Half Year Results

1 February 2016

Conviviality plc

Half Year Results

A transformational year for the Group

Conviviality Plc (AIM: CVR), ("Conviviality", the "Company", or the "Group"), the UK's leading independent alcohol wholesaler serving consumers through the on-trade and through its Franchise retail estate, announces its half year results for the 27 weeks to 1 November 2015 (H1 FY15 26 weeks to 26 October 2014), together with an update on current trading.

Group Financial Highlights

· Revenue up 38% to £252.0m (H1 FY15: £182.9m)

· EBITDA up 43% to £6.5m (H1 FY15: £4.5m)

· Group profit before tax and exceptional items up 2.8% to £3.3m (H1 FY15: £3.2m)

· Adjusted profit before tax up 19% to £3.8m (H1 FY15: £3.2m)

· Gross Margin up 0.5% points to 10.0% (H1 FY15: 9.5%)

· Adjusted diluted earnings per share up 3% to 3.8 pence (H1 FY15: 3.7 pence)

· Net debt of £98.5m (H1 FY15: net cash £1.2m) reflecting the acquisition of Matthew Clark

· Interim dividend up 5.0%, ahead of earnings, to 2.1p (FY15 interim dividend 2.0p)

Operational Highlights

· Completed transformational acquisition of Matthew Clark on 7 October 2015

· New Board and organisational structure in place

· Integration of Matthew Clark ahead of plan

Conviviality Retail Highlights

· Sales up 0.8% over the comparable 26 week period

· An improvement in like for like retail sales down 1.3%

· EBITDA in line with last year at £4.5m (H1 FY15: £4.5m)

· On track to meet full year net store opening growth target of 50

· Number of stores owned by multisite Franchisees up 7.4% to 276 (H1 FY15: 257)

· Average Franchisee profitability maintained

Matthew Clark Highlights

· Revenue from 7 October to 1 November up 2.7% to £60.6m (corresponding prior period £59.0m)

· EBITDA of £2.1 million up 10% on the corresponding prior period

· Acquired Peppermint on 31 December 2015 providing access to the fast growing events market

Christmas Trading

· Strong Christmas trading in the two peak weeks to 3 January 2016 with Group sales growth 13% above last year

· Like for like retail sales during the two peak weeks up by 1.1% (Wine Rack up 11.1%)

· Champagne and sparkling wine saw sales increase 31% with four bottles of Prosecco sold every minute in the peak trading weeks; premium bottle ales up 300% and cases of craft ales up 218%

· Matthew Clark sales to outlets increased 20% in the two weeks to 3 January 2016.

Outlook

· Trading in line with board expectations for the current financial year

· Integration of Matthew Clark significantly ahead of plan, benefitting FY17 onwards

Diana Hunter, Chief Executive Officer of Conviviality, said:

"This is a strong set of results during a period of significant transformational change. With Matthew Clark we now have a firm foundation in the expansive on-trade market from which to build on, and our success over the important Christmas period gives us confidence that the second half will deliver further growth. I am pleased with the progress we have made to bring our two businesses together. I would like to thank all of our people, our Franchisees, our on trade customers and our suppliers who have contributed to our success."

There will be a presentation for analysts at the offices of FTI Consulting (200 Aldersgate, EC1A 4HD) at 9.30am today, 1 February 2016.

Enquiries:

Chairman's Statement

The first half of the year has been transformational for the Group with the successful acquisition of Matthew Clark. Conviviality Plc is now the UK's leading independent delivered drinks wholesaler providing alcoholic and soft beverages to both its Franchise retail estate and to over 6,000 customers in the on-trade. The response to the acquisition of Matthew Clark from our people, our Franchise partners, customers and suppliers has been overwhelmingly positive.

Following the acquisition, we have created two divisions: Conviviality Retail and Matthew Clark. Each business unit will be run by a Managing Director reporting to the Group CEO Diana Hunter. I am delighted that Mark Aylwin joined the business on 4 January 2016 as Managing Director of Matthew Clark bringing a wealth of experience from Booker Group Plc, and as announced on 26 January 2016, David Robinson will be joining the business as Managing Director of Conviviality Retail. David brings a significant amount of experience from his extensive retail career, most recently at Home Retail Group plc.

