Restaurant Brands annual earnings fall 27%

Tuesday 3rd April 2012

Restaurant Brands, which operates the local Pizza Hut, KFC and Starbucks brands, reported a 27 percent fall in annual profit due to the Christchurch earthquakes and fewer Pizza Hut stores as it offloaded unprofitable outlets.

Net profit fell to $18.4 million in the 12 months ended Feb. 29 from $25.1 million in the same period last year, the Auckland-based company said in a statement. Sales decreased 4.9 percent to $308.9 million with Restaurant Brands blaming the impact of the Christchurch earthquake and the sell down of its Pizza Hut stores for some $6 million in lost revenue.

“Whilst down on what was a stellar year last year, the underlying performance of the company remains strong,” the company said. “Directors believe that current levels of profitability will be maintained in the face of continuing tight trading conditions and soft retail environment through a continued focus on efficiency and cost reductions, together with new marketing initiatives.”

Earlier this month Restaurant Brands flagged lower annual sales from the closure of earthquake-damaged stores and the sale of Pizza Hut outlets, though same-store sales were only down 2.5 percent.

Sales at KFC, traditionally the company’s strongest brand, reached a new high rising 0.2 percent to $236.3 million, though earnings before interest, tax, depreciation and amortisation dropped 13 percent to $45.6 million as its margins came under pressure.

Starbucks Coffee suffered more than the other two brands as a result of the Christchurch quakes with three of its four Christchurch stores were closed and unlikely to reopen. That led to a 9.8 percent decline in sales to $26.5 million, and an 8.8 percent fall in EBITDA to $3.7 million.

The coffee-house chain also closed two stores in Newmarket and Botany during the period due to respective lease ends.

Pizza Hut sales dropped 23 percent to $45.5 million and EBITDA sank 63 percent to $2.1 million as 13 stores were sold to independent franchisees.

“The strategy remains to sell stores with smaller sales volumes, particularly in regional areas where an independent franchisee can make a success of the business on a smaller sales base with a more personal approach to running the store,” the company said.

In December, the company announced it will roll out a chain of Carl’s Jr restaurants after striking a deal with US own CKE Restaurants. The new brand will see three of the four stores opening in the second half of the year.

The board declared a dividend of 9.5 cents per share up from 4.1 cents apiece a year earlier. That takes the full-year payout to 16 cents per share, down from 17 cents in 2011.

The stock climbed 3.8 percent to $1.93 in trading today, and has shed 11 percent this year.

BusinessDesk.co.nz

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