Retail Food : Chairman's Address to Annual General Meeting

Retail Food Group Limited

Level 4, 35 Robina Town Centre Drive

Robina Qld 4226

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[SLIDE 1 - CHAIRMAN'S ADDRESS]

Retail Food Group Limited

2021 Annual General Meeting

Chairman's Address

24 November 2021

[SLIDE 2 - TURNAROUND PROGRESS]

During the Company's 2018 AGM, my first as RFG's Chairman, I stressed the enormity of the turnaround journey which then faced the Group.

I noted that journey would be neither quick nor easy, but that RFG could aspire to a brighter future.

Since that time, and despite the challenges presented by the COVID-19 pandemic, much has been achieved, with many of the elements forming part of our turnaround plan having been satisfied or considerably advanced over the past three years.

A good portion of this work was achieved during FY21.

Guided by an unwavering commitment to supporting our franchise partners, RFG has transformed into a much more nimble, customer focussed organisation better positioned to drive positive outcomes for its stakeholders.

Whilst much work remains to be done, those outcomes were evident in the Company's FY21 results.

[SLIDE 3 - CREDITABLE RESULTS IN A CHALLENGING YEAR]

RFG's FY21 performance, which included the Group's first statutory profit since FY17, was a creditable one having regard to the ongoing and unavoidable impact of COVID19. It also provided comfort that we are on the right path in our pursuit of a firm platform for a return to consistent future profitability and growth.

FY21 underlying Net Profit After Tax (NPAT) of $23.2 million represented a 23.3% increase on the prior corresponding period, and was derived from underlying EBITDA of $26.9 million, consistent with consensus forecast(1).

At a statutory level, restructuring costs, non-cash lease impairments and a loss on disposal of the non-core Dairy Country business contributed to EBITDA of $16.6 million.

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Statutory Net Profit After Tax (NPAT) was $1.5 million, which represented a considerable turnaround on the prior year's loss of $4.0 million.

RFG was also compliant with all lending covenants at the end of the financial year.

[SLIDE 4 - SUPPORTING OUR NETWORK]

Underpinning FY21 performance has been an ongoing commitment to providing a franchise support model that leverages the power of our brands, the capability of our people and an ever present appreciation that our success is fundamentally linked to the success of our franchise partners.

We've launched a new training facility on the Gold Coast which, given COVID-19 travel restrictions, has ample capability for remote training.

We've also launched a new Partnership Program designed to give each franchise partner unique insights into their businesses so that business plans may be tailored, growth opportunities targeted and operational efficiencies driven with the customised support of field team and support office personnel.

Additionally, we've provided considerable financial, operational and other support to our franchise partners in response to the evolving COVID-19 situation.

The customer has also been front of mind.

Focussing on value, reward and service, whilst at the same time enhancing products, menu and engagement, we've:

• Undertaken around 100 targeted marketing strategies and new product launches;
• Driven incremental spend per transaction which has offset pandemic induced decreases in customer traffic; and
• Completed the rollout of new loyalty programs across each of our brands to drive frequency and engagement, improve Brand System data and provide an enhanced platform for direct communication with customers.

These initiatives, when combined with the valued efforts of our franchise partners and their teams, contributed to strong FY21 domestic Average Transaction Growth (ATV) of +5.7% and Same Store Sales (SSS) growth of +3.2%, notwithstanding COVID-19's impact on customer count(2).

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[SLIDE 5 - FY21 BRAND SYSTEM PERFORMANCE]

Operationally, the Brumby's Bakery and QSR Brand Systems (Crust and Pizza Capers) were stand-out performers throughout FY21.

Brumby's has successfully re-engaged with local communities during the pandemic, leveraging its fresh baked promise and quality product offer to grow FY21 network Same Store Sales (SSS) by +9.1%, Customer Count by +2.8% and Average Transaction Value (ATV) by +6.1%(2).

In other words, more customers were spending more each time they visited their local Brumby's outlet during FY21.

Our QSR Division on the other hand unveiled a new value model that resonated with customers and contributed to 600,000 more pizzas being sold during the year. FY21 customer count grew +6.7% and +10.0% across Crust and Pizza Capers respectively(2).

These outcomes contributed to solid SSS growth for Crust of +3.2%, whilst Pizza Capers outperformed, achieving FY21 SSS growth of +12.4%(2).

Whilst these encouraging results were partially influenced by consumer preferences for low contact home delivery options during the pandemic, they also validate the significant planning invested in the new value model whilst also demonstrating our franchise partners' ability to execute on new strategies designed to grow their businesses.

[SLIDE 6 - FY21 BRAND SYSTEM PERFORMANCE CONT']

These strong performances were offset by significant customer count declines amongst our coffee based brand systems which are predominantly based in shopping centres and metro locations most impacted by COVID-19 measures.

This was particularly the case in Victoria and New South Wales, where circa 86% of those same stores across our network which suffered turnover declines of 25% or more were situated(2).

However, amongst overall Brand System results were some very encouraging signs.

Donut King grew FY21 SSS by +2.9%, however, performance was more pronounced amongst non-metro outlets, less impacted by COVID-19 measures, where SSS grew by +6.6%(2).

A similar story applied in the case of Gloria Jean's and Michel's Patisserie, where(2):

• The former sustained a network SSS decline of -1.8% (excluding Drive Thru stores), but performed strongly with +6.6% SSS across regional and non-metro areas; and

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• The latter sustained a network SSS decline of -5.8%, but +0.5% positive growth in regional locations.

These outcomes indicate that our 'franchisee first' and customer driven strategies, supported by product innovation and strong marketing execution, are delivering tangible outcomes for our franchise partners.

[SLIDE 7 - INTERNATIONAL & DI BELLA COFFEE]

COVID-19's impact across Di Bella Coffee and our international franchise network was no less apparent, but again, there were a number of positive signs apparent in FY21 performance.

These included:

• The launch of 43 new outlets across international licensed territories, offsetting 84 closures, the majority of which were attributable to COVID-19(3);
• The global launch of Gloria Jean's 'Glorious Blend' in response to Master Franchise Partner demand;
• The respective relocations of our USA headquarters to Chicago, and supply hub to the east coast, so both are better aligned with the country's outlet profile; and
• The launch of contract roasting solutions to service the Middle East, Central Asia, European and New Zealand networks, providing a more efficient, agile and cost effective supply chain better able to respond to growth opportunities once less volatile trading conditions return.

[SLIDE 8 - INTERNATIONAL GROWTH OPPORTUNITY]

We maintain considerable optimism regarding the potential future contribution of our international network as global trading conditions continue to improve, and consider that it will become a key ingredient in RFG's future success.

Save for the Gloria Jean's South Korea and UAE territories which have been heavily impacted by COVID-19 measures, the majority of our international licensed territories are in definite recovery with Master Franchise Partners actively planning store growth within their networks.

Since July 2021, 20 new outlets have been established, with a further 46 new outlets across 19 countries in the pipeline(3). This includes the programmed establishment in 2022 of two further Gloria Jean's Drive Thru outlets in Texas, USA, by one of that country's most successful franchise partners.