Retail Food Group reports record growth

Retail food franchisor the Retail Food Group reported a 9% increase in its first-half net profit, to $13.6 million.

With more than 1100 outlets, RFG is franchisor and IP owner of Donut King, Michel’s Patisserie, Brumby’s bakeries, Esquires Coffee Houses and bb’s café franchise systems.

The company achieved record figure despite a 1.6% fall in revenue to $61.3 million, which was due to a change in the wholesale bakery division of Michel’s Patisserie, from which it is generating greater loyalty income.

The increased NPAT figure was driven by increased average weekly sales across all franchise systems.  

“Given the company’s continuing robust performance and exceptional net cash inflow the board today announced a fully franked interim dividend of 7 cents per share, to be paid on April 6, 2011 following a record date of March 23, 2011,” the company said in a statement.

According to RFG chief executive Tony Alford the company has recorded total franchisee network sales of $327 million.

“(This result) was supported by marketing initiatives, with fortified average weekly sales and average transaction value of 2.3% and 2.4% respectively over the first half of 2010,” he says.

“The underlying strength of the company’s franchise systems manifests itself in strong diverse revenue streams and each remains positioned to increase growth once retail returns to normality.”

Alford says the optimisation of RFG’s revenue is being challenged by external factors including “depressing” shopping centre foot traffic, slow consumer spending and “burdensome” labour laws.

According to RFG chairman John Cowley the results are “particularly satisfying” given difficult retailing conditions which he claims continue to suppress franchisee networks and franchise system expansion.

“RFG remains acutely focused on those business drivers which generate maximum return at both corporate and franchisee level,” Cowley says.

“We have a tried and tested platform for further growth and maximisation of shareholder value.”

RFG recently increased its outlet population growth by acquiring the Esquires Coffee Houses franchise system, adding a further 46 franchised outlets to the RFG group.

The company says the acquisition facilitates the realignment of bb’s café with a strongly branded system which is likely to generate additional outlet and sales growth. Alford says the company also refinanced its debt facilities.

“The new three-year $95 million facility incorporates considerable flexibility, simple covenants and a very low margin,” he says.