The Retail Food Group Limited (ASX: RFG) share price has edged lower today after the food and beverage company released its full-year results.
At the time of writing its shares are down almost 2% to $4.72.
Highlights from FY 2017 include:
- Revenue up 27% on the prior corresponding period to $349.3 million.
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) increased 12.1% to $123.5 million.
- Net profit after tax up 14% to $75.7 million.
- Earnings per share up 7.9% to 43.7 cents per share.
- Final dividend of 15 cents per share fully franked, bringing its FY 2017 dividend to 29.75 cents per share.
- Net debt of $271 million.
- Outlook: Underlying NPAT growth of circa 6% in FY 2018.
What drove the solid result?
One of the biggest drivers of Retail Food Group's 12.1% increase in EBITDA was its International Brand Systems division which delivered EBITDA growth of 7.5% to $19.4 million during the period.
This helped offset a reasonably weak performance by its Domestic Brand Systems division which delivered EBITDA growth of just 0.1% to $78.1 million.
Pleasingly, its international operations should be given a boost in FY 2018 thanks to joint venture arrangements with Al Hathboor Group and HKO Group in the Middle East. Management expects these arrangements to accelerate its expansion within the Gulf region and establish a world-class coffee business focused on realising the significant untapped coffee opportunities throughout the region.
The company's Coffee Wholesale business posted a 0.7% increase in EBITDA to $14.2 million despite facing a 13.2% decline in revenue to $63.7 million. This decline in revenue was due to a one-off gain in FY 2016 related to its capsule machine launch into the supermarket channel.
Last but not least, the newly formed Commercial division reported EBITDA of $11.8 million on revenue of $100.6 million. This division was established as a way for management to leverage the substantial opportunity arising from FY 2017's merger and acquisition activity.
As of August 18, Retail Food Group had net debt of $271 million. While this is significantly higher than the $191.8 million net debt it had at the end of FY 2016, it is comfortably within its $344 million debt facility and complies with its debt covenants.
Should you invest?
Based on its current share price, Retail Food Group's shares are now changing hands at a little under 11x earnings and provide a trailing fully franked 6.3% dividend.
I think this is reasonably undemanding for a company expecting to grow its bottom line by 6% in FY 2018 and providing such a market-beating yield.
Whilst I would still pick industry peer Collins Foods Ltd (ASX: CKF) ahead of it, I feel Retail Food Group could be a good addition to most portfolios today.
