RBD - Restaurant Brands

[Snoopy]

So Note 5 says they made a loss of $1.664m selling stores with $3.192m of booked goodwill attached. (Note 8 suggests originally about $13m but written down over prior years).

The entire amount was not 'written-off' but as a result of the sales the amount of goodwill owned by the company decreased.

The buyers paid more than $2.484m for PP&E valued by RBD at $958k so the buyers were willing to pay at least $1.5m for goodwill which appears as cold-hard cash.


Thanks for the analysis PT. It starts to make sense when put like that. Buyers willing to pay more than asset value is not bad news. However, I don't think RBD management are quite off the hook. The buyers payed RBD $1.5m in goodwill and as a result the goodwill on the books at RBD reduced by $3.192m.

That still means $3.192m - $1.5m = $1.692m of goodwill has been taken off the books yet not paid for. Does that not represent a $1.692m loss for shareholders, based on the audited goodwill valuation of AR2012?

SNOOPY

[Snoopy]

Snoopy - did the goodwill right off relate to just the sold stores or is that they sold slight under carrying value so they revalued all the stores downwards (via goodwill right off).

I would be questioning their annual impairment reviews (and the auditors review of the review) if they were that much out on just the sold stores. Remind me how many they sold again?

CJ the wording in the Analysis of Expenses was "Goodwill disposed of", under the super heading 'Loss on sale of stores'. So I take that to mean all $3.192m of goodwill removed from the accounts directly related to the disposed of stores only.

Total number of stores disposed of was 13 during the year (AR2013, p17).

Referring to my previous post in response to Paper Tiger, it looks like $1.692m worth of goodwill was not paid for in the sales. That is on average $130,000 per store on a total price of some $500,000 (my estimate). Is that enough of an error to get anyone else annoyed?

RBD management obviously do not admit to any such goodwill valuation error because the goodwill attached to their remaining stores is unchanged during the year.

SNOOPY

[Snow Leopard]

... Does that not represent a $1.692m loss for shareholders, based on the audited goodwill valuation of AR2012?

SNOOPY

The total loss on the transactions is the $1M664 (in note 5). The loss on sale of goodwill will be less than this because there will be other expenses involved in the sales that add to the loss.

What RBD considers the carrying value of goodwill of an outlet as part of a national chain and the value an independent operator is willing to pay are going to vary.

Best Wishes
Paper Tiger

[bull....]

CJ the wording in the Analysis of Expenses was "Goodwill disposed of", under the super heading 'Loss on sale of stores'. So I take that to mean all $3.192m of goodwill removed from the accounts directly related to the disposed of stores only.

Total number of stores disposed of was 13 during the year (AR2013, p17).

Referring to my previous post in response to Paper Tiger, it looks like $1.692m worth of goodwill was not paid for in the sales. That is on average $130,000 per store on a total price of some $500,000 (my estimate). Is that enough of an error to get anyone else annoyed?

RBD management obviously do not admit to any such goodwill valuation error because the goodwill attached to their remaining stores is unchanged during the year.

SNOOPY

valid points but rbd historically write off goodwill on sold stores but dont have any impairment on carrying stores.
considering they have raised there growth valuations on pizza hut the goodwill loss may be less on the stores to be sold this year because they can sell them for more based on the increased sales provided they acheive them otherwise the opportsite may happen.

[Snoopy]

The total loss on the transactions is the $1.664m (in note 5). The loss on sale of goodwill will be less than this because there will be other expenses involved in the sales that add to the loss.

What RBD considers the carrying value of goodwill of an outlet as part of a national chain and the value an independent operator is willing to pay are going to vary.


The question heading this post is something that I have believed for some time. Of course when RBD was trading on a PE of 10 there was a much larger margin of safety than now. So overstating profits by not reducing goodwill by a couple of million did not affect my decision as to whether RBD was a good investment or not. Now the PE is nearer to 15, some of what were small points should not be so readily swept under the carpet.

PT I fully accept there may be some business broker fees and/or legal costs associated with the sale of each PH branch. However it is hard to imagine these being much more than say $10k on each sale. So instead of these PH stores having $130,000 written off their goodwill on sale, it might ""only" be $120,000.

I also accept your point that goodwill associated with being part of a national chain, and goodwill as agreed to by an independent buyer may vary. But I would have thought that, if anything, a good independent operator who knows their local market might be willing to pay a bit more for that PH store on the block (implying higher goodwill than on the RBD books), not less. Nevertheless I do see that on a one off basis, a variation of goodwill by $120,000 could happen on the sale of a store.

The problem I have with this argument is that we are not talking about the sale of one store. We are talking about the sale of thirteen stores. Why is the 'error' in book valuation something like 20% of thirteen store? "Whoops" once or twice I will tolerate. "Whoops" thirteen times and I start to wonder whose shoes have been resoled with banana skins.

SNOOPY

PS For those 'worried about the recent RBD share price decline, I should point out it went ex-dividend last Friday.

[CJ]

PS For those 'worried about the recent RBD share price decline, I should point out it went ex-dividend last Friday.ACC has just sold down a bit too.

[winner69]

Snoopy - work out what Mr Beneish would think

He has a model to identify the manipulators

[Snoopy]

Snoopy - work out what Mr Beneish would think

He has a model to identify the manipulators


Thanks Winner. I looked up the Beneish factor, did the back of the envelope calculation and it came out "non manipulative".

However, that doesn't address my point. Nowhere in that Beneish calculation is the word 'goodwill' mentioned.

The Pizza Hut goodwill was generated when RBD took over 'Eagle Boys Pizza' all those years ago. After FY2006, the accounting standard changed and PH goodwill that was being written off at over $2m per year was officially frozen. However, goodwill does imply a certain level of ongoing profitability and I would argue that with Pizza Hut this hasn't happened, despite a series of 'one off' PH goodwill write offs since FY2006 along the way. Nevertheless this 'error' is coming to light as RBD seeks to sell down their chain to smaller operators.

SNOOPY

[Snoopy]

CJ the wording in the Analysis of Expenses was "Goodwill disposed of", under the super heading 'Loss on sale of stores'. So I take that to mean all $3.192m of goodwill removed from the accounts directly related to the disposed of stores only.

Total number of stores disposed of was 13 during the year (AR2013, p17).

Referring to my previous post in response to Paper Tiger, it looks like $1.692m worth of goodwill was not paid for in the sales. That is on average $130,000 per store on a total price of some $500,000 (my estimate). Is that enough of an error to get anyone else annoyed?


I have dived back another year in the records to FY2012 where eight Pizza Hut stores were sold to owner operators.

Net sales were $1.237m. Property plant and equipment disposed of $1.045m. So implied goodwill 'bought' by the new owners was near enough to $192k (I say near enough in deference to Paper Tiger's point that there may be extra sale related charges that form part of the net price paid eg legal fees for contracts drawn up by RBD to get the sales process right. If for example legal fees totaled $25,000 for each of the 8 stores sold, that would sum to $200k. Thus the implied goodwill paid as a collective amount would go up to $192k +$200k = $392k).

I note in the accounts that total goodwill disposed of was $1.518m. Let's give PTs assumption the benefit of the doubt and say that $392k of goodwill was bought by the new owners collectively. That still leaves $1.518m- $0.392m= $1.126m to be accounted for and that comes to $140,750 per store 'written off'.

Frankly, I don't think that much variation on what surely must be a circa $500k purchase is an acceptable error to hold on the books in FY2012. And my subsequent FY2013 calculations show the goodwill was still overvalued in FY2013 because of similar goodwill write downs in PH stores sold in the current year.

SNOOPY

[CJ]

Thanks Snoopy.

What's your current view on the current price. I know you are a long time holder but do you consider it under/over/fairly valued?

Disc: I sold down half my holding today to lock in my gains and to increase my cash holding (sold a few other shares too. Should have sold a little while ago but was a bit slow). I think it is at its upper range and its dividend yield not as attractive as when I first bought. May look to get back in on weakness or if Carl Jr goes better than expected.

[Snoopy]

I have dived back another year in the records to FY2012 where eight Pizza Hut stores were sold to owner operators.


If you go to the intangible asset page in the annual report (AR2013 p47), management outline conditions that allow the goodwill in the books to be retained at today's values. These assumptions include predicted future cashflows and EBITDA margins.

In the annual report 2012, RBD were looking for a 2% sales growth per annum over 2013-2015

Actual sales for PH FY2012 were $45.477m, and actual sales FY2013 were $47.876m which represents a sales growth of 5.3% (very good).

EBITDA margin was forecast to be 7.0-10.0%.

Actual EBITDA margin for FY2013 was:

$3.296m / $47.876m = 6.9% (Not so good)

Clearly sales were above expectations and margins a touch lower. I guess that is why there was no general write off of goodwill for FY2013 required, at least in management's eyes.

Looking forward however is where things get interesting. PH Cashflows are forecast to rise another 4-6% per year on top of the turnaround year we have just had. And EBITDA margins are forecast to increase to 8.1-8.6% as a proportion of sales.

