NOU - Noumi Limited

[Dona Ferentes]

The polite version

...the spotlight remains on the group over the carrying value of assets and how they are capitalised. For FY 2020, Freedom Foods capitalised development costs of about $62.4m and about $171m of construction costs in the previous financial year.

The company had a plan to outlay about $160m a year on capital spending at a time that some say cashflows have been poor. It has net debt of $300m and equity of $671m, so some expect a capital raising could be on the cards.
Sources say it is also worth noting that the number of parties shorting the stock had surged in the days before the announcement.

 

[finicky]

Chart. Might buy a few @ $1. Won't bore anyone with my hit and miss auto-didact t/a
#glib

Not Held
Sentiment: Sell

All Data Qtrly

 

[galumay]

You are too polite

The signs were there, the massively increasing capital costs with no impact on cash flow in a business where they should be fairly closely correlated. Also the large increase in inventories - in a business where inventory shelf life is very short. Final straw, (too late for those who missed the other signs), was the management deserting ship like rats off the titanic.

There were some astute shorters here who had done the legwork on the financials.

 

[Dona Ferentes]

"A number of issues". Oh dear

Freedom Foods has extended its voluntary suspension until October 30, saying it may be some time before the embattled company can resurrected. The company said a number of activities needed to be considered by the broad before it could be in a position to provide information on the historical issues identified, the financial position and outlook of the
company.

The company said it will need to conclude its investigation into the historical issues referred to in previous announcements, complete its annual accounts, provide appropriate guidance, search for a new chief executive officer and chief financial offer, and complete any necessary capital initiatives.

The company said it will keep investors advised of any material developments in accordance with ongoing continues disclosure obligations.

The company said it had received a waiver from its financiers in relation to its financial covenant obligation at June

Carcass awaits to be picked over.

 

[Miner]

A clear sign of a family affair giving enough time to wind up personal finances.
https://www.asx.com.au/asxpdf/20200806/pdf/44l8dn118n7z50.pdf
They can let the investors and shareholders wait until Oct but realised with reshuffling within house give the family to wind up.
Can not recall such tacit game and such a helpless ASIC to come into investigation instead of waiting Rome to burn. Unfortunately a holder.

 

[Dona Ferentes]

Fraud.

it may not be. Just withering lack of process, or competence. There's an AFR article today
https://www.afr.com/companies/retail/perich-family-pays-high-price-for-freedom-20200723-p55etv
saying there was $60million in stock in Shepparton warehouses dating from 2017 and hence well past the use-by date.... thousands of pallets of "out-of-date UHT milk and cereals piled up without being noticed, bypassing basic inventory controls, pest management protocols as well as both the internal and external audits."

On its share price alone, Freedom looked like a winner. Shares had risen from about 35¢ when the Perich family bought in back in 2005 to above $5 a share, fuelled by a series of acquisitions and capital raisings.

Its products, including Messy Monkey kids snacks and So Natural soy drinks, popped up on major supermarket shelves, and the company seemed to have successfully found a market in Asia. It went from a small company to a much larger one very quickly.

Not every decision was perfect. Much has been made of the decision to sell a minority stake in The a2 Milk Company, but it seemed to be delivering on its core strategy and there was little attention given to whether its internal systems were keeping up with its growth.

But despite the outward success, institutional investors were relatively scarce, quietly questioning the company's lack of cash earnings for at least two years, despite an impressive and growing brand portfolio.

Someone has been asleep at the wheel. The Board hasn't handled the growth well, there are hints that 'performance bonus structure' was misaligned. The CEO was described variously as "controlling", "personable" and with a "short temper". The CFO abruptly resigned. When it all came to a head, an Announcement flagged the old stock couldn't be repurposed; this raised some accounting issues as the cost of goods had been carried forward as a capital item, when it should have been included as a cost of sales.

You would have to worry about oversight and processes, and the role of auditors. The Perich family now own 53%. It would be a brave investor willing to put money in FNP and go along for the ride, in the hope this company can be turned around.

 

[Dona Ferentes]

Freedom Foods is facing at least one unfair dismissal claim, a potential class action and a looming capital raising. The Perich Family is are also in the uncomfortable position of recommending to many family and friends a stock that lost nearly a quarter of its value in less than a week before being suspended amid concerns of accounting issues and mismanagement.

Sources suggested Tony Perich is devastated by the recent events. Now the Perichs are in clean-up mode: they recently hired a new CFO and are rationalising business units on top of the very messy job of physically disposing of millions of litres of milk and tonnes of expensive packaging.

But they also have a fresh problem they are throwing big money at, which could impact any capital raising (a key supplier of Almond Breeze milk products is suing the snacks and dairy group for $US16 million ($22.3 million) in a California court. It has accused Freedom's former chief executive of being complicit in alleged fraud and breach of contract. )

On Monday, October 19, at 5.11pm Freedom Foods sneaked in an ASX announcement requesting that its stock be suspended from trade for another month until November 30. If it sticks to this date, all up that will be five months suspended while it works through accounting irregularities and fraud allegations arising in a US court case....

 

[galumay]

it may not be.

Then again, it may be!

 

[Miner]

Could company expecting lot many legal cases when it arrives early December

 

[galumay]

A train wreck, equity gone, debt huge, impairments, serial incompetence if not outright fraud. Sad for anyone caught holding.

From the AR today,

"Most significantly, the reviews determined that most of the costs capitalised during the commissioning phase of the Group’s capital investment program should be more appropriately treated as expenses. These accounting treatments contributed to decisions on new products and expansions that were based on unrealistic assessments of market opportunities and margin assumptions that were not realised. As a result, too many Group products were sold at prices that did not fully recover their costs."

