RFG: Bakes Up Record Profit and Dividend

Southport / AU. (rfg) Leading Australian retail food brand manager and franchisor Retail Food Group Limited (RFG) announced an FY 2012 core NPAT result of 30,3 million AUD, an increase of 8,9 percent on the previous year. Statutory NPAT rose 4,9 percent to 28,5 million AUD. The Company´s record NPAT follows seven successive years of annual profit growth and reflects a statutory cumulative annual growth rate (CAGR) of 30 percent for NPAT and 20,6 percent for EPS since Listing in June 2006.

RFG CEO Tony Alford advised that «astute management of the Company´s robust and diversified business model, underpinned by a 31 percent increase in wholesale coffee revenues together with enhanced franchise system revenues, has delivered tangible results for shareholders».

. FY 2012 Highlights
  • Record core NPAT result (30,3 million AUD) and EPS (28,0 cps) despite depressed retail conditions
  • 20 percent increase in final dividend (to nine cps) and increased dividend payout ratio to 66,3 percent
  • Gross margin expansion increase to 80,2 percent (from 71,3 percent)
  • 39 new outlets commissioned
  • Completion of Pizza Capers Gourmet Kitchen (April 2012) and Evolution Coffee Roasters (September 2011) acquisitions
  • Positive weighted AWS and ATV growth in all franchise systems
  • Adjusted revenue growth accelerated due to conversion to royalty model of Michel´s outlets, wholesale coffee sales and reinvigoration of corporate retailing division
  • Esquires Coffee Houses system successfully established in Australia
  • Wholesale coffee businesses now roasting over 1’000 tonnes of green beans annually
  • Successful implementation of efficiency programs and major organisational restructure

    «RFG´s performance has also fostered continuing improved outcomes for our franchisee community. As an example, direct support afforded to our franchisee network and brand systems has increased by approximately 4,1 million AUD over FY 2011, amply demonstrating the effectiveness of the Company´s business model and the ‘strength in brands’ generated by it».

    «Given retail trading conditions continue to be challenged by deflated consumer confidence, consumption and enlivened household savings, a situation compounded by increased operational costs at outlet level, we are particularly buoyed by these results», he said.

    As a consequence of the Company´s record profit result, prudent debt management and continuing robust cash position, shareholders will be paid a final fully franked dividend of nine cents per share, up 20 percent on the previous corresponding period (PCP). The dividend will be paid on 11 October 2012 following a record date of 13 September 2012.

    RFG Chairman Bruce Hancox said, «when combined with the interim dividend paid in April 2012, the Company´s full year dividend of 17, 5 cps reflects a payout ratio of 66,3 percent, an increase of 21 percent over FY 2011 and consistent with the Board´s intent to maintain a payout ratio in the order of 65 percent during periods of acquisitive growth».

    «In terms of that growth, April´s acquisition of the Pizza Capers Gourmet Kitchen franchise system, now bolstered by today´s announcement that RFG has contracted to purchase the 119 outlet Crust Gourmet Pizza Bar system, has facilitated RFG´s entry into the traditional Australian QSR segment and positions it as the market leader in the gourmet QSR pizza market».

    «Not only do these acquisitions provide multiple synergistic opportunities for RFG´s existing business operations, they broaden the Company´s exposure to all day trading parts whilst extending RFG´s complement of retail brands from impulse, treat and staple offers with lower to mid-sized average transaction values (ATV) to high ATV lunch and evening meal time opportunities», he said.

    The Company´s coffee operations were also significantly expanded by acquisition following the addition of Evolution Coffee Roasters Group to the Company´s suite of businesses in September 2011. This roasting capacity has contributed to a 31 percent increase in coffee revenues (over PCP) with RFG now roasting in excess of 1’000 tonnes annually of green beans and wholesaling various coffee products amongst its existing franchise networks and a growing external customer base.

    «These transactions execute on the Company´s strategy to identify acquisitive targets that complement existing business operations, are capable of vertical or horizontal integration and which generate both immediate and long term value for shareholders», Hancox said.

    Thirty nine new outlets were commissioned during FY 2012, and together with the addition of the Pizza Capers Gourmet Kitchen brand system, the number of outlets under RFG stewardship increased by 103 to 1’251 outlets (or nine percent) across six brand systems.

    RFG CEO Tony Alford said, «organic growth continues to be hindered by a constricted franchisee candidate market, an absence of premium site opportunities, tighter lending requirements amongst financiers and subdued lessor development activity albeit we are witnessing some change in the later with a growing development pipeline for both greenfield and existing centre refurbishment works».

    At a franchise network level, excluding the Michel´s Patisserie Queensland population which has been subject to unique but temporary supply side challenges, all systems generated positive average weekly sales (AWS) and average transaction value (ATV) growth albeit modest and in line with management expectations having regard to the prevailing retail climate».

    «We remain focused on the organic growth of AWS, ATV and new outlets in each brand system and have redoubled our efforts on the development and execution of strong marketing programs, product innovation and brand reinvigoration strategies targeted at fortifying sales by the application of extended menu offers, enhanced customer engagement and the migration of outlets from shopping centre centric locations challenged by escalating rental demands and depressed consumer visitation cycles», he said.

    «Examples of these activities include the recent introduction of savoury products within the Donut King system and the programmed Australian roll-out of the Esquires Coffee Houses system into non-traditional trading environments including drive-through sites».

    Insofar as the Esquires system is concerned, three outlets are now operating in Australia with a further six outlets scheduled for establishment during the remainder of FY 2013.

    «Pleasingly, the first Australian Esquires outlet represented a conversion from the bb´s café system consistent with the Company´s vision to consolidate the group´s café offer under a single banner. Four outlets across the Australian and New Zealand networks have now converted to the Esquires system», Alford said.

    FY 2012 also witnessed the successful implementation of significant organisational restructure.

    «The restructure formed part of an ongoing effectiveness and efficiency program instigated in late 2011 for the purposes of maximising franchise system performance, liberating further operating efficiencies and continuing the seamless integration of acquired business assets», Alford said.

    «Whilst these activities have resulted in certain one off costs which have impacted FY 2012 profit, the delivery of a brand system structure will ultimately deliver tangible efficiencies as well as positively impacting franchisee service delivery and corporate responsiveness. We remain focused on increasing productivity and efficiencies, implementing enhanced performance activation programs and liberation of further positive supply side outcomes amongst all facets of RFG operations», Alford said.

    RFG Chairman Bruce Hancox gave thanks to the hard work and focus applied by the Company´s staff and valued franchisee fraternity and which have contributed to RFG´s impressive FY 2012 result.

    «Whilst the Board remains of the firm view that the Company has constructed a concrete platform for sustained growth and long term shareholder satisfaction, current trading conditions, consumer sentiment and supply side initiatives rendered it premature at this stage to provide FY 2013 guidance notwithstanding RFG´s confident outlook and anticipation of future growth», he said.

    bakenet:eu