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News
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.
Industry reaction
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.
I am sure the smiley bosses of Conviviality will retain the congrouos salaries and bonuses they have accrued over the company’s expansion in the past few years.
While the tax payers, pension funds, employees and suppliers will pay the price for their incompetent and criminal corporate mismanagement.
Wow. Hatch Mansfield must really be in a hole with Conviviality for Mr McGrath to be making such a passionate plea…. Dare say they’re one of many who are desperate to see Conviviality survive for the sake of their own business?
A castle built on foundations of sand will never last the fullness of time, although it might look nice for a while while it’s standing.
Rather a hysterical and ill-judged reaction from the MD of Hatch Mansfield – “seismic shocks”…… competitors “putting the knife in”. Conviviality was a disaster waiting to happen, due to a high risk strategy and incompetent senior management. In my opinion, it will be good for the Trade, in the long run, for this business to be broken up and only truly viable parts saved. One has sympathy for the employees and, hopefully, most will be redeployed within the industry. Customers will be fine; it won’t take them long to find another supplier.
Well contrary to the comments so far that seem to be indeed ‘putting the knife in’ I offer my wholehearted support for what Patrick McGrath says and indeed my best wishes to the Conviviality employees who are the innocent pawns in this situation.The impact on the on trade would be huge if they go because no one can offer the distribution coverage they do and anyway it would take time for others to absorb that business. In the meantime restaurants and pubs would be without supplies and potentially get inot trouble themselves with the risk of even more job losses. Over-exposed suppliers might too fail and so the ripple effect is huge. Finally it will discourage anyone wanting to invest their money in the drinks industry. How can any of this be good?
I offer not an ounce of sympathy to the Conviviality board that have got the company into this situation and have issued irritating statements suggesting ‘just short term turmoil’ when the problem is clearly far more serious than that. There are a lot of as yet unanswered questions about how they have run this potentially sound business into the ground.
I hope the next 10 days will bring a happy outcome for the emplyees and suppliers who understandably are facing a very worrying few days. Best of luck of luck guys (and girls)
woeful financial mismanamgeent by the board
how a surprise £30m tax bill turned into a £135m funding requirement only highlights how badly they must have been paying creditros and funding their business on supliersgoodwill#
shameful
Totally agree with Alan on this. Any job losses are unfortunate but the UK trade will survive the wake of this just fine (although it sounds like Hatch may learn a tough lesson). Bargain Booze and Wine Rack have always been a disaster and I am sure any Bibendum/Matthew Clark on-trade customers will have plenty of calls from keen suppliers looking to grab market share.
Charles, The ones who stuck the knife in were the Board and directors of Conviviality. It’s a cheap shot to accuse others of that, merely for recognising the reality of the situation.
The UK wine industry has over-capacity in a shrinking market, and hastens its demise by pandering to supermarkets and cash & carry (a race to the bottom). It needs to wake up and sort itself out, otherwise naive commercial thinking; complacency and propping up of lame ducks will lead to even more business failures. Best to break up Conviviality asap and at least rescue the salvageable parts (& their employees).
Alan, it is not a ‘cheap shot’ as you choose to call it to support what Patrick McGrath has said. I make no defence of the directors who should hang their heads in shame. I am first and foremost thinking of the 2600 staff and then the staff in the many suppliers.
I hope for your sake you never find yoruself in this situation. Since you do not reveal your full name I have no idea if you are currently in the trade and who you work for but having been made redundant myself once and been in very uncertain times on several occasions with a family to support I feel for the people caught up in this directly or indirectly.
Even if the trade has overcapacity ( a moot point in terms of the role MC fulfill) it is going to be a very painful period for a lot of people.
Maybe you should show a little more understanding!
i think the board were into increasing profit by buying other businesses without
doing feasabilty studies if they fitted in their corporate image ,buying by borrowing more and got stuck
Why did they pay premium prices for biddendum
and the ex palmer and harvey stores ,when they had no money
i hope there is a white knight to save parts of the business.
i suggest wetherspoons buys the wholesale business to serve themselves and others in the same predicament