Conviviality Retail Regulatory News (CVR)

CORRECTION: This replaces RNS number 4149V released at 7.00am on 30 January 2017. There was an error in the calculation of the weighted average number of shares and as a result, the adjusted fully diluted Earnings Per Share figure should have been stated as 7.2p per share rather than the 9.2p per share stated. This has been amended throughout this announcement. This change does not affect the Profit After Tax generated in the period.

31 January 2017

CONVIVIALITY PLC

HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 30 OCTOBER 2016

A ROBUST BUSINESS MODEL DELIVERING RESULTS

Conviviality Plc ("Conviviality", the "Company", or the "Group"), the UK's leading independent wholesaler and distributor of alcohol and impulse serving consumers through its franchised retail outlets and through hospitality and food service, announces its results for the 26 weeks to 30 October 2016 (H1 FY16: 27 weeks to 1 November 2015).

Group Financial Highlights

· Revenue up 211% to £782.5m (H1 FY16: £252.0m)

· Gross margin up 2.5% points to 12.5% (H1 FY16: 10.0%)

· Profit before tax up 285% to £7.4m (H1 FY16: loss £4.0m)

· Adjusted EBITDA1 up 252% to £22.9m (H1 FY16: £6.5m)

· Adjusted profit before tax2 up 295% to £15.4m (H1 FY16: £3.9m)

· Adjusted fully diluted EPS3 up 89% to 7.2 pence (H1 FY16: 3.8 pence)

· Free cash flow4 improved 18% to an outflow of £9.2m (H1 FY16: out flow of £11.2m)

· Net debt at £138.4m is 1.2% below pro forma net debt5 at 1 November 2015 of £140.1m

· Leverage is comfortably below the Adjusted EBITDA bank covenant of 2.50x at 2.19x

· Interim dividend up 100% to 4.2 pence (H1 FY16: interim dividend 2.1 pence), which is currently expected to represent approximately one third of the anticipated full year dividend

Operational Highlights

· Sales 4.4% above the corresponding prior period6 with each business unit trading well

· Completed complementary acquisition of Bibendum PLB Group

· Successful integration of strategic acquisitions ahead of plan and on track to deliver stated synergies of £6m in FY17

· Strengthened Plc Board with appointments of Jennifer Laing, Mark Aylwin and David Robinson

· Number of outlets served in the period increased 1.5% and sales per outlet grew 3.8%

· Number of Bibendum customers who buy all product categories has increased 100% (H1 FY17 10%; H1 FY16 5%)

· Entered into a two year supply agreement with Palmer and Harvey to provide lower volume beers, wines and spirits, who in turn will supply the Group with tobacco

Conviviality Direct Highlights

· 5.2% increase in sales compared to the corresponding prior period6 

· 1.5% increase in outlets supplied

· 3.8% increase in revenue per outlet

Conviviality Retail Highlights

· 2.5% increase in sales compared to the corresponding prior period6 

· Franchisee like for like7 retail sales down 1.7% (H1 FY16: down 1.7%)

· Franchisee margin up 1.8%

Conviviality Trading Highlights

· 5.1% increase in sales compared to the corresponding prior period6 

· 47% increase in Events sales

· Appointed agents for a number of key brands including Santa Rita and Luis Felipe Edwards

Current Trading

· 6.1% increase in Group sales in November and December

· 2.1% increase in retail like for like7 sales for the 6 weeks ended 1 January 2017

Diana Hunter, Chief Executive Officer of Conviviality, said:

"These strong results demonstrate our competitive advantage, the broad customer base we have developed and the robust nature of Conviviality as the UK's leading drinks wholesaler, distributor and solution provider to our Customers. We have successfully restructured to create three business units Conviviality Direct, Conviviality Retail and Conviviality Trading, each providing our customers and Franchisees with unrivalled range, expert service and advice to meet their customer needs whilst providing our suppliers with unmatched access to routes to market across both the on and off trade.

"The recent acquisitions have resulted in Conviviality being well positioned in its market with a resilient business model that provides unique positioning for its suppliers and customers. We are also pleased to report that the Group continues to trade in line with expectations for the full year"

There will be a presentation for analysts at the offices of FTI Consulting (200 Aldersgate, EC1A 4HD) at 9.30am today, 30 January 2017.

1Adjusted EBITDA is calculated as profit before tax of £7,434,000 (H1 FY16: loss of £4,023,000), adding back net interest of £2,643,000 (H1 FY16: £346,000), depreciation of £2,299,000 (H1 FY16: £1,311,000), amortisation of £6,255,000 (H1 FY16: £650,000), exceptional items of £3,669,000 (H1 FY16: £7,344,000) and share based payment charges of £1,259,000 (H1 FY16: £766,000) and adjusting for fair value movements on foreign exchange derivatives £673,000 (H1 FY16: ( £122,000)). The last 12 months adjusted EBITDA used in the leverage calculation for the bank covenants is a rolling last 12 months EBITDA including the results of all current entities assuming they were part of the group for the full 12 month period.

2Adjusted profit before tax is calculated as profit before tax of £7,434,000 (H1 FY16: loss of £4,023,000), adding back amortisation of intangible assets created on the acquisitions of Matthew Clark, Peppermint and Bibendum PLB of £5,014,000 (H1 FY16: £412,000), exceptional items of £3,669,000 (H1 FY16: £7,344,000) and adjusting for fair value movements on foreign exchange derivatives of £673,000 (H1 FY16: (£122,000)).

