Winner 69 does that mean that their fall has been only 8.5% if this is the case they would have increased their market share but still going down gurgler
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Winner 69 does that mean that their fall has been only 8.5% if this is the case they would have increased their market share but still going down gurgler
Your post is suggesting the same scenario as some beggar saying in Zimbabwe, i am richer than Bill Gates. I just made $100b in one day.
Snoppy. At what point will you say that "Snoppy was wrong"?
I know you love stocks that pay divies but at what price? Unless someone buys out RBD how can this stock go any other way?
NITA, I take it my mate SNOOPY is on holiday in Australia so i will answer for him. Snoopy will never say he is wrong and sell out. He buys more of the same to average down giving him a cheaper average entry price. he accumulates to his losses each time he gets it wrong.
I had some young visitors last friday so told them it was take aways for dinner. I thought out of morbid curiousity to get them KFC just to test their reaction. They all wanted Macdonalds but i told them KFC was better.
The general opinion was that it was YUCK.
I myself thought it was putrid even although i liked the coldslaw and finished up only eating that and the mashed potatoes. The chicken tasted like boiled crow the young visitors made me promise never to go there again. Macdunk
Had KFC for the first time the other day - the chicken was rubbish. Tried Pizza Hut with the rugby the other weekend - thick base with no topping. I will stick to Spagalimis Pizza.
What I find significant with the massive closure of Australian Starbucks is that the incredibly strong Aussie dollar would surely be a beacon of good news to a weak US Dollar based Starbucks....assuming any money was being made?
Historically, global US based companies like McDonalds and Coca-Cola(and I would have thought Starbucks) have been investment havens for a weakening US Dollar and weakening US economy as they all have incredibly strong, vibrant, and growing foreign(Non-US) markets.
Australia is about as insulated as you can get globally from the various economic and financial woes the globe is facing with its immense commodity wealth and diversified economic base.......if Starbucks is pulling the pin the level of my confusion in attemtping to understand what is going on has sunk to an even darker shade of opaque :)
YOU cant compare USA, AUS to NZ mainly by size, So whats wrong in Oz coffee cafes are rare
and the population don't go to these places because its to dam Hot but they are in the mid city locations with 80 odd for AUS you would not see them and shutting 61 is a wipe out leaving about 7 in each capital but the one at Sydney Airport dose a roaring trade.
Rents in AU you cant believe so it is NO surprise to see them GO.
NZ they may trim but will not shut DOWN..
Dr Who to best of my knowledge Starbucks are company owned (Yum Brands) in Australia and NZ is a franchise & Yum Brands gets an income even if RBD is going down the tubes
RBD should buyout Nandos and grow it nationwide. Nandos chickens are the best. BBQ chicken with yummy hot mexican sauce.
The strategy should be to sell off Pissa Hut and Stardust. Buy Nandos so they can have a monopoly on the chicken market. KFC is lower end and Nandos mid level market.
At the moment the only winner RBD have in their stable is KFC. Both Pissa Hut and Stardust are dogs.
I investigated the Nandos model long before it came to NZ. I concluded that it would be too difficult to build a critical mass in NZ due to the price. Maybe Auckland and Wellington, but elsewhere, forget it.
They have found a way around the pricing though, at the Tauranga (Bayfair) Nandos they leave a choice off the menu in the combo's i.e they are shorting their customers without the customers actually knowing it.
KFC is a winner, especially in these tough times when a family can buy a bucket of chicken for less than a bottle of milk, plus bread and a block of cheese.
Correct Possum, bar one small detail. The parent company (master franchise holder) for Starbucks is actually called Starbucks and they are based in Seattle USA. The Starbucks operation is nothing to do with Pizza Hut or KFC or YUM Brands (the master franchise holder of those latter two brands).
Oh and the bit about RBD 'going down the tubes'. When they start making an operational loss get back to me. You need to get real.
SNOOPY
This HeraldSun article of July 30th 2008 has more on the financials
http://www.news.com.au/heraldsun/sto...00-664,00.html
and in particular this bit:
---------
Its Australian operation relies on huge loans from its parent company in the US.
Despite opening five new stores and selling $64 million worth of coffee and food in Australia last year, it posted a net loss of $36 million.
That was a $9 million bigger hole than the previous year.
