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Restaurant Brands New Zealand Limited
Restaurant Brands NZ Limited
2017 Full Year Results Presentation
Russel Creedy CEOGrant Ellis CFOTed van Arkel Chairman
20 April 2017
RESTAURANT BRANDS NEW ZEALAND LIMITED
• Highlights
• Results Overview
• New Zealand Operations
- KFC NZ
- Pizza Hut NZ
- Starbucks Coffee NZ
- Carl’s Jr. NZ
• KFC Australia
• Hawaiian Operations
• Opportunities
• Outlook
Presentation Outline
Highlights
Commentary (FY17 vs FY16)
• Group Revenues +28.1%
• NPAT (excluding non-trading) +26.3%
• Reported NPAT (including non-trading) +7.8%
• Brand EBITDA +$19.3m driven by KFC Australia
• Fully imputed 13.5 cps final dividend brings full year to +9.5%
• Hawaiian expansion with acquisition of Pacific Island Restaurants (post balance date)
FY15 FY16 FY17
$372.6m $404.1m $517.5m
$22.5m $24.2m $30.6m
$23.8m $24.1m $26.0m
$61.5m $66.9m $86.2m
19.0cps 21.0cps 23.0cps
- 82 stores
RESULTS OVERVIEW
NPAT excluding non-trading was $30.6 million, up 26.3% on prior year mainly from KFC Australia contribution
$m FY15 FY16 FY17 % Δ 1
Revenue 372.6 404.1 517.5 28.1
Gross Margin 68.4 74.1 95.7 29.1
Distribution (2.3) (2.5) (2.8) (10.3)Marketing (18.9) (20.7) (28.1) (36.1)G&A (15.1) (16.4) (20.4) (23.9)
EBIT 32.1 34.5 44.4 28.7
Non-trading 1.3 (0.5) (5.1) (1,020.1)
Interest (1.0) (1.0) (2.3) (131.2)
NPBT 32.5 33.1 37.1 12.1
Tax (8.6) (9.0) (11.1) (23.6)
NPAT 23.8 24.1 26.0 7.8
NPAT (excl non-trading) 22.5 24.2 30.6 26.3
1 FY17 on FY16
KFC Australia (QSR) added strongly to store sales and margin growth
New Zealand,
387.6
New Zealand,
400.0
Australia, 97.2
FY16 FY17
Sales Contribution ($NZm)
387.6
497.2
New Zealand,
66.9
New Zealand,
71.2
Australia, 15.0
FY16 FY17
EBITDA Contribution ($NZm)
66.9
86.2
G&A costs were up with KFC Australia but better than targeted 4.0% of revenue
15.1 16.4 16.8
3.6
4.1% 4.1%3.9%
FY15 FY16 FY17
G&A
G&A $m NZ G&A $m Australia G&A % of Revenue
20.4
Non-trading items were significantly higher than prior year with acquisition costs
Non-trading items FY16 FY17 Δ$m$m $m B/(W)
Pizza Hut store sales proceeds (1.6) (1.5) (0.1)
Pizza Hut goodwill write off 0.4 0.2 0.2
Pizza Hut Store book value disposal 0.2 0.6 (0.4)
Gain on disposal Pizza Hut (1.0) (0.7) (0.3)
Store closure costs 0.5 1.7 (1.2)
Due diligence and legal costs PIR acquisition - 1.5 (1.5)
Gain on sales and leaseback of stores - (0.4) 0.4
Stamp duty and other QSR acquisition costs 1.0 2.4 (1.4)
QSR franchise rights amortisation - 0.6 (0.6)
0.5 5.1 (4.6)
Operating cash flows continue to grow. Investing cash flows impacted by settlement of QSR acquisition
Cash Flow $m FY15 FY16 FY17
Operating cash flow 36.5 44.3 47.9
Investing cash flow (33.0) (15.3) (79.0)
Free cash flow 3.5 29.0 (31.1)
FY15 FY16 FY17Investing cash outflow (QSR) - - (63.9)
Investing cash outflow (other) (41.4) (20.8) (20.3)
Investing cash inflow 8.4 5.5 5.2
(33.0) (15.3) (79.0)
Borrowings were up following QSR acquisition but distorted by cash holdings of $91 million following capital raising for Hawaii acquisition
Ratios FY15 FY16 FY17
Interest Cover 33x 35x 19x
Net Debt: EBIT 0.7:1 0.3:1 N/A
Gearing (D:D+E) 23% 13% 19%
22.612.7
46.5
FY15 FY16 FY17
Bank Debt $m
FY15 FY16 FY17
