Noumi Limited (NOU) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning. It is now 10:00 a.m., and I have been informed by the company's secretary that a quorum is present. And so I declare this Extraordinary General Meeting of Shareholders in Freedom Foods Group Limited open. For those I have yet to meet, my name is Genevieve Gregor, and I'm the Chair of the Freedom Foods Group. I would like to begin by acknowledging the traditional custodians of the land on which we meet today and pay my respects to their elders past and present. I extend that respect to Aboriginal and Torres Strait Islander peoples here today. Today's meeting will take place as a hybrid meeting, which allows shareholders, proxy holders and guests to attend the meeting either in person in the Sydney CBD or online. Regardless of how you have chosen to attend the meeting today, all shareholders and proxy holders will have the opportunity to ask questions and cast votes. I'm joined today in person or by phone by my fellow Board members: Deputy Chair, Tony Perich; Non-Executive Independent Directors, Jane McKellar and Stuart Black; and Non-Executive Director, Timothy Bryan. Also attending the meeting are Michael Perich, the Group CEO; Josée Lemoine, the Group CFO; Justin Coss, the Group General Counsel and company secretary; and Scott Standen, our co-company secretary; and a number of our staff and advisers. Now before we get too far into the meeting, could I ask everyone to turn their phones to silent, please? I also wanted to point out that for those shareholders not attending in person today, if you lose connection to the meeting at any time, you can log back into the EGM online platform by returning to the link log-in page and following the prompts. You will then receive an automated e-mail with a recovery link, which will reconnect to the EGM. Alternatively, please call our share registry provider, Link Market Services, on 1800 990 363 for assistance. The Notice of the Meeting was published on the ASX and sent to shareholders on Monday, the 26th of April 2021. I will take the Notice of Meeting and the accompanying explanatory statement as having been read. Today's meeting will be structured as follows. I will provide a brief overview of the company's recapitalization and turnaround strategy and give some broader background to the resolutions you are being asked to vote on today. Our company secretary, Justin Coss, will then go through some procedural matters, including how you can ask questions and submit your votes in person or online. After that, I will open the floor for shareholders and proxy holders to ask any questions. And finally, we will run through each of the 13 ordinary resolutions, as presented in sequence on the slides and proceed to vote on each resolution. Let me firstly address the recapitalization. This is an important meeting in the history of Freedom Foods Group, one, I think, will be -- we believe will mark the start of a new era for our company. Today, you are being asked to vote on a number of resolutions, all related to the recapitalization plan that we first announced at our Annual General Meeting in January and confirmed in March. As you know, this plan involved an offer of up to $130 million of convertible notes to eligible wholesale investors and a placement of up to $200 million of notes to Arrovest, our majority shareholder, subject to the company having the ability to scale back Arrovest's investment to a minimum of $135 million, depending on the level of participation under the wholesale investor offer. We are pleased to announce yesterday the results of the capital raising, which has raised the full amount of $265 million. We were particularly pleased that the wholesale investor offer was oversubscribed, enabling us to reach an agreement with Arrovest to scale back its minimum commitment by that amount. In total, Arrovest, which is the Perich family investment vehicle, has committed $126.1 million through the placement, while existing and new investors have committed $138.9 million through the notes issued by way of $130 million of the wholesale investor offer and the balance of $8.9 million under the company's existing placement capacity. This will enable us to repay approximately $231 million of bank debt with the balance going towards working capital as we continue our turnaround. Today's meeting is one of the final steps in completing the recapitalization of the company. Today, we will also seek your support to issue up to 40.8 million options to all Freedom Food Group shareholders, excluding Arrovest and certain shareholders outside of Australia and New Zealand, to enable you to participate in any upside as we continue the turnaround of the company. Working with our expert advisers, the Board sought input from the market, including many existing investors, and determined that this recapitalization structure was the best outcome for the company and its shareholders given the challenging circumstances we found ourselves in last year. However, we are confident that with the proposed capital structure and the support of the existing and new investors, we can continue rebuilding this business around a portfolio of well-known and well-loved brands, including Australia's Own, MILKLAB, PUREnFERRIN and Vital Strength to name a few. So much progress has already been made. As we have outlined previously, we have refreshed the Board and overhauled the executive team. We have conducted a detailed review of every brand and product to ensure we are focusing on those with the most profitable potential. We have dramatically improved governance and protocols, systems and processes. We have identified and, in the case of cereal and snacks, divested noncore assets. We've empowered our people, and we have worked relentlessly to instill a culture of discipline and accountability. The one thing, though, we do not want to lose is our culture of innovation, which in the past has enabled us to build valuable new brands and capture new markets. We do, however, want to contain those entrepreneurial spirits within our culture of discipline and accountability so that every investment and opportunity is thoroughly assessed and every dollar wisely spent. I can say with confidence that at every level, this is a demonstratively better managed and better governed business than it was 12 months ago. The missing piece has been a stable, long-term capital structure, something we're addressing here today. Signs that our turnaround strategy is working are starting to come through in our financial performance. Although our March results were affected by seasonal factors, as foreshadowed, there were positive signs, including continued strength in the plant-based beverage sales, led by solid quarter-on-quarter growth in MILKLAB. The plant-based beverage business is one of the 2 cornerstones of our growth strategy, tapping into the growing consumer demand for most healthy food and beverage choices. This month, we launched the first consumer-facing advertising campaign to promote MILKLAB, which is already Australia's favorite barista beverage range. The other cornerstone to our growth strategy is Dairy and Nutritionals business, which is undergoing a significant operational turnaround. This transformation strategy is focused on a number of areas, each critical to returning the business to sustainable and profitable growth, including reducing waste, improving production efficiencies, removing or reducing unprofitable products, optimizing milk supply and curtailing losses from the sale of surplus milk, as experienced in the past. The turnaround of Freedom Foods since the middle of last year would not have been possible without the ongoing support of our majority shareholder, Arrovest, and our ability to agree a standstill agreement with our banks while we work through the best options for the recapitalization. The continued support of Arrovest underpins the recapitalization plan. The Perich family has been a committed shareholder in Freedom Foods Group for more than 15 years and will remain so following completion of the recapitalization. By voting for the resolutions today, you will join us on this journey. Your support for the recapitalization will allow us to consolidate the gains we have already made and set the company up to continue and complete its turnaround strategy, restoring Freedom Foods to sustainable and profitable long-term growth. Today is your opportunity to ask the Board about the recapitalization plan and the resolutions themselves. We want to have the opportunity to hear from as many as you as possible. But given many of the resolutions are very similar, I propose to take all questions on all topics in one block moving forward then into the formal business of the meeting to vote on the individual resolutions. I will now hand over to our company secretary, Justin Coss, to go through the question time and voting mechanics for the meeting. Justin?

