Freedom Foods

CEO Michael Perich says FY21 was a “defining year” for Freedom Foods

Freedom Foods has released its full year financial results which show the business has delivered a 141 per cent positive turnaround in underlying adjusted operating EBITDA.

The business has also announced that it would be changing its corporate identity, following the sale of its Cereal and Snacks division, which included the Freedom Foods brand name itself.

At the 2021 Annual General Meeting, shareholders will be asked to vote on a new corporate name. The name, which will be revealed in coming weeks, represents a clean break with the past and the emergence of a reset and refreshed organisation.

Michael Perich, CEO, Freedom Foods Group Limited, said that 2021 saw phase one of the ‘Reset, Transform, Grow’ strategy substantially complete.

“FY21 was a defining year for Freedom Foods Group, marking the start of our ‘Reset, Transform, Grow’ transformation into a progressive Australian and regional branded FMCG business, with a much improved operating model and tighter controls that better respond to changes occurring in the local and international environments.

“As we enter the new financial year, we can declare the financial, structural, operational and cultural reset of the Company substantially complete, with the Company now having the right platform and talent to return it to long-term, sustainable and profitable growth.”

Revenue from continuing operations, which excludes the divested Cereal and Snacks business, rose eight per cent to $559.1 million, with solid sales growth across both the Plant-based Beverages and Dairy and Nutritionals divisions.

The Group has experienced growth in key channels, with sales through e-commerce channels up 38 per cent and export sales up 31 per cent. Overseas sales now represent 24 per cent of group revenue, up from 20 per cent in FY20, with a particularly strong performance in China and Southeast Asian markets.

Adjusted Operating EBITDA from continuing operations of $22.4 million represents a significant $76.4 million, or 141 per cent, turnaround from an EBITDA loss of $54.0 million in FY20.

This reflects improved operational efficiencies across the business and ongoing discipline around product development, marketing, and distribution. Adjusted Operating EBITDA excludes one-off restructuring costs of $27.9 million.

The Group reported a statutory net loss (continuing operations) after tax for FY21 of $38.8 million, a substantial improvement on a loss of $136.4 million in FY20. The FY21 accounts include a number of one-off, non-recurring items related to financing, the recapitalisation and other costs relating to the reset of the Group.

Cashflow from operations was negative for the full year at $5.5 million. Net cash used in operating activities for FY21 was negative $52.8 million, an improvement of $45.9 million from FY20.

Plant-based beverages revenue increased 16 per cent to $152.9 million as the segment continues to benefit from rising consumer demand for healthier lifestyle options. Adjusted Operating EDITDA in this segment rose 194 per cent to $25.7 million, with profitability continuing to improve as a result of the transformation program being implemented.

Plant-based beverage sales continue to accelerate, with the Group investing in the size of its Australian and New Zealand food service team to strengthen its direct relationships with distributors.

Sales of MILKLAB rose 49 per cent overall. In June 2021, the Group successfully launched MILKLAB Oat, complementing the launch of Australia’s Own Barista Oat milk and immediately capturing a meaningful share of the fastest growing plant-based milk category.

Dairy and Nutritionals revenue rose seven per cent to $394.3 million, with strong export growth offsetting a flat domestic performance. FY21 Adjusted Operating EBITDA loss of $4.1 million for the year was a substantial 93 per cent improvement on the loss of $56.7 million in FY20.

The Dairy and Nutritionals business is the focus of the Group’s operational turnaround strategy to reduce wastage, improve production efficiencies, remove or reduce unprofitable products, optimise milk supply and curtail losses from the sale of surplus milk as experienced in previous periods.

Sales of the Group’s PUREnFERRIN lactoferrin products rose 215 per cent in FY21 on the back of increasing customer numbers and expansion into the European and North America markets.

Overall sales of Consumer Nutritionals – including Vital Strength, UPROTEIN and Crankt Protein – rose five per cent in the year, despite a temporary fall in demand caused by the closure of gyms and specialty stores during COVID-19 lockdowns.

The Consumer Nutritionals range, which includes several new products launched through the year, continues to benefit from strong demand for protein sports nutrition products.

Specialty Seafood revenue fell 22 per cent to $11.8 million as COVID-19 disrupted global supply chains, causing stock shortages and resulting in the need to cancel promotions. Adjusted Operating EBITDA remained close to breakeven.

Freedom Foods Group and its advisers have commenced a dual-track review of the Specialty Seafood business under which the business will either be “retained and improved” or divested.

“Actions to transform the Company are well underway, with the Group benefitting from the hard work and commitment of our employees,” said Perich.

“The continued focus by the team on the customer, quality and innovation has continued to deliver very pleasing results. The significant $76.4 million turnaround in our Adjusted Operating EBITDA performance year-on-year – as well as the sales growth we are seeing in our key brands and markets here and overseas – point to the potential of these actions to continue delivering better returns for the Company and its investors.

“While there is more work to do, and we do not expect to see the full benefits of the improvements we are making flow through until FY23, the transformation strategy provides the springboard to continue to grow the business by capitalising on the ever-increasing consumer demand for healthier lifestyle options.

“Notwithstanding the uncertain impact of the latest COVID-19 lockdowns and related supply chain disruptions, we are confident of continuing the positive momentum delivered in the past year into FY22 as we pursue our transformation strategy.”

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