Virgin Wines has launched a new plan to “turbocharge” growth over the next five years as it looks to put its excess cash to good use.
By 2030, the company is hoping the strategy will deliver £100m in annual revenue – up from £59m currently – at a profit margin of 7%.
Virgin’s strategy is based on four goals: investing in new technologies, expanding its commercial relationships, investment in Warehouse Wines, and acquiring new customers.
CEO Jay Wright said that while sales had flatlined in recent years, the new strategy should trigger a return to growth by the summer of 2026.
To hit its target, Virgin will need to attract around 70,000 new active customers by 2030, he said, with the majority of these expected to be lured away from supermarkets.
“Where the real growth opportunity comes is by capturing supermarket drinkers who we think we can offer better quality, better value, and superior service,” Wright said.
While the company said it had explored several M&A opportunities in recent years, it now believes the best use of cash is to invest in its new growth plan.
“We’ve looked at numerous different opportunities but we have really strict criteria in terms of what we want to invest in,” said Wright. “We don’t want to invest in businesses where we’re funding losses for people and there’s not a lot of businesses in our sector that are profitable.”
The company is not ruling out acquisitions, however, and will maintain at least £5m in cash to help fund a potential deal. “It’s certainly not off the table, but it would need to very much be the right opportunity,” Wright said.
The AIM-listed business plans to spend its £23.7m of cash reserves on the plan, made up of £17.3m in net cash and a further £6.4m of customer WineBank deposits.
As the new growth initiatives are not expected to use the majority of this money, the business is also launching a buyback of 15% of its existing shares.
“The plan is sound, but targets are stretching,” said Wayne Brown, an analyst at Panmure Liberum. “That said, if Virgin can grow the base, the flywheel of profitability should kick in as the assets and infrastructure of the group get leveraged.”
The announcement came as Virgin reported stable revenues at £34.0m for the six months to 27 December, while pre-tax profits grew 20% to £1.3m.
The business performed particularly strongly over Christmas, with revenue in December up 9% year on year, the highest sales period for the business outside the Covid affected years.
After boosting marketing spend by over 20% last year to try and acquire new customers, it boosted numbers by 29%. This meant that despite the rise in spending, the cost-per-recruit fell from £15.75 to £14.92.
Its commercial partnerships with the likes of Moonpig, WH Smith, and Ocado had delivered strong growth in recent years, Virgin said, and it was now expecting that they would deliver about 20% of total revenue by 2030.
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