Conviviality : Half Year Results

29 January 2018

CONVIVIALITY PLC

HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 29 OCTOBER 2017

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, is pleased to announce its results for the 26 weeks to 29 October 2017 (H1 FY17: 26 weeks to 30 October 2016) and that it continues to trade in line with the Board's expectations for the full year.

H1 FY18¹Financial Highlights

Robust results with an increase in revenue and adjusted EBITDA²with profits reflecting the phasing of cost synergies into the second half of the year.

·Revenue up 9.2% to £836.3m (H1 FY17: £765.9m)

·Gross margin down 0.3% points to 12.5% (H1 FY17: 12.8%) due to increased sales to large national account customers in H1 FY18

·Adjusted EBITDA²up 1.7% to £23.3m (H1 FY17: £22.9m)

·Adjusted profit after tax³ down 1.6% to £12.3m (H1 FY17: £12.5m) and adjusted fully diluted EPS⁴down 5.6% to 6.8 pence (H1 FY17: 7.2 pence)

·Profit after tax down 10.3% to £5.2m (H1 FY17: £5.8m) and fully diluted EPS down 12.1% to 2.9 pence (H1 FY17: 3.3 pence)

·Net debt at £133.3m is 3.7% below net debtat 30 October 2016 of £138.4m

·Interim dividend increased by 7.1% to 4.5 pence (H1 FY17: 4.2 pence)

Operational Highlights

·Strong gains in market share during the period:

o1,408 new on trade customers

oOver 2,400 customers, including 84 national accounts, increased their purchases year on year

·Above market growth achieved: +6.5%pts above market in on trade distribution and +1.9%pts above market in off trade distribution

oOn trade: Conviviality's sales growth of +6.9% (H1 FY18 v H1 FY17) compared to estimated growth* in the on trade distribution market of +0.4% for the same period

oOff trade: Conviviality's sales growth of +5.7% (H1 FY18 v H1 FY17) compared to estimated market growth* of 3.8%

·Significant increase in both national and regional customers buying from both Matthew Clark and Bibendum:

o36 national accounts (18 in H1 FY17)

o189 regional accounts (115 in H1 FY17)

·Security of future earnings improved as the Group's two largest customers entered into new long term agreements demonstrating further confidence in the Group's strategy

·New digital platform successfully launched for on trade customers

o50.3% of Matthew Clark sales are now through our integrated e-commerce platform

oTotal number of users up 33% to 5,490

·Successfully completed the integration of Matthew Clark and Bibendum Wine onto the same Enterprise Resource Planning (ERP) platform - a significant milestone in our ongoing integration plan

·Capex investment of £10.5m to upgrade our IT systems thereby facilitating organisational alignment and synergies and to improve our store estate

Conviviality Direct Highlights

·6.9% increase in sales compared to the corresponding prior period⁵

·1.2% increase in outlets supplied

·5.7% increase in revenue per outlet

·Long term contracts secured with the Group's largest customers - Stonegate Pub Company (5 year) and JD Wetherspoon

·10 year agreement signed with Wadworth to supply wines to 200 managed and 139 independent free trade outlets

Conviviality Retail Highlights

·10.0% increase in sales compared to the corresponding prior period⁵

·Like for like⁶retail sales:

o+2.3% excluding tobacco

o+0.4% including tobacco

·22 new stores opened in the period

·53% increase in average sales per store opened in the first half

·Franchisee gross margin increased 0.8% points

Conviviality Trading Highlights

·9.6% increase in sales compared to the corresponding prior period⁵

·27% increase in Events sales

·Key agency brands performing well with Larios, Estrella Galicia, Marie Brizard and Gancia Prosecco delivering strong sales growth

·2 further exclusive agencies secured: Piccini and Barramundi

Current Trading

·8.4% increase in Group sales during November and December (9 weeks) compared with the same period last year

·Conviviality Retail sales (including Central Convenience stores) increased 12.3%, Conviviality Direct sales increased 7.7% and Conviviality Trading grew 3.2%

·0.6% increase in retail like for like⁶sales for the 6 weeks ended 31 December 2017

·The Group continues to trade in line with the Board's expectations for the full year

Post Balance Sheet Events

·Conviviality Retail successfully acquired the Central Convenience business from WS Retail Limited (in administration) on 15 December 2017, adding 127 Convenience stores located in the South and South West into the Group, bringing total store numbers as at 2 January 2018 to 831

·Organisational structure now fully aligned to the Group's business competencies and operating model

Diana Hunter, Chief Executive Officer of Conviviality, said:

'Our customers and franchisees have continued to recognise the strength of the Conviviality proposition and the opportunities a single supplier and distribution solution affords them. This has been evidenced by our above market growth in both the on trade and the off trade during the period.

'We have made deliberate choices to successfully grow market share and enhance the quality of future earnings by agreeing long term contracts with our larger customers and securing new national account customers. These gains in market share coupled with our continued strong sales demonstrates 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.

'As previously highlighted, cost initiatives for the second half of the current financial year provide confidence for both achieving current year Board expectations, as well as the Group's longer-term performance.'

There will be a presentation for analysts at the offices of FTI Consulting (200 Aldersgate, EC1A 4HD) at 9.30am today, 29 January 2018.

¹H1 FY18 refers to the 26 week period to 29 October 2017.

²Adjusted EBITDA is presented in Note 4 'Segmental Information'. This note also presents the reconciliation of Profit before income tax to Adjusted EBITDA.

³Adjusted profit after tax is calculated as Adjusted profit before tax (as presented in Note 4 'Segmental Information') less a tax charge calculated at the effective tax rate. The calculation is presented in Note 15 'Earnings per Ordinary Share'.

⁴Adjusted fully diluted EPS is calculated by dividing the Adjusted profit after tax by the diluted weighted average number of ordinary shares. This calculation is presented in Note 15 'Earnings per Ordinary Share'.

⁵Corresponding prior period refers to the 26 weeks from 2 May 2016 to 30 October 2016 and includes the results of Bibendum PLB Group acquired during this period as if it had been part of the Group for the whole period.

⁶Like for like performance adjusts for the impact of non-recurring trading disruptions in both periods. In retail, like for like performance adjusts for the impact of stores opened and closed in the period.

⁷Adjusted profit before tax is presented in Note 4 'Segmental Information'. This note also presents the reconciliation of Profit before income tax to Adjusted profit before tax.

