Conviviality director admits failings as stricken company turns to City for funding
A director at Conviviality, the financially stricken UK drinks retailer and wholesaler, has admitted that “lessons have to be learned” in the wake of the near collapse of the business following two profit warnings and the resignation of the chief executive in the past week.
“Sometimes it takes a massive shock for a business to wake up,” conceded group buying director Andrew Shaw, in an interview with The Buyer. “Touch wood we get the next few days and we will be a stronger unit, with a clearer vision, with much better process management and controls in the business.”
However, the company’s fate will be determined in the next few days after it unveiled a rescue plan to stave off bankruptcy. The beleaguered business is hoping to raise £125m from shareholders and new investors to enable it to pay off an unexpected £30m tax bill, overdue payments to creditors and a £30m loan.
If it fails to raise the required funding from the City, the company has confirmed that “it is unlikely to be able to trade on a going concern basis.” Should that scenario unfold, then the company could become the target of a takeover bid, with the potential break up of different parts of the business, with Bargain Booze in particular the focus of acquisition-hungry investors.
However, Shaw defended the former chief executive and her strategy. “Diana (Hunter) has done a fantastic job at motivating the troops to create an absolutely exceptional structure. I think that’s unquestionable. A lot of our peers and suppliers globally would respect the model that she put together in such a short space of time. The challenge has been supporting that.”
He added: “The lesson here is you need incredibly good support, back office and logistical operational efficiency to drive the model forward whilst you are on the acquisition trail.”
Going forward the businesses needed, in the short term, to have a “complete redefinition of our priorities”. “Changing business practice and process will have to be in place going forward. What we tried to do was a lot very well, very fast and we need to do less, with some things faster, and some things slower and re-prioritise our behaviour internally to achieve a better outcome”.
Conviviality hopes that by early next week it will be able to assess how much interest there has been from shareholders for further investment. After the resignation earlier this week of CEO Diana Hunter, the overall business is now being headed up on an interim basis by non executive chairman David Adams, who has stepped up to become executive chairman.
Last week The Buyer reported that several suppliers and customers were concerned by “the high churn of staff” both at the customer service and senior management level. Producers and suppliers at this week’s Prowein also expressed concerns about the payment and invoice processes within the group.
Some of the harshest criticism of the group from the City was reserved for the quality and experience of the Convivliaty PLC board, some of whom have only been with the business for less than two and a half years.
But Shaw remained bullish about the company’s future, saying that the financial crisis had had a galvanising effect on staff across the business. “Individuals have stepped up to take responsibility outside of the senior leadership team,” he claimed. “I have seldom seen people come together they like they have over the last couple of weeks." He added that he had been “blown away” by the level of supplier support they had received.