is for Naked Wines
to share our expertise, contacts and industry
knowledge to help winemakers succeed. This
is not just about winemaking; we plan to help
mentor people in multiple areas:
G Digital marketing experience – how to build
a wine brand DtC / communicate with your
customers
G Sourcing & procurement – including
extending access to preferential terms
we enjoy
G Broader business advice, including
managing budgeting, cash flow, etc
G Connecting wine drinkers to our incredible
network of superstar winemakers
Our aim over time is for this programme to
help us discover talent that could potentially
go on to become winemakers for our Angels.
Ian Harding
Chairman
On behalf of the Board
June 2021
Sean Rogan
Laura Bacharach
62
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An experienced team
to take us forward
Ian Harding
N
AR
Nick Devlin
Shawn Tabak
David Stead
A
R
N
Justin Apthorp
Katrina Cliffe
R
A
N
Darryl Rawlings
R
Remuneration Committee member
A
Audit Committee
N
Nominations Committee
Committee Chairman
Invitee to Board committees
Ian Harding (56)
Chairman (since 6 August 2020)
Appointment date: June 2013
Committees:
Nominations Committee: Chair
Audit: Member
Remuneration: Member
Ian spent 19 years with Kingfisher Plc in various
senior roles, including 11 years as Group
Communications Director. Previously he was an
auditor for 12 years including senior positions at
PwC. Ian is a fellow of the Institute of Chartered
Accountants in England and Wales.
Skills brought to the Board:
Finance, retail experience and communication
Sector experience:
Finance and retail
External appointments:
None
Attendance at Board meetings:
Attended all
Nick Devlin (36)
Chief Executive Officer
Appointment date: 8 June 2019
Shawn Tabak (41)
Group Chief Financial Officer
Appointment date: 1 January 2021
Committees:
None as he is an Executive Director, but can
attend as a member of the management team.
Committees:
None as he is an Executive Director, but can
attend as a member of the management team.
Nick was appointed Director of the Board
in June 2019 and was promoted to the CEO
role in January 2020. Since then, Nick has led
Naked through a rapidly evolving operational
and customer environment to deliver a step
change in growth in 2020. Previously and as
President of Nakedwines.com, Nick had grown
and professionalised our US business and
established it as the number one DtC wine
business in America. Nick has a background in
corporate strategy, having previously worked
in OC&C’s consumer practice in London. He is
a passionate wine lover and advocate for the
role of Naked in transforming the shape of the
wine industry.
Skills brought to the Board:
Corporate strategy, marketing, retail best
practice and a deep knowledge of the US wine
market
Sector experience:
UK and US wine sector
External appointments:
None
Attendance at Board meetings:
Attended all
Shawn joined Naked Wines as CFO in
December 2020 and was appointed to the
Board on 1 January 2021. He leads Investor
Relations, FP&A, Accounting, Treasury, HR,
and Legal across the Company.
Shawn was previously Vice President of
Finance at Upwork Inc., the world’s largest work
marketplace that connects businesses with
independent talent. He has also worked as Vice
President of Investor Relations and Treasury at
Shutterfly and CFO at Clean Power Finance.
Shawn spent 10 years at KPMG focusing on the
technology and internet sectors.
Skills brought to the Board:
Finance, Direct-to-consumer, investor relations
Sector experience:
Finance, investor relations, capital markets,
M&A
External appointments:
None
Attendance at Board meetings:
Attended all since appointment
David Stead (63)
Non-Executive Director and Senior
Independent Director (since 6 August 2020)
Appointment date: November 2017
Committees:
Audit: Chair
Remuneration: Member
Nominations: Member
David was CFO of Dunelm Group Plc from
September 2003 until his retirement in 2015.
Prior to this, David was Finance Director for
Boots The Chemists Ltd and Boots Healthcare
International between 1991 and 2003. David is
a chartered accountant, having spent the early
part of his career with KPMG.
Skills brought to the Board:
Finance and public markets, extensive board
experience
Sector experience:
Finance and retail
External appointments:
Non-Executive Director – Card Factory Plc
Non-Executive Director – Joules Group Plc
Attendance at Board meetings:
Attended all
Katrina Cliffe (54)
Non-Executive Director
Appointment date: May 2019
Committees:
Remuneration: Chair (since 6 August 2020)
Audit: Member
Nominations: Member
Katrina has experience over a wide range
of financial and retail institutions, including
American Express and Lloyds TSB. Through
these roles she has gained valuable financial,
marketing, customer relations and retail
experience.
Skills brought to the Board:
Financial knowledge, retail and marketing,
board experience
Sector experience:
Finance and retail
External appointments:
Non-Executive Director – London and Country
Mortgages Limited, Senior Independent
Director – HomeServe Plc
Attendance at Board meetings:
Attended all
Justin Apthorp (59)
Non-Executive Director
Appointment date: January 2016
Committees:
None as is considered non-independent
Justin spent 25 years as an employee of
Majestic Wine, retiring from his executive role
in 2015, having spent the last 10 years of his
employment as the Buying Director. Justin
previously worked in marketing and brand
development for Bejam and Lyons Tetley.
Skills brought to the Board:
Knowledge of buying wines and wine
Sector experience:
Retail with focus on multi-channel and
ecommerce delivery
External appointments:
HM Deputy Lieutenant of Hertfordshire
Trustee of John Apthorp Charity
Trustee of Friends of St Peter’s
Attendance at Board meetings:
Attended all
Darryl Rawlings (52)
Non-Executive Director
Appointment date: 13 April 2021
Committees:
Audit: Member
Remuneration: Member
Nominations: Member
Darryl is founder and CEO of Trupanion
Inc., an industry leading, direct-to consumer
(DtC), monthly subscription business that
provides medical insurance for cats and dogs
throughout the United States and Canada.
Skills brought to the Board:
20 years’ experience in operating and scaling
a subscription DtC business in US, mentoring
Sector experience:
Direct-to-consumer
External appointments:
Trupanion Inc., Trupanion Australia Pty
Ltd, Canada Pet Health Insurance Services
Inc., Gallant Pet Inc., Baystride Inc., Seattle
Academy of Arts and Sciences, Trupanion
Administration Canada, Inc., Trupanion
Alberta Holding Company, ULC, Trupanion
Canadian Shareholders, Ltd
Attendance at Board meetings:
None as his appointment followed the
reporting period
Board activities
M N O
A
L
K
J
I
H
G
F
E
B
C
D
A Strategy (financial and operational)
B Board appointments, including
succession planning
C Remuneration Policy and
remuneration matters
D Risk management and mitigation
E Business updates
F External reporting
G Trading updates and financial
performance
H Budgeting and plans
I Employee share scheme
J
Investor relations
K Legal and tax matters
L Auditor reports, appointment
and fees
M Sustainability
N Key policies and governance
including Alternative Investment
Market (AIM) compliance
O Capital allocation
Business updates
12%
10%
10%
10%
10%
7%
7%
6%
5%
5%
5%
4%
4%
3%
2%
Board
Audit
Rem
Nom
2020
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2021
Feb
Mar
64
65
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Quoted Companies Alliance (QCA) Corporate Governance Code
The Company has been a member of the QCA since 2018 and has adopted the QCA Code on the basis that it is the corporate governance code most
suited to the requirements and size of the business. Set out below is a summary of what we have done to comply with the 10 principles of the QCA
Code and will continue to do. Further information on the application of the QCA Code by the Company is set out in our Statement of Compliance with
the QCA Corporate Governance Code, which can be found on our website – this should be read as an integral part of this report.
Throughout the report, we have used a key code of symbols indicating where various principles of the QCA Code have been addressed to assist the
reader to follow our story.
QCA Code compliance summary
Principle
In short – What we did
G We have driven LTV by harnessing our increasing scale and
as a result have created the largest DtC wine businesses in
the US
What we are going to do
Increasing our investment in new customer acquisition and
looking at expanding our market share even further
Please see Strategic report (pages 2–13), Our business model
(page 28) and Governance report (page 69)
G The Directors held regular calls with institutional investors to
provide opportunities to hear their views
G Direct engagement of our Chairman and Chair of the Audit
Committee with principal investors
G Although we were unable to meet the shareholders
physically over the last year, we have kept shareholders
abreast of developments through video calls, bilateral and
group meetings, results announcements and regulatory
announcements
Please see Stakeholder engagement (page 43)
G Increased the support available to support our winemakers
through the establishment of a COVID-19 fund
G Engaged periodically with our suppliers, sharing our values
and ethical principles
G Collected sizeable donations to support communities we
work in, e.g. for South African school children
G Set up a Naked Wines charity in the UK to advance
charitable purposes in winemaking regions across the world
G Supported winemakers in Australia in light of recent
increases in tariffs
Please see Stakeholder engagement (pages 44-46) and
Sustainability report (pages 57-62)
G Appointed a Head of Assurance with responsibility for risk
management across the Group
G Carried out an assessment of and identification of significant
Group risks
G Regular reporting of the risk management to the Board and
the Audit Committee
Please see Risk management and control environment
(pages 47-55)
G Appointed a new interim Chairman and a new CFO during
the reporting period
G The Executive team worked closely with the Non-Executive
Directors outside of formal Board meetings
G Delegation of responsibilities to the three Committees of
the Board
Please see Governance report (page 68)
Unlike last year due to social distancing restrictions, we are
looking at holding a physical AGM and engaging directly with
our shareholders
Continue to provide both virtual and physical opportunities to
meet and communicate with shareholders in a transparent and
clear manner
Live up to our purpose of connecting everyday wine drinkers
with the world’s best independent winemakers
Continue to engage with our stakeholders
Continue to support our winemakers in a socially
responsible manner
Continue to develop and enhance our risk management and
controls systems across our Group to identify and mitigate our
risks while continuing to seek out opportunities to further
enhance our business
Improve diversity of Board composition
1 Establish a strategy
and business model
which promote
long-term value for
shareholders
2 Seek to understand
and meet
shareholder needs
and expectations
3 Take into account
wider stakeholder
and social
responsibilities and
their implications
for long-term
success
4 Embed effective risk
management,
considering both
opportunities and
threats, throughout
the organisation
5 Maintain the
Board as a
well-functioning,
balanced team led
by the Chairman
66
Principle
6 Ensure that
between them the
Directors have the
necessary
up-to-date
experience, skills
and capabilities
In short – What we did
G Carried out an assessment of current skill set and strengths
of the Board and identified areas of deficiency
G Directors are encouraged to attend workshops
and roundtables organised by the QCA to enhance
understanding of regulatory environment
G Regular AIM Rules updates are provided by the Company’s
Nominated Advisor
7 Evaluate Board
performance based
on clear and
relevant objectives,
seeking continuous
improvement
8 Promote a culture
that is based on
ethical values and
behaviours
Please see Governance report (pages 68-69)
G Addressed shortcomings identified by internal Board
assessment
G Secured appointment of a new Chairman in first half
of 2021, being one of the set objectives
Please see Governance report (page 69)
G Maintain regular engagement with our staff through
a number of surveys and Group initiatives
G Supported winemakers and other communities in need
during the COVID-19 pandemic
What we are going to do
Looking at adding one or two additional members to increase
the size of the Board and fill gaps in experience, skills and
capabilities
Continue to attract suitable talent to add to the skill set of the
team as and when required
Carrying out independent Board evaluation in FY22
Non-Executive Directors to be directly involved in
performance assessments of CEO and other members
of the leadership team
Continue to work towards our goal to disrupt the wine industry
for the benefit of our customers, winemakers and our people
Please see Sustainability report (pages 58-62) and Governance
report (page 69)
G Proactively engaged with Angels to highlight the option to
withdraw funds from their accounts to help with financial
difficulties in light of COVID-19
G Adopted a Treasury policy that provides reassurance to
investors and our Angel customers
G Oversight of Executive by the Non-Executive Directors
G Delegation of responsibilities between Board and
Committees of the Board
Please see Governance report (pages 68-69)
G Engaged with stakeholders, including shareholders, through
a variety of methods, to ensure that they understood how
the business was performing
Please see Stakeholder engagement (pages 42-46) and
Sustainability report (pages 43-46)
9 Maintain
governance
structures and
processes that are
fit for purpose and
support good
decision-making by
the Board
10 Communicate how
the Company is
governed and is
performing by
maintaining a
dialogue with
shareholders and
other relevant
stakeholders
Continue to review our governance structures to ensure that
they are fit for purpose
Continue to communicate with all stakeholders and to maintain
a dialogue
Please refer to this symbol throughout the Governance report to cross-refer where we address the QCA Code principles.
QCA
67
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Governance
continued
6 9
QCA
Governance structures
fit for purpose
The list of Board members, including short
biographies and skill sets, as well as Committee
membership, is set out on pages 64-65.
G The Chairman has responsibility to lead
the Board effectively and to oversee the
adoption, delivery and communication of the
Company’s corporate governance model. It
is imperative that the relationship between
the Chairman and the Chief Executive
Officer, as well as all Non-Executive Directors
(NEDs) and executive management, remains
collaborative, cordial and robust. The
Board members work together in the best
interests of the Company, while remaining
comfortable to engage in rigorous and
constructive debate. There is no individual or
group of individuals dominating the Board’s
decision-making processes.
G The Board has a Charter (“Board Charter”)
which sets out in detail its functions and
responsibilities, as well as the clear
separation of duties between the Chairman
and the Chief Executive Officer. It also
clarifies the role of the Senior Independent
Director (“SID”), David Stead. The Company
has in place a statement of authority, which
supplements the delegated authority set
out in the Board Charter. This is reviewed
annually to ensure that the correct controls
are in place across the organisation. The
Board has delegated certain powers to itself
to the Audit, Remuneration and Nominations
Committees. It has also set up a Bid
Committee to deal with any stake building or
potential public offers for the Company.
G During the year, Ian Harding replaced John
Walden as Chairman and Shawn Tabak
replaced James Crawford as Chief Financial
Officer.
G The Company’s Articles of Association
require that one third of the Directors
stand for re-election annually. This is
done through a process of rotation with
those recommended for re-election by
shareholders being subjected to a peer
review prior to recommendation. This year
Justin Apthorp and Nick Devlin will retire
by rotation and, being eligible, will offer
themselves for re-election. Ian Harding will
retire from the Board at the conclusion of the
2021 Annual General Meeting.
G Directors’ contracts are available for
inspection at the Company’s registered
office and will be made available at the
2021 Annual General Meeting. These are
summarised in the Remuneration
68
G The Company holds directors’ and officers’
liability insurance cover for any claim
brought against the Directors or officers
for wrongful acts in connection with their
position, but the cover does not extend to
claims arising from dishonesty or fraud.
G We keep a running Board and Committees
annual work plan, which ensures that all
elements of business are addressed across
the relevant governance bodies. Meeting
dates are aligned with the financial and
trading calendars of the Company ensuring
a spread of meetings across the calendar
year. The scheduled meetings may be
supplemented with additional ad hoc
meetings as and when necessary.
G Our meetings are structured, and the
agendas of the Board and Committees are
reviewed by, and agreed with, the respective
Chairs. Minutes are taken at all meetings,
shared with the Directors for comments, and
any actions are followed up and reviewed at
the next meeting.
G The Board and Committees receive
appropriate notice prior to meetings and
are provided with relevant information in
advance of the meetings. More specifically,
NEDs are regularly kept abreast of financial
and operational performance or new
material developments relating to the
business. The Company reports on its
monthly headline performance against
its agreed budget and the Board reviews
variances at each meeting.
G The Board held nine meetings during
the year as detailed on page 65. All but
one of the meetings took place remotely
because of the COVID-19 travel restrictions.
It is our intention to resume holding physical
meetings (including in each of our markets)
as soon as it is safe to do so. Whilst we
remain cognisant of the environmental
and financial costs associated with travel,
holding Board meetings in local markets
allows the Board members the opportunity
to familiarise themselves with all operations.
All members of the Board continue to
devote sufficient time and effort to their
responsibilities as Directors.
G Where required, all Directors are able to
seek independent professional advice in
support of their duties to the Company,
at the Company’s expense, in addition
to having full access to the Company
Secretary/General Counsel, Group Chief
Financial Officer and any member of the
management team. Board members are
also free to seek the counsel of the SID.
During the year, the advice of recruitment
and remuneration consultants was sought in
relation to the recruitment and remuneration
of a number of senior management roles,
including the CFO and new Chairman.
G As part of our enhanced processes, we have
recognised the need for ongoing training
and information sharing at Director level.
Directors are given access to suitable training
opportunities and receive regular updates
regarding topical issues and changes in the
governance environment. During the review
period, we had a formal presentation by
the Company’s Nominated Advisor on the
AIM rules and its governance requirements.
We run a formal induction programme for
new Directors and an electronic “Directors’
Toolkit” is available allowing easy access to
information on the Group.
G We review overall Company performance
and ensure that the necessary resources
are available to management to give effect
to the strategy. We exercise accountability
to the shareholders and are responsible for
safeguarding the relevant interests of all
stakeholders (see Stakeholder engagement
on pages 42-46) to enable it to function
effectively with a full understanding of the
business.
G As a Board, we consider the independence
of all members and have an effective conflict
of interests procedure in place. Under this
policy, the Directors must declare any other
commitments and interests, which assist
in the determination of independence.
Changes to commitments and interests are
reported to the Company Secretary, and
where appropriate referred to the Board,
as and when necessary. On this basis, Justin
Apthorp has been determined to be non-
independent given his previous status as an
employee of the Company.
1 6
QCA
5 9
QCA
8
QCA
Succession planning
This year saw significant changes to the Board
with the appointments of a new CFO and a
new Chairman. In July 2020, we announced
John Walden’s intention to step down from the
Board for personal reasons at the conclusion
of the Annual General Meeting on 6 August
2020 and that Ian Harding, Senior Independent
Director and Chair of the Remuneration
Committee, would be appointed as Chairman
until Ian’s scheduled retirement from the
Board in the summer of 2021. At the same
time, we announced that David Stead, Chair
of the Audit Committee, would be appointed
Senior Independent Director and that Katrina
Cliffe, NED and member of the Remuneration
Committee, would become Chair of the
Remuneration Committee. On 17 November
2020, we announced the appointment of
Shawn Tabak as Group CFO with effect
from 7 December 2020. Shawn took over the
role of CFO from James Crawford, who was
appointed Managing Director of the Naked
UK business during the year.
The Board is aware of the issues relating
to gender and ethnic diversity in board
compositions and the Directors have
highlighted this as an area of focus for the
Board in the coming months. The Board
continues to be committed to continuing
to identify suitable succession candidates.
A summary of the Board’s skills and experience
is set out on pages 64-65.
Board Committees
The Board has in place Audit, Remuneration
and Nominations Committees, all of which
have specific mandates contained in
approved Terms of Reference. These cover the
composition, key activities and responsibilities
of the relevant Committee and can be viewed
on our website. Each of the individual Terms of
Reference were reviewed during the reporting
period. The membership of each of the
Committees is set out on pages 64-65.
Audit Committee – the report of the Audit
Committee under the chairmanship of
David Stead is available on pages 80-81.
Remuneration Committee – the report of
the Remuneration Committee under the
chairmanship of Katrina Cliffe is available
on pages 70-79.
Nominations Committee
G The Nominations Committee comprises at
least three members, with the majority being
independent. It is chaired by the Chairman of
the Company
G The principal role of the Nominations
Committee is to consider and make
recommendations for Board appointments
and executive roles, to consider succession
planning in respect of both the Board
members and senior management, and to
consider the performance, ongoing training
and evaluation of the Board
G The Nominations Committee meets as and
when necessary, but at least to consider any
Director’s resignations and to review the
Board performance and assessment
The Board has also set up a Bid Committee
comprised of certain members of the Board to
assess and deal with any potential takeovers of
the Company. This Committee is only convened
when circumstances require.
7
QCA
Board assessment
During the reporting period, the Board
conducted an assessment of the Board by
means of a questionnaire prepared by the
Company Secretary and circulated to each
of the Directors. Responses and feedback
on these were compiled and shared on an
anonymised basis with the Chairman and the
Chair of the Audit Committee. The outcome
was then shared with the full Board.
Ethical values and behaviour
The Board recognises the need to promote an
ethical culture and to lead from the top. We
have a Code of Conduct which is applicable to
all of our employees and suppliers and makes
it clear what is expected of them. The Code of
Conduct is regularly reviewed, is shared with
our staff and suppliers and is available on our
website (Code of Conduct).
Internally, we drive a culture of respect, fairness
and non-discrimination. We have a number
of policies which underpin this approach
including our Anti-Bullying and Harassment,
Equal Opportunities, Anti-Bribery, Competition,
Data Protection, Share Dealings, Anti-Money
Laundering, Health and Safety, Substance
Abuse, Maternity Benefits, Recruitment and
Discipline policies, all of which supplement
and integrate our Code of Conduct. We have a
Whistleblowing Policy and procedure to assist
staff bringing transgressors to our attention.
We have an employee share participation
scheme which is offered to all members of staff
and is a way for us to incentivise our staff, to
allow them to directly reap the rewards of their
hard work and give them a sense of ownership
of the business.
Externally, our suppliers are seen as part of
the Naked Wines family. We therefore expect
our winemakers, as well as other suppliers, to
adhere to our standards by subscribing to our
Responsible Supplier Policy. We have again
published our Modern Slavery Statement and
continue to embed these principles across our
supply chain. It is our position that we will assist
our suppliers to address shortcomings and will
look for ways to help them to understand and
meet our expectations as set out in our policy.
Our sustainability plan has clearly identified
responsible drinking as one of our priorities.
The public concerns around alcohol misuse,
underage drinking and general health risks are
taken very seriously. While we want to increase
the sale of wine, we want to be encouraging
our customers to enjoy their alcohol
responsibly. We provide strict guidelines on
responsible drinking for our staff together with
a policy to assist with support and education.
We acknowledge that changing social norms
and attitudes towards alcohol present a risk
to our business and thus our commitment to
responsible drinking remains a top priority.
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Strong performance in a year of change
The Group has delivered
strong performance
across all three geographies
during the year. We are
delighted with the business
performance this year and
look forward to continuing
our recent momentum.
Katrina Cliffe
Chair of the Remuneration Committee
Dear Shareholder
On behalf of the Board, I am pleased to present
the report on Directors’ remuneration for the
financial year ended 29 March 2021. This is
my first report as Chair of the Remuneration
Committee and I am delighted to be able
to report on a year of excellent business
performance and strategic execution, which
has generated significant shareholder value.
I hope that you find this report clear and
insightful and that the report demonstrates
pay for performance at Naked Wines. In line
with best practice, this report will be subject
to a vote on its adoption at the 2021 Annual
General Meeting.
Impact of COVID-19 on business
performance and remuneration
considerations
The Group has delivered strong performance
across all three geographies during the year,
particularly in the US. This performance is in part
driven by an increase in demand for the direct-
to-consumer (DtC) wine subscription model
but also due to the shift in consumer behaviour
as a result of the COVID-19 pandemic.
We were able to continue to operate
throughout the pandemic, and were delighted
with the flexibility and positive attitude shown
by all our staff as they adapted to working
from home. I am pleased to report that no
staff have been furloughed, the Company has
not required any additional funding from the
government, and all our suppliers continued to
be paid in full and on time.
FY21 incentive plan payouts
Annual bonuses for FY21 were driven both by
return on investment in new customers and
profitability on sales to our repeat Angels.
As set out in last year’s report, stretch bonus
targets were introduced this year which, if
achieved, result in payout of 200% of the target
bonus opportunity. Based on strong business
performance during FY21, the bonus will
pay out at the maximum performance level.