⁸Adjusted basic EPS is calculated by dividing the Adjusted profit after tax by the basic weighted average number of ordinary shares. This calculation is presented in Note 15 'Earnings per Ordinary Share'.

⁹Operating costs are defined as operating expenses per the income statement excluding depreciation, amortisation of all intangible assets, share based payment charges and fair value movement on foreign exchange derivatives.

*On trade market growth calculated using CGA data and Conviviality modelling assumptions. Off trade market growth calculated using Nielsen Scantrack data and Conviviality modelling assumptions.

Enquiries:
Conviviality Plc	Tel: [phone]
Diana Hunter, Chief Executive Officer
Mark Moran, Chief Financial Officer
Investec (Nominated Adviser and Broker)	Tel: [phone]
Garry Levin / David Flin / Daniel Adams
FTI Consulting	Tel: [phone]
Jonathan Brill / Georgina Goodhew / Fiona Walker

CHAIRMAN'S STATEMENT

I am pleased with the trading performance of the Group during the first half of the year, particularly under the circumstances of the significant integration programme underway during the period. The strong revenue growth across all areas of the business indicates that our strategy is the right one for meeting customer needs in a market where customers seek the support and expertise of a drinks expert and solution provider. Furthermore, investing to secure long term contracts with our largest on trade customers and adding new national accounts to the Group have been key initiatives to grow our market share and secure future earnings.

The integration is now in its final stages, with the important step of implementing our JD Edwards ERP system into Bibendum now complete. As a result, and as announced on 12 January 2018, we have taken the decision to further align our organisation to the operating model and the Company's core competencies of franchising, and the Buying, Selling and Distribution of drinks to both the on trade and the off trade. This next step in the evolution of our organisation enables us to simplify our processes, remove duplication and continue to reduce overheads as a percentage of sales into FY19 and beyond.

On behalf of the Board, I would like to thank Andrew Humphreys who, as previously announced, is leaving us. I would also like to thank Mark Aylwin who we announced, as part of the announcement on 12 January 2018, is also leaving us at the end of January 2018.

Furthermore, I would like to recognise everyone working in our business for their passion, commitment and customer focus that has made it possible to deliver our integration whilst also delivering strong underlying growth across the business.

Reflecting the progress of the Group I am pleased to announce a 7.1% increase in the interim dividend to 4.5 pence per share, which is expected to represent approximately one third of the anticipated total dividend for the year.

The Board continues to look to the future with confidence.

David Adams

Chairman

29 January 2018

CHIEF EXECUTIVE OFFICER'S STATEMENT

Conviviality Group Overview

Conviviality supplies over 25,000 restaurants, hotels, bars; over 830 retail outlets, the majority franchised; approximately 400 independent specialists and events and serves major multiple supermarkets drawing from over 10,000 alcohol SKUs sourced globally from specialist producers and brand owners.

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.

During H1 FY18 we saw 1,408 new on trade customers joining the Group and over 2,400 of our existing on trade customers, including 84 national account customers, increase their purchases from us. Additionally we saw strong and consistent growth within our franchised retail estate with like for like sales up 0.4% including tobacco (up 2.3% excluding tobacco). Our total on trade revenue growth is 6.5% ahead of the market and market share increased by 1% to 15%. Importantly the increase in purchases from large national account customers served by Matthew Clark increased by 4.5%; these customers have favourable end to end economics and long term stability. Our operating model is resilient and provides the infrastructure to deliver unparalleled customer service today with the opportunity to scale as we drive future growth. We made deliberate choices to create further resilience in our model by agreeing long term contracts with our two largest customers during this period thereby securing future earnings.

The sales growth and the relationships with our customers are a testament to the strength of the Conviviality proposition, and, as announced on 7 November 2017, the increase in sales to large national account customers during H1 FY18 had a resultant shift in the Group's gross margin mix. However, the efficiencies which will be brought about by the now completed integration of the JD Edwards ERP system in Bibendum and the ongoing implementation of systems across the remainder of the Group will secure a stronger second half in particular, as well as improved operational performance over the longer term.

Logistics and ERP systems integration

Our logistics integration is nearing completion with Paragon route planning now in place in all depots with the exception of the London depot at Park Royal which completes next month. The benefit of this new software and the positive changes made to ways of working has been partly offset by higher costs due to increased volumes where we are using more agency drivers in the short term as well as an increase in pay for permanent drivers in some depots. Despite these market pressures, looking forward, we are confident that the actions we have taken and the rewards and benefits for all drivers are attractive in the UK market. We have plans in place to move all of our slow moving lines into our third party depot in Reading, creating a National Distribution Centre, and benefiting all our depots by releasing capacity and driving greater efficiencies. Whilst we have seen a change to the phasing of the logistics benefits in FY18 we are confident in the plans which we have in place for the expected costs benefits to come through in FY19 and beyond.

We implemented the JD Edwards ERP system into Bibendum at the end of July 2017. Bringing together the two on trade propositions of Matthew Clark and Bibendum on to the same ERP system will benefit customers, suppliers and the business as we create a more seamless approach to servicing our customers and increasing their ability to access the full product range that Conviviality has to offer. This important implementation also facilitated the transition of the two contact centres in London and Bristol and the two credit control and processing teams into one, located in Bristol. Both of these functions are key to ensuring good quality customer service to support our increasing sales. As a result we delayed some of the planned cost savings to ensure the smoothest possible transition for our customers to protect our growth. The new ways of working are now sufficiently bedded down to maximize the benefit of this change, simplify our processes, remove duplication and align our organisation to our core competencies of franchising, and the Buying, Selling and Distribution of drinks across the UK market. This in turn will ensure that we will not only provide excellent service to our customers but our overhead costs as a percentage of sales will reduce to the target levels of 4.5% by FY20.

We announced the next stage of our organisation design changes on 12 January 2018. The organisational structure that is now in place is as follows:

Group Buying and Procurement: Group Buying, Procurement and Insight : We have brought together all of our drinks buying teams under the leadership of Steve Jebson who joined the business in November 2015 and has successfully delivered the buying synergies from the Matthew Clark and Bibendum integration. The benefit of this change is to ensure that we truly leverage the scale of Conviviality with our suppliers as well as giving our supplier partners a clear route to maximise their business across our entire group, linking insight, buying, category and activation.

