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Tag: RFG

  • RFG recapitalisation plan balloons to $190m

    RFG recapitalisation plan balloons to $190m

    Just days after the beleaguered Donut King, Gloria Jeans and Michel’s Patisserie franchisor announced a $160m capital raising initiative, Retail Food Group (RFG) has doubled down on their plans.

    Initially aiming to raise $150m from a fully underwritten institutional placement to repay the company’s crippling debt, RFG has now raised that figure to $170m, adding a further 200 million ordinary shares to the fold at a price of $0.10.

    Additionally, the brand has also upsized its share purchase plan from $10m to $20m.

    RFG executive chairman Peter George said the recapitalization plan had gathered significant support from investors and the wider community.

    “We are delighted with the support received for the Placement, and welcome a number of highly credentialed and supportive institutional investors to the shareholder register,” he said.

    “The recapitalization is transformational for the RFG business and will allow the RFG team to continue to harness the underlying value of the franchise network and enhance franchisee profitability.”

    RFG capital raising increase

    The now $190m RFG recapitalization plan forms part of a wider strategy to reduce the company’s mountain of debt.

    It comes after two successive years of dwindling profit, culminating in a $150m FY19 loss and bringing the net debt to $260m.

    “Following completion of the offer and debt restructure, RFG will have a sustainable go-forward debt facility, and a liquidity buffer to provide stability whilst management implements various performance improvement initiatives,” the company said.

    “The company considers the Debt Restructure and equity raising to be the best outcome available to the company and shareholders, delivering a strengthen the balance sheet and an opportunity for stabilization and business improvement.”

    Soliton Capital proposal

    Previous reports had indicated that RFG had received a $160m recapitalization proposal from Soliton Capital Partners, granting the firm limited exclusivity, however, the company on Tuesday confirmed no offer had been reached.

    “The company engaged in extensive discussions with Soliton Capital Partners during the exclusivity period,” RFG said.

    “However, the exclusivity period has now expired, and the company has not received any binding proposal from Soliton Capital Partners at this time.”

    Debt restructuring

    Tuesday’s announcement also brought further operational initiatives into the frame, with RFG revealing how it plans to achieve a previously announced $30m gross margin generation into the franchisee network.

    Specifically, the company plans on passing on significant savings to franchisees in connection with rental arrangements, fit-out and refurbishment costs, as well as greatly reducing the cost of goods. This includes a 15 to 20 per cent reduction in wholesale coffee pricing, which kicked off on July 1 this year.

    According to the franchisor, the initiative delivered an 18 percent increase in average coffee volumes ordered per store in July when compared to the prior months, and a 10 percent increase compared to July 2018.

    At present, RFG is still clinging to Friday’s FY20 underlying EBITDA guidance projection of between $42.0 and $46.0m.

    “Whereas retail continues to represent a challenging sector, RFG is beginning to observe the positive impacts of the business improvement measures being implemented by the company,” RFG said.

    The company will be hoping to see those positive impacts flow on, particularly in light of the share price slump that hit once the trading suspension was lifted early on Tuesday.

    Shares hit an all-time low of 12.5c following Friday’s initial recapitalization announcement, before regaining to 15c by around 11am.

  • RFG director taking on operational role

    RFG director taking on operational role

    Retail Food Group director Jessica Buchanan has resigned from her position in order to transition to an operational consulting role.

    The move, announced in a statement to the ASX on Thursday, will enable Buchanan to execute some of the strategic initiatives she has helped to formulate in her capacity as a director.

    These include a strategy for the rollout of 62 new product campaigns, which are now being delivered to franchise partners by the company’s brand general managers.

    The first of these campaigns are showing significant improvements, a company spokeswoman said.

    According to RFG, the new Gloria Jean’s ‘Kit Kat Chiller’ promotion so far has lifted sales by 9 percent, and the Brumby’s ‘Gourmet Donut’ campaign has lifted sweet category sales by 8 percent.

