18 July 2016
CONVIVIALITY PLC
FINAL RESULTS FOR THE YEAR ENDED 1 MAY 2016
Conviviality Plc ("Conviviality", the "Company", or the "Group"),
the UK's leading independent wholesaler and distributor of alcohol and impulse serving consumers through its Franchised retail
outlets and through hospitality and food service, announces its final results for the 53 weeks to 1 May 2016 (FY15: 52 weeks to
26 April 2015).
Group Financial Highlights
· Revenue up 137% to £864.5m (FY15:
£364.1m)
· Gross margin up 1.3% points to 11.5%
(FY15: 10.2%)
· Adjusted EBITDA1 up 135% to £30.2m (FY15: £12.9m)
· Adjusted profit before tax up 124% to
£21.7m (FY15: £9.7m)
· Adjusted fully diluted EPS up 27% to
14.2p (FY15: 11.2p)
· Free cashflow up 100% to £11.4m (FY15:
£5.7m)
· Debt reduction ahead of plan with net
debt of £86.1m (FY15: net cash £1.2m) and bank leverage of 1.96 times reflecting the acquisition of Matthew Clark in October
2015.
· Full year dividend up 14% to 9.5p
(FY15: full year dividend 8.3p)
Operational Highlights
· Completed transformational acquisition
of Matthew Clark on 7 October 2015
· New management team and organisational
structure in place
· Acquired Peppermint on 31 December
2015, which is performing in line with expectations
· Post year-end, completed complementary
acquisition of Bibendum PLB Group
· Integration plan ahead of expectations
for both Matthew Clark and Bibendum PLB Group
· Conviviality Retail, Matthew Clark and
Bibendum PLB have all traded well during the acquisition processes, and are in line with expectations
Conviviality Retail Highlights
· 0.8% increase in revenue for 53 weeks
to £366.9m (FY15: 52 weeks £364.1m)
· 0.7% increase in adjusted EBITDA to
£14.6m (FY15: £14.5m)
· Franchisee like for like retail sales
improved to (1.3%) (FY15: down 1.7%)
· 15% increase in stores to 716 as at 1
May 2016 (April 2015: 624)
· 38 new Franchisees joined the
group.
· 42% increase in stores owned by
multisite Franchisees to 364 (April 2015: 257)
Matthew Clark Highlights
· 4.9% increase in revenue from 7 October
to 1 May to £497.0m (corresponding prior period £474.0m)
· 18% increase in adjusted EBITDA to
£18.1m (corresponding prior period £15.3m)
· 2.9% increase in outlets supplied and
new customers
Diana Hunter, Chief Executive Officer of Conviviality, said:
"These strong results reflect the hard work of our employees, Franchisees and suppliers. Our
Franchisees in the Off-Trade and customers in the On-Trade remain at the heart of our business as we continue to work together to
blend their entrepreneurial skill with the branding, ranging and wholesale expertise of Conviviality. The experienced management
team in place, coupled with the well invested and compelling businesses with market leading expertise and current trading in line
with expectations, gives the Board confidence for the future.
"We look to the year ahead with a stronger and more resilient business able to thrive in
uncertain economic times. It is our intention to continue to deliver against our integration plan during the year, ensuring the
benefits are realised from our transformational acquisitions. The performance of the businesses is encouraging, with the team's
relentless focus on serving their customers well and supporting Franchisees in the Retail business evidenced by the consistent
delivery of results. We continue to review the market within which we trade ensuring that we strengthen our position as the UK's
leading drinks and impulse wholesaler and distributor."
There will be a presentation for analysts at the offices of FTI Consulting (200 Aldersgate, EC1A
4HD) at 9.30am today, 18 July 2016.
1Adjusted EBITDA is calculated as
profit before tax of £9,080,000 (FY15: £8,986,000), adding back net interest of £2,502,000 (FY15: £52,000), depreciation of
£2,833,000 (FY15: £1,887,000), amortisation of £6,089,000 (FY15: £125,000), exceptional items of £9,855,000 (FY15: £731,000) and
share based payment charges of £1,767,000 (FY15: £1,073,000) and deducting fair value movements on foreign exchange
derivatives £1,958,000 (FY15: £Nil).
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Enquiries:
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Conviviality Plc
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Tel: 01270 614 700
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Diana Hunter, Chief Executive Officer
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Andrew Humphreys, Chief Financial Officer
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Investec (Nominated Adviser and Joint Broker)
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Tel: 020 7597 4000
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Garry Levin / David Flin / Daniel Adams
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Zeus Capital (Joint Broker)
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Nick Cowles / Andrew Jones / Jamie Peel
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Tel: 0161 831 1512
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John Goold / Adam Pollock
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Tel: 0203 829 5000
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FTI Consulting
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Tel: 020 3727 1000
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Jonathan Brill / Alex Beagley / Tom Hufton
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CHAIRMAN'S STATEMENT
Over the past three years, we have focused on creating a long term sustainable business
resilient to market and economic challenges. I am pleased to report that with the acquisitions of Matthew Clark and Bibendum PLB,
we have made significant progress in achieving that aim and have significantly strengthened our organisation, providing future
growth opportunities for our people, our Franchisees, our customers and our suppliers. I am delighted to welcome our new
colleagues from both Matthew Clark and Bibendum PLB into our Group.
We have rapidly reconfigured the business to successfully integrate our acquisitions and added
key executives to lead the delivery of our business units and planned synergies. In November 2015 we welcomed Sallyann Brookes as
Group People Director to help ensure that we have a common set of guiding principles behind the growth and development of our
people. In January 2016 we welcomed Mark Aylwin as Managing Director of Conviviality Direct; Mark joined the business from Booker
Group Plc, where he held the position of Managing Director Booker Direct, and was appointed to the Plc Board in May 2016. Nigel
Basey joined the Group in March 2016 as Group Logistics Director. Nigel joined from DHL and was previously at Homebase. On 6 June
2016 James Lousada joined the Group as Managing Director of Conviviality Trading; James was previously the Chief Executive
Officer of Carlsberg UK. David Robinson also joined the Group as Managing Director of Conviviality Retail on 1 July 2016 and was
previously the Chief Operating Officer of Argos.
The Directors believe that these appointments have significantly strengthened the senior
management team and provide the expertise to achieve the forecast synergy benefits of integrating of the acquired businesses,
whilst driving future growth to ensure Conviviality Plc reaches its potential market scale.
I am pleased to report that the business integration is progressing well and I remain positive
about the future and the opportunities ahead.
Conviviality is a robust business across both the On-Trade and Off-Trade markets enabling it, as
the UK's largest wholesaler and distributor of alcoholic drinks and impulse, and following the acquisitions of Matthew Clark and
Bibendum PLB, to benefit from increased volumes and reach across the market.
Reflecting both the progress of the business and the strong future prospects, the Board
is pleased to recommend a final dividend of 7.4 pence per share increasing the total dividend for the year by 14% to 9.5
pence per share.
This is an exciting time to be part of Conviviality. On behalf of the Board, I would like to
thank all of our Franchise partners, customers and all of our people working in the business for their outstanding efforts which
together have made the success of the past year possible.
David Adams
Chairman
18 July 2016
CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
Conviviality Plc has reconfigured its business, building on its significant strength and
expertise in the UK drinks market, providing the Group with further growth potential in both the On and Off-Trade markets. This
directly fulfils the Group's mission to satisfy all customers who want to drink alcoholic beverages in home or out of the home,
whatever the occasion: serving customers directly via retail outlets or indirectly through hospitality and food service. The
Group's aim is to be the drink and impulse sectors leading specialist wholesaler and distributor to the On and Off-Trade and to
be the most knowledgeable and inspiring partner for our customers and Franchisees. As a result, Conviviality is able to provide
suppliers with unparalleled market access, insight and capabilities to develop brands in the UK and beyond.
Conviviality is independent of major drinks brands and therefore able to supply an unrestricted
selection of products whilst providing expertise in key categories to customers who value breadth of range whilst offering a
compelling route to market for suppliers to access both the On and Off-Trade retailers. As the retail environment becomes more
complex, Conviviality, through its expertise, is able to provide its valued customers with the solutions they need from
distribution, ranging and merchandising, and marketing.
The acquisition of Matthew Clark on 7 October 2015 and the subsequent acquisition of Bibendum
PLB post year end on 20 May 2016 resulted in pro forma combined revenues for the enlarged group of over £1.4billion. Bibendum PLB
will provide the Group with additional wine expertise, access to the premium On-Trade, particularly in London, and significant
capability in consumer insights across the alcohol sector.
The increased scale enhances our ability to reach more customers across both the On and
Off-Trade markets and therefore we have become more attractive to our suppliers, allowing us to secure better trade terms. In
addition there is further potential to realise organisational, distribution and revenue synergies from the acquired businesses as
we share resources. By strengthening our position in the sector, we have developed excellent collaboration between our suppliers
and our buying teams. More than 400 suppliers are now working with the Group. The full offering that is available to Conviviality
customer's spans across 10,000 alcohol lines, 1,900 tobacco and 4,500 convenience foods. Conviviality has an unrivalled range of
premium bottled ales with 250 lines, the spirits range has over 2,500 lines with more than 300 gins, as well as our range of
6,500 wines. This year across the Group we have been recognised for the hard work of our buying teams, winning "Drinks Buying
team of the Year" at the Drinks Awards 2016 and "Fine Wine Merchant of the Year" at the Sommelier awards.
Financial Results
An important aspect of our business model is its flexibility, protecting our earnings through
periods of significant change in our organisation and a competitive external environment. We have continued to deliver against
our objectives set out at flotation in July 2013 and are pleased to report profits slightly ahead of expectations, during a year
where we have significantly transformed our business. For the 53 weeks to 1 May 2016 revenue was up 137% to £864.5 million
reflecting the benefit of the Matthew Clark acquisition from 7 October, as such, adjusted EBITDA increased 135% to £30.2 million
and Adjusted PBT increased 124% to £21.7 million, demonstrating the significant strength of the combined group. Adjusted fully
diluted EPS is up 27% to 14.2 pence. The acquisition of Matthew Clark resulted in an increase of net debt, however, this is
currently at £86.1 million which is below consensus expectations. The full year dividend has increased 14% to 9.5 pence per share
in line with our progressive dividend policy and reflecting underlying confidence in the outlook for the Group.
