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Restaurant Brands shares rise on record annual profit

Thursday 7th April 2011

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Fast food franchise operator Restaurant Brands posted a record annual profit and upped its dividend but expressed caution about its outlook after trading conditions deteriorated in the latter half of the year.

The company's share price rose 11 cents to $2.48 after it reported a 26% rise to $25.1 million in full year net profit, excluding non-trading items, with most of the rise due to good performance by the KFC brand. It also operates the Pizza Hut and Starbucks Coffee chain brands.

"Maybe people were looking for more of a margin softening than actually came through because we already knew the sales," Guy Hallwright from Forsyth Barr said.

The company had given solid guidance on where the result was likely to be.

"Things have definitely slowed but the question was how long could they keep growing at KFC," said Hallwright.

For the year to February 28 the company had a 2.1% rise in revenue to $324.9 million, with same store sales up 2.4%.

A final fully imputed dividend of 10c per share is to be paid, making a full year dividend of 17cps, up 4.5cps on the year before.

The company attributed a softer retail environment in the latter half of the year to the rise in the goods and services tax and increasing petrol prices and said any further increase in profitability will be very challenging.

"The KFC brand still has considerable momentum driven by the ongoing benefits of its transformation project. The planned slowing in this expenditure in the 2011/12 year will give KFC the opportunity to stabilise its operations after the significant growth of the past couple of years," the company said.

KFC sales were up 5.6% to $235.8 million, and earnings before interest, tax, depreciation and amortisation (ebitda) were up 12.7% to $52.1 million.

At Pizza Hut sales fell 4.9% to $59.3 million, with the company having nine fewer stores, while ebitda lifted 4.3% to $5.6 million.

Starbucks Coffee sales fell 3.8% to $29.3 million, although up 0.8% on a same store basis, with ebitda up 27.3% to $4.1 million.

The marketplace would remain tough in the current financial year, with strong competition for an increasingly scarce consumer dollar. Some improvement was expected during the year, particularly with the Rugby World Cup at the start of the third quarter of the financial year.

Restaurant Brands' bottom line profit was up 24.4% to $24.3 million.



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