Half Year Results and Christmas Trading Update

Conviviality Retail Plc

HALF YEAR RESULTS FOR THE 26 WEEKS TO 26 OCTOBER 2014

AND

CHRISTMAS TRADING UPDATE

Strong uplift in profits and profitable Christmas Trading

Conviviality Retail Plc ("Conviviality" or "the Group"), the UK's largest franchised off-licence and convenience chain with 599 stores, announces its half year results for the 26 weeks to 26 October 2014, together with its Christmas trading update.

Half Year Highlights

Group Financial Highlights

· Revenue was maintained at £182.9m (2013: £183.7m).

· Average revenue per store per week up 0.7%

· Group profit before tax1 increased by 46.7% to £3.2m (2013: £2.2m)

· Gross profit margin increased by 1.7% points to 9.5% (2013: 7.8%)

· EBITDA increased by 9.1% to £4.5m (2013: £4.2m)

· Net cash balance of £4.2m

· Interim dividend declared of 2p per share

Improved Franchisee Performance

· Franchisee loyalty increased with average wholesale sales per store up 1.1%

· Like for Like Franchisee retail sales2 down 1.7% (as previously announced in November)

· Franchisee profits improved 6.4%

· Franchisee financial stability much stronger

Non-Financial

· Store numbers increased to 599 (FYE 2014: 595)

· Bargain Booze brand re-fresh continues with over 50% of stores benefiting from a new fascia

· Rhythm and Booze stores converted and successfully integrated

· Plans for expansion into Scotland through the Scotmid trial progressing well

· Wine Rack expanding into the North and products popular with Franchisees

· "As if it wasn't cheap enough" APP launched and over 2,000 customers are already subscribing

· Logistics capability transformed enabling more efficient distribution

Christmas Trading Highlights and Outlook

· Strong Christmas trade in the two weeks to 4th January 2015 with growth 2.6% above last year

· Like for like Franchisee retail sales2 up by 1.2%, average store sales up 2.8% year on year

· Trading in line with expectations

Commenting on the results, Diana Hunter, Chief Executive Officer of Conviviality, said:

"I am pleased with our first half year results which are in line with our expectations in a highly competitive market. Despite closures of underperforming stores in the period and the integration of the Rhythm and Booze units, sales have been maintained and store numbers have started to grow as we open higher quality outlets. This has led to increased profits for both the Company and its Franchisees. We now have a solid platform from which to accelerate Franchisee growth, our pilot with Scotmid demonstrates the potential for Bargain Booze to expand throughout the UK, and with our strong balance sheet we have the ability to exploit growth opportunities as they arise. I am confident in the progress we have made and I would like to thank our Franchisees, Employees and Suppliers for their commitment and the important part they all play in achieving these results."

1 Group profit before tax excludes exceptional items

2 The statutory revenue of Conviviality Retail is the aggregate of wholesale sales and sales by corporately owned stores to consumers. Retail sales represent the total sales to consumers by Franchisees and corporately owned stores. This is an important indicator of business performance but does not form a part of the statutory revenue of Conviviality Retail plc.

19 January 2015

 CHAIRMAN'S STATEMENT

During the first half of the year the team have continued to make good progress against our strategy. Franchisees and suppliers are more engaged than ever, the acquired Rhythm and Booze stores have been successfully converted and are performing in line with expectations and Wine Rack's expansion into the North has proved popular with Franchisees. It is pleasing that sales have maintained as we close underperforming stores and open higher quality outlets, store numbers have started to grow and trading is in line with expectations despite a very competitive market.

With the appointment of Amanda Jones as Chief Operating Officer the Board restructuring is complete. The Board has a wealth of relevant experience and I am confident we have the capability to deliver the strategy.

I am pleased to announce that the Board has declared an interim dividend of 2 pence per share.

The strength of our business is in its people and I would like to thank, on behalf of the Board, all of our Franchise partners and everyone working in the business for their passion and commitment that is driving our success.