3Adjusted fully diluted earnings per share takes into account the dilutive effect of share options. The difference between the basic and diluted average number of shares represents the dilutive effect of share options. Note 15 reconciles the weighted average number of shares to the diluted weighted average number of shares.

4Free cash out flow of £9,282,000 (H1 FY16: £11,155,000) is calculated as EBITDA £22,885,000 (H1 FY16: £6,515,000) less working capital movements (£15,631,000) (H1 FY16: (£13,873,000)), tax payments £5,083,000 (H1 FY16: £958,000), net capital expenditure £8,799,000 (H1 FY16: £2,671,000) and interest payments £2,654,000 (H1 FY16: £168,000).

5Proforma performance measures restate the prior period to include the impact of acquisitions including Matthew Clark, Bibendum PLB Group and Peppermint Events and apply to various measures including net debt, sales, working capital.

6References to corresponding prior period and year on year in the front section of this report are on a pro forma basis.

7Like for like performance measures adjust the prior period of 27 weeks to 26 weeks to compare with the current period of 26 weeks. Like for like performance measures also adjust for the impact of non-recurring trading disruptions in both periods.

8Adjusted profit after tax is calculated as adjusted profit before tax less a tax charge calculated at the marginal tax rate.

CHAIRMAN'S STATEMENT

I am pleased with the trading performance of the Group during the first half of the year whilst also completing the acquisition of Bibendum PLB Group, which provides the business with a complementary proposition and further strengthens our leading position both in the On-Trade and as a center of excellence for Wine.

The Group is now structured into three Business Units: Conviviality Direct, serving the On-Trade through its Matthew Clark and Bibendum propositions; Conviviality Retail, serving the Off-Trade focusing on its Franchisee model and strategic partnerships; and Conviviality Trading, providing brand agency expertise and sourcing to suppliers and to multiple and independent retailers. The recent acquisitions and new structure result in Conviviality being well positioned in its market with a robust business model that provides a unique positioning with both its suppliers and its customers.

We have strengthened the management team with the following key appointments:

· Mark Aylwin joined the business in January 2016 and was subsequently appointed as Managing Director Conviviality Direct;

· James Lousada joined the business in June 2016 as Managing Director Conviviality Trading;

· David Robinson joined the business in July 2016 as Managing Director Conviviality Retail; and

· Nigel Basey joined the business in March 2016 as Group Logistics Director ensuring that all of Conviviality's customers benefit from our extensive logistics capability.

Furthermore, we have added experience to the Plc Board with the appointments of Mark Aylwin and David Robinson as Executive Directors and the addition of Jennifer Laing as our fourth Independent Non-Executive Director.

The integration of Matthew Clark and Bibendum PLB Group continues to progress well and we remain ahead of schedule. Importantly, we are on track to deliver our stated synergies and the teams are working well together across the entire business. On behalf of the Board, I would like to thank everyone working in our business for their passion, commitment and customer focus that has made it possible to deliver our acquisitions to plan while also delivering underlying growth across the business.

Reflecting the progress of the Group I am pleased to announce a 100% increase in the interim dividend to 4.2 pence per share, which is currently expected to represent approximately one third of the anticipated total dividend.

David Adams

Chairman

30 January 2017

CHIEF EXECUTIVE OFFICER'S STATEMENT

Conviviality Group Overview

As a result of the acquisitions of Matthew Clark and Bibendum PLB we are now in a truly unrivalled position. Across the UK we have access to over 25,000 restaurants, hotels, bars; over 700 Franchise retail outlets; approximately 400 independent specialists and events and we serve major multiple supermarkets drawing from over 10,000 alcohol SKUs sourced globally from specialist producers and brand owners. Total Group unaudited pro forma revenues for the current financial year are now over £1.5bn underlining our significant scale and reach across the drinks industry.

We are the only company in our sector which has the skillset spanning, marketing, branding, merchandising, logistics, supplier management, buying and technical with unrivalled scale and reach across the On-Trade and Off-Trades. As we connect across all these areas of our business and utilise our skills and talent more effectively, we move from being not only a wholesaler and distributor but also a solution provider by providing access to all of these resources to our customers as they face the complexity and operational challenges of their market place.

Our strategic goal is to be the drinks and impulse sectors leading independent wholesaler, distributor and solution provider to hotels, restaurants, bars, events and retail outlets by being the most knowledgeable and inspiring partner for our customers.

In 2016, we put in place a new organisational structure and leadership team with the formation of our three business units; Conviviality Retail led by David Robinson, Conviviality Direct led by Mark Aylwin and Conviviality Trading led by James Lousada. This uniquely connected business model has been purposefully designed to make us stronger and more resilient and to provide the infrastructure to deliver unparalleled customer service today with the opportunity to scale easily as we drive future growth.

Each business unit faces the customer with the full back up of our Group support function which helps service the needs of each business unit in the core areas of Finance, Human Resource and critically in Supply Chain and Logistics, a key backbone and increasingly differentiating element of competitive advantage for our business. We have very purposefully lowered our center of gravity to empower our people closest to the customer and provide the support required by the Group to remain agile and efficient. We believe that our determination to ensure our customers and suppliers succeed will continue to further strengthen our market leading position.

