Conviviality Share Discussion Threads

[montynj] 07/4/2014 14:08

Chart looks awful

[nw99] 07/4/2014 12:31

Chart looks good for a rebound here

[thepsychic] 20/3/2014 15:09

Same here. I'm still on the sidelines. I'd look into buying at a lower valuation. Between 100p to 120p. I can't see what's going to drive this above the current price for now as the sentiment is not so positive.

[jakedog2] 20/3/2014 10:47

Have previously held.

Watching from sidelines here.

MJW - warned this morning

Negative sentiment in the whole retail sector (bought SBRY last week for divi)

Nothing drawing me into this at moment.

[nw99] 20/3/2014 08:18

Majestic wine read thro ?

[nw99] 11/3/2014 15:22

Looks close to a buy support at 160 level

[mcrocker] 11/3/2014 15:17

Thanks for the replies - supermarket wars are certainly a large factor although I was hoping CVRs focus on the convenience end of the market would help offset this and the move into higher margin wines, etc would also give them a boost. The management team are also very experienced and have a interesting business model.

Much as I would like to believe it I don't buy into the "tree shaking" arguement that there's a big order out there needing to be filled. I fell for that line a couple times during the tech bubble and learnt the hard way that the market is usually pretty efficient at signalling an overpriced asset.

My stop-loss is approaching but I'll hold for now as the dividend and long term prospects look encouraging.

[andygibb101] 11/3/2014 14:35

Could be falling in sympathy with a lot of the supermarkets today:

The pressure on the big four supermarkets intensified during the 12 weeks ended on March 2nd, according to the latest data available from Kantar Worldpanel.

That came as Aldi's year-on-year growth rate accelerated to a record 33.5% pace so that it now accounts for 4.3% of the market. Lidl's share also hit a historical high, at 3.2%.

Adding to their woes, the overall rate of growth in the grocery market, of 2.2%, fell further from the last period, which was the lowest since mid-2005, mainly as a result of falling inflation.

Sainsbury was the exception amongst the big four, which also includes Asda, Morrison and Tesco, managing to hold on to its 17% of the market. Waitrose also shrugged off the pressure from the discounters, obtaining its highest ever market share of 5%.

Thus, Asda, Morrison and Tesco all saw their markets shares decline, with the latter two seeing a decline in actual sales.

The Co-operative saw sales grow 0.7% and only a marginal drop in share to 6.1%.

Over the past three years Waitrose, Aldi and Lidl combined have taken 3.5 percentage points (£4.4bn per year) from their competition, placing further pressure on their competition to lower their prices to fend them off.

[geoff21] 11/3/2014 14:32

mcrocker, I've had the same happen to a couple of my other holdings over the past few months, drops 10-20% completely out of the blue, then pretty much goes straight back up. I think it is because it is a very thinly traded stock and the brokers are trying to trigger stop losses to fill an order for a client.

[mcrocker] 11/3/2014 11:15

Has anyone found any reasons for the recent fall (other than bringing the PE down to a more sensible level for a highly competitive market sector and locking in a good profit on the float price)?

I can't find news or rumours of anything that appears to threaten the projected dividend and no significant institutional sales for the past couple weeks (provision for a potential environmental fine was factored into the accounts).

[5pointplan] 11/2/2014 12:41

could anyone post the link please ?

[protean] 10/2/2014 09:42

No probs. SCSW has a buy rating.

It also had CVR down as one of its naps for 2014 in last month's mag and pointed out that booze sales should benefit from the World Cup this year.

[gswredland] 10/2/2014 09:28

thanks protean.

[protean] 10/2/2014 09:06

Positive write-up in SCSW at the weekend.

[solarno lopez] 10/2/2014 08:41

we are off again

[tintin82] 23/1/2014 02:02

Features in this weeks Shares. 'Plays Update' pg 16. Buy.

[montynj] 22/1/2014 11:50

@mechanical trader. Can read your broker comment. Please send link

[mechanical trader] 22/1/2014 08:14

BROKER COMMENT

[montyville2] 21/1/2014 14:41

IC article...

Promising start for Conviviality RetailThis is Conviviality Retail's (CVR) maiden result, so it's perhaps no surprise that the retailer incurred £3.3m of exceptional charges, largely related to its flotation last summer, which dampened reported earnings growth. But strip out these extra costs and the underlying pre-tax profit jumped 14 per cent to £2.2m, thanks to a 30 basis-point margin improvement.

The company, which runs 442 off licences selling cut-price alcohol and groceries largely under the Bargain Booze brand, has enjoyed a good start to the year. Closing 71 underperforming outlets hit the reported sales figure, but like-for-like retail sales were ahead by 1.5 per cent, while average sales per store improved by 4.9 per cent. Christmas trading was positive and the newly acquired Wine Rack business saw underlying sales surge 22 per cent over the festive period. Shutting one of Conviviality's two distribution centres will lead to cost savings next year, while the appointment of a 'master of wine' should result in a broader and better-value range to compete with the likes of Waitrose and Majestic (MJW).

