Retail Food Group half-year results for FY2019 reveal its losses have worsened as it looks to sell Donut King, Crust and Pizza Capers

After 18 months of pain, Southport franchisor RFG has revealed whether its turnaround plans can bring it back from the brink.

GOLD Coast franchisor Retail Food Group has widened its already gaping losses, posting a $111.1 million net loss for the first six months of the financial year.

The company confirmed it was negotiating the sale of its Donut King brand as well as its Crust and Pizza Capers chains.

Revenue slipped 1.8 per cent to $192 million, and the company said “the Group’s current financial position is unsustainable”.

Despite a board restructure and some encouragement from franchise customers, RFG said its board and senior management were “acutely aware that the Group has not performed as it should”.

RFG has booked an impairment charge of $123.7 million for the period, which reduces shareholder funds to $18.5 million.

It said 93 RFG domestic outlets had closed in the six months to December 31, leaving 1252 remaining in Australia, while 139 had closed overseas, where 11 new outlets were opened.

The results are revealed on the same day as the Southport company’s banks will review its covenants for RFG’s hefty loans, which at $258.8 million far outweigh its $50 million market capitalisation.

Shares in RFG remained unchanged at 27c after the results were released just before the market closed.

CRUNCH TIME AS RFG SET TO REVEAL HALF YEAR RESULTS

Donut King.

RFG also said it would close the bakery operations of its manufacturing and distribution division, and that full-year earnings were expected to slide by at least a 32 per cent.

Profit at the Brumby’s Bakery, Crust, and Michel’s Patisserie owner fell by 25 per cent for the six months to December 31.

This time last year, it posted an $87.8 million six-month loss despite an earlier guidance of a $22 million profit.

Investors haven’t had a dividend since October 2017, when shares were trading at $4.56 and collectively worth $833.34 million.

The company said no dividends were likely in the foreseeable future unless the company improved its financial position.

“There remains much work to be done at RFG, and it is important to acknowledge the enormity of the restructuring being actioned,” the comapny said in a statement.

“The group is in a position where reducing bank borrowings and refocussing on its customers are top priorities.

“To reduce bank borrowings, it is likely that RFG will need to sell assets, recapitalise the balance sheet and reduce its cost base by a large amount.

“All of this needs to be done whilst at the same time ensuring that the remaining business is positioned for success in the future.”

RFG is negotiating the sale of its Pizza Capers brand.

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The company has shed two chairmen and a CEO in the first six months of FY2019, after losing its managing director suddenly in May.

Current executive chairman Peter George, fresh to the role at the tail end of the half-year reporting period, has been focussed on providing as many options as possible for debt reduction and the strengthening of the group’s balance sheet.

In the second half of last financial year, as complaints of long-suffering franchisees were widely aired, the lucrative new income tap was tightly turned off.

In its October annual report, RFG revealed it had failed to open a single new outlet in the second half of last financial year, and that 305 outlets had closed in the full financial year.

It expected the closures to continue until the end of this coming June.

More to come