REG - Virgin Wines UK PLC - Interim Results
14/03/2023 07:00
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RNS Number : 8134S Virgin Wines UK PLC 14 March 2023
Virgin Wines UK plc
("Virgin Wines", the "Company" or the "Group)
Unaudited interim results for the six months ended 31 December 2022
Strong performance from flagship WineBank scheme despite tough trading
conditions
Virgin Wines UK plc (AIM: VINO), one of the UK's largest direct to consumer
online wine retailers, today announces its interim results for the six months
ended 31 December 2022 ("H1 2023").
Financial highlights
· Total revenue of £33.6m (H1 2022: £40.6m; H1 2020(1): £26.2m)
· Underlying EBITDA of £1.4m (H1 2022: £3.9m; H1 2020: £1.5m)
· Profit before tax of £0.1m (H1 2022: £3.2m; H1 2020: £0.5m)
· Earnings per share of 0.1p (H1 2022: 4.6p; H1 2020: 1.1p)
· Net cash(2) of £7.6m (1 July 2022: £7.8m)
Strategic highlights
· Customer base remains strong:
o Over 60k new customers acquired in H1 (+4% since H1 2022 and a 24% LFL
increase during Q2)
o Recruitment onto WineBank was particularly strong (+21% year-on-year),
achieving record number of members (142k), and deposits at end of December of
£6.5m (+25% year-on-year)
o Cost per recruit remained low, and was ahead of our expectations, at
£11.82 (H1 2022: £13.62)
o Continued stable, low cancellation rates
· New strategic partnerships continued to perform well
o Saga launched in November, generating over 2k new members in the lead-up
to Christmas
o Partnerships with Moonpig, Avanti West Coast, LNER, Great Western Railway
and Virgin Red have been pivotal in driving revenue through the B2B channel.
Revenue through Moonpig up 283% year-on-year, whilst growth in the Virgin Red
loyalty programme delivered 77% year-on-year growth
o Commercial continues to accelerate year-on-year, with growth of +25% vs H1
2021 and 71% ahead of H1 2020 levels
· Record product gross margin achieved through DTC repeat sales
channels, despite inflationary pressures, at 41.1% (H1 2022: 40.4%; H1 2020:
38.9%)
Current trading and outlook
· January and February trading broadly in line with expectations with
consistently resilient demand among loyal customers
· Issues identified with new Warehouse Management System (WMS) being
rectified and supporting more normalised trading into H2
· As the landscape remains challenging, we continue to be disciplined
with our marketing investment, focusing on low cost recruitment and maximising
value from the existing customer base
· Business review underway to identify new initiatives for future
growth and profitability
· As previously announced, the Board expects revenue for FY23 to be
around £63m, full year EBITDA margin to be between 4% and 5%, and EBITDA
margin excluding exceptional factors to be 2% higher, in the range of 6-7%
(1) All references to H1 2020 in this document are to show the comparative
position to the Pre-Covid performance
(2) Net cash of £7.6m is total cash of £14.1m less Wine Bank customer
deposits of £6.5m
Jay Wright, Chief Executive Officer at Virgin Wines, said:
"As previously announced in our year-end trading update, profitability was
impacted during the first half, with a number of macroeconomic headwinds
exacerbating certain internal and operational challenges which we encountered
particularly over our peak Christmas trading period.
"However, we continue to make progress on addressing the challenges where we
can, and we remain confident in the future growth prospects of Virgin Wines.
This is underpinned by the fundamental strength of our business model and
consumer proposition, with our customers remaining loyal and ever-increasing
numbers signing up to our WineBank subscription scheme. Furthermore, our
exciting new strategic partnerships continue to be a key focus in helping to
introduce our brand's unique, high-quality products and service to new
customers every day. The growth in our WineBank membership and continued focus
on low cost customer acquisition, disciplined cost control, maximising gross
margins and optimising working capital to maximise free cash flow, places us
in an advantageous position to capitalise on opportunities as the cost of
living crisis eases."
