- Consumer brand Freedom Foods (FNP) has backflipped on previously announced profits, instead revealing millions of dollars in losses
- Freedom once stated that it made $11.6 million in profits last year
- Now, the company is claiming $590 million in write-downs
- Freedom says the write-downs come as the company failed to list expenses and held out of date inventory
- The Australian Securities and Investments Commission (ASIC) has begun its investigation into the company's claims of accounting errors
- Such errors are worsened by reports of company executives receiving bonuses without the permission of the board
- Shares in Freedom have been suspended since June — last trading at $3.01 each
The Australian Securities and Investments Commission (ASIC) has begun investigating consumer brand Freedom Foods (FNP).
The company revealed on Monday that the past financial year tabled losses of up to $174.5 million — backflipping on previously announced profits of $11.6 million.
The downgrade is contributed by $590 million in write-downs, caused by "accounting deficiencies".
As the company explained on Monday, Freedom management failed to list new machinery purchases as an expense. This was combined with $60 million in losses from out-of-date inventory as well.
"The implementation of our warehouse consolidation program led to the identification in May 2020 of out-of-date, unsaleable and obsolete inventory and other inventory accounting matters," Chair Perry Gunman stated on Monday.
These massive losses aren't the challenge Freedom has faced thus far. Recent shifts in management have seen a handful of leaders leave the brand. Earlier this year, Chief Executive Rory Macleod and Chief Financial Officer Campbell Nicholas quit the business.
Now, Perry Gunner and Director Trevor Allen have announced their departures. They will both finish in January next year.
ASIC begins investigation
Following the full-year results and executive resignations, the corporate watchdog has flagged an investigation. On top of that, new information also reveals executives at Freedom were reportedly receiving healthy bonuses — without the OK from the board.
"During the year ended 30 June 2020, the board identified matters regarding the operation and administration of the group's equity incentive plan," external auditor Deloitte stated.
"The matters included the granting of previously undisclosed employee share options and/or extension of the expiry date of share options by management between September 2014 and September 2019," it continued.
"[..] these employee share options granted and/or extensions were not authorised [...] by the board," Deloitte stated.
ASIC has requested documents from Freedom Foods to further its investigation. The company is cooperating.
Shares in Freedom Foods continued to be suspended from trading — last closing in June at $3.01 per share.