The market continues to be full of challenges and opportunities and we now have the best platform from which to benefit. We span the entire market across the UK and we are best placed to see trends starting in festivals and cocktail bars, across the retail space and we, more than any business, can provide access to the market to help our suppliers place their products appropriately and to help our customers know what is going to appeal to their consumers. We are rapidly becoming the one stop shop for any customer who sells alcohol or any supplier who wants to reach the right consumers.

Financial Results

Due to the acquisitions of Matthew Clark on 7 October 2015, Peppermint on 31 December 2015 and Bibendum PLB Group on 20 May 2016, coupled with strong organic growth, sales grew 211% to £782.5m (H1 FY16: £252.0m and adjusted EBITDA1 increased 252% to £22.9m (H1 FY16: £6.5m).

Adjusted profit before tax2 increased by 295% to £15.4m (H1 FY16: £3.9m) and fully diluted adjusted earnings per share3 increased 89% to 7.2 pence (H1 FY16: 3.8 pence).

Net debt at 30 October 2016 was £138.4m (1 May 2016: £86.1m) reflecting new debt of £30.0m to fund the acquisition of Bibendum PLB Group coupled with a seasonal increase in net working capital. Net debt was £1.7m below pro forma net debt5 at 1 November 2015 and leverage at 30 October 2016 was comfortably below the bank covenant of 2.50x Adjusted EBITDA1 at 2.19x.

Business Unit Highlights:

Conviviality Direct

We have made excellent progress with the integration of Matthew Clark and Bibendum PLB Group and are ahead of schedule. We have seen good sales growth from both propositions, with first half sales up 5.2% over the corresponding prior period6 to £515.2m. The number of outlets served in the period increased by 1.5% and sales per outlet grew 3.8%, demonstrating the strength of our proposition to both existing and new customers. The number of Bibendum customers who buy all product categories has increased 100% (H1 FY17 10%; H1 FY16 5%).

Conviviality Direct will continue to serve its customers through the differentiated propositions of Matthew Clark and Bibendum, however, with the integration of Bibendum there is a significant opportunity for our customers to choose from over 10,000 SKUs of alcohol from the Group's assortment, enabling them to reduce complexity of supply and enabling Conviviality Direct to be a one stop shop for its customers. Detailed analysis has been undertaken to assess the purchases of the 25,000 outlets served by Conviviality Direct, and only 3% of these outlets have duplicated assortments, thereby indicating a significant growth opportunity for both Mathew Clark and Bibendum to support our customers further. 1,769 customers are now trading through the digital platform, a 34% increase year on year6.

We have created a Group Wine Buying team to ensure our supplier partners benefit from access to the enlarged group and so that our customers benefit from the expertise of our buying team and the enhanced choice of wine both in quality and value.

Conviviality Retail

For the half year, total sales were up 2.5% reflecting the number of new stores brought into the group and that some of the stores brought into the group in March will be converted and refurbished in the second half of the year leading to further expected growth. 10 existing Franchisees opened 11 more stores in the first half and in total there are 12 Franchisees actively seeking to grow with the business. Attracting new quality Franchisees remains key to our plan with 8 new Franchisees joining us in the period. Franchisee margin for the period improved 1.8% and we were delighted to award 224 Franchisees 920,180 shares under our Franchisee Inventive Plan.

The store pipeline continues to build, albeit the focus will always be on quality outlets as opposed to quantity hence the slightly lower number of store openings compared to the prior half. During the period 19 stores were opened including a new Wine Rack in Tattenham Corner, Epsom. On 5 December 2016, 15 high quality convenience stores were purchased from the convenience operator KMD and these stores will be gradually converted to Bargain Booze Select Convenience during the second half and will be subsequently Franchised. The refurbishment programme continues to show strong results with on average 5.8% growth post refurbishment.

The supply agreement with Palmer and Harvey signed in October 2016 provides a strong indication of expertise in the drinks sector through our ability to serve a wider group of customers and partners. The relationship with Palmer and Harvey is working well and we consider that there is further potential going forward.

Conviviality Retail continues to develop marketing strategies to win in the local community, leveraging its significant strength in social media. Facebook followers now exceed 100,000 enabling the business to communicate with its customers efficiently and with a wide range of mechanics. The Conviviality Retail pricing policy is to be everyday low promotionally priced. On average across our off licence range we have maintained competitiveness in spite of the heavy discounting in the market. Value and consistent pricing is important to our customers and they appreciate the transparency of our pricing strategy, which in turn increases customer loyalty.

Differentiating the proposition from our competitors has been a successful part of our Retail strategy and will continue to be so. By way of example, we recently launched the vaping category into 150 stores with sales per week of vaping products up 61% in participating stores, an average of £140 per week per store. Vaping is an increasing trend as customers switch from tobacco into alternative solutions. Franchisees have embraced the proposition, it is a category that is complementary to an off-licence proposition and Franchisees are benefiting from the enhanced margin that these products bring.

Conviviality Trading

Conviviality Trading, which aims to be the UK's leading drinks agency, brings together PLB, Instil and Catalyst Brands, three specialist brand agency businesses, each with significant expertise in their respective categories.

