Restaurant Brands Half Year Results Announcement

Directors’ Report to Shareholders
For the 28 Weeks ended 10 September 2018
(1H 2019)


Key Points

1H 2019 1H 2018 Change ($) Change (%)
Total Group sales ($NZm) 431.0 386.1 +44.9 +11.6
Group NPAT (reported) ($NZm) 20.4 19.1 +1.3 +7.0
Group NPAT (excl. non-trading) ($NZm) 21.9 20.4 +1.5 +7.0

• Net Profit after Tax for the 28 weeks ended 10 September 2018 (1H 2019) was $20.4 million (16.5
cents per share), up $1.3 million or +7.0% on the prior period (1H 2018).

• Net Profit (excluding non-trading items) was $21.9 million (17.6 cents per share), up $1.5 million or
+7.0% on the prior period.

• Total Group Sales were $431.0 million, up 11.6% on the previous half year, with the bulk of the
increase being attributable to Australian KFC acquisitions made in the second half of FY 2018.

• Combined brand EBITDA was up $5.8 million to $69.2 million with $4.6 million of the increase from
the Australian KFC business as a result of prior year acquisitions and strong same store sales
growth (+4.8%) and the New Zealand businesses delivering a further $1.1 million.

Group Operating Results

Directors are pleased to report that Restaurant Brands New Zealand Limited (RBD) has produced a first half
unaudited net profit after tax for the 28 weeks ended 10 September 2018 (1H 2019) of $20.4 million (16.5
cents per share). This compares with a reported NPAT of $19.1 million (15.5 cents per share) for the prior
half year.

After allowing for the impact of non-trading items the underlying NPAT was $21.9 million (17.6 cents per
share), up $1.5 million or +7.0% on prior year.

Total brand sales for the Group were $431.0 million, up $44.9 million or +11.6% on 1H 2018 with the benefit
of $A25.8 million in sales from the acquisition of 13 Australian KFC stores and one new store opening in the
second half of FY18. Total operating revenue was $445.8 million, up $45.9 million on prior year.

Combined brand EBITDA at $69.2 million was $5.8 million (+9.1%) up on prior year, largely because of the
contribution from KFC Australia acquisitions which delivered an additional $4.6 million.

Restaurant Brands’ store numbers now total 305, up eight on the prior year and comprise 163 in New
Zealand, 81 in Hawaii and 61 stores in Australia.

New Zealand Operations

New Zealand operating revenue was $244.9 million, up $5.8 million or +2.4% on 1H 2018.

Total store sales were $230.2 million, an increase of $4.8 million (+2.1%) on last year, with EBITDA of $41.2
million; a $1.1 million or +2.8% improvement on 1H 2018 driven mainly by the continued strong performance
of the KFC business.

New Zealand operations produced an EBIT (before non-trading items) of $23.8 million, up 5.1% on the prior
year.




RESTAURANT BRANDS NEW ZEALAND LIMITED

KFC New Zealand

1H 2019 1H 2018 Change ($) Change (%)
Network Sales ($m) 190.2 180.8 +9.4 +5.2
Network Store Numbers 100 98

RBD Sales ($m) 179.3 170.3 +9.0 +5.3
RBD Store Numbers 94 92

RBD EBITDA ($m) 37.0 35.3 +1.7 +4.9
EBITDA as a % of Sales 20.6 20.7


Restaurant Brands’ KFC New Zealand sales were $179.3 million, up 5.3% or $9.0 million on prior year with
same store sales up 3.8%. Successful product promotions and the increased use of the delivery service in
selected stores contributed to a strong first half sales performance.

Margins remained strong in percentage terms, with an EBITDA margin of 20.6% of sales being delivered in
the period. In dollar terms EBITDA totalled $37.0 million, up $1.7 million (+4.9%) on last year’s result.

Both company-owned and total network store numbers increased by two to a total of 94 and 100 respectively
with the opening of the Christchurch Airport store and a new format store in Fort Street Auckland. The Fort
Street store continues to outperform expectations and is now the prototype for similar central city stores
planned for Wellington and Christchurch.

Pizza Hut New Zealand

1H 2019 1H 2018 Change ($) Change (%)
Network Sales ($m) 55.8 54.9 +0.9 +1.7
Network Store Numbers 98 94

RBD Sales ($m) 20.5 22.9 -2.4 -10.5
RBD Store Numbers 29 34

RBD EBITDA ($m) 1.5 2.1 -0.6 -29.7
EBITDA as a % of Sales 7.1 9.0


Restaurant Brands’ Pizza Hut store sales were down $2.4 million to $20.5 million, due to a reduction in the
company’s store network to 29 stores, because of further sales to independent franchisees. Same store
sales from Restaurant Brands’ stores were also down -4.9%, rolling over +10.6% in the prior year.

Restaurant Brands’ Pizza Hut store earnings were $1.5 million (7.1% of sales), down $0.6 million or 29.7%
on the equivalent period last year reflecting both the reduction in store numbers and the ongoing cost
pressures encountered in the first half of the year, particularly in relation to increased labour rates.

