14 April 2016
NZX
RESTAURANT BRANDS’ 2016 ANNUAL RESULT
2016

2015

(52 weeks)

(53 weeks)

Change
%

Total Group Store Sales

$m
387.6

$m
359.5

+7.8%

Group Net Profit after Tax

24.1

23.8

+1.0%

Dividend (cps)

21.0

19.0

+10.5%

Key points

•

Group Net Profit after Tax was $24.1 million (24.6 cents per share), up $0.2 million (+1.0%), on prior
year. Net Profit after Tax (excluding non-trading items) was $24.2 million (24.7 cents per share), up
7.5% on prior year.

•

On a like-for-like basis, adjusting for the impact of the 52 vs 53 week comparison and the LTI scheme,
Net Profit After Tax (excluding non-trading items) was up $2.8 million or 12.6%.

•

Total Group Store Sales were $387.6 million, up $28.0 million (+7.8%) on prior year with continued
strong growth from KFC and the impact of acquisitions in the Carl’s Jr. brand.

•

KFC continued to dominate performance with sales continuing to grow to a new high of $282.5 million.

•

Total store EBITDA of $66.9 million was up $5.4 million (+8.7%) on the prior year, again driven by a
very strong performance by KFC.

•

Operating cash flows were $44.3 million, up $7.8 million and debt was reduced to $12.7 million

•

After balance date the company entered into an agreement to acquire QSR Pty Limited, the largest
KFC franchisee in New South Wales Australia. The acquisition will result in an additional $A100 million
in annual revenues and $A15 million in store EBITDA.

•

A final fully imputed dividend of 12.5 cents per share will be paid on 24 June, making a full year dividend
of 21.0 cents (up 10.5% on the previous year).

Note: Results for the 2015/16 financial year are on a 52 week basis vs 53 weeks for the previous year. Because the company
normally reports on a 52 week (364 day) year, a “leap” year is occasionally required; hence the extra week last year. Unless
otherwise stated, all comparative data (with the exception of same store sales) is presented on the basis of a 52 week to 53 week
comparison.

Group Operating Results
Restaurant Brands Net Profit after Tax for the 52 weeks to 29 February 2016 (FY16) was $24.1 million (24.6
cents per share), up 1.0% on last year’s profit of $23.8 million (24.3 cents per share).
Net Profit after Tax (excluding non-trading items) was $24.2 million (24.7 cps), up 7.5% on the $22.5 million
(23.0 cps) result in FY15.
Non-trading costs were $0.5 million for the year (compared with $1.3 million in non-trading gains for FY15).
Total store sales of $387.6 million were up $28.1 million (+7.8%) on the previous year’s sales. Adjusted for the
extra trading week in the prior year, the real increase was closer to $34.9 million or +9.9%. KFC and Carl’s Jr.

 drove most of the growth with Pizza Hut showing a small decline in sales because of the sale of company
stores. Same store sales for the group were up 5.3% (up 5.7% in FY15).
Group revenues for the year were $404.1 million with the inclusion of sales of ingredients and packaging
materials to independent franchisees. This was up 26.4% on prior year with higher volumes and an increased
number of independent franchisees.
Store EBITDA (before G&A costs) was up by $5.4 million (+8.7%) to $66.9 million, with KFC contributing $6.4
million of the improved earnings.
Year end store numbers at 173 were eight down on February 2015 with continuing sales of regional Pizza Hut
stores to independent franchisees and the closure of one Pizza Hut and one Starbucks Coffee store at lease
end.
KFC
2016
$m

2015
$m

Change
$m

Change
%

Sales

282.5

265.0

+17.5

+6.6%

EBITDA

57.2

50.8

+6.4

+12.6%

20.2%

19.2%

-

+1.0%

EBITDA as % of Sales

KFC enjoyed another year of strong sales and margin growth, achieving another record annual sales of $282.5
million, an increase of $17.5 million or +6.6% on the prior year. Adjusting for the extra week’s trading last year,
sales growth was +8.6%.
Same store sales started very strongly with the first half delivering same store sales growth of +8.8% and
finishing the full year at +6.3% (compared with +7.7% last year).
The strong sales continue to be driven by the store transformation program, increased marketing spend and
successful promotions.
Margins continued to improve with an EBITDA of $57.2 million, another new record for the brand. This
represents an increase of $6.4 million or +12.6% on FY15. As a percentage of sales, brand EBITDA improved
from 19.2% in FY15 to 20.2% this year.
Store transformations continued with four more major transformations being undertaken, together with 14
minor upgrades. The major transformation process is now nearly complete with 86 out of the company’s 91
stores now either new or fully transformed. A further 2-3 are scheduled for transformation in the new financial
year.
Store numbers remained at 91 with the opening of a new store at Albany and the closure of an underperforming
store in Kaikohe.
Pizza Hut

