Second Taco Bell store opening shortly in Auckland, might grab a few mates and try out New Lynn's store tomorrow
https://www.nzherald.co.nz/business/...ectid=12338376
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Second Taco Bell store opening shortly in Auckland, might grab a few mates and try out New Lynn's store tomorrow
https://www.nzherald.co.nz/business/...ectid=12338376
RBD is certainly a 'darling of the market'. The latest FY2019 Annual Report, the one with the blue cover, ( I say latest as there have been two because of the balance date realignment from end of February to end of December), shows revenue and profit decline. But this is because the 'second' FY2019 reporting year covered only 10 months. The report then talks about annualising profit and revenue figures, without spelling out how this was done. You have to read the chairman's AGM address to find that out (for the NPAT at least). The associated presentation 'Slide 3' shows that the unaudited eight weeks to the end of February 2020 results have been added to the FY2019 10 month result to make up a full calendar year. A further non trivial profit adjustment was the adoption of NZ IFRS16 which changed the accounting treatment of rental property lease payments.
Annualising Net Profit Reference FY2019 NPAT to 31-12-2019 as declared $30.1m add Unaudited NPAT for 01-01-2020 to 28-02-2020 $7.1m add Negative effect of adopting NZ IFRS 16 on NPAT $4.532m AR2019(2) p55: $6.076m - $1.547m = $4.532m add Other Income and Expenses (*) $4.0m AR2019(2) p55: $0.722m - $5.338m = $4.616m (?) equals Comparative NPAT for FY2019(2) $45.7m Comparative EBITDA for FY2019(2) $137.1m (As stated in Chairman's address)
(*) 'Other Income and Expenses' in previous years were income and expenses relating the the wholesale support functions that RBD provides to mainly independently franchised Pizza Hutt outlets in New Zealand.
Annualising NZ Revenue
There was a vague reference in AR2019(2) p16 on annualising revenue:
"On a like for like brand footing (total brand sales for the group) are up approximately 5% (when compared to the 52 week comparative period).
The chief executive's {Russel Creedy's) address to the AGM contained a little more information:
"When normalised for 12 months, New Zealand sales were up +3.5% to $434 million."
If we refer back to AR2019(1), the previous reporting year, NZ sales for KFC, Pizza Hutt and Carl's Junior plus 'Other Revenue' summed to:
$356.9m + $101.0m + $31.9m + $30.9m = $520.7m
Add a 3.5% increment onto that and I get $539m for NZ sales. That is a very large discrepancy to the $434m Russel claims as 'normalised'.
If we refer back to AR2019(2) p17,18,19, the current 'year' (actually 10 months), NZ sales for KFC, Pizza Hutt and Carl's Junior summed to:
$325.8m + $85.2m + $29.9m = $440.9m
This is above Russel's normalised NZ $434m figure for the whole year! How can this be? Something very strange has gone on with the annualising process here. Can anyone explain?
Annualising Australian Revenue
Moving to the Australian result, Russel says:
"On a full year equivalent basis sales were up +5.7% or $A10 million. "
Once again I refer back to AR2019(1) and Australian sales were listed at $A178.3m. So this implies a full year comparative sales figure over FY2019(2) of:
$178.3m x 1.057 = $188.5m, which is an increment of $A10m. Russel and I agree on that figure at least!
Annualising Hawaiian Revenue
Russel made no mention of this in his address. Very disappointing considering the effort he went to annualise revenue in the other jurisdictions in which RBD operates. However, if we look in AR2019(2) we can see that total Hawaiian sales added to: $66.5m + $44.1m = $110.6m. Russell quotes $111m in his AGM address which lines up. So this is confirmation that Russel hasn't bothered to annualise the Hawaiian result.
Annualising Revenue Conclusion
The reporting is inconsistent across geographies, and the NZ annualised result just looks wrong. I am forced to resort to the rather vague Annual Report 2019(2) p16 reference:
"On a like for like brand footing (total brand sales for the group) are up approximately 5% (when compared to the 52 week comparative period).
to determine annualised company revenues. Last years revenue (i.e. from AR2019(1) ), including other income, amounted to $824.9m: $824.9m x 1.05 = $866.1m. If we look on p7 of AR2019(2) we see a revenue figure of $867.1m. That is close enough to be the same number, if you take into consideration the multiplier margin of error. From that I can conclude that the figure of $867.1m is the annualised annual revenue figure today (even though AR2019(2) doesn't specifically say that).