Enquiries:
Virgin Wines UK plc Via Hudson Sandler
Jay Wright, CEO
Graeme Weir, CFO
Liberum Capital Limited
(Nominated Adviser and Sole Broker)
Clayton Bush
Edward Thomas
John Fishley
Lucas Bamber
Hudson Sandler
(Public Relations)
Alex Brennan
Dan de Belder
Charlotte Cobb
Harry Griffiths
Tel: +44 20 3100 2222
virginwines@hudsonsandler.com (mailto:virginwines@hudsonsandler.com)
Tel: +44 20 7796 4133
Notes to editors:
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, which is headquartered in Norwich, UK, 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 has more than 500 wines, 250 spirits and 100 beers in its
portfolio, which it sells to an active customer base of 187,000 members. It
has approximately 200 employees and more than 40 trusted winemaking partners
and suppliers around the world.
The Company drives the majority of 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 to be named Online Drinks Retailer of the Year for 2022 at this
year's Drinks Retailing Awards, as well as receiving the bronze award for
Contact Centre of the Year at the 2022 UK National Contact Centre Awards.
https://www.virginwinesplc.co.uk/
RESULTS Unaudited Unaudited
31-Dec 31-Dec
£000's 2022 2021
Revenue 33,627 40,609
Gross Profit 9,774 12,630
Underlying operation expenses (8,368) (8,760)
Underlying EBITDA 1,406(3) 3,870
Profit before tax 90 3,159
Net Assets 22,235 20,355
(3) After adding back £616k for exceptional one off costs relating to the
WMS implementation
CHIEF EXECUTIVE'S STATEMENT
Business overview
We continue to see adverse trading conditions and challenges impacting the
sector, with well-documented inflationary pressures and cost of living issues
affecting consumer spend and frequency of order.
In addition, as previously reported, the Group was impacted during the period
by a number of one-off factors, including over the two weeks of national
mourning following the passing of Queen Elizabeth II in September and the peak
Christmas trading period. Internally, this involved teething problems with the
implementation of our new Warehouse Management System (WMS) to support the
operation of our two warehouses, and externally we saw the negative effects on
the courier network following the postal strikes and bad weather leading up to
Christmas. The issues surrounding the WMS implementation, in particular,
resulted in significant exceptional one-off costs to the business, and
necessitated an early sales cut-off one week prior to Christmas, leading to
approximately £1.5m in lost revenue.
In the face of these challenges, the Group has remained strongly focused on
the implementation of its strategy, including the acquisition of new customers
through a number of channels onto our subscription schemes at a consistently
low cost per recruit. Price increases have also been implemented where
appropriate, to help mitigate inflationary pressures whist being mindful of
minimising any impact on competitiveness and value.
Despite the challenging environment, the underlying mechanics of the business
are in good health, demonstrating the resilience of the core business model.
This includes the Group's consistent focus on acquiring high numbers of new
customers at low cost, increasing our loyal WineBank membership base, growing
our B2B business channel, margin expansion in the repeat DTC channels (despite
significant cost pressures) and the Group remaining debt free whilst
maintaining significant cash reserves and a high-quality, appropriate level of
inventory on the balance sheet.
Trading overview
Revenue for H1 2023 was £33.6m (H1 2022: £40.6m). The Company delivered an
underlying EBITDA of £1.4m (H1 2022: £3.9m). As previously announced, the
reduction in sales over H1 coupled with the exceptional costs associated with
the WMS implementation had a material impact on the profitability of the
business. We estimate that, together, the one-off issues associated with the
reduction in September trading and the early cut-off for Christmas impacted H1
revenue by circa £3.26m, whilst the profit lost from those sales negatively
affected EBITDA by a further £1m.
Despite this challenging backdrop, the business acquired over 60k new
customers over the first six months of the year with recruitment onto the
flagship WineBank subscription scheme particularly strong (+21% year-on-year)
leading to a total membership number of 142k, +9%. Cost per recruit was also
well controlled, and ahead of expectations, at just £11.82 (H1 2022:
£13.62).
The Commercial arm of the business continues to accelerate year-on-year,
generating growth of +25% vs H1 2021 and 71% ahead of H1 2020 levels. In
particular, our partnerships with Moonpig (+283% year-on-year) and Virgin Red
(+77% year-on-year) performed strongly.
Gross margin achieved record levels through the DTC repeat sales channels
despite the pressures on the dry goods element of a bottle of wine (eg glass,
packaging, capsule, freight and filling). Margin increased through the core
repeat channels to 41.1% from 40.4% in H1 2022 and from 38.9% in H1 2020. The
flexibility of our open source buying model enables us to focus globally on
the best quality/value ratios and we can configure the contents of our
pre-mixed cases to achieve this.