Thank you, Gen. Today, all online attendees can watch a live webcast of this meeting. [Operator Instructions] For those members who have attended in person, you'll be able to ask a question in due course by raising your hand, and a microphone will be provided to you. There will be only one opportunity to ask questions today, as Gen has referred to earlier. I ask that you keep your questions short, to the point and relevant to the resolutions, please, so that as many shareholders as possible have the chance to ask a question. All online questions will go through to the moderator for the meeting. The moderator will identify each person who asks an online question, read out the question and will then pass the question to the Chair of the meeting. The Chair will either answer the question or pass it to the most appropriate person to answer. Please also note that if we receive multiple questions on one topic, we may amalgamate them together. We reserve the right to rule out questions that don't relate to the business of the meeting, and we'll not answer questions that are the same or substantially similar to questions that have already been answered. Otherwise, we will endeavor to answer as many of your questions as we possibly can today. Voting today will be conducted by way of a poll on all items of business. Each of the shareholders will be passed -- as each of the resolutions, rather, will be passed as an ordinary resolution, meaning each resolution must be passed by more than 50% of the votes cast by eligible shareholders entitled to vote on that resolution, whether in person, by proxy, attorney or corporate representative. In order to provide you with enough time to vote, polling on each of the resolutions is now open. If you are voting online, you are eligible to vote at this meeting. A new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with the voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do have the ability to change your vote up until the time that the Chair declares voting closed at the end of this meeting. If you have any questions about casting your vote online, please call Link Market Services on 1800 990 363 for assistance. If you're attending in person today and hold a yellow admission card, you're entitled to vote on each of the resolutions today, except where you have been excluded from voting in accordance with the Listing Rules. If you have been excluded from voting on a resolution, this should clearly be marked on your admission card. On the back of your admission card is a ballot for each of those 13 resolutions to be considered at this meeting. Please indicate on your card how you wish to vote on each resolution by marking the appropriate squares. If you are a proxy and you have been instructed to vote in a certain way, you must direct your votes as directed on each resolution by marking the appropriate square on your proxy holder voting card. Your admission cards will be collected from you at the end of the meeting. If you're attending in person and hold either a blue or red admission card, you are not entitled to vote. Finally, the results of the polls will not be available until after the close of this meeting and will be announced on the ASX and posted on the company's website as soon as reasonably practicable after the meeting closes. Are there any questions relating to the procedures of the meeting that I've described today? As there are no questions about the procedures of the meeting, I'll pass back to your Chair, Genevieve Gregor.

