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Following on from the positive trading update in May, Conviviality today reports a strong full year set of results. Group sales increased 85% YoY to £1,560m, while adjusted EBITDA doubled to £60.9m, 5.2% ahead of our forecast of £57.9m. Adjusted PBT increased 111% to £45.8m, and adj. fully diluted EPS of 21.0p was also ahead of our forecast of 20.2p. FY17 was a transformational year for Conviviality and significantly the integration of the recent acquisitions are running ahead of plan. Management remain confident in the outlook for the business, reflected by the 33% increase in the full year dividend to 12.6p that is covered 1.7x, as well as increased guidance on synergies in FY19.
Conviviality
CVR has this morning released a positive trading update for year ended 30 April 2017, with full year performance reassuringly in line with management and market expectations. Each of the three business divisions performed strongly, and management remain confident in the outlook and plan to deliver significant synergies following the transformational acquisitions of Matthew Clark and Bibendum, with integration plans continuing to progress well. Despite the shares being up c.50% over the past six months, our view remains that the risks still lie to the upside as more synergies could emerge over time. The size and influence of CVR in the UK drinks market is not fully reflected in the valuation and the shares continue to trade at a discount to the peer group. Despite the Booker takeover premium of 24x P/E to December 17, in our view CVR trading on 13.0x to April 18 with a yield of 4.4% remains too cheap. If it were to trade on 16x this would imply a price of 380p, and 18x would imply a price of 404p.
We flag this morning's announcement and note that the amendment to the interim EPS calculation as announced yesterday in the accounts does not affect our forecasts which remain unchanged. We calculate EPS on a fully diluted basis, and reiterate our EPS forecasts of 20.2p and 23.8p for FY17 and FY18 respectively. Our view remains that the business is considerably undervalued trading on the resultant P/E multiples of 12.6x to March 17 and 10.6x to March 18.
CVR today issues a positive set of results for the H1 period to the end of October 2016. The company also reports strong trading during the Christmas period across all of its businesses, with Group sales +6.1% in November and December, including record sales at Matthew Clark, and a 2.1% increase in retail like for like sales. Overall, the business continues to perform in line with full year market expectations. Management remain confident in the outlook and the plan to deliver significant synergies following the transformational acquisitions of Matthew Clark and Bibendum, with integration plans on track. Despite the shares being up c.27% over the past three months, our view remains that the risks still lie to the upside in terms of more synergies emerging over time. The size and influence of CVR in the UK drinks market is not fully reflected in the valuation and the shares continue to trade at a significant discount to the peer group. Despite the Booker takeover premium of 24x P/E to December 17, in our view CVR trading on 10.6x to April 18 is too cheap. If were to trade on 16x would imply a price of 380p.
CVR has this morning released a positive trading update, with the business continuing to perform in line with full year market expectations. Strong performance has been seen across all three divisions during the 26 weeks to 30 October 2016, with total Group sales growth of 211% YoY to £783m, albeit this is skewed by acquisitions. Management remain confident in the outlook and the plan to deliver significant synergies following the transformational acquisitions of Matthew Clark and Bibendum remain on track. Our view remains that the risks still lie to the upside in terms of more synergies emerging over time. The size and clout of CVR in the UK drinks market is not fully reflected in the valuation and the shares continue to trade at a significant discount to the peer group.
At the final results in July, management stated that it was very confident in the outlook for the business and this was reflected in the 14% increase in the dividend, as well as increased guidance on synergies following the transformational acquisitions of Matthew Clark and Bibendum. Since then, we expect that confidence has not changed and our view remains that the risks still lie to the upside in terms of more synergies emerging over time. The size and clout of CVR in the UK drinks market is not fully reflected in the valuation and the shares continue to trade at a significant discount to the peer group.
Following on from the positive trading update in May, Conviviality today reports a strong full year set of results. Group sales increased 137% YoY to £864.5m, adjusted EBITDA of £30.2m was 3% ahead of our expectations, and fully diluted EPS of 14.2p was also ahead of our forecast of 14.0p. FY16 was a transformational year for Conviviality, and management are very confident in the outlook for the business, reflected by the 14% increase in the dividend to 9.5p, as well as increased synergies driving upgrades. This should reassure investors, and we would expect a re-rating given the recent weakness in the share price
Conviviality has successfully acquired Bibendum PLB, one of the largest wine, spirit and beer distributors and wholesalers to the UK on and off-trade markets, for an EV of £60m. The acquisition of Bibendum builds upon the transformational acquisition of Matthew Clark, completed last October, by accelerating CVR’s strategy of expanding the wholesaling business into new channels and markets, namely old world and premium wine, in London and the South East. Analogous to the Matthew Clark deal, we see scope for significant synergies, and on conservative assumptions, the deal is earnings enhancing in the current year.
Following on from the reassuring half year trading update announcement in November, Conviviality today reports strong trading over the Christmas period, with Group sales growth of 13% YoY and like-for-like retail sales +1.1%. Much has happened since the half year, with a new organisational structure being established and two experienced Managing Directors recruited to run the Conviviality Retail and Matthew Clark business units respectively. Conviviality Retail continues to trade well while the integration of Matthew Clark is running ‘significantly ahead of plan’. As a result of management’s assessment to date and confidence in delivering buying synergies from running the combined businesses, we are upgrading our FY17 and FY18 synergy assumptions by £2m in each year, from £4m and £6m to £6m and £8m. This drives an increase in PAT and EPS of 5.5% in FY17 and 5.1% in FY18.
Conviviality has appointed the highly experienced Mark Aylwin as Managing Director of Matthew Clark, replacing Steve Thompson who is standing down as anticipated after 10 years as CEO. Mark has worked in the food and drinks industry for 35 years and has held senior positions at Booker plc (where he was MD of Booker Retail and also a Group board member), Blueheath (where he was CEO), Safeway and Musgrave Group. Matthew Clark Commercial Director Ian Smith, who has been with the business for 37 years, will also become Deputy Managing Director.
Conviviality’s half year trading statement is reassuring for two main reasons. Firstly, the company confirms it continues to trade in line with market expectations, and, secondly, in the short time since the Matthew Clark acquisition competed (7 October), everything has been found to be as expected and the company feels confident about delivering synergies, work already begun in this respect. Further details on the progress of the integration, as well as key Christmas trading update, will be provided at the half year results, expected on 1 February 2016.
CVR is acquiring Matthew Clark, the UK’s leading drinks distributor, for an EV of £200m. The combined business has created an exciting ‘one-stop shop’ that will have well in excess of £1bn purchasing power in the drinks market. We see scope for considerable synergies, and on conservative assumptions the deal is 39% earnings enhancing in the first full year of ownership.
Conviviality Retail has announced the acquisition of Matthew Clark (from Punch Taverns and Accolade Wines) for total consideration of c.£200m, funded via a £130m equity raise (£122.5m net) and £80m of new debt facilities, implying a 2015 historic takeout EBITDA multiple of c.8x. The acquisition is expected to be earnings enhancing in the first full year of ownership. Following the acquisition we put our forecasts under review. We retain our Buy recommendation and 209p target price ahead of reassessing the investment case.
Conviviality Retail has announced full year results to the end of April 2015 with trading broadly in line with our expectations. We leave our forecasts for the year ahead unchanged and retain our Buy recommendation and 209p price target.
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