restaurant brands nz limited 2017 full year results

Restaurant Brands New Zealand Limited

Restaurant Brands NZ Limited

2017 Full Year Results Presentation

Russel Creedy CEOGrant Ellis CFOTed van Arkel Chairman

20 April 2017

RESTAURANT BRANDS NEW ZEALAND LIMITED

• Highlights

• Results Overview

• New Zealand Operations

- KFC NZ

- Pizza Hut NZ

- Starbucks Coffee NZ

- Carl’s Jr. NZ

• KFC Australia

• Hawaiian Operations

• Opportunities

• Outlook

Presentation Outline

Highlights

Commentary (FY17 vs FY16)

• Group Revenues +28.1%

• NPAT (excluding non-trading) +26.3%

• Reported NPAT (including non-trading) +7.8%

• Brand EBITDA +$19.3m driven by KFC Australia

• Fully imputed 13.5 cps final dividend brings full year to +9.5%

• Hawaiian expansion with acquisition of Pacific Island Restaurants (post balance date)

FY15 FY16 FY17

$372.6m $404.1m $517.5m

$22.5m $24.2m $30.6m

$23.8m $24.1m $26.0m

$61.5m $66.9m $86.2m

19.0cps 21.0cps 23.0cps

- 82 stores

RESULTS OVERVIEW

NPAT excluding non-trading was $30.6 million, up 26.3% on prior year mainly from KFC Australia contribution

$m FY15 FY16 FY17 % Δ 1

Revenue 372.6 404.1 517.5 28.1

Gross Margin 68.4 74.1 95.7 29.1

Distribution (2.3) (2.5) (2.8) (10.3)Marketing (18.9) (20.7) (28.1) (36.1)G&A (15.1) (16.4) (20.4) (23.9)

EBIT 32.1 34.5 44.4 28.7

Non-trading 1.3 (0.5) (5.1) (1,020.1)

Interest (1.0) (1.0) (2.3) (131.2)

NPBT 32.5 33.1 37.1 12.1

Tax (8.6) (9.0) (11.1) (23.6)

NPAT 23.8 24.1 26.0 7.8

NPAT (excl non-trading) 22.5 24.2 30.6 26.3

1 FY17 on FY16

KFC Australia (QSR) added strongly to store sales and margin growth

New Zealand,

387.6

New Zealand,

400.0

Australia, 97.2

FY16 FY17

Sales Contribution ($NZm)

387.6

497.2

New Zealand,

66.9

New Zealand,

71.2

Australia, 15.0

FY16 FY17

EBITDA Contribution ($NZm)

66.9

86.2

G&A costs were up with KFC Australia but better than targeted 4.0% of revenue

15.1 16.4 16.8

3.6

4.1% 4.1%3.9%

FY15 FY16 FY17

G&A

G&A $m NZ G&A $m Australia G&A % of Revenue

20.4

Non-trading items were significantly higher than prior year with acquisition costs

Non-trading items FY16 FY17 Δ$m$m $m B/(W)

Pizza Hut store sales proceeds (1.6) (1.5) (0.1)

Pizza Hut goodwill write off 0.4 0.2 0.2

Pizza Hut Store book value disposal 0.2 0.6 (0.4)

Gain on disposal Pizza Hut (1.0) (0.7) (0.3)

Store closure costs 0.5 1.7 (1.2)

Due diligence and legal costs PIR acquisition - 1.5 (1.5)

Gain on sales and leaseback of stores - (0.4) 0.4

Stamp duty and other QSR acquisition costs 1.0 2.4 (1.4)

QSR franchise rights amortisation - 0.6 (0.6)

0.5 5.1 (4.6)

Operating cash flows continue to grow. Investing cash flows impacted by settlement of QSR acquisition

Cash Flow $m FY15 FY16 FY17

Operating cash flow 36.5 44.3 47.9

Investing cash flow (33.0) (15.3) (79.0)

Free cash flow 3.5 29.0 (31.1)

FY15 FY16 FY17Investing cash outflow (QSR) - - (63.9)

Investing cash outflow (other) (41.4) (20.8) (20.3)

Investing cash inflow 8.4 5.5 5.2

(33.0) (15.3) (79.0)

