Daily ShareChat: Restaurant Brands

By Jenny Ruth

Wednesday 3rd November 2010

Restaurant Brands' 50.4% rise to $13.9 million in net profit for the six months ended September 13 was "yet another impressive result," says Sarndra Urlich, an analyst at First NZ Capital.

"Every line item was a hit with same-store sales up 4.9%, gross profit margins up from 18.7% to 21.3% and S, G&A (selling, general & administrative) costs down 1.9% when compared to the first-half 2010," Urlich says.

The company's KFC chain "continues to be the stand-out performer" with turnover up 7.5% and operating profit up 20%, she says. KFC accounted for 72% of Restaurant Brands' revenues and 85% of its operating profit.

"The sales performance was attributed to new product and promotional activity combined with the continued traction from the store transformation program."

Four KFC stores were transformed in the six months, taking the total of transformed stores to 42 out of 87.

The Pizza Hut chain also delivered an “impressive” result, although off a low base and even Starbucks contributed a small part of the earnings uplift, Urlich says.

Management maintained its guidance for net profit for the year ending February at between $24 million and $26 million. "Although management is wary about consumer sentiment, we believe it is being overly, although not surprisingly, conservative," she says.

Recommendation: Outperform (upgraded from neutral).

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