Shares in Freedom Foods Group Ltd (ASX: FNP) finished the day nearly 8% lower today after releasing its FY21 results.
The last 12 months have been challenging for the company and its shareholders. Freedom Food’s shares came out of a 9-month long trading halt in March this year following a forensic accounting investigation.
More recently, Freedom Foods lost its appeal against one of its manufacturers, Blue Diamond Growers. This disputed licensing agreement is ongoing.
FY21 results
Freedom Foods reported total revenue from continuing operations of $559.1 million, an 8.2% increase on FY20.
Adjusted EBITDA, which excludes items such as restructuring costs came in at $22.4 million, well up from its $54 million loss last year.
Freedom’s statutory net loss after tax was $38.8 million, a 72% improvement on its restated FY20 loss of $136.4 million.
The company ended the period with a $31.7 million cash balance and $265 million of debt in the form of convertible notes. This capital was raised earlier this year to pay down its debt at the time and fund its turnaround strategy.
Segment breakdown
Plant Based Beverages which include brands such as MilkLab were a key growth driver over FY21. MilkLab’s domestic sales increased by 50% and export sales were up by 46%, with the brand now available in over 20 countries.
Net revenue for the segment was up 15.6% to $152.9 million and adjusted EBITDA surged nearly 200% to $25.7 million.
Freedom’s largest segment, Dairy & Nutritionals also improved during the year with revenue and adjusted EBITDA up 6.8% and 92.8%, respectively.
Freedom’s seafood segment didn’t fare as well, with revenue down 21.7% during FY21 due to disrupted supply chains and stock shortages. Management is currently reviewing the segment and could potentially divest it in the future.
Restructure plans
Freedom Foods is in the process of simplifying its portfolio of brands and directing investment into stronger performing parts of the business.
It expects that a large portion of EBITDA growth will come from MilkLab and plant-based Australia’s Own.
Since its recent accounting scandal, the company has also had its management team and board renewed with additional changes to its committees including Finance & Audit, and Risk & Compliance.
Summary
If MilkLab really is Freedom Food’s crown jewel, it’s somewhat worrying that it could lose its right to sell the brand if the current court case doesn’t go to plan.
With this sort of risk, I struggle to see the appeal of becoming a shareholder at the moment without more clarity into the business’s long-term prospects.
