TIDMVINO
RNS Number : 3229Y
Virgin Wines UK PLC
04 May 2023
04 May 2023
Trading Statement
("Virgin Wines", the "Company" or the "Group")
Virgin Wines UK plc (AIM: VINO), one of the UK's largest
direct-to-consumer online wine retailers, today provides an update
on its recent trading and strategic progress.
Key highlights
Warehouse Management System
- Significant progress has been made in remedying the stability
and software operational issues that previously affected the
implementation of the new Warehouse Management System (WMS), which,
as previously reported, negatively affected H1 revenue and
profit.
- The Board is confident that these one-off issues are in the
past, and the system is now working efficiently and driving
increased productivity in the operational environment.
- This positive progress can be seen with the April cost per
case for warehouse fulfilment being in line with April 2022
levels*.
Cash
- The working capital position continues to be strengthened,
with a reduction in stock holding of GBP1.2m (10%) since its
January high point.
- The Group maintains a strong cash position with GBP12.3m gross
cash as at 28 April 2023 and no debt.
Current trading
- As previously announced, Q3 trading continued to be negatively
affected by a reduction in order frequency through the key WineBank
customer membership, as customers continued to build their balances
rather than spend.
- An increasingly competitive environment arose during Q3 as
retailers discounted at aggressive levels to liquidate high stock
holdings.
- However, encouragingly, cancellation and conversion rates have
started to improve since the end of H1, whilst the trade rate has
also recovered from its low point in November 2022.
- In addition, the total customer deposit balance in WineBank continues to build.
- Q4 revenue is expected to be in line with Q422 following a
marginally positive YOY variance in April 2023 and improved order
frequency.
Strategic progress
Delivering on the core pillars that have enabled the Group to
generate growth and profit consistently for many years remains
critical. The Group remains focused on:
- Acquiring large numbers of high-quality, new customers, at a low cost per recruit;
- Driving membership growth onto our WineBank scheme;
- Maximising gross margins through our DTC channels;
- Optimising working capital to maximise free cash flow; and
- Maintaining strict control of costs in a highly inflationary environment
Good progress has been made against these pillars, as the
Company sees a number of positive trends emerging to support the
business model, despite the challenging consumer environment. These
include:
- A reduction in the cost per recruit by 12.5% YOY;
- The introduction of a number of large new strategic and
Commercial partnerships with the potential for substantial scale
over future years; and
- An increase of over 200 bps gross margin through the DTC sales channels
The Group has made good progress with its Business Review, with
the initial introduction of a number of new initiatives to enable
the Group to trade more effectively with a wider range of
consumers, as well as refining and refreshing the appeal of the
core business. These are expected to benefit trading from FY24
onwards. Further details on these initiatives and the outputs from
the Business Review will be announced later this year.
Outlook
In light of recent trading, for FY23 the Group expects sales to
be slightly lower than market expectations, at circa GBP60m, with
underlying PBT to be in the region of GBP0.5m - GBP1m, with a
profitable and cash generative Q423.
Thereafter, the Board expects double digit sales growth in FY24,
alongside EBITDA margin of circa 4% - 5%, as inflationary pressures
particularly on freight and glass start to ease. This will be
supported by the elimination of the previously reported one-off
factors that negatively affected this year's performance, alongside
the development of the Group's new strategic initiatives and a
return to operational efficiency.
Jay Wright, Chief Executive Officer of Virgin Wines said:
'As previously reported, this financial year has seen an
unprecedented range of external and internal challenges impact the
business. We anticipated that trading would take some time to
settle following our substantial growth during the COVID period,
but despite the challenges of the trading environment over the last
year, we are proud to have built a business that is circa 50%
larger in revenue terms than it was moving into FY20.
"We have a number of exciting new initiatives in the pipeline
aimed at delivering incremental growth, and our fundamental
customer proposition and business model remains strong. With a
record number of WineBank members, deposits at all-time highs, and
cancellation and conversion rates trending positively, we are in a
good position to benefit from ongoing improvements in the
macroeconomic environment, and are optimistic as we look to FY24
and FY25."
.* Excluding NLW increase.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
- Ends -
Enquiries:
Virgin Wines UK plc Via Hudson Sandler
Jay Wright, CEO
Graeme Weir, CFO
Liberum Capital Limited
(Nominated Adviser and Sole Broker)
Clayton Bush
Edward Thomas
John Fishley
Lucas Bamber
Hudson Sandler
(Public Relations)
Alex Brennan
Dan de Belder
Charlotte Cobb
Harry Griffiths
Tel: +44 20 3100 2222
virginwines@hudsonsandler.com
Tel: +44 20 7796 4133
Notes to editors:
About Virgin Wines
Virgin Wines is one of the UK's largest direct-to-consumer
online wine retailers. It is an award-winning business which has a
reputation for supplying and curating high quality products,
excellent levels of customer service and innovative ways of
retailing.
The Company, which is headquartered in Norwich, UK, was
established in 2000 by the Virgin Group and was subsequently
acquired by Direct Wines in 2005 before being bought out by the
Virgin Wines management team, led by CEO Jay Wright and CFO Graeme
Weir, in 2013. It listed on the London Stock Exchange's Alternative
Investment Market (AIM) in 2021.
Virgin Wines has more than 700 wines, 150 spirits and 60 beers
in its portfolio which it sells to an active customer base of
176,000 members. It has approximately 200 employees and more than
40 trusted winemaking partners and suppliers around the world.
The Company drives the majority of its revenue though its
fast-growing WineBank subscription scheme, using a variety of
marketing channels, as well as through its Wine Advisor team, Wine
Plan channel and Pay As You Go service.
Along with its extensive range of award-winning products, Virgin
Wines was delighted to be named Online Drinks Retailer of the Year
for 2022 at last year's Drinks Retailing Awards, as well as
receiving the bronze award for Contact Centre of the Year at the
2022 UK National Contact Centre Awards.
https://www.virginwinesplc.co.uk/
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END
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