Conviviality will have relationships ‘for years to come’

Conviviality intends to have relationships with its stakeholders “for years to come”, executive chairman David Adams has said in a bid to mitigate mounting fears over the future of the business.

Conviviality is facing a “short-term challenge”, according to executive chairman David Adams

The beleaguered Bargain Booze owner has experienced a turbulent month, announcing two profit warnings and a previously unidentified £30 million (US$42m) tax bill.

On 8 March, Conviviality informed investors 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”.

This was later clarified as an “arithmetic error” and the company said its profits could fall from the previously forecast bracket of £69.1m-£70.5m to £55.3m-£56.4m.

Concerns intensified last week when Conviviality announced it had discovered a £30m tax bill, and subsequently issued a further profit warning. The payment to HM Revenue & Customs is due on 29 March.

The company has suspended trading its shares on AIM and, in a bid to generate cash, cancelled an interim dividend of 4.5p per share that was due to be paid on Friday 16 March, providing it with £8.2m.

Conviviality has hired PwC to assist it in its forthcoming discussions with HMRC and key stakeholders, including its lending banks, credit insurers, suppliers and other creditors. It said HMRC has “been receptive” to its needs.

Diana Hunter has resigned from the board of Conviviality

In the space of two weeks, the company’s value has decreased by more than £300m.

Yesterday, the group confirmed that its CEO Diana Hunter would resign with immediate affect, with non-executive chairman David Adams stepping into the leadership role of executive chairman “until further notice”.

Adams has now released a statement that aims to to quell mounting fears over the future of the company, saying it faces a “short-term challenge”.

“We’re a profitable business, with the very best route to market in the UK – and our suppliers, franchisees, producers and customers know this,” he said.

“We’re very grateful to have so many people across the industry stand by our side and rally around us as we overcome this short-term challenge.

“We’ve been heartened by the support and will continue to talk openly to everyone we’re working with – these are relationships we intend to have for years to come.”

The current leadership team at Conviviality will remain in place and will “continue to run the business on a day-to-day basis”.

Conviviality is the leading UK alcohol wholesaler and distributor. It owns the Matthew Clark, Bibendum, and Bargain Booze subsidiaries, among others. The company serves 10,000 customers and more than 23,000 outlets, with more than 2,500 people on its staff.