We have strengthened the organisation throughout by ensuring we retain high calibre people in both businesses, as well as adding expertise where required to ensure the benefits of the acquisition are realised.

It is a testament to the quality of all of our people and our Franchisees that Conviviality Retail and Matthew Clark have both continued to trade well through the acquisition process during the first half.

I would like to thank, on behalf of the Board, all of our Franchise partners and everyone working in the businesses for their outstanding efforts, passion and commitment that has made the exceptional achievements of the last six months possible.

Reflecting the progress of the business, I am pleased to announce a 5% increase in the interim dividend, ahead of earnings, to 2.1 pence per share.

Chief Executive Officer's Statement

Conviviality Group Overview

Conviviality plc, the UK's leading off licence and convenience chain is now also the UK's leading independent drinks wholesaler and distributor. By acquiring Matthew Clark and bringing it together with our Retail business, Conviviality now has the opportunity to leverage its strengths across both the on and off-trade in the drinks markets. Conviviality now has combined revenue of £1.2 billion for the financial years ended April 2015 (Conviviality) and February 2015 (Matthew Clark). The enlarged group has a competitive advantage being independent of major drinks brands, enabling it to supply an unrestricted selection of products to customers who value breadth of range, offering a compelling route for suppliers to access both on and off-trade retailers.

Conviviality is now also able to work with brand owners to maximise distribution potential across all drinking occasions, in home and out of home, across a deeper product portfolio. Our strategic goal is to leverage our position as the UK's leading independent wholesaler and distributor to drive further growth from our increased scale and improvements in the range offering, price competitiveness and customer experience in the out of home, off-licence and convenience retail markets. We will also be reviewing further opportunities to leverage our scale by connecting with target consumer segments across channels and partnering with suppliers to grow our mutual businesses.

In accordance with the strategy outlined at IPO, Conviviality has built a number of distinctive and differentiated retail brands, strengthened its relationship with Franchisees, and undertaken complementary acquisitions and strategic partnerships to extend its geographic reach. The acquisition of Matthew Clark represents a continuation of the strategy to leverage Conviviality's key strengths to enter new markets by providing significant scale in the non-tied, on-trade drinks market, delivering to approximately 17,000 on-trade outlets annually. The on-trade market includes pubs, restaurants and hotels; night venues (e.g. night clubs and casinos); destination leisure venues (e.g. holiday parks and theme parks); and other premises licensed to sell alcoholic drinks for consumption on premise and is worth £14.0 billion of which £8.3 billion is accessible to Matthew Clark. Matthew Clark's sales last year were £811 million which indicates the potential growth available to the enlarged group.

The greater scale of the enlarged Group provides the potential to realise lower costs through buying and distribution synergies, better service through improved organisational efficiency, and increased revenues through more competitive pricing and an enhanced range offering.

It is pleasing that all of the key leadership roles have been recruited and will be in place before the end of the financial year. The new team members will add significant value working alongside our existing talent to drive real benefits from the acquisition.

We have completed the detailed analysis of supplier terms, held a joint supplier conference and started negotiations to deliver the buying synergies which we expect to deliver significantly ahead of plan, benefitting FY17 onwards.

The analysis of the supply chain is underway and the potential for distribution synergies will be identified before year end.

The opportunities offered by the enlarged group have been well received by our Franchisee partners, customers and suppliers.

Financial Overview

Adjusted profit before tax increased by 19% to £3.8 million from £3.2 million the prior year, as the Group benefited from profits generated by Matthew Clark in the post-acquisition period from 7 October to 1 November. Total revenue of £252 million benefitted from Matthew Clark contributing £61 million for the 3.5 weeks post acquisition and sales growth in Conviviality Retail of £8 million primarily due to an additional trading week which increased sales by £7 million. EBITDA increased 43% to £6.5 million from £4.5 million last year with Matthew Clark contributing profits of £2.1 million whilst Conviviality Retail was in line with last year.

