Restaurant Brands Half Year Results Announcement

Directors’ Report to Shareholders
For the 28 Weeks ended 9 September 2019
(1H 2020)


Key Points

1H 2020 1H 2019 Change ($) Change (%)
Total Group sales ($NZm) 442.6 431.0 +11.6 +2.7
Group NPAT (reported) ($NZm) 20.0 20.4 -0.4 -2.0

• Total Group sales were $442.6 million, up $11.6 million on the previous half year and up $24.6
million (+5.7%) on a like-for-like basis (excluding the Starbucks Coffee sales in 1H 2019). The bulk
of the increase is attributable to KFC in New Zealand and Taco Bell in Hawaii.

• Net Profit after Tax for the 28 weeks ended 9 September 2019 (1H 2020) was $20.0 million (16.0
cents per share), down $0.4 million on the prior period (1H 2019). Net profit after tax was adversely
impacted $2.9 million by the adoption of the new lease accounting standard NZ IFRS 16.

• Net Profit after tax (excluding non-trading items and the effect of NZ IFRS 16) was $25.0 million
(20.0 cents per share), up $3.2 million or +14.4% on the prior period.

• Combined brand EBITDA before G&A was up $3.4 million to $72.6 million with the New Zealand
businesses delivering an increase of $1.8 million, despite the loss of the Starbucks Coffee
contribution of $2.1 million due to the sale of the business in October 2018. A further $1.3 million
was generated in Hawaii with a strong Taco Bell performance.

Group Operating Results

Dire ctors are pleased to report the Restaurant Brands New Zealand Limited (RBD) results for 1H 2020, with
a Group Net Profit after Tax (NPAT) of $20.0 million, $0.4 million down on the same period last year.

The underlying NPAT (excluding non-trading items and the effect of the adoption of the new lease
accounting standard NZ IFRS 16) is $25.0 million, an increase of 14.4% on 1H 2019. When also taking into
account the profit effect of $1.1 million relating to the Starbucks Coffee business sold in October 2018 the
ongoing business NPAT is $4.3 million (19.7%) ahead of 1H 2019.

Total store sales for the Group were $442.6 million, up $11.6 million or +2.7% on 1H 2019. This is despite
the loss of $13.0 million in Starbucks Coffee sales in 1H 2019. Total operating revenue was $458.8 million,
up $12.9 million on prior period.

Combined brand EBITDA at $72.6 million was $3.4 million (+5.0%) up on 1H 2019, largely because of
increased performance of KFC New Zealand which delivered an additional $4.8 million.

Restaurant Brands’ store numbers now total 285, down 20 on the 1H 2019 (due primarily to the sale of the
22 Starbucks Coffee stores) and comprise 145 in New Zealand, 79 in Hawaii and 61 stores in Australia.

New Zealand Operations

New Zealand operating revenue was $246.8 million, up $2.0 million or +0.8% on 1H 2019.

Total store sales were $230.8 million, an increase of $0.6 million (+0.2%) on last year, with EBITDA of $43.0
million, a $1.8 million or +4.3% improvement on 1H 2019, driven mainly by the continued strong performance
of the KFC business.

New Zealand operations produced an EBIT (before non-trading items and lease adjustments) of $25.9
million, up 9.1% on the prior year.


RESTAURANT BRANDS NEW ZEALAND LIMITED

KFC New Zealand
1H 2020 1H 2019 Change ($) Change (%)
Network Sales ($m) 204.6 190.2 +14.4 +7.6
Network Store Numbers 103 100

RBD Sales ($m) 193.5 179.3 +14.2 +7.9
RBD Store Numbers 97 94

RBD EBITDA ($m) 41.8 37.0 +4.8 +12.9
EBITDA as a % of Sales 21.6 20.6


Restaurant Brands’ KFC New Zealand sales were $193.5 million, up 7.9% or $14.2 million on prior year with
same store sales up 5.7%. Continuing successful product promotions, the further roll out of delivery and the
effect of opening three new stores during the period have helped drive the strong sales growth.

Margins remained strong at 21.6% of sales. In dollar terms EBITDA totalled $41.8 million, up $4.8 million
(+12.9%) on last year’s result.

