Brisbane-based Youfoodz hopes to raise about $60m in an IPO even as it endures huge trading losses
It’s one of Australia’s leading meal delivery outfits and is poised to go public to raise about $60 million. But there are a few warning signs about Brisbane-based Youfoodz that might spook investors, as it suffers huge losses.
City Beat
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GOING PUBLIC
One of Australia’s leading meal delivery outfits is poised to go public and raise about $60m but, as we outline below, there are a few warning signs that might spook investors.
Brisbane-based Youfoodz, headed by founder Lance Giles, expects to release a prospectus for its IPO in about two weeks and aims to start trading on the ASX by early December.
The price per share has yet to be determined but City Beat understands at least part of the money will go towards development of a new manufacturing facility in the city.
Investment bankers at Sydney outfit Greenhill have been advising the company, while brokers Morgans and Bell Potter are jointly underwriting the float.
Launched in 2012, the company is tipped to have a market cap of about $200m.
One of its arch rivals, Marley Spoon, raised $70m ahead of a float two years ago and since then the share price has more than doubled.
HUGE LOSSES
The cash injection can hardly come soon enough for Youfoodz as it battles for market supremacy in the $500m ready-made meal sector.
City Beat has obtained a copy of the most recent annual report for the company, which shows net losses more than doubled to $31.4m in the year to June 2019.
Total accumulated losses for the company are now just shy of $50m.
The situation is so dire that KPMG auditor Stephen Board warned in June this year that a “material uncertainty’’ hangs over the firm’s ability to survive.
To help stay afloat, Youfoodz received a $24m injection in August last year from private equity group RGT Capital and it now has a controlling stake in the business. RGT has vowed to tip in another $30m if needed.
The report also reveals that Youfoodz had to strike payment plans with both the ATO and the Office of State Revenue in mid-2019 “to cover arrears in payroll related taxes and employee benefits’’.
These deals were renegotiated in February this year for the company’s 800 to 1000 workers, who are based at a factory in Virginia.
On a brighter note, the company saw revenues climb to $155m, up from $122m in the prior year.
But that’s still a far cry from a forecast made by Giles last year that sales would surpass $250m.
The company now produces more than 65,000 meals a days for customers across the country, as well as the shelves of about 3000 retail outlets and supermarkets. It has also branched out to include snacks, drinks and seasonal produce boxes.
UNION DISPUTE
In case all the financial drama wasn’t enough, Youfoodz has had to cope recently with a series of legal and industrial battles as well.
Last year, as the company laid off some staff, it spent big sums in court fending off a shareholder lawsuit, an unfair sacking claim and a dispute with a supplier over allegedly unpaid bills.
The United Workers Union alleged in November that Youfoodz subjected its migrant workers to “a culture of bullying, racism and extreme wage theft,’’ as well as culturally-motivated violence.
The company vigorously denied the allegations but a union official claimed this week that problems remain.
“Youfoodz has continued to mistreat their workforce, who experience regular occurrences of wage theft and intimidation,’’ she alleged. These claims are denied too.
The union complaint last November came just a week after Giles and his fiancée sparked controversy while attending a global leadership event in Singapore.
The couple apologised after making expletive-laden videos impersonating Asian people and then posting them to Instagram.
Giles did not return a call seeking comment on Thursday.
A native of NZ, Giles previously launched and operated Gold Coast-based My Fit Fridge, which collapsed with debts of $1m in 2012.