RFG BLOOD BATH

PROFIT FALLS 72%

PROFIT for battered Gold Coast franchisor Retail Food Group dived 72.2 per cent, the company’s revenue was slashed by more than half and it is $11.8m behind in rent for its stores.

A week out from a court showdown with the country’s consumer watchdog, the Robina-based company reported statutory net profit of $3.86m for the six months to December 31, down from $13.9m from the same time last year.

RFG said its results were heavily impacted by COVID-19, due to its high presence in shopping centres and metro areas, with its international operations also hit by government restrictions.

However, RFG, which operates franchises including Donut King, Michel’s Patisserie and Gloria Jean’s, said improvements in its Brumby’s Bakeries and Crust and Pizza Capers divisions had helped soften the COVID blow.

The company faces an unconscionable conduct case brought by the Australian Competition and Consumer Commission (ACCC), due to commence on March 5.

Executive chairman Peter George described the commission’s allegations as “relatively narrow in scope and focus”.

“Should the ACCC be successful in the proceedings, this could result in the imposition of potentially significant penalties for the group,” he said.

“That said, RFG intends to defend the proceedings.”

The company is $11.8m behind on rent for a number of its stores, which it said was due to landlords failing to formalise COVID-19 concessions agreed on leases.

Mr George said the group negotiated lease concessions for more than 400 stores.

“Unfortunately, less than 30 per cent of these concessions have been formalised by landlords via adjusted rental statements,” he said in the group’s ASX statement.

“This has led to high levels of confusion among all concerned parties, and given rise to a gross rental arrears amount of circa $11.8m across those outlets in the network where the group is ‘head on lease’.”

Mr George said the company had taken an impairment of $5.3m for non-cash lease receivables, but was confident “the vast majority of current arrears” would be paid.

In its statement to the ASX, RFG said its statutory net profit was impacted by discontinued operations, while it received $3.8m in JobKeeper payments.

Mr George said pandemic trading conditions had produced mixed results across the group’s operations.

“A number of positive indicators were being observed across RFG’s business, particularly in Brumby’s Bakery, the (Crust and Pizza Capers) division and outlets situated within regional locations,” he said.

“These have partially offset the impact of COVID-19 on operations with high exposure to shopping centre locations, metropolitan and CBD regions, where government social distancing and trading restrictions have had a more enduring effect.”

Mr George said a shift to non-contact delivery services had benefited the group’s QSR pizza operations.

“Driven by strong preferences for non-contact meal delivery options, both (pizza) division brands performed well throughout the period,” the statement said.

The company said sales in regional areas which were least affected by the pandemic had bolstered coffee brand losses in Sydney and Melbourne.