Retail Food Group Limited

RFG Responded to Media Speculation:Retail Food Group Limited (ASX: RFG) is Australia’s largest multi-brand retail food franchise owner and a roaster and supplier of high-quality coffee products. The market capitalisation of the company stood at ~A$33.81 million as on 25th September 2019. Recently, the company has responded to the media speculation with respect to the possible funding in a bid to reduce its debt. As per the release, the company has confirmed that it isconsidering a range of debt reduction options, including equity and debt funding options as well as asset sales.RFG is currently meeting with investors in relation to potential equity raising. No decision has been made by the Board as to whether to proceed with an equity raising at this stage. Currently, the discussions are underway with Soliton in relation to its proposal. No decision has been made by the Board at this time. The Board continues to consider various other options and a further update will be provided in due course.

FY19 Highlights: The company reported an underlying EBITDA of $50.7 million in FY19, indicating that the turnaround objectives set by new management are being met as the company executes the restructuring program which was commenced in 1H FY19.RFG reported a statutory net loss after tax of $149.3 million, improvement of 51.3% on PCP. The following picture provides a brief overview of the FY 2019 group performance:


 Financial Performance (Source: Company Reports)

Despite challenging retail trading conditions and adverse sentiments around the franchising industry, considering the parliamentary inquiry and other media attention, the company is seeing early signs of stabilisation.

Company’s Restructuring and Turnaround Plan: The company is progressing towards its debt reduction strategies to repair its balance sheet and position for future growth. RFG has also been exploring options for potential divestment of its non-core Manufacturing and Distribution Division assets, with discussions in relation to the sale of Dairy Country now at an advanced stage. A new product and marketing strategy that will deliver a rolling pipeline of 62 new campaigns over the next 12-18 months has commenced for franchisees.

New Strategies: Major developments to RFG have been implemented in FY19, and early results are proving very positive with momentum building as the company heads into FY20.The new management team has announced and or implemented a circa 15-20% reduction in the wholesale price of coffee for franchisees of RFG’s domestic retail brands, which is going to be funded by the restructuring of the company’s wholesale coffee business.
The company has been working with landlords to introduce tiered store refurbishment options to make it more affordable for franchisees to reflect current brand standards and ensure modern appeal in a competitive consumer environment, particularly in shopping centres.

Company’s Outlook: While the retail industry continues to provide its challenges, RFG is beginning to observe the positive impacts of the business improvement measures being implemented throughout the company as part of its turnaround strategy.In the immediate term, RFG is focusing on the progression of debt reduction strategies which are already well advanced and the continued rollout of its new product and marketing strategy.
The company is making solid progress with respect to the execution of Six Point Plan and expects to witness stabilisation and future growth through strategic initiatives underway.Thecompany is refocusing on core retail food franchise and coffee operations.

Stock Performance: The company produced returns of 37.04% and 8.82% in the time period of three months and six months, respectively. Currently, the stock is trading below the average of 52-week high-low. 

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