Restaurant Brands expects to at least match last year's profit

Friday 29th June 2012

Restaurant Brands, the fast food company expects to at least match last year's profit in the year ending February 2013, chairman Ted van Arkel told the annual shareholders' meeting.

“Even though the 2012 underlying profit was down on 2011's stellar result, directors consider the 2012 profit performance to have been satisfactory, given the continuing tough economic environment,” van Arkel said.

“Our expectations for 2013 are for a result of at least the same level,” he said.

Restaurant Brands reported a 29.5 percent decline in net profit to $16.9 million in the year ended February 29 with underlying profit down 27%.

Van Arkel said he doesn't expect any let-up in “the challenging economic conditions or competitive nature of the marketplace.”

“Directors believe that current levels of profitability will be maintained through a continued focus on efficiency and cost reductions, together with new marketing initiatives,” he said.

Chief executive Russel Creedy said KFC, which contributed 77 percent of annual sales and 90 percent of operating profits, saw five more stores refurbished during the year, bringing the total to two-thirds of its 88 stores. A further eight stores a scheduled for upgrades this year.

“With virtually every store that has been revamped we have seen a return on investment well in excess of the cost of capital, demonstrating the effectiveness of the upgrade program,” Creedy said.

As well, the company is beginning a “next generation” of KFC transformations at its new Lower Hutt store later this year.

“This is an entirely new design concept and incorporates significant improvements in operational flow as well as a considerably enhanced customer experience in the restaurant, together with some major technological changes,” he said.

The company plans to open two more KFC stores in the current financial year.

First quarter KFC sales through stores open 12 months or more fell 6 percent. Of the other two chains the company operates, Pizza Hut showed a 10 percent rise in same-store sales while Starbuck's sales fell slightly.

It also plans to open its first store in a new chain, Carl's Jr, a US-based hamburger format, by October this year and plans to build at least five stores a year over the next five years, Creedy said.

“We have a great deal of enthusiasm for the brand and believe it has the potential to be our second biggest business within the next five years,” he said.

Restaurant Brands shares are unchanged at $2.08, up from their year low at $1.80 in March after the fourth quarter sales results were released. The shares have declined from $2.75 in May last year.

BusinessDesk.co.nz

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