Virgin Wines Uk (LSE:VINO) — Investor Presentation

0:02 Good afternoon, and welcome to the VIRGIN WINES UK PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be sent at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. Have the company review your questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll, and I'd now like to hand you over to CEO, Jay Wright. Good afternoon, sir.

0:32 Hi. Thank you very much, and thanks for, everyone for attending, and I appreciate everyone giving up their time to listen to Graeme and myself today. What I'd like to do is give an overview of the key elements that have influenced our performance over f y twenty three, followed by some details around a handful of new initiatives that we have developed as part of our business review, and then an update on our q one trading and areas of focus for this current financial year. I know that everyone is well aware of the challenges that the business has faced over the past eighteen months. Many of these have been well documented with high levels of inflation, ever increasing interest in mortgage rates, and spiraling energy costs contributing to increased cost inputs, which in turn have put pressure on margins.

1:18 As everyone is also aware, we're dealing with a relatively subdued level of consumer confidence right now with customers less willing to order quite as frequently as they have over previous years. In addition, we also experienced operational difficulties following the implementation of a new warehouse management system back in September 2022. This had a material effect on our operational efficiency and required a significant amount of increased cost in the warehouse to deal with the volume of orders we're dispatching over the October to December peak trading period. The backlog of orders that we had led us to stop taking orders for Christmas delivery six days ahead of schedule, all of which was clearly a real disappointment. I'm pleased to say that after a lot of hard work during the first few months of this year, we've resolved the issues and have returned to the levels of operational excellence we've prided ourselves upon for many years.

2:09 I'll show this with some year on year comparisons later in the presentation. But for now, the key point I'd like to make is that the system we've chosen is an excellent tier one warehouse management system, and the issues that we experienced were due to a poor implementation, not a poor system. Despite the issues with the WMS and the challenging environment, there were still many positives demonstrating the strength and resilience of the underlying business model. We retained our disciplined approach to customer acquisition. We increased our WINES Bank membership, thanks to the low cancellation rates from our loyal engaged customer base. And this is an environment where many businesses with large subscription schemes were seeing significant year on year decline. It was therefore also pleasing to note that customers on our subscription schemes delivered 87% of our direct to consumer revenue.

3:00 Our wine buying model continued to allow us to mitigate a number of the margin pressures we were facing and keep inventory levels under control, while our commercial channel continued to deliver steady progress. Our balance sheet remains healthy with good levels of net and gross cash. And last but not least, our team continued to remain enthusiastic, energetic, dynamic and resilient, particularly given the challenges they faced over the period. So I'd like to hand over to Graham now who will talk through the financials for the year with you.

3:34 As Jay highlighted, there were a number of factors, both external and internal, impacting the FY 'twenty three trading performance. Revenue for the year was GBP 59,000,000, down from 69,000,000 in FY '22. And as a result, the loss before tax for the year was 700,000. Adjusted for the exceptional cost, this equated to a profit before tax of GBP 600,000 compared to GBP 5,100,000 in FY 2022. And our adjusted EBITDA before exceptional costs and share based payments was GBP 1,800,000 for the year compared with GBP 6,200,000 the previous year.

4:20 The exceptional costs of GBP 1,000,000 relates solely to additional costs incurred as a result of the implementation of the new warehouse management system and mainly relate to extra labor costs and external consultancy fees incurred in H1. The performance issues are now resolved, and the system is operating as we expected.

4:45 The group remains debt free with positive cash reserves. There was little overall movement in the net asset value, 21,900,000 compared to GBP 22,100,000 in the prior year. At the end of the financial year, the group held GBP 13,500,000 in gross cash. Our net cash was GBP 5,500,000. The gross cash number includes GBP 8,000,000 of deposits from our Wine Bank customers. As we have highlighted before, we have a long standing policy of holding Wine Bank customer deposits in a ring fenced account. We do not treat this as group cash or use it to fund our working capital.

5:31 As a result, we also report the net cash number to show the underlying group cash position.

5:41 As previously reported, we have, in prior years, invested in higher inventory levels to offset potential supply chain risks. As these risks have eased, we've now focused on bringing our stock levels down. Across H2, inventories were reduced by GBP 2,600,000 from GBP 11,000,000 down to GBP 8,400,000. We continue to assess supply chain risk on a regular basis. We monitor our stock range and inventory levels to make sure we optimize our offering to customers, but also working capital. CapEx for the year was naught 900,000, broadly in line with FY '22, and the focus mainly was on the new warehouse management system that was launched in in FY twenty three.