This area of the business not only represents large suppliers and brands as an agency but is also a consolidator of wine suppliers managing the supply of wine to the Off-Trade and selling more than 9 million 9 litre cases of wine per annum to the UK retail trade including high street retailers, specialists and supermarkets. Conviviality Trading has significant capabilities in consumer insight, sourcing, ranging and supply that can add significant value to its customers by reducing the complexity of the wine category in large multiple national chains.

Following the creation of this business unit, we have already seen new strategic relationships established. In January 2017 two of the largest Chilean wine producers transferred their Off-Trade business to Conviviality: Santa Rita, with brands including Santa Rita, Vina Carmen and Sur Andino, is the leading Chilean wine producer in the domestic market with a 31% market share and is the third largest wine group in the export market and second largest in the premium wine category; and Luis Felipe Edwards, a privately owned wine group founded in 1976 by Luis Felipe Edwards Senior, with brands including Luis Felipe Edwards, Dona Bernada, Marea and Cien. The business is focused heavily on exports and less so on the domestic market.

In addition to the agency business, Conviviality Trading is also responsible for the development and growth of an events business including Peppermint and Wondering Wine Co, which are both specialists in outdoor events and festivals. Sales increased by 47% over the corresponding prior period6. The aim for the outdoor business (known as "third space") is to create one stop shop solutions for event owners to include full bar and food service management as well as ATM operation and Click and Collect. Click and Collect in association with Bargain Booze was trialled for the first time in 2016 at the Isle of Wight Festival and then at Bestival. Furthermore, Elastic, our brand activation agency, which provides activation and brand building expertise to many of Conviviality's branded supply base saw sales grow strongly. Elastic has signed with 8 new branded suppliers in addition to the retained business of Diageo, LVMH, ABInBev, cementing our positioning as one of the UK's leading agencies.

Integration

Operational Efficiencies

With the greater scale of the Group there is the potential to realise lower costs through buying and distribution and improved organisational efficiency. A clear integration plan has been established to ensure the benefits of both the Matthew Clark and Bibendum PLB acquisitions are achieved. By acquiring the two businesses in relatively close succession we have been able to simplify the integration process particularly in the areas of logistics and IT. The key benefit areas are detailed as follow:

Buying benefits

Two key programmes of work have been undertaken, firstly the alignment of Buying terms from the Matthew Clark acquisition by Conviviality Retail, and the subsequent acquisition of Bibendum PLB. Secondly through the establishment of the Group Wine Buying team in June 2016, the team are now undertaking detailed analysis of the supply base and assortment to ensure that not only do we carry the choice that our customers and their consumers demand but also to maximise buying scale.

Logistics and Distribution

The enlarged Group spans 18 depots and third party distribution through DHL Trade Team. During May 2016 we changed the reporting structure of all the Depots to report into Nigel Basey, Group Logistics Director. We believe there is clear opportunity to align best practice and process to drive more efficient ways of working and deliver between £1-1.5million of cost savings into FY18. Furthermore, the logistics function is reviewing the network to ensure that it has the capacity to allow for future growth. As a result, trials will be undertaken in the remainder of the financial year to understand the potential to consolidate slow moving lines as well as to fulfil six day deliveries in target city locations. Further updates on the network will be provided in our full year results.

Organisation

With the acquisition of Bibendum PLB Group we have decided to move our systems on to one platform across the entire group. The migration of Bibendum Wines to the JD Edwards system that is used in Matthew Clark is expected to be completed during 2017 and will facilitate consolidation of several back office teams. Conviviality Retail is also implementing JD Edwards which will result in more streamlined processes. Once these IT projects are complete we plan to migrate Conviviality Trading to JD Edwards.

Christmas Trading

Conviviality performed well during the Christmas trading period across all of its businesses. Group sales in November and December were 6.1% above the corresponding prior period6 with each business unit performing well. Retail like for like sales in the 6 weeks ending 1 January 2017 grew 2.1% and Conviviality Retail sales increased 6.9%. Conviviality Direct sales increased 6.2% and Conviviality Trading grew 3.1%.

Outlook

Our trading is in line with expectations for the full year. We have a proven capability in delivering results whilst managing the integration of acquisitions and delivery of synergies. Our teams believe in the potential there is for the business and are working well together to deliver our aims. We will continue to invest in our business, supporting our customers and Franchisees and our supplier partners as we build upon our strong foundations.

Diana Hunter

Chief Executive Officer

30 January 2017

FINANCIAL REVIEW

Overview

Following the acquisitions of Matthew Clark on 7 October 2015, Peppermint on 31 December 2015 and Bibendum PLB Group on 20 May 2016, sales grew 211% to £782.5m (H1 FY16: £252.0m) and adjusted EBITDA1 increased 252% to £22.9m (H1 FY16: £6.5m).

Profit before tax, amortisation of intangible assets created on the acquisitions of Matthew Clark, Peppermint and Bibendum PLB Group, exceptional items and mark to market adjustments ("Adjusted profit before tax")2 increased by 295% to £15.4m (H1 FY16: £3.9m). On the same basis, fully diluted adjusted earnings per share3 increased 89% to 7.2 pence (H1 FY16: 3.8 pence).

