Moa Group, the listed boutique beer maker, has cut its annual loss by 5 per cent and boosted sales by nearly a third in its latest financial results.
The Auckland-based brewer, which went public in 2012, reported a net loss of $5.58 million in the year ended March 31, compared to loss of $5.82 million the previous year.
Revenue rose to $6.1 million from $4.59 million while sales volumes climbed 40 per cent to 1.7 million litres, near what the company's prospectus forecast it would achieve in the 2014 financial year.
Chief executive Geoff Ross said the company remains around 12 months behind its original business plan, having initially struggled to meet sales forecasts which it blamed on its now dumped distributor, Treasury Wine Estates.
Moa overhauled its business strategy in late 2013, changing to a direct distribution model, shifting focus to the New Zealand and Australian markets, and outsourcing much of its beer production to McCashin's Brewery in Nelson while making its higher-margin speciality brews at its Blenheim site.
Ross said in hindsight it should have always had a direct sales and distribution structure and he shoulders the blame for that mistake.
Its $1.25 IPO price has fallen markedly and is currently languishing at 32.5 cents, valuing the company at $15.5 million.
Ross said the latest results were in line with expectations and its strategy to cut costs and fatten margins was likely to start delivering benefits in the coming financial year as gross margins are starting to improve.
The company started in 2004 by Blenheim-based winemaker Allan Scott and his son Josh raised $16 million in the IPO and a further $5.75 million from shareholders last July.
Cornerstone investors Pioneer Capital and The Business Bakery had committed to providing financial support to ensure the company would keep running for at least another year after it burned through cash faster than anticipated.
It now has only $3.8 million cash in hand, which is less than the losses this financial year.
Ross said the board was conscious of the business's cash requirements and losses were expected to be significantly lower this financial year, although no forecast figure was given.
He said the board was confident that the cash position, growing sales, cost efficiencies, and working capital improvements would provide the necessary funding for growth.
Moa currently has no debt and Ross said the directors are prepared to consider bank debt or further capital raising if the company requires it. It also has unrealised tax losses of $4.9 million.
Moa continued to increase it share of the craft beer category which is growing at more than 10 per cent a year in New Zealand while mainstream beer sales are in decline.
Craft beer still only accounts for around 5 per cent of the total beer market in New Zealand compared to around 15 per cent in the US.
Moa is now the fourth biggest craft beer brand in this country behind Monteiths, Mac's and Boundary Road.
Across the ditch, international craft, the segment Moa is part of, is growing at an estimated 18 per cent a year.
Its biggest selling products are Original Lager and Session Pale Ale which Ross describes as "accessible craft" and deliberately tilt more towards the premium beer market than most traditional craft beers.
The focus currently is still on building distribution with a big push into supermarkets which sell a big portion of beer nationally. In Australia its beers are sold through the Dan Murphy's and BWS liquor chains.
Ross said it will be next year at least before Moa is in a position to start spending money on brand promotion.
"When we've finished with product, placement, and price we can get to the promotion piece but we're not there yet," he said.
Following mediation with those who objected to a proposed expansion of its Blenheim brewery, Moa now has resource consent to expand production volumes, but only to around half of what it originally wanted.
Ross said given Moa's existing resources, plans for the expansion were on hold as the money available was better spent on growing distribution than production capacity.
See the full results here: