Restaurant Brands ups dividend as Colonel hits another record

By Paul McBeth

Wednesday 8th April 2009

Restaurant Brands New Zealand, the holder of New Zealand's KFC, Starbucks, and Pizza Hut franchises, increased its full-year dividend by 7.7% as its KFC chain boosted annual sales to a record $211.5 million.

Net profit slipped 1.2% to $8.4 million, or 8.5 cents per share, in the 12 months ended Feb. 28, as falling sales at its Pizza Hut stores dragged earnings down. It will pay a final dividend of 4 N.Z. cents per share, taking total payments for the year to 7 cents, up from 6.5 cents last year.

"The 2008/9 year has seen some profit improvement driven purely by the KFC business," the company said in a statement. "Given the current uncertain climate and existence of continued cost pressures, directors are expecting a similar profit performance in the new financial year."

New Zealand retailers are cutting prices to underpin sales as rising unemployment and fears about job security dampen sentiment among consumers. The Westpac McDermott Miller Consumer Confidence Index fell to 96 in the first quarter from 101.3 in the previous three month period, where a reading below 100 shows pessimists outnumber optimists. Restaurant Brands shares have climbed 24% in the past month, outpacing the 7.9% gain in the NZSE Consumer Index.

Earnings before interest, taxation, depreciation and amortisation for the company's Pizza Hut franchise sank 38% to $2.8 million. Revenue for its New Zealand pizza outlets in New Zealand sank 9.6% to $64.6 million. The company completed its exit from Victoria, Australia, last year.

Pizza Hut faces stiff competition from Domino's and Hell Pizza, and the company is considering the sale of some stores to independent franchisees.

Restaurant Brands is currently re-negotiating an agreement with Yum! Brands Inc., the world's largest restaurant company, over the future of its Pizza Hut franchise, and expects to make an announcement within the next month, the company said today

Sales at the Starbucks franchise fell 0.3% to $33 million and EBITDA declined 24% to $2.9 million as rising costs for raw materials were compounded by the weak New Zealand dollar.

The company said KFC will continue delivering sales growth after lifting annual revenue by 4.1%. EBITDA rose to $38 million from $35.9 million the previous year.

The stock, which is rated 'outperform' by three analysts who follow Restaurant Brands, rose 2.4% to 87 cents in morning trading on the NZX.

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