Directors’ Report to Shareholders
For the 28 Weeks ended 14 September 2015
(1H 2016)
Key Points
1H 2016
210.0
13.4
8.5

Total Group Sales ($m)
Group Net Profit after Tax ($m)
Dividend (cps)

1H 2015
185.7
11.5
7.5

Change ($)
+24.3
+1.9
+1.0

Change (%)
+13.1
+16.7
+13.3

•

Net Profit after Tax for the 28 weeks ended 14 September 2015 (1H 2016) was $13.4 million (13.7
cents per share), up $1.9 million or 16.7% on the prior period (1H 2015). Net Profit (excluding nontrading items) was $13.1 million, up $1.6 million or 13.8% on the prior period.

•

Total Group Sales were $210.0 million, up 13.1% on the previous half year, driven by a strong
performance from KFC and increased volumes from the new Carl’s Jr. brand. Same store sales were
up 6.7% for the half year (+4.9% 1H 2015) with solid same store sales growth from KFC and
Starbucks Coffee.

•

Combined brand EBITDA was up $4.4 million to $36.0 million.

•

Directors have declared an interim dividend of 8.5 cents per ordinary share, up 1.0 cent on last year.
The dividend is fully imputed and payable on 27 November 2015.

Group Operating Results
Directors are pleased to report that Restaurant Brands (RBD) has achieved a strong first half result with an
unaudited net profit after tax for the 28 weeks ended 14 September 2015 (1H 2016) of $13.4 million. This
amounts to 13.7 cents per share, up 16.7% on prior year (1H 2015). NPAT (excluding non-trading items)
was $13.1 million, up 13.8% on prior year.
Total brand sales for the Group were $210.0 million, up $24.3 million or 13.1% on 1H 2015 with a strong
performance from KFC (up $16.1 million) and the newly-acquired and built Carl’s Jr. stores delivering
another $9.5 million in sales. Total operating revenue was $218.4 million, up $26.4 million on prior year.
Same store sales were up 6.7% (compared with 4.9% last year) led by KFC and Starbucks Coffee.
Combined brand EBITDA at $36.0 million was $4.4 million (13.8%) up on prior year.
Across the networks of all four brands, store numbers in New Zealand at the end of the half year totalled
231, up from 218 in the prior year. Of these Restaurant Brands’ stores comprised 180, six up from the prior
year.
KFC

Network Sales ($m)
Network Store Numbers

1H 2016
162.7
98

1H 2015
147.4
97

Change ($)
+15.3
-

Change (%)
+10.4
-

RBD Sales ($m)
RBD EBITDA ($m)
EBITDA as a % of Sales
RBD Store Numbers

153.2
30.9
20.1
92

137.1
26.2
19.1
90

+16.1
+4.7
-

+11.7
+17.8
-

For Restaurant Brands, KFC sales were $153.2 million, up 11.7% or $16.1 million on prior year with same
store sales up 8.8% (+6.4% in 1H 2015). A continuing positive retail environment, higher levels of advertising
activity and some successful new product promotions all contributed to a strong first half profit performance.

 Margins continued to improve, commensurate with sales, with the benefits of higher sales leverage largely
offsetting some input cost increases. As a result KFC finished the half year with an EBITDA margin of 20.1%
of sales, at the upper end of its normal range. In dollar terms KFC produced an EBITDA of $30.9 million, up
$4.7 million (17.8%) on last year’s result.
Both RBD and total network store numbers increased by one over the half year to a total of 92 and 98
respectively with the opening of a new store at Albany.
No major transformations took place over the period, but four are scheduled for 2H 2016. This will bring the
total number of transformed KFC stores to 87 out of the 92 Restaurant Brands stores in the network.
However the brand is embarking on a further round of facility refreshment with 11 stores receiving minor
upgrades and one other receiving another major upgrade.
Pizza Hut
1H 2016

1H 2015

Change ($)

Change (%)