Now I would be the first to congratulate Pizza Hut on their turnaround performance over FY2013. But to mirror that 5% sales performance again over the next two years, while this time increasing margins from 6.9% to 8% plus is I think a stretch target. This provides more evidence to me that the Pizza Hut goodwill on the RBD books is still overvalued.

SNOOPY

[Snoopy]

Thanks Snoopy.

What's your current view on the current price. I know you are a long time holder but do you consider it under/over/fairly valued?


If I reprise my dividend valuation technique I consider dividend payments (excluding special dividends) over a five year period, effectively a retail business cycle. The dividend performance of RBD over the last 5 years is as follows:

FY2013: 6.0c, 9.5c
FY2012: 6.0c, 9.5c
FY2011: 7.0c, 10.0c
FY2010: 4.5c, 8.0c
FY2009: 3.0c, 4.0c

That averages out to 13.5cps or 19.3cps gross.

If you regard an over the cycle yield of 8% gross being about right, this translates to a fair value of RBD shares of $2.41

Of course you have to understand the crudeness of what is a fairly simple mathematical model. Implied within this is a slight trimming of the dividend going forwards (on average). And of course zero value has been applied to Carl Juniors.

At $2.83 I would agree that RBD is no longer outstanding value. But in 3-4 years Carl Juniors could easily bridge my 'value gap'. As a result I intend to hold onto all my RBD shares going forwards.

SNOOPY

[CJ]

Thanks Snoppy

Confirms my own assessment, with Carl Jr being the wild card. It will do well in some demographics but seems over the top for others - still to try myself.

[CJ]

Another persons veiw:


In a reversal of 2007, last week two private equity firms asked me how the equity market could place such a high value on a business such as Restaurant Brands. Restaurant Brands is a very well-managed company but its core business exhibits little growth (although it does have a new offering, Carl's Jr, which is likely to go well). My private equity colleagues would place a value of about 5 times ebit on Restaurant Brands after adjusting for Carl's Jr - the equity market is currently valuing this business at close to 10 times, presumably on the basis of its high dividend yield.

It looks like he got it right in the last nine words of the paragraph. However, with the recent increase in price, that yield has reduced.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10890960 Sparky has already commented on the Ryman comments in the article on the RYM thread.

[bull....]

reuters data im looking at shows current market pe 18 , next yr 15.9
ryman pe next yr 26 , yr2 = 22 div yield 1.91 , 2.2
rest brands pe next yr 14 , yr2 = 12 div yield 5.97 , 6.4

obviously ryman is priced as more of a growth stock than resturant brands and resturant brands as a div stock , but then again resturant brands looks better value on a pe basis compared to both the market and ryman so perhaps more upside in rest brands than ryman?

[CJ]

reuters data im looking at shows current market pe 18 , next yr 15.9
ryman pe next yr 26 , yr2 = 22 div yield 1.91 , 2.2
rest brands pe next yr 14 , yr2 = 12 div yield 5.97 , 6.4

obviously ryman is priced as more of a growth stock than restaurant brands and restaurant brands as a div stock , but then again restaurant brands looks better value on a pe basis compared to both the market and ryman so perhaps more upside in rest brands than ryman?RYM is growing at 15%+ per year.

Pizza Hut is well ...
Starbucks is well....
KFC has been going OK but that is after a big refit program so I'd only expect a few % growth per year there. Carl Jr is the wildcard - I haven't sampled yet but do Kiwis really want, from what I have heard, overly fatty burgers with overly sugary sauce - hopefully not. Still 6% yield is better than the bank and Carl Jrs will do really well in some areas.

[bull....]

Was in KFC other day carpark was pretty full and the que was nearly back to the door. ( havnt really seen this before )
raised some i brows until got inside and see they have $5 lunchbox and their 1,2,3 $ ( isnt this a georgie pie thing they did?) specials so i see they have moved to match all these dominos, mcdonald similar specials smart move as they dont want a pizza hut experience happening with kfc.
Although i note now a much more sharper pizza hut website with a good promo offering , things might be on the up.

[bull....]

nice annual meeting commentary today by the chairman forecasting steady to slightly higher results , also note milford increased their holding in the growth fund for rbd fits in with my targets in that if you take a 2 - 3yr view its cheap.
carl jr 173000 one week wow imagine if you had 80 stores at a % of this and you get the drift of the potential upside

[winner69]

nice annual meeting commentary today by the chairman forecasting steady to slightly higher results , also note milford increased their holding in the growth fund for rbd fits in with my targets in that if you take a 2 - 3yr view its cheap.
carl jr 173000 one week wow imagine if you had 80 stores at a % of this and you get the drift of the potential upside

$173,000 per week is $9m a year

80 stores of this size 3/4 billion -- WOW

Just imagining

[artemis]

Quite a lot of questions at the meeting about CJ. Mostly from one shareholder. Chairman said that the Hamilton CJ was tracking at almost the same take as opening. There was a mention of 2% slowdown after opening but I was not very clear what that referred to or what time frame. Bull, did you get that? CJ opening week in Mangere was 2nd highest opening week world wide. Bit sad really. RBD are looking to CJ as a 2nd big engine over time (KFC being the big one).

Big takeup of $4.90 pizzas and $5 KFC lunch boxes were big helps to bottom line.

Non question of the day from the floor - video clips too loud. I kid you not.

Several kids present as well. Don't see that very often. KFC and pizza might have helped.

A couple at the top table looked bored and fidgetty. You'd think they could pretend to be interested for an hour or so once a year.

[bull....]

Quite a lot of questions at the meeting about CJ. Mostly from one shareholder. Chairman said that the Hamilton CJ was tracking at almost the same take as opening. There was a mention of 2% slowdown after opening but I was not very clear what that referred to or what time frame. Bull, did you get that? CJ opening week in Mangere was 2nd highest opening week world wide. Bit sad really. RBD are looking to CJ as a 2nd big engine over time (KFC being the big one).

Big takeup of $4.90 pizzas and $5 KFC lunch boxes were big helps to bottom line.

Non question of the day from the floor - video clips too loud. I kid you not.

Several kids present as well. Don't see that very often. KFC and pizza might have helped.

A couple at the top table looked bored and fidgetty. You'd think they could pretend to be interested for an hour or so once a year.

cheers for the feedback would have liked to go , did you get served kfc afterwards or pizza ?

you can play around with the CJ figure of 173k opening week figure and adjust it to a more normal figure ill us a 50k per week per store as an example for normal conditions

so 50k x 52 = 2.6m sales per yr
multiply this by say 20 stores and you get 52 million in extra sales

If you take the ceo comment of a 19.6% ebitda average you get 10mil odd extra ebitda not to shabby

[CJ]

They are targeting 40 stores with Revenue of $200m so that is $100k per week. This seems realised given they are large stores with drive through (I think). Going beyond this, they will probably start cannibalising their own sales.

I still think demographic will be key for them but they are all too well aware about this with KFC is my guess. Parody website (Not RBD but links to RBD site): www.kai.maori.nz

[bull....]

They are targeting 40 stores with Revenue of $200m so that is $100k per week. This seems realised given they are large stores with drive through (I think). Going beyond this, they will probably start cannibalising their own sales.

I still think demographic will be key for them but they are all too well aware about this with KFC is my guess. Parody website (Not RBD but links to RBD site): www.kai.maori.nz (http://www.kai.maori.nz)

200m at ebitda of 19.6% = 39mil
net profit is on average 72% of ebit roughly so will add nicely to net profit in time and possibly divs

[CJ]

200m at ebitda of 19.6% = 39mil Remember that is EBITDA. These will all be brand new stores so there is a lot of capex that needs to be spent (at least $2m per store if they have fully ownership? which I expect they would do, folllowed by a sale and lease back later on) which will impact cashflow.

[Brfc]

i went to The AGM on friday in Wellington

Its was great way of really knowing whats happening within the Company with yours truely asking about 80%

of the questions from the floor plus i had one and one with 2 directors after the meeting whilst most people

where eating lots of free KFC/Pizzas !

From what i have obtain i think this a great investment for 2 reasons

Firstly at the Moment they have great Mature business which changes very little from year to year (KFC mainly )
which is great has this gives the company a steady earnings approx 51Mill Ebit every year which underpines the business and the share price/dividend in other words agreat cash cow each year with very little varation to the above and subsequently very little movement from the share price and the 7.81% yeild on a share price of 2.80.(in other words a great insurance for your investment )

Secondly the exciteing bit

as mentioned you have the safety of the above mature business plus you have a growth company (karls jnr ) all in one

Its early days for Karls Jnr they currently have 4 stores open but they have a target of 40 stores in NZ

Currently after lots of questions at the above meeting the Hamilton branch of Karls jnr after the intial opening as settled to approx 150k t/o pw (its first week was approx 170k the other 3 stores opening week was all over 100k pw) and with the other 3 stores avge approx 83k pw = a avge over the 4 stores being 100k pw

So now down to the numbers:

40 stores(a good thing is to achevie the 40 stores there will be no increase in debt as the increase in store numbers all come from the cash cow as mentioned above so no more debt to fund growt!) if they can maintain there avge of 100k pw with a ebit margin of 20 % = 20,000 pw ebit (the figure of 20% ebit is what they think they can acheive however it will take a liitle while to acheive this as the set up costs will be high to start with but once established this is the target)

However taking in account i have come up with the following : (please be aware these are the numbers that i have obtain direct they are of course subject to change and it will take time for the above numbers to come though.)