--------
I think that lightens the 'opaqueness' lakedaemonian. Specifically:
1/ Starbucks are not making any money in Australia. In fact they are losing staggering amounts of money. I had to do a double take when I saw those figures. A $36m loss on only $64m in sales! This isn't a slow bleed to death. It is more like a massacre with 'General Starbucks' having replaced 'General Custer'. No wonder the US based management have acted.
2/ The expansion into Australia was debt funded from the US. So the Oz market is not globally insulated as you presumed. It is entirely funded from US debt. And you know what has happened to credit 'over there'.
Some more comparative figures between Oz and NZ are telling.
Average Annual Sales Per Store:
Oz: $A64m/84 stores = $A0.761m per Store
NZ: $NZ33m/44 stores = $NZ0.750m per Store
Those figures are surprisingly similar. Yet NZ Starbucks lost $NZ 0.5m last year (my after tax estimate after building in head office costs) verses an $A36m loss in Australia! All I can deduce is that costs in Australia are completely out of control.
Starbucks US management have decided the only way the Starbucks model can work in Australia is in the super high population density cities of Sydney, Melbourne and Brisbane.
Except if the brand is brought to New Zealand where the business model can successfully run in much smaller cities through superior management :-). That really shows how world class the Starbucks operation run by RBD really is....
SNOOPY
discl: hold RBD
PS The only downside for RBD shareholders is, the master franchise company in Seattle doesn't look to be in any state to buy out the Starbucks franchisee in *this* country anytime soon.
Or evidence that the tough talking Van Arkel is living up to his word and his lieutenants are carefully matching supply to demand? I remember being at my brother's over last Christmas and persuading him to order a late Pizza lunch at around 2:30pm. He rang the Pizza Hut order line. But was told the local shop didn't open until later (4pm IIRC).
I got a $4.90 offer from Dominos too, through the mailbox. But the $4.90 model can only be hawaiian, is only available on Sunday and only at selected stores AND there is a 10% surcharge on public holidays. AND the coupon looks like it has a short shelf life, about two weeks. The 'regular' coupon price on the same leaflet is $7.90.Quote:
Also, I've just received in the mail a Dominoes voucher offering large pizzas at 4.90.. This is about as cheap as i've ever seen them, I think. Further evidence of a downturn?
hiawatha
SNOOPY
RBD are expecting a decrease in sales as they progessively close their Red Roof Pizza Hut dine in restaurants. RBD do not release a breakdown of sales betwen their takeaway stores and their red roof restaurants. So I think we can assume Pizza Hut restaurant sales will be caught up in the takeaway food statistics. A decrease in sales can be a good thing if those restaurants that were closed were losing money.
A decrease in takeaway sales does not necessarily imply a decrease in profits. Indeed with Pizza Hut the sales decrease is planned for, and should be profit enhancing for RBD.
SNOOPY
Yes I had a buy order in before I left for Aussie a month ago at 80c, but pulled it before I flew out. So I was quite happy to buy a few more today at 76c. If the price goes lower I will buy still more shares so long as the fundamentals remain sound.
It was interesting to hear Rod Duke today on the divergent performance of his Briscoe general merchandise stores and the Rebel Sports stores. The Rebel Sport stores were hit far worse with the retail downturn, because what they sell makes up discretionary spending.
Just in case no-one noticed, food is not a discretionary item.
I can't see any rational reason why the share price of RBD has gone from 90c to 76c in just over a month. The only reasons I can think of are a general lack of buyer interest in all fringe shares (because RBD has dropped out of the NZX 50), some rub off from the Starbucks closures in Australia (which will have no effect on the New Zealand Starbucks operation), and a general perception that RBD 'are not doing well' which is not true. Operational profits are forecast to increase this year, and RBD will be one of the few retailers to be in this situation.
If things go on like this I guess I will just keep buying shares until (eventually) I own the entire company. Then I will close down RBD head office, put the store managers on decent profit share incentive schemes and the company will be away. It should be easy to run the company myself. All I will need is to establish an Auckland presence, even a lease on a bedsitter on the North Shore should suffice! I will keep the forum posted on my 'takeover progress' ;-P.
SNOOPY
discl: hold RBD, topped up today.
"food is not a discretionary item"
correct......but takeaway food is possibly...I would hardly call pizza a necessity.
But I get your point. Shouldn't be hit as hard as retail stocks.
I remember from an economics class many years ago that spend on things like ice cream (along with luncheon) went up in tough times because it was an affordable "luxury". Maybe takeaway foods are the same in this day in age.
p.s. good luck with your takeover efforts!!