David Adams

Chairman

19 January 2015

CHIEF EXECUTIVE OFFICER'S STATEMENT

Overview

Conviviality is a value based off-licence led convenience retailer and wholesaler. As such we have focused on offering to our Franchisees and to their customers a destination off-licence assortment of products at prices that are on average 10% below the multiples.

We are committed to building and maintaining strong relationships with our Franchisees and these continue to strengthen, with both Conviviality and our Franchisees benefiting from the growth of our business.

In this half year we have focused on driving profitable sales for our Company and its Franchisees in the face of a highly competitive market. We have rolled out our new branded fascia to over 50% of our estate and our Franchisees are seeing positive results from this change. We have grown our brand into new catchments with the acquisition of 31 Rhythm and Booze stores and through the expansion of Wine Rack into the North of England. We are seeing a strengthening of our Franchisee base as the poorer performing stores continue to leave the business, reflected in a strengthening of our estate. Our Franchisees are in a much stronger financial position than at the time of flotation.

We have transformed our logistics capability, investing in our infrastructure with a full racking replacement in our 195,000 sq ft warehouse. This will improve the efficiency of our store pick operation, adding more capacity and resilience for our planned future growth.

Results

Profit before tax and exceptional items increased by £1.0m to £3.2m demonstrating the benefit of our new capital structure. Profit after tax was £2.1m compared to a loss of £0.9m in the corresponding prior period as we substantially reduced exceptional items having dealt with legacy issues quickly and effectively. Earnings per share increased by 5.1 pence to 3.2 pence.

We are pleased to report that sales stabilised at £182.9m due to higher Franchisee loyalty and the acquisition of Rhythm and Booze stores driving an increase in revenue per average store of 0.7%. A higher number of corporately owned stores drove a gross margin increase of 1.7% points with a corresponding increase in operating costs, with EBITDA increasing by 9.1% to £4.5m.

The balance sheet remains strong with net cash of £4.2m at the half year.

Strategic progress

To strengthen the relationship with our Franchisees to drive sustainable and profitable growth

The strength of our Franchisee model is the ability to drive profitability for our partners whilst delivering increased profitability for Conviviality. This will result in more successful Franchisees which in turn are willing to invest in their existing stores but also open additional units. Our off-licence Franchisee margin increased 0.4% points in the period helping average Franchisee profitability grow 6.4% and the key indicator of financial stability of our Franchisees improved with debt written off falling 87%.

To attract quality new recruits and incentivise growth from within

Over the last 18 months we have been focusing on improving our existing store estate with underperforming Franchisees leaving the business, whilst we have concentrated our efforts on growing our more progressive business partners. This has started to show encouraging results with store closures slowing and existing Franchisees opening more stores. We now have good visibility of the potential pipeline of new stores and are working with our Franchisees to identify profitable new stores. In addition we are committed to grow our footprint in areas where we are currently under represented and have been successful in attracting new Franchises into Conviviality. Our trial in Scotland with Scotmid is an example where a successful retailer is partnering with Conviviality and opening up a new territory to us where we know there is good potential for our brands.

To strengthen the Bargain Booze brand, driving awareness and broadening its appeal to attract new shoppers

The Bargain Booze brand is well established within its immediate store catchments but as we grow we have been redefining our brand proposition. To this end we have embarked on a refresh of our estate with a package of store upgrades, new fascias and point of sale material. To support our customers top up mission we have launched a price led grocery range to drive larger basket sizes. In addition we have re-focused our marketing spend away from TV to local activity, more effectively highlighting our promotions and our place in the community. The launch of our APP in December provides us and our suppliers with new and unique routes to engage directly with our customers, offering unique deals and personalised offers. The APP will provide us with valuable insight into our customers demographic and how they shop.

