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Share Name Share Symbol Market Type Share ISIN Share Description
Conviviality LSE:CVR London Ordinary Share GB00BC7H5F74 ORD 0.02P
  Price Change % Change Share Price Shares Traded Last Trade
  +0.00p +0.00% 101.20p 0 05:00:01
Bid Price Offer Price High Price Low Price Open Price
101.20p 102.00p - - -
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Retailers 1,560.08 22.46 10.80 9.4 185.5

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sweepie2: Get your money back on this one Blockbuster report from Investor Show about Tern, market sensitive news leaked to attendees Further to yesterday’s brief post, I had the pleasure of sitting through the TERN presentation by Bruch Leith and the chance to talk to him in detail for about 15 minutes after. Bruce came across as a nice guy and indeed, he explained some of the personal issues that Al Sisto has had to deal with in the last 3 years and it puts things in perspective. Presentation Key points: - Al Sisto; career in Intel; encryption expert with expert knowledge of what’s needed in the IOT space. - Al Sisto California based but spends approx. 50% of his time in the UK. - Tern; the leading investment company in the IOT space. - Bruce Leith; primary role; finding new deals/investment companies (note; at last, people now in dedicated roles rather than trying to do everything). - Bruce; looking at 4 new investment companies , deals imminent , subject to term sheets and due diligence completion. - Working with Microsoft (possibly through In VMA). - Device Authority : hungry for cash due to growth; building product and distribution channels with Global technology companies - Intel deal; took 2 years to consumate; 7 months behind schedule mainly due to Intel internal process/sign offs. DA will handle authentication of Intel chip and through the Cloud - GEC; launched in USA last week (medical devices); launch re-scheduled to enable DA integration to be integral to the product. Enables 24/7 monitoring and treatment remote from hospital of patient condition but all data secured by DA. Huge market potential. - Strong play – authenticating sensors and at point of application; data remains secure throughout. - Products are now being rolled out; very well placed! Data analytics will also be a revenue growth area. - IOT take up by global tech has been slower than envisaged but now starting to gain traction and momentum. - 8 fold increase in security attacks in the last year; DA has a hack proof platform that automates at scale. - Strong patent suite that global’s cannot copy - DA life cycle has seen 12-24 month sales campaign followed by a 9-12 month product development/integration period. THIS IS WHY IT HAS TAKEN TIME TO REACH PARTNERSHIP AGREEMENT AND PRODUCT ROLL OUT. Global tech companies are slow to progress due to internal approvals, budgets and priorities. - Now in a position to deploy Keyscaler globally with good evidence of several major customer contracts signed in the last 6 months. - THALES/GEMALTO; TO BUILD A BUSINESS AROUND DA/KEYSCLER; 2018-2021 RAPID GROWTH ENVISAGED - PTC; a $6 billion company with DA intrinsically linked! - Verticals/markets huge; sensors/data transmission now permeating every aspect of global world/life. - Emphasised high profile global partners. - THALES; LOOKING AT HUGE USA DEAL WITH ROBOTICS DELIVERING SURGICAL PROCEDURES – DA WILL BE INTEGRAL TO SECURITY. - AMAZING THINGS TO COME…… In VMA - Phenomenal order book; tripled revenue in 3 years to £1million and no signs of slowing - Key contracts with Howdens, MSE, MEM’s , GEC - Asset Minder can now be deployed within 3 months of enquiry; see huge potential and synergies with DA. Wrap up - Focus on improving investor communications via 3 monthly conference calls - PATENTS ARE EVRYTHING! THIS IS WHY COMPETITION IS STIFLED, DA ARE IN THE BOX SEAT AND GLOBALS GO TO DA FOR THE SOLUTION TO THEIR SECRUITY ISSUES - SaaS model ; recurring and growing revenues - BLENDING OF THE TERN COMPANIES TO PROVIDE INTEGRATED DISRUPTIVE SOLUTIONS THAT GLOBAL PLAYERS NEED! Conversation with Bruce Leith Bruce came across as a genuine and nice guy. It was clear the last 2-3 years has hurt the BOD as much as shareholders. For example, a number of Bruce’s family have shares in ISA’s bought at 14,12, 10, and 8 pence. It is clear the single issue that has stymied progress has been the time it takes to consummate a deal (typically 12-18 months) and then integrate Keyscaler into the eco system offer. This is due to global tech companies themselves struggling to shape their offer to the market and the way these companies deal with their supply chain in terms of