RFG SHARES FIRED UP AS PROFIT UPGRADED TO $55M
Written on the 25 February 2015 by Nick Nichols
RETAIL Food Group has revealed it is on track for a bumper 2015 after a run of major acquisitions bolstered its interim net profit by more than 46 per cent.
The latest $21.5 million bottom-line profit has pushed RFG to upgrade its full-year forecast for net profit after tax by 10 per cent to $55 million and given investors another reason to drive the company's shares to a new high.
The targeted full-year result would represent a 49 per cent increase on the $36.9 million profit recorded in FY14.
RFG's underlying performance for the half year was even stronger, with net profit for the first half up 46.4 per cent to $25.3 million and underlying EBITDA up 39.7 per cent to $39.3 million.
RFG chairman Colin Archer says the latest result comes from a well-executed acquisition strategy by the company which now has 2476 stores across 45 countries. This time last year, RFG had just 1401 outlets.
"In terms of network scale and penetration, the company's first-half activities represent a revolution for shareholders and franchisees, providing immediate access to international markets and increased supply chain capability," says Archer.
RFG has been acquisitive since listing on the ASX in 2006, but the past six months have been pivotal to the company growing its economies of scale.
Major deals included the buyout of US-based Gloria Jean's Coffees Group for $163 million and Brisbane's Di Bella Coffee for $30 million.
Archer says the acquisitions allow RFG to penetrate a broad spectrum of coffee market segments, including franchise systems, in-home coffee capsules, contract roasting and specialty coffee markets.
RFG, whose stable includes Donut King, Michel's Patisseries, Brumby's Bakeries and Crust Pizza, also grew organically during the first half. It opened 75 new outlets within its systems, although there was a net gain of 28 after store closures were taken into account.
The company's oldest brand, Donut King, delivered growth of 23.3 per cent in EBITDA which was described by CEO Tony Alford (pictured) as "exemplary".
The company's Project Evo has resulted in 194 outlets either established or refurbished under a rejuvenation program begun two years ago.
The acquisition of Gloria Jean's Coffees Group, Di Bella Coffee and Cafe2U has more than tripled RFG's contract roasting business, boosted coffee throughput from 1.6 million kilograms a year to 5.9 million kilograms. It has also facilitated the company's entry into the in home capsule market.
"Coffee and allied products remain a significant opportunity to be exploited, particularly in terms of enhanced international penetration and the establishment of a more robust service platform to better leverage the scale afforded by the company's growing third-party wholesale customer base," says Alford.
He says RFG is "strongly positioned" to exploit further acquisition opportunities despite the weaker consumer environment.
RFG has rewarded shareholders with an interim dividend of 11.5c per share, up from 10.75c a year earlier.
Investors also added more than $140 million to RFG's market value today, driving the company's shares more than 14 per cent higher to a new high. The shares climbed from the open, finishing 93c higher at $7.47 and capitalising the company at $1.2 billion.
Author: Nick Nichols