Restaurant Brands annual earnings fall 27% on Chch quakes

BUSINESSDESK: Restaurant Brands, which operates the local Pizza Hut, KFC and Starbucks brands, saw a 27% percent fall in annual profit due to the Christchurch earthquakes and fewer Pizza Hut stores as it offloaded unprofitable outlets.

Net profit fell to $18.4 million in the 12 months ended February 29 from $25.1 million in the same period last year, the Auckland-based company said.

Sales decreased 4.9% to $308.9 million, with the company blaming the impact of the earthquakes and the sell-down of iPizza Hut stores for some $6 million in lost revenue.

“While down on what was a stellar year last year, the underlying performance of the company remains strong,” it said.

“Directors believe current levels of profitability will be maintained in the face of continuing tight trading conditions and soft retail environment through a continued focus on efficiency and cost reductions, together with new marketing initiatives.”

Earlier this month, Restaurant Brands flagged lower annual sales from the closure of quake-damaged stores and the sale of Pizza Hut outlets, though same-store sales were only down 2.5%.

Sales at KFC, traditionally the company’s strongest brand, reached a new high rising 0.2% to $236.3 million, though earnings before interest, tax, depreciation and amortisation dropped 13% to $45.6 million as its margins came under pressure.

Starbucks Coffee suffered more than the other two brands as a result of the quakes, with three of its four Christchurch stores were closed and unlikely to reopen.

That led to a 9.8% decline in sales to $26.5 million, and an 8.8% fall in EBITDA to $3.7 million.

The coffee-house chain also closed two stores, in Newmarket and Botany, during the period due to respective lease ends.

Pizza Hut sales dropped 23% to $45.5 million and EBITDA sank 63% to $2.1 million as 13 stores were sold to independent franchisees.

“The strategy remains to sell stores with smaller sales volumes, particularly in regional areas where an independent franchisee can make a success of the business on a smaller sales base with a more personal approach to running the store,” the company said.

In December, it announced it will roll out a chain of Carl’s Jr. restaurants after striking a deal with US own CKE Restaurants.

The new brand will see three of the four stores opening in the second half of the year.

The board declared a dividend of 9.5 cents per share, up from 4.1 cents apiece a year earlier. That takes the full-year payout to 16 cents per share, down from 17 cents in 2011.

The stock climbed 3.8% to $1.93 in trading today, and has shed 11% this year.