Troubled Freedom Foods, which is controlled by the megarich Perich family, says it may not be able to survive as a going concern unless it gets more capital.
The warning came in a belated half year report issued on Monday and was despite reporting a small improvement in both revenue and profits for the six months to December.
The company said while it had prepared its accounts on a going concern basis, the business’ ability to continue operating was contingent on locking in a significant amount of funding via a recapitalisation.
The company’s shares have been halted at $3.01 since June 24, 2020, when the first signs of an accounting scandal emerged with an initial value of around $25 million. That had grown to an estimated $60 million by last December.
A recapitalisation plan to support the company is being discussed, the centrepiece of which is a $200 million investment from the company’s majority shareholder, Perich family-backed Arrovest.
Freedom says this fundraising was “well-progressed” but warned there remained risks it could not be completed.
“The on-going support of the Group’s major shareholder and lenders both in the period prior to, and subsequent to, the proposed fund raising is critical to the ability of the Group to continue as a going concern,” Freedom’s directors said in their statement to the ASX.
“In the absence of the fund raising being completed, the Directors in consultation with their advisers will reassess the options available at that point in time, including requesting a further extension of the standstill agreement, and/or commencing a process to sell non-core businesses and/or assets.”
Freedom believes it will be successful in its recapitalisation, though no update on the raise was provided to investors at its results.
The company revealed there are signs of life – its revenue from continuing operations for the half rose 15% to $291 million, and operating earnings before interest, tax, depreciation and amortisation swung back into profit at $21.7 million.
However, statutory earnings remained in the red at a $23.9 million loss, though this marked an improvement on the $63 million loss booked in the prior half.
“While there remains a lot of work to be done to ensure Freedom Foods Group can meet its full potential, these results validate our decision to focus on building a world-class business around our market-leading Dairy and Nutritionals and Plant-based Beverages brands,” CEO Michael Perich said in the statement.
“Once the recapitalisation is complete, we will have a capital structure that allows us to continue to focus on delivering on our turnaround strategy and restore the Group to sustainable and long-term profitable growth.”
