Virgin Wines LON:VINO, published its six month results to end-December 2022 this morning (14th March). As previously reported, investors were not expecting a strong set of results.
The AIM-listed company reported total revenue of GBP33.6m, down 17.2% from GBP40.6m in 1H22. Earnings also nose-dived 64% from GBP3.9m in 1H22 to GBP1.4m. Subsequently profit before tax evaporated with the Norwich-based wine retailer making only GBP100,000 in the period, compared to profits of GBP3.2m – a 96.9% fall.
Virgin Wines managed to preserve its cash, however, with GBP7.6m in the bank at the calendar year’s end, compared to GBP7.8m at the start of July 2022.
The online retailer opened trading today at 45.7p and had fallen to 42.6p within the first hour, with the share price trending downwards. Virgin Wines has a market capitalisation of GBP27.1m.
Year-to-date, Virgin Wines offered a -32.2% return and over one-year had fallen -65.5% with the AIM-listed company’s shares ranging from 45p to 138p over a 52-week period.
Macroeconomic headwinds
The company’s chief executive, Jay Wright said in a statement this morning: “[…] profitability was impacted during the first half, with a number of macroeconomic headwinds exacerbating certain internal and operational challenges which we encountered particularly over our peak Christmas trading period.”
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He continued: “…However, we continue to make progress on addressing the challenges where we can, and we remain confident in the future growth prospects of Virgin Wines.”
The company had previously said, as reported, that it had experienced several “one-off” events that impacted sales and revenues in 2022. These include the death of Queen Elizabeth II where Virgin Wines put a “pause on all marketing activities” which the company said cost it GBP1.7m; the introduction of a Warehouse Management System, which didn’t work as expected: “creating a backlog of orders in the peak weeks to Christmas,” which forced it to hire temporary staff to deal with the backlog.
Warehouse issues rectified
The statement to the market noted: “…issues identified with new Warehouse Management System [have been} rectified and [will be] supporting more normalised trading into 2H23.”
Management also noted the company was affected by bad weather and postal strikes, which forced it to cut off pre-Christmas orders a week earlier. Customers for its WineBank subscription service had reduced their average net spend from GBP258 to GBP231.
The company said it was reviewing its business operations “to identify new initiatives for future growth and profitability” and was continuing “to be disciplined with [its] marketing investment, focusing on low cost recruitment and maximising value from [its] existing customer base.”
As previously reported, the company expects revenue for FY23 to be around GBP63m, full year EBITDA margin to be between 4% and 5%, and EBITDA margin excluding exceptional factors to be 2% higher, in the range of 6-7%.”
