Retail Food Group (RFG) expects an underlying net profit after tax (NPAT) to be approximately $34.5 million for FY18, a 54 per cent decline on FY17’s figure of $75.7 million.
Additionally, the company expects statutory NPAT to be a loss of approximately $87.6 million.
At the time of publication market shares have dropped by almost 6 per cent.
According to the update, “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.”
RFG has been plagued by scandal recently, with allegations of bad business practices, including exorbitant fees and a lack of support, driving franchisees out of business surfaced in the media.
RFG owns several food and beverage chains including Michel’s Patisserie and Gloria Jeans
The Group continues to “maintain dialogue with its bankers and their advisers” in regard to the expected results after concerns over whether it would breach its bank covenants.
RFG’s lenders, Westpac and National Australia Bank, raised the debt to earnings ratio to 3 times from 2.5 times – hinting that the company may have been close to breaching its borrowing requirements.
The company is currently in a banker-enforced “step down program” in an effort to reduce its debt from $259.7 million, with 60 per cent of net proceeds dedicated to paying this debt for the foreseeable future.
The Statutory FY18 NPAT figure is also impacted by termination payments to former Managing Director, Andre Nell, who left the position after just two years, in May.
The position was picked up by Richard Henson, a former Metcash state manager, who joined the business in January.
RFG will provide a detailed market update with the FY18 results announcement in August 2018.
Updated: 11.50 am
More to come.
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