Virgin Wines has reported pre-tax profit of just £100,000 in the six months to December 31, a fall from £3.2 million in the corresponding period a year earlier.
Revenue in the first half of its financial year was £33.6 million, a fall of 17.2%. Underlying EBITDA was down from £3.9 million to £1.4 million.
The falls in earnings and revenue came despite recruiting 60,000 new customers during the period and a 21% growth in membership of its Wine Bank subscription service.
Virgin had already flagged in an earlier trading update that profitability was hit during the second half of 2022 by the cost of living crisis, bad weather, postal strikes, a pause in marketing activities following the death of the Queen and issues with the integration of a new warehousing system.
It said today that the warehouse problems were “being rectified and supporting more normalised trading” in early 2023.
Virgin said January and February trading had been “broadly in line with expectations with consistently resilient demand among loyal customers”.
A business review is underway to identify new opportunities for growth.
Market analyst Davy said in a note this morning that it was “a positive” that the situation hadn’t deteriorated further since Virgin’s post-Christmas trading update.
It added: “Virgin Wines is undertaking a business review focused on the core UK business – in reality, the strategic possibilities are perhaps somewhat limited.
“Aside from the self-inflicted warehouse management system deployment issues, [Virgin] continues to make modest progress in other areas of the business, yet investor confidence in the model remains limited.”
Chief executive Jay Wright said: “The growth in our Wine Bank 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.”
He added that new marketing partnerships were a “key focus” in recruiting new customers. These included B2B partnerships with the online gift platform Moonpig and several train companies.
A partnership with Saga, the holiday and insurance service for the over 50s, brought in 2,000 new customers in the pre-Christmas period.