Sales
EBITDA
EBITDA as % of Sales

2016
$m

2015
$m

Change
$m

Change
%

44.9

48.4

-3.5

-7.2%

4.9

6.4

-1.5

-23.0%

10.9%

13.2%

-

-2.3%

Total sales of stores operated by Restaurant Brands were down 7.2% over the year to $44.9 million, due to
lower store numbers as the company sold a further six stores to independent franchisees and closed its Red
Roof dine–in store in Rotorua.
Same store sales for company stores grew 2.6% over the year with particularly strong sales growth in the
fourth quarter - increasing by 8.8% with the benefit of the launch of a new mobile-friendly Pizza Hut website
and a revised menu.

 Earnings from company stores were adversely impacted by both sales of profitable stores to independent
franchisees and some increases in labour and ingredient costs. EBITDA for the year was $4.9 million, down
$1.5 million on FY15. This represented 10.9% of sales vs 13.2% last year, but still within the company’s
expected margin range.
By year end Restaurant Brands still retained a total of 39 stores and independent franchisees had 50 stores.
Sales from the 89 store Pizza Hut network increased by 7.2% on the equivalent period.
Demand from independent franchisees remains strong for both purchases of Restaurant Brands’ stores and
new store construction in green fields locations.
Starbucks Coffee

Sales
EBITDA
EBITDA as % of Sales

2016
$m

2015
$m

Change
$m

Change
%

26.8

26.1

+0.7

+2.9%

4.4

4.3

+0.2

+3.7%

16.4%

16.3%

-

+0.1%

As the company’s smallest brand, Starbucks Coffee continues to make a reliable and sustainable contribution
to the overall group result.
Sales enjoyed a solid total increase of +2.9% and same store growth of +6.9% to total $26.8 million for the
year. Same stores sales growth remains very consistent for this brand, delivering +5.1% in FY15 and +5.7%
for FY14.
Despite some weakening of the NZD/USD exchange rate, increased volumes and continuing operating
efficiencies delivered a further increase in earnings to a new high of $4.4 million (16.4% of sales).
Store numbers reduced to 25 with the closure at lease end of the Courtenay Place store in Wellington. Two of
the brand’s South Island stores in Riccarton and Queenstown received major upgrades over the year.
Carl’s Jr.
2016
$m

2015
$m

Change
$m

Change
%

Sales

33.4

20.1

+13.3

+66.3%

EBITDA

0.4

0.2

+0.3

+186.9%

1.3%

0.8%

-

+0.5%

EBITDA as % of Sales

The newest brand in the Restaurant Brands stable continued to make progress.
Sales were up 66.3% to $33.4 million, with the full year impact of the stores acquired from Forsgren NZ Limited
in FY15 and last year’s new store openings. Same store sales for the brand were -5.1% with continued rollover
of last year’s openings.
Carl’s Jr. introduced the 1/3 pound and the 1/2 pound burger options in the New Zealand market during the
year as part of a refresh of the menu.
High beef prices together with the residual effects of the US West Coast port strike, some labour inefficiencies
and a conscious strategy to accelerate advertising expenditure to try and build brand presence all adversely
impacted margins over the year. The Carl’s Jr. brand produced an EBITDA of $0.4 million (1.3% of sales).
The Company has introduced a number of initiatives to improve margins and a more robust profit result is
forecast for FY17.
Store numbers remained constant at 18 as store rollouts slowed pending a return to more solid profitability.
One new store incorporating a trial of the new Carl’s Jr. livery opened in Christchurch in the first month of the
new financial year with a second one scheduled to open at the end of April.

