'Shareholder Q&A' is located at the end of this email.
HALO FOOD CO. LIMITED (HLF)has authorised us to contact their shareholders on their behalf to ensure you have received the
booklet in the post and/or via emailthat outlines an offer only for existing investors like you, called an “SPP”
-Share Purchase Plan.
The Companyhas signed a binding conditional agreement to acquire 100% of the issued share capital in leading digital health and wellness business, The Healthy Mummy Holdings Pty Limited (THM), for $17m.
In conjunction with the placement, Halo has announced a Share Purchase Plan
(SPP)specifically for existing investors only, to raise up to $3 million. Eligible shareholders (such as yourself) have the opportunity to acquire up to A$30,000 worth of shares at
an issue price equal to the lower of:- $0.105 per share without incurring any brokerage costs; and
- A 15% discount to the volume weighted average market price (VWAP) of the shares over the last five trading days on which sales in the Shares were recorded up to and including the closing date of the offer (expected to be Monday, 14 March 2022) without incurring any brokerage costs.
Halo recently conducted a
share placement raising $3.5m, with strong participation from new and existing institutional and sophisticated investors. In order to reward existing retail shareholders, the Company is offering this SPP opportunity at a potentially attractive price of the lower of $0.105 per share or a 15% VWAP of shares over the last 5 trading days, including the close date of the offer.
Given the interest shown in this SPP Offer, the company reserves the right in their absolute discretion to scale back or accept applications under the SPP if applications exceed A$3m. For this reason, we’re contacting you today to make sure you’re aware of your ability to participate as an eligible shareholder in the business.
The offer is not underwritten, and in conjunction with the placement, HLF’s board members and directors are also participating in the SPP, in addition the
directors have also purchased shares on market(announcement – Change in Director’s Interest Notice -22/24.02.22).
Full details of the SPP are set out in the SPP Offer booklet.
Payment must be received by 5:00pm (AEST) on Monday, 14 March 2022 (“Closing Date”). You can also find all the details about this offer, along with HOW TO PARTICIPATE on the following website - https://events.miraqle.com/hlf-offer*Make sure you have your SRN/HIN handy. Your HIN or SRN can be found on your holding statement and other security holder communications
For more information about the offer, or 'how to subscribe' please reply to this email or contact Stevan Adzic (Peloton Shareholder Services) via email
[email protected]or call 0401 639 114.
Proceeds from the Placement,SPP and Debt Facility are intended to primarily be used toprovide the company with funds to complete the acquisition and support its growth initiatives, including:
- Acquisition funding for The Healthy Mummy (THM)
- Refinance of Existing Debt Facility
- Working Capital and Growth initiatives
- Transaction costs.
Ultimately the proceeds will placeHalo Foodsin a strong position for growth and growing positive EBITDA as it has demonstrated over the last 9 months, recording normalised EBITDA of $1.6m for the 9 months to 31 December 2021.Moving forward the company will capitalise on substantial cross-sell opportunities between Halo and THM brands, along with the integration of The Healthy Mummy’s high margin subscription digital product offering to transform Halo sales mix and profitability.
In discussions with the company, we believe there are additional positive factors to consider:
In summary- Providesaccess to valuable and high margin direct to consumer digital distribution channels,with the ability to cross sell Halo’s products through those channels
- Introduceshigh margin recurring digital subscription-based revenueto Halo
- Halo will manufacture in-house the Healthy Mummy’s products, this is anticipated to be $4-5m per annum of workcreating approximately $800k synergies for the benefit of Halo Food Co
- Healthy Mummy is aprofitable and cash generative business, recorded $4.1m EBITDA as at 30 June 2021 and is on track to record more than $5.0m by June 2022.This EBITDA will be recorded in Halo’s financial results from the time of completion of the transaction
- Transforms Halo’s branded sales overnight from 10% of the sales mix to c.40%
- THM hasa large social media following(1.9m Facebook followers, 220k Instagram followers and an engaged community of 600k mums)for which to market both THM and Halo brands to
- Complementary distribution channels across supermarket, petrol & convenience, specialty, pharmacy, online & social
- The Healthy Mummyis a fast-growing, profitable and cash generative business, in FY21, THM recorded revenue of~$21 million and normalised EBITDA of $4 million.
The highly strategic acquisition to deliver combined revenue of ~$84 million and normalised EBITDA of ~$5.7 million (on a historic basis) to the Company pre-synergies and $800k in synergies expected to be realised from the manufacture of THM products in-house at Halo’s existing manufacturing facilities
Taking into account Halo Food Co’s current EBITDA run rate of the last 9 months the consolidated EBITDA is expected by ~$7.5m
THM offers a differentiated product, service and digital distribution offering with substantial cross-selling opportunities for existing Halo brands, driving organic growth.
- Halo financial positionis $50.7m in revenue in FY21 compared to FY22 revenue forecasted at $60.1m,projecting growth of more than 18% this financial year vs 2021. The company also reported Consolidated normalised EBITDA profitability of $503K for the December 2021 quarter, $1.6m normalised EBITDA for the 9 months to 31 December 2021, with a strong pipeline of orders and new clients moving into calendar year 2022.