The third tranche of the long-term incentive
award granted in July 2016 and the award
granted in July 2018 will both be eligible to vest
in July 2021. These awards are based on a Total
Shareholder Return (TSR) measure against a
peer group of AIM and FTSE listed retailers. We
are close to the end of the performance periods
for each award and the estimated vesting is
full vesting for both the July 2016 and July 2018
awards. Final vesting details for these awards
will be confirmed in next year’s report. This
outcome is reflective of the excellent TSR we
have delivered over these periods.
In addition to these share awards to senior
executives, during the year we also made
a free share award to the entire workforce
worth £380,000, to recognise the outstanding
performance delivered and to encourage
more widespread share ownership.
The Remuneration Committee is satisfied
the policy has operated as intended and
confirms that no discretion was exercised in
determining the incentive outcomes for FY21
and, furthermore, that performance targets
for the incentives were not adjusted.
Board changes
As announced in June 2020, James Crawford,
former Chief Financial Officer, was appointed
Managing Director of the Naked UK business
and therefore stepped down from the
Board during the year. We were delighted to
appoint Shawn Tabak as James’s successor,
on 7 December 2020. After a brief handover,
James stepped down from the Board on
31 December 2020 and Shawn was appointed
to the Board on 1 January 2021.
In anticipation of the appointment of a new
CFO, the Remuneration Committee reviewed
the remuneration package, mindful of the fact
that James’s successor would be US-based and
with a technology background.
As a result of this review, Shawn’s remuneration
package on appointment comprises a salary
of $400,000, a pension contribution of 4% of
salary and benefits in line with policy. Shawn’s
maximum annual bonus opportunity is 100%
of salary, and he is entitled to receive a Long
Term Incentive Plan (LTIP) award each year.
In addition, Shawn also received a “buy-out”
of awards forfeited from his previous employer
on joining Naked Wines, which is payable in
FY21 and FY22.
During the year, we also announced John
Walden’s intention to step down as Chairman
of the Group following the 2020 Annual
General Meeting. Ian Harding succeeded John
as interim Chairman and will hold this role
until his scheduled retirement from the Board
in the summer of 2021. We were pleased to
announce shortly after our year end that Darryl
Rawlings had agreed to join the Board as a
Non-Executive Director and will succeed Ian as
Chairman at the 2021 Annual General Meeting.
Darryl brings extensive experience in operating
and scaling a subscription DtC business, which
will be invaluable to the Group and will have
a key strategic role as the Group continues its
expansion over the next few years. The design
of Darryl’s package takes into consideration
these factors and we were delighted that
Darryl proposed taking his Chairman’s fees
exclusively in equity, which will align his
entire remuneration with the performance of
the business and the long-term interests of
shareholders.
Darryl’s remuneration on appointment as
Chairman will comprise:
G A conditional share award grant worth
$525,000, being the equivalent value of
three years’ worth of annual fees at $175,000
p.a. The award will vest, subject to continued
service, in equal one-third tranches on
the first, second and third anniversaries
of his appointment as Chairman and he
will not sell the shares for four years from
appointment
G In addition, Darryl will have the opportunity
to acquire further shares on a co-investment
basis, up to a maximum of $175,000 worth
of shares. The Company will match shares
purchased on a 1:1 basis, and these matching
shares must be held for Darryl’s initial three-
year term and for a further one-year period
As our Articles of Association currently do not
permit Non-Executive Directors’ fees to be paid
in shares, we are seeking shareholder approval
at our 2021 Annual General Meeting by way of
a special resolution to amend certain Articles to
enable this package to be awarded to Darryl
and for flexibility to offer an equity component
to the package for other Non-Executive
Directors in the future.
Remuneration Policy
changes for FY22
The annual bonus opportunity will remain at
a target opportunity of 50% of salary and a
stretch opportunity of 100% of base salary for
both Executive Directors. The performance
measures and weightings have been amended
slightly such that performance will be based
on an equal one-third weighting between
Revenue, Repeat EBIT and value creation,
with stretching target ranges set for each
performance condition. Following a review
of the structure of bonus deferral, from FY22
Executives will be required to invest one-third
of any bonus in shares of the Company and
hold them for a period of two years. The
change from cash-based deferral to deferral
through investment in shares will enable
Executive Directors to build their shareholdings
in the Company quicker. These shares will
not be forfeited in the event an Executive
leaves the Company.
The Remuneration Committee is in the process
of reviewing the award of LTIPs to the Executive
Directors and the wider Group, in light of the
recent step change in the scale of the business
and the increasing focus on the US as the key
growth driver. At the date of this report, the
review has not been finalised. However, it is
anticipated that changes to our LTIP policy
will be effective for FY22 and we are likely to
move to a mix of LTIP awards and Restricted
Shares for all participants, including Executive
Directors. Full disclosure of any changes
to the policy in relation to the LTIP will be
included in the FY22 Directors’ Remuneration
report, alongside the performance conditions
and targets.
Consultation with shareholders
We consulted during the year with our major
shareholders in relation to the fee structure
for our Chairman and were pleased that the
feedback was positive.
We intend to consult again in relation to the
proposed change to our LTIP policy to a
mix of LTIP awards and Restricted Shares,
before proceeding with any proposal to grant
Restricted Shares.
Closing comments
The Remuneration Committee ensures that our
Executive Directors and all employees continue
to be appropriately rewarded for performance
that benefits the future of the business for
all our stakeholders. We are delighted with
the business performance this year and look
forward to continuing our recent momentum.
The Remuneration Committee is committed
to having an open and constructive dialogue
with investors. At our forthcoming Annual
General Meeting, there will be a resolution
for a proposed amendment to the Articles
of Association to enable the remuneration
package to be delivered to Darryl and there
will also be the usual advisory resolution
approving this report. I would be very pleased
to receive any feedback you may have on
these proposals and look forward to your
support at the AGM.
Katrina Cliffe
Chair of the Remuneration Committee
June 2021
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The Remuneration Committee
Who
G The Remuneration Committee comprises
me, as Chair, together with David Stead
(Senior Independent Director) and Ian
Harding (Interim Chairman)
G Executive Directors and other Non-
Executive Directors may attend meetings
as invitees, but play no role in decisions
relating to their own remuneration
G None of the members of the Remuneration
Committee have any conflict of interests,
nor do they have any personal financial
interests other than as shareholders.
Subject to these qualifications,
the Remuneration Committee is
considered independent
The Remuneration Policy
Our Remuneration Policy was adopted
following the 2019 Annual General Meeting,
when 98.43% of shareholders voted in favour
of the resolution.
In this report, we describe the elements of
our remuneration together with a clear link to
our strategy and explanations as to how we
implement each element operationally, setting
out the maximum that an Executive can earn.
While this policy is specific to our Executives,
the Company prides itself on its simple and
equal approach. We have thus included a
column to indicate where a specific element
of reward offered to Executive Directors
differs substantially from that offered to other
employees. The rewards are in fact significantly
consistent across our structure with individuals
generally being differentiated only on amount,
level of responsibility, skills and performance.
72
What
Responsibilities, in summary
G Determine and recommend to the Board the
Remuneration Policy and monitor ongoing
effectiveness thereof
G Determine specific targets and objectives
for any performance-related bonus or pay
schemes for Executive Directors
G Determine targets for any performance-
related bonus or share schemes for staff
G Review and approve Executive Directors’
packages upon appointment and any
termination payments
Main activities for review period
G Set performance criteria targets for annual
bonus and LTIP
G Considered performance criteria for vesting
of shares and payment of bonuses
G Approved vesting of LTIP and Share
Incentive Plan (SIP) to staff
G Approved new CFO compensation and
benefits
G Recommended to the Board the basis upon
which the new Chairman-elect’s fees are
set and paid
G Reviewed proposed compensation for
other senior hires, including MD of Naked
Wines US
As communicated on previous occasions,
the Remuneration Committee intends to ask
shareholders to approve the Remuneration
Policy every third year. It is intended that
shareholders will be asked to vote on the
Remuneration Policy at the 2022 Annual
General Meeting.
Executive Remuneration Policy
1. Introduction
The Remuneration Policy is intended to
offer fair, competitive and attractive reward
packages consistent with the scale and
performance of the Company. It is aligned with
our strategy, key performance indicators (KPIs),
risk management processes and also supports
our business model.
2. Policy statement
We will seek to attract and retain talent through
fair rewarding while placing our overall
Company wellbeing, values and performance
at the heart of our reward practices. We
believe the reward process is key to change,
and establishes and reinforces the outputs
and behaviours required in order to achieve
strategic business objectives and results.
How
G Terms of Reference (Remuneration
Committee ToRs)
G External services
– Tapestry continues to provide ongoing
support in respect of the various share
schemes, although we did not incur any
costs during the reporting year
– External head-hunters were appointed
to support the search for the new CFO
and new Chairman roles
– Korn Ferry was appointed in March 2021
to provide advice to the Remuneration
Committee on remuneration matters
When
G The Remuneration Committee meets
as required and the list of meetings and
attendance is contained in the Governance
report (see pages 64 and 65)
3. Application
The Remuneration Policy is applicable to the
Executive Directors. Where applicable, the
appropriate comparison with remuneration
practices applicable outside of the executive
management level is highlighted.
4. Reward principles
The following overarching principles are
applicable:
G We will offer competitive salaries that attract,
retain and motivate talented people
G We will operate transparent, simple and
effective reward schemes that incentivise
delivery of stretching targets and our long-
term business strategy
G We will offer the chance for all employees to
participate in share schemes so that we all
think and act like business owners
5. Remuneration Policy
Each element of the Remuneration Policy
for Executive Directors is summarised in the
following tables.
Fixed
Policy
1. Salary
Purpose and link to strategy/KPIs:
Base salaries are set to recognise individual
skill, experience, performance and market
value of the role so as to attract, retain and
motivate the best skills to deliver against the
strategy and KPIs, implement our business
model, manage our risks and exploit our
opportunities, while remaining disciplined
about fixed cost management.
Operation – How we determine it:
G Position/role
G Expertise
G Experience
G Competitive salaries relative to the market
and jurisdiction
G Affordability – we strive to be competitive
but manage costs in line with the Company
revenue and budget
Operation – When we pay it:
Monthly, in cash (in the US twice monthly in line
with local custom)
Fixed
Policy
2. Pension
Limitation:
Maximum increases are no greater than the
workforce average unless: (a) there has been a
material increase in industry rates; (b) changes
in role have taken place with enhanced
responsibility; or (c) there has been a reward
for individual development.
How it is linked to performance:
It is not, except for consideration of
performance expectation when setting and
reviewing salaries.
Significant differences between Executive
Directors and the main body of employees:
None, other than salary levels.
Purpose and link to strategy/KPIs:
Provide for a competitive post-retirement
income which supports recruitment and
retention of talented people to deliver
on strategy.
Operation – What we offer:
G Payments in defined contribution schemes
Fixed
Policy
Purpose and link to strategy/KPIs:
Make us competitive within the market while
providing financial protection for Executives
and their families, supporting retention.
Operation – What we offer:
G Paid annual leave
G Enhanced maternity benefits
G Credits to spend on wine
G Company car or car allowance
G Private medical insurance
Limitation:
The CEO and CFO receive a pension
contribution equivalent to 4% of salary.
Significant differences between Executive
Directors and the main body of employees:
None.
How it is linked to performance:
Pension contributions are not conditional
on performance, but we believe that they
enhance recruitment and retention of talent
and improve staff wellbeing.
3. Benefits
G Life insurance
G Relocation expenses
Limitation:
Level of benefits are set to be appropriate for
our business relative to the market.
How it is linked to performance:
Benefits are not conditional on performance,
but we believe they enhance recruitment and
retention of talent and improve staff wellbeing.
Significant differences between Executive
Directors and the main body of employees:
All employees are entitled to the same suite of
benefits, with the exception of company car
or car allowance and relocation expenses.
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Variable
Policy
4. Bonus
Variable
Policy
5. Shares – SIP
Purpose and link to strategy/KPIs:
Reward for achieving key financial, operational
and strategic goals, annually by selecting
measures that drive long-term shareholder
value, as well as reward achievement of
customer-centric KPIs that grow and retain
customer base.
Operation – How we determine it:
G We set each role an “on target” bonus as a
percentage of salary
G Bonus targets are set at the start of the
financial year and performance is reviewed
regularly and assessed at the end of the
financial year to determine whether targets
have been reached
G The Remuneration Committee may apply
discretion to the final bonus payout taking
into account performance against targets
and underlying performance of the
Company
G Robust clawback and malus provisions apply
Operation – What we don’t do:
G We do not reward failure or mediocre
performance
G While encouraging stretch targets, we do not
How it is linked to performance:
The bonus will be based on the achievement
of an appropriate mix of challenging financial,
strategic or individual targets.
set unrealistic goals
G We do not encourage unhealthy risk-taking
and inappropriate behaviour
Limitation:
Executive Directors’ target bonus levels are set
at 50% of salary.
If stretch targets are achieved, up to 200% of
the on-target bonus can be earned.
Executive Directors are required to invest
one-third of any bonus payable in shares of
the Company. These shares must be held for a
period of two years and will not be forfeit in the
event the Executive leaves the Company.
Significant differences between Executive
Directors and the main body of employees:
Executive Directors and some senior executives
receive the highest level of potential bonuses,
currently set at 50% of base salary for target
bonus. The bonus for Executive Directors
has an element of deferral to encourage
the Executives to build their shareholdings.
At local level, we incentivise staff based on
local market performance rather than Group
performance.
Variable
Policy
5. Shares – LTIP
Purpose and link to strategy/KPIs:
Incentivise and retain staff by delivering
shares as part of their package, subject to
performance, while aligning management
interests with the value creation interests of
shareholders.
Operation – What we offer:
G Nil cost awards made annually up to a fixed
percentage of salary
G Either structured as LTIP awards, Restricted
Shares (or a mix of both). We will consult with
shareholders before any move to granting
Restricted Shares to our Executive Directors
G LTIP awards will have a performance
condition measured over a three-year
period
G Restricted Share awards may vest in
annual tranches over a multi-year vesting
period, subject to the achievement of a
performance underpin, as determined by
the Remuneration Committee
G Robust clawback and malus provisions
apply, whereby awards may be reduced or
cancelled
Limitation:
Award levels will be determined by the
Remuneration Committee for each grant.
How it is linked to performance:
G LTIP awards will be linked to performance
conditions which are based on the
creation of absolute value in a digital,
direct business, as well as rewarding staff
when the Company delivers superior TSR
relative to our peers. Both measures have a
sliding scale of vesting, with 25% vesting for
threshold performance and 100% vesting for
maximum performance achievement
G Restricted Shares will create a strong
alignment of interest with shareholders
from the outset, with a focus on long-term
shareholder value
G The vesting of Restricted Share awards
will be subject to a performance underpin,
requiring the Remuneration Committee to
be satisfied with financial performance and
strategic execution before awards may vest
Clawback/malus provision
G At discretion of the Remuneration Committee
G Triggers are misconduct, misstatement, error
and corporate failure during the clawback
period (three years from grant to vesting)
G The amount is determined on a basis that
the Remuneration Committee considers
to be fair, reasonable and proportionate,
and adjustment should not exceed the
74
market value of the shares on the date the
adjustment is made, or, if lower, the market
value on the date that the shares were
acquired by the participant
G Adjustment/clawback is effected by a
transfer of shares, cash payment, reduced
vesting in future, reduced number of future
shares to vest, reduced future cash bonus,
reduced value of shares
The Executive Directors are subject to minimum
shareholding requirements, meaning that they
must hold equity in the Company equivalent to
100% base salary, to be built up over time for
new recruits.
Significant differences between Executive
Directors and the main body of employees:
Award levels as a percentage of salary are
lower for less senior executives and may be
subject to a different mix between LTIP awards
and Restricted Shares.
Purpose and link to strategy/KPIs:
Incentivise and retain staff while aligning their
interests with the value creation interests of
shareholders.
Operation – What we offer:
G Awards are determined in accordance with
period of continuous employment and/or job
grading of employee
G Awards are made annually at the discretion
of the Remuneration Committee, based on
fixed percentage of base salary, subject to
maximum
How it is linked to performance:
G Awards encourage share ownership and
G Vesting takes place after three years with a
further two-year holding period to enjoy tax
benefits
G Dividends may be earned during the holding
align interests with shareholders
G The Remuneration Committee has discretion
to change the percentage of salary awarded
in the event of poor performance
period
Limitation:
Maximum award currently set at £3,600
(or the equivalent in local currency outside
the UK) for Executive Directors.
G Participants must remain in continued
employment for the shares to vest
Significant differences between Executive
Directors and the main body of employees:
None.
6. Recruitment and remuneration
The Recruitment Policy provides the
framework for the attraction and selection
of talented individuals to lead the Company.
Remuneration forms a part of this process and
the Remuneration Committee determines the
remuneration package for the appointment of
any Executive Director position.
Our goal is recruitment of the best candidates
to lead the Company and grow shareholder
value. In undertaking this, we consider:
G The general principles set out in this policy
G What is in the best interests of the Group and
its shareholders, without paying more than
is necessary to secure the best person for
the job
In addition, the Remuneration Committee takes
into account:
G Current incumbent package
G Skills and expertise of the candidate
G Jurisdiction from where the person is
recruited and location of employment
G The appropriate structure of the package
G Comparable market compensation
packages
In doing this, the Remuneration Committee
may consider the “buy-out” of existing equity
or other elements of remuneration forfeited on
leaving a previous employer.
The Remuneration Committee utilises the
services of external recruitment consultants
and its advisors in determining relevant
remuneration packages.
The limitations the Remuneration Committee
imposes on recruitment are as follows:
G The remuneration package will be limited
to base salary, pension benefits, bonus and
share plan participation as applicable in the
policy
G “Buy-out” grants will only be paid in
exceptional circumstances and will be
capped at the current fair value
LTIP this is subject to performance criteria
being achieved. If the executive is considered
a “bad leaver”, then awards will lapse
7. Service contracts
In order to retain key skills and mitigate risk
from unplanned vacancies in key roles, all
Executive Directors have rolling employment
agreements with notice periods.
Our policy is to ensure that no contract extends
beyond a 12-month period and thus the CEO’s
service contracts include a 12-month notice
period by either the Company or the Executive
and the Group CFO’s service contract includes
a six-month notice period by either the
Company or the Executive.
8. Policy of payment for loss of office
To ensure a smooth transition for leadership
roles during times of change, we maintain a
policy on payments for loss of office.
This operates as follows:
G The terms of the service contract and other
legal obligations will be upheld
G The Remuneration Committee will
have the authority to approve any final
payment taking into account the specific
circumstances surrounding the termination,
including but not limited to approved leaver
criteria, performance, service and health
G The Remuneration Committee may make
such payments as are necessary to settle
or compromise any claim or by way of
damages, where it is seen to be in the best
interests of the Company
G The Remuneration Committee may waive
the need for an executive to work any notice
period and may make a payment in lieu
thereof
G If an executive is deemed a “good leaver”,
shares due to vest in the next 12 months will
typically be accelerated. In the case of the
We aim to limit any payments for loss of office
to a maximum of one year’s salary.
9. Non-Executive Directors (NEDs)
Appointment/termination
NEDs, including the Chairman, have letters of
appointment from the Company which contain
their terms of service. NEDs are appointed for
an initial three-year term subject to election
and annual re-election by shareholders, unless
terminated earlier by and at the discretion of
either party upon three months’ written notice.
All Directors (including NEDs) will be subject to
the rotation policy, as contained in the Articles
of Association of the Company, as well as to
the provisions of the Board Charter, the terms
of reference of the various committees and the
Governance Codes adopted by the Company
from time to time.
Remuneration
The remuneration for NEDs is paid as an all-
inclusive fee with no split between base and
attendance fees. The remuneration does not
include any additional benefits, and currently
specifically excludes the participation by NEDs
in any share scheme. However, in light of the
proposed remuneration for the new Chairman
of the Board, we are seeking shareholder
approval at our 2021 Annual General Meeting
to amend Article 63 to enable the package to
be awarded to Darryl. Flexibility will also be
built in to permit awards of equity as part of
the fees for other NEDs in the future if this is
considered appropriate by the Board.
Payment is made on a monthly basis.
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10. External appointments
An Executive Director may be permitted to sit
on external boards, subject to the following:
G The appointment must be to the benefit of
the Director’s development, but should not
be to the detriment of their full-time position
at the Company
G Appointments to external boards must be
declared to the Remuneration Committee
and must be referred to the Board for
approval with a recommendation from the
Remuneration Committee
G Fees earned from an external position would
be retained by the Executive Director in
recognition of the risks attaching to Board
positions
11. Application of discretion
The Remuneration Committee has discretionary
authority in a number of instances which are
set out in the policy (as well as the various share
scheme rules) and how these are applied.
Some such examples include the criteria for
accelerated vesting of shares awarded to good
leavers under the relevant share schemes, the
criteria for awarding SIPs, the interpretation
Annual Report on Remuneration
of definitions within the clawback provisions
of the LTIP rules, payment of relocation costs,
payment of settlement amounts upon ending
of contracts and the moderation element of
individual performance on determination of
bonus payments.
In using its discretion, the Remuneration
Committee will apply the following guiding
principles:
G Always explain use of discretion, including
how and why it is applied
G Discretion will not be used to reward failure
G Any decisions made using discretion will be
reasonable, impartial, procedurally fair and
will take into account all relevant information
G Discretion will be exercised having regard
to the law, contractual entitlements, policies
and the best interests of the Company
G Application of discretion will be consistent
and follow precedent, where possible
G Decisions will be based on supporting
evidence which will be retained
Where there is a discretionary authority in
respect of the grant of bonuses and shares
awarded under the share schemes, the
position of the Remuneration Committee is that
discretion should be used to address the effect
of unforeseen challenges and not as the norm.
In this regard, the Remuneration Committee
will endeavour to reach a discretionary
decision which will be applicable for an agreed
period of time (example: accelerated vesting of
shares for good leavers).
12. Review and amendment of
the policy
The Remuneration Committee has discretion
to amend the terms of the policy. Where any
amendments are required, the Remuneration
Committee will maintain regular and
transparent communication with shareholders
to understand their views on the remuneration
arrangements of the Company.
The Remuneration Policy shall be put to a
non-binding advisory vote of the shareholders
at every third annual general meeting of the
Company. Shareholders will therefore be
asked to vote on the Remuneration Policy at the
Annual General Meeting in 2022.
This section describes the remuneration payments in respect of the financial year ended 29 March 2021 and the operation of the policy for the
forthcoming year.
Executive Remuneration for FY21 (audited)
Name
Nick Devlin
Position
CEO
Shawn Tabak1
CFO (current)
James Crawford2
CFO (former)
Basic
salary/fees
£’000
Benefits
£’000
Annual
bonus
payment
£’000
Long-term
incentives3
£’000
Company
pension
contribution
£’000
306*
94*
157
9
2
13
306
95
160
283
–
282
9
–
29
Other4
£’000
Total 2021
£’000
Total Fixed
2021
£’000
4
38
4
917
229
645
324
96
199
Total
Variable
2021
£’000
593
133
446
* Remuneration has been converted from US dollars to sterling based on an exchange rate of 1.306 for FY21 and 1.272 for FY20.
1 Shawn Tabak joined the Company as Chief Financial Officer on 7 December2020 and was appointed to the Board from 1 January 2021.
2 James Crawford stepped down from the role of Chief Financial Officer on 7 December 2020 and from the Board on 31 December 2020.
3 LTIP comprises the estimated vesting of the July 2016 and July 2018 awards for Nick Devlin and the July 2016 awards for James Crawford based on performance up to March 2021 and valued
using the average share price over Q4 of FY21 of 719.4p. Based on current performance, 100% of the awards are expected to vest which is 39,398 shares for Nick Devlin and 39,181 shares for
James Crawford.
4 Other comprises the value of SIP shares awarded during the year and the value of a buy-out award Shawn Tabak received on joining.