40 stores x 100 pw x 20 % ebit = 800k pw x 52 = 41.60 mill Ebit for Karls jnr

Put this figure on top of the existing ebit ie 41.60
51.5
------------------------------------------------------------------------------------------

93.10Ebit pa

Depreciation (25.14)

Gen/admin (target 4% of T/O) (20.00)

Interest (0.7)

Tax (13.2)

Profit 34.2


EPS 34.00

x pe 12.5 Target Share price = 4.25

dividend 34.00

Yeild if the above targets met on current share price will be 16.32 % in a few years on your inv today

All in all it is not going to happen overnight but taking the above factors in consideration my reccomendation is

to slowly buy the stock at current prices and if the Carls jnr doesnt work for any reason the share price is under pinned by KFC etc to approx 2.40 and since Friday i have been adding to my existing exposure to this stock.

[Snoopy]

They have great Mature business which changes very little from year to year (KFC mainly )
which is great has this gives the company a steady earnings approx 51Mill Ebit every year which underpins the business and the share price/dividend in other words a great cash cow each year with very little varation to the above and subsequently very little movement from the share price and the 7.81% yeild on a share price of 2.80.(in other words a great insurance for your investment )


Welcome to the forum Brfc, and thanks for the comprehensive thoughts on where you think RBD is going.

You say RBD has a cash cow via KFC. But RBD have indicated themselves that future store transformations are unlikely to see the returns the previous transformations have provided, simply because the bigger higher profile stores have already been done. Also I see management talk about a 'T2' transformation program for KFC stores which is yet unproven. Does this not sound like a recipe for more cash in to get less cash out?

SNOOPY

[Snoopy]

Its early days for Karls Jnr they currently have 4 stores open but they have a target of 40 stores in NZ

Currently after lots of questions at the above meeting the Hamilton branch of Karls jnr after the intial opening as settled to approx 150k t/o pw (its first week was approx 170k the other 3 stores opening week was all over 100k pw) and with the other 3 stores avge approx 83k pw = a avge over the 4 stores being 100k pw

So now down to the numbers:

40 stores(a good thing is to achieve the 40 stores there will be no increase in debt as the increase in store numbers all come from the cash cow as mentioned above so no more debt to fund growth!) if they can maintain there avge of 100k pw with a ebit margin of 20 % = 20,000 pw ebit (the figure of 20% ebit is what they think they can achieve however it will take a little while to achieve this as the set up costs will be high to start with but once established this is the target)


Well it would certainly be nice to see $100k turnover per week from each Carl Juniors store. However, I would suggest it is a little too early to garner what the longer term turnover of Carl Juniors might be, given it is so early in the franchises development. It would be nice to think Carl Juniors could go one up on KFC in this regard. But you should also remember that the 'other' franchisor (the Michael Jones consortium) have plans for 8 Carl Juniors stores in NZs largest market, Auckland. That surely is quite a big hole in the nationwide footprint of Carl Juniors, as far as RBD is concerned. Personally I would be happy if Carl Juniors could simply match KFC on a per restaurant brands store nationwide basis.

You quote a 20% EBIT figure as targeted for Carl Juniors, but then go on to say that set up costs will restrain this target while the Carl Juniors Brand builds up scale. If RBD's past accounting procedures are followed, almost all of these set up costs will form part of head office general and administrative expenses. That 20% EBIT margin, I think you will find does not include the apportioned cost Auckland based head office crew allocated to making Carl Juniors perform, nor any proportion of nationwide advertising and promotion that IMO should be included when assessing the true profitability of the Carl Juniors brand.

Nevertheless, apart from a couple of your assumptions being slightly too bullish, IMO, I don't have too much of a problem with your analysis. You may be in the market for more RBD shares, but I won't be selling you any of mine!

SNOOPY

[NZSilver]

On the rare occasion I have takeaways from bk, mds, KFC ect, we are talking 3-4x year total. Usually when I'm travelling with others. Yesterday I was in palmy and I though I would check out the Carl's jr for a quick dinner as I have been keeping an eye on RBD.

It was right opposite MDs, there was a good selection of food. You received a number and your order was brought to your table (something different for these kind of food outlets). The counter lady said they have been very busy.

The food wasnt bad taste wise but it wasnt anything special either (chicken Santa Fe) and nothing huge considering the small combo was $10.40. I havnt been to MDs for a while but I think it is better value $8 for a Big Mac combo?

Restraunt well lit up, easy to see and clean simple layout.

I believe there are currently 3 Carl's jr stores. I guess with their menus they are really trying to compete with bk and mds

I think if it was a really good burger I might be more inclined to buy some RBD, not convinced now however will keep an eye on them.

Would be interested to know what burger I should try next.

[winner69]

Carl's burgers look pretty healthy to me. Must try one when I can

http://www.stuff.co.nz/life-style/videos/9023988/Carls-Jr-ads-Sexy-or-sick

[bull....]

Carl's burgers look pretty healthy to me. Must try one when I can

http://www.stuff.co.nz/life-style/videos/9023988/Carls-Jr-ads-Sexy-or-sick

im going to the states so im gonna try one over there , then try one back here see if any difference

[baller18]

Make sure u try shake n shack bull if your in east coast, seriously best burgers....

[Harvey Specter]

Teco ball back on the menu ... maybe.... in 3 years .... maybe ....

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11160720

[winner69]

Pretty solid sales result announced yesterday. No comment on margins / profitability so that's good news.

Will keep the shareprice around the 3 buck level for longer

Can't see huge growth though ......Russell was pretty bullish on the radio this morning

So RBD still a solid performer churning out those divies

[Harvey Specter]

Winner - disagree. Huge growth potential if they get CJ right. Location is very important given high level of capex needed.

Will be interesting to see how they go compared to BurgerFuel who I understand are planning a big push in NZ this year.

[klid]

Make sure u try shake n shack bull if your in east coast, seriously best burgers....

Shake Shack, be prepared to wait in line 1 hour + to even get in if you go in Manhattan!!! I couldn't wait :(
But you KNOW it's good when that happens.
Apparently on their website you can see the queue as they have live cameras there.

RBD looks like it's going to drive right past $3.

[winner69]

RBD was$2 when they announced Carls 2 years ago. It crept up to $2.50 mid 2012 and when Carl's starting selling something price moved to $3 odd.

Does that suggest that maybe a buck is already 'built' into the RBD price at the moment .....or AR punters just looking at current yield and paying accordingly irrespective of what's going on? What you think?

Interesting that price today is about the same as a year ago .....price gone nowhere

[winner69]

Looking at Carl's growth I was surprised to see Q3 sales of $4.0m were less than Q2 sales of $4.3m .....eve though there were 3 more stores

Bit strange I thought

[Harvey Specter]

Looking at Carl's growth I was surprised to see Q3 sales of $4.0m were less than Q2 sales of $4.3m .....eve though there were 3 more stores

Bit strange I thoughtInteresting. Maybe they arne't doing as well as I thought. Looking at same store sales is also confusing - I assume it only relates to one week so opening week they earned $90k, now only earning $20k a week from that store. That is low, especially given the level of capex.

[bull....]

RBD very highly correlated with nz50 at the moment so as the index goes so goes rbd , sideways channel between 2.70 - 3 so maybe a punt around 2.70 if you think the index will bounce soon.
CJ always will have skewd sales as they rollout because of the high demend you get opening few weeks so probably need to look at how many they roll out each qurter to work out the skew

[winner69]

Interesting. Maybe they arne't doing as well as I thought. Looking at same store sales is also confusing - I assume it only relates to one week so opening week they earned $90k, now only earning $20k a week from that store. That is low, especially given the level of capex.

There were 16 weeks in Q2 v 12weeks in Q3

[Rep]

Yep RBD's second quarter is 16 weeks.

Rolling over one store's part week opening is not a particularly good indicator of the overall brand performance. The Carl's Jr stores appear to be doing an average weekly revenue that is higher than what has been achieved across the KFC network although on relatively small amount of stores. The EBITDA 20% target is more or less what KFC has been achieving over the several years that Russel has been in charge and now that the red ink @ Pizza Hut has been stemmed and some rationalisation of the Starbucks network then it isn't unreasonable to expect some growth in earnings year on year.

IMHO the competition has stepped up their game in response to Carl's Jr although Harvey's comment about a BurgerFuel store rollout probably isn't worrying anyone at RBD. Apart from one store, all of the Carl's Jr stores to date have a drive-thru with the capital build and revenue in a different league from a Burgerfuel store. It's a bit like comparing Nando's with KFC - BFW stores are more boutique compared to a mass market QSR like a KFC.

