Freedom Foods Group Ltd (ASX: FNP) was amongst a large handful of companies to wait until after 5pm last Friday to announce to the market its half -year financial results.
For readers unfamiliar with Freedom Foods, the group boasts a market capitalisation of $500 million and is a niche manufacturer of allergen-free healthy foods including cereal and spreads.
For the half year ending 31 December 2014, the group achieved an 8.3% increase in net sales revenue to $55.5 million. On a statutory basis, reported profits were huge thanks to a fair value gain on the group's investment in the New Zealand-based a2 Milk Company. On an underlying basis however, operating net profit after tax fell 24.9% to $3.1 million and the corresponding earnings per share fell 26.2% to 2.04 cents per share.
Not Great
The underlying profit result could hardly be described as great, however as management noted: "Profitability (was) impacted by commissioning of the new nutritional snack equipment reducing manufacturing recoveries and gross margin during the half."
This investment for future growth included a $9 million expenditure on upgrading capacity including the installation of a new state of the art automated nutritional snack line.
Freedom also invested in expanding its North American sales and distribution capabilities in readiness for plans to launch new products into this market.
Outlook
Management didn't exactly quantify what investors should expect for the full year, however, they did state that they anticipate: "Growth in sales and profits over the remainder of financial year (FY) 2015, with the benefits of its multi stage capital investment programme delivering increased profits and returns from FY 2016 and beyond."
Given the company already commands a market capitalisation of over $500 million, investors will want to be confident that current spending will boost future earnings significantly as this is required to justify the hefty multiple that they are currently being asked to pay.
