22 October 2024

("Virgin Wines", the "Company" or the "Group")

Audited Annual Results

Robust FY outturn with significant rise in profitability

Virgin Wines UK plc (AIM: VINO), one of the UK's largest direct-to-consumer online wine retailers, announces its audited Annual Results for the year ended 28 June 2024 ("FY24" or the "Period").

 

Financial highlights

·	Total revenue remained firm at £59 million (FY23: £59 million)
·	Adjusted EBITDA(1) up 59% to £2.8 million (FY23: £1.8 million) as a result of enhanced margins and operational efficiencies
·	Gross profit up 8% to £18.8 million (FY23: £17.4 million)
·	PBT increased by £2.4m to £1.7m (FY23: loss £0.7m)
·	Gross Margins(2) increased by 230 bps to 31.9% (FY23: 29.6%) o  Reflecting our unique sourcing model o  Strong cost control and favourable sales channel mix
·	Cash balances up £4.9m to £18.4 million (FY23: 13.5 million), with net cash of £10.3m (FY23: £5.5 million) and debt free
Results summary		FY24	FY23
		£'m	£'m
Revenue		59.0	59.0
Gross profit		18.8	17.4
Gross profit %		31.9%	29.6%
Adjusted EBITDA pre-exceptional costs and share based payments		2.8	1.8
Adjusted EBITDA post exceptional costs and pre share based payments		2.8	0.8
Profit/(Loss) before tax		1.7	-0.7
Diluted earnings per share		2.4	-1.1
Net assets		23.3	21.8
Cash and cash equivalents		18.4	13.5

 

 

(1)  EBITDA is pre exceptional costs (FY24 £nil, FY23 £1m) and pre-share based payments (FY24 £0.3m, FY23 £0.3m).

(2)  Gross margins include packaging and delivery costs.

 

 

 

Strategic highlights

·	Disciplined focus on driving new customer acquisition at a low cost per recruit o  Fully costed cost per acquisition fell to £19.62 (FY23: £19.91), driven by increased level of high-quality customers o  Committed to increasing the volume of new customers, a key priority as we move into FY25
·	A number of strategic initiatives have been implemented o  Warehouse Wines has been launched with encouraging results, and a particularly strong Q4   o  Full creative brand refresh complete and being rolled out across channels o  The bespoke Vineyard Collection and premium Australian Five O'clock Somewhere Wine Club have been launched, with positive customer feedback o  The Wine Advisor team continues to excel, achieving the highest average order value among our main repeat channels o  Our gift service continues to grow at double digit rate
·	Active and loyal customer base with sales through existing customers up 1.5% despite a difficult market environment o  New customer conversion rates for subscription schemes rose to 55.5% (FY23: 49.2%) o  Customer deposits through the Company's flagship membership service, WineBank, hit a record level of over £9 million pre-Christmas, with a seasonal high of £8 million by year-end (FY19: £4.5 million) o  WineBank cancellation rates improved to 16.1% (FY23: 17.3%)
·	Operational efficiency continues to drive performance and enhance margins o  Fulfilment costs decreased to 11.8% of revenue (FY23: 14%), despite a 10% increase in the national living wage and ongoing cost pressures o  Improved warehouse accuracy resulted in a 50% reduction in costs associated with customer returns and refunds o  Cost optimisation programme implemented with £1.4m annualised savings
·	Strong strategic focus on commercial partnerships delivered 5% YOY growth in revenue from B2B activity   o  Partnership with Moonpig continues to develop with potential for considerable future growth o  Agreements with all key rail partners extended, including LNER, Avanti and GWR

 

Current trading and outlook

 

·	Trading through the last 4 months remains in line with market expectations
·	We are encouraged by the progress of our strategic initiatives launched this year, particularly the strong growth of Warehouse Wines that now has over 8k customers, and expect this channel will significantly contribute to our growth over the next year and beyond
·	Post-year end, we agreed to a new partnership with Ocado.com, providing the Company with access to Ocado's considerable customer-base as the world's largest dedicated online supermarket
·	With a healthy balance sheet, the Board remains confident in current market expectations for FY25 underpinned by our resilient business model, loyal customer base and new strategic initiatives to drive growth.

 

 

Jay Wright, Chief Executive Officer, said:

"In July 2024 we announced our FY24 Trading Update with both EBITDA and PBT ahead of expectations. Today we are delighted to reiterate a positive full year performance, with strong profitability. Despite a tough consumer backdrop, we are pleased to have increased new customer conversion rates, lowered cancellation rates and delivered a competitive cost per acquisition. We have also introduced several strategic initiatives to enhance our growth and are particularly encouraged by the initial results of our Warehouse Wines offering as well as the Vineyard Collection and Five O'clock Somewhere Wine Club.

