REG - Virgin Wines UK PLC - Growth Strategy and Capital Allocation Plan

Virgin Wines UKAnnouncement

26/03/2025 07:15

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RNS Number : 1421C  Virgin Wines UK PLC  26 March 2025

26 March 2025

 

 

Virgin Wines UK plc

("Virgin Wines" or the "Group")

Growth Strategy and Capital Allocation Plan

Plans to turbocharge growth delivering £100m in annual revenue at a 7% EBITDA
margin in the medium term

Virgin Wines UK plc (AIM: VINO), one of the UK's largest direct-to-consumer
online wine retailers, is pleased to announce its new growth strategy (the
"Growth Strategy") and capital allocation plan (the "Capital Allocation
Plan").

Jay Wright, Chief Executive Officer at Virgin Wines, commented:

"I am delighted to release our Growth Strategy and Capital Allocation Plan,
both of which underpin the next chapter of Virgin Wines' growth. The
underlying business is performing well, and we have a unique business model as
well as a dedicated and highly experienced team. We look forward to executing
this strategy to turbocharge Virgin Wines' growth and deliver value for all of
our stakeholders."

Since Virgin Wines listed on AIM in March 2021, the Group has remained debt
free, consistently cash generative and has grown its revenues by 45% since the
start of FY2020 despite volatile and challenging trading conditions. This
growth has been driven by strong commercial disciplines, a loyal and active
customer base and the introduction of new initiatives and propositions to
attract new customers. As of end Dec 2025, the Group had net cash of £17.3m
and a further £6.4m of customer WineBank deposits giving a gross cash
position of £23.7m. The Board has been actively engaging in discussions with
investors as to the best use of cash to deliver increased value to
shareholders and drive growth.

The Growth Strategy, which is to be implemented over the next 5 years, has
been devised with the objective of propelling annualised revenue to at least
£100m at the end of that period (FY24: £59m revenue), at EBITDA margins of
7%. Alongside the Growth Strategy the Group intends to launch a share buyback
programme enabling the Group to purchase up to 15% of the existing share
capital of the Company in order to return value to shareholders.

The Growth Strategy is focused around 4 key strategic goals:

1)   Increased customer acquisition

Increasing the size of the customer base by acquiring high numbers of new,
quality customers is the fuel that drives the Group's growth. Given the
volatility of the consumer landscape in recent years, the Group has been both
disciplined and prudent in using cash in an environment where there is subdued
consumer intent to purchase. However, through a period of 'test and learn' the
business has introduced new propositions, different mechanics and an improved
customer journey that has seen a 29% year-on-year increase in customers
acquired in H1 2025. Given the success the business has shown retaining
existing customers and delivering increased loyalty and engagement the Board
believes that now is the right time to invest further in growing the customer
base and to drive the number of customers acquired each year, in a controlled
but accelerated manner.

The Group will report its success in this area through the number of customers
acquired, the cost per recruit, the conversion rate and the growth of the
active customer base.

2)   Drive growth in commercial partnerships

The commercial channel has delivered impressive revenue growth over recent
years, driven in particular by partnerships with Moonpig, WH Smith, Very and
Virgin Red. This has been supplemented by long standing supply agreements in
the travel sector with LNER, Avanti and Great Western Railways.

The recent addition of Ocado as a key partner that will deliver increased
growth, alongside the opportunity to develop significantly increased volume
through a newly expanded relationship with Moonpig, increases the Board's
confidence in the opportunities for further growth. It has therefore been
identified as a low risk and high reward area for increased investment as the
business maximises the opportunities to expand visibility and revenue with
existing partners as well as forge new relationships into the future.

Success here will be demonstrated by an increase in the absolute value of
revenues from this channel with the expectation that it will contribute circa
20% of Group revenue by FY30.

3)   Utilise technology to enhance customer engagement

The Board recognises the significant opportunities to grow through investing
in new technology. The development of a mobile app is a major investment that
is already under way and will give the business the ability to engage more
frequently and effectively with existing customers as well as create
additional methods to acquire new customers and different propositions to
create incremental revenue streams..

The pace at which AI is developing also affords the Group opportunities to be
far more sophisticated in terms of the personalisation of consumers
experience, relevancy of content and tactical use of data, as well as
increasing productivity and efficiencies across the Company's operations.
These initiatives will all drive value through the core business in terms of
increased customer acquisition, higher order frequency, increased loyalty and
further cost efficiencies.

4)   Investment in Warehouse Wines

Since the 'soft' launch of Warehouse Wines in the last financial year, the
Board has been highly encouraged with the key metrics delivered, consumer
feedback and the brand's ability to scale in a market poorly catered for by
existing direct-to-consumer wine retailers. It is the Company's intention to
invest in the growth of the proposition through further investment in
marketing, resource and range expansion.

