Restaurant Brands directors are not getting carried away with enthusiasm after the company yesterday reported its best trading profit.
But they did increase the final dividend by 36% to 17c per share.
The company, which operates KFC, Pizza Hut and Starbucks Coffee, reported earnings before interest and tax (ebit) of $33.5 million for the year ended February 28, up 18.6% on the $27.8 million reported in the previous corresponding period (pcp).
Net profit after tax, excluding non-trading operations, rose 25.8% to $25.1 million from $19.9 million. The group paid a tax rate of 28% this year compared with 29% in the pcp.
Total group revenue rose 2.1% to $324.9 million in the period.
Chief executive Russel Creedy said the underlying performance of the company and its brand had lifted considerably in the past couple of years and directors believed that those levels of profitability were sustainable.
The latter half of the 2011 year saw deterioration in trading conditions with a much softer retail environment.
"These trends were exacerbated by the change in GST rates and increasing petrol prices. The retail marketplace in the 2012 year will remain tough with strong competition for an increasingly scarce consumer dollar."
However, some improvement was expected as the year progressed, particularly with the Rugby World Cup taking place at the start of the third quarter of the financial year, he said.
The company was well positioned to manage its way through the economic downturn.
The KFC brand still had momentum driven by the ongoing benefits of its transformation project, Mr Creedy said.
The planned slowing in that expenditure in the 2011-12 year would give KFC the opportunity to stabilise its operations after the growth of the past two years. No more than four to five smaller stores were targeted for transformation and no more than one new store was planned.
Pizza Hut was also expected to face softer sales in the first half of the year but then begin to return to same store growth.
Continued focus on operating controls and the sale of smaller stores should see some small expansion in margins. Store sales to independent franchisees would continue, with eight to 10 stores expected to be sold in the coming year.
The Starbucks Coffee business was expected to maintain steady sales growth. Margins might be squeezed with input cost increases but they would be at least partially offset by improved operating controls.
Directors considered the 2011 profit performance to be "very satisfactory", Mr Creedy said.
"Restaurant Brands has demonstrated resilience in the recent tough economic environment. Current trends mean taking a more cautious approach in looking at the year ahead."
The annual meeting on June 23 would be held in Christchurch as a sign of support for the people affected by the February 22 earthquake, he said.
