Virgin Wines Uk Plc · LSE:VINO
Virgin Wines Uk — H1 FY23 Earnings Presentation
30 slides from Virgin Wines Uk's earnings presentation, Mar 14, 2023
Slide 1: FY23 Interim Results
FY23 Interim Results Results for the 26 weeks to 31st December 2022
Slide 2: Half year review
Half year review 1. Half Year Review 2. Highlights 3. Challenges 4. Warehouse Management System (WMS) Implementation 5. Warehouse Managament System (WMS) Progress
Slide 3: Half year review
1 Half year review It's been a challenging first half of the year with an unprecedented set of circumstances We have continued to focus on the key drivers of our business model in a difficult trading environment: One. Low-cost customer acquisition delivering high quality recruits Two. Driving member
Slide 4: Half year review: highlights
2 Half year review There were a number of highlights: » Maintained focus on driving low-cost customer acquisition » Continued to deliver membership growth in the key WineBank subscription scheme » WineBank membership at record high at 142,000 and WineBank customer deposits at Delivered YOY an all ti
Slide 5: Half year review: challenges
3 Half year review And there were a number of challenges: » There were extensive issues with the implementation of the new Warehouse Management System (WMS) that led to operational inefficiency and exceptional one-off costs » Cut off for Christmas delivery was brought forward by a week due to multip
Slide 6: Warehouse Management System (WMS) implementation
4 Half year review Warehouse Management System (WMS) implementation » Previous WMS in place since March 2000 and in need of upgrading » Limitations particularly exposed following expansion into second warehouse following rapid growth over the Covid period » 18-month process in terms of selection, op
Slide 7: WMS progress during FYQ3
5 Half year review Progress made during FYQ3 to prove WMS fit for purpose: » Full system review carried out with implementation partner » Bug fixes actioned and remedial work to rectify stability issues completed » Independent consultant hired full time over Feb/March to review warehouse processes »
Slide 8: Results and margin summary
Results and margin summary 6. Results Summary 7. Exceptional one off impacts 8. Dry goods and freight costs driving up components of wine cost 9. Unique open source buying model 10. Continued focus on maximising margin & offsetting inflationary impacts
Slide 9: Results summary
6 Results summary » H1 FY23 Performance impacted by a number of one off issues » Group remains debt free. Cash Unaudited Unaudited £14.1m, Group cash £7.6m and 31 Dec 2022 31 Dec 2021 Wine Bank deposits £6.5m £’000s £’000s Revenue 33,627 40,609 Gross profit 9,774 12,630 Underlying operating expenses
Slide 10: Exceptional one off impacts
7 Exceptional one off impacts A significant Suspension of marketing activity in WMS implementation September feature of H1 » This had two major impacts with a sharp spike trading is the » In accordance with Virgin Group guidelines (which we supported) all new marketing in operating costs and early c
Slide 11: Dry goods and freight costs driving up components of wine cost
8 Dry goods and freight costs driving up components of wine cost » Challenging backdrop to managing input costs and protecting margins » Covid disrupted supply chains and increased freight rates Dry goods inflation index » The Russian invasion has driven up the cost of dry good inputs via higher ene
Slide 12: Unique open source buying model
9 Unique open source buying model The flexibility and fast paced nature of our buying model has ensured product margins have been maximised in an inflationary Su pp li er s environment data » There have been unprecedented cost increases in the ‘non-wine’ element of a bottle of wine blending » More i
Slide 13: Continued focus on maximising margin & offsetting inflationary impacts
10 Continued focus on maximising margin & offsetting inflationary impacts Product margins Statutory margins » Resilient D2C product margins in the face of inflationary input costs » Sales less cost of wine less packaging and delivery » Flexible open source purchasing model to find the best value/qua
Slide 14: The Business Model in practice
The Business Model in practice 11. Business model in a nutshell 12. Customer acquisition 13. Customer acquisition continued 14. Loyalty of the customer base 15. WineBank - A robust, growing membership scheme 16. Average order frequency 17. Commercial channel 18. Gifts, beers and spirits 19. Looking
Slide 15: Business model in a nutshell
