IRS Delays Cast Shadow Over HPP’s Financial Recovery Despite Reduced Losses
Health and Plant Protein Group Limited has dramatically reduced its half-year net loss to $43,000 following the divestment of its macadamia division, though uncertainty lingers over a significant IRS receivable in the US.
- Net loss narrowed to $43,000 in H1 FY25 from $748,000 a year earlier
- No trading activity due to sale of US macadamia division and ASX suspension
- US$3.9 million IRS receivable remains unresolved with unclear timing
- Corporate overheads decreased by $345,000 despite increased reclaim provisions
- Unrealised foreign exchange gain of $361,000 on IRS receivable recorded
A Turning Point in Financial Performance
Health and Plant Protein Group Limited (ASX:HPP) has reported a significant improvement in its financial results for the half-year ended 31 December 2024. The company posted a net loss after tax of just $43,000, a stark contrast to the $748,000 loss recorded in the same period last year. This improvement largely reflects the impact of the divestment of its core US-based macadamia business in April 2023.
With the sale of its main operating division, HPP has effectively ceased business activities during this half-year, resulting in zero revenue generation. This operational pause has coincided with the suspension of HPP shares on the ASX since August 2023, limiting market liquidity and investor engagement.
The IRS Receivable: A Lingering Question Mark
One of the most critical unresolved issues for HPP is the outstanding US$3.9 million receivable from the Internal Revenue Service (IRS) in the United States. This amount is subject to withholding taxes estimated at US$550,000 and reclaim costs of approximately US$67,000. The company and its advisors have faced ongoing delays and a lack of clarity from the IRS regarding the timing and amount of funds to be returned.
This uncertainty poses a material risk to HPP’s near-term liquidity and financial planning. However, the company recorded an unrealised foreign exchange gain of $361,000 on this receivable during the half-year, reflecting currency fluctuations that partially offset some costs.
Cost Management and Corporate Overheads
Despite the operational standstill, HPP has managed to reduce corporate overheads significantly, down by $345,000 to $429,000 for the half-year. This reduction was achieved even as the company increased its provision for the costs associated with reclaiming the IRS receivable by $26,000. The prior period had been burdened by one-off expenses including director option grants, legal fees related to the macadamia division sale, and foreign exchange losses, which were absent in the current reporting period.
Looking Ahead: Strategic and Market Implications
With its core business divested and shares suspended, HPP is at a crossroads. The company’s immediate focus will likely remain on resolving the IRS receivable issue, which is pivotal to restoring financial stability. Beyond that, investors will be keen to see if HPP can articulate a clear strategic direction or new business initiatives to leverage its health and plant protein expertise.
The current financial results, while improved, underscore the transitional phase HPP is navigating. The market will be watching closely for updates on IRS developments and any signals of renewed operational activity or capital restructuring.
Bottom Line?
HPP’s near-term recovery hinges on IRS clarity and a fresh strategic vision to reignite growth.
Questions in the middle?
- When will the IRS provide clarity or release the US$3.9 million receivable?
- What new business strategies or markets might HPP pursue post-macadamia divestment?
- How long will the ASX suspension last, and what impact will it have on shareholder confidence?
