Freedom Foods Group Limited 

Case Filed Over Disputed Licencing Agreement: Freedom Foods Group Limited (ASX: FNP) is involved in sourcing, manufacturing, selling, marketing, and distribution of specialty cereal and snacks and plant and dairy beverages. On 01 October 2020, the company announced the appointment of Josée Lemoine as new Chief Financial Officer, effective 16 November 2020.

Key Highlights of the Update: On 30 September 2020, the company filed legal proceedings against Blue Diamond Growers to the Federal Court of Australia. The key highlights from the proceedings are stated below: -

• The company has commenced a legal proceedings against blue diamond's Almond Breeze product over the disputed licencing agreement.
• Blue Diamond alleges a violation of licensing agreement when freedom foods began producing and selling its competing almond milk brand MILKLAB and seeking US$16 million as compensatory and general damages for breaching the licence agreement initiated through American Arbitration Association.
• FNP is confident that they will defend the blue diamond claim and court-related proceedings.

FNP Secures Support of its Principal Lenders: On 11 September 2020, the company has reached a standstill agreement with its lenders to access its finance facilities while it works to recapitalise its business. FNP agreed on a standstill deed with HSBC and National Australia bank to use the financial facilities until 30 November 2020.

1HFY20 Results Highlights: FNP declared its half-yearly results, wherein the company posted total sales of $227.1 million, which improved significantly by 32.6% on pcp, driven by growth across key branded categories and channels. In the same time span, operating EBITDA for the period increased by 55.6% year over year and came in at $32.7 million. Operating net profit was $9.1 million, up 42.1% year over year. Net debt as at 31 December 2019 amounted to $188.5 million, as compared to $122 million as at 30 June 2019. Further, the company declared an interim dividend of 2.25 cents per share (unfranked); however, the dividend was cancelled due to COVID-19 turmoil. During 1HFY20, the company reported working capital of $109.3 million, up from $96.1 million reported at the end of 30 June 2019. The company exited the period with cash and cash equivalents of $7.2 million.

H1FY20 results (Source: Company Reports)

Key Risks: After the resignation of the last CEO and CFO in June 2020 and suspension from ASX, the company is under the scanner of key shareholders and investors. FNP’s current proceedings with blue diamond and standstill deed to use financial facilities until 30 November 2020 pose significant risk to the stock.

Stock Details: Over a period of one month and three months, the stock gave negative returns of 29.84% and 35.27%, respectively. The stock of the company last traded at $3.01.

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