Network Sales
Network Store Numbers

45.8
89

42.9
86

+2.9
-

+6.8
-

RBD Sales ($m)
RBD EBITDA ($m)
EBITDA as a % of Sales
RBD Store Numbers

24.5
2.8
11.6
44

26.5
3.3
12.3
49

-1.9
-0.4
-

-7.3
-13.3
-

Total Pizza Hut network sales climbed to $45.8 million for the half year, up $2.9m (6.8%) on prior year.
Whilst Restaurant Brands’ own store sales were down slightly to $24.5 million, this was largely as a result of
sales transfers to independent franchisees with the continuing disposal of Pizza Hut stores.
Restaurant Brands’ earnings were also marginally down on prior year, in line with the reduction in the
number of stores operated by RBD. There were also some operational areas needing improvement, all of
which have been subsequently addressed. As a result EBITDA million was $2.8 million for the half year.
The Pizza Hut network finished the half year with 89 stores, three up on the same period last year as
independent franchisees opened three new stores over the year. Restaurant Brands sold five more stores to
independent franchisees, bringing the total number sold to 39.
Restaurant Brands expects to continue with the refranchising program and consolidate its holding of
company owned stores at about 25 over the next two years.
Starbucks Coffee

Sales ($m)
EBITDA ($m)
EBITDA as a % of Sales
Store Numbers

1H 2016
13.9
2.2
15.8
26

1H 2015
13.2
2.1
15.5
26

Change ($)
+0.7
+0.1
-

Change (%)
+5.2
+6.9
-

Note: all Starbucks Coffee stores are RBD owned

Starbucks Coffee maintained its strong momentum, delivering same store sales growth over the period of
7.6%. Total sales were up $0.7 million (+5.2%).
Margins improved with continuing sales leverage and store efficiencies. The brand achieved an EBITDA of
$2.2 million (15.8% of sales), up slightly on 1H 2015.
Store numbers remained constant at 26. A refurbishment programme is now under way for the Starbucks
Coffee network with stores in Queenstown and Christchurch receiving major store upgrades.

 Carl’s Jr.

Sales ($m)
EBITDA ($m)
EBITDA as a % of Sales
Store Numbers

1H 2016
18.4
0.1
0.5
18

1H 2015
8.8
0.1
1.0
9

Change ($)
+9.5
-

Change (%)
+107.9
+12.9
-

Note: all Carl’s Jr. stores are RBD owned

The Carl’s Jr. establishment phase is well under way as the brand makes steady progress towards building
its network of stores, and improving sales growth and profitability.
The focus for the first half of this year was integrating the seven stores acquired in December 2014 from
Forsgren NZ Ltd. The costs of this, together with an extended port strike in the US and significant increases
in beef prices, impacted adversely on the results. The company is well advanced in an initiative to locally
source the majority of its ingredients for the Carl’s Jr. business.
The brand held its earnings at flat to prior year at $0.1 million and is starting to see margin improvement as
the second half of the year unfolds.
Sales were up $9.5 million or 107.9% to $18.4 million on 1H 2015 assisted by the acquisition of the seven
Forsgren stores and an additional two stores having been built over the past 12 months.
Store numbers now total 18, with two more new stores targeted to be built in Christchurch over the next few
months.
Corporate & Other
General and administration (G&A) costs were $8.7 million, up $0.9 million (11.3%) on prior year. G&A staff
numbers increased as a result of enhancing both HR (recruitment and employee relations) and marketing
capabilities. $0.2 million of the increment arose from taking up a further liability for the Chief Executive’s
Long Term Incentive scheme. The fair value of this liability is now recognised at $0.5 million of a potential
total liability of $1.5 million. Even with these incremental costs G&A remains at the targeted 4.0% of total
revenue (vs 4.1% last year).
Depreciation charges of $9.0 million for the half year were $1.2 million higher than for the prior year mainly
because of the increased capital expenditure in Carl’s Jr. (with an additional $0.8 million depreciation
charge) and KFC (a $0.5 million charge).
Funding costs were up $0.2 million to $0.6 million with higher levels of borrowing, following the Carl’s Jr.
store acquisition in December 2014.
Tax expense was $0.8 million up on the prior year with higher reported profit levels. The effective tax rate of
27.0% is slightly higher than prior year’s 26.6% with no significant movements in non-deductible items.
Non-Trading Items
Non-trading income was $0.3 million, with the bulk of this arising from gains on disposal of Pizza Hut stores.
Cash Flow & Balance Sheet
The company‘s balance sheet remains conservative with $73.3 million in total equity and gearing levels at
just over 9%.
Total assets of $139.3 million were down slightly on the year end’s $144.6 million, largely because of a
reduction in receivables of $3.4 million mostly arising from receipts of landlord contributions for new and
transformed stores.
Total liabilities of $66.0 million were down $7.4 million on the previous year end, mainly because of reduced
levels of borrowings, although this was partially offset by higher payables with timing of creditor payments.

