Restaurant Brands Half Year Financial Results 2021

Restaurant Brands New Zealand Limited
Results announcement to the Market



Results for announcement to the market
Name of issuer Restaurant Brands New Zealand Limited
Reporting Period Six months ended 30 June 2021
Previous Reporting Period Six months ended 30 June 2020
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$563,653 42.5%
Total Revenue $563,653 42.5%
Net profit/(loss) from
continuing operations
$34,506 207.8%
Total net profit/(loss) $34,506 207.8%
Interim/Final Dividend
Amount per Quoted Equity
Security
n/a
Imputed amount per Quoted
Equity Security
n/a
Record Date n/a
Dividend Payment Date n/a
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
($0.12) $0.20
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Refer announcement for Restaurant Brands released to the
market on 24 August 2021
Authority for this announcement
Name of person

authorised
to make this announcement
Grant Ellis
Contact person for this
announcement
Grant Ellis
Contact phone number +64 9 525 8710
Contact email address Grant.ellis@rbd.co.nz
Date of release through MAP

24/8/2021

This report is based on accounts which have not been audited. The report is provided with the
accounts which accompany this announcement.

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PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand
T: +64 9 355 8000, www.pwc.co.nz

To the shareholders of Restaurant Brands New Zealand Limited


Report on the consolidated financial statements
Our conclusion
We have reviewed the consolidated financial statements of Restaurant Brands New Zealand Limited
(the Company) and its subsidiaries (the Group), which comprise the consolidated statement of
financial position as at 30 June 2021, and the consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated statement of cash flows for the
period ended on that date, and significant accounting policies and other explanatory information.
Based on our review, nothing has come to our attention that causes us to believe that these
accompanying consolidated financial statements of the Group do not present fairly, in all material
respects, the financial position of the Group as at 30 June 2021, and its financial performance and
cash flows for the six month period then ended, in accordance with International Accounting Standard
34 Interim Financial Reporting (IAS 34) and New Zealand Equivalent to International Accounting
Standard 34 Interim Financial Reporting (NZ IAS 34).
Basis for conclusion
We conducted our review in accordance with the New Zealand Standard on Review Engagements
2410 (Revised) Review of Financial Statements Performed by the Independent Auditor of the Entity
(NZ SRE 2410 (Revised)). Our responsibility is further described in the
review of the financial statements section of our report.
We are independent of the Group in accordance with the relevant ethical requirements in New
Zealand relating to the audit of the annual financial statements, and we have fulfilled our other ethical
responsibilities in accordance with these ethical requirements. Other than in our capacity as auditor
and providers of specified procedures on landlord certificates and review of Yum! Advertising Co-
operative report, we have no relationship with, or interests in, the Group.

The Directors of the Group are responsible on behalf of the Group for the preparation and fair
presentation of these consolidated financial statements in accordance with International Accounting
Standard 34 Interim Financial Reporting (IAS 34) and New Zealand Equivalent to International
Accounting Standard 34 Interim Financial Reporting (NZ IAS 34) and for such internal control as the
Directors determine is necessary to enable the preparation and fair presentation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor
Our responsibility is to express a conclusion on the consolidated financial statements based on our
review. NZ SRE 2410 (Revised) requires us to conclude whether anything has come to our attention
that causes us to believe that the consolidated financial statements, taken as a whole, are not
prepared in all material respects, in accordance with IAS 34 and NZ IAS 34. A review of consolidated
financial statements in accordance with NZ SRE 2410 (Revised) is a limited assurance engagement.
We perform procedures, primarily consisting of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures.

PwC
The procedures performed in a review are substantially less than those performed in an audit
conducted in accordance with International Standards on Auditing (New Zealand) and International
Standards on Auditing and consequently does not enable us to obtain assurance that we might identify
in an audit. Accordingly, we do not express an audit opinion on these consolidated financial
statements.
Who we report to
under
required to state to them in our review report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Shareholders, as a body,
for our review procedures, for this report, or for the conclusion we have formed.
(Pip) Cameron.
For and on behalf of:
Chartered AccountantsAuckland
24 August 2021

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Directors’ Report to Shareholders
For the six months ended 30 June 2021
(1H 2021)


Key Highlights

($NZm) 1H 2021 1H 2020 Change ($) Change
(%)
Total Group sales 540.6 383.4 +157.2 +41.0
Group NPAT (reported) 34.5 11.2 +23.3 +208.0


 Total Group sales for the six months to 30 June 2021 (1H 2021) were $540.6 million, up
$157.2 million on the previous half year (1H 2020). This is the result of the inclusion of the California
business in 2021 and the adverse impact of COVID-19 in 2020.

