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LEGAL | Staff Reporter, Australia
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Retail Food Group hit by $87.8m loss in 1H18

RFG plans to reset its focus on quality of domestic franchise business which will see 160-200 domestic outlet closed by end of FY19.

It started the first quarter with a disappointing performance, impacted by persistent challenging retail trading conditions.

1H18 EBITDA/NPAT performance was also influenced by ineffective tactical initiatives and disappointing execution across certain business units, cumulative impact of 2H17/1H18 domestic outlet closures, and the sharp decline in domestic new, resale, and renewal activity.

RFG reported that its revenue increased 20.8% to $195.5m from $161.9m on the previous corresponding year, whilst its EBITDA collapsed to 24.5% to $45.7m.

The significant items recognised in 1H18 include non-cash impairments, write-downs, and provisioning totalling $138m pre-tax which comprises of brand system impairments of $84m, $35.7 arising from closure program, and $18.3m for PP$E and inventory write-downs, loss on real property disposals and miscellanous matters.

The company's net debt as of 31st December 2017 totals to $259.7, with senior debt covenant reset agreed (including leverage ration increase to 3.0x)

For Retail Food Group's Bakery Cafe Division, all of its bakery brands declined in network sales. BCD's sales fell 12.5%, Donut King's sales dipped 2.1%, Brumby's sales slipped 15.7%, and Michel's Patisserie's sales crashed 22%.

For its Coffee Division, Gloria Jean's network sales also fell 5.1% to $114.9m in Q1. Gloria Jean's 20:20 first pilot outlet launched on February 2018 marking a significant brand evolution for Gloria Jean's.

Its QSR Division's Pizza Capers brand also reported its network sales to be lower than last year's previous result of $94.3m. It now stands at $91.1m, which decreased by 3.4%

For its outlook, RFG remains confident in the strength of its underlying business operations and ability to support brand systems and franchisees.

It also looks to expedite business-wide review and fast-tracking outcomes which will include broader brand strategy and portfolio review and ongoing structural improments to enhance its business model. RFG plans to reset its focus on quality of domestic franchise business which will see a total of 160-200 domestic outlets to be closed by end of FY19.

The Company didn't provide a full-year guidance and said, " The Company will keep the market informed on developments." 

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