Interesting discussion. Personally I am holding as I expect a positive financial report in the coming weeks. These franchisor businesses are potentially great cash cows just through the growth in number of outlets/shops franchised.
Printable View
Interesting discussion. Personally I am holding as I expect a positive financial report in the coming weeks. These franchisor businesses are potentially great cash cows just through the growth in number of outlets/shops franchised.
Hi all,
I'm still holding all my shares too, not gonna sell a single share because it's way too early to sell out... Only concern might be debt levels.
Has anyone heard what is happening with the commissioning of the Central Manufacturing Facility (CMF) - supposed to be completed in '07 FY and the Coffee Roasting Facility (CRF) supposed to be "blending and roasting" by April '07.
I can find no further mention of these since February.
I like this result from Retail Food Group. They have achieved very profitable operation throughout the takeover of Brumbies and are now looking ahead to further expansion.
FY2007 NPAT of $7.52 million representing a 26.7% growth from FY2006(1), and
exceeding the Prospectus forecast of $7.4 million
EBIT growth of 25.8% over pcp to $12.2m
Earnings per share increase of 22.1%
Full year dividend of 3.125 cents per share
37 new outlets commissioned exceeding Prospectus forecast by 48% or 12 outlets
360 Donut King and bb’s café outlets as at year end (an increase of 28 stores)
Central Manufacturing Facility operational and already servicing 50 Donut King
Outlets
Coffee Roasting Facility commissioned
Successful acquisition of Brumby’s Bakeries Holdings Limited (Brumby’s)
FY2008 EBIT forecast to grow by 55% to $19 million following Brumby’s
Acquisition
NPAT for FY2008 forecast to increase by 30%
FY2008 new outlet commissionings programmed to exceed 50 stores
(1) Represents 17.5% increase in NPAT from Continuing Operations.
See also the press release.
Hi bobby,
Yeah not a bad result apart from the market reaction :-(
Highlights are:
"In respect of FY2008, RFG is forecasting an EBIT growth increase of 55% to approximately
$19 million.
Based upon net debt (excluding property debt the subject of a sale and lease back
arrangement) of $57.5 million as at 8 August 2007, RFG is forecasting FY2008 NPAT to be
approximately $9.8 million representing a 30% increase over FY2007.
FY2008 EBIT growth will again be driven by strong new outlet commissionings which are
forecast to be in excess of 50 across the Donut King, bb’s café and Brumby’s Bakeries
franchise systems.
“RFG is a company with significant momentum and with the value added foundations laid to
date, we remain extremely enthusiastic regarding the Company’s prospects for FY2008 and
beyond”, Mr Alford said."
I think I will continue holding patiently :-)
Yes Tommy patients is certainly required until the brokers start to see the value in RFG. I believe there are indications of another takeover in the wind so maybe that will also give the SP a boost.
I too will continue to hold.
Mailer through the letterbox 29th August 2007 shows the location of all cafe bb's in NZ.
AUCKLAND
1/ BBs cafe Ascot Hospital
2/ BBs cafe Downtown Shopping Centre
3/ BBs cafe Dress-Smart Onehunga
4/ BBs cafe Eastridge Shopping Centre
5/ BBs cafe Foodtown Supermarket, Browns Bay
6/ BBs cafe Freedom Furniture Wairau Park
7/ BBs cafe Meadowbank Shopping Centre
8/ BBs cafe Southgate Retail Centre
9/ BBs cafe Supa Centa Manajau City
10/ BBs cafe Waitakere Mega Centre
11/ BBs cafe Pacific Plaza Whangaparoa
HAMILTON
12/ BBs cafe Chartwell Square Shopping Centre
13/ BBs cafe Dress-Smart Te Rapa
14/ BBs cafe Farmers Hamilton
TAURANGA
15/ BBs cafe Bayfair Shopping Centre
16/ BBs cafe Fashion Island Papamoa
17/ BBs cafe Fraser Cove Shopping Centre
NEW PLYMOUTH
18/ BBs cafe The Valley Mega Centre
PALMERSTON NORTH
19/ BBs cafe Farmers Palmerston North
WELINGTON
20/ BBs cafe Dress-Smart Tawa
21/ BBs cafe North City Shopping Centre Porirua
CHRISTCHURCH
22/ BBs cafe Dress-Smart Hornby
23/ BBs cafe Merivale Mall
24/ BBs cafe Tower Junction Mega Centre
HTH
SNOOPY
Was amazed at the number of people waiting to get served at the Doughnut King at Westfield Chermside (Brisbane) last Saturday morning. Business was booming!
Why not..... the price of the Doughnut King offering is very reasonable, and their coffee ain't bad either. :)
Thanks snoopy for the list of bb cafes, highly appreciated mate.
Huang Chung, Donut King in Sydney especially those in Westfield shopping center is always busy, particularly after school hours and on weekends. I must confess I can't help grabbing one of those donuts and a coffee now and then for a sugar boost :-P
In contrast, krispy kreme isn't half as busy. Perhaps their brand color is too boring/bland compared to the loud-pink donut king?
As I noted a week or two ago here is RFG's next growth move.
"Retail Food Group Limited (‘RFG’) today announced that it had entered into a conditional
Scrip & Cash Terms Agreement (‘SCTA’) to acquire all the issued shares in The Michel’s
Group Australia Pty Ltd (‘TMGA’). TMGA is the intellectual property owner and manager
of the Michel’s Patisserie franchise system (‘Michel’s’), a well known Australian food
retailer which specializes in the sale of cake, coffee and patisserie related products.
Currently Michel’s have a total of 340 franchised outlets in Australia, and a further 6
franchised outlets in New Zealand. Upon completion of the transaction and following
RFG’s recent acquisition of the 321 store Brumby’s Bakeries franchise system, the total
number of franchised outlets under the stewardship of RFG will exceed 1,020 outlets,
making RFG one of the largest retail food franchisors in Australia and the largest by a
considerable margin with respect to “home grown” retail food franchise concepts."
RFG up 25% today!
"RFG provided FY2008 guidance on the 29th August detailing a forecast increase in
EBIT of 55% to $19 million and an increase in NPAT to $9.8 million (an increase of
30%)."
So that makes RFG even cheaper than ever before!
They weren't being very committal on EPS increments. However it's easy to see massive economies of scale for the CMF making bakery products for Brumby's/Doughnut King/Michelle's.
Michel's is a great franchise.
Hi oneup,
Yeah but only concern is how are they gonna finance it? Debt? They already have quite a bit of borrowings...
Hey mate,
I think we'll see a mix of debt/equity. Hopefully a placement for half the needed funds at circa $1.60. Getting a few instos in the register would be no bad thing. Tired of seeing the share price slide on no volume.
Technically, and maybe a TA junkie can confirm, we may have a breakout of the $1.30-$1.70 trading range she's been oscilating between all year.
Does anyone know what this centralised manufacturing facility at is supposed to accomplish. I understand that it is currently servicing SE Qld. Surely, you can't transport jam doughnuts and the like any distance....or does the facility only make the pastery bit, with all the trimmings like cream etc added by the franchisees?? Are they going to roll these facilities out, in say, Syndey and Melbourne?
What happens in other areas of the country...does each franchisee have to make everything from scratch? Does RFG make money by selling finished / partly finished product to the franchisee, as opposed to the franchisee buying raw ingredients (from RFG?) and making the stuff themselves?
Any ideas guys???
Hi Oneup
Yeah low liquidity has been a big problem with RFG for the past year... no one wants to buy or sell the stock (including myself!)
Getting instos in their shareholder registry will be a nice move, especially if they can write off all the debt (although I hate dilution of shareholder value).
I totally agree that Michel's is a good business and a good fit for RFG, they are everywhere in Sydney (almost as prevalent as Donut king). Excellent move by RFG indeed, it is soooo undervalued now.
