Retail Food Group reports net loss of $149m on declining revenue and unresolved debt issues

Southport franchisor Retail Food Group has posted another staggering loss and revealed part of what the future looks like for the once billion-dollar company.

The offices of RFG at Olympic Circuit in Southport. Picture Glenn Hampson

SOUTHPORT franchisor Retail Food Group has halved its losses from last financial year to post a still-staggering $149.26 million net loss for 2018-19.

In an announcement after the market closed, RFG reported revenue of $349.77 million, down 6.5 per cent from the $374.03 million logged last year, with underlying earnings down 28.9 per cent to $50.73 million from $71.36 million.

The net loss recognised $185.2 million in write-downs and restructuring costs.

It said it had asked for, but was yet to receive, further extensions on lending covenants for $262 million in secured loans and that it had been ordered by two federal agencies to hand over documents as part of investigations into whether it breached the Corporations Act and Australian Consumer Law.

Its loans are due for repayment on October 31.

The group said it was “well advanced” in raising up to $160million in funds to pay down debt, either through a further financing pacakge with Soliton Capital Partners (Soliton) or a new equity raising.

“The group will also seek to agree a new financing facility for the residual debt with the existing syndicated debt lenders as part of a comprehensive funding program, in conjunction with the Soliton proposal or the new equity raising, or other potential financing,” RFG said.

Fiona Sang prepares one of the last batches of cinnamon donuts as the store prepared to close its doors at Casuarina Square.

The company said it was aiming for costs savings of $20 million a year as it looked to relieve its debt and revealed 173 domestic outlets had closed during the financial year.

RFG has battled for 20 months to recover from a volley of hits to its reputation and financial situation after franchisees, and then a parliamentary inquiry, revealed its business model had exploited franchisees.

The company’s share price had dipped 5.4 per cent to 17.5c after close of market on Friday, before the results were released.

The company reported an $111.1 million net loss for the first six months of the financial year, following up a $307 million net loss for full-year 2017-18, two months after the company said it expected an $87.6 million loss.

RFG did not provide any earnings guidance in the lead-up to this year’s results.

Investors haven’t had a dividend since receiving 30c per share in 2017, when RFG was trading at $4.56 and collectively worth $833.34 million.

This week, a 30c dividend payout would be worth more than one and a half times the value of an investor’s entire portfolio of shares.

Retail Food Group executive chairman Peter George. Photo: Supplied

The company said its turnaround was “still in its early stages and there remains much work to do”.

Executive chairman Peter George said the company was committed to doing more to help and protect franchisees.

“This includes making sure that prospective franchisees understand exactly what is associated with buying and operating a franchise and then helping them make an informed decision on whether their situation is suitable, or not,” he said.

“The narrative propagated in some media articles that RFG is indifferent to the position of its franchisees ignores the commercial reality that RFG’s success is linked to that of its franchisees.

“We have absolutely every reason to do all we possibly can to help our franchisees be more profitable.”

The group has been shopping around for new premises for its headquarters, roughly a third the size of its current home at Olympic Cct in Southport, after shedding more than 200 local staff.

In March its lenders, NAB and Westpac, agreed to waive a key review of its loan conditions that had hung over the company since the end of February.

Brumby's in Red Hill. (AAP image, John Gass)

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Talks with a potential buyer for Donut King and Crust, as well as fellow brand Pizza Capers, collapsed in April after RFG said the proposed price for the chains was too low.

RFG had valued its Donut King, Pizza Capers and Crust brands at $87.34 million after lease liabilities of $45.79 million.