Basic
salary/fees
£’000
229
206
Benefits
£’000
5
42
Annual
bonus
payments
£’000
Long-term
incentives
£’000
Company
pension
contributions
£’000
103
174
53
115
7
38
Total 2020
£’000
397
575
Total Fixed
2020
£’000
241
286
Total
Variable
2020
£’000
156
289
Executive Remuneration for FY20
Position
Nick Devlin1
CEO (Current)
James Crawford
CFO
1 Nick was appointed CEO on 13 June 2019.
76
Annual bonus for FY21
The target annual bonus opportunity for FY21 was 50% of salary for all Executive Directors. Achievements against the performance conditions and
targets are set out in the table below.
Performance condition
Repeat EBIT
Payback from New Customer investment
Net inventory per Repeat Customer (£)
Total
Weighting
40%
40%
20%
100%
Target
18,346
92
57
Maximum Actual performance
38,531
191
12
20,181
102
51
Outturn
(% of element)
80%
80%
40%
200%
Bonus outcomes for Executive Directors
The bonuses payable to the Executive Directors are set out in the table below. Shawn and James’ annual bonus opportunities are pro-rated based on the
period of the financial year served as Chief Financial Officer. Bonuses for FY21 are payable 50% in cash and the remaining 50% is deferred in cash for 12 months.
Executive Director
Nick Devlin
Shawn Tabak
James Crawford
Target annual bonus
opportunity
50% of salary
50% of salary
50% of salary
Total bonus
payable for FY21
(% of salary)
100% of salary
100% of salary
100% of salary
Total bonus
payable for FY21
£’000
306
95
160
Long-term incentives with performance periods substantially completed in FY21
The performance period for the LTIP awards granted in July 2016 (third tranche) and July 2018 to Nick Devlin and the LTIP awards granted in July 2016
(third tranche) to James Crawford will end in 2021. Performance for each award is based solely on TSR performance relative to a comparator group
of UK-based store retailers. Based on performance up to March 2021, it is expected that both the July 2016 and July 2018 LTIP awards will vest in full.
The performance targets and current performance against these targets is set out in the table below. Actual performance and the final vesting will
be provided in next year’s report. Subject to the determination of final performance, which is measured to July 2021, these awards will vest in July 2021.
Award
22 July 2016
9 July 2018
Threshold TSR target
(25% vesting)
Maximum TSR target
(100% vesting)
Median
Upper quartile
Median
Upper quartile
Naked Wines
performance up to
March 2021
Above upper
quartile
Above upper
quartile
Estimated vesting
(% of max)
100%
100%
Long-term incentive awards granted during the year
Conditional share awards were granted to Nick Devlin and James Crawford during the year on 29 July 2020.
Nick Devlin
James Crawford
Date of grant % salary grant
Shares
awarded
Share price
for grant*
Face value
of award
£’000
% vesting at
threshold
performance
End of
performance
period
July 2020
July 2020
150%
100%
136,708
53,090
395p
395p
£540
£210
25%
25%
July 2023
July 2023
* Number of shares determined by reference to the preceding three-month average share price to 29 July 2020.
These awards are eligible to vest in 2023 subject to the achievement of the following performance conditions:
Performance condition
Standstill EBIT
Relative TSR1
Weighting
Threshold target
(25% of element vests)
25%
75%
£15.1m
Median
Maximum target
(100% of
element vests)
£20.3m
Upper quartile
1 TSR performance is measured against a group of international direct retailers comprising:
Farfetch
AO World
Overstock.com
Gear4Music
Stitch Fix
ASOS
Shop Apotheke
Ocado Group
Wayfair
Zalando
HelloFresh
Blue Apron
Zooplus
Hotel Chocolat
boohoo.com
77
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Directors’ Remuneration report
continued
Directors’ shareholdings and share interests
The table below sets out the interests of the Directors (including those of their connected persons) who served on the Board during the year.
Director
Nick Devlin
Shawn Tabak
James Crawford1
Justin Apthorp
Katrina Cliffe
Ian Harding
David Stead
John Carl Walden2
Total beneficially owned shares
30 March
2020
37,907
N/A
138,499
150,000
15,000
12,000
–
26,300
29 March
2021
82,364
N/A
156,672
50,000
15,000
12,000
–
26,300
Unvested LTIP
shares (subject to
performance
conditions)
258,533
N/A
N/A
Unvested shares
(subject to continued
employment only)
Shareholding required
% of salary
Shareholding at
29 March 2021
% of salary
911
N/A
N/A
100%
100%
N/A
618%
–
N/A
1 James Crawford stepped down from the Board on 31 December 2020. Share interests are shown as at the date of stepping down.
2 John Walden stepped down from the Board and his role as Chairman on 6 August 2020. Share interests are shown as at the date of stepping down.
Non-Executive Directors’ remuneration for FY21 (audited)
The table below sets out the fees received by Non-Executive Directors for FY21 and the prior year. Non-Executive Directors are not entitled to receive
any other remuneration except from fees.
Name
John Carl Walden1
Ian Harding2
David Stead
Justin Apthorp
Katrina Cliffe
Gregory Hodder
Total remuneration
Position
Chair of Board
NED/SID/Remuneration Committee Chair/Chairman
NED/SID/Audit Committee Chair
NED
NED/Remuneration Committee Chair
NED
Total fixed fees 2021
£’000
35
85
53
40
43
–
256
Total fixed fees 2020
£’000
80
58
45
40
35
47
305
1 John Walden stepped down from the Board and his role as Chairman on 6 August 2020.
2 Ian Harding was appointed Chairman of the Board on 7 August 2020.
The Remuneration Committee considers the
actual performance targets to be commercially
sensitive and therefore will disclose them
retrospectively in next year’s report.
The bonus deferral structure has changed for
FY22 onwards to encourage Executive Directors
to build their share ownership quicker. Executive
Directors will be required to invest one third of
any bonus earned in shares in the Company.
These shares must then be held for a period
of two years.
As indicated in the annual statement, the
Remuneration Committee is currently in the
process of reviewing the awards of LTIP to
the Executive Directors. Full disclosure of the
LTIP for FY22 will be included in next year’s
Remuneration Report.
Non-Executive Directors
Non-Executive Directors’ fees for FY22 will
remain unchanged with the exception of
the remuneration arrangements for the new
Chairman of the Board, Darryl Rawlings,
who will succeed Ian as Chairman at the
2021 Annual General Meeting. As set out
earlier in this report, Darryl’s remuneration on
appointment will comprise the following:
G A conditional share award grant worth
$525,000, with the number of shares
determined by reference to the average
share price over the 28 trading days prior
to the date of Darryl’s appointment as
Chairman. The award will vest, subject to
continued service, in equal one-third tranches
on the first, second and third anniversaries of
his appointment as Chairman
G In addition, Darryl will have the opportunity
to acquire further shares on a co-investment
basis, up to a maximum of $175,000 worth
of shares. The Company will match shares
purchased on a 1:1 basis in the form of a
conditional share award. Any matching
shares will be required to be held for
the duration of the period of service as
Chairman and for a further one-year period
Darryl will not be entitled to receive any other
fees or benefits in kind in his role as Chairman.
The Non-Executive Directors’ fee structure,
with the exception of the new Chairman’s fee,
remains unchanged for FY22 as follows:
NED
FY22
FY21
£40,000
£40,000
Committee Chair
+£5,000
+£5,000
SID
+£13,000
+£13,000
Katrina Cliffe
Remuneration Committee Chair
On behalf of the Board
June 2021
UK gender mix and gender based pay analysis
% UK employment men : women
First quartile
71
29
Second quartile
67
33
Third quartile
69
31
Fourth quartile
26
74
Total
58
42
Total Shareholder Return performance
The chart below shows the Company’s Total Shareholder Return performance over the last 10 years compared with the FTSE AIM 100 Index. Naked
Wines is a constituent of this index and therefore it is considered an appropriate comparator index to use.
UK gender pay facts
Total Shareholder Return
)
£
(
e
u
a
V
l
250
200
150
100
50
0
28 Mar 11
02 Apr 12
01 Apr 13
31 Mar 14
30 Mar 15
28 Mar 16
03 Apr 17
02 Apr 18
01 Apr 19
30 Mar 20
29 Mar 21
Naked Wines plc
FTSE AIM 100
Operation of the Remuneration Policy in FY22
Executive Directors
Salaries for the Executive Directors will
remain unchanged for FY22, being $400,000
for each of Nick Devlin and Shawn Tabak.
Pension contributions are 4% of salary for both
Executive Directors.
78
Annual bonus opportunity will continue to be
50% of salary at target with the opportunity to
earn 200% of target subject to the achievement
of stretch targets during the year. Performance
conditions for FY22 have been reviewed
and reweighted to include a sales revenue
performance condition weighted one-third
of the opportunity. The payback from net
inventory per Repeat Customer condition
has been removed such that performance
conditions and weightings for FY22 are:
G Sales revenue – 33.3%
G Adjusted EBIT from Repeat Customers – 33.3%
G Value creation from Investment in New
Customers – 33.3%
Hourly mean
pay rate 2021
28.31
18.23
£
Hourly mean
pay rate 2020
17.49
27.60
£
Mean bonuses
paid 2021
14.3
4.0
£’K
Mean bonuses
paid 2020*
3.5
15.7
£’K
Portion of employees
receiving bonus 2021
Portion of employees
receiving bonus 2020*
78.0
69.0
70.0
63.0
%
%
* FY20 figure recalculated for consistency with FY21 basis.
Our UK gender-based pay analysis shows
some positive year-on-year development
but continues to be influenced by two
distorting factors:
G The Group employs a high proportion of
technology and IT roles in the UK where,
despite progress in this area this year, our
team and the market from which we recruit
remains under-represented by female staff
G The last of the historic management
acquisition “lock-in” shares vested during
the year. These shares rewarded founders
of Naked Wines for achieving a minimum
value creation over the period after Naked
was acquired by Majestic Wine in 2015. As
per last year’s analysis, the bonus figures
for the current year are distorted as a result
of an unequal gender split of the founders
of Naked Wines
The Group remains actively engaged in
initiatives to promote gender pay equality.
In the year, we have commissioned an audit
of our current policies and procedures, for
example around recruitment and appraisal,
to ensure gender pay equality, and the
business will act on its findings.
In order to further address gender pay
equality, Naked is working in collaboration
with external consultants to explore and
address areas of cultural bias that may
be continuing to influence our recruitment
and remuneration policy application.
79
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
In addition to their statutory duties, Deloitte
LLP may be also engaged where, as a result
of their position as external auditors, they are
best placed to perform non-audit services. This
includes, for example, the interim review and
other minimal and incidental non-audit work.
Audit Committee report
A systematic approach to controls and risks
The appointment of a Group
Head of Assurance has
enabled a more systematic
approach to mapping
internal controls and
rectifying control
weaknesses.
David Stead
Chair of the Audit Committee
I am pleased to present this report on behalf of
the Audit Committee, whose responsibilities are
set out below.
A significant development in the course of the
year has been the appointment of a Group
Head of Assurance. This has enabled a more
systematic approach to mapping internal
controls and rectifying control weaknesses,
and will bring increased rigour to assessing
the operation of those controls across all
geographies in which the Group does business.
Implementation of the Group’s new accounting
system has now been successfully completed
covering all parts of the Group other than
Australia. A project is now under way to
replace the Group’s inventory management
system, and the Audit Committee will receive
regular updates on progress of this important
development, including independent external
assurance as appropriate.
David Stead
Chairman of the Audit Committee
June 2021
Key responsibilities
The objective of the Audit Committee is to
provide oversight and governance to the
Group’s financial reports, its internal controls
and processes in place, its risk management
systems and the appointment of and
relationship with the external auditor.
In accordance with its Terms of Reference, the
Audit Committee is required, among other
things, to:
G Monitor the integrity of the financial
statements of the Group, reviewing any
significant reporting issues and judgements
they contain
G Advise on the clarity of disclosure and
information contained in the Annual Report
and Accounts
G Ensure compliance with applicable
accounting standards and review the
consistency of methodology applied
G Review the adequacy, effectiveness and
integrity of the internal control and risk
management systems
G Oversee the relationship with the external
auditor, reviewing performance and
providing a fair and balanced assessment
to the Board on their appointment and
remuneration
G Review management’s and the internal
auditor’s reports to ensure the independence
and effectiveness of systems for internal
financial control, financial reporting and
risk management, together with monitoring
management’s responsiveness to internal
audit findings
The Terms of Reference are available on
Naked Wines plc website at https://www.
nakedwinesplc.co.uk/about-us/our-board-
corporate-governance/committees/
Audit Committee governance
The Audit Committee is chaired by David
Stead, who is also the Company’s Senior
Independent Director. David is a chartered
accountant with recent and relevant financial
experience, having served as Chief Financial
Officer of Dunelm Group plc from 2003 to 2015
and again, on an interim basis, in 2018.
The other members of the Audit Committee are
Ian Harding and Katrina Cliffe.
In addition to the permanent members and
Company Secretary, at the invitation of the
Audit Committee, during the year meetings
were also attended by Nick Devlin, Shawn
Tabak, James Crawford (former CFO and now
MD of the UK business), the external auditors,
the Group Finance Director and the Group
Head of Assurance, where relevant.
The Audit Committee meets a minimum of
three times per year, including at least twice
a year with the external auditors present.
The key work undertaken by the Audit
Committee during the year under review
and up to the date of this Annual Report
is detailed below.
Activities of the Audit Committee
during the year
Internal controls and risk management
The Board has overall responsibility for
the system of internal controls and risk
management. The Audit Committee has
reviewed these on behalf of the Board.
The Group has an established set of standards
for internal controls, and adherence to
these standards is confirmed in regular
reporting from management. Following the
appointment of a suitably qualified Group
Head of Assurance in the course of the year, a
comprehensive control mapping exercise has
been carried out. Various recommendations
were made as a result of this exercise and
these are being implemented by management.
The Group Head of Assurance has commenced
a series of reviews of the operating units within
the Group to validate the operation of controls
in practice. In addition, specific “deep dive”
topics have been selected for review by the
Group Head of Assurance in the coming year.
The results of all these reviews will be reported
to the Audit Committee and implementation of
recommendations will be monitored.
The Audit Committee also received and
considered reports from the external auditor,
Deloitte LLP, which included control findings
relevant to their audit.
Management conducts regular reviews
to identify and evaluate the risks faced by
the Group, and to ensure that mitigation
is appropriate. This process was reviewed
by the Audit Committee and is considered
appropriate.
The Board carries out an annual review and
assessment of key risks. The Review of the year
on pages 10 to 63 includes further detail as to
the key business risks identified and actions
being taken.
Significant reporting issues and judgements
The Audit Committee considered a number
of significant reporting matters and
judgements, in respect of which it reviewed the
recommendations of the Finance function and
received reports from the external auditors on
their findings.
These matters included:
G The fair value of the Vendor Loan Note
issued as part of the disposal of the Majestic
Businesses in FY20
G The presentation of “adjusted” profit
alongside statutory profit. The Audit
Committee considered the approach
adopted in previous years and was satisfied
that this approach continues to provide a
useful view of the underlying performance of
the business. With the exception of the share
based payments charge, which is included
in adjusted profit from FY21 onwards but
previously excluded, the approach is being
applied consistently from year to year
and the rationale is clearly disclosed (see
the Financial review on pages 36 to 39 for
details)
G The carrying value of goodwill and other
intangible assets, to determine whether
any impairment had been suffered. The
Audit Committee reviewed the key financial
assumptions underpinning cash flow
projections, the discount and long-term
growth rates applied thereto and the results
of sensitivity analyses. The Audit Committee
was satisfied that no impairment was
required and that appropriate disclosure has
been made (see note 14 on pages 107 and
108 for details.)
The Audit Committee and the Board has
considered the Going Concern paper
presented by management and was satisfied
that the Group will have adequate resources
to continue as a going concern across the
forecast period of more than 12 months from
the signing of these accounts.
As a result of its work, the Audit Committee was
able to confirm to the Board that it considers
this Annual Report and financial statements,
taken as a whole, to be fair, balanced and
understandable.
External audit
The Group’s external auditors since 2014/15
have been Deloitte LLP.
The Audit Committee considers a number of
areas in relation to the appointment of the
external auditors, namely their performance
in discharging the audit, the scope of the audit
and terms of engagement, their independence
and objectivity, and their remuneration.
The Audit Committee reviews the objectivity
and independence of the auditors when
considering reappointment. The external
auditors report to the Audit Committee on
actions taken to comply with professional
and regulatory requirements. They are
required to rotate the lead audit partner every
five years, as a result of which a new audit
partner took responsibility in 2019. There is
also an active, ongoing dialogue between the
Audit Committee and the external auditors
on improvements to the effectiveness and
efficiency of the external audit process.
The Audit Committee has confirmed it is
satisfied with the independence, objectivity
and effectiveness of Deloitte LLP and has
recommended to the Board that they be
reappointed, and there will be a resolution to
this effect at the forthcoming Annual General
Meeting.
80
81
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Directors’ report
As required under the Companies Act, the Directors present their report
and Group financial statements for the year ended 29 March 2021
a) Results and review of the business
The Group income statement is set out on
page 89. The Directors’ report should be read in
conjunction with the Chairman’s letter on pages
14 and 15 and the Strategic report on pages 1 to
63, which together include information about
the Group’s business performance during the
year and indication of future prospects. Details
of significant events since the balance sheet
date are contained in note 33 to the financial
statements. An indication of likely future
developments in the business of the Company
and details of research and development
activities are included in the Financial and
investment review on pages 36-39. Information
about the use of financial instruments by the
Company and its subsidiaries is given in note 25
to the financial statements.
b) Dividends
The Company will not be declaring a final
dividend during the reporting period. The
Directors’ intention continues to be to maintain
a capital allocation policy aimed at maintaining
a healthy balance sheet, investing in growth in a
disciplined manner and returning to shareholders
any funds in excess of the level reasonably
needed to fund growth and manage risk.
c) Strategic report
The Strategic report, which can be found on
pages 1 to 63, sets out the development and
performance of the Group’s business during
the financial year, the position of the Group at
the end of the year and a description of the
principal risks and uncertainties.
d) Significant events since the end of the
financial year
The Company announced the appointment
of Darryl Rawlings as Director on 13 April 2021.
Darryl joined the Board as Non-Executive
Director and will become Chairman at
the conclusion of the 2021 AGM, subject to
shareholders’ approval of his election as director.
At the time of signing the Annual Report and
Accounts, the Directors note that the markets in
which the Group operates are showing positive
signs of economic recovery following the Covid
19 pandemic in the year. There have been
no events since the end of the financial year
which would have a material impact on the
performance or financial position of the Group.
e) Articles of Association and
applicable legislation
With regard to the appointment and
replacement of Directors, the Company is
governed by its Articles of Association, the UK
Corporate Governance Code, the Companies
Act and related legislation. The Articles
themselves may be amended by special
resolution of the shareholders. The powers of
Directors are described in the Board Terms
of Reference and the Corporate Governance
Statement available on the Company’s
website.
82
The Company is subject to the UK City Code on Takeovers and Mergers.
f) Share capital
The authorised and called-up share capital of the Company, together with details of the ordinary
shares allotted and purchased during the year, is shown in note 27 to the financial statements.
In accordance with the AIM Rule 2, in so far as the Company is aware, the percentage of the
Company’s issued share capital that is not in public hands as at 17 May 2021 is 0.22%. This
percentage comprises the holdings of Directors and related parties.
g) Major shareholders
At 17 May 2021, the following interests of shareholders in excess of 3% have been notified to
the Company:
Shareholder
Conifer Capital Mgt (New York)
JMX Capital
Punch Card Mgt (Florida)
Morgan Stanley (London)
Anthorp Family
Baillie Gifford & Co
h) Political donations
No political donations were made during the
reporting period.
i) Directors’ indemnities and insurance
The Company maintains directors’ and officers’
liability insurance, which is reviewed annually
and is permitted under the Company’s
Articles of Association and the Companies
Act 2006. The Company agrees to indemnify
each Director against any liability incurred
in relation to acts or omissions arising in the
ordinary course of their duties. The indemnity
applies only to the extent permitted by law.
No Directors were indemnified during the year.
j) Annual General Meeting
The Annual General Meeting will be held at
4:30pm on 5 August 2021 at the offices of Allen
& Overy LLP, One Bishops Square, London E1
6AD. The Notice of Annual General Meeting,
which sets out the resolutions to be proposed
at the forthcoming Annual General Meeting, is
enclosed with this Annual Report.
The Notice specifies deadlines for exercising
voting rights and appointing a proxy or proxies
to vote in relation to resolutions to be passed
at the Annual General Meeting. All proxy votes
will be counted and the numbers for, against
or withheld in relation to each resolution will be
announced at the Annual General Meeting and
published on the Company’s website.
k) Approval of the Directors’ remuneration
report at the last AGM
The Directors’ remuneration report was last
tabled for approval by the shareholders of
the Company at the last Annual General
Meeting held on 6 August 2020 by means of a
non-binding advisory vote. The shareholders
approved the resolution relating to the 2020/21
Directors’ remuneration by a majority of
90.74%, with 9.20% of votes cast against and
0.06% votes withheld. Shareholders will be
Number of ordinary shares
held
6,246,610
5,675,206
5,380,461
5,137,411
4,086,600
2,436,863
Ordinary shares as % of
issued share capital
8.54
7.76
7.35
7.03
5.59
3.33
asked to vote on the Directors’ remuneration
policy at the Annual General Meeting in 2022.
l) Financial reporting
The Group’s trading performance is monitored
on an ongoing basis. An annual budget
is prepared and specific objectives and
targets are set. The budget is reviewed and
approved by the Board and a re-budgeting
exercise is carried out at least once during the
financial year. The key trading aspects of the
business are monitored weekly and internal
management accounts are prepared monthly.
The results are compared with budget and
prior year performance. The Group’s financial
risk management objectives and policies are
discussed in note 25 to the financial statements.
m) Modern slavery
We take the issue of modern slavery very
seriously. This is addressed as part of our
Sustainability Report and our anti-slavery
statement is available here: https://www.
nakedwinesplc.co.uk/about-us/our-
board-corporate-governance/corporate-
governance/
n) Key performance indicators
The Group monitors a number of performance
indicators, both financial and non-financial.
See pages 24-25 for a full list of KPIs.
o) Disclosure of information to auditor
In accordance with section 418 of the
Companies Act 2006, each Director who
held office at the date of this Directors’ report
confirms that, as far as he or she is aware,
there is no relevant audit information of which
the Group’s auditor is unaware, and he or she
has taken all the steps that he or she ought
to have taken as a Director in order to make
himself or herself aware of any relevant audit
information and to establish that the Group’s
auditor is aware of that information.
Statement of Directors’ responsibilities
p) Board of Directors
Details of the Board of Directors can be found
on pages 64 and 65.
q) Stakeholder engagement
Please refer to the section 172(1) statement on
page 42 and to the stakeholder engagement
initiatives mentioned on pages 43 to 46
regarding: (i) how the Directors have engaged
with employees and have had regard to their
interests during the financial year; and (ii) how
the Directors have had regard to the need to
foster the Company’s business relationships
with suppliers, customers and others, and the
effect of that regard.
r) Disabled employee engagement
See page 60 for our accreditation as a
Disability Confident Employer.
s) Greenhouse gas emissions reporting
The Company is required to disclose its UK
energy use and associated greenhouse gas
emissions (GHG) under the Streamlined Energy
and Carbon Reporting (SECR) Regulations.
Starting from this year, the Company is now
reporting its energy use and associated
greenhouse gas emissions on a global basis,
not just for the UK. Details of our report are set
out on page 60 of the Strategic Report.
Energy efficiency actions taken:
During the reporting period we have taken a
number of steps to improve energy efficiency.
