Conviviality Share Discussion Threads

[typo56] 14/3/2018 16:28

Given the rate at which debt has been increasing (why is that?) and the recent statements, how can you have any confidence that £8.2m plus £25m would be sufficient to cover the cash shortfall?

Yes, I've read Paul Scott. He's expressing a point of view, which you can choose to share or not, as you wish.

[bullet ant] 14/3/2018 16:22

who said DIV was going to get cancelled?

who said to be careful not to buy ?

MOI.


The begging bowl is out now, and guess what happens when forensic goes in their past account statement.

PLOOOOOOOOOOOOOOp to 10p


BA
Stealing is good

[s1zematters] 14/3/2018 16:19

QPP at 500p
ami at 65p
jqw at 45p


Warren fingerfood this man isn't!

[typo56] 14/3/2018 16:19

Divi cancelled then.

What happens to CFD/spread accounts that have already been adjusted?

[tsmith2] 14/3/2018 16:19

That's an £8.2mn improvement.£25m accelerated placing with institutions @ 80-85p. Job sorted.peeps should read Paul Scot's write up

[douglas macarthur] 14/3/2018 16:17

Dingo

You have bigger issues here, something like a minus -80% coming or bankruptcy. That should be the only concern for any gamblers.

People gamble on black

and it's red


Move on to your next aim disaster.

[s1zematters] 14/3/2018 16:15

no i would say posters pointing the huge inconsistencies in what windy says and what he does, or in lay terms what a hypocrite he is.

well said Douglas we need more like you on here!

btw have you tried fabswingers.com?

[d1nga] 14/3/2018 16:12

See you have a fanclub here w1ndy

Or most likely one disgruntled punter with 'issues'

[s1zematters] 14/3/2018 16:10

Hoobo i believe you may have a case for deformation against windjammer.
In his post to you he clearly alludes you are telling an untruth.

if windjammer calls the plaintiff a “liar,” this statement may be considered defamatory, because it implies that the defendant knows facts that demonstrate the plaintiff’s dishonesty when in actual fact Winjammer has no way of knowing if you're posting untruths, thus defaming your charactor1

W1NDJAMMER
14 Mar '18 - 15:11 - 665 of 688
0 1 0
hooboo

you will get prosecuted for that post

I HAVE COPIED IT

WJ.

[mbdx7em21] 14/3/2018 16:09

this is pukka proper analysis.

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

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

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

Further Update

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

This has created a short term funding requirement.


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

Trading could be adversely affected by this funding crisis;

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

To the extent that the current situation creates operational difficulties, this may negatively impact the adjusted EBITDA range.
So clearly this funding crisis needs to be resolved quickly, before it does serious damage to the business. Obviously, customers will carry on buying product, because in the short term it doesn't matter to a customer if the vendor is in financial difficulties. The problem lies with suppliers. If trade credit insurance is withdrawn, then they may decide not to take on the credit risk themselves, and could refuse to send in any more goods to CVR. If that can't be resolved quickly, then CVR would run out of inventories, and that's it, the business is gone.

So time is very much of the essence, in this type of situation.

Banking covenants - the company is currently in compliance with its banking covenants;

The Company is currently in compliance with its banking covenants. The next covenant test date is 29 April 2018.
What are the bank covenants?

The Company is subject to two banking covenants

(i) for covenant debt (which excludes any amount drawn down under the Company's invoice discounting facility) to be less than 2.5 times the last 12 months adjusted EBITDA, and

(ii) adjusted EBITDA to be at least 4 times the net financial charge.


