News Column

Conviviality Retail Annual Profit Hit By IPO, Acquisition Costs

July 14, 2014

Rowena Harris-Doughty

LONDON (Alliance News) - Off-license chain Conviviality Retail PLC Monday reported a drop in pretax profit for its last financial year, hit by the costs of its initial public offering and acquisition of Wine Rack, while revenue was held back by planned store closures.

The owner of off-licence chains Bargain Booze and Rhythm and Booze said its pretax profit for the financial year ended April 27 was hit by costs from its July 2013 IPO and August 2013 acquisition of Wine Rack. Pretax profit was GBP4.8 million, down from GBP6.6 million a year earlier.

Excluding exceptional costs, profit increased to GBP9.3 million from GBP7.1 million, which Conviviality said was driven by an improvement in gross margin, strong cost control and a reduction in financing costs following a financial restructuring conducted as part of its IPO.

However, the company gave a confident outlook for the year ahead and declared a maiden dividend of 8 pence per share for the year.

"The impact of the change to a public company has been positive, although this created a pipeline lag in our new store openings," the company said in a statement Monday, adding: "It has only been in the last quarter that we have seen the full benefit with our pipeline of new openings increasing.

"As we look ahead to the new financial year, we will continue to build on this strong start to growth and continue to build on consumer enthusiasm for our brands."

Revenue for the year fell by 4.3% to GBP355.7 million from GBP371.8 million a year earlier, as Conviviality continued to close stores during the period.

Retail sales, which represent total sales to consumers, were GBP506.7 million for the year as a whole, down 4.7% on the prior year. Conviviality said the managed reduction of underperforming stores was offset by new store openings and the acquisition of 22 Wine Rack stores.

Post year end, the group spent GBP1.8 million to buy 31 Rhythm & booze stores from Bibby Retail Services Ltd, a deal that expanded its operations into new regions of the UK, particularly in the North East and Yorkshire.

"The year ahead will see us start to reap the benefits of the acquisition of Wine Rack and the Rhythm and Booze stores, improve Wine Rack's on line presence, develop Click and Collect and a Bargain Booze app, trial a new larger format store, and update the fascias across our existing estate through Operation Spring Clean," the company said.

During the year, the group closed 62 stores, most of which occurred in the first half of the year. It also opened fewer new stores than originally planned, closing the year with a total of 595 stores.

"Our average weekly sales per store have increased by GBP430. We expect this to improve further in the year ahead. We have concluded the bulk of our store closure programme and anticipate a lower number in the current year," the company said.

Conviviality shares were 0.4% higher early Monday at 164.10 pence.

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Source: Alliance News

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