A good post and agreed you have highlighted a key issue that FCF...

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614 Posts.

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28/02/23

19:01

Post #: 66521110
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Originally posted by Digger26: ↑

Sorry, everyone. In my last post naming the lenders, I marked sentiment as buy. That was before I looked at the half yearly accounts. Sentiment should have remained as hold.

All those wonderful stories and improvements and the EBITDA, which George's remuneration depends on, mean diddly squat when you look at the key figures. Simply move the figures around so you claim the great EBITDA "before the etc", which are normal expenses now. The upshot is that in the period, the company reported a loss before tax benefit (if it ever eventuates) of $1.36m. Most of the payments for the ceased ACCC and class action commitments will be paid in the second half, not in this period (remember RFG has a commitment of $13m for this).

Additionally, the cash flow result is also poor. The cash from basic operations was just $8m, which was insufficient to meet interest, principal reduction and lease payments. The financials did not contain a breakdown of accounts receivables that, in the final accounts, show that the company was covering the franchisees who do not pay for the goods they sell.

Until the company actually achieves positive cash generation and real profits, I can't support a buy sentiment. I can't support George's bonuses nor that the company has really turned around.

I hoped for a lot better result this half year.

A lot of posts have mentioned the possibility of a take over. The biggest benefit of a take over of RFG is not the value of the underlying businesses but legitimate access to the over $400m in retained losses! That's a lot of tax saving!

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A good post and agreed you have highlighted a key issue that FCF was roughly neutral (slightly negative actually) after lease payments.

Current assets are way below current liabilities. In my view it is likely that they will be forced to raise capital to deal with their looming debt due in September. There's always a chance that they will manage to refinance, however if they do the interest rate is likely to be high.

The value of their intangibles requires improved profitability and cashflow to hold up going forward, as a neutral cashflow doesn't support a $200m+ intangibles value.

If their businesses start booming perhaps I'll eat my words, the next year or so doesn't look like it will be an easy win though with inflationary pressures on franchisee costs and the real possibility that people will reduce their discretionary spending at these outlets.

RFG Price at posting: 9.1¢ Sentiment: Sell Disclosure: Not Held
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0 Great analysis

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