SNOOPY
'Restaurant Brands' (RBD) are now 75% owned by 'Finaccess Capital' (stake acquired in April 2019) headquartered in Mexico. 'Finaccess Capital' was created from money received by the Fernandez family (Carlos Fernandez is now on the RBD board) from the buyout of Mexico's 'Grupo Modulo', a beer market giant that was gobbled up by an even bigger beer fish 'Anheuser Busch', the world's biggest brewing company. 'Finaccess Capital' has a strong presence in the casual dining and quick service restaurant sector. It currently holds a 67% stake in 'Amrest Holdings BV', a similarly (from YUM Brands) franchised fast food company in Europe that is listed on the Polish Stock Exchange. Nevertheless, the intention is to maintain operational separation between 'Restaurant Brands' and 'Amrest'.
'Restaurant Brands' might now be better named as 'YUM Pacific'. YUM Brands is the master franchise holder of the 'KFC' , 'Pizza Hut' and 'Taco Bell' brands globally. 'Restaurant Brands' operates franchised YUM branded restaurants and is looking to add their own unique restaurant designs and menu adaptations and local promotions. This tailors the offering to meet the expectations of consumers around the Pacific Rim: New Zealand, Australia, Hawaii, Guam and now California. In California, a conditional deal is in place to acquire 70 both 'pure KFC' and 'KFC/Taco Bell paired' restaurants. 'Restaurant Brands', aside from being a Pacific Regional YUM Franchise, operate 18 'Carl's Junior' Burger themed restaurants in NZ. But they are not rolling out any more 'Carls Junior Restaurants'. And the niche chain of 'Starbucks' coffee houses that 'Restaurant Brands' used to run in NZ has been sold.
'Restaurant Brands' are already the largest KFC franchise operator in New Zealand and New South Wales in Australia. Likewise they have a strong position in greater Hawaii with 'Taco Bell' and 'Pizza Hut'. 'Pizza Hut' in NZ continues to be under profitability pressure (most outlets are now independently franchised and more independent franchising is planned) even if it remains the second largest Pizza operator by footprint (now 102 NZ stores). The are 439 KFC stores in California
https://leadsdeposit.com/list-of-all...ons-in-the-us/
and 'Restaurant Brands' are looking to own 70 of those. It is RBD's intention to strengthen their position in California and Australia over time, both buying existing stores and opening new ones. Interestingly, new RBD Chairman Jose Pares sees California as 'relatively underpenetrated' by KFC' (AR2019(2) p26).
The position of 'Carl's Junior' in The NZ environment is of a 'niche payer'. It would not surprise me, now that RBD is seeing 'Taco Bell' as the prime development goal for building new restaurants in Australia and NZ (60 stores over the next 5 years), to see 'Carl's Junior' sold off much as 'Starbucks' was last year.
The company mission goal now is the 'big dollar target', chasing $1billion in annual revenue (annualised revenue is already at $867.1m ( AR2019(2) p6 ). To reach this goal dividends have ceased and the earnings generated from the business is being reinvested. But will this single minded growth goal see the balance sheet stretched too far in a post Coivid-19 world where debts remain but revenue to service those debts becomes less certain?
Conclusion: In answer to 'Buffett Test 1', PASS TEST (as regards being a major market player). RBD are very significant players with 'KFC'/'Pizza Hut' in NZ,' KF'C' in New South Wales and 'Taco Bell' and 'Pizza Hut' in Hawaii. 'KFC' in California and 'Taco Bell' in Australia and N.Z. are developing market positions and are likely to form the bulk of future growth plans.
SNOOPY
I have used the net profit after tax, excluding non-trading items for the purpose of this comparison. Non trading items include those associated with store closures and sales transformation costs and insurance payments. These are omitted because they obscure how the business is performing on the ground.
Net Profit/No.of Shares
2016: $24.207m /102.871m = 23.5cps
2017: $30.567m /122.843m = 24.9cps
2018: $40.361m /123.629m = 32.7cps
2019(1): $42.181m /124.759m = 33.8cps
2019(2): $45.7m /124.759m = 36.6cps
Conclusion: PASS TEST
SNOOPY
Here is the reason I was getting all 'hot and bothered' about calculating an annualised revenue figure in my post 2622 on this thread.