 

While the sector remains challenging, demand remains strong for our different subscription schemes and award-winning range of wines. This differentiated offering, underpinned by our unique open-source buying model and loyal customer base, positions us well to continue delivering growth.

 

Looking ahead, and with Q1 trading being in line with our expectations, we remain confident of delivering a strong outturn in 2025 and beyond."

 

- Ends -

Enquiries:

Virgin Wines UK plc  Jay Wright, CEO Graeme Weir, CFO   Panmure Liberum Limited (Nominated Adviser and Sole Broker)  Edward Thomas Dru Danford John Fishley       Hudson Sandler  (Public Relations)  Alex Brennan  Dan de Belder  Harry Griffiths Eloise Fleet	Via Hudson Sandler
	Tel: +44 20 3100 2222           [email protected] 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 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 is headquartered in Norwich, with two fully bonded, national distribution centres in Preston and Bolton. It stocks over 650 wines sourced from more than 40 trusted winemaking partners and suppliers around the world which it sells to a large active customer base, the majority of whom are on one of the Group's subscription schemes.

The Company drives the majority of its revenue though its fast-growing WineBank service, that has over 126k members, using a variety of marketing channels, as well as through its 30 strong Wine Advisor team, its Wine Plan channel and its Pay As You Go service.

Along with its extensive range of award-winning products, Virgin Wines was delighted that its flagship WineBank service was awarded 'Wine Club of the Year' at the 2024 IWC Awards, was named Online Drinks Retailer of the Year for 2022 at the Drinks Retailing Awards, as well as receiving the bronze award for Contact Centre of the Year at the 2022 UK National Contact Centre Awards. In addition, in 2023 the Group's Head of Buying, Sophie Lord, was named Buyer of the Year by Decanter magazine. 

 

https://www.virginwinesplc.co.uk

 

Chairman's Statement

Introduction

This financial year has seen an encouraging boost in profitability for Virgin Wines following a sustained period of challenging trading conditions. It is a testament to the team that this has been achieved despite some continued economic headwinds. Whilst inflation has eased and consumer confidence has improved slowly, this has yet to translate to greater levels of consumer expenditure. However, we are confident that the important operational work that was completed this year positions the business well to capitalise on a recovery.

Virgin Wines has a loyal base of customers who recognise the value and quality of the product we offer and, as a consequence, continue to commit to their subscriptions and buy wine despite the difficult market environment. This reinforces the strength of our core business model. A tough market, however, is also characterised by new customers being less willing to commit to subscriptions, and this has affected our ability to acquire new customers at the same rate as we have in previous years. We are tackling this challenge with energy, determination and some innovative thinking which we are confident will underpin our recovery in the coming years.

Strategy and Operations

The success of our long-term strategy, by way of organic growth, is built upon our resilient business model and we are determined not to deviate away from our core proposition. We continue to make improvements across all areas and develop new initiatives, such as the Warehouse Wines brand which was launched during the year.

Customer acquisition remains a key focus for the Group, and we are pleased to have recruited some impressive new hires who are already breathing fresh energy into this part of the business. The Group's strategy is set out in more detail on page 7.

We have made good progress operationally this year, particularly with improvements in our warehouse management. The new system and processes we put in place over 18 months ago have helped to improve our overall delivery service and at a lower cost, all of which enhances the value of offering for our loyal customers.

In December, we also launched Warehouse Wines - a curated range of great wines at exceptional value. This new proposition is ideally positioned to capture incremental market share among customers who don't want a subscription and has made a great start.

Governance

We are committed to achieving and maintaining high standards of corporate governance and the Company has adopted the QCA Code.

The Board keeps its composition and performance under regular review to ensure we have the appropriate skills, experience and resources to fulfil our requirements and responsibilities. We undertake a regular formal board effectiveness review with balanced and practical contributions to strategy and operations.

Many businesses, particularly in the consumer sector, have experienced greater vulnerability from cyberattacks. Given this heightened threat, we have reviewed all our processes, increased investment, and allocated more resources to ensure all information and customer data are protected to the highest level.

We continue to push forward with our ESG strategy and report on this separately on pages 29 to 36.

Capital Allocation

We are mindful of the Company's strong capital position and the need to put this capital to use in the most effective way possible to maximise shareholder value. We initiated a share buyback during the year and will continue to explore further ways to invest capital in the near future.

Outlook

The Board and I are cautiously optimistic of continued growth, given an improvement in trading conditions and consumer confidence. The Company has strong customer loyalty, an excellent proposition and a resilient model which we believe positions us well to achieve our growth targets, both in the current financial year and in the medium to long term.

