REG - Virgin Wines UK PLC - Audited Annual Report
22/10/2024 07:00
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RNS Number : 0283J Virgin Wines UK PLC 22 October 2024
22 October 2024
("Virgin Wines", the "Company" or the "Group")
Audited Annual Results
Robust FY outturn with significant rise in profitability
Virgin Wines UK plc (AIM: VINO), one of the UK's largest direct-to-consumer
online wine retailers, announces its audited Annual Results for the year ended
28 June 2024 ("FY24" or the "Period").
Financial highlights
·
Total revenue remained firm at £59 million (FY23: £59 million)
· Adjusted EBITDA((1)) up 59% to £2.8 million (FY23: £1.8 million) as a result
of enhanced margins and operational efficiencies
· Gross profit up 8% to £18.8 million (FY23: £17.4 million)
· PBT increased by £2.4m to £1.7m (FY23: loss £0.7m)
· Gross Margins((2)) increased by 230 bps to 31.9% (FY23: 29.6%)
o Reflecting our unique sourcing model
o Strong cost control and favourable sales channel mix
· Cash balances up £4.9m to £18.4 million (FY23: 13.5 million), with net cash
of £10.3m (FY23: £5.5 million) and debt free
Results summary FY24 FY23
£'m £'m
Revenue 59.0 59.0
Gross profit 18.8 17.4
Gross profit % 31.9% 29.6%
Adjusted EBITDA pre-exceptional costs and share based payments 2.8 1.8
Adjusted EBITDA post exceptional costs and pre share based payments 2.8 0.8
Profit/(Loss) before tax 1.7 -0.7
Diluted earnings per share 2.4 -1.1
Net assets 23.3 21.8
Cash and cash equivalents 18.4 13.5
(1) EBITDA is pre exceptional costs (FY24 £nil, FY23 £1m) and pre-share
based payments (FY24 £0.3m, FY23 £0.3m).
(2) Gross margins include packaging and delivery costs.
Strategic highlights
· Disciplined focus on driving new customer acquisition at a low cost per
recruit
o Fully costed cost per acquisition fell to £19.62 (FY23: £19.91), driven
by increased level of high-quality customers
o Committed to increasing the volume of new customers, a key priority as we
move into FY25
· A number of strategic initiatives have been implemented
o Warehouse Wines has been launched with encouraging results, and a
particularly strong Q4
o Full creative brand refresh complete and being rolled out across channels
o The bespoke Vineyard Collection and premium Australian Five O'clock
Somewhere Wine Club have been launched, with positive customer feedback
o The Wine Advisor team continues to excel, achieving the highest average
order value among our main repeat channels
o Our gift service continues to grow at double digit rate
· Active and loyal customer base with sales through existing customers up 1.5%
despite a difficult market environment
o New customer conversion rates for subscription schemes rose to 55.5%
(FY23: 49.2%)
o Customer deposits through the Company's flagship membership service,
WineBank, hit a record level of over £9 million pre-Christmas, with a
seasonal high of £8 million by year-end (FY19: £4.5 million)
o WineBank cancellation rates improved to 16.1% (FY23: 17.3%)
· Operational efficiency continues to drive performance and enhance margins
o Fulfilment costs decreased to 11.8% of revenue (FY23: 14%), despite a 10%
increase in the national living wage and ongoing cost pressures
o Improved warehouse accuracy resulted in a 50% reduction in costs
associated with customer returns and refunds
o Cost optimisation programme implemented with £1.4m annualised savings
· Strong strategic focus on commercial partnerships delivered 5% YOY growth in
revenue from B2B activity
o Partnership with Moonpig continues to develop with potential for
considerable future growth
o Agreements with all key rail partners extended, including LNER, Avanti and
GWR
Current trading and outlook
· Trading through the last 4 months remains in line with market expectations
· We are encouraged by the progress of our strategic initiatives launched this
year, particularly the strong growth of Warehouse Wines that now has over 8k
customers, and expect this channel will significantly contribute to our growth
over the next year and beyond
· Post-year end, we agreed to a new partnership with Ocado.com, providing the
Company with access to Ocado's considerable customer-base as the world's
largest dedicated online supermarket
· With a healthy balance sheet, the Board remains confident in current market
expectations for FY25 underpinned by our resilient business model, loyal
customer base and new strategic initiatives to drive growth.
Jay Wright, Chief Executive Officer, said:
"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."
- Ends -
Enquiries:
Virgin Wines UK plc Via Hudson Sandler
Jay Wright, CEO
Graeme Weir, CFO
Panmure Liberum Limited
(Nominated Adviser and Sole Broker)
Edward Thomas
Dru Danford
John Fishley
Hudson Sandler
(Public Relations)
Alex Brennan
Dan de Belder
Harry Griffiths
Eloise Fleet
Tel: +44 20 3100 2222
virginwines@hudsonsandler.com (mailto:virginwines@hudsonsandler.com)
Tel: +44 20 7796 4133
Notes to editors:
About Virgin Wines
Virgin Wines is one of the UK's largest direct-to-consumer online wine
retailers. It is an award-winning business which has a reputation for
supplying and curating high quality products, excellent levels of customer
service and innovative ways of retailing.
The Company was established in 2000 by the Virgin Group and was subsequently
acquired by Direct Wines in 2005 before being bought out by the Virgin Wines
management team, led by CEO Jay Wright and CFO Graeme Weir, in 2013. It listed
on the London Stock Exchange's Alternative Investment Market (AIM) in 2021.
Virgin Wines is headquartered in Norwich, with two fully bonded, national
distribution centres in Preston and Bolton. It stocks over 650 wines sourced
from more than 40 trusted winemaking partners and suppliers around the world
which it sells to a large active customer base, the majority of whom are on
one of the Group's subscription schemes.
The Company drives the majority of its revenue though its fast-growing
WineBank service, that has over 126k members, using a variety of marketing
channels, as well as through its 30 strong Wine Advisor team, its Wine Plan
channel and its Pay As You Go service.
Along with its extensive range of award-winning products, Virgin Wines was
delighted that its flagship WineBank service was awarded 'Wine Club of the
Year' at the 2024 IWC Awards, was named Online Drinks Retailer of the Year for
2022 at the Drinks Retailing Awards, as well as receiving the bronze award for
Contact Centre of the Year at the 2022 UK National Contact Centre Awards. In
addition, in 2023 the Group's Head of Buying, Sophie Lord, was named Buyer of
the Year by Decanter magazine.
https://www.virginwinesplc.co.uk
Chairman's Statement
Introduction
This financial year has seen an encouraging boost in profitability for Virgin
Wines following a sustained period of challenging trading conditions. It is a
testament to the team that this has been achieved despite some continued
economic headwinds. Whilst inflation has eased and consumer confidence has
improved slowly, this has yet to translate to greater levels of consumer
expenditure. However, we are confident that the important operational work
that was completed this year positions the business well to capitalise on a
recovery.
Virgin Wines has a loyal base of customers who recognise the value and quality
of the product we offer and, as a consequence, continue to commit to their
subscriptions and buy wine despite the difficult market environment. This
reinforces the strength of our core business model. A tough market, however,
is also characterised by new customers being less willing to commit to
subscriptions, and this has affected our ability to acquire new customers at
the same rate as we have in previous years. We are tackling this challenge
with energy, determination and some innovative thinking which we are confident
will underpin our recovery in the coming years.
Strategy and Operations
The success of our long-term strategy, by way of organic growth, is built upon
our resilient business model and we are determined not to deviate away from
our core proposition. We continue to make improvements across all areas and
develop new initiatives, such as the Warehouse Wines brand which was launched
during the year.
Customer acquisition remains a key focus for the Group, and we are pleased to
have recruited some impressive new hires who are already breathing fresh
energy into this part of the business. The Group's strategy is set out in more
detail on page 7.
We have made good progress operationally this year, particularly with
improvements in our warehouse management. The new system and processes we put
in place over 18 months ago have helped to improve our overall delivery
service and at a lower cost, all of which enhances the value of offering for
our loyal customers.
In December, we also launched Warehouse Wines - a curated range of great wines
at exceptional value. This new proposition is ideally positioned to capture
incremental market share among customers who don't want a subscription and has
made a great start.
Governance
We are committed to achieving and maintaining high standards of corporate
governance and the Company has adopted the QCA Code.
The Board keeps its composition and performance under regular review to ensure
we have the appropriate skills, experience and resources to fulfil our
requirements and responsibilities. We undertake a regular formal board
effectiveness review with balanced and practical contributions to strategy and
operations.
Many businesses, particularly in the consumer sector, have experienced greater
vulnerability from cyberattacks. Given this heightened threat, we have
reviewed all our processes, increased investment, and allocated more resources
to ensure all information and customer data are protected to the highest
level.
We continue to push forward with our ESG strategy and report on this
separately on pages 29 to 36.
Capital Allocation
We are mindful of the Company's strong capital position and the need to put
this capital to use in the most effective way possible to maximise shareholder
value. We initiated a share buyback during the year and will continue to
explore further ways to invest capital in the near future.
Outlook
The Board and I are cautiously optimistic of continued growth, given an
improvement in trading conditions and consumer confidence. The Company has
strong customer loyalty, an excellent proposition and a resilient model which
we believe positions us well to achieve our growth targets, both in the
current financial year and in the medium to long term.
JOHN RISMAN
Chairman
Chief Executive's Review
Introduction
It was encouraging to see substantial progress made in a whole host of key
areas over the last 12 months. We have prided ourselves for many years on
being the lowest cost to serve in our sector and we were delighted to see a
significant increase in operational efficiency and productivity this year,
whilst reducing spend across our operating costs. This has contributed to the
business delivering a 260% increase in EBITDA1 to £2.8m and a profit before
tax of £1.7m.
Our customer base continues to show great resilience despite the subdued
consumer environment, with several positive trends highlighting its health.
These include an improvement in our WineBank cancellation rate, a material
increase in our new customer conversion rate, and a reduction in our lapse
rate. We believe our continued focus and 'no compromise' approach to
delivering excellent quality wines, outstanding value for money and
exceptional levels of service are fundamental in driving this customer
loyalty.
We are vitally aware of the need for a strong balance sheet. As well as
remaining debt free, the business increased its gross cash holding to £18.4m
(FY23: £13.5m) and our net cash position (excluding customer WineBank
deposits) to £10.3m (FY23: £5.5m). This has been achieved through excellent
inventory management and the profits generated by the trading performance.
We have continued to be disciplined in our approach to customer acquisition
and recruit excellent quality customers that will deliver a fast return on
investment. This has been shown by a year-on-year improvement in our fully
costed cost per recruit and the substantial increase in the new customer
conversion rate. We are now committed to increasing the volume of new
customers being acquired and that is a priority moving into FY25.
We went into the year with several new initiatives including the launch of our
value brand, Warehouse Wines. We have been encouraged by the initial results
and have committed to investing in the growth of the proposition over the
coming year.
We have been pleased with the initial impact of the creative/brand review
carried out during FY24. We have also launched the first seven wines under our
Vineyard Collection banner, Virgin Wines' first foray into creating wines from
our 'own' vines, as exclusively allocated by our winemaking partners around
the world.
