FCG
Freedom Care Group Holdings Limited
ASX
Response to ASX Query Letter
Sentiment:
Response to ASX Query
22 November 2024 2:42 AM
Australian-listed Freedom Care Group Holdings (ASX: FCG) faced an ASX query regarding delayed disclosure of an NDIA payment suspension and potential NDIS registration revocation, leading to a significant share price drop.
Delay expected
The company delayed disclosing the NDIA payment suspension and the notices from the NDIS Quality and Safeguards Commission, which were considered material information that should have been disclosed earlier.
Worse than expected
The significant drop in share price following the delayed disclosure of the NDIA payment suspension and potential NDIS registration revocation indicates worse-than-expected results for investors.
The negative operating cash flow and the potential loss of a significant portion of revenue due to the NDIS issues point to worse-than-expected financial performance.
Summary
- Freedom Care Group Holdings Limited (FCG) received an ASX query letter on November 18, 2024, regarding its delayed disclosure of a National Disability Insurance Agency (NDIA) payment suspension and potential NDIS registration revocation.
- The NDIA payment suspension began on September 12, 2024, due to inconsistencies identified in FCG's claims.
- FCG first disclosed the NDIA audit and its impact on cash receipts in its Quarterly Activities/Appendix 4C Cash Flow Report on October 31, 2024, reporting nearly $8.7 million in cash receipts for Q1 FY25, but estimating over $800,000 less due to the audit.
- On November 4, 2024, FCG received two notices from the NDIS Quality and Safeguards Commission, one suggesting registration revocation and another a potential ban from providing services.
- FCG disclosed this information to the market on November 6, 2024, after the close of trading on November 5, 2024.
- The share price dropped significantly from $0.13 on November 5 to $0.037 on November 11, 2024.
- FCG requested a trading halt on November 12, 2024, and its securities were suspended from quotation on November 14, 2024.
- FCG stated that it did not initially consider the payment suspension to be price-sensitive information because it had sufficient cash reserves and believed the issue would be resolved quickly.
- FCG's Annual Report for the period ending June 30, 2024, did not contain information about the NDIA audit.
Sentiment
Score: 3
Explanation: The delayed disclosure of material information, significant share price drop, and potential loss of NDIS registration create a negative sentiment. While management expresses optimism about future growth, the immediate situation is concerning.
Positives
- The company had sufficient cash at bank to fund its operations during the NDIA assessment.
- The company provided all required information to the NDIA promptly.
- The company believed it could resolve the payment suspension with the NDIA and fully cooperated.
- The company's service revenue base showed solid growth in the September 2024 quarter.
Negatives
- NDIA payment suspension impacting short-term cash flow.
- Significant share price drop following disclosure of the payment suspension and NDIS Commission notices.
- Potential revocation of FCGPL's NDIS registration and a potential ban from providing services.
- Delayed disclosure of material information to the ASX.
- Negative operating cash flow in the September 2024 quarter.
Risks
- Potential revocation of NDIS registration and ban from providing services.
- Protracted NDIA audit and payment suspension.
- Significant impact on revenue and cash flow.
- Further share price decline.
- Uncertainty regarding the outcome of discussions with the NDIA.
Future Outlook
The company believes it can access sufficient short-term cash and does not anticipate the pause in NDIS funding to extend much longer. Growth prospects remain rock-solid, focusing on specialized care within the NDIS ecosystem.
Management Comments
- We are well-pleased with the solid growth seen in Freedom Cares service revenue base over the September 2024 quarter.
- While we reported a negative operating cashflow in the September 2024 quarter, this was attributable to one-off expense items and a NDIS audit, none of which are likely to be repeated in following quarters.
- Looking ahead, our growth prospects remain rock-solid.
Industry Context
The situation highlights the risks associated with reliance on the NDIS for revenue and the potential for significant financial impact from audits and payment suspensions. It also underscores the importance of timely and accurate disclosure of material information to the market.
Next Steps
- Discussions between FCG and the NDIA regarding the payment suspension.
- Resolution of the NDIA audit and payment suspension.
- Potential appeal of the NDIS Commission's notices.
Key Dates
- June 30, 2024: End of financial year for Freedom Care Group's Annual Report
- September 12, 2024: NDIA suspended all payment requests from FCGPL
- September 18, 2024: FCGPL received a letter from the NDIA regarding inconsistencies in claiming behaviours
- September 30, 2024: End of the first quarter of FY25 for Freedom Care Group
- September 30, 2024: Freedom Care Group's Annual Report released
- October 31, 2024: FCG released its Quarterly Activities/Appendix 4C Cash Flow Report
- November 4, 2024: FCG received two notices from the NDIS Quality and Safeguards Commission
- November 5, 2024: FCG considered the NDIA payment suspension to be Price Sensitive Information
- November 6, 2024: FCG announced the payment suspension and NDIS Commission notices to the market
- November 11, 2024: FCG's share price closed at $0.037
- November 12, 2024: FCG requested a trading halt
- November 14, 2024: FCG's securities were suspended from quotation
- November 18, 2024: ASX sent a query letter to FCG
- November 22, 2024: FCG responded to the ASX query letter
Keywords
NDIS, Freedom Care Group, ASX, Payment Suspension, Audit, Registration Revocation, Continuous Disclosure, Share Price, Trading Halt
FCG
Freedom Care Group Holdings Limited
ASX
Sector: Health Care Equipment & Services
Filings with Classifications
Worse than expected
15 December 2024 8:49 PM
Suspension Update
- The company's securities remain suspended due to inadequate financial condition and breach of listing rules, which is a worse outcome than expected.
Capital raise
28 November 2024 9:20 PM
Annual General Meeting Results
- The approval of an additional 10% placement facility suggests a potential future capital raise.
Worse than expected
22 November 2024 2:42 AM
Response to ASX Query
- The significant drop in share price following the delayed disclosure of the NDIA payment suspension and potential NDIS registration revocation indicates worse-than-expected results for investors.
- The negative operating cash flow and the potential loss of a significant portion of revenue due to the NDIS issues point to worse-than-expected financial performance.
Delay expected
22 November 2024 2:42 AM
Response to ASX Query
- The company delayed disclosing the NDIA payment suspension and the notices from the NDIS Quality and Safeguards Commission, which were considered material information that should have been disclosed earlier.
Worse than expected
11 November 2024 5:12 PM
Trading Halt Announcement
- The trading halt announcement indicates a negative development, as it suggests a disruption in payments from the NDIS, impacting FCG's financial stability.
Worse than expected
5 November 2024 6:03 PM
Market Update
- The preliminary notices from the NDIS Quality and Safeguards Commission regarding potential registration revocation and a banning order represent significantly worse-than-expected news for Freedom Care Group.
Delay expected
5 November 2024 6:03 PM
Market Update
- The protracted review of FCGPL's support services claims has resulted in a payment suspension from the NDIS.
Capital raise
29 October 2024 2:57 AM
Annual General Meeting Notice
- The company is seeking shareholder approval for an additional 10% placement facility, allowing them to issue equity securities up to 10% of their issued capital.
- The funds raised will be used for continued exploration expenditure and/or general working capital.
Delay expected
30 April 2024 7:22 PM
Investor Presentation
- Timing of receipts from debtors impacted revenues for the Mar-24 quarter, with these revenues expected to be booked in the Jun-24 quarter.
Disclaimer: This summary was generated by artificial intelligence and its accuracy is not guaranteed. The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.