Retail Food Group Limited (RFG) Earnings Call Transcript

Good morning, everyone. Thank you all for standing by, and welcome to the Retail Food Group Financial Year 2025 Annual Results Briefing. [Operator Instructions] I'll now hand the conference over to Matt Marshall, CEO of Retail Food Group.

Thank you, Rob, and good morning, everyone, and thank you for joining Rob and I as we share the full year FY '25 financial results for Retail Food Group. The solid results will share reflect a further 12 months of progress against our customer-led enhancement growth strategy delivered against the backdrop of well-publicized challenging retail conditions. Today, we'll cover our business update, full year financial performance and conclude with a Q&A session. Moving to Slide 3 now and to share some of the highlights. Firstly, I'm pleased to announce we have reached solid financial growth with consecutive year-on-year improvements in network sales, revenue and underlying EBITDA despite the prevailing market conditions that created some headwinds. After a challenging Q3, our efforts to focus on the customer, reset brand and innovation priorities and work closely with the drivers of performance with our franchise partners, build strong momentum in Q4, including a return to growth for our QSR with 5.5% network sales growth. Secondly, advanced customer insights are shaping our modernized brand road maps, approach to refurbishments, product innovation and digital channel expansion. Importantly, we've launched a voice of customer platform that will be available to all of our franchise partners to enhance real-time customer feedback and boost commercial performance. Thirdly, our network quality has improved as we continue to fix on the individual store economics as a baseline for benchmarking and identifying opportunities. Better buying outcomes for our franchise partners to mitigate input costs and enhanced franchise partner engagement support plan and ongoing investments to support the quality of new store openings have all been a key focus with 37 -- 38 new outlets opened in FY '25. Moving forward to Slide 4. We've continued to progress our growth strategy in 3 key areas during FY '25. Firstly, brief expansion has shown a 16.6% increase in network sales versus the full year FY '24 that includes comparison with the pre-acquisition period. 5.1% growth in same-store sales and an additional 5 new stores now launched since acquisition, expanding from the Sunshine Coast to now include stores in Brisbane, to Wanda, Valener and more recently, the Gold Coast. We remain on track to our goal of opening 50 new stores by 2028, including a move towards franchising later in FY '26. Secondly, our partnership with Restaurant Burns International will bring Firehouse Subs to Australia, targeting a minimum of 165 stores in the first 10 years. We're thrilled to announce Tracy Steinwand has joined Retail Food Group as the General Manager of Firehouse Subs. Tracy brings a wealth of experience and is now leading the well-progressed launch plan with the first store expected to open in mid FY '26. Lastly, our international network has delivered improved financial outcomes in FY '25, and we're well progressed with the opening of a new supply hub in Turkey to reduce complexity and ensure product purchasing and service quality within our master franchise territories. With the appointment of a new Head of International due to commence in the first quarter of FY '26, we're focused on the next stage of growth, leveraging the extensive global footprint we already have. Moving on to Slide 5 now. This year, we've made some deliberate strategic choices against our enhancing growth framework, which includes managing our legacy portfolio in 3 key areas. Firstly, as we look to prioritize rapid growth for Beefy's Pies and Firehouse Subs, we'll seek to transition our company stores in other brands, other brand outlets to franchise ownership or they will be closed. Both Beefy's Pies and Firehouse Subs will focus on Southeast Queensland for company store operations, allowing us to focus our resources I'll provide more details on comps shortly. Secondly, we've assessed Brumby’s Bakery against our strategic pillars. And given the resource requirements for growth in our other brands, we're exploring options for potential divestment in FY '26, freeing up capital for investment against our other priorities. The process is underway, but there are no guarantees as to timing on that nor whether it will result in an acceptable offer. Well, lastly, we've divested our international operations of Café2U, The Coffee Guy and it's a Grind, releasing over $1 million in capital in FY '25. Domestically, we're working with all our franchise partners across Michelle's, Pizza Capers and domestic mobile to continue supporting them whilst offering conversion opportunities to larger brands where