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Beleaguered booze retailer and wholesaler Conviviality (CVR) has issued another market update to attempt to reassure the market it is making progress to overcome the issues that led to its share price tumble and suspension of trading.
The Bargain Booze owner said it has been “actively engaging with its stakeholders” while it continues to work through its funding requirements.
It is exploring an equity fundraise to attempt to recapitalise the business and has been in discussions with its advisers and broker over the possibility.
It insists that customers and suppliers “remain supportive” of the company and are working “closely and constructively” with the group.
Discussions with its lenders remain ongoing and are “constructive” and it is engaging with HMRC over the £30m payment due on the 29 March 2018. This payment could see the group breach its banking covenants, but Conviviality said “HMRC has been receptive to our needs and these discussions continue”
PwC’s review of the business and its future finding requirements is “progressing well”
It added: “The Board wishes to express its gratitude to all its stakeholders for their on-going support during this difficult period for the company.”
The shares remain suspended after being pulled from the market before Conviviality revealed details of the outstanding payment to HMRC. Its shares had previously plunged from over 300p to just over 100p late last week after it revealed a “material error” in its financial forecasts meant profits would be 20% lower than previously forecast.
This week’s edition of The Grocer looks at booze giant Conviviality’s faces a battle for survival after a week of turmoil that saw more than £350m wiped from its value.
One industry source said that the events raised serious concerns over Conviviality’s management. “The shareholders are not happy – it was in a dominant position with a strong business model. The next story is going to be who the new management is and whether they will have to offload parts of the business to get the cash needed to keep going.”
The Grocer understands a number of suppliers have also not been paid. One insider said: “It has been going on for the last two months. Brand owners haven’t been paid for stock and there is major concern within the trade, and some temporary stops on supply.”
Shore Capital’s Phil Carroll added that were the business to collapse a discounted valuation could entice a “willing suitor”.
Click here for the full story.
There is also an analysis of what has gone wrong at Conviviality in this week’s edition of The Grocer. Check thegrocer.co.uk later today to read the in-depth look at why Conviviality faces collapse.
Morning update
JD Wetherspoon has announced its first half results this morning, with like-for-like sales in the 26 weeks to 28 January up by 6.1% and total sales up by 3.6% to £830.4m
Like-for-like bar sales increased by 5.7% (up from 2.4% in its previous financial year) and food by 6.9% (up from 5.1%). Operating profit increased by 13.6% to £74.0m (2017: £65.1m).
Never shy of wading into the debate on Europe, chairman Tim Martin commented:
““There has been a huge debate, since the referendum, about the economic effects of Brexit. In particular, trade organisations like the CBI and the BRC, supported by the FT, the Sunday Times, the Guardian, the chairmen of Whitbread and Sainsbury’s and others, have misled the public by saying that food prices will automatically rise if we leave the EU without a deal.
“This is a fallacy – the EU is a protectionist organisation which imposes high taxes on food, clothing, wine and thousands of other items from non-EU countries – which comprise around 93% of the world’s population.
“Provided that the UK parliament votes to eliminate tariffs, EU producers will, in any event, be faced with a far more competitive UK market – since New Zealand wine producers, for example, will be able to compete on an equal, import tax-free basis, for the first time. So, the antagonistic approach of EU negotiators, which risks alienating UK consumers, is extremely unhelpful to businesses within their own bloc.
“Most economists who criticise Brexit use hypothetical arguments, but, in the real world, the UK can eliminate import taxes, improving living standards and simplifying the Byzantine tax system – both of these factors will improve the outlook for consumers and businesses in the UK.
However, he did admit the company anticipates higher costs in the second half of the financial year, in areas “including pay, taxes and utilities”. “In view of these additional costs, and our expectation that growth in like-for-like sales will be lower in the next six months, the company remains cautious about the second half of the year”.
On the markets this morning, the FTSE 100 has continued its unspectacular week this morning, edging up 0.2% to 7,151.4pts this morning.
Early risers include Fever-Tree (FEVR), up 3.2% to 2,995p, McBride (MCB), up 2.3% to 165.8p, AG Barr (BAG), up 2.2% to 641p and Greene King (GNK), up 1.7% to 492.2p.
Fallers so far today include Greencore (GNC), down 2.5% to 125.5p and Tesco (TSCO), down 1.5% to 210.7p.
Yesterday in the City
The FTSE 100 closed up 0.1% yesterday at 7,139.7pts.
Unilever was the big story of the day, with the Anglo-Dutch consumer goods giant announcing its intention to shift its dual corporate HQ to a single entity in the Netherlands, thus ditching its UK headquarters. Unilever shares fell back 1.7% to 3,756p amid worries it would no longer be able to be a FTSE 100 constituent, meaning a number of FTSE tracker investment funds could be forced to sell Unilever stock.
The other big fmcg story of the day was a profits warning from Imperial Leather maker PZ Cussons, which warned tough conditions in its key international market of Nigeria and back home in the UK will weigh on earnings. The shares dropped 16.3% to 231.8p.
Other fallers included Irn Bru maker AG Barr (BAG), which dropped 5.6% to 627p, Cranswick (CWK), down 2.1% to 2,892p, Marston’s (MARS), down 2.9% to 100.9p and Premier Foods (PFD), down 2.3% to 37.6p.
FTSE 100 fallers included Morrisons (MRW), down 1.8% to 211.4p after its falls on Wednesday and Imperial Brands (IMB), down 1.7% to 2,479p.
Stocks on the up included Fever-Tree (FEVR), which rose 3.4% to 2,902p after a volatile week following its annual results.
Also on the up was McColl’s (MCLS), up 2% to 250p, Tesco (TSCO), up 1.8% to 214p, B&M European Value Retail (BME), up 1.6% to 423.4p, Dairy Crest (DCG), up 1.6% to 515p and Ocado Group (OCDO), up 1.4% to 586.2p.
Greencore (GNC), which lost 30% of its value on Tuesday after a profits warning relating to its US operations, clawed back 1.3% to 128.7p.
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