Glimmer of RFG hope
AN air of cautious optimism circulated among Retail Food Group shareholders after they had their first chance to quiz bosses since the company’s fall from grace 12 months ago.
About 40 shareholders showed up as CEO Richard Hinson and new chairman Peter George outlined what they propose to do about the company’s dire results and diminishing share price.
The chairman was frank under questioning about the likelihood of RFG’s lenders calling in more than $260 million in loans – a potentially terminal prospect articulated by one shareholder who declared “all these programs mean nothing if the banks pull the rug out”.
“The short answer is that there’s $250-odd million in bank debt and we’re not earning enough to cover that debt,” Mr George replied. “Do the banks want to take RFG over and sell those assets into a buyers’ market? No. Are they happy with the proposal we’ve put to them? So far, yes.
“They’re going to require tangible evidence in the next couple of months, but provided those initiatives proceed ... I have every reason to think the banks will allow us to restructure – but nothing’s certain.”
The company said it was not in a position to release a profit guidance for the current financial year, perhaps for several months.
The group reported an after-tax loss of $306.7 million last financial year, an eye-watering turnaround from its $61.9 million profit the previous year and far worse than its $87.6 million guidance.
Mr George, who’s been chairman for just three weeks, flagged the drastic changes needed to save the company.
“There is much work to be done at RFG, and I think it is important that I acknowledge the enormity of this turnaround, from the outset,” he said. “To reduce our bank borrowings, it is likely that we will need to sell assets, recapitalise the balance sheet and reduce our cost base by a large amount.
“All of this needs to be done while at the same time ensuring that the remaining business is positioned for success in the future.”
One shareholder wanted to know what consequences would be felt by previous RFG board members for the company’s current predicament.
“Franchisees and shareholders have been ripped off — not by anyone in this room,” the shareholder said.
Mr George said “if there’s any illegality it will be investigated and action will be taken”.
“I have certainly seen no evidence of anything illegal,” he said. “I’ve seen evidence of a company that grew too quickly and lost its way and that’s a very different thing.”