I think the best spot for a drive through takeaway is Te Kuiti
Exactly 5 years ago Restaurant Brands closed at $1.30.
Unless I have missed a share split or something then in the intermediate 5 years one would have received 42c (10c, 10c, 10c, 5.5c & 6.5c) in dividends and your shares closed today at 75c.
Interestingly enough Mainfreight closed at $1.30 each as well.
You would have received 84c in dividends (6.5c, 6.5c, 12c, 15c + 28c special, 18c) and your shares closed today at $6.89.
regards
Paper Tiger
Snoops. You gonna be right one of these days. You remind me of exactly the way Bel... did during Felex. Virtually owned 5 8ths of stuff all.
Good luck all the same
Years ago small rural towns revolved around the local grocery store and the country garage. These days rural folk regularly make trips to the big smoke to stock up on food, and reliability and extended service distances of modern cars (plus the need for a computer to service them) have drvien many rural garages to the wall.
Take a look between the boarded up facades on the main street of rural New Zealand these days and you will find two constants. Every small town, without fail, has its own hairdressing salon and pizza parlour. Coiffure and chips. Welcome to the new definition of 'necessity'.
SNOOPY
Glad to see you wake up to the reality of constant change SNOOPY. Macdonalds woke up to this fact years ago targeting their market to the very young who demand to be taken there. KFC started off with its secret recipee, which was a great success, but it died of old age, they never changed it. The model A ford was also a great success at that time, but we dont drive them any more. The share market is in constant change so why would you invest in some outdated unwanted product?. You have to learn to move on if Macdonalds dont keep up with constant change they will follow KFC down the gurgler. Macdunk
Okay quarterly announcement soon. I note new Pizza Hut menu - very simplistic and certainly heading in the right direction for the simplistic consumers of their absolute rubbish product.
Anyway I predict more of the same. Same store sales down for Pizza Hut... comments about new menu strategy and new marketing only just kicking in (same comments for past 5 years remember the gourmet range etc and the pizza mutt strategy). We are working hard to turn the brand around. Down 9% on same store level.
KFC continuing growth particularly in refitted stores. Plus 2-3 % on same store level.
Starbucks - static turnover and move to close stores that are bastardising others turnover. No growth.
Talk about increased cost pressure particular with commodity linked products cheese etc. Continual wage pressure etc. Directors and management working hard for the success of the 3 brands.... Well what else would you expect.... We are confident with current strategy in today's difficult environment and are looking forward to a respectable end year result.....
Blah Blah same old I say....
Snoopy said :-
"If things go on like this I guess I will just keep buying shares until (eventually) I own the entire company. Then I will close down RBD head office, put the store managers on decent profit share incentive schemes and the company will be away. It should be easy to run the company myself. All I will need is to establish an Auckland presence, even a lease on a bedsitter on the North Shore should suffice! I will keep the forum posted on my 'takeover progress' ;-P."
See, what I can can't figure out is why RBD don't do the above *now*.
I believe that - at some stage - the NZ Pizza stores will be on the market and (just for fun) have asked myself how I would go about turning them around.
If you walk into the stores, it is very hard to spot the manager - the staff are as disinterested as each other.
In certain stores, it is even possible to observe staff taking money from the till while you are waiting for your pizza!
They need to work out how to get the best bits of the franchise model whilst continuing to own the stores. It *is* possible. Clearly, there is no incentive at this stage for anyone to care. In these circumstances, winners resign for greener pastures. Losers remain.
They need a major cleanout - starting at the top.
A business can only treat its customers with contempt for so long.
Anyone tried Kelly, the "new automated ordering system" ? I'm quite sure they'll be calling Kelly new in 10 years time, thus is the general apathy with which the place is run.
Anyone figured out how to ask Kelly for BBQ sauce yet and have it happen reliably? I haven't. Managed to give Kelly a name different to the one they have attached to the phone number? I haven't.
Completely coincidental *cough* with them ironing out the bugs with Kelly, I note answering times in the call centre have gone down *hugely*. Previously, you got a near instant answer.
The last 3 times I have called, twice I gave up on humans and went to Kelly. The last time I gave up all together and called Domino's instead. Twice since then I've gone to Domino's.
I walk to pick up the order. Domino's is twice the distance. I don't think the pizza is better. All that has driven me there is contempt from RBD.