Commercial and Marketing:We have brought together all of the selling and marketing functions within Conviviality Direct and Conviviality Trading under James Lousada who joined the business in June 2016. James has successfully integrated the agency businesses and festival businesses that existed within Matthew Clark, Bibendum and Peppermint Events. James will now also lead the Bibendum and Matthew Clark sales and marketing teams who support all customer relationships in the on trade. The benefit of this change is that we can simplify the processes involved in supporting our customers, ensuring they receive the best support possible to meet their needs. We will also drive greater efficiencies through more effective pipeline and retention management.

Customer and Operations:Mark Riley joined Bibendum in 2012 and joined the Group when we acquired Bibendum PLB in May 2016 where he was Managing Director of Bibendum, during which time he successfully supported the integration of Bibendum into Conviviality. Mark in his new role of Customer and Operations Director will ensure the delivery of an efficient supply chain with outstanding service to customers. Mark's responsibilities cover the Bristol customer contact centre, Bristol supply chain teams and the entire Conviviality logistics operation including the relationship with Trade Team, our third party provider.

Conviviality Retail:headed by David Robinson, Conviviality Retail specialises in drinks led convenience retailing and focuses on the wholesaling and Franchising of alcohol and convenience foods, predominantly through the fascia of Bargain Booze, Select Convenience and Wine Rack. David's organisational structure remains unchanged.

People:headed by Sarah Miles: focused on the effective retention, development and recruitment of our people to support the future growth of the organisation. This ensures that our culture and the ownership for success lives and breathes across the entire organisation.

Finance and Legalheaded by Mark Moran, CFO: focused on providing the appropriate financial support and controls to enable growth and to meet our investor expectations by ensuring effective management reporting.

Not only does the new structure mirror our operating model and enable us to lower the centre of gravity of the organisation, bringing decision making closer to the customer, it drives a lower cost as a % of sales into FY19. We expect this new operational structure to deliver full year cost savings of £2.3m, which in turn will increase the target synergy savings by £1 million in FY20, to £17.5million. The market continues to be full of opportunities and challenges we now have the best platform from which to gain benefit. We span the entire drinks market across the UK and we are best placed to identify trends starting from 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 and drive their businesses.

Financial Results

Sales grew 9.2% to £836.3m (H1 FY17: £765.9m) and adjusted EBITDA²increased 1.7% to £23.3m (H1 FY17: £22.9m).

Adjusted profit before tax⁷decreased by 1.9% to £15.1m (H1 FY17: £15.4m). On the same basis, adjusted fully diluted earnings per share⁴decreased 5.6% to 6.8 pence (H1 FY17: 7.2 pence). Net debt at 29 October 2017 was £133.3m (30 October 2016: £138.4m) and leverage at 29 October 2017 was comfortably below the bank covenant of 2.50x Adjusted EBITDA²at 1.5x.

Business Unit Highlights:

Conviviality Direct

We have seen very strong sales growth from both Matthew Clark and Bibendum, with first half sales up 6.9% over the corresponding prior period⁶to £540.5m. The number of outlets served in the period increased by 1.2% and sales per outlet grew 5.7%, demonstrating the strength of our proposition to both existing and new customers. The number of Bibendum outlets who buy all product categories has increased 29%. The improvements made to the digital ordering platform are proving successful with a 33% increase in users, with 5,490 now using digital ordering, and we are continuing to see higher average orders of £1,179 (+17% vs H1 17) compared to traditional methods with an average of £763 (-9% vs H1 17).

The 'City Centre' strategy, where the sales team focus on increasing the number of outlets per target city, ensures not only increased sales but improvements in distribution efficiency. London city plan has seen a 17% increase in sales over H1 FY17, with our five target cities averaging 14% sales growth over the same period. Spirit sales in London have grown by 33% over H1 FY17.

The National Accounts team have secured long term contracts with our two largest customers Stonegate Pub Company and JD Wetherspoon ensuring we continue to provide the consistent service and support to these valued customers for the long term as well as securing future earnings. In addition the team have won a 10 year contract with Wadworth to distribute to 200 managed and 139 independent free trade outlets, as well as continuing strong growth with Mitchell and Butler as large national groups see the benefit of working with Conviviality. A consequence of securing such high volume business is a change in customer margin mix, the lower margin core product as well as higher listing fees due to the nature of the agreements, in time this will be offset by a lower cost to serve through more efficient distribution.

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 product range, enabling them to reduce complexity of supply and enabling Conviviality Direct to be a one-stop shop for its customers.

Conviviality Retail

The Convenience market is experiencing significant consolidation with both Tesco and Booker and Nisa and the Co-Op announcing mergers. The Board sees these changes as positives for Conviviality Retail, which continues to hold a differentiated position in the Convenience market through being off-licence led Convenience retail. This is supported through its strong customer service feedback scores and net promoter scores which are significantly ahead of its symbol group competitors.

For the half year, total sales were up 10.0% on the corresponding prior period⁵reflecting the quality and number of new stores brought into the group. In line with our strategy of increasing our multi-site franchisees, 16 existing franchisees opened 45 more stores in the first half, some of which were acquired from existing franchisees, and in total there are 30 franchisees actively seeking to grow with the business. Attracting new quality franchisees remains key to our plan with 15 new franchisees joining us in the period. Franchisee margin for the period improved 0.8% points and we were delighted to award 220 franchisees 1,214,650 shares under our Franchisee Inventive Plan.

Conviviality Retail continues to develop marketing strategies to win in the local community, leveraging its significant strength in social media. A new digital club which already has 50,000 members has been launched, enabling consumers to access personalized offers and promotions and Facebook followers now exceed 128,000 enabling the business to communicate with its customers efficiently and with a wide range of mechanics.

Differentiating our proposition and innovating has been a successful part of our Retail strategy and will continue to be so. We recently opened a trial standalone Vape store in Stretford to further strengthen our credentials in Vape and 418 stores now have the full Vape range in store to complement the destination off-licence and convenience proposition.

During the period 22 stores were opened. The refurbishment programme continues to show strong results with on average 2% sales growth post refurbishment.

The acquisition of the Central Convenience business from WS Retail Limited (in administration) on 15 December 2017 added 127 stores into the Group predominantly located in the South and South West of England. All stores will move to being fully supplied by Conviviality by the end of February 2018 and all back office functions will be supported from Crewe from May 2018. During the next eighteen months the stores will be converted predominantly to the Select Convenience proposition and will move from being Company owned and operated to fully franchised. We already have 10 existing franchisees who have stated an interest in operating certain of these stores. We expect to achieve buying synergies of approximately £0.2m and cost synergies of approximately £0.8m in the first full year of ownership.