 Net Profit after Tax for 1H 2021 was $34.5 million (27.66 cents per share), up $23.3 million on
1H 2020. The current result includes recognition of $11.4 million of loan forgiveness under the US
Paycheck Protection Program (PPP).

 Brand EBITDA before G&A was up $26.5 million to $89.9 million, of which $12.7 million came from
the inclusion of a maiden profit from the new California division. The comparison was enhanced by
the effect of COVID-19 store closures in New Zealand in the 1H 2020 result*.

Group Operating Results

Directors are pleased to report that Restaurant Brands New Zealand Limited (RBD) has earned a Group Net
Profit after Tax (NPAT) of $34.5 million for the six months ended 30 June 2021 (1H 2021). This is up
$23.3 million on the last half-year’s reported result. Although the company continues to face challenges from
COVID-19 the operating results have remained strong across all divisions.

The result includes $77.3 million in sales and $12.7 million of brand EBITDA from the newly acquired
California division. This, combined with the adverse effect of COVID-19 on the 1H 2020 results,
compromises the opportunity for direct comparisons between the two half years’ reported results.
Comparisons at a reported profit level are further distorted by the recognition of $11.4 million
($US8.1 million) in relation to the PPP loan drawn down last year at the beginning of the COVID-19
pandemic, that was forgiven during the period.

After adjusting for the PPP loan, the underlying NPAT would be $23.1 million, up $11.9 million. This increase
is due to rolling over the adverse effect of COVID-19 on the 1H 2020 results, the addition of the new
Californian business and the strong trading results in the current year.

Total store sales hit a new high of $540.6 million, up $157.2 million or 41.0% on 1H 2020, thanks to the
inclusion of $77.3 million in sales from the California business (acquired in September 2020). Very strong
same store sales growth from the other divisions also contributed.

Combined brand EBITDA at $89.9 million was up $26.5 million (41.7%) on 1H 2020*, with the increase
arising from strong sales growth in the current year, a $12.7 million contribution from the California division
and the COVID-19 impact on the prior year’s results.

Restaurant Brands’ store numbers now total 350, up 60 on the 1H 2020 – again largely due to the inclusion
of 69 stores in California. This is partly offset, however, by the sale of New Zealand Pizza Hut stores to
independent franchisees. There are now 132 RBD-owned stores in New Zealand, 73 in Hawaii, 69 in
California and 76 stores in Australia.

*Including government grant of $22.1 million in 1H 2020.


RESTAURANT BRANDS NEW ZEALAND LIMITED

New Zealand Operations

New Zealand store sales were $239.3 million, up $64.7 million or 37.0% on 1H 2020. Particularly strong
sales in KFC and Carl’s Jr. made an impact here, as well as rolling the five week COVID-19 lockdown in
1H 2020 (an estimated $40.0 million in lost sales). Same store sales were up a healthy 12.5%.

EBITDA was $43.1 million, a $9.5 million or 28.3% increase on 1H 2020 as a result of the strong store sales
performance and rolling the five week store closure in the June 2020 result*. EBITDA margin at 18.0% was
slightly softer on prior year with some cost pressures and the mix of less profitable Taco Bell brand sales as
this business continues to build.

Actual
26 weeks
30 June
2021
Actual
26 weeks
30 June
2020
Change ($) Change (%)
Store sales ($NZm) 239.3 174.6 +64.7 +37.0
EBITDA ($NZm) 43.1 33.6* +9.5 +28.3
EBITDA as a % of Sales 18.0 19.2
Store Numbers 132 150
*Including government grant of $22.1 million in 1H 2020.