Both company-owned and total network store numbers increased by three to a total of 97 and 103
respectively with the opening of the Tauranga Crossing, Bombay and Courtney Place stores. The latter is the
second in the new CBD-format, following the success of the Fort Street store which opened in 2017.

Pizza Hut New Zealand
1H 2020 1H 2019 Change ($) Change (%)
Network Sales ($m) 53.6 55.8 -2.3 -4.0
Network Store Numbers 100 98

RBD Sales ($m) 18.3 20.5 -2.1 -10.5
RBD Store Numbers 30 29

RBD EBITDA ($m) 0.5 1.5 -1.0 -65.6
EBITDA as a % of Sales 2.7 7.1


Restaurant Brands’ Pizza Hut store sales were down $2.1 million to $18.3 million, despite an increase in the
company’s store network to 30 stores. Same store sales from Restaurant Brands’ stores were also down
-4.4% due to continued competitive pressure, the impact of new stores and new food delivery companies
coming into the market. A revamped menu launched late in 1H 2020 has had a positive effect on sales and
EBITDA which is expected to continue into the second half of FY20.

Restaurant Brands’ Pizza Hut store earnings were $0.5 million (2.7% of sales), down $1.0 million or -65.6%
on the equivalent period last year reflecting some sales deleverage, ongoing cost pressures (particularly in
rel ation to increased labour rates) and aggressive price competition in the market.

Total Pizza Hut network sales declined to $53.6 million for the half year, down $2.3 million (-4.0%) on prior
year. Network store numbers increased by 2 to 100 at the end of 1H 2020, with company owned stores at
30.

Carl’s Jr. New Zealand
1H 2020 1H 2019 Change ($) Change (%)
Sales ($m) 19.0 17.5 1.5 +8.8
EBITDA ($m) 0.8 0.7 +0.1 +18.0
EBITDA as a % of Sales 4.4 4.0

Store Numbers 18 18

The Carl’s Jr. business demonstrated an improved performance as the half year progressed, driven primarily
by the introduction of a delivery channel into a number of stores. The arrangement with our delivery service
provider has been successful to date, driving strong same store sales growth.

Sales were up 8.8% (+9.8% on a same store basis) and this has begun to flow through to improved earnings
with EBITDA of $0.8 million (4.4% of sales), up 18% on last year.

Store numbers remain the same as prior year at 18 stores.

Taco Bell New Zealand

Initial planning and setup is well under way to bring this exciting new brand to the New Zealand market with
the first new store in Auckland targeted to open in November. Initial costs of $0.1 million have been incurred
within concept EBITDA (with additional G&A costs).

Australia Operations

In $NZ terms the Australian business contributed total (KFC) sales of $NZ104.8 million (up 1.4%), a store
EBITDA of $NZ15.5 million (up 2.3%) and EBIT (excluding the effect of NZ IFRS 16) of $NZ6.8 million (down
1.3%). These results were adversely effected by a strengthening of the NZD-AUD exchange rate.

KFC Australia
1H 2020 1H 2019 Change ($) Change (%)
Sales ($Am) 99.5 95.5 +4.0 +4.2
Store EBITDA ($Am) 14.8 14.0 +0.8 +5.7
EBITDA as a % of Sales 14.9 14.7

Store Numbers 61 61

In $A terms total sales of the KFC business in Australia were $A99.5 million, up $A4.0 million (or +4.2%) on
last year. The ongoing store upgrade program has contributed to positive sales growth, coupled with
encouraging growth generated through the digital channels, including home delivery, in-store kiosk and
mobile app. Same store sales were also strong at +5.9% for the period.

Store EBITDA margins of $A14.8 million (14.9% of sales) were up $A0.8 million or +5.7% on last year. The
strong underlying results are supported by a well-balanced marketing calendar and continued product
innovation.

Taco Bell Australia

As with New Zealand the planning and set up is well underway with two Taco Bell stores expected to be
opened in New South Wales this calendar year. Initial store set up costs were incurred of $A0.1 million.

Hawaii Operations

Total sales in Hawaii for the period were $US70.9 million with store level EBITDA of $US9.4 million
generated equating to 13.3% of sales.

In $NZ terms the Hawaiian operations contributed $NZ106.9 million in revenues, $NZ14.1million in EBITDA
and an EBIT of $NZ5.8million for the period. These results were all significantly up on the prior year.