Have the calls go straight to the stores. Fire the loser staff and managers. Provide training and incentives to the potential winners. Introduce profit share contracts that allow potential winner managers to enjoy some of the benefits of franchising (store level control, meaningful share of the proceeds) without the downsides (mortgaging the house when house prices are falling). Continue to own the store. Make the manager own the day to day and make it worth his while.
Create incentive for the manager to engage with the community. Give out pizza slices at local rugby if you have to. You're competing against a big Australian co but you're looking more like a disinterested corporate than they are! Get interested.
Maybe -just maybe - when the chance to renew with YUM comes up, wonder where it is worth it. Where is the value in the Pizza Hut brand? Sure RBD haven't destroyed much of that value? What does Pizza Hut mean? The best pizza? A long call centre wait? What you order when you can't afford to spring for Hell? Hanging up on Kelly?
Perhaps when battling a large AU listed company they could find a way to brand that says "we're kiwi", "we're in your neighbourhood", "our service rules".
Kiwibank has done an A++ job of this.
Of course, talk is cheap - you then gotta back it up. Which takes us back to a flat corporate structure and empowered local managers with incentive.
I *want* to be an RBD customer. I *want* to be an RBD shareholder.
Until there is *some* evidence that this business is not run by a pet rock, I find it hard to be the former and impossible to be the latter.
Have to agree there.
A complete change on board level. Get rid of Pizza Hut. Put more time and advertising into Starbucks. Continue with existing plan for KFC. Look to bring in a new and exciting chain to NZ.
Now, where can I find enough capital to buy 19.99% of RBD?
RBD used to have the rights to this food franchise in NZ not too sure whether they still do though....
Snoopy ..... that is so so mean of you only offering 61 for the those shares the poor buggers want to sell .... and then did you have a spurt of genrosity and offer to take some for 65
You must be enjoying this
65 cents the announcement has been pre-empted.....
Tick....tock...tick....tock....
Will Pizza Hutt be gone by the end of next year?
An interesting comment this week from Domino's in the UK. They said that they were benefiting from the consumer slowdown as customers chose to order takeaways rather than eat out.
Domino's benefits from downturn
BD
09/10/2008
HALFYR
REL: 0948 HRS Restaurant Brands New Zealand Limited
HALFYR: RBD: Restaurant Brands Half Year Results Announcement
Directors' Report to Shareholders
For the Half Year ended 8 September 2008
Key Points
Net Profit after Tax for the half year (excluding non trading items) was $4.6
million (14.7% down on prior year). Reported profit (including non trading
items) was $2.4 million, down 47.3% on prior year.
Total revenues of $162.5 million were 1.1% down on prior year, but same store
sales were up 0.9% for the half, with KFC continuing to be the growth driver.
Non-trading items of $3.2 million largely comprised an impairment charge of
$2.5 million to the carrying value of goodwill on the Pizza Hut New Zealand
business.
Margins were impacted by continuing pressures on input costs with all three
brands producing lower contributions than prior year.
Directors have declared a fully imputed interim dividend of 3.0 cents per
ordinary share payable on 21 November 2008, the same level as last year.
That was two and a half years ago. You got that prediction almost right. Would you care to give another prediction of where the sp will be in another two years time. Even i being one of the harshest critics of this company thought the downtrend might have been less than it is. They have very little to lose now, after selling their properties in the good times, to pay rent in the bad times, then blow it on an overseas working holiday. Macdunk
7 cents if it is still in existence in 2 years time and Bricks might own 90%
See last weeks NBR had reports that Van Arkel had approached the government to nationalise RBD through the injection of new capital via preference shares that would take preference over ordinary shares in the case of liquidation. Of course these government owned shares would not have voting rights but it is understood that is a matter of contention Apparently Russell Creedy was doing all he could to keep KFC separate from the bailout plan
Last weeks NBR -- grab a copy for the full report
I’ve heard that John Key doesn’t want this to be a political issue and that both he and Helen Clark should sit down and take a bipartisan approach. Clark has denied – it looks like Parakura Horomia has been involved with this and been keeping Gerry Brownlie up to date. Hard to know where the Greens stand. On one hand they have sustainable chicken farming – on the other hand KFC food labelling could be a bit better. I’m not sure why KFC would be kept separate – its an iconic brand which has fed thousands of New Zealanders . Its rumoured that there are more servings of KFC than travellers through AIA or passenger bookings on Kiwrail.