- Halo is an establishedand rapidly growingmanufacturer, exporter and brand owner of formulated dairy, health and wellness products and operates 2 key divisions:
- Manufacturing: 7 purpose built and fully accredited production facilities in Aus and NZ
- Proprietary Brands: Which include Tonik, SuperCubes, Gran’s Fudge and KeyDairy
Their growth strategy is to leverage its manufacturing capabilities to make acquisitions, implement organic growth initiatives including proprietary brands and extract operational efficiencies and scaling benefits.
- Share price stabilisationas the company has been informed that the block trade sale of large shareholder Bergen Special Opportunity Fund LP's entire holding of 20.3m shares (announcement 15.02.2022) has been completed. This is a positive for the Company as Bergen had been selling shares on market through the months preceding the acquisition.
- SPP offer attractively pricedas the offer price is of the LOWER OF 1) $0.105 per share or 2) a 15% VWAP of shares over the last 5 trading days of the SPP offer, ie, the last five days of the offer prior to close. Means shareholders will always get a discount to the market price.
- Directors have skin in the game– they have invested considerable amounts of their own money in via direct share purchase/placements/SPPs and are fully committed to the business and motivated to ensure its growth and profitability. All eligible directors are participating in full through the SPP offer.
- Halo Foods boasts a highly experienced Board and Management Team, who have extensive hands-on operational experience in Fast-Moving Consumer Goods (FMCG), manufacturing, strategic business growth and strong Health and Wellness industry experience in Australia and around the world.
HALO FOOD CO. LIMITED(HLF)is an ASX-listed company, based in Sydney and Melbourne, Australia and Christchurch, New Zealand, Halo Food Co. Limited is an established manufacturer and exporter of formulated dairy products and health and wellness products.
Their offering includes both extensive contract manufacturing capability along with own proprietary brands including Tonik, KeyDairy, SuperCubes, and Gran’s Fudge. Our aim is simple – to provide the best in diversified health and wellness products to consumers globally, eliminating the worry for time poor, health-conscious consumers.
In addition to their products being carried in major supermarkets, petrol and convenience and independent chains throughout Australia, New Zealand and international markets including China, Hong Kong, Taiwan, Vietnam and the Middle East.
Halo’s fully accredited and purpose built facilities in New Zealand and Australia and offer a broad range of product manufacturing and pack formats, including powders, UHT ready to drink products, protein bars and fudge. With the capability to provide private label nutritional and lifestyle supplements for some of Australia’s largest pharmacy chains, retailers and sports nutrition companies.
The Healthy Mummy (THM)was founded in 2010 by Rhian Allen, with a vision of becoming Australia’s Leading support solution for mother’s aiming to regain their health and fitness.
The Health Mummy’s mission is to help millions of mothers around the world who want to improve their health and wellbeing after having children. The healthy Mummy has the world’s largest health and wellbeing community of mothers with young children; its 28 day Weight Loss Challenge (28 day challenge) has helped women lose over 2.7m kg (6m lbs) collectively
The business generated c/$21m of revenue and c.$4m of normalised EBITDA in FY21.
HALO FOOD CO. LIMITED (HLF)– Shareholder Questions & Company AnswersQuestion – Why has the share price dropped so suddenly when the SPP was announced?It is not uncommon for a stock to trade at the SPP or placement price through an SPP period and as some shareholders sell some or all of their shares to participate in the SPP.
In this case, there has been further pressure on the price from macro conditions outside of the company’s control (ie, Ukraine & Russian political tensions) and the sell down of the founder who now has an immaterial number of shares remaining at (~2% of the register). Additionally, some shareholders will naturally sell-down on market to pick up stock at the offer price.
However, we’ve offered the SPP at an attractive price of the LOWER OF $0.105 per share or a 15% VWAP of shares over the last 5 trading days prior to the close of the SPP offer. This means shareholders will always receive a discount to the market price at the time the offer closes.
For example, let’s say the closing market price is 0.8 (8 cents) over the last 5 days of the offer, including offer close day. Thus the 15% VWAP would apply as it is the LOWER of the offer price.
Calc – 40/5 days = 8 cents VWAP
VWAP 8 cents x 15% discount = 0.068 (6.8 cents) final SPP Offer price, with no brokerage.
Question – On the SPP offer price of 15% VWAP discount, why has the company decided to introduce this?The Company wishes to offer all shareholders the ability to participate in the capital raise and the SPP regardless of the market price and pro-rata their holdings to avoid dilution. This pricing mechanism allows shareholders to participate even where the market price trades below the $0.105 as the 15% discount is applied to the 5 day VWAP closing SPP price and the company is acutely aware of the prevailing market conditions in equity markets at the present time, particularly the political tensions between Russia and Ukraine.
Question – The company has been informed that the block trade sale of large shareholder Bergen Special Opportunity Fund LP’s entire holding of 20.3m shares? (as per announcement 15.02.2022), what does this mean for shareholders?This is a positive for shareholders, it means the share overhang from Bergen has been cleared and any pressure on the share price from their consistent selling (per the release of the substantial shareholder notices) has been eliminated. Their shares have been sold to multiple parties through the shareholders register creating additional liquidity in the Halo stock.