These include:
G Worked closely with our winemakers,
growers and suppliers towards achieving
a more sustainable winemaking in our
supply chain aimed at significantly reducing
greenhouse emissions (GHG) in the following
areas:
– Cultivation
– Winemaking
– Glass bottles
– Imports
G Reduced our average bottle weights
to provide direct material savings and
reduction in logistics emissions
G Some of our winemakers have actively
produced organic wines and encouraged
biodiversity in the vineyard
Reporting boundary and methodology
We have followed the 2019 UK Government
Environmental Reporting Guideline. We have
used the GHG Protocol Corporate Accounting
and Reporting Standard (revised edition) and
emission factors from the UK Government’s GHG
Conversion Factors for Company Reporting 2019
to calculate the above disclosures.
Directors’ responsibility statement
The Directors are responsible for preparing
the Annual Report and the Group and parent
company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare
such financial statements for each financial
year. Under that law, and as required by the
AIM rules, the Directors are required to prepare
the Group financial statements in accordance
with International Financial Reporting Standards
(IFRSs) as adopted by the European Union (EU)
and Article 4 of the IAS Regulation and have
also chosen to prepare the Company financial
statements in accordance with Financial
Reporting Standard 101 Reduced Disclosure
Framework. Under company law the Directors
must not approve the financial statements
unless they are satisfied that they give a true
and fair view of the state of the affairs of the
Group and parent company and of their profit
or loss for that period.
In preparing each of the Group and parent
company financial statements, the Directors
are required to:
G Select suitable accounting policies and then
apply them consistently
G Make judgements and accounting estimates
that are reasonable and prudent
G State whether Financial Reporting Standard
101 Reduced Disclosure Framework has been
followed, subject to any material departures
disclosed and explained in the financial
statements
G Prepare the financial statements on the
going concern basis unless it is inappropriate
to presume that the Group and parent
company will continue in business
In preparing the Group financial statements,
International Accounting Standard 1
Presentation of Financial Statements requires
that Directors:
G Properly select and apply accounting
policies
G Present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information
G Provide additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users
to understand the impact of particular
transactions, other events and conditions on
the Group’s financial position and financial
performance
G Assess the Group’s ability to continue as a
going concern
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group and
parent company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Group and parent
company and enable them to ensure that
the financial statements comply with the
Companies Act 2006. They are also responsible
for safeguarding the assets of the Group
and parent company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Group’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
G The financial statements, prepared in
accordance with the relevant financial
reporting framework, give a true and fair
view of the assets, liabilities, financial position
and profit or loss of the Group and parent
company and the undertakings included in
the consolidation taken as a whole
G The Strategic report includes a fair review
of the development and performance of
the business and the position of the Group
and the undertakings included in the
consolidation taken as a whole, together
with the description of the principal risks
and uncertainties that they face
G The Annual Report and financial statements,
taken as a whole, are fair, balanced and
understandable and provide the information
necessary for the shareholders to assess the
Group and parent company’s position and
performance, business model and strategy
This responsibility statement was approved
by the Board of Directors on 10 June 2021 and
signed on its behalf below.
Auditor
A resolution to reappoint Deloitte LLP as
auditor of the Group will be put to the Annual
General Meeting.
The Directors will also be given the authority to
fix the auditor’s remuneration.
Approved by the Board of Directors
Nicholas Devlin
Chief Executive Officer 10 June 2021
Shawn Tabak
Chief Financial Officer 10 June 2021
Registered in England and Wales No. 2281640
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Report on the audit of the financial statements
1. Opinion
In our opinion:
G the financial statements of Naked Wines Plc (the ‘parent company’)
and its subsidiaries (the ‘group’) give a true and fair view of the state of
the group’s and of the parent company’s affairs as at 29 March 2021
and of the group’s loss for the period then ended;
G the group financial statements have been properly prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards (IFRSs) as issued by the International
Accounting Standards Board (IASB);
G the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101
“Reduced Disclosure Framework”; and
G the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
G the group income statement;
G the group statement of comprehensive income;
G the group and parent company statements of changes in equity;
G the group and parent company balance sheets;
G the group cash flow statement; and
G the related notes 1 to 35.
The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law, and
international accounting standards in conformity with the requirements
of the Companies Act 2006 and IFRSs as issued by the IASB. The financial
reporting framework that has been applied in the preparation of the
parent company financial statements is applicable law and United
Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework” (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditor’s responsibilities for
the audit of the financial statements section of our report.
We are independent of the group and the parent company in
accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the Financial Reporting
Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit
matters
Materiality
Scoping
The key audit matter that we identified in the current
year was:
G Risk of fraudulent recognition of revenue through
management override of controls over manual
adjustments.
The materiality that we used for the group financial
statements was £3.5 million which was determined
using group revenue as the key benchmark.
We have performed full scope audit procedures over
100% of the Group’s revenue, 99% of the Group’s loss
before tax, and 94% of net assets. The remaining areas
not in scope were subject to analytical procedures.
Significant
changes in
our approach
There have been no significant changes in our approach
in the period to 29 March 2021 compared to the prior
period.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s and parent
company’s ability to continue to adopt the going concern basis of
accounting included:
G Obtaining independent confirmations of the Group’s significant
cash on hand position, combined with the absence of any financing
facilities, and assessed its ability to independently meet its liabilities
as they fall due.
G Evaluation of management’s cash flow forecasts and challenge of key
assumptions used in their preparation, through comparison to historic
performance and external data sources. This included evaluation of
the business model and medium-term risks, including Covid-19, Brexit
and climate change, to assess whether the recent significant growth
trends are considered likely to continue going forwards.
G Consideration of the amount of headroom in the forecasts, including
sensitised downside scenarios, to assess the likelihood of conditions
arising which result in the Group’s inability to meet its liabilities as
they fall due.
G Evaluation of the model used to prepare the forecasts, testing of
clerical accuracy of those forecasts and our assessment of the
historical accuracy of forecasts prepared by management.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group’s and parent
company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised
for issue.
Our responsibilities and the responsibilities of the directors with respect
to going concern are described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
5.1. Risk of fraudulent recognition of revenue through management override of controls over manual adjustments
Key audit matter description
The group generated revenue from continuing operations of £340.2m in the period ended 29 March 2021 (2020:
£202.9m). Revenue consists of sales of wine to subscription and one-off customers and is recognised on delivery
of the goods provided.
Revenue is a key metric when evaluating the performance of the business, and receives ongoing scrutiny externally
and internally due to management’s growth strategy for the online retail business. Consistent with prior year, we
identified a potential risk of bias or fraud through management manipulation of revenue journal entries. As Naked
Wines is an online retail business, sales journals are collated based on data recorded automatically in the online
sales system at point of order. Given the high volume and low value of individual sales transactions, we considered
the risk of material error to be as a result of manual journals posted by management to override financial reporting
processes and controls in order to manipulate results.
The accounting policy for revenue recognition is on page 98.
How the scope of our
audit responded to
the key audit matter
In order to address the risk of fraudulent recognition of revenue due to management override, our procedures
included:
G Obtaining an understanding of the relevant controls over the recognition of revenue and management override.
G Assessing the revenue recognition policy to understand characteristics that might indicate revenue journal entries
outside the normal course of business.
G Using our data analytics tools to identify a population of manual entries to revenue, from which we have selected
a sample of items. We have challenged management on the business rationale for these entries and agreed these
to supporting evidence .
G Performing a historical monthly gross margin analysis to identify and investigate any unusual trends or fluctuations
in the data which were not in line with our knowledge of the business.
As a result of the procedures performed, we concluded that manual revenue adjustments had been recognised
appropriately in accordance with the revenue recognition policy and accounting standards and were not indicative
of bias or fraud effected by management override.
Key observations
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results
of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Materiality
£3.5m (2020: £2.5m)
Basis for determining
materiality
1.1% of Group revenue.
Rationale for the
benchmark applied
In line with the previous year we determined materiality based on revenue from
continuing operations given that the Naked Wines group is focussed on growth
and therefore revenue is the key measure of overall performance used by
stakeholders. As the group is currently pursuing a reinvestment strategy, profits
are volatile and do not represent a stable measure on which to base materiality.
Parent company financial statements
£1.9m (2020: £1.2m)
Parent company materiality equates to
1.8% of net assets, which is capped at 80% of
group materiality.
As the parent company is non-trading
and there are no sales or profit measures,
we have determined net assets to be the
appropriate benchmark.
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Report on the audit of the financial statements continued
6. Our application of materiality (continued)
Revenue
£340m
Group materiality
£3.5m
Component materiality
range £1.2m to £1.9m
Audit Committee reporting
threshold £0.175m
Revenue
Group materiality
6.2. Performance materiality
We set performance materiality at a level lower than materiality to
reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a
whole.
Performance
materiality
Basis and rationale
for determining
performance
materiality
Group financial
statements
70% (2020: 70%) of
group materiality
Parent company financial
statements
70% (2020: 70%) of
parent company
materiality
We have set performance materiality at this
level reflecting the following factors, namely:
G No significant changes in the nature of the
business. Consistent with prior year, following
the disposal of the high street and fine wine
divisions, the Group is simplified and less
exposed to high street retail risks.
G The nature, size and volume of adjustments
identified in the prior year and whether these
occurred in the continuing or discontinued
parts of the business.
G The quality of the control environment. We
do not place reliance on internal controls.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £175k (2020: £125k), as well as
differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation of the
financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Naked Wines Plc are 100% owners of Naked Wines International Ltd,
which acts as a holding company for the three Naked Wines trading
companies, based in the USA, the UK and Australia, as well as the non-
trading components.
Our group audit was scoped on a subsidiary entity basis, assessing
components against the risk of material misstatement at the group
level. We considered group wide controls, and the quantum of financial
statement balances and individual financial statement transactions of a
significant nature.
86
We performed full scope audit procedures on all significant trading
companies in the UK, USA and Australia. The results taken together for
these entities account for 100% of the Group’s revenue, 99% of the Group’s
loss before tax, and 94% of net assets.
All UK entities were audited by one team in the UK led by the Senior
Statutory Auditor. Audit work at all audit locations was executed at a local
component materiality level determined by reference to the scale of the
business, with all entities using a materiality lower than group materiality.
Component materiality applied ranged from £1.2 million to £1.9 million
(2020: £875k to £1.2 million).
At the parent entity level, we tested the consolidation process including
any consolidation adjustments. Procedures performed to test
consolidation adjustments included assessing the business rationale for
the entries and agreeing to supporting evidence. We have carried out
analytical procedures to confirm there were no material misstatements
in the aggregated financial information of the group’s non trading
subsidiaries that were not subject to full scope audit.
7.2. Working with other auditors
We have engaged with component audit teams to perform work
over the USA and Australia trading divisions, which are both full scope
components in the current year. Detailed instructions were sent to the
USA and Australia component audit teams, who were included in team
briefings to discuss risk assessment.
We have held calls with component audit teams, including close meetings
at the conclusion of the audit work which were attended by the Senior
Statutory Auditor. Due to travel restrictions in place as a result of the
Covid-19 outbreak we have not visited components in person but have
obtained remote access to working papers in order to review the work
performed on a selective basis and have reviewed component reporting
documents.
8. Other information
The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information
contained within the annual report.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the course of the
audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the
directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
– the internal controls established to mitigate risks of fraud or non-
compliance with laws and regulations;
G the matters discussed among the audit engagement team including
significant component audit teams and relevant internal specialists,
including tax, valuations, IT, and financial instruments specialists,
regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud.
In preparing the financial statements, the directors are responsible for
assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s
report.
11. Extent to which the audit was considered capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is detailed below.
11.1.Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect
of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
G the nature of the industry and sector, control environment and business
performance including the design of the group’s remuneration
policies, key drivers for directors’ remuneration, bonus levels and
performance targets;
G the group’s own assessment of the risks that irregularities may occur
either as a result of fraud or error that was approved by the board;
G results of our enquiries of management, internal audit, those
charged with governance, and the audit committee about their own
identification and assessment of the risks of irregularities;
G any matters we identified having obtained and reviewed the group’s
documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and
whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they
have knowledge of any actual, suspected or alleged fraud;
As a result of these procedures, we considered the opportunities and
incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud in the following areas: Risk of fraudulent
recognition of revenue through management override. In common
with all audits under ISAs (UK), we are also required to perform specific
procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory
framework that the group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of
material amounts and disclosures in the financial statements. The key
laws and regulations we considered in this context included the UK
Companies Act, AIM rules, tax legislation and pensions legislation.
In addition, we considered provisions of other laws and regulations that
do not have a direct effect on the financial statements but compliance
with which may be fundamental to the group’s ability to operate or to
avoid a material penalty. These included local licensing and alcohol laws,
and the UK Bribery act.
11.2.Audit response to risks identified
As a result of performing the above, we identified risk of fraudulent
recognition of revenue through management override as a key audit
matter related to the potential risk of fraud. The key audit matters section
of our report explains the matter in more detail and also describes the
specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified
included the following:
G reviewing the financial statement disclosures and testing to supporting
documentation to assess compliance with provisions of relevant laws
and regulations described as having a direct effect on the financial
statements;
G enquiring of management, the audit committee and in-house legal
counsel concerning actual and potential litigation and claims;
G performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud. This included use of data analytics tools
over revenue and inventory to 100% reconcile the general leger
population to supporting evidence.
G reading minutes of meetings of those charged with governance,
reviewing internal audit reports and reviewing any correspondence
with HMRC; and
G in addressing the risk of fraud through management override of
controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and evaluating
the business rationale of any significant transactions that are unusual
or outside the normal course of business.
We also communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members including internal
specialists and significant component audit teams, and remained alert
to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
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Report on other legal and regulatory requirements
Group income statement
For the year ended 29 March 2021
12. Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
G the information given in the strategic report and the directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
G the strategic report and the directors’ report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the
parent company and their environment obtained in the course of the
audit, we have not identified any material misstatements in the strategic
report or the directors’ report.
13. Matters on which we are required to report by
exception
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
G we have not received all the information and explanations we require
for our audit; or
G adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
G the parent company financial statements are not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters.
13.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of directors’ remuneration have not been
made.
We have nothing to report in respect of this matter.
14. Use of our report
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for
this report, or for the opinions we have formed.
Paul Schofield FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Cambridge, United Kingdom
10 June 2021
Continuing operations
Revenue
Cost of sales
Gross profit
Fulfilment costs1
Advertising costs2
General and administrative costs
Fair value loss arising on deferred contingent consideration net of settlement
Operating loss
Net finance income/(charges)
Loss before tax from continuing operations
Analysed as:
Adjusted loss before tax3
Adjusted items*:
G Non-cash charges relating to acquisitions
G Other adjusted items
Loss before tax from continuing operations
Tax
Loss from continuing operations
Discontinued operations
Profit from discontinued operations, net of tax
(Loss)/profit for the period
Loss per share – continuing operations
Basic and diluted
(Loss)/earnings per share – total Group
Basic
Diluted
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
340,226
(204,732)
135,494
(58,294)
(42,334)
(42,675)
(3,868)
(11,677)
1,002
(10,675)
202,911
(125,352)
77,559
(34,955)
(19,757)
(27,721)
–
(4,874)
(501)
(5,375)
(514)
(2,896)
(3,646)
(6,515)
(10,675)
635
(10,040)
–
(10,040)
(3,646)
1,167
(5,375)
(1,310)
(6,685)
14,837
8,152
(13.8p)
(9.3p)
(13.8p)
(13.8p)
11.3p
11.1p
Note
6
6
7
8
10
7
7
11
30
13
13
13
1.
2.
3.
Previously disclosed as distribution costs. The description has been changed to fulfilment costs as it is more relevant to the function and nature of the costs.
As the business has expanded, advertising expenditure has become a very significant portion of the Group’s general and administrative costs. As such, the Directors have chosen to disclose
amounts spent on media and associated spend separately on the face of the income statement (see note 3.7 for further details). General and administrative costs and advertising spend in the
prior year have been reanalysed accordingly on this basis.
Share based payment charges have been reclassified in the period from adjusted items and are included within adjusted loss before tax in the year ended 29 March 2021. Comparatives have
been reclassified accordingly.
88
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Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Group statement of comprehensive income
For the year ended 29 March 2021
Group statement of changes in equity
For the year ended 29 March 2021
(Loss)/profit for the period
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive losses
Total comprehensive (loss)/income for the period
Year ended
29 March 2021
£’000
(10,040)
Year ended
30 March 2020
£’000
8,152
(1,282)
(1,282)
(11,322)
(1,320)
(1,320)
6,832
The total comprehensive loss for the year and the profit for the prior year are wholly attributable to the equity holders of the parent company, Naked
Wines plc.
At 1 April 2019
5,411
21,116
(17)
363
2,701
Called-up
share
capital
£’000
Note
Share
premium
£’000
Capital reserve
– own shares
£’000
Capital
redemption
reserve
£’000
Currency
translation
reserve
£’000
Adjustment on initial application of IFRS 16
Profit for the period
Other comprehensive losses for the period
Total comprehensive profit for the period
Shares issued
Credit to equity for equity-settled share
based payments
Dividends paid
Deferred tax on share based payment
At 30 March 2020
Loss for the period
Other comprehensive losses for the period
Total comprehensive loss for the period
Shares issued at par
Credit to equity for equity-settled share
based payments
Transfer of shares to employee benefit
trust account
Deferred tax on share based payment
At 29 March 2021
27
29
12
11
27
29
27
11
–
–
–
–
55
–
–
–
–
–
–
–
46
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,466
21,162
(17)
363
–
–
–
21
–
–
–
–
–
–
–
–
–
–
5,487
21,162
–
–
–
–
–
17
–
–
–
–
–
–
–
–
–
Retained
earnings
£’000
79,577
36
8,152
–
8,152
(53)
1,695
(3,786)
(397)
85,224
(10,040)
–
(10,040)
(21)
777
(17)
331
Total
shareholders’
funds
£’000
109,151
36
8,152
(1,320)
6,832
48
1,695
(3,786)
(397)
113,579
(10,040)
(1,282)
(11,322)
–
777
–
331
–
–
(1,320)
(1,320)
–
–
–
–
1,381
–
(1,282)
(1,282)
–
–
–
–
363
99
76,254
103,365
90
91
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Group balance sheet
As at 29 March 2021
Group cash flow statement
For the year ended 29 March 2021
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Deferred tax assets
Other receivables
Current assets
Inventories
Trade and other receivables
Financial instruments at fair value
Cash and cash equivalents
Assets classified as held for sale
Total assets
Current liabilities
Trade and other payables
Deferred Angel and other income
Lease liabilities
Provisions
Bond financing
Financial instruments at fair value
Non-current liabilities
Provisions
Lease liabilities
Deferred tax liabilities
Total liabilities
Net assets
Shareholders’ funds
Called-up share capital
Share premium
Capital reserve – own shares
Capital redemption reserve
Currency translation reserve
Retained earnings
Equity shareholders’ funds
Note
29 March 2021
£’000
30 March 2020
£’000
14
15
16
17
11
19
18
19
25
20
21
22
24
26
23
25
26
24
11
27
27
27
27
27
33,982
1,452
2,780
855
3,993
9,520
52,582
76,130
7,168
41
85,148
168,487
–
168,487
221,069
(40,757)
(69,902)
(645)
(1,570)
(30)
(1,405)
35,996
1,234
5,289
899
3,309
13,005
59,732
69,935
5,737
539
54,736
130,947
953
131,900
191,632
(26,046)
(43,632)
(1,165)
(1,165)
(84)
(143)
(114,309)
(72,235)
(393)
(2,231)
(771)
(3,395)
(117,704)
103,365
5,487
21,162
–
363
99
76,254
103,365
(348)
(4,198)
(1,272)
(5,818)
(78,053)
113,579
5,466
21,162
(17)
363
1,381
85,224
113,579
Cash generated by operating activities
Cash generated/(used) by operations
UK income tax paid
Overseas income tax paid
Net cash generated/(used) by operating activities – continuing operations
Net cash generated by operating activities – discontinued operations
Net cash generated by operating activities
Cash flows from investing activities
Disposal of discontinued operations, net of cash disposed of
Interest received, including interest received on the vendor loan note
Purchase of property, plant and equipment
Purchase of intangible fixed assets
Proceeds received on settlement of deferred contingent consideration
Proceeds from sale of asset held for resale
Net cash (used in)/from investing activities – continuing operations
Net cash used in investing activities – discontinued operations
Net cash (used in)/from investing activities
Cash flows from financing activities
Interest paid (including lease interest)
Issue of ordinary share capital
Repayments of principal under lease liabilities
Repayment of borrowings
Equity dividends paid
Net cash used in financing activities – continuing operations
Net cash used in financing activities – discontinued operations
Net cash used in financing activities
Net increase in cash
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
The financial statements of Naked Wines plc (company registration number 02281640) were approved by the Board and authorised for issue on
10 June 2021 and were signed on its behalf by Shawn Tabak.
92
Note
32
32
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
34,207
274
(880)
33,601
–
33,601
–
559
(845)
(1,824)
175
953
(982)
–
(982)
(116)
–
(904)
(54)
–
(1,074)
–
(1,074)
31,545
54,736
(1,133)
85,148
(117)
(276)
(268)
(661)
22,290
21,629
63,761
–
(569)
(544)
–
–
62,648
(2,430)
60,218
(344)
53
(1,153)
(22,459)
(3,786)
(27,689)
(6,625)
(34,314)
47,533
6,997
206
54,736
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Notes to the financial statements
1 General information
Naked Wines plc, “the Company” is a public limited company and is
incorporated in the United Kingdom under the Companies Act 2006
and is registered in England and Wales. The Company is the ultimate
controlling party of the Naked Group and its ordinary shares are traded
on the Alternative Investment Market (AIM).
The Company’s registered address is Norvic House, Chapel Field Road,
Norwich, NR2 1RP. The Group’s principal activity is the direct to consumer
retailing of wine. The Company’s principal activity is to act as a holding
company for its subsidiaries.
2 Adoption of new and revised standards
The following new amendments that are required to be adopted in
annual periods beginning on 1 January 2020, did not have an impact on
the financial statements of the Group:
IFRS
Amendments to IFRS 9, IAS 39
and IFRS 7
Amendment to IFRS 16
Subject
Interest Rate Benchmark Reform
Impact of the initial application of
Covid-19-Related Rent Concessions
Amendments to References to the Conceptual Framework in
IFRS Standards
Amendments to IFRS 3
Definition of a business
Amendments to IAS 1 and IAS 8
Definition of material
At the date of authorisation of these financial statements, the Group has
not applied the following new and revised IFRSs that have been issued
but are not yet effective.
Effective date
1 June 2020
IFRS
Amendment to IFRS 16 COVID-19-Related Rent
Subject
1 January 2021
Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4
and IFRS 16
Concessions
Interest Rate Benchmark
Reform – Phase 2
1 January 2022
Amendments to IFRS 3 Reference to the
The Directors do not expect that the adoption of the Standards listed
above will have a material impact on the financial statements of the
Group in future periods.
3 Accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise
stated.
3.1 Basis of accounting
The financial statements have been prepared in accordance with the
International Financial Reporting Standards and International Accounting
Standards as issued by the International Accounting Standards Board
(IASB) and Interpretations (collectively IFRSs).
The financial statements have also been prepared in accordance with
international accounting standards in conformity with the requirements
of the Companies Act 2006.
The Group’s financial reporting year represents the 52 weeks to 29 March
2021 and the prior financial year, 52 weeks to 30 March 2020.
The consolidated financial statements are presented in GBP, the
functional and presentational currency of the parent company.
The financial statements have been prepared on a historical cost basis
except for financial instruments which are measured at fair values as at
the end of each reporting period, as explained in the accounting policies
below.
