Annual Shareholders Meeting 2021 – Chairman’s Address

Annual Shareholders Meeting 2021

Chairman’s Address

There is not a country or business in the entire world that has not been affected by the spread of COVID-
19. Restaurant Brands has been no exception. However, as we noted in the annual report, ours is an
adaptable company operating in a resilient industry, and we weathered the storm despite the headwinds
of compulsory store closures, increasingly difficult operating procedures, and economic uncertainty.

Operating with multiple brands in a variety of geographical markets has helped us diversify the risk and
dilute the adverse impact of the COVID pandemic.

For instance, while our KFC stores in New Zealand were completely closed, our Pizza Hut business in
Hawaii delivered strong sales growth as customers had their pizzas delivered to their homes at
significant rates. We also successfully finalized the acquisition in California of 69 KFC and Taco Bell
restaurants, moving us forward in our strategy to increase our presence in a new and relevant market.

As evidenced in our results, although the financial outcomes for the “year of COVID” are below
expectations, they were certainly satisfactory in the face of unprecedented circumstances.

As we discuss the 2020 results, please note that Restaurant Brands changed its balance date last year
from February to December 31st, which means our trading results as of December 2020 correspond to
a full 52-week year, and not only to the 44 weeks of the prior period. Where necessary, I will quote a
full year equivalent, so that the comparison with underlying performance will be clearer.

These, then, are some of the highlights for the last financial year:

• Total sales for the year of $892.4 million, up against the previous 44-week period, with full year
positive same-store sales growth across all three operating divisions. On an equivalent 12-
month basis, total sales were up 7.0%, or $58.6 million.

• Reported net profit after tax of $30.9 million for the year, up $0.8 million on the 44-week
reporting period last year, despite the adverse impacts of COVID-19.

• Combined store EBITDA (pre NZ IFRS 16) for the period of $147.3 million, up 27.0% on the
previous 44-week period. On an equivalent 12-month basis, EBITDA was up over 7.5%, or
$10.3 million.

• The acquisition of 69 KFC and Taco Bell stores in California on September 2nd, 2020,
generated an additional $51.9 million in sales and $8.5 million in EBITDA in the last four months
of the financial year.


Restaurant Brands’ store numbers went up from 287 to 348, mainly on the back of the 69-store
California acquisition. There were some Pizza Hut store sales in New Zealand, and a couple of closures
in Hawaii.

Launched in New Zealand and in New South Wales in late 2019, the Taco Bell brand has continued to
grow, with eight stores now successfully operating in New Zealand and Australia.

COVID-19 was particularly testing for the New Zealand division, with the entire business being closed
for nearly five weeks in March-April 2020. The Australian, Hawaiian, and Californian operations,
although adversely affected, have generally continued to trade through the crisis (with some limitations),
and have sustained much less of an adverse profit impact.

The net profit after tax (NPAT) for the year ended December 31st, 2020 (FY20) of $30.9 million, was
up 2.8% on the reported NPAT of $30.1 million for the prior period. As previously noted, the prior period
reported NPAT is for 44 weeks compared to 52 weeks in this year.

In addition to the change of balance date, two other factors distort the prior year comparison: the
continuing negative impact of NZ IFRS 16, and Other Income and Expenses (unrelated to normal
trading).

On a like-for-like comparison of the current year’s 12-month result versus the prior year’s 10 months of
normalised trading, the underlying trading profit is estimated at $46.7 million, which is up 2.2% on the
prior equivalent year.

This is after adjusting for the negative impact of the NZ IFRS 16 accounting lease standard, which was
at $2.5 million and the shorter trading period, estimated at $7.1 million, in addition to the impact of
higher net expenses unrelated to normal trading of $4.8 million.

Later on in our presentation, Russel will provide more insight into our individual divisional performance.

With the California acquisition in September of last year, Restaurant Brands has now established a firm
presence in each of its four key operating markets. This has significantly diversified our earnings stream
from the 100% New Zealand base of five years ago to a position where the New Zealand business now
represents only slightly more than 40% of total sales and earnings.

We have a growth strategy in place for each market.

We will continue to deliver organic same-store sales and profit growth through: operational
improvements, store refurbishments, channel enhancements, innovative marketing, new product
development, and staff attraction and retention initiatives.

We see significant additional growth opportunities by expanding our networks in each location through
either new store builds or acquisitions. New store builds in the KFC and Taco Bell brands is a prime
focus for the Australian and New Zealand markets. We plan to have 60 Taco Bell stores opened in
these two markets over the course of the next four years, and a steady build of 4-6 KFCs a year.

Despite the fact that we have owned the business for just over six months, we also have considerable
new KFC store prospects in California, where we are already under way with three new stores.

We also expect to be opening our first KFC store in Hawaii in the next 1-2 years.

Acquisitions remain opportunistic in nature, but the Californian and Australian markets in particular
provide significant opportunities. In the past couple of months, we settled the purchase of five KFC
stores in urban Sydney and we are currently finalising the acquisition of another KFC store in California.

Ongoing investment in both new store builds and acquisitions will continue to be undertaken within a
disciplined and structured framework. We will only embark upon those offering clear value creation for
our shareholders.

