Retail Food Group blasts brokerage report

GOLD Coast franchisor Retail Food Group has accused UBS – which raised concerns about rising debt levels – of “speculative guesswork”.

Retail Food Group has described a UBS report as ‘broad unsubstantiated assumptions’. Pictured is RFG managing director Andre Nell. Picture: Richard Gosling.

GOLD Coast food franchisor Retail Food Group has accused the UBS brokerage – which raised concerns about rising debt levels – of “speculative guesswork”.

RFG hit out yesterday after a UBS report said International Financial Reporting Standards (IFRS) meant retailers such as RFG will have to recognise rental payments over the entire term of a lease as a balance sheet liability.

UBS said the measures, which come into effect from July, 2019, could add $105 million in lease debt.

The report sent shares in the owner of the Donut King, Brumby’s Bakery and Pizza Capers chains, diving 59¢, or 11.3 per cent, to close at $4.63 on Monday – a 16-month low. Yesterday its shares bounced back 15¢ or 3.24 per cent to close at $4.78.

RFG said UBS has made “broad unsubstantiated assumptions” on the impact of the accounting standards.

“UBS would have no insight into the company’s position in respect of the impact (if any) of IFRS,” it said. RFG said the brokerage made no attempt at contact prior to publication of the report.

“RFG considers that any assumptions as to the potential impact of IFRS on the company’s financial statements, lending covenants or other debt arrangements is both premature, precipitous and an exercise in speculative guesswork.”

It will continue to monitor the effect of the new standards and update investors as necessary.

It said it enjoys a strong relationship with its lenders.

“They are well aware of the leasing structures which have been employed by the group since 2006.”

UBS has a target price of $4.70 for RFG shares. The financial uncertainty comes as RFG embarks on a new phase of overseas expansion.

RFG has more than 2500 outlets across 12 brands in 78 licensed territories and last month announced it has sold the master franchise licences for Brumby’s Bakery Fiji and Gloria Jean’s Coffees Pacific Islands. RFG posted a FY17 half-year net profit of $33.5 million, up 17.3 per cent.