Good Drinks Australia (GDA) says it will seek approval at its upcoming annual general meeting to delist from the ASX. The GDA board says the company is “significantly” undervalued by the market when compared to typical industry metrics including sales volume, revenue, market share, and brand positioning.
The board said operating as an unlisted public company and growing market share will allow GDA to achieve a valuation that is more closely aligned to industry metrics, which could be done through a trade or asset sale.
“Over the past five years, the company has successfully implemented a strategy focused on growing the market share of its proprietary brands by consistently reinvesting gross contributions into sales, marketing, and other brand growth initiatives.
“This deliberate approach has resulted in sales of the company’s GDA brands growing to more than 15 million litres per annum, establishing GDA as the fourth largest, fastest-growing brewing business in Australia,” a statement from the board said.
According to GDA, it doubled the revenue of its core business through onboarding leading international partner brands, and the successful launch of its hospitality division contributed annual sales of $29 million and $4.5 million EBITDA.
GDA managing director, John Hoedemaker, said the listed company environment was “simply no longer fit for purpose” if the company was 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.
The board said the undervaluation was evident when comparing GDA’s enterprise value – which reflects a value of approximately $4 per litre for GDA’s core business (excluding hospitality) – to typical industry valuation metrics, which range between $18 to $20 per litre based on factors such as sales volume, market share, brand growth and brand margins.
It said it views market share as “the ultimate determinant of shareholder value” and the company aims to “aggressively” increase its proprietary brand sales volumes from the current 15 million litres per annum to around 18–20 million litres.
Hoedemaker said, “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.
“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.
“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.”
