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Retail Food Group Limited downgrades 1H18 guidance

Retail Food Group Limited (ASX: RFG) has provided an update to the market this morning about the guidance for the first half of FY18.

The business has recently concluded its new Master Franchise Agreements in the UK with Crust Gourmet Pizza and Donut King Brand Systems.

A few weeks ago, the company gave guidance that statutory net profit after tax (NPAT) for the six months to 31 December 2017 would be around $22 million depending on the timing of master licence sales and the risk to franchise earnings.

The company has finalised those master licences and are effective December 2017, however a recent variation to an element of the commercial terms means that the revenue from those transactions will be included in the annual result but not in the first half to December 2017.

Management now expects its statutory NPAT ‘will be less than the $22 million advised on 19 December 2017’. The release did not state how much less it expects the profit to be.

The share price has opened around 5% down, but could go down further as the market usually dislikes uncertainty.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Retail Food Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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