RBD
29/10/2015 08:48
HALFYR
PRICE SENSITIVE
REL: 0848 HRS Restaurant Brands New Zealand Limited
HALFYR: RBD: Restaurant Brands Half Year Results Announcement
Directors' Report to Shareholders
For the 28 Weeks ended 14 September 2015
(1H 2016)
Key Points
1H 2016 1H 2015 Change ($) Change (%)
Total Group Sales ($m) 210.0 185.7 +24.3 +13.1
Group Net Profit after Tax ($m) 13.4 11.5 +1.9 +16.7
Dividend (cps) 8.5 7.5 +1.0 +13.3
o Net Profit after Tax for the 28 weeks ended 14 September 2015 (1H 2016) was
$13.4 million (13.7 cents per share), up $1.9 million or 16.7% on the prior
period (1H 2015). Net Profit (excluding non-trading items) was $13.1
million, up $1.6 million or 13.8% on the prior period.
o Total Group Sales were $210.0 million, up 13.1% on the previous half year,
driven by a strong performance from KFC and increased volumes from the new
Carl's Jr. brand. Same store sales were up 6.7% for the half year (+4.9% 1H
2015) with solid same store sales growth from KFC and Starbucks Coffee.
o Combined brand EBITDA was up $4.4 million to $36.0 million.
o Directors have declared an interim dividend of 8.5 cents per ordinary
share, up 1.0 cent on last year. The dividend is fully imputed and payable on
27 November 2015.
Group Operating Results
Directors are pleased to report that Restaurant Brands (RBD) has achieved a
strong first half result with an unaudited net profit after tax for the 28
weeks ended 14 September 2015 (1H 2016) of $13.4 million. This amounts to
13.7 cents per share, up 16.7% on prior year (1H 2015). NPAT (excluding
non-trading items) was $13.1 million, up 13.8% on prior year.
Total brand sales for the Group were $210.0 million, up $24.3 million or
13.1% on 1H 2015 with a strong performance from KFC (up $16.1 million) and
the newly-acquired and built Carl's Jr. stores delivering another $9.5
million in sales. Total operating revenue was $218.4 million, up $26.4
million on prior year.
Same store sales were up 6.7% (compared with 4.9% last year) led by KFC and
Starbucks Coffee.
Combined brand EBITDA at $36.0 million was $4.4 million (13.8%) up on prior
year.
Across the networks of all four brands, store numbers in New Zealand at the
end of the half year totalled 231, up from 218 in the prior year. Of these
Restaurant Brands' stores comprised 180, six up from the prior year.
KFC
1H 2016 1H 2015 Change ($) Change (%)
Network Sales ($m) 162.7 147.4 +15.3 +10.4
Network Store Numbers 98 97 - -
RBD Sales ($m) 153.2 137.1 +16.1 +11.7
RBD EBITDA ($m) 30.9 26.2 +4.7 +17.8
EBITDA as a % of Sales 20.1 19.1 - -
RBD Store Numbers 92 90
For Restaurant Brands, KFC sales were $153.2 million, up 11.7% or $16.1
million on prior year with same store sales up 8.8% (+6.4% in 1H 2015). A
continuing positive retail environment, higher levels of advertising activity
and some successful new product promotions all contributed to a strong first
half profit performance.
Margins continued to improve, commensurate with sales, with the benefits of
higher sales leverage largely offsetting some input cost increases. As a
result KFC finished the half year with an EBITDA margin of 20.1% of sales, at
the upper end of its normal range. In dollar terms KFC produced an EBITDA of
$30.9 million, up $4.7 million (17.8%) on last year's result.
Both RBD and total network store numbers increased by one over the half year
to a total of 92 and 98 respectively with the opening of a new store at
Albany.
No major transformations took place over the period, but four are scheduled
for 2H 2016. This will bring the total number of transformed KFC stores to 87
out of the 92 Restaurant Brands stores in the network. However the brand is
embarking on a further round of facility refreshment with 11 stores receiving
minor upgrades and one other receiving another major upgrade.
