Good morning, it's Paul here.


Conviviality (LON:CVR)

Share price: Suspended (at 101p)
No. shares: 183.3m
Market cap: £185.1m

(at the time of writing, unfortunately I hold a long position in this share)

Suspension of shares & further update

There is more disastrous news today for shareholders in this distributor of mainly alcoholic drinks. I bought some yesterday, unfortunately, after being reassured by a broker note saying that the situation re bank covenants was alright. In fairness, the broker can only report what the company tells him. So if the company doesn't know what's going on, then nor will the broker's analyst.

Director buys - the Directors genuinely didn't seem to know that trouble was brewing. This is evidenced by 5 Directors collectively spending about £583k buying shares at around 300p on 5 Feb 2018 - that's only just over 5 weeks ago. Since then the share price has dropped by two-thirds, and will probably drop considerably more when it returns from suspension.

The share has been "temporarily" suspended. An announcement came out at 09:55 today;

Further Update

Further to the announcements made by Conviviality Plc on 8 March 2018 and 13 March 2018, the Company yesterday identified a payment due to HM Revenue & Customs of approximately 30.0 million which falls due for payment on 29 March 2018 and which has not been accrued for within its short term cash flow projections.

This has created a short term funding requirement.


What can I say? It's total incompetence. The finance department at CVR seems to have lost control of the budgeting process, and now cashflow management as well. Heads will need to roll - I think the CEO has to go, once this funding crisis has been resolved. The FD is relatively new, having joined CVR on 30 Oct 2017. In my view that is plenty of time to have got the budgeting & cashflow processes under proper control. So in my view, serious question marks hang over the new FD's competence too.

Trading could be adversely affected by this funding crisis;

The Company's announcement on 13 March 2018 confirmed an expected range of adjusted EBITDA of between 55.3 million and 56.4 million.

To the extent that the current situation creates operational difficulties, this may negatively impact the adjusted EBITDA range.

So clearly…

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