To buyers of inexpensive wines, the name of Virgin Wines UK (LON:VINO) will be well known, probably from the group’s continual advertising programme. 

To be fair, it is not just inexpensive, but also of higher quality bottles in which the company specialises. 

Its marketing really appears to be building up its active customer numbers, especially through its subscription schemes, which help to drive repeat purchases. 

The company’s customer acquisition model uses both physical and digital marketing to recruit new customers and then to convert them into active customers.  

The Business 

Virgin Wines was established in 2000 by the Virgin Group and was subsequently acquired by Direct Wines in 2005.  

In November 2013, the Virgin Wines management team, led by CEO Jay Wright and CFO Graeme Weir, successfully completed a buyout of the business. 

The business is headquartered in Norwich, with two fully bonded, national distribution centres in Preston and Bolton.  

Virgin Wines was established in 2000 by the Virgin Group and was subsequently acquired by Direct Wines in 2005.  

In November 2013, the Virgin Wines management team, led by CEO Jay Wright and CFO Graeme Weir, successfully completed a buyout of the business. 

It joined AIM in 2021. 

Over recent years the group has expanded its offering to include a high-quality craft beer and spirit collection, as well as corporate and consumer gift propositions, such as its highly popular Wine Advent Calendar. 

Since it started over two decades ago, the company has sold more than 100m bottles of wine to its customers and it has won multiple independent awards. 

Impressively, Virgin Wines today accounts for nearly 10% of the UK’s growing £850m online direct-to-customer wine market.  

The company stocks over 650 wines, sourced from more than 40 trusted winemaking partners and suppliers around the world, which it then sells to its large active customer base, the majority of whom are on one of the group’s subscription schemes.   

It has an active customer base totalling more than 150,000, most of whom are subscribed to one of the two subscription schemes, WineBank and WinePlan. 

The company drives the majority of its revenue through 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. 

Earlier this month the company announced that it had agreed a strategic partnership with Ocado.com, the world’s largest dedicated online supermarket. 

Ocado customers will have access to an exclusive selection of 50 wines from the Virgin Wines portfolio, carefully curated by both the Virgin Wines and Ocado buying teams.  

Previously available only to Virgin Wines customers and sold as part of multi-bottle cases, this marks the first time these wines will be offered as individual bottles. 

Latest Results 

On Tuesday of this week, the company reported its Final Results for the year to 28^th June. 

On revenues of £59.0m (£59.0m), the group showed a £2.4m swing into a profit of £1.7m (£0.7m loss), with its earnings coming out at 2.4p (1.1p loss) per share. 

Cash and cash equivalents were up at the year-end to £18.4m (£13.5m), which is a very strong feature of the group’s operating model, built up through monthly subscriptions by its customers, with cash deposits by WineBank clients of some £8.1m. 

Management Comment 

CEO Jay Wright stated that: 

“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.” 

Analyst’s Views 

Analysts Wayne Brown and Anubhav Malhotra at Panmure Liberum rate the group’s shares as a Buy, with a Price Objective of 85p. 

For the year now underway to end-June 2025, they estimate £63.0m sales and pre-tax profits of £2.3m, generating 2.9p per share in earnings. 

For 2026, they foresee £66.0m sales, £2.6m profits and 3.3p earnings. 

In My View 

This group’s Management has disciplined its cost savings and built up its operating profile admirably. 

I love the market cap value of £22m compared to the group’s own cash of £10m, the group’s shares, at just 38p, could easily lift 50% and still offer Upside Value. 

Travis Perkins shares were deep in the red on Thursday after the building merchants released another downbeat assessment of their business and the wider environment.

Falling revenue and another reduction in their profit forecast were too much for some investors who offloaded the stock on Thursday and sent the shares down 6%.

Travis Perkins’ 5.9% revenue drop, driven by slow merchant trade, is at odds with the Labour government’s plans to fire up the economy with a wave of construction. The company’s Q3 update released today was devoid of any positives related to the promised recovery in housebuilding.

Indeed, Travis Perkins is so concerned about the near-term future that it reduced its 2024 operating profit guidance to £135m from the £150m guidance issued just a few months ago.

There were some bright spots in the group’s retail Toolstation unit, which enjoyed a 2.9% increase in sales in the UK and 9.6% in Benelux.

“It felt like only yesterday that Labour’s housing policy pledges were going to rejuvenate the UK property market and fire the sector back into favour,” said Mark Crouch, market analyst at investment platform eToro.