Net debt at 1 November 2015 was £98.5 million due to new debt facilities of £80 million to fund the acquisition of Matthew Clark and £19 million drawn down from our working capital facilities. The Group is comfortably within all of its banking covenants.

Conviviality Retail

We continue to make strong progress against the delivery of our retail strategy of being the UK's leading franchised off-licence and convenience retailer. We have invested in our Franchisees and their stores to ensure they are competitive. Strengthening our Franchisee base led to a 7.4% increase in the number of stores owned by multi-site Franchisees at the half year from 257 to 276, over the last 18 months and the number of stores owned by multi-site Franchisees has increased 31%. 16 new Franchisees have joined the Group resulting in 19 stores opening in the first half compared to 8 in the prior year. Closures have reduced by 49% with 18 closures versus 35 in the comparable period. Franchisee profitability continues to remain strong with Franchisees seeing their profits c.15% above 2012 levels and resilient to the changes in the National Living Wage.

A differentiated destination off-licence offer has been key to the success of Conviviality's brands. The strategy to improve the credibility of key categories, particularly wine, continues to be successful as wine participation is now 9.4% up in the last 18 months, which is further reinforced by the excellent performance of Wine Rack. By capitalising on the growing impulse and grocery categories within the Retail business, we have seen a 17% increase in sales as customers increasingly recognise the relevance of the brand for local convenience shopping. Pricing remains an important differentiator in the convenience market and the H1 price comparison relative to the multiples has been on average 12% cheaper.

The UK retail environment continues to be highly competitive. The strategy to continue to strengthen our fascias and brands through innovative marketing and service extensions has been key. The Bargain Booze App continues to grow its user base with 46,000 downloads and 82,000 redemptions. The most popular offers have been Jack Daniels and Strongbow Cider, with redemptions of 2,793 and 1,256 respectively. In April 2015, Click and Collect was piloted, with a gradual roll out to 165 stores. This development phase has been a very informative process and by April 2016, a further 1,000 lines will be added to the offer.

During the summer, we undertook an advertising campaign highlighting Bargain Booze's comparative pricing to Aldi and Lidl and this was well received by both our suppliers and customers and has ensured greater brand recognition. This activity has been followed during the autumn with a targeted campaign to demonstrate the value and choice in our Franchisees local areas, enabling them to compete more effectively in their local markets.

The pipeline for new stores is at a three year high with 162 potential sites under review and we are targeting a net increase of 50 stores by the year end, ensuring a strong start to the new financial year. The Retail business remains positive about acquisitions although it is important that any opportunities are in the right locations to complement the existing brands and Franchise business.

The strategy to grow our Wine Rack business is showing positive results with like for like performance showing consistent improvement through the year at 5.3% and Christmas peak weeks at 11.1%. The 'Try Before You Buy' any wine offer has had positive response from customers and their recognition of the specialism in wine and spirits has been demonstrated in the sales increase during the peak weeks of 10% and 21% respectively.

Matthew Clark

The acquisition of Matthew Clark on 7 October 2015 has been well received by the 1,400 team members, 6,000 customers and over 200 suppliers. Matthew Clark team members have ensured the business continued to trade well during a period of significant disruption and change following the acquisition process. Sales in the period from 7 October 2015 to 1 November 2015 were 2.7% above the same period last year. Since the acquisition, 841 new outlets have chosen to be serviced by Matthew Clark, an increase of 27% on the same period last year. Customers have recognised the benefits of the competitive pricing, unparalleled choice and excellent service.

Matthew Clark acquired a controlling interest in Peppermint, one of the UK's largest events bar operators on 31 December 2015, gaining access to the large and fast growing market for drinks consumed at leisure events and festivals. In the year ended 31 October 2015, Peppermint generated revenues of £13 million. The combination of Conviviality and Peppermint will provide event goers and operators an even more compelling proposition and present opportunities for growth.

