• Conviviality analysis: why the real work starts now

    Conviviality has turned everyone’s heads in the trade. Its acquisitions of Matthew Cark and Bibendum PLB in less than a year has made it the biggest drinks supplier in the country. Its trading figures show how strong it has become. But now the real work of bringing all aspects of the business together really works. The trade is watching…

    Conviviality has turned everyone’s heads in the trade. Its acquisitions of Matthew Cark and Bibendum PLB in less than a year has made it the biggest drinks supplier in the country. Its trading figures show how strong it has become. But now the real work of bringing all aspects of the business together really works. The trade is watching…

    mm By July 19, 2016

    The trading figures reflect what a massive impact Conviviality has had on the wine and drinks industry in the last year. But the hard work starts now…

     

    matthew clarkIt’s now nearly three months since Conviviality shocked the wine world with its out of the blue £60m purchase of Bibendum PLB. Making it in one stroke the biggest wine and drinks supplier in the UK as it followed the acquisition of Matthew Clark for a further £200m only a few months earlier.

    You only need to look at the release of its latest year-end financial figures for 2015-2016 to see the size and scale of the Conviviality operation and what the Bibendum and Matthew Clark deals have done to its business.

    Its overall revenues have mushroomed by 137% to £864.5 million. Over half of which, £497m, came from Matthew Clark. But when you consider it was only, by comparison turning over £364m in 2015 the step change in its fortunes, never mind influence on the sector in the last few months has been staggering.  It has also helped its bottom line with adjusted profits before tax up a staggering 124% to £21.7 million. Cash flow was also up 100% to £11.4m and dividends rose by 14%. Its EBITDA figures are also very impressive, up 135% to £30.2 million.

    It has also helped its bottom line with adjusted profits before tax up a staggering 124% to £21.7 million. Cash flow was also up 100% to £11.4m and dividends rose by 14%. Its EBITDA figures are also very impressive, up 135% to £30.2 million.

    All of which appears to be pleasing the City as its share price is up 2.4% to 200.70p but are down from mid-May when they sat nearer the 215p mark. The company’s net debt is settled around £87m which is in line with analysts expectations.

    It has also helped its bottom line with adjusted profits before tax up a staggering 124% to £21.7 million. Cash flow was also up 100% to £11.4m and dividends rose by 14%. Its EBITDA figures are also very impressive, up 135% to £30.2 million.

     

    Transformational times

    diana hunter small
    Conviviality’s Diana Hunter has enjoyed an amazing 12 months

    It is not surprising that chief executive, Diane Hunter, has described the last 12 months as “transformational”. It’s a rise in fortunes to par the likes of Leicester City in the last 12 months.

    But for all the scale and impressive numbers Conviviality, as a business, remains very much in the background. And that’s the way it clearly likes it. Hunter is a chief executive who does not court the press and appears happier remaining out of the spotlight and just getting on with the work in hand.

    Which, let’s face it, is a more than just a lot. Taking on Matthew Clark was a job in itself, but all the signs are that the business has smoothly been integrated in to the Conviviality model with very little disruption for staff or customers alike.

    The Bibendum PLB deal is a little different. Clearly not all was rosy behind the doors of Bibendum or else it would not have found itself up for sale, and also for a price that when you look at all the caveats and share dealings within it was not a staggering amount.

    Serious work needs to be done within the Bibendum PLB portfolio and business, regardless of where it now sits within Conviviality, and with Matthew Clark in particular.

    Part of the new buying process has now been revealed by Conviviality. With Andrew Shaw, previously Bibendum’s head of buying, coming out top as the group’s overall wine buyer. But considering the scale of buying that involves he will clearly need a comprehensive team working alongside him. That detail is yet to be released, but will be vital in understanding quite how the cross over with Matthew Clark is going to work.

    It would ideally involve the best of Bibendum and Matthew Clark working together. By having a group buying position means there is going to be a lot of group buying going along with wine sourced that can go in to all of Conviviality’s businesses including PLB, Bargain Booze and Wine Rack.  Easier said than done.

    How Shaw runs the new buying operation will be fundamental to how it can all come together. He could not have been thrown a more difficult hand with the fall out from Brexit yet to be truly felt across the trade. The uncertainty around that, and the worrying state of the currency markets, makes buying difficult just for one business, never mind across what is now the biggest wine buying department in the country.

    As Hunter said on the back of Conviviality’s trading figures we live in “uncertain economic times”. Which places even greater pressure on ensuring it can continue to “deliver against” what she calls “our integration plan during the year, ensuring the benefits are realised from our transformational acquisitions”.

     

    Pressure to succeed 

    There is much work to be done to integrate the Bibendum business
    There is much work to be done to integrate the Bibendum business

    We wish Conviviality well in its quest, for having made such bold moves to dominate the UK wine and drinks sector, it is vital for the health of the overall industry that it succeeds. The eyes of the wine world, in particular, are on the UK at this time. None more so than the producers currently supplying Matthew Clark or Bibendum or PLB. Where do their futures lie?

    Conviviality is also now sitting on a gold mine of sales data and trends information covering all aspects of the UK drinking scene from multiple grocers to discounters, independent wine merchants through to all channels of the on-trade. How it uses that data, or has the skills to analyse and disseminate what it has, will also be vital not just for its own future, but arguably for the trade as a whole.

    Let’s hope Conviviality is as bullish when it comes to sharing insights and some of its data as it has been over the last year on the acquisition trail.  It is gone from being a  background player to the driving force of the UK wine trade.

    It has been quite spectacular year. But the real work starts now.

    Leave a Reply

    Your email address will not be published. Required fields are marked *