6:39 Like similar businesses, we have not been immune to a range of inflationary cost pressures driving up our input costs. In terms of wine, this was particularly apparent in the cost of our dry goods such as glass and packaging and in our inbound freight and outbound carrier costs due to the spike in oil prices. It would be fair to say we're now seeing a much more normalized situation. And in some areas such as freight costs, we are actually see seeing lower pricing starting to feed through. Our teams have and will continue to work hard to mitigate the impact of cost inflation by using our wine buying model, by using UK bottling and by using strategic pricing policies to ensure we offset as much of the impact as we possibly can.

7:32 Reported gross profit, which includes our packaging and delivery costs, fell to 29.6% from 31.4%. This was due in the main to increases in packaging and fuel costs, competitive pricing on our customer acquisition activity and the change in the sales mix across FY 2023. Our product margins on our repeat B2C activity remained extremely robust at 40.5% compared to 41% in FY 'twenty two and remain over 2% higher than our FY 'nineteen levels. I'll hand you back to Jay. Thanks, Graham.

8:19 So moving on to the actual sort of channel performance within the business, our ongoing ambition around customer acquisition is to bring in large numbers of high quality customers at low cost. This ensures we can continue to generate a quick return on investment and maximize lifetime value with an industry leading five year payback of around 4.5 times. Over the year, we recruited 91 and a half thousand new customers at a cost per recruit of just £11.99, down 9% year on year, an outstanding achievement in the circumstances. Pressure on gross margins and operating variables, combined with an extremely competitive environment, led to an increase in our fully costed cost per acquisition to £19.99, and that number includes the marketing cost of acquisition, the operating variable, and any gross profit impact.

9:13 Bringing in the majority of our customers through our partnership channel is the way we're able to keep our cost per acquisition low, and we're pleased to see 70% of all new customers acquired through this method, up from 67% in FY '22. We continue to drive other channels to deliver new customers, including digital marketing, social media channels, telemarketing, CRM rerecruitment, and recommend a friend schemes. Our digital marketing in particular is key with around 20% of new customers acquired this way, but it's also vital that the level of activity is controlled and continuously optimized to keep the cost per acquisition within the levels we allow. Our active customer base is driven by the success of our wine bank scheme.

10:00 This continues to perform robustly and is still delivering strong underlying trends. Just to remind everyone, our WINES Bank service allows customers to spread the cost of buying wine by them saving a chosen amount each month. Most customers save £25, which is the default position, but they can save anything from £15 to a £100 a month. And we then top up that monthly deposit with 20% interest, so £5 in the case for £25 deposit, which can then be spent on future wine purchases. In addition to this, customers also receive free express delivery standard, saving them a further £7.99 on each order. The mechanics of the scheme that allow customers to save smaller amounts regularly whilst receiving the additional value through the interest payments and free delivery keeps customers both loyal and active.

10:53 Despite the challenging consumer landscape, we saw our WINES Bank membership grow to a 133,000, up from a 130,000 the previous year. Our cancellation rate only moved a small amount to 17.3% from 16.7%, and customer deposits reached an all time high at over £8,000,000. Whilst we've been pleased to see our WINES Bank members remain loyal and that they continue to save record amounts with their monthly deposits, their order frequency declined over the year as customers saved a little more and spent a little less often. This has had the biggest single effect on revenue as customers reducing their orders from an average of four times a year to three times a year, even with increased average order values, has a material effect on our overall revenue.

11:42 There have been positive signs that this bottomed out during our Q3 and that slowly order frequency is starting to trend back in the right direction, although it still has some way to go to reach the levels we've seen consistently for many years prior to this last eighteen months. We focused less we focused less on our wine plan scheme over the past year as it's much more difficult proposition to encourage customers to embrace in the current climate, with the price of a full case of wine being spent in one lump sum every quarter rather than the small and often mechanics of WINES Bank. Revenue generated from customers on our subscription schemes accounted for 87% of our total direct to consumer revenue, showing what a vital part of our customer base they are and how significant the upside will be once order frequently start frequency starts to normalize.