The last 12 months has, once again, seen substantial headwinds including
significant increases in a variety of input costs, a consumer environment that
continues to be challenging and the largest single increase in alcohol duty in
recent times. Despite this, I am proud that the hard work and dedication of
our team has maintained revenue whilst delivering significantly increased
profitability.
The resilience, commitment and unwavering enthusiasm of the Virgin Wines team
is an inspiration, and I would like to take this opportunity to highlight the
energy and talent that they possess. It is a never-ending privilege to work
with such a wonderful group of people.
The business has shown great resilience alongside the ability to drive
increased levels of profit in a challenging environment, and we enter the
coming financial year with a strong and loyal customer base, encouraging
initial results on a number of new initiatives, continued growth in both our
commercial and gift channels, as well as a healthy balance sheet that gives us
numerous options for investing in growth.
Business overview
During the year we delivered revenues of £59m, like for like with the
previous year. Enhanced margins and operational efficiencies drove an
improvement in profitability, with EBITDA1 up 260% to £2.8m and Profit/
(Loss) before tax up to £1.7m (FY23: Loss £0.7m).
Growth in our repeat sales (+1.5%), our commercial revenues (+5%) and our gift
service (+10.8%) all helped to negate a YOY decline in revenue through
customer acquisition as we focused on the quality of our recruits and managing
our cost per acquisition, rather than chasing unprofitable customers in a
highly competitive environment.
Gross product margin increased to 37.6% from 36.5%, partially due to the
strength of our open-source buying model that allowed us to maintain
competitive pricing despite the inflationary environment and duty increase,
while the higher proportion of repeat sales compared to lower margin
acquisition revenue also had a positive effect.
Progress was made operationally with fulfilment costs reduced to just 11.8% of
revenue from 14% the previous year. This was despite a 10% increase in the
national living wage and a variety of increased input costs related to energy,
transport and packaging. In addition, the increased accuracy in the pick and
pack function within our warehouse operation, a change in packaging to reduce
cost but strengthen the carton, and a close working relationship with our
courier partners to minimise delivery issues, led to a 50% reduction in costs
relating to customer returns or refunds.
As noted above, we have a strong balance sheet with no debt, gross cash of
£18.4m and net cash of £10.3m, giving the business a variety of options to
consider as part of its capital allocation plan.
New customer acquisition
It has been a challenging environment for acquiring new customers. The market
has been extremely competitive, there has been subdued consumer demand and as
such the cost of acquisition can escalate dramatically in those circumstances.
We have focused our efforts, and our investment, on acquiring new customers of
a high quality, that then convert at higher rates to become long-term
customers of Virgin Wines, whilst delivering a lower fully costed cost per
recruit at just £19.62 (FY23 £19.91).
Given the strength of our balance sheet, we know we are in a strong position
to increase our investment in acquisition, but we are also determined to
ensure that investment delivers future value to the business in terms of
five-year payback and return on investment.
WineBank
Our flagship subscription scheme, WineBank, has continued to deliver
outstanding value to wine enthusiasts across the UK by allowing them to spread
the cost of buying wine, giving 20% 'interest' on their monthly deposits that
can then be spent on our wines, while also giving all WineBank customers free
express delivery.
The total amount of customer money held by the business hit a record level of
over £9m pre-Christmas '23 and finished the financial year at a seasonal high
of over £8m.
We should stress that WineBank deposits are held in a separate ring- fenced
account and are not used to fund the day-to-day operations or working capital
requirements of our business.
It has been particularly pleasing to see that our 12-month rolling WineBank
membership cancellation rate has improved from 17.3% in FY23 to just 16.1%
this year. In addition, the customer conversion rate for new WineBank recruits
has increased materially to 55.5% from 49.2% in FY23. The loyalty of our
existing customers and the attraction of the service for new customers speaks
volumes for the value it delivers to them, new and old, particularly in the
current consumer climate.
We were delighted that the substantial benefits customers receive were
recognised when WineBank was awarded 'Wine Club of the Year' at the
International Wine Challenge awards earlier this year.
Wine Advisors
Our team of Wine Advisors continue to offer customers an outstanding
experience as well as delivering exceptional results. We have driven
productivity through the team with revenue up 1% year-on-year despite
streamlining the team from 44 advisors to 29 by year-end. Each active Wine
Advisor delivered an average of 10% increased sales year-on-year to achieve
this commendable result.
With around 1k customers each to look after, the team are able to offer an
exceptionally personal, one-to-one service. This ensures every wine purchased
is perfectly suited to the customers' tastes, and that they receive the
'inside track' on new wines and special discoveries that they may have
otherwise missed. Wine Advisors also handle any rare service queries that may
arise, meaning they oversee the entire customer relationship.
The team also delivers the highest average order value amongst our main repeat
channels, 27% higher than those through the email channel and 11% higher than
orders through the website.
Commercial and gift channels
It has been a positive year for two of our growth channels with a 5% increase
in sales through our Commercial/B2B business and an 11% increase in sales
through our gift service.
The Commercial team have continued to secure new opportunities while
developing existing relationships. Our travel partners have continued to
perform well, and we are pleased to have extended supply agreements with
Avanti, LNER and Great Western Railways. Our partnership with Moonpig
continues to go from strength to strength and we are optimistic about the
potential for increased scale as both businesses focus on growth.
Our 2023 advent calendar campaign was a great success, and we were delighted
to see 25% sales growth across our range of calendars over the 2023 festive
period, despite this becoming an increasingly competitive market. We have also
continued to develop our gift range with innovative new products that are
beautifully packaged - this diligent approach to our gifting category has
helped deliver double digit growth through the channel.
Open-source wine buying model
Uniquely, we continue to source our wines from a large network of trusted
long-term winemaking partners and suppliers across the globe using a data
driven, customer focused, open-source supply model. This means that we can
focus our efforts on sourcing from countries and regions across the globe that
deliver the best quality grapes for each individual vintage, while maintaining
the flexibility to ensure we can blend and deliver, the very best value wines
to our customers.
We saw first-hand the benefit of this approach over the past year as it has
allowed us to mitigate, as much as possible, the effect of the 20% duty
increase the industry was subjected to in August 2023. Our buyers have been
able to work with their wide network of winemaking partners to secure
increased volumes from areas where we can see the most attractive
quality/value ratios and reduce volumes from areas where it was less
beneficial. This helped contribute to us minimising the price increases we
needed to pass on to customers in the short term, as well as enabling us to
increase our gross product margins over the year.
The other benefit of not contracting volumes into the future is inventory
management, not least because we are always ordering based on recent sales and
market information and purchasing based on our expected sales volumes. This
gives us much greater visibility than doing so months, or even years, in
advance.
I am delighted that this unique approach to buying and the skill and expertise
it requires has been independently recognised with Sophie Lord, our Head of
Buying, being awarded 'Buyer of the Year' by Decanter magazine, an accolade
richly deserved but also reflecting the outstanding work of our buying team as
a whole.
New initiatives
Last year, we announced a number of new initiatives that we were looking to
launch over FY24 with the most significant being the development of a new
brand that would focus on the value end of the DTC market. Warehouse Wines
soft-launched over the Christmas period and since then has delivered
encouraging results. We have committed to investing in its growth and are
excited about the potential of the opportunity.
The Virgin Wines brand went through a creative refresh and brand review during
FY24, the results of which are being rolled out across the business during
FY25. We are delighted with the results and, alongside a new logo, we have a
more premium and aspirational identity being incorporated into our marketing
materials and website.
The Vineyard Collection is our most ambitious venture into bespoke winemaking,
where we are showcasing our credentials by creating a small number of wines
from our 'own' vines. We have been lucky to team up with our winemaking
friends at some of our best-loved wineries around the world, who have secured
us a series of select vines and small plots to craft seven outstanding wines
in strictly limited quantities. This is an ongoing project which will continue
to deliver new wines made from our own vineyard locations annually.
Finally, our Five O'clock Somewhere Wine Club has launched, showcasing the
talents of Steve Grimley and his winemaking team out in McLaren Vale,
Australia. These are 'renegade' wines made in tiny quantities that show the
variety and complexity of incredibly made boutique Aussie wine. Nearly 2,000
customers are now part of a limited community who receive early access to
reserve these wines when they first leave Australia, and there is an ongoing
schedule of new wines under the 5OS banner being created on a continuous
basis.
Operational excellence
It has been a year of excellent progress regarding our operational
performance. The warehouse management system that we implemented in late 2022
has delivered substantial efficiencies, not only in terms of productivity but
also in the accuracy of the pick and pack. Despite increases in costs and wage
inflation, the business improved fulfilment costs to represent just 11.8% of
revenue from 14% the previous year.
In addition, our damage rate reduced by 32%, while mis-picks equated to just
three cases per 1k. This contributed positively to a 50% reduction in the
amount of returns or refunds the business was required to fund.
Our customer service team have also delivered an outstanding level of service
to our members with a reduction in call waiting times of 54% and 77% of all
customers having their query resolved within a single contact.
Our Trustpilot score has increased to 4.6 out 5 (rated 'Excellent') with over
18k 5-star reviews, of which over 1.2k have come in the past 12 months.
Our culture, values and people
Virgin Wines has always been a business where the people come first. The
welfare, support and development of our team is a priority and this is
supported by the tenure so many of our people have in the business and the
incredible journeys they have been on to fulfil their professional ambitions
here at Virgin Wines, all while adding immeasurably to the fun, informal
environment that has been created.
We continue to listen to our people and act on the feedback we receive. Hybrid
working has changed how our teams interact, and we must adapt to ensure we
maintain the culture we have been so proud of developing. With that in mind,
formalising communication has become more important than ever. Over the past
year we have introduced quarterly business updates from myself that are held
in person to all members of staff, Listening Groups hosted by Helen Jones, one
our Non-Executive Directors, that allow members of our team to speak freely
about any subjects that they may wish to raise, as well as having a more
informal, regular staff newsletter 'Just the Juice'.
We have also introduced an enhanced holiday entitlement to reward the loyalty
of our team by adding up to five additional days holiday each year to staff
who have been with us from upwards of two years. We have also revamped our
appraisal process this year, formalising the format across the business while
adding a section that celebrates the contribution our team are making to
embracing and 'living' our brand values.
The development of our people remains a priority, and we are expanding the
learning and development we can offer in a number of ways, from helping
explore development and training opportunities for individuals through to
funding external courses, as we look to maximise the talent we have within the
business.
We continue to offer an Employee Assistance programme that has been used
extensively over the three years since we first introduced it. The programme
allows all employees access to a range of free services and support documents,
from one-to-one counselling to advice on finances, health, and personal
welfare.
A welcoming and inclusive environment for all is paramount and we continue to
deliver a range of initiatives to promote this. We are in the process of
formalising our training programmes, with plans to continue offering
additional courses such as LGBTQ+ awareness and sexual harassment prevention
training to all staff. We've also taken part in Virgin's Dyslexic Thinking
training.
We continue to support a range of charities. These include Bright Start, which
aims to give children from impoverished backgrounds a chance of a quality
education. Growing Well, meanwhile, is a specialist mental health charity that
champions recovery through outdoor activity in two Cumbrian market gardens.