feasible. Now let's take a look at our financial results for FFL25 on Slide 6. We're pleased to announce that we've delivered growth in FY '25 with network sales up 0.3% to $50.4 million driven by strong performance of our growth brands in Cafe Coffee bakery being Donut King, Gloria Jean’s and Beefy’s, up 4.8%. Our focus on customer-led execution plans and store performance is yielding results, and this will continue into FY '26. Pleasingly, we finished the year with strong Q4 trading results with 2.2% same-store sales growth across all domestic outlets and our QSR segment returned to growth as we build specific and targeted plans to focus on product innovation, quality and value to the customer. Our underlying revenue was up 13.6% with the full year contribution and growth from Beefy’s Pies and we successfully opened 38 new domestic trading outlets in addition to the 22 Cibo Espresso stores that joined the RFG portfolio on the 31st of December 2024. Globally, we launched 93 new outlets in total as we continue to focus on network growth and the quality of our outlets. We continue to look at new store formats and modernized designs as part of our brand road map to ensure we can provide unique flexible solutions in each market. We delivered $29.6 million in underlying EBITDA, up 1.7% on FY '24 with $22.1 million in underlying operating cash flows that were in line with the prior year. Due to one-off noncash impairment of intangible assets associated with the Brumby’s Bakery and one-off costs relating to our company store's reset, we posted a statutory net profit after loss of $14.9 million, and Rob will provide more detail on this shortly. As we move to Slide 7, I'd like to take the opportunity to highlight some additional key takeaways for this financial year that further demonstrate the focus and momentum that's being built. Despite some improvement in retail conditions in Q4 and increasing optimism with regards to consumer discretionary spending into FY '26, our growth brands as Donut King, Gloria Jean’s, Beefy’s and Crust are outpacing macroeconomic conditions as we continue to focus our resources and investments. During FY '25, we delivered an additional 24 net outlets and a 2.7% increase in network sales in these brands. Our network health has continued to improve with Q4 results in cluster highlight, delivering 3.9% growth in same-store sales, driven by reset brand initiatives. Closures in core brands were less than 7% of the network, with the majority being low-performing outlets or amongst noncore brands. Central to our network planning, we've announced a bold new direction for Gloria Jeans, including a significant store refurbishment plan aimed at reimagining the customer experience with more on this shortly. To get our ongoing commitment to drive growth with our best multisite operators, our plans for network expansion are grounded in modernizing brand propositions in stores, simplifying operations and attracting new customers. This extends to our international footprint, where we have a truly global business that's well positioned to capitalize on growth opportunities for Gloria Jean’s and in time, our other growth brands. On Slide 8, we operate in 30 countries with circa 1,250 trading outlets. The majority of our business is in Australia but with global brands like Gloria Jeans, we have existing scale and opportunities for growth across the portfolio. Firehouse Subs now joins our platform of brands with exclusive development rights in Australia. On Slide 9, we have confidence in the ability of Gloria Jean’s, Donut King, Beefy’s and Crust to grow internationally. Gloria Jean’s brand continues to thrive with 634 trading outlets across 30 countries, and we see significant opportunities to further extend Donut King as the first priority with support of the right master franchise partners as well as through new market expansion. Beefy’s and Crust remain opportunities at the right time. With a reset on our international strategy, we are well positioned to capitalize on these growth opportunities and drive our global presence forward. On Slide 10, we've placed the customer at the heart of our strategy and invested in deeper insights to guide our growth plan. As outlined, our enhancing growth strategy provides a simple road map for success and a clear framework to guide our investment choices. The ongoing simplification of our brand portfolio, the focus on the quality of our network and the prioritization of growth opportunities, including our resources, both capital and team remains a focus to deliver sustainable outcomes for all stakeholders. I'd now like to highlight some of the key results under our enhancing growth framework. As we move to Slide 11, we're starting to see these choices with the launch of customer-validated innovation showcased here with examples in Crust, Donut King and Beefy’s. Crust's top