The acquisition of Bibendum PLB Group was funded in part by new debt of £30m which, coupled with a seasonal increase in net working capital increased net debt at 30 October 2016 to £138.4m (1 May 2016: £86.1m). Net debt was £1.7m below pro forma5 net debt at 1 November 2015 and leverage at 30 October 2016 was comfortably below the bank covenant of 2.50x Adjusted EBITDA1 at 2.19x.

Revenue

Group revenues for the period were 211% ahead of last year at £782.5m (H1 FY16: £252.0m) and include revenues from the acquisitions of Matthew Clark, Peppermint and Bibendum PLB Group. On a pro forma5 basis Group revenues are 4.4% above the corresponding prior period6 with each of Conviviality's three business units (Conviviality Direct; Conviviality Retail and Conviviality Trading) delivering strong growth.

Conviviality Direct generated sales of £515.2m in the 26 weeks to 30 October 2016 and were 5.2% above the corresponding prior period7 as both Matthew Clark's and Bibendum Wine's sales teams remained focused and worked well together during the acquisition and subsequent integration process. The strong sales growth is due to a 1.5% increase in the number of outlets coupled with a 3.8% increase in sales per outlet.

Conviviality Retail's sales were 2.5% above the corresponding prior period6 as the benefit of a 14% increase in the average number of stores was offset by lower wholesale sales per store as the strong store growth enjoyed in FY16 resulted in a far less mature store estate. In addition, a significant number of the stores joined the franchisee estate in March 2016 and have not yet been rebranded, further restricting wholesale sales.

During the period, Conviviality Retail's store estate fell by 2.0% to 702 (1 May 2016: 716) and the number of stores owned by multi-site franchisees decreased by 2.2% to 356 (1 May 2016: 364).

Franchisee like for like7 sales were down 1.7% reflecting strong summer 2015 marketing campaigns with higher discounts. Franchisee gross margin increased 1.8% such that average Franchisee margin was in line with last year.

Conviviality Trading generated sales of £79.0m in the 26 weeks to 30 October 2016 and were 5.1% above the corresponding prior period6 due to strong growth in Peppermint, Conviviality Trading's festivals and events business that was acquired on 31 December 2015.

Adjusted EBITDA1

Adjusted EBITDA1 increased 252% to £22.9m (H1 FY16: £6.5m) as the strong sales growth was augmented by a 2.5% point improvement in gross margin. This increased gross margin by £72.4m which was partly offset by a £56.0m increase in operating costs (excluding exceptional items, depreciation, amortisation, share based payment charges and mark to market adjustments on foreign currency contracts).

Gross margin improved to 12.5% (H1 FY16: 10.0%) due to a significantly improved sales mix with the mix of higher margin wines increasing from 19% to 34% and low margin tobacco falling from 23% of sales to 8% of sales.

Bibendum PLB Group was acquired on 20 May 2016 generating sales of £135.3m and profit before tax of £2.7m.

Adjusted Profit before Tax2

Adjusted profit before tax2 increased £11.6m as the £16.4m increase in adjusted EBITDA1 was offset by higher finance costs, depreciation and amortisation (excluding amortisation of Matthew Clark and Bibendum PLB Group acquisition intangibles).

Finance costs increased to £2.7m primarily due to interest on debt acquired to fund the acquisitions of Matthew Clark and Bibendum PLB Group, and the amortisation of banking arrangement fees.

Depreciation and amortisation (excluding amortisation of Matthew Clark and Bibendum PLB Group acquisition intangibles) increased £2.0m due to the acquisitions of Matthew Clark and Bibendum PLB Group coupled with an increase in Conviviality Retail depreciation following investments in the store estate and IT systems since IPO on 2 October 2015.

Profit before Tax

Profit before tax increased by £11.4m from a loss of £4.0m to a profit of £7.4m.

Exceptional items includes the costs of acquiring Bibendum PLB Group and business integration costs. Exceptional items have fallen £3.7m due to the prior period including the costs of acquiring Matthew Clark.

The intangible assets created on the acquisitions of Matthew Clark and Bibendum PLB Group total £73.5m, comprising brands and customer bases and generated an amortisation charge of £5.0m in the 26 weeks ended 30 October 2016 (H1 FY16 £0.4m).

Tax

The tax charge of £1.7m represents tax on Group profit before tax and exceptional items of £2.1m offset by a tax credit on exceptional items of £0.4m. The effective tax rate on Group profit before tax and exceptional items was 19.0% as disallowable expenses in Matthew Clark were offset by deferred tax movements. The tax credit on exceptional items was 12% due to disallowable transaction costs on the acquisition of Bibendum PLB Group.

Earnings per Share

Adjusted profit after tax8 increased 303% to £12.5m (H1 FY16: £3.1m) and the basic weighted average number of shares increased 46% to 168.6m (1 May 2016: 115.3m) following the issue of approximately 86.7m new shares, for cash, to help fund the acquisition of Matthew Clark (Holdings) Limited in October 2015 and the issue of 15.6m new shares, for cash, to help fund the acquisition of Bibendum PLB Group in May 2016. This resulted in basic adjusted EPS increasing 85% to 7.4 pence (H1 FY16: 4.0 pence).