Conviviality Trading

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 6.5 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. Conviviality Trading generated sales of £92.8m in the 26 weeks to 30 October 2017 and were 9.6% above the corresponding prior period⁵ as its customers increasingly recognise the skill and talent of the team at managing the complex premium wine category and utilising the exclusive supplier agreements that Conviviality has to support their ranging plans. During the period, a further 2 agencies, Piccini and Barramundi were added to the Group. Notable growth in existing agencies were seen for Larios, Estrella Gallicia, Voss, Gancia Prosecco and Marie Blizzard.

A key strength of Conviviality is its scale and reach across the UK Drinks market and as a result we have taken the opportunity to launch three new brands to test our own brand capability and speed to market. They are Rolling Calf spiced spirit, Whipstitch Festival Cider and a range of specialty mixers under the Primrose Hill brand. To date Rolling Calf is now in distribution in 557 outlets including 476 Retail stores, Whipstitch Festival Cider was launched at 2 events during the Summer of 2017 and is sold in 151 Retail stores. Primrose Hill mixers were launched in time for Christmas and New Year trading and are in 306 outlets. It is early in our innovation journey, however, we are encouraged by the feedback from our customers and performance to date.

In addition to the agency business, Conviviality Trading is also responsible for the development and growth of an events business, Peppermint, which specialises in outdoor events and festivals. Sales increased by 27% over the corresponding prior period⁵. 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.

Christmas Trading

Conviviality performed well during the Christmas trading period across all of its businesses. Group sales in November and December 2017 (9 weeks) were 8.4% above the same period in the prior year. Conviviality Retail sales (including Central Convenience stores) increased 12.3%, Conviviality Direct sales increased 7.7% and Conviviality Trading grew 3.2%.

Retail like for like sales⁶in the 6 weeks ended 31 December 2017 grew 0.6% and like for like sales⁶for the 2 weeks ended 31 December 2017 were up 7.7%.

Outlook

We are pleased with the performance of all of our business units across the Christmas trading period.

We have a proven capability in delivering results whilst managing the integration of acquisitions and the delivery of synergies. Our teams believe in the significant opportunities available to 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. Furthermore, with our improved organisational structure, enhanced quality of earnings and as we enter the final stages of our logistics and ERP system integration programme, we look forward to the future with confidence and can report that the Group's trading continues to be in line with the Board's expectations for the full year.

Diana Hunter

Chief Executive Officer

29 January 2018

FINANCIAL REVIEW

Overview

Sales grew 9.2% to £836.3m (H1 FY17: £765.9m) and adjusted EBITDA²increased 1.7% to £23.3m (H1 FY17: £22.9m).

Adjusted profit before tax⁷decreased by 1.9% to £15.1m (H1 FY17: £15.4m). On the same basis, adjusted fully diluted earnings per share⁴decreased 5.6% to 6.8 pence (H1 FY17: 7.2 pence).

Net debt at 29 October 2017 was £133.3m (30 October 2016: £138.4m) and leverage at 29 October 2017 at 1.5x was below the bank covenant of 2.50x Adjusted EBITDA².

Revenue

Group revenues for the period were 9.2% ahead of last year at £836.3m (H1 FY17: £765.9m). Group revenues are 7.9% above the corresponding prior period⁵with each of Conviviality's three business units (Conviviality Direct; Conviviality Retail and Conviviality Trading) trading well.

Conviviality Direct generated sales of £540.5m in the 26 weeks to 30 October 2017 and were 6.9% above the corresponding prior period⁵due to a 1.2% increase in the number of outlets supplied coupled with a 5.7% increase in sales per outlet.

Conviviality Retail's sales were 10.0% above the corresponding prior period⁵due to a higher mix of corporate stores, an increase in franchisee loyalty and higher secondary wholesale sales due to higher sales to Palmer & Harvey.

During the period, Conviviality Retail's store estate decreased by 0.8% to 708 (30 April 2017: 713) but with the acquisition of the Central Convenience business from WS Retail Limited (in administration) on 15 December 2017 the number of stores increased to 831 as at 2 January 2018. We aim to franchise a majority of the Central Convenience stores over the next few years.

Like for like retail sales⁶continued to improve with like for like sales up 2.3% excluding tobacco and up 0.4% including tobacco. Franchisee gross margin increased 0.8% points.

Conviviality Trading generated sales of £92.8m in the 26 weeks to 30 October 2017 and were 9.6% above the corresponding prior period⁵ as its customers increasingly recognise the skill and talent of the team at managing the complex premium wine category and utilising the exclusive supplier agreements that Conviviality has to support their ranging plans.

Adjusted EBITDA²

Adjusted EBITDA²increased 1.7% to £23.3m (H1 FY17: £22.9m) as the strong sales growth was offset by a 0.3% point reduction in gross margin such that gross profit was £5.9m above last year. The increase in gross profit was partly offset by a £5.5m increase in operating costs⁹.

Gross margin decreased by 0.3% to 12.5% (H1 FY17: 12.8%) due to an increase in sales to large national account customers and investment to gain market share.

Operating costs⁹increased by £5.5m due to an increase in logistics costs of £3.2m, higher overheads of £0.2m and operating a higher number of corporate stores which increased costs by £2.1m. Logistics costs remained flat at 4.4% of sales in both H1 FY18 and H1 FY17, whilst overheads fell from 5.0% of sales in H1 FY17 to 4.6% of sales in H1 FY18.

Adjusted Profit before Tax⁷

Adjusted profit before tax⁷decreased to £15.1m as the £0.4m increase in adjusted EBITDA²was offset by higher depreciation and amortisation (excluding amortisation of acquired intangible assets) and an increase in share based payment charges due to options issued under the Share Incentive Plan and the Franchise Incentive Plan.

Finance costs reduced by £0.5m primarily due to the removal of tobacco guarantee costs as the group ceased buying directly from the tobacco manufacturers.

Depreciation and amortisation (excluding amortisation of acquired intangible assets) increased £0.8m due to increased investment in the retail estate and the implementation of JD Edwards into Bibendum Wine.

Profit before Tax

Profit before tax decreased by £1.0m from £7.4m to £6.4m as the fall in adjusted profit before tax⁷was exacerbated by higher exceptional items.

Exceptional items includes business integration costs of £4.1m and adjustments to accruals and provisions in the Bibendum PLB acquired balance sheet of £1.1m.

Tax

The tax charge of £1.2m represents tax on Group profit before tax and exceptional items of £2.2m offset by a tax credit on exceptional items of £1.0m. The effective tax rate on Group profit before tax and exceptional items was 19.0%.

