The FOD Turnaround has Officially Begun...
The biggest returns we have ever made are investing in company turn-arounds, and we love when they start to deliver better and better financial results.
A turnaround is where a new, experienced CEO comes into an existing business and turbocharges it to deliver returns for investors.
Food Revolution Group (ASX:FOD) is a food and beverage manufacturing company specialising in innovative health-focused products.
Its flagship product is premium orange juice - you might have seen their "Original Black Label" juice brand in supermarkets - and FOD is starting to gain traction with their "wellness juice shots" and plant based protein products.
The world is moving towards plant based protein and general health and wellbeing, and FOD is well positioned to capture these massive global trends.
We invested in FOD after watching its new turn-around CEO Tony Rowlinson take the reins for 12 months and start to execute on the turnaround strategy for FOD - growing the business, increasing efficiencies and delivering innovative new products.
We tried to time our entry into FOD just as it was on the cusp of seeing the first results of "Turnaround Tony’s" first 12 months of effort.
We took a position at 3.5c back in March in what we are hoping is a share price low point before the impact of Tony’s turnaround strategy starts to become visible in the reported companies financials.
Our strategy is to hold FOD over the long term (5 to 7 years) to see the full turnaround strategy play out. We expect a return on our capital through either dividends (not for a while though) or an acquisition of FOD by a larger health or food brand.
FOD's holding out for a hero - he’s gotta be strong, and he’s gotta be fast, and he’s gotta be fresh from the fight...
... and the latest quarterly shows that Turnaround Tony has delivered.
We think the FOD turnaround has officially begun.
Highlights for us from the quarterly:
- Gross sales of $10M in the quarter up 14% from same quarter last year
- Profit of $284k in the quarter, from a $684k loss same quarter last year
- Cash reserves have increased from the previous quarter
- Original Juice Co and FOD fresh juice business delivers 25.9% growth in Woolworths and Coles - this is huge growth for a consumer good.
- New JuiceLab wellness shops now in 1,000 stores (Woolies, Coles, IGA/Metcash).
- Year to date numbers show a $2.5M unaudited EBITDA. Massive improvement from last year.
Key comments from CEO:
We like FOD’s "plant based high-protein non dairy range" product line - we firmly believe that people are going to move away from dairy and animal food products for ethical reasons much faster than expected - anyone who has read books or seen documentaries on factory-style farming of animals will agree.
Companies like FOD will be perfectly positioned to replace animal products with plant based alternatives and we are investing in this thematic.
We also believe the population is becoming more conscious of health and wellness, which is why we are watching closely to see how FOD’s "Juice Lab Wellness shots" will perform over the next 3 months.
What we are watching out for next:
- Increased traction in JuiceLab health shots.
- Update on plant based product strategy.
- Increased revenue, EBITDA in full year results.
- Reduction of debt facility.
- New distribution partners (local or international).
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
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