Gold Coast’s Retail Food Group annual report 2018 says debt levels still major risk for company

THE future of Southport food franchisor Retail Food Group remains shaky due to its high debt and multiple challenges. Today the company has revealed the steps it’s considering to secure its future

THE future of Southport food franchisor Retail Food Group hinges on the generosity of its lenders, with more asset sales and a possible market recapitalisation on the cards, the company’s annual report said today.

The group, which operate brands including Pizza Capers, Brumbys, Donut King and Gloria Jeans, confirmed its after-tax loss of $306.7 million, an eye-watering turnaround from its $61.9 million profit the previous year.

The loss represented an earnings per share loss of $1.695.

New chairman Stephen Lonie said the board appreciated the challenge it had in restoring value to shareholders, whose investments have fallen in price by as much to 90 per cent since December.

RFG has been pummelled by investors and customers since revelations its franchise model had proven unsustainable for many of its franchisees.

Three of its former executives, Tony Alford, Alicia Atkinson and Andre Nell have been formally summoned to face a federal inquiry into the franchise sector.

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Franchise chain Retail Food Group operates Pizza Capers …

The company reported net debt of $258.9 million as at June, 30 — more than triple the current combined value of its shares.

It has since gained some breathing room by renegotiating the terms of its loans, however it remains at risk of breaching them, Mr Lonie said.

“The risk that the Group may breach financial covenant thresholds within the next 12 months remains, which could result in the Company’s syndicated debt becoming due and payable,” he said.

“RFG’s continuing viability is, therefore, dependent upon the continuing support of its syndicated lenders, and managing the terms of its renegotiated debt facilities.

“Having regard to these matters, a key focus for RFG is the reduction of debt and strengthening the Company’s balance sheet.

“The Company is considering a range of options, including potential asset sales and securing potential alternative funding such as a market recapitalisation.

“Work on these options began some time ago and is continuing, but, at this date, the Board does not have a definitive position on which option is in the best interests of RFG’s shareholders.”

FORMER RFG EXECS NOW THE COMPANY’S LANDLORDS

RFG is based at Southport.

Mr Lonie said the results had worsened throughout the year despite significant progress in the company’s turnaround strategy.

“As the financial year progressed, it became evident that trading results were not meeting management’s budget,” he wrote in his chairman’s statement.

“The Group’s performance was being impacted by challenging retail trading conditions, particularly within shopping centres, negative market sentiment towards franchising and RFG in particular arising from negative publicity, the cumulative impact of domestic store closures, and internal challenges in managing what had become an increasingly complex business model following the Gloria Jean’s and Hudson Pacific acquisitions.”