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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. 

ASX: FOD

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: 

FOD Comments From Tony

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). 

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Disclaimer

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its reports. As a result, investors should be aware that the S3 Consortium may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making any investment decision. The publishers of this report also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this report.

Publishers Notice

The information contained in this report is current at the finalised date. The information contained in this report is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

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