Megamerger news like that of supermarket chain Tesco (TSCO) and wholesaler Booker (BOK) often has wider implications for the market, and the smaller companies operating within it.
This was certainly on the minds of Conviviality (CVR) shareholders when the booze supplier issued half-year results just a few days after Tesco announced its intentions. Conviviality supplies Tesco with its fine wine range, but chief executive Diana Hunter says she doesn’t expect Conviviality’s relationship with Tesco to change – should the merger go ahead – as the group has always operated “side by side” with Booker. What’s more, Conviviality prides itself on its specialism in alcohol compared with Booker’s wider grocery offering.
Conviviality, like Booker, spans retail and wholesale operations through businesses such as Matthew Clark, Bargain Booze and Wine Rack. This diverse revenue stream should help protect it against the toughening consumer environment. For now, we still think the shares are good value on just 12 times forward earnings – not to mention the attractive dividend yield of more than 4 per cent. Buy. HR
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