NPAT? Its cash flow that matters

In 5 June press release RFG stated that the company expected a NPAT for the financial year ended 30 June 2018 of approximately $34.7 million.

Summary of cash from operating activities ($thousands) as published:
1st half 2017 - $32,568
financial year 2017 - $63,795
1st half 2018 - $3,400

The NPAT and published accounts are accounting constructs. A key consideration of how a company is performing is its cash generated from operating activities.

RFG's decline in operating performance is stunning.

One can only guess at the 2nd half's performance.

The company is under restrictive banking conditions and it is likely that it would not find another (reasonable) debt provider(s).

The company will need significant amounts of capital to among other things, upgrade or replace plant and equipment, meet its (so far undisclosed) lease obligations (of franchisees), and so on.

Additionally, if it were to sell/dispose of any of its assets the banks have a 60% clawback requirement in place.

The potential outcomes are to sell some assets (generating little meaningful funds as any purchaser will know it is a distressed sale) and/or have a significant capital raising (but at what price would funds be provided?).

Realistically, the decline in cash flow from operations has and will continue to have adverse effects on the company and its ability to implement its strategies.