[winner69]

If you add up the number of weeks stores are open (like Q2 is 4 stores at 16 weeks and 1store for 4 weeks to give 68 'store weeks') and then take average sales per week per store here is the trend -

Q413. $82k
Q114. $62k
Q214. $64k
Q314. $52k

So Q3 was a bit weak compared to previous 2 quarters

Might keep this going to see what happens

So is $50k to $60k a week per store the going rate ..... Still quite a lot over 60 stores if they ever get there

There was a article in The Herald about the Auckland Airport Carl's jnr ........did it really cost $4.5 million to set up?

[winner69]

If you add up the number of weeks stores are open (like Q2 is 4 stores at 16 weeks and 1store for 4 weeks to give 68 'store weeks') and then take average sales per week per store here is the trend -

Q413. $82k
Q114. $62k
Q214. $64k
Q314. $52k

So Q3 was a bit weak compared to previous 2 quarters

Might keep this going to see what happens

So is $50k to $60k a week per store the going rate ..... Still quite a lot over 60 stores if they ever get there

There was a article in The Herald about the Auckland Airport Carl's jnr ........did it really cost $4.5 million to set up?

[winner69]

The carls website lists 16 stores ....yet sales repo says 8

Have they opened the other 6 in the last week or so?

[Rep]

There are two franchisees for Carl's Jr in New Zealand. Forsgren NZ obtained rights that totalled 8-9 stores in Auckland, RBD obtained subsequently the rights to open 50 or more stores in NZ incl Auckland.

[Rep]

The $4.5 million was for the Carl's Jr and the adjacent KFC store also operated by RBD

[winner69]

There are two franchisees for Carl's Jr in New Zealand. Forsgren NZ obtained rights that totalled 8-9 stores in Auckland, RBD obtained subsequently the rights to open 50 or more stores in NZ incl Auckland.

The website said the info only relates to Restaurant Brands Carls ....and they list 16 ...jst a tad confused

[winner69]

I think the 16 does include the non RBD ones it lists the Henderson ne and that is Forsgren rone

[Harvey Specter]

If you add up the number of weeks stores are open (like Q2 is 4 stores at 16 weeks and 1store for 4 weeks to give 68 'store weeks') and then take average sales per week per store here is the trend -

Q413. $82k
Q114. $62k
Q214. $64k
Q314. $52k

So Q3 was a bit weak compared to previous 2 quarters

Might keep this going to see what happens

So is $50k to $60k a week per store the going rate ..... Still quite a lot over 60 stores if they ever get there

There was a article in The Herald about the Auckland Airport Carl's jnr ........did it really cost $4.5 million to set up?good work.

For comparison, BFW is about $20-30k per week for a fit out of $300-400k. RBD probably has better economies on certain items plus isn't a franchise model.

[winner69]

So the $60k a week doesn't quite give $200m a year over 60 stores, but pretty close to it

All we need is to work out how much they can make out of this ..... with as Snoopy says all the unallocated costs sitting in HO admin which in reality will be extra costs directly related to Carls. I just have a feeling that it will not be as profitable as some say it will.

In theory Carls should be a game changer and take RBD from a 300m company to a 1/2 billion company. Haven't had much success in the past with game changers have they ..... but this time is different eh

Snoopy has been there several times over the years and what he posted a few pages back always echos in my mind - Does this not sound like a recipe for more cash in to get less cash out?. Was talking about KFC (I think) but has applied to RBD over the years

So maybe just a little bigger dividend is on the cards in a few years time .... double I doubt it

[winner69]

RBD very highly correlated with nz50 at the moment so as the index goes so goes rbd , sideways channel between 2.70 - 3 so maybe a punt around 2.70 if you think the index will bounce soon.
CJ always will have skewd sales as they rollout because of the high demend you get opening few weeks so probably need to look at how many they roll out each qurter to work out the skew

On those numbers I did average weekly sales were down from 64k to 52k in Q3.

There were 3 new stores opened (for a combined 16 weeks v combined 60 weeks for the 5 stores that were already opened) in Q3.

If there was a high demand in those opening weeks then the 52k weekly average is "skewed' to the high side, ie average weekly sales less than 52k.

The 64k average in Q2 only had 1 new store in it so the 'skew' would not have been that great.

So maybe average weekly sales in real terms without the buzz of openings are less than 50k. If so this average is about the same as KFC as per reps note.

Early days yet ......maybe momentum still building.

[Snoopy]

So maybe average weekly sales in real terms without the buzz of openings are less than 50k. If so this average is about the same as KFC as per reps note.

Early days yet ......maybe momentum still building.


Well sleuthed Winner. It would not surprise me at all if CJs turned out to be no better than KFC in the long run. I am not disappointed. There aren't many who could take on the Colonel in a fair fight and come out on top in the long run.

Let me add I am not disappointed. If CJs can match KFC on a same store basis, then I am very satisfied.

SNOOPY

[winner69]

Telling us that 100,000 likes on cjs Facebook page suggests this is a measure of success / progress.

So lets monitor eh

cjs about 100,000 and only a year old ......KFC and Maccas old as about 300,000 odd and poor old burgerfuel only 30,000 odd (although store has its page as well with a handful of likes)

So pretty good ......cjs on a roll with those who love liking things - I like it

C'mon snoopy ....go to Facebook and like cjs

[Snoopy]

RBD was$2 when they announced Carls 2 years ago. It crept up to $2.50 mid 2012 and when Carl's starting selling something price moved to $3 odd.

Does that suggest that maybe a buck is already 'built' into the RBD price at the moment .....or ARE punters just looking at current yield and paying accordingly irrespective of what's going on? What you think?


I think the latter. One of the few high yielding shares not caught in the government crossfire. TUA is another and that has gone up sharply over that same period too.



Interesting that price today is about the same as a year ago .....price gone nowhere


Which just goes to show why you shouldn't just watch the price. RBD is having an amazing year, the most significant since they pulled out of Australia. Pizza Hut finally turned around, with maybe a profit even on the horizon? Carl's bedding in without the real dip in corporate profitability I feared. KFC incrementally locking in their gains. Even dear old Starbucks had a big rise in same store sales last quarter. RBD is the place to be for income investors on the NZX I reckon.

SNOOPY

[winner69]

Yes snoopy I agree ..... Good to see Starbucks positive .....and ph chugging along a bit better .....and KFC still performing

So maybe 4 bucks in a years time when cjs starts putting real runs on the board

[Snoopy]

So maybe 4 bucks in a years time when cjs starts putting real runs on the board


I would settle for four bucks in a couple of years, with a 16cps per year net dividend payment (around 8% gross) while I am sitting in the waiting room.

SNOOPY

[noodles]

Referenced RBD on the CKF thread
http://www.sharetrader.co.nz/showthread.php?8710-CKF-Collins-Food&p=449676&viewfull=1#post449676

[bull....]

Glad to see some focus on KFC operations, my experience was some stores were pretty good while some were outright disgusting.

My wife used to work for KFC when she was a teenager she said that the way they set up the stores customer service could not be a priority. She said you could walk into any KFC in the country and it would be the same, food all over the tables, floors and visible kitchen area, and the same is true today as it was then. When my wife worked there (and looks to be the same today) they would have one person on the burger station making the burgers, the burgers always went to drive thru first - if she was serving on the front counter during peek times could have up to 4 orders waiting for their burgers with the rest of the tray all made up - couldn't serve anymore till burgers done, burgers would just about be ready then get put to a drive thru order, making customers at the counter wait longer while the rest of their food goes cold sitting on a tray. The front counter staff were supposed to clean the restaurant tables and empty rubbish bins in between orders, peek time would go for up to 4 hours where the ques were 10 deep, there was no time for this. It was not uncommon to find rubbish bins overflowing and tables piled high with rubbish, especially in the stores with the upstairs restaurants. There was a set of defined "operating procedures" that you could not deviate from, from my wifes experience, the issue was the burger station, the duty manager would normally man this station during peek times to have more staff serving. The food was always there (ocasionally chicken would run out - from poor inventory managment) the service couldn't keep up - their processes do need to change - if they can do that then they could acheive faster/ cleaner service.

http://www.stuff.co.nz/business/better-business/9564777/Service-is-key-for-new-KFC-chief

[JayRiggs]

Yea KFC really do need to clean up their service.
My visits to KFC this year have not been good. At the Birkenhead one a few months ago during the evening, all the tables on the bottom floor were covered in trays, burger wraps, cups and chicken bones. I had to ask staff to clean it up before my friends and I could sit down to start our meal.
For a fast food restaurant, the service is very slow! At times I need to wait several minutes for my order, even when the store is not busy. And they always seem to be out of stock. I was so keen to try the Mexican burger one night at Browns Bay, only to find they ran out of burger buns! So I asked for a wrap instead, the guy at the counter had to quickly ask someone if they had wraps available.
I would also like it if KFC can clean their floors properly. All the floors seem to be covered in chicken grease, making it slippery and quite hazardous. I'm lucky I haven't slipped over yet, but I have been close on a few occasions. Maybe they need a new cleaning solution to cut through that grease.

