RFG GETS A BOOST FROM COFFEE PROFITS

Written on the 23 August 2012

RFG GETS A BOOST FROM COFFEE PROFITS

A BOOMING coffee business has delivered Gold Coast-listed Retail Food Group (RFG) a record $30.3 million net profit after tax (NPAT) announced today on the ASX.

CEO Tony Alford (pictured) says a 31 per cent increase in revenue from its wholesale coffee business was a key to the company’s strong performance in difficult times.

The NPAT is a 8.9 per cent increase on the previous fiscal period. Revenue was up 29.3 per cent to $100.6 million, compared to $77.8 million in FY11.

“Given retail trading-conditions continue to be challenged by deflated consumer confidence, consumption and enlivened household savings, a situation compounded by increased operational costs at outlet level, we are particularly buoyed by these results,” he says.

RFG’s wholesale coffee business grew with the acquisition of Evolution Coffee Roasters, which joined existing in-house brands Caffe Coffee and Barista’s Choice. The businesses collectively roast more than 1000 tonnes of green beans annually.

Today’s announcement came as the company revealed it would purchase the promising Crust Gourmet Pizza chain, which is hoped will establish it as a market leader in the gourmet takeaway pizza market – building on its acquisition of Pizza Capers Gourmet Kitchen earlier this year.

The company has entered into a conditional sale and purchase agreement (SPA) with Crust to acquire the brand’s 119 outlets.

RFG will pay about seven times Crust’s FY13 earnings before interest and tax (EBIT) in two tranches. It will pay $21 million in cash and RFG ordinary shares to the value of $3 million to be paid on purchase. RFG will make up any difference when the brand’s FY13 results are known in 12 months.

The sale will be predominantly made in cash and by RFG partly drawing from its debt facility. The company estimates Crust and Pizza Capers will contribute about $7.5 million to RFG’s FY13 EBIT.

The company is rewarding shareholders with a 20 per cent increase in its share dividend to $0.09 per unit (total $0.175).

Its share price jumped 3.7 per cent to $2.8 this morning in response to the good news, giving the company a dividend yield of about 6 per cent.

The company has been a prolific buyer of brands in recent times and Alford admits organic growth has been slow.

“Organic growth continues to be hindered by a constricted franchisee candidate market, an absence of premium site opportunities, tighter lending requirements amongst financiers and subdued lessor development activity – albeit we are witnessing some change in the latter with a growing development pipeline for both greenfield and existing centre refurbishment works,” says Alford.

An organisational restructure produced a one-off cost for the business this year, but Alford says it will lead to long-term cost savings.

RFG owns the franchise systems and intellectual property of Donut King, Michel’s Patisserie, Brumby’s Bakery, bb’s café, Pizza Capers Gourmet Kitchen and Esquires Coffee Houses. It has 1251 total outlets, up 103 from the previous year.

Meanwhile, Ardent Leisure Group (AAD) revealed its Gold Coast theme park operations had a tough FY12.

The Dreamworld operator recorded a 7.7 per cent drop in revenue to $93.7 million at its theme park, compared to $101.6 million in the previous fiscal period. EBITDA also dropped 10.4 per cent to $28.9 million.

Visitor numbers fell 21.8 per cent, but per capita spend increased 17.9 per cent.

The company puts the attendance drop down to a combination of wet weather and the reduced number of unlimited season-passes issued.

“Second half revenues and earnings for the theme park division were significantly impacted by record rain during key holiday trading-periods in January, April and June. Second half rainfall of 1249mm was an increase of 79 on prior year rainfall of 696mm,” says the company.

The company is banking on its new attractions including the Buzzsaw rollercoaster, DreamWorks precinct and Big Brother partnership to improve revenues this year.

A new Kung Fu Panda thrill ride and themed area will be completed in December as part of the DreamWorks partnership.

Ardent managed an overall increase in core earnings of 7.1 per cent to $42.1 million, largely thanks to growth in its Goodlife Health Clubs and Main Event operation in the United States.


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