QSR satisfaction scores as part of independent research conducted in April 2025, thanks to the clarity from our customer insights that have shaped our dedicated focus on product quality, flavor and freshness. We've launched new products like high-protein bases and the Meat Deluxe range, which have been incredibly successful and launched with specific franchise partner training and support. Donut King has introduced a new hot dogs range, driving category growth of 117% versus the prior comparative period, which has helped drive the lunch segment for the brand. Our insight-led premium donut range has also boosted same-store sales and brand consideration. Beefy’s has launched a new gourmet sausage roll range, driving category growth of 12.3% and our nearly launched mini snack bundles have become a top-selling product on Uber Eats for the brand, capitalizing on the snacking trend and unlocking new dayparting occasions. These innovations and customer-focused initiatives are examples of the steps we're taking to drive new customer acquisition improving the health and performance of our highly recognizable and loved brands and a fundamental in our road map for growth. Across on Slide 12, I want to share the progress on our bold new direction for Gloria Jeans that I announced at our interim results earlier this year. This strategic brand evolution aims to reimagine the customer experience. And it's not just a new look. It's a complete redesign to take a fresh look at the entire customer journey whilst delivering a unique beverage destination. The approach has incorporated modern architectural design whilst keeping the build cost as a key consideration so that we have options available for all franchise partners. In this regard, we have a tiered program that will enable store-specific conversations to take place providing options from basic to advance to franchise partners without compromising the key features that will attract new customers. The fundamental elements of design can be applied to the interior with paint, lighting and digital signage to enhance our unique product offering and simplify the ordering process, ongoing product innovation, digital channel expansion and the communication of our dayparting and value bundles remain critical to the execution plan. These efforts will ensure that Gloria Jean’s is seen as a market leader, delivering exceptional experiences for our customers. We've also seen strong franchise partner interest in the reset with 29 partners already registering interest on refurbishment in addition to the 7 CIBO company stores that will convert in the first half of FY '26. Overall, we're aiming to refurbish over 50% of our network within the financial year. On Slide 13, our efforts to continue to strengthen our network by focusing on end-to-end store economics continue. Our strategy includes 3 main areas. One, better buying for our network. It's all about leveraging our scale to drive improved outcomes with our external stakeholders, including suppliers and landlords. Two, structured franchise partner engagement to build trust, to provide meaningful training, support and toolkits that make it easy to follow our proven systems. And three, improving the quality of our network by benchmarking success criteria and collecting operational P&Ls that allow us to identify opportunities and share best practice. Our plan is to launch a dedicated Voice of Partner program that will work alongside our Voice of Customer program providing comprehensive feedback loops that drive performance. In FY '25, specifically, we achieved an average annual rental increase limited to 2.4% and an annualized impact of supplier price increases at just 1.2% for the spend we manage. Additionally, we've improved franchise lead conversion by 28%, whilst launching 8 new stores under the multistate operator program and a further 15 in the pipeline. These examples are representative of our focus in this area to strengthen the unit economics of our brands, making them more attractive to current and prospective franchise partners. Moving on to Slide 14 and to follow the unique opportunity that we have with a national footprint of brands to unlock new channels for growth. Today, less than 2.5% of our CCB transactions are digital, representing a massive untapped opportunity that we've already started to unlock. The average digital transaction value is 2.5x larger than in-store, and we know that customers are increasingly looking for convenience and new ways to engage with our brands. In the second half of '25 alone, our Donut King occasion's orders grew 57% on the first half by our bespoke e-commerce platform, which launched late in FY '24. With our national footprint, we can meet customers wherever they are unlocking new channels for growth and strengthening our digital brand. We're investing in technology to create a seamless