The Freedom Foods Group board told the ASX that last night (29 June) it accepted the resignation of CEO and managing director Rory Macleod. Macleod has resigned from all board and executive positions.
Freedom Foods nightmare began to unfold last Tuesday with the sudden resignation of CFO Campbell Nicholas. The following day it was announced Macleod was taking leave.
In the five hours it took the company to request a trading halt after the announcement, 21 million shares were traded compared to an average one million, dropping 15 per cent by the close.
In an investor conference call on 25 June, chair Perry Gunner said a further $35 million in inventory write-down was needed on top of the $25 million announced in May. The board had only been made aware of the extent of the situation that morning but there were ongoing investigations, he said.
Gunner said it was “certainly not the company’s finest hour… This is fairly raw, and we’re looking at everything. These matters have only arisen in the last 24-48 hours and we learnt about a lot of it just today.”
Freedom Foods has engaged Ashurst and PwC to investigate the company’s financial position.
The company has gone into a 14-day trading suspension while it continues its investigations, with Gunner saying that figure could change with year-end review processes and the FY20 results audit.
The write-downs related to obsolete or out-of-date stock and product withdrawals dating back to 2017. Initial estimates included amounts expected to be recovered from re-processing inventory, but the company concluded re-processing risks, time commitments and costs are not likely to be realised.
Invoicing errors dating back five years, which should have been credited but had not been were also uncovered.
- $60 million in inventory write-down;
- $10 million in bad debt; and
- Increased short term liquidity limit by $100m.
Commercial director Brendan Radford has been appointed acting CEO by the board. Radford has 18 years FMGC experience and was formerly MD Australasia of Rockstar Energy Drink.
Group general manager corporate development Stephanie Graham is acting CFO.
Non-executive director Trevor Allen has been appointed company secretary with immediate effect.
In a 29 May trading update, Macleod said the company was “reshaping” its commercial and organisational structures to reflect the company’s new operational footprint and key products, channels and markets.
In the last four years Freedom Foods has invested $430 million in capital expenditure, with a key component of that being construction of new nutritionals capabilities and a 500 million litre capacity expansion at its Shepparton plant.
Macleod said its Shepparton operation was transitioning from the completion of a significant capital expenditure period, relocating all external warehouse and logistics functions to an integrated on-site operation, including the commencement of an on-site container management function to facilitate further export growth underway.
Internalisation of other external warehousing relating to Cereal, Snacks and Specialty Seafood businesses was also happening.
But there had been 41 redundancies across the business.