Taco Bell Hawaii
1H 2020 1H 2019 Change ($) Change (%)
Sales ($USm) 42.4 38.6 +3.8 +9.8
Store EBITDA ($USm) 8.4 7.8 +0.6 +8.0
EBITDA as a % of Sales 19.8 20.1

Store Numbers 36 36

This half year saw another strong performance from Taco Bell with total sales to date of $US42.4 million, up
9.8% in total and 13.7% on a same store basis. A full promotional programme including both new product
releases and the re-introduction of previously successful products, together with initial returns from
refurbished stores all helped to drive the strong sales growth.

Store-level EBITDA rose to $US8.4 million (19.8% of sales) driven by the increased sales, although the
EBITDA margin is down slightly due to continued cost pressure in labour and ingredients.

Store numbers have remained stable during the period at 36. The Company continues with its refurbishment
strategy which has helped to drive sales as store refurbishments are completed. Three new stores and major
refurbishments are underway with more planned for FY21. The Moanalua store reopened after undergoing a
major transformation, delivering sales growth of +29% on its pre-refurbishment levels.

Pizza Hut Hawaii
1H 2020 1H 2019 Change ($) Change (%)
Sales ($USm) 28.5 28.4 +0.1 +0.1
Store EBITDA ($USm) 1.0 1.0 +0.0 +0.0
EBITDA as a % of Sales 3.5 3.5

Store Numbers 43 45

Total sales were slightly up for the brand by $US0.1 million. I mproved promotional activity has helped drive
positive sales growth despite the closure of two stores. Same store sales were up 2.9% for the half year.
Despite the U.S. Pizza Hut market continuing to struggle, Pizza Hut Hawaii sales bucked the trend, in
particular benefitting from the re-introduction of the Big New Yorker pizza in the Hawaiian market.

EBITDA at $US1.0 million (3.5% of sales) was in line with prior year despite continued margin pressure
particularly from 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.

Franchise agreements for a considerable number of stores expire before the end of the calendar year and
negotiations continue with Yum! as to renewal terms.

Corporate & Other

General and administration (G&A) costs were $20.9 million, an increase of $1.4 million on prior year. This
reflects the impact of some additional headcount from FY19 now rolling into a full year and additional staff
and training costs arising from the establishment of the Taco Bell brand. G&A as a % of total revenue was
4.6%, up from 4.4% in the prior year.

Depreciation charges of $29.1 million for the half year were $12.7 million higher than the prior year. This is
primarily due to the effect of NZ IFRS 16 which added $14.0 million in lease depreciation. When adjusted for
NZ IFRS 16 the depreciation charge was $1.3 million down on the prior year mainly because of the sale of
the Starbucks Coffee business sold in FY19.

Financing costs of $13.4 million were up $9.7 million on prior year primarily due to lease interest of $10.1
million resulting from the adoption of NZ IFRS 16. Bank interest costs were $3.3 million, $0.4 million lower
than prior year with reduced borrowing levels.

Tax expense was $7.7 million and in line with the prior year reflecting similar reported profit levels.

Non-Trading Items

Non-trading expenditure for the half was $2.3 million, an increase of $0.2 million on prior year. This year’s
costs included amortisation of franchise rights acquired on acquisition of QSR Pty Limited and Pacific Island
Restaurants Inc. ($1.1 million), store closure costs ($0.3 million) and relocation and major refurbishment
costs ($0.6 million).

NZ IFRS 16

The Group adopted the new lease accounting standard, NZ IFRS 16 on 26 February 2019. The impact of the
standard has been significant on the half year financial statements. Net profit after taxation attributable to
shareholders has been negatively impacted by $2.9 million as a result of the lease depreciation of $14.0 million and
lease interest of $10.1 million (partially off-set by the removal of lease expenses of $20.2 million).

The consolidated statement of financial position also has seen significant changes with total assets increasing over
FY 2019 year-end balance by $421.7 million, primarily through the recognition of right of use assets ($356.0 million)
and the deferred tax implications of the standard. Total liabilities increased by $442.0 million with the recognition of
future lease liabilities of ($428.7 million). The net impact on retained earnings was a reduction of $46.5 million on
adoption of the standard with a further $2.9 million reduction in net profit during the period.

