Mighty Craft profitable as quarterly revenue nearly doubles

A listed craft beverage business that owns 10 per cent of in-administration Ballistic Beer Company today told shareholders it has achieved its first ever cash flow-positive quarter as revenue nearly doubled.

Melbourne-based Mighty Craft (ASX: MCL) is now profitable with operating net cash inflows of $1.6 million in the December quarter, while unaudited group revenue rose by 91 per cent year-on-year to $31.2 million, particularly buoyed by strong sales of its Better Beer craft beer brand which launched in October 2021.

Better Beer achieved record sales in the period, with 3.2 million litres sold (a whopping 687 per cent increase on Q2 FY22), meaning the brand has now achieved in excess of $50 million in retail sales value in the last 12 months.

Mighty Craft says that Better Beer is on track to deliver 10 million litres during its first full year of trading, during which the brand launched into New Zealand.

“It is evident that Better Beer is capable of competing with the largest beer brands in Australia,” Mighty Craft said.

“Considering ongoing strength, the company continues to view Better Beer as a unique asset with significant value.”

The strength of Better Beer was not emulated overall across the rest of the company’s craft beer portfolio, which includes brands Mismatch, Jetty Road Brewery, Ballistic Beer Company and Sauce Brewing Co. The company did not, however, provide financials for each individual brand.

According to Mighty Craft, craft beer and craft cider sales were softer than anticipated, ‘albeit well ahead of overall category performance’.

Off-premise craft beer and cider categories sales declined 12 per cent and 18 per cent respectively during the quarter. Mighty Craft says the diversified nature of its portfolio has allowed the company to absorb these softer than anticipated sales while still recording a record quarterly result for the wholesale channel.

Overall, the segment delivered $25.1 million in revenue - up 93 per cent on the pcp. Key growth drivers were the aforementioned Better Beer sales, alongside a 35 per cent increase in sales of spirit brand 78 Degrees and 34 per cent growth from distiller Kangaroo Island Spirits.

“Q2 FY23 was a record quarter for the business from both a sales and operating cash perspective,” Mighty Craft managing director and CEO Mark Haysman said.

“We delivered the first positive operating cash result since listing in December 2019 – a significant milestone, reflecting increasing scale across the business and incredibly strong performance of Better Beer. We believe Better Beer is a unique asset of significant value, capable of competing with the largest beer brands across Australia and New Zealand.

“The upside potential of Better Beer is incredibly exciting for the business, an opportunity we’re aggressively pursuing.”

Haysman remains bullish on the future of the company’s spirit brands, which in addition to 78 Degrees and Kangaroo Islands Spirits includes Seven Seasons and Brogan’s Way.

“Our focus spirit brands are also performing very well. Likewise, we’re confident there exists significant opportunity over coming years to continue to unlock value for locally manufactured spirit brands,” Haysman said.

“Our outlook for Q3 FY23 is strong, and we remain committed to balancing revenue growth with profit / cash delivery, while simplifying the business through our program of divestments.”

Beyond drinks sales, Mighty Craft also operates a number of venues around the country including the recently rebranded Mismatch brewpub in Adelaide’s Whitmore Square.

Mighty Craft says it has seen positive turnaround for venues continuing during the latest quarter, particularly across December, with venues achieving $5.5 million in sales.

Notable contributions included Jetty Road Dromana which achieved 38 per cent sales growth versus the pcp, and the new Mismatch venue in Adelaide which reported $680,000 in sales in its first quarter of operation after opening in October last year.

“Importantly, venues – as a group – were profitable during the quarter, with overall EBITDA margins of approximately 18 per cent, representing a significant turnaround from FY22,” Mighty Craft said.

“The company expects a similar margin result across FY23. Mighty Craft also continues to view venues as an important strategic growth driver for craft brands. The focus in the short to medium-term will be optimising performance of branded venues.”

Ballistic Beer Company administration update

Mighty Craft today provided an update on the impact of Brisbane-based Ballistic Beer Company’s voluntary administration.

The listed company owns 10 per cent of Ballistic via a $2.4 million investment in the craft brewer which fell into administration last week and is currently being operated by PKF administrators Jason Stone and Paul Allen.

According to Mighty Craft, there will be a number of one-off and non-cash earnings related to Ballistic’s administration.

In a short statement sent to Business News Australia, PKF says its current intention is to carry on Ballistic’s activities and continue trading.

“We are reviewing the company's operations, activities and financial position to enable us to provide an opinion on the company's future,” a PKF spokesperson said.

“It is expected that a proposal will be received and that, if accepted, will see the company continue into the future.”

Shares in MCL are up 5.71 per cent to $0.18 per share at 11.08am AEDT.