Conviviality PLC shows how quickly it has made both Matthew Clark and Bibendum PLB part of its business in strong half year 2016 figures, but
Conviviality’s Diana Hunter was one of the few to enjoy 2016
2016 was a year many in the trade would like to forget. Not Conviviality PLC. Whilst all around them were largely ducking for cover and trying to cope with the changing traditions conditions and the plummeting pound after the EU referendum vote, Conviviality was quietly racking up the sales.
To some extent it is not surprising it is able to report such healthy half year trading figures today and claims to be well on track to hit its targets for the full year. It just happened to acquire Bibendum PLB Group along the way in May 2016 and overnight turn itself in to a billion pound a year business.
But buying a business of the scale and stature of Bibendum PLB is one thing, integrating it in to a business that was still bedding in the acquisition of Matthew Clark in October 2015 is another.
Which is probably why it continues to get “buy” recommendations from industry analysts who think its share price still does not reflect the capacity and capability of Conviviality PLC to grow in the coming years.
The Financial Times last week revised its consensus forecast for Conviviality PLC, based on the predictions of six investment analysts. They are recommending their investors to purchase equity in the company and that is was on course to “outperform the market”. Its share price today sits at 258.75p.
The figures show how quickly the combined businesses have come together and the impact it has had on Conviviality’s own scale and bottom line.
Facts and figures
The Bibendum business has been quickly integrated in to the wider business
It has reported that sales for the 26 weeks to October 30 grew 211% to £782.5m, with an adjusted Ebitda up 252% to £22.9m. This was on the back of a 4.4% increase in like-for-like sales in the six months to the end of October which helped make a £7.4m pre-tax profit compared with a £4m loss a year ago.
Impressive figures in themselves but when you consider for the first half of 2016 its sales were £252m, its Ebitda stood at £6.5m and its profits before tax was £3.9m, you can see quite an impact the Bibendum PLB deal has had on the overall company.
It seems that momentum has been maintained for the last quarter of last year with a 6.1% increase in group sales in November and December 2016 and and a 2.1% rise in retail like-for-like sales for the six weeks ending January 1 2017.
It is now on track, it says, to achieve its goal of delivering £6m synergies from its acquisitions during the 2017 financial year.
But it is also important to point out that year-on-year Conviviality PLC had a net income fall of 25.06% from £7.03m to £5.27m despite a 137.44% increase in revenues from £364.09m to £864.50m (Financial Times). It is working from a gross margin position of 11.47%, a net profit margin of 0.61% and and operating margin of 1.34%.
The number of outlets it is now serving has gone up by 1.5%, which you might have expected to be more considering its buying power and distribution channels, but noticeably the sales it is achieving through those outlets has gone up by 3.8%. Which suggests the on the ground support is working, often the hardest thing to get right in companies of this size.
Diana Hunter, Conviviality’s chief executive, is not surprisingly delighted by its strong performance. She said: “These strong results demonstrate our competitive advantage, the broad customer base we have developed and the robust nature of Conviviality as the UK’s leading drinks wholesaler, distributor and solution provider to our customers.”
Matthew Clark was acquired in October 2015 and is being run separately from Bibendum
Noticeably each of its three new trading divisions are all in positive growth.
- Conviviality Direct, which looks after the on-trade and a customer base now said to be over 23,000 outlets, saw sales of £515m up 5.2% in the 26 weeks to October 30.
- Conviviality Retail, which includes Bargain Booze and Wine Rack figures, was up 2.5% to £189m sales compared to £184m for the same period in 2015.
- Conviviality Trading, which covers its events and festival businesses, was up 5.1% to £79m in sales.
One leading analyst, Zeus Capital, said the figures represent good value for money for investors. In a note it said: “We expect that the company will continue to build on the good start to the year as it continues to trade in line with expectations. The current valuation is a significant discount to the peer group that includes a mix of retail, similar franchise businesses and alcohol specific retailers. Applying a 25% discount to the FY18 P/E multiple of the average of Booker and Majestic, i.e. 13.0x, we see an intrinsic value of 309p, a premium of 51% to the current share price.”
The FT quoted predictions from three analysts that say over the next 12 months, “Conviviality PLC has a median target of 290.00, with a high estimate of 300.00 and a low estimate of 280.00. The median estimate represents a 11.54% increase from the last price of 260.00”.
