Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Retail Food Group Ltd (RFGPF, Financial) achieved a net outlet growth of 42, with 33 new physical locations opened in FY24.
- Underlying revenue grew by 12.9%, reaching $114.9 million, and underlying EBITDA increased by 15% to $29.2 million.
- The cafe-coffee-bakery segment performed strongly, with a 3% increase in network sales, representing 71% of total network sales.
- The acquisition of Beefy's Pies added $1.7 million to underlying EBITDA and maintained an 8% same-store sales growth post-acquisition.
- The company launched new e-commerce platforms, including Donut King Occasions, enhancing accessibility and driving incremental profits for franchise partners.
Negative Points
- The quick service restaurant (QSR) segment faced challenges due to heavy competitive discounting, impacting customer counts.
- Customer count in the cafe-coffee-bakery segment declined by 2.8% over the prior year, despite improvements in the second half.
- The company experienced wage inflation and increased payroll costs due to new remuneration plans and recruitment of senior staff.
- Corporate stores made a small loss on a four-wall EBITDA basis, with a need to improve profitability in the company stores division.
- The company expects some lease write-ups in FY25, although at a smaller level than in FY24, indicating ongoing challenges with the lease portfolio.
Q & A Highlights
Q: Can you talk about the new store openings, particularly for Beefy's and Donut King?
A: (Matthew Marshall, CEO) We are targeting six new Beefy's stores for FY25, with three leases already secured. These will be company-owned. For other brands like Donut King, Gloria Jean's, and Crust, we are focused on quality and leveraging our multi-site operator incentives. We expect new openings in FY25, driven by strong interest and a robust pipeline.
Q: Are there any expected lease write-ups in FY25?
A: (Robert Shore, CFO) Yes, we expect some lease write-ups, but at a much smaller level than in FY24. We have various growth drivers, including corporate stores, Beefy's, Ribs, and Donut King Occasions, to fill any earnings gap.
Q: What capacity for growth do you see within the brands currently?
A: (Matthew Marshall, CEO) We see significant capacity for growth, particularly in untapped traditional shopping centers for Donut King and new formats for Gloria Jean's. For Crust, we are focusing on quality and innovation. Rack'em Bones will expand through new channels rather than more outlets.
Q: How should we think about promotional activity and its impact on revenue and costs?
A: (Matthew Marshall, CEO) We focus on value rather than discounting. For example, Donut King offers profitable bundle deals that drive transaction values while maintaining franchise partner profitability. We aim to provide value through quality offers and innovation.
Q: Can you provide a trading update for the coffee cafe bakery segment?
A: (Matthew Marshall, CEO) The segment has started FY25 strongly, with a focus on execution and value propositions. We are optimistic about the outlook, driven by strong brand performance and customer value.
Q: How do you plan to offset negative comps in the QSR segment?
A: (Matthew Marshall, CEO) We are focusing on data-led decisions, product innovation, and technology to re-engage customers. We will not engage in discounting wars but will protect profitability through quality and innovation.
Q: What is the timeline for the 20 committed multi-site operator stores?
A: (Matthew Marshall, CEO) The commitments are for five stores over three years, with different starting points. We have tiered incentives to support both large and smaller multi-site operators, ensuring a rolling commitment.
Q: How do the year-to-date trading numbers translate to same-store sales?
A: (Matthew Marshall, CEO) Same-store sales growth has been positive, particularly in core brands. We are focused on quality execution to continue this trend, despite the challenging trading environment.
Q: What is the expected revenue contribution from new Beefy's stores?
A: (Matthew Marshall, CEO) New Beefy's stores are expected to perform similarly to existing ones. We are confident in their success, with initial openings already showing strong performance.
Q: Can you explain the increase in coffee GP margins and its future outlook?
A: (Robert Shore, CFO) The margin increase is due to long-term contracts secured at low commodity prices. These contracts provide pricing stability, allowing us to manage gradual price increases without shocking the franchise network.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
