Conviviality files intention to appoint administrators ‘unless circumstances change’
Following a statement yesterday in which it confirmed that it had failed to raise its equity target of £125 million, Conviviality has filed notice of its intention to appoint administrators within 10 business days “unless circumstances change”.
In a statement, the company said: “the board has resolved to file notice of intention to appoint administrators to the company. Unless circumstances change, and in accordance with statutory requirements, the board intend to appoint administrators within 10 business days”.
It added: “The directors intend to allow the business to continue to trade and the company continues to work alongside advisers in order to preserve as much value as possible for all stakeholders as it explores a number of inbound enquiries regarding a potential sale of all or parts of the business”.
A further update is expected in due course.
Speaking to the drinks business following the announcement, Patrick McGrath MW, managing director of Hatch Mansfield which is one of Conviviality’s largest suppliers, was critical of reporting on Conviviality’s troubles and stressed the need for caution.
“We are one of their largest wine suppliers and I have worked with them in various guises for nearly 30 years now,” he told db.
“We’re most alarmed by the inaccuracy of the reporting, with news sites stating that Conviviality has gone into administration.
“They are not in administration, and more importantly, they have made a clear statement that there are a number of strong parties interested in buying the business.”
McGrath also stressed his continued support of Conviviality and told db that he hopes the industry will work together to help the business.
“Conviviality is a very strong business, they are the major supplier to the drinks industry. They’ve obviously had some short term issues with cash management and financial planning.
“My number one concern is to get the message out that they are not in administration – for the sake of all the industry it is important to get that message out.
“I think this is a seismic time for the industry and we’ve had messages of support from their competitors who rightly believe that it’s absolutely essential that Conviviality survive for the whole drinks industry – it’s crucial.
“What I would say is now is not a time for competitors to be throwing stones at greenhouses. It’s inexcusable for competitors to be trying to put the knife in. We need everybody in the industry to rally round and help each other.
“The crucial thing is that it’s business as normal, until otherwise. Now is the time that we need all suppliers and competitors to pull together to ensure that this business survives.”
McGrath did comment, however, on what it would mean for the trade should Conviviality not find a buyer.
“They are by far the largest drinks wholesaler and we need them to survive, because if they don’t it’s serious news, first for their employees and also for their customers who have got to run around now and find alternative suppliers. It’s also very serious news for many wine, beer and spirit suppliers if Conviviality goes into administration.
“And it’s not just the suppliers and the employees but it’s actually many of their competitors that are saying to us that they need them to survive.
Commenting on what it could potentially cost each supplier, McGrath stressed that it was complicated due to the fact that “every supplier will have different clauses in their contracts and different terms and conditions that determine the arrangements should the company fall into administration”.
Concluding, he stated: “If Conviviality were to go into administration, it would cause seismic shocks across the whole of the drinks industry.
“Other companies have had their difficulties in the last couple of years, and we have always tried to support them”.
Miles Beale, chief executive of the Wine and Spirit Trade Association said: “It is sad news for all concerned and for the wine and spirit industry as a whole that Conviviality have announced plans to file for administration.
“We are sending our support and best wishes to Conviviality’s employees who are facing uncertain times. The WSTA look to support the great British wine and spirit industry – including its jobs, businesses and employees facing uncertain times”.
Conviviality, the owner of Bargain Booze, Matthew Clark, Wine Rack and Bibendum, employs over 2,600 members of staff and supplies more than 23,000 restaurants, hotels and bars, over 700 retail outlets and 370 franchises in the UK.
It also works with over 400 suppliers which provide its range of over 1,000 lagers, beers and ciders, 6,500 wines and 2,500 spirits.
The 21st century has already seen four major industry players fall into administration, beginning with Unwins in 2005 and followed by Thresher in 2009, Oddbins in 2011 and Waverley TBS in 2012.
The story so far…
Conviviality’s troubles began when it reported its first profit warning on 8 March in which it declared that a “material error” in its financial forecasts had meant that its profit would be £5.2 million less than expected, with share prices plummeting by as much as 68% following the announcement.
This was followed by a further update on 14 March in which the company added that it was facing a £30 million tax bill and had suspended trading in its shares. In an effort to pay off debts, on 16 March Conviviality stated that it was “actively engaging with its stakeholders” as it worked out its “funding requirements”.
On 19 March the departure of CEO Diana Hunter was announced. This follows additional restructuring at the company which saw a flurry of directional and operational changes announced in January 2018, as well as the departure of Andrew Humphreys as CFO in October last year and the appointment of the appointment of Mark Moran in his place. In January this year, the former head of Bibendum and business development director at Conviviality, Michael Saunders, announced that he had scaled back his role at the drinks supplier to pursue other projects.
On 21 March, Conviviality announced that it would be raising £125m to pay off debts and continue trading.
Yesterday (28 March), the wholesaler reported it had failed to reach its equity target of £125 million and suggested parts of the business may now have to be sold off.