HALFYR: RBD: Restaurant Brands Half Year Results Announcement
REL: 0924 HRS Restaurant Brands New Zealand Limited
HALFYR: RBD: Restaurant Brands Half Year Results Announcement
Directors' Report to Shareholders
For the Half Year ended 10 September 2012
1H 2013 1H 2012 Change (%)
Total Group Revenue ($m) 167.2 166.8 +0.2
Group Net Profit after Tax* ($m) 8.8 8.6 +2.4
Dividend (cps) 6.5 6.5 -
*Excluding non-trading items
o Net Profit after Tax for the half year (excluding non-trading items) was
$8.8 million (9.0 cents per share), up 2.4% on the prior year. Reported
profit (including non-trading items) was $6.9 million.
o Total revenues of $167.2 million were up 0.2% on the prior year. Same
store sales were up 0.5% for the half year, driven by a significant
improvement in Pizza Hut which was up 19.5%.
o Total brand EBITDA was $27.0 million, an increase of $1.0 million (4.0%) on
the previous half year, with higher earnings for KFC and Pizza Hut partly
offset by reduced earnings for Starbucks Coffee.
o G&A costs increased $1.0 million (16.6%), with increased investment in
human resources and information systems, together with Carl's Jr
establishment costs, in anticipation of three stores opening in the second
o Directors have declared a fully imputed interim dividend payable on 23
November 2012 of 6.5 cents per ordinary share, consistent with last year.
Group Operating Results
Restaurant Brands' unaudited net profit after tax (excluding non-trading
items) for the half year ended 10 September 2012 was $8.8 million or 9.0
cents per share, a 2.4% increase on the prior year's result of $8.6 million.
Reported profit was $6.9 million (7.0 cents per share) down 9.2% on prior
year because of a $1.3 million increase in non-trading items.
Total operating revenue at $167.2 million was up $0.3 million (0.2%) on the
prior year with the small decline in KFC revenue of $0.5 million and
Starbucks Coffee of $0.6 million being offset by the $1.3 million increase in
revenue for Pizza Hut.
Brand EBITDA was up $1.0 million on prior year to $27.0 million. KFC
earnings increased $0.7 million (2.9%). Pizza Hut also increased EBITDA by
$0.6 million (59.5%), although Starbucks Coffee was down $0.3 million
(15.5%). The earnings increase for KFC was mainly from a lower cost of sales
(mix variance and some efficiency improvements). Pizza Hut's lift in
earnings largely arose from enhanced fixed cost leverage from increased sales
volumes. Starbucks Coffee earnings were adversely affected by the fall in
Directors are comfortable with the improvement in overall trading results
(and particularly Pizza Hut), achieved in the face of a continuing
challenging retail environment and some increases in key input costs.
The increase in earnings at the brand level was almost completely offset by a
$1.0 million increase in above store overhead (G&A). The bulk of the
increase was in Carl's Jr set up costs (recruitment, training and salaries of
new staff). There were also increases in human resource and information
systems costs with the significant "beefing up" of resources in these areas.
Two further stores were closed permanently following the Christchurch
earthquake - these were Starbucks Coffee stores located in Cathedral Square
and Colombo Street. One further Starbucks Coffee store in Cashel Mall
remains closed and is unlikely to re-open.
1H 2013 1H 2012 Change Change (%)
Sales ($m) 127.4 127.9 -0.5 -0.4
EBITDA ($m) 23.9 23.2 +0.7 +2.9
EBITDA as a % of Sales 18.7 18.1 - -
KFC produced total revenues of $127.4 million, down 0.4% ($0.5 million) on
prior year. Same store sales were down 2.4%. Whilst negative for the first
quarter, rolling over the launch of Double Down last year, they improved to a
positive 0.7% for the second quarter, a satisfactory result given the
comparative period last year also had the impact of the Rugby World Cup.
Despite the negative same store and total sales, operating efficiencies and a
higher margin menu mix resulted in an increase in this half year's earnings
against prior year. The KFC business produced $23.9 million of EBITDA (up
$0.7 million) which was 18.7% of sales versus 18.1% last year.
The transformation process has continued with three stores located at Te
Awamutu, Thames and Hawera being refurbished over the period. All of these
stores have re-opened with sales at or ahead of expectations. Two stores at
Lower Hutt and Park Avenue, Hutt Valley were closed during the half to
prepare for site relocation as part of the transformation programme. The new
relocated KFC Hutt Valley store re-opened with very strong sales shortly
after the end of the half year as one of the flagship stores for the brand.
A total of 62 stores have now been transformed which represents nearly three
quarters of the network of 86. A further four transformations and two new
stores (including the relocated Hutt Valley store) are planned for the second
half of the year.
1H 2013 1H 2012 Change Change (%)
Sales ($m) 25.9 24.6 +1.3 +5.4
EBITDA ($m) 1.7 1.0 +0.7 +59.5
EBITDA as a % of Sales 6.4 4.2 - -
Pizza Hut saw a significant lift in sales and margin over this half year.
