The embattled owner of the Gloria Jean's and Donut King brands, Retail Food Group, has made a shock admission that its first-half results will not be ready by the stock exchange's cut off date as it faces a delay in the auditing of its accounts.
On Wednesday morning, RFG took the unusual step of halting its shares from trade ahead of its first-half results.
Retail Food Group chief Andre Nell at the company's annual meeting in November on the Gold Coast.Credit: Dan Peled
It again warned the market that it expected its 2018 first-half results to be "materially lower" than in the first half of 2017.
The delay clearly caught some at RFG offguard with the company confirming it had cancelled a planned analyst call. It is believed the company also pushed back scheduled media interviews.
The halt comes as speculation mounts the company will book impairments to its assets when it releases results.
RFG declined to comment on whether it has been in any discussions with its lenders Westpac and National Australia Bank regarding its results. It is understood the company's recently refinanced $150 million senior debt remains in the frontline of the bank's lending book and has not been placed in the workout books for either banks.
The results delay and profit warning come after Fairfax Media revealed in December that the group was using a brutal business model that had sent hundreds of franchisees within its network to the wall financially.
Fairfax's investigation also uncovered rampant underpayment of workers within RFG's brands as a result of the unfair business model for franchisees, and highlighted the company's misuse of marketing funds contributed by franchisees.
The investigation came at a time when RFG was also under pressure from analysts at UBS to properly record its leases in its accounts as per new accounting rules. The change could have a severe financial impact on the group, UBS has warned.
RFG owns the Gloria Jeans, Brumby's Bakeries, Donut King, Michel's Patisserie, Crust Pizza and Pizza Capers chains.
Australian-listed companies have to report their results twice a year - once by the end of February and again at the end of August. If RFG does not release its reports by March 1 its shares risk suspension by the ASX. RFG said it expected to release its results by March 2 at the latest.
The trading halt comes after RFG issued a profit downgrade in January. This followed a readjusted earnings forecast issued by the group in December.
In a statement to the Australian Securities Exchange on Wednesday, Retail Food Group requested the halt pending the receipt by RFG of the auditor’s report on the company's first-half result to December 31, 2017.
"As foreshadowed in the release made on January 9, 2018, RFG expects its statutory net profit after tax for first half 2018 to be materially less than the result for the equivalent prior period," the company said.
"These results can only be finalised and released to the ASX once RFG’s financial statements for the period have been finalised.
"That can only occur once the auditor’s report has been issued which may not, RFG currently understands, be available to RFG until Friday March 2, 2018."
PricewaterhouseCoopers partner Steven Bosiljevac conducted the audit of RFG's annual accounts for 2017. Some of RFG's major subsidiaries were in 2017 audited by Alfords Accounting, the firm founded by RFG's former long-standing chief Tony Alford but to which he is no longer associated.
The company has also recently appointed investigating accountants from Deloitte to conduct a review of its Australian business.