Matthew Clark's strategy is to be the Number 1 drinks wholesaler and distributor to the on-trade, not only in terms of size but also in range offering, price competitiveness and customer experience.

To achieve this, our key strategic plans are to:

· communicate our unique proposition clearly to our target customers and strategic partners;

· strengthen our position as a centre of expertise in wine and be at the forefront of range innovation in the dynamic drinks sector;

· leverage our scale and reach to be the most competitive wholesaler in the drinks market;

· grow share in major cities and inner urban areas through a superior service proposition;

· grow the number of food-led outlets we serve and the mix of products we sell them;

· create a market-leading supply chain that delivers excellent customer service;

· become recognised as the suppliers' strategic partner of choice in the on-trade;

· develop the tools and capabilities to ensure we provide the most value-adding customer service in the market;

· develop a true one stop shop for drinks brands, leveraging our distribution, sales, agency, marketing and event capabilities; and

· undertake complementary acquisitions to drive long term value and expand our capabilities.

Group Christmas Trading

Conviviality had a profitable Christmas across all of the businesses. Group sales growth was 13% above the prior year. It is pleasing that retail sales beat last year by 3.9% and our Franchisees witnessed trade coming into their stores during the weeks when shoppers would have traditionally visited supermarkets, an indication of customers' shopping more often and locally in line with widely reported industry trends. Like for like sales were up 1.1%, a solid performance given the competitive nature of the market. Champagne and sparkling wine saw sales increase 31% with four bottles of Prosecco sold every minute in the peak trading weeks; premium bottle ales up 300% and cases of craft ales up 218%. Matthew Clark delivered a strong Christmas performance with sales to its outlets up 20% for the two weeks ended 3 January and new outlets up 27% since the acquisition.

Outlook

Looking to the year ahead, trading is in line with expectations, we have a strong pipeline of Franchisee openings in our Retail business as well as a strong pipeline of customers in the Matthew Clark business. Our focus will be to continue to provide our Franchisees and our on-trade customers with exceptional choice and value from the ranges we offer, with excellent service through our people and supply chain. We have exciting plans for the year ahead as well as building on our excellent progress already underway.

We will continue to invest in our business, our Franchisees and to expand in both our heartland and further afield. With Matthew Clark we now have a firm foundation in the expansive on-trade market 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. The new team members have been recruited and are working well with our existing talent to grow our business and continue to deliver our integration which is significantly ahead of plan, benefitting FY17 financial year onwards.

Chief Financial Officer's Statement

Overview

Group profit before tax and exceptional items increased by £0.1 million to £3.3 million (H1 FY15: £3.2 million). Sales increased 38% to £252 million with Matthew Clark contributing £61 million for the period from acquisition on 7 October to 1 November 2015, and Conviviality Retail increasing £8 million. EBITDA increased to £6.5 million (H1 FY 2015: £4.5 million) with Matthew Clark adding £2.1 million and Conviviality Retail in line with last year. EBITDA margin increased 0.1% points to 2.6% of sales (H1 FY15: 2.5%) and adjusted diluted earnings per share increased 3% to 3.8 pence (H1 FY15: 3.7 pence).

Exceptional items increased to £7.3 million primarily due to acquisition and integration costs of Matthew Clark. Net debt at October 2015 was £98.5 million (April 2015: cash £1.2 million) due to the acquisition of Matthew Clark.

Conviviality Retail

Conviviality Retail sales increased 4.7% to £191 million (H1 FY15: £183 million) primarily due to an additional trading week which increased sales by £7 million. Sales for the corresponding 26 week period grew by 0.8% driven by an increase in the average number of stores to 622 (H1 FY15: 608) partly offset by a fall in revenue per store of 1.7%. This was due to the 37 stores acquired from GT News having subsequently been franchised to James Convenience Retail Limited. Excluding the James Convenience Retail Limited stores revenue per store was up 0.7%.

Gross profit margin reduced by 0.3% points to 9.2% (H1 FY15: 9.5%) as the Group invested in its Franchisees to ensure they remain highly competitive. Operating costs as a percentage of sales decreased to 6.9% (H1 FY15: 7.0%) such that EBITDA margin was 0.2% points lower than last year at 2.3% (H1 FY15: 2.5%).

