RFG sees profits rising 10-15% in first half

Posted by Daniel Palmer on 30th November 2009

ASX-listed Retail Food Group has told shareholders that they expect a 10-15% increase in profit for the first half, while expansion activity continues apace with a deal to acquire a Donut King competitor and the Brumby’s master franchises in north Queensland and New Zealand.

“The Brumby’s North Queensland master franchise territory represents the best performing Brumby’s territory in Australia,” RFG CEO Tony Alford said during the company’s AGM on Friday. “Further, acquisition of the New Zealand master territory completes the re-acquisition of all master rights in that country so that the whole of the network therein is now ‘company managed’.”

There are presently 37 outlets within the Brumby’s North Queensland territory and a further 19 outlets in New Zealand.

“Given the outlets forming part of the North Queensland and New Zealand master franchise territories already form part of the Brumby’s Bakeries system, integration of subfranchised outlets under RFG’s franchise service and operational support systems will be seamless in comparison to that which would apply if an independent network had been acquired.”

The owner of the Michel’s Patisserie, Donut King, Brumby’s and bb’s cafe franchise brands also announced the acquisition of the ‘Donuts Coffee and Muffins’ franchise – a direct competitor of Donut King with 23 outlets, mainly in New South Wales.

“The Company will ultimately look to re-brand DCM outlets and assimilate them within the Donut King network,” Mr Alford said. “Thereby accelerating total Donut King outlet population growth whilst affording DCM franchisees the opportunity to partake of the benefits that accrue from membership in a nationally established and iconic retail franchise brand.”

The cost of the acquisitions, which will be completed in January, was not disclosed.

Retail Food Group further announced that net profit after tax in the first half is likely to be 10% to 15% over that reported in 1H09 (being $11.05m).

Mr Alford advised that the Company’s Donut King, Michel’s Patisserie, Brumby’s Bakeries and bb’s café franchise systems had continued to achieve positive growth in terms of weighted average weekly sales (2% YTD) and weighted average transaction values (3% YTD).

The Company also anticipated FY10 full year organic new outlet growth to be approximately 40 outlets, with half of those to be established prior to 31 December 2009.

“New outlet growth has been tempered by a tightening of new franchisee enquiry, lack of shopping centre development resulting in reduced prime site opportunities and stricter lending practices adopted by lenders. We have therefore adjusted our growth strategies to accommodate these factors whilst pursuing non-traditional site and potential acquisitive outlet conversion opportunities,” Mr Alford concluded.