The Restaurant Brands New Zealand Limited (ASX: RBD) share price is one to watch today, after the Kiwi restaurant group reported a 42.9% slump in net profit.
What does Restaurant Brands do?
Restaurant Brands NZ operates the New Zealand outlets of KFC, Pizza Hut and Carl’s Junior. It also operates KFC in Australia and Taco Bell in Hawaii, Guam and Saipan.
The Kiwi company has a market capitalisation of $1.1 billion but has limited liquidity given its tight shareholding.
Why is the Restaurant Brands share price on watch?
The Kiwi restaurant group reported half-year sales down NZ$59.2 million or 13.4% to NZ$383.4 million. Net profit after tax (NPAT) for the 6 months to 30 June 2020 (1H20) fell 42.9% lower to NZ$11.4 million.
That was largely thanks to the coronavirus pandemic restrictions in New Zealand, which forced the closure of many stores.
However, the US business performed well with earnings before interest, tax, depreciation and amortisation (EBITDA) climbing $2.2 million. That was thanks to strong Pizza Hut performance despite ongoing challenges.
Positively, the group reported second-quarter sales in the New Zealand market had largely returned to pre-COVID levels.
KFC and Carl’s Jr were touted as key performers in the New Zealand market while Taco Bell continues to track above expectations.
The group’s Pizza Hut sub-franchising process is continuing despite limited activity during the year.
The Restaurant Brands share price is one to watch after this morning’s result, which saw Australian store EBITDA fall 23.6% to A$11.3 million.
That softer earnings result reflected a lack of dine-in restaurants being open as well as the initial setup costs of operating Taco Bell. The group is looking to open more than 60 stores in Australia and New Zealand over the next 5 years.
In the US, Restaurant Brands saw strong results from its Hawaiian operations including growth in revenue, in-store EBITDA and EBIT in New Zealand dollar terms.
Dividend
The Restaurant Brands share price will be worth watching today after the board decided to not pay an interim dividend. That comes as the company looks to reinvest cash into the business for its extensive Taco Bell rollout.
Acquisitions
Restaurant Brands entered into a conditional agreement to acquire 70 stores in Southern California, USA for US$73 million in December 2019. That deal saw the company acquire 59 KFC stores and 11 combined KFC Taco Bell stores.
The group settled that transaction on 2 September 2020 in New Zealand with the US$80.7 million purchase price fully funded through debt drawdown on existing facilities.
FY21 outlook
The Restaurant Brands share price will be on watch this morning as investors digest the company’s results release.
The company reported sales have bounced back strongly with new store rollouts continuing to process in Australia and New Zealand.
However, Restaurant Brands was unable to provide specific FY21 guidance given the current uncertainty due to COVID-19.
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