Note that they Michel's have their own coffee roasting and training facility already, plus their expansion plan (will they sustain this expansion? See bold section)
http://www.michels.com.au/pages/about/index.htm
The Story
Michel’s Patisserie was established in Sydney in 1987 by joint founders Noel Roberts and Noel Carroll. It began with a bakery in Hornsby NSW delivering fresh products daily to two stores, Michel’s Patisserie Newport & Castlecrag NSW. Their passion for the business has seen it grow into an entity turning over more than $220 million annually with over 320 retail outlets across Australia. The name is French, but it’s 100% Australian owned and operated.
Our Bakery offers an extensive range of ‘quality fresh’ baked cakes (gateaux, fruit flans, traditional, special occasion small and large), with the inclusion of Danish pastries, quiches, gourmet pies and sausage rolls to satisfy even the most discerning of culinary palates…it’s what our customers expect – great tasting and great variety at the right price.
As a natural accompaniment to our selection of patisserie products, Michel’s own in-house coffee roasting and training facility, Michel’s Espresso is paramount in ensuring our franchisees and their staff are able to meet and exceed our customer expectations of a ‘great tasting’ coffee.
The Michel’s Franchise system owes its recipe for success to strong management; comprehensive training and a ‘family culture’ based work ethic. It is unique in that it is not royalty based and offers major key benefits such as no manufacturing and a strong retail / marketing network from within.
It is not by coincidence that Michel’s Patisserie has grown to become one of the most successful franchisors in Australia, when it invests in people who have a passion to achieve and strive for ‘best practice’ in franchising and retailing. Michel’s management, office personnel and bakery staff together form a strong enterprise that is committed to deliver quality product along with customer value and experience with each visit to a Michel’s Patisserie outlet.
As a responsible corporate citizen, Michel’s Patisserie is proud to be associated with various charities, including the Starlight foundation.
Over a period of six consecutive years Michel’s Patisserie has been awarded the status of a “high achiever” by its industry peers and has earned the honour of being awarded:
Winner of the “Franchise System of the Year” (capital entry costs $50K - $200K category) for 1995, 1996, 1997, 1998 and 1999 plus OVERALL “Franchise System of the Year” in 2000 and 2003. In 2005 we were again a finalist for "Franchise System of the Year". In addition to the above, Michel’s was also a finalist in the Franchise Council of Australia’s “Best Homegrown Franchise System” in 1998, 1999 and 2000. These industry awards are held annually by the Franchise Council of Australia.
In February 2006, Michel's Patisserie completed a management buy-out, and merged with its master franchisee for Queensland and Victoria to create a single national franchise business. The transaction is the final step in the process of consolidating Michel’s Patisserie into a single national business.
The business is well established and resourced to continue growth within Australia, with plans for significant NEW store growth. There will be an increasing focus on the marketing direction and continued introduction of new products. With Michel’s Patisserie’s strong prominent brand, strong franchise system and innovative distribution model as key strengths, the business is positioned well for significant growth over coming years.
The company plans to have 50 stores per year throughout Australia and to increase expansion offshore in the not too distant future. There are currently 6 stores in New Zealand and one in China. With this in mind we have committed to developing our computer technology to ensure the effective and efficient operation of on-line communications with our franchisees, customers and suppliers to further enhance the Michel’s chain.
____________________
And here is a news article in the AGE, surely this would raise more interest next week:
http://www.theage.com.au/news/Busine...783458372.html
RFG profits to soar after Michel's buy
September 7, 2007 - 10:19AM
Franchisor Retail Food Group Ltd expects to boost before-tax earnings this year by a hefty 167 per cent, after swallowing Michel's Patisserie chain in an $88 million deal.
When the latest deal is complete - coming just weeks after the franchisor snapped up Brumby's Bakeries for $45.8 million - RFG will have more than 1020 donut shops, cafes, cake shops and bakeries on its books.
But RFG chief executive Tony Alford still has an appetite for more buys, describing the retail food space as "flush with opportunity".
"Do we have any in mind? Yes. The answer is we continue to investigate potential acquisition targets," Mr Alford said.
Any target must be "immediately EPS accretive" and must be able to be integrated into RFG's existing business easily, he said.
In particular, the RFG boss noted the outstanding human resources coming into the company with its purchases of Michel's and Brumby's.
"It's as much about acquiring human resources as it is acquiring the systems," he said.
Mr Alford tipped cafes as the most likely direction for RPG to expand by acquisition as its existing coffee chain bb's is significantly smaller than its other brands.
"We are going to have to look at a bolt-on acquisition to complement that," he said.
Even before factoring in synergies, efficiencies and savings, RFG expects the Michel's deal will boost its fiscal 2008 earnings before interest and tax (EBIT) to $32 million from $12.2 million in the previous year.
A revised guidance on net profit will not be released until the franchisor has finalised the funding for the cash component of the deal.
Nevertheless the earnings forecast alone excited investors who pushed RFG stock up 40.5 cents, or 28.2 per cent, to $1.84.
The latest deal comprises $50 million in cash and a scrip component hitched to the strength of Michel's EBIT performance this financial year.
In total, the deal could be worth up to $88 million.
The takeover of Michel's, due to complete in November, if shareholders approve, comes less than two months after RFG acquired the 321-store Brumby's Bakeries franchise chain.
Michel's has 340 franchised outlets in Australia and a further six in New Zealand.
Before this buy, RFG already had 289 Donut King outlets and 71 bb's cafe outlets.
Mr Alford said both the Michel's and Brumby's systems would provided an immediate positive earnings contribution to RFG along with a platform to drive medium and long term shareholder value.
RFG will continue developing the Michel's network across Australia and New Zealand.
"Indeed, Michel's prominent brand, innovative distribution model and service systems positions the brand well for future organic growth," Mr Alford said.
Last week, RFG reported a 27 per cent rise in net profit to $7.52 million for fiscal 2007 and upgraded its fiscal 2008 guidance for profit to grow by 30 per cent to $9.8 million.
Its fiscal 2008 EBIT was forecast to grow 55 per cent to $19 million after the Brumby's acquisition.
More news articles! Key personnel to stay with RFG, which is good.
http://www.foodweek.com.au/main-feat...&articleId=748
Retail Food Group to acquire Michel’s Patisserie chain
Retail Food Group Limited has today announced it has entered into a conditional agreement to acquire all the issued shares in The Michel’s Group Australia (TMGA).
TMGA is the intellectual property owner and manager of the Michel’s Patisserie franchise system (‘Michel’s’), a well known Australian food retailer which specialises in the sale of cake, coffee and patisserie related products.
Currently Michel’s has 340 franchised outlets in Australia, and a further six franchised outlets in New Zealand. Upon completion of the transaction and following RFG’s recent acquisition of the 321 store Brumby’s Bakeries franchise system, the total number of franchised outlets under the stewardship of RFG will exceed 1020 outlets, making RFG one of the largest retail food franchisors in Australia and the largest by a considerable margin with respect to “home grown” retail food franchise concepts.
The acquisition is anticipated to be completed by the end of November 2007, however pursuant to the SCTA RFG will be entitled to the whole of TMGA’s FY2008 earnings (after deduction of interest on TMGA’s existing debt) from July 1.
The consideration payable to TMGA shareholders is $50 million cash and a scrip component being subject to an incentivated earn-out program based on TMGA FY2008 adjusted EBIT performance. TMGA shareholders will be entitled to be issued with RFG scrip on a pro rata basis where TMGA’s adjusted FY2008 EBIT is between $13.25 million and $18 million.
Assuming full entitlement to the earn-out the maximum value of the consideration payable is $88 million with any scrip entitlement being issued on the earlier of the finalisation of the FY2008 audited accounts or 30th October 2008.
TMGA also has debt of approximately $56 million which will either remain with the company on completion of the SCTA or be refinanced by RFG. RFG provided FY2008 guidance on August 29 detailing a forecast increase in EBIT of 55% to $19 million and an increase in NPAT to $9.8 million (an increase of 30%).
Prior to factoring synergies, efficiencies and integration savings which would be achievable from the incorporation of Michel’s into RFG’s management and operational service structure, RFG expects that the successful completion of the TMGA transaction would result in revised FY2008 guidance of $32 million in EBIT, an increase of approximately $20 million or 167% on FY2007.
