Retail Food Group value written down as company profits tumble 50 per cent

Franchising giant Retail Food Group has suffered a $185.2 million hit from write-downs and restructuring costs as the company's profit halved in the past year.

The company owns large franchise brands including Michel's Patisseries, Donut King, Gloria Jeans, Crust Gourmet Pizza, Pizza Capers and Brumby's Bakery. On Friday, it reported underlying net profit of $15.4 million, down from $33.3 million the year prior.

Retail Food Group, owner of Michel's Patisserie, has seen its profits drop over 50 per cent.Credit: Geoff Jones

Revenue dipped 6.5 per cent to $349 million as same store sales at every division declined, dropping  2.4 per cent at Michel’s, Brumby’s, and Donut King, 3.6 per cent at Gloria Jeans, and 1.5 per cent at Crust and Pizza Capers.

Friday's $150.3 million write-down of intangible assets, such as brand systems and goodwill, followed a $402.9 million impairment the company booked in 2018.

RFG said it had asked its banks to extend a $262 million loan, due on October 31, which they were considering.

It also said if its $160 million debt and equity bailout with Soliton Capital Partners did not go ahead, it was "well advanced" in preparing for a new equity raising.

The company blamed "intense competition and changing consumer trends", along with a decline in retail performance for the downturn in operations at the company which has suffered a string of public scandals.

In May, an investigation from The Age and The Sydney Morning Herald revealed the company had directed franchisees at Michel's Patisserie to sell batches of chocolate cakes after their use-by dates.

The company was also slammed in the government's franchising inquiry earlier this year, and is facing two separate class actions as well as a number of regulatory investigations.

Executive chairman Peter George said the company was committed to existing and prospective franchisees, dismissing claims the company was "indifferent" to them.

"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," he said. "We have absolutely every reason to do all we possibly can to help our franchisees be more profitable."

Looking forward, Mr George said he was expecting the business to stabilise and grow through a number of new initiatives, which include moving back to fresh cakes at Michel's and a focus on social media influencer campaigns.

The results were released after the market closed. On Friday RFG shares were down 5.41 per cent to 18 cents.

- with Patrick Hatch.