That would explain why the Health Minister Annette King is quite keen on the idea. She says its a win win situation for everyone ... "shareholders recoup their investment via a certain fall in future hospital costs' ..... even though she would not be drawn on whther she would close the operation down to reduce obesity levels.
Maybe there’s a hidden message in Jeanette Fitzsimmons press release today: “"There are individual policies where we (the Greens) agree with the National Party, for example they helped us stop a law that would take away control of dietary supplements and they want to see more of the NZ Super Fund invested in New Zealand.”
I was wondering if the article was a windup until these quotes made me think it really is true ..... 'proposed plan was another example of the nanny state gone mad' .... and a pizza lover 'I've been eating pizzas since my uni days - how could they have let the business get to this state'
Veteren financial commentator Bernard Hickey was also quoted as saying the markets 'were running scared' and went on to say 'I have never seen more disgraceful financial management'
Shoeshine from NBR spelt out the crisis as 'Its what everyone else in the fast business already knows - pizza is a game for mom and dad size operators. The emporer has no competitive clothes. It is time to shut down the hapless, and now boring, annual saga'
Shut them down ... no way said the protesters outside the RBD HQ. Protesters included Weldon who didn't want to see another company disappear from the NZX and a handful of Restuarant Brand shareholders who have averaged down over the last couple of years.
Were you there Snoopy?
Yes, great kiwi icons such as Kentucky Fried Chicken and Colonel Sanders deserve government support and protection in the same way as received by Air New Zealand, Tranz (NZ) Rail and Auckland Airport.
I feel a lot of Tui ads coming on!
;)
You are painting a flattering picture of me Winner. Yes I am in the market for RBD shares. So my slow takeover plan is proceeding. But my top offer price today was only 60c. Got all the shares I was after too.
I was quite impressed with the half year result. Good to see growth in KFC and Starbucks in these tough times. 'Pizza Hut' still resembles an outside dunny - but that was not news to me. The dividend is being maintained. The P.E. is now under 7, and gross dividend yield is around 15%, with a dividend payment imminent!
Interesting to see Dominos in the U.K. doing so well, and trading on a P.E. of 17. With a change in sentiment that would be equivalent to RBD shares trading at $1.46, with no increase in Restaurant Brands earnings! The comparison offers an interesting window as to what might be possible, should RBD be seen to get their act together.
SNOOPY
discl: hold RBD
You cant compare Dominos with Pizza Hut. Both have difference business models and Dominos is eating PH alive. The main concern with RBD is that they lack a strategic plan for growth. PH and Starbucks are dying ducks. The only winner they have in the portofolio is KFC. If a competitive chicken chains comes into NZ KFC maybe history also.
So was Pizza Hutt really closed on Monday. There was this odd ad in the paper that I couldn’t be bothered figuring out (so the ad defeated its purpose) but it gave me the impression the PH wasn’t open on a statutory holiday. Any major fast food business that cannot accrue enough holiday pay throughout the year to stay open on a public holiday is sailing very close to the wind.
Macdunk, my purchases are part of a carefully controlled 'thrust into retail' strategy. Why retail? Because it is liable to be the worst performing sector over the next twelve months. Everyone knows that which is why prices in that sector have been hammered down. And now is the best time to take advantage of that negative market sentiment.
The retail market is a contiuum of 'consumable essentials' to 'big ticket discretionary spending'. The most essential consumable is food. It doesn't matter what happens in the economy. People still have to eat. Also RBD is a cash business. RBD don't have to worry about people not paying for their pizza on account! So IMO from a global ongoing business perspective, RBD is low risk.
There are of course operational issues at RBD. But that is why the shareprice is discounted so heavily. Indeed it was the spoof NBR article that finally made me decide to purchase. For that meant the business was being rated as a joke, and was not being analyzed seriously by 'the market'.
I have made a mistake in my 'thrust into retail' strategy. I was assuming a one in five year business downturn, and it appears we could be headed for something rather worse. However, the response to my mistake is not to buy less retail shares. It is to spend the money I was planning to spend on more conservative retail prospects, until the timing of any retail recovery becomes clearer. At that point I will stop buying RBD and start buying TUA which is up towards the big ticket end of the spending continuum.
So why not wait until the share price turns before investing? Well the first leg of any recovery is always the safest. And I cannot earn anywhere near the amount from cash in the bank as I can from RBD shares, for as I said previously:
"The case for investment, since 1998 has always been based on dividend yield."
My investments are always made from a forward looking perspective, and there is no difference with yesterday's one into RBD.