budgets, approvals, gateways etc. Essentially, think of a timescale and double it. Intel took 18-24 months but things are moving rapidly; Keyscaler will be ‘on chip’ and in the cloud for the Intel solution. In summary, they are 12 months behind where they thought they’d be. The US fund raise is still open but didn’t take off due to the slow uptake of contracts + a poor understanding of what is being developed. Device Authority are talking with Microsoft and ARM (DA were approached); global’s will use DA rather than spend years developing in house; ALL ABOUT TIMING! Last week’s San Francisco conference went well with significant interest shown in DA. There is significant interest in DA and ‘players are circling’. They’ve already had offers that have been rejected (at above the current TERN market cap). The dilemma is the timing of sale of DA versus timing of value created by the global partnerships versus the cost of funding a growing company. Also, in order to attract institutional investors to TERN, they need to prove the business model by selling a company for a significant return. Whilst Bruce wouldn’t be directly drawn, my impression was a £75-100million offer (short term) will be considered. Bruce so stated a realistic aspiration that TERN will be valued at £100 million within 12 months. I left the event feeling extremely positive that our money is in safe hands and the share price will be multiples of what it is today in the coming months. My personal preference/issue is they find a way to keep DA for another 2 years unless a £250 million offer is tabled as there’s no reason why DA shouldn’t be valued at £1 billion + within 3 years. Ultimately, I cannot find a reason to sell my shares anywhere below £1. Hope this helps but DYOR,NAI.
kingston78: Tiger, You have my sympathy for losing money on CVR. I don't think anyone at CVR intended to mislead. Generally speaking, Plc directors tend to glorify the positives and suppress the negatives. This is PR. They want the share price stays up and their remuneration stay high. I would say that credit should be given when credit is due; it should not be taken for granted. A company would not exist without support from its shareholders. Directors should treat everyone with respect and act professionally. Whilst I would not divulge details about myself, I just want to say that I know accounting and finance intimately. It is clear to me that the quality of the accounts personnel and control, review and reporting at CVR was lacking. They didn't know the business well enough to spot obvious errors. They didn't have a robust financial modelling and planning process. I could imagine that accounting information was late and not up to date. Accordingly, their series of closely timed announcements were conflicting and the figures were deteriorating based on the same underlying data, which were being updated. Forget about the FD for a minute. A good Financial Controller would have had all the up to date financial information up his (her) sleeves and reported to the FD and the Board every week and every month. That would have raised the alarm bell several months back to enable the Board to have addressed the problems earlier. Good financial control and management is essential for all businesses, big or small. More often than not, I pay more attention to the strength of the Balance Sheet and Cash Flow than the Profit and Loss Account (or trading statement). A company with a sound financial footing can weather a storm whereas a weak company which apparently trades profitably may collapse spectacularly without warning. Beware of companies growing by acquisition using debt finance. Its good fortune does not last for long, as economic cycles are now very short (every ten years or so there is now a financial crisis).
hpcg: Too much import is put by director and management purchases after profit warnings, poor results etc. Following people that have demonstrated their incompetence is irrational IMO. It is almost always a fraction of their remuneration, and in any case supporting the share price is to their benefit also. Also, a reminder that most equity investors are completely and willfully ignorant about debt. This includes fund managers. A company without debt is often able to soldier on even in distress, and has the ability to raise new equity which it can use. Companies will continue to go bankrupt, that is how business works. If that company is publicly listed then someone has to lose. Our only duty to ourselves as investors is to ensure that it is someone else that suffers the loss, and our duty to the community is not to reward companies which load up on unsupportable debt.