The preparation of financial statements in conformity with adopted IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the
Group’s accounting policies.
The Company has taken advantage of the exemption provided in section
408 of the Companies Act 2006 not to publish its individual income
statement and related notes. The Company has not made any other
comprehensive income and consequently has not presented a statement
of comprehensive income for the year.
Amendments to IAS 16 Property, Plant and
Conceptual Framework
Equipment – Proceeds
before Intended Use
Amendments to IAS 37 Onerous Contracts – Cost
3.2 Going concern
The Directors have, at the time of approving the financial statements,
a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the
foreseeable future.
Annual Improvements
to IFRS Standards
2018–2020 Cycle
1 January 2023
Amendments to IAS 1
of Fulfilling a Contract
Amendments to IFRS 1
First-time Adoption of
International Financial
Reporting Standards, IFRS
9 Financial Instruments,
IFRS 16 Leases, and IAS 41
Agriculture
Classification of Liabilities
as Current or Non-current
IFRS 17
Insurance Contracts
Available for
optional adoption/
effective date
deferred indefinitely
IFRS 10 and IAS 28
(amendments)
Sale or Contribution
of Assets between an
Investor and its Associate
or Joint Venture
94
As part of the Group’s going concern assessment, management has
produced forecasts that have been sensitised to model plausible but
severe downside scenarios and their impact on the Group and its global
markets, which have been reviewed by the Audit Committee and the
Board of Directors. These forecasts demonstrate that the Group has
access to sufficient cash reserves (net cash £85.1m at 29 March 2021),
for the forecast period of more than 12 months beyond the date of the
signing of these financial statements, to enable the Group to meet its
obligations as they fall due.
Accordingly, the Directors continue to adopt the going concern basis of
accounting in preparing the financial statements.
3.3 Basis of consolidation
The consolidated financial statements include the financial statements of
Naked Wines plc and entities controlled by the Company (its subsidiaries).
Control is achieved where the Company has:
G Power over the investee;
G Is exposed, or has rights, to variable return from its involvement
with the investee; and
G Has the ability to use its power to affect its returns.
level of returns on a portfolio level using the expected value method. As
an almost exclusively consumer facing business, we do not provide credit
terms to our customers.
No warranties or related obligations are offered.
Sale of goods
Revenue from the sale of goods represents the sale of principally wine
and some spirits through the Group’s direct to consumer ecommerce
channel.
The Group reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the
three elements of control listed above.
Revenue comprises the fair value of consideration received or receivable
for the sale of goods and services in the ordinary course of the Group’s
activities.
The results of subsidiaries acquired or disposed of during the period are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
The Group does not offer payment terms and dispatches goods when
funds have been received from customers. As such it does not have any
significant payment term arrangements.
Accounting policies of subsidiaries have been changed where necessary
to ensure consistency with the policies adopted by the Group.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
3.6 Cost of sales
Cost of sales consists of the cost of the product, primarily wine,
including excise duties, credit card processing charges and online
selling teams’ costs.
3.4 Presentation of adjusted items
The Group’s income statement and segmental analysis separately
identify trading results before certain adjusted items. The Directors
believe that presentation of the Group’s results in this way is relevant
to understanding the Group’s financial performance by providing
additional useful information for shareholders on underlying trends and
performance. Adjusted items are identified by virtue of their size, nature
or incidence. This presentation is consistent with the way that financial
performance is measured by management and reported to the Board
and provides a meaningful analysis of the trading results of the Group.
In determining whether an event or transaction should be adjusted for,
management considers quantitative as well as qualitative factors such as
the frequency or predictability of the item. Details of adjusted items can
be found in note 7.
3.5 Revenue
Revenue is recognised in accordance with IFRS 15 as performance
obligations are fulfilled to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Prior to a customer placing an order for wine, amounts received from
Angels are recognised as a financial liability under the terms of IFRS 9
and are therefore not considered to be a contract liability in accordance
with the requirements of IFRS 15.
Variable consideration, specifically to the Group, consideration that may
be subject to refund and return, is recognised when it is highly probable
that a significant reversal in the amount of cumulative revenue will not
occur when the related uncertainty is resolved. A provision is made on
the basis of observed experience to adjust revenue for the element
of sale which is still subject to performance uncertainty. Revenue is
recognised when the customer obtains control of their purchase and
there is reasonable certainty regarding the recovery of the consideration.
Specifically to the Group, the performance obligations of the Group are
deemed to be fulfilled when our product is delivered to our customer
or Angel, which is typically within one to three days following dispatch.
The adjustment for unfulfilled contract income included as part of the
deferred Angel balance is considered to be immaterial and therefore no
further disclosure is made of this balance in the notes to the accounts.
The Group uses its accumulated historical experience to estimate the
Naked Wines generally trades with its suppliers on a simple purchase
price agreement with no complex buying arrangements in place. Any
supplier incentives, rebates and discounts are simple in nature and are
recognised within cost of sales as they are earned.
3.7 Advertising costs
Advertising costs comprise the cost of media spend, partner spend, cost
of inserts and other advertising and marketing spend related to the
acquisition of new customers.
3.8 General and administrative costs
General and administrative costs principally comprise salaries and bonus
costs for global support and Group corporate functions and global
technology and legal and professional costs. General and administrative
costs includes staff and other support costs of global advertising and
marketing functions.
3.9 Finance income and charges
Finance charges comprise interest on lease liabilities. Finance income
comprises interest receivable on funds invested, positive cash balances
and accrued income on the vendor loan note (see 3.23 below).
3.10 Share based payments
The Group operates a number of equity-settled share based
compensation plans. The fair value of the employee services received in
exchange for the grant of shares or options is recognised as an expense
over the vesting period. The total amount to be expensed over the vesting
period is determined by reference to the fair value of shares or options
granted, excluding the impact of any non-market vesting conditions (for
example, profitability and sales growth targets). Non-market vesting
conditions are included in assumptions about the number of shares or
options that are expected to vest. At each balance sheet date, the Group
revises its estimates of the number of shares or options that are expected
to vest and recognises the impact of the revision to original estimates, if
any, in the income statement, with a corresponding adjustment to equity.
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continued
3 Accounting policies (continued)
3.11 Tax
Income tax on the profit or loss for the year comprises current and
deferred tax.
Current tax
Income tax is recognised in the income statement. Current tax is the
expected tax payable on the taxable income for the year, using tax
rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax
Deferred taxation is accounted for in respect of temporary differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in computation
of taxable profit. Deferred tax is measured at the tax rates that are
expected to apply in the periods in which the asset or liability is
settled based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date. It is recognised in the
income statement except when it relates to items credited or charged
directly to other comprehensive income, in which case the deferred tax is
also recognised in equity.
Deferred tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary
difference can be utilised. Their carrying amount is reviewed at each
balance sheet date on the same basis. Deferred tax assets and liabilities
are offset when they relate to income taxes levied by the same taxation
authority and when the Group intends to settle its current tax assets and
liabilities on a net basis.
Deferred income tax liabilities are recognised for all temporary
differences, except where the deferred income tax liability arises from
the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and at the time of the transaction
affects neither the accounting profit nor taxable profit or loss and in
respect of taxable temporary differences associated with investments in
subsidiaries where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary difference will not
reverse in the foreseeable future.
3.12 Foreign currencies
Transactions in foreign currencies are translated at the exchange rate on
the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies at the balance sheet date are translated at the
exchange rate ruling at that date. Foreign exchange differences arising
on translation are recognised in the income statement for the year.
The consolidated financial statements are presented in GBP which is the
Group’s functional and presentational currency. Each entity in the Group
determines its own functional currency. The income and expenses of
overseas subsidiaries are translated at the average rate of exchange
ruling during the year. The balance sheet of the overseas subsidiary
undertaking is translated into sterling at the rate of exchange ruling at
the balance sheet date. Exchange differences arising from the translation
of overseas subsidiaries are reported in the statement of comprehensive
income and are transferred to the Group’s currency translation reserve.
3.13 Business combinations and goodwill
Business combinations are accounted for using the acquisition method.
Identifiable assets acquired and liabilities assumed in a business
combination are measured at their fair values at the acquisition date.
Goodwill arises when the fair value of the consideration for a business
exceeds the fair value of the net assets acquired. Goodwill arising
on acquisitions is capitalised and subject to impairment review, both
annually and when there are indications that the carrying value may not
be recoverable.
For the purpose of impairment testing, goodwill acquired in a business
combination is allocated to cash generating units (CGUs), or groups
of CGUs. Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which the goodwill is
monitored for internal management purposes.
The recoverable amounts of CGU are determined based on the higher
of net realisable value and value in use calculations. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the business.
If the recoverable amount of an asset or CGU is estimated to be less than
its carrying amount, the carrying amount of the asset (or CGU) is reduced
to its recoverable amount with the impairment loss being recognised in
the income statement.
Where an impairment loss subsequently reverses, the carrying amount
of the asset or CGU is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment
loss been recognised for the asset (or CGU) in prior years. A reversal of
an impairment loss is recognised immediately in the income statement.
The Group does not reverse impairment losses previously recognised on
goodwill.
Acquisition related costs are recognised in the income statement as
incurred.
3.14 Other intangible assets
Other intangible assets are stated at cost less accumulated amortisation
and any impairment losses.
Amortisation is charged to administrative expenses in the income
statement on a straight-line basis over the estimated useful lives of each
asset. The estimated useful lives are as follows:
Customer list and relationships
Brand
Software
Licences
6 years
8 years
2–5 years
Over the term of the licence
Facilities and trademarks
8 years
Customer lists and relationships arise only on acquisition of the Naked
business. Brands arise on both the acquisition of the Naked business
and subsequent brand and trademark purchases.
3.15 Impairment reviews
Impairment reviews in respect of other intangible and tangible assets
are performed at least on an annual basis and furthermore when an
event indicates that an impairment review is necessary. Examples of
such triggering events include a significant planned restructuring, a
major change in market conditions or technology, expectations of future
operating losses, or a significant reduction in cash flows. See note 14
Goodwill and Intangible Assets for further explanation of the basis of
impairment testing.
3.16 Property, plant and equipment, and right-of-use assets
Property, plant and equipment are stated at cost less accumulated
depreciation and any accumulated impairment losses.
Depreciation is charged to the income statement on a straight-line basis
to write the cost of an asset down to its residual value over the estimated
useful lives of each asset. The estimated useful lives are as follows:
Freehold land
Freehold buildings
Leasehold properties
Not depreciated
50 years
For the term of the lease
Equipment, fittings and vehicles
3–10 years
Depreciation methods, useful lives and residual values are reviewed at
each balance sheet date.
3.17 Investment property
The Group has elected to use the cost model for investment property.
Depreciation is charged to the income statement on a straight-line basis
to write the cost of an asset down to its residual value over the estimated
useful lives of each asset. The estimated useful lives are as follows:
Freehold land
Freehold buildings
Not depreciated
50 years
Equipment, fittings and vehicles
2 years
Depreciation methods, useful lives and residual values are reviewed at
each balance sheet date.
3.18 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is determined on a first in, first out basis and includes expenditure
incurred in acquiring the inventories, production or conversion costs and
other costs in bringing them to their existing location and condition, less
rebates and discounts. Work in progress includes advance payments to
winemakers.
3.19 Deferred Angel and other income
Amounts received by the Group from Angels are initially reported as a
liability in the balance sheet. It is recognised as revenue in the period
when Angels use the funds to buy wine and delivery of goods is made.
See note 22 for a fuller explanation of the nature of the sums received
from our Angels and the rights and obligations the Group assumes in
respect of these amounts.
3.20 Provisions
A provision is made when there is a present legal or constructive
obligation as a result of a past event, for which it is probable that an
outflow of economic benefit will be required to settle the obligation, and
where the amount of the obligation can be reliably measured. Provisions
are discounted for the time value of money where the effect is material.
3.21 Leases
Group as lessee
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease arrangements
in which it is the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low-value assets
(defined as leases of a value of less than the equivalent of $5,000). For
these leases, the Group recognises the lease payments as an operating
expense on a straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in which
economic benefits from the leased assets are consumed. The lease
liability is initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted by the Group’s
incremental borrowing rate. If no rate is available, the Group will use the
rate implicit in the lease.
Lease payments included in the measurement of the lease liability
comprise fixed lease payments (including in substance fixed payments),
less any lease incentives.
The lease liability is presented as a separate line in the consolidated
balance sheet.
The lease liability is subsequently measured by increasing the carrying
amount to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease
payments made.
The Group remeasures the lease liability (and makes a corresponding
adjustment to the related right-of-use asset) whenever:
G The lease term has changed or there is a change in the assessment
of exercise of a purchase option, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised
discount rate
G A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised
discount rate
The Group did not make any such adjustments during the periods
presented.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are subsequently
measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the shorter period of lease
term and useful life of the underlying asset. The depreciation starts at the
commencement date of the lease. The Group does not have any leases
that include purchase options or transfer ownership of the underlying
asset.
96
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continued
3 Accounting policies (continued)
3.21 Leases (continued)
The right-of-use assets are presented as a separate line in the
consolidated balance sheet.
Variable rents that do not depend on an index or rate are not included
in the measurement of the lease liability and the right-of-use asset. The
related payments are recognised as an expense in the period in which
the event or condition that triggers those payments occurs and are
included in the consolidated income statement.
For short-term leases (lease term of 12 months or less) and leases of
low-value assets, the Group has opted to recognise a lease expense on
a straight-line basis as permitted by IFRS 16. This expense is presented
within administrative expenses in the consolidated income statement.
As a practical expedient, IFRS 16 permits a lessee not to separate non-
lease components, and instead account for any lease and associated
non-lease components as a single arrangement. The Group has not
used this practical expedient.
Group as lessor
The Group has a freehold asset which is leased out under an operating
lease and is included in investment property with depreciable assets
depreciated over their useful lives and is let for a peppercorn rent.
3.22 Pensions
The Group contributes to a number of defined contribution pension plans
in respect of its employees. The contributions are charged as an expense
as they fall due. Any contributions unpaid at the balance sheet date are
included as an accrual at that date. The Group has no further payment
obligations once the contributions have been paid.
3.23 Financial instruments
Financial assets and financial liabilities are recognised on the Group’s
balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Trade and other receivables
Trade and other receivables are initially measured at fair value and
subsequently measured at amortised cost less any provision for
impairment. Any provision for impairment is established based on an
expected loss model.
The Group acquired a vendor loan note in the course of the disposal of
the Majestic Wine businesses in the prior year. This was initially measured
at fair value and subsequently measured at amortised cost less any
provision for impairment. Any provision for impairment is established
based on an expected loss model.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and
short-term deposits, with original maturities at inception of less than
90 days. For the purpose of the cash flow statement, cash and cash
equivalents comprise cash at bank, cash in hand, short-term deposits
with an original maturity of three months or less held for the purpose of
meeting short-term cash commitments and bank overdrafts.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are
classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity
instrument. An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its liabilities. The
accounting policies adopted for specific financial liabilities and equity
instruments are set out below.
Trade and other payables are initially recorded at fair value and
subsequently measured at amortised cost.
Equity instruments issued by the Group are recorded at the amount of
the proceeds received, net of directly attributable issue costs.
Derivative financial instruments
The Group uses derivative financial instruments to hedge its exposure
to foreign currency fluctuations arising from operational activities.
These instruments are primarily foreign exchange forward contracts.
The Group does not hold or issue derivative financial instruments for
speculative purposes.
Derivative financial instruments are initially measured at fair value on the
contract date and are remeasured at fair value at subsequent reporting
dates. For derivative financial instruments not designated as a hedge, the
gain or loss on remeasurement to fair value is immediately recognised in
the income statement.
There were no derivatives accounted for using hedge accounting during
the year.
3.24 Own shares
Naked Wines plc shares held by the Group are classified in shareholders’
equity as ”Capital reserve – own shares” and are recognised at cost. No
gain or loss is recognised in the income statement on the purchase or
sale of such shares. See note 27 for further details.
4 Critical accounting policies, estimates and judgements
Estimates and assumptions underlying the preparation of the financial
statements are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if
the revision affects only that period, or in the period of revision and future
periods if the revision affects both current and future periods.
In the process of applying the Group’s accounting policies, the directors
consider that there are no key sources of estimation uncertainty that
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
5 Revenue
Revenue represents the total amount receivable for the sales of goods
and services, net of discounts and excluding sales taxes sold, in the
ordinary course of business. See accounting policy note 3.5.
6 Segmental reporting
IFRS 8 requires operating segments to be determined based on the
Group’s internal reporting to the Chief Operating Decision Maker
(CODM). During the course of the year and following the accelerated
growth and maturation of the business, the Board has determined
that the Executive Directors of the Company are now the CODM of the
business. Previously, the CODM was determined to be the Board. This
is on the basis that the Executive Directors have primary responsibility
for the allocation of resources between segments and the assessment
of performance of the segments. In line with the information presented
to the Executive Directors of the Company, the Group now presents its
segmental analysis based on the three geographic locations in which
the Group operates rather than one operating segment which it was
previously based on.
Performance of these operating segments is assessed on continuing
revenue, adjusted EBIT (being operating profit excluding any adjusted
items) and adjusted PBT (being profit before taxation excluding any
adjusted items), as well as analysing the business between New
Customer and Repeat Customer lines of business.
These are the financial performance measures that are reported to the
CODM, along with other operational performance measures, and are
considered to be useful measures of the underlying trading performance
of the segments. Adjusted items are not allocated to the operating
segments as this reflects how they are reported to the CODM.
The table below sets out the basis on which the performance of the business
is presented to the CODM. The CODM considers that, as a single route to
market and solely consumer facing business in three geographically and
economically diverse locations, the business comprises three operating
segments. The Group reports revenue from external customers as a single
product group being wine and associated beverages.
Goodwill has been allocated to the segments based on value in use, see
note 14 for further details.
Costs relating to global Group functions are not allocated to the
operating segments for the purposes of assessing segmental
performance and consequently global costs are presented separately.
This is consistent with the presentation of those functions to the CODM.
Prior year comparatives have been represented accordingly.
Revenues are attributed to the countries from which they are earned. The Group is not reliant on a major customer or group of customers.
Year ending 29 March 2021
Revenue
New Customer sales
Repeat Customer sales
New Customer Contribution loss
Advertising costs
Investment in New Customers
Repeat Customer Contribution profit
General and administrative costs1
Adjusted EBIT
Finance income
Finance charges
Adjusted profit/(loss) before tax
Adjusted items:
Non-cash items relating to acquisitions
Other adjusted items
Profit/(loss) before tax
Depreciation
Amortisation
Year ending 29 March 2021
Geographical analysis
Revenue
Non-current assets excluding deferred current assets
Naked Wines
USA
£’000
Naked Wines
UK
£’000
Naked Wines
Australia
£’000
Unallocated
£’000
Total
£’000
31,908
129,797
161,705
(3,275)
(30,163)
(33,438)
47,870
14,432
(12,445)
1,987
10
(85)
1,912
17,303
115,755
133,058
(3,585)
(7,529)
(11,114)
27,301
16,187
(5,279)
10,908
–
(14)
10,894
–
–
–
–
1,912
10,894
859
1
315
–
USA
£’000
7,160
38,303
45,463
(852)
(4,642)
(5,494)
9,741
4,247
(3,303)
944
–
(17)
927
–
–
927
227
–
–
–
–
–
–
–
–
–
(15,355)
(15,355)
1,108
–
(14,247)
(3,646)
(6,515)
(24,408)
49
3,837
UK
£’000
Australia
£’000
56,371
283,855
340,226
(7,712)
(42,334)
(50,046)
84,912
34,866
(36,382)
(1,516)
1,118
(116)
(514)
(3,646)
(6,515)
(10,675)
1,450
3,838
Total
£’000
161,705
3,516
133,058
44,597
45,463
476
340,226
48,589
98
1.
General and administrative costs – Per income statement excluding £3,646,000 of acquisition related amortisation costs, £1,966,000 of fair value adjustments relating to open FX contracts
and £681,000 of PLC company foreign exchange revaluations.
99
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Notes to the financial statements
continued
6 Segmental reporting (continued)
Year ending 30 March 2020*
Revenue
New Customer sales
Repeat Customer sales
New Customer Contribution loss
Advertising costs
Investment in New Customers
Repeat Customer Contribution profit
General and administrative costs1
Adjusted EBIT
Finance income
Finance charges
Adjusted profit/(loss) before tax
Adjusted items:
Non-cash items relating to acquisitions
Other adjusted items
Profit/(loss) before tax
Depreciation
Amortisation
Year ending 30 March 2020
Geographical analysis
Revenue
Non-current assets excluding deferred current assets
Naked Wines
USA
£’000
Naked Wines
UK
£’000
Naked Wines
Australia
£’000
Unallocated
£’000
Total
£’000
17,910
72,994
90,904
(485)
(14,200)
(14,685)
23,877
9,192
(7,806)
1,386
–
(101)
7,445
72,548
79,993
(2,422)
(3,500)
(5,922)
15,713
9,791
(3,777)
6,014
–
(57)
3,881
28,133
32,014
(849)
(2,057)
(2,906)
6,770
3,864
(2,614)
1,250
–
(21)
–
–
–
–
–
–
–
–
(11,045)
(11,045)
321
(643)
29,236
173,675
202,911
(3,756)
(19,757)
(23,513)
46,360
22,847
(25,242)
(2,395)
321
(822)
–
–
–
–
–
–
(3,646)
1,167
1,285
5,957
1,229
(13,846)
856
–
559
–
USA
£’000
208
–
UK
£’000
15
3,698
Australia
£’000
(3,646)
1,167
(5,375)
1,638
3,698
Total
£’000
90,904
4,161
79,993
51,637
32,014
625
202,911
56,423
*
The allocation of variable costs has been changed from nine litres of wine to a hybrid basis of allocation which better reflects the correct allocation of variable costs between nine litre
equivalent and six bottle cases which have become a larger part of the business in the current year. Prior year comparatives are stated on a consistent basis.
1. General and administrative costs – Per income statement excluding adjusted items of £2,479,000 (see note 7 for details).
The segmental analysis for the discontinued operations for the year ending 30 March 2020 can be found in note 30.
1,285
5,957
1,229
(11,367)
(2,896)
Fair value movement through P&L on foreign exchange contracts and
7 Adjusted items
The Directors believe that adjusted profit/(loss) before tax and adjusted diluted earnings per share measures provide additional useful information
for shareholders on trends and performance. These measures are used for performance analysis. Adjusted profit is not defined by IFRS and
therefore may not be directly comparable with other companies’ adjusted profit measures. It is not intended to be a substitute for, or superior to IFRS
measurements of profit.
Reclassification of share based payment charges
As the Group has built up a consistent rolling three years of LTIP and SIP schemes, current year and prior year share based payment charges are now
more comparable. For the first time, in the year ended 29 March 2021, these charges have been reclassified from adjusted items to adjusted EBIT
and the comparative statements have been restated accordingly (2020: £1.0m). Share based payment charges are therefore no longer reported in
adjusted items.
In the year, the adjustments made to reported loss before tax are:
Non-cash charges relating to acquisitions
Amortisation of acquired intangibles
Other adjusted items
Fair value loss arising on deferred contingent consideration net of settlement
associated unrealised foreign currency inventory
Foreign exchange movements on plc company currency bank balances
Total adjusted items
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
(3,646)
(3,646)
(3,868)
(1,966)
(681)
(6,515)
(10,161)
(3,646)
(3,646)
–
396
771
1,167
(2,479)
Amortisation of acquired intangibles
These items reflect costs of customer acquisition from prior to the purchase of the Naked Wines business in 2015. In order to reflect the cost of current
New Customer acquisition in its adjusted PBT, the Group includes the expenses of all ongoing customer acquisitions in its adjusted profit measures but
removes the amortisation cost of those customers acquired before acquisition by Naked Wines plc.