The Group has maintained its very strong cash position, remaining debt free
and providing the scope to assess new opportunities to invest in growth in
what has become a significantly different consumer environment to that of 18
months ago.
Customer acquisition
Through its disciplined, focused and robust customer acquisition strategy, the
Group has made great progress in attracting thousands of new recruits and in a
consistent manner year after year. Over 60k new customers were recruited
during the period, which was 4% ahead of the comparable period last year and a
24% LFL increase during Q2 (Q2 2023: 44,000; Q2 2022: 35,600).
Cost per recruit was also ahead of expectations, remaining low at £11.82 (H1
2022: £13.62). However, the competitive landscape and pressure on pricing has
led to more competitive offers in the market, including a proportion of 6
bottle deals. This, alongside the rise in wine costs, has led to an increase
in the fully costed cost per recruit to £20.51 (H1 2022: £11.75).
The business was delighted to launch its partnership with Saga in mid-November
and was encouraged to see over 2k members taking advantage of the service
over the lead-up to Christmas. This was ahead of expectations and a positive
result in a short period of time.
WineBank subscription scheme and customer behaviour
The key driver of repeat sales for the business is our WineBank subscription
scheme. The total membership of the scheme hit record levels in the period, at
142k customers (up 9% from 130k in June 2022). WineBank customer deposits are
also at a record level for the end of December at £6.5m, up 25% from the
same point last year.
Customers have remained loyal to the WineBank scheme but have lengthened the
average period of time between orders in light of recent macroeconomic
challenges. This trend in customer frequency of order has been a key factor
in the year-on-year fall in revenue through the main repeat sales channels,
resulting in total H1 revenue from WineBank customers declining by 10.8%
year-on-year, albeit still 65% ahead of H1 2020 levels.
The cancellation rate remains relatively stable and in line with long-term
rates, at 17.8%. Whilst this has ticked up from 16.7% at the same point last
year, this is a relatively small movement considering the dramatic change in
consumer confidence and the trading environment. This also bodes well for when
the cost of living crisis eases as it highlights our customers' loyalty to the
scheme, despite them currently scaling back on their average spend per annum.
The trade rate for the full active customer base shows a similar trend,
falling from 69.6% in H1 2022 to 68.4% in H1 2023, whilst the lapsed rate
increased from 32.7% in H1 2022 to 34.7% in H1 2023. Given the significantly
different consumer landscape these are relatively minor movements, and show
the resilience of the customer base as a whole.
Given the shortfall in sales in H1 2023, there was a fall in the sales
retention rate from 91% in FY 2022 to 80% in H1 2023, driven primarily by a
reduction in order frequency as the customer retention rate fell less
substantially, from 88% in H1 2022 to 84% in H1 2023.
Strategic partnerships
The Group continues to focus its efforts on forging strategic partnerships to
help drive both its customer acquisition and its commercial channels.
Partnerships with Moonpig, Avanti West Coast, LNER, Great Western Railway and
Virgin Red have all been pivotal in driving revenue through the B2B channel
and continuing its steady year-on-year growth.
Similarly, the customer acquisition channel has used partnerships as the core
method to attract significant numbers of new customers to Virgin Wines. In
particular, relationships with Currys, On The Market, Go Outdoors, Rail
Delivery Group, O2, The Daily Mail and Saga plc (amongst many others) have
underpinned our ability to deliver a substantially increased number of new
recruits into the business over H1 2023.
We believe the benefit we can drive from both new and existing strategic
partnerships has significant headroom for further growth, which the Group
continues to target.
Open source buying driving our exclusive wine range
Given the pressure on the cost of producing wine, which has been driven by the
escalation in dry goods such as glass, packaging and freight, it has become
more important than ever that the business is able to work with its large,
long-standing network of winemakers and wineries all around the world to
deliver the very best quality and value wines possible.
It has been the ability to leverage this vital part of our unique model that
has allowed the margin expansion that has been delivered to the repeat sales
channels whilst managing price increases to remain attractive and competitive.
