Virgin Wines (VINO) , one of the UK's largest online wine retailers, announced audited results for FY23 ended June 30 2023.

The company reported group revenues of £59m in line with expectations, down from £69.2m a year ago. Revenues were impacted by previously reported one-off exceptional events, including Virgin Wines' implementation of a new warehouse management system (WMS). Revenues from the WineBank scheme were £35.3m, slightly below last year's £38.5m .

Adjusted EBITDA and pre-tax profit slipped to £1.8m and £0.6m respectively while inventory decreased by 24%. Gross margins were down slightly to 29.6%, reflecting inflationary pressures. Direct-to-consumer product margins remained high at 40.5%, broadly unchanged from last year. Virgin Wines finished the fiscal year with no debt and a cash balance of £5.5m, down from £7.7m a year ago.

Operationally, the wine retailer acquired 91.5k new customers during the period, with 70% gained through partnership channels. The cost per recruit was £11.99, down from £13.22 last year, and one of the lowest recorded outside of Covid-19 years. The conversion rate remained broadly unchanged from FY22 at 46.8%.

Virgin Wines recorded 173k active customers at the period-end, with a record 133k WineBank members. The latter deposited £8m, almost double the level of FY19. Overall, customers on subscription schemes contributed 87% of direct-to-consumer sales, up from 82% last year.

In terms of partnerships, Virgin Wines agreed new deals with WH Smith Travel, Saga, Go Outdoors and OnTheMarket. Commercial revenue contributed 11.6% of total FY23 sales, up from 10% in FY22.

 

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Overall, Virgin Wines showed resilience in FY23 as it continued to grow its WineBank membership and develop its customer acquisition channels through a growing list of partnerships. It finished the year with a healthy balance sheet, remaining debt free with £5.5m in cash and much reduced levels of stock.

The company made it through a difficult year for consumer non-essential spending relatively unscathed, with revenues not harshly impacted by macroeconomic headwinds and in line with expectations. It should be noted that full-year revenues were also impacted by logistical issues, most notably related to the implementation of the company's new warehouse management system in H1.

The new warehouse system is now operating robustly, with Q1 2024 operating variable cost reduced by 9.4% YOY, plus a 15.% YOY reduction in Q1 2024 warehouse cost per case against last year's highs. Overall, the system is yielding tangible productivity benefits and increased efficiency.

Moreover, Virgin Wines recorded a 12% increase in YOY sales achieved in Q1 2024, suggesting strong momentum into FY24 as conversion and cancellation rates continued to improve. Sales through core repeat channels and commercial sales were also ahead YOY by 15.5% and 8%, respectively, post-period end. A number of strategic initiatives to be implemented in Q2/Q3 2024 should see new products and services introduced, further helping growth.

As inflationary pressures on freight and class begin to ease, Virgin Wines expects double-digit sales growth in FY24 with EBITDA margin of c. 4-5%.

 

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