Another charity we support is the Drinks Trust, which works to safeguard the
drinks industry community, both those currently employed as well as others now
retired. We are also a community partner for Virgin StartUp, something close
to my heart as it supports entrepreneurs and small businesses as they launch
and grow.
We also understand the importance of responsible drinking and the dangers of
alcohol abuse. As such we actively promote to our customers the importance of
enjoying alcohol in moderation and we continue to drive our unique messaging
that 'Drinking's only fun when you don't overdo it'.
Progress on sustainability
Virgin Wines is fully committed to having a positive impact on our planet as
well as delivering on our commercial objectives. Both the Board of Directors
and our Senior Management are committed to minimising our environmental impact
through product innovation, targeted operational initiatives and collaboration
with our stakeholders. We are also committed to operating in a transparent
manner and ensuring our products are sourced through a visibly ethical supply
chain.
I am delighted to say this year has been one of positive progress for the
business with several landmark achievements and new initiatives.
Over the last 12 months, we have conducted our first double- materiality
assessment, internally audited our ESG position and formed a new three-year
sustainability strategy. The assessment helped us identify and prioritise the
topics where we can have the greatest impact with those areas identified as
people development, climate adaption and carbon emissions.
We have also carried out an internal audit to assess the current ESG position
of the business which has led to a three-year sustainability strategy. We are
proud of the progress we have made in recent years, particularly being
officially certified carbon neutral for each of the past three years under the
internationally recognised PAS 2060 standards. But we are keen to continue
progressing. Whilst our new sustainability strategy is a helpful roadmap, it
isn't a fixed plan and can adapt as new research and technologies come into
play.
We continue to tackle greenhouse gas (GHG) emissions and are targeting to
reduce our Scope 1 and Scope 2 GHG emissions by 42% by 2030, alongside
lowering Scope 3 emissions. Reductions this year have been delivered through
installing LED lighting across all our premises and increasing the amount of
wine we ship in tank and bottle in the UK to over 45% (compared to 39.8% last
year).
Looking ahead to the next year, we are committed to mapping our entire carbon
footprint, including all downstream activity, which will help us finalise our
carbon reduction roadmap.
Capital allocation
As highlighted earlier, we are in the fortunate position of having a healthy
balance sheet with cash at our disposal to allocate where we believe it will
deliver most value. Options include investment in organic growth, our new
initiatives, and M&A, through to additional buybacks or the introduction
of a dividend policy. I would reiterate that it is the preference of the Board
to use our cash to drive growth and we continue to actively discuss the topic.
A more detailed update will follow once we have delivered our H1 trading
performance.
Outlook
The business has completed its first quarter and trading remains in line with
current market guidance. We have been encouraged by the progress made with our
new Warehouse Wines proposition and our expectation is that this will be a
significant contributor to our growth over the next year and beyond.
We are pleased that our customers have remained so loyal to the business and
that they continue to drive growth in our repeat core sales. The continued
expansion of our B2B channel is exciting with a new, long-term partnership
with Ocado recently launched that gives their customers the ability to buy
from a selection of 52 different wines exclusively sourced from the Virgin
Wines range.
The operational efficiency the business delivers gives us a solid platform
from which to grow and we remain both hugely motivated and optimistic about
the prospects for the business.
Jay Wright
Chief Executive Officer
Financial Review
Financial summary
At the onset of FY24 we identified three main financial priorities for the
Group. Firstly, to demonstrate the continued robustness of the core business
model by quickly returning the Group to profitability. Secondly, to reduce
working capital, in particular lower Inventory levels and thereby improve cash
balances. Thirdly, to ensure the cost structure is appropriate for the size of
the Group and it is fit and lean to take advantage of future growth
opportunities. These priorities were delivered across the financial year.
The business model
The robust nature of the business model is demonstrated in a number of ways,
but fundamentally the focus is on acquiring quality new customers at a
competitive cost per recruit to ensure a quick positive payback. The fully
costed investment in new customers remained stable in FY24 at £19.62 per
recruit, (FY23: £19.92). This is supported by a marketing strategy and
operational efficiency to maximise the contribution from repeat loyal
customers. Throughout FY24 the business delivered progress in a number of key
performance measures. These included increases in the sales retention rate,
new customer conversion rates, revenue per customer, gross margins, with this
supported by a reduction in fulfilment expenses, lower membership
cancellations and lapsed rates. Together these advances delivered a Profit
before Tax of £1.7m compared to the prior year loss of £0.7m, a turnaround
of £2.4m.
Working Capital and Cash
With no borrowing the Group retains a strong Balance Sheet, enabling it to
manage risk and be agile to take advantage of growth opportunities. A
particular focus for FY24 was to quickly reset inventory to a level suitable
to both supply risk and business size. The net result was a £2.5m reduction
in inventory and an increase in the cash balance. The net cash balance
(excluding WineBank deposits) increased by £4.8m to £10.3m (FY23: £5.5m).
Cost structure
Inflationary cost pressure for supplies, services and salaries has not gone
away, albeit the rate of increase declined during the course of FY24. The
Group carried out a major review of the cost base, including IT services and
the retendering of key supplies for good and services, to ensure value for
money, resize the cost base for the size of the business and repurpose
expenditure into growth channels. This contributed towards a drop in order
fulfilment costs to 11.8% of revenue from 14.0% in FY23. These measures have
ensured the business is now well positioned to take advantage of improving
market conditions and growth opportunities.
Profit/Loss before tax
Profit before tax for the year was £1.7m compared to a prior year loss of
£0.7m. This uplift in performance of £2.4m was the result of improved gross
margin and the elimination of the exceptional operating expenses incurred in
FY23. The Group does not propose to pay a dividend for FY24.
Adjusted EBITDA
Adjusted EBITDA for FY24 was £2.8m, up £1m (59%) on FY23 £1.8m. This
equates to an adjusted EBITDA margin of 4.8% of revenue (FY23: 3.0%). The
adjusted EBITDA for FY24 is calculated after adding back share based payment
costs of £0.3m, FY23 add backs include exceptional costs of £1.0m and share
based payments of £0.3m. Adjusted EBITDA is not a statutory reporting measure
but is included as an additional performance measure consistent with previous
reporting.
Exceptional costs
There are no exceptional items to report in the results for FY24:£0.0m (FY23:
£1.0m). The prior year exceptional item related solely to additional costs
incurred following the implementation of the new warehouse management system
(WMS). As stated in our report last year the Board is satisfied the additional
costs incurred are non-recurring in both scale and nature. The new WMS
performed consistently well across the whole of FY24 in terms of costs and
accuracy, reducing the rate of picking errors and service credits. The
management expectations are for more productivity gains as the WMS system
continues to be optimised. Exceptional items are added back in the adjusted
EBITDA performance for FY23.
Revenue
Reported revenue for the 52-week period to 28 June 2024 was unchanged at £59m
(FY23: £59m). Repeat D2C revenue increased by 1.5% to £48.2m (FY23:
£47.5m). This increase was underpinned by the loyalty and stability of the
customer base with a sales retention rate of 93% in FY24 compared to 76% in
FY23. Key to this is the performance of the WineBank members with revenue up
1.6% from the prior year. Commercial revenues continued their progress up 5.1%
to £7.2m (FY23 £6.8m), thanks to a combination of growth from existing B2B
customers and the securing of new contracts. Revenue from new customer
acquisition was down £1.1m, reflecting the lower volumes in FY24.
Gross margin
Both reported gross margin and product margin improved in FY24. Reported gross
margin for the 52-week period to 28 June 2024 improved by 230 basis points to
31.9%, (FY23: 29.6%). Gross profit in these Financial Statements is stated as
revenue less wine cost, packaging and carrier delivery costs. UK Duty, inbound
packaging, and freight costs are included in the wine cost. Inflationary
pressures on wine input costs eased throughout FY24. These gains were to a
large extent offset by the increase in excise duty imposed on 1 August 2023.
The use of UK bottling and our wine sourcing model enabled the wine buying
team to continue to find wines to achieve our margin expectations. Product
margins which exclude packaging and delivery costs improved to 37.6% (FY23:
36.5%).
Operating expenses
Reported operating expenses fell by £0.6m in FY24 to £17.6m, (FY23:
£18.2m). Focus on reducing order fulfilment costs and the cost reduction
exercise in H2 FY24 helped to offset the ongoing impact of inflation on goods,
services and salaries. Operating expenses adjusted for exceptional costs
increased by £0.3m to £16.0m, (FY23: £15.7m).
Finance income and expense
Finance income increased as a result the improvement in cash balances and the
higher interest rates available throughout most of FY24. Interest received on
company cash deposits increased by £0.4m to £0.6m, (FY23: £0.2m). Finance
expenses were unchanged at £0.2m (FY23: £0.2m). The charge in Financial
Statements for both years relates solely to the interest charge on right of
use assets and the adoption of IFRS 16 for leases. Further details are
available in notes 11 and 12 of the Financial Statements.
Amortisation and depreciation
The business continues to invest in IT development where we can demonstrate a
business case that improves operational performance or enhances consumer
propositions. Amortisation and depreciation for FY24 was £1.3m, up £0.1m
from prior year (FY23: £1.2m). The increase was due to the amortisation of
intangible assets, depreciation of tangible assets and right of use assets
remaining unchanged.
Impairment review
At the reporting date the Directors tested goodwill for impairment in
accordance with the requirements of IAS 36 Impairment of Assets. The total
carrying amount of the Group's single cash-generating unit was compared to its
estimated value in use. No impairment was identified. For further details see
note 15.
Taxation
The tax charge in the Financial Statements for FY24 is £0.3m, compared to a
tax credit of £0.14m in FY23, reflecting the return to profitability in the
period. The tax charge relates to the movement in the deferred tax provision
and measured using the tax rate of 25% (FY23: 25%).
Earnings Per Share (EPS)
The Group reported an improvement in earnings per share. The basic earnings
per share for FY24 was 2.5p compared to a loss per share of 1.1p in FY23. The
weighted average number of shares in issue for FY24 was 55.9m (FY23: 55.8m).
Diluted earnings per share for FY24 was 2.4p, FY23 loss per share 1.1p with
the weighted average number of shares FY24 58.3m (FY23: 58.7m), (see note 14
of the Financial Statements for more details).
Cash and working capital
Reflecting the reduced risk of supply chain disruption, the Group continued
the programme of reducing inventory levels throughout FY24. As a result, year
end Inventory decreased by £2.5m to £5.9m from £8.4m in FY23. We will
continue to keep the inventory levels under review to manage supply risk and
maintain the optimum inventory levels to achieve our business growth plans.
Combined with cash generated from operations, this resulted in a significant
improvement in the Group cash position.
The Group end of year gross cash balance for FY24 was £18.4m (FY23: £13.5m).
These balances include cash deposits from WineBank customers of FY24 £8.1m,
(FY23:£8.0m), leaving Group net cash at £10.3m FY24, (FY23: £5.5m). The
WineBank customer deposits are not used to fund working capital and are kept
in a ring-fenced client account separate from Group cash. The Group funded
investment in capital projects of £0.45m in FY24 (FY23 £1.0m).
