Record earnings for Gage Roads owner Good Drinks

Co-founder John Hoedemaker and COO Aaron Heary

Gage Roads Brew Co. owner Good Drinks has hailed its “fantastic momentum” and record earnings in the first half of its financial year.

EBITDA for the six months to December 2020 rose to $7.1 million from $300,000 in the same period last year, it told the ASX this morning. The Western Australian drinks business said this was a “record earnings result” for the business, surpassing expectations for the full year.

Profit before tax rose to $4.9 million as it returned to the black after making a $1.1 million loss for the previous corresponding half year.

Meanwhile, revenue from ordinary activities rose 47 per cent to $28.4 million.

Record own-brand for Good Drinks

Part of the drinks business’ strategy has been refocusing on its own brands, which now total 72 per cent of its sales mix in its latest half-year results, compared to 30 per cent in 2016.

Its target is to drive 10 million litres of growth over the next five years across its brands including Gage, Matso’s, Atomic Beer Project and Hello Sunshine.

Overall for its first half, Good Drinks’ volumes rose 46 per cent to 6.1 million litres, and total volume rose to 8.6 million litres, up 41 per cent – a record for the business.

Own-brand products are “represented in 3,760 sales outlets both on and off-premise” and its focus on independent retail channels has delivered solid growth, rising 55 per cent, it revealed.

Good Drinks said its performance validated its strategies, saying that it can accelerate earnings growth “well beyond” revenue growth with efficient manufacturing costs.

High-speed canning lines, upgrades to its bottling lines and a 5,000 sqm cool room and logistics facility has helped reduce its production cost structure by 30 per cent to 41 cents per litre produced, compared to 53 cents in the same half last year and well below targets.

The drinks company also said that its sales and marketing capabilities were reaching critical mass and it expected to deliver earnings growth in all key markets.

Venue strategy

It says it sees a “clear path” to this growth, with significant potential for growth in the “untapped markets” on the East Coast.

“The team is securing key partnerships with high-quality venues with the right consumers in the right areas,” it said, saying that East Coast on-premise grew 16 per cent for the first half.

As a result, it is undertaking a major recruitment drive for its sales department, looking for national off-premise and on-premise heads, on-premise account managers in Western Australia and the East Coast, and additional brand ambassadors in each state.

Good Drinks said its flagship Atomic Beer project in Redfern is providing a solid foundation to grow the brand in NSW since opening in September in “non-ideal” conditions during COVID, and it made a $400,000 loss for the first half.

It said this showed maintained operating losses at a similar level as would have been incurred if the venue had delayed its opening. It expects the venue to be profitable in the coming months as the impact of COVID-19 continues to reduce.

Good Drinks also heralded the progress of the Gage Roads Brewery venue at A-Shed at Victoria Quay in Fremantle, having recently received the support of Fremantle City Council, with planning to be completed in the next few weeks. It is due to complete in time for summer trading 2022. The $10 million costs of the project are expected to fall into its 2022 financial year and will be fully funded by debt facilities and cash reserves.

It is currently looking at potential sites in Queensland and one in New South Wales and said that this year will be “significant” for the business.

Good Drinks’ share price is currently at $0.082, its highest in the past 12 months.

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