RFG SHARES JUMP 13 PER CENT

BRANDCHISOR Retail Food Group (ASX: RFG) today announced a 5.7 per cent net profit increase to $27.9 million for FY11 despite 193 outlets affected by the January floods.

Following the news, the company’s share price jumped 13 per cent to $2.43 today with around 40,000 units traded.

Chairman John Cowley told Gold Coast Business News the result was solid, but admits the company’s failed $95 million bid for the Oaks Hotels and Resort Group earlier this year ‘hurt’ the company’s market cap.

“I like many others believe the stock is way undervalued. Obviously the acquisition bid for Oaks had an instant effect,” says Cowley, who also sits on the Oaks board.

“People thought we were going away from our core business, which as probably fair comment. It wasn’t a top recommendation, but anyway that’s done now and here we are.”

Chief executive Tony Alford says the natural disasters in Australia and New Zealand in the early part of 2011 impacted 193 franchised outlets.

He says net profit would have been in the order of 13 per cent to 15 per cent over the previous corresponding period were it not for the floods.

“The company’s performance is testament to the effectiveness of its business model and franchise systems as is amply demonstrated by its ability to drive enduring results notwithstanding the severely challenged retail environment which has prevailed throughout FY11,” says Alford in a statement to the ASX.

The Gold Coast company increased its final dividend of 7.5cps or 15.4 per cent and commissioned 40 new outlets. It also completed the Esquires Coffee Houses acquisition of 47 outlets.

“Notwithstanding the natural disasters and not insignificant retail headwinds, combined franchise system network sales increased $10.5m over FY10 to $651.1m while 40 new outlets have been established, thus validating the continued relevancy of our franchise systems to the consumer as well as the new franchisee candidate market,” says Alford.

Coupled with the recent acquisition of the 47 outlet Esquires Coffee Houses, total outlet population under RFG’s stewardship has increased to 1148 stores.

RFG has continued to build upon and enhance its proprietary coffee business by increasing green bean roasting in FY11 by 10 per cent to around 780 tonnes and follows the acquisition of the Evolution Coffee Roasters Group, scheduled for settlement in early September.

“Evolution is a retail brand owner and operator of a state-of-the-art coffee roasting facility in Auckland which manufactures and distributes 170 tonnes of premium coffee annually throughout New Zealand, Asia and the Middle East”, says Alford.

RFG is the franchisor and intellectual property owner of the Donut King, Michel’s Patisserie, Brumby’s Bakeries, bb’s café and Esquires Coffee Houses franchise system.

The board announced a final fully franked dividend of 7.5cps which together with the FY11 interim dividend represents a 23.4 per cent increase over FY10.