'Margins' in this context means 'Net Profit Margins'. This is the net profit, excluding non-trading items, divided by the total sales for the year. Note that in a change from the 2015 perspective, I am now including 'other revenue' as part of the representative on-going revenue of the company. This is because the largest part of other revenue is money received from YUM to act as master franchise holder for Pizza Hut in New Zealand. And this is a revenue stream that will be on-going
2016: $24.207m / $404.095m = 6.0%
2017: $30.567m / $517.549m = 5.9%
2018: $40.361m / $766.289m = 5.3%
2019(1): $42.181m / $824.9m = 5.1%
2019(2): $45.7m / $867.1m = 5.3%
The profit margin hasn't got any worse, which is a positive. But it hasn't really got any better either. I call it 'bouncing around a new bottom'. Our Russel has continued his object lesson in how to reduce net profit margins. Growth in revenue is all very well. But if you are not increasing your profit as a percentage of revenue, and you have to employ new equity to create your growth, 'long term' this can be a formula for standing still on an earnings per share basis.
Conclusion: FAIL TEST
SNOOPY
The above is my most recent 'Buffett Conclusion' from two years ago. The story remains the same. An important statistic that RBD quote in their annual report is 'EBITDA as a Percentage of Sales'. (AR2019(2) pp17 to 21). This is important from an operational perspective. But it takes out of focus the cost of capital needed to buy these sales in the first place. If we take a look at the intangible assets on the books ( AR2019(2) Note 20, p84 ) 'Goodwill' stands at $227.841m. Of that total by far the largest is that relating to the KFC expansion into Australia ( $94.552m ) and Taco Bell and Pizza hut in Hawaii ( $120.352m ).
Let's look at KFC Australia as an example. KFC Australia shows a very impressive 15.4% EBITDA to Sales Margin. This figure can be verified from the Segmented Results (AR2019(2) p65).
EBITDA / Total Operating Revenue = $25.900m / $169.105m = 15.3% (Hmm, not quite sure why I don't get 15.4%, but this is close enough)
However if we subtract the interest cost on holding the 'Australian Goodwill' from this calculation, a different picture emerges.
------
Loan Balance Average Over the Year (actually ten month period, 01-03-2019 to 31-12-2019): ($154.328m + $145.823m) /2 = $150.076m
The interest paid on loans can be found in the Cashflow statement ( p61 AR2019(2) ): $5.370m.
Therefore, the implied overall averaged 10 month out of 12 'Interest rate' paid and averaged over all Loans is: $5.370m / $150.076m = 3.6%
-------
1/ This means the implied interest cost on the Australian Goodwill is: 0.036 x $95.442m = $3.436m. This is assuming that all of the Australian equity is being financed by debt. In fact some will be financed by equity. But since the cost of debt is less than the cost of equity, this will be a conservative estimate of the real funding cost.
EBITDA (adjusted for Goodwill Holding Cost) / Total Operating Revenue = ($25.900m - $3.436m ) / $169.105m = 13.3%
That is still good but getting ever closer to RBD's cost of capital. which RBD record as 8.7% for KFC in Australia. So the 'value accreting margin' in Australia for KFC is:
13.3% - 8.7% = 4.6%
2/ Now compare that with the equivalent figure for KFC in New Zealand
The implied interest cost on the New Zealand Goodwill, also modelled as being financed at 3.6% is is: 0.036 x $3.818m = $0.137m
EBITDA (adjusted for Goodwill Holding Cost) / Total Operating Revenue = ($66.100m - $0.137m ) / $308.400m = 21.4%
The cost of capital for RBD in New Zealand is record as 8.9%. So the 'value accreting margin' in New Zealand for KFC is:
21.4% - 8.9% = 12.5%
Note that this is nearly three times the Australian value. This means that each NZ KFC restaurant is generating close to three times the earnings value for RBD compared to their Australian KFC counterpart. The hidden effects of holding all that goodwill should not be underestimated by shareholders! Of course RBD management do not consider this as they are one eyedly pursuing their $1billion dollar revenue goal with little regard to the cost of getting there. There is no doubt that RBD is a good company and potentially a great company. But it does look like there is little control on the cost of expansion, and that is reflected in a new low level of Net Profit margin. For this reason, I don't believe Warren Buffett would be jumping out of his insurance float to invest in RBD today.
