It’s a common story. A new CEO at a troubled company, so suddenly there a bit of ‘reality’ about the finances and performance – and hey presto – red ink or more of it.
And so it was at the embattled Retail Food Group (RFG) yesterday and that produced a record low for the struggling share price.
In fact for accuracy sake, it was more of the same after a massive loss in the December half year caused by more than $100 million in write-downs.
RFG’s new CEO Richard Hinson made his approach clear in a market update yesterday, taking a chopper to the troubled food and coffee franchisor’s profit guidance for 2017-18 with a warning that underlying net profit is expected to fall 54% this year.
Investors didn’t like that news and sent the shares down more than 6.5% to 72.5 cents, an all time low. They closed at 76 cents, down 2.5%.
Tuesday’s trading update came a week after Mr Hinson was named to the CEO role after the board flicked incumbent Andre Nell. Mr Hinson had been brought in earlier in the year to do an audit of the troubled group’s operations.
In Tuesday’s announcement to the ASX, RFG said underlying net profit for the 12 months ending June was expected to be around $34.5 million, compared with $75.7 million in 2017 and $24.7 million in the December-half.
The new guidance is well below market consensus forecasts around $54.6 million.
RFG did not issue guidance at the half-year results release in late February, but at last year’s annual results the company said it expected underlying earnings to grow 6% in 2018.
But that was before the company’s dodgy running of several of its key franchises was exposed in a spate of media reports.
RFG own the Gloria Jeans, Michel’s Patisseries, Brumby’s Bakeries, Donut King and Crust franchises.
With $138 million of impairments revealed late in 2017, RFG expects a bottom line net loss around $87.6 million for 2017-18, baring further one-off costs. No further impairments were mentioned in yesterday’s statement.
RFG said the full-year forecast included termination payments to Mr Nell, who left last week, and other additional one-off turnaround expenses.
But However, it did not include about $3 million of anticipated international licence fee revenues that may occur before the end of the financial year on June 30.
“Trading performance has continued to be impacted by a combination of previously noted persistent difficult retail market conditions, the cumulative impact of planned domestic outlet closures, and ongoing negative sentiment regarding both retail franchising and RFG in particular," the company said.
The company said more detail will be made public when the 2017-18 results are released “in August”.
What’s the betting the release is as late in the month as possible. August 31 is the cut off for June 30 companies to release their 2017-18 figures.