Earnings per Share

Adjusted profit after tax³decreased 1.6% to £12.3m (H1 FY17: £12.5m) and the basic weighted average number of shares increased 2.3% to 172.5m (30 October 2016: 168.6m) resulting in adjusted basic EPS⁸decreasing 4.1% to 7.1 pence (H1 FY17: 7.4 pence).

Fully diluted weighted average shares increased 2.6% to 179.3m (30 October 2016: 174.8m) resulting in adjusted fully diluted EPS⁴decreasing 5.6% to 6.8 pence (H1 FY17: 7.2 pence).

Cash flow and Funding

Free cash flow (adjusted EBITDA²plus changes in working capital less capital expenditure, interest and tax) was an out flow of £13.6m (H1 FY17: outflow of £9.2m) as adjusted EBITDA²of £23.3m (H1 FY17: £22.9m) was offset by an increase in working capital of £22.8m (H1 FY17: increase of £15.6m), net capital expenditure of £10.5m (H1 FY17: £8.8m), interest payments of £2.3m (H1 FY17: £2.6m) and tax payments of £1.3m (H1 FY17: £5.1m).

Net working capital of £39m was 22% below the prior year net working capital of £50m as an increase in stock of £12m and debtors of £30m was offset by higher creditors of £53m.

Capital expenditure of £10.5m includes investments in our store estate of £2.3m and £6.8m in our IT systems and equipment as we implement our systems convergence strategy.

Net debt increased from £95.7m at 30 April 2017 to £133.3m at 29 October 2017 primarily due to the free cash outflow of £13.6m, exceptional costs of £4.2m, dividend payments of £14.6m and the purchase of other business combinations of £4.6m.

At 29 October 2017 the Group's net debt comprised £94.5m of term loans, amounts drawn down under the Group's working capital facilities of £61.1m, finance leases of £0.4m, cash at bank and in hand of £22.1m and 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 the Group's invoice discounting facility) to be less than 2.5 times the last 12 months adjusted EBITDA². The interest cover covenant requires adjusted EBITDA²to be at least four times net finance charges. At the measurement date of 29 October 2017 leverage was 1.5x and interest cover was 13x.

Dividend

Conviviality has a progressive dividend policy and aims to increase dividend cover (based on adjusted fully diluted EPS⁴)to two times by the year ending April 2020. In line with this policy an increase in the interim dividend to 4.5 pence per share (H1 FY17: 4.2 pence) is declared today for shareholders on the register at close of business on 16 February 2018 and will be paid on 16 March 2018. This is expected to represent approximately one third of the anticipated total dividend.

Mark Moran

Chief Financial Officer

29 January 2018

INDEPENDENT REVIEW REPORT TO CONVIVIALITY PLC

Conclusion

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 29 October 2017 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.

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 29 October 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reportingas adopted by the EU and the AIM Rules.

Scope of 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 Entityissued 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. We read the other information contained in the half-yearly report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) 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.

Directors' responsibilities

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 International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 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

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Nicola Quayle

for and on behalf of KPMG LLP

Chartered Accountants

1 St Peter's Square

Manchester

M2 3AE

29 January 2018

CONSOLIDATED INCOME STATEMENT

For the 26 Weeks ended 29 October 2017

				Unaudited			Unaudited	Audited
		Before exceptional items	Exceptional items	Total	Restated Before exceptional items	Exceptional items	Restated Total	Total
		26weeks ended	26weeks ended	26weeks ended	26 weeks ended	26 weeks ended	26 weeks ended	52weeks ended
		29 Oct 2017	29 Oct 2017	29 Oct2017	30 Oct 2016	30 Oct 2016	30 Oct 2016	30 April 2017
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Continuing operations
Revenue		836,340	-	836,340	765,932	-	765,932	1,560,081
Cost of sales		(732,048)	-	(732,048)	(667,531)	-	(667,531)	(1,353,012)
Gross profit		104,292	-	104,292	98,401	-	98,401	207,069
Operating expenses	6	(90,366)	(5,291)	(95,657)	(84,655)	(3,669)	(88,324)	(179,157)
Operating profit / (loss)		13,926	(5,291)	8,635	13,746	(3,669)	10,077	27,912
Finance income		250	-	250	11	-	11	62
Finance costs		(2,470)	-	(2,470)	(2,654)	-	(2,654)	(5,512)
Profit / (loss) before income tax		11,706	(5,291)	6,415	11,103	(3,669)	7,434	22,462
Income tax (expense) / credit	7	(2,221)	1,004	(1,217)	(2,108)	441	(1,667)	(4,016)
Profit / (loss) for the financial period		9,485	(4,287)	5,198	8,995	(3,228)	5,767	18,446
Other comprehensive income
Cash flow hedges
Change in fair value		386	-	386	(67)	-	(67)	(522)
Tax on change in fair value		(66)	-	(66)	15	-	15	104
Total comprehensive income		9,805	(4,287)	5,518	8,943	(3,228)	5,715	18,028
Earnings per ordinary share
- Basic	15			3.0p			3.4p	10.8p
- Diluted	15			2.9p			3.3p	10.4p

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

	Note	As at 29 Oct 2017	Restated As at 30 Oct 2016	Restated As at 30 April 2017
		£'000	£'000	£'000
Non-current assets
Property, plant and equipment		19,225	14,235	16,924
Goodwill	11	214,808	208,205	211,771
Intangible assets	12	74,403	75,359	73,861
Deferred taxation asset		5,188	3,895	6,021
Trade and other receivables		16,456	6,257	11,579
Total non-current assets		330,080	307,951	320,156
Current assets
Assets held for sale	13	-	5,385	-
Inventories		108,628	97,232	93,840
Trade and other receivables		241,987	221,973	220,661
Cash and cash equivalents	5	22,051	4,457	10,424
Derivatives		317	1,995	356
Total current assets		372,983	331,042	325,281
Total assets		703,063	638,993	645,437
Current liabilities
Trade and other payables		(321,698)	(256,388)	(299,233)
Borrowings short term	5	(80,109)	(72,711)	(24,651)
Derivatives		(295)	(86)	(1,915)
Current taxation payable		(874)	(1,544)	(1,759)
Provisions		-	(513)	(1,015)
Total current liabilities		(402,976)	(331,242)	(328,573)
Non-current liabilities
Derivatives		(221)	-	(608)
Borrowings long term	5	(75,199)	(70,160)	(81,519)
Deferred taxation liability		(9,855)	(9,959)	(10,524)
Trade and other payables		(2,859)	(6,159)	(2,859)
Provisions		(3,866)	(11,787)	(5,517)
Total non-current liabilities		(92,000)	(98,065)	(101,027)
Total liabilities		(494,976)	(429,307)	(429,600)
Net assets		208,087	209,686	215,837
Shareholders' equity
Share capital	14	78	78	78
Share premium		196,142	197,136	196,142
Share based payment and other reserves		6,227	4,929	5,311
Retained earnings		5,640	7,543	14,306
Total equity		208,087	209,686	215,837