Additionally, while RFG is confident that the TMGA acquisition will be earnings per share (EPS) accretive in FY2008, the quantum of such increase will depend upon the funding structure adopted and the scrip issue as a consequence of the earn-out.
The acquisition is subject to a number of conditions including shareholder approval, ASX not objecting to the terms of performance shares which will be issued in connection with the scrip component of the consideration and satisfactory completion of RFG’s current due diligence enquiries.
The agreement is also conditional on RFG obtaining financing on terms which are satisfactory to it. RFG has yet to determine the structure and composition of the funding of the cash component of the consideration.
John Livy, the managing director of TMGA will remain with Michel’s. Livy has extensive experience in multi outlet retail environments including TAB (10 years) and Regional Director of Franchising - Pepsi Co Restaurants Group (11 years). Occupying the position of MD of TMGA since early 2004, he has developed and refined the franchisee service delivery systems for Michel’s as well as recruiting an extremely robust and skilled management team – all of which have agreed to go forward under RFG’s stewardship. In addition Livy has committed to a long term involvement with the RFG senior management team, both with respect to Michel’s and RFG’s other systems.
Bruce Hancox will join the Board of RFG. Bruce has been a strategic advisor to the TMGA Board since October 2006 and has been instrumental in corporatising TMGA and developing its non-operational service systems. Bruce has over 35 years experience in corporate positions, manufacturing and retailing including 19 years with Brierley Investments (occupying the positions of director and chairman).
RFG chairman John Cowley said “the Board is extremely excited about the proposed TMGA acquisition as it represents a fantastic opportunity for the company to consolidate another impressive, and complementary, retail food system under its management umbrella”.
“Not only does the Michel’s Patisserie acquisition allow RFG to apply its proven expertise in managing franchise systems to another high-profile Australian brand”, he said, “it also further delivers on the strategic growth initiatives outlined in the company’s May 2006 prospectus”.
Livy said “the opportunity to partner a successful and growing public company with strong management skills and ready access to capital such as RFG will provide early access for our franchisees and stakeholders to the benefits of a larger organisation”.
RFG CEO Tony Alford said “the TMGA acquisition was part of the company’s strategy to consolidate a number of retail food franchise systems to achieve economies of scale through multi-brand ownership and leveraging of existing franchise systems.”
“Michel’s will bolster RFG’s outlet numbers to in excess of 1020 franchised units”, Alford said, “As with the recent Brumby’s acquisition, the Michel’s system will fit both strategically and synergistically with our Donut King and bb’s café systems”.
“Michel’s is a well developed and successful franchise system particularly in NSW with 195 outlets. Franchisee revenue is underpinned by its coffee and cake product offering and is of such scale and maturity that, similar to the Brumby’s system, it provides an immediate positive earnings contribution to RFG as well as providing a further platform to drive medium and long term shareholder value”, he said.
Alford said “the TMGA purchase would not only benefit the franchisees of Michel’s, but also RFG’s existing Brumby’s Bakeries, Donut King and bb’s cafe franchisees by allowing further cross-pollination of products, collaborative marketing initiatives, co-branding, supply economies and leveraging of RFG’s proven franchise management systems and growing national presence to take advantage of the significantly increased scale.”
He said “Michel’s, as with Retail Food Group’s existing systems, would retain its unique and distinct branding and identity.”
Alford said Retail Food Group would continue the development and growth of the Michel’s network across Australia and New Zealand. Indeed, Michel’s prominent brand, innovative distribution model and service systems positions the brand well for future organic growth”.
Retail Food Group is a leading Australian retail food brand manager and franchisor. It is the franchisor and intellectual property owner of the Donut King, bb’s café and Brumby’s systems.
_________________
http://news.brisbanetimes.com.au/ret...71907-xqi.html
RFG profits to soar after Michel's buy
Franchisor Retail Food Group Ltd expects to boost before-tax earnings this year by a hefty 167 per cent, after swallowing Michel's Patisserie chain in an $88 million deal.
When the latest deal is complete - coming just weeks after the franchisor snapped up Brumby's Bakeries for $45.8 million - RFG will have more than 1020 donut shops, cafes, cake shops and bakeries on its books.
But RFG chief executive Tony Alford still has an appetite for more buys, describing the retail food space as "flush with opportunity".
"Do we have any in mind? Yes. The answer is we continue to investigate potential acquisition targets," Mr Alford said.
Any target must be "immediately EPS accretive" and must be able to be integrated into RFG's existing business easily, he said.
In particular, the RFG boss noted the outstanding human resources coming into the company with its purchases of Michel's and Brumby's.
"It's as much about acquiring human resources as it is acquiring the systems," he said.
Mr Alford tipped cafes as the most likely direction for RPG to expand by acquisition as its existing coffee chain bb's is significantly smaller than its other brands.
"We are going to have to look at a bolt-on acquisition to complement that," he said.
Even before factoring in synergies, efficiencies and savings, RFG expects the Michel's deal will boost its fiscal 2008 earnings before interest and tax (EBIT) to $32 million from $12.2 million in the previous year.
A revised guidance on net profit will not be released until the franchisor has finalised the funding for the cash component of the deal.
Nevertheless the earnings forecast alone excited investors who pushed RFG stock up 40.5 cents, or 28.2 per cent, to $1.84.
The latest deal comprises $50 million in cash and a scrip component hitched to the strength of Michel's EBIT performance this financial year.
In total, the deal could be worth up to $88 million.
The takeover of Michel's, due to complete in November, if shareholders approve, comes less than two months after RFG acquired the 321-store Brumby's Bakeries franchise chain.
Michel's has 340 franchised outlets in Australia and a further six in New Zealand.
Before this buy, RFG already had 289 Donut King outlets and 71 bb's cafe outlets.
Mr Alford said both the Michel's and Brumby's systems would provided an immediate positive earnings contribution to RFG along with a platform to drive medium and long term shareholder value.
RFG will continue developing the Michel's network across Australia and New Zealand.
"Indeed, Michel's prominent brand, innovative distribution model and service systems positions the brand well for future organic growth," Mr Alford said.
Last week, RFG reported a 27 per cent rise in net profit to $7.52 million for fiscal 2007 and upgraded its fiscal 2008 guidance for profit to grow by 30 per cent to $9.8 million.
Its fiscal 2008 EBIT was forecast to grow 55 per cent to $19 million after the Brumby's acquisition.
__________
http://optuszoo.news.ninemsn.com.au/...aspx?id=108088
RFG profits to soar after Michel's buy
Friday Sep 7 17:45 AEST
Franchisor Retail Food Group Ltd expects to boost before-tax earnings this year by a hefty 167 per cent, after swallowing Michel's Patisserie chain in an $88 million deal.
When the latest deal is complete - coming just weeks after the franchisor snapped up Brumby's Bakeries for $45.8 million - RFG will have more than 1020 donut shops, cafes, cake shops and bakeries on its books.
But RFG chief executive Tony Alford still has an appetite for more buys, describing the retail food space as "flush with opportunity".
"Do we have any in mind? Yes. The answer is we continue to investigate potential acquisition targets," Mr Alford said.
Any target must be "immediately EPS accretive" and must be able to be integrated into RFG's existing business easily, he said.
In particular, the RFG boss noted the outstanding human resources coming into the company with its purchases of Michel's and Brumby's.
"It's as much about acquiring human resources as it is acquiring the systems," he said.
Mr Alford tipped cafes as the most likely direction for RPG to expand by acquisition as its existing coffee chain bb's is significantly smaller than its other brands.
"We are going to have to look at a bolt-on acquisition to complement that," he said.
Even before factoring in synergies, efficiencies and savings, RFG expects the Michel's deal will boost its fiscal 2008 earnings before interest and tax (EBIT) to $32 million from $12.2 million in the previous year.
A revised guidance on net profit will not be released until the franchisor has finalised the funding for the cash component of the deal.
Nevertheless the earnings forecast alone excited investors who pushed RFG stock up 40.5 cents, or 28.2 per cent, to $1.84.
The latest deal comprises $50 million in cash and a scrip component hitched to the strength of Michel's EBIT performance this financial year.
In total, the deal could be worth up to $88 million.
