RFG reports worse than expected loss but CEO vows to rebuild brands

RETAIL Food Group (RFG) unveiled a worse than expected $306.7 million loss for the year as it vowed to build its relationship with troubled franchisees.

Richard Hinson, the boss of troubled franchise operator Retail Food Group.

RETAIL Food Group (RFG) unveiled an annual loss more than three times larger than forecast as it vowed to rebuild its relationship with troubled franchisees.

The Gold Coast-based owner of the Donut King, Brumby’s Bakery and Gloria Jean’s Coffees chains reported a $306.7 million loss for the year to June 30 compared to a profit of $61.9 million in the previous year. In June, the company forecast an annual loss of about $87.6 million.

Revenue for the 12 months rose 7.1 per cent to $374 million, but the company recognised $402.9 million in impairments and provisions to cover store closures, restructuring and a reduction in the value of its brands and assets.

RFG shares dropped 8.8 per cent to 57¢ yesterday. They have slumped 88 per cent in the past year as the company battled complaints from franchisees about rising costs, franchise fees and lack of head office support.

RFG chief executive Richard Hinson said that despite the heavy losses, he was optimistic a restructuring effort would pay off in the future.

The company closed 123 stores in the last six months as it cut debt and sought to simplify the business.

“We now have the opportunity to grow the business and strengthen the network,” Mr Hinson said. “We have started a 12 to 18-month turnaround strategy.” Mr Hinson said he had just completed a national roadshow, meeting 700 franchisees to discuss the future of the business. A survey found that 79 per cent of franchisees supported the new direction.

RFG has hired more field workers to support franchisees, discounted new store and franchisee fees and passed on more than $4.5 million in savings on goods to franchisees.

“Our focus in the current financial year is to stabilise the business and return it to a profitable platform,” said Mr Hinson who joined RFG in May.

Hunter Green Institutional Broking director Charlie Green said the size of the company’s loss was surprising.

“That’s a breathtaking write off and one of the largest in Queensland history,” he said.

Mr Hinson said the company was looking at various options to reduce debt including asset sales and a recapitalisation.