Organisation
Conviviality has changed the structure of its core businesses by putting in place three business
units to ensure operational focus on each channel and the continued delivery of excellent service to its customers:
Conviviality Direct: The UK's largest independent wholesaler
to the On-Trade, serving over 23,000 outlets from national prestige hotel chains to independent food led pubs and restaurants
trading through two businesses Matthew Clark and Bibendum.
Conviviality Retail: The UK's largest franchised off-licence and
convenience chain with over 370 Franchisees and more than 700 retail stores trading primarily under the fascia of Bargain Booze,
Bargain Booze Select Convenience and Wine Rack.
Conviviality Trading: A full service brand and wine agency with
activation capability including festivals and events where new products and brands can be developed through the whole life cycle
and through to the On and Off-Trade.
In addition Conviviality has created a Group Function comprising Finance, Legal, Human Resources
and Logistics to support each business unit, focusing on delivering expertise and removing duplication of task.
Conviviality Direct: Mark Aylwin, who joined the business in January
2016, has been appointed Managing Director Conviviality Direct and is responsible for Matthew Clark and Bibendum, the specialist
wholesalers to the On-Trade. Since the acquisition, Matthew Clark revenues have increased 4.9% to £497 million (corresponding
prior period £474 million) on a like for like basis. The number of outlets have increased by 2.9% and adjusted EBITDA is up 18%
to £18.1 million. The Conviviality Direct Strategy is focused on:
· Communicating the unique Direct
proposition clearly to target customers and strategic partners in the On-Trade
· Strengthening the position as a
centre of expertise in Wine and at the forefront of range innovation, particularly in World Beers and
spirits in the dynamic drinks sector
· Leveraging scale and reach
to become the most competitive wholesaler in the drinks market
· Growing the number of food-led
outlets served and the mix of products across each outlet
· Growing share in major cities and
inner urban areas through a superior service proposition
· Developing the tools and
capabilities to ensure we provide the most value-adding customer service in the market
The integration of Matthew Clark is ahead of schedule with a full leadership team in place.
Matthew Clark affords a range of over 7,000 alcohol lines to over 6,000 customers and serves over 19,000 outlets. Matthew Clark
offers a one-stop solution to hotels, restaurants, bars and venues for their alcohol needs delivering next day consistent service
nationwide. Matthew Clark is based in Bristol, where its support centre is located, and its sales force of over 230 employees are
based across Scotland, the North, Central and South West, London and the South East ensuring excellent service to its Independent
Free Trade customers. Matthew Clark has a 41 strong sales team to support its National Account business. The sales team has up to
date information on industry sales trends, new product information and pricing and are able to recommend new or popular products
to customers to help them optimise the breadth of products offered. Conviviality's nationwide distribution network of eighteen
depots ensures customers benefit from a nationwide next day delivery service and timed delivery slots.
Conviviality Direct's other trading business, Bibendum, affords a range of over 4,000 wines,
with strength in old world wines sourced from over 300 suppliers, some with exclusive distribution, across 20 different
countries. Bibendum has significant skill and expertise in wine providing excellent training to all of its team and support to
its 3,500 strong customer base by advising them on the right ranges to meet their specific customer needs. Bibendum is based in
London with a sales force of 109 around the country. Consumer insight is a key strength of the Bibendum business and in turn its
demographic profiling and ranging capability is valued by its customer base. The new Plonk APP, which helps customers learn about
wine whilst also sharing their wine and food experiences and favourites is an exciting development from the team.
Bibendum PLB acquired Walker & Wodehouse in 2014. Walker and Wodehouse focuses on supplying
independent wine merchants and regional wholesalers with a number of exclusive products and producers. The business is separate
and distinct from Matthew Clark and Bibendum Wine in the On-Trade. Whilst this is a small part of Conviviality it is building the
business' skills and capabilities in independent specialist wholesale.
Conviviality Retail: David Robinson joined the Group on 1 July 2016
as Managing Director of Conviviality Retail. During the year Franchisee like for like retail sales improved to (1.3%) reflecting
the strategy to improve the quality of the estate and strengthen perceptions of the fascia and brands. We reported in the 2015
Annual Report that in the last two years the Group embarked on a major restructure of the Franchisee base and that the programme
had been completed, arresting the number of closures and successfully building a pipeline of openings. It is therefore pleasing
to report that during the year the number of store closures decreased to 34, almost half the prior year, and the number of stores
increased by 15% to 716, ahead of plan. 38 Franchisees joined the Group and the number of stores owned by multi-site Franchisees
increased by 42% to 364, a strong indication of the benefits of our model to independent
businesses.
The Company's 370 Franchisees are local people, employing local people and are passionate about
their customers and the communities in which they trade. Our Franchisees make a real difference in their local communities
through a relentless focus on meeting consumer needs, providing a unique customer experience. By operating at the heart of their
communities they play a key role in re-energising their locality, their stores are exciting and energising places to shop, their
people serve with care, consideration and great responsibility.
It is also pleasing that Wine Rack continues to perform well. During 2016 we opened three new
Wine Rack locations in Ascot, Wilmslow and Yarnton. Wine Rack's Like-For-Like performance is up 3.2%, reflecting the importance
of a specialist Wine and Spirits proposition on the high street. Six of our Wine Rack stores are now managed by existing
Franchisees of the Group.
Our offer to potential new Franchisees is increasingly compelling, enabling them to compete
effectively and generate solid profits. Our core model is predicated by Franchisee loyalty and commitment to upholding the values
of our brands. This, combined with the high standards that we set help deliver our differentiated "local customer experience". We
have some of the highest levels of loyalty in the sector with our Retail/Wholesale ratio at 96.6%.
Franchisees have seen the potential to improve their profits by over £6,000 per year, compared
to two years ago, through a consistent improvement in retail margin and the benefits of our award winning Franchisee share
scheme. The scheme enables Franchisees to be awarded up to 3,500 shares per store for achieving annual standards targets.
Conviviality Retail actively rewards Franchisee loyalty and compliance, this year 1.3 million shares will be allocated and to
date over £3.6 million has been awarded through the over rider scheme to our Franchisees.
The Conviviality Retail pricing policy is to be everyday low promotionally priced. On average
across our off licence range we have maintained competitiveness in spite of the heavy discounting in the market. Value and
consistent pricing is important to our customers and they appreciate the transparency of our pricing strategy, which in turn
increases customer loyalty.
The Conviviality Retail Strategy is to:
· Strengthen the relationship with
Franchisees to drive sustainable and profitable growth
· Attract quality new Franchisees and generate growth from within
· Strengthen the Bargain Booze brand,
Select Convenience and Wine Rack fascia by driving awareness and broadening its appeal to new
shoppers
· Build credibility and capability in
Wine to attract new more affluent customer groups
· Undertake complementary
acquisitions to drive long term value and expand into new territories using a mix of fascia and
formats
· To be recognised as the Suppliers'
strategic partner of choice for the off-licence and convenience channel
· Leverage Wholesale capability
into new markets
Conviviality Trading: James Lousada joined the Company as Managing
Director of Conviviality Trading on 6 June 2016 formerly holding the role of CEO at Carlsberg UK. Conviviality Trading brings
together PLB, Instil and Catalyst Brands, three specialist brand agency businesses, each with significant expertise in their
respective categories.
PLB was founded in 1982 and is a consolidator of wine suppliers and
in turn manages the supply of wine to the Off-Trade, incorporating Bibendum Wine's Off-Trade offering. PLB sells more than 9
million 9 litre cases of wine per annum to the UK retail trade including high street retailers, specialists and supermarkets and
it has built a reputation for significant expertise in wine, brand and innovation. PLB's supply base covers Europe, the Americas,
Australasia and South Africa, its portfolio includes prestigious brands such as Blason de Bourgogne, Catena, Plaimont, Banfi
and Kautz. PLB has capabilities in consumer insight, sourcing, ranging and supply that can add significant value to its customers
by reducing the complexity of the wine category in large multiple national chains.
Instil Drinks Co: is a brand agency business acting for brand owners
to increase distribution of beer and spirits brands (for example Estrella Galicia) to both the On-Trade and Off-Trade. Instil has
significant expertise in the beer category adding value to its customers through their understanding of world beers, craft beers
and local and regional ranging.
Catalyst Brands is an agency acting for Spirits and Wine brand
owners to increase distribution of brands to both the On- Trade and the Off-Trade. Catalyst Brands include Bottega wines and
Prosecco, J&B scotch whisky, Larios gin and Voss water.
In addition to the agency business, Conviviality Trading is also responsible for the development
and growth of new business areas including Peppermint and Wondering Wine Co, which are both specialists in outdoor events and
festivals, and Elastic, a brand activation agency that provides support and insight to many of Conviviality's branded supply
base.
Peppermint: is an outdoor event bar operator with significant
expertise in large scale events and festivals such as the Henley Regatta, the Isle of Wight Festival, British Summertime and
Bestival. In December 2015 Conviviality acquired 61% of the share capital of Peppermint Bars and Events Limited for a total
consideration of £8.0 million (£1.8 million cash and £6.2 million contingent consideration). Conviviality is committed to
acquire the remaining 39% in the year ending April 2020 or April 2021 based on EBITDA in the year ending April 2019 or April
2020.
Wondering Wine Co: is a premium outdoor bar operator formed as part
of Bibendum PLB. The business complements the work of Peppermint and the Company expects to see growth of Wondering Wine Co
through its association with the Peppermint business.
Elastic: is a marketing agency focused on experiential promotional
campaigns to launch or re-launch brands, utilising data to directly measure the impact of the promotional campaigns. Conviviality
works closely with Branded Suppliers many of whom not only want to increase distribution of brands but also build new brands or
reinvigorate brands. Elastic has significant expertise in the Drinks sector and as such supports many of Conviviality's suppliers
with Brand activation.
Conviviality Trading's key Strategic aims are to:
· Become the market leader and centre
of expertise in Wine sourcing, ranging, merchandising and activation providing its key customers with
unrivalled service to meet their customer needs by format and location.
· Develop a one stop service for
drinks brands leveraging distribution, sales, agency, marketing and event capabilities
· To be at the forefront of range innovation in the dynamic drinks sector
· To become recognised as the
suppliers' strategic partner of choice in the On-Trade
Group: the Group functions comprise Wine Buying, Logistics, Finance,
Legal, IT and Human Resources all of which provide the expertise and support to each of the business units, removing duplication
and in turn enabling the business units to focus directly on serving their customers and working in partnership with their
suppliers. The eighteen depots nationwide are managed through the Group Logistics function, driving best practice and
efficiencies and ensuring that each and every customer and Franchisee receives consistent service and support across every
outlet.