Cash Flow & Balance Sheet

Bank debt at the end of the half year was down to $151.2 million compared to $145.9 million at the previous
year end. As at balance date, the Group had bank debt facilities totalling $NZ258.0 million in place. Cash
and cash equivalents increased by $26.3 million during the period resulting in net debt reducing by $21.0
million to $109.8 million over the half year.

Operating cash flows continue to improve, up $16.4 million to $63.7 million. However included in this is a
$10.1 million increase in relation to NZ IFRS 16 with the remaining $6.3 million due to enhanced earnings,
albeit with the assistance of positive working capital movements.

Net investing cash outflows at $27.7 million versus $13.9 million in 1H 2019 reflects the increased level of
spend as the Group continues to focus on refurbishing stores throughout the network.

Dividend

As previously advised, the company is beginning to ramp up its capital expenditure programme. Planning for the
opening of more than 60 Taco Bell stores in New Zealand and Australia over the next five years is now underway
with the first of these due to open this financial year. This, combined with potential further acquisitions and the
refurbishment programme in Hawaii now picking up pace, is beginning to place significant demands on the capital
resources of the company. Therefore the directors have resolved there will be no interim dividend for FY20.

Outlook

The overall business continues to deliver solid results across all geographic markets and this strong
performance is expected to continue in the second half of the year.

New store roll outs for the KFC brand will continue in New Zealand and Australia with at least a further two
stores opening in each market. The launch of the Taco Bell brand will also see two stores opening in each
country by early 2020. The Hawaiian market will see at least one further Taco Bell transformation completed
by the end of the calendar year.

The company continues to evaluate further acquisition opportunities in all three existing markets, together
with the US mainland.

Directors believe that, absent any major changes to economic or market conditions, the Group will deliver a
Net Profit after Tax (excluding non-trading items and the effect of NZ IFRS 16) for the FY20 year of at least
10% in excess of the FY19 year.









For further information, please contact:

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

ENDS

Cons olidate d Income State me nt
For the 28 week period ended 9 September 2019
9 September 2019 vs Prior10 September 2018
28 weeks%28 weeks
$NZ000's
Sale s
KFC193,487 7.9179,264
P izza Hut18,309 (10.5)20,452
Starbucks Coffee- (100.0)13,049
Carl's Jr.19,001 8.817,461
Total New Zealand sales230,797 0.2230,226
KFC 104,846 1.4103,391
Total Australia sales104,846 1.4103,391
Taco Bell63,998 14.056,115
P izza Hut42,921 4.041,255
Total Hawaii s ale s106,919 9.897,370
Total sales442,563 2.7430,987
O ther revenue16,196 9.014,861
Total operating revenue458,759 2.9445,848
Cost of goods sold(367,136)0.2(366,536)
Gross margin91,623 15.579,312
Distribution expenses (2,319)15.0(2,016)
Marketing expenses(25,010)4.8(23,871)
General and administration expenses(20,933)7.2(19,523)
EB IT be fore non-trading ite ms43,361 27.933,902
N o n- tra d ing ite ms(2,312)10.4(2,095)
EBIT41,049 29.131,807
Financing expenses(13,365)264.9(3,663)
Ne t profit be fore taxation27,684 (1.6)28,144
Taxation expense (7,679)(0.6)(7,726)
Total profit afte r taxation (NPAT)20,005 (2.0)20,418
Net profit after taxation excluding non-trading items and NZ IFRS 1625,008 14.421,853
% sales% sales
Conce pt EB ITD A be fore G&A
KFC41,779 21.612.937,018 20.6
P izza Hut499 2.7(65.6)1,450 7.1
Starbucks Coffee- n/an/a2,061 15.8
Taco Bell(82)n/an/a- n/a
Carl's Jr.830 4.418.0704 4.0
Total New Zealand43,026 18.64.341,233 17.9
KFC 15,598 14.92.615,197 14.7
Taco Bell(59)n/an/a- n/a
Total Aus tralia15,539 14.82.315,197 14.7
Taco Bell12,625 19.711.711,305 20.1
P izza Hut1,446 3.4(1.7)1,471 3.6
Total Hawaii14,071 13.210.112,776 13.1
Total conce pt EBITDA be fore G&A72,636 16.45.069,206 16.1
Ratios
N e t tangible as s e ts pe r s e curity (ne t tangible as s e ts divide d by numbe r of
s hare s ) in ce nts
(42.5)(35.6)
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.