The result has been led by another strong performance from KFC combined with Carl’s Jr. where sales
continue to grow through both the delivery and store channels. At this stage, Taco Bell contributes only a
small proportion of the New Zealand business sales with the five stores opened to date continuing to track in
line with expectations.

Operating profit for the NZ division (excluding the effect of NZ IFRS 16) was $28.7 million (up 68.5%).

The Pizza Hut sub-franchising process continued with seven stores sold to independent franchise operators
and two new stores opened by independent franchisees over the first half year taking the total number of
stores in the wider Pizza Hut network to 105. The effect of these franchisee store sales on total RBD owned
store numbers was offset by one new KFC store opening in Takanini, Auckland, and the fifth Taco Bell store
(first in the South Island) opening in the Eastgate Shopping Centre, Christchurch. Both are trading ahead of
expectations.

The KFC Takanini store that opened in April 2021 incorporates a range of innovations that improve
sustainability, including use of solar panels and energy efficient water heating. Customer experience is also
enhanced through new features such as a dual lane drive-thru and a separate click & collect area.
An additional four Taco Bell stores and two KFC stores are expected to open before the end of the year.

KFC is proud to be celebrating its 50th anniversary in New Zealand with the first store having opened in
Royal Oak, Auckland in 1971.

Australia Operations

In $NZ terms the Australian business contributed total sales of $NZ123.0 million (up 24.1%), a store EBITDA
of $NZ16.3 million (up 37.9%) and operating profit (excluding the effect of NZ IFRS 16) of $NZ5.6 million (up
106.3%).

In $A terms total sales in Australia were $A114.8 million, up $A20.4 million (or 21.6%) on last year, primarily
due to the acquisition of five additional KFC stores in February 2021, the effect of additional store openings,
and solid same store sales growth (up 5.2 % for the half year).

Actual
26 weeks
30 June
2021
Actual
26 weeks
30 June
2020
Change ($) Change (%)
Sales ($Am) 114.8 94.4 +20.4 +21.6
Store EBITDA ($Am) 15.2 11.3 +4.0 +35.3
EBITDA as a % of Sales 13.3 11.9

Store Numbers 76 65

Australian operations continue to face challenges with COVID-19 lockdowns. These restrictions have
adversely impacted dine-in sales across the network and many of the mall and in-line city store sales are
operating below pre-COVID-19 levels. During the initial COVID-19 lockdown restrictions the Australian
business successfully expanded home delivery services and generated further growth in KFC mobile
ordering. Both initiatives continue to drive strong sales growth through these channels. With continued
investment in existing stores in the portfolio and a particular emphasis on driving workplace safety,
operational excellence and digital innovation that enhances customer experience the business has
succeeded in mitigating some of the impact of the current COVID-19 restrictions.

Store EBITDA margins of $A15.2 million (13.3% of sales) were up $A4.0 million or 35.3% on last year.
Although store EBITDA is up on last year this is primarily due to the increase in sales from store acquisitions
and new store openings. There remain underlying cost challenges from COVID-19 as well as initial set up
costs of operating Taco Bell as we look to scale the business.

Store numbers continue to grow through both new builds and acquisitions. Five KFC stores were acquired in
North Sydney early in the half year and one new Taco Bell opened in Green Square Sydney. This store
produced record opening day transactions this year for the entire Asia Pacific region. Four more new
Taco Bells are scheduled to open by the end of the year. Two Taco Bell and three KFC stores also opened
in 2H 2020.

Hawaii Operations

Total sales in Hawaii for the period were $US72.7 million with store level EBITDA of $US11.6 million (15.8%
of sales).

In $NZ terms the Hawaiian operations contributed $NZ101.0 million in revenues, $NZ16.0 million in EBITDA
and an operating profit (excluding the effect of NZ IFRS 16) of $NZ19.3 million for the period. This result
includes $11.4 million ($US8.1 million) in relation to the PPP loan drawn down at the onset of the COVID-19
pandemic last year, that was forgiven in June 2021.