experience, capture first-party data, personalize offers and build loyalty. This investment in turn, is making access to our brands easier across a variety of digital platforms that we're striving to make access universal from own platforms to third-party delivery, kiosks and Click and Collect. From there, we can leverage these digital platforms to capture new occasions and accelerate growth. More sophisticated and dynamic execution using digital platforms is enabling targeted dayparting and value bundles to be scheduled along with new -- specific new occasions such as snacking -- outside peak trading periods, gifting and catering. In short, this is a huge market gap, a higher-value transaction and a proven growth engine that we are focused on continuing to scale. On Slide 15, we move to our growth priorities. And since the announcement of the interim results of our agreement with RBI to bring Firehouse Subs to Australia, we've been busy preparing for launch. Our goal is to open at least 165 stores within the next 10 years, supported by 15 company store restaurants in the first 3 years in Southeast Queensland. In June, we proudly announced the appointment of Tracy Steinwand as the General Manager of Firehouse Subs Australia and are thrilled to have her join the team. Her extensive and relevant experience, including in Subway Australia and New Zealand, is leading our go-to-market strategy. We are well progressed in our menu development and QA with suppliers, operations team, recruitment and training, store design, digital integration and marketing plans and expect to open our first restaurant in mid-FY '26, quickly followed by additional stores in the pipeline. We look forward to bringing you more information as we get closer to this exciting launch. As we transition now to Slide 16, I'm pleased to share the impressive growth of Beefy’s Pies. For FY '25, we achieved network sales growth of 16.6% in the prior year and same-store sales growth of 5.1%, delivering underlying revenue of $18.6 million and an underlying EBITDA of $3.4 million. Since acquisition, we've now delivered 5 new stores, including the opening of Coolangatta on the Gold Coast last week, and we're on track to reach our goal of 150 stores by 2028. With new sites already in progress in Morayfield in North Brisbane and Oxenford on the Gold Coast, we're building significant momentum for the brand alongside various product innovation, marketing partnerships and the rollout of digital platforms. This growth trajectory highlights the strong potential of Beefy’s Pies as a key player in our portfolio and franchising plans are set to commence in late FY '26. On Slide 17, we continue to make significant progress in our international business. This year, we've established a new supply chain and support hub in Istanbul, Turkey, which will unlock revenue growth through improved service and purchasing compliance. We've also recruited a head -- experienced Head of International who will commence in late Q1 FY '26 and will be based in Turkey close to our international supply hub and closer to some of our core markets. Having local resourcing in our largest international region will bring us closer to our master franchise partners and ensure we look for common growth opportunities in line with our domestic brand strategies already outlined today. As part of the work already completed, we've identified trusted partners for expansion into new priority markets, and we see potential for further expansion within our existing Gloria Jean’s Coffees master franchise partner network. Donut King is our next priority for international expansion, and we believe Crust and Beefy’s can also grow internationally at the right time. With 507 trading outlets for Gloria Jean’s in 29 licensed territories, we're well positioned to capitalize on these opportunities with a truly global brand and a capital-light business model. On Slide 18, on outlooks in further detail on our company store strategy. The investment in company-owned stores between 2022 and 2024 was following a difficult COVID period where many stores closed, and we protected outlet numbers in locations deemed viable while the franchise network was recovering. As network performance has improved and franchise partners, particularly our multisite operators have increased confidence to invest, we've determined that franchise partners are in a better place to manage these geographically dispersed locations. As a result, we're announcing the current outlets will either be sold to franchise partners or for reinvestment or closed as we move to our company store focus in building rapid growth in Beefy’s and Firehouse Subs. Both these brands have a localized cluster of stores in Southeast Queensland, allowing for effective focus of our resources. Appropriately, our revised corporate store strategy includes a onetime restructuring provision of $15.7 million, inclusive of a noncash impairment of plant, property and equipment of $5.3 million and onerous lease provisions booked for all stores marketed for sale or approved for exit totaling $8.9 million. We've already made some progress with the sale of stores and will actively look to minimize the impact of closures with 39 outlets currently available for sale. Rob will cover the detail as part of the underlying to statutory reconciliation shortly. In the meantime, this strategy will simplify our corporate store network, remove the current associated cash outflow of $5.2 million, including the lease cash outflows and ensure we focus our capital and resources effectively to maximize growth. On Slide 19 and with the announcement that we're exploring options for the divestment of Brumby’s Bakery. Acquired by RFG in 2007, Brumby’s has been a profitable contributor to our CCB segment but has seen a decline of outlets over an extended period. We have previously outlined our strategic investment pillars that we've used to assess opportunities that outline our core competencies, and these remain unchanged. After an assessment of Brumby’s against these strategic pillars, a decision has been made to explore divestment options for Brumby’s. This decision aligns with our focus on investment requirements to grow other brands like Beefy’s Pies and the Firehouse Subs. Annual impairment testing has resulted in a noncash impairment of $12.2 million. Whilst the divestment process is underway, there are no guarantees of acceptable offer. Our strategic pillars remain unchanged, and we're committed to delivering strong commercial outcomes for all of our stakeholders while continuing to support our franchise partner's teams during this process. I'll now hand over to Rob, who will take you through the detail on our financial results before returning for a Q&A session at the end. Thank you.

Thank you, Mark, and good morning, everyone. I'll take you through the financial results for the year ending 27th of June 2025, starting on Slide 23 of presentation. Network sales of $4 million for the year was a good result against the backdrop of a challenging economy. Whilst we typically see lower sales after holiday season, it was exacerbated this year with election on delayed interest cuts relative to expectations. Underlying revenue of $102.7 million with 13.6% in PCP and excludes the corporately operated stores Matt had mentioned will be restructured, either presold to franchise partner or exited in FY '26. Statutory revenue, which includes these items and marketing funds increased by 8% in the PCP. At its core, our business model is simple. RFG franchises operates trading outlets to retail to consumers, and we focus our efforts on brands which have a clear consumer proposition and can grow to more than 200 outlets. Brands which are simple to operate with a low capital investment requirement. Where possible, we vertically integrate for key products such as coffee or pies because this allows us to control key variables such as quality, margins and innovation. Our business has got 3 key revenue drivers. Franchise service fees, coffee product sales and operation of company stores. In the period, the revenue yield increased to 20.3%, which reflects the full year contribution and growth from Beefy’s where we corporately operate all stores. Underlying EBITDA was up on FY '24 to $29.6 million, with the prior year comparatives we presented to be on a consistent basis is FY '25, so excluding those corporately operated stores undergoing the restructuring. Underlying NPAT fell for the year with higher depreciation and amortization, higher financing costs due to The Coffee Guy establishment fees and interest costs on the additional drawdown to Firehouse Subs and a higher tax charge due to recognition of prior year tax losses in FY '24. Underlying cash flow was 74% of underlying EBITDA in the period enacted by noncash releases of lease impairments of $3.8 million and noncash releases of recruited income totaling $2.6 million, which is a timing difference between when we receive cash on initial franchise fee and its amortization over the life of the franchise agreement. We continue to have a strong balance sheet with minimal net debt, which gives us confidence we can fund the growth opportunities that Matt has outlined. The majority of our business is highly leverageable to sales, particularly as we concentrate our capital into a small number. Looking at the CCB segment on Page 21 now. Our core CCB brands -- all core CCB brands either flat or in same-store sales growth for FY '25. Our core CCB brands were net down single outlook, which is inclusive of the loss of 7 outlets from Brumby’s and the acquisition of CIBO Espresso. We opened 16 new outlets in the year, and they traded significantly better than the outlets which closed with average weekly