Transformation Costs Drive Retail Food Group’s Profit Plunge Despite Revenue Gains
Retail Food Group reported an 8.5% revenue increase for FY25 but posted a significant net loss of A$14.9 million, weighed down by transformation and strategic reset costs.
- FY25 revenues up 8.5% to A$143.2 million
- Underlying EBITDA rises modestly by 1.6% to A$29.6 million
- Reported EBITDA plunges 29.5% due to high transformation and legal expenses
- Net loss of A$14.9 million compared to prior year profit of A$5.8 million
- No dividends declared amid worsening net tangible liabilities
Revenue Growth Masks Profit Challenges
Retail Food Group Limited (RFG) has delivered a mixed financial performance for the fiscal year ended June 27, 2025. The company’s revenues and other income rose by a healthy 8.5% to A$143.2 million, reflecting some resilience in its consumer discretionary food retail segment. However, this topline growth belies deeper profitability struggles.
Underlying Earnings Show Slight Improvement
The company’s underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) edged up by 1.6% to A$29.6 million. This suggests that the core business operations maintained a degree of stability despite a challenging retail environment. Yet, this positive underlying performance was overshadowed by significant one-off costs.Transformation and Strategic Reset Weigh Heavily
Reported EBITDA, which includes transformation, acquisition, legal, and marketing expenses, fell sharply by 29.5% to A$15.3 million. The company incurred A$2.3 million in transformation and acquisition costs and a substantial A$11.9 million charge related to company store performance and a strategic reset. These expenses reflect ongoing efforts to restructure and reposition the business, but they have severely impacted reported profitability.Net Loss and Balance Sheet Pressure
Consequently, Retail Food Group swung to a net loss of A$14.9 million, a stark reversal from the prior year’s profit of A$5.8 million. The company’s net tangible liabilities per security worsened to (39.11) cents from (34.09) cents, underscoring balance sheet pressures. In light of these results, no dividends were declared for FY25, signaling a cautious stance on capital returns amid the turnaround phase.While the revenue growth and underlying EBITDA improvement offer some encouragement, the heavy costs associated with transformation and strategic initiatives highlight the challenges ahead. Investors will be watching closely for management’s next moves to restore profitability and strengthen the company’s financial position.
Bottom Line?
Retail Food Group’s FY25 results underscore a pivotal moment; growth is evident, but the cost of change is exacting a heavy toll.
Questions in the middle?
- What specific strategies will management implement to reduce transformation and legal costs?
- How will the company address its worsening net tangible liabilities and balance sheet health?
- What is the outlook for dividends and shareholder returns in the near term?