12:33 We've continued to focus on our commercial channel as we see this as a major growth area and one with significant future potential. Our relationship with a number of The UK's key train key train operators, including LNER, Great Western Railway, and Avanti continues to thrive, whilst we've continued to work closely and collaboratively with Moonpig to maximize the value of that relationship. Our business with Virgin Red has grown again this year as this Virgin Group loyalty program continues to gain more customer recognition and traction, while corporate gifting continues to be key both from a revenue perspective, but also as the element of our commercial business that has the highest margin profile, particularly when compared to the higher volume wholesale type relationships we operate.

13:23 We were delighted to secure a partnership with WH Smiths, whereby a selection of our eighteen seventy five mil single serve bottles would be stocked in all their travel hubs across The UK, and we hope this will be a successful long term relationship. Similarly, we are excited by a new partnership with Debenhams whereby a great selection of Virgin Wines products can be purchased directly from their website. Clearly, our normal levels of operational excellence were compromised over our Q2 and Q3 periods last year following the implementation of the new WMS. As mentioned, we're pleased that the issues we experienced last year have been rectified and that the team are operating productively and efficiently using the new system. We believe there are further efficiencies to follow, but our total focus initially was on delivering a stable and robust platform that allows us to give customers the exceptional levels of service we pride ourselves upon.

14:19 We're also confident that the investment we've made in the new warehouse management system will prove to be beneficial as we realize those future efficiencies and have acknowledged we have a tier one system that's capable of supporting our growth ambitions over the coming years. Our customer service team performed with the utmost professionalism and resilience over the course of the year. We've been delighted to see our Trustpilot score bounce back quickly after taking a short term dip last Christmas. Indeed, our rating is back to excellent at 4.4 out of five and with over 1,005 star reviews in the last twelve months alone. Similarly, our WINES advisor team have produced excellent results over the year, delivering the highest average order values out of all of our channels, 23% ahead of email and nine percent ahead of web, whilst also delivering an unprecedented 42% gross product margin over the year.

15:14 We have a total of 42 wine advisers who look after approximately 50,000 of our customers on a one to one basis, giving them exceptional service and looking after the entire relationship the customer has with Virgin wines. Our wine buying model has been absolutely key in our ability to mitigate as much as possible the significant cost increases we've seen across our product portfolio. We don't contract supply from any of the wineries we work with in advance, meaning we have complete flexibility from year to year and vintage to vintage to source our wines relating to the quality of the grapes that's been achieved each vintage, the price of the grapes each year, the exchange rates of different currencies, the cost of the dried goods in those different countries, and the freight costs.

16:03 This allows us to ensure we're delivering our customers the best wines made from the finest grapes at the very best value prices year after year. 96% of the virgin wines range by volume is exclusive with our buyers involved in the full blending and winemaking process. Whilst we've increased the volume of wines we bottle in The UK to 40% from 28% due to the cost benefits as well as the environmental advantages. We're also delighted that our head wine buyer, Sophie Lord, was awarded wine buyer of the year by Decatur magazine, further showcasing the credibility and value of our wine portfolio, something I don't believe we get the recognition for that we deserve. And as you'll hear later, this is something we're working hard to rectify in a number of ways.

16:57 As mentioned, we are we're we continue to drive forward our ESG initiatives, and the way that we're promoting our UK bottling is one of those. But over the past twelve months, we're pleased to achieve carbon neutral status according to the PAS 2,060 standards for carbon neutrality. We reduced our Scope one, two and three emissions by 43% over the year, and we've committed to a science based target initiative to further reduce our scope one and two emissions by 42% by 2030.

17:28 We also continue to invest in and support our people through our employee assistance program that provides everything from free one to one counseling to advice on finances, as well as investing in a whole range of internal and external training initiatives and by undertaking a full culture and engagement study to understand what are we doing well and where we can do better. We've also continued to champion inclusivity and diversity in the workplace with variety of initiatives and training programs. I'd like to spend time some time now to talking about a range of new initiatives that we're introducing. We announced at the start of this calendar year we're conducting a business review to look at new opportunities. Given how volatile the consumer landscape has been over the past few years, it's vital we adapt and focus our efforts to grow both our core proposition, but also to look at where we can expand our market share.

