Though Better Beer continues to show promise, Mighty Craft is in a difficult position, with a decrease in revenue and currently unsustainable levels of debt.

Mighty Craft’s Q3 FY24 report indicates that revenue fell by 22 per cent compared to the prior corresponding period, with an unaudited total revenue of $19.8m. This revenue includes approximately $6.1m sales from discontinued operations. However, the like-for-like decrease in revenue is lower, at 11 per cent, which is adjusted for the impact of asset sales over the last financial year, such as Jetty Road Brewery, Hills Cider, and Slipstream.

To address debt, Mighty Craft is in the process of selling off its non-Better Beer assets. In early April, Mighty Craft entered into an agreement to sell Mismatch Brewing Company and The Hills Distillery, which makes 78 Degrees, to the United Publicans Group, and the $7.2m sale is on track to settle by 31 May. Mighty Craft has also received non-binding offers for its remaining South Australian assets.

In Q3 FY24, approximately $2.3m of senior debt was repaid, and Mighty Craft expects approximately half of the proceeds of the 78 Degrees and Mismatch sale to go to further paying this senior debt.

Mighty Craft Chair Grant Peck explained the company’s updated strategy.

“The focus and priority of the board remains very clear: deleverage the company and continue to reduce operational costs. The deleveraging process has started with a $2.3m debt reduction in the quarter and the divestment of 78 Degrees and Mismatch. The company’s debt levels, however, remain unsustainable and divestments of the non-Better Beer assets alone will not be sufficient to restructure the balance sheet to the extent required,” he said.

Crucial restructuring centred on Better Beer

Mighty Craft has made a strategic shift to focus its efforts on the Better Beer brand, which is continuing to gain market share with a scan growth of 18.2 per cent over the most recent quarter. Twelve million litres of Better Beer were sold in the previous 12 months, and FY24 sale volumes are expected to be in line with this figure.

Due to the significant strategic value of the brand, Mighty Craft is seeking to restructure the business in a way that maximises the value of Better Beer, including through preliminary discussions with Better Beer to acquire remaining shares not already owned by the company. Mighty Craft has signed a non-binding letter of intent with Better Beer and is in discussions with its senior lender, Pure Asset Management, to determine the viability of the transaction.

“While the board continues to assess all available options, the company’s strategic focus has shifted towards seeking a potential merger with Better Beer. Discussions with the relevant stakeholders are at a very early stage, and there is no certainty of any transaction eventuating. The board is committed to finding a path that balances the interests of all stakeholders,” Peck said.

In the event that Mighty Craft is unable to acquire the remaining shares in Better Beer, the board believes it is unlikely that the company will be able to secure the additional debt or equity funding that is required for the company to continue its operations.

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