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share	Share	Share based	Other	Retained	Total
	Capital	premium	payment	Reserves	earnings	equity
	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 May 2016	75	164,342	3,959	(112)	14,561	182,825
Profitfor the financial period	-	-	-	-	5,767	5,767
Cash flow hedge reserve for interest rate swap	-	-	-	(52)	-	(52)
Total comprehensive income for the period	-	-	-	(52)	5,767	5,715
Transactions with owners:
Issue of new ordinary shares	3	32,794	-	-	-	32,797
Dividends	-	-	-	-	(12,785)	(12,785)
Share-based payment charge	-	-	1,259	-	-	1,259
Deferred tax on share-based payment charge	-	-	(247)	-	-	(247)
Disposal of shares in EBT	-	-	-	122	-	122
Total transactions with owners	3	32,794	1,012	122	(12,785)	21,146
Balance as at 30 October 2016	78	197,136	4,971	(42)	7,543	209,686
Profit for the financial period	-	-	-	-	12,679	12,679
Cash flow hedge reserve for interest	-	-	-	(470)	-	(470)
rate swap
Deferred tax on interest rate swaps	-	-	-	104	-	104
Total comprehensive income for the period	-	-	-	(366)	12,679	12,313
Transactions with owners:
Adjustment to share premium	-	(994)	-	-	-	(994)
Transfer of share-based payment charge	-	-	(1,213)	-	1,213	-
Dividends	-	-	-	-	(7,129)	(7,129)
Share-based payment charge	-	-	1,465	-	-	1,465
Deferred tax on share-based payment charge	-	-	496	-	-	496
Total transactions with owners	-	(994)	748	-	(5,916)	(6,162)
Balance as at 30 April 2017	78	196,142	5,719	(408)	14,306	215,837
Profitfor the financial period	-	-	-	-	5,198	5,198
Cash flow hedge reserve for interest rate swap	-	-	-	386	-	386
Deferred tax movements on Cash flow hedge reserve for interest rate swap	-	-	-	(66)	-	(66)
Total comprehensive income for the period	-	-	-	320	5,198	5,518
Transactions with owners:
Dividends	-	-	-	-	(14,549)	(14,549)
Share-based payment charge	-	-	1,570	-	-	1,570
Deferred tax on share-based payment charge	-	-	256	-	-	256
Transfer of share-based payment charge	-	-	(685)	-	685	-
Purchase of shares in EBT	-	-	-	(545)	-	(545)
Total transactions with owners	-	-	1,141	(545)	(13,864)	(13,268)
Balance as at 29 October 2017	78	196,142	6,860	(633)	5,640	208,087

CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 29 October 2017

		26weeks ended	26weeks ended	52weeks ended
		29 Oct 2017	30 Oct 2016	30 April 2017
	Note	£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	5	528	7,255	78,276
Interest paid		(2,330)	(2,654)	(5,348)
Income tax paid		(1,255)	(5,083)	(8,251)
Net cash (used in)/ generated from operating activities		(3,057)	(482)	64,677
Cash flows from investing activities
Purchases of property, plant and equipment		(4,406)	(5,010)	(10,090)
Purchases of intangible assets		(6,066)	(3,789)	(9,668)
Proceeds from sale of property, plant and equipment		-	-	6,338
Interest received		-	11	62
Purchase of subsidiary undertaking (net of cash acquired)		-	(39,663)	(43,526)
Net debt on acquisition of Bibendum PLB/Matthew Clark		-	(18,736)	(19,147)
Exceptional costs of acquiring and integrating subsidiary		(4,195)	(3,669)	(9,788)
Purchase of other business combinations		(4,575)	(226)	(396)
Net cash used in investing activities		(19,242)	(71,082)	(86,215)
Cash flows from financing activities
Dividends paid		(14,549)	(12,785)	(19,914)
Proceeds/(repayment) of borrowings		50,283	(5,111)	(19,589)
Proceeds from sale of shares		-	32,000	31,803
(Purchase)/disposal of shares in EBT		(545)	-	122
(Payments made against)/proceeds from term loans		(1,263)	10,000	30,000
Net cash generated from financing activities		33,926	24,104	22,422
Net increase/(decrease) in cash and cash equivalents		11,627	(47,460)	884
Cash and cash equivalents at beginning of the period		10,424	(10,715)	9,540
Cash and cash equivalents at the end of the period		22,051	(58,175)	10,424

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 29 October 2017 and 30 October 2016 and the year ended 30 April 2017. 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 29 January 2018.

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 30 April 2017 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 29 October 2017, 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 2020. 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. 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 30 April 2017.

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 2017 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 30 April 2017.

Restatements

30 April 2017

On 4 December 2016, the Group entered into an agreement to acquire the entire issued share capital of KMD Enterprises Limited and Xcel Retail Limited. As at 30 April 2017, management had not finalised the fair value assessment of certain of businesses assets and liabilities.

The balance sheet as at 30 April 2017 has been restated to reflect the final fair value adjustments identified during the current period. Further details are provided in note 10 Business Combinations.

30 October 2016

On 20 May 2016, the Group acquired the entire issued share capital of Bibendum PLB Group. As of 30 October 2016, management had not finalised the fair value assessment of certain Bibendum PLB assets and liabilities and as a result the interim results for the 26 weeks ended 30 October 2016 reflected the provisional assessment of fair values as at the acquisition date. The interim balance sheet as at 30 October 2016 has been restated to reflect the final fair value adjustments recorded in the 30 April 2017 balance sheet. Turnover and cost of sales have been reduced by £9m, reflecting the first 19 days of May 2016 trading activity that was previously included in turnover, which was prior to the Group acquiring Bibendum PLB Group. There is no impact on the profit or loss for the prior year interim period. Further details are given in note 10 Business combinations.

