After two years of strong profits, ASX-listed Gage Roads Brewing has recorded a loss for the last financial year.

Its annual report, released today, showed revenue down by 7 per cent, or $2.9m, to $36.8m. With increased expenses the company saw a loss for the year of $2.13m, a turn around of $4.7m over its 2019 result.

While acknowledging COVID has had an impact on its bottom line in the second half, its half-year earnings announcement in February prior to the impact of COVID, showed that earnings had fallen to $300,000 from $2.1 million the previous year.

Managing Director John Hoedemaker said the first half results were due to “an isolated and temporary shortfall…in sales through one channel to market followed by a solid recovery in H2 subsequently impacted by the loss of draught sales and earnings as a result of the COVID-19 pandemic.”

The company advised the impact of COVID on H2 FY20 EBITDA was approximately $3.2m. It also announced that draught sales were up 9 per cent despite COVID.

Name change to Good Drinks

The report announced that the board will seek shareholder permission to change the company from Gage Roads Brewing Co Ltd to Good Drinks Australia at its upcoming Annual General Meeting.

Gage created the Good Drinks name in 2018 as the overarching brand for its expanded national sales and marketing team after acquiring Matso’s and launching the Alby and Hello Sunshine brands. It has since created the separate Atomic brand, with plans to open its Sydney brewery in September.

In June Gage announced a partnership with Philippines-based San Miguel Corp to become the exclusive importer and distributor of San Miguel Pale Pilsen, San Miguel Lower Carb and its high-alcohol brand Red Horse for the next three years.

The report said the Good Drinks strategy seeks to evolve the business from a “branded house to a house of brands”.

“Each with distinct identities, and to develop a highly capable national sales, distribution and marketing team to enable broader distribution, access to broader categories of the liquor market and deliver sustained sales and earnings growth.”

The latest report showed sales of Good Drinks brands through the national chains were down 14% for the year, contributing to a shortfall to total 20-25% annual volume growth target for the Good Drinks brands.

However, since announcing plans to buy back Woolworth’s 25 per cent stake in the company, the business has shown a substantial change in product mix from contract brewing to propriatary brands.

In FY17 the company produced 32 per cent of its volume under its own proprietary brands with the balance under contract for others. It has since reversed this position, now selling 64 per cent of its volume under its own brands. At the same time it has grown proprietary volumes from 3.5 million litres to 7.5 million litres.

Outlook

The company says early signs for FY21 are ‘encouraging’.

“Sales for July and August (which are historically slow sales months) have exceeded internal expectations and we feel the momentum building” the annual report advised.

“We have deliberately and decisively invested in sales and marketing ahead of the sales curve in FY19 and FY20 and expect FY21 to deliver strong returns.”

Gage Roads (GRB) shares are currebtly trading at $0.050, down from $0.098 twelve months ago.