Shareholders of Gold Coast’s Retail Food Group grill new chairman Peter George at annual meeting

Shareholders of Southport franchisor Retail Food Group have grilled its board over its $265 million debt, what’s being done to save the company and who will be held to account for its predicament. Here’s what they heard.

AN air of cautious optimism circulated among Retail Food Group shareholders who have had their first chance to quiz bosses since the company’s freefall from grace 12 months ago.

About 40 shareholders showed up as CEO Richard Hinson and new chairman Peter George outlined what they propose to do about the company’s dire results and diminishing share price.

The chairman was frank under questioning about the likelihood of RFG’s lenders of calling in more than $260 million in loans — a potentially terminal prospect articulated by one shareholder who declared “all these programs mean nothing if the banks pull the rug out”.

“The short answer is that there’s $250-odd million in bank debt and we’re not earning enough to cover that debt,” Mr George replied.

“Do the banks want to take RFG over and sell those assets into a buyer’s market? No.

“Are they happy with the proposal we’ve put to them? So far, yes they are.

“They’re going to require some tangible evidence in the next couple of months to maintain that, but provided those initiatives proceed as we think then I have every reason to think the banks will allow us to restructure — but nothing’s certain.”

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Retail Food Group shareholders at the company's 2018 AGM at RACV Royal Pines. Photo: Kathleen Skene

The company said it was not in a position to release a profit guidance for the current financial year, perhaps for several months.

The group reported an after-tax loss of $306.7 million last financial year, an eye-watering turnaround from its $61.9 million profit the previous year and far worse than its $87.6 million guidance.

Mr George, who’s been chairman for just three weeks, flagged the drastic changes needed to save the company.

“There is much work to be done at RFG, and I think it is important that I acknowledge the enormity of this turnaround, from the outset,” he said.

“To reduce our bank borrowings, it is likely that we will need to sell assets, recapitalise the balance sheet and reduce our 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 CEO Richard Hinson was appointed in May. Photo: Richard Gosling

One shareholder wanted to know what consequences would be felt by previous RFG board members for the company’s current predicament.

“Franchisees and shareholders have been ripped off — not by anyone in this room,” the shareholder said.

Mr George said “if there’s any illegality it will be investigated and action will be taken”.

“I have certainly seen no evidence of anything illegal,” he said.

“I’ve seen evidence of a company that grew too quickly and lost its way and that’s a very different thing.”

Peter George.

Another shareholder asked the CEO and chairman what performance targets they were willing to undertake to measure the effectiveness of their strategy.

“You’re both recent arrivals on the scene, and it’s a bit hard as a shareholder to take you guys by the scruff of the neck,” he said.

“You’ve painted a reasonably positive picture going forward … but it doesn’t always work out that way.

“What are you and the board willing to put in place so that shareholders here next year will be able to say `yes you did well’ or `no, you were telling us garbage’?.”

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Retail Food Group shareholder Jon Bosisto at the company's 2018 AGM at RACV Royal Pines. Photo: Kathleen Skene

Mr George said the results would speak for themselves as the balance sheet was restored and franchisees chose to stay or go.

Another shareholder wanted to know when RFG would start generating some good news stories to improve its domestic and international reputation in the face of continued coverage of its poor performance.

“The good news will follow the success or otherwise of our restructure,” Mr George said.

“All I can say, as a leap of faith, is that I’ve done this kind of thing a few times and the bleak situation that you’re looking at now can be changed.

“If we can do that consistently over one or two years, that sentiment will start to turn.”

Tweed Heads shareholder and former investigative accountant Jon Bosisto, who bought into RFG four years ago, said he believed RFG had expanded too quickly and let its franchisees down — but could still have a positive future.

“I’m confident that the new regimen, under the leadership of Mr George, have every chance of trying to turn it around,” he said.

Mr Hinson said the company’s turnaround strategy was a 12 to 18 month endeavour “with our valued franchise customers and their shoppers at its heart”.

“To turn around performance we have had to make some difficult business decisions.”

RFG’s share price sunk to 38c, down 2.6 per cent.