Reports today suggest that the impact of its merger last July with Chain Reaction Cycles have hit Wiggle's bottom line due to the costs of the transaction plus its move to a new warehouse. But close analysis of Wiggle's accounts – and more importantly, that of the group parent company – reveal a different picture.
A report from Retail Week picked up by the cycle trade press states that Wiggle's losses worsened to £3.2 million in the 52 weeks to 1 January 2017 compared with £2.7 million in the previous year.
The figures reflect the pre-tax losses reported in the accounts filed at Companies House of Wiggle Limited. However, they exclude one-off costs associated with the merger and the warehouse move, and they do not include the Chain Reaction business.
Moreover, a change in financial year-end means those pre-tax loss figures are not directly comparable. The latest figures cover the 52 weeks to 1 January 2017, the previous ones the 48 weeks to 3 January 2016, so they are not directly comparable.
According to those accounts, Wiggle had non-recurring costs of £3.3 million in the 52 weeks to 1 January 2017, including £2.1 million relating to “evaluating the merger with Chain Reaction Cycles” and £1.1 million relating to the move of its warehouse facility from several sites in Bournemouth to a single facility in Wolverhampton.
The bulk of non-recurring costs related to the warehouse move were accounted for in the previous accounts for the 48 weeks to 3 January 2016, however – £4.9 million out of a total of £6.5 million.
And what that means for Wiggle's bottom line is after factoring in the one-off costs, its pre-tax loss improved from £9.2 million to £6.5 million.
Being a private equity-backed business, it's more useful to adopt the measure used in that industry to assess a business's underlying performance, which is to look at its earnings before interest, tax, depreciation and amortisation (EBITDA).
By that measure, Wiggle returned a much-improved profit, up from £840,000 in the 48 weeks to 3 January 2016 to £3.6 million in the 52 weeks to 1 January 2017.
Those were achieved on a turnover of £205.5 million in the latest accounting period compared to £178.1 million for the prior 48-week period.
A note to the accounts filed at Companies House of parent company Mapil Topco, however, reveals that Wiggle and Chain Reaction had would have had combined sales in the 52 weeks to 1 January 2017 of £370 million had they both been included for the full period, with EBITDA of £11.3 million.
While those figures don't appear in Malin Topco's actual profit and loss account for the period, with Chain Reaction only included since the date the merger completed, 7 July 2016, they do give an idea of the sheer scale of the merged operation now known as WiggleCRC.
Reported turnover for Mapil Topco was £282.9 million, with EBITDA before non-recurring costs standing at £7.3 million, up from £688,000 the previous year, again only including Chain Reaction from 7 July 2017.
At group level, the strength of sterling in the first half of the year affected sales outside the UK, but that situation reversed during the second half of the year following the collapse of the pound after the EU referendum vote, which came a fortnight before the merger completed.
In the 2015/16 financial year and based on the customer’s location, 56.7 per cent of Wiggle’s turnover came from the UK, 18.7 per cent from Europe and 24.6 per cent from Rest of World.
In the year to 3 January 2017, including Chain Reaction Cycles from 7 July, the figures were 47.6 per cent from the UK and 19.2 per cent from Europe, with Rest of World accounting for the remaining 33.3 per cent.
Non-recurring costs at group level were £11.9 million during the year, of which £8.6 million related to the merger and £1.8 million to Wiggle’s warehouse move.
In the latest accounts, Mapil Topco said that the merger of the two retailers “will create an even more compelling customer proposition, retaining the brands and websites of each business while seeking to extend its product range over a stronger, well invested platform and infrastructure synergies.”
Those “synergies” include, as previously announced, CRC’s warehousing facilities in Belfast being relocated to Wolverhampton to bring all of the group’s logistics and distribution functions together at one site.
The group added: “Together, the combined business will be better placed to compete in the growing global online market for cycling, running, swimming and tri-sports products and accessories.”
Born in Scotland, Simon moved to London aged seven and now lives in the Oxfordshire Cotswolds with his miniature schnauzer, Elodie. He fell in love with cycling one Saturday morning in 1994 while living in Italy when Milan-San Remo went past his front door. A daily cycle commuter in London back before riding to work started to boom, he's been news editor at road.cc since 2009. Handily for work, he speaks French and Italian. He doesn't get to ride his Colnago as often as he'd like, and freely admits he's much more adept at cooking than fettling with bikes.