Restaurant Brands New Zealand Limited Analysis

Overview

Restaurant Brands New Zealand Ltd (RBD) is a corporate franchisee that specialises in managing multi-site branded food retail chains. It is based in New Zealand but has operations in Australia and the United States (Hawaii, Guam and Saipan). Its restaurant support centre and corporate office is located in Penrose in Auckland, New Zealand. Restaurant Brands is listed on the New Zealand Stock Exchange under NZX code RBD and on the Australian Securities Exchange under ASX code RBD. As of February 2018, Restaurant Brands operated 314 stores: 94 KFC New Zealand, 61 KFC Australia, 36 Pizza Hut New Zealand, 22 Starbucks Coffee, 19 Carl's Jr., 37 Taco Bell Hawaii and 45 Pizza Hut Hawaii stores. The company employs over 9,000 staff across New Zealand, Australia and Hawaii and serves over 125,000 customers worldwide every day.

RBD was founded in 1997 to acquire the New Zealand restaurant operations of KFC and Pizza Hut. The prospectus issued at the time stated that 'as a listed company with its own dedicated management, board and financial resources, Restaurant Brands will be closer to the New Zealand market and have the potential to better capture growth opportunities, strengthen its competitive position and improve operating performance'. It has now leveraged that capability into the international arena.

Performance

The following information was extracted from Restaurant Brands New Zealand Limited's full year results, released on 26 February 2024:

• Total Group Store sales hit a record high of $1,322 million, an increase of $83 million (6.7%) on FY22, with all four operating divisions showing growth in terms of $NZ.
• Net Profit After Tax (NPAT) was $16.3 million (in the upper range of market guidance), NPAT was down $15.8 million on the prior year due to inflationary pressures on ingredient and wages, and underperformance in California and New Zealand, which were not fully mitigated by revenue growth.
• Cost pressures continue. The implementation of a strategic programme of price increases and cost control measures delivered margin gains in the second half of FY23, and the Group is starting to see steady signs of recovery in margins.
• Group Store EBITDA* for the period was $178.4 million, down 0.9% on the previous year.
• At present, Directors have not deemed it appropriate to declare a dividend payment.

Restaurant Brands New Zealand Limited and its subsidiaries (together the Group) delivered record total store sales of $1,322 million in FY23, an increase of $83 million (6.7%) on FY22. All four regions produced positive sales growth over the year (in terms of $NZ).

Same store sales were also positive in all regions with the exception of California, where consumer spending continues to be adversely impacted by inflation.

Inflation pressures eased in most of the regions in the second half of FY23. Inflation remains elevated and above Central Bank targets, impacting the Group’s margins.

NPAT was $16.3 million (13.04 cents per share). The decreased profit versus FY22 is primarily a result of continuing inflationary pressures, higher financing costs impacting the New Zealand region in the first half of 2023 (1H 2023), and decreased performance in the California business.

Store EBITDA was $178.4 million, down $1.6 million or -0.9% on the prior year. The decrease in Store EBITDA is due to tighter margins in 1H 2023. EBITDA margins (as a % of sales) reduced from 14.5% to 13.5% due to continued cost pressures across all divisions, particularly in 1H 2023.