Poor choices, bad sums: Conviviality’s recipe for disaster

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It took less than four weeks for a firm worth more than half a billion pounds to fall apart.

On 8 March, Conviviality – not a household name, but a big firm with more than 4,000 staff – had a stock market value of more than £550m. Fast-forward less than a month and its finances have fallen apart, its bankers have balked at rescue plans and shares then worth 300p are now worth nothing. It will be remembered as one of the quickest corporate collapses ever seen in the UK.

On Wednesday the firm went into administration; the best parts of the operation were immediately sold to new operators and 2,000 workers suddenly have a new employer. For the other staff, the outlook is far less certain.

Conviviality was a big player in the drinks business. It was the wine and spirits supplier to JD Wetherspoon’s 900 pubs, to chains including Slug & Lettuce and Yates, and to Hilton’s UK hotels. It ran the bars at major outdoor events including the Isle of Wight festival and the Henley regatta. Conviviality also owned the Wine Rack and Bargain Booze chains and a handful of upmarket wine merchants, including Bibendum and the royal warrant holder Walker & Wodehouse.

It expanded rapidly via a dizzying sequence of acquisitions, which delivered impressive growth and transformed the company from a little-known, downmarket drinks chain into a darling of the stock market.

That strategy, it now seems, is where it all went so badly wrong. Industry observers say that Conviviality’s acquisitions, while delivering stunning revenue growth that looked impressive, ended up exposing underlying weaknesses in its management.

Now, as the hangover kicks in, the recriminations are beginning. Former investors in Conviviality are considering a lawsuit, while the chair of the work and pensions committee, MP Frank Field, has questioned the role of the auditor KPMG, which also ran the rule over the books of the government contractor Carillion before it failed.

Conviviality’s chairman, David Adams, who on Thursday cited the company’s collapse as he resigned from the board of mixer-drinks firm Fever-Tree, can add another name to the list of ill-fated directorships on his CV: Jessops (bust), JJB Sports (bust) and HMV (also bust).

As administrators from PricewaterhouseCoopers (PwC) start to pick through the remains, they are understood to be severely hampered by poor record-keeping – in line with the chaotic picture of Conviviality that has emerged during its decline.

Source https://www.theguardian.com/business/2018/apr/05/conviviality-administration-bargain-booze-wine-rack-owner-acquisitions