Founders First ups stake in Jetty Road
Craft accelerator Founders First is set to up its stake in Victoria’s Jetty Road Brewery.
The ASX-listed investment vehicle told the ASX today that Jetty Road offered its existing shareholders, including Founders First, an option to take up convertible notes to raise $2.5 million.
Founders First will take up just over 2.7 million of the convertible notes, raising $1.4 million for Jetty Road.
This will take Founders First’s holding in Jetty Road to 64 per cent, up from its original 55 per cent.
However it will be largely a non-cash transaction, as Jetty Road will use some of it to repay the $1.1 million in loans advanced to the business by Founders First and complete its Dromana brewery upgrade.
It has been financially involved with Jetty Road since 2017 and helped fund Jetty’s second venue in the heart of Melbourne.
Founders First supported its backing of the Mornington Peninsula-based brewery with an update on its sales growth.
According to the investment firm, the wholesale side of the Jetty Road business has increased 296 per cent in the past six months compared to the same half year period in 2019.
The Jetty Road team have also increased brewing capacity at Dromana and are aiming for 1.5 million litres to support its wholesale and venue growth, while also expanding its brand reach up the east coast.
Earlier this month Founders First also updated the markets on its strategy during the COVID-19 pandemic.
Measures to alleviate the strain on the business included halting all property development, and proactively seeking out government grants and opportunities from government stimulus packages to support existing businesses.
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Having expanded into a venue-based model in addition to making investments in craft beer, distilleries and other brands, it will be affected as much as the rest of the hospitality industry already has been by the mandatory venue closures and gathering restrictions.
Founders First acknowledged that it was difficult to predict the duration or extent of the impact of the pandemic on business performance, but said it was aiming for balanced growth and resilience in its strategies.
It said it remained in a strong position on its balance sheet, with $21.7 million cash on hand and $35.1 million in net assets at the end of the first half of its financial year.
Since then it acquired Potters Brewery, Hotel & Resort, as well as the Kangaroo Island Distillery.
However it updated the market prior to the closure of all bars and hotels last Monday (23rd March) meaning that projections for on-premise consumption of brands, which were already being disrupted, are out of date.
Despite this, Founders First said it was “well positioned” to see out the current challenges, and it will return to “attractive and value accretive opportunities” in the medium term.
It also suggested that potential industry consolidation could provide opportunity to acquire further businesses.
Founders First said it expects consumer demand though off premise and digital channels to remain steady, and had already begun shifting distribution focuses to online retailers and it said it had stepped up the development of direct-to-consumer digital solutions.
“As a board and management team we are prepared for multiple scenarios and are ready to enact various measures as and when required to ensure we continue to be cost conscious and preserve cash over the coming months,” said Founders First managing director Mark Haysman at the time of the update.
“We remain confident in the growth opportunities for our business. We are strongly positioned to continue to execute our plans and meet increased consumer demand for our local products. We will continue [to] leverage the strength of our balance sheet and our competitive position to ensure growth within our portfolio for long-term value,” he said.