18:25 To achieve this, there are a number of new initiatives we're driving. First, we're looking to take market share in the under £12 a bottle sector with the launch of a value proposition called warehouse wines. Alongside that, we've been carrying out a thorough creative review of our core virgin wines brand to build in its premium positioning. And then building on this, we're introducing two premium wine propositions, the 05:00 somewhere wine club, which will focus on an outstanding small batch handcrafted wine from Australia, and our VIRGIN WINES' own exclusive finds from select locations around the world.

19:06 First of all, I'd like to talk about the rationale for launching a value proposition in warehouse wines. Guess the question is why should we do this? The total wine market in The UK is worth circa £11,000,000,000 a year with the off trade accounting for just under £8,000,000,000 of that. Around 30% of wine in the off trade is sold at £10 a bottle or more, which is very firmly where virgin wine sits. However, that leaves 70% of the off trade wine volume being sold under £10 a bottle, which is a huge volume of both wine and potential customers that virgin wines can't target with its existing offering.

19:48 Currently, there isn't any direct to consumer wine retailer of any scale that specializes in the under £10 a bottle category. And given the high fixed costs required to operate a business such as this, along with the high cost of customer acquisition, that's not surprising as it would be hugely difficult to operate a value proposition as a stand alone business.

20:09 However, given Virgin Wines already has an existing infrastructure with all the relevant IT, marketing, wine buying, and operational skills in place, we're in a position where we can create a proposition with a lower gross margin profile that still delivers an attractive net contribution. We haven't employed a single extra person to create and launch this brand, and all the relevant departments in the VIRGIN WINES business have added this workflow to their existing priorities. I'm delighted that we've been able to successfully launch this in such a cost effective manner.

20:45 So what exactly is Warehouse Wines going to offer?

20:49 Well, it will focus on delivering good quality wines at everyday low prices, mainly between £6.49 and £8.99 a bottle. Just to be absolutely clear, this is not about offering inferior quality product. It's about keeping all of our costs to a minimum whilst incorporating all the techniques and contacts we have from our twenty plus years of buying wines from around the world so we can deliver wines that offer a significantly superior quality value ratios over wines available at the supermarket in that same price bracket. There also won't be any subscription scheme apart from our wine pass service that offers free delivery for a year for the equivalent of £1 a month. As mentioned, keeping customer acquisition costs to a minimum is key to the success of the proposition.

21:38 This is another reason we believe we have a competitive advantage.

21:42 Nearly all customers who either lapse from the virgin wine space or don't convert after taking their introductory offer is due to either the price of the wines being too high or the fact they don't wanna be on the subscription scheme. In both those cases, we have an ideal proposition in warehouse wines that may be more suitable for those customers. And the fact that there are several 100,000 customers that fall into that bracket on the VIRGIN WINES LAP space means we have a huge pool of potential customers that have already been acquired and paid for that we can utilize as leads for for warehouse wines. These are essentially free recruits. And over the first three weeks of marketing warehouse wines to a proportion of this lab space, we already have over 600 customers who've taken up the Warehouse Wines offer, which we found really encouraging.

22:32 Whilst I know we still have to prove the concept over time, we're optimistic that we can add scale to Warehouse Wines, make it become a meaningful contributor to the group's revenue and profit over the coming years. If we're going to add a value proposition, then it becomes even more important than ever that the core Virgin Wines business distance itself from that market.

22:56 For some time, we felt that Virgin Wines needs to evolve creatively to appear more premium and aspirational. We know that our wine offering is outstanding, but we don't feel we we receive the acknowledgement or recognition we deserve for the quality of our wines. Following a significant amount of qualitative and quantitative consumer research, we embarked on a project to refresh our brand identity with the help of an outside agency and our friends within Virgin Group's own brand team. The result of this has been a new logo, new typefaces and fonts that add a more modern and aspirational feel, along with the incorporation of much more wine imagery. The world of wine has so much beautiful, evocative, rich content that can be utilized from wine cellars and barrels to rolling vineyards and chateaus and winemakers at work. But it seems a shame not to utilize that much more across our creative assets.

23:55 This doesn't mean we're forgetting that we're in a highly competitive environment where deals, offers, and discounts are essential to deliver the sales we require. These promotions will all be wrapped up in a more premium sheen than ever before. We believe this will help the perception of Virgin wines both in our market sector and with consumers overall. Backing this up is two wine propositions that showcase the premium nature of our range. The first of these is the creation of the five o'clock somewhere wine club. Steve Grimley is a winemaker we've worked with for over eighteen years now, and he creates the vast majority of our Australian wine range.