With no borrowing and cash reserves, the Group continues to be mindful of our
Capital Allocation policy. Our clear priority is to utilise cash to fund
growth opportunities through Capex, Opex or M&A opportunities. During FY24
the Group carried out a limited share buyback, spending £0.15m to hedge
against future LTIP liabilities and shareholder dilution.
Consolidated Statement of Comprehensive Income
for the 52-week period ended 28 June 2024
28 June 30 June
2024 2023
Note £'000 £'000
Revenue 5 59,005 58,998
Cost of sales (40,200) (41,560)
Gross profit 18,805 17,438
Administrative expenses before 6 (5,981)
Exceptional items (990)
Administrative expenses (6,261) (6,971)
Selling and distribution costs (11,311) (11,189)
Operating profit/(loss) 7 1,233 (722)
Finance income 11 602 159
Finance costs 12 (154) (174)
Profit/(loss) before taxation 1,681 (737)
Taxation (expense)/credit 13 (302) 143
Profit/(loss) for the financial period and total comprehensive 1,379 (594)
(expense)/income
Basic and diluted earnings/(loss) per share (pence) 14 2.5 (1.1)
Diluted earnings/(loss) per share (pence) 14 2.4 (1.1)
The results for the periods shown above are derived entirely from continuing
activities.
The Group has no other comprehensive income or expense other than the
(loss)/profit above and therefore no separate statement of other comprehensive
income has been presented.
Consolidated Statement of Financial Position
as at 28 June 2024
28 June 30 June
2024 2023
Company number 13169238 Note £'000 £'000
ASSETS
Non-current assets
Intangible assets 15 11,159 11,350
Property, plant and equipment 16 202 402
Right of use assets 17 2,370 2,870
Deferred tax asset 18 194 496
Total non-current assets 13,925 15,118
Current assets
Inventories 19 5,868 8,367
Trade and other receivables 20 2,684 2,615
Cash and cash equivalents 21 18,370 13,514
Total current assets 26,922 24,496
Total assets 40,847 39,614
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 22 (14,425) (14,206)
Derivative financial instruments 24 (3) (12)
Lease liability 17 (539) (521)
Total current liabilities (14,967) (14,739)
Non-current liabilities
Provisions 23 (367) (321)
Lease liability 17 (2,193) (2,732)
Total non-current liabilities (2,560) (3,053)
Total liabilities (17,527) (17,792)
Net assets 23,320 21,822
Equity
Share capital 25 560 558
Share premium 11,989 11,989
Own share reserve (3) -
Merger reserve 65 65
Share based payment reserve 552 402
Retained earnings 10,157 8,808
Total equity 23,320 21,822
The Financial Statements on pages 81 to 108 were approved by the Board of
Directors and authorised for issue on 21 October 2024. They were signed on its
behalf by:
Graeme Weir
Chief Financial Officer
The notes on pages 85 to 108 form part of these Financial Statements.
Consolidated Statement of Changes in Equity
for the 52-week period ended 28 June 2024
Share capital Share premium Own share reserve Merger reserve Share based Retained earnings Total Shareholders'
payment reserve funds
£'000 £'000 £'000 £'000 £'000 £'000 £'000
2 July 2022 558 11,989 (36) 65 95 9,402 22,073
Loss for the financial period - - - - - (594) (594)
Total comprehensive income for the period - - - - - (594) (594)
Share-based payments (note 10) - - - - 307 - 307
Own shares distributed - - 36 - - - 36
Total transactions with owners recognised in equity - - 36 - 307 - 343
30 June 2023 558 11,989 - 65 402 8,808 21,822
1 July 2023 558 11,989 - 65 402 8,808 21,822
Profit for the financial period - - - - - 1,379 1,379
Total comprehensive income for the period - - - - - 1,379 1,379
Share-based payments (note 10) - - - - 266 - 266
Shares issued on exercise of share-based payment 2 - - - (116) 116 2
Shares repurchased, held in treasury - - (3) - - (146) (149)
Total transactions with owners recognised in equity 2 - (3) - 150 (30) 119
28 June 2024 560 11,989 (3) 65 552 10,157 23,320
The notes on pages 85 to 108 form part of these Financial Statements.
Consolidated Statement of Cash Flows
for the 52-week period ended 28 June 2024
28 June 30 June
2024 2023
Note £'000 £'000
Cash flows from operating activities
Profit/(loss) before taxation 1,681 (737)
Adjustments for:
Depreciation and amortisation 7 1,311 1,195
Loss on disposal of intangible asset 15 23 -
Share-based payment expense 10 266 307
Own shares distributed - 36
Net finance costs 11, 12 (448) 15
Increase in trade and other receivables (70) (122)
Decrease in inventories 2,499 286
Increase/(decrease) in trade and other payables 257 (1,126)
Net cash generated from/(used in) operating activities 5,519 (146)
Cash flows from investing activities
Interest received 11 602 159
Disposal of intangible fixed assets 15 - 35
Purchase of intangible and tangible fixed assets 15, 16 (443) (968)
Net cash used in investing activities 159 (774)
Cash flows from financing activities
Payment of lease liabilities 17 (521) (462)
Payment of lease interest 12 (154) (174)
Share issue 25 2 -
Purchase of own shares (149) -
Net cash used in financing activities (822) (636)
Net increase/(decrease) in cash and cash equivalents 4,856 (1,556)
Cash and cash equivalents at beginning of period 13,514 15,070
Cash and cash equivalents at end of period 18,370 13,514
Cash and cash equivalents comprise:
Cash at bank and in hand
18,370 13,514
The notes on pages 85 to 108 form part of these Financial Statements.
Notes Forming Part of the Financial Statements
for the 52-week period ended 28 June 2024
1. General information
The principal activity of the Group is import and distribution of wine.
The Company was incorporated on 1 February 2021 in the United Kingdom and is a
public company limited by shares registered in England and Wales. The
registered office is 37-41 Roman Way Industrial Estate, Longridge Road,
Ribbleton, Preston, Lancashire, United Kingdom, PR2 5BD. The registered
company number is 13169238.
2. Accounting policies
This note provides a list of the significant accounting policies adopted in
the preparation of these consolidated Financial Statements to the extent that
they have not already been disclosed in the other notes above. These policies
have been consistently applied to all the years presented, unless otherwise
stated. The Financial Statements are for the Group consisting of Virgin Wines
UK plc and its subsidiaries.
Basis of preparation
On 31 December 2020, IFRS as adopted by the European Union at that date were
brought into UK law and became UK-adopted International Accounting Standards,
with future changes being subject to endorsement by the UK endorsement Board.
The Group transitioned to the UK-adopted International Accounting Standards in
the Group Financial Statements on 1 July 2021. This change constitutes a
change in accounting framework. However, there is no impact on recognition,
measurement or disclosure in the periods reported as a result of the change in
framework. The Group Financial Statements have been prepared in accordance
with UK-adopted International Accounting Standards and with the requirements
of the Companies Act 2006 as applicable to companies reporting under these
standards.
The financial information set out in this announcement does not constitute the
Group's financial statements for the period ended 28 June 2024 as defined by
Section 434 of the Companies Act. This financial information should be read in
conjunction with the financial statements of the Group for the period ended 30
June 2023 (the "Prior year financial statements"), which are available from
the Registrar of Companies. The Prior year financial statements were prepared
in accordance with UK adopted international accounting standards and the
applicable legal requirements of the Companies Act 2006. The previous
auditors, PricewaterhouseCoopers LLP, reported on those accounts and their
report was unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under Section 498 (2) or (3) of the Companies
Act 2006.
Accounting reference date
UK company law permits a company to draw up Financial Statements to a date
seven days either side of its accounting reference date. For operational
reasons the Company has adopted an accounting period of 52 weeks, and as a
result of this, the exact year-end was 28 June 2024 (2023: 30 June 2023).
Historical cost convention
The Financial Statements have been prepared on a historical cost basis except
for certain financial assets and liabilities (including derivative
instruments), measured at fair value through the income statement.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the Strategic
Report and the Directors' Report, which also describes the financial position
of the Group. The Group's financial risk management objectives and its
exposure to credit risk and liquidity risk are set out in note 24.
During the period the Group met its day-to-day working capital requirements
through cash generated from operating activities. The Group's forecasts and
projections, prepared to the period to June 2026, taking account of a severe
but plausible change in trading performance, show that the Group should be
able to operate using cash generated from operations, and that no additional
borrowing facilities will be required.
Having assessed the principal risks, the Directors considered it appropriate
to adopt the going concern basis of accounting in preparing its consolidated
Financial Statements.
Climate change
The Group recognises the risks of climate change. The Group's current climate
change strategy focuses on reducing its carbon footprint through carbon
neutral certification and sustainability initiatives to reduce waste and
Greenhouse gas emmissions. The impact of climate change has been considered in
the preparation of these Financial Statements, including the risks identified
as part on page 50. None of these risks had a material effect on the
consolidated Financial Statements of the Group. In particular, the Directors
have considered the impact of climate change in respect of the following
areas:
• Going concern and viability of the Group over the next three years;
• Carrying value and useful economic lives of property, plant and
equipment; and
• The discounted cash flows included in the value in use calculation used
in the annual goodwill impairment testing.
Whilst there is currently no material impact expected from climate change, the
Group is aware of the ever-changing risks related to climate change and will
continue to developing its assessment of the impact on the Financial
Statements.
Basis of consolidation
The Financial Statements consolidate the financial information of the Group
and companies controlled by the Group (its subsidiaries) at each reporting
date.
Control is achieved where the Company has the power to govern the financial
and operating policies of an investee entity, has the rights to variable
returns from its involvement with the investee and has the ability to use its
power to affect its returns. The results of subsidiaries acquired or
sold are included in the financial information from the effective date of
acquisition or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the results of acquired subsidiaries to
bring their accounting policies into line with those used by the Group.
All intra-Group transactions, balances, income and expenses are eliminated on
consolidation.
The Financial Statements of all Group companies are adjusted, where necessary,
to ensure the use of consistent accounting policies.
Employee Benefit Trust
The assets and liabilities of the Employee Benefit Trust (EBT) have been
included in the consolidated financial statements. Any assets held by the EBT
cease to be recognised on the Consolidated Statement of Financial Position
when the assets vest unconditionally in identified beneficiaries.
The costs of purchasing own shares held by the EBT are shown as a deduction
against equity. The proceeds from the sale of own shares held increase equity.
Neither the purchase nor sale of own shares leads to a gain or loss being
recognised in the Consolidated Statement of Comprehensive Income.
Revenue recognition
Revenue from contracts with customers contains one performance obligation,
unless it is a WineBank sale, in which case there are two performance
obligations and this is described separately further below. The single
performance obligation is the supply of goods. The transaction price is fully
allocated to the single performance obligation for non-WineBank sales. The
Group recognises revenue at a point in time when the single performance
obligation is satisfied. The performance obligation is satisfied when control
is passed to the customer. Control is deemed to pass to the customer upon
delivery of the goods.
Revenue is recognised at the transaction price of the sale of goods, net of
discounts and excluding value added tax, in the ordinary course of business.