Earnings per share (excluding non-trading) cps 23.0 24.7 28.4
Total dividend cps 19.0 21.0 23.0
Payout ratio of NPAT (excluding non-trading) % 83% 85% 81%
Dividend up 9.5% to 23.0 cents commensurate with profitability (fully imputed at 28%)
New Zealand Operations
265.0 282.5
296.5
7.7%6.3%
3.6%
FY15 FY16 FY17
KFC Sales
Total Sales $m Same Store Sales %
48.4 44.9 40.5
6.3% 2.6%3.6%
FY15 FY16 FY17
Pizza Hut Sales
Total Sales $m Same Store Sales %
26.1
26.8
26.7
5.1%
6.9%
4.5%
FY15 FY16 FY17
Starbucks Sales
Total Sales $m Same Store Sales %
20.1 33.4 36.3
-28%-5% -3.8%
FY15 FY16 FY17
Carl's Jr. Sales
Total Sales $m Same Store Sales %
The New Zealand business continued to grow strongly with sales of $400m, led by KFC
50.8 57.2 61.4
19.2%20.2%
20.7%
12.0%
16.0%
20.0%
FY15 FY16 FY17
KFC EBITDA
EBITDA $m EBITDA % of Sales
6.4 4.9 4.1
13.2%
10.9%10.0%
0.0%
4.0%
8.0%
12.0%
16.0%
FY15 FY16 FY17
Pizza Hut EBITDA
EBITDA $m EBITDA % of Sales
4.3 4.4
4.8
16.3% 16.4%
17.8%
12.0%
16.0%
20.0%
FY15 FY16 FY17
Starbucks EBITDA
EBITDA $m EBITDA % of Sales
0.2
0.4
1.0
0.8% 1.3%
2.7%
FY15 FY16 FY17
Carl's Jr. EBITDA
EBITDA $m EBITDA % of Sales
KFC also drove New Zealand earnings growth
New store builds and a solid NPD pipeline key in driving KFC sales
Kumara Hash Brown Double Down
KFC Rolleston
BBQ Bacon with Swiss Cheese and Mustard Mayo
KFC sales knocking on $300m, building over the year; margins remain at upper end of range
• Another year of record sales driven by transformation, successful promotions and increased marketing spend
• EBITDA margin remains above 19-20% range assisted by sales leverage, and stable input costs, but labour and marketing expenditure
3.5%1.4% 2.3%
4.2%7.1%
3.6%
FY16 Q4 FY17 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY
Sam
e St
ore
Sale
s %
KFC - Sales $296.5m
44.5 50.8 57.2 61.4
18.4%19.2%
20.2%20.7%
FY14 FY15 FY16 FY17
KFC EBITDA $61.4m
EBITDA $m EBITDA % of Sales
Pizza Hut sales growth for RBD begins to taper as bigger stores are sold to franchisees but system sales growth remains strong. Margins see some pressure from ingredient cost and labour increases but remain within
historical bands
5.5 6.4
4.9 4.1
11.4%13.2%
10.9% 10.0%
FY14 FY15 FY16 FY17
Pizza Hut EBITDA (RBD stores)
EBITDA $m EBITDA % of Sales
48.4 44.9 40.5
31.9 41.2 51.1
FY15 FY16 FY17
Pizza Hut Total System Sales ($m)
Sales ($m) RBD Owned Stores Sales ($m) IF Owned Stores
91.6 +6.4%86.1
+7.2%80.3 +10.0%
Sales of stores to independent franchisees continues as does new store builds. RBD on track to a concentrated core holding with continued store growth in Pizza Hut network
51 4639 35
25
33 42 50 58 75
FY14 FY15 FY16 FY17 Target
RBD Independents
9389
8884
100
Starbucks Coffee – keeps delivering
5.5%
1.8%4.0%
5.6%6.6%
4.5%
FY16 Q4 FY17 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY
Sam
e St
ore
Sale
s %
Starbucks- Sales $26.7m
3.5 4.3 4.4 4.8
14.0%
16.3% 16.4%17.8%
FY14 FY15 FY16 FY17
Starbucks EBITDA $4.8m
EBITDA $m EBITDA % of Sales
Carl’s Jr. NPD pipeline assisting sales build
Carl’s Jr. continues to grow, but is a “slow burn”
20.1 33.4 36.3
FY15 FY16 FY17
Carl's Jr. Sales
Total Sales $m
-
0.2
0.4
1.0
0.0% 0.8%1.3%
2.7%
-5.0%
10.0%
FY14 FY15 FY16 FY17
Carl's Jr. EBITDA
EBITDA $m EBITDA % of Sales