Total Pizza Hut network sales climbed to $55.8 million for the half year, up $0.9 million (+1.7%) on prior year.
Whilst company owned store numbers continue to reduce, the Pizza Hut network continues to expand with
total store numbers up four on prior year to 98, with independent franchisees operating 69.

On 13 June 2018, the company entered into a ten year master franchise agreement with Yum! for the Pizza
Hut business in the New Zealand market. Under the terms of this agreement Restaurant Brands stepped into
the position of franchisor to existing independent franchisees. The company provides operational, marketing
and development support to new franchisees, and in return receives a portion of the franchise fees payable
by independent franchisees to Yum!

Starbucks Coffee New Zealand

1H 2019 1H 2018 Change ($) Change (%)
Sales ($m) 13.0 13.4 -0.4 -2.8
EBITDA ($m) 2.1 2.2 -0.1 -7.5
EBITDA as a % of Sales 15.8 16.6

Store Numbers 22 23

Starbucks Coffee saw same store sales growth over the period of +3.8%.

Total sales were down marginally on 1H 2018 by $0.4 million (-2.8%) to $13.0 million, reflecting the reduced
store network to 22 stores, following the closure of the Auckland Newmarket store in 2H 2018.

Margins decreased with the continued pressure on costs. The brand achieved an EBITDA of $2.1 million
(15.8% of sales), down $0.1 million on 1H 2018.

As Restaurant Brands has increasingly pursued a growth strategy with a much stronger emphasis on its core
quick service restaurant brands, the Starbucks Coffee business has less relevance to its core activities. On 3
September 2018, we announced the sale of the Starbucks Coffee business for $4.4 million. Settlement on
this transaction is expected to be late October 2018.

Carl’s Jr. New Zealand

1H 2019 1H 2018 Change ($) Change (%)
Sales ($m) 17.5 18.8 -1.3 -7.1
EBITDA ($m) 0.7 0.5 +0.2 +28.3
EBITDA as a % of Sales 4.0 2.9

Store Numbers 18 19

The Carl’s Jr. business continues to make steady progress towards a sustainable operation with a focus on
building margin.

Sales were down 7.1% due primarily to the closure of the Upper Harbour store (-2.0% on a same store
basis). With the focus on generating more profitable sales rather than driving sales through discounting and
promotional activity EBITDA was $0.7 million (4.0% of sales), an increase of $0.2 million or +28.3% on last
year.

Store numbers now total 18 following the compulsory closure of the Auckland Upper Harbour store in 1H
2019 due to road development.

Australia Operations

In $NZ terms the Australian business (operating the KFC brand) contributed total sales of $NZ103.4 million,
a store EBITDA of $NZ15.2 million and EBIT of $NZ6.9 million. These results are all significantly up on prior
year, primarily because of the acquisition of 13 stores and the opening of one new store during 2H 2018.

KFC Australia

1H 2019 1H 2018 Change ($) Change (%)
Sales ($Am) 95.5 66.7 +28.8 +43.1
Store EBITDA ($Am) 14.0 9.8 +4.2 +42.5
EBITDA as a % of Sales 14.7 14.7

Store Numbers 61 47

In $A terms total sales of the KFC business in Australia were $A95.5 million, up $A28.8 million (or +43.1%)
on last year, reflecting both increased store numbers following the acquisition of 13 stores during 2H 2018
and the annualised effect of the five stores acquired at the start of 1H 2018. Same store sales were strong at
+4.5% for the period.

Store EBITDA margins of $A14.0 million (14.7% of sales) are up $A4.2 million or +42.5% on last year.

Further new store build and acquisition opportunities continue to be explored.

Hawaii Operations

Total sales in Hawaii for the period were $US67.1 million with store level EBITDA of $US8.8 million
generated equating to 13.1% of sales.

In $NZ terms the Hawaiian operations contributed $NZ97.4 million in revenues, $NZ12.8 million in EBITDA
and an EBIT of $NZ4.3 million for the period.

Taco Bell Hawaii

1H 2019 1H 2018 Change ($) Change (%)
Sales ($USm) 38.6 36.6 +2.0 +5.5
Store EBITDA ($USm) 7.8 7.2 +0.6 +8.0
EBITDA as a % of Sales 20.1 19.7

Store Numbers 36 37

Taco Bell continues to perform well with total sales to date of $US38.6 million up 5.5% in total and 3.2% on a
same store basis, assisted by a strong promotional programme.

Store-level EBITDA rose to $US7.8 million (20.1% of sales) despite some increasing cost pressure in labour
and ingredients.

Store numbers have dropped by one with the closure of the Pearlridge store due to the lease expiring. The
Company has undertaken a number of minor refurbishments as part of an asset refurbishment strategy
which continue to drive sales as they are completed. A number of major store transformations are expected
to be under way in the coming months.

Pizza Hut Hawaii

1H 2019 1H 2018 Change ($) Change (%)
Sales ($USm) 28.4 27.3 +1.2 +4.4
Store EBITDA ($USm) 1.0 1.9 -0.9 -48.9
EBITDA as a % of Sales 3.5 7.1

Store Numbers 45 45

Whilst total sales were up for the brand, they were negative (-2.0%) on a same store basis. Disruption from
the implementation of a new store point of sale system, a weak economic environment in Guam and a lack
of new promotions all contributed to a softer sales outcome at $US28.4 million.