 Corporate and Other Costs
G&A (above store overheads) at $16.4 million were $1.3 million (8.8%) up on prior year. Most of this increase
arose from taking up a $1.2 million pre-tax charge (FY15 $0.3 million) to recognise the Company’s total liability
under the Chief Executive’s Long Term Incentive Scheme.
Group non-trading items were a net loss of -$0.5 million for the year. This comprised gains on the disposal of
Pizza Hut stores of +$1.0m, store closure costs of -$0.5m, and legal and due diligence costs arising from the
proposed acquisition of QSR Pty Limited of -$1.0m. Group non-trading items in FY15 were a gain of +$1.3m.
Depreciation charges at $16.8 million were up $1.7 million on the prior year, largely as a result of a full year of
depreciation of Carl’s Jr. new stores and the purchased Forsgren stores (an additional $1.2 million). Reduced
depreciation charges in Pizza Hut from store disposals amounted to $0.2 million and the KFC depreciation
charge at $11.3 million was $0.8 million up on prior year due to recent store transformations.
Interest and funding costs at $1.0 million were flat to prior year. Bank interest rates (inclusive of margins) for
the year averaged 4.8% compared with 5.1% in FY15.
Cash Flow and Balance Sheet
The company continues to enjoy strong cash flow with operating cash flows of $44.3 million for the year, up
$7.8 million on prior year. Whilst some of this was attributable to favourable working capital movements, it
continues to reinforce the strong financial dynamics of the business.
Net investing cash outflows were down significantly on prior year to $15.3 million from $33.0 million in FY15.
The FY15 numbers were inflated by the purchase of two independent KFC franchisees and the acquisition of
the Carl’s Jr. business from Forsgren NZ Limited (for $10.4 million).
Resultant free cash flows were $29.0 million, well up on $3.4 million for the FY15 year. With dividend payments
taking $19.6 million (vs $17.1 million in FY15), the company paid down bank debt by $9.9 million. Resulting
borrowings reduced to $12.7 million at year end from $22.6 million last year.
Total assets at year end were $139.8 million, slightly down on last year’s $144.6 million. Non-current assets
were up $0.9 million to $127.2 million whilst current assets were down $5.7 million to $12.6 million (lower
receivables and bulk inventory levels).
Total liabilities were down by $9.2 million to $64.2 million with the bulk of the reduction arising from lower levels
of borrowings (down to $12.7 million).
Year-end shareholders’ funds of $75.6 million were $4.4 million up on prior year because of increases in
retained earnings.
The balance sheet remains conservative with a gearing ratio of 13% (FY15: 23%).
Dividend
Directors have declared a final fully imputed dividend of 12.5 cents per share. This, together with the interim
dividend of 8.5 cents per share, makes a full year dividend of 21.0 cents per share (up 2.0 cents on FY15).
Restaurant Brands continues to enjoy strong cash flows and dividend levels will continue to increase as the
company continues to enhance its profit performance.
The final dividend of 12.5 cents per ordinary share will be payable on 24 June 2016 to all shareholders on the
register on 10 June 2016. A supplementary dividend of 2.2060 cents per share be paid to all overseas
shareholders at the same time.
The dividend re-investment plan remains suspended for this dividend.
Australian Acquisition
On 3 March 2016, Restaurant Brands entered into a conditional agreement to purchase 100% of the shares
in QSR Pty Limited (QSR). The transaction (which is expected to be completed in the first quarter of the new
financial year) was for a consideration of $A82.4 million. QSR is the largest KFC franchisee in New South

 Wales, Australia. It operates 42 stores in Sydney and rural New South Wales. The transaction is subject to a
number of conditions including approval of the franchisor, Yum! Restaurants International and is expected to
be settled within the month.
The transaction will be partially settled by the issue of 5 million Restaurant Brands shares (at a set price of
$4.16) with the balance in bank debt. Following completion the company is expected to have borrowing levels
of approximately $NZ82 million.
The acquisition is seen by the company as a strategic move into the Australian market buying a well-run
profitable company which will provide a sound base for future expansion opportunities. The acquired business
generates in excess of $A100 million in turnover and $A15 million in store EBITDA and will bring Restaurant
Brands’ total annual revenues to in excess of $NZ500 million.
As part of the transaction, Mr Stephen Copulos, the current owner of QSR Pty Limited will be invited to join the
board of Restaurant Brands.
Outlook
Whilst the reported profit for the year at $24.1 million was only 1.0% up on prior year, the underlying result was
considerably higher after taking into account the impact of the cost of the Long Term Incentive Scheme ($0.9
million after tax) and the due diligence and legal costs of the QSR acquisition ($1.0 million after tax).
The new financial year has seen a continuation of the trading performance of the last quarter of the FY16 year.
KFC will see a tapering off of investment in store transformation as the brand reaches its target of having all
91 stores at the new high standard. This, together with a strong promotional calendar and continued levels of
marketing expenditure will see continued same store sales growth for the coming year and margins will be
maintained at similar levels.
Pizza Hut is expected to deliver same store sales growth in both its company stores and across the network
of independent franchisees. The store sell down programme and construction of new independent franchisee
stores will see company stores at close to 30% of a 90 store network by year end. The residual stores will
continue to remain profitable and royalty and services income from independent franchisee stores will grow.
Starbucks Coffee will continue to enjoy stable same store sales. Margins will remain solid, but there will be
some pressure from ingredient costs with exchange rate movements.
The Carl’s Jr. business in the new year will see the benefits of the appointment of a new General Manager, a
heightened focus on store labour and ingredient costs, some menu rationalisation and the opening of new
stores to assist in building critical mass all of which will help to improve both sales and margin.
The new Australian acquisition is expected to contribute to increased profitability from late in the first quarter,
but there will be some further one off transaction costs in settling the transaction.
Absent any significant changes in the economic and competitive environment or unusual costs, with both an
improved domestic performance and the contribution from the QSR business in Australia from the end of the
first quarter, directors expect that the company will deliver a profit result in the new financial year of $28-30
million. More details will be provided at the Annual Shareholders’ Meeting.
Annual Shareholders' Meeting
The Annual Shareholders' Meeting for the company will be held in Auckland on 22 July 2016.

