Just had another look at the RFG accounts and still hold the...

Just had another look at the RFG accounts and still hold the view of long term sell here. Their operating cashflow has barely been enough to cover dividends for the last 3 years. If you include P,P&E cash payments (before even considering business purchases) they have been cashflow negative over the last 3 years. This means that their expansion is funded entirely by debt, with cashflow being inadequate to cover any expansion after paying dividends. As their expansions include a lot of goodwill being purchased, this debt funded expansion has resulted in their net tangible assets per share deteriorating to their worst point since at least 2006, being very negative now (net tangible assets now negative $110m).

Also of real concern is the declining revenue of some of their flagship brands - donut king, brumbys and michels had a total revenue decline of circa $11m in FY15 compared to FY14. The cashflows from those 3 brands need to support circa $200m of intangible assets. This stock will be an interesting one to watch.