Fair value loss arising on deferred contingent consideration net of settlement
During the year, the Directors were approached by CF Bacchus Holdco Limited, the holder of the deferred contingent consideration obligation issued
as part of the disposal of the Majestic business. In the light of restrictions on travel and as a result of the new duty-free allowances which came into
force on 1 January 2021, the Directors accepted an offer of £175,000 in full settlement of the Group’s deferred contingent consideration in respect of the
disposal of Majestic’s French retail business. This settlement was received on 19 March 2021.
The deferred contingent consideration was valued in the books at £4,043,000 at the end of last year and a fair value adjustment was taken earlier
in the year bringing the value down to £nil. After proceeds of £175,000 was received, a loss of £3,868,000 was taken to the Income Statement and
disclosed in adjusted items.
Fair value movement on foreign exchange contracts and associated unrealised foreign currency inventory
We commit in advance to buying foreign currency to purchase wine in order to mitigate exchange rate fluctuations. International accounting standards
require us to mark the value of these contracts to market at year end. As this may fluctuate materially we adjust this and associated foreign currency
inventory revaluation out as to better reflect our trading profitability.
Foreign exchange movements on funding currency bank accounts
The Group holds net cash on its balance sheet and this includes sums of foreign currency which it will deploy to fund its US and Australian businesses.
At 29 March 2021, the FX revaluation of foreign currency balances held in the Group were reported as adjusted items so as not to distort the picture of
the underlying business cost base.
100
101
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Notes to the financial statements
continued
8 Operating loss
Operating loss for the year has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment and investment property
Amortisation of intangible fixed assets
Depreciation of right-of-use assets
Loss on disposal of fixed assets
Net currency exchange losses
Expenses on short-term and low-value leases
Auditor’s remuneration
Fees payable for the audit of the Company’s subsidiaries
Fees payable to the Company’s auditor and their associates for the audit of the Company’s annual accounts
Total audit fees
Audit-related assurance services
Other taxation advisory services
Total non-audit fees
Total fees paid to the Company’s auditor
9 Staff costs
The average monthly number of employees (including Directors) during the year was as follows:
Administrative and distribution
Sales
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Contributions to defined contribution pension plans
Share based payment charges
Directors’ emoluments comprised:
Salary and benefits
Bonuses accrued and paid in the year relating to the current year
Payments in lieu of pension contributions to money purchase schemes and contributions to money purchase scheme (401(k))
Emoluments before share based payment charges
Share based payment charges
102
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
507
3,838
943
51
(277)
168
422
20
442
40
–
40
482
475
3,698
1,163
86
(88)
111
359
20
379
35
41
76
455
Year ended
29 March 2021
number
Year ended
30 March 2020
number
184
199
383
193
140
333
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
22,703
1,858
608
777
25,946
17,337
1,627
585
834
20,383
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
839
599
37
1,475
262
1,737
1,004
337
72
1,413
145
1,558
The highest paid Director’s emoluments comprised:
Salary and benefits
Bonus accrued
Pension contributions to money purchase schemes
Emoluments before share based payment charges
Share based payment charges
Detailed disclosure of Directors’ remuneration is set out in the Remuneration Report on page 76.
10 Finance income and charges
Finance charges
Interest payable on bank overdraft
Interest payable on revolving credit facility
Interest on lease liabilities
Amortisation of debt issuance costs
Finance charges
Finance income
Financial instruments measured at amortised cost
Bank interest receivable
Other interest receivable
Interest income on vendor loan note
Finance income
Net finance income
11 Tax
(a) Tax charge
Current income tax
UK income tax
Overseas income tax
Adjustment in respect of prior periods
Current income tax charge
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Effect of change in tax rate on prior period balances
Total deferred tax credit
Total income tax credit/(charge) for the year
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
315
306
9
630
189
819
248
174
38
460
64
524
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
–
–
(116)
–
(116)
191
9
918
1,118
1,002
(23)
(567)
(156)
(76)
(822)
18
28
275
321
(501)
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
1
(547)
176
(370)
1,464
(459)
–
1,005
635
12
(324)
(2,427)
(2,739)
1,159
246
24
1,429
(1,310)
103
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Notes to the financial statements
continued
11 Tax (continued)
(b) Tax reconciliation
The tax charge for the year differs from the standard rate of corporation tax in the UK of 19% (2020: 19%). The reasons for this are detailed below:
Loss before tax
Tax credit at the standard UK corporation tax rate of 19% (2020: 19%)
Adjustments in respect of prior periods*
Overseas income tax at higher rates
Disallowable expenditure
Income not taxable
Deferred tax not previously recognised
Share based payments
Change in tax rate on prior period deferred tax balances
Foreign exchange
Total income tax credit/(charge)
Effective tax rate
*
Adjustments in respect of 2020 mainly relate to Group tax relief for losses surrendered to discontinued operations in previous years.
(c) Tax on items recorded in reserves
Deferred tax credit/(charge) on share based payments
Total tax on items credited/(charged) to equity
(d) Deferred tax
At beginning of year
Adjustment in respect of prior years
Credited to the income statement in the year
Credited/(charged) to other comprehensive income in the year
Disposal of subsidiaries
Foreign exchange
At end of year
Year ended
29 March 2021
£’000
(10,675)
2,028
(283)
(66)
(82)
212
(1,606)
138
–
294
635
5.9%
Year ended
30 March 2020
£’000
(5,375)
1,021
(2,181)
95
–
–
(755)
410
100
–
(1,310)
-24.4%
Year ended
29 March 2021
£’000
331
331
Year ended
30 March 2020
£’000
(397)
(397)
Year ended
29 March 2021
£’000
2,037
(459)
1,464
331
–
(151)
3,222
Year ended
30 March 2020
£’000
2,039
246
1,183
(397)
(1,106)
72
2,037
Deferred tax assets and liabilities
Fixed assets
Share based payments
Tax losses carried forward
Inventories
Deferred income
Accruals
Provisions
Unrealised foreign exchange differences
Deferred tax assets
Deferred tax liabilities
29 March 2021
£’000
–
696
227
1,287
80
623
250
830
3,993
30 March 2020
£’000
–
240
59
1,634
245
250
283
598
3,309
29 March 2021
£’000
(771)
–
–
–
–
–
–
–
(771)
30 March 2020
£’000
(1,272)
–
–
–
–
–
–
–
(1,272)
The movement in recognised deferred tax assets and liabilities during the year is shown below:
Fixed assets
Share based payments
Tax losses carried forward
Inventories
Deferred income
Accruals
Provisions
Unrealised foreign exchange differences
30 March 2020
£’000
Recognised in
income
statement
£’000
Recognised
in OCI
£’000
Foreign
exchange
£’000
29 March 2021
£’000
Deferred tax
assets
£’000
Deferred tax
liabilities
£’000
(1,272)
240
59
1,634
245
251
282
598
471
131
167
(208)
(181)
410
(36)
251
–
331
–
–
–
–
–
–
2,037
1,005
331
30
(6)
1
(139)
16
(39)
5
(19)
(151)
(771)
696
227
1,287
80
622
251
830
–
696
227
1,287
80
622
251
830
(771)
–
–
–
–
–
–
–
3,222
3,993
(771)
Deferred tax on losses of £26.8m (2020: £15.5m) relating to losses in the UK, have not been recognised in these financial statements on the basis that
there is insufficient evidence of suitable future taxable profits against which to recover any deferred tax asset created. An amount of £3,868,000
relating to the fair value loss arising on deferred contingent consideration net of settlement is not included in the deferred tax losses as the timing and
the crystallisation of any future capital gains is unclear. There is no expiry date on these unrecognised losses.
(e) Factors that may affect future tax charges
The Group’s overseas tax rate is higher than that in the UK as future profits earned by the Naked Wines subsidiaries in the United States of America and
Australia are taxed at 21% and 30% respectively.
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries as following the enactment of the Finance Act 2009 the Group
considers that it would have no liability to additional taxation should such amounts be remitted.
The Group has recognised deferred tax assets for deductible temporary differences and unused tax losses that it believes are recoverable. These do
not include any uncertain tax positions. The basis of the creation of these assets is the examination of underlying documents and relevant law and
regulation for temporary timing differences and future profitability forecasts set out in the business plans approved by the Board.
12 Dividends
Amounts recognised as distributions to shareholders in the year:
2020 special dividend: 5.2p
Equity dividends paid
No final dividend is proposed (2020: nil).
104
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
–
–
3,786
3,786
105
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Notes to the financial statements
continued
13 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares
in issue of the Company, excluding 146,814 (2020: 243,055) shares held by the Naked Wines plc Share Incentive Plan Trust (which have been treated as
dilutive share based payment awards).
The dilutive effect of share based payment awards is calculated by adjusting the weighted average number of ordinary shares in issue to assume
conversion of all dilutive potential ordinary shares. All outstanding share based payment award grants have been included in the dilutive earnings
per share calculation as they are potentially dilutive at the year end. In the prior year, 365,626 ordinary shares were not included in the dilutive
earnings per share calculation which relate to share option schemes which subsequently lapsed in the current financial year. See note 29 (a) and
(b) for further details of these schemes.
A negative diluted EPS equals a negative basic EPS as it would have an anti-dilutive effect if the dilutive shares are included in the calculation.
(Loss)/earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Weighted average number of shares in issue
Dilutive potential ordinary shares:
Employee share options and contingently returnable shares
Weighted average number of shares for the purpose of diluted earnings per share
Total number of shares in issue
Continuing operations
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
Group including
discontinued
operations
Year ended
30 March 2020
£’000
(13.8p)
(13.8p)
(9.3p)
(9.3p)
11.3p
11.1p
Year ended
29 March 2021
72,896,800
Year ended
30 March 2020
71,909,151
1,496,174
74,392,974
73,161,485
1,552,166
73,461,317
72,874,018
If all the Company’s share schemes had vested at 100% the Company would have 74,763,497 issued shares.
14 Goodwill and intangible assets
Cost
At 1 April 2019
Additions
Disposal of subsidiaries
At 30 March 2020
Additions
At 29 March 2021
Accumulated amortisation
At 1 April 2019
Charge for the year
Impairments
Disposal of subsidiaries
At 30 March 2020
Charge for the year
At 29 March 2021
Net book value
At 29 March 2021
At 30 March 2020
At 1 April 2019
Goodwill
£’000
Facilities and
trademarks
£’000
Customer lists
£’000
Brands
£’000
Software
£’000
Total
£’000
40,305
–
(11,143)
29,162
–
29,162
2,985
–
(2,985)
–
1,607
1,607
(8,298)
(2,250)
–
–
–
–
8,298
2,250
–
–
–
29,162
29,162
32,007
–
(50)
(50)
1,557
–
735
14,300
10,100
–
–
14,300
–
14,300
(9,474)
(2,384)
–
–
(11,858)
(2,383)
(14,241)
59
2,442
4,826
–
–
10,100
–
10,100
(5,020)
(1,263)
–
–
(6,283)
(1,263)
(7,546)
2,554
3,817
5,080
9,800
544
(8,078)
2,266
217
2,483
(7,295)
(51)
(740)
6,395
(1,691)
(142)
(1,833)
650
575
2,505
77,490
544
(22,206)
55,828
1,824
57,652
(32,337)
(3,698)
(740)
16,943
(19,832)
(3,838)
(23,670)
33,982
35,996
45,153
Impairment testing of goodwill
Goodwill is tested annually for impairment, or more frequently if there are indications that goodwill may be impaired. Goodwill acquired through
business combinations has been allocated for impairment testing purposes to the three segments of the business. The recoverable amount of goodwill
is determined based on value in use calculations.
An analysis of goodwill and intangible assets by operating segment is shown below:
Naked Wines US
Naked Wines UK
Naked Wines Australia
Unallocated
At 29 March 2021
Goodwill
£’000
21,648
5,859
1,655
–
29,162
Facilities and
trademarks
£’000
1,557
–
–
–
1,557
Customer lists
£’000
44
12
3
–
59
Brands
£’000
1,896
513
145
–
2,554
Software
£’000
3
–
–
647
650
Total
£’000
25,148
6,384
1,803
647
33,982
106
107
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Notes to the financial statements
continued
14 Goodwill and intangible assets (continued)
Amortisation
Intangible fixed assets are amortised on a straight-line basis through the income statement, based on the estimated useful lives as disclosed in
note 3.14.
Impairment testing
Cash generating units (CGU)
Consistent with the Board’s re-evaluation of its operating segments, being the three geographic markets in which the Group operates, the Directors
now recognise these as the CGUs of the business.
Key assumptions
The key assumptions for calculating value in use are cash flows, long-term growth rate and the discount rate. The primary determinants of cash flow
are expected sales and the cost of sales of those goods, the level of expenditure on the acquisition of New Customers and other associated costs which
relate to the cash flows of the operating business units.
Cash flow assumptions
The cash flows used in the value in use calculation are pre-tax cash flows based on the latest management forecasts in respect of the following five
years, the first of which being the Board approved budget. An estimate of capital expenditure required to maintain these cash flows is also made.
The Board draws attention to the fact that the Group intends to continue to invest in growth and therefore does not anticipate that the Group will be
significantly cash generative until the later stages of the forecast period. This is in line with the Board’s expectations and consistent with its objectives of
creating long-term value for the Group’s stakeholders.
Long-term growth rate assumptions
The five-year management forecasts are extrapolated in perpetuity using a growth rate of 2.0%. This is not considered to be higher than the average
long-term industry growth rate. The long-term growth rate is common to all CGUs.
Discount rate assumptions
The discount rate applied to the cash flows is calculated using a pre-tax rate based on the weighted average cost of capital (WACC) which would be
anticipated for a market participant investing in the Group. Management believes it is appropriate to use a single common discount rate for the testing
of the Naked Wines goodwill and intangible assets as the Directors believe there is not a materially different WACC for each of the three CGUs. The
Group has considered the impact of the current economic climate in determining the appropriate discount rate to use in impairment testing.
At 29 March 2021, the pre-tax rate used to discount the forecast cash flows has been determined to be 12.0% (2020: 10.1%).
The Group has carried out a sensitivity analysis on the impairment test of the Naked Wines goodwill and intangible assets for each of its three CGUs.
The Directors do not believe that a reasonably possible change in the cash flows of the business would result in the recoverable amount being equal
to the carrying value. An increase in the discount rate to between 39.1% and 65.7% would cause the carrying value of the goodwill in the Naked Wines
Group operating segments to equal its recoverable value.
Impairment of software incurred in the year to 30 March 2020 related to investments made in Group systems which related to businesses disposed of
during that year.
15 Property, plant and equipment
Cost
At 1 April 2019
Additions
Reclassification to investment property – depreciation offset
Reclassification to investment property
Disposals
Disposal of subsidiaries
Foreign currency
At 30 March 2020
Transfers
Additions
Disposals
Foreign currency
At 29 March 2021
Accumulated depreciation
At 1 April 2019
Charge for the year
Reclassification to investment property – depreciation offset
Disposals
Disposal of subsidiaries
Foreign currency
At 30 March 2020
Transfers
Charge for the year
Disposals
Foreign currency
At 29 March 2021
Net book value
At 29 March 2021
At 30 March 2020
At 1 April 2019
Land & buildings
Freehold
£’000
Long leasehold
£’000
Leasehold
improvements
£’000
Equipment,
fittings and
vehicles
£’000
40,634
6,238
26,000
43,850
837
(7)
(830)
–
–
–
–
–
3
–
–
–
(40,634)
(6,203)
(25,909)
–
–
–
–
–
–
–
–
35
(35)
–
–
–
–
(2)
92
35
–
–
2
644
(6)
(69)
(445)
(41,136)
89
2,927
–
845
(238)
(209)
Total
£’000
116,722
1,484
(13)
(899)
(445)
(113,882)
87
3,054
–
845
(238)
(207)
129
3,325
3,454
(9,040)
(641)
(20,945)
(31,795)
(62,421)
(7)
7
–
9,040
–
–
–
–
–
–
–
–
–
(6)
–
–
614
–
(33)
33
–
–
–
–
–
2
(8)
–
–
20,886
3
(64)
(33)
(12)
–
(3)
(112)
17
28
31,594
5,597
5,055
(454)
6
359
30,197
(36)
(1,723)
–
(451)
187
97
(475)
13
359
60,737
(33)
(1,820)
–
(463)
187
94
(1,890)
(2,002)
1,435
1,204
12,055
1,452
1,234
54,301
108
109
The gross value of fully depreciated assets in use was £601,000 (2020: £627,000).
Impairment of property, plant and equipment
CGUs are reviewed at least annually to identify any indicators of impairment at the balance sheet date. Recoverable amounts for CGUs are the
higher of fair value less costs of disposal, and value in use. The key estimates for the value in use calculations were those regarding discount rates and
expected changes to future cash flows.
The Group estimated discount rates using pre-tax rates that reflected the current market assessment of the time value of money and the risks specific
to the CGUs. Cash flow projections were based on the Group’s three year internal forecasts, the results of which were reviewed by the Board. Estimates
of selling prices and direct costs were based on past experience and expectations of future changes in the market. These forecasts were extrapolated
to five years on a business unit basis, with separate extrapolations of net revenue and expenses based on a combination of recently observable trends
and management expectations, and beyond five years based on long-term average growth rates which were not considered to be higher than
average long-term industry growth rates.
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report Notes to the financial statements
continued
16 Right-of-use assets
Cost
On transition at 2 April 2019
Additions
Disposals
Disposal of subsidiaries
Foreign currency
At 30 March 2020
Disposals
Foreign currency
At 29 March 2021
Depreciation
On transition at 2 April 2019
Charge for the year
Disposals
Disposal of subsidiaries
Foreign currency
At 30 March 2020
Charge for the year
Disposals
Foreign currency
At 29 March 2021
Net book value
At 29 March 2021
At 30 March 2020
On transition at 2 April 2019
Buildings
£’000
Equipment,
fittings and vehicles
£’000
58,473
2,414
(641)
(54,203)
97
6,140
(1,551)
(256)
4,333
–
(1,148)
252
–
3
(893)
(926)
197
47
(1,575)
2,758
5,247
58,473
2,954
13
(27)
(2,810)
8
138
–
(13)
125
(1,990)
(15)
27
1,888
(6)
(96)
(17)
–
10
(103)
22
42
964
Total
£’000
61,427
2,427
(668)
(57,013)
105
6,278
(1,551)
(269)
4,458
(1,990)
(1,163)
279
1,888
(3)
(989)
(943)
197
57
(1,678)
2,780
5,289
59,437
Impairment of right-of-use assets
The Group leases several buildings for use as offices and a winery. The group also lease some and plant and equipment. The average lease term is
seven years. The total cash flow for leases was £1,020,000 (2020: £980,000).
The maturity analysis of lease liabilities is presented in note 24.
110
17 Investment property
Cost and valuation
At 30 March 2020 and 29 March 2021
Depreciation
At 30 March 2020
Charge for the year
At 29 March 2021
Net book value
At 29 March 2021
At 30 March 2020
Freehold property
£’000
899
–
(44)
(44)
855
899
The Directors are adopting the cost model for the value of this asset which was recorded on acquisition at the transferred net book value. The Directors
of the Company have assessed the fair value of the property and consider it to be broadly in line with the book value.
The property is being let for a peppercorn rent until the disposal of the property is completed. The tenant is liable for operating expenses as they
fall due. The letting agreement of the property allows for the termination of this lease by either party immediately prior to completion of the sale of
the property or to the benefit of the tenant by giving six months notice. The Group has no contractual obligations to purchase, construct or develop
investment property or for repairs, maintenance or enhancements. Depreciation has been charged in accordance with the Group’s depreciation
policy for freehold buildings.
18 Inventories
Raw materials
Work in progress
Finished goods
29 March 2021
£’000
30 March 2020
£’000
192
35,571
40,367
76,130
426
30,234
39,275
69,935
Recognising the Company’s control of this asset, all inventory has been reported as a current asset in the Balance Sheet. Note, £2.6 million (prior year
comparative not readily available) of this relates to work in progress where the wine is expected to be received from winemakers more than 12 months
from the balance sheet date.
The cost of inventories recognised as an expense during the year was £204,732,000 (2020: £125,352,000).
Inventory of £89,000 (2020: £71,000) was expensed through the income statement in the year relating to samples and tasting products.
19 Trade and other receivables
Due within one year
Trade receivables
Vendor loan note
Other debtors
Prepayments and accrued income
29 March 2021
£’000
30 March 2020
£’000
95
360
4,849
1,864
7,168
293
360
3,662
1,422
5,737
111
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Notes to the financial statements
continued
19 Trade and other receivables (continued)
Due after more than one year
Vendor loan note
Deferred contingent consideration
29 March 2021
£’000
30 March 2020
£’000
9,520
–
9,520
8,962
4,043
13,005
The vendor loan note will mature in December 2024 unless repaid in full before that date. The loan note bears interest of 3% p.a. for the first three
years, 4% in year four and 5% in year five, to be paid annually. The payment for the first year was received in December 2020. The terms of the Loan
Note limit distributions (or certain other payments) by Majestic Wines unless a base level of EBITDA generated by Majestic Wines is maintained.
20 Assets classified as held for sale
The Group has no assets classified as held for sale in the current year. At 30 March 2020, the Group had property classed as an asset held for sale
at an amount of £953,000 on which the sale was completed on 10 June 2020.
21 Trade and other payables
Trade payables
Other taxes and social security
Accruals and other payables
Amounts payable in respect of defined contribution pension schemes were £42,000 (2020: £47,000).
22 Deferred Angel and other income
Angel funds
Other deferred income
29 March 2021
£’000
30 March 2020
£’000
15,405
3,056
22,296
40,757
11,310
2,546
12,190
26,046
29 March 2021
£’000
30 March 2020
£’000
65,825
4,077
69,902
38,422
5,210
43,632
Angel funds and the purchase of inventory from winemakers
On registering as an Angel with Naked Wines, subscription customers agree to lodge a regular monthly sum into their “Angel Account”. These sums
accumulate in the Angel’s individual account and build a balance to use against their next purchase from Naked Wines. This is disclosed within
deferred Angel and other income on the face of the balance sheet.
Naked Wines’ operating model is to pool amounts lodged by Angels in their personal Naked Wines accounts to use as working capital within the
business.
Naked Wines contracts directly with its winemakers and purchases wine in its own name. Naked Wines retains all risk associated with the purchase
of wine from winemakers and no inventory or funding risk is carried by our Angels. Angels only bear the risk relating to the ongoing liquidity of Naked
Wines to the extent of the value of the funds lodged in their Angel account. Naked Wines plc guarantees these funds via a parent company guarantee
and has provided a guarantee to the credit card acquirer through whom refunds would be made.
Angels can cancel their Naked Angel Account at any time and may request and receive their money back immediately with no penalty whatsoever.
The refund of such funds is provided directly by Naked Wines and is not contingent on any associated flows of funds or wine from winemakers back to
Naked Wines.
Angels are not entitled to interest or any other return on the funds lodged in their Angel Accounts. Registration as an Angel entitles a customer to benefit
from a lower price than the standard price displayed on the Naked Wines website.
23 Other borrowings due within one year
Customer bond finance
Total bank and other borrowings due within one year
112
29 March 2021
£’000
30 March 2020
£’000
30
30
84
84
24 Lease liabilities
The Group leases warehouse and office facilities. The leases run for a period between one and 10 years, with an option to renew the lease after that
date. The Group also leases equipment and office space with contract terms of up to four years. These leases are either short term of one year or less
and/or low-value items which the Group has elected not to recognise as IFRS 16 leases. Information about leases for which the Group is a lessee is
analysed between current and non-current below.