    Buchanan, who founded consumer research agency Consumerology, which counts Autograph, Katies, Millers, and Crossroads as clients, has many years of experience in consumer product marketing and retail franchising.

    She was also a non-executive director of Banjo’s Bakery Cafes for four years from 2008 to 2012, according to LinkedIn.

    Earlier this month, The Age and The Sydney Morning Herald reported that Buchanan had sought to stock products from Naytiv, a food brand she started in 2017, in some of RFG’s franchises.

    The company ultimately decided not to move forward with the idea, according to a statement given to the publications.

    “Jessica has served on the RFG Board for eight years and as we close out the end of another financial year, she has decided the best use of her time at this point is to step into the company and commit more of her time to help drive the successful execution of these campaigns for our franchisees,” the spokeswoman said about her transition to operational consultant.

    RFG executive chairman Peter George thanked Buchanan for her contribution as a director and said he looks forward to working with her as a contributor.

    “Innovative product offerings and campaigns will be critical to the revitalization of the RFG’s franchisee network which will, in turn, underpin the operational turnaround of RFG,” he said.

    The franchisor, which owns the Gloria Jean’s, Donut King, Crust, Pizza Capers and Brumby’s Bakery businesses, has faced ongoing challenges since it got caught up in the parliamentary inquiry into the franchising sector.

    In March 2018, the company revealed plans to close more than 200 stores and posted a $306.7 million loss later in the year, after it was forced to make impairments and provisions to the tune of $402.9 million to cover store closures and restructuring and a reduction in brand value and assets.

    Over the last 12 months, RFG has renegotiated its financial covenants with lenders, gaining some breathing room while it seeks to reduce debt levels, including the potential sale of its Crust, Pizza Capers and Donut King businesses.

    The company’s stock price spiked in early July after it received a $160 million refinancing proposal subject to various conditions from Soliton Capital Partners, which it did not make public despite the ASX’s continuous disclosure rules.

    The company defended this decision, citing the fact that it has said numerous times that it is exploring various ways to reduce its debt.

  • RFG back to square one in asset sale process

    RFG back to square one in asset sale process

    Retail Food Group on Tuesday said sale talks with a potential buyer of its Donut King, Pizza Capers and Crust businesses have ended in disappointment, following months of negotiations.

    The deal fell through after the two parties failed to reach a formal binding agreement on terms that the board considered to be in the best interests of the company as a whole, RFG said in a statement.

    “Our Donut King and QSR brands [Pizza Capers and Crust] continue to provide solid earnings contributing to the company’s underlying profit,” Peter George, executive chairman of RFG, said.

    “The potential sale of any of these assets must be at a price not only acceptable to our board but in the best interests of our shareholders.”

    The franchisor, which operates Gloria Jean’s Coffees, Brumby’s Bakeries, Donut King, Michel’s Patisserie, Di Bella Coffee, The Coffee Guy, Café2U, Pizza Capers and Crust, had been pursuing an asset sale to help pay down its net debt of roughly $258.9 million, after restructuring costs and write-downs wiped out its declining profit in the first half of FY19.

    An RFG spokesperson said the failure to sell its Donut King and QSR brands will not impact the company’s recent agreement with NAB and Westpac to reset its financial covenants and waive a review of the business.

    The company continues to work closely with its lenders and maintains their support, the spokesperson said.

    The RFG board is investigating a range of other options to pay down its debt, including equity, other debt funding options and potential asset sales, and will update the market of any definitive option being reached.

    In response to a report that the Australian Securities and Investments Commission is “keeping an eye” on the franchisor, particularly around big announcements, the RFG board said it has not been made aware of any current investigations.

    A spokesperson for ASIC told that “ASIC supervises the market, so we monitor all share trading”.

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  • RFG totters making its way

    RFG totters making its way

    Retail Food Group remains in danger of collapse as it tests the nerve of its financiers. The multi-brand franchisor has racked up losses of more than half a billion dollars in the past 18 months; its market capitalisation has fallen below $50 million, with its share price dropping to 25¢ last week on the Australian Securities Exchange.