Current position - fully drawn

The Company is fully drawn under its term loans and revolving credit facility
The last Annual Report shows facilities (provided by a consortium of RBS, HSBC, and Barclays) as at 30 April 2017, as follows;

Term loan of £95.8m

Revolving credit facility (i.e. an overdraft) of £30m + £15m accordion facility

There is also a £130m receivables facility (i.e. invoice discounting) - let's ignore this for the moment, as it's outside the scope of the bank covenants (since it is secured on CVR's sales invoices)

The term loan will have had repayments made by CVR since 30 April 2017, of £1.25m on 31 May 2017, £6,361k on 29 Oct 2017, which will have reduced the term loan to £88.2m. There will also be interest charges of about 10.5 months to add to that, which is charged at LIBOR + 2.5%, so I make that roughly £2.4m, so by my rough calculations, the term loan probably currently stands at c.£90.6m. The next repayment is £6,631k, due on 29 April 2018, assuming that the banking arrangements are unchanged from the last Annual Report, where I got the above info.

Forecast debt - the company says this today;

... covenant net debt at 29 April 2018 is expected to be approximately 113.0 million (which excludes any amount drawn down under the Company's invoice discounting facility).
This seems to tie in with my estimates above of £45m RCF facility (including the accordion) + c. £90.6m term loan = £135.6m, less say 3 days receivables cash in transit of £23.1m, which I've estimated at about £7.7m per day - based on £2bn VAT-inclusive sales p.a., divided by 260 working days p.a.) = £112.5m - which is only £0.5m away from what the RNS says. So I've therefore sense-checked the company's £113m estimate of covenant debt as at 29 April 2018 as being correct. Actually, thinking about it, since those calculations are based on the group having already maxed out its covenant facilities, covenant debt can't go any higher! (unless they exceed their overdraft limit, which the bank would probably prevent, by rejecting BACS runs that would breach the limit.

Working backwards from the 2.5 times Net Debt: EBITDA covenant, and the maximum facilities less cash of £113m, this means that EBITDA would have to drop to below £45.2m to breach this covenant. The current estimate is about £56m, but if serious disruption to trade occurs due to the current funding crisis, then EBITDA could plunge, and trigger a breach of bank covenants later this year. So again, time is very much of the essence, they need to get the short-term funding crisis resolved in days, rather than weeks, in my view.

Invoice discounting facility - historically, CVR seems to have drawn down relatively little of this facility, which is perplexing. With a large trade receivables book (of £184.2m in last Annual Report - as at 30 April 2017), then surely CVR could relieve the pressure on its maxed-out, and relatively small overdraft, by drawing down more heavily on its £130m invoice discounting facility - which, crucially, lies outside the scope of the bank covenants, so is better (i.e. safer) debt to incur. Unfortunately, today's announcement does not state how much headroom the company has on that particular facility.



What happens next?

The Company has engaged PwC to assist it in its forthcoming discussions with HM Revenue & Customs and its key stakeholders including its lending banks, credit insurers, suppliers and other creditors, as well as to determine the potential impact of any resulting funding requirement on the Company's adjusted EBITDA expectation and compliance with its banking covenants.

Following preliminary advice received from PwC, whilst there can be no guarantee, the Board believes this short term funding requirement will be satisfactorily resolved.


To me this seems nonsensical - it's a sledgehammer to crack a nut. In this situation, what the CEO/Chairman should be doing, is ringing round its biggest Institutional shareholders, and do a quick discounted placing for £30m, to get them out of trouble.

If they were to offer say 60m new shares at 50p each, I'm sure there would be plenty of takers. Better still, do an accelerated book build, and get the whole thing sorted in a couple of days. If they do that, there wouldn't be any need to have further discussions with various stakeholders, the situation would have been quickly fixed.

My opinion - it's quite clear that this business has incompetent management, who need to be cleared out, once the current funding crisis is sorted.

The fundamental problem here is not the bank covenants. It's rather that the overdraft facility is too small for what the company needs in the short term, to make this £30m payment to HMRC. Therefore the quickest solution would be to persuade the bank to extend the overdraft by £30m, to give the company breathing space to raise some fresh equity, and to relax the covenants until the fundraising is done.