SNOOPY
discl: I do hold RBD myself, but on the strength of this analysis am not lining up to buy more
Another year into the 'great overseas expansion'. To reprise what it was (and is), here is how the RBD 'overseas managed restaurant landscape' has changed since EOFY2016 (28-02-2016) so far:
27-04-2016: QSR Pty Ltd, operating 42 KFC Restaurants in New South Wales acquired.
13-12-2016: 2 KFC stores in New South Wales acquired from Samesa Pty Limited.
13-12-2016: 3 KFC stores in New South Wales acquired from Oshamma Pty Limited.
07-03-2017: Pacific Island Restaurants 'PIR', now 37 Pizza Hut and 37 Taco Bell stores acquired.
17-07-2017: 3 KFC stores in New South Wales acquired from Vida Rica Pty Limited.
28-08-2017: 10 KFC stores in New South Wales acquired from YUM Restaurants International
In addition to these purchases one incremental KFC store was opened in Q3 FY2018 and a second in Q4 FY2019(2). A further KFC store was acquired in December 2019. Very recently a couple of Taco Bell Restaurants have opened in NSW too, but these are not material to the overseas strategy yet.
From the Buffettology Workbook, p149
"We take the per share amount of earnings retained by a business for a certain period of time then compare it to any increase in per share earnings that occurred during the same period"
In this instance the 'per share earnings retained' has been supplemented by a whole lot of new capital raised with the October 2016 cash issue PLUS the fact that no dividends have been paid by RBD since June 2018.. Those unpaid dividends become retained earnings that can then be spent on new restaurant initiatives. I will use the change in shareholders equity from the reporting date before the cash issue (EOFY2016) to the end of FY2019(2). This is the first year that all of the Australian operations and Hawaiian operations have been operating as 'bedded in units'.
EOFY2016 Change EOFY2019(2) (Annualised) Normalised Earnings {A} $24.207m $45.7m No. of Shares {B} 102.871m 124.758m eps {A}/{B} 23.53c +10.28c {D} 36.6c Owner Equity {C} $75.617m $207.994m Owner Equity per share {C}/{B} 74c +$0.93 {E} $1.67 Return on Incremental Equity / Share {D}/{E} +11.0%
The 'overseas expansion period' now covers four years. The above result is a significant improvement on the "Return on Incremental Equity / Share" over the previous two compounded periods (9.5% over two years and 9.7% over three years respectively). Is this proof that the overseas expansion strategy is working? All the new capital raised in the cash issue in October 2016 and those retained dividends has now had sufficient time to be deployed. But much of this business expansion funding is by debt. Using debt will improve the 'Return on Incremental Equity' / 'Share' figure. There is nothing wrong with using debt for expansion of course, provided the debt load does not become excessive. We need to investigate whether excessive debt is being used!
SNOOPY
In the fast food industry accounts are normally paid 'on time' and 'in cash'. Furthermore stock turnover is rapid. This enables a fast food business to carry more debt than other retail businesses as cashflow is better. But how much debt is too much debt? Now that RBD has become a 'growth company' and dividends have been suspended, this is a question we shareholders should consider.
My favourite debt measure remains 'MDRT'. Put simply, MDRT is the answer to the question: "If all earnings after tax were poured back into repaying the company's bank debt, how long would that take?" When working out this, we must use a company's declared IFRS profit, not a normalised profit. It takes actual cash to repay a bill!