JOHN RISMAN

Chairman   

 

Chief Executive's Review

Introduction

It was encouraging to see substantial progress made in a whole host of key areas over the last 12 months. We have prided ourselves for many years on being the lowest cost to serve in our sector and we were delighted to see a significant increase in operational efficiency and productivity this year, whilst reducing spend across our operating costs. This has contributed to the business delivering a 260% increase in EBITDA1 to £2.8m and a profit before tax of £1.7m.

Our customer base continues to show great resilience despite the subdued consumer environment, with several positive trends highlighting its health. These include an improvement in our WineBank cancellation rate, a material increase in our new customer conversion rate, and a reduction in our lapse rate. We believe our continued focus and 'no compromise' approach to delivering excellent quality wines, outstanding value for money and exceptional levels of service are fundamental in driving this customer loyalty.

We are vitally aware of the need for a strong balance sheet. As well as remaining debt free, the business increased its gross cash holding to £18.4m (FY23: £13.5m) and our net cash position (excluding customer WineBank deposits) to £10.3m (FY23: £5.5m). This has been achieved through excellent inventory management and the profits generated by the trading performance.

We have continued to be disciplined in our approach to customer acquisition and recruit excellent quality customers that will deliver a fast return on investment. This has been shown by a year-on-year improvement in our fully costed cost per recruit and the substantial increase in the new customer conversion rate. We are now committed to increasing the volume of new customers being acquired and that is a priority moving into FY25.

We went into the year with several new initiatives including the launch of our value brand, Warehouse Wines. We have been encouraged by the initial results and have committed to investing in the growth of the proposition over the coming year.

We have been pleased with the initial impact of the creative/brand review carried out during FY24. We have also launched the first seven wines under our Vineyard Collection banner, Virgin Wines' first foray into creating wines from our 'own' vines, as exclusively allocated by our winemaking partners around the world.

The last 12 months has, once again, seen substantial headwinds including significant increases in a variety of input costs, a consumer environment that continues to be challenging and the largest single increase in alcohol duty in recent times. Despite this, I am proud that the hard work and dedication of our team has maintained revenue whilst delivering significantly increased profitability.

The resilience, commitment and unwavering enthusiasm of the Virgin Wines team is an inspiration, and I would like to take this opportunity to highlight the energy and talent that they possess. It is a never-ending privilege to work with such a wonderful group of people.

The business has shown great resilience alongside the ability to drive increased levels of profit in a challenging environment, and we enter the coming financial year with a strong and loyal customer base, encouraging initial results on a number of new initiatives, continued growth in both our commercial and gift channels, as well as a healthy balance sheet that gives us numerous options for investing in growth.

Business overview

During the year we delivered revenues of £59m, like for like with the previous year. Enhanced margins and operational efficiencies drove an improvement in profitability, with EBITDA1 up 260% to £2.8m and Profit/ (Loss) before tax up to £1.7m (FY23: Loss £0.7m).

Growth in our repeat sales (+1.5%), our commercial revenues (+5%) and our gift service (+10.8%) all helped to negate a YOY decline in revenue through customer acquisition as we focused on the quality of our recruits and managing our cost per acquisition, rather than chasing unprofitable customers in a highly competitive environment.

Gross product margin increased to 37.6% from 36.5%, partially due to the strength of our open-source buying model that allowed us to maintain competitive pricing despite the inflationary environment and duty increase, while the higher proportion of repeat sales compared to lower margin acquisition revenue also had a positive effect.

Progress was made operationally with fulfilment costs reduced to just 11.8% of revenue from 14% the previous year. This was despite a 10% increase in the national living wage and a variety of increased input costs related to energy, transport and packaging. In addition, the increased accuracy in the pick and pack function within our warehouse operation, a change in packaging to reduce cost but strengthen the carton, and a close working relationship with our courier partners to minimise delivery issues, led to a 50% reduction in costs relating to customer returns or refunds.

As noted above, we have a strong balance sheet with no debt, gross cash of £18.4m and net cash of £10.3m, giving the business a variety of options to consider as part of its capital allocation plan.

New customer acquisition

It has been a challenging environment for acquiring new customers. The market has been extremely competitive, there has been subdued consumer demand and as such the cost of acquisition can escalate dramatically in those circumstances. We have focused our efforts, and our investment, on acquiring new customers of a high quality, that then convert at higher rates to become long-term customers of Virgin Wines, whilst delivering a lower fully costed cost per recruit at just £19.62 (FY23 £19.91).

Given the strength of our balance sheet, we know we are in a strong position to increase our investment in acquisition, but we are also determined to ensure that investment delivers future value to the business in terms of five-year payback and return on investment.