Management have changed the classification of retrospective sales rebates and franchise fees in the prior interim period to be consistent with year ended 30 April 2017. In the prior period retrospective sales rebates of £4.6m were treated as a cost of sale, management now believe it is more appropriate to recognise these rebates as a reduction to revenue. Franchise fees of £0.9m were previously recognised as other operating income; these have been reclassified as revenue.

Management have also restated both turnover and cost of sales by £3.9m relating to intra-group sales that were recorded as external in the prior interim period.

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.

On 12 January 2018, the Group announced a change to its management structure. Going forward the Group will operate two business both of which will be supported by specialist group functions. This new management structure has become effective as of 12 January 2018.

	26 weeks ended 29 Oct 2017	Restated 26 weeks ended 30 Oct 2016	52weeks ended 30 Apr 2017
Revenue	£'000	£'000	£'000
Conviviality Direct	540,494	499,649	1,036,085
Conviviality Retail	203,068	184,619	378,014
Conviviality Trading	92,778	81,664	145,982
Total revenue	836,340	765,932	1,560,081

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

	26 weeks ended	26 weeks ended	52weeks ended
	29 Oct 2017	30 Oct 2016	30 Apr 2017
	£'000	£'000	£'000
Profit before income tax	6,415	7,434	22,462
Exceptional items	5,291	3,669	10,017
Amortisationof acquired intangible assets	5,014	5,014	10,028
Fair value of foreign exchange derivatives	(1,580)	(673)	3,284
Adjusted profit before tax	15,140	15,444	45,791
Depreciation of non-acquisition tangible assets	2,481	2,299	4,560
Amortisation of non-acquisition intangible assets	1,746	1,240	2,871
Share-based payment charge	1,671	1,259	2,427
Net finance expense	2,220	2,643	5,221
Adjusted EBITDA	23,258	22,885	60,870

5.Cash generated from operations and net debt

	26weeks ended	26weeks ended	52weeks ended
	29Oct 2017	30 Oct 2016	30 Apr 2017
	£'000	£'000	£'000
Profitbefore tax:	6,415	7,434	22,462
Adjustments for:
- Depreciation and impairment	2,481	2,299	4,950
- Amortisation	6,760	6,254	12,899
- Profit on sale of property, plant & equipment	-	-	(621)
- Fair value of foreign exchange derivatives	(1,580)	(673)	3,284
- Equity settled share options charge	1,691	1,259	2,724
- Net finance costs	2,220	2,643	5,450
- Increasein inventories	(14,749)	(12,537)	(8,557)
- Increase in trade and other receivables	(26,127)	(14,597)	(17,370)
- Increase in trade and other payables	21,888	9,796	47,920
- (Decrease)/increase in provisions	(2,666)	1,708	(4,653)
- Costs associated with acquiring and integrating subsidiary	4,195	3,669	9,788
Cash generated from operations	528	7,255	78,276

	Net debt at 30 Apr2017	Cashflow	Non Cash	Net debt at 29 Oct2017
	£'000	£'000	£'000	£'000
Current borrowings	(24,651)	(55,340)	(118)	(80,109)
Non-current borrowings	(81,519)	6,320	-	(75,199)
Total debt	(106,170)	(49,020)	(118)	(155,308)
Cash at bank and in hand	10,424	11,627	-	22,051
Net debt	(95,746)	(37,393)	(118)	(133,257)

6.Exceptional costs

	26weeks ended	26weeks ended	52weeks ended
	29 Oct 2017	30 Oct 2016	30 Apr 2017
Within operating costs	£'000	£'000	£'000
Costs associated with the acquisition of Bibendum PLB Group	-	1,463	1,644
Impairment of property, plant and equipment	-	-	390
Business integration costs	4,125	1,883	8,699
Share-based payments	20	-	497
Increase in contingent consideration - Elastic Productions Ltd	8	-	1,365
Increase/(release) of contingent consideration - Peppermint Events Ltd	37	-	(3,375)
Other non-recurring events and projects	1,101	323	568
	5,291	3,669	9,788
Within finance costs
Unwind of discount on provisions and deferred consideration	-	-	229
Total exceptional costs	5,291	3,669	10,017

Business integration and restructuring costs include employee, management and consultancy costs associated with the integration of the acquired businesses and the generation of buying, logistics and organisational synergies.

Included within Other non-recurring events and project costs of £1,101,000 (2016HY: £323,000; 2017FY: £568,000) are non-cash costs relating to adjustments to accruals and provisions in the Bibendum PLB Group acquired balance sheet of £1.1m.

7.Taxation

Taxation for the period has been calculated by applying the forecast effective tax rate for the financial year ending 29 April 2018. Deferred tax assets relating to share-based payments have been calculated to reflect the number of options outstanding and movement in the share price.

8.Dividends

An interim dividend of 4.5 pence per ordinary share was declared by the Board of Directors at the date of publication of these financial statements. It will be paid on 16 March 2018 to shareholders whose name appears on the register at close of business on 16 February 2018. This dividend, amounting to £8.2million, has not been recognised as a liability in this interim financial information. It will be recognised in the shareholders' equity in the year to 29 April 2018.

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

Prior period business combinations

KMD Enterprises

On 4 December 2016, the Group entered into an agreement to acquire the entire issued share capital of KMD Enterprises Limited and Xcel Retail Limited for a total consideration of £4.0 million in cash plus normalised working capital on a debt/cash free basis. KMD Enterprises and Xcel Retail is a chain of 15 high quality convenience stores branded as Nisa Local operating at various locations in the UK. This acquisition is consistent with the Group's ongoing strategy of focusing on key regions to improve store density and drive logistics and marketing efficiencies. All of the stores have been rebranded under the Bargain Booze Select Convenience fascia.

The table below summarises the consideration paid for KMD Enterprises Limited and Xcel Retail Limited and the amount of assets and liabilities assumed recognised at the acquisition date.

	Book value	Fair value Adjustment	Fair value
	£'000	£'000	£'000
Property, plant and equipment	903	(448)	455
Inventories	589	-	589
Receivable due from the seller	1,950	-	1,950
Trade and other receivables	282	(38)	244
Cash and cash like items	171	-	171
Trade and other payables	(743)	(23)	(766)
CT liability	(62)	-	(62)
Deferred tax liability	37	(30)	7
Total identifiable net assets	3,127	(539)	2,588
Goodwill (note 11)			3,396
Total consideration satisfied by cash			5,984

Cash flow

Total consideration			5,984
Less payable due to the seller			(1,950)
Cash consideration			4,034
Net cash acquired with subsidiary			(171)
Acquisition costs			(85)
			3,778

Following the acquisition, a loan of £1,950,000 both due to and from the seller were novated, extinguishing the balances due from both parties.