Maturity analysis
Due within 1 year
Due between 1 and 2 years
Due between 2 and 3 years
Due after 3 years
Less: unearned interest
Current
Non-current
29 March 2021
£’000
30 March 2020
£’000
726
719
424
1,271
3,140
(264)
2,876
1,318
1,146
1,139
2,253
5,856
(493)
5,363
29 March 2021
£’000
645
2,231
2,876
30 March 2020
£’000
1,165
4,198
5,363
25 Financial instruments
The Group’s financial instruments, other than derivatives, comprise cash and various balances, such as trade receivables and trade payables, all
arising directly from its operations.
The Group also enters into forward foreign currency derivative contracts. The purpose of these transactions is to manage the currency risk arising from
the Group’s operations. The Group does not hold or issue financial instruments for speculative purposes and does not engage in speculative trading.
The principal financial risks to which the Group is exposed relate to liquidity risk, credit risk, interest rates, market risk and foreign exchange rates.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. In order to manage liquidity risk, each business
unit prepares short-term and medium-term cash flow forecasts. These forecasts are consolidated and reviewed centrally to ensure the Group has
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without risking damage to the Group’s reputation.
The Group did not hold any borrowing facilities at 29 March 2021 (2020: £nil).
The Group’s net funding position can vary from month to month and there is some volatility within months. This reflects seasonal trading patterns, timing of
receipts from customers and payments to suppliers, patterns of inventory holdings and the timing of the spend on major capital and restructuring projects.
For these reasons the net funds position levels at the period end date may not be indicative of the funds position at other points throughout the period.
The following table analyses the Group’s financial assets and liabilities into relevant maturity groupings based on the contractual undiscounted cash flows.
At 29 March 2021
Financial assets
Trade and other receivables
Vendor loan note
Forward foreign currency assets
Cash and cash equivalents
Financial liabilities
Trade and other payables
Deferred Angel and other income
Forward foreign currency liabilities
Lease liabilities
Customer-funded bond
Due within 1
year
£’000
Due between 1
and 2 years
£’000
Due between 2
and 3 years
£’000
Due after 3
years
£’000
Total
£’000
Held at
amortised cost
£’000
Held at fair
value
£’000
4,944
360
41
85,148
90,493
(37,701)
(69,902)
(1,405)
(645)
(30)
(109,683)
–
–
–
–
–
–
–
–
(659)
–
(659)
–
–
–
–
–
–
–
–
(381)
–
(381)
–
9,520
–
–
9,520
–
–
–
(1,191)
–
(1,191)
4,944
9,880
41
85,148
100,013
(37,701)
(69,902)
(1,405)
(2,876)
(30)
(111,914)
4,944
9,880
–
–
14,824
(37,701)
(69,902)
–
(2,876)
(30)
(110,509)
–
–
41
85,148
85,189
–
–
(1,405)
–
–
(1,405)
113
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Notes to the financial statements
continued
25 Financial instruments (continued)
Liquidity risk (continued)
At 30 March 2020
Financial assets
Trade and other receivables
Vendor loan note
Deferred contingent consideration
Forward foreign currency assets
Asset held for sale
Cash and cash equivalents
Financial liabilities
Trade and other payables
Deferred income
Forward foreign currency liabilities
Lease liabilities
Customer-funded bond
Due within 1
year
£’000
Due between 1
and 2 years
£’000
Due between 2
and 3 years
£’000
Due after 3
years
£’000
Total
£’000
Held at
amortised cost
£’000
Held at fair
value
£’000
3,955
360
–
539
953
54,736
60,543
(23,500)
(43,632)
(143)
(1,318)
(84)
(68,677)
–
–
4,043
–
–
–
4,043
–
–
–
(1,146)
–
(1,146)
–
–
–
–
–
–
–
–
–
–
(1,139)
–
(1,139)
–
8,962
–
–
–
–
8,962
–
–
–
(2,253)
–
(2,253)
3,955
9,322
4,043
539
953
54,736
73,548
(23,500)
(43,632)
(143)
(5,856)
(84)
(73,215)
3,955
9,322
–
–
953
–
14,230
(23,500)
(43,632)
–
(5,856)
(84)
(73,072)
–
–
4,043
539
–
54,736
59,318
–
–
(143)
–
–
(143)
Financial assets consist of cash and cash equivalents, trade and other receivables, the vendor loan note and forward foreign currency assets. All
financial assets with the exception of forward foreign financial assets (held at fair value), are recognised on an amortised cost basis using the simplified
approach to expected credit losses.
Financial liabilities held at amortised cost consist of trade and other payables, deferred income and customer-funded bond. See note 22 for an
explanation of the nature of the funding made by “Angels” and Naked Wines’ rights and obligations in respect of these amounts. All financial liabilities
are held at amortised cost with the exception of forward foreign financial liabilities which are held at fair value.
The following table analyses the Group’s simple foreign currency forward purchase contract derivative financial instruments into relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed are the undiscounted
cash flows.
At 29 March 2021
Outflow
Inflow
At 30 March 2020
Outflow
Inflow
Due within 1 year
£’000
Due between 1 and 2
years
£’000
Due between 2 and 3
years
£’000
(29,315)
27,951
(1,364)
(15,707)
16,079
372
–
–
–
(1,294)
1,318
24
–
–
–
–
–
–
Total
£’000
(29,315)
27,951
(1,364)
(17,001)
17,397
396
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and
arises principally from the Group’s receivable from CF Bacchus Holdco Ltd, the owner of the Majestic Wine businesses and relating to the vendor loan
note as set out in note 3.23, Accounting policies.
In addition, the Group is exposed to credit risk in relation to restricted cash of £300,000 included in cash and cash equivalents which relates to a
guarantee to HMRC for customs duties for the UK trading subsidiary.
The maximum credit risk exposure relating to financial assets is represented by its carrying value as at the balance sheet date limited to the value
of trade and other receivables. The Group does not have any material exposure to trade receivables and therefore exposure to trade bad debt is
negligible. Other receivable amounts are substantially amounts owed from CF Bacchus Holdco Ltd as set out above and credit card acquirer funds
disclosed in other receivables.
114
CF Bacchus Holdco Ltd is subject to covenants relating to indebtedness and profitability and is obligated to report covenant compliance as part of the
vendor loan note agreement. The Directors evaluate the continuing creditworthiness of CF Bacchus Holdco Ltd through a combination of review of
publicly reported performance data and through the contents of the submitted covenant certificates. Expected credit loss assumptions continue to be
evaluated in the light of this information and any other new information that becomes available.
The Group does not utilise any reverse factoring or supplier financing.
As at the balance sheet date, the ageing analysis of trade receivables that were past due but not impaired is as follows:
At 29 March 2021
At 30 March 2020
Total trade debtors
£’000
95
293
Current
£’000
92
284
Up to 3 months
past due
£’000
3–6 months
past due
£’000
Over 6 months
past due
£’000
–
–
–
–
3
9
There are no indicators of impairment for those debtors that are neither past due nor impaired.
Movements in the provision for impairment of trade receivables are as follows:
At beginning of year
Disposal of subsidiary
At end of year
29 March 2021
£’000
30 March 2020
£’000
–
–
–
(137)
137
–
Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions. The Group
ensures that the banks used for foreign exchange forward contracts are reputable, large institutions with acceptable risk ratings.
Interest rate risk
The Group’s interest rate risk arises primarily from its deposit of net funds with reputable financial institutions.
Market risk
Market risk is the risk that changes in market prices, such as foreign currency exchange rates and interest rates, will affect the Group’s income or
the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return on risk. The Group manages foreign currency risk as detailed below. The Group does not currently
enter into any interest rate swaps or other derivative financial instruments to mitigate the risk of rising interest rates.
Foreign currency exchange rates
The Group’s presentation currency is sterling although some transactions are executed in non-GBP currencies, including euros, US dollars and
Australian dollars. The transactional amounts realised or settled are therefore subject to the effect of movements in these currencies against GBP.
It is the Group’s policy to manage the exposures arising using forward foreign currency exchange contracts. Hedge accounting is not sought for
these transactions. The Group generates some of its profits in non-GBP currencies and has assets in non-GBP jurisdictions, principally in the US dollar
and Australian dollar. The principal foreign currencies affecting the translation of subsidiary undertakings within the Group financial statements are
these currencies.
The rates applicable are as follows:
Principal rate of exchange
Australian dollar : GBP
Period end
Average
US dollar : GBP
Period end
Average
The Group does not use derivatives to hedge balance sheet and profit and loss translation exposures arising on the consolidation of the US and
Australian subsidiaries.
29 March 2021
30 March 2020
1.805
1.825
1.377
1.306
2.017
1.864
1.242
1.272
115
Naked Wines plcAnnual Report and Accounts 2021Naked Wines plcAnnual Report and Accounts 2021FinancialsGovernance reportStrategic report
Notes to the financial statements
continued
25 Financial instruments (continued)
Foreign currency exchange rates (continued)
The following table demonstrates the sensitivity to a reasonable change in GBP against the exchange rates with all other variables held constant, of
the Group’s profit before tax:
Year ended 29 March 2021
Australian dollar : GBP
Euro : GBP
US dollar : GBP
Other currencies : GBP
Year ended 30 March 2020
Australian dollar : GBP
Euro : GBP
US dollar : GBP
Other currencies : GBP
Sensitivity in exchange
rate
Impact of increase
in rate
£’000
Impact of decrease
in rate
£’000
5%
5%
5%
5%
5%
5%
5%
5%
(81)
(1,135)
(64)
(111)
204
(394)
(95)
(110)
89
1,113
71
136
328
899
78
89
Sensitivity analysis relating to market risk is calculated by taking the overseas profits and applying the stated sensitivity. The stated sensitivities are also
applied to the outstanding forward foreign exchange contracts. The table below shows the Group’s currency exposures that gave rise to net currency
gains and losses recognised in the consolidated income statement as a result of monetary assets and liabilities that are not denominated in the
Group’s presentational currency.
We assumed a 5% sensitivity as it is in excess of currency markets.
Forward foreign currency contracts
AUD
EUR
NZD
USD
ZAR
Total forward foreign exchange contracts
Deferred contingent consideration
At 29 March 2021
Fair value
At 30 March 2020
Fair value
Nominal value
£’000
Assets
£’000
Liabilities
£’000
Nominal value
£’000
Assets
£’000
Liabilities
£’000
1,692
23,802
1,677
1,404
740
29,315
–
3
–
–
–
38
41
–
–
(1,312)
(33)
(60)
–
(1,405)
–
1,023
12,207
1,522
1,671
578
17,001
5,000
–
466
–
73
–
539
4,043
(46)
–
(45)
–
(52)
(143)
–
Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to
support its business and maximise shareholder value. The Group considers capital to consist of the total equity of the Group.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital
structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in
the objectives, policies or processes during the current year.
The Group’s capital allocation policy is currently to:
1. Maintain a healthy balance sheet
2. Invest in growth in a disciplined manner and
29 March 2021
£’000
30 March 2020
£’000
3. Return to shareholders any funds in excess of the level reasonably needed to fund growth and manage risk.
Australian dollar
Euro
US dollar
Other currencies
Group’s functional currency:
GBP
Total
15,601
117
31,608
201
47,527
37,621
85,148
5,192
330
3,119
39
8,680
46,056
54,736
Fair value
The Group enters into forward foreign currency exchange contracts in order to manage the Group’s forecast currency requirements. These are held
for hedging purposes with fair value movements being recognised in the income statement.
In 2020, the Group held a contingent consideration asset at fair value of £4.0m which has now been settled. Refer to note 7 for details on the fair
value assessment.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2:
other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly; and
Level 3:
techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
There have been no financial instruments which have transferred between the levels in the hierarchy as detailed above.
The nominal and fair value of financial instruments is shown in the following table, all are due within one year. The fair value of the forward currency
contracts was determined using quoted forward exchange rates matching the maturities of the contracts and includes counter party credit risk.
The Group’s measurement of its financial instruments meets the criteria of Level 2 and hence all have been included in this classification.
116
The Directors continue to believe that suspension of the payment of ordinary dividends is in support of this policy to support its stated capital
management objective.
The Group is not subject to externally imposed capital requirements.
26 Provisions for liabilities
At 1 April 2019
Provided in the year
Released in the year
Disposal of subsidiaries
Foreign currency
At 30 March 2020
Provided in the year
Released in the year
Utilised in the year
Foreign currency
At 29 March 2021
Dilapidations
£’000
Store closures
£’000
Social
security costs
£’000
Refund liability
provision
£’000
214
–
–
(214)
–
–
–
–
–
–
–
171
–
–
(171)
–
–
–
–
–
–
–
906
154
(569)
–
–
491
181
–
(72)
–
600
1,256
671
(342)
(580)
17
1,022
954
(561)
–
(52)
1,363
Total
£’000
2,547
825
(911)
(965)
17
1,513
1,135
(561)
(72)
(52)
1,963
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Notes to the financial statements
continued
26 Provisions for liabilities (continued)
Provisions have been analysed between current and non-current as follows:
Current
Non-current
29 March 2021
£’000
30 March 2020
£’000
1,570
393
1,963
1,165
348
1,513
Social security costs on share based payment awards
Social security costs which will become payable on exercise of share based payment awards have been provided. The share based payment awards
will vest at various dates from the balance sheet date to 15 December 2023. The value of social security costs payable on the vesting of share based
payment awards is dependent on the Group’s share price at the date of vest of those share based payment awards. The provision, which is allocated
on a time weighted basis over the period from date of grant to the date that employees become unconditionally entitled to the awards, has been
calculated on the share price at the balance sheet date of £7.49 and the assumption that 100% of employees will take up their vested share based
payment award and that the rate of social security is 13.8% for UK employees, 7.65% for US employees and 0% for Australian employees.
Refund liability provision
Under the requirements of IFRS 15, the Group has established a right of return provision under the requirements to recognise variable consideration
in the form of a sales cancellation provision. The Group uses its accumulated historical experience to estimate the level of returns on a portfolio level
using the expected value method. The resulting outflows are expected within six months.
27 Share capital and reserves
Authorised
Ordinary shares of 7.5p each
Allotted, called up and fully paid
At beginning of the year
Issue of shares on the vesting of share based payment schemes/award
of share options
Issue of shares into the Naked Wines plc Share Incentive Plan
Issue of acquisition related shares
At end of year
29 March 2021
30 March 2020
Number of shares
£’000
Number of shares
£’000
140,000,000
10,500
140,000,000
10,500
72,874,018
5,466
72,137,402
231,138
56,329
–
17
4
–
89,965
130,468
516,183
5,411
7
10
38
73,161,485
5,487
72,874,018
5,466
During the year, 287,467 (2020: 736,616) ordinary shares of 7.5p each were allotted for a consideration of £22,000 (2020: £101,000). These shares were
allotted under the terms of the Company’s share option schemes which are described in note 29.
Share premium account
The share premium account represents the amounts received by the Company on the issue of ordinary shares that are in excess of the nominal value
of the issued shares net of share issue costs.
Capital reserve – own shares
At 30 March 2020, the Group held shares in an employee share ownership trust. The reserve represented the cost of acquired shares that had not fully
vested with employees. These shares related to a deferred bonus scheme no longer in existence and on 21 August 2020, the shares were transferred
to an employee benefit trust account which acquires shares in Naked Wines plc to satisfy awards under the Naked Wines plc Long Term Incentive Plan
(LTIP) (see note 29 (c)).
Capital redemption reserve
The Company, when cancelling its ordinary shares, transfers amounts equivalent to the nominal value of the cancelled shares into the capital
redemption reserve so as to maintain the level of non-distributable reserves in shareholders’ equity.
Currency translation reserve
The currency translation reserve represents exchange differences arising from the translation of foreign currency subsidiary undertakings.
118
28 Employee Share Ownership Trust
The Employee Share Ownership Trust acquired shares in Naked Wines plc to satisfy awards under the deferred bonus scheme. The shares were
distributed to participants of the scheme at the end of a two-year deferral period. This scheme is no longer in existence and on 21 August 2020, the
trust transferred 3,934 shares to an employee benefit trust account which acquires shares in Naked Wines plc to satisfy awards under the Naked Wines
plc Long Term Incentive Plan (LTIP) (see note 29 (c) below).
At the year end 30 March 2020, the trust held 3,934 shares with a nominal value of 7.5p each. The total acquisition cost of these shares was £17,000 and
the market value of these shares at 30 March 2020 was £10,000.
29 Share based payments
The charge recognised in the income statement in respect of share based payments, including social security, is £935,000 (2020: £965,000 for
continuing operations, £1,857,000 for the total Group) relating to share schemes.
Share schemes
NIC provided on share schemes
At end of year
Continuing operations
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
Total Group
Year ended
30 March 2020
£’000
777
158
935
833
132
965
1,695
162
1,857
The Company operated four share schemes during the year, all of which are equity-settled.
a) The Naked Wines plc Approved Executive Share Option Scheme (2006) was adopted on 4 August 2006 and achieved HMRC approval for tax
purposes on 7 December 2006. The first grant of options under the rules of this scheme was made in January 2007.
b) The Naked Wines plc 2006 Unapproved Employee Share Option Scheme was adopted on 4 August 2006. The first grant of options under the rules
of this scheme was made in January 2007.
Following the completion of the disposal of the Majestic and Lay & Wheeler businesses, all participants who were granted shares in this scheme
ceased to hold office or employment with Naked Wines plc. The participants had the option to exercise any option in this scheme during the six months
after the date of such cessation, after which the options lapsed. All outstanding shares lapsed by 10 June 2020.
The following table shows the number of shares outstanding by share scheme:
2006 Approved scheme
2006 Unapproved scheme
Outstanding at the end of the year
Year ended
29 March 2021
number
Year ended
30 March 2020
number
–
–
–
307,850
96,450
404,300
The following table reconciles the number of share outstanding and the weighted average exercise price (WAEP) for both schemes:
Year ended 29 March 2021
Year ended 30 March 2020
Outstanding at the beginning of the year
Exercised
Lapsed
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average remaining contractual life in years
Range of exercise prices
Options
404,300
–
(404,300)
–
–
–
–
WAEP
£4.45
–
£4.45
–
–
–
–
Options
526,300
(24,000)
(98,000)
404,300
404,300
0.20
£2.02 – £5.41
WAEP
£4.44
£2.02
£4.77
£4.45
£4.45
£0.00
£0.00
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Notes to the financial statements
continued
29 Share based payments (continued)
c) The Naked Wines plc Long Term Incentive Plan (LTIP) was adopted on 20 July 2016. The first grant of shares under the rules of the scheme was made
in July 2016. This scheme is unapproved.
The following table reconciles the number of share outstanding and the weighted average price on vesting for the LTIP scheme:
Outstanding at the beginning of the year
Exercised
Lapsed
Granted
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average remaining contractual life in years
Range of exercise prices
Year ended 29 March 2021
Year ended 30 March 2020
LTIP shares
1,501,172
(189,419)
(456,118)
794,071
1,649,706
–
1.58
£nil
Weighted average
price on vesting
–
£4.22
–
–
–
–
–
–
LTIP shares
1,609,621
(198,015)
(1,438,651)
1,528,217
1,501,172
–
1.65
£nil
Weighted average
price on vesting
–
£2.33
–
–
–
–
–
–
Based on the share price of £7.49 at the year end, the Group expects to transfer an estimated amount of £554,000 to the tax authorities to settle the
employees’ tax obligation.
d) The Naked Wines plc Share Incentive Plan (SIP) was adopted on 20 July 2016. The first grant of shares under the rules of the scheme was in July 2017.
The following table reconciles the number of share outstanding and the weighted average price on vesting for the SIP scheme:
Outstanding at the beginning of the year
Exercised
Lapsed
Granted
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average remaining contractual life in years
Range of exercise prices
Year ended 29 March 2021
Year ended 30 March 2020
SIP shares
Weighted average
price on vesting
101,439
(22,998)
(23,882)
89,201
143,760
–
1.77
£nil
–
£3.91
–
–
–
–
–
–
SIP shares
198,027
(248,299)
(40,745)
192,456
101,439
–
1.55
£nil
Weighted average
price on vesting
–
£2.17
–
–
–
–
–
–
Based on the share price of £7.49 at the year end, the Group expects to transfer an estimated amount of £46,000 to the tax authorities to settle the
employees’ tax obligation.
The fair value of equity-settled shares is estimated as at the date of grant using the Black-Scholes option pricing model for (c) and (d).
The following table lists the range of assumptions applied to the share based payment awards granted in the respective periods shown.
Weighted average share price at grant
Expected life of options (years)
Contractual life (years)
Volatility (%)
Dividend yield (%)
Risk free interest rate (%)
Weighted average fair value of shares granted during the year
Year ended 29 March 2021
Year ended 30 March 2020
Long Term
Incentive Plan
Share Incentive
Plan
Long Term
Incentive Plan
Share Incentive
Plan
£4.31
3
3
39.0% to 39.7%
N/A
-0.12% to -0.04%
£3.51
£4.26
3
3
39.0%
N/A
-0.12%
£4.26
£2.81
3
3
35.5% to 39.7%
0.0%
0.54% to 0.56%
£2.65
£2.71
3
3
38.6%
N/A
0.5%
£2.71
The expected life of the shares is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility
reflects the assumption that historical volatility is indicative of future trends, which may not necessarily be the actual outcome.
120
30 Disposal of subsidiaries
There has been no disposal of subsidiaries during the year ended 29 March 2021.
During the year ended 30 March 2020, the Group completed two sale agreements. Following those disposals, Naked Wines became a single brand
online business wholly focused on realising the attractive growth opportunity ahead.
G On 10 December 2019, the Group announced the disposal of Majestic Wine Warehouses Limited and Les Celliers de Calais S.A.S, which together
comprise the Majestic Wine business, pursuant to the terms previously announced by the Company on 2 August 2019. The businesses were sold
to CF Bacchus Holdco Limited, a vehicle controlled by funds managed by Fortress Investment Group LLC, for a total consideration of £95m.
G On 1 October 2019, the Group completed the disposal of Lay & Wheeler Limited and Vinotheque Holdings Limited, which together comprise the
Lay & Wheeler business (“L&W”), to Coterie Limited (“Coterie”) for a total cash consideration of £11.3m.
The results of the Majestic and L&W operations which have been included in the consolidated income statement as discontinued in the year to 30
March 2020, were as follows:
Revenue
Expenses
Gain from operating activities
Tax
Gain from operating activities, net of tax
Gain on sale of discontinued operations
Gain from discontinued operations
Earnings per share
Basic
Diluted
The segmental analysis of the operations discontinued in the year to 30 March 2020 was as follows:
Third-party revenue
Movement in en primeur sales
Reported third-party revenue
Segment result – Adjusted EBIT
Finance income
Finance charges
Adjusted profit/(loss) before tax
Adjusted items:
Non-cash items relating to acquisitions
Other adjusted items
Profit/(loss) before tax
Depreciation
Amortisation
Impairments
Geographical analysis
Reported third-party revenue
Non-current assets
Retail
£’000
177,021
–
177,021
3,947
1
(1,271)
2,677
–
–
2,677
9,731
199
740
Commercial
£’000
31,564
–
31,564
733
–
–
733
–
–
733
–
–
–
L&W
£’000
7,693
477
8,170
298
10
(12)
296
–
–
296
64
179
–
UK
£’000
211,185
–
Rest of Europe
£’000
5,570
–
Year ended
30 March 2020
£’000
216,278
(214,108)
2,170
659
2,829
12,008
14,837
20.6p
20.2p
Total
£’000
216,278
477
216,755
4,978
11
(1,283)
3,706
(113)
(1,423)
2,170
9,795
378
740
Total
£’000
216,755
–
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Notes to the financial statements
continued
30 Disposal of subsidiaries (continued)
During the year ended 30 March 2020, the discontinued operations contributed £22,290,000 to the Group’s net operating cash flows, paid £2,430,000
in respect of investing activities and paid £6,625,000 in respect of financing activities.