The Group uses its accumulated historical experience to estimate the level of
returns on a portfolio level using the expected value method. Credit terms are
only provided to corporate customers, and the average days are 60.
WineBank
Amounts deposited by customers for WineBank are initially reported as a
liability in the Statement of Financial Position. On registering as a WineBank
customer, subscription customers agree to lodge a regular monthly sum into
their WineBank account. These sums accumulate in the customer account and
build a balance to use against their next purchase from the Group.
Amounts deposited by WineBank customers are reported within the Group cash
balance but are held separate to Group funds. WineBank deposits are not used
to fund the working capital of the business. WineBank customers can cancel
their WineBank account at any time and may request to receive their money back
immediately with no penalty whatsoever.
Using funds deposited through the WineBank scheme entitles account holders to
benefit from an extra discount on the Group's website prices. This discount
represents a 'material right' under IFRS 15 Revenue from Contracts with
Customers when customers spend their WineBank cash balance but not the
associated interest. The material right performance obligation is calculated
on a portfolio basis taking into account inactive customers and expected
future cash receipts which reduce the portfolio value of the material right.
The material right provision is included within contract liabilities and
deferred until the customer uses the discount on a future order.
Orders placed through the WineBank scheme also contain the same performance
obligation as for other sales, as described above. The transaction price
allocated to this performance obligation is the remaining amount after
allocating the element to the material right, and is recognised upon delivery
to the customer.
Finance costs
Finance costs on financial liabilities are recognised in the profit and loss
account over the term of such instruments at a constant rate on the carrying
amount. Issue costs relating to financial instruments are recognised in the
income statement over the term of the debt at a constant rate over the
instrument's life.
Interest on leases is calculated based on the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used (see
lease accounting policy).
Taxation
Tax on the profit or loss for the year comprises current and deferred tax.
Tax is recognised in the Consolidated Statement of Comprehensive Income except
to the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates and laws enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following temporary differences are not
provided for: the initial recognition of goodwill, the initial
recognition of assets or liabilities that affect neither accounting nor
taxable profit other than in a business combination, and differences relating
to investments in subsidiaries to the extent that they will probably not
reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities,
using tax rates and laws enacted or substantively enacted at the reporting
date. A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the asset
can be utilised.
The carrying amounts of deferred tax assets are reviewed at each reporting
date.
Foreign currencies
Functional and presentational currency
Items included in the Financial Statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the functional currency). The functional currency of the
Group is Pounds Sterling. The Financial Statements have been rounded to
thousands.
Transactions and balances
Transactions denominated in foreign currencies are translated into the
functional currency at the exchange rates prevailing on the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are translated at quoted rates of exchange ruling at the balance sheet date.
Exchange profits and losses arising from current trading are included in
operating profit.
Goodwill
Goodwill arising on the acquisition of subsidiary undertakings and businesses,
representing any excess of the fair value of the consideration given over the
fair value of the identifiable assets and liabilities acquired is capitalised.
The goodwill in the consolidated financial statements represents the goodwill
recognised in the predecessor holding company Financial Statements at the
original carrying value.
Goodwill is not amortised but is reviewed for impairment at least annually.
For the purpose of impairment testing, goodwill is allocated to each of the
Group's cash-generating units (or groups of cash-generating units) expected to
benefit from the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than the carrying
amount of the unit, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the unit and then to the other
assets of the unit pro rata on the basis of the carrying amount of each asset
in the unit. An impairment loss recognised for goodwill is not reversed in a
subsequent period.
Intangible assets
Computer software is stated at cost less accumulated amortisation and
impairment losses. Software is amortised over its estimate useful life, of
between five and eight years, on a straight line basis.
Where factors, such as technological advancement or changes in market prices,
indicate that residual value or useful life have changed, the residual value,
useful life or amortisation rate are amended prospectively to reflect the new
circumstances.
Property, plant and equipment
Property, plant and equipment are stated at historic purchase cost less
accumulated depreciation and impairment losses. Cost includes the original
purchase price of the asset and the costs attributable to bringing the asset
to its working condition for its intended use.
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
• Leasehold Property - over the life of the lease
• Fixtures and fittings - 33.33% per annum
• Computer hardware and warehouse equipment - 33.33% per annum
Assets classified as 'work in progress' are not depreciated as such assets are
not currently available for (or in) use. Once in use, assets will be re-
categorised and depreciated at the rate appropriate to their classification.
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the net sale proceeds and the carrying
amount of the asset and is recognised in the Statement of Comprehensive
Income.
Impairment of non-financial assets (excluding goodwill)
At each reporting date, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the extent of the
impairment loss (if any). Where the asset does not generate cash flows that
are independent from other assets, the Group estimates the recoverable amount
of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised immediately in comprehensive income.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss
been recognised for the asset (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss to
the extent that it eliminates the impairment loss which has been recognised
for the asset in prior years.
Leases
A contract, or a portion of a contract, is accounted as a lease when it
conveys the right to use an asset for a period of time in exchange for
consideration. Leases are those contracts that satisfy the following criteria:
• There is an identified asset;
• The Group obtains substantially all the economic benefits from use of
the asset; and
• The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive substitution rights.
If the supplier does have those rights, the contract is not identified as
giving rise to a lease. In determining whether the Group obtains substantially
all the economic benefits from use of the asset, the Group considers only the
economic benefits that arise from use of the asset. In determining whether the
Group has the right to direct use of the asset, the Group considers whether it
directs how and for what purpose the asset is used throughout the period of
use. If the contract or portion of a contract does not satisfy these criteria,
the Group applies other applicable IFRS rather than IFRS 16.
The Group leases various offices, warehouses and equipment. Rental contracts
are typically made for fixed periods of five to ten years, but may have
extension options as detailed in note 16.
Contracts may contain both lease and non-lease components. The Group allocates
the consideration in the contract to the lease and non-lease components based
on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of
different terms and conditions. The lease agreements do not impose any
covenants other than the security interests in the leased assets that are held
by the lessor. Leased assets may not be used as security for borrowing
purposes.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
• fixed payments (including in-substance fixed payments), less any lease
incentives receivable;
• variable lease payment that are based on an index or a rate, initially
measured using the index or rate as at the commencement date;
• amounts expected to be payable by the Group under residual value
guarantees;
• the exercise price of a purchase option if the Group is reasonably
certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term
reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases in the Group, the lessee's incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the
individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third party financing was received;
• uses a build-up approach that starts with a risk-free interest rate
adjusted for credit risk for leases held by Virgin Wines UK plc, which does
not have recent third-party financing; and
• makes adjustments specific to the lease, for example term and security.
If a readily observable amortising loan rate is available to the individual
lessee (through recent financing or market data) which has a similar payment
profile to the lease, then the Group entities use that rate as a starting
point to determine the incremental borrowing rate.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or rate
take effect, the lease liability is reassessed and adjusted against the
right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance
cost is charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
The Group has elected not to recognise right of use assets and lease
liabilities for leases of low-value assets and short-term leases. The Group
recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
Inventory
Inventories are valued at the lower of cost and net realisable value on a FIFO
basis. Cost comprises purchase price plus associated freight and duty costs
for imported goods. Inventories are regularly assessed for evidence of
impairment. Where such evidence is identified, a provision is recognised to
reduce the value of inventories to its selling price after incurring any
future costs to sell.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and with banks, as well as any
deposits made with financial institutions with a maturity period of less than
three months from the date of deposit. Cash and cash equivalents also includes
amounts received from WineBank customers which are not restricted and as such
are presented as cash and cash equivalents.
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument and
are measured initially at fair value adjusted by transactions costs, except
for those carried at fair value through profit or loss which are measured
initially at fair value. Subsequent measurement of financial assets and
financial liabilities are described below.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and all
substantial risks and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement, financial assets are classified
into the following categories upon initial recognition:
• financial assets at amortised cost; and
• financial assets/liabilities held at fair value through profit or loss
(FVTPL).
Financial assets at amortised cost
Financial assets at amortised cost are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market.
After initial recognition, these are measured at amortised cost using the
effective interest method, less provision for impairment. Discounting is
omitted where the effect of discounting is immaterial. The Group's cash and
cash equivalents, trade and most other receivables fall into this category of
financial instruments.
The Group recognises a loss allowance for expected credit losses (ECL) on
financial assets that are measured at amortised cost. The amount of expected
credit losses is updated at each reporting date to reflect changes in credit
risk since initial recognition of the respective financial instrument.
The Group always recognises lifetime ECL on trade receivables. The expected
credit losses on these financial assets are estimated using a provision matrix
based on the Group's historical credit loss experience, adjusted for factors
that are specific to the debtors, general economic conditions and an
assessment of both the current as well as the forecast direction of conditions
at the reporting date, including time value of money where appropriate.
All income and expenses relating to financial assets that are recognised in
the Consolidated Statement of Comprehensive Income are presented within
finance costs or finance income, except for impairment of trade receivables
which is presented within other administrative expenses.
Classification and subsequent measurement of financial liabilities
The Group's financial liabilities include trade and other payables, accruals
and contract liabilities, loans and borrowings and derivative financial
instruments.
Financial liabilities are measured at amortised cost using the effective
interest method, except for financial liabilities held for trading or
designated at FVTPL, that are carried at fair value with gains or losses
recognised in the Consolidated Statement of Comprehensive Income.
All interest-related charges and, if applicable, changes in an instrument's
fair value that are reported in Consolidated Statement of Comprehensive Income
are included within finance costs or finance income.
Derivative financial liabilities
Derivatives are initially recognised at fair value at the date a derivative is
entered into and are subsequently remeasured to their fair value at each
reporting date. A derivative with a positive fair value is recognised as a
financial asset whereas a derivative with a negative fair value is recognised
as a financial liability. The resulting gain or loss is recognised in the
Consolidated Statement of Comprehensive Income immediately. A derivative is
presented as a non-current asset or non-current liability if the Group has an
unconditional right to defer payment beyond 12 months. Otherwise derivatives
are presented as current assets or liabilities.
Exceptional items
The Company presents certain items as "exceptional" on the face of the
Consolidated Statement of Comprehensive Income account in arriving at
operating profit. These are items which in management's judgement need to be
disclosed separately by virtue of their size, nature and occurrence.
Employee benefits
The Group provides a range of benefits to employees, including annual bonus
arrangements, paid holiday arrangements and defined contribution pension
plans.
(i) Short-term benefits
Short-term benefits, including holiday pay and other similar non-monetary
benefits, are recognised as an expense in the period in which the service is
received.
(ii) Defined contribution pension plans
The Group operates a number of country-specific defined contribution plans for
its employees. A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity. Once the contributions
have been paid the Group has no further payment
obligations. The contributions are recognised as an expense when they are due.
Amounts not paid are shown in accruals in the balance sheet. The assets of the
plan are held separately from the Group in independently administered funds.
(iii) Share-based payments
A transaction is accounted for as a share-based payment where the Group
receives services for employees, Directors or third parties and pays for these
in shares or similar equity instruments.
The Group makes equity-settled share-based payments to certain employees and
Directors. Equity-settled share-based schemes are measured at fair value
(excluding the effect of non-market-based vesting conditions) at the date of
grant, measured by use of an appropriate valuation model. The expected life
used in the model has been adjusted, based on management's best estimate, for
the effects of non-transferability, exercise restrictions and behavioural
considerations.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the period services are
received, based on the Group's estimate of shares that will eventually vest.