 Bank debt reduced over the half year from $22.6 million to $8.5 million. Compared with 1H 2015 borrowings
are now classified as non-current following renewal of the company’s $35 million bank facility in October
2014.
Operating cash flows were up strongly by 27% to $30.4 million assisted by both improved profitability and a
decrease in working capital.
Investing cash outflows were down on prior half year with lower levels of capital expenditure (down $5.6
million to $9.1 million). Investing receipts this year were from Pizza Hut store sales of $0.8 million and
landlord contributions for new store developments of $2.8 million. Resultant net cash outflows from investing
activities were $5.5 million, down $5.8 million on the prior period.
With $24.9 million in free cash flow for the half year, debt was reduced by $14.0 million on the year-end
balance to $8.5 million.
Dividend
Directors have declared a fully imputed interim dividend of 8.5 cents per ordinary share (up 1.0 cent or 13.3% on
the prior year). The dividend will be paid on 27 November to all shareholders on the register on 13 November 2015.
A supplementary dividend of 1.5 cents per share will be paid to all overseas shareholders at the same time.
Directors have elected to continue to suspend the dividend reinvestment plan for the time being, but will
review this again prior to the declaration of a final dividend.
Outlook
All four of the company’s brands now have sales and profit momentum that is expected to continue for the
balance of this financial year.
KFC is expected to maintain positive same store sales growth, although not at the levels enjoyed in the first
half year as it rolls over strong prior year results. Input prices are expected to remain stable for the balance
of the year and margins are expected to be sustained.
Pizza Hut is expected to deliver modest same store sales growth; however RBD will see total earnings
impacted by the continued sell down programme.
Starbucks Coffee sales growth is anticipated to continue, although there will be some margin pressure from
the weaker exchange rate.
Carl’s Jr. will see one further store (the first in Christchurch) opened in the second half of the year.
Profitability will improve in the second half with improved operational efficiencies and higher sales volumes.
The strong sales trends enjoyed in the first two quarters of this year have continued into the third quarter,
benefitting margins and efficiencies in our stores. The improved first half profit performance (absent any
major changes to economic or market conditions) is expected to be sustained. This will result in a Net Profit
after Tax for the 2016 financial year (excluding unusual items) in excess of $24 million.

For further information, please contact:
Russel Creedy
CEO
Phone: 525 8700
ENDS

Grant Ellis
CFO/Company Secretary
Phone: 525 8700

 RESTAURANT BRANDS GROUP
Consolidated Income Statement
For the 28 week period ended 14 September 2015 (2016 Half Year)

Group
$NZ000's

(28 weeks)
Unaudited
1st Half 2016
14 September 2015

Sales
KFC
Pizza Hut
Starbucks Coffee
Carl's Jr.
Total sales

153,171
24,543
13,910
18,388
210,012

Other revenue
Total operating revenue

8,392
218,404

Cost of goods sold

vs Prior
%

11.7
(7.3)
5.2
107.9
13.1
31.6
13.7

(178,862)

Gross margin
Distribution expenses
Marketing expenses
General and administration expenses
EBIT before non-trading
Non-trading
EBIT

(13.8)

(28 weeks)
Unaudited
1st Half 2015
8 September 2014

137,107
26,486
13,228
8,846
185,667
6,376
192,043
(157,148)

13.3

34,895

4.5
(11.3)

(1,347)
(9,436)
(7,814)

18,729

14.9

16,298

250

221.4

(206)

18,979

17.9

16,092

39,542
(1,287)
(10,830)
(8,696)

(14.8)

