Restaurant Brands profits up

KFC stores will receive significant capital investment in the new financial year. Photo by Gregor Richardson
KFC stores will receive significant capital investment in the new financial year. Photo by Gregor Richardson
Restaurant Brand directors proved yesterday they were confident enough in their business to provide market guidance for the new financial year, something which has been rare in recent reporting seasons.

The company, which operates KFC, Pizza Hut, Starbucks Coffee and Carl's Jr, reported an operating profit of $56.9 million for the 52 weeks ended February 24, up nearly 4% on the previous corresponding period.

The reported profit of $19.9 million was 23.5% on the pcp's $15.2 million. A final fully-imputed dividend of 10c per share took the total dividend to 16.5c, up 3.1% on the pcp.

Sales and total revenue were both up 5.6% and the operating cash flow of $32.7 million was slightly down on the previous period.

Craigs Investment Partners broker Chris Timms said investors took heart from the result and pushed the shares up 3% to $2.98 following the announcement on the NZX. In the last 12 months, the shares had traded at a low of $2.65 and an all-time high of $3.08.

''Directors have enough confidence and optimism to provide guidance of $20 million of net profit for the next financial year. Given we have seen shares get savaged if companies do not meet forecasts, Restaurant Brand directors are confident they can achieve their targets.''

The company's low level of debt and strong cash flow had allowed it to keep its strong position in the market. Main competitors included Burger King, McDonalds and various pizza chains such as Dominos and Hell Pizza.

''Restaurant Brands is trading on the right side of things,'' Mr Timms said.

Forsyth Barr broker Suzanne Kinnaird said the company's 2015 guidance was in line with her current forecast of $20 million in reported profit.

''The company indicated a strong start to the year to date. We expect the positive momentum to continue, helped by an improving economic backdrop.''

Restaurant Brands had successfully turned around both Pizza Hut and Starbucks. KFC was benefiting from some price normalisation in the industry, with less emphasis being placed on aggressive value campaigns.

Carl's Jr, which so far only operated in the North Island, would benefit from further supply chain localisation, new store openings and increased understanding of day-to-day trading which helped to reduce waste and for labour scheduling, she said.

Company chief executive Russel Creedy said the retail sector was not ''particularly robust'' in the first half of the year and competitive activity, particularly in price discounting, was aggressive.

The company met the dual challenges of both maintaining market share and margin in a competitive environment while building a new brand.

''Restaurant Brands will be in a strong position to benefit from the general economic recovery in the coming year.''

KFC would see significant capital investment over the new financial year as the brand focused on bringing the remainder of its network up to new-store standard.

With some management changes, and a renewed focus on operational performance, the brand was expected to deliver both sales and margin growth in the 2015 financial year, he said.

''Pizza Hut will continue to maintain its sales and margin momentum with another year of solid same store sales and earnings growth anticipated.''

Store sales to independent franchisees would continue, but at a slower pace.

 


At a glance
                                               2014         2013      change

 

                                              $000)        ($000)      (%)

Sales                                     329,269     311,901    5.6

Gross margin                         56,906       54,732      4

Ebit                                        28,170       22,736      23.9

Reported profit                      19,953       16,1592    3.5

Total dividend                        16.5cps      16cps       3.1


 

 

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