The takeover of Michel's, due to complete in November, if shareholders approve, comes less than two months after RFG acquired the 321-store Brumby's Bakeries franchise chain.
Michel's has 340 franchised outlets in Australia and a further six in New Zealand.
Before this buy, RFG already had 289 Donut King outlets and 71 bb's cafe outlets.
Mr Alford said both the Michel's and Brumby's systems would provided an immediate positive earnings contribution to RFG along with a platform to drive medium and long term shareholder value.
RFG will continue developing the Michel's network across Australia and New Zealand.
"Indeed, Michel's prominent brand, innovative distribution model and service systems positions the brand well for future organic growth," Mr Alford said.
Last week, RFG reported a 27 per cent rise in net profit to $7.52 million for fiscal 2007 and upgraded its fiscal 2008 guidance for profit to grow by 30 per cent to $9.8 million.
Its fiscal 2008 EBIT was forecast to grow 55 per cent to $19 million after the Brumby's acquisition.
Hi HC,
Central manufacturing facility is "a dedicated facility established to manufacture and supply doughnut and bakery products on a wholesale basis to its franchisees".
http://svc114.wic011v.server-web.com...hising/resale/
"This store is involved in the Donut King ‘Centralised Manufacturing Facility’ process (CMF) and receives all its product fresh into store daily. The CMF service daily dressed is unique to the Donut King stores in SE Queensland, and only requires a weekly product order to be sent to head office each week.
As such, this process brings balance between owning & operating your own business and the lifestyle that only the Gold Coast can offer."
Basically a way of making more money out of existing franchisees!
P.S. One up, as for the technical trend of RFG, I think the trading volumes are way too low (and stock too tightly held) to determine any up/downtrend but hopefully we will stay at least above $1.60 from here onwards. A bit of a scary stock to hold because of its lack of liquidity, but this has been my single largest holding for a while now. If this tanks I will be burnt badly!
Have to agree with you Tommy. I too felt I was holding a bit too much RFG given they can be almost impossible to sell at a fair price in any quantity. As a consequence I used Fridays good news and buyer interest to sell half my holding. I have some regret in doing this as I feel they have great potential. Still, a good profit is worth having in the pocket - I gave far too much back in the recent correction!!! As I am sure did many others.
RFG reaches all time high of $1.92 albeit on thin volume, not doing too bad in this volatile market:-)
Hopefully two dollars will come sooner than later, though uncertaintly remains until the financing structure is disclosured. Will ANZ be interested in a placement? mmm...
P.S. Bobbyvee, well done on cashing in, we all have to take profits some time. I don't wanna sell out RFG yet because this latest deal has finally put it into the radar of bigger players and I believe there is more upside and downside at the current price level. Still underpriced IMO.
http://www.news.com.au/adelaidenow/s...64-913,00.html
Retail Food Group bids for Michel's
September 10, 2007 11:30am
TONY Alford is now Australia's fast-food franchise king. First it was Donut King, then Brumby's Bakeries, now Michel's Patisserie.
Yesterday Mr Alford, the managing director of Retail Food Group, made an $88 million offer to buy 346 franchised Michel's cake outlets in Australia and New Zealand, sealing his position as the country's leader in the fast-food franchise fiefdom.
Soon he will be in control of 1020 food outlets -- among the most in the country -- with 322 Brumby's Bakeries stores, 290 Donut King shops and 70 bb's cafes, besides the 346 Michel's cake shops.
The move on Michel's sent RFG's share price soaring more than 28 per cent to $1.84 -- the biggest one-day gain since the company listed in June last year.
And Mr Alford will not be stopping at cakes. He is now eyeing a chain of coffee shops to complement his food empire.
"We are discerning in what we acquire -- we want quality franchise chains with strong management and experienced teams. There are over 8000 coffee shops in Australia and only 1400 are franchised. The sector is ripe for consolidation."
RFG will pay $50 million in cash and $38 million worth of RFG shares if Michel's is able to deliver earnings before interest and tax (EBIT) of $18 million in 2008.
RFG will also assume Michel's debt of $56 million.
Mr Alford said that the transaction will probably be debt-funded but the company is also considering a capital-raising.
"The finance structure has yet to be finalised but it will be done in the best interest of shareholders," Mr Alford said.
With the acquisition, RFG has now upgraded its EBIT forecast for next year to $32 million -- an increase of $13 million over earlier guidance given at the end of last month. This year the company reported EBIT of $12.2 million.
The acquisition will also be earnings-accretive in 2008.
Noel Roberts and Noel Carroll started Michel's as a bakery in Hornsby in northern Sydney 20 years ago. The chain quickly grew into 320 outlets turning over more than $220 million a year, selling gateaux, fruit flans, pastries, quiches, pies and sausage rolls.
Early last year, there was a management buyout led by John Livy who merged it with the master franchisee for Victoria and Queensland to create a national franchise business.
Mr Livy, who will remain with Michel's, said the acquisition by RFG will provide easier access to capital.
RFG chairman John Cowley said: "The acquisition represents a fantastic opportunity for the company to consolidate another impressive and complementary retail food system under its management umbrella."
Mr Alford said Michel's had a well-developed franchise system that would offer synergies with the rest of RFG's food operations.
In May, RFG paid $45.8 million for 321 Brumby's Bakeries shops.
RFG falls to $1.71, on small volumes (as usual)... mmm, is this stock ever gonna take off? I'm getting bored of holding this stock!
RFG basically will more than double in size after Michel's takeover and has greater growth potential than ever before, yet it can't stir interest in the market? Isn't the franchise business model one of the safest havens at times like this? We need an investor presentation!
Share all your frustration Tommy. I will now sit on to my reduced holding looking for that elusive blast-off, but I fear it might take 6 months!
Are you guys worried about the debt levels at all.
My analysis below extracts from company announcements:
Brumby's
The Company expects that the compulsory acquisition in respect of acceptances not received pursuant to the offer will be completed by mid-September 2007. The Company expects the total acquisition cost to be approximately $45.8 million. The acquisition cost except for $2.76 million has been funded from debt.
Michel's
The consideration payable to TMGA shareholders is $50 million cash and a scrip
component being subject to an incentivated earn-out program based on TMGA FY2008
adjusted EBIT performance. TMGA shareholders will be entitled to be issued with RFG
scrip on a pro rata basis where TMGA’s adjusted FY2008 EBIT is between $13.25
million and $18 million.
TMGA also has debt of approximately $56 million which will either remain with the
company on completion of the SCTA or be refinanced by RFG.
I have assumed the cash consideration for the Michel's deal will be fully debt funded which may or may not be incorrect.
RFG Borrowings 30 June 07 24372000
Funding for Brumby's 43000000
Brumby's Debt 31 Dec 06 approx 2000000
TMGA Funding 50000000
TMGA Debt 56000000
Total $175,372,000
$175m in debt with very minimal few tangible assets to back this up. Most of the assets comprimise intangible assets. Although the FCF's are strong, I am uncomfortable investing in RFG with this level of debt as what I am buying is effectively a whole lot of debt that will take many years to clear from the earnings of the company, and even longer if dividends are continued to be paid to shareholders.
Very valid point there mamos, I am well aware of the level of debt... that is why I previously said I suspect a placement is due with instos sooner or later. Not necessarily a bad thing if it goes into the portfolio of a few super funds given the fair dividend payout ratio.
I hate dilution of shareholder value but I don't think I would ever be able to buy back RFG at 80c again so am still holding patiently. If I could find better value in another stock, I would have sold out... but the market is too volatile at the moment, and I have plenty of cash so I am willing to stick RFG under the bottom drawer:-)
In regards to the asset backing issue, in a franchise business I would have assumed that there isn't really a lot of "tangible assets" in the first place as the franchiser doesn't own fixed assets and stuff, it's the franchisee who has to foot the bill... am I wrong here?
In any case, RFG intends to expand further through acquisitions of coffee chains, so they are definitely in need of cash. RFG is really tightly held and I don't like the fact that it is prone to market manipulation, so expanding the shareholder base wouldn't be a bad thing if it gets insto support. If it is just a capital raising through public issue I will be very disappointed because then they will be selling themselves too cheap. Michel's is a very established brand in Australia with a widespread national presence and the latest takeover is an excellent strategic move.