SNOOPY
Bad news for the retail sector today:
Pumpkin Patch predicting further declines in sales....
Hallensteins delaying the move of their purchasing centre to Australia.....
So I have taken the opportunity to pick up another helping of Restaurant Brands shares - my biggest ever buy up in terms of number of shares (if not in dollars).
That's because I decide how much money I want to spend well in advance. And if the share price goes down in the interim, I just buy more shares on the day. That is how 'value averaging' works - to make sure you buy more shares when the price is low and fewer shares when the price is higher.
RBD is the one retail share where the MD is not talking gloom and doom. In fact MD Russel 'One L' Creedy bought up big last month to the tune of 50,000 shares.
At 60c per share, the price I bought at today, and with an annual dividend payment of 6cps, this equates to a gross dividend yield of 15%. With the reserve bank indicative rate tipped to fall to 5.5% next week that income gap is in my judgement starting to become irresistable to the income investor.
I don't often make specific predictions. But I think the RBD price will hit 80c before this summer ends.
SNOOPY
discl: hold RBD
Hey Snoopy, do you think the div is sustainable for the next 2 years?
Are you gonna file a SSH soon? LOL
There may be some more write downs in goodwill associated with Pizza Hut. But these will be 'non cash writedowns' and will not affect the ability of RBD to pay dividends from their ongoing business. So yes, I think the dividend payments are sustainable.
Helpful to the industry, I think, will be new PM John Key's decision to cancel the traditional 'Christmas at Bellamys' in favour of pizza and beer on the parliamentary front grounds. Granted there is no guarantee he will buy those pizzas from Pizza Hut. But you can imagine the headlines if he goes to the opposition? "Key goes to Hell" or "Dominos descend on Key" would both be PR nightmares! So who do you think has the necessary production capacity in Wellington to fulfill such a bulk pizza order?
All in all, I think this will be a very astute PR exercise by Key - as well as having obvious flow ons for Pizza Hut. It will be a very public way to show Key's support for the private sector, while empasising his status as 'a man of the people'. Criticisim from the opposition? Contacts have told me that a number of former cabinet Labour Ministers are looking at supplementing their now reduced salaires with other income. Both David Benson Pope and would you believe Michael Cullen are in negotiation to 'take private' two Pizza Hut outlets in Dunedin. In the case of Cullen, still being a list MP, it would be a simple matter to convert his former electorial office into a PH delco as the paint is the right colour already!
All this means that Key's prospective 'end of year bash' is unlikely to be criticised by the Labour party. Even the Greens won't be able to say much because RBD is a fully NZ owned company (in line with 'buy kiwi made') and the boxes the pizzas come in will be fully recyclable!
SNOOPY
discl: hold RBD, LNN
EVEN though 7 stores where closed the turnover and sales up 8%. Love that KFC,
still growing all except the share price but the Dividends are SAFE cant say that
for to many other NZ companies..
Good work.
I see McDs is doing very well in the US with revenues up. I guess everyone is going for fast and cheap food in a recession.
I think that sales were up 0.8% rather than 8% - that's still up, but not quite as impressive.
Restaurant Brands Third Quarter Sales Announcement says
Restaurant Brands’ total sales across the company’s three brands for the third quarter (12 weeks ended 1 December 2008) were $69.6 million, an increase of 0.8% on the equivalent period last year.
Anyone see the NBR article on 19th December? The parent franchise company of Burger King and Hell Pizza in NZ, TPF Restaurants, is looking to sell both assets.
Burger King has "long been losing money as it struggles to find a market niche between the low end and gourmet food chains."
I must admit I never knew that. Always thought BK was profitable in N.Z.
Meanwhile TPF has been in trouble with the Hell Pizza master franchise creators for cheapening the brand.
"Earlier this year the company sent a memo entitled 'Improving Gross Profit Through Pizza Topping Standardisation'. to stores, telling franchisees to reduce toppings by 10-255 to boost margins , at the same time as it announced a price rise."
"The order to cut toppings was cancelled after complaints from Hell Systems, the company started by Hell founders Callum Davies, Warren Powell and Stu McMullin who sold the master licence to TPF for about $15m in 2006."
The article goes on to say that the licence was sold on the proviso that certain quality standards were maintained and that TPFs memo advice threatened to tarnish the brand image as Hell Pizza looked to international expansion.