The increase in sales of $1.3 million (5.4%) to $25.9 million is a
particularly pleasing outcome, given it was on a significantly lower store
base - 11 stores (15%) less than prior year. The effective same store sales
increase was 19.5%.
The introduction of strong value propositions to the Pizza Hut business with
the sustained success of the $4.90 Large Classics Pizza and other value price
points have successfully driven the improved sales.
The sales leverage together with tight operational controls has seen Pizza
Hut EBITDA increase $0.6 million to $1.7 million for the half year (up
59.5%). EBITDA margin also improved to 6.4% of sales, up on the 4.2% in the
Pizza Hut finished the half with 63 stores, 11 less than the prior year with
20 stores now sold to independents (seven in this half year) and four stores
closed (one over this half year).
Sales of regional stores to independent franchisees will continue with a
further five stores expected to be sold by the end of the financial year.
Total Pizza Hut system sales (including independent franchisees) were $32.2m
for the half year, an increase of 18.8% in total and 18.7% on a same store
1H 2013 1H 2012 Change Change (%)
Sales ($m) 13.4 14.0 -0.6 -4.4
EBITDA ($m) 1.4 1.7 -0.3 -15.5
EBITDA as a % of Sales 10.7 12.1 - -
The Starbucks Coffee brand experienced a fall in sales on a total and same
store basis in the half year. Despite a strengthening exchange rate and
improvement in operational efficiencies, sales deleverage, increased input
costs and the end of business interruption insurance cover for three stores
in Christchurch resulted in a reduction in earnings. The business returned
an EBITDA of $1.4 million for the half, $0.3 million or 15.5% down on the
prior year. EBITDA margins declined from 12.1% in the prior year to 10.7%.
Sales at $13.4 million were down by $0.6 million or 4.4% on last year with
same store sales down 2.7%.
Store numbers were 33 at balance date, two down on the prior year but only 32
stores were operating consistent with the prior year. During the period, two
stores in the Christchurch CBD that did not re-open after the earthquake were
permanently closed. These stores were located at Cathedral Square and
Colombo Street with a further store at Cashel Mall in the CBD remaining
closed since the earthquake.
The development of the Carl's Jr concept continues to gain momentum. Initial
training with the franchisor in the US for the first batch of managers has
been completed and site acquisition, design and development is well under way
for the first stores.
Three stores are expected to open in the second half of the year. They are
located in Metro Centre in the Auckland CBD, Palmerston North and Mangere. A
number of other stores are also in the development pipeline as part of a
progressive rollout of stores across the country.
There have been some initial set up costs (largely personnel and training)
incurred for the development of the brand, but all stores once opened are
expected to be immediately profitable at the EBITDA level.
Corporate & Other
General and administration (G&A) costs at $7.2 million were up $1.0 million
or 16.6% on the prior half year. With the establishment of the Carl's Jr
brand, there have been increases in headcount to build the initial management
structure and train the first managers. As the brand builds critical mass
this expenditure requirement will reduce considerably. There has also been
significant investment in human resources and information systems capability
to support other significant initiatives such as replacement of the payroll
processing system and a centralised recruitment centre to provide greater
consistency and quality in selecting staff. G&A costs were 4.3% of sales for
the half year, an increase on the 3.7% of sales in the prior year; however a
number of these additional costs will progressively reduce and G&A is
targeted to return to 4.0% of sales in the new year.
Depreciation charges of $7.4 million for the half year were consistent with
the prior year. Although there has been significant capital expenditure over
the past year, particularly in KFC, this was largely offset by reductions in
depreciation from the sale of Pizza Hut stores to independent franchisees.
Interest expense of $0.4 million is down $0.3 million on the prior year with
lower debt levels.
Tax expense is down on the prior year with lower reported profit levels. The
effective tax rate of 25.8% is similar to the prior year of 25.6%.
Non-trading items of $2.9 million were up on last year's $1.7 million. Most
of the increase came from Pizza Hut store disposals as the $1.0 million book
gain on store sales was offset by a $2.8 million write down in associated
goodwill. There were also write offs and make good costs on store closures
of a further $1.1 million.
Cash Flow & Balance Sheet
Total assets of $103.4 million were $1.5 million lower than last year end,
with property, plant and equipment at $76.6 million versus $78.0 million at
year end. Despite payment of $0.3 million in franchise fees, intangible
assets of $18.2 million were down from $20.9 million at the last year end
with Pizza Hut continuing to write off goodwill as stores are sold to
independent franchisees. There are no further impairment write downs on
intangibles as all three brands continued to maintain enterprise values in
excess of their carrying values.
Total liabilities at $46.0 million were up $0.9 million on the previous year
end with total borrowings reduced by $7.3 million to $6.4 million; however
this was largely offset by an increase in current liabilities. Creditors and
accruals increased $7.3 million compared to prior year end.
Operating cash flows of $19.8 million were $4.6 million up on the previous
half year mainly because of favourable working capital movements in creditors
and accruals and the receipt of insurance proceeds from the earthquake.
Cash outflows from investing activities of $3.1 million were down $7.8
million on the previous half year with a reduction in KFC transformation
expenditure to $4.9 million and the benefit of proceeds from the sales of
Pizza Hut franchises ($2.1 million).
