Restaurant Brands boosted by store expansion
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Fast-food operator, Restaurant Brands NZ, has posted a 41 per cent lift in first-half profit after it expanded its footprint through Australia and Hawaii.
The Auckland-based company said net profit rose to $19.1 million, or 15.5 cents per share, in the 28 weeks ending September 11, from $13.5 million, or 13.3 cents, a year earlier.
Sales jumped 50.7 per cent to $386.1 million compared to the previous corresponding period with the bulk of the increase attributable to the Pacific Island Restaurants Inc. (PIR) acquisition in Hawaii and the full impact of the Australian operations which were acquired part way through the first half of the 2017 financial year.
Total sales of the KFC business in Australia were A$66.7 million, up A$25.3 million (or +61.1 per cent) on last year, reflecting both increased store numbers following the acquisition of the business assets of five stores at the start of this financial year, and the full impact of the acquisition of QSR Pty Limited which only became effective part way through 1H 2017. Same store sales jumped 5.8 per cent. Store EBITDA margins of A$9.8 million (14.7 per cent of sales) are up A$2.9 million or +43.2 per cent on last year.
First-half profit excluding non-trading items lifted 27 per cent to $20.2 million and the company said it expects full-year profit on that measure of about $40 million.
Combined brand EBITDA was up $17.7 million to $63.0 million with $12.7 million of the increase resulting from the PIR acquisition, the Australian KFC business accounting for a further $3.4 million and the New Zealand businesses driving the remaining $1.6 million.
Restaurant Brands holds the rights to the KFC, Pizza Hut, Starbucks Coffee and Carl’s Jr brands in New Zealand and has recently turned its focus to overseas expansion to drive future earnings growth.
“The current strategies across all geographic markets are delivering positive results,”
In April 2016 it expanded into KFC in Australia and in March 2017 bought the company which operates Taco Bell and Pizza Hut in Hawaii.
“The current strategies across all geographic markets are delivering positive results,” the company said.
In NZ, the company’s KFC stores lifted earnings before interest, tax, depreciation, amortisation and administrative expenses by 5.7 per cent to $35 million as sales advanced 8.2 per cent to $170.3 million.
After the year-end balance date, Restaurant Brands opened a new format KFC store in Fort Street in central Auckland, which it said has “significantly outperformed expectations” and is expected to be the prototype for other central city stores.
Its Pizza Hut stores posted an 18 per cent decline in earnings to $2 million and its margin contracted to 8.6 per cent from 11 per cent as it faced increased costs for labour and ingredients.
Earnings at its Starbucks Coffee stores edged up 0.4 per cent to $2.2 million as sales declined 2.6 per cent to $13.4 million after two stores were closed, taking the total to 23.
Carl’s Jr earnings jumped 58 per cent to $600,000 as sales slipped 2.8 per cent to $18.8 million.
Directors have declared an interim dividend of NZ10.0 cents per ordinary share, up NZ0.5 cents on last year. The dividend is fully imputed and payable November 30.
Questions & Answers
Q.What specifically contributed to the significant increase in the company's sales during this period?
What specifically contributed to the significant increase in the company's sales during this period?
The substantial jump in sales was primarily driven by the acquisition of Pacific Island Restaurants Inc. In Hawaii and the full inclusion of Australian operations, which were acquired partway through the previous financial year.
Q.How did the performance of the various New Zealand brands differ in the first half?
How did the performance of the various New Zealand brands differ in the first half?
KFC stores in New Zealand saw earnings increase, and a new format store outperformed expectations. However, Pizza Hut earnings declined due to higher costs, and Starbucks Coffee earnings barely rose after two stores closed.
Q.What is the company's strategy for future earnings growth, and where have they expanded recently?
What is the company's strategy for future earnings growth, and where have they expanded recently?
The company's strategy for future growth is overseas expansion. They expanded into KFC in Australia in April 2016 and acquired the company operating Taco Bell and Pizza Hut in Hawaii in March 2017.
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