Share options are forfeited when an employee ceases to be employed by the
Group unless determined to be a 'Good Leaver'. A 'Good Leaver' is a
participant who ceases employment by reason of death, injury, ill-health or
disability.
The Group has discretion to recover the employer's National Insurance
liability from the employee. For the current active schemes the Company has
chosen to do so.
Merger reserve
The merger reserve was created during the prior period as a result of the
share for share exchange under which Virgin Wines UK plc became the parent
undertaking prior to the IPO. Under merger accounting principles, the assets
and liabilities of the subsidiaries were consolidated at book value in the
Group Financial Statements and the consolidated reserves of the Group were
adjusted to reflect the statutory share capital, share premium and other
reserves of the Company as if it had always existed, with the difference
presented as the merger reserve.
Retained earnings
Retained earnings includes all current and prior period retained profits and
losses, including foreign currency translation differences arising from the
translation of Financial Statements of the Group's foreign entities.
All transactions with owners of the parent are recorded separately within
equity.
Dividends are recognised when approved by the Group's shareholders or, in the
case of interim dividends, when the dividend has been paid.
Section 479c Companies Act 2006 Audit exemption
The subsidiaries Virgin Wine Online Limited (registered number 03800762) and
Virgin Wines Holding Company Limited (registered number 07970057) are exempt
from the requirements of the Act relating to the audit of accounts under
section 479A of the Companies Act 2006.
3. Judgements in applying accounting policies and key sources of estimation uncertainty
In preparing these Financial Statements, the Directors have made the following
key judgements and estimates:
Goodwill impairment assessment (note 15)
At each reporting date, the Group tests goodwill for impairment in accordance
with the requirements of IAS 36. The recoverable amount of the Group's single
cash-generating unit (CGU) is determined by calculating its value in use. The
value-in-use calculation requires the Group to estimate the future cash flows
expected to arise from the single CGU and to use a suitable discount rate in
order to calculate their present value. The value in use is then compared to
the total of the relevant assets and liabilities of the CGU. See note 15 for
details of the test for impairment and the relevant key assumptions.
Assessment of carrying values of plc company investments and amounts due from Group undertakings
In relation to the plc company's investments in subsidiaries, the Directors
are required to assess whether there are any indicators of impairment at each
reporting date. All relevant potential indicators are considered, including
the performance of the underlying trading subsidiary and the results of the
Group's impairment assessment performed as at the same date as described
above. The Directors exercise their judgement in determining whether any such
indicators exist. Where an indicator of impairment is identified in relation
to the Company's investments or intercompany receivable balances, a full
impairment review is performed. The Directors performed their assessment and
concluded that no impairment indicators existed at 28 June 2024 and, as such,
a full impairment review over the Company's investments in subsidiaries and
intercompany receivables was not performed.
In relation to the amounts due from Group undertakings, the Directors are
required to assess their carrying amount for any impairment using the expected
credit losses ("ECL") model. As set out in note 6 to the Company Financial
Statements, the amounts owed by Group undertakings are unsecured, interest
free and repayable on demand. Consistent with the ECL model, the Directors
have assessed the carrying amount for impairment on the assumption that
repayment of the amounts were demanded at the reporting date. The Directors,
having determined that the borrower
had insufficient highly liquid resources at the reporting date, considered the
expected manner of recovery and recovery period of these loans (the Company's
'recovery scenarios'). The Directors determined that the only non-trivial
recovery scenario would be realised by way of a dividend distribution by the
Group's trading subsidiary, Virgin Wine Online Limited. The Directors, amongst
other factors, considered the ability and intent
of the subsidiary to make such a distribution if required, and ultimately
determined that any reduction in the carrying amount of these receivables
would be inconsequential to the Company's Financial Statements. On that basis,
no ECL provision has been recognised.
Sources of estimation uncertainty
The Group has considered other estimates and assumptions that, whilst not
deemed to represent a significant risk of material adjustment, do represent
important estimates at 28 June 2024 and are disclosed accordingly. The
valuation of the material right provision is disclosed as an other estimate in
the current year.
4. Segmental reporting
IFRS 8 requires operating segments to be determined based on the Group's
internal reporting to the Chief Operating Decision Maker (CODM). The CODM has
been determined to be the Board as it is primarily responsible for the
allocation of resources to segments and the assessment of performance of the
segments.
The level of aggregation of results reported to and assessed by the CODM
supports that there are not operating segments smaller than the business as a
whole, there is only one operating segment, which comprises all of the
operations of the Group. Performance of this operating segment is assessed on
revenue and Adjusted EBITDA (being operating profit excluding share based
payments and any exceptional items, see table on page 46). These are the
financial performance measures that are reported to the CODM, along with other
operational performance
measures, and are considered to be useful measures of the underlying trading
performance of the segment. Adjusted items are not allocated to the operating
segment as this reflects how they are reported to the Board.
5. Revenue
The Directors have considered the requirement of IFRS 15 with regards to
disaggregation of revenue and do not consider this to be required as the Group
has only one operating segment which is the sale of alcohol.
There is one geographical market being the UK, all revenue streams having
similar recognition policies and whilst the Group provides services,
Management do not believe such analysis would provide meaningful information
for users of the Financial Statements.
There were no major customers that individually accounted for more than 10% of
total revenues (2023: no customers).
6. Exceptional items
Prior year exceptional items relate to additional labour costs and goodwill
compensation given to customers due to operational issues following the
implementation of the new Warehouse Management System. These costs are deemed
exceptional due to their size and non recurring nature.
7. Operating profit/(loss)
Operating profit/(loss) is stated after charging/(crediting):
28 June 30 June
2024 2023
£'000 £'000
Inventory charged to cost of sales 37,063 37,548
Depreciation (note 16) 228 232
Depreciation of right of use asset (note 17) 500 501
Staff costs (note 8) 8,367 8,192
Shared-based payments (note 10) 266 307
Net exchange gains (including movements on fair value through profit and loss (75) (11)
derivatives)
Movement in inventory provision 67 (98)
Intangible asset amortisation (note 15) 583 462
Low value and short-term rentals excluded from right of use asset 59 70
Auditors' remuneration:
- for the audit of the Group and Parent Company Financial Statements 132 219
- non audit fees (tax compliance services) - 13
8. Staff costs
28 June 30 June
2024 2023
£'000 £'000
Staff costs (including directors) consist of:
Wages and salaries 7,123 6,948
Social security costs 773 790
Other pension costs 471 454
8,367 8,192
The amount recognised in the Consolidated Statement of Comprehensive Income as
an expense in relation to the Group's defined contribution schemes is
£471,000 (2023: £454,000).
The monthly average number of employees (including directors) during the
period was as follows:
28 June 30 June
2024 2023
By function Number Number
Sales 151 164
Management and administrative 40 36
191 200
The majority of employees are eligible to join the defined contribution
pension plan.
9. Key management personnel
28 June 30 June
2024 2023
£'000 £'000
Short-term employee benefits 686 675
Post employment benefits 25 24
711 699
During the period, retirement benefits were accruing to two directors (2023:
two) in respect of defined contribution pension schemes. Key management
personnel include only the Directors and as such no further disclosures in
respect of compensation are given.
Additional analysis can be found in the Remuneration Committee report.
10. Share-based payments
In the 52-week period ended 28 June 2024 the Group operated an equity-settled
share-based payment plan as described below. The charge in the period
attributed to the plan was £266,000 (2023: £307,000).
The total amount recognised in relation to share based payments is £668,000
(2023: £402,000).
Under the Virgin Wines UK plc Long-Term Incentive Plan, the Group gives
performance share awards (PSA) and restricted share awards (RSA) to Directors
and senior staff subject to the achievement of a pre-agreed revenue and net
profit figure for the financial year of the Group, three financial years
subsequent to the date of the award. These shares vest after the delivery of
the audited revenue and profit figure for the relevant financial period has
been announced.
Awards are granted under the plan for no consideration and carry no dividend
or voting rights. Awards are exercisable at the nominal share value of £0.01.
Awards are forfeited if the employee leaves the Group before the awards vest,
except under circumstances where the employee is considered a 'Good Leaver'.
28 June 2024 30 June 2023
Grant date Vesting date Expiration date
Share price at grant Number of share options issued Share price at grant Number of share options issued
PSA Share Awards
6 December 2022 6 December 2025 6 December 2032 - - 70p 1,606,003
30 April 2024 30 April 2027 30 April 2034 48p 2,077,748 - -
2,077,748 1,606,003
RSA Share Awards
6 December 2022 6 December 2023 6 December 2032 - - 70p 204,654
6 December 2022 6 December 2024 6 December 2032 - - 70p 204,654
6 December 2022 6 December 2025 6 December 2032 - - 70p 275,949
- 685,257
Number of Shares Number of Shares
28 June 30 June
2024 2023
Outstanding at start of period 2,811,645 1,204,217
Granted during the period 2,077,748 2,291,260
Lapsed during the period (564,773) (305,451)
Exercised during the period (134,845) -
Forfeitures in the period - (378,381)
Outstanding at end of period 4,189,775 2,811,645
The average remaining time for awards to vest is 2.0 years (2023: 1.9 years).
The awards outstanding at 28 June 2024 have a weighted average remaining
contractual life of 9.1 years (2023: 7.1 years).
The fair value at grant date was determined with reference to the share price
at grant date, as there are no market-based performance conditions and the
expected dividend yield is 0%. Therefore there was no separate option pricing
model used to determine the fair value of the awards.
11. Finance income
28 June 30 June
2024 2023
£'000 £'000
Bank interest 602 159
12. Finance costs
28 June 30 June
2024 2023
£'000 £'000
Interest payable for lease liabilities 154 174
13. Taxation
28 June 30 June
2024 2023
£'000 £'000
Analysis of charge for the period
Current tax
Adjustment in respect of prior period - (75)
Charge for the year - -
Total current tax - (75)
Deferred tax
Origination and reversal of timing differences 414 (165)
Adjustment in respect of prior period (112) 97
Total deferred tax 302 (68)
Tax charge/(credit) on profit/(loss) on ordinary activities 302 (143)
Factors that may affect future tax charges:
Deferred taxes at the balance sheet date have therefore been measured using
the effective tax rate (25%).
The tax assessed for the period is lower (2023: higher) than the standard rate
of corporation tax in the UK applied to profit before tax. The differences are
explained below:
28 June 30 June
2024 2023
£'000 £'000
(Loss)/profit before tax 1,681 (737)
Profit before tax at the standard rate of corporation tax in the UK of 25% 420 (184)
(period ended 30 June 2023 - 25%)
Effects of:
Expenses not deductible for tax purposes 68 77
Adjustment in respect of prior period (112) 22
Other permanent differences (74) (58)
Total tax (credit)/charge for the period 302 (143)
For further information on deferred tax balances see note 18.
13. Earnings per share
Basic and diluted earnings per share are calculated by dividing the earnings
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the period.
