Conviviality, the company behind high street off-licence chains Wine Rack and Bargain Booze, is on the brink of collapse, putting 2,600 jobs at risk and prompting warnings that pubs could run dry.
In a statement to the stock market, Conviviality said investors had refused its request for £125m of new money, which it needs to stave off bankruptcy after a string of shock profit warnings.
Directors are still seeking a buyer for all or part of the business but Conviviality is facing the prospect of an administration likely to be managed by accountancy firm PricewaterhouseCoopers.
The trade body for the UK’s pubs, more than 20,000 of which are supplied by the company’s Matthew Clark distribution division, warned many could now face “short term supply issues”.
“Despite a significant number of meetings with potential investors resulting in good levels of demand, and constructive discussions with a number of key customers and suppliers regarding the provision of support, there was ultimately insufficient demand to raise the full £125m,” the company said.
“The board wish to thank its customers, suppliers and employees for their continued support during this difficult period for the company.
“The company is in discussions with its lending banks and advisers regarding other possible options and is in receipt of a number of inbound enquiries regarding a potential sale of all or parts [of] the business.”
The company, which has annual sales of £1.6bn, said its shareholder were likely to receive “little-to-nil” value for their shares, which have been suspended on the junior AIM stock market since 14 March.
Despite reporting strong sales and profits in recent trading updates, Conviviality was plunged into turmoil after a string of profit warnings issued earlier this month that saw its shares suspended.
The company blamed the first profit warning on a erroneous calculation made by a member of its finance team and weakening profit margins. It later admitted it had not budgeted for a £30m tax bill.
Conviviality’s chief executive, Diana Hunter, stepped down after City analysts criticised the company’s financial controls and processes.
The firm is a major player in the UK drinks industry, supplying more than 700 off-licences and serving more than 23,000 pubs and restaurants including the JD Wetherspoon chain, via its Matthew Clark and Bibendum subsidiaries.
The British Beer & Pub Association said: ‘We are working with our members to assess the impact of the ongoing issues with Conviviality who, through Matthew Clark, are significant suppliers to the pub trade.
“Alternative suppliers will be sought in order to minimise the impact on the trade as far as possible, but inevitably a situation like this will likely cause short term supply issues for pubs.”