To build greater capability and credibility in wine to attract new customer groups

We have an established position in the traditional off-licence category, however, we have identified the potential to grow further in core wine categories. A key product strategy is to build our credentials in this important category to firstly satisfy the demands of our existing customer base but importantly to attract new customers who would like quality wines at affordable prices. To this end we acquired Wine Rack in September 2013 and using that expertise we have re-ranged our core estate seeing wine participation grow by 10.4% to 14.8%. Additionally Wine Rack has given us the ability to alter the product mix by store catchment type ensuring we reflect customer requirements more closely.

To undertake strategic acquisitions to drive long term value

Whilst growing our existing Franchisee base is a key activity there are many parts of the UK where we have no existing franchises so our ability to acquire, convert and franchise strategic parcels of stores is a core capability. We have been successful with the conversion of the former Rhythm and Booze stores and the purchase of Wine Rack and continue to explore the potential of expanding our footprint in this manner. This provides the ability to improve our estate and consolidate the market.

To expand into new territories using a mix of fascias and formats

The market in which we operate is valued at £37 billion and is expected to grow to £49 billion by 2019 (source: IGD). In order to maximise our opportunity we will operate a number of fascias to attract a wider customer base and cater for different shopping missions. We have increased our convenience range and will be rolling out an improved assortment to our Franchisees during 2015. Wine Rack is an example of a format suited to more affluent areas which demand a wider assortment as well as knowledgeable staff. Last year we launched BB's Warehouse with a trial store in Wakefield. This format is designed to attract bulk purchase customers who want case deals in a clean bright environment with easy car parking. We plan to extend this trial over the next 12 months.

Christmas Trading

We had a profitable Christmas for Conviviality and for our Franchisees. It is pleasing that our retail sales beat last year by 2.6% and our Franchisees witnessed trade coming into their stores during the weeks when shoppers would have traditionally visited supermarkets, an indication of customers shopping little and often and shopping locally in line with widely reported industry trends. Like for like sales were very satisfactory at 1.2% up and pleasing given the competitive nature of the market.

Outlook

Looking to the year ahead we have exciting initiatives to deliver as well as continuing with the good progress already underway with store numbers growing, continuing investment in our existing estate, improving our convenience ranges and our new APP connecting us more closely with our customers.

We will continue to invest in our business, our Franchisees and to expand in both our heartland and further afield. We now have a firm foundation from which to build on, and our success over the important Christmas period gives us confidence that the second half will deliver further profitable progress.

Diana Hunter

Chief Executive Officer

19 January 2015

CHIEF FINANCIAL OFFICER'S STATEMENT

Group revenue stabilised at £182.9m (2013: £183.7m) as the impact of lower average stores was largely offset by Franchisees buying a higher proportion of products from Conviviality. This increased loyalty resulted in revenue per average store growing 0.7%.

Group profit before tax excluding exceptional items increased by £1.0m to £3.2m as sales stabilised, EBITDA margin improved to 2.5% (2013: 2.3%) and finance costs fell following the financial restructure at IPO.

Retail sales represent total sales to consumers and in the first half were 0.3% lower at £309.4m (2013: £310.3m) as a 1.1% reduction in the average number stores was offset by a 0.8% increase in retail sales per store. Like for like retail sales decreased by 1.7%.

Gross profit margin strengthened by 1.7% points to 9.5% (2013: 7.8%) due to a higher proportion of sales generated by company owned stores and strong underlying margins.

Franchisee margin increased 0.4% points helping average Franchisee profitability grow 6.4% and financial stability improve with debt written off falling 87%.

Operating expenses before exceptional items increased to £14.2m (2013: £11.1m) primarily due to an increase in costs of £2.5m relating to company owned stores and share based costs of £0.4m in connection with the Franchisee and employee share based incentive plans.

Exceptional items of £0.5m (2013: £3.3m) have fallen significantly as the prior period included one off IPO costs and the restructuring of the business nears completion.

The Group's balance sheet is strong with a net cash balance of £4.2m at 26 October 2014 (2014 FYE: £10.0m). The reduction in cash in the first half of the year reflects an increased investment in our Franchisee estate and in transforming our logistic capabilities (£1.6m), the acquisition of Rhythm and Booze (£1.7m) and the payment of the final dividend (£4m).