Meanwhile the price of RBD shares has jumped significantly in the last few weeks on no news. Perhaps the private equity companies who have been running the ruler over their competitors now realise how undervalued RBD is? I am picking an RBD share price of 80c by the end of this summer.
SNOOPY
discl: hold RBD
I'm surprised as well that Burger King isn't profitable.
I'm actually finding that hard to believe......I was of the thought that, anecdotally, Burger King had far more remaining growth potential in NZ than McDonald's...even factoring in the McCafe growth potential.
On the pizza side of the house, it would be interesting to learn what pricing the franchisor is getting for cheese. I'm of the opinion that they may still be paying quite high cheese prices as they do not seem to have dropped with the dairy payouts.
I still wouldn't touch this company with a barge pole at the moment as I think it has room to move lower in 2009 and into 2010.....but I do think your concept of there being a "fortune at the bottom of the pyramid" is a valid one....in fact there's a great book on that topic :)
Snoopy,
Out of interest, have you ever had a good look at ASX listed DMP?
To me, Domino's passes the "sniff test" - in my view, at store level they are clearly beating the pants off RBD.
They are well run by an experienced team - with significant shareholdings - and whilst not as "cheap" as RBD, I see them as fundamentally a lot "cheaper" as you are getting a rapidly expanding quality business, rather than a dying relic run by salary jocks with bugger all skin in the game (ie Pizza Hut).
I realise that RBD is more than just pizza, but I wonder if you've considered DMP for the fast food part of your portfolio?
Personally, the difference between the Domino's stores and Pizza Hut stores that I see (delivery times, is the pizza hot?, is the store clean?, do the staff care?) is night and day which is why I continually pass on RBD, no matter how "cheap" it is.
Shasta, RBD has a stated policy of closing unprofitable stores. Apparently Wainuiomata in 'outer Wellington' was closed. I thought that odd because I considered that suburb would reflect the demographic target market of KFC quite well. I suppose it is 'cooler' to cruise into nearby Lower Hutt to pick up your KFC now?
No idea whether Manner's Mall was profitable for RBD or not. RBD may just not be happy with a new rent deal the landlord has put on the table. Or they may have found a better site nearby. It does seem odd to leave only one KFC within the Wellington CBD. Nevertheless in Christchurch KFC only have one store - within the four avenues - at the top of the High Street Mall a block away from Cathedral Square. So perhaps that is de rigeur for City centres these day?
SNOOPY
Im not sure Lower Hutt could ever be considered "cool", even compared to Wainui! :eek:
Manners mall is in a prime location but there is MacDonalds & Burger King on the same block.
I havent had KFC since Shrewd Crude came up to Wellington, & before that god knows.
Must say though i did get Pizza Hut delivered a while back, & was very impressed.
I understand where you are coming from Stranger Danger. The counter point to your argument is to ask at what price point RBD *does* become cheap enough. 60c obviously didn't do it for you, so what about 50c? 40c?..20c? Provided the company is still making a profit it *has* to be cheap enough at some point, provided RBD don't start to run out of capital for reinvesting in the business (which isn't happening). In hindsight you could say that 'the market' found the company cheap enough at 60c- even if you didn't-, given the known business risks.
People ask where the growth is going to come from within RBD. Well, if a store is losing money, all you have to do is close it. Perverse as it may sound, in financial terms that is growth. And it would seem RBD still have some of these 'growth' opportunities available.
DMP operate a different largely franchise model. It stands to reason that -on average- the people who own the stores as managers on site will look after them better than some manager in head office Auckland. That doesn't mean the corporate pizza model *cannot* work of course - just that it is harder to make it work. Nevertheless there are anecdotally scores of pizza store individual operators looking to exit the industry.
Personally I have never had problems with delivery times with either Pizza Hutt or Dominos. Also I have never had problems with how hot the pizzas are, although it must be said I usually pick up my own. Pizza Hutt in Upper Riccarton have a warming oven where they stick the Pizzas after they have been cooked. Dominos in Addington IIRC do not.
To answer your question on DMP directly, yes I have looked at it. I turned it down mainly because of their track record not being long enough. I don't think we know how DMP will handle a recession and there is still a growth premium priced into the share (or was when I last looked, admittedly a year or so ago). I haven't taken DMP off the radar and will look again. But I saw better income prospects with RBD and better growth prospects with YUM (RBD's parent master franchise holder lised in the USA). So that is where I put my money.
SNOOPY
Snoppy. You do not get growth from closing stores. You may increase bottom line but you reduce your revenues.