The Goodwill arising on acquisition represents the premium paid to acquire KMD Enterprises Limited and Xcel Retail Limited in a key region providing significant opportunities for increased wholesale sales and cross-selling and other synergies. Goodwill has been allocated to the Conviviality Retail CGU. There are no separately identifiable intangible assets as the Nisa Local brand name was not acquired and the customer base was deemed to have no value.

Within Property plant and equipment, a correction to the opening value of property, plant and equipment of £0.3m was made. In addition an adjustment of £0.4m was made to write down the value of property, plant and equipment to their expected fair value. In addition a further £0.1m was provided to impair trade and other receivables to its fair value and to provide for additional liabilities that existed on the opening balance sheet. The results of the above fair value adjustments was to increase the goodwill recognised on the KMD acquisition by £0.8m.

11.Goodwill

	Total
Cost and net book value	£'000
As at 1 May 2016	177,491
Acquisitions through business combinations	33,884
Other acquisitions	396
As at 30 April 2017	211,771
Other acquisitions	3,037
As at 29 October 2017	214,808

12.Intangible assets

	Other	Brands and customer base	Total
Cost	£'000	£'000	£'000
As at 1 May 2016	8,277	64,123	72,400
Acquired through business combinations	100	10,840	10,940
Additions	9,668	-	9,668
Disposals	(11)	-	(11)
As at 30 April 2017	18,034	74,963	92,997
Transfers from property, plant and equipment	1,307	-	1,307
Additions	5,995	-	5,995
As at 29 October 2017	25,336	74,963	100,299
Amortisation
As at 1 May 2016	1,331	4,911	6,242
Charge for the period	2,871	10,028	12,899
Disposals	(5)	-	(5)
As at 30 April 2017	4,197	14,939	19,136
Charge for the period	1,746	5,014	6,760
As at 29 October 2017	5,943	19,953	25,896
Net book value
As at 29 October 2017	19,393	55,010	74,403
As at 30 April 2017	13,837	60,024	73,861

13.Assets held for sale

Matthew Clark 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 as at 30 October 2016.

14.Share capital

	As at 29 Oct 2017	As at 30 Oct 2016	As at 30 Apr 2017
	Number	Number	Number
Number of shares Authorised, allocated, called up and fully paid
Ordinary shares of £0.0002 each	175,192,465	172,057,643	172,642,934
Deferred shares of £0.0002 each	217,058,802	217,058,802	217,058,802
Total	392,251,267	389,116,445	389,701,736

	As at 29Oct 2017	As at 30 Oct 2016	As at 30 Apr 2017
	£'000	£'000	£'000
Authorised, allocated, called up and fully paid
175,192,465 ordinary shares of £0.0002 each	34	34	34
217,058,802 deferred shares of £0.0002 each	44	44	44
Total	78	78	78

During the period the Company issued 251,141 shares to satisfy a number of allotments under the ESOP and 46,756 shares to satisfy an allotment under the SOP.

In addition a further 1,210,650 free shares were issued under the Franchisee Incentive Plan and 1,040,984 free shares were issued under the Share Incentive Plan for employees in the period.

15.Earnings per ordinary share

	26weeks ended	26weeks ended	52weeks ended
	29 Oct 2017	30 Oct 2016	30 Apr 2017
Profit attributable to ordinary shareholders (£'000)	5,198	5,767	18,446
Basic earningsper share (pence)	3.0	3.4	10.8
Diluted earningsper share (pence)	2.9	3.3	10.4

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

	26weeks ended	26weeks ended	52weeks ended
	29 Oct 2017	30 Oct 2016	30 Apr 2017
	Number	Number	Number
Basic weighted average	172,474,246	168,579,435	170,142,975
Diluted weighted average	179,319,207	174,832,403	176,985,247

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:

	26weeks ended	26weeks ended	52weeks ended
	29 Oct 2017	30 Oct 2016	30Apr 2017
	Number	Number	Number
Basic weighted average shares	172,474,246	168,579,435	170,142,975
Diluted effect of:
- Exceptional employee share incentive plans, resulting from IPO	820,595	816,057	816,914
- Long term incentive plan	1,311,703	-	786,029
- Employee share incentive plans	2,007,163	2,042,661	2,048,579
- Franchisee share incentive plan	2,705,500	3,394,250	3,190,750
Total dilutive effect of share incentive plans	6,844,961	6,252,968	6,842,272
Diluted weighted average number of shares	179,319,207	174,832,403	176,985,247

Adjusted earnings per share

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

	26weeks ended	26weeks ended	52weeks ended
	30 Oct 2017	30 Oct 2016	30 Apr 2017
Adjusted profit before tax (£'000s)	15,140	15,444	45,791
Tax at effective rate 19.0% (HY 2017: 19.0%; FY 2017 18.8%)	(2,877)	(2,933)	(8,586)
Adjusted profit after tax (£'000s)	12,263	12,511	37,205
Adjusted Basic earnings per share (pence)	7.1	7.4	21.9
Adjusted Diluted earnings per share (pence)	6.8	7.2	21.0

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 amortisation of acquired intangibles 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 15 December 2017, the Group acquired the entire business, assets and goodwill of WS Retail Ltd (in administration), including the assignment of the agreements with franchisees, for an aggregate cash consideration of £25.0 million. The Group funded the acquisition through the placing of 8,000,000 new ordinary shares of £0.0002 each in the capital of the Company (at a price of 375 pence per Placing Share) to raise gross proceeds of £30.0 million.

The acquisition provides enhanced scale and reach for the Conviviality Retail division:

·Strengthening the Group's retail presence, particularly in the south and south west of England;

·Adding, in aggregate, 127 convenience stores including 20 petrol forecourts, stores incorporating 47 Post Offices and 18 franchisee operated stores; and

·Securing wholesale supply to owned and franchised stores, allowing the Group to realise further economies of scale.

The Acquisition is expected to facilitate acceleration of the Group's strategy to satisfy customers who wish to consume alcoholic beverages at home or out of home, whatever the occasion, serving customers directly via retail outlets and indirectly through hospitality and foodservice channels.

Due to the proximity of the acquisition to the announcement date, the Group is still assessing the fair value of the net assets acquired. Further details of the acquisition will be provided in the 2018 annual report and accounts.