Thursday 16 August 2018

Conviviality shares plunge further despite executive share buy-up

It compounded pain felt a day earlier when shares plunged nearly 60%.

Conviviality owns Bargain Booze (Ben Birchall/PA)
Conviviality owns Bargain Booze (Ben Birchall/PA)

By Kalyeena Makortoff, Press Association City Correspondent

Shares in Bargain Booze owner Conviviality have tumbled another 13% despite executive efforts to boost confidence in the company by buying up thousands of shares.

Regulatory filings on Friday showed that chief executive Diana Hunter paid more than £50,000 for 44,000 shares at 109p each, while finance chief Mark Moran also bought a further 120,000 shares – both just a day after warning on profits.

The move failed to calm worries about the future of the business, with investors sending shares down more than 13% in afternoon trading to as low as 107p per share.

The company has not seen any material weakness in overall demand and the previously announced cost saving actions remain fully on track Conviviality trading statement

It compounded pain felt a day earlier when shares plunged nearly 60% after warning in a market update that annual earnings would come in 20% lower than previously expected.

Conviviality said it had found a “material error” in the forecasts for its Conviviality Direct business, which would knock underlying earnings by around £5.2 million.

The alcohol wholesaler and distributor said it had also suffered from softer margins in January and February, which Conviviality expects will continue throughout the rest of the financial year.

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“A number of enhanced controls and disciplines have been introduced to address this and management believes that appropriate corrective actions are in place,” the group assured.

“The company has not seen any material weakness in overall demand and the previously announced cost saving actions remain fully on track.”

Phil Carroll, a research analyst at Shore Capital Markets, said there was clearly “insufficient oversight” around both internal reporting and the quality sales at the firm, which is likely to raise questions among investors.

“The rebuilding of management credibility is going to take time and a significant period of results delivery, in our view. In the meantime we expect this damage to credibility to weigh on the stock’s rating.”

However, Mr Carroll said the problems behind the profit warning are likely “fixable” and that “the business model works and remains relevant”.

“The group commands a strong route to market so has value, in our view, with the potential to generate more value in the future.

“Therefore, we see the group as attractive to potential suitors and so reducing further downside potential to some extent,” he added.

Press Association

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