WineBank

Our flagship subscription scheme, WineBank, has continued to deliver outstanding value to wine enthusiasts across the UK by allowing them to spread the cost of buying wine, giving 20% 'interest' on their monthly deposits that can then be spent on our wines, while also giving all WineBank customers free express delivery.

The total amount of customer money held by the business hit a record level of over £9m pre-Christmas '23 and finished the financial year at a seasonal high of over £8m.

We should stress that WineBank deposits are held in a separate ring- fenced account and are not used to fund the day-to-day operations or working capital requirements of our business.

It has been particularly pleasing to see that our 12-month rolling WineBank membership cancellation rate has improved from 17.3% in FY23 to just 16.1% this year. In addition, the customer conversion rate for new WineBank recruits has increased materially to 55.5% from 49.2% in FY23. The loyalty of our existing customers and the attraction of the service for new customers speaks volumes for the value it delivers to them, new and old, particularly in the current consumer climate.

We were delighted that the substantial benefits customers receive were recognised when WineBank was awarded 'Wine Club of the Year' at the International Wine Challenge awards earlier this year.

Wine Advisors

Our team of Wine Advisors continue to offer customers an outstanding experience as well as delivering exceptional results. We have driven productivity through the team with revenue up 1% year-on-year despite streamlining the team from 44 advisors to 29 by year-end. Each active Wine Advisor delivered an average of 10% increased sales year-on-year to achieve this commendable result.

With around 1k customers each to look after, the team are able to offer an exceptionally personal, one-to-one service. This ensures every wine purchased is perfectly suited to the customers' tastes, and that they receive the 'inside track' on new wines and special discoveries that they may have otherwise missed. Wine Advisors also handle any rare service queries that may arise, meaning they oversee the entire customer relationship.

The team also delivers the highest average order value amongst our main repeat channels, 27% higher than those through the email channel and 11% higher than orders through the website.

Commercial and gift channels

It has been a positive year for two of our growth channels with a 5% increase in sales through our Commercial/B2B business and an 11% increase in sales through our gift service.

The Commercial team have continued to secure new opportunities while developing existing relationships. Our travel partners have continued to perform well, and we are pleased to have extended supply agreements with Avanti, LNER and Great Western Railways. Our partnership with Moonpig continues to go from strength to strength and we are optimistic about the potential for increased scale as both businesses focus on growth.

Our 2023 advent calendar campaign was a great success, and we were delighted to see 25% sales growth across our range of calendars over the 2023 festive period, despite this becoming an increasingly competitive market. We have also continued to develop our gift range with innovative new products that are beautifully packaged - this diligent approach to our gifting category has helped deliver double digit growth through the channel.

Open-source wine buying model

Uniquely, we continue to source our wines from a large network of trusted long-term winemaking partners and suppliers across the globe using a data driven, customer focused, open-source supply model. This means that we can focus our efforts on sourcing from countries and regions across the globe that deliver the best quality grapes for each individual vintage, while maintaining the flexibility to ensure we can blend and deliver, the very best value wines to our customers.

We saw first-hand the benefit of this approach over the past year as it has allowed us to mitigate, as much as possible, the effect of the 20% duty increase the industry was subjected to in August 2023. Our buyers have been able to work with their wide network of winemaking partners to secure increased volumes from areas where we can see the most attractive quality/value ratios and reduce volumes from areas where it was less beneficial. This helped contribute to us minimising the price increases we needed to pass on to customers in the short term, as well as enabling us to increase our gross product margins over the year.

The other benefit of not contracting volumes into the future is inventory management, not least because we are always ordering based on recent sales and market information and purchasing based on our expected sales volumes. This gives us much greater visibility than doing so months, or even years, in advance.

I am delighted that this unique approach to buying and the skill and expertise it requires has been independently recognised with Sophie Lord, our Head of Buying, being awarded 'Buyer of the Year' by Decanter magazine, an accolade richly deserved but also reflecting the outstanding work of our buying team as a whole.

New initiatives

Last year, we announced a number of new initiatives that we were looking to launch over FY24 with the most significant being the development of a new brand that would focus on the value end of the DTC market. Warehouse Wines soft-launched over the Christmas period and since then has delivered encouraging results. We have committed to investing in its growth and are excited about the potential of the opportunity.

The Virgin Wines brand went through a creative refresh and brand review during FY24, the results of which are being rolled out across the business during FY25. We are delighted with the results and, alongside a new logo, we have a more premium and aspirational identity being incorporated into our marketing materials and website.

The Vineyard Collection is our most ambitious venture into bespoke winemaking, where we are showcasing our credentials by creating a small number of wines from our 'own' vines. We have been lucky to team up with our winemaking friends at some of our best-loved wineries around the world, who have secured us a series of select vines and small plots to craft seven outstanding wines in strictly limited quantities. This is an ongoing project which will continue to deliver new wines made from our own vineyard locations annually.

