Over Sold, page-312

Here is an email I just sent to Andre Nell (CEO) and Colin Archer (Chairman). It will be interesting to see their response.

"Dear Andre and Colin,

I am a share holder of RFG and I am a CPA accountant.

I actively participate in a share forum being Hot Copper.

My views about RFG and how it should respond to its current share price situation are contained within a post which I shared with Hot Copper this morning.

“After the recent share price fall, RFG find themselves in the unusual situation where there cost of finance of 3.73% (according to 2017 annual report), is significantly less than there cost of equity of 10.4% (dividend yield) i.e. their cost of servicing equity is 2.8 times greater than servicing the debt.

Assuming that their profit and cash flow remains unchanged after the sensationalised Fairfax article, this offers management a great opportunity and I will be writing to them today to suggest the following;

1. Ensure their bank are still supportive of the company, and perhaps debt covenants may need to be extended due to the SP fall, which has occurred from nothing other than a media attack on the company.

2. The company does not acquire any more businesses or brands in the immediate future. They have enough and they now need to execute on running the business well with the brands they already own.

3. All free cash flow and profit from the business, should now be used to implement an on market share buy back. This will significantly add value to the business and increase future FCF, by much greater than paying off debt. They should not borrow any more money for the buy back, it should come out of their existing profit.

This would be the best thing RFG could do in the current situation and would put a sky rocket under the SP.”

Could you please consider the above and let me know your thoughts.

I am also concerned by some of the content that is being posted on Hot Copper as a lot of it is damaging to RFG. I believe many people posting on this forum are not share holders (or prospective shareholders), but current/former franchisees trying to stir up trouble. For example, one poster has suggested on multiple occasions that the company will most likely be liquidated, and also suggested it enter voluntary administration. Perhaps RFG could review the contents of this forum, and if any unreasonable and libellous comments are found, the company could request Hot Copper provide details of the offending members account e.g. their email address. You could then investigate whether these comments are coming from current or former RFG franchisees, and take the appropriate action.

If you would like to discuss further please contact me,

Regards"