Borrowings were up following QSR acquisition but distorted by cash holdings of $91 million following capital raising for Hawaii acquisition

Ratios FY15 FY16 FY17

Interest Cover 33x 35x 19x

Net Debt: EBIT 0.7:1 0.3:1 N/A

Gearing (D:D+E) 23% 13% 19%

22.612.7

46.5

FY15 FY16 FY17

Bank Debt $m

FY15 FY16 FY17

Earnings per share (excluding non-trading) cps 23.0 24.7 28.4

Total dividend cps 19.0 21.0 23.0

Payout ratio of NPAT (excluding non-trading) % 83% 85% 81%

Dividend up 9.5% to 23.0 cents commensurate with profitability (fully imputed at 28%)

New Zealand Operations

265.0 282.5

296.5

7.7%6.3%

3.6%

FY15 FY16 FY17

KFC Sales

Total Sales $m Same Store Sales %

48.4 44.9 40.5

6.3% 2.6%3.6%

FY15 FY16 FY17

Pizza Hut Sales

Total Sales $m Same Store Sales %

26.1

26.8

26.7

5.1%

6.9%

4.5%

FY15 FY16 FY17

Starbucks Sales

Total Sales $m Same Store Sales %

20.1 33.4 36.3

-28%-5% -3.8%

FY15 FY16 FY17

Carl's Jr. Sales

Total Sales $m Same Store Sales %

The New Zealand business continued to grow strongly with sales of $400m, led by KFC

50.8 57.2 61.4

19.2%20.2%

20.7%

12.0%

16.0%

20.0%

FY15 FY16 FY17

KFC EBITDA

EBITDA $m EBITDA % of Sales

6.4 4.9 4.1

13.2%

10.9%10.0%

0.0%

4.0%

8.0%

12.0%

16.0%

FY15 FY16 FY17

Pizza Hut EBITDA

EBITDA $m EBITDA % of Sales

4.3 4.4

4.8

16.3% 16.4%

17.8%

12.0%

16.0%

20.0%

FY15 FY16 FY17

Starbucks EBITDA

EBITDA $m EBITDA % of Sales

0.2

0.4

1.0

0.8% 1.3%

2.7%

FY15 FY16 FY17

Carl's Jr. EBITDA

EBITDA $m EBITDA % of Sales

KFC also drove New Zealand earnings growth

New store builds and a solid NPD pipeline key in driving KFC sales

Kumara Hash Brown Double Down

KFC Rolleston

BBQ Bacon with Swiss Cheese and Mustard Mayo

KFC sales knocking on $300m, building over the year; margins remain at upper end of range

• Another year of record sales driven by transformation, successful promotions and increased marketing spend

• EBITDA margin remains above 19-20% range assisted by sales leverage, and stable input costs, but labour and marketing expenditure

3.5%1.4% 2.3%

4.2%7.1%

3.6%

FY16 Q4 FY17 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY

Sam

e St

ore

Sale

s %

KFC - Sales $296.5m

44.5 50.8 57.2 61.4

18.4%19.2%

20.2%20.7%

FY14 FY15 FY16 FY17

KFC EBITDA $61.4m

EBITDA $m EBITDA % of Sales

Pizza Hut sales growth for RBD begins to taper as bigger stores are sold to franchisees but system sales growth remains strong. Margins see some pressure from ingredient cost and labour increases but remain within

historical bands

5.5 6.4

4.9 4.1

11.4%13.2%

10.9% 10.0%

FY14 FY15 FY16 FY17

Pizza Hut EBITDA (RBD stores)

EBITDA $m EBITDA % of Sales

48.4 44.9 40.5

31.9 41.2 51.1

FY15 FY16 FY17

Pizza Hut Total System Sales ($m)

Sales ($m) RBD Owned Stores Sales ($m) IF Owned Stores

91.6 +6.4%86.1

+7.2%80.3 +10.0%

Sales of stores to independent franchisees continues as does new store builds. RBD on track to a concentrated core holding with continued store growth in Pizza Hut network