It has also allowed the business to manage inventory levels to maximise the
breadth and range of our portfolio without holding unnecessarily high levels
of stock or having large ongoing commitments.
Operations
Following a thorough review of the new Warehouse Management System, our teams
have started to implement the necessary measures to resolve the issues
experienced during the period. As a result, the Group is already seeing a
return to more normal operations in H2, with over 97% of orders placed before
4pm being despatched the same day.
Whilst there is still work to do to deliver the operational costs we aim for,
our initial focus has been on ensuring our customers receive the highest
levels of service and quality possible. With that now in place, we will
continue to drive the cost per case down, prove that the system is robust and
delivers full stability while stress testing to prove the capability for
operational efficiency at peak trading.
Outlook
The consumer landscape remains challenging as customers continue to be prudent
with their expenditure on discretionary purchases. We do not expect this trend
to unwind in the near future, so we will continue to be disciplined with our
marketing investment, focusing on low-cost recruitment and maximising value
from the existing customer base.
We are confident that the one-off issues surrounding the WMS will continue to
unwind over H2 and we can drive the business back to operational efficiency
and with a platform in place that will allow significant future growth. Whilst
we understand that there will continue to be pressure on revenue due to
current levels of consumer confidence and on costs due to the inflationary
climate, we believe that the core business model is robust, and the business
can continue to trade resiliently in the short term and thrive in the longer
term as the consumer landscape improves.
The business has traded broadly in line with expectations over January and
February, continues to be profitable with consistently strong cash reserves
and, as previously announced, the Board expects top-line performance in H2 to
remain resilient. Full year revenue and profit will be impacted by the factors
in H1 outlined above and, as a result, as previously announced, the Board
expects revenue for FY23 to be around £63m, full year EBITDA margin to be
between 4% and 5%, and EBITDA margin excluding exceptional factors to be 2%
higher, in the range of 6-7%.
Business review
Given the shift in consumer confidence over the past 15 months, the macro
challenges that we are facing, and the changes experienced across our trading
environment versus that experienced during the Covid period, the business is
currently undertaking a full business review to ensure we are fully leveraging
the opportunities available to us and that we are positioned as positively as
possible for future growth and profitability.
Whilst the Group has been open-minded about potential strategic opportunities
to date, the quality of potential acquisitions available that could deliver
incremental value has been mixed and the desire to look at international
expansion is limited in the short to medium term. The business is therefore
focussing resources on delivering growth opportunities in the domestic market,
utilising its core competencies and infrastructure to drive performance over
the coming three years.
Further work is being done in this area and we look forward to providing more
detail on these plans later in H2 2023.
FINANCIAL REVIEW
Revenue
Group revenue of £33.6m reflected a reduction of 17% year-on-year (H1 2022:
£40.6m). Revenue performance was impacted by the one-off issues referenced
earlier in the report. WineBank revenue was the least impacted by these
issues, down 10.8% year-on-year, and remains 65% higher than H1 2020. Revenue
from new customer acquisition activity was unchanged year-on-year.
Gross profit
Gross profit margin fell to 29.1% (H1 2022: 31.1%). Packaging and delivery
costs increased as a percentage of revenue by 0.8% year-on-year, as a result
of the sharp increase in fuel and energy costs. The new structure of
introductory case offers, including the use of 6 bottle offers rolled out in
H2 FY2022, led to lower new business margins in H1 this year compared to H1
2022. Product margins excluding packaging and delivery for D2C activity
increased to 41.1% (H1 2022: 40.4%). The index of dry goods costs (glass,
packaging, labels etc) has increased by 66% from a base in October 2021. The
ability of the business to configure cases has enabled it to offset a large
part of these inflationary pressures.
Exceptional one-off expenses
Due to operational issues following the launch of the new WMS system, the
business incurred additional one-off expenses relating to the requirement for
extra temporary labour, third party IT support and additional storage costs of
£616k (H1 2022: £0). These have been disclosed separately due to their scale
and one-off nature.
EBITDA
Underlying EBITDA before the exceptional expenses highlighted above was
£1.4m, down from £3.9m in H1 2022.
Profit before tax
Profit before tax was £0.1m (H1 2022: £3.2m).
Share based payments
The Group provided for a share-based payment expense of £89k (H1 2022:
£177k) relating to the share based long-term incentive plan for the
leadership team.
