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Jim Armitage: Convivial lunch when investors can either Fill or Kill

Conviviality owns Bargain Booze: Getty Images
Conviviality owns Bargain Booze: Getty Images

They’re calling it Fill or Kill day. If investors don’t fill up a rescue pot for booze distributor Conviviality with £125 million on Monday, expect the thing to go into administration.

It would be Britain’s fastest corporate implosion in years.

A lunch today, hosted at broker Investec’s offices for potential backers, sees Conviviality’s caretaker management present a bright future of the country’s biggest wine, spirits and beer supplier.

The same caretaker executives who failed to spot the £30 million tax bill that caused this mess.

PwC, helicoptered in to comb over the accounts, will be updating on how confident they should be in the rest of the accounts.

Amid talk that sales-chasing Conviviality extended credit to restaurants and bars of dubious quality, PwC’s beancounters have their work cut out.

I’m told Investec is hoping to get 12 investors to stump up £10 million or so each, most of whom will be on the existing share register. There will be no “anchor” funder taking on the lion’s share.

A high risk approach from Investec? And then some. But it could work. The sterling mid-cap equities community are a collegiate bunch. If one or two go for it, the others may well follow. After all, nobody likes to admit that a portfolio company has gone bust. Especially if the alternative might be a bunch of hedgies supporting a pre-pack administration, turning the business around and making out like bandits in a couple of years. A £10 million moonshot could be worth the gamble if it saves those red faces.

Alternatively, they could decide to take the loss on the chin and move on. As they say in small-cap investing: “the first cut is the cheapest.”

Imps shows why there’s no smoke…

On days like this, when the markets are tumbling on Donald Trump’s latest bananas policy, I can’t help recalling the words of our resident day trader, Wes Nolte. In wise Wes’s column this week, he wrote of the simple BTFD policy: “Buy the effin’ dips”.

If you steer clear of structurally challenged outfits like Next, whose shares rightly reflect the market they trade in, there are undervalued nuggets in sectors forgotten amid the algorithm-driven momentum trading lately.

Take Imperial Brands. Still one of the world’s biggest tobacco companies, Imps makes nearly £4 billion a year in profit. Yet its shares — down 24% this year — trade on a multiple to its earnings of just nine times, with a huge 8% dividend yield. The FTSE 100 average is 13 times and 5%.

For nine years, Imps has upped its divi 10%, yet still covers those payouts easily with its earnings.

US investors aren’t so fickle. Philip Morris trades on 20 times earnings.

Even if you don’t buy the old line that the Japanese or Chinese megaliths will come in with a bid, the dividend alone must make this a bargain, right?