Operational Efficiencies
With the greater scale of the Group there is the potential to realise lower costs through buying
and distribution and improved organisational efficiency. A clear integration plan has been established to ensure the benefits of
both the Matthew Clark and Bibendum PLB acquisitions are achieved. By buying the two businesses in relatively close succession
the Company is able to simplify the integration process particularly in the areas of logistics and IT. The key benefit areas are
detailed as follow:
Buying benefits
There is overlap between suppliers and products across Conviviality and Matthew Clark and also
Bibendum PLB. As a result, the Group expects buying benefits through pricing and terms harmonisation across the Group. The
benefits from the Matthew Clark buying synergies are included in the Group forecasts. Further potential benefit will be realised
over time by taking a Group approach to buying. The Group has put in place a Group Wine Buying Director, Andrew Shaw, previously
Buying Director for Bibendum PLB, to set out the Group strategy for wine and take buying responsibility across the full Group. In
turn Group has put in place a Buying Director, Steve Jebson, previously Commercial Director at Greene King Plc, to buy spirits,
lager beer and cider and soft drinks for the On-Trade. Both of these important roles will help the Group ensure benefits are
realised through increased scale and synergy benefits achieved.
Logistics and Distribution
With the acquisition of Matthew Clark and the subsequent acquisition of Bibendum PLB, the depot
network of Conviviality has increased from two to eighteen depots nationwide and a third party logistics operation managed by DHL
Trade Team, as well as a fleet of over 260 vehicles. This depot network provides the Group with the opportunity to deliver better
service to its customers by being able to deliver nationwide next day with timed delivery slots and to drive a more efficient
operation through better route planning and vehicle utilisation. It is our expectation to deliver synergies of between £1.0m and
£1.5m in FY18. Furthermore it thas given Conviviality the opportunity to set out a clear strategy to optimise the network for
future growth over time as some leases of depots become available for review. To achieve this a Group Logistics structure has
been implemented and Nigel Basey has been appointed as Group Logistics and Distribution Director to lead this important work
across the Group.
Organisation
The enlarged group employs 2,639 people across eighteen depots and three support offices and
regional sales teams and as a result there is significant talent in the organisation. By bringing the respective teams in the
businesses closer together we are seeing clear opportunities to drive greater efficiencies, develop talent across the business
and drive operational savings. We expect organisational synergy benefits to be realised during the financial year
2018.
People
We see it as our responsibility to create a business that offers talented and committed people
sustainable and worthwhile employment, and a safe and secure environment where our people can grow and thrive. Developing our
management capability and developing our internal talent is key to our strategy.
In November 2015 we welcomed Sallyann Brookes as Group People Director to help ensure that we
have a common set of guiding principles behind the growth and development of our people. In January 2016 we welcomed Mark Aylwin
as Managing Director of Conviviality Direct; Mark joined the business from Booker Group Plc, where he held the position of
Managing Director Booker Direct, and was appointed to the Plc Board in May 2016. Nigel Basey joined the Group in March 2016 as
Group Logistics Director. Nigel joined from DHL and was previously at Homebase. On 6 June 2016 James Lousada joined the Group as
Managing Director of Conviviality Trading; James was previously the Chief Executive Officer of Carlsberg UK. David Robinson also
joined the Group as Managing Director of Conviviality Retail on 1 July 2016 and was previously the Chief Operating Officer of
Argos.
Current Trading
The Company and its businesses are trading in line with management's expectations. Matthew Clark
continues to trade at 4.8% above last year and it is pleasing to see that Bibendum has brought in 110 new customers since
acquisition on 20 May. We saw a strong start to the financial year in Conviviality Retail, although some softening has been
experienced in June 2016 with like-for-like sales to 3 July 2016 being (2.1%).
Outlook
We look to the year ahead with a stronger and more resilient business able to thrive in
uncertain economic times. It is our intention to continue to deliver against our integration plan during the year, ensuring the
benefits are realised from our transformational acquisitions. The performance of the businesses is encouraging, with the team's
relentless focus on serving their customers well and supporting Franchisees in the Retail business evidenced by the consistent
delivery of results. We continue to review the market within which we trade ensuring that we strengthen our position as the UK's
leading drinks and impulse wholesaler and distributor.
Diana Hunter
Chief Executive Officer
18 July 2016
FINANCIAL REVIEW
Overview
Following the transformational acquisition of Matthew Clark on 7 October 2015, sales grew 137%
to £864.5m (FY15 £364.1m) and adjusted EBITDA increased 135% to £30.2m (FY15 £12.9m).
Profit before tax, amortisation of intangible assets created on the acquisition of Matthew
Clark, exceptional items and mark to market adjustments ("Adjusted profit before tax") increased by 124% to £21.7m (FY15 £9.7m).
On the same basis, fully diluted adjusted earnings per share increased 27% to 14.2 pence (FY15 11.2 pence).
The acquisition of Matthew Clark was funded in part by £80.0m of term loans which increased net
debt at 1 May 2016 to £86.1m (26 April 2016 net cash of £1.2m). Leverage at 1 May 2016 was comfortably below the bank
covenant of 2.50 times Adjusted EBITDA at 1.96.
Revenue
Revenue increased by 137% to £864.5m (FY15: £364.1m) as the acquisition of Matthew Clark
increased sales by £497.0m and Conviviality Retail's sales for the 53 weeks ending 1 May were £366.9m (52 weeks ended 26 April
£364.1m). Conviviality acquired Peppermint, a small highly seasonal events business, in December 2015 which generated sales of
£0.6m.
Matthew Clark's sales teams remained focused during the acquisition and subsequent integration
and its customers responded well to the new ownership of Conviviality with sales 4.9% above the corresponding prior period. Sales
to National Accounts grew 5.4% and sales to Regional Customers increased by 3.8%. The number of customers and outlets both
increased 2.9% and revenue per outlet increased 1.9%.
Conviviality Retail's sales increased 0.8% as the benefit of an extra week's trading was offset
by a reduction in very low margin services sales from company owned stores following the franchise of 36 stores to James
Convenience Retail in April 2015.
During the year Conviviality Retail increased the number of stores by 15% to 716 (26 April 2015:
624) as the number of franchise stores grew 15% to 656 (26 April 2015: 571) driven by a 42% increase in the number of stores
owned by multi-site Franchisees to 364 (FY15: 257). Due to the timings of stores closures and new stores openings the
average number of stores trading per week increased by 4.4% to 635 (FY15: 608).
Conviviality Retail's sales grew more slowly than the average number of stores, reflecting like
for like sales generated by Franchise and company owned stores of (1.3%), the impact of acquiring 37 GT News stores in February
2015 which generated lower sales, and lower sales from stores closed or opened in the year.
Adjusted EBITDA
Adjusted EBITDA increased 135% to £30.2m (FY15: £12.9m) as the impact of 137% sales growth and a
1.3% point improvement in gross margin was partly offset by an increase in operating costs.
Gross margin improved to 11.5% (FY15: 10.2%) as Conviviality Retail's margins increased 0.6%
points and Matthew Clark generated gross margins of 12.0%.
Operating costs (excluding exceptional items, depreciation, amortisation, share based payment
charges and mark to market adjustments on foreign currency contracts) increased by £44.9m due to Matthew Clark and Peppermint
operating costs and the expansion of the Group function to drive synergies and provide strong governance.
In December 2015 Conviviality acquired 61% of the share capital of Peppermint Events Limited for
an initial consideration of £1.8m. Conviviality is committed to acquire the remaining 39% in the year ending April 2020 or
April 2021 based on EBITDA in the year ending April 2019 or April 2020. The timing of the final earn-out
will depend on whether Peppermint Events exceeds an EBITDA target that has been set for the year ending 2019. If the target is
not met the earn-out moves to the year ending 2020. Assuming EBITDA targets are achieved the total
consideration will be £8.0m. In accordance with IFRS 3, goodwill has been calculated on this basis at £7.4m.
Peppermint is a highly seasonal festival and events business and generated an adjusted EBITDA loss of £0.4m in the period ended 1
May 2016 on sales of £0.6m.
During 2016 Conviviality managed Conviviality Retail, Matthew Clark and Peppermint as discreet
trading entities and established a Group function. The adjusted EBITDA from each trading entity and the costs of the Group
function are shown below. The results for 2015 have been restated to highlight Group costs and aid comparison.
|
|
FY16
Adjusted EBITDA
£m
|
FY15
Adjusted EBITDA
£m
|
Variance
£m
|
|
Conviviality Retail
|
14.6
|
14.5
|
0.1
|
|
Matthew Clark
|
18.1
|
-
|
18.1
|
|
Peppermint
|
(0.4)
|
-
|
(0.4)
|
|
Group costs
|
(2.1)
|
(1.6)
|
(0.5)
|
|
Total
|
30.2
|
12.9
|
17.3
|
Conviviality Retail's adjusted EBITDA increased 0.7% as 0.8% sales growth coupled with a 0.6%
point higher margin increased margin by £2.3m which was largely offset by higher operating costs to support future
growth.
Matthew Clark's adjusted EBITDA increased by 18% over the corresponding prior period due to
strong sales growth, good margin management and tight cost control.
Peppermint is a highly seasonal business with over 80% of sales generated during the
summer. In the period since acquisition, as expected, Peppermint generated a loss.
Group costs include the costs of the Board, all costs associated with being a publically quoted
company and the costs of Group functions including finance, legal, human resources and logistics management. Group costs
have increased due to the strengthening of the Group team to provide good governance and accelerate synergies.
Profit before Tax
Group profit before tax increased £0.1m. The £17.3m increase in adjusted EBITDA and a £2.0m
favourable mark to market adjustment on foreign exchange contracts were offset by higher finance costs, exceptional items,
depreciation and amortisation, together with amortisation of Matthew Clark acquisition intangibles and an increase in share based
charges.
Finance costs increased to £2.5m primarily due to interest on £80m of term loans drawn down to
fund the acquisition of Matthew Clark and the amortisation of banking arrangement fees.
Exceptional items includes Matthew Clark acquisition costs of £5.9m and integration costs of
£3.3m.
Depreciation and amortisation (excluding amortisation of Matthew Clark acquisition intangibles)
increased £2.2m due to Matthew Clark and an increase in Conviviality Retail depreciation following investments in the store
estate and IT systems since IPO.
