Fast food revamp lifts profit 70pc

Expanded menus at KFC and Pizza Hut have helped push up full-year profits at Restaurant Brands 70 per cent to $19.9 million.

Its share price closed yesterday at $2.10, the highest in eight years.

The company is forecasting a further improvement during the current 12 months to between $22 million and $23 million. Total revenues for the year to February 28 rose 2.8 per cent to $318.3 million, while same-store sales were up 6.8 per cent.

A final full-year fully imputed dividend of 8c a share is to be paid, making a full-year dividend of 12.5c, up 5.5c on the previous year.

The 85-store KFC chain contributes well over two-thirds of revenue and its sales grew 5.5 per cent to $223.2 million during the year.

Restaurant Brands' chief executive, Russel Creedy, said growth was attributable in roughly equal parts to the recession forcing people to look for more affordable dining options, the progressive revamp of stores and expanded menus. KFC has introduced a wider range of burgers and wraps and new iced smoothie-type drinks Krushers, heavily promoted around the TV show Glee, had helped attract new customers.

"They're addressing a new market, they are very much youth associated."

The company was investigating following other countries in introducing grilled chicken to the menu.

While most of the improvement came from KFC, both the Pizza Hut and Starbucks Coffee businesses recorded improved profitability.

Pizza Hut had suffered from increased competition for the previous two to three years but had begun to return to profitability. Sales of $64.2 million were down 0.7 per cent, with two fewer stores, but same-store sales lifted 3.9 per cent, the first time Pizza Hut had a rise in same-store sales since 2002-03. Two stores had closed during the year, reducing the total to 91.

Earnings before interest, taxation, depreciation and amortisation at Pizza Hut rose 95 per cent to $5.4 million.

Revenues at the 41-store Starbucks Coffee chain fell 7.6 per cent to $30.5 million, with sales down 2.9 per cent on a same-store basis. Despite the sales result, Starbucks lifted ebitda 9.6 per cent to $3.2 million, helped by a more favourable exchange rate, better in-store controls, and some product rationalisation.

Forsyth Barr analyst Guy Hallwright said the impact of the recession was hard to judge.

"Maybe it has benefited from an affordable place to feed the family in tough times but we'll only ever know when things get better," he said.

"They do seem to be doing a lot of things right. A lot of it has been digging into the business, it had been a bit loose in the past."