Gage Roads Brewing Co. was last week placed in a trading halt as it prepared to announce it is holding a capital raising on the ASX.
The WA-based brewer today announced it is raising $5.2 million through a placement of 100 million shares at $0.052 each. The company said it is engaging in the “proactive” capital raising as it looks to ”create a stronger platform for future profitability, growth and long-term shareholder value.”
Managing director John Hoedemaker thanked Gage’s investors for their ongoing support, and welcomed “new highly credentialed institutional investors” to its shareholder register.
“The strong support from the investment community is both indicative of the success of the proprietary brand strategy as well as a vote of confidence for the Company’s Good Drinks strategy that is designed to deliver incremental earnings to all shareholders,” he told the markets this morning.
Following the capital raise which it hopes to have completed by 14th July, Gage Roads will have a market capitalisation of $68.1 million, as well as $9.8 million in the bank with debt of $10.2 million.
The capital raising will strengthen the brewer’s balance sheet, which Gage said was “prudent in light of COVID uncertainty” and is in line with its efforts in the capital raising to “improve financial flexibility”.
It reported that for the second half of its 2020 financial year, EBITDA was down $2.5 million compared to pre-COVID-19 forecasts.
Last month it announced that it had outperformed the market during the difficult COVID-19 shutdown period. It said packaged sales were “unaffected” during COVID-19, and it saw a strong sales recovery in May and June.
According to the AFR it sold three times as many kegs in June as it did in the same month last year.
There have been a number of movements within Gage’s shareholder register this year, with Spheria Asset Management ceasing to be a substantial shareholder indicating that its shareholding dropped below the 5 per cent mark, whilst Perennial Value Management upped its stake.
Growth plans following capital raise
The company has ambitious growth plans, aiming to become the number one independent supplier to the national beer market as part of the Good Drinks strategy – an umbrella brand which Gage Roads has proposed the company moves to at a later date.
It has suggested that as part of this, it will be looking to expand into broader categories of the liquor market, as well as the “untapped” east coast.
As part of these expansion plans, its Redfern venue in Sydney which is now complete is expected to open by September 2020. Gage Roads also has plans to open further venues on the east coast.
It said that due to faster-than-expected recovery of on-premise trade following the relatively early reopening of venues in WA, “coupled with competitor supply issues” has driven strong draught sales recovery. In addition, Optus Stadium is set to return to full capacity by mid-July.
Meanwhile, debt facilities announced in June unlocked an additional $7.5 million in funds and it also announced a distribution agreement with Filipino brand San Miguel, which it said adds additional scale and access to the imported beer segment.
It is targeting an additional 10 million litres of Good Drinks, and is expecting an uplift for summer in its 2021 year.
Gage Roads’ share price currently sits at $0.057 per share.