With higher operating cash flows and reduced investing cash outflows, debt
reduced by $7.3 million over the half year reducing total borrowings to $6.4
Given the fact the financial performance for the first half is anticipated to
continue for the balance of the year, the company's relatively low levels of
debt and factoring in the capital expenditure requirements of bringing the
Carl's Jr stores progressively to market, the board has declared an interim
dividend of 6.5 cents per share, the same as the prior year.
Following the change in corporate tax rate from 30% to 28% from 1 March 2011,
the company has been gradually utilising imputation credits at the rate of
30% with each dividend paid since that change to ensure that the maximum
benefit of these imputation credits are passed onto shareholders within the
statutory two year transition period. As a result, the interim dividend will
be at a blended rate with 2.8 cents fully imputed at 30% and the balance of
3.7 cents fully imputed at 28%.
The dividend will be paid on Friday 23 November 2012 to all shareholders on
the register at 5pm on Friday 9 November 2012. For overseas shareholders, a
supplementary dividend of 1.1471 cents per share will be paid at the same
Directors have elected to continue to suspend the dividend reinvestment plan
for the time being, but will review this again prior to the declaration of a
This continues to be a challenging period for the sector and for the company
in the current tight economic and retail environment.
Pizza Hut has performed significantly better than the prior year with the
significant sales lift providing a platform for sales leverage and an
improvement in margin; this is expected to continue.
The KFC business faces further input cost increases in the second half of the
year but is anticipating being able to manage these through some sales growth
and operating efficiencies. KFC will receive a further boost in the second
half with the opening of two of its new "Fusion" stores and a number of
Starbucks Coffee has experienced a decline in sales and margins; however
pricing changes, revised beverage formulations and a revamped food range are
expected to address this.
The level of increased G&A is also expected to reduce in the second half.
With three Carl's Jr stores opening towards the end of the year, and all
expecting to be immediately profitable, there will be some positive
contribution from this new brand to the full year result.
Directors therefore anticipate a similar trend in profit in the second half
over to a full year NPAT (excluding non-trading items) in the vicinity of $18
For further information, please contact:
Russel Creedy Grant Ellis
CEO CFO/Company Secretary
Phone: 525 8710 Phone: 525 8710
RESTAURANT BRANDS GROUP
Consolidated Income Statement
For the period 1 March to 10 September 2012 (2013 Half Year)
1st Half 2013 vs Prior 1st Half 2012
10 September 2012 % 12 September 2011
KFC 127,443 (0.4) 127,912
Pizza Hut 25,884 5.4 24,565
Starbucks Coffee 13,369 (4.4) 13,980
Total sales 166,696 0.1 166,457
Other revenue 465 29.2 360
Total operating revenue 167,161 0.2 166,817
Cost of goods sold (137,905) (0.1) (137,834)
Gross margin 29,256 0.9 28,983
Distribution expenses (1,529) 10.3 (1,704)
Marketing expenses (7,921) 7.6 (8,576)
General and administration expenses (7,204) (16.6) (6,179)
EBIT before non-trading 12,602 0.6 12,524
Non-trading (2,924) (76.1) (1,660)
EBIT 9,678 (10.9) 10,864
Net financing expenses (432) 40.2 (722)
Net profit before tax 9,246 (8.8) 10,142
Taxation expense (2,388) 7.9 (2,593)
Total profit after tax (NPAT) 6,858 (9.2) 7,549
Total NPAT excluding non-trading 8,762 2.4 8,556
% sales % sales
EBITDA before G&A
KFC 23,877 18.7 2.9 23,209 18.1
Pizza Hut 1,662 6.4 59.5 1,042 4.2
Starbucks Coffee 1,433 10.7 (15.5) 1,695 12.1
Total 26,972 16.2 4.0 25,946 15.6
Net tangible assets per security (net tangible assets divided by number of
shares) in cents 40.0c 36.7c
Cost of goods sold are direct costs of operating stores: food, paper,
freight, labour and store overheads.
Distribution expenses are costs of distributing product from store.
Marketing expenses are call centre, advertising and local store marketing
General and administration expenses (G&A) are non-store related overheads.
Restaurant Brands New Zealand Limited
Results for announcement to the market
Reporting Period 6 months to 10 September 2012
Previous Reporting Period 6 months to 12 September 2011
Amount (000s) Percentage change
Revenue from ordinary activities NZ$167,161 0.2%
Profit from ordinary activities after tax attributable to security holder.
Net profit attributable to security holders. NZ$6,858 (9.2)%
Interim/Final Dividend Amount per share Imputed amount per share
Interim NZ 6.5 cents NZ 2.6 cents
Record Date 9 November 2012
Dividend Payment Date 23 November 2012
Comments: A brief Refer to attached report
This report is based on accounts which have not been audited. The report is
provided with the accounts which accompany this announcement.
End CA:00228901 For:RBD Type:HALFYR Time:2012-10-26 09:24:26You must be a member to download Join - it is free and easy
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