32 Notes to the cash flow statement
(a) Reconciliation of profit to cash generated/(utilised) by operations
The net assets at the date of disposal were as follows:
Goodwill and intangible assets
Property, plant and equipment
Right-of-use asset
Other non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Lease liabilities
Current and deferred tax liabilities
Foreign exchange translation
Net assets disposed of
Gain on disposal
Total consideration
Satisfied by:
Cash and cash equivalents
Deferred consideration
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents
Less: cash and cash equivalents disposed of
31 Commitments
Future minimum amounts payable under non-cancellable operating leases:
Within one year
Majestic
At
10 December 2019
£’000
L&W
At
1 October 2019
£’000
4,238
51,290
50,414
2,723
72,214
10,266
14,001
(69,643)
(51,959)
(1,178)
(2,045)
80,321
5,333
85,654
71,611
14,043
85,654
954
165
94
2,098
5,577
5,712
4,059
(14,081)
(638)
(405)
–
3,535
6,675
10,210
10,210
–
10,210
Total
£’000
5,192
51,455
50,508
4,821
77,791
15,978
18,060
(83,724)
(52,597)
(1,583)
(2,045)
83,856
12,008
95,864
81,821
14,043
95,864
81,821
(18,060)
63,761
29 March 2021
£’000
30 March 2020
£’000
64
64
87
87
Total of future minimum payments expected to be received under non-cancellable under-lettings is £nil (2020: £nil). The investment property is being
sublet for a peppercorn rent until the property is disposed of. Refer to note 17 Investment property for further details.
Cash generated/(used) by operations
Operating loss
Add back:
Depreciation and amortisation
Loss on disposal of fixed assets
Fair value loss arising on deferred contingent consideration net of settlement
Fair value movement on foreign exchange contracts
Share based payment charges
Operating cash flows before movements in working capital
Increase in inventories
Increase in customer funds in deferred income
(Increase)/decrease in trade and other receivables
Decrease in trade and other payables
Net cash generated/(used) by operating activities
(b) Cash and cash equivalents
Cash and cash equivalents
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
(11,677)
(4,874)
5,288
51
3,868
1,760
777
67
(8,984)
28,244
(1,445)
16,325
34,207
5,336
71
–
(935)
833
431
(13,291)
5,312
594
6,837
(117)
29 March 2021
£’000
85,148
30 March 2020
£’000
54,736
Included in cash and cash equivalents is a restricted amount of £300,000 which relates to a guarantee to HMRC for customs duties for the UK trading
subsidiary.
(c) Analysis of movement in net cash
Cash and cash equivalents
Borrowings – customer funded bond
Borrowings – IFRS 16 lease liabilities
Gross borrowings
Total net cash/(borrowings)
30 March 2020
£’000
54,736
(84)
(5,363)
(5,447)
49,289
Cash flows
£’000
31,545
54
904
958
32,503
Non-cash
movements
£’000
29 March 2021
£’000
(1,133)
–
1,583
1,583
450
85,148
(30)
(2,876)
(2,906)
82,242
33 Events after the balance sheet date
There were no post balance sheet events that have a material impact on the financial position and performance of the Group.
34 Related party transactions
The Group considers its key management personnel to be the Directors of the Company. The compensation of key management personnel is disclosed
in note 9.
There are no other related party transactions which require disclosure (2020: none).
122
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Notes to the financial statements
continued
Company balance sheet
As at 29 March 2021
35 Investments in subsidiaries
Details of the Group’s subsidiaries at 29 March 2021 are as follows:
Subsidiary
Primary activity
Place of incorporation
and operation
Naked Wines Employee Share Ownership Trust Limited *
Trustee company
United Kingdom
Naked Wines International *
www.nakedwines.com Limited
Naked Wines Prepayments Trustee Company Limited
Holding company
United Kingdom
Retailing of wines
United Kingdom
Trustee company
United Kingdom
% and class of
shares held
100% ordinary shares
100% ordinary shares
100% ordinary shares
100% ordinary shares
Nakedwines.com Inc.
Retailing of wines
United States of America
100% ordinary shares
Nakedwines.com Prepayment Protection Company LLC
Trustee company
United States of America
100% ordinary shares
Naked Wines Australia Pty Limited
NWA (Prepayments) Pty Limited
Naked Fine Wine Bonds plc
*
Directly owned by the parent company.
Retailing of wines
Trustee company
Australia
Australia
Funding company
United Kingdom
100% ordinary shares
100% ordinary shares
100% ordinary shares
Subsidiaries incorporated in the United Kingdom
Norvic House, 29-33 Chapel Field Road, Norwich, NR2 1RP
Subsidiaries incorporated in the United States of America
135 Gasser Drive, Suite A, Napa, CA 94559, USA
Subsidiaries incorporated in Australia
18 Sydney Road, Manly, NSW 2095, Australia
Registered address
All subsidiary undertakings have been included in the consolidation.
The subsidiaries have the same reporting date and cover the same period as that of the consolidated financial statements.
Non-current assets
Investments in subsidiaries
Loan notes receivable from subsidiaries
Investment property
Right-of-use assets
Intangible fixed assets
Deferred tax assets
Other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
Current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Non-current liabilities
Provisions
Lease liabilities
Total liabilities
Net assets
Shareholders’ funds
Called-up share capital
Share premium
Capital redemption reserve
Retained earnings
Equity shareholders’ funds
Note
29 March 2021
£’000
30 March 2020
£’000
39
40
41
42
43
44
45
45
46
47
48
49
49
48
50
50
57,671
44,631
855
5
648
578
9,520
113,908
835
64,235
65,070
–
65,070
178,978
(55,548)
(4)
(207)
(55,759)
(393)
–
(393)
(56,152)
122,826
5,487
21,162
363
95,814
122,826
56,986
28,573
899
10
575
242
13,005
100,290
750
42,871
43,621
953
44,574
144,864
(18,766)
(5)
(143)
(18,914)
(348)
(4)
(352)
(19,266)
125,598
5,466
21,162
363
98,607
125,598
For the year ended 29 March 2021, the Company reported a loss of £3,815,000 (2020: profit of £85,033,000).
The financial statements of Naked Wines plc were approved by the Board of Directors and authorised for issue on 10 June 2021. They were signed on its
behalf by Shawn Tabak.
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Company statement of changes in equity
For the year ended 29 March 2021
Notes to the Company financial statements
At 1 April 2019
Profit for the period
Total comprehensive profit for the period
Shares issued
Share based payment charges – subsidiary employees
Share based payment charges – Company
Dividends paid
Deferred tax on share based payment
At 30 March 2020
Loss for the period
Total comprehensive loss for the period
Shares issued
Share based payment charges – subsidiary employees
Share based payment charges – Company
Deferred tax on share based payment
At 29 March 2021
126
50
29
29
12
44
50
29
29
44
Called-up
share capital
£’000
Share premium
£’000
Note
Capital
redemption
reserve
£’000
5,411
21,116
363
–
–
55
–
–
–
–
–
–
46
–
–
–
–
–
–
–
–
–
–
–
Retained
earnings
£’000
16,132
85,033
85,033
(53)
533
1,161
(3,786)
(413)
Total
shareholders’
funds
£’000
43,022
85,033
85,033
48
533
1,161
(3,786)
(413)
36 Significant accounting policies
Details of the Company are disclosed in note 1 of the Consolidated notes to the financial statements.
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets the definition of
a qualifying entity under FRS 100 Application of Financial Reporting Requirements issued by the FRC. Accordingly, these financial statements were
prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share based
payments, financial instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash
flow statement, standards not yet effective and certain related party transactions.
No income statement is presented by the Company as permitted by section 408 of the Companies Act 2006. The profit attributable to the Company is
disclosed in the footnote to the Company’s balance sheet.
The financial statements have been prepared on the historical cost basis.
5,466
21,162
363
98,607
125,598
The principal accounting policies adopted are the same as those set out in note 3 to the consolidated financial statements except as noted below.
–
–
21
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,815)
(3,815)
(21)
685
92
266
(3,815)
(3,815)
–
685
92
266
5,487
21,162
363
95,814
122,826
Investment
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and any impairment losses.
Amortisation is charged to the income statement on a straight-line basis over the estimated useful life of the asset. These assets relate to software and
are charged to the income statement over five years.
Property, plant and equipment and right-of-use assets
Refer to note 3.16 Property, plant and equipment and right-of-use assets for depreciation methods, useful lives and depreciation rates used for each
class of asset.
Investment property
Refer to note 3.17 Investment property for depreciation methods, useful lives and depreciation rates used for each class of asset.
Impairment review of loan notes receivable from subsidiaries
Impairment reviews in respect of loan notes receivable from subsidiaries are performed at least on an annual basis and furthermore when an event
indicates that an impairment review is necessary.
37 Key accounting judgements and estimates
In the preparation of these accounts, the directors consider that there are no key sources of estimation uncertainty that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
38 Staff costs
The average monthly number of employees (including Directors) during the year was as follows:
Administrative and distribution
The aggregate remuneration comprised:
Wages and salaries
Social security costs
Contributions to defined contribution pension plans
Share based payment charges
Directors’ emoluments are as disclosed in note 9 Staff costs.
Year ended
29 March 2021
number
83
Year ended
30 March 2020
number
76
Year ended
29 March 2021
£’000
Year ended
30 March 2020
£’000
8,557
606
249
92
9,504
5,821
639
320
1,161
7,941
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Notes to the Company financial statements
continued
39 Investments in subsidiaries
Cost or valuation:
At 30 March 2020
Net movement on share options granted/(lapsed) to subsidiary companies’ employees
At 29 March 2021
Amounts provided for:
At 30 March 2020 and 29 March 2021
Net book value
At 29 March 2021
At 30 March 2020
Details of the Company’s subsidiaries at 29 March 2021 are disclosed in note 35.
£’000
56,986
685
57,671
–
57,671
56,986
42 Right-of-use assets
Cost
At 30 March 2020 and 29 March 2021
Accumulated depreciation
At 30 March 2020
Charge for the year
At 29 March 2021
Net book value
At 29 March 2021
At 30 March 2020
40 Loan notes receivable from subsidiaries
Inter-company balances held in the Company largely relate to investment in its trading subsidiaries through the provision of loan amounts. As such,
these amounts are disclosed as loan notes receivable from subsidiaries reported within non-current assets.
Total cash outflow for leases was £5,459 (2020: £5,459).
43 Intangible assets
41 Investment property
Cost and valuation
At 30 March 2020 and 29 March 2021
Depreciation
At 30 March 2020
Charge for the year
At 29 March 2021
Net book value
At 29 March 2021
At 30 March 2020
Refer to note 17 of the Group financial statements for details.
128
Freehold property
£’000
899
–
(44)
(44)
855
899
Cost
At 1 April 2019
Additions
At 30 March 2020
Additions
At 29 March 2021
Accumulated amortisation
At 1 April 2019
Charge for the year
Impairments
At 30 March 2020
Charge for the year
At 29 March 2021
Net book value
At 29 March 2021
At 30 March 2020
44 Deferred tax assets
Provisions
Share based payments
Equipment, fittings
and vehicles
£’000
12
(2)
(5)
(7)
5
10
Software
£’000
822
544
1,366
214
1,580
–
(51)
(740)
(791)
(141)
(932)
648
575
30 March 2020
£’000
Recognised in income
statement
£’000
Recognised in OCI
£’000
29 March 2021
£’000
89
153
242
(3)
73
70
–
266
266
86
492
578
Deferred tax assets arising from timing differences are recognised to the extent that these amounts are recoverable through the reversal of the timing
difference in the foreseeable future.
Deferred tax on losses of £8,329,000 (2020: £755,000) relating to losses in the Company have not been recognised in these financial statements
on the basis that there is insufficient evidence of suitable future taxable profits against which to recover any deferred tax asset created. An amount
of £3,868,000 relating to the loss arising on the fair value loss arising on deferred contingent consideration, net of settlement, is not included in the
deferred tax losses as the timing and the crystallisation of any future capital gains is unclear. There is no expiry date on these unrecognised losses.
129
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Notes to the Company financial statements
continued
45 Trade and other receivables
Trade receivables
Vendor loan note
Prepayments and accrued income
Other receivables due after more than one year
Vendor loan note
Deferred contingent consideration
29 March 2021
£’000
30 March 2020
£’000
91
360
384
835
284
360
106
750
29 March 2021
£’000
30 March 2020
£’000
9,520
–
9,520
8,962
4,043
13,005
49 Provisions
At 1 April 2019
Charged in the year
At 30 March 2020
Credited in the year
At 29 March 2021
Current
Non-current
Social security costs
£’000
906
(415)
491
109
600
29 March 2021
£’000
30 March 2020
£’000
207
393
600
143
348
491
The vendor loan note was initially measured at fair value and subsequently measured at amortised cost less any provision for impairment.
The deferred contingent consideration was initially recognised at a fair value of £4,043,000. During the year, the Board agreed on a sum of £175,000
in settlement of this asset which was paid during March 2021. Refer to note 7 Adjusted items for further details.
46 Assets classified as held for sale
The Company had no assets held for resale at the end of the year. Refer to note 20 of the consolidated financial statements for details.
47 Trade and other payables
Trade payables
Other taxes and social security
Amounts due to Group undertakings
Accruals and other payables
29 March 2021
£’000
30 March 2020
£’000
378
–
50,412
4,758
55,548
253
58
13,865
4,590
18,766
The amounts due to Group undertakings have no fixed payment terms and are interest free.
48 Lease liabilities
The Company leases a motor vehicle and the lease runs for a period of four years. The maturity analysis of the lease is shown below.
Due within 1 year
Due between 1 and 2 years
Less: unearned interest
Analysed as:
Current
Non-current
130
29 March 2021
£’000
30 March 2020
£’000
4
–
4
–
4
4
–
4
5
4
9
–
9
5
4
9
Social security costs on share based payment awards
Social security costs which will become payable on exercise of share based payment awards have been provided. The share based payments will vest
at various dates from the balance sheet date to 15 December 2023. The value of social security costs payable on the vesting of share based payment
awards is dependent on the Group’s share price at the date of exercise of the options. The provision which is allocated on a time weighted basis over
the period from date of grant to the date that employees become unconditionally entitled to the options has been calculated on the share price at the
balance sheet date of £7.49 and the assumption that 100% of employees will take up their vested share based payment award and that the rate of
social security is 13.8% for UK employees and 7.65% for US employees.
50 Share capital and share premium account
Refer to note 27 Share capital and reserves for details of share capital. Refer to notes 27 and 28 for details of own shares.
51 Share based payments
Refer to note 29 Share based payments for:
G A description of each type of share option and share based payment arrangement that existed at any time during the period, including the general
terms and conditions of each arrangement
G The weighted average share price at the date of exercise for share options exercised and share based payment awards vesting during the period
G The range of exercise prices and weighted average remaining contractual life for share based payment awards outstanding at the end of the
period.
52 Post balance sheet event
There were no post balance sheet events that have a material impact on the financial position and performance of the Company.
53 Related party transactions
The Company has identified the Directors of the Company as related parties for the purpose of FRS 101. The compensation of key management
personnel is disclosed in note 9 Staff costs. The Company has no transactions with or amounts owed to or from subsidiary undertakings that are not
100% owned either directly by the Company or by its subsidiaries. There are no other related party transactions which require disclosure (2020: none).
54 Ultimate controlling party
The Company, Naked Wines plc, is the ultimate controlling party of the Naked Wines Group.
131
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Shareholder information
Definitions and Customer experience KPIs
Annual General Meeting
The AGM will be held at the offices of Allen & Overy LLP, One Bishops
Square, London, E1 6AD on 5 August 2021 at 4.30 p.m. The Notice of
Meeting will be separately distributed to shareholders.
Key contacts:
Company Secretary
Alex Iapichino
Norvic House
29-33 Chapel Field Road
Norwich NR2 1RP
Nominated Advisor and Joint Corporate Broker
Investec Bank (UK) Limited
2 Gresham Street
London EC2V 7QP
Joint Corporate Broker
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
Auditor
Deloitte LLP
1 Station Square
Cambridge CB1 2GA
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
PR Advisor
Instinctif Partners
65 Gresham Street
London EC2V 7NQ
Investor Relations
IR@nakedwines.com
Norvic House
29-33 Chapel Field Road
Norwich NR2 1RP
Solicitors
Allen & Overy LLP
One Bishops Square
London E1 6AD
Tax Advisor
PwC LLP
3 Forbury Place
23 Forbury Road
Reading RG1 3JH
Banker
HSBC UK Bank PLC
1 Centenary Square
Birmingham B1 1HQ
Definitions
AGM
Angel
CAGR
Company,
Naked or
Naked Wines
Contribution
DtC
Group
LTIP
Marketing
R&D
Annual general meeting
A customer who deposits funds into their account each
month to spend on the wines on our website.
Compound annual growth rate. The year-on-year growth
rate required for a number of years for a value to grow
from its beginning balance to its ending balance.
Naked Wines plc
Customer experience KPIs
Product
availability
% of targeted range available on our websites as indicated
by our inventory reporting.
Wine quality
–“Buy it again
ratings”
5* customer
service
% of “Yes” scores in the last 12 months as recorded by
websites/apps.
The number of service ratings scoring 5* (out of 5) as a % of
total ratings in the past 12 months as recorded by websites/
apps/telephone feedback.
A profit measure between gross profit and EBIT, calculated
as gross profit less the costs of fulfillment and servicing (e.g.
credit card fees, delivery costs, customer-facing staff costs).
We often split contribution into that from new and repeat
customers as they can have different levels of profitability.
Direct to Consumer
Naked Wines plc and its subsidiary undertakings
Long Term Incentive Plan
Expenditure focused on researching and testing new
marketing channels and creative approaches, with the aim
of opening up significant new growth investment
opportunities.
New Customer A customer who, at the time of purchase, does not meet
our definition of a repeat customer; for example, because
they are brand new, were previously a repeat customer
and have stopped subscribing with us at some point or
cannot be identified as a repeat customer.
New Customer
sales
Revenues derived from transactions with customers who
meet our definition of a new customer.
A reconciliation of total sales to New Customer sales is
shown in note 6.
Repeat
Customer
Repeat
Customer
sales
A customer (“Angel”) who has subscribed and made their
first monthly subscription payment.
These are the revenues derived from orders placed by
customers meeting our definition of a repeat customer at
the time of ordering.
A reconciliation of total sales to Repeat Customer sales is
shown in note 6.
SIP
Share Incentive Plan
Standstill EBIT The adjusted EBIT that would be reported if Investment in
New Customers was reduced to the level needed to just
replenish the current customer base.
See page 136 for calculation from constituent Group KPIs
and APMs.
TAM represents the available market which Naked sees as
a revenue opportunity which it could serve.
Total
Addressable
Market (TAM)
132
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Alternative performance measures
Investment measures
EBIT
Operating profit as disclosed in the Group income
statement.
Investment in
New Customers
Adjusted EBIT Operating profit adjusted for amortisation of acquired
intangibles, acquisition costs, impairment of goodwill,
restructuring costs and fair value movement through the
income statement on financial instruments and revaluation
of funding cash balances held.
EBIT plus depreciation and amortisation.
Adjusted EBIT plus depreciation and amortisation, but
excluding any depreciation or amortisation costs included
in our adjusted items, e.g. amortisation of acquired
intangibles.
EBITDA
Adjusted
EBITDA
Adjusted PBT
Adjusted EBIT plus net finance income.
Free cash flow Cash generated by operating activities less capital
expenditure and before adjusted items and tax.
A reconciliation of free cash flow is shown on page 135.
Net cash
The amount of cash we are holding less debt at year end.
New Customer
Contribution
loss
5-Year
Forecast
Payback
The Investment in New Customers during the year,
including contribution profit/loss from New Customer sales
and advertising costs. Please note we have updated the
description of this term to elaborate on its components,
but the underlying calculation has not changed.
The contribution earned from sales to New Customers.
An explanation of why this is used is on page 25.
A reconciliation of adjusted EBIT to New Customer
Contribution loss is shown in note 6.
The ratio of projected future Repeat Customer Contribution
Profit we expect to earn from the new customers recruited
in the year divided by the Investment in New Customers.
We forecast contribution at a customer level using a
machine learning algorithm which weighs several
characteristics including demographics, interactions and
transactions forecast over a five-year horizon. This is then
aggregated to a monthly, then annual, cohort level for
reporting purposes.
An explanation of why this is used is on page 25.
As this is an undiscounted forward-looking estimate it
cannot be reconciled back to reported financial results.
As we can refine this expectation over time, we also
updatethe expected returns from prior year investment
(see page 37). For this year, we will also show the lifetime
payback for comparative purposes but we then intend
to report only the 5 year forecast payback in future.
5-Year
Lifetime
Value
The future Repeat Customer Contribution Profit we expect
to earn from customers recruited in a discrete period of
time.
We calculate this future contribution using a Machine
Learning (ML) model. Collecting data for a number of key
customer characteristics including retention, order
frequency and order value along with customer
demographics and non-transactional data, the ML
algorithms then predict the future (lifetime) value of that
customer.
The profit attributable to sales meeting the definition of
sales to repeat customers after fulfilment and service costs.
An explanation of why this is used is on page 25.
A reconciliation of adjusted EBIT to Repeat Customer
Contribution profit is shown in note 6.
The ratio of sales made to customers who met our
definition of “Repeat” last year that were realised again this
year. Using our website data, the population who were
subscribers in the prior year are identified and their sales in
the current year then assessed. This is done for each month
and summed to calculate the full year retention.
Repeat
Customer
Contribution
profit
Repeat
Customer sales
retention
Year 1 Payback This short-term payback measure shows the actual return
in this financial year of our investment in the prior year.
134
Free cash flow
Adjusted EBIT
Add back depreciation and amortisation (excludes amortisation of acquired intangibles included in adjusted items)
Add back IFRS 2 charges
Adjusted EBITDA
Working capital movement
Inventories
Deferred income
Trade and other receivables
Trade and other payables
Repayments of principal under lease liabilities
Working capital movement
Pre-tax operating cash flow
Capital expenditure
Pre-tax operating cash flow/“Free cash flow”
Reconciliation to statutory cash flow statement
Free cash flow
Capital expenditure
Repayments of principal under lease liabilities
Net cash generated/(used) by operating activities
29 March 2021
£m
30 March 2020
£m
(1.5)
1.7
0.8
1.0
(9.2)
28.2
(1.4)
15.6
(0.9)
32.3
33.3
(2.7)
30.6
30.6
2.7
0.9
34.2
(2.4)
1.8
0.8
0.2
(13.3)
5.3
0.6
7.1
(1.2)
(1.5)
(1.3)
(1.1)
(2.4)
(2.4)
1.1
1.2
(0.1)
135
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Alternative performance measures (APMs)
continued
Standstill EBIT calculation
Standstill EBIT is calculated as
Repeat Customer Contribution profit (a)
Less: replenishment spend (e)
Less: General and administrative costs2
(a) Repeat Customer Contribution profit
(b) Repeat Customer sales retention
(c) Repeat Customer Contribution profit lost to attrition (a x (1-b))
(d) Year 1 Payback
(e) Spend to replenish lost Repeat Customer Contribution profit (c/d)
29 March 2021
£m
30 March 20201
£m
84.9
(12.2)
(33.4)
39.3
84.9
88.2%
10.0
82.0%
12.2
46.3
(11.5)
(25.2)
9.6
46.3
83.3%
7.7
67.0%
11.5
The basis of the cost allocation has been updated in the current year and prior year comparatives are stated on a consistent basis.
1.
2. General and administrative costs exclude £3.6m amortisation, £2.0m fair value adjustments, £0.7m adjustment for FX and £3.0m marketing R&D spend.
136
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