Australia’s Freedom Foods Group has told the market that the voluntary suspension of trading in its shares, originally intended to be for 14 days, has been extended until October.
In an announcement to the Australian Securities Exchange (ASX), on which it is listed, Freedom Foods said the suspension is “pending the release of an announcement regarding the outcome of further investigations in relation to the company’s financial position”.
At the end of last month, Freedom Foods, which produces free-from cereals and snacks, and also fresh milk, milk drinks and plant-based beverages, said it had engaged professional firms Ashurst and PwC to “assist with ongoing investigations into the company’s financial position”.
In a call with analysts on 25 June, the company said it was probing the possibility of fraudulent activity after booking fresh write-downs, which followed the departure of its CFO Campbell Nicholas and a leave of absence for CEO Rory Macleod, who has since resigned.
In its ASX statement today (8 July), Freedom Foods announced its voluntary share suspension will last until the close of trading on Friday 30 October. The first day of trading will be Monday 2 November.
It said: “The board of Freedom Foods Group is of the view that investors require comprehensive and up-to-date information as to the impact of the historical issues identified and the financial position and outlook of the company, and that trading in the securities of the company should not recommence until more clarity can be provided.
“There are a number of interconnected activities that the board considers need to be completed before the company will be in a position to provide that information.”
It said these include the completion of the latest annual accounts, appropriate guidance as to the outlook for the financial year to 30 June 2021, and any update in its search for a new CEO and CFO.
Freedom Foods added the trading halt could also be a period during which any necessary capital initiatives are announced or completed, including the amendment of its syndicated and bilateral banking facilities, to “ensure the company has sufficient balance sheet strength and financial flexibility to support its business going forward”.
The statement concluded: “The board has formed the view that significant resources and time will be required to achieve a position where all of these activities are announced or finalised.”
Perry Gunner, named Freedom Foods’ executive chairman on 24 June, told analysts on a call the following day that the group is committed to resolving the current issues and “ensuring that we regain the confidence of investors as soon as possible”.
During the call, Gunner cited a series of cancelled export orders and admitted Freedom Foods would have to revise its Asian trading strategy. He also said retailers had de-listed a number of products, which would force the company to rationalise its brand range.
Analysts were told Freedom Foods had widened its write-down estimate for its 2020 financial year from AUD25m (US$17.2m) to AUD60m to reflect the provisioning for obsolete inventory, out-of-date stock and product withdrawals. However, the company added “this revised estimate is still subject to further analysis, year-end review processes and audit as part of the finalisation of the financial year 2020 results”.
On the subject of the increased write-down, Gunner was asked if he was aware of any fraud. He said the company was “undertaking further investigations”.