FY2015 FY2016 FY2017 FY2018 FY2019(1) FY2019(2) Bank Term Debt $12.675m $22.550m $46.482m $166.815m $145.853m $154.326m less Cash and Cash Equivalents ($1.575m) ($1.093m) ($70.390m) ($10.410m) ($15.034m) ($34.965m) equals Net Debt {A} $11.100m $21.457m NM $156.405m $130.819m $119.361m Declared NPAT {B} $23.830m $24.070m $25.595m $35.466m $35.741m $36.650m (a) MDRT {A}/{B} 0.5 yrs 0.9 yrs 0 years 4.4 yrs 3.7 yrs 3.3 yrs
(a) $30.542m X (12/10) = $36.650m (Declared profit of $30.542m is for a ten month period)
The anomaly in the table was the large amount of cash carried on the balance sheet at EOFY2017. That cash was raised for the Hawaiian settlement that was still pending at balance date. $94 of this cash was raised through the share offer dated 26th October 2016 via a 1: 5.15 cash issue. If we remove that cash from the balance sheet we can get a more representative MDRT figure:
$70.092m / $25.595m = 2.7 yrs
2017 was also the year that RBD announced their change of direction to become a 'global' rather than a 'solely New Zealand based operator' of restaurants. Underlying EPS has risen from 24.9cps to 36.6cps from EOFY2016 to EOFY2019(2) over the almost four years since. But net debt has ballooned as well.
My rule of thumb for the MDRT answer in years is:
years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern
So no concerns from me with the debt at EOFY2019(2) levels. But RBD has announced a subsequent acquisition.
http://nzx-prod-s7fsd7f98s.s3-websit...496/314595.pdf
"The transaction (to purchase 70 Californian restaurants) is for a purchase price of $US73 million plus capital expenditure reimbursements for recent store refurbishment and customary working capital adjustments. It will be fully debt funded."
I think that translates to about $NZ100m of new debt. Profits at EBITDA level are listed as $US12m+ ($NZ19m+). That is a similar level of historical profitability as RBD's "KFC Australia" investment. Yet given the much reduced profits from Covid-19 flow on effects over FY2020, we may yet see RBD net profits down for the year by 20%. And that means a projected MDRT figure for FY2020 of something like this:
$219.361m / (0.8 x $36.650m) = 7.5
I would call that a worry. But major shareholder 'Finaccess' might say it is 'efficiently maxing out debt covenants'. I will leave you, the investor, to choose the interpretation that you are most comfortable with!
SNOOPY
The above was written in March 2019. Obviously things have moved on. We can't used the 'Capitalised Dividend Valuation Model' to value RBD any more, because dividends have been cancelled. Yet the company doesn't tick all the boxes to allow a Buffett style growth valuation model to be used either. So what to do? It looks like I will be forced to use an earnings valuation multiple based on EBIT and/or EBITDA. Grant Samuel did this when valuing RBD for the 'Finacces's takeover.
The problem here is that, due to the adoption of NZ IFRS 16, the calculation of both EBIT and EBITDA has changed. From AR2019(2) p80:
Pre NZ IFRS 16 Adjustments Post NZ IFRS 16 EBITDA before G&A Expenses $115.974m $31.511m $147.485m General & Administration Expenses ($29.427m) $0.857m (2) ($28.570m) EBITDA after G&A Expenses $86.547m $32.368m $118.915m less Depreciation ($25.356m) ($22.395m) (1) ($47.751m) less Amortistion ($2.178m) $0m ($2.178m) equals EBIT before Other Items $59.013m $9.973m $68.986m
Notes
(1) This adjustment figure is the 'lease depreciation', which did not exist as a separate depreciating item under the superseded accounting standard.
This makes things difficult when using historical EBIT and EBITDA multiples as benchmarks. However, in this case the authors of the annual report have bridged the 'old' and the 'new' way of looking at things. Refer to AR2019(2) sections 1.1, 14,15,16,17,18 and 19.
(2) Why the general and administrative expenses have dropped under NZ IFRS16 is not explained. My guess is that 'head office', not being part of the 'earnings machine', operated under the old NZ IAS 17, on a separate 'finance lease' arrangement. With the adoption of NZ IFRS16, and the distinction between finance leases (that were on the balance sheet), and operating leases (which up to that point were not on the balance sheet) was removed. At that point the former 'finance lease' at head office was reclassified as an 'operating lease'. That replaced what was an 'expense item' with a 'depreciation item', that 'on paper' reduced the General & Administration running costs. In reality these costs were transferred to an alternative deduction in the accounts. I don't know if I am right about this. But it seems the most logical way to explain what has happened..
So we can carry on using historical comparative ratios, provided we use EBIT and EBITDA figures calculated under the 'old standard'. Let's begin!
