Beleaguered ASX-listed brewer Broo told the markets yesterday it had experienced another sales decline, in the same period that executive director Kent Grogan sold 40 million of his own shares.

In its latest quarterly report released last night, Broo told the ASX that it had made $509,000 in sales in its latest quarter which ran to the end of March, covering a week in which COVID-19 restrictions impacted venues. As a comparison, in the same quarter last year, Broo made $1.3 million.

It reported that in the quarter product manufacturing costs reached $470,000, more than half of the yearly total of $772,00 indicating that it ramped up production at the beginning of the year. In the previous quarter it spent $150,000 on manufacturing costs.

Staff costs also rose to $330,000 in the quarter compared to $153,000 in the previous one, during which finance director Adrian Siah was brought on board. His company Gem Syndication Pty became a substantial shareholder following Grogan’s sale of nearly $1 million worth of his shares in the company on Christmas Eve.

Feeling the effects of COVID-19

In a statement from company secretary Justyn Stedwell, the company said it would be scaling back operations until the COVID-19 restrictions are relaxed over the coming months, and “will continue to meet its business objectives where possible”.

He admitted Broo, owners of the Australian Draught and Broo Premium Lager brands, had seen a drop in trading activity, which he said happened “during the March quarter” due to the effects of COVID.

“However the company is actively managing a very difficult economic environment and is seeking new opportunities with potential strategic partners,” Stedwell said.

The company already has a partnership agreement in place with a Bundaberg-based distribution network with the aim of selling 2 million litres of Broo beer a year in the state. Executive director Kent Grogan told Brews News when the announcement was made that at the time it sold 500,000 litres annually in Queensland.

The report made no mention of a much-lauded Chinese distribution deal made in 2017 which it is due to receive payments from this December. It is unclear whether the current COVID-19 situation will affect this.

However the company’s Mildura Brewery, is still operating. It was the subject of controversy last year after Grogan made a U-turn after the company announced to the stock market that it intended to sell the site. Currently the “iconic” site continues to brew beer under its existing sales arrangements, “and the company remains focused on increasing domestic sales and distribution”.

The company’s Sorrento Brewhouse and Mildura Pub have both closed temporarily “and measures have been taken to significantly reduce costs of these businesses while restrictions remain in place”.

The company forecast a “lesser level” of train cash flow for the quarter ending 30th June.

Broo said that as a result of COVID-19, it had taken a number of steps to manage cash flow, including “reducing staffing numbers” at its hospitality venues and applying for JobKeeper allowance, reviewing assets with its corporate advisor that may be “surplus to the core activity of beer production and sales” – although did not identify what this might be.

It said it was “assessing a range of longer-term sources of capital of a strategic nature that can assist it to expand its operations”.

Share sale

During the Q3 period, Kent Grogan disposed of 40 million shares held by his company Groges Holdings Pty in an off-market sale, netting $400,000.

This took his voting power from 49.1 per cent following another off-market share sale in December 2019, to 43.37 per cent.

The ASX requires notice if a company or person becomes a substantial shareholder, that is, if they own more than 5 per cent of the listed public company.

This suggests that the 40 million shares went to an existing shareholder of Broo who has already passed this mark, as no additional initial substantial shareholder declaration was made.