sales 21% better. This is in part driven by a number of outlets opened by multisite operators to 8 trading outlets in the year. Our MSO group consistently -- retail program and trade better as a result. Net reg sales for the segment were up 2% to $366.9 million with our core brands performing significantly better, up 3.5% in the year driven by strong growth from leases noncontinued less than 3.3% for the full year network sales number and closed the year with only 34 outlets in the segment. The segment underlying revenue excludes the corporately operated outlets being restructured and restricted marketing funds. CCB underlying revenue was up 15.8% on PCP, and that was driven by a full year contribution from the net of the year. We also benefited from insurance proceeds to recovery of some new rental revenue trend. Segment underlying EBITDA rose 4.1% as the core business and weekly earnings offset a material headwind as lease impairment provision releases in the prior year were much lower than this year in FY '25. Our Beefy’s site MP struggled with the opening of the Bruce Highway bypass, but excluding this nominee, Beefy’s Pies is continues to be the standout perform or sales growth on the PCP. The CCB segment did see a deterioration in customer count, 3.3% PCP, which is driven by a lower and particularly evident in Q3, offset by an increase in ATV of 5.5% to $118. Moving to Slide 22. Although for the majority of the year, we saw challenging trading conditions in our QSR segment. We've seen rapid improvement from quarter 4 and into the start of FY '26. Quarter 4 network sales growth of 5.5% in Crust versus a multi-quarter challenge, and we're confident that our previous strategic decision not to participate in our comparison price for premium product against discount competitors was to correct decision. We're focused on product innovation, opening up a long time occasion. And it's pleasing to see encouraging signs although we have work to do into a positive customer count and positive average transaction value we've seen in the first 7 weeks of FY '26 continues throughout the year. Revenue conversion from network sales is lower in the QSR brands because we don't have any integrated product supply like we do in the brands, which sell coffee or pies, and we only operate a small number of outlets directly. Looking at the income statement on Slide 23 now. We've represented FY '24 to exclude the stores subject to restructuring, comparability. A full P&L reconciliation is presented on Slide 29 and 30. Underlying revenue, excluding the restructured stores were 13.6%, it's got a full year consolidation of Beefys and there's strong growth during the year. Franchise-related income, principally a franchise service fees and supplier rebates has no COGS and converts to 100% margins. Company store revenue, which is mostly Beefys in these results as the full product COGS sold to consumers generated a GP margin of 56% to a slight differ in the prior period due to a delivered pricing strategies to retain a strong Coffee revenue includes the sale of coffee and ancillary products to franchisees and runs the gross profit margin in the 32.7%. EBITDA fell slightly on the prior year as our long-weighted commodity prices started to wind down with price movement on wholesale waste will be already completed. We expect this to settle back to long-term averages of around that 30% to 32%. Group payroll costs the impact of wage inflation of majority roles, which is about 3% to 4% and new wells to drive growth but offset by productivity improvements. So that was a good result. Corporate overhead fell significantly due to impact in bad debt expense, core marketing, consultant fees, insurance and the offset of operating lease income accounting. As noted, the increase more normalized run rate will be million per annum. So this is in line with our expectations we're at. At the start of the year, we forecasted there will be material reduction in lease impairment releases in FY '25 relative to the prior periods. And the year-on-year, $70.7 million is in line with that. We're also clear that we are proactively focused on a number of controllable actions management can execute and we've got the headwinds. This includes negotiation and receipt of $2.7 million in cash, which we received in the first half. In summary, we're pleased to deliver an underlying EBITDA result of $29.6 million, which was up 1.7% on PCP -- is a significant lease impairment release headwind this year. Whilst we incurred a tax expense of $5.3 million in the period, there are no cash tax outflows as the group has significant tax losses available to shared profits for the foreseeable future. Over the end of the year, we had $10.8 million in corporate remaining on balance sheet to offset against future profits. Underlying NPAT fell $13.3 million due to higher depreciation and amortization, finance