    Directors have been attempting to sell assets in a bid to reduce debt to satisfy bankers and ensure the company can continue to trade.

    The problem is that most of the assets have little value in real terms and, in some instances, carry significant liabilities in respect of store lease commitments, exit costs on unprofitable and unfranchised stores and prospective legal action by disgruntled franchisees.

    The results for the first half of the 2019 financial year would indicate that the entire company is struggling to survive and is facing imminent administration if it cannot quickly conclude a significant asset sale.

    Debt covenants tested

    A waiver of debt covenants by lenders NAB and Westpac expired on December 31 – and are due to be tested by March 31. Without clear indications of the viability of the company on an ongoing basis, lenders are unlikely to hold their nerve.

    Directors of the company have been unable to conclude a deal on any asset sales despite the company reporting the Donut King and QSR Division as discontinued operations in its FY19 first-half results released last week.

    Directors advised investors that negotiations were ongoing but no formal binding agreement had been achieved with a proposed buyer.

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  • Retail Food Group shares continue to plummet battling other retailers

    Retail Food Group shares continue to plummet battling other retailers

    Shares in Retail Food Group have continued to plummet for a second day after a damaging profit warning from the embattled owner of the Gloria Jean’s, Michel’s Patisserie and Donut King brands.

    RFG shares fell 17.9 per cent to $1.625 on Wednesday – their lowest value since July 2009, compounding a 25 per cent slump suffered on Tuesday when the company warned its first-half profit is expected to decline by more than a third.

    The franchise chain owner’s shares have now fallen 63 per cent since December 11, after Fairfax Media first published stories from an investigation into allegations of high fees and financial stress suffered by franchisees.

    The Fairfax reports have also claimed that significant proportions of Gloria Jean’s and Pizza Capers franchises are up for sale.

    On Thursday morning, shares recovered and bounced up over 20 per cent to $1.96.

    The plummeting stock prices has wiped $507 million from RFG’s market value in just eight trading days.

    RFG did not respond to requests for comment from AAP on Wednesday, however the company has previously denied all allegations in the reports and has blamed a tough retail environment as having a negative impact on its franchisees’ sales.

    The company said on Tuesday that its Crust Pizza and Donut King brands have continued to perform in line with forecasts but Michel’s Patisserie, Brumby’s and Gloria Jean’s are trading below expectations.

    It said domestic franchise revenue is now expected to be lower than previously anticipated, and it will book one-off costs of $7 million, including expenses linked to a business-wide review, in its accounts for the six months to December.

    As a result, the group’s now expects a net profit of around $22 million for the half year, down 34 per cent on $33.5 million in the same period a year ago.

    Meanwhile a law firm involved in a class action against Volkswagon has turned its attention to Donut King and Gloria Jean’s owner the Retail Food Group.

    Bannister Law says it is investigating a potential class action against RFG, and whether the company had reasonable grounds to issue forecasts between August 29 and December 7 of underlying annual profit growth, and whether it should have corrected its guidance earlier than December 19.

  • Seezar Soesan plans more Gloria Jean’s

    Seezar Soesan plans more Gloria Jean’s

    Australia-based coffee retail chain Gloria Jean’s is planning to open more outlets in Myanmar through its local franchisee Seezar Soesan.

    It already has two branches in Yangon, one in Myanmar Plaza, which opened in January, and the other in Yangon’s new international airport terminal, which opened in March.

    Seezar Soesan COO U Kyaw Htin Latt says the company plans to continue as sole operator for the next two years, but may allow other interested firms to open branches after that.

    Other coffee outlets in Myanmar include Espressonite Myanmar, Nervin and Ya Kun.
    Seezar Soesan has business interests in such areas as IT, trading, construction, agriculture, consultancy and media services.

    Part of Australia’s largest multi-food franchiser Retail Food Group (RFG), Gloria Jean’s Coffees has nearly 800 outlets in 39 markets worldwide.