Bargain Booze owner Conviviality is facing a cash squeeze after discovering it must pay HMRC £30m by the end of this month.
Conviviality, which suspended trading in its shares earlier this morning, said that it realised yesterday that the payment was due and that “this has created a short-term funding requirement” as covenants come under pressure.
Conviviality sought to reassure investors however that “the board believes this short-term funding requirement will be satisfactorily resolved”.
PwC has been drafted in to advise on the discussions with HMRC and with Conviviality’s “key stakeholders including lending banks, credit insurers, suppliers and other creditors, as well as to determine the potential impact of any resulting funding requirement on the company’s adjusted EBITDA expectation and compliance with its banking covenants”.
The bad news followed a profit warning last week after Conviviality uncovered a financial forecasting error.
Today Conviviality said: “The company’s announcement on 13 March 2018 confirmed an expected range of adjusted EBITDA of between £55.3m and £56.4m. To the extent that the current situation creates operational difficulties, this may negatively impact the adjusted EBITDA range.”
It added: “Following preliminary advice received from PwC, whilst there can be no guarantee, the board believes this short-term funding requirement will be satisfactorily resolved.”
Conviviality later cancelled its interim dividend of 4.5p per share, which was due to be paid this Friday.
It said that, as a result of the move, the company’s cash position has improved by approximately £8.2m.