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Finger-lickin' good result for Restaurant Brands

Wednesday 7th April 2010

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(BusinessWire) - Fried chicken franchise KFC streaked ahead in the year to February 28, helping to deliver a "very satisfactory" net profit after tax of $19.5 million for listed fast food operator Restaurant Brands, 137% up on the previous year's $8.3 million result.

The result was achieved on total sales of $318.3 million, up 2.8% on the previous year. Lower interest costs, thanks to stronger operating cashflows, cost controls on marketing and distribution, the relative absence of impairment writedowns versus the previous year, and unprofitable store closures in the Pizza Hut and Starbuck's chains, also assisted.

Earnings equated to 20.5 cents per share, and the company has declared a fully imputed final dividend of 8 cents per share, taking total distributions for the year to 12.5 cents per share, up 79%, or 5.5 cents per share, on last year's result. Restaurant Brands shares continued their 12 month-long rise from just below 60 cents in early 2009, to $2.06 in early trading on the NZX today, an increase on the day of 3 cents, or 1.5%.

For accounting reasons, the latest result compares a 52 week period against 53 weeks in the previous financial year.

Chief executive Russel Creedy told shareholders that directors were "cautiously optimistic" of a profit "slightly in excess of $20 million" in the current financial year.

Total sales for both Pizza Hut and Starbucks were down on the previous year, at $64.2 million (down 0.7%) and $30.5 million (down 7.6%) respectively, although this reflected store closures and product rationalisation. Pizza Hut recorded a dramatic improvement in same store sales and earnings before interest, tax, depreciation and non-store overheads, up 95% to $5.4 million, producing a margin to sales ratio of 8.4%. Starbucks on the same basis was up 9.6% to $3.2 million, producing a sales margin of 10.6%.

However, Starbucks still posted a 2.9% reduction in same store sales at $30.5 million, whereas KFC and Pizza Hut both produced same store sales increases. Gross margin across the group improved 19.9% to $63.2 million ($52.7 million the previous year).

Distribution expenses at $10.4 million, were down 10.4% on the year before, while marketing expenditure at $6.7 million was down 4.1%, but general and administration expenses rose 22.4% to $12.9 million.

Interest expenses more than halved to $1.5 million ($3.9 million), reflecting a $16.6 million reduction in bank debt, made possible by strong operating cash flows. Impairment costs of $0.6 million compared with $5 million in the previous year, when the company took heavy hits on the value of unprofitable Pizza Hut outlets.

A programme of Pizza Hut franchise sales to individual store owners is a priority this year, while there will be an accelerated roll-out of KFC store rebranding and refurbishment.

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