The intangible assets created on the acquisition of Matthew Clark comprise the Matthew Clark
brand of £23.9m and the customer base of £38.8m. The brand is being amortised over 10 years and the customer base over 6.5
years resulting in an amortisation charge of £4.8m in the period from 7 October 2015 to 1 May 2016.
Share based charges increased £0.7m due to our continued investment in the Franchise Investment
Plan, Matthew Clark management retention options and an increase in share options granted to the leadership team.
Adjusted profit before tax increased 124% to £21.7m (FY15: £9.7m) as adjusted EBITDA of £30.2m
was offset by finance charges of £2.5m, depreciation and amortisation of £4.2m and share based charges of £1.8m.
Tax
The tax charge of £3.8m represents tax on Group profit before tax and exceptional items of £4.2m
offset by a tax credit tax on exceptional items of £0.4m. The effective tax rate on Group profit before tax and exceptional
items is 22.0% due to changes in the substantially enacted tax rates for future years and disallowable expenses in Matthew Clark.
The tax credit on exceptional items is 3.5% due to disallowable transaction costs on the
acquisition of Matthew Clark.
Earnings per Share
Adjusted profit after tax increased 117% to £17.0m (FY15: £7.8m) and the basic weighted average
number of shares increased 76% to 115.3m (FY15: 65.5m) following the issue of 86.7m new shares to fund the acquisition of Matthew
Clark. This resulted in basic adjusted EPS increasing 23% to 14.7 pence (FY15: 12.0 pence).
Fully diluted weighted average shares increased 71% to 119.4m (FY15: 69.7m) resulting in fully
diluted adjusted EPS increasing 27% to 14.2 pence (FY15: 11.2 pence).
Cashflow and Funding
The Group is strongly cash generative with free cash flow (adjusted EBITDA plus changes in
working capital less capital expenditure, interest and tax) increasing by 100% to £11.4m (FY15: £5.7m) as adjusted EBITDA of
£30.2m was offset by an increase in working capital of £1.8m, net capital expenditure of £11.6m, interest payments of £2.9m and
tax payments of £2.5m.
Capital expenditure includes a continued investment in our Franchisees stores of £3.4m and the
development of IT systems, including a new EPOS system, of £4.3m, and the building of a replacement depot in Shefford (£3.3m)
which will be sold and leased back once construction is completed in the financial year ending 30 April 2017.
Cash reduced by £11.9m as free cash flow of £11.4m was offset by a net cash outflow on the
acquisition of Matthew Clark of £5.7m, restructuring and integration costs of £3.4m, consideration paid to acquire Peppermint of
£1.8m, term loan repayments of £4.0m and dividend payments of £7.4m.
The consideration for Matthew Clark was £199.0m which, together with £11.1m of debt acquired and
acquisition costs of £5.9m, resulted in a total investment of £216.0m. This investment was funded by proceeds from the
issue of new ordinary shares of £130.3m and new term loans of £80m generating a net cash out flow of £5.7m.
At 1 May 2016 the Group's net debt totalled £86.1m (26 April 2015: net cash of £1.2m) and
comprised £76.0m of term loans and £10.7m drawn down under the Group's working capital facilities, less unamortised banking
arrangement fees. The bank facilities include a leverage and an interest cover covenant. The leverage covenant
requires debt (excluding any amounts drawn down on under Matthew Clark's invoice discounting facility) to be less than 2.5 times
the last 12 months adjusted EBITDA. The interest cover covenant requires adjusted EBITDA to be at least four times net finance
charges. At the measurement date of 30 April 2016 leverage was 1.96 and interest cover was 12.1.
Bibendum PLB Group
On 20 May 2016 Conviviality acquired 100% of the share capital of Bibendum PLB Group for a cash
consideration of £39.7m plus the assumption of Bibendum PLB Group's debt on 29 April of £19.2m. Unaudited management
accounts for the 12 months ended 31 March 2016 indicate EBITDA before exceptional items for the period of approximately
£6.8m.
The acquisition was funded by the proceeds from the issue of new ordinary shares of £32.0m, a
new term loan of £10.0m and the transfer of Bibendum PLB Group's existing invoice discounting facility. The maximum draw
down on the invoice discounting facility is £30m and the net debt as at 1 May 2016 was £19.2m.
Post-acquisition of Bibendum PLB Group, Conviviality has term loans of £86.0m and working
capital facilities with a maximum draw down of £110.0m. The working capital facilities comprise a £50m invoice discounting
facility secured on Matthew Clark's debtors, a £30m invoice discounting facility secured on Bibendum PLB Group's debtors and a
£30m revolving credit facility.
The definition of debt used to calculate leverage has been adjusted to include £20.0m which
represents the core debt required by Bibendum PLB Group. The covenant remains that debt has to be less than 2.5 times the
last 12 months EBITDA. The interest cover covenant is unchanged.
Segmental Reporting
Following the acquisitions of Matthew Clark and Bibendum PLB Group the Group is being
restructured to enable buying, logistics, organisation and revenue synergies to be delivered. The restructuring will result
in revenues being discreetly reported for each of Conviviality's trading divisions (Conviviality Direct, Conviviality Retail and
Conviviality Trading) but the trading divisions will share a common supply chain, a single team will buy on behalf of all trading
divisions with complex commercial terms that reflect the overall Group rather than specific businesses, and back office functions
will support each trading division.
The Board has carefully considered the requirements of IFRS 8 and has concluded that there is
one segment of wholesale activities. However, to assist the understanding of performance we will disclose sales for each of
Conviviality Direct, Conviviality Retail and Conviviality Trading. Due to the acquisitions that have taken place during the 53
week period ending 1 May 2016, additional information has been disclosed to show adjusted EBITDA by business unit, however this
will not be disclosed going forward.
Dividend
Conviviality has a progressive dividend policy and aims to increase dividend cover (based on
fully diluted adjusted EPS) to two times by the year ending April 2020. In line with this policy a final dividend of 7.4
pence per share is proposed. Subject to shareholder approval at the Annual General Meeting, the final dividend will be paid on 7
October 2016 to shareholders on the register on 9 September 2016. This increases the total dividend for the year by 14% to 9.5
pence per share (FY15: 8.3 pence per share) and increases dividend cover to 1.5 times (FY15: 1.3 times).
Andrew Humphreys
Chief Financial Officer
18 July 2016
CONSOLIDATED INCOME STATEMENT
For the 53 weeks ended 1 May 2016 (2015: for the 52 weeks ended 26 April 2015)
|
|
Note
|
Before exceptional items
2016
£000
|
Exceptional items (note 4b)
2016
£000
|
Total
2016
£000
|
Before
exceptional items
2015
£000
|
Exceptional items (note 4b)
2015
£000
|
Total
2015
£000
|
|
Continuing operations
|
|
|
|
|
|
|
|
|
Revenue
|
3
|
864,496
|
-
|
864,496
|
364,092
|
-
|
364,092
|
|
Cost of sales
|
|
(765,330)
|
-
|
(765,330)
|
(327,093)
|
-
|
(327,093)
|
|
Gross profit
|
|
99,166
|
-
|
99,166
|
36,999
|
-
|
36,999
|
|
Operating expenses
|
3 & 4
|
(77,729)
|
(9,855)
|
(87,584)
|
(27,230)
|
(731)
|
(27,961)
|
|
Operating profit
|
4
|
21,437
|
(9,855)
|
11,582
|
9,769
|
(731)
|
9,038
|
|
Finance income
|
5
|
24
|
-
|
24
|
23
|
-
|
23
|
|
Finance costs
|
5
|
(2,526)
|
-
|
(2,526)
|
(75)
|
-
|
(75)
|
|
Profit before income tax
|
|
18,935
|
(9,855)
|
9,080
|
9,717
|
(731)
|
8,986
|
|
Income tax expense
|
6
|
(4,159)
|
349
|
(3,810)
|
(1,895)
|
(59)
|
(1,954)
|
|
Profit for the financial period
|
|
14,776
|
(9,506)
|
5,270
|
7,822
|
(790)
|
7,032
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
Cashflow hedge reserve
|
|
(86)
|
-
|
(86)
|
-
|
-
|
-
|
|
Total comprehensive income
|
|
14,690
|
(9,506)
|
5,184
|
7,822
|
(790)
|
7,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share
|
|
|
|
|
|
|
|
|
- Basic
|
7
|
|
|
4.6p
|
|
|
10.7p
|
|
- Diluted
|
7
|
|
|
4.4p
|
|
|
10.1p
|
The results for the financial period are derived from continuing operations.