Given that Krispie Kreme in Tokyo is creating a lot of buzz among local consumers (people are queuing like the Russians in former Soviet Union!) RFG should also take a leaf out of their book and analyze the Asian market in the future for expansion of Michel's and Donut King there.
I think management need to better explain the RFG model to investors. If investors fully understood what RFG provides franchisees, the make up of its revenue stream, and had more information on the centralised manufacturing concept, cross selling / cross promotion between the chains in the RFG stable etc, they may be more comfortable with buying into the stock....myself included.
Hi HC,
Hope the latest presentation makes a bit of sense to you about RFG's business!
http://sa.iguana2.com/cache/b28b15ab...RFG-191636.pdf
Interesting thing is that michel's main revenue source is wholesale and manufacturing margin, as opposed to franchise service fees, i.e. royalties.
"CMF currently delivering consistent high quality product to 50 South East Qld Donut King
franchisees
- Planned roll out of CMF product to a further 23 stores in North Qld underway
- CMF frozen blank pilot commenced - Revised taste profiles & coffee blends for Donut King and bb’s café completed
- CRF roasting and distribution underway following extensive product taste trials
- Initial production target set at 2.7 tonnes per week
CMF / CRF
- National rollout of Donut King CMF product to continue throughout FY08
- Planning for bb’s café product rollout for SE QLD to be completed within 6 months
- Investigations underway for CMF product supply to Brumby’s franchise system
- CRF product rollout underway to Donut King system to be followed by bb’s café and Brumby’s
- Joint venturer to pursue potential 3rd party sales contracts
Revenue & Profit Drivers
- Following Brumby’s acquisition:
- FY08 EBIT forecast to grow by 55% to $19 million
- FY08 NPAT forecast to be approximately $9.8 million representing a 30% increase over FY2007
- Underlying business drivers – ie increasing and sustaining franchisee AWS and ATV allied with new outlet commissionings - will again be the fundamental drivers of RFG revenue in FY08
- Brumby’s to provide additional Franchisee Revenue (excluding marketing) of circa $11 million – up 48% on FY07
- Corporate expenses FY08 forecast to be circa 42% of Franchise Revenue
Michel’s Acquisition
Scrip & Cash Terms Agreement Consideration
- Pursuant to the SCTA, RFG will be entitled to the whole of TMGA’s FY08 earnings (after deduction of interest on TMGA’s existing debt) from 1 July 2007
- Consideration payable to TMGA shareholders is $50 million cash and a scrip component being subject to an incentivated earn-out program based on TMGA FY08 adjusted EBIT performance
- TMGA shareholders will be entitled to be issued with RFG scrip on a pro rata basis where TMGA’s adjusted FY08 EBIT is between $13.25 million and $18 million
- Assuming full entitlement to the earn-out the maximum value of the consideration payable is $88 million with any scrip entitlement being issued on the earlier of the finalisation of the FY08 audited accounts or 30th October 2008
- TMGA debt of approx $56m will either remain with the company on completion of the SCTA or be refinanced by RFG
Funding of Acquisition
- Total Acquisition Cost:
Assumption of TMGA debt $56m
Cash Payout to Vendors $50m Funding solution proposed to be provided by ANZ
Total Acquisition Cost $106m
- Incentivised Earn-Out:
Where EBIT =< $13.25m nil
Where EBIT => $18.00m $38m
Payable by: Issue of RFG scrip no later than 31 October 2008
Scrip Pricing at 3 month VWAP less Discount
Discount on VWAP 10% if RFG (VWAP) share price is > $1.68 per share
5% if RFG (VWAP) share price is > $1.52 < $1.68 per share
0% if RFG (VWAP) share price = < $1.52 per share
Michel’s FY08 P&L Forecast
- FY08 Revenue principally derived from wholesale and manufacturing margin, as opposed to
franchise service fees, i.e. royalties.
- FY08 Outlet growth forecast to be 25 new stores
FY08 Outlook Combining TMGA with RFG
- Pre-synergies, the successful completion of the transaction is forecast to result in revised FY2008 EBIT of $32 million(1), an increase of approx $20 million or 167% on FY2007
- RFG is confident that the Michel’s acquisition will be EPS accretive in FY08 - quantum of EPS accretion is dependent upon the funding structure adopted and the scrip issue as a consequence of the earn-out
Capital Management
With the completion of the Brumby’s acquisition RFG’s debt to equity ratio stood at 60% [ND/(ND+E)].
This sits at the upper end of RFG’s preferred debt to equity range of 40% to 60%.
- Following the completion of the Michel’s acquisition (and assuming all debt funding) RFG’s debt to equity ratio would increase to 80% which sits outside its acceptable debt to equity ratio range. The Michel’s acquisition is subject to completion of RFG’s due diligence enquiries and is due for settlement late November.
- In conjunction with the acquisition of Michel’s RFG is reviewing its capital management. Such review will take account issues such as additional equity requirements and the current shareholder register including liquidity.
So Tommy do you take the last paras to mean they will be looking to raise funds through specific institutional share placements?
For the sake of existing shareholders, I would prefer them that they did so, but in terms of liquidity and expanding the shareholder base (it is sooooooo tightly held at the moment!), a public issue might be in the cards... given Michel's status as the number one coffee/patisserie chain in Australia, its brand name alone might be enough to garner enough interest from the public. However, I can't imagine instos not being interested in RFG's, so let's keep our fingers crossed. That said, the management might seek to combine the two...
Acquisition of Brumbies doubles the size of RFG, and the takeover of Michel's will mean it will triple... this is a huge acquisition and makes RFG a dominant player in the coffee/donut/patisserie franchise industry.
What surprised me the most in this presentation is that Michel's profit margin is derived from whole sale and manufacturing instead of franchise royalties. As we already know, RFG is trying to make more money out of existing franchisees through whole sale and manufacturing by CRF and CMF, so obviously they see a lot can be learnt from Michel's supply chain (synergies!)
Michel's has a great reputation for its coffee too and I had no idea they were a bigger chain than Gloria Jeans, McCafe, Starbucks and Coffee Club!! I wonder which coffee chain will join RFG next? Very excited about Michel's acquisitions, I hope the capital management issue gets sorted out soon.
The RFG presentation was very interesting Tommy.
Any thoughts about the quality of the balance sheet? Assets are by and large intangibles, which I guess is the nature of the beast.......
Well! well! So now RFG is ex dividend and we revert to dull trade and negligible buyer interest. Maybe all will remain quiet until they clarify the financial plan moving forward. Let's hope there are some juicy buying opportunities in the meantime.
With the completion of the Brumby’s acquisition RFG’s debt to equity ratio stood at 60% [ND/(ND+E)].
This sits at the upper end of RFG’s preferred debt to equity range of 40% to 60%.
Following the completion of the Michel’s acquisition (and assuming all debt funding) RFG’s debt to equity
ratio would increase to 80% which sits outside its acceptable debt to equity ratio range. The Michel’s
acquisition is subject to completion of RFG’s due diligence enquiries and is due for settlement late
November.
In conjunction with the acquisition of Michel’s RFG is reviewing its capital management. Such review will
take account issues such as additional equity requirements and the current shareholder register including
liquidity.
Hi Bobby, mamos et al
RFG full year accounts released:
http://sa.iguana2.com/cache/124176d1...RFG-192049.pdf
Nothing much in there... yawn.
Now RFG forecasts a minimum EPS increase for FY2008 over FY2007 of 50%.
Funding structure still under review though. yawn!
http://sa.iguana2.com/cache/eaaa76cf...RFG-192072.pdf
ASX/media release
TMGA DUE DILIGENCE UPDATE & EPS GUIDANCE
On 7 September 2007 Retail Food Group Limited ('RFG') announced that it had entered into
a conditional Scrip & Cash Terms Agreement ('SCTA') to acquire all of the issued shares in
The Michel's Group Australia Pty Ltd ('TMGA').