Finally, our Five O'clock Somewhere Wine Club has launched, showcasing the talents of Steve Grimley and his winemaking team out in McLaren Vale, Australia. These are 'renegade' wines made in tiny quantities that show the variety and complexity of incredibly made boutique Aussie wine. Nearly 2,000 customers are now part of a limited community who receive early access to reserve these wines when they first leave Australia, and there is an ongoing schedule of new wines under the 5OS banner being created on a continuous basis.

Operational excellence

It has been a year of excellent progress regarding our operational performance. The warehouse management system that we implemented in late 2022 has delivered substantial efficiencies, not only in terms of productivity but also in the accuracy of the pick and pack. Despite increases in costs and wage inflation, the business improved fulfilment costs to represent just 11.8% of revenue from 14% the previous year.

In addition, our damage rate reduced by 32%, while mis-picks equated to just three cases per 1k. This contributed positively to a 50% reduction in the amount of returns or refunds the business was required to fund.

Our customer service team have also delivered an outstanding level of service to our members with a reduction in call waiting times of 54% and 77% of all customers having their query resolved within a single contact.

Our Trustpilot score has increased to 4.6 out 5 (rated 'Excellent') with over 18k 5-star reviews, of which over 1.2k have come in the past 12 months.

Our culture, values and people

Virgin Wines has always been a business where the people come first. The welfare, support and development of our team is a priority and this is supported by the tenure so many of our people have in the business and the incredible journeys they have been on to fulfil their professional ambitions here at Virgin Wines, all while adding immeasurably to the fun, informal environment that has been created.

We continue to listen to our people and act on the feedback we receive. Hybrid working has changed how our teams interact, and we must adapt to ensure we maintain the culture we have been so proud of developing. With that in mind, formalising communication has become more important than ever. Over the past year we have introduced quarterly business updates from myself that are held in person to all members of staff, Listening Groups hosted by Helen Jones, one our Non-Executive Directors, that allow members of our team to speak freely about any subjects that they may wish to raise, as well as having a more informal, regular staff newsletter 'Just the Juice'.

We have also introduced an enhanced holiday entitlement to reward the loyalty of our team by adding up to five additional days holiday each year to staff who have been with us from upwards of two years. We have also revamped our appraisal process this year, formalising the format across the business while adding a section that celebrates the contribution our team are making to embracing and 'living' our brand values.

The development of our people remains a priority, and we are expanding the learning and development we can offer in a number of ways, from helping explore development and training opportunities for individuals through to funding external courses, as we look to maximise the talent we have within the business.

We continue to offer an Employee Assistance programme that has been used extensively over the three years since we first introduced it. The programme allows all employees access to a range of free services and support documents, from one-to-one counselling to advice on finances, health, and personal welfare.

A welcoming and inclusive environment for all is paramount and we continue to deliver a range of initiatives to promote this. We are in the process of formalising our training programmes, with plans to continue offering additional courses such as LGBTQ+ awareness and sexual harassment prevention training to all staff. We've also taken part in Virgin's Dyslexic Thinking training.

We continue to support a range of charities. These include Bright Start, which aims to give children from impoverished backgrounds a chance of a quality education. Growing Well, meanwhile, is a specialist mental health charity that champions recovery through outdoor activity in two Cumbrian market gardens. Another charity we support is the Drinks Trust, which works to safeguard the drinks industry community, both those currently employed as well as others now retired. We are also a community partner for Virgin StartUp, something close to my heart as it supports entrepreneurs and small businesses as they launch and grow.

We also understand the importance of responsible drinking and the dangers of alcohol abuse. As such we actively promote to our customers the importance of enjoying alcohol in moderation and we continue to drive our unique messaging that 'Drinking's only fun when you don't overdo it'.

Progress on sustainability

Virgin Wines is fully committed to having a positive impact on our planet as well as delivering on our commercial objectives. Both the Board of Directors and our Senior Management are committed to minimising our environmental impact through product innovation, targeted operational initiatives and collaboration with our stakeholders. We are also committed to operating in a transparent manner and ensuring our products are sourced through a visibly ethical supply chain.

I am delighted to say this year has been one of positive progress for the business with several landmark achievements and new initiatives.

Over the last 12 months, we have conducted our first double- materiality assessment, internally audited our ESG position and formed a new three-year sustainability strategy. The assessment helped us identify and prioritise the topics where we can have the greatest impact with those areas identified as people development, climate adaption and carbon emissions.

