RBD
17/10/2013 08:30
HALFYR
REL: 0830 HRS Restaurant Brands New Zealand Limited
HALFYR: RBD: Restaurant Brands Half Year Results Announcement
Directors' Report to Shareholders
For the 28 Weeks ended 9 September 2013
Key Points
1H 2014 1H 2013 Change ($) Change (%)
Total Group Revenue ($m) 176.0 167.2 +8.9 +5.3
Group Net Profit after Tax* ($m) 8.8 8.8 - +0.9
Dividend (cps) 6.5 6.5 - -
*Excluding non-trading items
o Net Profit after Tax (excluding non-trading items) for the 28 weeks ended 9
September 2013 (1H 2014) was $8.8 million (9.0 cents per share), the same as
the prior period (1H 2013). Reported profit (including non-trading items)
was $9.7 million (9.9 cents per share), up $2.8 million or 41.4% on the prior
period.
o Total revenues of $176 million were up 5.3% on the previous half year,
mainly because of the contribution from the new Carl's Jr. brand. Same store
sales were up 2.9% for the half year, driven by ongoing improvement in Pizza
Hut which was up 19.3%.
o Total brand EBITDA was up $0.2 million to $27.2 million, with a very strong
performance by Pizza Hut, partly offset by lower earnings from KFC and new
store establishment costs in Carl's Jr.
o Non-trading items made a positive pre-tax contribution of $1.1 million,
mainly arising from the successful sale and leaseback of two KFC stores in
Lower Hutt and Greenlane.
o Directors have declared a fully imputed interim dividend payable on 22
November 2013 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 28 weeks ended 9 September 2013 (1H 2014) was $8.8 million or
9.0 cents per share, in line with prior year (1H 2013). Reported profit was
$9.7 million (9.9 cents per share), up 41.4% on prior year due to a positive
contribution from non-trading items.
Total operating revenue at $176.0 million was up $8.9 million (or 5.3%) on
the prior year, primarily driven by $6.6 million in sales from the new Carl's
Jr. brand. Same store sales were also positive at 2.9% because of a very
strong performance by Pizza Hut.
Brand EBITDA at $27.2 million was $0.2 million up on prior year. KFC
earnings were down by $1.1 million (4.4%), but this was more than offset by a
$1.5 million or 88.3% increase in Pizza Hut EBITDA. Starbucks Coffee was in
line with prior year. Carl's Jr. had a small loss of $0.2 million as new
store opening costs were incurred as expected.
The ongoing challenges in the retail environment have continued to suppress
margins, but directors are pleased the company has been able to hold total
brand EBITDA slightly above last year's levels.
A profit in non-trading items of $1.1 million, compared with a $2.9 million
loss in the previous half year, largely arose from the successful sale and
leaseback of two KFC stores.
Store numbers totalled 174 at the end of the half, eight down on prior year.
Increases in numbers of KFC and Carl's Jr. stores with new builds were more
than offset by Pizza Hut disposals and Starbucks Coffee closures.
KFC
1H 2014 1H 2013 Change ($) Change (%)
Sales ($m) 129.3 127.4 +1.8 +1.4
EBITDA ($m) 22.8 23.9 -1.1 -4.4
EBITDA as a % of Sales 17.7 18.7 - -
KFC's total sales were $129.3 million, up 1.4% or $1.8 million on prior year.
Same store sales were flat at -0.1%. Strong competition, a soft
marketplace and in particular the impact of value campaigns all kept pressure
on same store sales growth. Total sales growth was assisted by the new and
transformed stores completed in the back half of the previous financial year,
including a new store at Silverdale and one acquired from an independent
franchisee in Cambridge.
KFC launched a number of successful promotions over the quarter including the
return of Hot 'n Spicy, a new Double Down variant and the Kentucky Burger.
Despite continuing operating efficiencies, margins were adversely impacted by
the need to introduce a value strategy to meet the market. The $1,2,3 menu
range was successful in generating sales, but had an adverse effect on margin
with a resultant 4.4% decrease in EBITDA on prior year to $22.8 million
(17.7% of sales).
The transformation process was slowed over this half with only one major
transformation being completed (Otahuhu), bringing a total of 69 out of 89
KFC stores now new or fully transformed. In addition the brand has begun
undertaking several five year upgrades of stores previously transformed.