 

[basilio]

Seems as if the ASIC cort cases are imminent.

Freedom Foods accounting scandal worsens, with ASIC now investigating

Cereal and snack-maker Freedom Foods has announced half a billion dollars in write-downs, and is being investigated by the corporate regulator ASIC for some "significant" accounting problems.

www.abc.net.au

 

[Dona Ferentes]

shrinking to greatness (sorry, current shareholders)


Freedom Foods says it is assessing options for its cereal and snacks division as it looks to simplify its business as part of its recapitalisation plan.

The company also announced it will conduct a capital raising of up to $280 million. It said it had hoped to be in a position to announce the recapitalisation by mid-December but now expects an update on the capital raising will instead occur on January 2021.

"The company has made good progress in this regard and remains in advanced discussions with a new investor to support the capital and operational turnaround of the business," said a spokesperson.

Oaktree?! Yikes

 

[frugal.rock]

Freedom Foods says it is assessing options for its cereal and snacks division as it looks to simplify its business as part of its recapitalisation plan.

..."serial incompetence if not outright fraud. "

Cereal incompetence.
They need a All Bran new approach without the corny flakes..
I had better go and wash the dishes now, before my Honey Smacks me

 

[Dona Ferentes]

Cereal incompetence.
They need a All Bran new approach without the corny flakes....

Marginally better than cereal incontinence?

A while ago, maybe not on ASF, I posted that any inspection of the retail aisles revealed gimmicky product, uncompetitively priced and poorly positioned / marketed on the range of offerings. Enough for me to sell FNP. ... and so glad I did.

 

[Garpal Gumnut]

@Dona Ferentes @Miner @basilio and others.

The posts this year on Freedom have been such an enjoyable read with excellent links. Thanks all

The Perich family seem to have taken their eye off the ball. They are a resilient mob but may be suffering generational fatigue, ( ole Jamie is a good example at Crown ) and could bounce back. Could, I say, but not with any of my dosh.

For those new to ASF, NSW/Queensland and Australia, this is how business was done in the 70's and 80's. My eyes misted over with nostalgia.

One of the Ross Island Hotel regulars has asked me to fly down with him and another pilot for the repo of an aircraft in the Mackay hinterland ( not the Perich's ). I may drop in and say g'day to old man Perich if he is still thereabouts and not back in Sydney.

gg

 

[PetEarwig]

Earlier in the year I had looked at this stock as the SP had drifted lower. On looking into the business a bit more, I found that they had rebranded many of their cereals and this had caused a customer backlash. If you have a visit to their facebook page, there were hundreds of furious customers venting their frustrations with the company's decisions, the main one being merging the production facilities that now meant that none of their cereals qualified as lactose free. Many customers bought their cereals based on gluten or lactose intolerances and it seems they wiped out that entire customer base with their rebranding and hoped expansion of the cereal market. We now know that there was far more going on behind the scenes. I don't always go digging on companies, but this was a lesson on why I should trust my instincts and do more work when investing my money. Thankfully, I avoided the mess. Craig

 

[Dona Ferentes]

Shares in Freedom Foods Group will begin trading on Monday after a nine-month hiatus as the troubled company aims to raise $265 million in fresh capital to stabilise the group.

But analysts have questioned whether the market will be fully informed after the company lodged a slew of documents for its capital raising, including a 271-page prospectus, after 5pm on Friday.

The Perich family is stumping up $200 million via a subordinated secured convertible note issue. The billionaire family is invested via its investment vehicle, Arrovest, which owns 52.5 per cent of Freedom Foods. The family would like to have the ability to scale back Arrovest’s investment to a minimum of $135 million, depending on the level of participation under the $130 million wholesale investor offer priced at $1 a share.

Existing shareholders will be given preference allocation. For the first 30 months the notes will have a coupon rate of 7 per cent.

Subject to obtaining shareholder approval, 40.8 million options will also be issued pro-rata to all shareholders, excluding Arrovest. This is equivalent to approximately 1 option for every 3.2 shares held.

The offer is not underwritten, but Arrovest has provided a binding commitment to subscribe for $200 million of notes. The company will seek to raise a further $65 million from new and existing shareholders. Terms are on par with that of the Arrovest offer.

the notes will have a dilutionary effect on shareholders, indicating that if the notes convert at the end of year three then current shareholders will control about 40 per cent (assuming all options exercised) while the note holders will control 60 per cent of the company.

 

[Miner]

@Dona Ferentes @Miner @basilio and others.

The posts this year on Freedom have been such an enjoyable read with excellent links. Thanks all

The Perich family seem to have taken their eye off the ball. They are a resilient mob but may be suffering generational fatigue, ( ole Jamie is a good example at Crown ) and could bounce back. Could, I say, but not with any of my dosh.

For those new to ASF, NSW/Queensland and Australia, this is how business was done in the 70's and 80's. My eyes misted over with nostalgia.

One of the Ross Island Hotel regulars has asked me to fly down with him and another pilot for the repo of an aircraft in the Mackay hinterland ( not the Perich's ). I may drop in and say g'day to old man Perich if he is still thereabouts and not back in Sydney.

gg

The Ross Island Hotel

The Ross Island Hotel - Ross Island Hotel, 99-101 Boundary St, Railway Estate QLD 4810, Australia

the-ross-island-hotel.edan.io

 

[Dona Ferentes]

how does this even get captured?

One year timeframe

 

[frugal.rock]

Another screwy chart... that first big bar of volume 6 months ago puts it all out of proportion, dunnit?