Innis and Gunn beers soured by losses

We were not expecting this. Innis and Gunn, an established and well regarded craft brewer, have gone back into loss for YE Dec17. It had told Crowdcube investors, who gave them more than £1m in 2016, that it hoped to be making a net profit of £1.18m for the year. The loss was more than £400k. 

Innis and Gunn saw higher than projected revenues of £22m but their GPM was well below the figure used in the Crowdcube pitch; 58%. It was in fact only 46%. A 12% drop that represents a heavy £2.64m taken off the GP number. That is a massive drop for a retail facing operation and is hard to put down to anything apart from the fact that the Crowdcube figure was a mistake - a very misleading one. The year gave the company an operating profit of just £80k as opposed to the Crowdcube version of £2.76m. The GM is the clue. 

Overall this just may have been a blip - the balance sheet looks healthy and was boosted in the year by another £4.5m equity investment. Exports make up 45% of revenues and are highlighted as a strong growth market for the beers, so there may well be some headwinds to tackle with the Brexit debacle unfolding. the USA , Canada and Sweden make up their three largest markets.

One important strand of the strategy might be questioned. They are opening bars and in the notes to the accounts, the company extols the virtues of this action. At the very end of this section there is an afterthought - brought about by the closure of their St Andrews unit just 2 years after opening. It was the most hopeless sight and as a local I bet back when they opened, that it would close withing 2 years. If they cant do better with their locations then they will be in serious trouble at some stage. Their excuse was that it was too small! 

The loss from this closure, which will be substantial, was not included in the accounts to Dec17. The building still stands empty, fully branded as a sad reminder of an I&G flop. 

Innis and Gunn sell 28% for £15m

Innis and Gunn - the Scottish brewer and pub operator has sold 26% of its company to a US PE firm, valuing the business at a little over £50m.

We are not quite sure what to make of this. Sure it verifies the Crowdcube valuation of £50m in 2016 but doesnt it also dilute those shareholders and place them at the mercy of some US corporate?

Around 20% of the £15m is going into buying management shares and rest into operations with no liquidity offered to ordinary shareholders - according to unconfirmed reports.

I&G were making losses before raising £3m on a 7.5% bond via Code Investing in 2015, to build a new brewery. The money ended up being used to buy and expand the Inveralmond Brewery in 2016. Revenues rose by 22% and the company was in profit for the last year.

Needless to say the profit for 2016 of just over £300k doesn't come close to the Crowdcube projected profit (from the pitch in the same year) of £717k.  

It will interesting to see if this, like the sale by Brewdog of part of their company to a US corporate, makes for changes in the companies' fundamental ethos and what happens to the wee shareholder at the bottom of the barrell. 

Innis and Gunn PRing their 2016 success

Innis and Gunn have released a glossy spin on their 2016 accounts, prior to their filing next month. The Crowdcube projections, produced when 2016 was almost complete, beg to differ.

Dont get us wrong, these are very good figures viewed on their own but they are not quite Carling. The way they have been fed to the press, you would expect I&G to have smashed their Crowdcube projections for 2016 - the ones used to raise the funding.

I&G raised £2.34m from almost 2000 investors at the end of 2016. The projections for that year, so mainly historic in nature, showed revenues of  over £15.1m and GP of £8.9m. Again dont forget that these were hardly projections as they were published on CC at the end of 2016. The accounts, now being trumpeted as an enormous success, show revenues of £14.3m or short by £800k and a GP of £8.5m or short £400k. Actually that's not bad certainly for a CC funded business but its still not reached targets which should have been, lets be honest, spot on. If a company with projections where 10/12ths of the year is historic, cant meet its figures, there is little hope for the rest of us.

You might ask why they chose GP as a measure instead of the NP, which is a far more important indicator. We will have to wait and see when the full accounts are filed. Certainly the margin held up well.

It's really far to early to see if the company's new direction will pay off. We were not impressed with the St Andrews unit.