Underlying retail sales per store were 1.0% below last year, however Franchisee profitability was maintained as Franchisee margin increased 0.3% points. Our Franchisees also benefited under the Franchise Incentive Plan from the higher share price following the acquisition of Matthew Clark.

Matthew Clark

On 7 October 2015 the Group acquired 100% of the share capital of Matthew Clark Holdings for a total cash consideration of £198.7 million. The acquisition was funded by a placing of 86.7 million new shares at £1.50 per share raising gross proceeds of £130 million, and £80 million of new term loans.

In the post-acquisition period sales were 2.7% above the corresponding prior period at £61 million. Alcoholic beverages represent over 90% of Matthew Clark's sales compared to 57% in Conviviality Retail such that on a pro forma basis, alcoholic beverages are 82% of the Group's sales and tobacco falls from 30% in the year ending April 2015, to 10%. We expect this ratio to be broadly stable going forward.

The Matthew Clark gross margin percentage in the post-acquisition period was slightly above the corresponding prior period at 12.4%. Matthew Clark margins are higher than those of Conviviality Retail as Matthew Clark does not sell tobacco which has lower margins than alcoholic beverages. Excluding tobacco the gross margin of Matthew Clark and Conviviality Retail are similar.

Matthew Clark operating costs in the period since acquisition are 9.0% of sales and are in line with the corresponding prior period. The operating cost percentage is higher than that for Conviviality Retail, primarily driven by higher supply chain costs due to the nationwide depot network and field sales team required to serve 17,000 pubs, bars and restaurants throughout the UK.

Matthew Clark EBITDA margin in the post-acquisition period was 3.4%.

On 31 December 2015 Matthew Clark acquired 61% of Peppermint Events Limited for an initial payment of £1.8 million. Peppermint is one of the UK's leading events bar operators and generated normalised EBITDA of £0.5 million in the year ended 31 October 2015. The founders will continue to run the business and have the potential to receive up to a further £0.8 million if EBITDA targets are achieved. Matthew Clark has agreed to acquire the remaining 39% by 2020 with the price dependent on Peppermint's EBITDA and cash flow.

Profit before Tax

Group profit before tax and exceptional items increased 3.1% to £3.3 million (H1 FY15: £3.2 million) as EBITDA growth of £2.0 million was offset by investments in Franchisees driving higher share based charges of £0.8 million (H1 FY15: £0.4 million), higher depreciation and amortisation of £1.5 million (H1 FY15: £0.9 million) and amortisation of the Matthew Clark brand and customer base intangible assets created on acquisition of £0.4 million.

Exceptional items of £7.3 million include the costs of acquiring and integrating Matthew Clark.

Earnings per Share

Group loss after tax and exceptional items was £4.5 million (H1 FY15: profit £2.1 million) and the placing of 86.7 million new shares to fund the acquisition of Matthew Clark increased the weighted average number of shares by 20% to 77.7 million (H1 FY15: 64.9 million), generating a basic loss per share of 5.9 pence (H1 FY15: EPS 3.2 pence). On a fully diluted basis the loss per share was 5.6 pence (H1 FY15: EPS 3.1 pence).

Group profit after tax before exceptional items, profits or losses on mark to market adjustments related to outstanding foreign currency financial derivatives and amortisation of the Matthew Clark brand and customer base intangible assets increased to £3.1 million (H1 FY15: £2.5 million). Adjusted basic eps increased 0.1 pence to 4.0 pence (H1 FY15: 3.9 pence) while adjusted fully diluted eps was 3% above last year at 3.8 pence (H1 FY15: 3.7 pence).

Cash

At 1 November 2015, Group's net debt was £98.5 million (26 April 2015: cash £1.2 million) primarily due to the acquisition of Matthew Clark.

