Australia's largest multi-brand food franchisor Retail Food Group Limited (ASX: RFG) today posted a net profit of $25.3 million on revenue of $78 million for the six-month period ending December 31, 2014. The net profit and revenue are up 24% and 21% respectively over the prior corresponding period (pcp).
The company announced a fully franked interim dividend of 11.5 cents per share, up 7% over the pcp. Excluding one off costs associated with a big six months of acquisitions and integration earnings per share were 17 cents, up 32% over the pcp.
An impressive set of numbers to back up what the business is describing as a transformative period.
Pizza, coffee, cake, donuts
Retail Food Group (RFG) is the franchisor behind popular chain stores like Brumby's Bakery, Michel's Patisserie, Donut King, Pizza Capers, Crust Gourmet Pizza, The Coffee Guy and Gloria Jean's Coffee.
The completion of the acquisitions of Gloria Jean's and Di Bella coffee over the prior six-month period helped RFG boost its outlets by 1,042 to a total of 2,476 across 45 international territories. The Gloria Jean's acquisition in particular looks like it may help take RFG to another level in its evolution.
The business is making strides towards its goal of becoming a market leader in servicing the retail coffee market as a franchisor, supplier and roaster. If able to execute its strategy successfully it would appear to have a long growth runway as a coffee giant both at home and abroad.
The non-coffee franchise businesses have also performed strongly benefiting from investment, promotional activity and the continued popularity of franchised business models within Australia.
As the business grows RFG benefits from supply-side scale and its pizza franchisees will be looking to challenge the dominance of dough-making juggernaut Domino's Pizza Enterprises Ltd (ASX: DMP).
Guidance upgraded
The company took the opportunity to upgrade its full year profit guidance by 10% to $55 million from $50 million as it said the business is generating significant momentum, while maintaining a buoyant outlook.
Notably, the outperformance has been delivered amidst an environment of soft consumer confidence and in my opinion RFG continues to look decent value when selling for $6.99 after a 7% climb on today's profit upgrade.
RFG joins Slater & Gordon Limited (ASX: SGH) as a stock to have delivered eye-watering returns in 2015 just as I suggested when nominating 3 of the best stocks for 2015.
Don't be surprised if Slater & Gordon upgrades its guidance on the back of a strengthening British pound, while the third stock I identified, Acrux Limited (ASX: ACR), may also reveal the benefits of US dollar strength when it reports tomorrow.
Those are three interesting growth businesses, but if you're looking to beat the paltry returns on term deposits the key is to make sure you find high yielders on attractive valuations.
