Conviviality suspends trading shares over £30m tax bill

UK alcohol wholesaler and distributor Conviviality has suspended trading its shares after identifying a £30 million (US$42m) tax bill.

Conviviality’s profits could be hit further by an unexpected £30m tax bill

In a statement yesterday (14 March), the group – which operates the Bargain Booze off-licence chain and the Matthew Clark and Bibendum wholesalers – said the payment is due to HM Revenue & Customs on 29 March 2018.

Conviviality now faces a “short-term funding requirement” that could cause it to struggle to meet its banking covenants.

The group has suspended trading its shares on AIM – a sub-market of the London Stock Exchange – and cancelled the interim dividend of 4.5p per share that was due to be paid tomorrow, Friday 16 March. The cancellation will provide the group with £8.2m.

Conviviality has hired PwC to assist it in its forthcoming discussions with HM Revenue & Customs and key stakeholders, including its lending banks, credit insurers, suppliers and other creditors.

“Following preliminary advice received from PwC, whilst there can be no guarantee, the board believes this short-term funding requirement will be satisfactorily resolved,” Conviviality said in a statement.

Last week, the group warned that its earnings before interest, taxes, depreciation and amortisation (EBITDA) for the 52-week period ending on 29 April 2018 would be “20% below current market expectations” due to a “material error”.

The adjusted EBITDA is expected to be between £55.3m and £56.4m – £5.2m less than initially forecast.

However, the unaccounted tax payment will create “operational difficulties” that could further hit profit expectation, the company has said.