All of the profit for the financial period and total comprehensive income are attributable to
the owners of the parent.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 1 May 2016
|
Non-current assets
|
Note
|
2016
£000
|
2015
£000
|
|
Property, plant and equipment
|
|
15,249
|
7,224
|
|
Goodwill
|
9
|
173,446
|
42,870
|
|
Intangible assets
|
10
|
66,158
|
1,833
|
|
Deferred taxation asset
|
|
1,419
|
647
|
|
Trade and other receivables
|
|
6,424
|
-
|
|
Total non-current assets
|
|
262,696
|
52,574
|
|
Current assets
|
|
|
|
|
Inventories
|
|
61,825
|
12,357
|
|
Trade and other receivables
|
|
151,928
|
33,669
|
|
Cash and cash equivalents
|
12
|
9,540
|
1,203
|
|
Derivatives
|
|
1,236
|
-
|
|
Total current assets
|
|
224,529
|
47,229
|
|
Total assets
|
|
487,225
|
99,803
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
|
(183,253)
|
(46,321)
|
|
Borrowings
|
11
|
(28,137)
|
(9)
|
|
Current taxation payable
|
|
(2,815)
|
(780)
|
|
Provisions
|
|
(449)
|
-
|
|
Total current liabilities
|
|
(214,654)
|
(47,110)
|
|
Non-current liabilities
|
|
|
|
|
Borrowings
|
11
|
(67,510)
|
(3)
|
|
Deferred tax liability
|
|
(11,165)
|
-
|
|
Trade and other payables
|
|
(6,159)
|
-
|
|
Provisions
|
|
(4,912)
|
-
|
|
Total non-current liabilities
|
|
(89,746)
|
(3)
|
|
Total liabilities
|
|
(304,400)
|
(47,113)
|
|
|
|
|
|
|
Net assets
|
|
182,825
|
52,690
|
|
Shareholders' equity
|
|
|
|
|
Share capital
|
|
75
|
57
|
|
Share premium
|
|
164,342
|
34,020
|
|
Share based payment and other reserves
|
|
3,847
|
2,002
|
|
Retained earnings
|
|
14,561
|
16,611
|
|
Total equity
|
|
182,825
|
52,690
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 53 weeks ended 1 May 2016
|
|
Note
|
Share capital
|
Share
premium
|
Share based payment
reserve
|
Other reserves
|
Retained
earnings
|
Total equity
|
|
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
Balance at 27 April 2014
|
|
57
|
34,020
|
1,014
|
(58)
|
14,818
|
49,851
|
|
Profit for the financial period
|
|
-
|
-
|
-
|
-
|
7,032
|
7,032
|
|
Total comprehensive income for the period
|
|
-
|
-
|
-
|
-
|
7,032
|
7,032
|
|
Transactions with owners:
|
|
|
|
|
|
|
|
|
Transfer of share-based payment charge
|
|
-
|
-
|
(25)
|
-
|
25
|
-
|
|
Dividends
|
8
|
-
|
-
|
-
|
-
|
(5,264)
|
(5,264)
|
|
Disposal of shares from EBT
|
|
-
|
-
|
-
|
32
|
-
|
32
|
|
Share-based payment charge
|
|
-
|
-
|
1,032
|
-
|
-
|
1,032
|
|
Deferred tax on share-based payment charge
|
|
-
|
-
|
(178)
|
-
|
-
|
(178)
|
|
Excess deferred tax deduction on share options
|
|
-
|
-
|
185
|
-
|
-
|
185
|
|
Total transactions with owners
|
|
-
|
-
|
1,014
|
32
|
(5,239)
|
(4,193)
|
|
Balance at 26 April 2015
|
|
57
|
34,020
|
2,028
|
(26)
|
16,611
|
52,690
|
|
Profit for the financial period
|
|
-
|
-
|
-
|
-
|
5,270
|
5,270
|
|
Cashflow hedge reserve for interest rate swap
|
|
-
|
-
|
-
|
(86)
|
-
|
(86)
|
|
Total comprehensive income for the period
|
|
-
|
-
|
-
|
(86)
|
5,270
|
5,184
|
|
Transactions with owners:
|
|
|
|
|
|
|
|
|
Issue of new ordinary shares
|
|
18
|
130,322
|
-
|
-
|
-
|
130,340
|
|
Transfer of share-based payment charge
|
|
-
|
-
|
(94)
|
-
|
94
|
-
|
|
Dividends
|
8
|
-
|
-
|
-
|
-
|
(7,414)
|
(7,414)
|
|
Share-based payment charge
|
|
-
|
-
|
1,661
|
-
|
-
|
1,661
|
|
Deferred tax on share-based payment charge
|
|
-
|
-
|
364
|
-
|
-
|
364
|
|
Total transactions with owners
|
|
18
|
130,322
|
1,931
|
-
|
(7,320)
|
124,951
|
|
Balance at 1 May 2016
|
|
75
|
164,342
|
3,959
|
(112)
|
14,561
|
182,825
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF CASH FLOWS
For the 53 weeks ended 1 May 2016
|
Cash flows from operating activities
|
Note
|
2016
£000
|
2015
£000
|
|
Cash generated from operations
|
12
|
27,250
|
11,496
|
|
Interest paid
|
|
(2,898)
|
(75)
|
|
Income tax paid
|
|
(2,524)
|
(1,645)
|
|
Net cash generated from operating activities
|
|
21,828
|
9,776
|
|
Cash flows from investing activities
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(7,710)
|
(4,166)
|
|
Purchases of intangible assets
|
10
|
(4,158)
|
(806)
|
|
Proceeds from sale of property, plant and equipment
|
|
240
|
281
|
|
Interest received
|
|
13
|
23
|
|
Purchase of subsidiary undertakings (net of cash acquired)
|
13
|
(200,412)
|
(6,495)
|
|
Net debt and debt like items on purchase of subsidiary undertaking
|
13
|
(11,085)
|
-
|
|
Exceptional costs incurred on acquisition of subsidiary undertakings
|
|
(8,956)
|
-
|
|
Purchase of other business combinations
|
9 & 13
|
(796)
|
(2,146)
|
|
Proceeds from sale of other business combinations
|
|
195
|
-
|
|
Net cash used in investing activities
|
|
(232,669)
|
(13,309)
|
|
Cash flows from financing activities
|
|
|
|
|
Dividends paid
|
8
|
(7,414)
|
(5,264)
|
|
Repayments of borrowings
|
|
(4,025)
|
(6)
|
|
Proceeds from sale of shares
|
|
130,340
|
-
|
|
Proceeds from sale of shares held by EBT
|
|
-
|
32
|
|
Proceeds from term loans
|
11
|
80,000
|
-
|
|
Net cash proceeds from / (used in) financing activities
|
|
198,901
|
(5,238)
|
|
Net decrease in cash and cash equivalents
|
|
(11,940)
|
(8,771)
|
|
Cash and cash equivalents at the beginning of the period
|
12
|
1,203
|
9,974
|
|
Effect of movements in exchange rates of cash held
|
|
22
|
-
|
|
Cash and cash equivalents at the end of the period
|
12
|
(10,715)
|
1,203
|
|
|
|
|
|
NOTES TO THE FINAL RESULTS
1. General
Information
This preliminary financial information does not constitute statutory accounts for the Group for
the financial periods ended 1 May 2016 and 26 April 2015, but has been derived from those accounts. Statutory accounts for the
financial period ended 1 May 2016 will be delivered following the Company's annual general meeting. The auditors have
reported on those accounts and their reports were unqualified and did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
The financial information included in this announcement has been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by the European Union, however, this announcement in itself does
not contain sufficient information to comply with IFRS. The accounting policies used in preparation of this announcement are
consistent with those in the full financial statements which have yet to be published.
The principal activity of Conviviality Plc (the "Company") and its subsidiaries (together, the
"Group" or "Conviviality") is that of wholesale of beers, wines, spirits, tobacco, grocery and confectionery to the UK On-Trade
and Off-Trade markets.
The Company is incorporated and domiciled in the United Kingdom. The address of its registered
office is: Weston Road, Crewe, Cheshire CW1 6BP. The registered number of the Company is 5592636.
The financial information presented is for the 53 week periods ended 1 May 2016 and the 52 weeks
ended 26 April 2015. The consolidated financial information is presented in sterling, which is also the functional currency of
the parent company, and has been rounded to the nearest thousand (£000).
2. Accounting
Policies
The principal accounting policies applied in the preparation of the consolidated financial
information are set out below. These policies have been consistently applied to all periods presented, unless otherwise
stated.
Basis of preparation
The Consolidated Financial Statements for the 53 weeks ended 1 May 2016 have been prepared in
accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial information has been prepared on a
going concern basis and under the historical cost convention.
The Directors have prepared cash flow forecasts for the period until April 2019. Based on these,
the Directors confirm that there are sufficient cash reserves to fund the business for the period under review, and believe that
the Group is well placed to manage its business risk successfully. There is also new funding in place as a result of the
acquisition of Matthew Clark (Holdings) during the financial period and the Group is forecasted to be cash generative going
forward. For this reason they continue to adopt the going concern basis in preparing the financial statements.
Basis of consolidation
The financial information comprises a consolidation of the financial information of Conviviality
Plc and all its subsidiaries. The financial period ends of all Group entities are coterminous.
Subsidiaries are all entities to which the Group is exposed, or has rights to variable returns
from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the
date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated except to the extent they provide evidence of impairment of the
asset transferred.
The Group operates an Employee Benefit Trust ('EBT') and a Franchisee Incentive Trust ('FIT')
for the purposes of acquiring shares to fund share awards made to employees and Franchisees respectively. The assets and
liabilities of these trusts have been included in the consolidated financial information. The cost of purchasing own shares held
by the EBT and FIT are accounted for in other reserves.
Segment Information
The Group's activities consist of the wholesale and retail distribution of beers, wines,
spirits, tobacco, grocery and confectionery within the United Kingdom to both the On-Trade and Off-Trade market. The Chief
Executive Officer is considered to be the chief operating decision maker (CODM).
Each trading division within Conviviality Plc wholesales to businesses that retail alcohol via
stores, pubs, bars, restaurants and events. The performance of each division is therefore driven by the UK market for alcohol
consumption, which is a single market with a single set of economic characteristics and risks. In addition 90% of the Group's
sales are of the same products and the sales process is similar in each division and is serviced by a single supply chain.
Consequently, all activities are reported as one segment. To assist with the understanding of performance, however, an analysis
of sales are disclosed for each of the trading divisions.
Due to the acquisitions that have taken place during the 53 week period ending 1 May 2016,
additional information has been disclosed for adjusted EBITDA by business unit for this financial period. This information will
not be monitored internally and therefore will not be provided in the segmental analysis in future periods:
|
|
Conviviality Retail
£000
|
Matthew Clark
£000
|
Peppermint Events
£000
|
Group Costs
£000
|
Total 2016
£000
|
Total 2015
£000
|
|
|
|
|
|
|
|
|
|
Revenue
|
366,915
|
497,003
|
578
|
-
|
864,496
|
364,092
|
|
Adjusted EBITDA
|
14,646
|
18,065
|
(408)
|
(2,135)
|
30,168
|
12,854
|
|
|
|
|
|
|
|
|
|
Exceptional costs
|
|
|
|
|
(9,855)
|
(731)
|
|
Share-based payment charge
|
|
|
|
|
(1,767)
|
(1,073)
|
|
Depreciation and amortisation
|
|
|
|
|
(4,168)
|
(2,012)
|
|
Amortisation of acquisition intangible assets
|
|
|
|
(4,754)
|
-
|
|
Fair value of foreign exchange derivatives
|
|
|
|
1,958
|
-
|
|
Operating profit
|
|
|
|
|
11,582
|
9,038
|
The CODM manages the business using adjusted EBITDA pre-exceptional costs. The table below
provides a reconciliation from this figure, to the reported profit before tax in the consolidated income statement:
|
|
|
2016
£000
|
2015
£000
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
30,168
|
12,854
|
|
Depreciation
|
|
(2,833)
|
(1,887)
|
|
Amortisation of non-acquisition intangible assets
|
|
(1,335)
|
(125)
|
|
Share based payment charge
|
|
(1,767)
|
(1,073)
|
|
Net finance expense
|
|
(2,502)
|
(52)
|
|
Adjusted profit before income tax
|
|
21,731
|
9,717
|
|
Exceptional costs
|
|
(9,855)
|
(731)
|
|
Amortisation of acquisition intangible assets
|
|
(4,754)
|
-
|
|
Fair value of foreign exchange derivatives
|
|
1,958
|
-
|
|
Profit before income tax
|
|
9,080
|
8,986
|
No individual customer accounted for 10% or more of the Group's revenue in either 2016 or
2015.