Fully diluted weighted average shares increased 47% to 175m (1 May 2016: 119m) resulting in fully diluted adjusted EPS3 increasing 89% to 7.2 pence (H1 FY16: 3.8 pence).

Cash flow and Funding

Free cash flow4 (adjusted EBITDA plus changes in working capital less capital expenditure, interest and tax) improved 17.9% to an outflow of £9.2m (H1 FY16: outflow of £11.2m) as adjusted EBITDA1 of £22.9m (H1 FY16: £6.5m) was offset by an increase in working capital of £15.8m (H1 FY16: increase of £13.8m), net capital expenditure of £8.5m (H1 FY16: £2.7m), interest payments of £2.7m (H1 FY16: £0.2m) and tax payments of £5.1m (H1 FY16: £1.0m).

Net working capital of £75m was 17% below the pro forma prior year net working capital of £90m.

Capital expenditure includes investments in our Franchisees stores of £1.8m, our IT systems of £4.2m, as we implement our systems convergence strategy, and the building of a replacement depot in Shefford with a total investment of £5.4m of which £1.9m was incurred in the 26 weeks ended 30 October 2016. The Shefford depot was sold and leased back in December 2016 realising cash proceeds of £5.7m.

Net debt increased from £86.1m at 1 May 2016 to £138.4m due to the free cash outflow4 of £9.2m, a net cash outflow on the acquisition of Bibendum PLB Group of £26.4m, exceptional items of £3.7m and dividend payments of £12.8m.

The consideration for Bibendum PLB Group was £39.7m which, together with £18.7m of debt acquired resulted in a total investment of £58.4m. This investment was funded by proceeds from the issue of new ordinary shares of £32.0m and new term loans of £10.0m.

At 30 October 2016 the Group's net debt comprised £80.2m of term loans and amounts drawn down under the Group's working capital facilities, less unamortised banking arrangement fees. The bank facilities include a leverage and an interest cover covenant. The leverage covenant requires debt (excluding any amounts drawn down under Matthew Clark's invoice discounting facility plus any amounts above £20.0m drawn down under Bibendum PLB's invoice discounting facility) to be less than 2.5 times the last 12 months adjusted EBITDA1. The interest cover covenant requires adjusted EBITDA1 to be at least four times net finance charges. At the measurement date of 31 October 2016 leverage was 2.19 and interest cover was 11.

On 16 January 2017 the Group's banking facilities were restructured to reduce costs and increase flexibility. The new facilities comprise term loans of £101m and a group wide invoice discounting facility with a maximum draw down of £130m. The leverage covenant requires the term loans to be less than 2.5 times the last 12 months adjusted EBITDA1. The interest cover covenant has not changed.

Dividend

Conviviality has a progressive dividend policy and aims to increase dividend cover (based on fully diluted adjusted EPS3) to two times by the year ending April 2020. In line with this policy an increase in the interim dividend of 100% to 4.2 pence per share (H1 FY16: 2.1 pence) is declared today for shareholders on the register at close of business on 10 February and will be paid on 10 March 2017. This is currently expected to represent approximately one third of the anticipated total dividend.

Andrew Humphreys

Chief Financial Officer

30 January 2017

INDEPENDENT REVIEW REPORT TO CONVIVIALITY PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the 26 weeks ended 30 October 2016 which comprises the consolidated income statement, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the 26 weeks ended 30 October 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the AIM Rules.

Nicola Quayle

for and on behalf of KPMG LLP

Chartered Accountants

1 St Peter's Square

Manchester

M2 3AE

30 January 2017

CONSOLIDATED INCOME STATEMENT

For the 26 Weeks ended 30 October 2016

The results for the financial period are derived from continuing operations. All of the profit for the financial period and total comprehensive income are attributable to the owners of the parent.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 30 October 2016

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General Information

The principal activity of Conviviality Plc (the "Company") and its subsidiaries (together, the "Group" or "Conviviality") is that of wholesale supply of beers, wines, spirits, tobacco, soft drinks, grocery and confectionery to the UK on trade and off trade markets.

The Company is incorporated and domiciled in the United Kingdom. The address of its registered office is: Weston Road, Crewe, Cheshire CW1 6BP. The registered number of the Company is 5592636.

The condensed interim financial information presented is for the periods ended 30 October 2016 and 1 November 2015 and the year ended 1 May 2016. The consolidated financial information is presented in sterling, which is also the functional currency of the parent company, and has been rounded to the nearest thousand (£000).

The condensed interim financial information shown has been approved for issue on 30 January 2017.

The condensed interim financial information shown does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The Group's statutory financial statements for the year ended 1 May 2016 have been reported on by the Company's auditor and delivered to the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The condensed interim financial information has not been audited.

2. Basis of preparation

The condensed interim financial statements for the 26 weeks ended 30 October 2016, which are unaudited, have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Directors have prepared cash flow forecasts for the period until April 2019. Based on these forecasts the Directors confirm that there are sufficient cash reserves to fund the business for the period under review, and believe that the Group is well placed to manage its business risk successfully. In addition to this the group has restructured its bank facilities to reduce costs and increase flexibility. For this reason they continue to adopt the going concern basis in preparing the financial information.

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's financial statements as at 1 May 2016.

The Board has considered the principal risk and uncertainties for the remaining half of the financial year and determined that the risks and uncertainties presented in the 2016 Annual Report still remain.