Before the COVID-19 outbreak, the transformation and rationalisation strategy for the Hawaiian store
network had begun to gain momentum, despite continuing delays in the local council approval process.
The construction of new Pizza Hut delivery stores and the closure of some of the larger inefficient red
roofs has helped produce solid growth in the Pizza Hut business. The transformation of the larger Taco
Bell stores continues to produce sales results well ahead of expectations, with four stores already
transformed and another two scheduled for completion this year.

Our capital expenditure requirements continue to increase as we build and refurbish stores and
undertake further acquisitions. Investing cash outflows over the year increased to $178 million, of which
$122 million was for acquisitions, primarily the purchase of the California business.

This has increased our net bank borrowings to $200 million, which is well within our $350 million facility
level, and we continue to meet required banking covenants very comfortably.

Operating cash flows continue to reach new highs, finishing this year at $111 million, this with only four
months trading out of the California business.

Despite the strength of these cash flows, the residual risks around COVID and the current intensive
capital expenditure programme have led the Board of Directors not to declare a dividend for FY20.

I would like to take this opportunity to acknowledge the contribution made by my fellow directors over
the past 12 months, and especially during the height of the COVID-19 crisis. This effort enabled us to
make the right decisions in leading the company during uncertain times.

Your directors have worked well together and actively contributed to an effective governance regime. I
greatly value their support and guidance.

We have a strong Board with a wide range of skills. To further strengthen it, this year we have recruited
a new director. We welcome Maria Elena Pato-Castel (Malena) as an independent non-executive
director for the company, effective April 1st, 2021.

Malena is based in Spain and she brings to the Board of Restaurant Brands over 30 years’ experience
in the consumer goods and restaurant industries, most recently having spent nine years at AmRest
Holdings. Additionally, she has served on the Boards of several Yum! Brands subsidiaries that operated
Pizza Hut and KFC stores in Spain. Malena will be seeking your approval for re-election later in the
meeting.

I would also like to thank Russel Creedy and his management team for their continued outstanding
efforts in adding further value for all shareholders. Russel and his team have successfully steered the
company through what has been one of the most disruptive crises of recent times.

I wish to recognize the entire staff for their hard work and loyalty. It has been a challenging year that
they have overcome with dedication and commitment.

And finally, I would like to thank you, our loyal shareholders, for your continued support and interest in
the company.

I am optimistic that we have left the hardest times behind us and that, in moving forward, we will
embrace new growth and expansion opportunities.

---

Highlights FY 20 Year
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Note:
• FY 19 = 52 weeks to 25 February 2019
• FY 19D = 44 weeks to 31 December 2019
• FY 19D (R) = Restated FY 19D (pro rata) for equivalent 52-week period
1
EBITDA is earnings before interest, tax, depreciation and amortisation. It is a non-GAAP financial measure and is not prepared in accordance with NZ IFRS
FY 19FY 19DFY 19D
(R)
FY 20
Group Sales $794.0m$705.5m$833.8m$892.4m
Net Profit after Tax$35.7m$30.1m$35.6m$30.9m
Brand EBITDA
1
$129.2m$116.0m$137.1m$147.3m
stores in
California
settled
Acquisition of

Profit reconciliation FY 19D to FY 20
8
$NZm
*Estimated (unaudited) NPAT over the eight weeks to February 2020, prorata’d from the 44 weeks to December 2019
FY 19DFY 20
Reported NPAT30.130.9
Impact of NZIFRS 164.57.0
Other Income & Expenses4.08.8
Change of Balance Date*7.1-
Comparable Trading NPAT45.746.7
+2.8%
Reported NPAT

Completion of US acquisition sets final piece
on beach head expansion strategy
• Confirms wisdom of geographic
and brand diversification
strategy.
• Offshore operations will
comprise over 50% of RBD
sales in FY21.
• With additional US business
RBD expects to reach its
$1billion dollar revenue target
this year.
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*FY20 existing businesses with California acquisition annualised.
New ZealandAustraliaHawaiiCalifornia
% of
Revenue
% of Store
EBITDA*

Growth Opportunities
RBD has now established a presence in each of its four key operating markets
and has a store growth strategy for each market.
Continue to deliver organic same-store sales and profit growth through: operational improvements, store refurbishments,
channel enhancements, innovative marketing, new product development, and staff attraction/retention initiatives.
10
New ZealandAustraliaHawaiiCalifornia
• New store builds.• New store builds.
• Acquire smaller franchises.
• Position for major acquisition
opportunity.
• Establish first RBD store in
Hawaii by 2022.
• New store builds.
• Acquire smaller franchises.
• Formalize structure and grow store
network as master franchisee.__
• Continue RR exit strategy
(delco replacements).
• Build new delcos where
appropriate.
__
• Accelerate new store roll out.• Accelerate new store roll out.• Continue store transformation
strategy.
• Maintain current business.
• Recommence store builds in smaller
format.
• Close/rebrand loss making stores.
______

Net borrowings up with completion of RBD California settlement,
somewhat mitigated by strong operating cash flows
11
Net Debt: EBITDA*1.3:11.2:11.9:1
Gearing(ND:ND+E)37%36%47%
*FY 19D EBITDA grossed up 44 weeks to 52 weeks, EBITDA including lease costs (pre NZ IFRS16)
Net Debt
$NZm
Ratios

Board of Directors
12

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