SNOOPY
The following valuation is based on historical earnings as listed in the FY2019(2) annual report that covered the ten month period ended 31-12-2019. Generally you would try to value a company on forecast earnings. However, due to Covid-19, these are likely to be significantly disrupted. By using last years results I am effectively 'looking through' the current financial year with the expectation that earnings will recover to FY2019(2) levels by FY2021. It is up to individual investors to judge how realistic that assumption is.
It is common to value a company based on 'enterprise value'. This reflects the fact that anyone acquiring a company for the purposes of control will have to pay the market value for the shares (a positive asset) and take on the book value of the balance sheet value of the net debt (a negative asset).
Enterprise Value = Market Capitalisation +Total Debt − Cash
In this instance the 'Enterprise Value market factor' is determined by historical earnings multiples that the market has determined it would be willing to pay for similar companies. This information can be found in the 'Target Company Statement' as commissioned by 'Restaurant Brands' in response the 'Finaccess' offer to buy a controlling stake in RBD in early 2019.
Historical EBITDA Historical EBIT Reference As Reported $86.547m $59.013m AR2019(2) page 80 Note 15 (IFRS 16 effects removed) Normalised for full year ( x12/10) {A} $103.856m $70.816m Market Multiple {B} 10.9 18 RBD Commissioned Independent Advisors Report p32 Net Debt @ 31-12-2019 (Total Debt - Cash) {C} $119.361m $119.361m AR2019(2) p60 'Balance Sheet' Enterprise Value @ 31-12-2019: {A} x {B} - {C} $1,012.674m $1155.317m No. of Shares on Issue@ 31-12-2019 124.759m $124.759m Enterprise Value 'per share' $8.11 $9.26
The share price closed at $12.07 on Friday. You could argue that since Covid-19 there has been a 'flight to safety' and those companies supplying staples (like food) have been re-rated. You could also argue that lower market interest rates have themselves pushed share valuations higher. However the premium that the market is pricing into these shares does seem very significant (between 30% and 49%). Good as this company is, it looks to me to be too highly priced to reflect any type of historical norm fair value. There is also some uncertainty as to whether the latest Californian restaurant chain acquisition will put pressure on the company's banking covenants as well. Consequently I would suggest new investors avoid putting money into RBD at these prices.
SNOOPY
discl: who nevertheless intends holding onto my own residual shareholding!
The is an interesting article here:
https://www.qsrmagazine.com/news/kfc...-through-april
'Free delivery' of course equates to 'paid for by the Shareholder delivery'.
"Those who prefer to pick up their meal can order online at kfc.com and pick up in the restaurant from the designated area at the front counter."
and that means the sit down areas of many (all?) KFC restaurants in the USA were closed for over a month.
From this June 2020 article
https://www.qsrmagazine.com/fast-foo...et-new-heights
"About 92 percent of North American units (of KFC, Pizza Hut and Taco Bell) are open. The figure increases to 99 percent if express units are not counted, which are mostly under Pizza Hut".
"Trends have improved meaningfully in recent weeks, however, the COVID-19 pandemic continues to impact sales in numerous markets across the world, particularly in markets where we continue to experience significant temporary restaurant closures,” the company said in a filing. “As we have taken steps in response to the pandemic, our primary focus continues to be the safety of everyone who engages with our brands, including our employees, franchisees, and their team members, and customers.”
This would indicate things have got better since the end of April. But with Covid-19 cases blowing out again in California, the prospect of new county wide restaurant lockdowns are already a reality.
https://la.eater.com/2020/7/1/213101...emic-july-2020
Indoor dining rooms must close. Restaurants will only be allowed to serve customers in outdoor areas, or for takeout and delivery.
"The lockdowns will last for at least three weeks. Restaurant dining rooms were only recently allowed to reopen under specific guidelines and a 60% capacity on May 29 after being ordered to close on March 15 to curb the spread of COVID-19."
None of this can be good for RBD's Californian Restaurant chain purchase. I see settlement was expected by March 2020. But at the AGM the Chairman said:
"Whilst the approval process has been delayed with the recent COVID-19 crisis, we are expecting completion early in the second half of this year"
I wonder if this purchase process will be further delayed, or possibly not go ahead at all?.
SNOOPY
Sorry for the delay getting an answer to your question Huxley, but no-one has stepped up, so I will give it a go. Here is a quote from an RBD press release dated 21/12/2001 (yes that long ago).