Question – Are there any other shareholders in the top 20 looking to continuously selldown their holdings?The Company cannot comment on the intentions of all shareholders as the election to buy further shares or sell is a matter for each individual shareholder.
Question – How will The Healthy Mummy acquisition benefit Halo and shareholders?The acquisition of The Healthy Mummy will be beneficial to Halo and ultimately Halo for the following reasons:
- Providesaccess to valuable and high margin direct to consumer digital distribution channels,with the ability to cross sell Halo’s products through those channels
- Introduceshigh margin recurring digital subscription based revenueto Halo
- Halo will manufacture in-house the Healthy Mummy’s products, this is anticipated to be $4-5m per annum of workcreating approximately $800k synergies for the benefit of Halo Food Co
- Healthy Mummy is aprofitable and cash generative business, recorded $4.1m EBITDA as at 30 June 2021 and is on track to record more than $5.0m by June 2022.This EBITDA will be recorded in Halo’s financial results from the time of completion of the transaction
- Transforms Halo’s branded sales overnight from 10% of the sales mix to c.40%
- THM hasa large social media following(1.9m Facebook followers, 220k Instagram followers and an engaged community of 600k mums)for which to market both THM and Halo brands to
- Complementary distribution channels across supermarket, petrol & convenience, specialty, pharmacy, online & social
Further details are set out in the Investor Presentation on the company’s website and ASX platform.
Question – THM shows a 5.1m EBITDA for June 2022, will Halo turn a positive EBIDTA for Dec 2022?Halo recorded a normalised EBITDA of $1.1m for the first half of its FY22 financial year to 30 September 2021 and a further $500k for the December 21 quarter. This totals $1.6m of normalised EBITDA for the 9 months to 31 December 2021.
Question – It mentions part of the proceeds from the capital raise will be used for growth initiatives, what does this mean?The combined business will seek to grow across several initiatives including further retail expansion for all its brands (including the Healthy Mummy) including additional marketing support, the launch of an ecommerce mummy marketplace, the development of a Healthy Mummy wellness app, international expansion for all brands across the Halo portfolio and the pursuit of further contract wins in the Halo business.
Question – Could a new COVID variant outbreak or lockdown impact Halo’s or THM operations/revenue?A new COVID variant may have an impact on the results and operations of the group subject to the action and response taken by Government. The business has robust procedures in place and has been classified as an essential service throughout the last 2 years of the pandemic and is confident it can navigate further COVID challenges.
Question – If the offer price trades higher than the market price, why would I participate in the SPP Offer?Let’s assume the offer price is higher than the market price; unfortunately, in this situation we can’t control the market price, however we’ve offered the SPP at an attractive price of the LOWER OF $0.105 per share or a 15% VWAP of shares over the last 5 trading days, including the close date of the offer. Shareholders ALWAYS receive a discount to the market price. Furthermore there’s a difference to buying on market vs participating in the SPP offer as explained below.
Buying on market– means you’re facilitating a 3
rdparty trade for existing shares, so a seller of the stock will receive funds and you will receive the stock at the purchased market price.
Participating in the SPP Offer– is the purchasing of new shares issued by the Company, with funds going directly toward a specific purpose to support growth initiatives and unlock greater shareholder value, this includes;
1. Funding to pay for the The Healthy Mummy (THM) acquisition
2. Refinance of Existing Debt Facility
3. Working Capital and Growth initiative funding
4. Transaction costs.
Ultimately the proceeds will place Halo Foods in a strong position for growth and positive EBITDA. Which includes capitalising on substantial cross-sell opportunities between Halo and THM brands, along with introducing a high margin subscription digital product offering to transform Halo sales mix and profitability.
Shares issued under the SPP are free of any brokerage costs which would typically be payable when buying on market.
Question – How much funds will the company raise as part of this SPP?The company is targeting a maximum total raise of A$3m. However, the company reserves the right and absolute discretion to scale back applications or accept oversubscriptions under the SPP if applications exceed A$3m.
Question – How will the shares under the SPP be ranked against existing shares?New shares issued as part of the SPP will rank equally with existing fully paid ordinary shares in the company quoted on the ASX, with the same voting rights, dividend and other entitlements.
Question – What’s the minimum or maximum amount I can participate?Answer – $2,000 minimum, $5,000 and then multiples of $5,000 up to $30,000 maximum.
Question – Will I receive allocation if I participate on the last day prior to offer close?Answer – Last day payment is ok, however If paying by BPAY it’s preferred to pay at least 24h prior to offer close. If paying by cheque Bank Draft or Money Order then please send asap as Australia Post will have delays due to COVID.
Full details of the SPP are set out in the SPP Offer booklet.
Payment must be received by 5:00pm (AEST) on Monday, 14 March 2022 (“Closing Date”). You can also find all the details about this offer, along with HOW TO PARTICIPATE on the following website - https://events.miraqle.com/hlf-offer*Make sure you have your SRN/HIN handy. Your HIN or SRN can be found on your holding statement and other security holder communications 