Pizza Hut
1H 2016 1H 2015 Change ($) Change (%)
Network Sales 45.8 42.9 +2.9 +6.8
Network Store Numbers 89 86 - -
RBD Sales ($m) 24.5 26.5 -1.9 -7.3
RBD EBITDA ($m) 2.8 3.3 -0.4 -13.3
EBITDA as a % of Sales 11.6 12.3 - -
RBD Store Numbers 44 49
Total Pizza Hut network sales climbed to $45.8 million for the half year, up
$2.9m (6.8%) on prior year. Whilst Restaurant Brands' own store sales were
down slightly to $24.5 million, this was largely as a result of sales
transfers to independent franchisees with the continuing disposal of Pizza
Hut stores.
Restaurant Brands' earnings were also marginally down on prior year, in line
with the reduction in the number of stores operated by RBD. There were also
some operational areas needing improvement, all of which have been
subsequently addressed. As a result EBITDA million was $2.8 million for the
half year.
The Pizza Hut network finished the half year with 89 stores, three up on the
same period last year as independent franchisees opened three new stores over
the year. Restaurant Brands sold five more stores to independent franchisees,
bringing the total number sold to 39.
Restaurant Brands expects to continue with the refranchising program and
consolidate its holding of company owned stores at about 25 over the next two
years.
Starbucks Coffee
1H 2016 1H 2015 Change ($) Change (%)
Sales ($m) 13.9 13.2 +0.7 +5.2
EBITDA ($m) 2.2 2.1 +0.1 +6.9
EBITDA as a % of Sales 15.8 15.5 - -
Store Numbers 26 26
Note: all Starbucks Coffee stores are RBD owned
Starbucks Coffee maintained its strong momentum, delivering same store sales
growth over the period of 7.6%. Total sales were up $0.7 million (+5.2%).
Margins improved with continuing sales leverage and store efficiencies. The
brand achieved an EBITDA of $2.2 million (15.8% of sales), up slightly on 1H
2015.
Store numbers remained constant at 26. A refurbishment programme is now under
way for the Starbucks Coffee network with stores in Queenstown and
Christchurch receiving major store upgrades.
Carl's Jr.
1H 2016 1H 2015 Change ($) Change (%)
Sales ($m) 18.4 8.8 +9.5 +107.9
EBITDA ($m) 0.1 0.1 - +12.9
EBITDA as a % of Sales 0.5 1.0 - -
Store Numbers 18 9
Note: all Carl's Jr. stores are RBD owned
The Carl's Jr. establishment phase is well under way as the brand makes
steady progress towards building its network of stores, and improving sales
growth and profitability.
The focus for the first half of this year was integrating the seven stores
acquired in December 2014 from Forsgren NZ Ltd. The costs of this, together
with an extended port strike in the US and significant increases in beef
prices, impacted adversely on the results. The company is well advanced in an
initiative to locally source the majority of its ingredients for the Carl's
Jr. business.
The brand held its earnings at flat to prior year at $0.1 million and is
starting to see margin improvement as the second half of the year unfolds.
Sales were up $9.5 million or 107.9% to $18.4 million on 1H 2015 assisted by
the acquisition of the seven Forsgren stores and an additional two stores
having been built over the past 12 months.
Store numbers now total 18, with two more new stores targeted to be built in
Christchurch over the next few months.
Corporate & Other
General and administration (G&A) costs were $8.7 million, up $0.9 million
(11.3%) on prior year. G&A staff numbers increased as a result of enhancing
both HR (recruitment and employee relations) and marketing capabilities. $0.2
million of the increment arose from taking up a further liability for the
Chief Executive's Long Term Incentive scheme. The fair value of this
liability is now recognised at $0.5 million of a potential total liability of
$1.5 million. Even with these incremental costs G&A remains at the targeted
4.0% of total revenue (vs 4.1% last year).
Depreciation charges of $9.0 million for the half year were $1.2 million
higher than for the prior year mainly because of the increased capital
expenditure in Carl's Jr. (with an additional $0.8 million depreciation
charge) and KFC (a $0.5 million charge).
