Losses drop further despite Mighty Craft revenue hike

Full-year revenues grew this year at Mighty Craft, but losses dipped further after a “challenging year and challenging environment” according to the ASX-listed beverage business.

Revenue from continuing operations increased considerably, to $62.6 million from $20.4 million the year before. Cash and equivalents sat at $3.7 million.

However, losses after income tax increased to $20.4 million, a further drop on the $15.5 million losses it made last year, it told the ASX this week.

The business recorded an EBITDA loss of $11.6 million, an improvement of 4 per cent from last year.

Mighty Craft acknowledged that the losses were “significant” but maintained that many of the impacts on its bottom line were one-off costs that will not be ongoing into FY23.

Earnings performance was behind expectations due to poor venue performance, COVID-related challenges and inflationary headwinds, particularly in the second half.

This was in addition to share-based payments “designed to maintain the management team in a difficult operating environment”.

Mighty Craft also acquired the Adelaide Hills Group in June last year for a total consideration of $47 million, it said, while an impairment charge of $2.98 million is related to discontinued operations which includes “several” non-core businesses, which it says it is in the process of divesting after suggesting this would be the case back in February.

The ASX-listed business is divesting both of its Mighty venues in Moonee Ponds and Hunter Valley, as well as Foghorn Brewery in Newcastle, despite initial suggestions it would stay within the portfolio. Foghorn was one of the first craft breweries that Mighty Craft invested in back in 2019.

Mighty Craft had previously suggested that these assets would be divested before the end of its financial year, however on a results presentation call this week, managing director Mark Haysman suggested that this may take up to another 18 months.

“It is taking longer than we thought in the current environment, we didn’t pre-empt what was going to happen in the markets…we have some good conversations afoot, but we’re not planning on getting these resolved in the next 6 months,” he said.

The growth in revenue was attributable to a combination of strong organic growth, the integration of the Adelaide Hills Group, and the launch of Better Beer.

Better Beer contributed $19 million of sales during the year since its October 2021 launch, and was described as a “major disruptor” of the category.

The brand achieved sales of 4.3 million litres during the year and Mighty Craft aims to bring this to 10 million litres in FY23.

The brand, launched last year in a collaboration with part-owned Torquay Beverage Company and social media influencers Inspired Unemployed, and it currently accounts for around 70 per cent of Mighty Craft’s beer volumes.

There is a planned launch for the brand in New Zealand in the coming year with DB Breweries, owned by Heineken taking over distribution.

Elsewhere, Jetty Road, Mismatch and Ballistic were said to dominate local markets with strong distribution gains in their home states.

Areas of challenge

Despite high hopes for the Adelaide Hills Group when it was acquired last year, its performance has been hit by “growing pains and inefficiencies”.

In terms of specific categories, the “much-loved” Hills Cider “didn’t hit the numbers” its parent group had targeted, despite growing its share in the cider category due to the category’s overall decline.

However, Mighty Craft said it would be relaunching the brand in the coming six months.

The business saw a 355 per cent growth in sales to national retailers, which include Endeavour, Coles, Paramount Liquor and Independent Brands, but this shift to national distribution in its wholesale business impacted profit margins, it admitted.

Haysman also suggested that he was “frustrated with the way the market is viewing Mighty Craft at the minute” and the business is looking to appoint an advisor to explore options to “unlock brand value”.

Despite the tumultuous year, Mighty Craft was bullish about its prospects for the coming 12 months.

The accelerator and beverage business is planning to increase production in its beer, cider and RTD categories to 14 million litres, up from 8 million litres this year, the majority of which was Better Beer.

Jetty Road and Mismatch Brewing are also targets for growth, with Mighty Craft projecting 20 per cent growth to 600,000 litres for Jetty Road and 33 per cent growth for Mismatch which would take it up to 1.3 million litres.

Mighty Craft praised the “amazing trajectory” of Better Beer, but also suggested with regards to its other brands that the “premiumisation trend is here to stay.”

The listed business said it had made “significant progress” towards its growth ambitions for 2025.

Haysman said that there were measures in place to address all the issues raised in its full year results, including significant reductions in the overhead cost base.

“I am incredibly proud of the team in delivering the growth result despite the challenging operating environment and we will continue to drive aggressive growth and the path to sustainable earnings.”

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