“However, Travis Perkins’ latest trading update does not offer any support to that narrative, in fact by the looks of these numbers, quite the opposite.

“Travis Perkins, the UK’s largest supplier of building materials, has slashed profit guidance for the second time in three months as revenues continue to fall. Weaker demand has been driven by a consumer that is still reluctant, and despite initial interest rate cuts, a feeling of uneasiness still lingers over the market.

“Along with battling the challenging market conditions, Travis Perkins, according to their new CEO, has become distracted and overly internally focused, which has further impeded the company’s overall performance, and is something they will need to put right fast if they are to reverse what is a worrying trend. While further rate cuts could be on the cards in November, for Travis Perkins, November can’t come soon enough.”

Nerves were still evident in London-listed stocks on Wednesday, as an early gain for the FTSE 100 was quickly sold into by traders as macroeconomic considerations dented risk sentiment.

There’s no one factor driving markets on Wednesday, but rather a combination of the upcoming UK budget, geopolitical tensions, and steadily increasing uncertainty around the US election.

Donald Trump has gotten his nose in front of the polls, and investors are becoming increasingly concerned about what a second term for Trump may do to the global economy.

The IMF recently downgraded its global growth target for 2025, citing concerns about potential trade wars and their impact on growth. Donald Trump’s recent suggestions he’s going to try his hardest to ignite an outright trade war with China will have contributed to the downgrade. 

“Caution is reigning on financial markets amid growing expectations that borrowing costs might come down slower in the US, the world’s largest economy, while political uncertainty and the threat of conflict spreading in the Middle East is also keeping investors a little more wary,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

After starting the session positively on Wednesday amid upbeat reports from Lloyds and Barratt Redrow, London’s leading index slipped back to trade down 0.2% at the time of writing.

Although the FTSE 100 was down as an index, there were some positive updates on the corporate front.

WPP shares rose 4% as revenue increased 1.4% in the third quarter, driven by robust demand in North America and Europe. The marketing giant also noted strength in its top ten clients, from which it earns a large proportion of its revenue.

Lloyds also had a positive session after reporting better-than-expected underlying profits, although provisions for bad debt were less than expected.

“There has been concern about the impact on consumer confidence from speculation ahead of the Budget but Lloyds paints a picture of improvement as its third quarter pre-tax profit beat expectations,” said Russ Mould, investment director at AJ Bell.

“The beat was driven by lower-than-expected impairments. The amount of bad debt being chalked up is still low and the bank and its customers will hope we’re now through the worst of the cost-of-living crisis.

“The other big positive surprise for investors was the quarter-on-quarter increase in the net interest margin – measuring the difference between what the bank pays out to depositors and charges those to whom it is lending money.”

Newly-merged Barratt Redrow shares ticked higher after giving investors reason to be hopeful with a decent forecast of completions for the year ahead.

Lloyds shares rose on Wednesday as investors digested the bank’s third-quarter earnings.

The backdrop of low UK economic growth and falling interest rates could have materially affected Lloyds’ earnings during the period, and investors would have been pleased to see Lloyds beat profit expectations amid lower-than-expected impairment charges.

Lloyds shares rose 1% despite third-quarter underlying profit slipping 8% to £1.9bn. This, however, was much better than the £1.7bn forecast by analysts.

Softer economic conditions had meant analysts had pencilled in a level of impairment charges which ultimately weren’t as bad as first thought, helping boost the bottom line.

Another major positive for investors was Lloyds’s income. There was a risk this would fall amid falling interest rates—which it did—but only marginally, from £4.5bn last year to £4.3bn this year.

The era of higher interest rates is over buu investors seem to be prepared to look through the fall profits and focus on stability.

“Lloyds is the first major UK bank to report third-quarter earnings, and it hasn’t disappointed. In tune with recent trends, impairment charges were better than expected and drove a good chunk of the pre-tax profit beat, as borrowers continue to stand firm. Loan and deposit numbers also looked encouraging, with new mortgages driving a big chunk of the loan book growth, a good sign that activity in the housing market is picking back up,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

“Net interest margin was a touch better than expected, with deposit migration not quite as much of a headwind as some had feared. There is still an ongoing shift toward higher-rate accounts, but as rates come down that should ease.

“The decent margin performance and lower impairments should be a good read-across for names like NatWest and Barclays.”

I do realise that investors may well find the background of the ASA International Group (LON:ASAI) as somewhat unexciting – however, I take the view that buying into a company whose earnings are predicted to grow at 32% per annum, is really quite an attractive situation. 

The Business 

ASA International provides small socially responsible loans, bank accounts, savings and other financial services to start or grow businesses.    

