06/07/2020 - 14:22

Gage Roads taps investors

06/07/2020 - 14:22

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Gage Roads Brewing Company is raising $5.2 million through an institutional placement, with the funds being used to strengthen its balance sheet and position the company for growth.

Gage Roads taps investors
Gage Roads says it expects the institutional placement to be completed on July 14.. Photo: Attila Csaszar

Gage Roads Brewing Company is raising $5.2 million through an institutional placement, with the funds being used to strengthen its balance sheet and position the company for growth.

The Palmyra brewer will issue 100 million shares at 5.2 cents each to institutional and sophisticated investors.

Argonaut Securities and Petra Capital acted as joint lead managers to the institutional placement.

In a statement to the ASX, the company said it would use the funds to strengthen its balance sheet, which it said was important in light of COVID-19, and improve financial flexibility.

It also said the money would position the company’s Good Drinks brand, which is the trading name for its national sales and marketing division and represents the full range of the brewery’s beverages, to grow.

Gage Roads managing director John Hoedemaker said he was pleased with the confidence in the business and the strategy.

“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,” Mr Hoedemaker told the market.

The company said it expected the institutional placement to be completed on July 14.

After the placement, Gage Roads will have a market capitalisation of $68.1 million, a cash balance of $9.8 million and $10.3 million in debt. 

It said its 2020 financial year earnings were expected to breakeven, after earnings in the second half of the year were approximately $2.5 million lower than pre-COVID-19 expectations, due to a loss of draught sales.

This was less of a reduction than anticipated, after COVID-19 restrictions eased more quickly than expected and Gage Roads reported strong sales recovery in May and June.

The brewer announced in June it had new debt facilities that would provide $7.5 million in funds to further working capital to support growth and a new distribution partnership with Philippines-based San Miguel.

The partnership will make Good Drinks the importer and distributor of several San Miguel beers including San Miguel Pale Pilsen, San Miguel Lower Carb and Red Horse.

Shares in Gage Roads were down 7 per cent at 1:50pm AWST, to 5.3 cents each.

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