Hoping this general manager can clean up KFC's act a bit.

disc: holding for dividends and the annual voucher :)

[In4a$]

Problem with the KFC and other fast food joints is the lazy, dirty, B*/+&$$, customers. 20 years ago everyone cleaned their own tables, put the rubbish in the bin and trays on the shelf. Now many expect someone to clean up after them, I blame it on poor parenting. KFC and the others need to put some signs up to remind people to clean up after themselves.
disc: dont hold long term, good stock to buy in the dips and sell in the peaks.

[forest]

All the floors seem to be covered in chicken grease.

JayRiggs if you do not like all this grease on the floor why put any into your arteries? :)

[JayRiggs]

Problem with the KFC and other fast food joints is the lazy, dirty, B*/+&$$, customers. 20 years ago everyone cleaned their own tables, put the rubbish in the bin and trays on the shelf. Now many expect someone to clean up after them, I blame it on poor parenting. KFC and the others need to put some signs up to remind people to clean up after themselves.
disc: dont hold long term, good stock to buy in the dips and sell in the peaks.

I agree with you. If I remember correctly back in the early to mid 90s, Ronald McDonald himself used to promote cleaning up after you've finished your meal. They made it fun by having separate bins for paper and cups, though alot of people couldn't bother to differentiate between the two. I think all fast food chains should re-introduce these initiatives.

[JayRiggs]

All the floors seem to be covered in chicken grease.

JayRiggs if you do not like all this grease on the floor why put any into your arteries? :)

I make sure to wash the grease away with plenty of Pepsi Max :p

[forest]

Maybe they need a new cleaning solution to cut through that grease.

JayRiggs when RBD find an new cleaning solution will you use that as a Pepsi Max replacement? :)

[forest]

Go to Burger Fuel and they serve you with respect.

[In4a$]

I agree with you. If I remember correctly back in the early to mid 90s, Ronald McDonald himself used to promote cleaning up after you've finished your meal. They made it fun by having separate bins for paper and cups, though alot of people couldn't bother to differentiate between the two. I think all fast food chains should re-introduce these initiatives.
You are right with the Ronald McDonald add, my kids used to proudly wipe the table with a paper napkin then put the rubbish in the bin, was all part of eating out. Then sing that "make it click" jingle on the drive home.

[JayRiggs]

Maybe they need a new cleaning solution to cut through that grease.

JayRiggs when RBD find an new cleaning solution will you use that as a Pepsi Max replacement? :)

I smell the scent of lemons after the floors are cleaned, so I swear they must be using Mountain Dew to clean their floors. :t_up:
Would you like to try some?

[bull....]

heading back to the bottom of that trading range

[winner69]

On those numbers I did average weekly sales were down from 64k to 52k in Q3.

There were 3 new stores opened (for a combined 16 weeks v combined 60 weeks for the 5 stores that were already opened) in Q3.

If there was a high demand in those opening weeks then the 52k weekly average is "skewed' to the high side, ie average weekly sales less than 52k.

The 64k average in Q2 only had 1 new store in it so the 'skew' would not have been that great.

So maybe average weekly sales in real terms without the buzz of openings are less than 50k. If so this average is about the same as KFC as per reps note.

Early days yet ......maybe momentum still building.

Updated the Carls Jnr numbers

Over the last quarter weekly sales averaged $38,700 per store(total sales divided by weeks stores open - for this quarter 8 stores open for 12 weeks)

Last quarter the numbers was $52,300

No new stores and no opening specials

Is current level about where it is going to level off or is the downtrend to continue

[Xerof]

Nice work winner. Could it be the curiousity/novelty factor is wearing off, are customers trying and getting turned off the product, or are they simply dying off from the fat intake?

[bull....]

heading back to the bottom of that trading range

Now back at the top of the range be interesting if we can break out this time - 3rd attempt in nearly 2 yrs

[Snoopy]

Now back at the top of the range be interesting if we can break out this time - 3rd attempt in nearly 2 yrs


RBD is my biggest NZX holding. It is surprising to me that many commentators late year considered it fully or overvalued. Even my broker rang and recommended that I sell down my holding because if anything happened at RBD it would have a significant effect on my portfolio overall. At the time I looked around at other retail shares to diversify into and found nothing better. Nevertheless, instead of having all my retail eggs in one basket I made a big decision - to diversify.

1/ I would risk adjust my overall retail holding so that the trend of buying alternative retail goods over the internet had little effect.
2/ I looked for retail investments that were not beholden to greedy mall owners ramping up their rents annually.
3/ I decided to stick to the food sector as that is generally fairly recession proof.
4/ I split my food investments into four: the first KFC an established cash cow. The second Carl's Junior, an emerging brand with national sales prospects. The third Pizza Hut, where some clever reworking of price points and the disposal of less well performed stores had the potential to revive profits in what was seen as a tired brand. The fourth, Starbucks, which is similarly resizing down to a profitable core.

In summary, I actively decided to do nothing at all. With the growing sickness among almost all other retailers this has proven to be a very successful strategy. Having followed this company for some time, I would be very surprised if there is a significant break out, either on the upside or the downside. Current dividend levels I believe fully support the current share price. And growth initiatives should mitigate the usual negative effect of rising interest rates. It is steady as she goes for me, as those dividends continue to roll in.

SNOOPY

[percy]

On Monday evening I attended an excellent presentation put on by Macquaries.
They felt the NZ ecomony was improving,and with low unemployment the out look for RBD was looking very bright.Increasing sales leading to increased dividends.
The trust I am a trustee of brought a parcel of RBD shares on Tuesday afternoon at $2.92.

[shonen knife]

I almost pulled the trigger on getting some of these a few months back when they were in the $2.70 range as I thought Carl's Junior would be a winner. I still kind of wish that I did get some, but I am not sure that Carl's is enough to offset KFC and Pizza Hutt—especially if Carl's is just a fad and Burger Fuel expands. Carl's is still very popular here in Singapore whereas KFC and Pizza Hut doesn't seem to have a great brand image (at least to me anyway). Looking at Carl's Junior's Facebook page it seems like the service and standards are pretty piss poor—although people likely to bother commenting are usually the ones who are unhappy with it.

I would think that in an improving economy, people would be keen to avoid Pizza Hut, Starbucks and KFC and replace them with more premium options like Hell's Pizza, local coffee shops and avoid fried chicken altogether...

In saying that, I would still consider getting some if it comes back down to the $2.70 range.

[Bjauck]

I would think that in an improving economy, people would be keen to avoid Pizza Hut, Starbucks and KFC and replace them with more premium options like Hell's Pizza, local coffee shops and avoid fried chicken altogether...

In saying that, I would still consider getting some if it comes back down to the $2.70 range.

RBD was one of my first equity investments. Since then they have provided me with way above market average returns. Mind you, the SP has been on a rollercoaster, and timing would be so important with this shareholding. Way back when I bought RBD, healthy eating was a hot topic and I had doubts that RBD may be caught on the wrong-side of the health issue and the Political Correctness line.

Should one avoid companies that sell or have or use sugary foods, fatty foods, carcinogens, dangerous items, weapons, chemicals, artificial additives, rainforest clearing, environment polluters, animal testing, poor wages, child labour, bribery, price fixing. Ethics, societal fashion and possible government regulation can be relevant to so many companies.

[shonen knife]

RBD was one of my first equity investments. Since then they have provided me with way above market average returns. Mind you, the SP has been on a rollercoaster, and timing would be so important with this shareholding. Way back when I bought RBD, healthy eating was a hot topic and I had doubts that RBD may be caught on the wrong-side of the health issue and the Political Correctness line.

Should one avoid companies that sell or have or use sugary foods, fatty foods, carcinogens, dangerous items, weapons, chemicals, artificial additives, rainforest clearing, environment polluters, animal testing, poor wages, child labour, bribery, price fixing. Ethics, societal fashion and possible government regulation can be relevant to so many companies.

Sure, but for the record, I am not avoiding it because it is bad for you, more that it is low quality bad stuff. E.g. in a good economy I would buy Suntory Hakushu and not even think about touching Johnnie Walker Red. Not trying to be a snob, but why anyone goes to KFC, Starbucks or Pizza Hut I will never know.

[Bjauck]

Fair point. I did misinterpret. Taking the other viewpoint, perhaps in a good economy, people undertake big investments, such as buying houses cars and other big ticket items, leaving less for takeaways, premium or otherwise. Personally I don't think Hell's is of better quality than Pizza Hut, and I like KFC ( as a treat when I visit with my shareholder voucher!)

[Bjauck]

Nice work winner. Could it be the curiousity/novelty factor is wearing off, are customers trying and getting turned off the product, or are they simply dying off from the fat intake?
In such short time?

Saturated fat is not bad for you: http://www.telegraph.co.uk/health/healthnews/10679227/Saturated-fat-is-not-bad-for-health-says-heart-expert.html , Of course as with any research...you always need to check to see who is funding it.

I would not do a "supersize me" on sushi, chcocolate bars, fish and chips, or muesli either.

BTW, I support GST being removed from fresh fruit and veg.

[Harvey Specter]

Saturated fat is not bad for you

BTW, I support GST being removed from fresh fruit and veg.My understanding is saturated fat is not bad provided your body is in good shape (I dont mean physically though it would help). It causes issues when other issues are present.