Earnings per share is 3.2 pence (3.1 pence diluted) compared to a loss per share of 1.9 pence (1.9 pence diluted) in the corresponding prior period. The improvement is largely due to the reduction in exceptional costs. On a pre-exceptional basis earnings per share is 3.9 pence compared to 5.1 pence last year due to the issuance of new share capital at IPO.

An interim dividend of 2p per share (2013: 2p per share) is declared today to shareholders on the register on 30 January 2015 and will be paid on 27 February 2015.

Andrew Humphreys

Chief Financial Officer

19 January 2015

CONSOLIDATED INCOME STATEMENT

The results for the financial period are derived from continuing operations.

There were no elements of other comprehensive income for any of the financial periods above other than those included in the consolidated income statements and therefore no statement of comprehensive income has been presented.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General Information

The principal activity of Conviviality Retail Plc (the "Company") and its subsidiaries (together, the "Group" or "Conviviality Retail") is that of wholesale and retail supply of beers, wines, spirits, tobacco, grocery and confectionery.

The Company is incorporated and domiciled in the United Kingdom. The address of its registered office is: Weston Road, Crewe, Cheshire CW1 6BP. The registered number of the Company is 5592636.

The condensed interim financial information presented is for the periods ended 26 October 2014 and 27 October 2013 and the year ended 27 April 2014. The consolidated financial information is presented in sterling, which is also the functional currency of the parent company, and has been rounded to the nearest thousand (£000).

The condensed interim financial information shown has been approved for issue on 19 January 2015.

The condensed interim financial information shown does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 27 April 2014 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial information has not been audited.

2. Basis of preparation

The condensed interim financial statements for the 26 weeks ended 26 October 2014, which are unaudited, have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Directors have prepared cash flow forecasts for the period until April 2016. Based on these, the Directors confirm that there are sufficient cash reserves to fund the business for the period under review, and believe that the Group is well placed to manage its business risk successfully. For this reason they continue to adopt the going concern basis in preparing the financial information.

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's financial statements as at 27 April 2014. There have been no significant changes in any risk management polices since the year end.

3. Accounting policies

In preparing these condensed interim financial statements, the Group's accounting policies and judgments and estimates were the same as those applied to the consolidated financial statements as at 27 April 2014 and as such should be read in conjunction with those consolidated financial statements.

4. Segmental Information

The Group's activities consist of the wholesale and retail distribution of beers, wines, spirits, tobacco, grocery and confectionary within the United Kingdom. The Executive Directors of the Board are considered to be the chief operating decision maker ("CODM"). The business is managed as one entity, and activities are not split are not split into any further regional or product subdivisions in the internal management reporting, as any such split would not provide the Group's management with meaningful information. Consequently all activities relate to this one segment.

The CODM manages the business using EBITDA pre-exceptional and share based payment costs. The table below provides a reconciliation from this figure to the reported profit before tax in the consolidated income statement.

5. Cash generated from operations

6. Exceptional costs

The exceptional costs of £0.5 million which are recognised within operating expenses for the 6 months ended 26 October 2014 relate to restructuring and reorganisation costs to create efficiencies and streamline processes.

The exceptional costs of £3.3 million and £3.9 million recognised within operating expenses for the 6 months ended 27 October 2013 and the year ended 27 April 2014 respectively primarily relate to costs associated with the IPO (£3.0 million 6 months ended 27 October 2013 and £3.1 million year ended 27 April 2014).

7. Business Combinations

RNB Stores

On 2 May 2014, the Company entered into an agreement to acquire certain trade and assets of RNB Stores Limited, including 26 stores, for a total consideration of £1.7 million, of which £0.2m was deferred. On 27 June 2014, the Company entered into an agreement to acquire a further 5 stores, for a total consideration of £0.18 million.