51 4639 35

25

33 42 50 58 75

FY14 FY15 FY16 FY17 Target

RBD Independents

9389

8884

100

Starbucks Coffee – keeps delivering

5.5%

1.8%4.0%

5.6%6.6%

4.5%

FY16 Q4 FY17 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 FY

Sam

e St

ore

Sale

s %

Starbucks- Sales $26.7m

3.5 4.3 4.4 4.8

14.0%

16.3% 16.4%17.8%

FY14 FY15 FY16 FY17

Starbucks EBITDA $4.8m

EBITDA $m EBITDA % of Sales

Carl’s Jr. NPD pipeline assisting sales build

Carl’s Jr. continues to grow, but is a “slow burn”

20.1 33.4 36.3

FY15 FY16 FY17

Carl's Jr. Sales

Total Sales $m

-

0.2

0.4

1.0

0.0% 0.8%1.3%

2.7%

-5.0%

10.0%

FY14 FY15 FY16 FY17

Carl's Jr. EBITDA

EBITDA $m EBITDA % of Sales

KFC Australia

The QSR acquisition settled on 27 April 2016. The 42 KFC stores have delivered ahead of plan

97.2

116.6 106.4

FY17 (10 monthsactual)

FY17 (annualised) Year 1 Target

$NZm

QSR – Sales above Target

15.0

18.0 16.0

FY17 (10 monthsactual)

FY17 (annualised) Year 1 Target

$NZm

EBITDA up on target

QSR material growth opportunities already being exploited

Expand restaurant networkA number of locations have been identified which represent ideal and profitable opportunities to increase the restaurant portfolio footprint in existing trade area

Acquire other franchises/portfoliosPotential scope to expand the QSR KFC portfolio footprint in NSW and other states, either through building restaurants in new locations or the acquisition of other franchise portfolios in the KFC network

Potential acquisition of Yum restaurantsYum owns approximately 150 KFC restaurants in Australia and has just put 100 of them on the market

• Two new stores under construction • Five independent store acquired (settled after balance date)

• RBD is actively evaluating the possible purchase of some of these stores

Hawaii Acquisition

Restaurant Brands Hawaii – Progress to date

• Agreement to purchase 100% of shares in Pacific Island Restaurants Inc. (PIR) for $US105 million signed 26 October 2016

• PIR is the sole Taco Bell and Pizza Hut franchisee in Hawaii, Guam and Saipan

• Successful capital raising in November 2016 through Accelerated Renounceable Entitlement Offer (AREO) raised $NZ94 million from mainly existing shareholders

• Transaction was finally settled on 7 March 2017

• Acquired business is expected to deliver $NZ180 million in sales and store EBITDA of $27 million; on target to deliver this to date

OPPORTUNITIES

Growth Opportunities

GROWTH PATH

TRANSFORMATION & STORE REINVESTMENT

(Existing brand and geography)

Running the business better• Strong Operations• Compelling Marketing

To build RBD to a $1 billion company in sales and market capitalisation by growing both top and bottom line

ASSET INVESTMENTORGANIC

Build profitable network growth through asset build or acquisition

BUILD NEW STORES(Existing brand and geography)

ACQUIRE INDIVIDUAL STORES(Existing geography and brand)

ACQUIRE LARGE NUMBERS OF STORES

(Existing brand and geography)

BUILD/ACQUIRE NEW BRAND

• KFC New Zealand• Taco Bell Hawaii• Pizza Hut Hawaii

• INFILL• GREENFIELD

• Pizza Hut New Zealand• KFC New Zealand• Taco Bell Hawaii• KFC Australia

• KFC New Zealand• KFC Australia • KFC Australia • Taco Bell New Zealand

• KFC Hawaii• Taco Bell Australia

OUTLOOK

• KFC NZ – continued positive same store sales growth, margins at upper end of historical range

• Pizza Hut – sell down continues, but strong sales growth from independents and residual company stores

• Starbucks Coffee – positive same store sales continue. Margins remain strong

• Carl’s Jr. – maintain positive SSS with strong margin improvement

• KFC Australia – positive SSS growth with margins in current range

• Hawaii Operations – full year sales and margins to business case expectations

Outlook for FY18 is positive with brand momentum and improving economic environment

Net Profit after Tax, (excluding non-trading) is expected to be in the vicinity of $40 million