Broker Panmure Gordon expects EPS of 10.6p for the full year, rising to 12.3p in 2015.


CONVIVIALITY RETAIL (CVR)
ORD PRICE: 180p MARKET VALUE: £120m
TOUCH: 177-182p 12-MONTH HIGH: 197p LOW: 100p
DIVIDEND YIELD: 1.1% PE RATIO: 15
NET ASSET VALUE: 69p* NET CASH: £11.9m


Half-year to 27 Oct Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2012 193 1.7 1.2 nil
2013 184 1.1 -1.9 2.0
% change -5 -34 - -
Ex-div: 29 Jan

Payment: 28 Feb

*Includes intangible assets of £35.8m, or 54p a share

IC VIEW:
The plan, spearheaded by former Waitrose director Diana Hunter, is to expand into the south, create a more profitable franchise network and broaden the appeal of the brand. The shares have risen 38 per cent since July, but still trade on a forward enterprise value-to-cash profits ratio of nine, less than peer Booker and rival Majestic, while offering net cash in the bank and a forecast dividend yield of 4.1 per cent. Buy.

[montyville2] 21/1/2014 14:25

Bought in yesterday just at the right point hopefully

[iandippie] 21/1/2014 08:36

Excellent. Looks like the short term profit takers have moved on to pasture anew.

Onward and upward...

[mechanical trader] 21/1/2014 08:16

hxxp://www.directorstalk.com/conviviality-retail-the-plan-spearheaded-by-former-waitrose-director-diana-hunter/

[montynj] 20/1/2014 11:03

The fact that sales & no of stores is down in absolutely no surprise. Read above report. It was expected as bad stores closed down as part of restructuring. Store expansion will start this year. People selling today just don't really understand the company strategy and the CEO growth strategy.