24:36 This includes a number of our most loved and reordered wines, such as Black Pig, Albacore, and Beneticio. However, Steve's real passion project is his five OS wines, as they're lovingly known, which are handcrafted, small batch wines that he makes in tiny quantities, often just a few 100 bottles of each. They retail between £15 and £25 a bottle. And whilst we've been selling these exclusively in The UK for over fifteen years, they've made up a tiny proportion of our sales. Along with Steve, we believe the five OS WINES could deliver much higher volumes without losing the essence of the small box small batch nature that makes them so special, along with the incredible packaging that's often created from original artwork Steve has sourced from local Adelaide artists.

25:26 Our concept is to create a closed group of around 5,000 members initially who signed up to receive information about the Fiver West wines. Steve will create video content direct from his vineyards in McLaren Vale to keep that group informed on the progress of the wines he's creating, and we'll back that up with regular newsletters and information. On a regular cycle, five OS wine club members will then receive information around the actual wines he's released as soon as they leave port in Australia. At that point, members will be able to preorder the wines as that that they want to secure from the latest batch, which will then be delivered to their door as soon as the wines arrive in The UK. We know the five West wines are of the highest rated across our entire range, and the customers who have the good fortune to try them love them. We believe there's a demand for premium Australian wine packaged beautifully at reasonable prices. And whilst we don't expect this to change our world, we do believe we can create a meaningful demand for these exceptional quality wines that showcase the outstanding winemaking skills of one of our key partners.

26:35 In addition, we're launching a new concept called the Vineyard Collection. This is an ongoing range of wines that are being created to showcase the provenance and winemaking expertise of Virgin wines. For some time, we've wanted to create our own wines from our own vineyard sites around the world. However, we don't really want to own land, go across the globe, or have to look after vineyards all year round. The solution to this is that due to the fantastic relationships we have with many wineries and winemakers around the world, we've arranged for a number of them to allocate a proportion of their vines exclusively to virgin wines. This allows us to have our own sign up in the vineyard to show that these plots belong to virgin wines, and we've been given ongoing access to create and make our own wines from these select vineyard sites.

27:27 We hope this will epitomize how we go about blending and making the wines for the full version range and give a real halo effect across our complete portfolio. As things stand, we've created these partnerships in France, Australia, South Africa, and with our friends at Henna's in Sussex where the photos you can see on the slide have been taken from. The launch of the first seven wines created this way will be in March next year with the aim to create our own wines from our own vineyard plots in all the major wine producing countries across the world, including Chile, Argentina, Spain, Italy, and New Zealand in addition to those already secured. So that's an overview of some new things that we have going on.

28:13 Moving on to trading for the first quarter of this financial year, we've been pleased to have had promising start in what are still challenging trading conditions. Revenue is in line with our expectations and 12% ahead year on year. Customer acquisition continues to be tough with a very competitive environment and relatively subdued consumer demand. However, we're particularly pleased to see sales to our existing customers ahead 15.5, showing that our loyal customers continue to be increasingly active. Indeed, over the past quarter, we've seen continued positive trends in our WINES bank cancellation rates and in our new customer conversion rate continuing those same positive movements that we saw over Q4 in the last financial year. Our commercial channel continues to perform well with revenue up 8% over Q1 and our gross margins are stable year on year despite continued cost pressures in a variety of areas.

29:11 I've talked about the progress we've made in the warehouse and whilst it's important we proved that over the peak trading period, over our Q1 the overall operating variable was down 9.4% year on year and our warehouse pick and pack cost was down 15.5% year on year. This was despite having a 10% National Living wage increase over that period, meaning even bigger year on year savings in real terms. We know we can drive more productivity and efficiency in the warehouse still, but we hope this is a good indication of the progress that's been made to date. Finally, I want to finish by reiterating where our focus lies as we work through the rest of this financial year. We know we have a resilient business model that's tried and tested and has delivered in a variety of trading conditions over many years.