The Group expects Warehouse Wines to become an increasingly important
contributor to Group revenue over the next 5 years at circa 10% of Group
revenue. We will measure our success through the growth in revenue and the
increase in the active customer base.

Due to the nature of the Group's business model, the necessary upfront
investment will affect Group operating expenditure rather than capital
expenditure and will therefore impact short term profitability during the
first phase of the Growth Strategy. However, following this initial period of
investment in years  1-3 , it is expected that the growth initiatives outlined
above are capable of delivering Group revenue of £100m in the medium term in
turn providing a solid foundation for the Group to achieve target EBITDA
margins of over 7%.

Capital Allocation Plan and Share buyback programme

In addition to funding these growth initiatives, which the Board doesn't
anticipate will utilise the majority of the Group's excess capital, the Board
also sets out its intention to implement a share buyback programme (the "Share
Buyback Programme").

Following approval of the Rule 9 Waiver at the Group's General Meeting on 24th
February 2025, the business is able to purchase up to 15% of the existing
share capital and will be actively implementing the policy with immediate
effect. The Board will actively manage the parameters used for the share
buyback programme depending on the share price, market conditions and
liquidity

The Group has, to date, relied upon the safe harbour conditions for trading as
set out in the EU Market Abuse Regulation (596/2014) (as in force in the UK
and as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019),
the Commission Delegated Regulation (EU) 2016/1052 (as in force in the UK and
as amended by the FCA's Technical Standards (Market Abuse Regulation) (EU
Exit) Instrument 2019) ("MAR"). However, given the Group's wish for the Share
Buyback Programme to be capable of acquiring an increased volume of shares
which would not be achievable within the safe harbour volume parameter, the
Board has decided that Cavendish will conduct the Share Buyback Programme on
the following basis:

 ·             Cavendish will manage the purchases on a discretionary basis, purchasing
               shares within certain pre-set parameters and making its trading decisions
               independently of, and uninfluenced by, the Group. Purchases may therefore
               continue during any closed periods of the Group.

 ·             The Share Buyback Programme will operate under the authority granted to the
               Group by shareholders at the Group's most recent General Meeting, held on 24
               February 2025.

 ·             Any Shares purchased will either be cancelled or held in treasury to satisfy
               future exercise of options pursuant to the Group's share option plans.

 ·             The Group has authorised the Share Buyback Programme to commence from today
               and will continue whilst it retains the authority from shareholders to
               repurchase Shares until the Company's next AGM.

 ·             Shareholders should be aware that the Share Buyback Programme may on any given
               trading day represent a significant portion of the daily traded volume in the
               Group's shares on the London Stock Exchange, and the Group expects that daily
               volumes may exceed 25% of the average daily traded volume on the London Stock
               Exchange. Accordingly, the Group may not benefit from the exemption contained
               in Article 5(1) of MAR.

 ·             Outside of the above, the Share Buyback Programme will be conducted in
               accordance with the other safe harbour parameters as prescribed by MAR.

The Board will keep the Share Buyback Programme under review.

Mergers and Acquisitions

The Group has explored several M&A opportunities in recent years, but to
date has not found a business that meets the criteria it would need to fully
pursue such an acquisition. Whilst the Group is open to explore opportunities
should they arise, the Board believes the best use of cash is to invest in the
Growth Strategy as outlined above.

Dividend Policy

The Board does not recommend introducing a dividend at this time, as it
prioritises using its excess cash to fund the Growth Strategy and Share
Buyback Programme. However, the Board will keep this policy under review and
revisit it periodically as part of the overall Capital Allocation Plan.

The Board is fully supportive of the above strategy and believes that the
business needs to, alongside growth, invest a proportion of its cash towards
returning value to shareholders throughout the execution phase of the Growth
Strategy.

 

- Ends -

Enquiries:

 Virgin Wines UK plc                   Via Hudson Sandler
 Jay Wright, CEO

 Graeme Weir, CFO

 Cavendish                             Tel: +44 (0) 20 7220 0500

 (Nominated Adviser and Sole Broker)
 Matt Goode

 Carl Holmes

 Seamus Fricker

 Elysia Bough

 Hudson Sandler                         virginwines@hudsonsandler.com (mailto:virginwines@hudsonsandler.com)

 (Public Relations)                    Tel: +44 20 7796 4133
 Dan de Belder

 Harry Griffiths

 Eloise Fleet

 

 

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 2021Virgin 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 subscription scheme, using a variety of marketing channels, as well
as through its Wine Advisor team, Wine Plan channel and Pay As You Go service.

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/ (https://www.virginwinesplc.co.uk/)

 

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