Funding costs were up $0.2 million to $0.6 million with higher levels of
borrowing, following the Carl's Jr. store acquisition in December 2014.
Tax expense was $0.8 million up on the prior year with higher reported profit
levels. The effective tax rate of 27.0% is slightly higher than prior year's
26.6% with no significant movements in non-deductible items.
Non-Trading Items
Non-trading income was $0.3 million, with the bulk of this arising from gains
on disposal of Pizza Hut stores.
Cash Flow & Balance Sheet
The company's balance sheet remains conservative with $73.3 million in total
equity and gearing levels at just over 9%.
Total assets of $139.3 million were down slightly on the year end's $144.6
million, largely because of a reduction in receivables of $3.4 million mostly
arising from receipts of landlord contributions for new and transformed
stores.
Total liabilities of $66.0 million were down $7.4 million on the previous
year end, mainly because of reduced levels of borrowings, although this was
partially offset by higher payables with timing of creditor payments.
Bank debt reduced over the half year from $22.6 million to $8.5 million.
Compared with 1H 2015 borrowings are now classified as non-current following
renewal of the company's $35 million bank facility in October 2014.
Operating cash flows were up strongly by 27% to $30.4 million assisted by
both improved profitability and a decrease in working capital.
Investing cash outflows were down on prior half year with lower levels of
capital expenditure (down $5.6 million to $9.1 million). Investing receipts
this year were from Pizza Hut store sales of $0.8 million and landlord
contributions for new store developments of $2.8 million. Resultant net cash
outflows from investing activities were $5.5 million, down $5.8 million on
the prior period.
With $24.9 million in free cash flow for the half year, debt was reduced by
$14.0 million on the year-end balance to $8.5 million.
Dividend
Directors have declared a fully imputed interim dividend of 8.5 cents per
ordinary share (up 1.0 cent or 13.3% on the prior year). The dividend will be
paid on 27 November to all shareholders on the register on 13 November 2015.
A supplementary dividend of 1.5 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
All four of the company's brands now have sales and profit momentum that is
expected to continue for the balance of this financial year.
KFC is expected to maintain positive same store sales growth, although not at
the levels enjoyed in the first half year as it rolls over strong prior year
results. Input prices are expected to remain stable for the balance of the
year and margins are expected to be sustained.
Pizza Hut is expected to deliver modest same store sales growth; however RBD
will see total earnings impacted by the continued sell down programme.
Starbucks Coffee sales growth is anticipated to continue, although there will
be some margin pressure from the weaker exchange rate.
Carl's Jr. will see one further store (the first in Christchurch) opened in
the second half of the year. Profitability will improve in the second half
with improved operational efficiencies and higher sales volumes.
The strong sales trends enjoyed in the first two quarters of this year have
continued into the third quarter, benefitting margins and efficiencies in our
stores. The improved first half profit performance (absent any major changes
to economic or market conditions) is expected to be sustained. This will
result in a Net Profit after Tax for the 2016 financial year (excluding
unusual items) in excess of $24 million.
For further information, please contact:
Russel Creedy Grant Ellis
CEO CFO/Company Secretary
Phone: 525 8700 Phone: 525 8700
ENDS
RESTAURANT BRANDS GROUP
Consolidated Income Statement
For the 28 week period ended 14 September 2015 (2016 Half Year)
(28 weeks) (28 weeks)
Unaudited Unaudited
1st Half 2016 vs Prior 1st Half 2015
Group 14 September 2015 % 8 September 2014
$NZ000's
Sales
KFC 153,171 11.7 137,107
Pizza Hut 24,543 (7.3) 26,486
Starbucks Coffee 13,910 5.2 13,228
Carl's Jr. 18,388 107.9 8,846
Total sales 210,012 13.1 185,667
Other revenue 8,392 31.6 6,376
Total operating revenue 218,404 13.7 192,043
Cost of goods sold (178,862) (13.8) (157,148)
Gross margin 39,542 13.3 34,895
Distribution expenses (1,287) 4.5 (1,347)
Marketing expenses (10,830) (14.8) (9,436)
General and administration expenses (8,696) (11.3) (7,814)
EBIT before non-trading 18,729 14.9 16,298
Non-trading 250 221.4 (206)
EBIT 18,979 17.9 16,092
Net financing expenses (616) (42.3) (433)
Net profit before tax 18,363 17.3 15,659
Taxation expense (4,953) (18.9) (4,164)
Total profit after tax (NPAT) 13,410 16.7 11,495
Total NPAT excluding non-trading 13,093 13.8 11,502
% sales % sales
EBITDA before G&A
KFC 30,855 20.1 17.8 26,198 19.1
Pizza Hut 2,836 11.6 (13.3) 3,271 12.3
Starbucks Coffee 2,193 15.8 6.9 2,052 15.5
Carl's Jr. 96 0.5 12.9 85 1.0
Total 35,980 17.1 13.8 31,606 17.0
Ratios
Net tangible assets per security (net tangible assets divided by number of
shares) in cents 54.0c 48.6c
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.