costs due to higher interest, establishment fees. Moving to Slide 24 and the reconciliation between underlying statutory earnings, 2 significant events for the period to call out which go through most lines of the P&L. Firstly, the restructuring company stores Matt's called out and already spoken to. The financial impact to underlying trade is to back out the trading results for stores, which will be additive, and we've done for both years -- gross base years for comparability. In connection with those stores we're exiting, we back out revenue of $26.5 million, but the net impact to the underlying EBITDA line of $1.5 million related to the trading results. D&A advice costs. Total cash burn is to mitigate with this restructuring is approximately $5.2 million per annum. The restructuring of the corporate stores we're in the process of exiting has triggered a provision to impair the lease assets for the remaining life of the lease. Whilst we fully impaired the leases for all stores without an agreed sale in place. Where appropriate, we are seeking to sell or transfer the stores to franchisee ownership and we aim to negotiate exits on surrender. Accordingly, the total impact of provisions at the Eagle level is $10.4 million. The second significant item concerns Brumby’s Bakery, which Matt discussed earlier. We've taken a provision against the intangibles, which consists of brand assets and goodwill for $12.2 million. As usual, underlying results exclude marketing funds and business development and M&A activity. On Slide 25, looking at the balance sheet. We have cash reserves of $26 million of which $23.5 million is unrestricted. Against this, we have a debt of $32.5 million owed to our lender at Washington -- Our facility has committed to remaining terms through April 2026, which means it's presented as current liabilities on year end -- liability as it falls due in FY '26. Outside of lease assets and liabilities and the intangible assets associated with acquired indefinite brand -- indefinite brands and goodwill, it's a simple balance sheet and capital light. We continue to see success in reducing receivable and balances, including realizing further improvements in aged debt in the second half. Inventory was broadly in line with the PCP at $4.3 million for '27 June. And the -- inventory relates to Green Bean and -- down our rates in Sydney and stock on hand at Beefy’s manufacturing site on the Sunshine Coast. We have a relatively small amount of low-priced green beanstock to utilize in FY '26. We've raised our wholesale roast bean prices in the second half to reflect higher commodity pricing. And the wholesale price in the second half is in the back steps taken earlier in the year to raise the recommended retail price to consumers. So given this is a worldwide commodity increase, we remain confident we're able to keep price -- keep pace with market pricing. Looking at cash flow, Slide 26. We saw underlying EBITDA to underlying operating cash flow conversion in the second year, up from 61% in the first half as forecast. We have 2 significant items which bridge the gap to 100% of EBITDA. Firstly, we released a -- revenue under AASB 15 of the timing between -- initial in cash, where the account price spread this over the life of the agreement. Secondly, the release of leasing down in the provision in the year, noncash item. Statutory operating cash flow improved to $18.4 million a year, up 3%. Investing $6.2 million includes the acquisition of CIBO Espresso and various capital expenditures. We grow the Beefy’s network, refurbished some stores as well as our offers. And then looking at financing activities, we've got the lease payments of $10.6 million on the corporate store network of offices and factories. And we drew down $7.5 million to fund the Firehouse Subs. To summarize trading results for FY '25, we've made expectations in the '25 financial results in the consecutive years of growth in our retail backdrop. We've continued to execute our growth project. We've delivered on our Beefy’s-based acquisition in our -- we signed a 20-year development agreement to introduce Firehouse Subs to Australian market, and we continue to focus the business on our smaller portfolio of brands with the best potential for success. When we consider the outlook ahead of us on Slide 27, the actions we've been delivering over the past couple of years have positioned us well for the future. Network sales in the first weeks of FY '26 are trending well, excluding Brumby’s particularly driven by Beefy’s, which is up 18%, Crust, which is up 5.7% and CIBO Espresso, which was acquired in mid FY '25. Gross profit margins are expected with a higher proportion of franchise fee revenue. And whilst there are some challenges in coffee commodity pricing, we're going to see the same inflationary pressures in recent years. Beefy’s and International, we