Matso's, Gage Roads owner Good Drinks Australia calls last drinks on ASX listing

With a legacy on the Australian Securities Exchange (ASX) approaching two decades and recent growth that has outperformed the Australian retail beer market, the WA-based brewer behind such brands as Gage Roads and Matso's is calling last drinks as a listed company. 

In an announcement this morning, Good Drinks Australia (ASX: GDA) revealed it had submitted a formal request to delist from the ASX, which has been accepted by the market operator so long as shareholders vote in favour of the idea at an annual general meeting (AGM) on 28 November.

The group's board is confident that as a private company Good Drinks can continue to focus on growing market share and "achieve a valuation more closely aligned with industry metrics", achieved through a potential trade sale or asset sale.

Originally known as Gage Roads Brewing Co, the company listed on the ASX in late 2006 to raise $4 million at a market capitalisation of $17.8 million.

At the time Gage Roads was its only brand, but over time its portfolio grew with the 2018 acquisition of Broome-based Matso's which is now the fastest-growing alcoholic ginger beer in the country, bolstered by a brewpub opening earlier this year in the Sunshine Coast hinterland.

The Gage Roads brand has also been lifted by a flagship venue in Fremantle just a stone's throw from the Rottnest Island ferry station, making it a high-visibility tourist stop. The overall hospitality business across its venues has added $29 million to sales and $4.5 million in EBITDA. 

Other brands include Atomic Sydney which it recently divested, as well as Alby lager and the Hello Sunshine line of seltzer and ciders.

Today the company's market valuation of $35 million may be double what it was upon listing in 2006, but this pales in comparison to the ASX's performance over the same timeframe and the effects of inflation. Sales are now roughly 100 times higher than they were before it became a listed company.

The board estimates Good Drinks' enterprise value reflects a value of approximately $4 per litre for the core business, excluding hospitality. This compares to typical industry valuation metrics ranging from $18-20 per litre.

In today's announcement, Good Drinks notes that a successful strategy to grow market share, consistently reinvesting gross contributions into sales, marketing, and other brand growth initiatives, has resulted in annual production of more than 15 million litres per annum, making it the fourth largest, fastest-growing brewing business in Australia.

Managing director John Hoedemaker, a founding shareholder who was chief financial officer (CFO) at the time of the IPO, says the listed company environment is "simply no longer fit for purpose" if Good Drinks is to fulfil its true potential as one of Australia's largest independent brewers.

"Good Drinks' share price performance in recent years has not reflected the inherent value of the business for some time and, as a listed company, remains at the mercy of macro-economic and capital market factors that are unrelated to us, as well as being beyond our control," Hoedemaker says.

"We believe that aggressively pursuing a strategy to grow GDA proprietary brand sales volumes and market share is a more effective way to create value for Good Drinks shareholders.

"Prioritising this strategic investment in sales and marketing to grow volumes, rather than a focus on bottom-line earnings, is more suited to an unlisted company environment."

Hoedemaker says that in pursuing the delisting strategy, the board is committed to maintaining strong governance and continuous disclosure obligations as an unlisted public company

"Importantly, we look forward to communicating directly with our shareholders, developing and executing on our strategy without continually revealing our plans to competitors in a listed company environment," he says.

"We have enjoyed a positive relationship with the ASX, and success as a listed public company. With a long history of positive operating cashflows and a sustainable underlying business that no longer requires access to equity capital as a listed public company, we feel that the timing is right for Good Drinks to pursue the next phase of its growth in an unlisted public company structure.

GDA shares have fallen 29 per cent in early trading today to $0.23 per share, representing a decline of 42.68 per cent over the past 12 months.

Even prior to today's drop, the company noted its recent market capitalisation of $45 million late last week was "materially lower" than its net assets of approximately $61.7 million.