Retail Food Group to close up to 200 stores
RETAIL Food Group will close up to 200 outlets after the embattled Donut King owner slipped to an $87.8 million first-half loss due to $138 million in writedowns and provisions.
RFG, which also owns the Gloria Jean's and Michel's Patisserie franchise chains, has suspended its dividend and says $35.7 million of the provisions will be for the closure of 160 to 200 outlets by mid-2019, due to unsustainable rents and declining performances in shopping centres.
The group has issued two profit warnings since December, when it was accused of mistreating its franchisees with exorbitant supply and marketing costs.
Its shares have been in a trading halt since Wednesday, while it waited for its auditor to sign off on its accounts.
Managing director Andre Nell said RFG was taking decisive action, which also includes a $45 million non-cash impairment against Michel's Patisserie, $34.5 million against its coffee division, and $4.5 million against Pizza Capers.
"We have had to make some tough decisions about our business model, our franchise network and the value of some of our assets," Mr Nell said.
Underlying profit for the six months to December 31 fell 31.8 per cent to $24.7 million.
RFG decided to close the outlets after analysing its group performance over the past three years.
The group had 2,450 outlets by December 31, a net contraction of 66.
"RFG's future profitability and growth is directly linked to the health and sustainability of its franchise network, and it is clear from the review process that RFG needs to reset its business model and enhance its support to franchisees," Mr Nell said.
The stock, which last traded at $2.04, will resume trading on March 5.
RFG'S ROUGH FIRST HALF:
* Net loss $87.8m v $32.7m profit
* Revenue up 43.0 per cent to $155.5m
* No interim dividend