Proactive Investors - Virgin Wines UK PLC (LON:VINO) shares rose 5% to 40p after it expressed confidence in hitting full-year targets thanks to much improved underlying profit in the first half, despite lower sales.
Underlying EBITDA jumped 122% to £1.76 million on revenue that was down 2% at £34.3 million.
The wine seller put the enhancement of earnings down to the introduction of strategic initiatives and the strength of the underlying business, plus a 25% reduction in warehouse fulfilment costs.
Customers remain “active and loyal”, the company said, with the new customer conversion rate up 22% year-on-year, the cost of customer acquisition down 14% and the cancellation rate of its WineBank scheme at an 18 month low at 16.8%.
Its WineBank club achieved its second-highest first-half revenue since inception and the new Warehouse Wines proposition was said to have delivered “encouraging” early results, bringing in almost 2,000 previously lapsed customers.
With net cash increasing to £11 million at the end of December from £7.6 million a year earlier, the board approved a “limited share buyback programme”.
Chief executive Jay Wright said: “We expect a full year profit for 2024 in line with market expectations and continue to look at opportunities to continue our growth trajectory moving forward.”
Broker Liberum said Virgin Wines has been “disciplined around repeat margins for sales and new customer acquisition and with a clear focus on maximizing profitability out of each order”, which drove an improved EBITDA margin.
“The key drivers have been a step-up in product margins, and lower operating costs. These disciplines leave the group in a strong position to accelerate profits as and when the environment for new customer acquisition eases.”