Non-GAAP Financial Measures
For the 28 week period ended 14 September 2015
The Group results are prepared in accordance with New Zealand Generally
Accepted Accounting Practice ("GAAP") and comply with International Financial
Reporting Standards (" IFRS"). These interim financial statements include
non-GAAP financial measures that are not prepared in accordance with IFRS.
The non-GAAP financial measures used in this presentation are as follows:
1. EBITDA before G&A. The Group calculates Earnings Before Interest, Tax,
Depreciation and Amortisation ("EBITDA") before G&A (general and
administration expenses) by taking net profit before taxation and adding back
(or deducting) net financing expenses, non-trading items, depreciation,
amortisation and G&A. The Group also refers to this measure as Concept
EBITDA before G&A.
The term Concept refers to the Group's four operating segments comprising
KFC, Pizza Hut, Starbucks Coffee and Carl's Jr. The term G&A represents
non-store related overheads.
2. EBIT before non-trading. Earnings before interest and taxation ("EBIT")
before non-trading is calculated by taking net profit before taxation and
adding back (or deducting) net financing expenses and non-trading items.
3. Non-trading items. Non-trading items represent amounts the Group
considers unrelated to the day to day operational performance of the Group.
Excluding non-trading items enables the Group to measure underlying trends of
the business and monitor performance on a consistent basis.
4. EBIT after non-trading items. The Group calculates EBIT after non-trading
items by taking net profit before taxation and adding back net financing
expenses.
5. Total NPAT excluding non-trading. Total Net Profit After Tax ("NPAT")
excluding non-trading items is calculated by taking profit after taxation
attributable to shareholders and adding back (or deducting) non-trading items
whilst also allowing for any tax impact of those items.
The Group believes that these non-GAAP measures provide useful information to
readers to assist in the understanding of the financial performance and
position of the Group but that they should not be viewed in isolation, nor
considered as a substitute for measures reported in accordance with IFRS.
Non-GAAP measures as reported by the Group may not be comparable to similarly
titled amounts reported by other companies.
The following is a reconciliation between these non-GAAP measures and net
profit after taxation:
Note* 2016 Half Year 2015 Half Year
$NZ000's
EBITDA before G&A 1 35,980 31,606
Depreciation (8,984) (7,800)
Loss on sale of property, plant and equipment (included in depreciation)
- (4)
Amortisation (included in cost of sales) (932) (861)
G&A - area managers, general managers and support centre (7,335) (6,643)
EBIT before non-trading 2 18,729 16,298
Non-trading items ** 3 250 (206)
EBIT after non-trading items 4 18,979 16,092
Net financing costs (616) (433)
Net profit before taxation 18,363 15,659
Income tax expense (4,953) (4,164)
Net profit after taxation 13,410 11,495
(Deduct) / add back non-trading items (250) 206
Taxation credit on non-trading items (67) (199)
Net profit after taxation excluding non-trading items 5 13,093 11,502
* Refers to the list of non-GAAP measures as listed above.
** Refer to note 1 of the interim financial statements for an analysis of
non-trading items.
End CA:00272473 For:RBD Type:HALFYR Time:2015-10-29 08:48:19
