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Restaurant Brands sales to exceed $700 mln in 2018 as KFC market keeps growing, CEO says

Friday 23rd June 2017

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Restaurant Brands New Zealand, the fast-food retailer, is forecasting sales above $700 million in the 2018 financial year as it reaps gains from its expansion into Australia and Hawaii.

In New Zealand, Restaurant Brands runs KFC, Pizza Hut, Carl’s Jr and Starbucks Coffee, while in the last 12 months it has added Hawaii, where it operates 82 Taco Bell and Pizza Hut stores, and Australia, where it operates 47 KFC outlets in New South Wales. Sales for the year ended Feb. 27, 2017 were $497.2 million, including $400 million in New Zealand sales and 10 months' trading from the Australian business.

"We are well on the way to our billion dollar revenue target," chief executive Russel Creedy said in speech notes published on the NZX. "The impact of sales from the Hawaiian acquisition will only be felt in the current financial year. With the benefit of virtually a full year’s trading for the Hawaiian and Australian operations, together with sound growth in New Zealand, we expect total sales for the current financial year to be comfortably in excess of $700 million."

Before today's annual meeting in Auckland, the company announced plans to dual-list on the Australian Securities Exchange by the end of September. Creedy said the company has "fundamentally changed" and is now "a truly international one", leading to its management reorganisation into three geographic reporting divisions.

Restaurant Brands had 212 stores in Australia and New Zealand at the end of the financial year, and with the Hawaiian acquisition and additional stores opening in the year, it expects that number to exceed 300 by the end of this financial year.

KFC, its biggest earner, continued to reap profits, with earnings before interest, tax, depreciation and amortisation (ebitda) up 7.5 percent to $61.4 million in the year. Restaurant Brands has spent $100 million updating its New Zealand KFC stores over the past 11 years, which it said had resulted in sales jumping from $172 million in 2006 to nearly $300 million in 2017.

Its NZ stores dropped to 170 after the sale of four Pizza Hutt stores to independent franchisees, as the company continued its store-selling strategy. At the end of the 2017 financial year, it owned 35 of the 93 stores, or around 38 percent, and plans to reduce that holding to around 25 percent in the long term.

Restaurant Brands is in negotiations to renew its franchise agreements for Starbucks, which begin to expire next year, while Carl's Jr margins continued to improve, Creedy said.

In Australia, the company has bought five KFC stores on top of the original 42, and has another three deals with independent franchisees pending while it builds two stores. It's also in negotiations to buy more stores from Yum! Brands, with whom it made the initial deal to expand into NSW.

"There are around 60 KFC franchisees in the Australian market with over 450 restaurants between them," Creedy said. "Over the next few years we see considerable opportunity to grow this business both organically and through acquisitions to a reach a level where our KFC Australia footprint could rival that of New Zealand."

Creedy said the company is "coming to grips" with the Hawaiian business but sales and earnings in the past three months had been sound, and it plans to build, relocate or renovate five stores over the next 12 months.

The shares rose 0.7 percent to $6, and have gained 17 percent over the past year.


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