Restaurant Brands posts 17.5 percent drop in interim profit

By NZPA

Thursday 17th October 2002

Fast food retailer Restaurant Brands posted a 17.5 percent drop in half-year profit to a net $5.0 million after tax.

The company will pay a fully imputed interim dividend of 4.5 cents per share (cps), the same paid for the last three years, on November 22.

Restaurant Brands operates the New Zealand KFC, Starbucks and Pizza Hut franchises, and bought 51 Pizza Hut outlets in the Australian state of Victoria.

"The negative impact was entirely due to the start-up losses in the Pizza Hut Victoria business, with net profit after tax for New Zealand operations up 6 percent on 2001," Restaurant Brands directors said in a statement today.

"On the basis of the successful New Zealand Pizza Hut turnaround, the planned benefits of the Victorian acquisition are expected to be achieved progressively over the next few years."

Operating cashflows for the group were up 13 percent at $14.4 million, while operating cash flows for Pizza Hut Victoria for the full year were expected to be up to $A1.5 million ($NZ1.73 million).

"Pizza Hut Victoria is expected to break even at operating cashflow on a monthly run-rate basis early in the new financial year."

However, margins were slimmer than expected at the Victoria business because of a cyclical downturn in takeaway food sales in Australia.

The Pizza Hut Victoria business was acquired from a receiver and seven small franchisees for $A11.8 million, below replacement cost.

"The acquisition of the Pizza Hut Victoria business represents the latest step in a sustained programme to achieve higher medium-term earnings growth rates."

Pizza Hut New Zealand and Starbucks earnings were satisfactory, but KFC's margins were down because of rental costs arising from the sale and leaseback of properties in 2001.

For the six months to September, Restaurant Brands saw total sales of $160.6 million, up 16.0 percent on the first half of 2001.

KFC total sales were up 2.8 percent, Pizza Hut New Zealand up 11.6 percent and Starbucks up 45.9 percent. KFC contributed 60 percent of total sales, down from 67 percent in the same period last year.

Earnings per share dropped to 5.30cps, from 6.5cps in the same period last year.

Because of a change of balance date, the half-year results have been compared with the unaudited trading results for the same period to September 2001.

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