Wiggle CRC Posts A Massive Loss After Writedowns

Mapil Topco Limited, which trades as Wiggle CRC, has just released its financial statements for the year ending 30th December 2018. They shown a pre-tax loss of £132.5 million (A$253 million). But as is often the case with large entities, that single figure does not tell the whole story.

Wiggles sales rose 15% to £453 million (A$865 million) and there was a trading profit of £14.2 million (A$27 million) representing a slim 3.1% net profit margin. Heavy write downs on the value of assets and interest payments to Bridgepoint impacted negatively to the tune of £106.4 million (A$203 million) and £28.7 million (A$55 million), respectively totalling A$258 million.

Wiggle CRC is still consolidating the two formerly separate businesses. To cut costs they are migrating the CRC (Chain Reaction Cycles) website to the same platform as the Wiggle website.

Distribution of the firm’s goods has steadily been consolidated from five sites to two. In the process the carried inventory has been reduced by 3%, something that the business expects will begin to show benefits in financials attached to 2019.

The director’s report concludes: “The directors believe that the most appropriate measure of the company’s profitability is EBITDA (earnings before interest, taxes, depreciation and amortisation) and this, along with revenue, is a key performance indicator in business.

“For the current year, EBITDA was a profit of £12,017,000 (2017: £152,000) before taking account of non-recurring costs. Loss before tax was £132,465,000 (2017: £39,522,000) driven principally by the non-cash one off impairment of goodwill along with significant non-cash interest and depreciation costs. The underlying trading performance of the business has improved year on year and is expected to continue to do so in 2019 and beyond.”

Looking at the financials more closely shows that the company’s gross profit (total sales less cost of goods sold) was 28%. Looking at the balance sheet, the company has net equity of minus A$236 million. In other words, its liabilities exceed its assets by this amount. When you look at what the assets and liabilities are composed of, the largest asset is ‘Intangible Assets’ which presumably includes intellectual property and goodwill. The amount of stock, A$162 million is lower than the amount of creditors falling due within one year, A$191 million. Dividing the total annual sales by the stock holdings suggests that Wiggle is turning over its stock 5.3 times per year. (‘stockturns’)

Of course, Australian bicycle industry members would be interested to know the value of Wiggle’s sales in Australia.
Wiggle Australia Pty Ltd is listed as one of the subsidiary companies, but with no financial details given.
The financials do not give break out of sales by country simply UK, Europe and Rest of World. The respective break downs in percentage terms for these three regions for 2018 was 38%, 37% and 25%.
Between 2017 and 2018 sales to the UK were flat, sales to Europe increased significantly whilst sales to the rest of the world dropped substantially from A$248 million to A$212 million. Australian sales would be a subset of that, along with many other countries in this region, probably including major nations such as the USA, Canada, Japan and China.

If you’d like to study Wiggle CRC’s financials in more detail you can see them here.

Notes:
All Australian dollar amounts in this story are based on the currency conversion rate at the time of writing $1.91 per Pound Sterling, then rounded to the nearest million dollars.
A large portion of this story was first published in Cycle Industry News.

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