Restaurant Brands annual profit rises 19%, sees higher earnings this year

Thursday 16th April 2015

Restaurant Brands, New Zealand's largest fast food store operator, posted a 19 percent gain in annual profit and said it expects to boost earnings again this year even as labour costs rise.

Profit rose to $23.8 million in the 52 week period ended March 2, up from $20 million a year earlier, the Auckland based company said. Sales rose 13 percent to $372.6 million while cost of sales rose 11 percent to $304.2 million. The company lifted its dividend 15 percent to 19 cents per share.

Restaurant Brands has been restructuring its stores to improve earnings. The retailer has sold regional and lower volume Pizza Hut stores to independent franchisees, closed unprofitable Starbucks Coffee outlets and added burger chain Carl’s Jr. to better compete with rivals McDonald’s Restaurants (NZ) and Burger King Corp.

The company has also improved margins to compete in the "benign retail environment". For the coming financial year it expected profit growth continued, as ingredient prices remained stable, although it did flag rising labour costs.

“The new financial year has started well with continuing strong sales across all four brands and the company is very focused on maintaining this momentum,” Restaurant Brands said. “Subject to any significant changes in the economic and competitive environment or unusual costs, with increased contributions from both KFC and Carl’s Jr, directors expect that the company will deliver an improved profit result in the new financial year.”

KFC, the company's biggest brand, lifted Earnings before interest, tax, depreciation and amortisation 14 percent to $50.8 million, while sales rose 9.7 percent to $265 million. The fried chicken fast food chain rolled out new burgers in the year as well as refurbishing stores and increasing marketing and promotional offers.

Carls Jr lifted earnings from near zero to $200,000 while sales jumped 40 percent to $20.1 million. Restaurant Brands has been buying stores from Forsgren NZ so it can control the market and expects this year the burger chain to start delivering earnings as it "has sufficient scale and presence in the market". Margins were squeezed in the year by rising food costs due to industrial action at US West Coast ports.

Pizza Hut lifted Ebitda 16 percent to $6.4 million while sales slipped 0.1 percent to $48.4 million as Restaurant Brands sold underperforming stores to franchisees. Improved sales volumes, cheaper menus and stable ingredient costs flowed through to a lift in earnings, despite the revenue fall.

Starbucks Coffee lifted earnings 22 percent to $4.3 million, while revenue increased 4 percent to $26.1 million.

Shares of the company last traded at $4.08 and have gained 11 percent since the start of the year.

BusinessDesk.co.nz

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