Re GST: Great idea but an implementation nightmare. Keep GST simple in my opinion.

[baller18]

I almost pulled the trigger on getting some of these a few months back when they were in the $2.70 range as I thought Carl's Junior would be a winner. I still kind of wish that I did get some, but I am not sure that Carl's is enough to offset KFC and Pizza Hutt—especially if Carl's is just a fad and Burger Fuel expands. Carl's is still very popular here in Singapore whereas KFC and Pizza Hut doesn't seem to have a great brand image (at least to me anyway). Looking at Carl's Junior's Facebook page it seems like the service and standards are pretty piss poor—although people likely to bother commenting are usually the ones who are unhappy with it.

I would think that in an improving economy, people would be keen to avoid Pizza Hut, Starbucks and KFC and replace them with more premium options like Hell's Pizza, local coffee shops and avoid fried chicken altogether...

In saying that, I would still consider getting some if it comes back down to the $2.70 range.

I like your point about if Carl's is enough to offset pizza hut or KFC, however, I was taking a stroll around the city, and burgerfuel was dead, whereas, carl was busy...

Don't forget in an improving economy, it is still the rich who gets richer, whereas, the poor still stays poor...

[shonen knife]

I like your point about if Carl's is enough to offset pizza hut or KFC, however, I was taking a stroll around the city, and burgerfuel was dead, whereas, carl was busy...

Yeah that's why I am also a bit undecided on the stock. Being out of the country it is hard to gauge how popular something is and I get a distorted view from the people that I do ask.


Don't forget in an improving economy, it is still the rich who gets richer, whereas, the poor still stays poor...
Sad but true-ish I guess...

[bull....]

Back into channel

[Snoopy]

On Monday evening I attended an excellent presentation put on by Macquaries.
They felt the NZ ecomony was improving,and with low unemployment the out look for RBD was looking very bright.Increasing sales leading to increased dividends.
The trust I am a trustee of brought a parcel of RBD shares on Tuesday afternoon at $2.92.

Well Percy, despite what 'the market' was hinting at before the result was released (with the price drifting down to $2.85), I think that yours and Macquarie's confidence has been vindicated.

I got excited when I heard on the radio that the result was up 20%. But then I found that figure included "non-trading items". The real operational after tax net profit was up 6.8%. Nevertheless in a tough retail market, and with Carl's Junior still very much in development phase, this was rather better than I expected. A modest increase in dividend accompanies the higher profit too. Meanwhile the gearing ratio is down from a moderate 19% last year to just 11% at balance date.

I expect to remain a Restaurant Brands junkie for many years to come on the strength of this result.

SNOOPY

discl: hold RBD

[blackcap]

I have a very modest holding left over from a selling mistake about 5 years ago (I sold slightly less than my holding) which does mean however that I get a free dinner once a year. But just looking at the share price so now and then in the paper I get the feeling that the $3 mark seems to be a very tough nut to crack?

[percy]

Well Percy, despite what 'the market' was hinting at before the result was released (with the price drifting down to $2.85), I think that yours and Macquarie's confidence has been vindicated.

I got excited when I heard on the radio that the result was up 20%. But then I found that figure included "non-trading items". The real operational after tax net profit was up 6.8%. Nevertheless in a tough retail market, and with Carl's Junior still very much in development phase, this was rather better than I expected. A modest increase in dividend accompanies the higher profit too. Meanwhile the gearing ratio is down from a moderate 19% last year to just 11% at balance date.

I expect to remain a Restaurant Brands junkie for many years to come on the strength of this result.

SNOOPY

discl: hold RBD

A very good result.
Snoopy;How much do RBD pay Yum Brands in franchise fees?
Years ago when I looked it was 10% of gross revenue.
Do you know whether it has changed.?

[winner69]

Great result

Even with refurbishments and the roll out of Carls (with no gain) the cash flow has managed an increased dividend and repaid nore than $6m of debt.

Cant do much better than that

Current cash flows support a share price of $3.70 to $4.20, even using modest future growth rates of 5% to 7%

That $3 mark seems hard to break through .....but I have a feeling that once it does break through (soon) than the share price could easily head to $3.50 plus (by Xmas eh)

[bull....]

Another attempt at the top of the range, a break should give a run to 3.30 me thinks. Weird this company so under- performed the nzx dont ya think when you look at similar companies in aus have gone gang-busters.
Reuters consensus is 3.2 at the moment but not sure if its updated for latest results

[Snoopy]

A very good result.
Snoopy;How much do RBD pay Yum Brands in franchise fees?


If you go to page 43 of the FY2013 Annual Report, then look under 'Analysis of Expenses', you will see that RBD paid $18.560m in Royalties last financial year. That covers the KFC and Pizza Hut brands that are owned by YUM. But is also covers Starbucks and Carl's Junior that are not owned by YUM. There is no specific breakdown in the segmented results which tells exactly what franchise fee amount goes into each of the four boxes ( KFC, PH, Starbucks and Carl's Jumior).



Years ago when I looked it was 10% of gross revenue.
Do you know whether it has changed.?

If you take the franchise fees paid in total and divide it by the total operating revenue I get:

$18.560m / $311.813m = 5.95%

However, it may net be quite as simple as that, as I will explain in my next post.

SNOOPY

[Snoopy]

If you take the franchise fees paid in total and divide it by the total operating revenue I get:

$18.560m / $311.813m = 5.95%

However, it may net be quite as simple as that, as I will explain in my next post.


I need to take you back to 21st May 2003, when a shareholder Mr G Bulling put a resolution to the AGM that RBD should fully disclose their franchise fees. The issue was not the annual franchise fee, but the once in ten year renewal fee that allowed RBD to keep operating their brands in NZ under the master franchise agreement. The resolution was lost as the board deemed such information commercially sensitive. But the board had this to say about franchise fees:

"Shareholders may take as a reference point the renewal fees disclosed for the original purchase of 122 stores ( Pizza Hut and KFC ) from Pepsi, ie $55,000 per store adjusted by the New Zealaand CPI from 1997 to the renewal date in 2007."

It is now 2014. So if we look at the CPI data since that time:

http://www.rbnz.govt.nz/statistics/key_graphs/inflation/

Than use 2.5% as an average inflation figure,the renewal fee in todays dollars given the 17 years elapsed since 1997 can be estimated as follows:

$55,000 x (1.025)^17 = $55,000 x 1.52 = $83,600 per store for a ten year period. That translates to $8,360 per store per year. Last year RBD has 177 stores at year end. I would argue you should amortise this one off cost over each year of the ten year franchise agreement. So the amount amortised each year shoud lbe:

177 x $8,360 = $1.479m

Add that to the actual franchise fees paid above:

($18.560m + $1.479m) / $311.813m = 6.42%

So sorry Percy, I still can't get to your 10%. But there is one more chapter to round out this story.

SNOOPY

[percy]

If you go to page 43 of the FY2013 Annual Report, then look under 'Analysis of Expenses', you will see that RBD paid $18.560m in Royalties last financial year. That covers the KFC and Pizza Hut brands that are owned by YUM. But is also covers Starbucks and Carl's Junior that are not owned by YUM. There is no specific breakdown in the segmented results which tells exactly what franchise fee amount goes into each of the four boxes ( KFC, PH, Starbucks and Carl's Jumior).



If you take the franchise fees paid in total and divide it by the total operating revenue I get:

$18.560m / $311.813m = 5.95%

However, it may net be quite as simple as that, as I will explain in my next post.

SNOOPY

Thank you.
Running around like a flea in a fit at present so I appreciate you finding the time to supply the answer.I think under 6% would be manageable. Big difference than the 10% I quoted.
{That was many many years ago].

[Snoopy]

($18.560m + $1.479m) / $311.813m = 6.42%

So sorry Percy, I still can't get to your 10%. But there is one more chapter to round out this story.


Here is some more preamble from the FY2003 notice of meeting.

"At previous meetings, Mr Bulling has expressed his concerns with the Company's obligationsto pay a franchise renewal fee on the expiry of the franchise agreements negotiated for each store. The board remains strongly of the view that the brands that Restaurant Brands operates create value in themselves,and that the company should renew its franchise agreements as they expire in order to preserve its rights to the brands. The board believes the company will continue to operate successfully notwithstanding its franchise costs, which, in addition to the franchise renewal fees include monthly royalty payments, brand advertising, maintenance of premises to minimum standards, premise refurbishment to 'brand standard', brand audit and franchisor operational programs. The board has, at Mr Bullings prompting, considered but rejected the alternative course of terminating the company's franchise arrangements and establishing new brands of its own, or of winding up the business."

The highlighting which was mine,shows that not all of those franchise fees disappear down a black hole which is YUM!

SNOOPY

[Snoopy]

Thank you.
Running around like a flea in a fit at present so I appreciate you finding the time to supply the answer. I think under 6% would be manageable. Big difference than the 10% I quoted.
{That was many many years ago].


If you looked at a year when many stores came up for renewal at once (2007 was such a year), then all of those once in ten year costs crammed into one year may have created that 10% that you refer to.

SNOOPY

[bull....]

