PE-backed Brewdog’s Profits have a hangdog look as costs increase

Profitability at Britain’s largest craft brewer fell back last year, despite a 25 per cent rise in sales to £215 million, as its fast growth came at a high price.

Brewdog experienced an increase in overheads as it expanded its bar network in Britain and overseas, the Scottish company’s latest accounts show.

Group pre-tax profit was £1.1 million, compared with a pre-tax loss of £600,000 in 2018, but the company only sneaked into the black thanks to its recording of a £14.2 million gain related to an acquisition. Operating profit was down compared with 2018 once the impact of the acquisition was stripped out.

Known for its outrageous publicity stunts and wide range of craft beers, Brewdog was founded in 2007 by James Watt and Martin Dickie. The Scottish company has expanded internationally to become the largest of a new wave of craft brewers. It is part-owned by TSG, a private equity firm.

Its Punk IPA brand is the most popular craft beer in the UK and it has more than 100 bars. The company said that it had shipped 183 million cans of beer last year, while sales at its bars grew by 48 per cent.

In the accounts, Mr Watt said that “slightly reduced” earnings “reflect our high growth rate and our global investments and infrastructure as we now have four major breweries globally”.

He said that the business had weathered the Covid-19 storm “better than expected, with very strong grocery and online sales compensating for the temporary closures of our bars”.

The accounts, which were signed off before a second lockdown for England was announced, record that the company had enough liquidity to endure a “second pandemic wave that would impact the group” into 2021.

The accounts also show that Brewdog secured a £25 million loan under the government’s coronavirus large business interruption loan scheme, which provides financial support for companies hit by the pandemic.

The accounts will raise fresh questions about the £1.85 billion valuation the company priced itself at in a recent crowdfunding round, which is far more than comparable businesses.

Brewdog, which has more than 130,000 small investors via its “equity punks” crowdfundings, said that it had made and donated more than 500,000 units of hand sanitiser to the NHS, charities and key workers.

Source: The Times