At 28 June 2024 the total number of potentially dilutive shares issued under
the Virgin Wines UK plc long term incentive plan was 4,189,775
(2023: 2,811,645). Due to the contingent nature of options under the long-term
incentive scheme, these share have no dilutive effect on the loss per share.
The calculation of basic profit per share is based on the following data:
Statutory EPS
28 June 30 June
2024 2023
Earnings (£'000)
(Loss)/earnings for the purpose of basic earnings per share 1,379 (594)
Number of shares
Adjusted average number of shares for the purposes of basic earnings per share 55,862,155 55,837,560
Adjusted average number of shares for the purposes of diluted earnings per 58,310,962 55,837,560
share
Basic and diluted (loss)/earnings per ordinary share (pence) 2.5 (1.1)
2.4 (1.1)
Adjusted EPS
The calculation of adjusted earnings per share is based on the after tax
adjusted operating profit after adding back certain costs as detailed in the
table below. Adjusted earnings per share figures are given to exclude the
effects of exceptional items and pre restructuring finance costs, all net of
taxation, and are considered to show the underlying performance of the Group.
28 June 30 June
2024 2023
Earnings (£'000)
(Loss)/earnings for the purpose of basic earnings per share Exceptional items
Tax effect of above 1,379 (594)
- 990
- (248)
Earnings for the purpose of adjusted earnings per share 1,379 148
Number of shares
Adjusted average number of shares for the purposes of basic earnings per share 55,862,155 55,837,560
Adjusted average number of shares for the purposes of diluted earnings per 58,310,962 58,649,205
share
Basic earnings per ordinary share (pence) 2.5 0.3
Diluted earnings per ordinary share (pence) 2.4 0.3
15. Intangible assets
Goodwill Software Total
£'000 £'000 £'000
Cost
At 2 July 2022 9,623 2,781 12,404
Additions - 734 734
Disposals - (35) (35)
At 30 June 2023 9,623 3,480 13,103
Additions - 415 415
Disposals - (23) (23)
28 June 2024 9,623 3,872 13,495
Accumulated amortisation and impairment
At 2 July 2022 - 1,291 1,291
Amortisation charge - 462 462
At 30 June 2023 - 1,753 1,753
Amortisation charge - 583 583
28 June 2024 - 2,336 2,336
Net book value
28 June 2024 9,623 1,536 11,159
30 June 2023 9,623 1,727 11,350
Included within Software is £0.2m (2023: £0.4m) net book value in relation
to development of the Mantiki core IT platform, which has a remaining
amortisation period of one (2023: two) years and £0.4m (2023: £0.6m) in
relation to development of the Korber Warehouse Management System, which has a
remaining amortisation period of three years (2023: four years).
Included in Software is £1.0m (2023: £0.7m) of internally generated asset.
Amortisation is charged to administrative expenses in the consolidated
statement of comprehensive income. Software is amortised over its estimated
useful economic life.
The Group is required to test, on an annual basis, whether goodwill has
suffered any impairment. The recoverable amount is determined based on value
in use calculations. The use of this method requires the estimation of future
cash flows and the determination of a discount rate in order to calculate the
present value of the cash flows.
The goodwill figure has been derived from the acquisition of 100% of the share
capital of Virgin Wine Online Limited by Virgin Wines Holding Company Limited
in 2013 and as such there is only one cash-generating unit.
The Group has estimated the value in use of the business as a cash generating
unit based on a discounted cashflow model which adjusts for risks associated
with the assets. The discount rate applied is a pre-tax rate of 15.2% (2023:
13.8%).
The forecasts for the business are based over a 5-year projection period, use
past experience and apply a forecast annual growth rate. The key assumptions
used in the discounting cashflow were the sales and EBITDA figures (based on
board approved plans), the future growth rate (including long-term growth rate
of 2%) and the discount rate.
The Directors have assessed the sensitivity of the impairment test to
reasonably possible changes in the key assumptions described above, and noted
that sufficient headroom existed in all cases.
16. Property, plant and equipment
Leasehold property Computer hardware & warehouse equipment Fixtures & fittings Total
£'000 £'000 £'000 £'000
Cost
At 2 July 2022 20 899 385 1,304
Additions - 81 153 234
At 30 June 2023 20 980 538 1,538
Additions - 14 14 28
At 28 June 2024 20 994 552 1,566
Accumulated depreciation
At 2 July 2022 20 612 272 904
Charge for the period - 138 94 232
At 30 June 2023 20 750 366 1,136
Charge for the period - 132 96 228
At 28 June 2024 20 882 462 1,364
Net book value
At 28 June 2024 - 112 90 202
At 30 June 2023 - 230 172 402
Depreciation is charged to administrative expenses in the consolidated
statement of comprehensive income.
17. Right of use assets
The Group leases a number of properties across the UK, in Norwich, Preston and
Bolton.
On 14 June 2022 the Group extended the lease on its offices in Norwich to 24
September 2032. The lease has a break clause on 24 September 2026 and on 24
September 2030.
The Group entered into a lease for a warehouse in Preston on 19 October 2016
under a ten-year lease term ending on 18 October 2026. The Group sometimes
negotiates break clauses in its property leases. The factors considered in
deciding to negotiate a break clause include:
• the length of the lease term; and
• whether the location represents a new area of operations for the Group.
The Preston Warehouse lease has a second break clause on 18 October 2024.
The Group entered into a lease for a bulk storage facility in Bolton on 1
September 2020 under a ten-year lease term ending on 31 August 2030. The first
break clause in is on 31 August 2026.
For all of the property leases, the periodic rent is fixed over the lease
term.
The Group also leases certain items of plant and equipment. Leases of plant
and equipment comprise fixed payments over the lease terms. The full
retrospective approach was adopted to calculate the cost of the right-of-use
asset.
Leasehold property Computer hardware & warehouse equipment Total
£'000 £'000 £'000
Cost
At 2 July 2022 5,060 143 5,203
Additions - 109 109
At 30 June 2023 5,060 252 5,312
At 28 June 2024 5,060 252 5,312
Accumulated depreciation
At 2 July 2022 1,891 50 1,941
Charge for the period 466 35 501
At 30 June 2023 2,357 85 2,442
Charge for the period 450 50 500
At 28 June 2024 2,807 135 2,942
Net book value
At 28 June 2024 2,253 117 2,370
At 30 June 2023 2,703 167 2,870
Lease liability Leasehold property Computer hardware & warehouse equipment Total
£'000 £'000 £'000
At 2 July 2022 3,509 96 3,605
Additions - 109 109
Interest expense 169 5 174
Lease payments (596) (39) (635)
At 1 July 2023 3,082 171 3,253
Interest expense 148 6 154
Lease payments (619) (56) (675)
At 28 June 2024 2,611 121 2,732
18. Deferred tax
28 June 30 June
2024 2023
£'000 £'000
Brought forward 496 428
Utilisation through income statement (302) 68
Carried forward 194 496
The balance comprises temporary differences attributable to:
Fixed asset differences Other timing differences Tax losses Total
£'000 £'000 £'000 £'000
Deferred tax asset at 2 July 2022 418 10 - 428
Recognised in the period through income statement (323) 10 381 68
Deferred tax asset at 1 July 2023 95 20 381 496
Recognised in the period through income statement (22) 3 (283) (302)
Deferred tax asset at 28 June 2024 73 23 98 19
The Directors consider that sufficient future taxable profits will be
available and as such deferred tax assets have been recognised in full for
Virgin Wine Online Limited and Virgin Wines UK plc.
A deferred tax asset has been recognised on losses in Virgin Wines Holding
Company Limited to the extent to which the losses can be utilised through
group relief. The deferred tax asset not recognised in Virgin Wines Holding
Company is £0.9m (2023: £0.9m).
The deferred tax asset is expected to be utilised in more than one year.
Deferred tax is calculated based on the expected tax rate in force when the
timing differences reverse of 25% (2023: 25%).
19. Inventories
28 June 30 June
2024 2023
£'000 £'000
Finished goods for resale 5,868 8,367
There is no difference between the replacement cost of stocks and carrying
value (30 June 2023: £nil). Inventories are stated after provision for
impairment of £262,000 (2023: £195,000).
20. Trade and other receivables
28 June 30 June
2024 2023
£'000 £'000
Amounts falling due within one year:
Gross carrying amount - trade receivables 1,040 821
Loss allowance (6) (7)
Net carrying amount - trade receivables 1,034 814
Prepayments 1,523 1,582
Other receivables 127 219
2,684 2,615
Trade receivables are considered past due once they have passed their
contracted due date. Trade receivables and contract assets are assessed for
impairment based upon the expected credit losses model.
The Group applies the IFRS 9 Simplified Approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables
and contract assets. To measure expected credit losses on a collective basis,
trade receivables and contract assets are grouped based on similar credit risk
and aging. The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group's historical credit losses
experienced over the three years prior to the period end. The historical loss
rates are then adjusted for current and forward-looking information on
macroeconomic factors affecting the Group's customers.
The average credit period on sales is 30 days after the invoice has been
issued. No interest is charged on outstanding trade receivables.
At 28 June 2024 there were two (30 June 2023: two) customers who owed in
excess of 10% of the total trade debtor balance. These customers were
operating within their agreed credit terms and the Directors do not foresee an
increased credit risk associated with these customers. As such no provision
for impairment has been recognised on these balances.
Trade receivables and contract assets are written off where there is no
reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of a debtor to
engage in a repayment plan with the Group, and a failure to make contractual
payments for a period of greater than 60 days past due. There are no amounts
outstanding on financial assets that were written off during the reporting
period and which are still subject to enforcement activity. Impairment losses
on trade receivables and contract assets are presented as net impairment
losses within operating profit. Subsequent recoveries of amounts previously
written off are credited against the same line item.
Other receivables relates to uncleared sales receipts from customers,
processed in the normal course of business. The maturity analysis of trade
receivables and other debtors is shown below:
28 June 2024 30 June 2023
Gross Provision Net Gross Provision Net
£'000 £'000 £'000 £'000 £'000 £'000
Trade receivables and other debtors
Not yet due 941 - 941 776 - 776
Overdue 99 (6) 93 45 (7) 38
1,040 (6) 1,034 821 (7) 814
Movements in the impairment allowance for trade receivables and contract
assets are as follows:
28 June 30 June
2024 2023
£'000 £'000
Opening provision for impairment of trade receivables and contract assets 7 13
Recovered provided debt (4) 5
Increase during the period 5 (10)
Write off of provided debt (2) (1)
Carried forward 6 7
21. Cash and cash equivalents
Included in Cash and cash equivalents is a balance of £8.1m (30 June 2023:
£8.0m) relating to advance payments received from WineBank customers. The
corresponding creditor to customers is included in contract liabilities.
£5.1m of the cash balance is held on 95 day notice (2023: £3.1m) at a
preferential interest rate of 5.4% (30 June 2023: 4.75%).
22. Trade and other payables
28 June 30 June
2024 2023
£'000 £'000
Trade payables 2,398 2,227
Taxation and social security 1,675 1,581
Contract liabilities 8,703 8,721
Accruals and other creditors 1,649 1,677
14,425 14,206
The Directors consider the fair value of creditors to be equal to the book
value given their short-term nature.
