Struggling alcohol maker Mighty Craft to sell Hills Cider and Jetty Road Brewery

Embattled alcohol company Mighty Craft aims to sell Hills Cider and Jetty Road Brewery imminently, with another $25m in asset sales targeted next year.

Toby Kline was one of the Hills Cider cofounders who sold out to Mighty Craft in a $47m deal in 2021.

Mighty Craft has struck a deal to sell its Hills Cider operations for $3m just more than two years after buying the company as part of a $47m acquisition.

The embattled alcohol company is also targeting another $25m in asset sales as part of its urgent turnaround plans announced in July.

Mighty Craft, which produces spirits under several brands and beer such as Mismatch and Better Beer, said group revenue was up 8.5 per cent over the September quarter compared with the previous corresponding period.

However cash outflows stood at $3.5m, impacted by “seasonality” and one-off restructuring costs and staff redundancies.

The company is urgently trying to get costs under control and is divesting non-core assets in a bid to reduce its debt burden.

Mighty Craft’s quarterly report shows it had just $4.8m in cash and cash equivalents at the end of the September quarter against its $3.45m cash burn for the period.

It also reported it had $33.4m in debt facilities, drawn to $29.8m.

The company’s turnaround plan has two main elements, comprised of a cost reduction push and an asset sales program.

Mighty Craft has struck a deal to sell its Hills Cider operations.

It told the ASX on Monday its annual staff costs were down $4.4m “flowing through in Q1” while discretionary costs were down by $500,000.

On the asset sale front, Mighty Craft said it was targeting $10m in asset sales with about $6m worth expected to settle by the end of the calendar year.

This includes the divestment of the Jetty Road Brewery in Victoria for about $3m including stock, with that sale “close to completion’’.

The sale of Hills Cider, which also includes stock, was also expected to be finalised before the end of December, with a non-binding offer currently in place.

Mighty Craft bought Adelaide Hills-based Hills Cider for $47m in cash and stock in June 2021, as part of a suite of assets including Mismatch Brewing, Adelaide Hills Distillery and 75 per cent of the Lot.100 hospitality venue in the Adelaide Hills.

That buyout was comprised of $27m in cash and $20m worth of Mighty Craft shares, which were valued at 35c apiece at the time.

Mighty Craft stock is now trading at 2.2c, just off its 12-month low of 2c, valuing the entire company at less than $10m.

The stock has crashed by 90 per cent over the past year, with its high of 25c achieved at about this time last year. The company said on Monday it was also targeting expanded divestments in the range of $25m over time.

“This program is focused on either divesting a larger asset in either beer/ cider or spirits to materially reduce debt,’’ the company told the ASX. “At this stage no acceptable offers have been received for these assets.

“The company will now maximise trading over peak.’’

Chairman Chris Malcolm said the company was in the “early stages’’ of its turnaround.

“Given the importance of peak trading, we will focus the business on maximising growth and earnings in the short term, while assessing any divestment opportunities that make sense for Mighty Craft shareholders,’’ he said.

“The company still requires significant restructuring, and we need a runway to execute our plans.

“I am pleased with the progress that is being made and we look forward to delivering a strong peak trading period.”

The company said it expected sales volumes across all brands to “increase meaningfully’’ across the peak summer period.

Originally published as Struggling alcohol maker Mighty Craft to sell Hills Cider and Jetty Road Brewery