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Restaurant Brands reports 44 percent fall in 1H profit, cuts interim dividend

Wednesday 19th October 2011

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Fast-food chain operator Restaurants Brands has reported a 44 percent fall in first-half profit as a lift from the Rugby World Cup failed to counter the impact of the Christchurch earthquake on its business.

The operator of KFC, Pizza Hut and Starbucks Coffee chains said net profit fell to $7.5 million in the six months to Sept. 12 from $13.5 million in the same period last year. Excluding non-trading items including a $600,000 write-down in the value of Pizza Hut and the closure of stores, earnings fell to $8.6 million from $13.9 million.

Total revenues fell 5.5 percent to $166.8 million and the company said 40 percent of the decline was due to the earthquake in Christchurch on Feb. 22 and the June 13 aftershock which caused the closure of 19 stores and cost the company $3.8 million in lost sales.

KFC produced total revenues of $127.9 million, up 0.7 percent on last year but down 1.9 percent on a same store sales basis.

"With the commencement of the Rugby World Cup there have been some positive signs of growth particularly in the KFC business, but the sustainability of this growth is still uncertain," the company said.

Directors declared a fully imputed interim dividend of 6.5 cents a share, payable on Nov. 25. The dividend is 0.5 cents lower than the same period last year.

Directors decided to continue to suspend the dividend reinvestment plan for the time being, but will review this again prior to the declaration of a final dividend.

Earnings fell across all three brands.

The company said the economic downturn persists and there are continuing pressures on sales and margins.

"Consumer sentiment remains bearish and retail sales uncertain.

"Absent any further deterioration in the economy, directors anticipate an improving trend in profit in the second-half to a full-year net profit after tax, excluding non-trading items, in the vicinity of $20 million.”

That’s down from earnings of $25.1 million a year earlier.

The stock fell 1.8 percent to $2.16 in trading yesterday, and has dropped 17 percent this year.

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