Cash used in operations was an out flow of £7.3 million (H1 FY15: inflow £2.5 million) due to higher working capital due to the period end changing from 26 October to 1 November resulting in higher duty and creditor payments, which we expect to unwind in the second half.

The Group invested £2.8 million in capital expenditure primarily in stores, systems and supply chain, and paid a final dividend of £4.2 million.

Upon the acquisition of Matthew Clark the Group raised £80 million of 5 year term loans. Half the debt is amortising and the remainder is due to be repaid on 7 October 2020. The agreements require leverage to be below 2.5 times and interest cover to be at least 4 times. These covenants are assessed quarterly with the first assessment on 1 May 2016. We expect to comfortably comply with the covenants.

Dividend

An interim dividend of 2.1 pence per share (FY15: 2.0 pence per share) is declared today for shareholders on the register at close of business on 12 February 2016 and will be paid on 11 March 2016.

CONSOLIDATED INCOME STATEMENT

For the 27 Weeks ended 1 November 2015

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

For the 27 Weeks ended 1 November 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 27 Weeks ended 1 November 2015

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 27 Weeks ended 1 November 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General Information

The principal activity of Conviviality Plc (the "Company") and its subsidiaries (together, the "Group" or "Conviviality") is that of wholesale and retail supply of beers, wines, spirits, tobacco, soft drinks, grocery and confectionery to the UK on trade and off trade markets.

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 1 November 2015 and 26 October 2014 and the year ended 26 April 2015. 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 1 February 2016.

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 26 April 2015 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 27 weeks ended 1 November 2015, 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 2018. 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 26 April 2015. Prior to the acquisition of Matthew Clark the management of the company obtained a full Financial Position, Prospects and Procedures report which identified any areas of risk and produced a remediation plan which was immediately implemented.

The primary financial risks faced by the Group relate to risk of default by counter parties to financial transactions and availability of funds to meet business requirements.

Credit risk

Both Conviviality Retail and Matthew Clark actively manage credit risk to franchisees and customers by experienced credit control teams. The principal credit risk arises from non-recovery of trade receivables. Credit risk is managed through a number of devices designed to keep payments regular and consistent.

Market Risk

The Group finances its operations through a mixture of retained profits, ordinary shares, and working capital facilities as well as a specific term loan secured during the period. The Group has a treasury policy and regularly reviews its position with regard to the hedging of interest rate, diesel fuel and foreign exchange exposure.

Foreign Exchange Risk

The Group is exposed to foreign exchange risk from the purchase of wine supplied from abroad to both Matthew Clark and Conviviality Retail. The majority of sales are made in the UK and a negligible portion being made to the Republic of Ireland.

Liquidity Risk

The group ensures that its liquidity position is not threatened through the use of short, medium and long term cash forecasting. The Group manages its capital to ensure that the Group will be able to continue as a going concern whilst maximising its return to shareholders through optimising debt and equity balance. The Group has a progressive dividend policy which aims to increase the value of ordinary dividends over time.

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 26 April 2015 and as such should be read in conjunction with those consolidated financial statements.

4. Segmental Information

Prior to the acquisition of Matthew Clark Holdings Limited on 7 October 2015, the Group's activities were considered to be one segment of the wholesale and retail distribution of beers, wines and spirits, tobacco, grocery and confectionery within the United Kingdom to the off-trade market. The acquisition of Matthew Clark Holdings Limited added a second segment of the wholesale of beers, wines and spirits to the on-trade market. The executive directors of the board are considered to be the chief operating decision maker ("CODM"). Prior to 7 October the business was managed as one entity and post 7 October the business was managed as two entities.

The CODM manages the business using EBITDA pre-exceptional items, foreign exchange mark to market adjustments on financial derivatives and share-based payment costs. The table below provides a reconciliation from this figure to the Operating Profit in the consolidated income statement.

5. Cash generated from operations

6. Exceptional costs

The exceptional costs of £7,343,000 which are recognised within operating expenses for the 27 weeks ended 1 November 2015 relate to acquisition costs for Matthew Clark Holdings Limited (£6,517,620), and cost of integrating Matthew Clark Holdings Limited (£612,000) including management restructuring and consultancy costs associated with the generation of buying, logistics and organisational synergies and costs relating to other business combinations (£213,380).