Finance income
Finance income of £52k (H1 2022: £0k) relates to bank interest earned on
cash balances.
Finance expenses
Finance expenses of £89k (H1 2022: £70k) relates to the interest charge for
Right of Use Assets. The Group has no borrowings so there are no expenses
relating to servicing overdrafts or loans.
Earnings per share
Earnings per share decreased to 0.1p from 4.6p in H1 2022 due to the fall in
operating profit.
Dividend
The Board is not recommending the payment of an interim dividend, but it will
keep the Group's dividend policy under review.
Foreign currency
All group income is derived from UK activity and denominated in GBP. The Group
purchases supplies, mainly wine, from the global market predominantly in
Euros, US Dollars and Australian Dollars. The Group hedges its foreign
currency purchases to provide clarity on future cost prices.
Inventory
As a result of the lower than planned sales volumes in H1, inventory levels
increased by £2.4m from June 2022 to £11m. By slowing down replenishment
activity in H2, inventory levels will drop back to the normal range by the end
of FY2023.
Cash
The Group monitors net cash after deducting WineBank customer deposits. The
cash in hand excluding WineBank deposits at 31 December 2022 was £7.6m,
compared to £7.7m at the previous year end. The extra working capital
invested in stock will reverse out during H2.
Jay Wright
Chief Executive Officer
14 March 2023
Condensed consolidated statement of comprehensive income
for the period ended 31 December 2022
Unaudited Unaudited
31 December 31 December
Note 2022 2021
£'000 £'000
Revenue 33,627 40,609
Cost of sales (23,853) (27,979)
Gross profit 9,774 12,630
Operating expenses (9,647) (9,401)
Operating profit 3 127 3,229
Finance income 5 52 -
Finance costs 6 (89) (70)
Profit before taxation 90 3,159
Taxation (17) (608)
Profit for the financial period and total comprehensive income 73 2,551
Basic earnings per share (pence) 7 0.1 4.6
Diluted earnings per share (pence) 7 0.1 4.6
Condensed consolidated statement of financial position
as at 31 December 2022
Unaudited Unaudited Audited
31 December 31 December 1 July
2022 2021
Note 2022
£'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 8 11,424 11,027 11,113
Property, plant and equipment 9 487 288 400
Right of use assets 10 3,007 2,656 3,262
Deferred tax asset 411 492 428
Total Non-current assets 15,329 14,463 15,203
Current assets
Inventories 11,046 10,176 8,653
Trade and other receivables 11 2,484 1,930 2,477
Derivative financial instruments 26 16 16
Cash and cash equivalents 14,128 18,799 15,070
Total current assets 27,684 30,921 26,216
Total assets 43,013 45,384 41,419
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 12 (17,074) (21,754) (15,451)
Lease liability (527) (506) (456)
Total current liabilities (17,601) (22,260) (15,907)
Non-current liabilities
Provisions (313) (267) (290)
Lease liability (2,864) (2,502) (3,149)
Total non-current liabilities (3,177) (2,769) (3,439)
Total liabilities (20778) (25,029) (19,346)
Net assets 22,235 20,355 22,073
Equity
Share capital 13 558 558 558
Share premium 11,989 11,989 11,989
Own share reserve (36) (36) (36)
Merger reserve 65 65 65
Other reserve 184 177 95
Retained earnings 9,475 7,602 9,402
Total Equity 22,235 20,355 22,073
Condensed consolidated statement of changes in equity
for the period ended 31 December 2022
Called up Own share Total Shareholders'
share capital Share premium reserve Merger reserve Other reserve Retained earnings funds
£'000 £'000 £'000 £'000 £'000 £'000 £'000
3 July 2021 558 11,989 (36) 65 - 5,051 17,627
Profit for the financial year - - - - - 2,551 2,551
Share-based payments - - - - 177 - 177
31 December 2021 unaudited 558 11,989 (36) 65 177 7,602 8,924
2 July 2022 558 11,989 (36) 65 95 9,402 17,627
Profit for the financial year - - - - - 73 73
Share-based payments - - - - 89 - 89
31 December 2022 unaudited 558 11,989 (36) 65 184 9,475 22,235
Condensed consolidated statement of cash flows
for the period ended 31 December 2022
Unaudited Unaudited
31 December 31 December
2022 2021
£'000 £'000
Cash flows from operating activities
Profit before taxation 90 3,159
Adjustments for:
Depreciation and amortisation 573 464
Net finance costs 37 70
Share-based payment 89 177
Decrease/(increase) in trade and other receivables (17) (394)
Increase in inventories (2,393) (2,938)
(Decrease)/increase in trade and other payables 1,647 3,426
Net cash (used in)/generated from operating activities 26 3,964
Cash flows from investing activities
Interest received 52 -
Purchase of intangible and tangible fixed assets (716) (561)
Net cash used in investing activities (664) (561)
Cash flows from financing activities
Payment of lease liabilities (215) (194)
Payment of lease interest (89) (70)
Net cash used in financing activities (304) (264)
Net (decrease)/increase in cash and cash equivalents 942 3,139
Cash and cash equivalents at beginning of period 15,070 15,660
Cash and cash equivalents at end of period(1) 14,128 18,799
942 3,139
(1) Cash and cash equivalents include Group cash and Wine Bank customer
deposits.
