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  • Retail Food Group (RFG) has updated its earnings guidance as customers start returning to its outlets amid easing COVID-19 restrictions
  • The group is Australia’s largest multi-brand retail food franchise owner, with names like Brumby’s Bakery and Donut King under its umbrella
  • While the company is reporting a number of permanent store closures across its portfolio, it seems revenues — and optimism — are slowly creeping back
  • The group now estimates underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be around $35 million for FY2020
  • As customers begin returning to outlets across Australia and global markets, the group seems on a steady footing despite trying circumstances
  • Retail Food Group is trading 13.1 per cent higher today at 6.9 cents per share

Retail Food Group (RFG) has updated its earnings guidance as customers start returning to its shopfronts amid easing COVID-19 restrictions.

The group is Australia’s largest multi-brand retail food franchise owner, with names like Gloria Jeans, Brumby’s Bakery and Donut King all under its umbrella.

While the company is reporting a number of permanent store closures across its portfolio, it seems revenues — and optimism — are slowly creeping back.

Updated guidance

The group now estimates underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be around $35 million for the 2020 financial year.

This figure has been revised down from previous guidance of $42 million to $46 million, which was withdrawn in late March as pandemic lockdown measures started affecting retail and hospitality businesses.

The revised EBITDA excludes the impact new Australian Accounting Standards Board (AASB) 15 and 16 reporting guidelines, which will adjust the company’s revenue and leasing numbers.

The company also advises its net debt at the end of June will be around $25 million.

Streamlining success

RFG has instigated a number of cost-cutting measures across its businesses to streamline operations during the pandemic shutdowns.

The group has permanently closed seven domestic shopfronts, which it says were slated for closure anyway — the pandemic merely expedited the process.

A further 30 international outlets have also closed permanently.

On a positive note, while around 100 other outlets are still shuttered, approximately 380 have at least partially reopened.

Only around 10 Australian franchisees remain closed, though it remains to be seen what impact the resurgence of cases in Victoria will have on the group’s business.

The group has also centralised its domestic coffee roasting operations and restructured its wholesale coffee business, with annualised cost savings of $6 million.

A large proportion of franchisees are also receiving rent relief, which has helped them stay afloat through the worst of the crisis.

Cause for optimism

While conditions are obviously still volatile and there are few certainties in the new COVID-19 economy, the reopening of large parts of domestic and overseas economies provides some cause for optimism.

RFG Executive Chairman, Peter George, says customers are starting to return in increasing numbers.

“Customer count has continued to improve, with recent trading data reflecting a weighted average decline amongst all brands of 13.76 per cent versus the previous corresponding period,” Peter said.

While that figure would be disastrous in most circumstances, it actually appears quite positive considering the how restrictive lockdown measures have been.

“RFG expects trading conditions to remain challenging in the foreseeable term and therefore anticipates a continuation of those measures implemented by the group in response to the pandemic to support franchisees,” Peter added.

“That said, there are a number of positive developments within the group’s business that provide optimism for the future”, he explained.

While current conditions are hardly a walk in the park, it seems RFG is weathering the storm so far, and providing valuable support for franchisees to stay afloat through the crisis.

Retail Food Group is trading 13.1 per cent higher today at 6.9 cents per share as at 2:49 pm AEST.

RFG by the numbers
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