Ann: Becoming a substantial holder, page-39

I accept that at the EBITDA level there appears to be no organic growth especially in the Australian franchise businesses. However it is a different story at the EPS level. I have include a table below with some estimates for EPS and Diluted EPS.
The data in the table suggest RFG on a pre abnormal basis may achieve over 5 years a 10.5% EPS CAGR compared to a estimated 7.5% CAGR for Diluted EPS.

I have another set of numbers that shows RFG over the 10 years to 2016 has achieved a EPS CAGR of 9.6% with an acceleration in the last 5 years due to some large acquisitions.

For mine growth in EPS is king, provided the balance sheet is not too highly geared and RFG is okay at present but will be constrained for large acquisitions unless some capital is raised.

Management deserve some credit for the growth over 5 and 10 years.

The real question is: are the abnormals truly abnormals?
In the case of the Michels Patisserie I believe not and I am therefore very, very pissed at the CFO and the auditors!!!!!

Can growth in Coffee, International and Food Service (56% of FY'17 EBITDA) make up for the lack of growth in Australian Franchising (44% of FY'17 EDITDA).
This is the key question.

From a market point of view the significant SP decrease is a PE derating due to no growth in 44% of the business, accounting monkey business in the Markeing Funds, bad press from other franchise systems and the loss of both Tony and Gary Alford.

My challenge to the Board, especially Colin Archer and to the MD is for them to manage the new circumstances without the Alfords.

RFG has a solid history and with some good results and no stupid surprises the market will reward the SP with a positive re-rating but it will take 12 - 18 months

	Column 1	Column 2	Column 3	Column 4
0	RFG	EBITDA	EPS	Diluted EPS
1	2012	50m	27.5c	26.3c
2
3	2016		42.1c	37.4c
4	2017	125m	45.5c	37.6c
5	CAGR		10.5%	7.5%