EBITDA at $US1.0 million (3.5% of sales) was also down because of significant margin pressure from
participating in value-led marketing promotions together with some higher commodity costs and rising direct
labour expense from low unemployment rates.

The company continues with an asset refurbishment strategy that will see a move away from the larger
restaurants into smaller, more cost-effective delivery and carry out (delco) units.

Corporate & Other

General and administration (G&A) costs were $19.5 million, a 5.3% increase on prior year. The increase in
the G&A cost base was partly as a result of growth of the Australian operations with various acquisitions part
way through 2H 2018 and partly through more corporate resource. G&A as a % of total revenue was 4.4%,
down from 4.6% in the prior year.

Depreciation charges of $16.5 million for the half year were $1.0 million higher than the prior year, which
primarily related to the Australian business acquisitions.

Financing costs of $3.7 million were up $1.0 million on prior year reflecting the higher borrowings required to
fund the Australian acquisition and increasing interest rates in the US.

Tax expense was $7.7 million, down $0.6 million on the prior year despite higher reported profit levels. The
effective tax rate of 27.5% reflects the increased proportion of profits that are generated off-shore and the
drop in the corporate tax rate in the US to 21% together with a non-trading capital gain on the sale of five
Pizza Huts to independent franchisees.

Non-Trading Items

Non-trading expenditure for the half was $2.1 million, an increase of $0.4 million on prior year. This year’s
costs included a $2.0 million settlement provision for New Zealand leave remediation following a review of
historical holiday pay calculations. Also included was the amortisation of franchise rights acquired on
acquisition of QSR Pty Limited and Pacific Island Restaurants Inc. (PIR) and the impairment of assets
associated with the relocation of the Australian support office. These were partially off-set by gains on the
sale of Pizza Hut stores to independent franchisees.

Cash Flow & Balance Sheet

Bank debt at the end of the half year was down to $159.6 million compared to $166.8 million at the previous
year end. As at balance date, the Group had bank debt facilities totalling $NZ257.6 million in place.

Operating cash flows continue to improve, up $9.7 million to $47.3 million with enhanced earnings, albeit
with the assistance of positive working capital movements.

Net investing cash outflows at $13.9 million versus $10.1 million last year (excluding business acquisition)
reflects the increased level of spend as the Group continues to focus on refurbishing stores throughout the
network. Cash inflows for the period saw $4.4 million received from the sale of Pizza Hut stores.

Partial Takeover Proposal

On 18 October 2018 the Group announced that it has received a non-binding indicative approach from
Finaccess Capital, S.A. de C.V. to acquire up to 75% of Restaurant Brands’ shares by way of a partial
takeover offer at $NZ9.45 cash per share (“Proposal”).

The Proposal does not constitute a takeover notice pursuant to the Takeovers Code. The Group and
Finaccess are in discussions to seek to agree and finalise the terms of takeover implementation
arrangements which, if agreed, could result in Finaccess issuing a takeover notice to Restaurant Brands
New Zealand Limited. There is no guarantee at this stage that agreement will be reached or that Finaccess
will proceed with a takeover. If Finaccess does proceed to make a takeover, the offer would be subject to
various conditions, including Overseas Investment Office consent and receiving consent from certain
subsidiaries of Yum! Brands Inc., the owner of the KFC, Pizza Hut and Taco Bell brands franchised to the
Group.

As a result of this Proposal the directors have resolved not to declare an interim dividend at this time. If the
Proposal does not result in a takeover by Finaccess, the Board will consider declaring a dividend at a later
stage.

Outlook

The overall business continues to deliver solid results across all geographic markets.

The strong performance of Taco Bell in Hawaii and the KFC brand in Australia and New Zealand is expected
to continue in the second half of the year. This will be partially off-set by the sale of the Starbucks Coffee
brand which is expected to have a minor adverse impact of approximately $1.3 million on the Group’s
EBITDA.

Directors believe that, absent any major changes to economic or market conditions, the Group is expected to
deliver a Net Profit after Tax (excluding non-trading items) for the FY19 year of between $43 million and $45
million, after adjusting for the impact of the Starbucks Coffee sale.


For further information, please contact:

Russel Creedy Grant Ellis
CEO CFO/Company Secretary
Phone: 525 8710 Phone: 525 8710

ENDS

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Restaurant Brands New Zealand Limited
Results for announcement to the market

Reporting Period 28 week period ended 10 September 2018
Previous Reporting Period 28 week period ended 11 September 2017

Amount (000s) Percentage change
Revenue from ordinary
activities
NZ$445,848 11.5%
Profit from ordinary
activities after tax
attributable to security
holder.
NZ$20,418 7.0%
Net profit attributable to
security holders.
NZ$20,418 7.0%

Interim/Final Dividend Amount per share Imputed amount per share
NA NA NA

Record Date
Dividend Payment Date

Comments: Refer to attached report

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