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 28th 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.