Of course, PwC will love to string out the whole process, as it means lucrative fees for them. It would be much better to send PwC packing, and instead get the house broker to do a very fast, underwritten discounted placing. Then once the financial position has been stabilised, the company could do another equity fundraising, with pre-emption rights, a Rights Issue, so that existing shareholders could also participate, and the balance sheet completely secured. (by the way, I don't charge for my advice to the company, unlike PwC).

EDIT: a friend has just messaged me, to make the excellent point that the bank (and potential equity investors) probably insisted on sending in PwC to review the books, before agreeing to extend further credit or new shares. I should have thought about that before criticising management for bringing in PwC. That was a rather daft oversight, since I've personally been in a situation where the bank insisted on the company calling in a firm of accountants to review the books. Banks also can use these reports as justification for withdrawing credit, if the investigating accountants paint a negative picture. End of edit

These are fundamentally sound businesses, in my opinion, and the amounts involved here are not huge. So this financial crisis really should be fairly straightforward to solve - if the company had competent management. The trouble is, they clearly don't have competent management.

Anyway, I hope they manage to resolve matters quickly. Being a holder of the shares, since yesterday afternoon, I'm braced for a loss of at least 50% on the price I paid. Thankfully my position sizing rules mean that I never take large positions in companies with a lot of debt. So the likely losses here for me, even if it goes bust, which I think is unlikely, won't be disastrous.

Another solution to short term funding issues, is to get your credit controller on the phone to the biggest customers, and offer them a 1% discount early payment discount, to settle everything on the account early. So if say £50m in customer invoices could be paid more quickly, then that would buy some breathing space, at a relatively small cost of £0.5m.

- paul scott.

[s1zematters] 14/3/2018 16:03

sorry we cant take you seriously windy due to your past involvement with ramping Chinese scam shares.

[typo56] 14/3/2018 16:03

I must say I don't share Mr P. Scott's sense of optimism. I think Shore are more likley to be right. We'll see.

[honour among thieves] 14/3/2018 15:57

Hope history does not repeat again for everyone sake, with another administration; asshamer has cursed thousands of people.

[honour among thieves] 14/3/2018 15:56

ASShammer



On Ami before suspension and administration




W1NDJAMMER - 25 Nov 2014 - 16:12:48 - 3954 of 5392 AMI - Another new chapter - AMI
so 12.8Bnt JORC Compliant ore resource defined , who want`s to give us 10 cents per ton that alone would be $1.28 billion

WJ.


ON JQW before suspension and administration



JQW - In second place to $100 billion Alibaba.





Rugby31 Mar '15 - 08:09 - 6032 of 8683
0 1 2
windjammer why do you not post on the AMI board anymore?
You played the expert over there as well didn't you, an then mysteriously vanished when it went into administration?You will do the same when this gets suspended and put into admin.
idiot chimp mug punter was in qpp at 500p as well.

[s1zematters] 14/3/2018 15:54

What kind of person actually believes that Chinese moneymen set up companies and list them in London rather than china/Hong Kong with the intention of making Englanders wealthy!
Right there you have an imbecile!

[honour among thieves] 14/3/2018 15:50

He has the habit sucking people in, before suspension and administration.

[s1zematters] 14/3/2018 15:48

How this sort of poster who was involved with criminal scam shares can take the moral high ground is amazing!

Really windy, the BOD are going to start a deformation case against a person whose words are viewed by 20 people!

Good luck with that! also good luck getting any money back here.

[honour among thieves] 14/3/2018 15:45

Asshamer

was saying these when JQW was 7p


W1NDJAMMER - 28 Apr 2015 - 10:08:12 - 7391 of 8319
very good volume for JQW its healthy for peeps to take their profits, with a new base of shareholder moving in. 40p in the coming weeks would provide a good base and would provide the head, for what could become a inverted head and shoulders as the year moves on and 60p beckons.

WJ.
JQW - In second place to $100 billion Alibaba. - JQW
W1NDJAMMER - 28 Apr 2015 - 08:29:05 - 7349 of 8319
Target 40p the divi will be interesting..........