Freedom Foods shares tumble as accounting probe looms

The board of health food company Freedom Foods is completing an internal investigation after identifying potential accounting discrepancies.

Freedom Foods CEO Rory McLeod at the Shepparton processing plant in Victoria. Picture: Stuart McEvoy

The board of health food company Freedom Foods is completing an internal investigation after identifying potential accounting discrepancies, sending its shares plummeting more than 20 per cent.

The $974m company said in an ASX announcement on Wednesday that its chief executive Rory MacLeod was on leave pending a further announcement expected early next week. It gave no further details.

But The Australian understands the board has intervened in the operations of the company after identifying a series of potential accounting discrepancies and is completing an internal investigation. According to The Australian’s DataRoom column, the company could also be making a statement in the coming days about the carrying value of its assets, sources say.

Freedom Foods’ shares dived as much as 21 per cent to $2.77 on Wednesday before the company requested a trading halt.

The news follows the resignation of chief financial officer and company secretary Campbell Nicholas on Tuesday. The Australian is not suggesting any wrongdoing from Mr MacLeod or Mr Nicholas, only reporting that Mr McLeod is on leave and Mr Nicolas has resigned.

The Australian has contacted Mr MacLeod for comment. It is understood the spotlight remains on the group over the carrying value of assets and how they are capitalised.

For the 2020 financial year, Freedom Foods capitalised development costs of about $62.4m and about $171m of construction costs in the previous financial year.

The company has had a plan to outlay about $160m a year on capital spending. It has net debt of $300m and equity of $671m, so some expect a capital raising could be on the cards.

Sources say it is also worth noting that the number of parties shorting the stock had surged in the days before the announcement.

The company has also made about 30 staff redundant. Most of those positions related to upgrades at its facilities in Shepparton in northern Victoria.

Freedom Foods produces a range of allergen-free breakfast cereals, such as gluten free and dairy products and dairy billionaire Tony Perich has a holding of about 54 per cent in the company.

It reported a 45.6 per cent lift in its net profit to $5.4m for the six months to December.

Under the management changes announced on Wednesday, Perry Gunner has been appointed executive chairman and commercial director Brendan Radford is now the acting chief executive.

The board has also appointed Stephanie Graham, who is the group general manager of corporate development, as the acting chief financial officer and was evaluating permanent appointment processes, Freedom Foods said.

Mr Radford is the former managing director in Australasia of Rockstar Energy Drink and has 18 years’ industry experience.

Mr MacLeod, a former investment banker, has been at the company since 2003, initially serving as chief financial officer before becoming managing director in 2012 when Freedom’s shares were hovering around 59c.