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news
Wiggle and Chain Reaction Cycles.jpgLocal bike shops look away now - reports of worsening losses at Wiggle are exaggerated
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.”
Simon joined road.cc as news editor in 2009 and is now the site’s community editor, acting as a link between the team producing the content and our readers. A law and languages graduate, published translator and former retail analyst, he has reported on issues as diverse as cycling-related court cases, anti-doping investigations, the latest developments in the bike industry and the sport’s biggest races. Now back in London full-time after 15 years living in Oxford and Cambridge, he loves cycling along the Thames but misses having his former riding buddy, Elodie the miniature schnauzer, in the basket in front of him.
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16 comments
It isn't big retailers killing the LBS, it's the consumer, like me.
I have no loyalty to any single retailer LBS or online. I buy from where is cheapest, often that is online, be it Evans, Wiggle or CRC (sometimes Merlin, sometimes Ribble).
I occasionally buy smaller things from the LBS if I need them urgently and the end of season sales at the LBS can have absolute bargains. I don't use the LBS for servicing anymore either, it's quicker and cheaper to do the work myself.
With regards to the spell check, doesn't MS Word correct most things automatically? Failing that, Grammarly can spell check and sort out the grammar in-browser.
shhhh - next thing, people who say they want their country back will be able to appear as if they can actually speak the language!
Haha, yeah that's potentially (and worryingly) true.
Mapil Topco? Could they not have been more inventive with the name?
Topco might be something you use on internal presentations explaining company structure, and I guess MAPIL is Middle Aged Person In Lycra. Nice to know they aren't sexist in their denigration of their customers.
Online retail businessess are best judged by cashflow: Often the stock and supply is being funded by suppliers, especially if their terms are good
This is so frustrating to read. Just a couple of examples:
"the measure used n that industry"
"profit - up fro £840,000 in the 48 weeks"
"Wiggle and Chain Reaction had would have had combined sales"
"don't appear in Malin Topco's actual profit" "turnover for Mapil Topco was"
Then I gave up. I would be embarrased to send this in a private email, but how anyone could actually publish this to the public is beyond me. Don't you have a proofing process?
Stop looking at the profit and loss and start looking at the cashflow. Tells you everything you need to know, including how the poor suppliers are funding this business.
Also look at the margins the business is being charged above LIBOR. Pretty steep.
This is a pretty speculative investment. Load it up with debt and hope someone buys it for more or you can spin it off through an IPO.
Press release from Wiggle's PR dept sucked up and spat out by road.cc. Utter garbage and lazy journalism.
Look at the multiple of EBITDA to debt and tell me how they are going to repay that...
Fully researched from filed accounts by someone who has previously worked researching financials of private equity-backed companies and not a press release in sight.
Thanks for reading, though.
You'll have to forgive me, but when an article appears on Road.cc that seems to be sensibly written and didn't begin 'you'll never believe what this cyclist did next...' or have some other click bait title then one can usually assume it's been written by a PR monkey.
But still, such a long piece with such attention to the facts is not bread and butter content for Road.cc so when I see such an article the cynic in me questions the motivation behind it.
But clearly I'm wrong, who has ever heard of a news outlet putting out positive stories on behalf of a major advertiser?
Thanks for taking the time to respond though.
I'm confused, do Wiggle pay to advertise on Road.cc... I haven't seen adds from them anywhere?
I usually get targeted adds from Evans Cycles and Wiggle, as well as a lot of Solidworks and AutoDesk adverts. I didn't think Wiggle CRC specifically does advertise on road.cc. I may be wrong?
Scroll down to the deals below, who do you think puts them there? The deal fairy? Paid adverts. This is how the internetz works.
Actually, I don't give a shit about Wiggle or its financial state, but I do care about advertorial which is what the original piece was.
seems to be more and more of this kind of stuff on this website. On another note what's the point on the near miss videos as well. Clickbait ?
The pounds value has been declining since November 2015. There is a drop after June 23 2016 but nowhere near as big as back in 2007/2008 when the credit crunch started. Since then we have had almost zero interest rates and large scale quantitative easing. When money is invented out of nowhere the value of the money drops. But that just means out exports become cheaper so we export more - as the Wiggle accounts show. The last time sterling dropped like this was when we came out of the ERM and we managed to balance the trade deficit.
Please Sir, my brain is full. May I be excused?