30:04 As such, we will continue to retain our disciplined approach to customer acquisition focusing on acquiring high quality recruits that deliver industry leading five year payback rates rather than chasing expensive low quality customers that don't convert or that instantly churn just to hit a short term number. We'll continue to build our WINES Bank subscription scheme, which we know delivers high levels of customer loyalty, low cancellation rates, and attractive lifetime value. And we'll continue to drive further efficiencies across our whole business with strict cost controls across IT, marketing, and operations. We'll look to maintain a healthy balance sheet and be cash generative over the year. In addition, we're excited about the new initiatives I've just talked about, and we're and we're keen to progress all of those with particular emphasis on seeing how we can progress the warehouse wines proposition and roll out the creative refresh of the VIRGIN WINES brand over the next few months.

31:05 And finally, we're always looking at further ways to grow, and that could include anything from an acquisition if it fulfilled the very specific criteria that we'd be looking for right through to continue to carry out our due diligence on different geographical territories. Right now, we're focused on the next five weeks of key Christmas trading. We'll be doing everything in our power to make that as successful as possible. Many thanks for listening. I think we'll probably now move over to to the q and a. Perfect. Jay, Graham, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab, which is situated on the top right hand corner of your screen. But just while the company take a few moments for you, there's questions submitted today. I'd like to remind you that recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

31:55 As you can see, we've received a number of questions throughout today's presentation. And, Jay Graham, if I could just hand back to you just to read out the questions and give responses where it's appropriate to do so. I'll pick up for you both at the end. That's great. Yeah. Thank you very much for that, and thank you for for those of you submitting some some questions, which I hope we'll be able to answer. The first one that I've got here says that as a wine experience business, is it worth doing more education posts online like a reference library? So I just thought I'd answer that. This is actually the questions in two parts. I'll answer that. But first, we we actually have a wine guide, which is incredibly comprehensive, which is on our on our website, which it's actually the most referenced wine education site in The UK, drives a huge amount of traffic.

32:50 It's extremely comprehensive. It also then obviously links through to areas of the main site where people can obviously I mean, it has everything from wine matching to the history of wine to to to to food pairing and all sorts of all sorts of things. Every every information about every grape variety and wine region you could imagine. It's a fantastic resource. I would encourage anyone to go onto onto the wine guide and have a look at it. We do do educational posts as sort of as as as emails as well. I'm sure you can imagine at the moment, you know, we try and use most of our most of our email sends to try to drive sales just through the very nature of trying to generate as much revenue as we possibly can. But we do do we do do regular newsletters that we try to make sure we have educational posts in as well. But please do reference that that that wine guide on the site. It's a it's a fantastic reference library.

33:45 The second part of that question just also well, also, why not look to have a customer choice of incentive wine related items, a point system that can build to earn quality glassware? Yeah. Look. It's certainly something that that that that we can look at. We do we do have a whole range of sort of wine associated sort of giveaways that that that we utilize everything from sort of, you know, cheese boards and and glassware and decanters and and wine aerators and all sorts of different different different different add ons that that we use. Again, you know, anything that involves, you know, trying to trying to you know, any ideas that we have where we can engage with customers, we're always really happy to look at. So, you know, appreciate appreciate that point.

34:36 This the second question I've got here just says, says when do you expect the company will recover and share start to rise? I think I think we've done I think last year was a bit of an anomaly. I think we've had twenty three years of trading now where we've got a business model that's proven that we can grow each year, that we can deliver good levels of profit all the time. And I know we had some we had some exceptional issues, which I do believe very much were one off issues last year, which we've recovered from. You know, we all, I think, are starting to see maybe some some green shoots at the moment. I think I talked about the fact that, you know, WINES Bank cancellation rate is going is going down. It has done each month for the last six months. Our conversion rate for new customers has gone up every month for the last six months, and we're just starting to see all the frequency starting to push in the right direction.

35:29 I mean, I I I believe that, you know, this will be tied into certain extensive to sort of consumer to the consumer landscape. And and as consumer confidence starts to increase in The UK, I'm absolutely sure that we'll continue to move with that as well. But I think there's some good signs already, and we're certainly encouraged by that. And I very, very much hope that on the back of that, the shares will start to rise as well because, you know, we certainly believe there's there's there's far more value in our business than that's being recognized right now. I'll maybe pass this one over to over to Greg, but it just says that the market capitalization of the company is extremely low given the revenue profile, the uniqueness of your offering.