(433)

Net financing expenses

(616)

Net profit before tax

18,363

17.3

15,659

Taxation expense

(4,953)

(18.9)

(4,164)

Total profit after tax (NPAT)

13,410

16.7

11,495

Total NPAT excluding non-trading

13,093

13.8

11,502

(42.3)

% sales

EBITDA before G&A
KFC
Pizza Hut
Starbucks Coffee
Carl's Jr.
Total

Ratios
Net tangible assets per security (net tangible assets divided by number of
shares) in cents
Cost of goods sold are direct costs of operating stores: food, paper, freight, labour and store overheads.
Distribution expenses are costs of distributing product from store.
Marketing expenses are call centre, advertising and local store marketing expenses.
General and administration expenses (G&A) are non-store related overheads.

30,855
2,836
2,193
96
35,980

54.0c

% sales

20.1

17.8

11.6

(13.3)

15.8

6.9

0.5

12.9

17.1

13.8

26,198
3,271
2,052
85
31,606

48.6c

19.1
12.3
15.5
1.0
17.0

 Non-GAAP Financial Measures
For the 28 week period ended 14 September 2015
The Group results are prepared in accordance with New Zealand Generally Accepted Accounting Practice (“GAAP”)
and comply with International Financial Reporting Standards (“ IFRS”). These interim financial statements include
non-GAAP financial measures that are not prepared in accordance with IFRS. The non-GAAP financial measures
used in this presentation are as follows:
1.

EBITDA before G&A. The Group calculates Earnings Before Interest, Tax, Depreciation and
Amortisation (“EBITDA”) before G&A (general and administration expenses) by taking net profit before
taxation and adding back (or deducting) net financing expenses, non-trading items, depreciation,
amortisation and G&A. The Group also refers to this measure as Concept EBITDA before G&A.
The term Concept refers to the Group’s four operating segments comprising KFC, Pizza Hut, Starbucks
Coffee and Carl’s Jr. The term G&A represents non-store related overheads.

2.

EBIT before non-trading. Earnings before interest and taxation (“EBIT”) before non-trading is
calculated by taking net profit before taxation and adding back (or deducting) net financing expenses and
non-trading items.

3.

Non-trading items. Non-trading items represent amounts the Group considers unrelated to the day to
day operational performance of the Group. Excluding non-trading items enables the Group to measure
underlying trends of the business and monitor performance on a consistent basis.

4.

EBIT after non-trading items. The Group calculates EBIT after non-trading items by taking net profit
before taxation and adding back net financing expenses.

5.

Total NPAT excluding non-trading. Total Net Profit After Tax (“NPAT”) excluding non-trading items
is calculated by taking profit after taxation attributable to shareholders and adding back (or deducting)
non-trading items whilst also allowing for any tax impact of those items.

The Group believes that these non-GAAP measures provide useful information to readers to assist in the
understanding of the financial performance and position of the Group but that they should not be viewed in isolation,
nor considered as a substitute for measures reported in accordance with IFRS. Non-GAAP measures as reported by
the Group may not be comparable to similarly titled amounts reported by other companies.
The following is a reconciliation between these non-GAAP measures and net profit after taxation:

Note* 2016 Half Year

2015 Half Year

$NZ000's
EBITDA before G&A
Depreciation
Loss on sale of property, plant and equipment (included in depreciation)
Amortisation (included in cost of sales)
G&A - area managers, general managers and support centre
EBIT before non-trading
Non-trading items **
EBIT after non-trading items
Net financing costs
Net profit before taxation
Income tax expense
Net profit after taxation
(Deduct) / add back non-trading items
Taxation credit on non-trading items
Net profit after taxation excluding non-trading items

1

2
3
4

5

* Refers to the list of non-GAAP measures as listed above.
** Refer to note 1 of the interim financial statements for an analysis of non-trading items.

35,980
(8,984)
(932)
(7,335)
18,729
250
18,979
(616)
18,363
(4,953)
13,410
(250)
(67)
13,093

31,606
(7,800)
(4)
(861)
(6,643)
16,298
(206)
16,092
(433)
15,659
(4,164)
11,495
206
(199)
11,502