TMGA is the intellectual property owner and manager of the Michel's Patisserie franchise
system ('Michel's'), a well known Australian food retailer which specialises in the sale of
cake, coffee and patisserie related products. As at 7 September 2007, there were a total of
340 Michel's Patisserie franchised outlets in Australia and a further 6 franchised outlets in
New Zealand.
The acquisition is subject to a number of conditions including shareholder approval, ASX
affirming the terms of the performance shares which will be issued in connection with the
incentivised scrip based earn-out and satisfactory completion of RFG's due diligence
enquiries.
RFG is pleased to announce that its due diligence enquiries have been satisfactorily
completed and that the SCTA is no longer subject to this condition.
RFG will keep the market informed as to satisfaction of the remaining conditions precedent to
the acquisition in accordance with its disclosure obligations.
Further to the revised guidance provided by the Company on the 7 September 2007, RFG
has continued to review its capital management strategies and in particular to resolve an
appropriate funding structure for the TMGA acquisition. Such review is ongoing.
In respect of FY2008, RFG has also previously indicated that the TMGA transaction would
be EPS accretive. Whilst the quantum of that increase will depend upon the funding structure ultimately adopted, the Company's Directors are of the belief that the TMGA transaction combined with the Brumby's take-over (which was completed on 3rd September 2007) will result in a minimum EPS increase for FY2008 over FY2007 of 50%.
RFG CEO Tony Alford said that "the Company's Board of Directors remain extremely excited
about the TMGA acquisition and the benefits which will flow from it, not only in favour of
Retail Food Group and its shareholders, but also the stakeholders in each of the Michel's
Patisserie, Brumby's, Donut King and bb's cafe franchise systems Retail Food Group is a leading Australian retail food brand manager and franchisor. It is the franchisor and intellectual property owner of the Donut King, bb's cafe and Brumby's systems. As at 28 September 2007, there were a total of 686 outlets comprising 324 Brumby's stores established in Australia and New Zealand, 292 Donut King stores established in Australia and a further 70 bb's cafe stores established within Australia and New Zealand.
ENDS
RFG struggling to break two dollar mark, still hovering around $1.90.
http://bigcharts.marketwatch.com/int...x=54&draw.y=17
Suppose no action until capital arrangement is finalized... yawn.
Be patient Tommy. Sometimes impatient will cost you money. It has cost me plenty of money the past few months where I set a target and lowered it and eventually the original target will get hit in a few days time. It can cost plenty in the long-term.
The problem with RFG (I am not a holder) is the uncertainty surrounding the capital raising. Obviously, you know once the uncertainty has been removed, then the SP can climb again. Of course, it all depends on the take-up of the capital raising, if there is any and the price. If the price is a premium to the current share price, watch RFG go.
Hi soulman,
Agree with you that capital raising is the current bottleneck. But can't see it taking place ABOVE the current share price though, more likely to be a bit below the current levels to entice instos to join in.
In the meantime, I'm gonna stick this one back under the carpet... yawn!
RFG finally breaches 2 dollar mark, sell side disappears :-)
Finally time for a party?
http://bigcharts.marketwatch.com/int...x=54&draw.y=17
Chart looking great tommy, congrats.
Whatever happened to Robbo btw? (original starter of this thread).
Yeah - nice call Tommy/Robbo :eek:
Have been following but it was one of those where you wait for the pullback, but instead it just keeps charging forward, first through $1 then $2. I can also say that I am a regular user of their recently acquired bread businesses, my fiance and I have no substitute for Brumby's when it comes to good bread. It seems to be a massively successful franchise set up over here in NZ.
M
Cheers espirit, as for Robbo I have no idea what happened to him... he just seems to have disappeared! It's a shame because his posts were fun and his stock picking skills were amazing.
Michael, thanx for the thumbs up for Brumby's! Didn't know they were popular in NZ. Anyway, RFG has always been a scary stock to hold because of its total lack of liquidity... it is virtually impossible to sell large volumes without causing the share price to plummet. Trading volume is virtually nonexistent so if someone decides to sell large holdings, the stock can tank quite a lot (though luckily this hasn't happened to date).
Let's see how RFG trading volume will change after capital raising.
Trading halt! WTF? Capital raising? Don't tell me its a another takeover, I can't keep up with this!
Tommy given that's till monday and the weekend falls, my gut would tell me that it has become a takeover target, or they are taking something else over.
Hi etrader,
I doubt RFG has become a takeover target (in fact I would NOT be happy if it is snapped up before it realizes its full potential) simply because I don't see any company that is bigger and could be a good franchise fit with RFG... if it is a takeover, they will be the ones snapping up smaller fish. But so soon even before finalization of Michel's deal?
I would have thought its more likely to be about the capital arrangement through a placement that they have implied previously to sort out the financing to take over Michels. But then again, they should just announce it rather than going into trading halt... mmm?
I don't think there have been trading halts for the previous takeovers and they would be a bit stretched to start another takeover so more likely to be capital raising.
If its a takeover of RFG who would be likely bidders?
:confused:
Page 2 of the annoucement says the halt is for a placement
Wow, that's a big placement... market cap will be close to 200 million after that.
But at least its all instos, not surprising they got commitments considering the good price ($1.85).
Now that the financing structure is clarified, I expect a bit of a retreat in share price and then a rerating upwards. Still holding :-)
____________________________
19 October 2007
ANNOUNCES $44.4 MILLION CAPITAL RAISING
Retail Food Group Limited (RFG) announced today that it had received commitments for a
placement of 24 million ordinary shares at $1.85 per share to raise $44.4 million before
costs.
Participants in the placement represent a range of institutional and private investors with all
existing institutional shareholders participating in the placement.
Funds will be applied to partially fund the cash component of the consideration payable to
The Michel’s Group Australia Pty Ltd (TMGA) and also pay down debt associated with the
recent acquisition of Brumby’s.
The placement has been made to new and existing institutional and sophisticated investors
pursuant to Section 708 of the Corporations Act 2001. All of the shares issued under the
placement will rank equally with existing ordinary shares.
The placement has been structured as follows:
• Tranche 1 – comprised of 11 million ordinary shares placed using the Company’s
15% placement capacity under ASX Listing Rule 7.1 raising $20.35 million; and
• Tranche 2 – comprised of 13 million ordinary shares placed subject to shareholder
approval under ASX Listing Rule 7.1 to raise $24.05 million.
A meeting of RFG shareholders to approve Tranche 2 of the placement is proposed for 28
November 2007. The notice of meeting will be sent to RFG shareholders shortly.
Following completion of the issue, RFG will have approximately 97.6 million ordinary shares
on issue.
RFG CEO Tony Alford said “we are extremely pleased with the significant interest and
response received in connection with today’s share placement and the tremendous support
RFG has recently enjoyed in respect of its industry consolidation aspirations and acquisition
activity”.
RFG Chairman John Cowley said, “a number of well respected institutional investors have
now become shareholders following the placement and the Board would like to sincerely
welcome them to the register whilst also thanking those existing shareholders who have
increased their shareholding in the Company”.
Mr Alford added, “not only has today’s placement facilitated the prompt raising of capital
necessary for the further realisation of the strategic plan outlined in our May 2006
Prospectus, it allows RFG to redouble its focus on managing its business, and in particular,
finalising the integration of Brumby’s Bakeries”.
ASX/media release
“With the composition of the Company’s capital structure now substantially determined, and
assuming the TMGA transaction is completed in 1HFY2008, the Company’s Directors remain
confident that the EPS accretion for FY2008 over FY2007 will be equal to or exceed 50%”,
he said.
“The acquisition of Michel’s Patisserie, which will bring total store numbers under RFG’s
stewardship to in excess of 1,030 outlets, bodes well for the Company’s shareholders and
RFG is well placed to deliver further rewards to its shareholders both this financial year and
subsequently”, he said.
Austock Corporate Finance Limited acted as lead manager to the placement referenced
above.
TMGA Update
As previously advised on 7 September 2007, RFG announced that it had entered into a
conditional Scrip & Cash Terms Agreement (“SCTA”) to acquire all the issued shares in
TMGA, the intellectual property owner and manager of the 348 store Michel’s Patisserie
franchise system (“Michel’s”).