7. Business combinations

Matthew Clark Holdings Limited

On 7 October 2015, Conviviality Brands Limited, a 100% subsidiary of the Company, acquired 100% of the share capital of Matthew Clark Holdings Limited, for a total consideration of £198.7 million.

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 future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised on the acquisition of Matthew Clark; these largely relate to synergy and integration benefits. On the acquisition of Matthew Clark, the fair value of assets and liabilities has been assessed and adjustments made as shown in the table above. Within Inventories, a fair value adjustment of £92,000 was made which represents the adjustment required to bring Inventories to their net realisable value. Fair value adjustments of £748,000 were made to Receivables in relation to non-recoverable loans made to customers. Adjustments of £500,000 were made to Trade and other payables in respect of the fair value of the head office lease arrangement. An assessment of the Matthew Clark depots identified that, for a number of specific depots, renovation works would need to be carried and therefore a provision for £1,000,000 was made to account for this obligation.

7. Business Combinations (contd…)

Below we set out the actual trading information of Matthew Clark pre and post-acquisition by Conviviality Retail:

8. Intangible assets

Acquired brands are initially recognised at their fair value on acquisition and amortised over their useful economic life. The acquisition of £62,700,000 relates entirely to Matthew Clark and comprises the brand value (£23,900,000) and the customer base (£38,800,000).

Other intangible assets are predominantly software costs which are initially recognised at their cost on acquisition and amortised over five years.

9. Taxation

Taxation for the period has been calculated by applying the estimated effective tax rate for the financial year ending 1 May 2016. Deferred tax assets relating to share-based payments have been calculated to reflect the number of options outstanding and movement in the share price and deferred tax liabilities relating to the valuation of the Matthew Clark Brand and customer base included in intangible assets have been recognised.

10. Dividends

A final dividend for the year ended 26 April 2015 of 6.3 pence per ordinary share was paid on 9 October 2015 to all shareholders whose names appeared on the register at close of business on 11 September 2015.

An interim dividend of 2.1p per ordinary share was declared by the Board of directors at the date of publication of these financial statements. It will be paid on 11 March 2016 to shareholders whose names appear on the register at close of business on 12 February 2016. The interim dividend, amounting to £3.3 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 1 May 2016.

11. 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:

12. Share capital

On 2 October 2015, a further 86,666,667 shares were issued at a value of £1.50 each in relation to the Matthew Clark acquisition. A further 1,334,000 shares have been issued up to 26 October 2015 relating to a Zeus Capital warrant which has been exercised, 7,212 employee matching shares and 272,806 free shares issued under the employee share option plan.

13. Earnings per ordinary share

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.

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, are calculated below:

Adjusted basic and diluted earnings per share are calculated by dividing the profit after tax but before exceptional items, fair value adjustments on derivative financial instruments and amortization of intangibles acquired with Matthew Clark, by the weighted average number of shares, which is the same as disclosed in the table above.

14. Net debt

Included within short term borrowings is the current portion of the £80,000,000 term loan used to finance the acquisition of Matthew Clark.

Included within long term borrowings is the non-current portion of the £80,000,000 term loan used to finance the acquisition of Matthew Clark. £72,000,000 offset against the arrangement fees of £822,000 which will be recognised in the Income statement over the life of the loan.

15. Events occurring after the reporting date

The Company issued 2,228 new ordinary shares of £0.0002 each on the 8 December 2015, being the Company matched shares in accordance with the employee share incentive plan.

On 31 December 2015, the Group concluded the purchase of 61% of the issued ordinary share capital of Peppermint Events Limited for an upfront consideration of £1,800,000. The transaction is subject to an initial earn-out performance based payment during 2017 and 2018 up to a total of £800,000. There is an earn-out provision in respect of the remaining 39% of the ordinary share capital, between 2019 and 2020 based on an EBITDA multiple of 4 or 5 times depending upon performance.