The recently acquired 42 Australian KFC businesses bought by fast food operator Restaurant Brands for $89.4 million have underpinned an almost 8 per cent boost to profits.
For its year to February, Restaurant Brands total sales rose 28.3 per cent, or by $109.6m, to $497.2m, earnings before interest and tax rose 15.6 per cent to $39.3m and after tax profit rose 7.8 per cent to $26m for the period.
Following settlement in April last year of the $89.4m Australian KFC acquisition, funded by $63.9m bank debt and a $25.5m share issue, that division contributed sales of $97.2m for the 10 month period.
The next reporting period will see Restaurant Brand's total outlets rise from 212 to 294 with the addition of 82 outlets in Hawaii and Guam, but recent acquistions and longer term plans indicated a further almost 70 outlets, mainly around New Zealand.
A 13.5c per share dividend was set, taking the full year to 23c, up 9.5 per cent on last year's dividend.
Restaurant Brands' shares dropped by 10c to $5.25 following the announcement.
Forsyth Barr broker Damian Foster said Restaurant Brands' normalised profit, up 26 per cent on a year ago at $30.6 million, was in-line with expectations and recent guidance.
"Store earnings before interest, tax, depreciation and amortisation (ebitda) of $86m was up more than 29 per cent, underpinned by the first time contribution from KFC Australia," Foster said.
Restaurant Brands' chief executive Russell Creedy said the New Zealand operations delivered their "best ever overall sales and profit performance" and singled out the strong trading from the KFC Australian business in New South Wales, where it is the largest KFC franchise owner.
Foster said adjusting for store ebitda for the New Zealand business, it was up more than 6 per cent, but marginally below Forsyth Barr's expectations, largely due to a modest pullback in KFC margins in second half trading, he said.
"KFC New Zealand is the key driver of group profit and was down 1 per cent below our expectations."
While Restaurant Brands' had provided first time full-year 2018 guidance for normalised profit "in the vicinity of $40m", Foster said the company was being "typically conservative" at this early stage into the new year.
Restaurant Brand's $40m guidance was below Forsyth Barr's current forecast of $44m and market analysts' consensus at between $43m to $46m.
However, Foster said there were several questions for management, largely around the outlook of margins for both KFC in New Zealand and Australia.