Are dividends off the menu at Retail Food Group after yet another downgrade?
The future of shareholder dividends from the embattled franchise company has been raised after RFG issued its second profit warning in less than a month.
The company owns the Gloria Jean’s, Donut King Crust Pizza and Brumby’s Bakery chains and less than a month after issuing its pre-Christmas earnings cut, it now says half year net profit is expected to be lower than the $22 million it forecast on December 19.
RFG paid an interim of 14.75 cents a share (and a final for 2016-17 of 15 cents) for total of 29.75 cents a share.
The chances of a similar payment to shareholders next year, staring with the interim are now up in the air.
RFG shares plunged following Fairfax Media reports in early December accusing the company of hurting many of its franchisees with crippling fees, including high supply costs, poor service and demands for more money.
The company has repeatedly denied all allegations.
Then on December 19, the company’s shares slumped to an eight-year low of $1.98 after it forecast a $22 million December half year profit, down 34% from $33.5 million a year ago.
While shares recovered some ground since then, they lurched lower on Tuesday dropping 15 cents, or 6.7%, to $2.32.
The company said in the new guidance that the terms of new international master licence agreements would impact revenue recognised in its accounts for the six months to December 31.
It said it had struck new master licence agreements for its Donut King and Crust Gourmet Pizza brands in the UK, but revenue from those businesses would not be realised until the June half of the current financial year.
“RFG’s financial results for first half of 2018 are still in preparation and will be released once RFG’s financial statements for the period have been finalised," the company said in the statement.
No mention was made of trading performance in the December half in is various chains.
The company is also facing possible legal action after a law firm last month said it was investigating a possible class action on behalf of RFG shareholders.