Sales of KFC and Pizza Hut remain strong in New Zealand. Photo / NZME
Consumers are under pressure from the cost-of-living crisis but it seems fast-food operator Restaurant Brands is still seeing strong demand for its KFC and Pizza Hut offerings - at least in New Zealand.
The company delivered a first-quarter trading update this week and its New Zealand business was a highlight. Group sales were up 7.9 per cent, driven by strong same store sales with New Zealand up 11 per cent and Hawaii, up 7 per cent.
“All brands across New Zealand have reported positive sales growth, an encouraging sign against a softer consumer backdrop, albeit cycling the impacts of poor weather in the [prior corresponding period],” Jarden analysts Guy Hooper and Nick Yeo noted this week.
But its performance in Australia and California was more lacklustre.
The analysts said the California stores were the biggest concern with same-store sales dropping for eight quarters in a row.
“Compounding California’s woes, the increase in the state minimum wage for fast food workers of +25 per cent to US$20/hour came into effect in April 2024. While a number of fast food brands have put through +3-10 per cent increases to menu prices, we are yet to see how the consumer digests these changes.”
Despite that, they remained relatively upbeat on the stock forecasting a rise in earnings this financial year.
“RBD [Restaurant Brands] is entering an earnings recovery phase. However, the margin recovery story is likely to be a multi-year journey as the company navigates a competitive backdrop and weighs consumer value perception versus possible price increases.”
Restaurant Brands shares were trading around $3.40 yesterday and are down 55 per cent over the year.
Analysts will be closely watching the outlook commentaries of the major bank bosses in the coming days to give clues on where the economy is tracking.
Yesterday National Australia Bank (NAB) - the parent of BNZ - reported its half-year result and Westpac and ANZ are both due to release their financials early next week.
BNZ’s net profit for the six months to March 31 was down 5.3 per cent on the same period last year while its net interest margin shrank from 2.45 per cent to 2.37 per cent.
Its credit impairment charges fell from $79 million to $71m. NAB’s new CEO Andrew Irvine told reporters that Australians were doing it tough and demand for social services was rising.
BNZ chief executive Dan Huggins sounded a similar warning: “High interest rates and cost of living pressures continue to impact business and household finances.
“While easing inflation is encouraging, it is expected to remain outside of the Reserve Bank’s target band until the end of year. Economic conditions are likely to remain challenging until there is a material reduction in interest rates. Supporting our customers through these challenging times remains our top priority.”
Robbie Urquhart, Fisher Funds senior portfolio manager - Australian equities, said he expected the major Australian-owned banks to report a tepid but benign set of numbers.
“Tepid, because it seems that intense competition on both sides of the balance sheet - deposits as well as lending rates - has weighed on the banks domestically from an interest-margin perspective.
“How much this has weighed on net interest margin deterioration will be interesting to note and also whether the intensity of competition is showing signs of abating.”
Urquhart expected the results to be relatively benign, given bad and doubtful debts to date should have been contained - even if they have ticked a bit higher, given some signs of rising stress in the economy.
He said what would be of more interest would be what banks expect to see in terms of bad debts over the next six months.
“This could be a more sombre picture. Consequently, the banks’ outlook commentary is likely to be more instructive for analysts and the market than the backward looking results of the past six months.”
Urquhart said cost inflation had been a feature for the banks too.
“Gauging what kind of expense pressures (and rising labour costs) they’re all facing in NZ will be interesting. The banks likely have had to keep spending up on technology and cyber security.”
Specific to the New Zealand arms, Urquhart said he would be looking for any flow-on impact from lending to the primary sector.
“It hasn’t been easy for farmers generally over the past six months, so we’ll see what that translates into for the local banks from an earnings perspective.
“Then lastly, how the banks themselves compare and contrast with each other on these topics will be instructive - it’s hard to judge ahead of time whether they’ll all show similar trends or whether it’ll vary from one company to another.”
Craigs Investment Partners has seen its bottom line boosted by a $30.78m gain on the sale of the management rights for QuayStreet Asset Management to the NZX.
It sold Quay Street on February 23 last year for a total upfront payment of $31.25m, made up of $22.5m in cash and $8.75m in NZX shares. Accounts filed to the Companies Office show those NZX shares were only worth $7.16m at balance date. The shares are subject to an escrow, which means Craigs can only sell them at an agreed point in time. The accounts did not specify when this was.
After it sold the management rights, Craigs liquidated the company and distributed its assets, resulting in a $21.53m distribution to the company. Two more distributions were made after that, resulting in a further distribution of $9.25m to the company.
The sale of the management rights also includes a potential earn-out of up to $18.75m.
The financial advice firm saw its net profit after tax rise from $25.4m in 2022 to $48.7m in 2023.
But its operating profit wasn’t as healthy last year compared to the prior year, with a fall from $35.7m to $27m. That was driven by lower operating revenue and higher staff and financing costs.
Its income from brokerage fell from $49.3m to $43.6m, while its investment banking fees fell from $170m to $164.4m. Only commissions rose from $18.3m to $19.24m.
The company paid a dividend of $4.28 per share to its investors, totalling $3.42m.
The accounts also reveal Craigs is currently disputing and appealing a US Internal Revenue Service [US tax department] penalty of around US$1m ($1.68m) relating to late filing of 2014 and 2015 withholding tax returns for US source income of foreign persons.
“The group has taken advice on this matter, which indicates that it is likely that any penalties will be abated,” it said in a statement.
Sky TV chair Philip Bowman has made a point about putting his money where his mouth is. Rough calculations by Stock Takes have Bowman spending more than a million dollars buying up shares in the pay-TV operator in the last year alone.
His latest acquisition was on April 30, when he bought up 50,000 shares for $142,000. That followed two tranches of acquisitions in March, another two in November last year and another on April 7 last year. All up, that adds up to around $1.077m.
Bowman has been building up shares in the company since September 2021, when he bought 250,000 for $48,250. He now owns a total of 700,000 shares in Sky TV - around half a per cent of the shares on issue and worth $1.988m at yesterday’s $2.84 share price.
Bowman was appointed independent chair of Sky in September 2019 and previously served on the board of Sky TV UK for 10 years. He also sits on the board of KMD Brands.
Sky TV CEO Sophie Moloney has also been buying up additional shares. Moloney bought 30,000 shares for $84,599 in February and 38,000 in March last year for $96,603. That’s on top of the shares she gets issued as part of its executive remuneration scheme. In total Moloney has 250,361 shares.
Bowman’s buy-up has won plaudits from at least one party. Craigs Investment Partners pointed it out in a note this week.
“We always keep an eye on insider/director buying... always a good sign when those in governance put their money where their mouth is.”
Barclay has been one of New Zealand's most respected deal-makers.