Actual
26 weeks
30 June
2021
Actual
26 weeks
30 June
2020
Change ($) Change (%)
Sales ($USm) 72.7 68.7 +3.9 +5.7
Store EBITDA ($USm) 11.6 10.2 +1.4 +14.0
EBITDA as a % of Sales 15.8 14.8

Store Numbers 73 75

Reported sales are up $US3.9 million with same store sales up 9.9%. Both Taco Bell and Pizza Hut have
shown growth on 1H 2020.

Pizza Hut’s resurgence in sales and profitability experienced last year has continued into 2021. As Hawaii
struggles through the ongoing pandemic, customer loyalty to a reliable and long-established brand that offers
product value has helped to maintain sales momentum. This has been reinforced by enhanced delivery and
customer ordering capability with Pizza Hut’s web orders now accounting for more than 60% of total orders
taken.

While Pizza Hut’s sales flourished in 2020, Taco Bell’s sales were stagnant under Hawaii’s initial “stay at
home” restrictions instituted in early 2020. Sales have subsequently resurged in 2021 with the recovery in
tourism arising from Hawaii opening up its economy. Increased deliveries, largely through third party
aggregators and digital sales through Taco Bell’s mobile ordering platform also played a large role in sales
growth in 2021. Prior to the pandemic, Taco Bell had no presence in the delivery market and nominal digital
sales.

Overall store numbers in Hawaii are down by two from 1H 2020 following the closure of three stores late last
year as part of the strategy to close some legacy dine-in restaurants. During the past six months one new
Pizza Hut store has opened in Pahoa.

California Operations

Total sales in California for the period were $US55.2 million with store level EBITDA of $US9.1 million
(16.5% of sales).

In $NZ terms the Californian operations contributed $NZ77.3 million in revenues, $NZ12.7 million in EBITDA
and an operating profit (excluding the effect of NZ IFRS 16) of $NZ4.0 million for the period. These results
were above expectations at the time of completion of the California acquisition in September 2020.

Actual
26 weeks
30 June
2021
Actual
26 weeks
30 June
2020
Change ($) Change (%)
Sales ($USm) 55.2 n/a n/a n/a
Store EBITDA ($USm) 9.1 n/a n/a n/a
EBITDA as a % of Sales 16.5
n/a
Store Numbers 69 n/a

The second quarter saw record sales levels in California thanks to the launch of the new KFC Chicken
Sandwich, coupled with the third round of Federal stimulus and a relaxation in COVID-19 pandemic
restrictions. During June, California relaxed many of the pandemic trading restrictions allowing dining rooms
to reopen.

Store numbers have remained constant at the acquisition level of 69 stores. One additional KFC store was
acquired from an existing franchisee just after balance date.

Corporate & Other

General and administration (G&A) costs were $24.3 million, an increase of $1.6 million on 1H 2020, largely
as a result of inclusion of the California division costs. G&A as a % of total revenue was 4.3% which is much
closer to the traditional run rate of 4.0% of revenues. This is a reduction from 5.7% in the prior year due to
the increase in revenue and the impact of COVID-19 on the 1H 2020 results.

Depreciation charges of $18.8 million for the half year were $3.1 million higher than the prior year. The
increase is from the California division charges ($2.1 million) and the continued high level of new store builds
and store refurbishments. Depreciation of leased assets is also up $4.9 million to $18.7 million with new
leases increasing the right of use asset depreciation.

Financing costs of $17.6 million were up $3.5 million on prior year primarily due to an increase in lease
interest of $3.4 million resulting from both new leases and existing leases being extended. Bank interest
costs were $3.4 million, $0.2 million lower than prior year with increased debt levels off-set by lower interest
rates.

Tax expense was $9.4 million, up $5.4 million due to the higher earnings. The effective tax rate is 21.5%,
down from 26.3% last year due to the lower relative level of assessable income in the Hawaii division with
the PPP loan forgiveness.

Other Expenses

Other expenses for the half year totalled $1.9 million, an increase of $0.2 million on prior year. This year’s
costs included acquisition costs (Australia and California) of $0.7 million and initial one-off costs associated
with a new company-wide ERP system ($1.2 million) being introduced. A further $2-3 million is expected to
be spent on this project over the balance of this financial year. The entire project is expected to cost in
excess of $7 million and will be largely expensed.

