Retail Food Group’s 1H FY19’s Performance Slackens - Is RFG On Downtrend?

  • Mar 07, 2019 AEDT
  • Team Kalkine
Retail Food Group’s 1H FY19’s Performance Slackens - Is RFG On Downtrend?

Retail Food Group Limited (ASX: RFG) is a food and beverage company, which owns multi-brand retail food franchise businesses in Australia as well as worldwide. The brands broadly comprise Gloria Jean’s, Donut King, Pizza Capers, Brumby’s Bakery, Crust Gourmet Pizza Bar, and Michel’s Patisserie.

It operates through five key segments comprising Bakery/Café, Di Bella Coffee, Coffee Retail, QSR, and Commercial Food Services. The company is based in Queensland, Australia and runs a network of around 2,400 outlets.

As of date, the Group’s market capitalisation stands at AUD 38.38 million with approximately 182.75 million outstanding shares. At the end of the trading session on March 6th, 2019, the RFG stock closed at a sell-off price of AUD 0.210, nosediving by 12.5%, indicating an intra-day fall of AUD 0.030. Around 2.35 million volume of shares were traded through the day. Today, 7 February’19, the stock closed flat at AUD 0.210. A glance at RFG stock’s past one-year performance depicts a sustained decline in the market price from AUD 1.140 (March 6th, 2018) to AUD 0.210 as at March 6th, 2019, indicating a fall of 81.58%.

Besides, the three-month and six-month return yields also stand negative at 41.67% and 58% respectively. The stock price underwent constant fluctuations in the past two months and has generated a negative YTD return of 28.81%.

Investors may wish to keep a close watch to see if the stock sees an upward momentum in near future.

The Group recently released its interim financial report for the Half-year ended December 31st, 2018 (1H FY2019), which began with a turnaround process involving the restructuring of management and cost reduction initiatives to stabilise the business, that would reduce the debt and strengthen the balance sheet.

The statutory revenue from continuing operations for 1H FY2019 was recorded around $171.2 million, representing a decrease of $ 6.9 million on the prior corresponding period (PCP). The decline can be attributed to a $ 5.2 million fall in Brand System segment revenues ($ 15-million fall in segment’s underlying revenue), following the planned store closure program, and lower transactional revenues from new outlet sales and franchisee renewals compared to PCP.

This was offset by a $ 9.4 million contribution of revenues from the launch of AASB 15, excluding the Donut King and QSR Brand Systems classified as discontinued operations along with an $ 8.0 million increase in Manufacturing & Distribution revenues. Besides, the Di Bella Coffee segment revenue reduced by approximately $ 10.2 million due to the exit of the capsule business in FY2018.

The underlying EBITDA was recorded at $ 23.9 million (down $ 21.8 million on PCP) and the underlying NPAT at $ 6.6 million for 1H FY2019 excluding the $ 9.8 million (pre-tax) of restructuring costs, $ 2.9 million of the expenses from non-core operations, $ 0.8 million worth amortisation of acquired intangible assets, and around $ 1.2 million of finance costs stemming from the reduction in tenor on debt facilities to October 2019.

As of December 31st, 2018, the Group’s net Assets amounted $ 19.5 million, and the net cash and cash equivalents stood at $ 21.03 million with massive total cash inflows of around $ 14.66 million from operating and investing activities.


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