Crust Pizza's holding company issued yet another profit downgrade, and its shares are falling

Donut King / Facebook

Shares in Retail Food Group (RFG) are once again under pressure after the company issued another profit downgrade this morning.

RFG’s share price fell more than 20% on December 19 last year, when it downgraded its half-year profit forecast to $22 million from $33.5 million.

In a statement to the ASX this morning, RFG said it now expects statutory Net Profit After Tax for the six months ended December 2017 to be even less than $22 million.

“Retail Food Group Limited is pleased to confirm the recent conclusion of new Master Franchise Agreements for the United Kingdom in connection with the Crust Gourmet Pizza and Donut King Brand Systems respectively,” the statement said.

RFG said due to a recent change in the commercial terms of the UK licences, any revenue from the agreements would not be included in the company’s half-year results to December.

Instead, “the revenue derived from these transactions will now be included in RFG’s full year results for the 2018 financial year,” RFG said.

In addition to Crust Gourmet Pizza and Donut King, RFG runs other well-known brands including Brumby’s, Michel’s Patisserie and Gloria Jean’s coffee.

A Fairfax Media report in December last year highlighted problems with numerous franchisees under the RFG umbrella, stemming from what was described as a “brutal business model”.

The company’s stock price hit a low of $1.62 on December 20 last year before recovering to around $2.50.

It subsequently announced that it had extended a three-year, $150 million debt facility with National Australia Bank and Westpac.

The AFR reported that $100 million worth of debt is now due to mature in January 2020, with a further $50 million maturing in December 2020.

A short time ago, RFG’s stock was more than 5% lower after trading in a steady range to start the year:

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