Struggling listed brewing business Broo has revealed to the ASX this week that despite ramping up beer production, revenues have declined.
In its preliminary full-year financial report released yesterday, receipts from customers totalled $2.0 million, a fall from $2.4 million the year before. Broo earned $1.4 million from off-premise beer sales, whilst its hospitality business earned $586,117, a fall from $768,138 the year before.
The poor performance comes despite the ASX-listed business receiving $281,603 in COVID relief from the government, and investing heavily in beer production throughout the year following a major contract brewing agreement with Carlton & United Breweries.
The deal saw the company take its first batch from CUB in December 2020, funded by an initial $1.25 million capital raise.
The financial statements recorded the company as having total liabilities of $8.17 million with assets of $8.8 million, including $1.75 million in stock on hand “at net realisable value”.
Brews News understands that the company has struggled to sell beer produced under its first order from CUB within its 12-month best-before date and has been heavily discounting its price, raising questions about the valuation of Broo’s inventory.
The East End Hotel, with which Broo had a 2-million litre distribution deal prior to its current ALM deal, is currently advertising Broo Lager at $29.99 a carton.
Total payments to suppliers and employees reached $4.7 million during the year, up from $3.4 million, Broo announced today. It has also increased its marketing budget fivefold, spending $121,521 on promotional activities during the year, although cost of sales was lowered to $1.7 million from $2.3 million.
At the time of the CUB deal, it predicted that it would place orders of 432,000 litres per quarter, or 1.7 million litres annually, however it remains unclear how much has been brewed by Broo or on its behalf to date, or how much has been sold.
An investor presentation released in May indicated that 7,000 cases, just 63,000 litres of beer, had been sold by April following its national distribution deal with Australian Liquor Marketers (ALM).
Losses for the full year narrowed, from $3.5 million in 2020 to $1.9 million after income tax for the most recent 12-month period. Accumulated losses now total $22.5 million.
Broo raised just under $3.0 million from share issues during the year, it said, up from $700,000 the year before, keeping the business afloat.
Broo valued its property, plant and equipment at $1.8 million, and right-of-use assets were valued at $2.3 million, including its leasehold property at its Mildura Brewery. The brewery sold its Sorrento Brewhouse hospitality site during the first half of the year for $60,000.
The brewery is also facing issues in relation to the sale of land in Ballarat, after Development Victoria blocked the sale which would have netted the business just over $5 million dollars, after purchasing the land for $2.16 million. Broo was holding out hope despite Development Victoria’s decision, saying that it had extended the deal with the purchaser to enable it to obtain approvals.
Executive director and Broo founder Kent Grogan was contacted via both phone and email for this article, but Brews News did not receive a response.