Retail Food Group Releases Its Half Year Results For FY 2019

Global food and beverage company, Retail Food Group Limited (ASX:RFG) has released its half-year results for FY 2019. For the half-year period, the company has reported revenue of $192.0 million which is 1.8% lower than the previous corresponding period (pcp). Further, the company reported an Underlying NPAT of $6.6 million which is 73.4% lower than pcp. Following the release of the results, the share price of the company decreased by 5.556% in the intraday trade as on 1 March 2019 (AEST 2:51 PM).

As per the company’s report, the half-yearly results were impacted by the ongoing difficult retail trading conditions. The half years results were also affected by the cumulative impact of outlet closures, investment in restructuring activity, prevailing negative sentiment regards franchising, and declines in new store, resale and renewal activity versus pcp.

During the half year period, Brand System segment witnessed a decline of $5.2 million in its revenues. Further, the company also experienced a $10.2 million decrease in Di Bella Coffee revenue, driven by the exit of the capsule business in FY18, and a loss of key customers in the competitive contract roasting sector, particularly in Victoria. However, the Manufacturing & Distribution revenues increased by $8 million in H1 FY19.

During the period, the company implemented major restructuring and cost reduction initiatives across the Group. It is expected that the restructuring activity will deliver around $20m in annualized cost savings. These benefits are expected to start materialising in the second half of 2019 but will largely be felt in FY 2020.

While commenting on the half-year results, the company’s Executive Chairman, Peter George told that the half-year results show that the company has gone some way towards clearing the decks and stabilizing the performance of its continuing operations. He further informed that there is a lot of work remains to be done to resurrect the financial health and performance of the business.

The Company’s present financial position and its requirement to reduce debt to strengthen its balance sheet, have contributed to all divisions experiencing a decline in sales and debtor collections, as the ability to attract and retain customers is diminished.

The company has reported a statutory EBITDA loss of $112.5m attributable to non-cash impairments and write-downs, and provisioning, totaling $123.7m, as well as $12.7m in one-off expenses for business turnaround and restructuring activity, property disposal and lease exit costs.

While providing the outlook, the company informed that its business improvement will be driven by the successful implementation of a Six Point Plan that focuses on business stabilization, debt reduction and operational improvement amongst the Company’s business units. The company has already implemented various measures to support its Six Point Plan and to stabilize the company’s performance. The Company is expecting the market conditions to remain challenging in future while the Company executes on its restructuring program. The Company therefore currently anticipates its FY19 underlying EBITDA to be in the range of $43m-$48m, assuming full-year contributions from all business units and the realization of forecast annualized restructuring benefits.

RFG’s shares trading at $0.260 with a market capitalization of circa $49.34 million as on 1 March 2019 (AEST 2:50 PM).

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