Thank you, Justin. I'll now open the floor to any questions relating to the recapitalization and the resolutions to be put to the members today. If you are attending in person and wish to ask a question, please raise your hand, and a microphone will be provided to you. We will be grateful if you could state your name before asking the question. All questions should be addressed to me as Chair, and then I may allocate them to various folks in the room to answer them, or I may answer them myself. I reiterate that this is the only opportunity to ask questions today prior to the voting on the resolutions. So if anybody has a question, love to hear from you. Or if there's any questions online, there's a screen that's in front of me here. And one of the -- and I think Scott is going to read out any questions that come in online as well. Or if you don't feel like you want to ask questions in the meeting here in a more formal setting, we are having team coffee after the meeting, and we are very -- the directors and some of the executives will be around so that you can actually ask questions there as well. So it's entirely up to you guys.

No questions are being submitted, Chair.

Seems like we're going to get off very lightly today. That's fine. If -- and I don't want to rush anybody. But if you do -- people are online and they do wish to ask any questions, please feel free to submit your questions online. I think you have to type them in if you're online, and then they come up on the moderator screen. And then they are actually passed on to me to read out or Scott to read out. So there's actually -- Justin's just reminding me that we did have some submissions of questions yesterday, and you are able to put them in prior to the meeting. One of the questions that was asked yesterday was, "What was the -- is the price that we sold cereal and snacks at above or below book value?" And I'm pleased to say that the price that we sold cereal and snacks at was effectively the book value. So there will be no additional sort of changes to that. But that will obviously be sorted through and audited in due course. But really, we sold it at book value. And I think the other question that we've received is, "Will we continue to have hybrid meetings?" And I think one of the challenges with the current environment that we operate in is I think that's the most reasonable way for people to attend meetings, depending on where they live. And also obviously, given the evolving COVID situation, I think a hybrid meeting is sensible to continue going forward. And I think that if everyone's happy with that, we'll continue with that. One other question that we did get yesterday is the independent expert's report basically said it was not fair, but it was reasonable. And so one of the questions that we received in writing yesterday was, "How do you feel about that independent review?" So without going into chapter and verse about the technical way you judge whether something is fair, technically, the ASIC and the regulators set a very hard level for assessing whether an issue of any particular capital is fair. And in this situation, given the way that it was structured, we would have had to have had effectively a takeover premium built into the pricing above the last listed price, which was before when we were suspended. And of course, that was -- predates our disclosures on the FY '20 accounts. So we probably could never have achieved a fair outcome. But we can and we did achieve a reasonable outcome, given the situation the company was faced with. The independent expert did rule that the structure of the securities and the offer was reasonable. So hopefully, that answers that question. One more question that Justin is reminding here about is -- there was a question that was written again yesterday was, "Why was cereal and snacks sold so cheaply?" And I would probably ask that if everybody looks back into the restated accounts and you looked at the loss that cereal and snacks had incurred, the fact that we were able to sell it at book value, we felt, was a good outcome for the company. We also -- given the current performance at the half yearly, you will see that cereal and snacks continued to underperform and was loss-making. So we felt that, that was a fair outcome for cereal and snacks, selling it at book value. And Justin, is there anything else that I've missed? No? There's a question that has come in online, and I'll get Scott to read it.

Thank you, Chair. We've received a question from [ Janice ]. "How confident can investors be of the overhaul of management and the culture in the company?"

Thank you for your question, [ Janice ]. I'll answer that one. Culture is -- starts at the top, and culture does start with myself and the Board members. And I can assure you that every single Board member is very focused on ensuring that we have a culture of accountability, a culture of transparency. And we will be measuring our executive on all of those things and more. But we feel that the new management team that we have put in place have all the right attributes to comply with what culture we're trying to set here in the company going forward. So time will tell. But certainly, we have, and hopefully, everyone has seen this in the way that we've been presenting to the public, we are presenting to the public with enormous amount of transparency. And we hope clarity for everybody to understand and re-understand the business. So that transparency and disclosure that we have been bringing forth, I hope, gives you the confidence to understand that things have changed.