N on-GAAP Financial M e as ure s
For the 28 week period ended 9 September 2019
The Group results are prepared in accordance with New Zealand Generally Accepted Accounting Practice (“GAAP”) and comply with
International Financial Reporting Standards (“IFRS”). These financial statements include non-GAAP financial measures that are not
prepared in accordance with IFRS. The non-GAAP financial measures used in this presentation are as follows:
1. EBITDA be fore G&A. The Group calculates Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) before
G&A (general and administration expenses) by taking net profit before taxation and adding back (or deducting) financing expenses,
non-trading items, depreciation, amortisation and G&A. The Group also refers to this measure as Conce pt EB ITD A be fore G&A.
The term Conce pt refers to the Group’s eight operating divisions comprising the New Zealand divisions (KFC, Pizza Hut, Taco Bell
and Carl’s Jr.), two Australian divisions (Taco Bell and KFC) and the two Hawaii divisions (Taco Bell and Pizza Hut). The term
G&A represents non-store related overheads.
2. EB IT be fore non-trading. Earnings before interest and taxation (“EBIT”) before non-trading is calculated by taking net profit before
taxation and adding back (or deducting) financing expenses and non- trading items.
3. Non-trading items. Non-trading items represent amounts the Group considers unrelated to the day to day operational performance of
the Group. Excluding non- trading items enables the Group to measure underlying trends of the business and monitor performance on a
consistent basis.
4. EBIT afte r non-trading ite ms. The Group calculates EBIT after non-trading items by taking net profit before taxation and adding
back financing expenses.
5. Total NPAT excluding non-trading items and NZ IFRS 16. Total N et Profit After Taxation (“N PAT”) excluding non- trading
items and NZ IFRS 16 is calculated by taking net profit after taxation attributable to shareholders and adding back (or deducting)
no n- tra d ing ite ms a nd N Z IF RS 1 6 a d jus tme nts whils t a ls o a llo wing fo r a ny ta x imp a c t o f tho s e ite ms .
The Group believes that these non-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-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-GAAP measures and net profit after taxation:
$NZ000'sNote *
EBITDA be fore G&A172,636 69,206
Depreciation(15,149)(16,426)
Net loss on sale of property, plant and equipment (included in depreciation)(487)(112)
Lease depreciation(13,996)-
Add back lease costs20,199 -
Amo rtis a tio n (inc lud e d in c o s t o f s a le s )(1,385)(1,920)
General and administration costs - area managers, general managers and support centre(18,457)(16,846)
EB IT be fore non-trading ite ms243,361 33,902
N o n- tra d ing ite ms * *3(2,312)(2,095)
EBIT afte r non-trading ite ms441,049 31,807
Financing expenses(13,365)(3,663)
Ne t profit be fore taxation 27,684 28,144
Income tax expense(7,679)(7,726)
N PAT20,005 20,418
Add back IFRS16 impact3,871 -
income tax on IFRS16 impact(956)-
Net profit after taxation excluding NZ IFRS 1622,920 20,418
Add back non-trading items2,312 2,095
Income tax on non- trading items(224)(660)
Net profit after taxation excluding non-trading items and NZ IFRS 16525,008 21,853
* Refers to the list of non-GAAP measures as listed above.
** Refer to Note 2 of the financial statements for an analysis of non-trading items.
2020 half year
(28 we e ks)
unaudite d
2019 half year
(28 we e ks)
unaudite d

---

Restaurant Brands New Zealand Limited
Results for announcement to the market

Reporting Period 28 week period ended 9 September 2019
Previous Reporting Period 28 week period ended 10 September 2018

Amount (000s) Percentage change
Revenue from ordinary
activities
NZ$458,759 2.9%
Profit from ordinary
activities after tax
attributable to security
holder.
NZ$20,005 -2.0%
Net profit attributable to
security holders.
NZ$20,005 -2.0%

Interim/Final Dividend Amount per share Imputed amount per share
Interim n/a n/a

Record Date n/a
Dividend Payment Date n/a

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.