Has Retail Food Group stabilized?Team Veye | 03 May 2018 ASX - RFG
Retail Food Group Ltd (ASX: RFG)
The company declared its H1 FY2018 results on 2nd Mar’18 highlighting a weak performance across key metrics. The company reported a $87.8 million statutory loss after tax. The company highlighted that the planned store closures, recent trading performance, and re-assessment of near-term trading prospects resulted in non-cash impairments, write-downs, and provisioning, totalling $138.0 million being recognised in the 1H18 result, including: - Impairments against the carrying value of Brand System intangible assets including Michel’s Patisserie ($45.0 million), Pizza Capers ($4.5 million), Gloria Jeans ($5.0 million), and Goodwill associated with the Coffee Retail Division CGU ($29.5 million);
- $35.7 million arising from network consolidation activity; and
- $18.3 million for property, plant & equipment and inventory write-downs, loss on real property disposals and miscellaneous matters.
As at 31st Dec’17, the Group’s total gross debt increased to $267.6 million including ancillary facilities. The increase in gross debt was predominately due to the timing of working capital cashflows, continued investment in property, plant and equipment and acquisition earn out payments for the Di Bella and Hudson Pacific Corporation acquisitions during 1H18. Persistently tough retail conditions and the cumulative impact of 2H17 and 1H18 domestic outlet closures, combined with onerous lease conditions and internal challenges in the management of RFG’s business model, particularly evident in a sharp decline amongst new domestic franchise sales and renewals in the December quarter, contributed to RFG’s disappointing 1H18 results.
As part of its outlook, the company stated that remains confident in the strength of its underlying business operations and ability to support brand systems and franchisees; Expediting business-wide review and fast-tracking outcomes - Includes broader brand strategy and portfolio review plus On-going structural improvements to enhance business model. The company did not provide any full-year guidance and stated that it will keep the market informed on developments (Data Source – Company Reports).
The company used to offer a fully-franked annual dividend yield of 32.34% against a sector average of only 2.22% but has currently suspended the dividend pay-out to support balance sheet following strategic reset. The company’s EPS stands at 29.17 and EBITDA margin is 18.74. The company has a market cap of 168.13m and a Share Volume of 182.75m. The Debt-to-Equity ratio is 69.51 against a sector average of 66.93. The stock price has slipped 79% during the last 6months and 86% during the last 1.5 years but it appears to have stabilized during the last 1 month. (Data Source – Reuters.com).
We give a “Hold” to Retail Food Group at the current price of $0.935
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