Black Hops reveals large loss post-crowdfund

In its first financial report since running a record-breaking equity crowdfunding campaign, Black Hops Brewing has revealed a before-tax loss of $1.8 million.

The company filed its annual report for the 2021-22 financial year with ASIC last week revealing the loss for the financial year, a $2.6 million turnaround from the prior year.

In the financial report lodged with ASIC, the company advised that the results were affected by COVID-19 and losses were set to continue this financial year.

“The company experienced a significant increase in operating costs across the board and an erosion of profit margins from the effects of inflation and COVID-induced supply chain issues,” the report noted.

“The company expects these general economic effects to continue into 2023.”

In a letter to shareholders seen by Brews News, new Managing Director Nathan Hyde expanded on the reasons for the loss.

“After posting a profit in FY21, unfortunately FY22 is a substantial loss,” Hyde said.

“There are a number of factors that have contributed to this – FY21 was a Covid year in Australia, the government offered subsidies and people stayed home ordering more alcoholic beverages than in previous years.

“This meant strong pack sales for Black Hops via our off trade channels.

“FY22 was a year that we were met with significantly increased costs in terms of raw materials, packaging and of course freight.

“This has culminated in higher costs to produce and ship our beers around the country, further, Black Hops as a business did not pass on any increases to our trading partners, which has impacted our GP and EBITDA.

“In FY23, we are going to see a similar result to FY22 for reasons mentioned above.”

Shareholders were also advised that for the current financial year to the end of February, the company had lost a further $1.06 million.

Rapid turnaround post crowdfund

The results may surprise the more than 900 investors who acquired shares in the company through its then-record-breaking CSF campaign in January 2022.

The company raised more than $2.2 million from 996 investors in a day at a valuation of more than $67 million.

In the offer documents accompanying its crowdfunding campaign through Birchal, the accounts showed that in the prior six months the company was running at a before-tax profit of $129,000.

Prospective shareholders were advised the company had “moved from losing money every year, navigated the brewery valley of death and into profitability ” with an EBITDA in the previous financial year of $1.76 million.

While the 2022 results refer to a profit of $867,223 for the 2021 financial year, the company has not filed annual reports 2019/20 and 2020/21 financial years.

New General Manager Nathan Hyde told Brews News that he wasn’t able to fully explain the turnaround in the company’s financials following the profitability reporting in the crowdfunding documents.

He said that towards the end of last year the company had appointed a new head of finance and new external accountants which had given a clearer insight into the business’ accounts.

“The finance team we have now and the external accountant we’re working with [means] I’m happy with what has been generated from them,” he said.

“I don’t know if the guys had complete oversight through that [prior] period. The business had grown pretty enormously.

“The reason for my appointment was the business is grown up and needs to be more sophisticated, and it needs to be held to account from a financial point of view.

“I’m currently working on a strategy to turn the business around and get it back to profitable.”

Hyde said the business had been impacted by a blowout in costs related to a new packaging line, and hadn’t increased prices for an extended period.

“The business in six years just had one price increase,” he said.

“The business has just absorbed all of these increased costs, in terms of raw materials, wages, logistics, all those sorts of things.

“The businesses has absorbed the whole thing, and not passed anything on.

He said this left Black Hops a little behind the market.

“Certainly, when you look at some of the bigger companies, and the smaller brands have really pushed ahead and shifted their price points, and we just have not done that.

“So costs have just gone through the roof. And you know, revenue sort of plateaued and dropped in some cases, especially from 2021.”

The company’s 2022 report shows revenue grew almost 19 per cent to $16 million, while raw materials and consumables grew 38 per cent to $11.9 million. Wages grew 44 per cent to $2.8 million.

Companies that undertake crowdfunding are required to meet annual reporting requirements, with ASIC recently expressing concern at the level of non-compliance amongst companies that have used the mechanism to raise funds.

Birchal hosted the 2022 crowdfunding campaign despite Black Hops not having filed its required financials with ASIC for the two years prior to its latest raise.

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