Investors looking for strategy guidance from Broo’s annual report will be left scratching their heads with founder Kent Grogan saying the embattled brewer wasn’t looking to sell its Mildura Brewery and would instead be turning it into a ‘craft facility’.
“Really, all our focus on the moment is the domestic marketplace, and we’re still full steam ahead on Ballarat, and also the expansion of Mildura we’re looking at as well,” Grogan told Brews News.
When queried about reports, including Brews News’, that the business had planned to sell its Mildura operation, Grogan said there was no substance to them.
“No, it never has been. There was a couple of misquoted articles that really didn’t have any substance to them,” he said.
“Certainly, I hadn’t given them that information. I think they just draw their own conclusions, mate.
“It hasn’t been and, at this stage, not intending on it either.”
Grogan’s comments contrast with last month’s release of the company’s annual report to shareholders. The report showed the business had incurred a net loss of $3,182,989 for the year ending 30 June 2019.
The accompanying notes on the financial statements said the report has been prepared on a going concern basis “assuming the realisation of assets and the extinguishment of liabilities, including:”
“The company is in negotiations for outsourcing its brewing requirements. This provides the consolidated entity with an efficient and cost effective supply chain and provides opportunity for significant expansion into further distribution channels,” the notes said.
“The outsourcing arrangement removes the consolidated entity’s requirement to retain its Mildura brewing plant. Once the outsourced brewing agreement is in place, the consolidated Mildura operations value can be realised.”
Grogan said the Mildura facility, which wasn’t pruducing near its capacity, still was not big enough but “there’s a lot of opportunities on our plate at the moment”.
“We may change SKUs; we might actually look to turn that facility back into a wholly and solely craft facility, with a couple of other introductions of some some different SKUs and different products mixes and things,” he told Brews News.
“But, yeah, no; honestly, mate, I did read that. There’s been a couple of articles about the Mildura property being up for sale. It hasn’t been, and, at the minute, won’t be. We’re just looking at all of the options on our plate at the moment.”
Grogan said his biggest frustration was “the inability in continuity of supply on scalable product”.
“That facility’s capabilities still wouldn’t allow us to enter into any supply contracts with the majors, which is ultimately where we want the product to be,” he said.
“And that’s why we’re talking of all these outsourced production facilities to be able to furnish the market with more products. Ultimately, we’re in a game selling beer. The more we can produce; the better.”
Grogan said that despite his previous bullishness about the purchase of Mildura, in hindsight the 2017 purchase may have been a mistake.
“We’ve come back to that facility is ultimately really a craft facility, and from our perspective is turning it back into craft,” he explained.
In addition to retaining and expanding Mildura, Grogan said the business would be expanding the Sorrento Brewhouse that the annual report also advised had “been placed on the market and the board is currently considering proposals.”
Grogan told Brews News this was now off the table and the business was looking at investing in the venue.
“We put it through an expressions of interest campaign just to see what the market was seeing with that property,” he said.
“But at this stage we’ve removed it off the market. We ran a short expressions of interest campaign just to see what the market taste was down there for it, but we’ve decided to retain it, and, in fact, looking at again expanding that side as well.”
As of 5 November the site is still listed for sale by hotel broker CBRE, with the listing last updated as recently as 4 November. The agent has been contacted for confirmation about the position of the sale.
Grogan was speaking to Brews News in relation to his recent personal sale of 10,000,000 shares. Admitting the shares are cheap, Grogan denied he was selling them at the bottom of the market.
“I own 413 million shares,” Grogan said. “So, I let go 10 million to a specific sophisticated investor looking to get in.
“And that, in regards to my holdings, it would be viewed honestly as immaterial. I think it makes up 2% of my holdings. 2.5%, or something.”
Grogan also said that despite the recent annual report indicating he had received a gross salary of $384,764 for 2018 and 2019, he hadn’t drawn a salary for the last 12 months.
“No, I haven’t actually taken a wage for the last 12 months,” he said. “The company would be accruing it, as far as the books, but I certainly haven’t personally taken a salary from the company for the last 12 months.
“It hasn’t come out [of the accounts]; it’s accrued wages. So, it’s sitting in our balance sheet there as accrual.”
Grogan said that despite the business burning through $371,000 in the last quarter, in addition to last year’s loss, leaving it with just $55,000 in cash and cash equivalents, he was confident of the business’ prospects.
“We’ve got a number of funding opportunities that we’re looking at identifying, and that may be equity, capitalization or debt. And we’re looking at all those at the moment and assessing which way we’re going to go.”