For further information please contact:
Russel Creedy
CEO
Phone: 525 8710

ENDS

Grant Ellis
CFO/Company Secretary
Phone: 525 8710

 About Restaurant Brands:
Restaurant Brands New Zealand Limited operates the New Zealand outlets of KFC, Pizza Hut, Carl’s Jr. and
Starbucks Coffee. These brands - four of the world's most famous - are distinguished for their product, look,
style and ambience, service and for the total experience they deliver to their customers in New Zealand and
around the world.

 RESTAURANT BRANDS GROUP
Consolidated Income Statement
For the 52 week period ended 29 February 2016
29 February 2016
52 weeks

vs Prior
%

2 March 2015
53 weeks

$NZ000's

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

282,531
44,871
26,811
33,351
387,564

Other revenue
Total operating revenue

16,531
404,095

26.4
8.5

13,075
372,603

(329,983)

(8.5)

(304,190)

74,112

8.3

68,413

(2,505)
(20,654)
(16,434)

(7.9)
(9.3)
(8.8)

(2,321)
(18,892)
(15,105)

34,519

7.6

32,095

(134.0)

1,328

34,067

1.9

33,423

(991)

(3.1)

(961)

Net profit before taxation

33,076

1.9

32,462

Taxation expense

(9,006)

(4.3)

(8,632)

Total profit after taxation (NPAT)

24,070

1.0

23,830

Total NPAT excluding non-trading

24,207

7.5

22,523

Cost of goods sold
Gross margin
Distribution expenses
Marketing expenses
General and administration expenses*
EBIT before non-trading
Non-trading
EBIT
Interest expense

6.6
(7.2)
2.9
66.3
7.8

(452)

265,038
48,364
26,067
20,059
359,528

% 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

57,150
4,902
4,409
439
66,900

56.3c

% sales

20.2

12.6

10.9

(23.0)

16.4

3.7

1.3

186.9

17.3

8.7

50,777
6,365
4,253
153
61,548

19.2
13.2
16.3
0.8
17.1

51.2c

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.
*Included in general and administration expenses is a $1.2 million charge (2015: $0.3 million) relating to the long term incentive scheme ("LTI Scheme") the Group entered into
with the Chief Executive Officer. Refer to Note 19 of the financial statements for further details.

 Restaurant Brands Group
Non-GAAP Financial Measures
For the 52 week period ended 29 February 2016
The Group results are prepared in accordance with New Zealand Generally Accepted Accounting Practice (“GAAP”)
and comply with International Financial Reporting Standards (“IFRS”). These 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 Taxation (“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.

6.

Capital expenditure including intangibles. Capital expenditure including intangibles represents additions to
property, plant and equipment and intangible assets.

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*

29 February 2016

2 March 2015

$NZ000's
EBITDA before G&A
Depreciation
Loss on sale of property, plant and equipment (included in depreciation)
Amortisation (included in cost of sales)
General and administration - 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
Add back / (deduct) non-trading items
Income tax on non-trading items
Net profit after taxation excluding non-trading items
* Refers to the list of non-GAAP measures as listed above.
** Refer to Note 2 of the financial statements for an
analysis of non-trading items

1

2
3
4

5

66,900
(16,512)
(243)
(1,797)
(13,829)
34,519
(452)
34,067
(991)
33,076
(9,006)
24,070
452
(315)
24,207

61,548
(15,008)
(1,628)
(12,817)
32,095
1,328
33,423
(961)
32,462
(8,632)
23,830
(1,328)
21
22,523