11 Business model in a nutshell Customer acquisition Partner Digital CRM Telephone Web Product range b2b Wine Customer groups COMMERCIAL Gifts WineBank Wine Plan PAYG Spirits Sales channels Email Web Wine Plan Wine Advisor MULTI-AWARD MAKING GREAT WINNING WINE EVEN BETTER Proud to beCarbon officiall
Slide 16: Customer acquisition
12 Customer acquisition A disciplined focus on low cost acquisition whilst testing price and formats to deliver volume and YOY growth » 62k new customer acquired Number of recruits Customer acquisition costs » 42k acquired on to the WineBank scheme PAYG Subscription Total Cost per recruit Fully cost
Slide 17: Customer acquisition continued
13 Customer acquisition continued The partnership channel continues to be the driver of our highest quality customers at the lowest cost » Partnerships continue to be the key driver of new customers » Partnership programme still the most cost-effective method » Recruits through the partnership chann
Slide 18: Loyalty of the customer base
14 Loyalty of the customer base Despite unprecedented pressure Subscription memberships Retention rates Sales Customer on consumers our customers have 175k 150k 120% remained loyal 125k 100k 100% 80% 75k 60% 50k 40% » Focus on driving the WineBank membership as most 25k 20% ‘recession-proof’ scheme
Slide 19: WineBank - A robust, growing membership scheme
15 WineBank - A robust, growing membership scheme WineBank customers have continued WineBank deposits held WineBank revenue to be loyal and carry on saving and £6.5m £24.0m enjoying the benefit of the 20% £6.0m £5.5m £22.0m £20.0m ‘interest’ rate £5.0m £18.0m £4.5m £16.0m £4.0m £14.0m » Membership g
Slide 20: Average order frequency
16 Average order frequency From record levels of frequency during the Covid period to longer periods now, the average length of days consumers wait between orders is a key indicator of consumer sentiment » Single largest factor on revenue is the change in average Days since last order (by month) 201
Slide 21: Commercial channel
17 Commercial channel We continue to see significant opportunities to drive the B2B channel forward in both corporate gifting and ‘wholesale/trade’ accounts » A story of ‘ups’ and ‘downs’ in the Commercial channel » Excellent growth in our trade partnerships and our travel partners » Moonpig + 283%
Slide 22: Gifting, beers and spirits
18 Gifting, beers and spirits A challenging period for gifts, beers and spirits Gifting » A major beneficiary of the Covid period » Expenditure on online gifting subsequently reduced » Advent calendar campaign successful with over 10k units sold » General DTC gifting under pressure » Initiatives to
Slide 23: Looking after our people and our planet
19 Looking after our people and our planet It is a business focus to look after our people during a challenging period and continuing to prioritise our environmental credentials Our people Sustainability A fun, supportive and inclusive place where The first online wine business to be certified peopl
Slide 24: Outlook
Outlook
Slide 25: Outlook
20 Outlook In the short term we will double down on the areas under our control, making good decisions for the long-term prosperity of the business We have a clear, proven strategy that we are laser-focused on delivering: One. Two. Three. Four. Five. Delivering high-quality, Driving membership Focus
Slide 26: Outlook continued
21 Outlook continued We are well positioned to take advantage of any upturn in consumer behaviour One. Two. Three. Four. Five. Our WineBank Partnerships for both Our commercial Despite teething issues, We know average order membership and our customer channel has a buoyant we have an upgraded freque
Slide 27: Appendix
Appendix.
Slide 28: Group Income Statement
a1 Group Income Statement Unaudited Unaudited 31 Dec 2022 31 Dec 2021 £’000s £’000s Revenue 33,627 40,609 Cost of sales (23,853) (27,979) Gross profit 9,774 12,630 Operating expenses (9,647) (9,401) Operating profit 127 3,229 Finance income 52 Finance costs (89) (70) Profit before tax 90 3,159 Taxat
Slide 29: Group Balance Sheet
Unaudited Unaudited Audited a2 Group Balance Sheet 31 Dec 2022 £’000s 31 Dec 2021 £’000s 1 July 2022 £’000s ASSETS Non-current assets Intangible assets 11,424 11,027 11,113 Property, plant and equipment 487 288 400 Right of use assets 3,007 2,656 3,262 Deferred tax asset 411 492 428 Total Non-curren
Slide 30: Group Cash Flow
a3 Group Cash Flow Unaudited Unaudited 31 Dec 2022 31 Dec 2021 £’000s £’000s Profit before taxation 90 3,159 Adjustments for: Depreciation and amortisation 573 464 Net finance costs 37 70 Share based payment 89 177 Decrease/(increase) in trade and other receivables (17) (394) Increase in inventories