Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

FY20 report: Freedom Foods (ASX:FNP) reveals accounting pain

Freedom Foods Group Ltd (ASX:FNP) has finally revealed its FY20 result to investors. It has also outlined the accounting pain. 

Freedom Foods Group Ltd (ASX: FNP) has finally revealed its FY20 result to investors. It has also outlined the accounting pain.

What has Freedom Foods been doing?

It has been around five months since the company first announced some accounting difficulties and it has been suspended for months.

In summary, its financial position has now been established following a rigorous process with independent advisors. It will require a significant recapitalisation, so shareholders will need time to understand the results before this can occur.

Freedom Foods has been engaging with its customers and suppliers and undertaken reviews of its operations and product range.

The company has secured $45 million of interim liquidity, guaranteed by the major shareholder, and a standstill agreement with its lenders.

It has been conducting investigations to find out what happened whilst rebuilding its management team. It has also rebuilt its financial reporting, cashflow, monitoring and improving its financial reporting tools.

Freedom Foods said it had improved its management processes, updated its costing standards and accounting policies and practices.

It has had an external audit done, including the restatement of historical financial accounts.

Summary of accounting matters

Freedom Foods said there was a $372.8 million impact on its fixed assets – its capitalisation practices have been reviewed and amended, with costs reclassified. Only directly attributable expenses will be capitalised. It’s a similar story with new product development costs with a $38.9 million impact, an impairment was recognised for underperforming products.

For an impact of $60.1 million, inventory stock take and write-off policies and practices have been reviewed and amended, result in writedowns being recognised.

Revenue and receivables were reviewed, with an impact of $22.1 million. The company said that long-dated receivables were unlikely to be collected, so it has provided provisions for those. Policies for provisioning and credit losses have been formalised.

Accrual recognition practices have been reviewed, trade spend will be accrued when the inventory is sold to the customer – for an impact of $11.9 million.

There was another almost $10 million of impacts relating to share based payments and ‘other’.

Finally, Freedom Foods recognised a $75.9 million impairment of its goodwill and brands value.

FY20 result

In FY20, Freedom said it grew revenue by 26% to $580.2 million. Offshore revenue rose by 29% to $109.8 million and now represents 19% of overall revenue.

Dairy and nutritional revenue rose 37% (this includes UHT dairy milk, nutritional products and performance powders). Plant-based beverage revenue went up 30% (which includes soy, rice and almond milk and liquid stocks), this includes MilkLab. Its cereal and snack revenue declined 14% to $69.9 million with reduced sales to Asia (this includes the brand Messy Monkeys).

FY19 numbers were restated, but Freedom Foods’ adjusted EBITDA (EBITDA explained) rose 2% to a loss of $86.5 million.

The net loss worsened by 20% to $174.5 million, after showing a loss of $145.8 million in FY19.

Net debt soared 125% to $275.2 million.

Recapitalisation

Freedom Foods has decided the best approach is an ASX-listed convertible note. It’s anticipated the capital raising will raise up to $280 million and existing shareholders are expected to be able to participate.

Major shareholder Arrovest intends to participate.

This is intended to complete in the middle of December.

Summary thoughts

This has been quite the process and it’s still not quite finished. It’s good to see there’s a path to the finish line though. I don’t know if it would be worth investing in after all this, so I’d prefer to focus on other ASX growth shares with a simpler set of accounts like Pushpay Holdings Ltd (ASX: PPH).

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
Skip to content