Looking at some analyst est they got div growing from 16c to 24c by 18 and esp from 20 to 30 guess by yr18 carl jr will have firmly est kfc upgrades all finished, pizza hut stores finalised and starbucks sorted so debt will be low and cashflows will be pretty strong

[Snoopy]

I have a very modest holding left over from a selling mistake about 5 years ago (I sold slightly less than my holding) which does mean however that I get a free dinner once a year. But just looking at the share price so now and then in the paper I get the feeling that the $3 mark seems to be a very tough nut to crack?


RBD is primarily a dividend share. These tend to not do so well when interest rates rise. So your obsevation of $3 being a hard nut to crack may come true blackcap.

The other (historical) problem with RBD is that it seemed difficult to get all of the divisions firing at once. If KFC was doing well then PH was having problems. When PH was going well, Starbucks was going backwards. This is the first reporting period I can remember where all brands seem to be on track. I think closing and/or selling marginal PH and Starbucks outlets has helped. That goes together with the end of RBDs ambition to turn them both into all powerful conquerors of their respective markets. The former ambition for PH and Starbucks now seems to be spent building up new brand Carl's Junior.

But history tells us that the alignment of all divisions at the same time is a rare event. I predict slow and steady growth for RBD going forwards rather than anything spectacular.

SNOOPY

[Harvey Specter]

With all this doom and Gloom on the markets, it looks like everyone has been ordering KFC for dinner!

Above $3

[blackcap]

With all this doom and Gloom on the markets, it looks like everyone has been ordering KFC for dinner!

Above $3

Almost, had some on Saturday for dinner. But its above $3 and that is a good thing. Lets hope it can hold and go beyond.

[bull....]

Maybe this is the breakout, you would think so considering RBD fits into the new momentum play at the moment of value stocks, just like tel is doing too

[winner69]

Great result

Even with refurbishments and the roll out of Carls (with no gain) the cash flow has managed an increased dividend and repaid nore than $6m of debt.

Cant do much better than that

Current cash flows support a share price of $3.70 to $4.20, even using modest future growth rates of 5% to 7%

That $3 mark seems hard to break through .....but I have a feeling that once it does break through (soon) than the share price could easily head to $3.50 plus (by Xmas eh)

I reckon that $4.20 is liking likely now

[winner69]

Wouldn't say punters are falling over themselves to either buy or sell but shareprice creeping up nicely

[bull....]

probably because reliable earnings arent as exciting as the unknown of a tech stock

[blackcap]

Wouldn't say punters are falling over themselves to either buy or sell but shareprice creeping up nicely

Yes bought some to add to my initial holding the other day at 3.06. Comfortable at that level.

[bull....]

ACC buying more, can understand why

[bull....]

slow grind to target 3.3 from the breakout

[bull....]

nice sales figures

http://www.nbr.co.nz/article/restaurant-brands-1q-sales-gain-led-carls-jr-chain-bd-156817

just what ya need to get the share price cranking yaha

[winner69]

nice sales figures

http://www.nbr.co.nz/article/restaurant-brands-1q-sales-gain-led-carls-jr-chain-bd-156817

just what ya need to get the share price cranking yaha



Going well eh bull

The signs were there eh

Finger lickin good I reckon

[percy]

Going well eh bull

The signs were there eh

Finger lickin good I reckon

Yes the result was not too fowl.!

[winner69]

Carls Jnr weekly sales per store settling at just under $40k

So looking forward possibly $2m bucks a store annual sales - 50 stores sometime - heading towards $100m annual sales for Carls

Maybe it is those sort of expectations that is driving RBD shareprice at the moment. Rest of the stable still growing reasonably but not enough to drive recent shareprice increases.

Just imagine the extra cash flow from another $100m in sales from Carls in a few years time

[bull....]

I think KFC increasing sales did it for me, always good to see the biggest earner going good.
Ill have to get down there and use my voucher haha

[bull....]

used my shareholders vouncher last night i must say it was ficker licking good, just like the share price

[Harvey Specter]

used my shareholders voucher last night i must say it was ficker licking good, just like the share priceI used mine over the weekend and I am not sure whether to be happy or concerned with the experience.

I ordered a 3 piece pack plus the free burger.
Got up to pay window and was told 2 piece pack and burger - I didn't complain since I didn't want them to think I was a pig.
Only charged for the 2 piece pack so not concerned.
Got home and had three pieces of chicken!

So, did they put stuff up my order (2 rather than 3 peice) but also stuff up by giving me an extra price.
or, reward me as a shareholder but downgrading the pack for payment purposes but giving me what I wanted.

[Harvey Specter]

used my shareholders voucher last night i must say it was ficker licking good, just like the share priceI used mine over the weekend and I am not sure whether to be happy or concerned with the experience.

I ordered a 3 piece pack plus the free burger.
Got up to pay window and was told 2 piece pack and burger - I didn't complain since I didn't want them to think I was a pig.
Only charged for the 2 piece pack so not concerned.
Got home and had three pieces of chicken!

So, did they put stuff up my order (2 rather than 3 peice) but also stuff up by giving me an extra price.
or, reward me as a shareholder but downgrading the pack for payment purposes but giving me what I wanted.

[JayRiggs]

I used mine over the weekend and I am not sure whether to be happy or concerned with the experience.

I ordered a 3 piece pack plus the free burger.
Got up to pay window and was told 2 piece pack and burger - I didn't complain since I didn't want them to think I was a pig.
Only charged for the 2 piece pack so not concerned.
Got home and had three pieces of chicken!

So, did they put stuff up my order (2 rather than 3 peice) but also stuff up by giving me an extra price.
or, reward me as a shareholder but downgrading the pack for payment purposes but giving me what I wanted.

That is interesting. Do you mean to say you ordered a "quarter pack"?
It's possible they realized you ordered a 3 piece quarter pack after they acknowledged it as a 2 piece quarter pack, so they put the extra piece of chicken in free of charge. They are usually pretty generous when they make mistakes like this.

Hmmm. Maybe I'll order a 3 piece quarter pack to go with my burger voucher. See what I get charged!

[blackcap]

That is interesting. Do you mean to say you ordered a "quarter pack"?
It's possible they realized you ordered a 3 piece quarter pack after they acknowledged it as a 2 piece quarter pack, so they put the extra piece of chicken in free of charge. They are usually pretty generous when they make mistakes like this.

Hmmm. Maybe I'll order a 3 piece quarter pack to go with my burger voucher. See what I get charged!

haha classic, I will have to try something similar with my voucher. Actually normally when I order their coupon deals kfc.co.nz/voucher I just quote the PLU when ordering but never submit the coupon as they do not need it. I see on the shareholder voucher that there is a PLU as well. I might try and order a Colonel Burger, give the PLU and see if I get the burger for free without having to submit the voucher. That would be interesting.

[Harvey Specter]

That is interesting. Do you mean to say you ordered a "quarter pack"?
It's possible they realized you ordered a 3 piece quarter pack after they acknowledged it as a 2 piece quarter pack, so they put the extra piece of chicken in free of charge. They are usually pretty generous when they make mistakes like this.

Hmmm. Maybe I'll order a 3 piece quarter pack to go with my burger voucher. See what I get charged!yes. 3 price quarter pack. They entered it as a 2 piece quarter pack and at no point did I correct them.

[blackcap]

Anecdotally, went to my local KFC tonight to give me some subsistence for the epic test forthcoming. Was pleasantly surprised at the speed of delivery, more akin to Aaron Smith, than the usual Piri weepu dollops. Is this a change across the board of am I just imagining things?

[Snoopy]

Director Danny Diab continues to mope up stock - buying shares at over 90 cents probably from institutions who got their shares from AMP at 57 cents - a huge 61% premium.

Who will prove to the clever one then?

Buy when insiders buy and sell out very fast when insiders are trying to get out - refer APX.


The above post was five years ago. With the RBD share price now hovering around $3.30, Danny Diab has proved to be the smart one.

But there are other ways for directors to build wealth, without having the 'skin in the game' of Diab. Over FY2009 when all the current directors were on the board, the director fee pool was $220,000. This was split up so that each director got $40,000, with Chairman Ted on $60,000. Early in the next year director Shawn R Beck quit. Without consultation with shareholders he was not replaced and his $40,000 was quietly divided up amongst the remaining directors bringing the base directors fees up to $46,000, with Ted getting $70,000 - nice.

In the notice of meeting for FY2014 we are told that a board of just 4 is "an atypically small board for a listed company of this size and profile." I want to remind shareholders that this "atypically small board" was entirely engineered by the current incumbents. The proposed new annual fee for five directors is $340,000. This represents a 54% increase in fees from FY2009 levels. The board classes the increase in fees from FY2011 (fee base $250,000), a different date as 'modest'. $30,000 'per director' over three years is 12% or 3.8% compounding per year. Not over the odds for a company that has turned the corner.

However, if we do the same calculation based on the 2009 fee base of $220,000 the increase is 54.5%, or 9.1% per annum compounding. This increase is far from modest, showing how important the base date for comparison is.

