Retail Food Group Limited

Key Personnel Changes: Retail Food Group Limited’s (ASX: RFG) stock climbed up 9.74 per cent on May 29, 2018 following the announcement of new CEO appointment. According to the release, Richard Hinson, who joined the company in January 2018 as Chief Executive with the objective of leading a strategic business review, has been promoted to group chief executive officer (CEO) effective immediately. In that role, Mr. Hinson is responsible for the Group’s domestic franchising network, and will be working with franchisees to strengthen and improve their businesses. Further, Richard Hinson and Darren Dench are focused on improving the performance of core domestic franchising and global coffee businesses, and their leadership has made a positive impact on the business in challenging retail trading conditions. Under their leadership, the Group has experienced the early sign of improving performance in terms of reducing franchisees cost of goods, renewal and new store fees, and worked with franchisees to pilot innovative new store concepts. Mr. Hinson has replaced Mr. Andre Nell who was the CEO for less than two years.

On the other hand, the embattled group that lost its momentum in the past few months, was otherwise seen to witness return on equity (RoE) on an average of 13.38 per cent over the last five years up till FY17. This however, has come under immense pressure lately. It is also worth noting that Invesco Australia Limited, which is a substantial holder of the Group changed its respective holding on 21 May 2018 from 11.262 per cent of the voting power to 12.298 per cent of the voting power. Based on key personnel change and expecting for further improvement in the business performance, we prolong our “Hold” recommendation on the stock at the current market price of $ 0.845, and the stock is worth a watch in case the recent changes can turn the tables.


Trend of RoE through to FY17 (Source: Company Reports)

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