36:15 You're debt free. So what is the market missing? Greg, do you wanna do you wanna answer answer all that? Well, it it's it's it's a very simple it's very similar answer to what you have just given because it's a very similar question, isn't it? Obviously, yes. We we I mean, we certainly believe the the current market capitalization is low given our historic trading performance and also the initiatives that we now have in place for for future growth. And, obviously, we're hoping that we'll see that rise as the share price rises going forward. But we know it's a sector, obviously, or or retail is is a sector, obviously, that's had a a hard time over the the last sort of twenty four months.

37:00 So, you know, we're sort of in a sector that isn't particularly popular at the moment, but but we know over time that will change. And I think what our advisers are telling us is a lot of the time it changes before you realize, and, you know, it starts to move back up. And we still think there's a lot of value to be got out of virgin wine shares, particularly at the current valuation. Great. Thanks, Graham. And, actually, because because I know how how involved you've been in both the the planning for the volumes that we mount that that that we're looking to to deliver over the course of these next few weeks. The question here is how are preparations going for the peak Christmas period? Do you wanna sort of pick that from an operational perspective, Graham, and just explain all of the The answer at the moment is extremely well.

37:50 We obviously, with with a with a stable WMS system that we now have and actually improved functionality that we didn't actually have this time last year, we've actually completely up to date as as of today in terms of where we are on customer orders coming in and being shipped shipped out. We have done all the preparation in terms of the premaking of significant volumes of cases that we know we're going to be retailing in the latter part of November and and into December. So as things stand today, obviously, we we we're actually very pleased with the situation that that we're currently in. Obviously, we have got our busiest sort of five weeks of the year still in front of us. And I think Jay and I will, you know, will be sharing a glass of wine when we get to the December 23, and and I can sort of make the similar comments that I'm making to you today.

38:50 But we obviously have to prove that we can do those high volumes over over the next four or five weeks, but the preparation has been done. We we are as well planned as we ever have been in the past, probably better across the board. And, obviously, we've got a stable WMS system to operate too. So things are looking very good at the moment. Great. Thanks. And, Graham, there's actually another one for for you straight away here saying, could you discuss your buying strategy on PRNs? Yeah. I'll just mention a bit about PRNs just in case everybody doesn't know what they are, but they're they're effectively recycling notes. And and as a as a retailer, we're responsible for the tonnages of packaging that we put into The UK market, and that includes metal, wood, glass, and plastic.

39:46 It has been a problem area over the last sort of twenty four months where we've seen a massive increase in in the cost. And just to sort of illustrate it, I mean, two years ago, our sort of annualized cost was around sort of £70,000 a year. In our FY '23 period, it was closer to £450,000. So it's been a a a big cost increase in the business. The good news for the current year is that we have seen the pricing of PRNs fall. We actually work with partners to effectively hedge our exposure to this. So effectively, like we would do with FX, we have a sort of hedging arrangement in place where we contract for a certain volume of the of the PRNs we need across the year, and then we also buy some of them when we see the the price is is in a good place.

40:51 And, obviously, so far this year, that that has worked out as a reasonable strategy because we have seen prices start to drop throughout the year. And, obviously, we will we'll be looking at a much lower cost for across our f y '24 period as as things currently stand. But, obviously, these rates do vary in the subject to market conditions and the amount of recycling available at any point in time. But I feel much more comfortable with where we are now than I would have been twelve months ago. That's great. Question you question here on what impact do we see the strategic initiatives having on growth and profitability without me looking like I'm trying to swerve the question completely, obviously, but we're we're excited about the impact that these can have moving forwards.

41:45 Just to put in proportion, WINES launched three weeks ago, so it is really, really early days. And I think trying to put exact numbers or targets onto that right now probably would be foolish given the fact it's so early in the in the life of this new new new business. But but quite clearly, you know, a value proposition such as that needs to have some scale to it to have some to have some real meaning, and that is absolutely our ambition is to create scale behind that and to make sure it does have a meaningful effect on on on growth and in time profitability. As as we do the other the other initiatives, I've as sort of mentioned when I went through them, I I I really think that Virgin Wines doesn't get the credit that it deserves for the for for the fantastic quality wines that it produces and that it makes and the value that they represent to customers.

