Broo stems losses as production scales down

Broo Australia Draught

Embattled Victorian brewery Broo has slowed the stream of losses this past quarter with the help of government grants and a share placement.

It reported to the ASX last Friday a loss on operating activities of $137,000 for the three months to June 2020.

The improvement on the $1.2 million loss from operating activities it reported last quarter – which also saw executive director Kent Grogan pocket $400,000 in a sale of his own shares – was helped by the scaling down of operations during the initial COVID-19 lockdowns.

Customer sales dipped to $420,000 from $509,000 the previous quarter, as consumers appeared to be buying Broo and Australian Draught beer manufactured prior to the period, with social media accounts linked to the brewery selling cases for $35.

Discnouted Broo on Facebook

Broo, which is not currently ranged by the two major retailers, is targeting consumers directly through Facebook with sharp discounts.

Production manufacturing costs more than halved in comparison with the previous quarter to $232,000, whilst staff and administration costs also took a dive due to the closures of Broo’s venues the Mildura Pub and Sorrento Brewhouse, and the scaling back of production operations.

In addition to the $109,000 it received in government grants and incentives including JobKeeper during the period, it raised $200,000 from the issue of shares from a June placement of 13 million shares for $0.015 each.

As a result, it had $76,000 in cash at the end of the period, with its annual report due in the coming months.

Its Mildura Brewery which was at the centre of controversy over a potential sale last year continues to produce beer under its existing sales arrangements, Broo said, and the company remains focused on increasing domestic sales and distribution.

However it reiterated that it is “actively reviewing” assets that may be surplus to the core activity of beer production and sales.

Responsibilities on the ASX

As part of the statement to the ASX, it was required to work out its future funding levels.

It estimated that it had half a quarter of funding remaining for future operating activities, and thus had to answer questions relating to this, as it is expected that an ASX-listed company would require two quarters of funding available.

It’s not the first time that Broo has been forced to answer to the ASX, after amysterious share price spike earlier this yearwhich forced the company into a trading halt.

Broo responded in its statement by saying that it expected to continue with the current level of net operating cash flows, and reiterated that it was making cost-saving measures across its operations.

The board said it was assessing “a range of longer term sources of capital of a strategic nature” which could assist it to expand its operations.

Despite forecasting a lesser level of trading cash flow for the quarter ending September 2020, the Broo board said it was satisfied that additional funds can be raised via debt or equity funding as required to continue to fund its business operations.

Broo indicated that however it expected to have negative operating cash flows in the short term, and they have already significantly decreased due to the closure of pub operations.

It says it is “actively managing a very difficult economic environment and is seeking out new opportunities with potential strategic partners”.

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