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Drinks

Virgin Wines UK Reports 'Positive Performance' In First Half

By Dayeeta Das
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Virgin Wines UK Reports 'Positive Performance' In First Half

Online wine retailer Virgin Wines UK has seen significant increase in profitability and 'strong' cash generation in the first six months of its financial year to 29 December 2023.

The UK-based direct-to-consumer wine retailer generated revenue worth £34.3 million (€40 million) in this period, up 2% year-on-year from £33.6 million (€39.2 million) in the same period last year, according to a trading update issued by the company.

Sales to repeat customers increased by nearly 5%, while commercial revenue grew by 6.5%, amid a subdued consumer economic landscape.

Virgin Wines UK saw a 22% increase in new customer conversion rate, driven by a disciplined approach implemented by the company on customer acquisition.

EBITDA for the period increased by 122% to £1.75 million (€2 million), reflecting an EBITDA margin of 5.0%.

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The company attributed this growth to cost management measures that saw operating variable costs falling by 14.5% year-on-year.

Other Highlights

Conversion and cancellation rates continued to improve, with the conversion rate at 50% by the end of December 2023, up from 41.1% in the year-ago period. The cancellation rate dropped to 16.8% for the flagship WineBank scheme, from 17.8% in the same period last year.

The company added that its new warehouse management system drove a warehouse cost per case reduction of 25% in the first half.

Jay Wright, chief executive officer at Virgin Wines, commented, "Following operational challenges last year, we made significant improvements in our warehouse operations, achieving a planned reduction in fulfilment costs, while maintaining an excellent next-day delivery service throughout the busy peak trading period.

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"We have remained debt free and cash generative, holding £17.4 million (€20.3 million) of gross cash and £11.0 million (€12.8 million) of net cash whilst reducing our inventory levels by 24% year on year."

Outlook

Virgin Wines added that its board is confident of the group's prospects in delivering a positive 2024 performance, in line with current market expectations.

Moreover, strategic initiatives implemented by the company, such as the launch of Warehouse Wines, will boost its growth prospects.

Wright added, "Whilst new customer acquisition remains challenging, we have maintained our disciplined approach, and our new Warehouse Wines value offering, which launched in late October has had an encouraging initial response.

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"We go into the second half encouraged by our performance and in line with the key drivers behind our business model, whilst remaining mindful of the challenging consumer landscape."

Read More: Pernod Ricard Creates New Business Unit For D2C Distribution

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