Retail Food Group swings to profitability as QSR brands drive growth

The company says it has built a ‘strong base’ for FY22.

Retail Food Group swung to profitability in its latest financial year, as its QSR brands withstand pains from a year of COVID-19 lockdowns and trading restrictions.

The ASX-listed franchisor reported a statutory NPAT of $1.5 million, a 136.6% increase on FY20’s statutory loss of $4.0 million - representing their first statutory profit since 2017.

Underlying EBITDA was at $26.9 million, down on the FY20 result of $31.7 million but says it is “consistent with consensus forecasts.” 

RFG’s same store sales were up 3.2% year-on-year, naming “stand outs” Gloria Jean’s drive-thru outlets growing 17.8%, Brumby’s Bakery with 9.1%, and Crust and Pizza Capers collectively gaining 4.3%.

Its 590-store international division and domestic Gloria Jean’s, Donut King and Michel’s Patisserie outlets in shopping centres within metropolitan NSW and VIC were most affected by COVID-19 during the year, the company said.

“The year’s results reflect periodic suppression of customer traffic in the major East Coast cities, store closures, and the challenges experienced by franchise partners who had volatile revenues but significant rental overheads,” RFG executive chairman Peter George said in a statement..

“These have been tough and unavoidable trading conditions and we believe that hard-working franchise partners, strong brands and ongoing promotional support from RFG has kept the impact to a minimum and built a strong base for FY22. We are cautiously optimistic.”

The downturn in the company’s underlying EBITDA for FY21, RFG added, was limited by a number of “bright spots” which included a 39.1% rise for EBITDA for Brumby’s Bakery and 6.6% same store sales growth both for Donut King and Gloria Jean’s in non-metro regions and regional Australia, respectively.

George added that RFG “placed itself in a stronger position” to respond to the challenges of FY21 by addressing financial and balance sheet issues in the past years.
“An encouraging outcome in FY21 was a 5.7 per cent increase in Average Transaction Value across our domestic network. The bright spots that we see in the FY21 results are largely a product of the ongoing commitment to an agile ‘franchisee first’ approach, which we are pursuing into FY22,” he said.

The Australian Competition and Consumer Commission’s (ACCC) action against Retail Food Group relating to “historical conduct” was still being addressed, George added. The company has filed a defence in response to the allegations.

“Given our focus on the positive initiatives which have and continue to be implemented under RFG’s new management, the company believes that the interests of franchisees are best served by an early resolution of the proceeding. However, if this cannot occur, the company remained committed to defending its position,” George added.

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