buoycat: Perhaps best to take a long term view here. I remember back in 2004 being relieved to sell Ashtead group at around 100p before the share price plummeted to 5p due to accounting problems of some sort that I can't recall exactly. Share price today...over 1900p
spooky: One point i would make is that if these announcements had all been made in one go when the share price was £3.00, i don't think any one would be talking about anything like 10p.As an aside,10p would only make sense to current shareholders if they could maintain their share of the equity.
typo56: russell250, I took a look at what happened at HUR. By 'earlier this year' do you mean financial year? If you mean the fund raising last July, it looks like they were able to get out of the pre-emptive offer to all shareholders because the share price in the open market had fallen below the 32p offer price. I'm not sure that's unreasonable as it wouldn't have been a productive use of time or money. Have you read Resolutions 14 and 15 from the CVR 2017 AGM that I posted earlier? I've been told that my comprehension skills are poor, but it reads to me like CVR would have to make a pre-emptive offer to all shareholders. Given the urgency they might try and do it the same way as HUR, doing the placing first and promising to look after the other shareholders later. As with HUR, it might not happen if the price in the open market ends up lower than the placing price, but if that happens the placees have been stuffed haven't they, rather than the ordinary PIs?
mbdx7em21: 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.
dagsteeth: It’s not in the interest of shareholders, creditors ir HRMC to let this go. Expect a very rapid capital raise at 50p/share to raise £50m accompanied by complete management change. Expect lawsuits galore. Directors, NEDs, auditors, Nomad etc. The placing agreement in December will see shareholders have rights. How far back does it go. Was the sale of Matthew Clark fraudulent. Can the company sue the vendors? Following a brief bounce back, company will then be bid for by another distributor. At least by not being suspended the hedge funds can’t drive the price to where a placing can’t be effected in adequate terms. For pi’s it ain’t c&&p but I’d buy the rights when they come to average down and look to trade out thereafter. If the company goes for a placing rather than a rights issue will be harder since the share price will bounce back very sharply. Mind you to raise £50m don’t think they can disapply preemption rights. Ps the dividend is due to be paid on Friday. Clearly not now!
chopp1: I think the answer lies in the appointment of mike Moran in Oct 2017.As an ex cfo of a large company, I am guessing he discovered some financial misdeeds in the accounts which he is now throwing into the kitchen sink. This could have been as suggested a failure to recognise the full cost of discounting or potentially an error in assumptions of realised margins in the wholesale arm which proved optimistic. It was however extremely naive of the directors to issue such a vague statement yesterday which would only punish the share price heavily. Shareholders rightfully expect to be told the nature of this “error” and its impact on future forecasts of profitability. Anything less is treating shareholders with contempt. The only saving grace is that both the cfo and ceo bought heavily today. I suspect we are seeing a new broom sweeping out the bad news before he can be blamed for it, but I may be wrong......
masurenguy: Graham Neary's view. "I'll stick to my guns and continue to suggest caution here, even though I have usually been wrong by doing this in the past. The profit figures are said to reflect "the phasing of cost synergies into the second half of the year". I think today's share price move reflects simple disappointment in the profit miss, and also maybe some fear that the cost over-runs and reduced margins won't be entirely offset by the cost synergies anticipated in H2 and beyond. My major concerns are the low-margin nature of the work it does and its partially debt-fuelled expansion. The constant use of "exceptional items" and the focus on adjusted numbers also leave me cold. Additionally, I have a concern about its possibly excessive use of share-based payments. In the twelve months to October 2017, it generated nearly £18m in profits, and spent £3m of this on share-based bonus payments to its managers. Finally, I think that today's H1 results were a profit miss, which is confirmed by the share price decline. But with respect to results versus expectations, today's statement has merely expressed confidence that results for the full year will be in line. It doesn't actually say whether or not the H1 results were in line with the company's prior expectations. Would it be much trouble for this to be included? Brokers are now forecasting that net debt will reach almost £150m by the end of the current financial year."
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