Bargain Booze firm Conviviality close to administration

Conviviality, the owner of Bargain Booze, has announced plans to file for administration within two weeks.

The firm also owns Wine Rack and supplies more than 25,000 restaurants, hotels and bars.

It has issued profit warnings in recent weeks and revealed a £30m tax bill. The company sought £125m from investors but said it had been unable to raise those funds.

Conviviality employs about 2,500 staff and their jobs are now in jeopardy.

Earlier this month, the company slashed its forecast for underlying earnings this year to £55m from £70m.

Just days later, on 14 March, it revealed a £30m tax bill that had to be paid by the end of the month.

Those revelations prompted the resignation of chief executive Diana Hunter, who had been in charge since 2013, the year Conviviality listed on the London Stock Exchange.

The high-speed crash of Conviviality

As recently as 29 January Conviviality management was bouyant. Announcing half-year pre-tax profits of £7.4m chief executive Diana Walker celebrated the company’s “strength” and “above market growth”.

However, the first sign of trouble came a little over a month later, on 8 March. The company warned that profits would be 20% below market expectations. It blamed an error in its forecasts and weaker profit margins.

Then, on the 14 March, it revealed a £30m tax bill that had to be paid by the end of the month. It entered discussions with its lenders and looked at raising funds on the stock market.

By 28 March the game was up. An effort to raise £125m from shareholders failed. A day later Conviviality announced its intention to call in the administrators.

From the first sign of trouble to failure took just 21 days.

High Street stress

Conviviality had been trying to raise £125m to keep the business going, but on Wednesday it announced that those attempts had failed.

In its latest update, the company said: “Unless circumstances change, and in accordance with statutory requirements, the Board intend to appoint administrators within 10 business days.

“The secured creditors can, however, appoint administrators without the requirement for notice.”

Conviviality said it would continue to trade and was exploring “a number of inbound enquiries regarding a potential sale of all or parts of the business”.

The collapse of Conviviality is the latest sign of stress in the retail and hospitality sectors.

Last week, fashion chain New Look said it would close 60 stores and cut 1,000 jobs, and restaurant chain Prezzo announced that a third of its restaurants would close.

At the end of February the UK arm of Toys R Us went into administration.

Source – BBC News