Restaurant Brands profit slumps 5 per cent

Fast food operator Restaurant Brands said today its net profit fell by almost five per cent in the first half.

The result was hit by fierce competition in the pizza market and cost pressures -- particularly in labour and freight -- across all businesses.

The company, the subject of a failed takeover bid by CVC Asia Pacific, reported a net profit after tax (npat), and before unusuals, of $5.2 million for the six months to September 12.

That compares with a $5.4 million profit for the same period a year earlier.

Following a $2.9m goodwill writedown of Restaurant Brand's Pizza Hut Victoria investment, reported npat for the first half was just $1.9m.

Total sales for the half year rose 1.7 per cent to $170.6 million. On a same store basis, the increase was just 0.1 per cent.

The company will pay an interim dividend of 4.5 cents per share on November 18.

Restaurant Brands, which operates the Starbucks, KFC and Pizza Hut chains in New Zealand, and Pizza Hut in Victoria, said the first half was a mixed bag.

KFC and Starbucks continued to deliver strong results, with earnings before interest, tax, depreciation and amortisation (ebitda) climbing 5.2 per cent and 21.8 per cent respectively on the same period a year ago.

Pizza Hut New Zealand sales grew by 7.5 per cent, but its ebitda margin declined to 13.9 per cent from 16.4 per cent as a result of cost increases and tough competition from rivals like Hell Pizza and Dominos.

Cheese, freight and labour costs were significantly higher during the period.

In dollar terms Pizza Hut NZ's ebitda declined from $7.6m to $6.9m in the first half.

Pizza Hut Victoria had a disappointing half, with same store sales down 0.9 per cent and a trading loss of $91,000 compared with a $189,000 profit for the same year ago period.

Total sales declined to $15.6m compared with $16.3m, while same store sales declined by 0.9 per cent.

Strong competition and poor promotions for the brand were the main drivers of the lower sales performance, Restaurant Brands said.

The company is looking into a "store rationalisation" programme that will see it sell a number of underperforming or poorly located franchises over the next six months.

Shares in Restaurant Brands last traded yesterday at $1.27.

They have fallen sharply this week since private equity fund CVC Asia Pacific announced on Tuesday it has abandoned takeover plans after failing to secure undertakings from Yum Restaurants International, the franchisor of the KFC and Pizza Hut brands.

CVC Asia had offered $1.65 per share for control of the company.

Restaurant Brands said today it had attracted interest from other parties, but was "not considering any other offers for the company at this stage".

The company expects to post a flat full year result.

- NZPA