3. Operating
Profit
(a) Operating profit is arrived at after charging / (crediting)
|
|
Note
|
2016
£000
|
2015
£000
|
|
|
|
|
|
|
Distribution costs
|
|
33,761
|
6,571
|
|
Depreciation of property, plant and equipment
|
|
2,833
|
1,887
|
|
Amortisation of intangible assets
|
10
|
6,089
|
125
|
|
Profit on disposal of property, plant and equipment
|
|
(65)
|
(28)
|
|
Operating lease payments
|
|
|
|
|
- Land and buildings
|
|
4,187
|
2,216
|
|
- Plant and machinery
|
|
3,621
|
1,527
|
|
Share based payment expense (non-exceptional)
|
|
1,767
|
1,073
|
|
Fair value of foreign exchange derivatives
|
|
(1,958)
|
-
|
|
Exceptional items
|
4(b)
|
9,855
|
731
|
(b) Exceptional costs
The exceptional costs which are recognised within operating costs, are analysed
below:
|
|
|
2016
£000
|
2015
£000
|
|
|
|
|
|
|
Costs associated with the acquisition of Matthew Clark (Holdings) Limited
|
|
5,941
|
-
|
|
Costs associated with the integration of Matthew Clark (Holdings) Limited
|
|
3,322
|
-
|
|
Costs associated with other business combinations
|
|
170
|
257
|
|
Other non-recurring events and projects
|
|
422
|
474
|
|
Total exceptional items
|
|
9,855
|
731
|
The costs associated with the acquisition of Matthew Clark (Holdings) Limited include
professional fees incurred during the acquisition.
The costs associated with the integration of Matthew Clark (Holdings) Limited include management
restructuring and consultancy costs associated with the generation of buying, logistics and organisational synergies.
Costs associated with other business combinations include £58,000 additional costs incurred in
respect of the purchase of GT News (Holdings) Limited, £81,000 relating to the acquisition of Peppermint Events and £31,000
relating to the acquisition of Bibendum PLB. Further details of these transactions are included in note 13.
Costs associated with other business combinations in 2015 include £237,000 incurred in respect
of the purchase of GT News (Holdings) Limited and £20,000 of additional costs in respect of the trade and assets purchase of 31
stores from R N B Stores Limited.
Other non-recurring events and projects of £422,000 (2015: £474,000) relate to professional and
consultancy charges arising from one-off transactional activity of £208,000 (2015: £19,000) and restructuring and reorganisation
costs of £214,000 (£455,000) following an exercise to create efficiencies and streamline processes.
4. Finance Income and
Expense
|
|
|
2016
|
2015
|
|
|
|
£000
|
£000
|
|
Finance income
|
|
|
|
|
Bank interest receivable
|
|
24
|
23
|
|
Total finance income
|
|
24
|
23
|
|
|
|
|
|
|
Finance expense
|
|
|
|
|
Receivables financing facility
|
|
310
|
75
|
|
Term loans
|
|
1,436
|
-
|
|
Revolving credit facility
|
|
66
|
-
|
|
Tobacco guarantees
|
|
229
|
-
|
|
Amortisation of arrangement fees
|
|
231
|
-
|
|
Non-utilisation charges
|
|
235
|
-
|
|
Other bank interest
|
|
19
|
-
|
|
Total finance expense
|
|
2,526
|
75
|
5. Income Tax
Expense
|
Current tax:
|
|
|
2016
£000
|
2015
£000
|
|
Current tax on profits for the period
|
|
|
4,579
|
1,737
|
|
Adjustment in respect of prior periods
|
|
|
(25)
|
4
|
|
Total current tax
|
|
|
4,554
|
1,741
|
|
Deferred tax:
|
|
|
|
|
|
Origination and reversal of temporary differences
|
|
|
(884)
|
212
|
|
Changes in taxation rate
|
|
|
140
|
1
|
|
Total deferred tax
|
|
|
(744)
|
213
|
|
Income tax expense
|
|
|
3,810
|
1,954
|
|
|
|
|
2016
£000
|
2015
£000
|
|
Tax on profit before exceptional items
|
|
|
4,159
|
1,895
|
|
Tax on exceptional items
|
|
|
(349)
|
59
|
|
Total income tax expense
|
|
|
3,810
|
1,954
|
|
Amounts recognised equity:
|
|
|
2016
£000
|
2015
£000
|
|
Deferred tax on share-based payment charge
|
|
|
364
|
(178)
|
|
Excess deferred tax deduction on share options
|
|
|
-
|
185
|
|
Total amounts recognised in equity
|
|
|
364
|
7
|
Income Tax Expense (continued)
The tax charge differs from the theoretical amount that would arise using the weighted average
tax rate applicable to profits of the consolidated entities as follows:
|
|
|
2016
£000
|
2015
£000
|
|
Profit before
tax
|
|
9,080
|
8,986
|
|
Profit on ordinary activities multiplied by rate of corporation tax in the UK of 20.00%
(2015: 20.93%)
|
|
1,816
|
1,881
|
|
Tax effects of:
|
|
|
|
|
- Expenses not deductible for tax purposes
|
|
1,764
|
114
|
|
- Changes in taxation rate
|
|
165
|
1
|
|
- Share option movements
|
|
(16)
|
19
|
|
- Adjustment in respect of prior periods
|
|
132
|
(61)
|
|
- Movement in deferred tax not provided
|
|
(46)
|
-
|
|
- Other differences
|
|
(5)
|
-
|
|
Tax charge
|
|
3,810
|
1,954
|
Factors that may affect future tax charges
Reductions in the UK corporation tax rate from 23% to 21% (effective 1 April 2014) and to 20%
(effective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017)
and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. An additional reduction to 17% (effective
1 April 2020) was announced in the Budget on 16 March 2016. This will reduce the company's future tax charge accordingly and the
relevant deferred tax balances have been re-measured.
6. Earnings Per Ordinary
Share
As at 26 April 2015 66,940,383 ordinary shares were in issue. During the year, an additional
88,298,105 ordinary shares were issued giving 155,238,488 shares in issue as at 1 May 2016.
|
|
|
2016
|
2015
|
|
Profit attributable to ordinary shareholders (£000)
|
5,270
|
7,032
|
|
Basic earnings per share (pence)
|
|
4.6
|
10.7
|
|
Diluted earnings per share (pence)
|
|
4.4
|
10.1
|
Basic and diluted earnings per share are calculated by dividing the profit for the period
attributable to equity holders by the weighted average number of shares.
|
|
|
2016
Number
|
2015
Number
|
|
Basic weighted average
|
|
115,263,828
|
65,452,630
|
|
Diluted weighted average
|
|
119,429,816
|
69,654,641
|
Earnings Per Ordinary Share (continued)
The basic weighted average number of ordinary shares is calculated as follows:
|
|
|
2016
Number
|
2015
Number
|
|
Ordinary shares in issue at 26 April 2015
|
|
66,940,383
|
66,713,020
|
|
- Effect of Employee Benefit Trust (EBT) shares held
|
(954,755)
|
(2,116,279)
|
|
- Effect of shares issued for the Share Inventive Plan (SIP)
|
178,098
|
119,889
|
|
- Effect of shares issued for the Matthew Clark acquisition
|
48,355,795
|
-
|
|
- Effect of shares issued for the Zeus Capital warrant
|
744,307
|
-
|
|
- Effect of shares options granted
|
-
|
736,000
|
|
Weighted average number of ordinary shares at 1 May 2016
|
115,263,828
|
65,452,630
|
The difference between the basic and diluted average number of shares represents the dilutive
effect of share options and warrants in existence. The weighted average number of shares can be reconciled to the weighted
average number of shares including dilutive shares as follows:
|
|
|
2016
Number
|
2015
Number
|
|
Basic weighted average shares
|
|
115,263,828
|
65,452,630
|
|
Diluted effect of
|
|
|
|
|
- Exceptional employee share incentive plans, resulting from IPO
|
814,749
|
812,298
|
|
- Warrant granted to Zeus Capital
|
-
|
472,910
|
|
- Employee share incentive plan
|
|
1,280,019
|
811,553
|
|
- Franchisee share incentive plan
|
|
2,071,220
|
2,105,250
|
|
Total dilutive effect of share incentive plans
|
4,165,988
|
4,202,011
|
|
|
|
|
|
Diluted weighted average number of shares
|
119,429,816
|
69,654,641
|
Adjusted earnings per share
Although not presented on the face of the Income statement, the adjusted earnings per share,
profit after tax, but before exceptional items, is calculated below:
|
|
|
2016
|
2015
|
|
Adjusted profit attributable to ordinary shareholders (£000)
|
16,950
|
7,822
|
|
Adjusted Basic earnings per share (pence)
|
14.7
|
12.0
|
|
Adjusted Diluted earnings per share (pence)
|
14.2
|
11.2
|
Adjusted basic and diluted earnings per share are calculated by dividing the adjusted profit
before income tax of £21,731,000 (note 3), less tax at the effective rate of 22% (£4,781,000), by the weighted average number of
shares, which is the same as disclosed in the table above.
7. Dividends
Amounts recognised as distributions to ordinary shareholders in the period comprise:
|
|
2016
|
2015
|
|
|
£000
|
£000
|
|
|
|
|
|
Final dividend for 2015 of 6.3 pence and 2014 of 6.0 pence per ordinary
share
|
4,235
|
4,006
|
|
Interim dividend for 2016 of 2.1 pence and 2015 2.0 pence per ordinary
share
|
3,260
|
1,339
|
|
Less amounts received by the Employee Benefit Trust
|
(81)
|
(81)
|
|
|
7,414
|
5,264
|
The 2016 final proposed dividend of £12,643,000 (7.4 pence per share) has not been accrued as it
had not been approved by the period end. Sufficient reserves are in place to pay the final proposed dividend.