At the time of purchase all stores operated under the Rhythm and Booze brand and were immediately rebranded to an appropriate Conviviality Retail Plc fascia. The purchase of these stores opens up a key region in which the Group had limited presence and is consistent with the Group's ongoing strategy to expand into new territories.

The following table summarises the consideration paid and the amount of assets acquired and liabilities assumed recognised at the acquisition date.

The goodwill arising on acquisition represents the premium paid to acquire a cluster of stores in a key region providing significant opportunities for cross-selling and other synergies.

In addition to the acquisitions set out above, the Group has acquired an individual store for a total cash consideration of £80,000, all of which has been recognised as goodwill.

8. Taxation

Taxation for the period has been calculated by applying the estimated tax rate for the financial year ending 26 April 2015. Deferred tax assets relating to share based payments have been calculated to reflect the number of options outstanding and movement in the share price.

9. Dividends

A final dividend for the year ended 27 April 2014 of 6 pence per ordinary share was paid on 16 October 2014 to all shareholders whose names appeared on the register at close of business on 19 September 2014.

An interim dividend of 2 pence per ordinary share was declared by the Board of directors on 19 January 2015. It is payable on 27 February 2015 to shareholders whose names appear on the register at close of business on 30 January 2015. The interim dividend, amounting to £1.4 million, has not been recognised as a liability in this interim financial information. It will be recognised in the shareholders' equity in the year to 26 April 2015.

10. Goodwill

Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs that are expected to benefit from that business combination or are established as a result of the business combination. The carrying amount of goodwill has been allocated as follows:

11. Share Capital

On 8 July 2013, each A ordinary Share and each B ordinary Share was sub-divided into 36.77614821 ordinary Shares resulting in a total of 33,536,098 ordinary Shares. During the year to 27 April 2014, an additional 33,176,922 ordinary shares were issued. A further 218,807 shares have been issued up to 26 October 2014 relating to Company matched shares and free shares in accordance with the employee share incentive plan.

During the period to 26 October 2014, share options over 291,874 shares were exercised and sold by Keith Webb, Executive Director on, 31 July 2014. The proceeds, net of costs were £427,680.

During the period to 26 October 2014, share options over 850,000 shares were exercised and sold by Diana Hunter, CEO on, 16 September 2014. The proceeds, net of costs were £1,330,083.

12. Earnings Per Ordinary Share

The earnings per share calculations for the year ended 27 April 2013 and the 6 months ended 27 October 2013 have been restated to reflect the share restructuring.

Basic and diluted earnings per share are calculated by dividing the profit / (loss) for the period attributable to equity holders by the weighted average number of shares. For the period to 27 October 2013 the share options and warrants in existence are considered to be anti-dilutive due to the loss in the period and therefore basic and diluted EPS are the same.

The difference between the basic and diluted average number of shares represents the dilutive effect of share options and warrants in existence. The weighted average number of shares can be reconciled to the weighted average number of shares including dilutive shares as follows:

Adjusted earnings per share

Although not presented on the face of the Income statement, the adjusted earnings per share, profit after tax, but before exceptional items, is calculated below:

Adjusted basic and diluted earnings per share are calculated by dividing the profit after tax but before exceptional items by the weighted average number of shares, which is the same as disclosed in the table above. For the period to 27 October 2013 the share options and warrants in existence are considered to be anti-dilutive due to the loss in the period and therefore basic and diluted EPS are the same.

13. Events Occurring After the Reporting Date

The Company issued new ordinary shares of 2,263 and 2,272 of £0.0002 on the 24 November and 22 December 2014 respectively being the Company matched shares in accordance with the employee share incentive plan.

The Company announced on 12 November 2014 that it would be commencing a trial to launch Bargain Booze in Scotland with Scottish Midland Co-operative Society Group as the exclusive Scottish Franchisee. The trial is expected to be completed by June 2015 and, if it proves successful for both parties, Bargain Booze franchise stores will be rolled out across Scotland.

The Company paid the £200,000 deferred consideration relating to the acquisition of 31 stores from RNB Stores Limited on the 21 November 2014 (see note 7).