Oliver’s shares down 54 per cent on earnings downgrade

Oliver's-Real-FoodRecently listed QSR chain Oliver’s Real Food has slashed its FY18 earnings guidance by around 33 per cent and has signalled a raft of changes to its operations after a deterioration in trading during March and April.

The business had affirmed earnings guidance of $4.7 million in late March but worse than expected trading over Easter and problems related to new store openings led to a horror April, forcing the business to downgrade its full year EBITDA forecast to between $3 – $3.3 million on Wednesday, including $1.8 million from property sales.

Oliver’s had been in a trading halt since Monday having signaled an update, but investors hammered its share price on Wednesday, sending it down more than 54 per cent to 11 cents, less than half the 30 cents the company listed at in June last year.

It’s a baptism of fire for chief executive Greg Madigan, who only took over the reigns from founder Jason Gunn on 9 April and is undertaking a full review of the entire business.

The former country director for Subway in the UK & Ireland has already hired a new supply chain chief to seek out efficiencies and is looking for a new chief of operations to improve store performance.

Madigan has also beefed up Oliver’s new store due diligence processes after recent openings in Aratula, Ballarat and Horsham performed poorly, which caused $0.3 million of Wednesday’s earnings downgrade.

The Horsham store only generated around half the revenue the business had anticipated and was closed yesterday.

Other new store openings in Sutton Forest and Halfway Creek were delayed due to issues “outside of the company’s control”drove an earnings forecast diversion of around $0.2 million.

Existing stores that traded throughout the entirety of FY17 were more positive, with sales up 5.7 per cent, but this was offset by worse-than-expected trading across the remainder of the portfolio to the tune of $0.44 million in earnings.

FY18 revenue is now expected to be in the $36 – 37 million range amid a business wide pricing review designed to ensure that its menu remains competitive.

Oliver’s put through price increases prior to Madigan taking the reins, but it is understood that some of those changes may be unwound when a new structured menu and pricing development committee is established.

It is expected that a medium-term business plan will be formulated for 2018/19 in the coming months to tie together Madigan’s vision for the business following Gunn’s departure from day-to-day oversight of operations.

Oliver’s chairman Mark Richardson said on Wednesday that Oliver’s still had significant potential under Madigan’s leadership.

“Although the directors are disappointed with the significant downturn in trading in March and April and the recent performance of the business generally, the directors are confident that the operational and organisational changes being implemented will improve performance at all levels,” he said.

Oliver’s trades across more than 20 stores on Australia’s east-coast and sells itself as a healthy fast-food alternative.

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