Conviviality Suspends Shares As Seeks Possible Funding To Pay Tax Bill

14th Mar 2018 10:50

LONDON (Alliance News) - Shares in Conviviality PLC were suspended from trading Wednesday as it considers its funding requirements in order to pay an unexpected tax bill which could further hit an already revised down full-year profit forecast.

The alcohol retailer and wholesaler said an error had resulted in it not accruing a GBP30.0 million bill owed to the UK taxman by March 29.

The bill to the HM Revenue & Customs has "created a short-term funding requirement", Conviviality explained. As a result, this may create "operational difficulties" which "may negatively impact" adjusted earnings before interest, tax, depreciation and amortisation range.

On Tuesday, Conviviality shares fell 12% after it confirmed it expected adjusted Ebitda to be in the range of GBP55.3 million and GBP56.4 million. This is compared to market expectations of GBP69.1 million and GBP70.5 million.

The reduction in Ebitda forecasts was, the company explained on Tuesday, due to a "material" error in the forecasts related to an "arithmetic error" in the forecast compilation.

On Wednesday, Conviviality said it is in talks with HMRC and other key stakeholders regarding the potential impact of the additional funding requirement on its adjusted Ebitda expectation and compliance with its banking covenants.

The company emphasised it was "currently in compliance" with its banking covenants. However, under its revised Ebitda expectations on Tuesday its covenant test result would be between 2.04 times to 2.00 times adjusted Ebitda.

Its covenant requirements - next to be tested on April 29 - is required to be less than 2.5 times its adjusted Ebitda. It also needs adjusted Ebitda to be at least four times the net financial charge.

Conviviality continues to expect net debt to be approximately GBP150.0 million for the year ended April 29.

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