Conviviality has confirmed that is undergoing a review of the business while holding “constructive” negotiations with lenders, as part of an update on the measures it is taking to handle its £30 million tax bill.
Earlier this week, the company said that the bill due for payment to HMRC on March 29 had only been discovered on March 13 and had not been accounted for in its short-term cash flow projections.
This prompted a suspension of Conviviality’s shares on the junior market and the cancellation of an £8 million dividend payment that was due to shareholders today.
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In a statement issued today, the parent company of Bargain Booze and Wine Rack said both its customers and suppliers continued to be supportive and that ongoing discussions with its lenders were “constructive”.
The off-licence retailer also confirmed that PwC had been appointed to undergo a review of the business and its future funding requirements.
In addition, Conviviality said it was liaising with advisers and brokers regarding the possibility of an equity fundraise to effect a recapitalisation of the business.
In regards to its surprise £30 million tax bill, Conviviality said the HMRC has been receptive to its needs and that negotiations were ongoing.
“The board wishes to express its gratitude to all its stakeholders for their on-going support during this difficult period for the company,” the company stated.
Conviviality’s troubles first started late last week when it issued a profit warning with adjusted earnings expected to come in 20 per cent below market expectations, between £55.3 million and £56.4 million.
It then issued a second profit warning on Tuesday, less than a week after the first one. More than £300 million has been wiped off its share value as a result.
Conviviality said it had found a “material error” in the forecasts for its Conviviality Direct business, as well as suffering from softer margins in January and February, which it expects will continue throughout the rest of the financial year.
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