KFC acquisitions drive profit boost

The recently acquired 42 Australian KFC businesses bought by fast food operator Restaurant Brands for $89.4million have underpinned an almost 8% boost to profits.

For its year to February, Restaurant Brands total sales rose 28.3%, or by $109.6million, to $497.2 million, earnings before interest and tax rose 15.6% to $39.3million and after-tax profit rose 7.8% to $26million for the period.

Following settlement in April last year of the $89.4million Australian KFC acquisition; funded by $63.9million bank debt and $25.5million share issue, that division contributed sales of $97.2million for the 10-month period.

The next reporting period will see Restaurant Brands' total outlets rise from 212 to 294 with the addition of 82 outlets in Hawaii and Guam, but recent acquisitions and longer-term plans indicate a further almost 70 outlets, mainly around New Zealand.

A 13.5c per share dividend was set, taking the full year to 23c, up 9.5% on last year's dividend.

Restaurant Brands' shares eased down 1.3% to $5.28, following the announcement.

Forsyth Barr broker Damian Foster said Restaurants Brands' normalised profit, up 26% on a year ago at $30.6million, was in-line with expectations and recent guidance.

``Store earnings before interest, tax, depreciation and amortisation (ebitda) of $86million was up more than 29%, underpinned by the first time contribution from KFC Australia,'' Mr Foster said.

Restaurant Brands' chief executive Russell Creedy said the New Zealand operations delivered their ``best ever overall sales and profit performance'' and singled out the strong trading from the KFC Australian business in New South Wales, where it is the largest KFC franchise owner.

Mr Foster said adjusting for store ebitda for the New Zealand business, it was up more than 6%, but marginally below Forsyth Barr's expectations, largely due to a modest pullback in KFC margins in second-half trading, he said.

``KFC New Zealand is the key driver of group profit and was down 1% below our expectations,'' he said.

While Restaurant Brands' had provided first time full-year 2018 guidance for normalised profit ``in the vicinity of $40million'', Mr Foster said the company was being ``typically conservative'' at this early stage into the new year.

Restaurant Brand's $40million guidance was below Forsyth Barr's current forecast of $44million and market analysts' consensus at between $43million and $46million.

Mr Foster said there were questions, largely about KFC margin outlooks in New Zealand and Australia.



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