RFG ANN 6 June 2017
Trading in RFG Shares
Retail Food Group Limited (RFG, the Company or Group) notes that trading in the Company’s shares yesterday was well in excess of normal volumes, and that the share price retracted c.11.3% over the course of the trading day.
The Company attributes recent trading to two reports issued by UBS on the afternoon of Friday, 2 June 2017 (the UBS Reports). The UBS Reports were referenced in media yesterday, including the Australian Financial Review.
The UBS Reports make reference to the release of a new accounting standard effective for the Company from 1 July 2019 (IFRS 16 Leases), and otherwise make broad unsubstantiated assumptions as to the impact of same on the Company. As well, the UBS Reports incorporate a share price target downgrade, from $5.70 to $4.70, predicated solely upon the introduction of IFRS 16 Leases in FY20.
Beyond the limited information disclosed therein, RFG has little insight into the basis upon which the UBS Reports were prepared. Indeed, at no stage prior to publication of the UBS Reports did UBS consult with or seek engagement with the Company regarding the matters outlined in the UBS Reports. Significantly, UBS would have no insight into the Company’s position in respect of the impact (if any) of IFRS 16 Leases, nor that of its bankers.
RFG continues to assess the extent of any future impact of the new accounting standard with its external accounting advisors and auditors, and will disclose this assessment as required in the notes to the Company’s statutory financial statements (as it has done historically so far as other prospective accounting standards were or are concerned).
Having regard to the matters outlined above, RFG considers that any assumptions as to the potential impact of IFRS 16 Leases on the Company’s financial statements, lending covenants or other debt arrangements is both premature, precipitous and with respect, an exercise in speculative guesswork.
Importantly, there has been no change to RFG’s business model or underlying cash flows, and RFG’s lenders are aware of the impending accounting changes which will arise on introduction of IFRS 16 Leases, from 1 July 2019.
The Company continues to enjoy a strong relationship with its lenders, who are well aware of the leasing structures which have been employed by the Group since listing in 2006, and have expressed no concern in respect of the same.
RFG Price at posting:
$4.63 Sentiment: Buy Disclosure: Held