8. Goodwill
|
|
Total
£000
|
|
Cost and net book value
|
|
|
At 27 April 2014
|
35,510
|
|
Acquisitions through business combinations
|
7,115
|
|
Other acquisitions
|
245
|
|
At 26 April 2015
|
42,870
|
|
Acquisitions through business combinations (note 13)
|
129,910
|
|
Other acquisitions (note 13)
|
796
|
|
Other disposals
|
(130)
|
|
At 26 April 2015
|
173,446
|
Other acquisitions relate a number of individual smaller store acquisitions for a total cash
consideration of £796,000, all of which has been recognised as goodwill. When purchasing individual stores the Group is
purchasing both the trade and assets of the store.
Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are
expected to benefit from that business combination or are established as a result of the business combination. The carrying
amount of goodwill has been allocated as follows:
|
|
2016
|
2015
|
|
|
£000
|
£000
|
|
Bargain Booze
|
37,084
|
36,418
|
|
Wine Rack
|
720
|
720
|
|
GT News (Holdings)
|
5,748
|
5,732
|
|
Matthew Clark (Holdings)
|
122,438
|
-
|
|
Peppermint Events
|
7,456
|
-
|
|
At 1 May 2016
|
173,446
|
42,870
|
Goodwill has an indefinite useful life and is subject to annual impairment testing. The
recoverable amounts of the CGUs are determined from value-in-use calculations. The value in use is the present value of the
pre-tax cash flow projections. The key assumptions used in determining value in use are growth rates and the discount
rate.
Goodwill (continued)
For each CGU, cash flow projections are based on the most recent financial budgets approved by
management for one year. Subsequent cash flows are extrapolated using an estimated annual growth rate of 2% for a further nine
years and terminal growth rates of 0% are then applied to perpetuity. These rates are below the average growth rate for the
industry. The rate used to discount the projected cash flows, being a pre-tax risk-adjusted discount rate, is 7.4% (2015: 7.6%).
This has been calculated using the Group's weighted average cost of capital, taking account of market assessment of risks. Risk
factors are similar in each of the Group's CGUs. All assumptions apply to all CGU's due to each CGU wholesaling to businesses
that retail alcohol via stores, pubs, bars, restaurants and events and the performance of each CGU is therefore driven by the UK
market for alcohol consumption which is a single market with a single set of economic characteristics and risks.
Management have reviewed the key assumptions in the forecast and have concluded that no
impairment is required in respect of the carrying values of the goodwill. A sensitivity analysis on the impairment test of each
CGU's carrying value including reducing sales levels and increasing the discount rate has also been carried out. At 1 May 2016,
no reasonably expected change in the key assumptions would give rise to an impairment charge for any CGU, and the assumptions
accordingly, are not sensitive.
9. Intangible
Assets
|
|
Other
£000
|
Brands & Customer base
£000
|
Total
£000
|
|
Cost
|
|
|
|
|
At 27 April 2014
|
-
|
838
|
838
|
|
Acquisitions through business combinations
|
-
|
342
|
342
|
|
Additions
|
806
|
-
|
806
|
|
At 26 April 2015
|
806
|
1,180
|
1,986
|
|
Acquisitions through business combinations (note 12)
|
3,313
|
62,943
|
66,256
|
|
Additions
|
4,158
|
-
|
4,158
|
|
At 1 May 2016
|
8,277
|
64,123
|
72,400
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
At 27 April 2014
|
-
|
28
|
28
|
|
Charge for the year
|
79
|
46
|
125
|
|
At 26 April 2015
|
79
|
74
|
153
|
|
Charge for the year
|
1,252
|
4,837
|
6,089
|
|
At 1 May 2016
|
1,331
|
4,911
|
6,242
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
At 1 May 2016
|
6,946
|
59,212
|
66,158
|
|
At 26 April 2015
|
727
|
1,106
|
1,833
|
Acquired brands and customer bases are initially recognised at their fair value on acquisition.
Acquired brands are amortised over 10 or 20 years and customer bases are amortised over their expected life of 6.5
years.
Other intangible assets are predominantly software costs which are initially recognised at their
cost on acquisition and amortised over 5 years.
10. Borrowings
|
Current
|
2016
£000
|
2015
£000
|
|
Term loan A
|
(8,000)
|
-
|
|
Arrangement fees on term loans
|
165
|
-
|
|
Receivables financing facility
|
(20,255)
|
-
|
|
Obligations under finance leases (due in less than one
year)
|
(47)
|
(9)
|
|
Total Current
|
(28,137)
|
(9)
|
|
Non-current
|
|
|
|
Term loan A
|
(28,000)
|
-
|
|
Term loan B
|
(40,000)
|
-
|
|
Arrangement fees on term loans
|
565
|
-
|
|
Obligations under finance leases (due between two and five
years)
|
(75)
|
(3)
|
|
Total Non-current
|
(67,510)
|
(3)
|
|
Total
|
(95,647)
|
(12)
|
The Group has tills under finance leases totaling £3,000 as at 1 May 2016, that were acquired
through the acquisition of GT News (Holdings) Limited. The Group also has assets required for events such as marquees under
finance leases totaling £119,000 as at 1 May 2016, that were acquired through the acquisition of Peppermint Events Limited during
the year. The obligations under finance leases are secured on the assets to which they relate.
The Group entered into a Receivables Financing agreement dated 9 October 2015. Under this
agreement the Group can sell any debts owed to Matthew Clark Wholesale Limited by its customers who have purchased goods or
services from Matthew Clark Wholesale Limited. The maximum facility available is 80% of the allowable trade receivables up to
£50,000,000. At 1 May 2016, the amount drawn down under this facility was £20,255,000 (2015: £Nil). The discount margin for the
funding of debts is 1.25%. There is a non-utilisation fee of 0.5% of the available facility payable during the minimum period of
the facility, being 24 months from the date of the agreement. The agreement terminates on 9 October 2020. An arrangement fee of
£250,000 was incurred on this agreement, which is being amortised over five years.
The Group entered into a senior term and revolving facilities agreement with a £10,000,000
Accordion option on 7 September 2015. Under this agreement the Group drew down two term facilities (Term loan A £40,000,000 and
Term loan B £40,000,000) to fund the acquisition of Matthew Clark Wholesale Limited on 7 October 2015. The Group also has a
Revolving Credit Facility (RCF) of £42,500,000. The Accordion option allows the Group to request an increase to the RCF up
to a maximum of £10,000,000 during the term of the agreement.
The Group has put in place bank-issued guarantees for the benefit of certain suppliers amounting
to £12,500,000 at 1 May 2016 (2015: £12,500,000). These have been drawn down from the RCF. The remainder of the RCF totaling
£30,000,000 has not been drawn at 1 May 2016. In addition the Accordion option of £10,000,000 has not been utilised at 1 May
2016.
The interest margin payable on the two terms loans and the RCF is 2.5% above Libor. A
non-utilisation fee of 1.0% is payable on the RCF up to the agreement termination date of 7 September 2020. An arrangement fee of
£1,260,000 was incurred on this agreement. The element relating to the RCF (£437,000) is being amortised through prepayments over
the life of the agreement. The element relating to the term loans (£823,000) is being amortised over the life of the agreement
with the balance as at 1 May 2016 of £730,000 being netted off against the term loans in short term and long term
borrowings.
Borrowings (continued)
The senior term and revolving facilities agreement terminates on 7 September 2020 and the two
term loans are repayable as follows:
|
|
Term Loan A £40,000,000
|
Term Loan B £40,000,000
|
|
24 April 2016
|
4,000
|
-
|
|
23 October 2016
|
4,000
|
-
|
|
30 April 2017
|
4,000
|
-
|
|
29 October 2017
|
4,000
|
-
|
|
29 April 2018
|
4,000
|
-
|
|
28 October 2018
|
4,000
|
-
|
|
28 April 2019
|
4,000
|
-
|
|
27 October 2019
|
4,000
|
-
|
|
26 April 2020
|
4,000
|
-
|
|
Termination date (7 September 2020)
|
4,000
|
40,000
|
|
Total
|
40,000
|
40,000
|
The RCF is repayable at the end of each interest period. The interest period can be selected by
the Group at the point of drawdown and can be one, three or six months.
All amounts outstanding under the facilities are secured by debentures over certain assets of
the Group.
11. Cash Generated From Operations
and Net Debt
|
|
|
2016
£000
|
2015
£000
|
|
Profit before tax including acquisitions
|
|
9,080
|
8,986
|
|
Adjustments for:
|
|
|
|
|
- Depreciation
|
|
2,833
|
1,887
|
|
- Amortisation
|
|
6,089
|
125
|
|
- Profit on sale of property, plant & equipment
|
|
(65)
|
(28)
|
|
- Loss on sale of shares held by EBT
|
|
-
|
1
|
|
- Equity settled share options charge
|
|
1,661
|
1,032
|
|
- Fair value of foreign exchange derivatives
|
|
(1,958)
|
-
|
|
- Net finance costs (note 5)
|
|
2,502
|
52
|
|
- (Increase) / decrease in inventories
|
|
(5,358)
|
649
|
|
- Increase in trade and other receivables
|
|
(7,984)
|
(1,169)
|
|
- Increase / (decrease) in trade and other payables
|
|
11,904
|
(296)
|
|
- Decrease in provisions
|
|
(410)
|
-
|
|
- Costs associated with acquisition of subsidiaries (note 13)
|
|
8,956
|
257
|
|
Cash generated from operations
|
|
27,250
|
11,496
|
The operating cash flows include an exceptional outflow of £422,000 in the 53 weeks ended 1 May
2016 (2015: £474,000) which relates to professional and consultancy charges arising from transactional activity and other one-off
projects. The costs associated with acquisition of subsidiaries have all been treated as exceptional items.
|
|
Net debt at 26 April 2015
|
Cashflow
|
Net debt at 1 May 2016
|
|
|
£000
|
£000
|
£000
|
|
Cash and cash equivalents
|
1,203
|
8,337
|
9,540
|
|
Receivables financing facility (note 11)
|
-
|
(20,255)
|
(20,255)
|
|
Total cash and cash equivalents
|
1,203
|
(11,918)
|
(10,715)
|
|
Other Borrowings - short term (note 11)
|
(9)
|
(7,873)
|
(7,882)
|
|
Borrowings - long term (note 11)
|
(3)
|
(67,507)
|
(67,510)
|
|
|
1,191
|
(87,298)
|
(86,107)
|
|
Add back cash
|
(1,203)
|
(8,337)
|
(9,540)
|
|
Net debt (note 11)
|
(12)
|
(95,635)
|
(95,647)
|
12. Business Combinations
Matthew Clark (Holdings) Limited
On 7 October 2015, the Group entered into an agreement to acquire the entire issued share
capital of Matthew Clark (Holdings) Limited for a total consideration of £199.0 million in cash. Matthew Clark (Holdings) Limited
is a leading independent wholesaler in the drinks industry. This acquisition is consistent with the Group's ongoing
strategy of expanding the Group's wholesaling expertise and entering new markets and channels. The acquisition, together with the
current businesses in the Group, creates a unique offering that addresses both the On-Trade and Off-Trade retailers. Significant
synergies across buying, distribution, organisational efficiencies and additional revenue generation are expected to be achieved
by bringing the businesses together.