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 Significant accounting policies
Basis of preparation
The consolidated unaudited interim financial information of the Virgin Wines
UK Plc group have been prepared in accordance with the principal accounting
policies used in the Group's consolidated financial statements for the 52 week
period ended 1 July 2022. These interim financial statements should be read in
conjunction with those consolidated financial statements, which have been
prepared in accordance with the international accounting standards in
conformity with the requirements of the Companies Act 2006.
These interim financial statements do not fully comply with IAS 34 'Interim
Financial Reporting', as is currently permissible under the rules of AIM.
Historical cost convention
The interim financial information has 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.
New standards, interpretations and amendments issued not yet effective
There are a number of standards, amendments to standards, and interpretations
which have been issued by the EU that are effective in future accounting
periods that the group has decided not to adopt early.
The following standards were in issue but have not come into effect:
Amendments to
· IFRS 17 and IFRS 4, 'Insurance contracts', deferral of IFRS 9, as
amended in June 2020 - effective for the year ending 30 June 2024
· IAS 1, Presentation of financial statements' on classification of
liabilities - effective for the year ending 30 June 2024
· IAS 1, Practice statement 2 and IAS 8 (narrow scope) - effective
for the year ending 30 June 2024
· IAS 12 - deferred tax related to assets and liabilities arising
from a single transaction - effective for the year ending 30 June 2024
· IFRS 17, 'Insurance contracts' - effective for the year ending 30
June 2024
The Directors anticipate that the adoption of planned standards and
interpretations in future periods will not have a material
impact on the financial information of the Group.
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 Chief
Executives Statement, which also describes the financial position of the
Group.
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, taking account of reasonably possible changes 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.
Goodwill
Goodwill is not amortised but is reviewed annually for impairment. 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 the
present value. The value in use is then compared to the total of the relevant
assets and liabilities of the CGU.
3 Operating profit
Operating profit is stated after charging/(crediting):
Unaudited Unaudited
31 December 31 December
2022 2021
£'000 £'000
Inventory charged to cost of sales 21,416 25,419
Amortisation of intangible assets (note 7) 209 152
Depreciation of property, plant and equipment (note 8) 109 62
Depreciation of right of use asset (note 9) 255 250
Net exchange gains (including movements on fair value through profit and loss 8 (30)
derivatives)
Movement in inventory provision (35) (58)
4 Share-based payments
In the period ended 31st December 2022 the Group operated an equity-settled
share-based payment plan as described below.
The charge in the period attributed to the plan was £89k (2021: £177k).
Under the Virgin Wines UK Plc Long-Term Incentive Plan, the Group gives awards
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 year 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'.
Unaudited Unaudited
31 December 31 December
2022 2021
Shares Shares
At 2 July 1,216,739 433,288
Granted during the period 2,366,798 783,451
Outstanding at 31 December 3,583,537 1,216,739
The Company granted its first share options on 23 June 2021. Further share
options were granted on 6 December 2021 and 6 December 2022.
The awards outstanding at 31 December 2022 have a weighted average remaining
contractual life of 2.2 years (2021: 2.5 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.