PPP Loan

In March 2020 during the onset of the COVID-19 pandemic the Hawaiian operations received $US8.1 million
as a Government loan under the Paycheck Protection Program (a US Government assistance package
offered to US businesses affected by the pandemic). In June 2021, the US government approved converting
the PPP loan to a government grant. This resulted in $11.4 million in Other Income being recognised in the
Consolidated Statement of Comprehensive Income.

NZ IFRS 16

The impact of NZ IFRS 16 on the Group accounts for the half year is a reduction of $4.5 million on after tax
operating earnings (1H 2020 impact: $2.8 million).

The Consolidated Statement of Financial Position has right of use assets of $537.8 million, up $26.0 million since
December 2020 due to the inclusion of the five newly acquired stores in Australia, various other new stores being
opened and lease renewals. Lease liabilities of $623.8 million are also up by $33.4 million reflecting the increase in
future lease commitments.

Statements of Cash Flow and Financial Position

Bank debt at the end of the half year was down to $222.3 million compared to $235.6 million at the previous
year end. As at 30 June 2021, the Group had bank debt facilities totalling $NZ357.0 million available. Cash
and cash equivalents decreased by $8.5 million during the period resulting in net debt reducing by
$4.8 million to $195.1 million over the half year.

Operating cash flows were $62.4 million, up $24.5 million on 1H 2020 which is a direct reflection of the
strong improvement in trading results vs the prior half year and the added benefit from the California
acquisition. Operating cash flows in 1H 2020 also included $22.1 million from the New Zealand wage
subsidy.

Net investing cash outflows at $53.2 million, versus $23.9 million in 1H 2020, include the acquisition of stores
in Australia for $25.3 million. The underlying spend on new stores as well as refurbishing stores throughout
the network is also up by $5.6 million.

COVID-19

The company continues to face challenges in relation to the ongoing COVID-19 pandemic including
increased operating costs, continued trading restrictions in some markets and ongoing lockdowns in
Australia and on 18 August New Zealand. However, there have been opportunities with increased focus on
takeout and delivery channels which have helped produce strong results for this half year. Directors
acknowledge the continuing efforts of all staff in helping to deliver such a strong result in what remains
challenging circumstances.

Outlook

Despite the impact of COVID-19, store numbers are expected to continue to grow in the second half. New
store roll outs for both the KFC and Taco Bell brands will continue in New Zealand and Australia. The
Hawaiian market will see another new Taco Bell completed, together with continuing scrape and rebuild
refurbishments delivering significant sales growth. A new store development programme is under way in
California, with up to three new KFC stores targeted for opening before year end.

The overall business continues to deliver solid results across all geographic markets and this strong
performance has carried over into the second half of the year. However, whilst current trading remains strong
across all divisions, the prevailing uncertainties with COVID-19, particularly in the Australian and most
recently the New Zealand markets make it difficult to provide firm profit guidance.

Authorised by:

Russel Creedy Grant Ellis
CEO CFO
Phone: 525 8710 Phone: 525 8710

ENDS

Consolidate d Income State me nt
For the six months ended 30 June 2021
30 June 2021vs Prior30 June 2020
$NZ000'sunaudite d%unaudite d
Sales
Ne w Ze aland
239,274 37.0174,603
Australia
123,027 24.199,137
Hawaii
101,024 (7.9)109,697
California
77,316 n/a-
Total sale s540,641
41.0
383,437
Other revenue23,012 90.912,054
Total operating revenue563,653
42.5
395,491
Cost of goods sold(454,801)(33.8)(340,033)
Gross margin108,852
96.3
55,458
Distribution expenses (4,191)(45.2)(2,887)
Marketing expenses(29,297)(39.7)(20,969)
General and administration expenses(24,313)(9.1)(22,284)
Government grants- n/a22,071
Loan forgiven11,407 n/a-
Other items(913)44.5(1,646)
Operating profit 61,546
109.8
29,338
Financing expenses(17,601)(24.6)(14,127)
Net profit before taxation43,945
188.9
15,210
Taxation expense (9,440)(136.0)(4,000)
Total profit after taxation (NPAT)34,506
207.8
11,210
% sales% sales
Conce pt EBITDA be fore G&A including Gove rnme nt grants
Ne w Ze aland
43,050 18.028.333,562 19.2
Australia
16,322 13.337.911,832 11.9
Hawaii
15,950 15.8(2.0)16,272 14.8
California
12,746 16.5n/a- n/a
Total concept EBITDA before G&A88,068
16.342.8
61,667
16.1
Ratios
Ne t tangible asse ts pe r se curity (ne t tangible asse ts divide d by
number of shares) in cents
(11.8)20.5
Cost of goods sold are direct costs of operating stores: food, paper, freight, labour and store overheads.
Distribution expenses are costs of distributing product from store.
Marketing expenses are order centre, advertising and local store marketing expenses.
General and administration expenses (G&A) are non-store related overheads.
Sales and concept EBITDA for each of the concepts may not aggregate to the total due to rounding.

