Retail Food Group report on acquisitions and 1H10 guidance

Retail food brand manager and franchisor, Retail Food Group Limited (ASX:RFG), has announced that it has reached agreements, subject to normal contractual terms and finalisation of due diligence enquiries, by which:

• The master franchise territories for Brumby’s Bakeries of North Queensland and New Zealand will be reacquired; and
• The Donuts Coffee & Muffins (“DCM”) franchise system would also be obtained.

Tony Alford, Retail Food Group’s CEO, said “The Brumby’s North Queensland master franchise territory represents the best performing Brumby’s territory in Australia. 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’”.

Within the North Queensland territory there are currently 37 Brumby’s outlets with another 19 in New Zealand.

All of the acquisitions are anticipated to settle in January 2010, will be EPS accretive with each purchase price funded by the issue of a combination of RFG scrip and cash.

Retail Food Group has also announced that for the six months ending 31 December 2009, the Company’s NPAT from core operations will be in the range of 10% to 15% over that reported in 1H09 (being $11.05m).

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

Retail Food Group 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.

Mr Alford said that new outlet growth has been tempered by a tightening of new franchisee enquiries and lack of shopping centre development. These factors have resulted in reduced prime site opportunities and stricter lending practices adopted by financial lenders. He continued to explain that Retail Food Group had adjusted their growth strategies to accommodate these factors while at the same time pursuing non-traditional site and potential acquisitive outlet conversion opportunities.

RFG anticipates release of its 1H10 results in late February 2010 and at that time will provide further details regarding the acquisition metrics relating to the transactions noted herein.