Update 1:13pm AEST, 28th October 2021: Following a trading halt announced yesterday, Mighty Craft told the markets that it had raised $5.8 million in a share placement.
The company said it raised the capital via a placement to sophisticated and institutional investors at $0.29 per share, issuing 20 million ordinary shares or 6.2 per cent of issued capital upon completion of the placement.
The funds raised will be used to accelerate the company’s whisky strategy and replace working capital funds impacted by lockdowns.
Mighty Craft said it would leave the business “well-funded” as it enters peak trading over the summer months.
“This funding gives us comfort to accelerate our whisky investment while also enabling us to absorb further potential disruptions to venues if those situations arise,” explained managing director Mark Haysman.
“We are extremely grateful for the support of our institutional and sophisticated investors and we feel confident coming into the peak trading period with a restored balance sheet and restrictions lifting across the country from November.”
Accelerator and hospitality business Mighty Craft’s quarterly results showed improved revenue performance but acquisitions and COVID continue to impact the business.
In the first quarter of its 2022 financial year, it made $11.4 million in receipts from customers, which it says is an increase of 187 per cent on the comparable quarter last year.
But the accelerator made a net loss of $5.5 million from operating activities in the three months to 30th September, which it called “an incredibly tough period”.
Mighty Craft told the ASX that COVID lockdowns have had a “material impact” on operating cashflows in Victoria and New South Wales, but it expects restrictions to lift from November.
Venues accounted for around 34 per cent of the company’s overall revenue and on-premise sales a further 16 per cent of revenue.
Beer sales were broadly flat, said the company, coming in at $2.4 million for the period, and the launch of its zero-carb Better Beer offering was delayed by a month.
Portfolio companies driving growth were identified as Jetty Road Brewery, and spirits brands Seven Seasons and the Torquay Beverage Company. As a result of this focus on spirits, the accelerator also launched the announcement that it would be accelerating its whisky segment, which will play an “integral role” in the business becoming “Australia’s strongest Craft drinks business”.
Off-premise sales continued to grow “well ahead of the market” in the quarter, Mighty Craft reported.
This is the first full quarter since the integration of the Adelaide Hills Group, which includes Mismatch Brewing Co., and its payments to acquire these entities cost it $25.6 million during the period.
But recent moves such as that to bring distribution in-house at the Adelaide Hills Distillery are expected to contribute to future cost reductions. The $3.6 million it made from the sale and leaseback of Jetty Road’s Dromana site will flow into the group by the end of the year, it said.
Meanwhile, The Mighty Hunter Valley venue is up for sale, and the business saw $500,000 returned as part of the original convertible note structure from Sparkke.
Investment at Kangaroo Island distillery is being “minimised” in the first half of the year, timed to align with post-lockdown trading in the second half of the year and other initiatives are on hold, Mighty Craft said.
Mighty Craft’s managing director Mark Haysman said he was proud of the team and what it has achieved through a difficult period, and is optimistic about the future for the portfolio of businesses.
“We have been disciplined with capital management, more so than ever this past quarter due to COVID’s impact on trading and cashflow, and to this end we are pleased with the sale and leaseback of Jetty Road and that we were able to negotiation debt covenant, leaves us well placed to accelerate growth when restrictions are lifted across the country from early November,” he suggested.
The business also announced a trading halt pending a market-sensitive announcement to the ASX before Friday 29th October.