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Top Shelf (ASX:TSI) share price pops on first earnings report

two hands clink together their glasses filled with spirit and ice, indicating a share price rise
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The Top Shelf International Holdings Ltd (ASX: TSI) share price is reacting well to the company’s inaugural earnings report today. The Top Shelf share price is up 0.25% at the time of writing to $2.04 a share.

That might not look like much of a top move. But considering the broader S&P/ASX 200 Index (ASX: XJO) is currently down a hefty 1.96% today, its actually a pretty decent outperformance.

High spirits for the Top Shelf share price today

Top Shelf reported earnings for the first half of the 2021 financial year (1H21) this morning. This is Top Shelf’s first report as a listed ASX company since it only IPO-ed on the ASX back in December.

The company reported that revenues came in at $7.23 million, which was a 159% increase on the prior corresponding period’s (1H20) $2.3 million. That included branded sales growth of 168%. This follows the company’s launch of NED Whiskey in September last year, and the launch of Grainshaker Vodka in October.

That total revenue metric represented an increase of 1.7% for Top Shelf’s gross cash margin to 23.3%.

However, pro forma earnings before interest, tax, depreciation and amortisation (EBITDA) went backwards. It fell 129% from a loss of $1.6 million in 1H20 to a loss of $3.6 million for 1H21. Statutory EBITDA fell from a loss of $1.6 million in 1H20 to a loss of $7.1 million in 1H21.

That lead to a proforma loss after income tax of $3.1 million, up 102% from 1H20’s loss of $1.5 million. The company’s statutory loss after income tax was $6.7 million, up 345% from the $1.5 million loss in 1H20.

Big investments from Top Shelf

Top Shelf tells us that these losses are the result of “continued investment in working capital”, which includes $1.6 million for facilities for maturing whiskey in a second whiskey lauter at its Campbellfield distillery. It also includes a $2.2 million cost of brand development for the formerly mentioned products. Over the period, Top Shelf’s whiskey inventory on hand increased from 105,000 litres of alcohol to 388,000.

The company also spent $2.2 million on acquiring the Eden Lassie agave farm in December (agave is used to make tequila).

As of 31 December, Top Shelf had a net cash position of $9.1 million.

Top Shelf CEO Drew Fairchild had this to say on the results today:

Top Shelf is focused on executing our growth plans in the second half of FY21 including accelerating the market penetration of our portfolio of distinctive Australian spirits brands…

… the continued build-out of the NED Whisky and GrainshakerVodkabrand and product portfolios…

… [as well as the] ongoing development of the Eden Lassie agave farm and agave market opportunity in dry north Queensland with the secure supply of 244,000 hardening plants in nursery, and the completion of the Agave Brand work and release to market of our Australian Agave spirit.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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