There are no further questions, Chair.

Yes?

The seafood business, has that [indiscernible]?

Yes. Is it -- was it...

[ Neil ].

[ Neil ], thank you for asking that question. I'll just repeat it so that everyone online can hear that. I think if I paraphrase it, [ Neil ], you're asking what are we doing about the seafood business? Have we got any buyers for that? So the seafood business is a smaller -- the smaller segment of the go-forward business. So we have the 2 main segments, which is obviously the plant-based and then the Dairy Nutritionals segment. And we have flagged that seafood is under strategic review and possibly for sale. Our intent with seafood is to improve its performance and then look to seek offers from the market, and we haven't really set a date on that yet, Neil. So that is still under review, and we're still working on improving the performance there as well. Thank you for your question. So I'm not sure if anybody else would like to ask a question. Very happy to, like I said, take questions outside over coffee. Or if there's no further questions from the floor or online, I might move that we keep moving through to the more formal part of the meeting.

So well, if we can move to the formal part of the meeting now. And as indicated in the Notice of Meeting, the deadline for the lodgement of the proxy forms was 10:00 a.m. on Sunday, the 23rd of May 2021. And as indicated on the proxy forms, I, as Chair, intend to vote all undirected proxies given to me in favor of each resolution. And so now if we can move to resolution 1. I will start by formally moving resolution 1, as set out in the Notice of Meeting, which invites you to approve the issue and conversion of up to 200 million convertible notes to Arrovest Pty Limited. Please note that while the resolution is expressed to relate to 200 million notes, the actual allocation to Arrovest, as I mentioned earlier and per the announcement yesterday, will be 126.1 million of notes. Resolution 1 is now displayed on the slide. And it is also followed in a moment by the next slide, it's already there, the results of the valid proxies received by the company for this resolution. Voting exclusions for this and all other resolutions are set out in the Notice of Meeting. I will now invite you to vote on resolution 1. If you vote on this resolution despite being excluded, the company will be entitled to disregard your vote. [Voting]

We will now move to resolution 2 and 3, for which I am excluded from voting and, therefore, hand over to Justin to put those resolutions to the meeting. Justin?

Thanks, Gen. Resolution 2. As set out in the Notice of Meeting, resolution 2 invites you to approve the issue and conversion of up to 130 million convertible notes in connection with the wholesale investor offer. Resolution 2 is now displayed on the slide, followed in a moment on the next slide by the results of the valid proxies received by the company for this resolution. I now invite you to vote on resolution 2. If you vote on this resolution despite being excluded, as Gen mentioned in the previous resolution, the company will be entitled to disregard your vote. I'll now pause for a moment to allow for the voting. [Voting]

And we'll now move to resolution 3. As set out in the Notice of Meeting, resolution 3 invites you to approve the issue and conversion of up to 150,000 convertible notes to Woolwich Family Pty Limited as trustee for the Woolwich Family Trust. Resolution 3 is now displayed on the slide, followed in a moment on the next slide by the results of valid proxies received by the company for this resolution. I now invite you to vote on resolution 3. If you vote on this resolution despite being excluded, the company will be entitled to disregard your votes. I'll now pause for a moment to allow some voting. [Voting]

And we'll now move to resolution 4, for which I'll hand you back to Genevieve.

Thank you, Justin. So resolution 4. As set out in the Notice of Meeting, resolution 4 invites you to approve the issue and conversion of up to 75,000 convertible notes to Ms. Jane McKellar. Resolution 4 is now displayed on the slide, followed in a moment on the next slide by the results of the valid proxies received by the company for this resolution. I now invite you to vote on resolution 4. If you vote on this resolution despite being excluded, the company will be entitled to disregard your vote. I will now pause to allow you time for voting. [Voting]

We will now move to resolution 5. Resolution 5. As set out in the Notice of Meeting, resolution 5 invites you to approve the issue and conversion of up to 25,000 convertible notes to Karooli Pty Ltd as trustee of the TB Bryan Family Trust. Resolution 5 is now displayed on the slides, followed in a moment on the next slide by the results of the valid proxies received by the company for this resolution. I now invite you to vote on Resolution 5. If you vote on this resolution despite being excluded, the company will be entitled to disregard your vote. I will now pause to allow you time for voting. [Voting]