42:36 So the things that we can do to enhance that and to really show that customers are getting better quality value ratios from us than they are from any of our competitors and most certainly from the supermarkets. I think we'll has has has got to help, and that's sort of premiumization of what we're doing is gonna be absolutely core and fundamental to that. So I guess without I'm I'm sure that you're wanting me to put revenue numbers and and against this, but I'm I'm sort of loath to do that right now just because it's such early days, but clearly would like that to be significant. Given our share price slump, have you considered a modest share buyback? Graham, do you want to pick that up? Because it's obviously regular sort of conversation. Yes. Share share backs are something that it's actually a a standing item on our PLC board.

43:33 So it's something that we do take seriously and and have it under continual review. Obviously, at the moment, we haven't announced any any intention to do so, but it will continue to be reviewed. And if we think there's really good value in the shares, then obviously, is an opportunity to do that with the cash that's on the balance sheet. I think at the moment, we're taking the view that cash is keen in in the business at the moment, obviously, and we're sort of making sure when in in sort of tricky market conditions that we make sure we maintain a really strong balance sheet. But I'm pretty sure that at some point in the future, it could be something that is part of of what we do as a business. Thanks. Another question.

44:21 Just given dry January and Stoptober, not things that I know much about personally, but anyway, should Virgin Wines be increasing its nonalcoholic offering? Brewed dogs done well, and Guinness, naught point more percent is is is excellent. I look. I agree. I think there's some there's some there's some really good nonalcoholic products on the on the market in the beer and the spirit sector in particular. Think there's still quite some way to go on the wine offerings. There are some very, very good lower ABV wines, and we're certainly doing a a huge amount around that sort of nine, nine and a half, ten, ten and a half percent level at the moment. We're introducing a a a substantial number of wines in that sort of range, which whilst that doesn't help the dry January or Stocktober issue, I think in terms of the consumer demand for sort of lower alcohol wines and people just trying to be a little bit bit more careful around their their alcohol intake, I think I think that's that's really helpful.

45:25 We do stock obviously, we stock a range of nonalcoholic spirits. We have a a small range of nonalcoholic wines, but quite frankly, you know, we wanna make sure that the product that we're offering to our customers is fantastic, whether it's with alcohol or without. And the range of really good nonalcoholic wines is is is quite low at the moment. There is a lot of technology being put into the the alkalization of wine and then trying to create a mouthfeel that that gives it a similar texture that that that you'd expect with normal wine, but it's I think it's I think it's got got a little way to go. We would certainly be all over it if there as soon as there are are products on the market, which we think give good value for money.

46:14 I think I may just pass this next question back to back to Graham if I can because I know this is something which which you're dealing with, but are your 42 advisers part of an employee share scheme? At the moment, some of them are covered by our LTIP schemes that that we have in operation. And, actually, we're we're we're launching a a save as you earn scheme for all the staff in January 24. So they will obviously definitely be part of that going forward. And, obviously, we're very much in favor of extending share ownership across the business where it's at where we're able to do so. And we're really hoping that the staff take up on a on a on an SIYE scheme will be really strong.

47:03 Perfect. Jay, Graham, thank you very much for that. I think you've addressed all the questions from investors. And, of course, the company will review all the questions submitted today and publish those responses on the Investor Meet company platform. But just before redirecting investors to provide you with their feedback, which is important to you both, Jake, could I just ask you for a few closing comments? Yeah. I think I think just that, yeah, we have a really solid business that's been proven over many years to be resilient and robust when times are hard and that also thrives exceptionally well when times get a little better. And clearly, we've been through a period where times have been quite tough and the consumer landscape's been quite difficult. And, yeah, we've tried to make sure we've been extremely robust and resilient over that period.

47:48 But I'm sure as things get better and the consumer landscape improves, this business will thrive moving forwards. We're already starting to see signs of, you know, underlying trends improving, which is really encouraging. We've got some really exciting new initiatives going on, and we think that the business is probably not being represented fairly at the moment in terms of valuation. So I think, you know, we've we'll we're we're extremely ambitious still. We're still extremely looking forward to to what we can achieve over the course of the next this next year or so, and I hope that other people will be excited by that as well. So, yep, that's that's that's probably where where we are right now. We're looking, like said, looking forward to a very busy five weeks coming up on the road to Christmas. Perfect. Jay, Graham, thank you once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations?

48:45 This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of VIRGIN WINES UK PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.