"Still profitable": Retail Food Group defends goodwill figure

The franchisor says that much of their recent losses relates to non-cash accounting adjustments.

Retail Food Group (RFG), the franchisor behind Gloria Jean's Coffees, Donut King and other well-known chains, has responded to a report by the Sydney Morning Herald that called into question the goodwill on its balance sheet.

The franchisor specifically valued its goodwill at $52 million whilst posting a $111 million loss, keeping the ASX-listed group in the black, with net assets now sitting at $19.5 million.

“Our first half results show that we have gone some way towards clearing the decks and stabilising the performance of our operations. While RFG did record a statutory net loss after tax, it’s important to note that much of this loss relates to non-cash accounting adjustments," RFG chief communications officer Belinda Hamilton said in a statement.

"What this means is that on an underlying basis, RFG is still profitable - we still have support for all of our brand systems, there are still earnings there, and our brands are still trading profitably so there is certainly strong goodwill in our brands."

Hamilton noted that RFG, currently undergoing major restructuring, saw about 67 million customer transactions going through its network last year. The challenge they are facing, she explained, is the amount of debt. RFG previously confirmed that it is in negotiations to sell its Donut King and QSR Division brand systems in a bid to reduce debt.

"We are implementing a number of major initiatives to get that debt down. We acknowledge we still have a lot of work to do however we remain confident that RFG can be restructured and as noted we expect to record earnings of $43m-$48m, so I guess you could say that the proof will be in the pudding.”