23. Provisions
Leasehold dilapidation provision
28 June 30 June
2024 2023
£'000 £'000
Brought forward 321 290
Charged in income statement 46 31
Carried forward 367 321
Leasehold dilapidations relate to the estimated cost of returning a leasehold
property to its original state at the end of the lease as a result of general
'wear and tear'. The cost is recognised as an expense in the Consolidated
Statement of Comprehensive Income and accrued for over the term of the lease,
on the basis that the 'wear and tear' increases over the period of the lease.
The main uncertainty relates to estimating the cost that will be incurred at
the end of the lease.
Maturity analysis for provisions
Dilapidation provisions are expected to mature at the end of the lease term as
follows:
28 June 30 June
2024 2023
£'000 £'000
October 2026 271 254
August 2030 96 67
367 321
24. Financial instruments and financial risk management
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
· trade and other receivables;
· cash and cash equivalents;
· trade and other payables; and
· lease liabilities.
The existence of these financial instruments exposes the Group to the
following financial risks:
· credit risk;
· liquidity risk;
· foreign currency risk; and
· capital management.
The Group's financial instruments may be analysed as follows:
28 June 30 June
2024 2023
£'000 £'000
Trade and other receivables 1,161 1,033
Cash and cash equivalents 18,370 13,514
Financial assets measured at amortised cost 19,531 14,547
Derivative financial liabilities measured at fair value through profit or loss (3) (12)
Financial liabilities measured at fair value through comprehensive income (3) (12)
Trade and other payables, excluding non-financial liabilities (4,047) (3,904)
Lease liabilities (2,732) (3,253)
Financial liabilities measured at amortised cost (6,779) (7,157)
Financial assets which are debt measured at amortised cost comprise trade
receivables, other debtors and cash and cash equivalents.
Financial assets measured at fair value through comprehensive income represent
the Group's derivative financial instruments, being foreign exchange forward
contracts.
Financial liabilities measured at amortised cost comprise trade payables,
accruals and other creditors, lease liabilities and loans and borrowings.
Credit risk
The Group's maximum exposure to credit risk is limited to the carrying amount
of the financial assets recognised at the reporting date, as summarised below:
28 June 30 June
2024 2023
£'000 £'000
Financial assets measured at amortised cost 19,531 14,547
The Group's cash and cash equivalents are all held on deposit with leading
international banks and hence the Directors consider the credit risk
associated with such balances to be low.
The Group provides credit to customers in the normal course of business. The
principal credit risk therefore arises from the Group's trade receivables. In
order to manage credit risk the Directors set credit limits for corporate
customers based on a combination of payment history, credit references and a
financial review of the business. Credit limits are reviewed on a regular
basis in conjunction with debtor ageing and payment history. Historic credit
losses of the Group have been negligible as referenced in note 20.
Details of the trade receivables impairment policy can be found in note 20.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
amount of funding required for growth. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they fall due.
The Group manages its cash and borrowing requirements through preparation of
annual cash flow forecasts reflecting known commitments and anticipated
projects in order to maximise interest income and minimise interest expense,
whilst ensuring that the Group has sufficient liquid resources to meet the
operating needs of the Group. Borrowing facilities are arranged as necessary
to finance requirements.
The following table shows the maturities of gross undiscounted cash flows of
financial liabilities as at 28 June 2024:
Carrying amount Contractual
£'000 cash flows <1 year 1-5 years >5 years
£'000 £'000 £'000 £'000
Non-derivative financial liabilities:
Trade and other payables 4,047 4,047 4,047 - -
Lease liabilities 2,732 3,197 667 1,804 726
6,779 7,244 4,714 1,804 726
Derivative financial liabilities:
Foreign currency forwards
(Inflow) (1,568) (1,568) - -
Outflow 1,565 1,565 - -
(3) (3) (3) - -
Total 6,776 7,241 4,711 1,804 726
Contractual maturities of financial liabilities as at 30 June 2023 are as
follows:
Carrying Contractual
amount cash flows <1 year 1-5 years >5 years
£'000 £'000 £'000 £'000 £'000
Non-derivative financial liabilities:
Trade and other payables
3,904 3,904 3,904 - -
Lease liabilities 3,253 3,872 675 2,096 1,101
7,157 7,776 4,579 2,096 1,101
Derivative financial liabilities:
Foreign currency forwards
(Inflow)
(1,376) (1,376) - -
Outflow 1,364 1,364 - -
(12) (12) (12) - -
Total 7,145 7,764 4,567 2,096 1,101
Foreign currency risk
Foreign exchange risk is the risk that movements in exchange rates affect the
profitability of the business. The Group purchases goods from overseas
suppliers and is invoiced in currencies other than GBP. It is therefore
exposed to movements in the GBP exchange rate against the currencies in which
suppliers invoice the Group. The Group monitors exchange rate movements
closely and ensures adequate funds are maintained in appropriate currencies to
meet known liabilities.
The Group enters into forward foreign currency contracts to mitigate the
exchange rate risk for certain foreign currency payables. At 28 June 2024, the
outstanding contracts all mature within 6 months (2023: 6 months) of the
period end. The Group is committed to buy Euro and Australian Dollars (2023:
Euro, Australian Dollars and US Dollars) with a Sterling value of £1.57m
(2023: £1.38m).
The forward currency contracts are measured at fair value, by reference to the
spot rate. This is a level 1 valuation in that the spot rate is a directly
observable input.
The Group's exposure to foreign currency risk at the end of the respective
reporting period was as follows:
28 June 30 June
2024 2023
£'000 £'000
AUS - 128
Total - 128
Liabilities include the monetary assets and liabilities of subsidiaries
denominated in foreign currency.
The Group is exposed to foreign currency risk on the relationship between the
functional currencies of Group companies and the other currencies in which the
Group's material assets and liabilities are denominated. The table below
summarises the effect on reserves had the functional currencies of the Group
weakened or strengthened against these other currencies, with all other
variables held constant.
28 June 30 June
2024 2023
£'000 £'000
Loss on 10% strengthening of functional currency (75) (104)
Gain on 10% weakening of functional currency 91 128
Capital risk management
The Group's capital management objectives are:
· to ensure the Group's ability to continue as a going concern so
that it can continue to provide returns for shareholders and benefits for
other stakeholders; and
· to provide an adequate return to shareholders by pricing products
and services commensurate with the level of risk.
To meet these objectives, the Group reviews the budgets and forecasts on a
regular basis to ensure there is sufficient capital to meet the needs of the
Group.
The capital structure of the Group consists of shareholders' equity as set out
in the Consolidated Statement of Changes in Equity. All working capital
requirements are financed from existing cash resources.
28 June 30 June
2024 2023
£'000 £'000
Net cash 15,638 10,261
Equity 23,320 21,822
25. Share capital
28 June 30 June
2024 2023
£'000 £'000
Authorised, allotted, called up and fully paid
55,972,405 (2023: 55,837,560) ordinary shares of £0.01 each 560 558
Virgin Wines UK plc was incorporated on 1 February 2021 with authorised,
allocated and fully paid share capital of 5,000,000 Ordinary Shares of
£0.01 each.
Prior to the transaction referred to in the next paragraph, the previous
ultimate parent undertaking, Virgin Wines Holding Company Limited, issued
1,604,900 new shares to existing shareholders. These shares form part of the
share capital of Virgin Wines Holding Company Limited which was subject to the
transaction referred to below.
On 2 March 2021 the Group underwent a reorganisation in which Virgin Wines UK
plc became the ultimate parent undertaking of the Group. As part of the
reorganisation 6,615,413 new Ordinary Shares of £0.01 each were created.
The new shares were fully paid and will rank pari passu in all respects with
the existing Ordinary Shares, including the right to receive all dividends and
other distributions.
£0.98m of costs in relation to the issue of new shares have been charged to
the share premium account. During the year 134,845 (2023: nil) Ordinary Shares
of £0.01 were issued by Virgin Wines UK plc.
During the year Virgin Wines UK plc acquired 310,735 (2023: nil) of its
Ordinary Shares of £0.01 for £149,547. These shares are held in treasury
within the Group.
The Directors have not approved an interim dividend and do not recommend the
payment of a final dividend (2023: nil).
26. Analysis and reconciliation of net cash
This section sets out an analysis of the movements in net cash, which includes
cash and cash equivalents and liabilities arising from financing activities.
2 July New leases Other non-cash 30 June
2022 £'000 changes Cashflow 2023
£'000 £'000 £'000 £'000
Cash at bank and in hand 15,070 - - (1,556) 13,514
Lease liabilities (3,605) (109) (174) 635 (3,253)
Net cash 11,465 (109) (174) (921) 10,261
Decrease in cash in the period (1,556)
New leases (109)
Lease interest (174)
Lease payments 635
Movement in net cash in the period (1,204)
Net cash at 2 July 2022 11,465
At 30 June 2023 10,261
1 July New leases Other non-cash 28 June
2023 £'000 changes Cashflow 2024
£'000 £'000 £'000 £'000
Cash at bank and in hand 13,514 - - 4,856 18,370
Lease liabilities (3,253) - (154) 675 (2,732)
Net cash 10,261 - (154) 5,531 15,638
Decrease in cash in the period 4,856
New leases -
Lease interest (154)
Lease payments 675
Movement in net cash in the period 5,377
Net cash at 30 June 2023 10,261
At 28 June 2024 15,638
27. Related Party disclosures
During the period ended 28 June 2024, sales of £756,770 (2023: £800,654)
were made by Virgin Wines UK plc to Virgin Wine Online Limited. These have
been eliminated on consolidation.
Balances between the Company and its subsidiaries, which are related parties,
have been eliminated on consolidation. Details of remuneration of key
management personnel can be found in note 8.
During the period the Group paid £46,948 (2023: £47,203) in monitoring fees
and expenses to Gresham House Asset Management Limited. At 28 June 2024
£3,900 (2023: £3,900) was due to Gresham House Asset management Limited.
Gresham House Asset Management Limited has significant influence over the
Group by virtue of their appointment of a board member.
During the period sales of £22,803 (2023: £24,405) were made to LKB
Enterprises Limited. At 28 June 2024 £3,715 (2023: £4,695) remaining
outstanding from LKB Enterprises Limited, a company in which Virgin Wines UK
plc's CEO's wife has significant control.
28. Ultimate parent undertaking
In the opinion of the Directors, there is no single controlling party.
29. Events after the end of the reporting period
There have been no matters arising after the balance sheet date that would
require disclosure in the Financial Statements.
30. Capital commitments and contingent liabilities
There are no capital commitments and no contingent liabilities not provided in
the Financial Statements for the period ended and as at 28 June 2024 or 30
June 2023.
The Group has a bank guarantee in place of £0.1m in relation to the operation
of its bonded warehouses.
31. Nature of each reserve
Share premium
Amount subscribed for share capital in excess of nominal value.
Own shares reserve
Nominal value of shares held in treasury.
Merger reserve
The difference between the nominal value of shares issued in exchange for the
book value of assets acquired.
Share-based payment reserve
The movements on share-based payments.
Retained earnings
All other net gains and losses and transactions with owners (e.g. dividends)
not recognised elsewhere
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