ASAI is one of the world’s largest international microfinance institutions, with a strong commitment to financial inclusion and socioeconomic progress.  

The business, which has over 2,016 branches, across 13 countries, handling its 2.3m clients, operates in Pakistan, India, Sri Lanka, The Philippines, Myanmar, Ghana, Nigeria, Sierra Leone, Tanzania, Kenya, Uganda, Rwanda and Zambia.   

The company provides small, socially responsible loans to low-income, financially underserved entrepreneurs, predominantly women, across South Asia, South East Asia, West and East Africa. 

Recent Management Comment 

At the time of announcing its Interims at the end of last month, CEO Karin Kersten stated that:  

“H1 2024 saw both operational growth as well as importantly increased profitability. The overall operating environment across most of our markets improved during the first half of the year.   

Encouragingly, demand remains high for our products from clients as economic conditions, while still challenging, have eased when compared to the same period in 2023.   

Clients and staff continue to demonstrate their resilience in these economic circumstances.   

In particular, we have demonstrated improved performance in our major operating countries – Pakistan, the Philippines, Ghana, Tanzania and Kenya – almost all of which recorded excellent portfolio quality, client and OLP growth, and profitability.   

The improved performance in our major operating markets was slightly offset by FX movements in certain markets.   

Currencies in most of our markets have been relatively stable against the USD in H1 2024.  

Away from the clear operational impacts, the effects of inflation, including hyperinflation accounting, other currency movements, are expected to continue to dampen financial performance in USD terms in 2024.   

However, given the improved operating developments we have already seen in 2024, we are confident of being able to continue our strong performance for the remainder of 2024.”  

Yesterday on presenting an update on its business operations for the three-month period to end-September, the company reported that its Outstanding Loan Portfolio had increased to $420m – which was 6% higher than at the end of its first half and 16% higher than at the same time last year. 

All of the group’s operating subsidiaries achieved collection efficiency of more than 90% in Q3, with 12 countries achieving more than 95% reflecting continued normalisation of the business. 

Analyst View 

Stephen Barrett at Cavendish Capital Markets has a Price Objective out on the shares at 148p, compared to the current 67.50p. 

His estimates for the current year to end-December are for revenues of $168.2m ($148.2m), with adjusted pre-tax profits of $53.4m ($38.0m), earnings of 23.2c (15.0c) and paying out a 4.6p a share dividend (nil). 

For 2025 he looks for $183.4m revenues, $56.6m profits, 27.5c earnings and 5.7p per share dividend. 

The 2026 year is expected to report around $201.3m in revenues, $64.2m profits, 34.4c earnings and a 7.7p dividend per share. 

In My View 

The above estimates really do it for me – this really is an undervalued situation that needs to be followed. 

Its shares at 67.50p, offer at least a 50% uplift in the short-term – it just takes other investors to realise! 

Barratt Redrow investors were enthused by the newly merged group’s start to life as a single entity, with shares rising 3% after the the group released a trading statement and update on the integration.

The key takeaway for investors will be the £90m in synergies the group hopes to achieve through the merger of Barrat Developments and Redrow and the upbeat predictions of 16,600 and 17,200 completions in 2025FY.

The group noted stabilising market conditions, which will please long-suffering investors who have had to contend with slowing sales rates amid rising interest rates.

The group said they were ‘encouraged by the solid trading we have experienced over recent weeks’.

In addition, the new Labour government has pledged to build 1.5 million homes over the parliament adding a fresh tailwind to housebuilders.

“In the first update since the dotted line was signed on Barratt’s acquisition of Redrow, the enlarged group signalled that it’s got big plans ahead. Together, Barratt Redrow expects to deliver between 16,600 and 17,200 new homes this year, with plans to build that figure up to 22,000 over the medium term, making it a serious force in the market. These will be spread across different geographies and with three differentiated brands under its umbrella, it’s able to meet the needs of different types of buyers at various price points,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“Sales rates are well ahead of the prior year, and there’s a strong landbank ready to be unleashed when the housing market recovers. Markets are pricing in interest rate cuts at every Bank of England meeting out to March 2025, which should ease mortgage availability and affordability pressures, and Barratt Redrow looks well placed to be buoyed by the rising tide.

“The enlarged group hopes to deliver at least £90mn of cost savings by trimming the fat on overlapping processes. If operations can be streamlined and new homes delivered as expected, there’s plenty of opportunity for profits to rebound over the medium term. But as with any merger, there will be challenges along the way.”