Moa Group capital raise came after auditor raised 'going concern' doubts

Moa's auditors have raised doubts about the company's ability to continue as a going concern. Photo / NZ Herald

Moa Group says it's confident that it has raised enough capital to meet its financial commitments and continue operating after auditors Grant Thornton flagged material uncertainty in the company's annual accounts.

The NZX-listed brewing and hospitality group reported a $4 million loss for the March year despite revenue climbing to $38m from $16m in the prior year. The revenue increase reflected the addition of hospitality business Savor Group and Non Solo Pizza during the year.

The group broke even at an underlying EBITDA level compared to a loss of $2m in the prior year.

Including one-off acquisition and restructuring costs incurred during the year and significant non-cash charges of depreciation, amortisation and interest, a net loss after tax of $4m compared to a loss of $3m in the prior year.

Notes to Moa's accounts said its financial statements had been prepared on a going concern basis, "the validity of which depends on the group generating sufficient cash flows in future periods and if necessary, its ability to raise new equity".

In its report, Grant Thornton noted that Moa had acquired two new hospitality businesses, Savor Group and Non Solo Pizza, for which it paid $24.1m comprising net assets of $4.9m and goodwill recognised of $19.1m.

"Given the significance of the purchase, the degree of estimation and judgement involved by directors and level of audit effort incurred, we considered the recognition, measurement, and disclosure of these business acquisitions to be a key audit matter," it said.

"As stated in Note 2, these events and conditions, along with other matters indicate that a material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern," Grant Thornton said in its report.

Grant Thornton said the group is required to test goodwill for impairment on an annual basis.

Moa uses a "value in use" model to determine the recoverable amount of the individual cash generating units.

"The Covid-19 global pandemic has impacted the New Zealand economy and hospitality sector in particular," Grant Thornton said.

The pandemic had created significant uncertainty of trading at least in the short term, it said.

The inherent uncertainty involved in forecasting and discounting future cash flows was one of the key judgement areas Moa's directors had concentrated on, Grant Thornton said.

Moa is made of two segments: Moa Beverages, which brews and distributes Moa branded craft beers and ciders, and Moa Hospitality, which owns and operates restaurants and bars across New Zealand following the acquisition of the Savor Group and Non Solo Pizza businesses in April and September 2019, respectively.

Since the end of the financial year Moa had raised $8.3m of new equity, resulting in total cash receipts of $6.1m.

"While the trading environment continues to be uncertain due to Covid-19, the three months of trading subsequent to year end have been solid for both the hospitality and brewing businesses which are positive cash contributors to the Group."

On that basis, Moa's directors "are confident that there is no need to raise additional capital, as the group is able to meet its forecast financial performance and remains a going concern for the foreseeable future," the annual report noted.

In its result, Moa chief executive Geoff Ross said the company had not been immune to the outbreak of Covid-19, with many of its venues shutting during levels 3 and 4.

"While we acted quickly to maximise revenues through a new online home delivery business, Savor Goods, Covid-19 has had a significant negative impact on our business in the second half of the year," Ross said.

Moa debuted on the NZX in November 2012 at $1.35 a share - a 10c premium over their issue price. The stock last traded on the NZX at 17c.