Restaurant Brands net profit could curry favour with investors

1.00pm

Fast food firm Restaurant Brands (RB) today posted a $8.1 million net profit for the February year, a result brokers say could curry favour with investors.

Despite being in line with expectations, RB's full-year net profit was 27 per cent down on the previous same period.

Chief executive Vicki Salmon said the $3 million profit fall was despite a 2 per cent increase in sales to $304.6 million.

RB -- which operates the KFC, Pizza Hut and Starbucks brands -- posted a full year dividend of 10 cents per share, consistent with the previous four years.

"KFC sales and margin performance was disappointing during the middle of the year and was the major contributor to the lower profit result for the company," she said.

Macquarie Equities investment director Arthur Lim said the market had responded favourably to the company's result.

At 11.30am, RB shares were up five cents at $1.27, having traded between $1.02 and $1.50 in the past year.

"The key for... investors is the ability (of RB) to maintain a high dividend yield and from what we can read it (the dividend) is not at risk and that would tend to bring back some support in the stock," Mr Lim said.

"The market's starting to anticipate that things may not be that bad," he told NZPA today, noting investors would be attracted by the consistent dividend yield.

KFC's ebitda (earnings before interest, tax, depreciation and amortisation) fell 15.5 per cent to $25.6 million on sales of $171.1 million.

Sales at Pizza Hut New Zealand lifted 7.4 per cent to $81.3 million with a corresponding ebitda increase of 9.7 per cent to $12.3 million.

Starbucks Coffee saw a return to positive same store sales growth in the fourth quarter with total sales of $23.1 million, up 1.1 per cent versus the prior year. Its ebitda rose 15.7 per cent to $3.0 million.

The company said that its Pizza Hut operation in Victoria had nearly completed its store transformation programme.

"Despite this disruption, the business achieved higher sales of $29.1 million (18.9 per cent up on prior year) and improved its margin performance at store level."

ABN Amro Craigs broker Matt Willis said RB's net profit was marginally below the expected $8.3 million.

"I think Restaurant Brands has been falling out of favour for some time, and the only redeeming feature is the good dividend yield," he told NZPA today.

The increasingly competitive fast food industry meant there was a risk of earnings volatility, Mr Willis said.

"If the market can get a feel that, even though growth might be restricted a little bit, they (RB) can service a dividend yield of around 10 cents per share then it's still attractive.

"That should, if nothing else, give the share price some support."

- NZPA