We have also carried out an internal audit to assess the current ESG position of the business which has led to a three-year sustainability strategy. We are proud of the progress we have made in recent years, particularly being officially certified carbon neutral for each of the past three years under the internationally recognised PAS 2060 standards. But we are keen to continue progressing. Whilst our new sustainability strategy is a helpful roadmap, it isn't a fixed plan and can adapt as new research and technologies come into play.

We continue to tackle greenhouse gas (GHG) emissions and are targeting to reduce our Scope 1 and Scope 2 GHG emissions by 42% by 2030, alongside lowering Scope 3 emissions. Reductions this year have been delivered through installing LED lighting across all our premises and increasing the amount of wine we ship in tank and bottle in the UK to over 45% (compared to 39.8% last year).

Looking ahead to the next year, we are committed to mapping our entire carbon footprint, including all downstream activity, which will help us finalise our carbon reduction roadmap.

Capital allocation

As highlighted earlier, we are in the fortunate position of having a healthy balance sheet with cash at our disposal to allocate where we believe it will deliver most value. Options include investment in organic growth, our new initiatives, and M&A, through to additional buybacks or the introduction of a dividend policy. I would reiterate that it is the preference of the Board to use our cash to drive growth and we continue to actively discuss the topic. A more detailed update will follow once we have delivered our H1 trading performance.

Outlook

The business has completed its first quarter and trading remains in line with current market guidance. We have been encouraged by the progress made with our new Warehouse Wines proposition and our expectation is that this will be a significant contributor to our growth over the next year and beyond.

We are pleased that our customers have remained so loyal to the business and that they continue to drive growth in our repeat core sales. The continued expansion of our B2B channel is exciting with a new, long-term partnership with Ocado recently launched that gives their customers the ability to buy from a selection of 52 different wines exclusively sourced from the Virgin Wines range.

The operational efficiency the business delivers gives us a solid platform from which to grow and we remain both hugely motivated and optimistic about the prospects for the business.

 

Jay Wright

Chief Executive Officer

 

 

 

Financial Review

Financial summary

At the onset of FY24 we identified three main financial priorities for the Group. Firstly, to demonstrate the continued robustness of the core business model by quickly returning the Group to profitability. Secondly, to reduce working capital, in particular lower Inventory levels and thereby improve cash balances. Thirdly, to ensure the cost structure is appropriate for the size of the Group and it is fit and lean to take advantage of future growth opportunities. These priorities were delivered across the financial year.

The business model

The robust nature of the business model is demonstrated in a number of ways, but fundamentally the focus is on acquiring quality new customers at a competitive cost per recruit to ensure a quick positive payback. The fully costed investment in new customers remained stable in FY24 at £19.62 per recruit, (FY23: £19.92). This is supported by a marketing strategy and operational efficiency to maximise the contribution from repeat loyal customers. Throughout FY24 the business delivered progress in a number of key performance measures. These included increases in the sales retention rate, new customer conversion rates, revenue per customer, gross margins, with this supported by a reduction in fulfilment expenses, lower membership cancellations and lapsed rates. Together these advances delivered a Profit before Tax of £1.7m compared to the prior year loss of £0.7m, a turnaround of £2.4m.

Working Capital and Cash

With no borrowing the Group retains a strong Balance Sheet, enabling it to manage risk and be agile to take advantage of growth opportunities. A particular focus for FY24 was to quickly reset inventory to a level suitable to both supply risk and business size. The net result was a £2.5m reduction in inventory and an increase in the cash balance. The net cash balance (excluding WineBank deposits) increased by £4.8m to £10.3m (FY23: £5.5m).

Cost structure

Inflationary cost pressure for supplies, services and salaries has not gone away, albeit the rate of increase declined during the course of FY24. The Group carried out a major review of the cost base, including IT services and the retendering of key supplies for good and services, to ensure value for money, resize the cost base for the size of the business and repurpose expenditure into growth channels. This contributed towards a drop in order fulfilment costs to 11.8% of revenue from 14.0% in FY23. These measures have ensured the business is now well positioned to take advantage of improving market conditions and growth opportunities.

Profit/Loss before tax

Profit before tax for the year was £1.7m compared to a prior year loss of £0.7m. This uplift in performance of £2.4m was the result of improved gross margin and the elimination of the exceptional operating expenses incurred in FY23. The Group does not propose to pay a dividend for FY24.

Adjusted EBITDA

Adjusted EBITDA for FY24 was £2.8m, up £1m (59%) on FY23 £1.8m. This equates to an adjusted EBITDA margin of 4.8% of revenue (FY23: 3.0%). The adjusted EBITDA for FY24 is calculated after adding back share based payment costs of £0.3m, FY23 add backs include exceptional costs of £1.0m and share based payments of £0.3m. Adjusted EBITDA is not a statutory reporting measure but is included as an additional performance measure consistent with previous reporting.