[montynj] 20/1/2014 10:55

Here is the report from the reputable Sharewatch in November:-(Sharewatch) When we heard that England had secured its place at the World Cup finals, we instantly began to look for potential beneficiaries. Our recommendation of free-to-air television channel operator STV (STVG; 317.5p) last month has already proved prescient (as TV advertising levels are set to rise - see update on page 3 for details). Another obvious sector is off-licences so our second main write up this month is Conviviality Retail, the holding company for Bargain Booze, a chain of over 600 franchised off licences in the UK, most of which are in the North West and the Midlands.It's a local convenience operator and its customers are often buying "drinks for tonight." The scorching summer weather has already given the business a bit of a fillip as sales of beers, lagers and ciders took off and the World Cup ought to do the same. But the underlying story is that the business is convalescing from store closures and next year will see it return to growing the franchise model and with 60 stores to open within three years, it is nowhere near saturation in the UK. Pretax profit this year (to end May) was £6.6m and over the next two years is projected to climb to £11m, with eps rising to 13.4p.HistoryAnyone considering opening an off licence has two options. Either set up on your own and then fill your shelves with alcohol, confectionery and groceries from the cash and carry, or alternatively acquire a Bargain Booze franchise and let them undertake the hassle of sourcing and delivering all the alcohol (whilst their bulk buying will enable you to undercut your local competition on price by c.15%).The company operates a simple yet powerful business model based on a proven franchising system, which enables it to roll out its brand without a commitment to capital.  The first Bargain Booze opened at Sandbach, Cheshire in 1981 and since then has grown to 616 franchises run by 463 franchisees. The move to AIM in June was intended to pay down debts (post IPO cash c.£8m) and buy out its private equity backers.Differences to Domino's franchiseOne of the chief comparators that investors may use for Conviviality Retail is Domino's Pizza (DOM; 601p), another franchise operation, and a hugely successful recommendation for SCSW. We forget how many times the shares have gone up after various share splits in the years since our first write-up  (a 20-bagger?) but it's worth mentioning the numerous differences between the two companies. Both Domino's and Conviviality pass their franchisees through a vetting procedure but Conviviality's franchise costs are much cheaper than Dominos.  Whereas Domino's charges an upfront fee of £180,000-£200,000 which enables a franchisee to open a home delivery unit under the Domino's brand (fee covers the cost of site identification, fitout and equipment as well as training), Conviviality charges nothing upfront. Domino's also rents the new stores and then sublets them to franchisees at a 5% premium whereas Conviviality franchisees will take on the lease obligations themselves (although Conviviality will occasionally arrange the financing).Another difference is that once up and running, Domino's franchisees have a commitment to pay an ongoing franchise system royalty of 5.5% of the total revenues from their store for use of the brand and also have to buy the dough and toppings that are used to make the pizzas.In Conviviality's case, the Bargain Booze franchise system royalty is a flat £1,700 or £1,900 each year (depending on store size) and it also supplies all the alcohol to the franchisees. It typically makes an 8% gross margin on alcohol sales to franchisees and this is the main source of its income (incidentally, dough and toppings have c.27% margins). It makes almost no money from tobacco but it helps bring in customers.Run by former Waitrose handLike one of our favourite retail concepts, Supergroup (SGP; 1185p), Conviviality also has another woman at the helm, Diana Hunter, who is again an old hand from the John Lewis Partnership. Before joining Conviviality she had been at Waitrose having cut her teeth developing convenience stores for Sainsburys.Hunter clearly has all the skills needed to run the business even if unlike John Lewis, most Bargain Booze customers fit a C2DE demographic profile. This demographic profile is reflected in the location of its stores. High streets don't work. The ideal spots are secondary or tertiary locations with plenty of residential housing around them; you need only look at the very low rents to appreciate the often down at heel locations (we spotted a couple of investment properties with rents of just £5,000 in Cumbria in the last Allsop commercial catalogue).Hunter joined Conviviality five months before its float. The store count had grown by almost 100 between 2009-12 but many of the new franchisees who had joined were of very low quality. Some of them were not compliant with the company's regulations (ie. had been sourcing goods illicitly outside their franchise agreements and avoiding alcohol duty); some were in geographically remote areas which made it expensive to deliver to them; whilst others had poor store standards, which had been alienating customers.After a settling in period, Hunter realised just how badly these franchisees were performing and began to close 70 of the most problematic ones, most for breaches of contract. Much of this is coming out in the wash in this year's results. Because the lease obligations are held by the tenant, however, Conviviality isn't getting hit with a load of empty stores.  The starting point for sales is that 2014 will naturally be down slightly (at c.£370m) but from next year, the net number of new stores should start to rise by around 20 a year. Hunter has also introduced more store visits and mystery shoppers to ensure the problems of the past are not repeated. In order to further motivate franchisees to take on public company disciplines, a franchise share incentive plan is in the process of being set up, in the style of John Lewis. Something about earning cold hard cash ought to resonate well with them.Economies of scaleThe great thing is that the franchise model is very cash generative and there is limited capex required to pay for the expansion of the store base and brokers look for growth from the current 616 outlets to c.675 by 2016. A restraining factor is that most franchises run for two or five years and in any one year 30 stores do close, so to meet the c.675 stores target, Conviviality will have to open 50 new stores each year until 2016. Most of these are flagged for areas where there are high C2DE populations but currently underserved by Bargain Booze; the North-East, Yorkshire, the South-West and north London.Introducing more wines helps gross marginsThe nice thing is that the company already has buying relationships with all the major suppliers and as its volumes grow, it should be able to leverage these further with better terms whilst it will also spread the unit cost of head office over a great number of stores. The business is already well invested with its Crewe and Newcastle warehouses having the capacity to service almost 1,950 stores.  Alcohol and tobacco presently account for 90% of group sales but the company has also begun to diversify into wine, impulse/snacking and a basic grocery range (but not fresh food) in the stores that are large enough to support it. This is particularly important because they will enhance gross margins.Introducing more wine into the stores is a particular area of emphasis. Just ahead of the float, Conviviality hired a Master of Wine and since the float acquired Wine Rack, a specialist retailer of wines, spirits and general tobacco with 22 stores, predominantly located in Greater London. The price paid looks a steal with the £1.65m consideration representing around 4x operating profit.The Wine Rack brand will now be used to expand southwards over the next three years and also build up Bargain Booze's wine offerings. As the company points out, not only is the mark-up on wine substantially better than most other types of alcohol but a strong offer here should encourage a more affluent demographic and also more female shoppers.Presently, there's a degree of customer ignorance regarding the extent of the wine range so  a national television advertising campaign is planned to lift awareness. In the past, a limiting factor from advertising campaigns was that franchisees might have been unwilling to take on extra stock to cope with the demand for promoted items but given that the potential like-for-like sales growth on a promoted item could be many hundreds of per cent Conviviality has begun to offer franchisees some promoted goods on "sale or return," encouraging them to take bigger stock positions. This in turn should give Conviviality better standing with its suppliers.   All told, the shares remain a slightly speculative buy but, with very high cashflows, the downside looks limited. The plan is to pay a dividend of at least 8p, a 5% yield.  If all goes well, the price has scope to double in the next 24 months.

[funkmasterp12] 20/1/2014 10:54

I'm out this morning - feel it's at a slightly frothier valuation than I'd like despite the attractive yield.

GLA holding.