1. Why were there successive profit warnings throughout the year, some near each other? With each announcement we indicated that RFP would be subject to continued volatility and there were numerous assumptions that would impact on financial performance. There was much uncertainty concerning the growing performance, maintenance costs and labour that was difficult to measure. As each month end accounting process concluded and YTD results known, disclosure requirements were assessed.
2. Why don’t you invest in new farms? RFM has stated in previous presentations that the risks and rewards of current growing contracts do not warrant further investment. Contract growing rates have declined significantly, the term of the contracts is much less and the risks, and the obligations higher. Further there is an asymmetry of influence in the industry dominated by two large participants.
3. Why aren’t all four water sanitation units installed? The third and fourth units are much larger and the supplier is taking longer than expected. They are expected to be installed within the next six weeks.
4. Can RFP continue to trade, is RFP a going concern given the successive losses? RFP can continue to trade with the support of the Lessor.
5. What are RFP’s future prospects? There is uncertainty as to future prospects. Some costs that are drought-driven will reverse at some point: insurance costs will change with the insurance cycle. However the labour required in a more intense operating environment, continued growing performance issues and the older farms provide an uncertain environment.
6. Is RFM conflicted as the Responsible Entity for RFP and RFF the Lessor? We manage this through a separation of staff, separate legal advice and a Board that is highly aware of its obligations to manage conflicts of interest properly. Moreover, a Board and management that are committed to acting in the best interests of each distinct group of unitholders. The arrangement is common with registered investment schemes and is disclosed in various documents, including the original PDS.
7. What options does RFP have going forward? RFM is assessing options for the best interests of RFP unitholders. To this end RFM, on behalf of RFP, is discussing options with Baiada, Turi Foods and the Lessor, RFF, to see what is possible with its obligations under the respective contracts.
8. Can the landlord give us more rent relief? RFP has rights under the lease to request a rent review and RFP is pursuing this, however the outcomes from such a request are uncertain and it would not be prudent for RFP to assume or rely on an outcome when making decisions.
RFF Price at posting:
$1.64 Sentiment: Buy Disclosure: Held
(20min delay)