Pizza Hut
1H 2014 1H 2013 Change ($) Change (%)
Sales ($m) 26.6 25.9 +0.7 +2.7
EBITDA ($m) 3.1 1.7 +1.5 +88.3
EBITDA as a % of Sales 11.8 6.4 - -
Pizza Hut continued to deliver strong improvements in sales and margin over
the half year on the back of its strong everyday value offers.
Same store sales continued to show strong growth, delivering a 19.3% increase
for the half year, rolling over a 19.5% increase in the previous year. Total
sales were also up by 2.7% to $26.6 million, despite a 17.5% (11 store)
reduction in store numbers with the sell down programme.
Continuing sales leverage and tight operational controls saw Pizza Hut EBITDA
increase $1.5 million to $3.1 million for the half year (88.3%). EBITDA
margin also improved from 6.4% of sales to 11.8%.
Pizza Hut finished the half with 52 stores, 11 less than the prior year with
31 stores now sold to independents (five in this half year).
The sales of lower volume and regional stores to independent franchisees will
continue with further stores expected to be sold by the end of the financial
year.
Starbucks Coffee
1H 2014 1H 2013 Change ($) Change (%)
Sales ($m) 13.0 13.4 -0.4 -2.9
EBITDA ($m) 1.4 1.4 - -1.6
EBITDA as a % of Sales 10.9 10.7 - -
Although there was a small reduction in total sales of 2.9% because of having
five stores less than the prior year, the Starbucks Coffee brand enjoyed
solid same store sales growth of 4.0% for the half year to $13.0 million.
Margins held for the brand resulting in an EBITDA flat to prior year of $1.4
million (10.9% of sales).
Store numbers were 28 at balance date, five down on the prior year with one
store (Mt Maunganui) closing during the half.
Carl's Jr.
1H 2014 1H 2013 Change ($) Change (%)
Sales ($m) 6.6 - +6.6 -
EBITDA ($m) -0.2 - -0.2 -
EBITDA as a % of Sales -2.6 - - -
The Carl's Jr. brand began to gain momentum with a further three stores
opening over the half year in Auckland Central, Frankton and Rotorua to bring
total store numbers to five. All stores have opened with very strong initial
sales and have settled back to sales volumes at levels slightly higher than
KFC.
The brand produced a small EBITDA loss for the half of $0.2 million,
reflecting as expected the impact of pre-opening costs such as staff
training, together with settling in costs post-opening.
Corporate & Other
General and administration (G&A) costs at $7.2 million were flat compared to
the prior half year and ran at 4.1% of sales, marginally over the 4.0%
target.
Depreciation charges of $7.6 million for the half year were marginally up on
the prior year with KFC and Carl's Jr. showing an increase as a result of
their transformation and new store capital expenditure and Starbucks Coffee
and Pizza Hut showing corresponding reductions with store closures and sales
to independent franchisees.
Amortisation charges also rose by $0.2 million, mainly as a result of Carl's
Jr. franchise fees and some software development costs.
Funding costs remained flat at $0.4 million with similar interest rates and
debt levels.
Tax expense was $1.2 million up on the prior year with higher reported profit
levels. The effective tax rate of 26.9% is slightly higher than prior year's
25.9% with higher effective non-deductible items.
Non-Trading Items
Non-trading items showed a positive balance of $1.1 million, a significant
change on the $2.9 million loss in the previous half year. The sale and
leaseback of the KFC stores in Greenlane and Lower Hutt produced a gain on
disposal of $1.5 million, with Pizza Hut store divestments producing another
$0.1 million gain on book value. The gains were partly offset by write-offs
as a result of store closure provisions and KFC transformations.
Cash Flow & Balance Sheet
Total assets of $110.9 million were similar to the last year end. Property,
plant and equipment was down to $80.4 million versus $85.7 million at year
end from Pizza Hut store disposals, but current assets were up to $8.8
million from $4.8 million with higher inventory levels and the Carl's Jr.
Frankton site (at $2.5 million) being classified as held for sale.
Total liabilities at $50.1 million were down $1.3 million on the previous
year end with total borrowings reduced by $4.6 million to $10.2 million,
partly offset by an increase in current liabilities with creditors and
accruals increasing by $5.2 million compared to prior year end.
Operating cash flows were $17.0 million, $2.8 million down on the previous
half year mainly because of higher tax payments ($1.9 million) and the fact
that the prior period had included the receipt of significant business
interruption insurance proceeds from the Christchurch earthquake.