have a clear growth opportunity to execute on and will benefit from additional resources as we look to restructure corporately-operated stores and investigate the divestment. Moving to Slide 28. We've had some questions about our capital priorities as we move into the next phase for our team. We remain committed to maintaining a strong balance sheet and anticipate keeping a relatively low level of external borrowings. Our facility reaches the end of a 3-year tenure in April 2026, and we expect to refinance this in the year ahead. We have 3 significant growth priorities to execute in the medium term, which will require capital allocation. As Beefy’s commenced its franchising in late FY '26, its capital demand will reduce, but we see a clear opportunity to reach these stores by 2028. Firehouse Subs will also require our capital at this early stage of this development in Australia, and we committed to annual USD 4 million in funding in 2026 and 2027. Our international division is much less capital intensive, but we still do expect significant growth. We'll continue to focus on enhancing our core brands, which may include programs to accelerate refurbishments and digital channels where these can be proved to deliver acceptable returns. The Board continues to assess options for capital management and expect to reach franked dividends to shareholders when fracture, most immediately wish to see progress on the debt refinancing, the corporate store restructuring and the Brumby’s divestment before making this decision. Now I'll hand you back to Matt to open up the session for questions.

Apologies, if there was a little bit of echo on this speaker, hope it's all clear. Take a moment here to let questions come through.

We got the first question from Chami Ratnapala from Bell Potter. The start of FY '26 appears to be tracking flat on PCP. What's the mix of outperformance and underperformance in CCB versus QSR?

Thanks for your question, Chami. I think the starting of FY '26, we've seen, obviously, in FY '25, we saw moderate growth across the whole network with differences in CCB across the full year and momentum coming into Q4. The trend coming out of Q4 was largely continued. And I think as Rob just mentioned, the Beefy’s and cross brands in particular are performing well as we come into the new year. The CCB trends largely continue following that Q4 momentum. And whilst we've got some network sales in Donut King Gloria Jeans, which are flat to moderate growth. The new stores coming in are offsetting from FY '25 with respect with the quality of those new outlets. So I think the trend coming into FY '26 largely reflects the way we've banked at FY '25, which is good news as we continue to focus on the fact where we're able to and results come through.

And then second question from Chami with franchising goals for Beefy’s is from FY '26 onwards, can you talk to timing and composition of 50 stores by FY '28.

Yes. Beefy's currently is like Southeast Queensland as per our company store announcements, we see the benefit in having a very tight cluster of stores there from an efficiency vision point of view, and it's working. Beefys is a very Queensland-loved brand at the moment. So we'll have consideration for a broader Australian experience in due course. But at the moment, we certainly see potential for 50 within Queensland. The key to getting to 50 will be a franchising approach, which we're working through currently to a launch at the end of FY '26. So we sent a potential beyond Queensland, but at the moment, the focus is very much in Queensland.

Question from Liam Cummins with Petra. What is the revenue EBITDA ramp profile being of the Beefys stores, which were added in FY '25?

We've seen -- as you put on some new stores in other areas, we've expanded, as I mentioned in the results, to Brisbane, Gold Coast, Baleno, Wamba. Depending on the profile of those stores, we've seen some stores with AWS or average weekly sales results lower than some of our best performers in the Beefy’s network. However, we're seeing continual improvements in those stores as we start to build brand presence. I go back to the announcement of Beefys, we did during due diligent number of consumer surveys, which said the brand was well understood and known. And as we build those habits out in those areas and launch new stores, we're seeing improvement in those areas. So the ramp overall, we're seeing some significant growth. I think the number of maybe I have to check it, but we're seeing above 20% numbers of overall sales across the network as those stores come on. And as we continue to leverage those stores, which we vertically integrate with our factory, that profile if we delivered $3.4 million in FY '25, we'll continue to commensurate with the stores because we're seeing the new and the same-store sales as we put new stores on the ground.