Virgin Wines

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Virgin Wines UK has fallen into the red as pressure on consumer spending hit revenues and rising costs hurt margins.

Group revenues in the year ended 30 June 2023 slipped 14.7% to £59m, with operational difficulties affecting the first half during the introduction of a new warehouse management system over the peak Christmas season.

Virgin acquired 91.5k new customers in the year, but its active customer base shrank from 186k to 173k.

Adjusted EBITDA fell from £6.2m to £1.8m, while pre-tax profits of £5.1m in the prior year turned into a £700k loss as the group struggled with the impact of significant cost increases across the supply chain.

However, Virgin also reported a 12% rise in year-on-year sales in the first quarter of the new financial year as conversion and cancellation rates continued to improve.

The group expects double-digit sales growth for the year and to see inflationary pressures, particularly on freight and glass, start to ease.

CEO Jay Wright said despite the challenges in 2023, the group had continued to grow the WineBank membership scheme, maintained “excellet discipline” in customer acquisition and remained debt free.

“Our unique wines, market-leading propositions and best-in-class customer service continue to support our base of loyal customers, and WineBank remains a great way for them to spread the cost of enjoying high-quality wines,” he added.

“Looking ahead, the implementation of a number of exciting new strategic initiatives following the completion of our business review earlier in the year will support our resilience, enhancing our ability to cater to a wider range of customers. More broadly, we remain confident in our longer-term prospects given the strength of the customer proposition and our proven business model.

“Our continued focus on profit, generating cash and driving efficiencies also positions us uniquely within the sector.”

Shares in the group plunged 7.3% to 38p as markets reacted to the results.

Morning update

Reckitt Benckiser Q3 volumes decline as it unveils £1bn share buyback

Volumes have declined 4.1% at Reckitt Benckiser as higher prices dampened demand and its nutrition division lapped artificially high figures last year during a baby formula shortage in the US.

A 7.5% increase in prices helped drive a 3.4% rise in like-for-like revenues in the third quarter to £3.6bn, with currency headwinds pushing sales 3.6% lower overall than a year ago.

The combined hygiene and health portfolio - which includes Finish, Lysol, Durex and a number of over the counter brands - recorded growth of 6.7%, which was offset by a 11.9% decline in the nutrition business.

Volumes in hygience fell 3.4% but Reckitt said it showed continued to improve, while health managed a 0.3% volume rise.

CEO Kris Licht called it “a strong quarter”. “We are firmly on track to deliver our full-year targets, despite some tough prior year comparatives that we continue to face in our US nutrition business and across our OTC portfolio in the fourth quarter,” he added.

In a separate stock exchange announcement, Reckitt also unveiled a strategy update and the start of a £1bn share buyback programme.

Licht, who joined the group on 1 October, said Reckitt was “a strong, competitive, resilient business with an inspiring purpose and a distinctive culture fit for the future”.

“We do, however, have room to sharpen and improve. We will continue to invest in the superiority of our products, work to improve the consistency of our in-market execution and optimise our cost base. At the same time, we will constantly sharpen our portfolio in line with our clear principles for portfolio value creation.”

Higher prices leads to less beer sold at Heineken

Volumes remained under pressure at Heineken in the third quarter as drinkers struggled to swallow higher prices.

The Dutch brewing giant sold 4.2% less beer in the period year on year, with volumes down 5.1% in the year to date, while premium volumes fell 5.7% in the quarter. However, the Heineken brand managed to sell 2.3% more than a year ago.

The group’s exit from Russia and an economic slowdown in Vietnam contributed to the declines.

Organic revenues increased 4.5% to €9.6bn as the group hiked prices by 9.5% to offset ongoing inflationary pressures.

CEO Dolf van den Brink said there had been a “gradual” improvement in the business performance, “although somewhat slower than our ambition”.

“Whilst inflation-led pricing is tapering, we observe a slowdown of consumer demand in various markets facing challenging macro-economic conditions,” he added. “In this context, we will stay the course on executing our strategy, remain vigilant on costs and focus on rebalancing our growth.”

Net profits in the first nine months of 2023 is down 12.5% to €1.9bn as the exit from Russia harmed the bottom line.

Nichols appoints CFO

Finally this morning, Vimto owner Nichols has appointed Richard Newman as chief financial officier, starting in March 2024.

Interim CFO David taylor will step down from the board following a transition period.

Newman brought “extensive and relevant” UK public company financial experience having held a number of senior plc roles and most recently, between 2021 and 2023, as CFO at AIM-listed Accrol Group.

He joined Cadbury in 1996, where he worked in finance and IT roles, moving to National Express after 15 years with the confectionery maker and joining DS Smtih in 2015 as finance director for packaging.

Nichol also announced that non-executive director James Nichols is leaving the board after 18 years to “pursue a fresh challenge”.

It is expected that a new representative of the Nichols family will be appointed as a non-executive in due course.

Chairwoman Liz McMeikan said: “”On behalf of the board I would like to thank James for his significant contribution over the past 18 years and we wish him well and every success for the future.

“Following a thorough search process, we are delighted that Richard will be joining the business and the board next year. Richard brings a wealth of highly relevant experience to the group and I have every confidence that he will make a substantial contribution to the group’s continued development and growth.”

Morning shares

The FTSE opened down 0.1% to 7,386.07pts.

Reckitt sank 2.2% to 5,784p, while managed a 1.6% improvement to €85.70.

Elsewhere, Bakkavor rose 7% to 95.4p, Glanbia is up 2.4% to €14.70 and Kerry is up 2.3% to €74.58.

Just Eat Takeaway fell 4.4% to 951p, while Ocado is down 4.4% to 485.4p.

Yesterday in the City

The FTSE 100 rose 0.2% to 7,389.70pts.

Irn-Bru maker AG Barr got a positive reaction to its acquisition of soft drinks brand Rio, with shares up 0.8% to 510p

Greencore was also among the risers, up 2.6% to 89.7p.

PZ Cussons and Fever-Tree were both down, falling 2.5% to 131.6p and 2.7% to 1,012p respectively.