The following table summarises the consideration paid for Matthew Clark (Holdings) Limited, and
the amount of assets acquired and liabilities assumed recognised at the acquisition date.
|
|
Book value
|
Fair value Adjustment
|
Fair value
|
|
|
£000
|
£000
|
£000
|
|
Property, plant and equipment
|
4,074
|
(891)
|
3,183
|
|
Intangible assets
|
3,624
|
(311)
|
3,313
|
|
Inventories
|
44,238
|
(266)
|
43,972
|
|
Trade and other receivables
|
116,738
|
(359)
|
116,379
|
|
Net debt and debt like items
|
(10,838)
|
(247)
|
(11,085)
|
|
Trade and other payables
|
(122,979)
|
(1,084)
|
(124,063)
|
|
Derivatives
|
(634)
|
-
|
(634)
|
|
Deferred tax liability
|
402
|
(11,859)
|
(11,457)
|
|
Provisions
|
(603)
|
(5,167)
|
(5,770)
|
|
Total identifiable net assets
|
34,022
|
(20,184)
|
13,838
|
|
|
|
|
|
|
Allocation to intangible assets - Brands (note 10)
|
|
|
23,900
|
|
Allocation to intangible assets - Customer Base (note 10)
|
|
|
38,800
|
|
Goodwill (note 9)
|
|
|
122,438
|
|
Total consideration satisfied by cash
|
|
|
198,976
|
|
|
|
|
|
|
Cash flow
|
|
|
|
|
Cash consideration
|
|
|
198,976
|
|
Debt acquired with subsidiary
|
|
|
11,085
|
|
Acquisition costs (expensed to exceptional operating costs)
|
|
9,263
|
|
Acquisition costs (accrued and not yet paid out)
|
|
(477)
|
|
|
|
|
218,847
|
Adjustments made to the fair value of assets acquired include the recognition of the deferred
tax liability relating to the intangible asset (£11,859,000), additional provisions and accruals to recognise three onerous
contacts that were in place at acquisition (£4,851,000), additional provisions to recognise that renovation works needed to be
carried out at specific depots (£1,000,000) and impairments for property plant and equipment that is impaired at the point of
acquisition (£891,000).
The goodwill arising on acquisition represents the premium paid to acquire Matthew Clark
(Holdings) Limited and the future economic benefits arising from other assets acquired in the business combination that are not
individually identified and separately recognised on the acquisition of Matthew Clark (Holdings) Limited; these largely relate to
synergy and integration benefits. Goodwill has been allocated to the Matthew Clark (Holdings) cash-generating unit
('CGU').
Business Combinations (continued)
Acquisition costs of £9,263,000 have been charged to exceptional items in the consolidated
income statement for the period (note 4). These represent costs incurred during the acquisition and costs associated with the
integration of Matthew Clark (Holdings) Limited including management restructuring and consultancy costs associated with the
generation of buying, logistics and organisational synergies.
From the date of acquisition, Matthew Clark (Holdings) Limited and subsidiaries have contributed
revenue of £497.0 million and £16.9 million to profit before tax to the Group's results. If the acquisition had taken place at
the beginning of the financial period, it is estimated that the Group revenue for the period would have been £1,228.1 million and
total Group operating profit would have been £20.2 million.
Peppermint Events Limited
On 31 December 2015, the Group entered into an agreement to acquire 61% of issued share capital
of Peppermint Events Limited for a total consideration of £1.8 million in cash plus contingent consideration of £6.2 million.
This is contingent on meeting EBITDA targets for financial years ended 2017, 2018 and 2019. The transaction is subject to an
initial earn-out performance based payment during 2017 and 2018 up to a total of £800,000. There is an earn-out put option in
respect of the remaining 39% of the ordinary share capital. The put and call option allows the non-controlling shareholder to
require sales of their shares to the Group at an agreed pricing method between 2019 and 2020 based on EBITDA up to a total of
£9,200,000 for the final earnout. The timing of the final earn-out will depend on whether Peppermint Events exceeds an EBITDA
target that has been set for financial year 2019. If the target is not met the earn-out moves to financial year 2020.
The company has agreed to pay the vendors additional consideration dependent on the performance
of Peppermint Events over the subsequent four financial years. The estimated range of the additional consideration payment is
estimated to be between £nil and £10,000,000. The Company has included £6,159,000 as contingent consideration related to
the additional consideration, which represents the amount determined at the acquisition date based on forecast EBITDA for the
next three years discounted to net present value.
The valuation model for the contingent consideration considers the present value of the expected
payment, discounted using a risk-free rate of 2.3%. The expected payment is determined by considering the possible scenarios of
forecast revenue and EBITDA, the amount to be paid under each scenario and the probability of each scenario.
The acquisition of Peppermint Events Limited has been accounted for using the anticipated
acquisition method as if the put and call option has already been exercised and therefore no non-controlling interest has been
recognised.
Peppermint Events Limited is an independent events company specialising in bars and events in
the outdoor event arena including festivals. This acquisition is consistent with the Group's ongoing strategy of focusing on new
markets and channels.
Business Combinations (continued)
The following table summarises the consideration paid for Peppermint Events Limited, and the
amount of assets acquired and liabilities assumed recognised at the acquisition date.
|
|
Book value
|
Fair value Adjustment
|
Fair value
|
|
|
£000
|
£000
|
£000
|
|
Property, plant and equipment
|
225
|
(23)
|
202
|
|
Inventories
|
152
|
(15)
|
137
|
|
Trade and other receivables
|
179
|
(12)
|
167
|
|
Cash and cash equivalents
|
536
|
-
|
536
|
|
Trade and other payables
|
(596)
|
-
|
(596)
|
|
Borrowings (short term)
|
(46)
|
-
|
(46)
|
|
Current tax payable
|
(6)
|
-
|
(6)
|
|
Deferred tax liability
|
(26)
|
(48)
|
(74)
|
|
Borrowings (long term)
|
(60)
|
-
|
(60)
|
|
Total identifiable net assets
|
358
|
(98)
|
260
|
|
|
|
|
|
|
Allocation to intangible assets - Brands (note 10)
|
|
|
243
|
|
Goodwill (note 9)
|
|
|
7,456
|
|
Total consideration
|
|
|
7,959
|
|
|
|
|
|
|
Cash flow
|
|
|
|
|
Cash consideration
|
|
|
1,800
|
|
Contingent consideration (payable April 2017, April 2018 & April 2019)
|
|
6,159
|
|
Cash acquired with subsidiary
|
|
|
(536)
|
|
Acquisition costs (expensed to exceptional operating costs)
|
|
|
81
|
|
|
|
|
7,504
|
Significant adjustments made to the fair value of assets acquired include the recognition of the
deferred tax liability relating to the intangible asset, provision for doubtful debts and obsolete stock and impairments for
property, plant and equipment.
The goodwill arising on acquisition represents the premium paid to acquire Peppermint Events
Limited in a key channel providing significant opportunities for increased wholesale sales and cross-selling and other synergies.
Goodwill has been allocated to the Peppermint Events cash-generating unit ('CGU').
Acquisition costs of £81,000 have been charged to exceptional items in the consolidated income
statement for the period (note 4). These represent legal costs incurred during the acquisition.
From the date of acquisition, Peppermint Events Limited has contributed revenue of £0.6 million
and £0.4 million loss before tax to the Group's results. If the acquisition had taken place at the beginning of the financial
period, it is estimated that the Group revenue for the period would have been £877.0 million and total Group operating profit
would have been £12.0 million.
In addition to the acquisitions set out above, the Group has also completed a number of
individual smaller store acquisitions for a total cash consideration of £796,000, all of which has been recognised as goodwill.
The Group also sold two stores in the 53 week period ending 1 May 2016 for a total consideration of £195,000. When purchasing
individual stores the Group is purchasing both the trade and assets of the store.
13. Events Occurring After the
Reporting Date
On 20 May 2016 the Group entered into an agreement to acquire the entire issued share capital of
Bibendum PLB for a cash consideration of £39,663,000. This was financed by an additional placing of 15,609,757 ordinary shares
and a £10,000,000 term loan drawn down under the Group's revised bank facilities with its existing lenders. In addition, an
extension of Bibendum PLB's existing receivables financing facility was agreed up to £30,000,000.
The shares were placed at a price of 205 pence therefore raising funds of £32,000,000. This
placing along with an issue of 2,551 ordinary shares to satisfy the requirement to allot matching shares at the time of purchase
of partnership shares for the Bargain Booze Share Incentive Plan, takes the total allotted ordinary share
capital to 170,850,796.
Bibendum PLB is one of the largest wine, spirit and beer distributors and wholesalers to the UK
On-Trade and Off-Trade markets. This acquisition is consistent with the Group's ongoing strategy of focusing on new markets and
channels and the acquisition strengthens the Group's expertise in premium trade wines and deepens the Group's presence in London
and the South East.
Due to the proximity of the acquisition date to the approval of these financial statements, a
full analysis of the book value and fair value of the assets and liabilities acquired, as required by IFRS 3 paragraph 59-62, is
not yet available.
Intangible assets are expected to be identified relating to brands and customer contracts.
Goodwill arising on the acquisition is expected to arise relating to the premium paid to acquire Bibendum PLB and the future
economic benefits arising from assets acquired in the business combination that are not individually identified and separable,
largely relating to synergy and integration benefits. Goodwill will be allocated to a separate cash-generating unit
('CGU').
A full analysis of the assets and liabilities, and fair value adjustments, will be presented in
the Group's interim statements for the period to 30 October 2016.
Acquisition costs of £31,000 have been charged to exceptional items in the consolidated income
statement during the period. These represent costs incurred during the acquisition and prior to the period end.