Bargain Booze owner Conviviality must raise £125m to halt bankruptcy

Bargain Booze’s owner, Conviviality, has made clear it is likely to go bust unless it can raise £125m, as it issued its third profits warning in a month.

In a stock exchange announcement, the company said that it was holding meetings with investors to raise £125m via a share placing that would help it pay a £30m tax bill due at the end of the month, fund overdue payments to creditors, and repay a £30m loan.

Conviviality said it was also looking at alternative sources of funding and if it was unable to raise the funds required it was “unlikely to be able to trade on a going-concern basis”.

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Shares in the company, which also owns the wholesaler Matthew Clark, were suspended at 101p last week after two profit warnings in the space of a week wiped more than 60% off its stock market value.

The company blamed the first shock profit warning on a spreadsheet arithmetic error made by a member of its finance team and weakening profit margins, and then admitted that it had not budgeted for the £30m tax bill due this month.

Conviviality shares have plunged by over two-thirds since January

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Conviviality’s chief executive Diana Hunter stepped down on Monday amid analyst criticisms of a lack of systems and controls at the company.

In its latest announcement on Wednesday, Conviviality admitted that profits for the year to 29 April would be about £10m less than it had told the City only last week.

Conviviality said that if its share placing was successful, it now expected annual underlying profits of £45.5m to £46m, compared to the £55.3m to £56.4m range it announced on 13 March. Previously the City had been expecting profits of £70m.

It added that if the share placing was successful it wanted to make an open share offer to all Conviviality shareholders to raise a further €5m (£4.4m).

Both fundraisings are subject to approval by shareholders at a general meeting.