Ann: Becoming a substantial holder, page-37

Well, I am not happy about declining revenues from their domestic franchise sector, I note though that this is partially a consequence of a planned reduction of the pizza business. Despite declining revenues the profits were still up, even excluding the acquisition.

Excluding acquisitions, the company's operating earnings are not growing.

ed over a 5-year view:

In FY2012, RFG's EBITDA was $51m.

This year, it will come in at around $125m, based on the company's guidance for 20% NPAT growth.

So that's a $75m total increase in EBITDA over that period.


However, the company has spent a total of $467m on acquisitions - funded by cash and scrip - over that time period.

At an average EV/EBITDA acquisition multiple of 6 times (the last one, Hudson Pacific was done at 5.7x), the equates to some $78m of EBITDA added by acquisitions.

Which means that, organically, the core business has shrunk overt that time period by:
$78m less $75m, => $3m.

Of course, in some years this has been less pronounced, and in some years it is noteworthy. Which is why, to observe underlying organic growth properly, requires performing the assessment over a number of financial periods.

And of course, this kind of analysis is - by its nature - not a precise science, and is intended to be merely indicative, rather than prescriptive.

The point being demonstrated is that the organic growth over time looks like it is negative, or at best, zero.