The Group's business is seasonal in nature. Historically, the Group's most important trading period in terms of sales, profitability and cash flow has been the Christmas season.

3. Accounting policies

In preparing these condensed interim financial statements, the Group's accounting policies and judgements and estimates were the same as those applied to the consolidated financial statements as at 1 May 2016, with the exception of a new policy for assets held for sale, and as such should be read in conjunction with those consolidated financial statements.

Assets held for sale

The Group classifies non-current assets and disposal groups as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. To be classified as held for sale, an asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for the sale of such assets, and the sale must be highly probable. Sale is considered to be highly probable when management is committed to a plan to sell an asset and an active programme to locate a buyer and complete the plan has been initiated at a price that is reasonable in relation to its current fair value, and there is an expectation that the sale will be completed within one year from the date of classification. Non-current assets classified as held for sale are carried on the Group's statement of financial position at the lower of their carrying amount and fair value less costs to sell.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.

4. Segmental Information

The Group's activities consist of the wholesale and retail distribution of beers, wines, spirits, tobacco, grocery and confectionery within the United Kingdom to both the On-Trade and Off-Trade market. The Chief Executive officer is considered to be the chief operating decision maker ("CODM").

Each trading division within Conviviality plc wholesales to businesses that retail alcohol via stores, pubs, bars, restaurants and events. The performance of each division is therefore driven by the UK market for alcohol consumption, which is a single market with a single set of economic characteristics and risks. In addition 90% of the Group's sales are of the same products and the sales process is similar in each division and is serviced by a single supply chain. Consequently, all activities are reported as one segment. To assist with the understanding of performance, however, an analysis of sales are disclosed for each of the trading divisions. This is a new divisional structure which became operational this year.

The CODM manages the business using adjusted EBITDA before exceptional costs. The table below provides a reconciliation from this figure, to the reported profit before tax in the consolidated income statement.

5. Cash generated from operations and net debt

6. Exceptional costs

The Remuneration Committee awarded a one off cash bonus of £288,000 to Diana Hunter on 13 September 2016 which represents an amount equal to the gross dividends received by Bargain Booze EBT trustees Limited ("EBT") (as trustee of the Bargain Booze Share Option Plan 2013) following the IPO of the Company during July 2013. The dividends are in respect of the shares held by the EBT that subsequently vested on the date of the IPO. The commercial intent, when the option was granted, was that Diana Hunter would be entitled to receive dividends on such shares from the date of the IPO. The dividends were not paid to Diana Hunter as planned and therefore this bonus payment realised the intended objective. The Company and the EBT have also entered into a joint share ownership plan with Diana Hunter and Andrew Humphreys which ensures they are both entitled to receive the future dividends payable on the vested share options owned by the EBT pursuant to the Bargain Booze Share Option Plan 2013.

7. Taxation

Taxation for the period has been calculated by applying the forecast effective tax rate for the financial year ending 30 April 2017. Deferred tax assets relating to share-based payments have been calculated to reflect the number of options outstanding and movement in the share price. Deferred tax liabilities have been recognised relating to the valuation of the Bibendum PLB Group brand and customer base included in intangible assets. In addition deferred tax assets have been recognised on certain acquisition fair value adjustments.

8. Dividends

A final dividend of 4.2p per ordinary share was declared by the Board of directors at the date of publication of these financial statements. It will be paid on 10 March 2017 to shareholders whose name appears on the register at close of business on 10 February 2017. The interim dividend, amounting to £7.2 million, has not been recognised as a liability in this interim financial information. It will be recognised in the shareholders' equity in the year to 30 April 2017.

9. Financial instruments

Fair values of financial assets and financial liabilities

The carrying values of all the Group's financial assets and financial liabilities approximate to their fair values because of the short-term maturity of these instruments.

The fair value of trade receivables and payables is considered to be equal to the carrying values of these items due to their short-term nature. All other financial assets and liabilities are carried at amortised cost. Cash is held with counterparties with a credit rating of A1, A2 and BBB+.

10. Business combinations

Current period business combinations

Bibendum PLB Group

On 20 May 2016, the Group entered into an agreement to acquire the entire issued share capital of Bibendum PLB Group for a total consideration of £39.7 million in cash. Bibendum PLB Group is a leading independent wholesaler in the drinks industry specialising in wines and spirits. This acquisition is consistent with the Group's ongoing strategy of expanding the Group's wholesaling expertise and entering new markets and channels. The acquisition, together with the current businesses in the Group, creates a unique offering that addresses both the On-Trade and Off-Trade retailers. Significant synergies across buying, distribution, organisational efficiencies and additional revenue generation are expected to be achieved by bringing the businesses together.

The following table summarises the consideration paid for Bibendum PLB Group, and the amount of assets acquired and liabilities assumed recognised at the acquisition date.

