Retail Food dishes up unhappy news
GOLD Coast bakery, pizza and coffee chain owner Retail Food Group has downgraded its full-year earnings forecast, sending its shares tumbling.
The owner of the Donut King, Pizza Capers, Michel’s Patisserie and Gloria Jean’s Coffees brands is now forecasting growth in underlying profit – a figure that strips out one-off items – of about 15 per cent in the financial year finishing this month.
That compares with a previous forecast of 20 per cent growth.
Shares in the company fell heavily following the revelation and closed down 53¢, or 10.4 per cent, at $4.56.
It follows another share slump earlier this month when UBS cut its share price target for RFG over concerns that new accounting standards will boost debt levels on its balance sheet.
In yesterday’s trading update the company said its domestic franchise operations were trading in line with last financial year, but growth across most brands had been offset by a decline for Michel’s Patisserie.
Supply chain issues had taken a toll on the bakery cafe chain, the group said.
Retail Food also revealed it would take a $22 million writedown in its full-year results after reassessing the “recoverability of advances” made to marketing funds for Michel’s Patisserie and Pizza Capers. It said the advances would not be recovered in full because each business now had fewer outlets.
The company also said its international operations continued to grow, although a significant new master franchise deal had been delayed to next financial year.
Its beverage division, which includes the Di Bella coffee brand, was performing to expectations, the group said, with growth in commercial coffee contracts offset by a reduction in the lower-margin supermarket capsule business.
Retail Food said it expected organic growth to continue next financial year, largely driven by its international, commercial and coffee divisions, while its food franchises were expected to achieve modest growth.
RFG also announced that managing director Andre Nell will take over as chief executive from Gary Alford, who will retire later this year.