60 to 70 cps seems about rght for this stock at the mo imo
Profit growth is what I am after Nita. I understand what you are saying about revenue growth. RBD press releases dwelt on revenue growth for years as their profit shrunk away.
There is a term for seeking (revenue) growth at any price. It is called 'the institutional imperative', beloved by managers who want to make their own jobs more important. Generally it is a successful mechanism for transferring wealth from long suffering shareholders to senior managers. I for one am glad that RBD have ceased to move down that path.
SNOOPY
Touched 70c today Nita, and closed steady at 69c. All in all not a bad performance with the market as a whole down some 50 odd points.
I guess some of you will be mystified as to what is happening, when there has been no obvious sudden improvement in the underlying business performance.
RBD debt at the half year (30th August) was $40.8m. We learn on page 53 of the FY2008 annual report that almost all the loans are at a floating interest rate (at balance date 9.22%) and that these arrangements are not up for renegotiation until 2010. That gives an annual interest bill of some $3.8m. But floating interst rates have dropped massively since 29th February 2008. So I am guessing that after tax the ongoing RBD profit has been lifted by $NZ1.8m because of interest falls alone. Of course not all of this will flow through immediately (FY ending 28th February 2009) because interest rates have been gradually falling throughout the year. But it does look very good for next year, with interest rates likely to stay at these lower levels. All else being equal, this interest rate decline alone will represent a 17% after tax profit rise for the company (based on RBD's declared normalised profit of $11m in FY2008).
Also come 31st August 2008, RBD completed their $35m store transformation project promises to YUM. I suspect the store transformations will continue, but they will be slower on RBD's terms, not YUM's. This all helps the cashflow.
Of course I am not picking a 17% profit rise for RBD for FY2009, because the interest savings will be offset by rising costs. But I do think there is a very good chance that they will at least hold their operating profit this year, and thre is an even better chance that dividends will not be cut going forward from here.
Even at 70c , this equates to a gross income yield of nearly 14%. With term deposit rates at the bank down to about 5%, this 14% yield is way, way too high, even given the business risks. So I'm sticking to my prediction of RBD getting to 80c by the end of the summer. The RBD share price was only 60c when I first made that prediction. So we already half way there.
SNOOPY
discl: hold RBD
SNOOPY, pretty valid point. Never thought about that myself.
AMP do not agree with you Nita. Their entire holding of 9.269m shares were sold on market today at the measly price of 57c. Is that an all time low? AMP have been holding since 2002 so have crystallized a multi million dollar loss here. The main cornerstone shareholder gone overnight has to be big news. Particularly so when last time they were involved in RBD, AMP did quite well - riding the price up from around 90c to $1.60 or so IIRC.
I guess the real question is, have AMP made another good call? Or is it the buyer of those shares that has got the bargain? I wonder who the buyer was? (no it wasn't me!)
SNOOPY
discl: hold RBD
I am also interested to find out who the buyer is. Did it go to one buyer or was it a placement spread to lots of clients?
Maybe AMP pumped up the sp and got a broker to place the shares to their private client?
THIS is a position that a big move with 19 million RBD traded in the last two days there is
change just to about to happen and they got it cheep so who is out there surprise us
you never know could be that take over we all have talked about but its time like this it better on the inside than on the OUTER..
I agree Bricks in principle. But where do you get your 'shares traded' numbers from? I saw the 9.269m shares from AMP go through the market on Thursday as an 'off market' trade plus IIRC a few hundred thousand more (?). Then around 700,000 shares went through the market on Friday. That is around 10m shares traded - significant, very significant - but way short of the 19m shares you are claiming was traded. The difference is of course that 19m shares basically means a takeover offer is required, probably next week, under the NZ takeovers code (if all those shares went to one buyer). Whereas buying 10m shares does not trigger such an offer. Are you sure that your figures are right?
SNOOPY
And it doesn't look like the 9 million went to one purchaser as that would have triggered a SSH notice .... either for a new substantial shareholder or one increasing it shareholding by 1% or more
Unless not everything is disclosed .... and that wouldn't surprise me either
It is possible the near 10% shareholding has been split up. Personally I think it is more likely that the new substantial shareholder (if they exist) has not got around to notifying the market yet. As Bricks says they will have to notify the market 'in time'. Not sure what that time limit is until the NZX policing hounds are set on them. A month? Anyone know?
SNOOPY