Virgin Wines

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Virgin Wines is confident drinkers will ditch pubs and restaurants in favour of socialising at home as household spending is squeezed harder. The DTC wine retailer expects the move to help it maintain revenues at current levels.

It comes as Virgin reported a 6% fall in sales to £69.2m in the year ended 1 July 2022 as the business lapped figures elevated by the pandemic, with the top line well above the £56.6m generated in 2019/20 and 63% higher than pre-pandemic levels.

Adjusted EBITDA slipped to £6.2m from £7m in the prior year but Virgin said it had a “disciplined approach” to margin against the backdrop of volatile input costs.

Virgin attracted 105,000 new customers during the year - 5% ahead of expectations - and increased its active customer base by 4,000 to 186,000.

In the new financial year, the group said trading was “positive” in August but weaker than expected in September as it pulled all marketing and promotional activity following the death of the Queen.

Looking ahead, Virgin added it was “mindful of the potential impact on frequency of order and average order values” as consumer disposable income declined.

“However, as consumer spending comes under pressure, we are also aware that people are more likely to stay in and socialise at home rather than taking the more expensive option of going out.”

Virgin expected top-line performance to be “relatively resilient” and forecast revenues would be broadly flat for the new financial year.

CEO Jay Wright said: “Despite widely documented macroeconomic challenges and consumer uncertainty, Virgin Wines has continued to show its resilience and strong positioning in the direct-to-consumer online wine retail sector.

“Our business model and disciplined approach to new customer acquisitions has enabled us to retain much of the substantial growth achieved during the Covid-19 lockdowns, with almost one-million cases sold in FY22, and we remain market-leading both in terms of our customer proposition and our profitability.”

He added: “In the context of a severe cost of living crisis, we also believe that our wines represent an affordable treat compared to the cost of alternative options such as going to pubs and restaurants, and therefore we may see more people opting to socialise and drink wine at home in the coming months.”

Shares in Virgin Wines jumped 4.7% to 51.8p on the confident future outlook.

Morning update

Embattled ready meal provider Parsley Box has revealed it is considering delisting from the London Stock Exchange as it weighs up its options to raise more cash.

The business, which sell meals directly to the over-65 demographic, has experienced a tumultuous time since its IPO in March 2021, with numerous profit warnings and faltering growth leading to a collapse in share price.

Parsley Box said in a short statement released after markets closed yesterday that it was in the “process of assessing the various potential sources of capital available to the company to fund its medium term growth plans”.

“This assessment includes consideration of whether the company’s status as a publicly traded company continues to be in the interests of shareholders as a whole,” the business added.

“The Board currently consider that the cancellation of trading in the company’s ordinary shares of one penny each on AIM may provide greater opportunities to raise any additional capital required by the company in the future.”

Parsley Box was forced to go cap in hand to investors back in December last year to raise fresh funds, sending shares tumbling.

The group floated at 200p per share, valuing it at more than £80m, but the stock has since lost almost all its value.

Any delisting from AIM is conditional on shareholder approval and Parsley Box said a further announcement would be made “in due course”.

The group added that 2022 trading remained in line with guidance and that it has cash reserves in excess of £3.5m.

Heineken has warned of signs of “softness” in consumer demand as beer sales came in short of analyst expectations in the third quarter amid a volatile economic backdrop.

CEO Dolf van den Brink said the results were “solid” across all regions, with Asia-Pacific benefitting from a strong post-Covid recovery as restrictions eased.

Revenues in the third quarter increased 27.5% to €9.4bn, with organic growth of 19.8%, mostly driven by the performance in Asia and price rises.

Heineken’s price mix rose 13.2% in the period, also buoyed by continued focus on premium, but volumes increased by just 8.9%, missing analyst expectations of more than 11%.

Volumes for its premium brands increased 15%, outperforming the portfolio, with Tiger boosted by the recovery in Vietnam and Heineken continuing its strong momentum.

“We maintain our efforts to price responsibly offsetting input cost inflation,” ven den Brink said.

“We are well underway to deliver €1.7bn gross savings on our productivity programme by the end of this year, while continuing to invest behind our brands and capabilities.

“We increasingly see reasons to be cautious on the macroeconomic outlook, including some signs of softness in consumer demand. We remain vigilant and confident in our EverGreen strategy.”

The group left full-year expectations unchanged.

Like-for-like sales at Reckitt Benckiser have grown 7.4% to £3.7bn in the third quarter as it hiked prices to deal with the inflationary environment and gained benefits from weakness in sterling.

A 12% rise in prices put pressure on volumes, which fell 4.6% in the period. Excluding declines for Lysol as demand for disinfectants normalised, volumes were down just 1%.

Reckitt also benefitted from currency tailwinds in the quarter, contributed an 8.5% rise to net revenues, primarily as the result of a strengthening of the US dollar against sterling.

The group said 70% of its portfolio less sensitive to Covid dynamics grew high-single digits, with strong demand for over-the-counter brands such as Nurofen and Strepsils, as well as for Durex and KY.

New CEO Nicandro Durante said Reckitt delivered another quarter of “broad-based growth amidst challenging market conditions”.

“Since joining Reckitt in an executive capacity, I have spent time with our people and in our markets,” he added. “It has been a delight to experience, first hand, the energy and passion of our teams.

“We have an excellent portfolio of trusted, market-leading brands in high margin, high-growth categories and a strong culture of ownership and delivery.

“My priority is firmly focussed on continuing to execute on our strategic path, to deliver sustainable mid-single digit growth, and mid-20s adjusted operating margins by the mid-2020s.”

The FTSE 100 is flat this morning at 7,013pts.

Shares in Heineken plunged 8.9% to €80.40 after it warned of soft consumer demand, while Reckitt fell 3.5% to 5,756p.

Elsewhere, THG shares fell back 2.7% to 53.3p after strong gains yesterday and Naked Wines fell 2.7% to 110p.

Yesterday in the City

The FTSE 100 slipped back by 0.1% to 7,005.66pts yesterday.

Embattled THG bounced back by 20.2% to 55.9p after a Q3 update showing trading holding up well and the company expecting to meet guidance. The group also announced it had refinanced its banking facilities.

Other tech stocks also had a strong showing yesterday thanks to THG, with Just Eat Takeaway up 10.2% to 1,453p and Deliveroo up 5.9% to 89.2p.

Elsewhere, risers included B&M European Value Retail, up 4% to 318p, Cranswick, up 3.9% to 2,850p, and Greencore, up 3% to 66p.

Fallers included Science in Sport, down 4.3% to 14p, Devro, down 1.8% to 163.1p, and Virgin Wines UK, down 1% to 49p ahead of this morning’s results.