Conviviality hurtles towards administration
Bargain Booze owner Conviviality has failed to raise the £125 million it needed to shore up its finances and prevent it from going under.
It is now careering towards administration and said it is in talks to sell off all or parts of the business to interested parties.
It added that shareholders in the group would receive “little-to-nil” value in their investment. More than 3,000 jobs are at risk, many of them at Bargain Booze and Wine Rack stores across the country.
It marks an almighty collapse for the group, which also owns Matthew Clark and Bibendum.
In November 2017 its shares were trading at 426p and it was regularly touted as a strong investment opportunity, while chief executive Diana Hunter was routinely praised for her vision and rampant consolidation.
Anyone who bought into the group is now facing up to huge losses, while franchisees that were rewarded with equity as the group grew will be hit.
A number of suppliers have put stop orders on Conviviality due to concerns they would not be paid, and this hampered Investec’s bid to raise the £125 million it needed to survive as a going concern.
PricewaterhouseCoopers is expected to be appointed as administrator tomorrow, and rumours abound that a multinational brewer is interested in purchasing the group.
Conviviality said in a statement: “On March 21, 2018, the company provided an update to the market on the actions the board were undertaking to resolve the Company's funding requirements.
“A key element to this was an equity placing to raise gross proceeds of £125.0 million, which the directors believe is the minimum amount required to adequately recapitalise the business.
“Despite a significant number of meetings with potential investors resulting in good levels of demand, and constructive discussions with a number of key customers and suppliers regarding the provision of support, there was ultimately insufficient demand to raise the full £125 million.
“The board wish to thank its customers, suppliers and employees for their continued support during this difficult period for the Company.
“The company is in discussions with its lending banks and advisors regarding other possible options and is in receipt of a number of inbound enquiries regarding a potential sale of all or parts the business. A further update will be made as appropriate.
“The board believe that shareholders in the Company will receive little-to-nil value.”
It is by far the biggest story to hit the drinks industry in recent years and it evokes painful memories of the collapse of First Quench.
It certainly escalated quickly. Conviviality issued a profit warning on March 13, blaming an “arithmetic error” made by a member of its finance team and softening margins. Then the bad news simply piled up and 15 days later it is on the verge of bankruptcy.
After the first profit warning, it admitted it had not budgeted for a £30 million tax bill due at the end of this month and shares in the group were suspended at just 101p.
Hunter fell on her sword and chairman David Adams stepped into the role of executive chairman, promising the group would be around for years to come.
It then issued a third profit warning, saying that if a new share placing was successful it expects annual underlying profits to be between £45.5 million to £46 million.
It needed to raise £125 million from investors, to pay back the £30 million HMRC bill it overlooked, repay a revolving credit facility, resolve overdue payments with its creditors and return to normalised trading terms.
But the efforts resulted in failure, plunging the industry into chaos.