Australia, insurance, car, home, live, holidays

The company has also revealed a blowout in doubtful debts. In May it revealed it was provisioning about $4 million for doubtful debts,relating to an export account for the June half. However,a review of its doubtful debt provisioning,and of its revenue recognition,has revealed a further negative impact on its EBITDA (earnings before interest,tax,depreciation and amortisation) of about $10 million.

The company has been granted a 14 day suspension from trading on the ASX,as it addresses its problems. Freedom Foods has engaged PWC and Ashurst to advise it on its financial position.

"It's a disappointing episode in the company's history,certainly not our finest hour,"said executive chairman Perry Gunner.

"We are committed at Freedom to resolving all of the current issues and in ensuring that we regain the confidence of investors as soon as possible,"he said.

Mr Gunner said investigations into what had happened were continuing,but he stressed that the company's major shareholder,the Perich family who hold more than 52 per cent of its shares,fully supported the business.

According to Bloomberg consensus analysts were forecasting that Freedom Foods would deliver a full year underlying profit of $19.1 million,from revenue of $609 million. The consensus forecast for EBITDA (earnings before interest,tax,depreciation and amortisation) was $78.9 million.

The Freedom Foods update comes in a dramatic week for the company. OnWednesday the company said that chief executive Rory Macleod was on leave from the business pending a further announcement. It said that Brendan Radford,commercial director,would be appointed acting CEO,with Mr Gunner appointed executive chairman.

Those moves came just one day after Campbell Nicholas resigned as chief financial officer and company secretary. Trevor Allen,a non-executive director of Freedom Foods,was appointed company secretary with immediate effect.

In May Freedom Foods released a COVID-19 trading update which showed that sales in one of its key channels,out-of-home which is to restaurants,cafes and hotels,were well below forecasts as outlets were closed because of COVID-19 lockdowns. It said its profitability in the second half of the financial year would be materially affected.

Freedom Foods has a market capitalisation of about $834 million based on its last traded stock price of $3.01 on Wednesday,before it went into a trading halt. It makes the cereal brands Heritage Mill and Arnold's Farm. It also makes Australia's Own longlife milk and Australia's Own organic almond milk.

In a note to clients after the management changes were announced but before Freedom's Thursday conference call,Citi analyst Sam Teeger said the company faced a downside risk to earnings following the unexpected management changes,higher risk to dairy product demand in Asia and had a balance sheet that likely needed equity capital.

"We are also concerned that the recovery of the highly profitable out-of-home channel may take longer than expected given the increased incidence of working from home and a potentially weaker consumer upon conclusion of government stimulus programs,"he said.

License this article