Cash flow

The goodwill arising on acquisition represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised on the acquisition of Bibendum PLB Group; these largely relate to synergy and integration benefits. On the acquisition of Bibendum PLB Group, the fair value of assets and liabilities has been assessed and adjustments made as shown in the table above. Within property, plant and equipment and intangible assets a fair value adjustment of £1.6 million was made to write down assets to their fair value. Within inventories, a fair value adjustment of £4.2 million was made which represents the adjustment required to bring inventories to their net realisable value. Fair value adjustments of £0.5 million were made to receivables in relation to non-recoverable debtors of £1.0 million offset by a £0.5 million fair value adjustment in relation to forward contracts. Adjustments of £0.2 million were made to bank balances to convert foreign denominated balances to spot rate. Adjustments of £0.2 million were made to trade and other payables in respect of conversion to spot rate for foreign denominated balances (£0.3 million) offset by a £0.1 million holiday pay accrual. A deferred tax liability of £2.0 million has been recognised on the brand and customer base intangible assets, offset by a deferred tax asset of £1.3 million on fair value adjustments.

From the date of acquisition Bibendum PLB Group has contributed revenue of £135.3 million and £2.7 million to profit before tax to the Group's results. Acquisition costs of £1.5 million have been charged to exceptional costs in the consolidated income statement for the period.

Prior period business combinations

Matthew Clark (Holdings) Limited

On 7 October 2015, the Group entered into an agreement to acquire the entire issued share capital of Matthew Clark (Holdings) Limited for a total consideration of £199.0 million in cash. Matthew Clark (Holdings) Limited is a leading independent wholesaler in the drinks industry. This acquisition is consistent with the Group's ongoing strategy of expanding the Group's wholesaling expertise and entering new markets and channels. The acquisition, together with the current businesses in the Group, creates a unique offering that addresses both the On-Trade and Off-Trade retailers. Significant synergies across buying, distribution, organisational efficiencies and additional revenue generation are expected to be achieved by bringing the businesses together.

The following table summarises the consideration paid for Matthew Clark (Holdings) Limited, and the amount of assets acquired and liabilities assumed recognised at the acquisition date.

Adjustments made to the fair value of assets acquired include the recognition of the deferred tax liability relating to the intangible asset (£10.1 million), additional provisions and accruals to recognise three onerous contacts that were in place at acquisition (£11.0 million which has been recalculated in this half year review and uplifted by £5.8 million), additional provisions to recognise that renovation works needed to be carried out at specific depots (£1.0 million) and impairments for property plant and equipment that is impaired at the point of acquisition (£0.9 million). A deferred tax asset of £1.8 million has been recognised in these interim financial statements relating to the fair value adjustment of onerous contracts. Goodwill has increased by net £4.0 million as a result of the measurement period adjustments.

The comparative balance sheets have been restated to reflect these measurement period adjustments.

The goodwill arising on acquisition represents the premium paid to acquire Matthew Clark (Holdings) Limited and the future economic benefits arising from other assets acquired in the business combination that are not individually identified and separately recognised on the acquisition of Matthew Clark (Holdings) Limited; these largely relate to synergy and integration benefits. Goodwill has been allocated to the Matthew Clark (Holdings) cash-generating unit ('CGU').

11. Goodwill

12. Intangible assets

13. Assets held for sale

Matthew Clark have disposed of a warehouse depot under a sale and leaseback arrangement which completed in December 2016. The net book value as at 30 October 2016 was £5.4 million and has been disclosed under assets held for sale.

14. Share Capital

On 20 May 2016, a further 15,609,757 shares were issued at a value of £2.05 each in relation to the acquisition of Bibendum PLB Group Limited.

The Company entered into additional block listing arrangements with AIM in respect of the notification to AIM of allotments of 250,000 new ordinary shares of £0.0002 each in the capital of the Company to satisfy the requirement to allot matching shares at the time of purchase of partnership shares for the Bargain Booze Share Incentive Plan. In this regard 47,679 shares were issued during the period.

In addition 36,667 shares were issued to a director during the period and a further 2,331,250 free shares were issued under the Franchisee Incentive Plan in the period.

15. Earnings per ordinary share

Basic and diluted earnings per share are calculated by dividing the profit / (loss) for the period attributable to equity holders by the weighted average number of shares.

The difference between the basic and diluted average number of shares represents the dilutive effect of share options. The weighted average number of shares can be reconciled to the weighted average number of shares including dilutive shares as follows:

Adjusted earnings per share

Although not presented on the face of the Income statement, the adjusted earnings per share, are calculated below:

Adjusted basic and diluted earnings per share are calculated by dividing the profit after tax but before exceptional items, fair value adjustments on derivative financial instruments and mortization of intangibles acquired with Matthew Clark and Bibendum PLB Group, by the weighted average number of shares, which is the same as disclosed in the table above.

16. Events Occurring After the Reporting Date

On 16 January 2017 the Group's receivable financing facilities were restructured to reduce costs and increase flexibility. Under the new agreement the Group can sell any debts owed to Matthew Clark Wholesale Limited, Bibendum PLB Group Limited and Conviviality Retail Limited by its customers who have purchased goods or services. The maximum facility available is 85% of the allowable trade receivables up to £130m. The discount margin for the funding of debts is 1.25%. There is a non utilisation fee of 0.5% of the available facility payable during the minimum period of the facility being 24 months from the date of the agreement. The agreement terminates in October 2020. An arrangement fee of £150,000 was incurred and is being amortised over 5 years.

The Group's existing senior term and revolving facilities agreement have been revised. Term loan A has increased from £40m to £51m and Term loan B has increased to £50m.