5 Finance Income
Unaudited Unaudited
31 December 2022 31 December 2021
£'000 £'000
Bank interest 52 -
6 Finance costs
Unaudited Unaudited
31 December 31 December
2022 2021
£'000 £'000
Interest payable for lease liabilities 89 70
89 70
7 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.
The calculation of basic profit per share is based on the following data:
Statutory EPS
Unaudited Unaudited
31 December 31 December
2022 2021
Earnings (£'000)
Profit after tax 73 2,551
Earnings for the purpose of basic earnings per share 73 2,551
Number of shares
Weighted average number of shares for the purposes of basic earnings per share 55,837,560 55,837,560
Weighted average number of shares for the purposes of diluted earnings per 57,054,299 56,381,553
share
Basic earnings per ordinary share (pence) 0.1 4.6
Diluted earnings per ordinary share (pence) 0.1 4.5
8 Intangible assets
Group
Goodwill Software Total
£'000 £'000 £'000
Cost
At 2 July 2021 9,623 2,188 11,811
Additions - 337 337
31 December 2021 unaudited 9,623 2,525 12,148
At 1 July 2022 9,623 2,781 12,404
Additions - 520 520
31 December 2022 unaudited 9,623 3,301 12,924
Accumulated amortisation and impairment
At 2 July 2021 - 969 969
Amortisation charge - 152 152
31 December 2020 unaudited - 1,121 1,121
At 1 July 2022 - 1,291 1,291
Amortisation charge - 209 209
31 December 2021 unaudited - 1,500 1,500
Net book value
At 31 December 2022 unaudited 9,623 1,801 11,424
At 1 July 2022 audited 9,623 1,490 11,113
At 31 December 2021 unaudited 9,623 1,404 11,027
9 Property, plant and equipment
Computer hardware & warehouse equipment
Leasehold property Fixtures &
fittings Total
£'000 £'000 £'000 £'000
Cost
At 2 July 2021 20 631 277 928
Additions - 117 70 187
31 December 2021 unaudited 20 748 347 1,115
At 1 July 2022 20 899 385 1,304
Additions - 71 125 196
31 December 2021 unaudited 20 970 510 1,500
Accumulated depreciation
At 2 July 2021 20 516 229 765
Charge for the year - 45 17 62
31 December 2021 unaudited 20 561 246 827
At 1 July 2022 20 612 272 904
Charge for the period - 63 46 109
31 December 2022 unaudited 20 675 318 1,013
Net book value
At 31 December 2022 unaudited - 295 192 487
At 1 July 2022 audited - 287 113 400
At 31 December 2021 unaudited - 187 101 288
Depreciation is charged to operating expenses in the profit and loss account.
10 Right of use assets
Computer hardware &
Leasehold property warehouse equipment
£'000 £'000 Total
£'000
Cost
At 2 July 2021 4,202 104 4,306
Additions - 39 39
31 December 2021 unaudited 4,202 143 4,345
At 1 July 2022 5,060 143 5,203
Additions - - -
31 December 2021 unaudited 5,060 143 5,203
Accumulated depreciation
At 2 July 2021 1,415 24 1,439
Charge for the period 238 12 250
31 December 2021 unaudited 1,653 36 1,689
At 1 July 2022 1,891 50 1,941
Charge for the period 241 14 255
31 December 2022 unaudited 2,132 64 2,196
Net book value
At 31 December 2022 unaudited 2,928 79 3,007
At 1 July 2022 audited 3,169 93 3,262
At 31 December 2021 unaudited 2,549 107 2,656
Notes to the interim financial information
for the period ended 31 December 2022
11 Trade and other receivables
Unaudited Unaudited
31 December 31 December
2022 2021
Amounts falling due within one year: £'000 £'000
Trade receivables 1,562 1,105
Contract assets 922 915
2,484 1,930
12 Trade and other payables
Unaudited Unaudited
31 December 31 December
2022 2021
£'000 £'000
Trade payables 4,674 5,112
Taxation and social security 3,440 6,952
Contract liabilities 6,734 5,780
Accruals and other creditors 2,226 3,910
17,074 21,754
13 Share capital
Unaudited Unaudited
31 December 31 December
2022 2021
£'000 £'000
Authorised, Allotted, called up and fully paid
55,837,560 (2020: 15,687,291) ordinary shares of £0.01 each 558 558
558 558
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