Non- G AAP Financial Me asure s
For the six months e nde d 30 June 2021
The Group results are prepared in accordance with New Zealand Generally Accepted Accounting Practice (“NZ GAAP”) and comply
with New Zealand International Financial Reporting Standards (“NZ IFRS”). These financial statements include non-NZ GAAP
financial measures that are not prepared in accordance with NZ IFRS. The non-NZ GAAP financial measures used in this presentation
are as follows:
1.
EBITDA including Government grants, G&A and other items
. The Grou
p calculates Earnings Before Interest, Tax, Depreciation
and Amortisation
(“EBITDA”) before G&A (general and administration expenses) and other items by taking net profit before taxation
and addin
g back (or deducting) financing expenses, other items, depreciation, amortisation and G&A. The Group also refers to this
measure as
Store EBITDA before G&A and other items
. This measure
provides the results of the Group’s core operating business
and excludes those costs not directl
y attributable to stores. This is believed to be a useful measure to assist in the understanding of the
financial performance of the Group.
The term
Store
refers to the Grou
p’s 10 operating divisions comprising the New Zealand brands (KFC, Pizza Hut, Taco Bell and
Carl’s Jr.
), the two Australia brands (KFC and Taco Bell), the two Hawaii brands (Taco Bell and Pizza Hut), and the two California
brands (KFC and Taco Bell). The term
G&A
represents non-store related overheads.
2.
Total NPAT excluding the impact of NZ IFRS 16
. Total Net Profit After Taxation
(“NPAT”) excluding the impact of NZ IFRS
16 is calculated b
y taking profit after taxation attributable to shareholders and adding back (or deducting) lease items whilst also
allowin
g for any tax impact of those items. This measure reflects the performance of the business, excluding costs associated with the
ado
ption of NZ IFRS 16 and is considered a useful measure to assist with understanding the financial performance of the Group.
The Group believes that these non-NZ GAAP measures provide useful information to readers to assist in the understanding of the
financial performance and position of the Group but that they should not be viewed in isolation, nor considered as a substitute for
measures reported in accordance with IFRS. Non-NZ GAAP measures as reported by the Group may not be comparable to similarly
titled amounts reported by other companies.
The following is a reconciliation between these non-NZ GAAP measures and net profit after taxation:
$NZ000's
Note*
EBITDA including Government grants, before G&A and other items
1
89,944 62,462
Depreciation(17,618)(14,973)
Net loss on sale of property, plant and equipment (included in depreciation)(1,162)(661)
Lease depreciation(18,695)(13,832)
Lease costs26,265 20,716
Amortisation (included in cost of sales)(4,460)(1,916)
General and administration costs - area managers, general managers and support centre(23,223)(20,812)
Loan forgiven11,407 -
Other items(913)(1,647)
Operating profit61,546 29,338
Financing expenses(17,601)(14,127)
Net profit before taxation 43,945 15,210
Taxation expense (9,440)(4,000)
Net profit after taxation34,506 11,210
Add back NZ IFRS 16 impact6,184 3,952
income tax on NZ IFRS 16 impact(1,724)(1,161)
Total NPAT e xcluding the impact of NZ IFRS 16
2
38,966 14,001
* Refers to the list of non-NZ GAAP measures as listed above.
30 June 2021
unaudite d
30 June 2020
unaudite d