The consideration payable to TMGA shareholders is $50 million cash and a scrip component
subject to an incentivated earn-out program based on TMGA FY2008 adjusted EBIT
performance. Assuming full entitlement to the earn-out, the maximum value of the
consideration payable to TMGA is $88 million.
TMGA also has debt of approximately $56 million which will either remain with the company
on completion of the SCTA or be refinanced by RFG.
Together with regulatory and shareholder approval, the SCTA remains conditional upon RFG
obtaining finance on terms which are satisfactory to it.
The balance cash component of the consideration (not covered by funds raised under the
above placement) payable to TMGA shareholders on completion of the SCTA will be funded
by debt and existing cash reserves.
Retail Food Group is a leading Australian retail food brand manager and franchisor. It is the
franchisor and intellectual property owner of the Donut King, Brumby’s and bb’s café
systems. As at 19 October 2007, there were a total of 687 outlets comprising 292 Donut King
outlets established in Australia, 325 Brumby’s outlets established in Australia and New
Zealand, and a further 70 bb’s café outlets established within Australia and New Zealand.
ENDS
Matthew Hart BBS Publications Relations - (07) 3221 6711
It looks to me like RFG will still be loaded up with debt even after the capital raising.
The $44 mill won't even cover the purchase price for the new acquisition, and they're assuming another $56 mill in debt on top of the cash they're forking out!
Has anyone done the work to see the likely debt/equity split post acquisition?
RFG share price has been struggling badly lately but hopefully the latest release will boost confidence. Today's trading volume was unusually large despite being on a down day of the overall market.
Following is an extract of today's MD presentation:
RFG has previously provided FY2008 earnings guidance;
• inclusive of the Brumby’s Bakeries Holdings Limited acquisition; being a 55% increase in EBIT to approximately $19 million and NPAT of $9.8 million – an increase of 30%, and
• inclusive of the Brumby’s Bakeries Holdings Limited and The Michel’s Group Australia Pty Ltd acquisitions; being annualized FY2008 EBIT of $32 million – an increase of $20 million or
167% over the Company’s FY2007 EBIT result and a minimum increase in EPS of 50%.
By way of current status we advise that as at the 31st October 2007;
• ATV and AWS in the Brumby’s Bakery, Donut King and bb’s Café systems are trending positively and are either consistent with or exceeding FY2008 forecast for the same period,
• Gross New outlet rollout is also ahead of forecast, and
• At this juncture the Company will exceed forecast 1HFY2008 New outlet and Net outlet growth.
That said, RFG is comfortably achieving its FY2008 earnings guidance so far as it pertains to its business operations without regard to the acquisition of TMGA.
So far as TMGA is concerned, we have also reviewed their management accounts for the period ending 31st October 2007 and can confirm, that based upon current performance TMGA is presently on track to achieve that FY2008 EBIT forecast by RFG, namely $13.2
million.
As previously detailed in this Address, the Christmas, New Year and Easter retail trading periods are critical in determining the outcome of full year operations and we will provide the market with further advice when the Company announces its 1HFY2008 results.
WTF, RFG down to $1.60, this in painful man...
http://bigcharts.marketwatch.com/int...w.x=0&draw.y=0
Low volumes as usual so not worried but lack of depth is a real risk at times of market volatility. All my small caps are getting burnt badly, including ADA.
Anyone still holding?
Decided to get out of RFG, sold out my holdings completely (only a 2+ bagger this time... not happy jan!) because of the ongoing credit crunch.
What concerned me is that because of RFG's high gearing, I believe either a capital raising or debt refinancing might be in the cards in the near future.
Previously I had assumed that Australian financial institutions would not be that heavily affected, but I have reconsidered my position: the situation will probably get worse in the coming months when they disclose and write off more bad debt.
Even though I am convinced its profits would be impressive following the takeover of brumbies and michell's, I decided to opt for companies with no debt in the current climate just to make my portfolio exposed to less debt-related risks. It was a hard decision and I would have held on for much much longer it the credit crunch wasn't getting worse by the day.
Now I'm about 40% cash, getting ready to buying cheap stocks, but the problem is I'm not sure whether the market has hit the bottom yet. The XAO chart looks very bearish and small caps are getting punished heavily (a lot of them are getting hammered badly!)
Good luck to holders, I am still a fan of RFG but for the meantime, I will sit in the sidelines...
CHART:
http://bigcharts.marketwatch.com/int...x=54&draw.y=17
Tommy,
Still, 200% in one year is a pretty impressive result!
Agree RFG is on the list of companies holding lots of debt - and being shunned by the market. Guess it stands to reason as all four big banks have increased lending rates even before reserve bank has done anything.
Its gonna be harder and harder for businesses to lend at favorable rates.
While I think the coffee and bread brands are great must say that we're not big fans of St Michels cakes, been there twice and dissapointed both times, but maybe we ordered the wrong stuff?!
17 January 2008 Significant Increase in First Half Profit Leading Australian retail food brand manager and franchisor Retail Food Group Limited (RFG) today announced that, based on unaudited management accounts, the Company's NPAT, for the
six months ending 31 December 2007 will significantly exceed (by greater than 15%) the NPAT
result achieved for the FY2007 corresponding period.
The Company's NPAT increase on the previous corresponding period is directly attributable to
the previously announced acquisitions in the second half of last calendar year, comprising
Brumby's Bakeries and Michel's Patisserie
Contributing to this result has also been a significant increase in total network franchise outlet
revenue due to strong organic new outlet growth and same outlet sales increases across the
Donut King, bb's cafe, Brumby's Bakeries and Michel's Patisserie franchise systems
CEO Tony Alford said that "the Company's business and franchise systems are performing well,
with the first half results consistent with expectations and previous guidance. Of particular note,
41 new outlet commissionings were achieved during the period across the Donut King, Brumby's
Bakeries, Michel's Patisserie and bb's café franchise systems - representing in excess of 50% of
the full year new outlet growth forecast - whilst at the same time completing two significant
acquisitions."
"Based upon the trading and operational performance to date, we maintain a positive full year
outlook for RFG as the Company progresses the physical integration process of the Michel's
Patisserie business and franchise system during the second half of FY2008." Mr Alford said.
Results for the six month period ending 31 December 2007 will be announced to the market in
late February 2008 at which time further commentary will be provided with respect to the
provisional TMGA results for the 1HFY2008 as well as the allocation of earnings between pre and
post acquisition.
As at 17 January 2008, there was a total of 4 franchise systems and 1050 franchised outlets
under RFG's stewardship comprising;
Franchise system Total Outlets Australia New Zealand Donut King 303 303 bb's cafe 69 46 23 Brumby's Bakeries 328 305 23 Michel's Patisserie 350 344 6 System Total 1050 998 52 ENDS. For further information, interviews or images contact:
Matthew Hart, BBS Public Relations, 07 3221 6711 / 0418 799 91
Hi micheal,
NPAT increase of 15%? Yo gotta be kidding me dude, considering their debt-equity ratio, that is not enough under the current climate to garner a higher PE ratio after such a major acquisition. They need to reduce their debt ASAP.
Don't get me wrong, I love RFG's franchise strategy (though i'm not a fan of michell's cakes similar to you) the fact is that being loaded with debt is not a positive contributor to share price under the current climate. When credit was easy peasy, debt-driven expansion was cool, but once there is a credit crunch, debt is nothing but a drag.
Until RFG clarifies this issue, I would stay on da sidelines for the sake of margin of safety...
Agree with you completely Tommy. I too am on the sidelines until RFG shows they can manage the debt.
How does a 90% increase in NPAT (as per the most recent announcement) sound Tommy?
I don't think a debt/equity ratio of 60% is too high... It also looks like we're now sitting on a PE of around 10, assuming the 2nd half produces a result similar to the first (although I'd imagine it will be more considering there will be a full contribution from Michel's)..
I'm back in at $1.40 after selling out around August (at $1.60).. I'm much more positive about the expansion strategy now, & with the CRF & CMF up & running, it all looks good for RFG (IMO)...
Austock are currently forecasting EPS of 17 cents which puts them on a PE of about 8x.