Cash outflows from investing activities of $3.0 million were similar overall
to the prior half year. Investing payments in this half were $12.2 million
(compared with $5.2 million in the prior year), reflecting incremental Carl's
Jr. capital expenditure. Investing receipts were also strongly up to $9.2
million (versus $2.1 million in the prior year). This largely arose from
final earthquake material damage insurance receipts and the impact of the
sale and leaseback of the two KFC stores.
With $14 million in free cash flow for the half year, debt was reduced by
$4.6 million reducing total borrowings to $10.2 million.
Dividend
Given that the financial performance for the first half is anticipated to
continue for the balance of the year, the relatively low levels of debt and
measured approach to capital expenditure requirements to bring 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.
The interim dividend will be fully imputed and payable on 22 November to all
shareholders on the register on 8 November 2013. A supplementary dividend of
1.1471 cents per share will be paid to all overseas shareholders at the same
time.
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
final dividend.
Outlook
Whilst there has been some improvement, trading conditions remain challenging
and the QSR market continues to see heavy price discounting. All four brands
have continued to build internal efficiencies around current pricing
pressures and will be well positioned to benefit from any upside when the
market stabilises.
KFC is expected to maintain positive sales growth and, market circumstances
permitting, bring some margin improvement in the second half.
Pizza Hut has continued to hold the sales gains made last year and is
expected to maintain current margins, while continuing the store sell down
programme.
Starbucks Coffee will hold sales and margin.
Carl's Jr. will see a continuation of store roll out with a further three
stores scheduled for opening in the second half of the year. The brand is
expected to begin returning positive EBITDA margins in the second half.
Directors therefore anticipate an improvement in profit in the second half to
a full year NPAT (excluding non-trading items) in the vicinity of $18-19
million.
For further information, please contact:
Russel Creedy Grant Ellis
CEO CFO/Company Secretary
Phone: 525 8710 Phone: 525 8710
ENDS
RESTAURANT BRANDS GROUP
Consolidated Income Statement
For the 28 week period ended 9 September 2013 (2014 Half Year)
(28 weeks) (28 weeks)
Unaudited Unaudited
1st Half 2014 vs Prior 1st Half 2013
9 September 2013 % 10 September 2012
$NZ000's
Total operations
Sales
KFC 129,264 1.4 127,443
Pizza Hut 26,577 2.7 25,884
Starbucks Coffee 12,975 (2.9) 13,369
Carl's Jr. 6,628 n/a -
Total sales 175,444 5.2 166,696
Other revenue 576 23.9 465
Total operating revenue 176,020 5.3 167,161
Cost of goods sold (147,199) (6.7) (137,905)
Gross margin 28,821 (1.5) 29,256
Distribution expenses (1,407) 8.0 (1,529)
Marketing expenses (7,676) 3.1 (7,921)
General and administration expenses (7,205) - (7,204)
EBIT before non-trading 12,533 (0.5) 12,602
Non-trading 1,130 138.6 (2,924)
EBIT 13,663 41.2 9,678
Net financing expenses (396) 8.3 (432)
Net profit before tax 13,267 43.5 9,246
Taxation expense (3,573) (49.6) (2,388)
Total profit after tax (NPAT) 9,694 41.4 6,858
Total NPAT excluding non-trading 8,837 0.9 8,762
% sales % sales
EBITDA before G&A
KFC 22,826 17.7 (4.4) 23,877 18.7
Pizza Hut 3,129 11.8 88.3 1,662 6.4
Starbucks Coffee 1,410 10.9 (1.6) 1,433 10.7
Carl's Jr. (170) (2.6) n/a - n/a
Total 27,195 15.5 0.8 26,972 16.2
Ratios
Net tangible assets per security (net tangible assets divided by number of
shares) in cents 43.3c 40.0c
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
expenses.
General and administration expenses (G&A) are non-store related overheads.
Restaurant Brands New Zealand Limited
Results for announcement to the market
Reporting Period 28 weeks to 9 September 2013
Previous Reporting Period 28 weeks to 10 September 2012
Amount (000s) Percentage change
Revenue from ordinary activities NZ$176,020 5.3%
Profit from ordinary activities after tax attributable to security holder.
NZ$9,694 41.4%
Net profit attributable to security holders. NZ$9,694 41.4%
Interim/Final Dividend Amount per share Imputed amount per share
Interim NZ 6.5 cents NZ 2.5 cents
Record Date 8 November 2013
Dividend Payment Date 22 November 2013
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:00242459 For:RBD Type:HALFYR Time:2013-10-17 08:30:06
