Dainton emerges from Administration after DOCA approved
Creditors of Daicom Australia Pty Ltd trading as Dainton Beer have voted to accept a Deed of Company Arrangement which will see the company emerge from Administration.
Under the DOCA proposal creditors, including the ATO, will receive 10c in the dollar.
Dainton entered Voluntary Administration last month saying it needed to financially restructure as a result of “financial losses the business has accrued from ill-timed expansion in the face of declining consumer demand.”
In a report to creditors, administrator Atle Crowe-Maxwell from DBA Reconstruction and Advisory advised creditors that Dainton recorded a loss of $79,000 in FY22 and $2.15 million in FY23.
In FY23 income from beer sales, contract brewing, online and export sales all declined. The company saw significant sales declines to Coles and Woolworths, falling from nearly $2m in FY21 to $1.2m in 2023.
Entering Administration the company reported debts totaling $1.67 million, with $1.4 million owed to the ATO and trade creditors owed a further $255,000.
Creditors were asked to accept a Deed of Company arrangement that would see the existing owners contribute $409,226, which – after Administration fees of $215,000 – would see 10 cents in the dollar returned to creditors.
The Administrator advised creditors that the proposal “provides a better return to creditors than a liquidation. Accordingly, I am required to recommend that creditors vote in favour of this proposal for a DoCA.”
The report noted that even with the best result in liquidation, the company would have a shortfall of $326,000 leaving creditors foregoing any return. The administrator did note that “creditors should be aware that the DOCA as proposed is dependent upon the business providing sufficient cash flow to meet some of the DOCA payments.”
The DOCA was signed after the meeting of creditors today, with control of the business reverting to Dainton’s management, headed by Dan Dainton as Founder and CEO.
Dan Dainton said in a statement that he was grateful that the restructuring proposal was approved.
“We are excited at the opportunities ahead and being able to return Dainton to a position of strength. Moreover, we are relieved and proud that our shareholders, employees and customers can continue the journey with us. Without them, there would be no Dainton,” he said.
Changed market conditions
In a Report on Company Activities and Property (ROCAP) provided by the company’s directors at the start of Administration, the administrators were advised the company had been growing “exponentially” in the 18 months leading up to December 2021 and “running profitably”.
“During this period, we made the decision to invest all our profits and cash reserves in order to increase the capacity of the business in terms of equipment, systems and people. For example, during July and August of 2021, we installed a new brew house, new fermentation vessels and a brewing automation system, which more than doubled our capacity and cost $1.5m. We paid for this equipment out of cash flow and did not take on any new debt,” the directors advised.
“We also invested in people, hiring a marketing manager and two full time positions to our production team to continue to grow the business.
“Unfortunately, we did not see the increase in sales that we forecasted, and revenue started fall well below expectations. We did raise money for a new venture in Croydon which was immediately profitable, but this addition was not sufficient to cover the overheads in the business as the wholesale side began to drastically decline.
“Reasons for this are clear – rising interest rates, a slowing of our wider economy and a decrease in craft beer sales across the country. We were not fast enough to pivot and make the necessary changes in the face of a declining market.
“In January 2022, we started a concerted effort to reduce our overheads in line with the ‘new normal’ that we were experiencing. At this time we made three full-time employees redundant, which led to savings of $250k per annum. We also ceased contracts with a number of management consultants with savings of $80k per annum.
“While this enabled the business to get back to profitability, unfortunately, it was not sufficient to put the business in a place to be able to pay back the large excise debt accrued to the ATO during the previous period within the repayment period required by the ATO (i.e. 12 months).”
The Director’s report to Administrators, which the Administrator noted he had ‘no reason to disagree with’ appears to differ from information provided to potential investors in August 2022 when the company raised almost $1 million through an Equity Crowdfund with Birchal.
In addition to the directors indicating that the company began to experience difficulty in 2021, following its brewery upgrade, winding back expenses in January 2022 as a result, the Administrator’s report noted that documents provided by the ATO showed the Company began experiencing difficulties from November 2021 when its Running Balance Account for Excise began to increase.
However, the August 2022 prospectus omitted mention of these challenges, painting a rosy picture of ‘exponential growth’.
The prospectus advised potential investors the company was marginally in profit – $18,979 FY22 – and that it expected the craft beer category and its business to continue to grow. The administrator’s report noted the company instead recorded a loss for FY22 of $79,013, with that loss increasing to $2.15m in FY23.
The company’s 2022 result filed with ASIC in November 2022 also noted the company returned an $18,000 profit in 2022.
The 2022 Crowdfund saw the business valued at $29.68 million.
Dainton Beer emerges from administration after a financial restructuring
Daicom Australia Pty Ltd trading as “Dainton Beer” (Dainton), has successfully emerged from voluntary administration after creditors today approved a financial restructuring of the business.
Dainton’s directors appointed DBA Advisory as Administrator on 20 November 2023. This was a necessary step to deal with financial losses from a difficult period for the business.
Dainton’s directors worked with the Administrator to develop a compelling Deed of Company Arrangement (DOCA) proposal to financially restructure the business, to ensure a stronger and more resilient operation moving forward. The Administrator recommended that creditors accept the DOCA proposal to provide the best outcome to creditors.
The DOCA was signed after the meeting of creditors today, so control of the business has reverted to Dainton’s management, headed by Dan Dainton as Founder and CEO.
Dan noted that under administration it’s been business as usual: “The administration process didn’t change the way we operated in the slightest. Beer production, sales and taphouse operations have not been impacted.”
Looking forward, Dan added: “After a rather challenging period for the business, we are grateful that our restructuring proposal was approved. We are excited at the opportunities ahead and being able to return Dainton to a position of strength. Moreover, we are relieved and proud that our shareholders, employees and customers can continue the journey with us. Without them, there would be no Dainton.”
Dainton remains committed to producing quality beer and providing memorable experiences for their customers and community.