RFG's franchise model generates fairly stable cash flows which allows them to service relatively high levels of debt.
Also, the company has successfully refinanced recently. Their new debt facility has an initial term of 3 years, with 80% hedged at an interest rate of 7%.
Well done, RFG!
http://sa.iguana2.com/cache/8ea77364...RFG-197245.pdf
The Company’s EBIT for 1H08 was $16.0 million. This result represents an increase of 153.6% (or $9.7 million) over EBIT for the previous corresponding period ($6.3 million). The Company has now achieved approximately 51.8% of its forecast full year EBIT for FY08, and 50.0% of its proforma full year forecast of $32.0 million.
The Directors are satisfied and remain confident that the Company is well positioned to meet its FY08 proforma adjusted EBIT of $32.0 million.
The Company’s strong half-year result was primarily due to recent acquisitive activity together with robust new outlet openings and growth in franchised outlet average weekly sales and average transaction values.
The Company’s NPAT for 1H08 was $8.1 million. This result represents an increase of 106.8% (or $4.2 million) over NPAT for the previous corresponding period ($3.9 million).
EPS almost double from 5.5c to 10.1c
HOWEVER, operating cash flow is now almost a third...
Receipts from customers massively increased but so has payments to suppliers and employees.
THEY BETTER GET THEIR COST SYNERGIES IN PLACE SOON, OTHERWISE THIS CAN BE A DANGEROUS SITUATION WHEN LOADED WITH SO MUCH DEBT!
Where's Tommy these days?
RFG still doing OK and making as much as they said they would
Announcement today could be good for share price ... that hasn't been hammered too much over the last 6 months
This thread has gone rather quiet. Despite some reservations about RFG's management early on (myself included) they seem to have proven themselves reasonably well since listing.
They might be making a bottom at around $2.40-2.50? Funadamentals are pretty solid at the moment, sub 10 PE, ROE of around 20% and the high debt/equity that scared a lot of people is gradually coming down which will allow the dividend payout ratio to improve with time.
Not one to give spectacular returns but a potenatially nice risk/reward ratio
Haven't looked at RFG for a while.
12 month chart isn't very pretty.
Any ideas as to why the year long sell down?
PS. Despite all the healthy eating promos etc, the is always a ton of people at our local Donut King. Not bad coffee either...
Yeah, well unfortunately I'm one of them...
mmmm...donuuuts......:)
"I owe it all to little chocolate donuts.":)
I wonder if RFG will try to pick this up?
The Krispy Kreme doughnut chain has entered voluntary administration because of poor sales at some stores.
The locally owned Australian arm of Krispy Kreme has 50 sites across the east coast that employ a total of 650 staff.
The company has confirmed accounting firm Smith Hancock will launch a month-long restructure that could result in lay-offs. Stores are expected to remain open while the restructure is under way.
Advertisement: Story continues below
“Krispy Kreme has excellent brand recognition and good turnover and profitability in its better stores,’’ director John McGuigan said.
“However several factors, including location, sales declines, high rents and high distribution costs, have meant that a number of stores are losing money...
“Directors have determined that a restructure is necessary and the appointment of a voluntary administrator is the responsible action in view of the risk of insolvency if the company continued to operate in its current form,” Mr McGuigan said.
The company's revenue rose 6.9 per cent to $57.9 million in 2009, according to Dun & Bradstreet's Company 360 business information service. However, net profit margins were up only $62,000 or 0.1 per cent, over the same period.
“In the event that there are redundancies arising out of the voluntary administration process, all employee entitlements have been protected and will be met in full,” Krispy Kreme said.
Mike Smith and Peter Hillig have been named voluntary administrators, the company said.
“The directors believe the company’s core business, which has a seven-year history in Australia, remains strong and that a financially stable company will emerge from the process.”
Krispy Kreme opened locally in 2003. The Australian company has the sole right to use the Krispy Kreme brand name in Australia and New Zealand. The business is fully owned by KKA Holdings.
50 sites and 57m revenue.
IF each turned over 1.1m and had a 5% margin, you should be seeing a healthy profit.
No doubt they have higher cost structures and with more than a few poorly performing stores, 5% doesnt give you much to play with.
I hope the things kicks it. The fuss people used to make when there was just one store in Sydney and work colleagues would make a point of bringing a box down.
It really used to Sh!t me. Bogan antics dont amuse me.
Chairman's Address to AGM CEO's Address to AGM
1.35 million kg of roasted coffee beans!
I’d be ashamed to say I owned RFG shares .....but then again if you want to make money sometimes you need to cause misery to others along the way
But looking at the chart screwing your franchisees isn’t always a good thing long term.
http://www.smh.com.au/business/retai...07-h00lbl.html
This network has created a lot of human misery. They're all unhappy. I haven't met a happy one.
It seems amazing that the directors confirmed guidance and then six days later changed their mind about that.
I investigated this company and it ticked quite a few boxes but something pushed me away.
I note Motley Fool had recommended it several times and it was recently $7 (but have today put out a sell now that its below 2.00)
A very scary loss of wealth here. I would say that the business model is flawed in that it profits in too many ways off its franchisees. Those franchise fees arent unusual, I've seen them in other operations, but with the supply chain eating itself it turns into a race to the bottom.
Weird that management are blaming everything and everybody for this fiasco .....not our fault.
Way over 2000 franchises and its all coming apart. I know a guy who has been averaging down on this; reminds me of aeons ago when i did the same with Brierleys re in 87. Big lesson that one.
gee whiz ... another shocking day ..... down 18%
RFG resumes trading on Monday after another shocker report
If you like 'bloodbaths' this could be a good one
Might be some decent spikes up fpr the brave
https://www.smh.com.au/business/comp...02-p4z2lu.html
In a nutshell, RFG has put profits before franchisees and it is now paying the price. The quality of food it sells to franchisees who then sell to customers has deteriorated and the prices have gone up, causing customers to flee and revenues to fall.
Yes it is not only RFG [food] model that is flawed.
Lawn mowing,carpet cleaning,house cleaning,petrol stations,book shops,the list just keeps on growing.
A great number of "self employed" working for next to nothing.Most would have used their home as security to finance buying their franchise.Grim future for hundreds of hard working battlers.
Interesting to note RFG are trading at $1.265.May seem cheap, as they once traded over $7.00.
Must admit I think anyone buying at these prices is very brave.
The fizz is well and truly out of the bottle.
RFG have been through a restructure and share issue. Currently around the AUD 7 cents region. They seem to be profitable now.
Those are two great last posts to read together! $1.26 may seem cheap, once traded over $7, now 7c. This is a tough game.
Had a look at this company quite recently as a friend thinks it's going to have a run sooner or later.
Here's the latest accounts recasted; interims to 31 December, 2021:
https://recastinvestor.substack.com/...d-group-rfgasx
And the annual accounts to 2 July, 2021:
https://recastinvestor.substack.com/...ail-food-group
This stock is looking very weak at the moment. Yesterday it traded between 3.9 and 4.1 cents, half of where it was for most of this year.
The only recent issues seem to be the debt extension (a positive) and the ongoing ACCC problem which is dragging on interminably.
Any other information out there on this stock?
Earnings guidance was released today through the ASX. Things looking ok compared to forecasts. The stock bounced on the news. Currently 4.5 Australian cents.
Latest look at this company:
https://recastinvestor.substack.com/...d-group-rfgasx
Rfg has had a decision on its litigation issues and will pay a significant fine. With these issues behind it the stock has started to move.
Disclosure: Not invested
Stock has been moving up strongly, now at 9.3 cents AU.
10.5 cents in AU today.
Capital raise was announced a few days ago. Part of it was an offer to shareholders at 8 cents. The SP at the time was over 10 cents. SP dived on the announcement to below 8. Currently 7.4 cents. Wiped around AU$ 50 million off the market cap.
A look at the interim accounts to 30.12.22.
Needless to say EBITDA is highlighted by the company but their profits are actually falling.
Interims HY23
FY23 out today:
Finals FY23
Share price softened up on an improved core result but non-core expenses created an overall significant loss. Recast operating cash flow doesn't inspire.