Exceptional costs

There are no exceptional items to report in the results for FY24:£0.0m (FY23: £1.0m). The prior year exceptional item related solely to additional costs incurred following the implementation of the new warehouse management system (WMS). As stated in our report last year the Board is satisfied the additional costs incurred are non-recurring in both scale and nature. The new WMS performed consistently well across the whole of FY24 in terms of costs and accuracy, reducing the rate of picking errors and service credits. The management expectations are for more productivity gains as the WMS system continues to be optimised. Exceptional items are added back in the adjusted EBITDA performance for FY23.

Revenue

Reported revenue for the 52-week period to 28 June 2024 was unchanged at £59m (FY23: £59m). Repeat D2C revenue increased by 1.5% to £48.2m (FY23: £47.5m). This increase was underpinned by the loyalty and stability of the customer base with a sales retention rate of 93% in FY24 compared to 76% in FY23. Key to this is the performance of the WineBank members with revenue up 1.6% from the prior year. Commercial revenues continued their progress up 5.1% to £7.2m (FY23 £6.8m), thanks to a combination of growth from existing B2B customers and the securing of new contracts. Revenue from new customer acquisition was down £1.1m, reflecting the lower volumes in FY24.

Gross margin

Both reported gross margin and product margin improved in FY24. Reported gross margin for the 52-week period to 28 June 2024 improved by 230 basis points to 31.9%, (FY23: 29.6%). Gross profit in these Financial Statements is stated as revenue less wine cost, packaging and carrier delivery costs. UK Duty, inbound packaging, and freight costs are included in the wine cost. Inflationary pressures on wine input costs eased throughout FY24. These gains were to a large extent offset by the increase in excise duty imposed on 1 August 2023. The use of UK bottling and our wine sourcing model enabled the wine buying team to continue to find wines to achieve our margin expectations. Product margins which exclude packaging and delivery costs improved to 37.6% (FY23: 36.5%).

Operating expenses

Reported operating expenses fell by £0.6m in FY24 to £17.6m, (FY23: £18.2m). Focus on reducing order fulfilment costs and the cost reduction exercise in H2 FY24 helped to offset the ongoing impact of inflation on goods, services and salaries. Operating expenses adjusted for exceptional costs increased by £0.3m to £16.0m, (FY23: £15.7m).

Finance income and expense

Finance income increased as a result the improvement in cash balances and the higher interest rates available throughout most of FY24. Interest received on company cash deposits increased by £0.4m to £0.6m, (FY23: £0.2m). Finance expenses were unchanged at £0.2m (FY23: £0.2m). The charge in Financial Statements for both years relates solely to the interest charge on right of use assets and the adoption of IFRS 16 for leases. Further details are available in notes 11 and 12 of the Financial Statements.

Amortisation and depreciation

The business continues to invest in IT development where we can demonstrate a business case that improves operational performance or enhances consumer propositions. Amortisation and depreciation for FY24 was £1.3m, up £0.1m from prior year (FY23: £1.2m). The increase was due to the amortisation of intangible assets, depreciation of tangible assets and right of use assets remaining unchanged.

Impairment review

At the reporting date the Directors tested goodwill for impairment in accordance with the requirements of IAS 36 Impairment of Assets. The total carrying amount of the Group's single cash-generating unit was compared to its estimated value in use. No impairment was identified. For further details see note 15.

Taxation

The tax charge in the Financial Statements for FY24 is £0.3m, compared to a tax credit of £0.14m in FY23, reflecting the return to profitability in the period. The tax charge relates to the movement in the deferred tax provision and measured using the tax rate of 25% (FY23: 25%).

Earnings Per Share (EPS)

The Group reported an improvement in earnings per share. The basic earnings per share for FY24 was 2.5p compared to a loss per share of 1.1p in FY23. The weighted average number of shares in issue for FY24 was 55.9m (FY23: 55.8m). Diluted earnings per share for FY24 was 2.4p, FY23 loss per share 1.1p with the weighted average number of shares FY24 58.3m (FY23: 58.7m), (see note 14 of the Financial Statements for more details).

Cash and working capital

Reflecting the reduced risk of supply chain disruption, the Group continued the programme of reducing inventory levels throughout FY24. As a result, year end Inventory decreased by £2.5m to £5.9m from £8.4m in FY23. We will continue to keep the inventory levels under review to manage supply risk and maintain the optimum inventory levels to achieve our business growth plans. Combined with cash generated from operations, this resulted in a significant improvement in the Group cash position.

