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Moa drops to record low on cash flow woes

Shares in Moa Group [NZX: MOA], which raised $16 million when it went public in 2012, plunged to almost a third of its listing price after the boutique beer maker posted a wider full-year loss and said major shareholders Pioneer Capital and the Business Bakery have committed to providing enough financial support to allow the company to keep operating for at least the year ahead.

The NZX-listed stock touched a record low of 40 cents, well below its $1.25 listing price.

The stock is the worst performer on the NZX today, dropping 23.1% to 40c, valuing the company at $12.1 million. 

The stock has declined 56% over the last 12 months.

Earlier this week the Auckland-based company reported an annual net loss of $5.8 million, or 19.2 cents a share, for the year ended March 31, wider than the year earlier loss of $1.9 million, or 7.3 cents. 

Sales had jumped 88 percent to $4.6 million but were outpaced by a 137 percent jump in cost of sales, trimming gross profit to $792,000 from $848,000.

Expenses soared 135 percent to $6.5 million, as costs of distribution, administration and sales and marketing all rose.

Moa had $4.1 million of cash reserves as at March 31, down from $11.5 million a year earlier and in a note to its accounts said it is "looking at a range of financing alternatives and timing to ensure adequate capital resources are available to support the group's growth plans and capitalise on opportunities."

"They do have some cash generation challenges," said Matthew Goodson, who helps manage $650 million of equities for Salt Funds Management, which doesn't hold Moa stock. "If you look at their cashflow statement they appear to be some way away from generating positive cashflow."

Pioneer Capital, which owns 24 percent of the company, and The Business Bakery, on 23 percent, have provided Moa with "a letter of commitment to provide financial support that the directors believe is sufficient to allow the group to continue to operate and meet its obligations for at least the next year," the company said in its accounts, adding the details are still being determined.

"The key shareholders, Business Bakery and Pioneer, have committed to supporting them but if you were another shareholder and further support was needed than that could be dilutive to your interests in the company," said Salt's Goodson.

What do you think? What will it take to turn Moa around?  Click here to vote in our subscriber-only business pulse poll.


Comments and questions

Saw this wisecrack over on sharechat:

"Moa just hit 42c. Wow.

Maybe they should rename Moa Beer to 42 below."

Nice . One difference though - 42 Below was a success, not an extinct bird

Their share price is now 42 Below!

Unless there's some serious guzzling of this brew, pretty quick, it will become extinct.

The only sensible and ethical thing to do is to liquidate the basket case now. At least shareholders would get something back.
The alternative is to pour good money after bad on this doomed from the outset train wreck.

In 6mths time 42c will look like the exit opportunity of the century.
I predict 4.2 cents coming fast.

Good time to buy. These guys are not quitters, and will get it sorted

OK then... cash up the farm and buy 'em... but wait, there's more... give it another few weeks for the settlement on the farm to come through and they'll be down another 20c... even better bargain. In fact, though it's opnly a 10 acre scrub block back of TeKuiti, you'll probably buy the whole thing with the proceeds by January15. Patience indeed !

As for the fools that you will buying the shares from... LMOA

Beer is not champagne!

I am one of many who has critised Moa's performance and its valuation, and that its shareholders took advantage of market conditions to list something at a value that hurt smaller retail investors. Beyond this, I'm done criticising, as business is hard, and they are not alone in their woes.

What I will say is that for the management and staff - they more than anyone will be extremely distraught over how things have panned out, and no doubt are working extremely hard to fix. They will themselves be shareholders, and will be feeling the pain, like the rest of shareholders.

Finally, good on them for trying to create something. If nothing else, they created something, and created jobs. While so far not an economic success for shareholders, there are worse things in life than creating a workplace, and creating jobs. Better to try, than not at all.

as an aside...I do hope Moa and Energymad etc serve as a cautionary tale to the over exuberance that is rife in early stage / start up or technology companies that are constantly listing. If these companies are so good - why are their shareholders sharing them with the public and not creaming it all themselves? Every day there is a new tech company or start up listing at a huge multiple of revenue. It is literally insane what is happening in the market, with so much paper profit being made, and so much disregard for the past. I truly hope investors, analysts, and journalists take note. A lot of people who cant afford it are being hurt by these sort of listings.

yeah the marketing and sales budget just doesnt cut it for me.

Selling anything is hard slog, these guys seem to have a sense of entitlement. Every time I park in britomart I see the flash moa truck parked up there ($150000?) that some sales guy has probably got. Why is it always parked there? Why isnt the sales guy out on the road selling?

My business has turnover of $5 mill and I pull out the better part of a mill each year, if I was buying these flash trucks for my sales guys and spending what they are on marketing I'd go broke too.

They stuffed up because they took a very large corporate approach to growing this business (HUGE marketing budget and trying to sell beer to americans at the americas cup) rather than trying to make good beer and selling it to locals through word of mouth.

Geo op is also going to be a total failure, ask them how much they spent sending their entire team to watch the americas cup and party when they have less than $200k in revenue in NZ.

We have got a sick capital market at the moment, so many crap companies listing at crazy prices and no one is worried about it.

Shareholders in Moa would have been better advised to put their money into a house in Auckland and leave it empty.
There would be no risk and the return would be about 16%.

how on earth can a new start up with limited resource expect to brew beers in NZ and transport them across the world at a profit. There are thousands of beers on the market and this is just another wannabe
These guys are good at producing glossy brochures and taking fat salaries. Its a great gig for them until the fizz runs out...and a laugh to the bank.
At least by now people should twig onto the modus operandi and avoid these people in future.

Hit the nail on the head here.

No skin in the game from the initial owners. They got their investment out with the initial float, and continue to get it out with inflated salaries. Perhaps they should check the requirements of a director, when trading insolvently.

Didnt understand the business/market they were getting into. You need to be way more capitalised to export beer from here. Initial distribution costs will kill you.

Ross should have known better. Trendy Vodka has a much higher gross margin. Maybe he forgot his expertise is in marketing.