Retail Food Group (RFG), the rapidly expanding coffee and carbs group based on the Gold Coast, has taken a writedown of more than $18 million, and reaffirmed previous earnings guidance as it revealed an organisational shake up yesterday.
The company has expanded rapidly in the past few years, building its brands of convenience carbs and coffee – with over $200 million paid in the past year to expand deeper into coffee here and offshore.
The company includes among its brands Gloria Jeans (bought last year for more than $163 million), Donut King, Brumby’s Bakery, The Coffee Guy, Michel’s Patisserie, Crust pizzas and Di Bella Coffee (also bought recently for nearly $40 million). It told the ASX yesterday it remains on track for a 50% rise in net profit to $55 million for the June 30 financial year.
Much that rise is due to the recent acquisitions and international growth.
By 2018, the company said yesterday, it expects 70% of new outlets to be offshore. Last month the first joint venture Gloria Jeans outlet was opened at Tianjin in China – RFG says it will open a minimum 25 coffee shops in China over the next year.
The $18.5 million non-cash writedown on assets comes as the company consolidates its acquisitions and streamlines accounting and other back office functions.
As part of this the company has written down the value of lesser chains, such as bb’s Cafe and Esquires Coffee, with most of the write-down to be booked in 2015, denting bottom-line profits. bb’s Cafe and Esquires stores will be converted to Gloria Jean’s outlets or Michel’s.
RFG has lifted the number of new outlets it expects to open this year to a record 200 – 81 overseas and 119 in Australia – compared with a previous forecast of 150.
But it will also close 204 outlets, more than twice the number that closed last year, as the company rationalises its 12 chains.
RFG 1Y – Retail Food restructures post acquisitions
Same-store sales across the group have risen by 2.9% in the year to date, thanks to solid growth at Gloria Jean’s, while average transaction value has grown 3.4%, thanks to reworked new menus and store upgrades.
As a result, RFG says it is looking to sweat a further $16 million in gains from the integration of the various brands, up from the earlier savings estimate of $13 million.
As part of the shake-up, RFG says it will separate the role of managing director and chief executive officer. The two roles were previously performed by Tony Alford who will now act as executive managing director which will see him concentrate on broader strategy including acquisition and alignment opportunities, international development and penetration of new markets.
He will be supported by two co-chief executive officers. Andre Nell has been appointed chief executive officer franchise, while Gary Alford has been appointed chief executive officer commercial.
RFG is also looking for two new non-executive directors to rebuild its four-person board after non-executive director Jessica Buchanan resigned from the board to take up an executive role as RFG’s chief brand officer.
“The initiatives outlined today enable RFG to consolidate its business streams and operations in order to reset its strategic direction and redefine the company’s position within the markets in which it operates,” said Mr Alford, whose stake in the company has been diluted from 30% to 13% after a series of share issues to help fund acquisitions.
"The company’s significant growth opportunities require and will be enhanced by the demarcation of roles and responsibilities. I have absolute confidence in Andre and Gary, and believe the creation of joint CEO functions will ensure that appropriate resources are focused on driving the entire complement of RFG’s growth initiatives," Mr Alford said.
RFG shares slipped 2% to $6.36.