KFC Australia
The QSR acquisition settled on 27 April 2016. The 42 KFC stores have delivered ahead of plan
97.2
116.6 106.4
FY17 (10 monthsactual)
FY17 (annualised) Year 1 Target
$NZm
QSR – Sales above Target
15.0
18.0 16.0
FY17 (10 monthsactual)
FY17 (annualised) Year 1 Target
$NZm
EBITDA up on target
QSR material growth opportunities already being exploited
Expand restaurant networkA number of locations have been identified which represent ideal and profitable opportunities to increase the restaurant portfolio footprint in existing trade area
Acquire other franchises/portfoliosPotential scope to expand the QSR KFC portfolio footprint in NSW and other states, either through building restaurants in new locations or the acquisition of other franchise portfolios in the KFC network
Potential acquisition of Yum restaurantsYum owns approximately 150 KFC restaurants in Australia and has just put 100 of them on the market
• Two new stores under construction • Five independent store acquired (settled after balance date)
• RBD is actively evaluating the possible purchase of some of these stores
Hawaii Acquisition
Restaurant Brands Hawaii – Progress to date
• Agreement to purchase 100% of shares in Pacific Island Restaurants Inc. (PIR) for $US105 million signed 26 October 2016
• PIR is the sole Taco Bell and Pizza Hut franchisee in Hawaii, Guam and Saipan
• Successful capital raising in November 2016 through Accelerated Renounceable Entitlement Offer (AREO) raised $NZ94 million from mainly existing shareholders
• Transaction was finally settled on 7 March 2017
• Acquired business is expected to deliver $NZ180 million in sales and store EBITDA of $27 million; on target to deliver this to date
OPPORTUNITIES
Growth Opportunities
GROWTH PATH
TRANSFORMATION & STORE REINVESTMENT
(Existing brand and geography)
Running the business better• Strong Operations• Compelling Marketing
To build RBD to a $1 billion company in sales and market capitalisation by growing both top and bottom line
ASSET INVESTMENTORGANIC
Build profitable network growth through asset build or acquisition
BUILD NEW STORES(Existing brand and geography)
ACQUIRE INDIVIDUAL STORES(Existing geography and brand)
ACQUIRE LARGE NUMBERS OF STORES
(Existing brand and geography)
BUILD/ACQUIRE NEW BRAND
• KFC New Zealand• Taco Bell Hawaii• Pizza Hut Hawaii
• INFILL• GREENFIELD
• Pizza Hut New Zealand• KFC New Zealand• Taco Bell Hawaii• KFC Australia
• KFC New Zealand• KFC Australia • KFC Australia • Taco Bell New Zealand
• KFC Hawaii• Taco Bell Australia
OUTLOOK
• KFC NZ – continued positive same store sales growth, margins at upper end of historical range
• Pizza Hut – sell down continues, but strong sales growth from independents and residual company stores
• Starbucks Coffee – positive same store sales continue. Margins remain strong
• Carl’s Jr. – maintain positive SSS with strong margin improvement
• KFC Australia – positive SSS growth with margins in current range
• Hawaii Operations – full year sales and margins to business case expectations
Outlook for FY18 is positive with brand momentum and improving economic environment
Net Profit after Tax, (excluding non-trading) is expected to be in the vicinity of $40 million