I'm just watching Conviviality's share price fall off a cliff this morning following release of their Half Year Results:
http://otp.investis.com/clients/uk/conviviality_plc/rns/regulatory-story.aspx?newsid=971298&cid=2022
As of midday it is about 18% down. It is an "in-line with expectations" and I'm struggling to see any reason for it.
I am a holder and normally I would sell on this kind of drop, but surely this is overdone? At the moment I am inclined to hold, or even top up.
Grateful for any views.
Hi Mechanical Bull,
Two reasons for the drop:
1) Some people no longer believe they will rearch current FY guidance. Mostly people who don't understand rebates, I believe.
2) More concerning -and the reason why some drop would be warranted- is the new assumption on working capital set by the new CFO, which will push debt to almost £150m by year end. I think there is an extent of kitchen sinking in there, but the reality is that you are absorbing cash by releasing payables and this is not longer available for shareholders on an ongoing bases. Basically this is the end of previous "window dressing". Disappointing that the cash is no longer available but no major deal. Interest payments will remain unchanged.
Happy to discuss further if interested.
