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Gage Roads fizzes on soft earnings result

Gus McCubbing
Shares in WA-based Gage Roads Brewing have taken a hit after an underwhelming earnings result

Gage Roads Brewing shares have lost a bit of fizz with the WA company's stock plunging to a more than two-year low after it flagged a shortfall in sales was likely contribute to a full-year guidance miss.

Shares in the craft brewer, which supplies drinks to Optus Stadium in Perth, were down 17.95 per cent to 6.4 cents at by 1243 AEDT on Tuesday after it revealed its unaudited half-year earnings had slipped to $300,000 from $2.1 million a year ago.

The Alby, Hello Sunshine, Atomic Beer Project, and Matso's brewer said the earnings slide was down to a shortfall in sales and continued investment in its Good Drinks strategy, with the company continuing its transition away from contract brewing and towards its own brands.

"(The) shortfall was due to a combination of high opening inventory balances and timing of new product ranging with our largest national customer relating to the transition from a historic contractual relationship to one of a traditional supplier," the company told the ASX.

Gage Roads said it was on track to complete its packaging line, cold store and warehouse expansions, while its new $4.5 million The Atomic Beer Project microbrewery will be open in Sydney's Redfern by June.

During the period it also secured the exclusive beer and cider partnership for the ACT Brumbies rugby side at GIO Stadium in Canberra, and partnerships with Sydney Kings, Western Sydney Waratahs, Laneway Music Festival.

Nonetheless, managing director John Hoedemaker said the soft half-year figures would likely result in the company missing its target of 25 per cent to 30 per cent earnings growth for the full year.

"FY20 is a year of 'changing gears' for our business," Mr Hoedemaker said in a note to the ASX.

"We are investing ahead of the curve in the right areas of the business to drive future growth."

Growth in sales from the company's own brands lifted unaudited revenues 10 per cent to $19.3 million for the half-year, with the own-brand portion of the total sales mix lifting from 62 per cent to 69 per cent.

"Sales at store level continue to grow strongly and accordingly, I believe that the strategy and the targets we have set for ourselves are sound and achievable," Mr Hoedemaker said.