One of the largest wine distributors in the UK, Conviviality, has been forced to suspend trading on the London stock exchange after discovering an unexpected £30 million tax bill less than a week after it cut profits forecasts.
The alcohol retailer and wholesaler said an error had resulted in it not accruing a GBP30.0 million bill owed to the United Kingdom taxman by March 29. "This has created a short term funding requirement".
Conviviality added that the discovery has "created a short-term funding requirement" and resulted in operational difficulties that could negatively impact profits.
This follows a recent announcement from the group in which it said its EBITDA was expected to come in 20 per cent lower than market expectations, due to an "arithmetic error" in its financial forecasts. This is compared to market expectations of GBP69.1 million and GBP70.5 million.
On Wednesday, Conviviality said it is in talks with HMRC and other key stakeholders regarding the potential impact of the additional funding requirement on its adjusted Ebitda expectation and compliance with its banking covenants.
The company reiterated that it was still in compliance with its banking covenants, the next test of which are due on 29 April this year.
Conviviality is expected to make an announcement later today.
Finally, it noted that it had applied for the suspension of the company's ordinary shares on AIM, which took effect from 7.40am today.
Although the news will ring alarm bells in a United Kingdom wine trade where finances are often tight, Conviviality said, 'Following preliminary advice received from [consultancy group] PwC, whilst there can be no guarantee, the board believes this short term funding requirement will be satisfactorily resolved'.