"Restaurant Brands has , since inception, had a policy of investing in store décor , fit out and equipment to sustain and build the in store experiences for our customers. This policy has never included real estate on which the stores are located because the company believes that investing in store assets rather than commercial real estate can make a better return."
"As of September 2001, the company had nearly 200 stores across our three brands (This was when RBD was a pure NZ operation). All Pizza Hut, Starbucks and 30 KFC stores were leased while 57 KFC stores were owned outright."
"In October after a thorough review of several options (included continued retention and disposal by securitization) and taking independent specialist advice, your board approved the sale and leaseback of the currently owned KFC stores. Of the 57 stores owned the company elected to sell 51. The remaining 6 were held for a number of reasons including potential for redevelopment or because of complications in the title that would have impeded the sale and leaseback process."
Tax deductions for depreciation on building structures were removed in the 2011-2012 tax year under the John Key lead national government. As part of the $2.8b support package for business, the Government has reintroduced building depreciation deduction claims for property owners with commercial and industrial properties, at a level of two percent a year, starting in April 2020. I don't see RBD as being a big beneficiary of this change in policy.
SNOOPY
We haven't heard much progress on the Restaurant Brand's deal to buy 70 KFC restaurants in California and I am wondering if it is time to end this trans pacific foray. The article below is mainly about McDonalds. But the final two sentences that mention KFC are telling:
https://www.qsrmagazine.com/fast-foo...ges-nationwide
"Back in March, which feels years ago, Starbucks announced on a Sunday (March 15) it stopped all seating, including café and patios, throughout U.S. and Canada restaurants. This as a slew of states began to pause dine-in service in an effort to stem the spread of COVID-19."
"It carries a familiar vibe to what’s happening today. Just that week alone, Chick-fil-A, Shake Shack, Noodles & Company, Inspire Brands, McDonald’s, Wendy’s, Dunkin’, and KFC followed suit, among others."
If I read that correctly, all dining on KFC premises in mainland USA (and that includes California) has stopped. I would think that is very material to RBD's Californian acquisition proposal. If the deal hasn't been called off, I would suggest there are now strong grounds for a renegotiation on price. If RBD can't get a discount on those Californian restaurants, I would suggest their capital is better spent revamping their Hawaiian operation, and perhaps re-energizing their plans to pick up another swag of KFC restaurants in New South Wales.
SNOOPY
Another opportunity to add stores?
https://www.cnbc.com/2020/08/17/pizz...ranchisee.html
News released today that the Californian deal is going ahead, with no mention of a price renegotiation.
http://nzx-prod-s7fsd7f98s.s3-websit...995/329793.pdf
The following is an article on how YUM Brands, the master franchise holder for KFC, has navigated Covid-19
https://www.qsrmagazine.com/restaura...rength-numbers
YUM closed down many restaurants during the second quarter of the year., but it looks like the tide has turned:
"Restaurants started reopening in May, and as of June, closures were down to half what they were at their peak. Today, closures have slid to fewer than 2,500 units, meaning Yum is back to 95 percent coverage."
Time will now tell if RBD has overspent to establish its Californian foothold.
SNOOPY
no interim dividend for the 31 December 2020 financial year. Directors have also considered the future of the existing Dividend Reinvestment Plan and, given the constraints upon the majority shareholder in participation and the limited likelihood of dividends in the immediate future, they have elected to terminate the Dividend Reinvestment Plan with immediate effect.
Becoming junk stock 42 trades for 567 shares & 24c movement
The other brands joining CarlsJr on Uber Eats. Just a trial so far for the additions.
https://www.scoop.co.nz/stories/BU20...ew-zealand.htm
Hey Snoops ...did you see this piece on our Russel
Don’t even bother do much analysis on RBD these days because no matter they do the share price keeps defying logic and keeps climbing. Weird as profit climbs rather slowly it’s PE goes up even faster.
You wouldn’t really call their profit trend really startling would you.
Still got most of the ones I bought around a buck many years ago. Something made me have a ‘never sell’ mentality and that’s worked out fine eh. Funny I’ve never seen it as a buy since but who cares as it’s been very rewarding anyway.
Still love the fact you make more out of investing in greasy chicken than retirement villages ...should have been totally committed to greasy chicken.
I take it you still have heaps
https://www.nzherald.co.nz/business/...YXTFZLKC4MJ2A/