The Group end of year gross cash balance for FY24 was £18.4m (FY23: £13.5m). These balances include cash deposits from WineBank customers of FY24 £8.1m, (FY23:£8.0m), leaving Group net cash at £10.3m FY24, (FY23: £5.5m). The WineBank customer deposits are not used to fund working capital and are kept in a ring-fenced client account separate from Group cash. The Group funded investment in capital projects of £0.45m in FY24 (FY23 £1.0m).

With no borrowing and cash reserves, the Group continues to be mindful of our Capital Allocation policy. Our clear priority is to utilise cash to fund growth opportunities through Capex, Opex or M&A opportunities. During FY24 the Group carried out a limited share buyback, spending £0.15m to hedge against future LTIP liabilities and shareholder dilution.

 

Consolidated Statement of Comprehensive Income

for the 52-week period ended 28 June 2024

	Note			28 June 2024 £'000	30 June 2023 £'000
Revenue	5			59,005	58,998
Cost of sales				(40,200)	(41,560)
Gross profit				18,805	17,438
Administrative expenses before Exceptional items	6				(5,981) (990)
Administrative expenses			(6,261)			(6,971)
Selling and distribution costs			(11,311)			(11,189)
Operating profit/(loss)		7	1,233			(722)
Finance income		11	602			159
Finance costs		12	(154)			(174)
Profit/(loss) before taxation			1,681			(737)
Taxation (expense)/credit		13	(302)			143
Profit/(loss) for the financial period and total comprehensive (expense)/income			1,379			(594)
Basic and diluted earnings/(loss) per share (pence)		14	2.5			(1.1)
Diluted earnings/(loss) per share (pence)		14	2.4			(1.1)

 

The results for the periods shown above are derived entirely from continuing activities.

The Group has no other comprehensive income or expense other than the (loss)/profit above and therefore no separate statement of other comprehensive income has been presented.

 

 

Consolidated Statement of Financial Position

as at 28 June 2024

Company number 13169238	Note	28 June 2024 £'000	30 June 2023 £'000
ASSETS
Non-current assets
Intangible assets	15	11,159	11,350
Property, plant and equipment	16	202	402
Right of use assets	17	2,370	2,870
Deferred tax asset	18	194	496
Total non-current assets		13,925	15,118
Current assets
Inventories	19	5,868	8,367
Trade and other receivables	20	2,684	2,615
Cash and cash equivalents	21	18,370	13,514
Total current assets		26,922	24,496
Total assets		40,847	39,614
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables	22	(14,425)	(14,206)
Derivative financial instruments	24	(3)	(12)
Lease liability	17	(539)	(521)
Total current liabilities		(14,967)	(14,739)
Non-current liabilities
Provisions	23	(367)	(321)
Lease liability	17	(2,193)	(2,732)
Total non-current liabilities		(2,560)	(3,053)
Total liabilities		(17,527)	(17,792)
Net assets		23,320	21,822
Equity
Share capital	25	560	558
Share premium		11,989	11,989
Own share reserve		(3)	-
Merger reserve		65	65
Share based payment reserve		552	402
Retained earnings		10,157	8,808
Total equity		23,320	21,822

 

The Financial Statements on pages 81 to 108 were approved by the Board of Directors and authorised for issue on 21 October 2024. They were signed on its behalf by:

 

 

Graeme Weir

Chief Financial Officer

 

The notes on pages 85 to 108 form part of these Financial Statements.

Consolidated Statement of Changes in Equity

for the 52-week period ended 28 June 2024

 

	Share capital	Share premium	Own share reserve	Merger reserve	Share based payment reserve	Retained earnings	Total Shareholders' funds
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
2 July 2022	558	11,989	(36)	65	95	9,402	22,073
Loss for the financial period	-	-	-	-	-	(594)	(594)
Total comprehensive income for the period	-	-	-	-	-	(594)	(594)
Share-based payments (note 10)	-	-	-	-	307	-	307
Own shares distributed	-	-	36	-	-	-	36
Total transactions with owners recognised in equity	-	-	36	-	307	-	343
30 June 2023	558	11,989	-	65	402	8,808	21,822

 

1 July 2023 Profit for the financial period	558 -	11,989 -	- -	65 -	402 -	8,808 1,379	21,822 1,379
Total comprehensive income for the period	-	-	-	-	-	1,379	1,379
Share-based payments (note 10)	-	-	-	-	266	-	266
Shares issued on exercise of share-based payment	2	-	-	-	(116)	116	2
Shares repurchased, held in treasury	-	-	(3)	-	-	(146)	(149)
Total transactions with owners recognised in equity	2	-	(3)	-	150	(30)	119
28 June 2024	560	11,989	(3)	65	552	10,157	23,320

The notes on pages 85 to 108 form part of these Financial Statements.