Market buys Restaurant Brands result

By Phil Boeyen, ShareChat Business News Editor

Wednesday 16th January 2002

Shares in fast food franchisor Restaurant Brands (NZSE: RBD) went as high as $2.00 in morning trading Wednesday after the company returned to form with a bottom-line profit of $12.2 million.

The result for the year ended November was a 24% increase on the previous year's $9.8 million, although the previous result included a $2.8 million after tax charge for costs associated with the purchase of the Eagle Boys chain. The latest effort remained $800,000 shy of 1999's $13 million net profit.

The operating surplus before unusual items and tax only managed a 2% rise despite a sales jump of nearly 13%, but the market nevertheless seems happy that the Eagle Boys acquisition has been bedded down and there are forecasts for increased margins and revenue in the coming year.

Total sales for the year stood at $258.8 million, up 12.7% on the prior year with KFC sales growing by 1.5%, Pizza Hut by 44.6% and Starbucks by 55.6%. Earnings before interest, tax, depreciation and amortisation was $46 million, up 14.8% on the prior year.

"KFC, Pizza Hut and Starbucks all recorded strong Ebitda margin growth over the year," the company says.

KFC's Ebitda margin grew 0.3% to 20.9% and Pizza Hut's margin rose 2.8% to 11.4%. Starbucks Ebitda margin showed the most impressive growth, improving 6.5% to 10.8% as the company says it achieves critical mass.

Restaurant Brands says its forward strategy is to be the market leader in the growth sectors of retail food and beverages and both Pizza Hut and Starbucks margins and revenue are expected to grow.

"Home delivery and takeaway pizza and cafes are both fast growing sectors and Pizza Hut is already the market leader in pizza. Starbucks will establish its position as the leading national brand in cafes during 2002.

"KFC is a highly profitable, stable brand and 2002 will see the continuation of activities that maintain and enhance that position, including new menu items, improved speed of service and modernised store image."

"With 3 strong growing or stable businesses, each profitable in its own right, Restaurant Brands is well positioned for sustained growth."

The company says it plans to spend up to $4 million on KFC store refurbishments but has not said what its plans are for all of the $53.8 million from last year's sale and leaseback of KFC properties.

"As previously announced, the cash proceeds of the KFC sale and leaseback programme will be applied to debt reduction and funding of future growth options.

"The timing of the sale and leaseback was set to optimise the value from the properties rather than to generate funds for an immediate growth opportunity. The company is seeking growth opportunities compatible with its current businesses and will make investments when the opportunity and timing is optimal."

RBD has announced a final dividend of 8 cents per share bringing the year's total to 12.5 cents, however this reflects plans to change the end-of-year balance date from November to February. On a 12 month annualised basis, the dividend is 10 cents per share, the same as last year.

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