Booze firm’s on the rack

Tax bill blow for drinks shop owner

THE owner of off-licence chains Bargain Booze and Wine Rack risks going into administration, analysts have warned.

Trading in Conviviality shares was suspended yesterday as bosses revealed it faced an unexpected £30million tax bill in two weeks’ time.

It led to a second profit warning in a week after previously disclosing a “material error” in financial forecasts for its wholesale arm.

Conviviality has 650 stores run by more than 400 franchisees and employs nearly 2,700 people.

As well as its own outlets, it also delivers to 10,000 business customers and 23,000 independent shops.

The firm, headed by chief executive Diana Hunter, who earned nearly £1m in pay and perks last year, is due to hold talks with HM Revenue & Customs, but refused to explain what the tax bill was.

The payment, due on March 29, would create a “short-term funding requirement” it said.

The board later announced it was scrapping a 4.5p-a-share interim dividend that was due to be paid this Friday, saving it around £8.2m.

Old Mutual, Conviviality’s third biggest shareholder, had already sold its entire 6.95% stake before the shares were suspended.

A spokeswoman could not confirm if and when trading in the firm’s stock would resume.

Analyst Phil Carroll of stockbroker Shore Capital said: “Our concern is that the business could be trapped in a vicious cash cycle.”

He added he believed that Conviviality’s problems were “very fixable” and “the business model still remains relevant”.

But he explained: “Our fear is that the shortterm funding alongside further liquidity pressure could result in the business being insolvent and therefore, going into administration.”