We will now turn to resolution 6. Resolution 6. As set out in the Notice of Meeting, resolution 6 invites you to approve the issue and conversion of up to 25,000 convertible notes to M.A. Clark Pty Ltd as trustee of the Chapman Eastway No. 4 Superannuation Fund. Resolution 6 is now displayed on the slide, followed in a moment on the next slide by the results of valid proxies received by the company on this resolution. I now invite you to vote on resolution 6. I'm proposing that I won't repeat the next thing, which is if you vote on this resolution despite being excluded, the company will be entitled to regard your vote. I think I'll leave that for the next few resolutions to stop repeating myself, but I'll now pause. [Voting]

And we will now move to resolution 7. Resolution 7. As set out in the Notice of the Meeting, resolution 7 invites you to approve the issue and conversion of up to 210,000 convertible notes to Famtron Pty Limited. Resolution 7 is now displayed on the slide, followed in a moment on the next slide by the results of the valid proxies received by the company for this resolution. I now invite you to vote on resolution 7. I'll pause for a moment to give you time. [Voting]

We will now move to resolution 8. Resolution 8. As set out in the Notice of Meeting, resolution 8 invites you to approve the issue and conversion of up to 2,268,099 convertible notes to the Perry Gunner Entities. Resolution 8 is now displayed on the slides, followed in a moment on the next slide by the results of the valid proxies received by the company for this resolution. I now invite you to vote on resolution 8, and I'll pause to allow you time to vote. [Voting]

We will now move to resolution 9, and I once again pass you back to Justin to put resolutions 9 and 10 to the meeting on the basis that I'm excluded from voting on those resolutions.

Thanks, Genevieve. Resolution 9. As set out in the Notice of Meeting, resolution 9 invites you to approve the grant of up to 40,000 -- sorry, 40,816,326 options to shareholders with a registered address in Australia and New Zealand other than Arrovest Pty Limited. Resolution 9 is now displayed on the slide, followed in a moment on the next slide by the results of the valid proxies received by the company for this resolution. I now invite you to vote on resolution 9. [Voting]

Now we'll move to resolution 10. As set out at the Notice of Meeting, resolution 10 invites you to approve the grant of up to 7,291 options to Woolwich Family Pty Limited as trustee for the Woolwich Family Trust. Resolution 10 is now displayed on the slide, followed in a moment on the next slide by the results of valid proxies received by the company for this resolution. I now invite you to vote on resolution 10. [Voting]

We'll now move to resolution 11, and I will hand you back to Genevieve once again.

Thanks, Justin. Resolution 11. As set out in the Notice of Meeting, resolution 11 invites you to approve the grant of up to 497 options to Ms. Jane McKellar. Resolution 11 is now displayed on the slide, followed in a moment on the next slide by the results of the valid proxies received by the company for this resolution. I now invite you to vote on resolution 11. I'll pause for a moment. [Voting]

We will now move to resolution 12. Resolution 12. As set out in the Notice of Meeting, resolution 12 invites you to approve the grant of up to 52,771 options to Famtron Pty Limited. Resolution 12 is now displayed on the slide, followed in a moment on the next slide by the results of the valid proxies received by the company for this resolution. I now invite you to vote on resolution 12. I'll just pause for a moment. [Voting]

We're now reaching the final resolution, resolution 13. As set out in the Notice of Meeting, resolution 13 invites you to approve the grant of up to 461,702 options to the Perry Gunner Entities. Resolution 13 is now displayed on the slide, followed in a moment on the next slide by the results of valid proxies received by the company for this resolution. I now invite you to vote on resolution 13. [Voting]

So that draws to conclusion all the formal voting, and I now declare the polls closed. That completes the voting on the formal business of this meeting. Representatives from Link will now move through the room collecting your voting cards. Please place the cards in the ballot boxes as the Link staff come around. For those of you who are voting online, there will be a short pause while votes are collected. There is no further business to be conducted today, and the results of the poll voting will be announced to the ASX as soon as possible after this meeting and will be posted on the company's website. I now declare the meeting closed. And in doing so, thank you for your attendance today, whether online or in person. We now invite shareholders and their representatives to join the Board and senior management for light refreshments, including coffee and tea made with some of our fabulous products. Thank you.