The 'Strategic Pay Limited' report states that the company's performance has improved and it has grown in complexity. But back in 2009 RBD was still battling with Pizza Hut in Victoria, and I would argue that replacing that with Carl's Junior has actually simplified the business. The 'complexity' of Carl's Junior is so great that when RBD opened a pair of new stores for KFC and Carl's Junior at the Auckland Airport precinct the two stores were identical.

The Strategic report goes on to say that "recently 8 Carl's Junior stores have opened, initiating a new brand into New Zealand." But this is untrue because Carl's Junior was actually introduced to New Zealand some years earlier by Michael Jones.

In summary I believe the reasons emphasised by directors asking for a pay rise are either selective or dishonest. This is not to say the directors do not deserve a pay rise. But they don't deserve it for the reason's outlined in the 'Strategic Pay Limited' report. For this reason I will be voting against the motion at the upcoming AGM.

SNOOPY

[noodles]

Great work Snoopy!

[Snoopy]

In the notice of meeting for FY2014 we are told that a board of just 4 is "an atypically small board for a listed company of this size and profile." I want to remind shareholders that this "atypically small board" was entirely engineered by the current incumbents. The proposed new annual fee for five directors is $340,000. This represents a 54% increase in fees from FY2009 levels. The board classes the increase in fees from FY2011 (fee base $250,000), a different date as 'modest'. $30,000 'per director' over three years is 12% or 3.8% compounding per year. Not over the odds for a company that has turned the corner.

However, if we do the same calculation based on the 2009 fee base of $220,000 the increase is 54.5%, or 9.1% per annum compounding. This increase is far from modest, showing how important the base date for comparison is.


Just had a look at the full Strategic Report on the web. The report does look as what has happened since 2009 (Table 1: Three year rolling trend in Directors' Fees movements to 2013), although that bit got left out of the summary sent to shareholders.

From Appendix 1

"In the year to May 2013, 54% of 381 organisations surveyed reviewed Directors’ fees.
The average annualised fee increase reported in the past year was 6.2% compared with 5.7% in the preceding year. No respondents reported a decrease. The annualised fee increase is calculated by taking the rate of increase and dividing it by the number of years since the last review date. Most firms tend to adjust fees every two to three years."

This confirms that RBD directors are asking for a pay rise (9.1% per annum) substantially above market rates.

Table 6 (Director Remuneration for RBNZ based on Director Evaluation Methodology) also mentions that current director fees at $55k are 10% above the average and 20% above the median.

So current directors fees are significantly above average already for the complexity of the business they manage. The proposed increase will take directors fees to the upper quartile of director earners. I don't think the proposed increase is justified. No wonder the whole Strategic report wasn't sent to shareholders!

SNOOPY

[winner69]

All gung ho at the ASM

Profits steaming ahead ahead amd more than $20m this year ..... good

Anybody go

Was Brian there ..... I hope so

[winner69]

and the directors got their pay rise

[Snoopy]

and the directors got their pay rise

Yeah well at least here were some 800,000 votes against. Always hard to argue against something when shareholders have had a good year. But even so, I believe the directors were due for a pay rise in lieu of the many historical bad years when shareholders would have voted down a pay rise if one had been proposed. Just not a pay rise of the amount they sought today. Sometimes these directors are worth more in tough times than they are in good times. But it is only in good times they can ask for that pay rise. Hopefully this pay rise will see enough new talent on the board to tackle the next tough times that will surely come.

SNOOPY

[vorno]

All gung ho at the ASM

Profits steaming ahead ahead amd more than $20m this year ..... good...


and the directors got their pay rise

MEANWHILE...... http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11292536

[winner69]

MEANWHILE...... http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11292536

Good for shareholders -- treating staff like a true variable resource is the way to go. Got to keep us greedy shareholders happy.

Not earning their keep they need to go - it doesn't matter if they are 76 years old and been working for 18 years. Surplus to requirements - dispense at lowest cost possible.

Creedy and his $700,000 annual salary and his $800,000 plus worth of shares wouldn't give a stuff about this. Probably disappointed somebody kept them on for another 3 weeks than 'legally obliged' to do.

One day another Occupy uprising will happen and he will get his comeuppance.

[percy]

Must be a pretty good firm to have taken on a 56 year old worker in the first place.
Must have been a pretty good firm to have worked for 18 years ?

[Under Surveillance]

Must be a pretty good firm to have taken on a 56 year old worker in the first place.
Must have been a pretty good firm to have worked for 18 years ?
Must have been a cosy number. She's been picking up government superannuation for the last 9 years, and at the same time keeping a youngster out of work. Suppose RBD is lucky she didn't die of old age on the job, as they would have been accused of cruelty for not allowing her to retire.

[Bjauck]

Must have been a cosy number. She's been picking up government superannuation for the last 9 years, and at the same time keeping a youngster out of work. Suppose RBD is lucky she didn't die of old age on the job, as they would have been accused of cruelty for not allowing her to retire. if she does not own her own home...as increasingly is the case for those of retirement age in our increasingly divided society...govt super may only just cover her accommodation expenses. As Moosie says...employment protection, never great in NZ, lags behind Many other countries we like to compare ourselves to.

[vorno]

if she does not own her own home...as increasingly is the case for those of retirement age in our increasingly divided society...govt super may only just cover her accommodation expenses. As Moosie says...employment protection, never great in NZ, lags behind Many other countries we like to compare ourselves to.

& that'll be it now... good luck to her finding work again. As the CEO will be saying "done-deal, wash hands, next patient!"

[percy]

Shame, although the internet will be taking down demand for call centres. Having just been through the contracts/no redundancy debacle, I feel for the old girl. NZ is way behind Canada in this regard, workers over there would be horrified by this case ever being thought possible!

This also highlights the fact that those workers should buy shares/receive options for insurance (and as per using inside knowledge of the company). Better to own the bank than park money there...

Don't think there would have been too many jobs in Canada for a 56 year old.Doubt they would have kept her for 18 years either.!
Don't think she realises "how lucky she was"!!!

[winner69]

Don't think there would have been too many jobs in Canada for a 56 year old.Doubt they would have kept her for 18 years either.!
Don't think she realises "how lucky she was"!!!

Ageism is a bad thing Percy .....ESP at your age

Pizza Hut had it right with their call centre ....the kids just loved talking to mum (or gran) when ordering ....gave them a sense of security

I feel charitable today ...might give the lady dividend cheque to Unite bot pass on the affected.

Ease my conscience ......even though the likes of Russell couldn't give a stuff

[Harvey Specter]

She could go and work at KFC - seriously she couldn't be any slower that the staff that work there at the moment. It took me 25 minutes to get drive through the other day. I dont think I will be a customer again till the bring back the Double Down again next year.

But seriously, they gave 3 weeks more than they were entitled to. They should have gone hardball at the start and the been generous and offer it once people started complaining.

And why are Unions complain after the fact. Surely they should have incorporated into their negotiations if they wanted it. They probably gave it up at one stage in return for an extra 25c and now they want to double dip.

[artemis]

& that'll be it now... good luck to her finding work again. As the CEO will be saying "done-deal, wash hands, next patient!"

She was offered other roles actually, but seems does not wish to accept either. Fine,her choice. We do not know her financial circs, might be the millionaire next door for all we know.

[vorno]

She was offered other roles actually, but seems does not wish to accept either. Fine,her choice. We do not know her financial circs, might be the millionaire next door for all we know.

An old lady who would move from easy work in a call centre to physical work at a chain? (the way the article sounds at least). If that is indeed the case, be realistic!

[Harvey Specter]

An old lady who would move from easy work in a call centre to physical work at a chain? (the way the article sounds at least). If that is indeed the case, be realistic!Luckily the government provides universal super*.

* which she is already receiving

The role has been disestablished. They have been offered more redundancy that the unions managed to negotiate for them OR another role in the company. Sure it is harsh but it does sound fair.

[artemis]

An old lady who would move from easy work in a call centre to physical work at a chain? (the way the article sounds at least). If that is indeed the case, be realistic!

One of the roles was making pizzas. More physical than sitting on a phone line, but not like heavy lifting or mopping floors all day. Maybe it was part time, or part time could be possible - we don't know.

Certainly the call centre work could be easy, but perhaps that is largely because there weren't many calls per operator. What was the company supposed to do?

In any case, people get laid off all the time, many with no redundancy - and this lady is better off financially than many others who don't have a guaranteed income for life.

[winner69]

One of the roles was making pizzas. More physical than sitting on a phone line, but not like heavy lifting or mopping floors all day. Maybe it was part time, or part time could be possible - we don't know.

Certainly the call centre work could be easy, but perhaps that is largely because there weren't many calls per operator. What was the company supposed to do?

In any case, people get laid off all the time, many with no redundancy - and this lady is better off financially than many others who don't have a guaranteed income for life.

That's the right attitude Artemis

Staff are just a resource, nothing else

When no need for that resource out she goes

Shareholders do not like wasted resources

[artemis]

...... Shareholders do not like wasted resources


Does anyone?

[In4a$]

Shows you the greedy, calous attitude of a lot of senior management now a days, and yes I work with some of them.
14 staff, if they had given them all a months wages as redundancy, whats that about 56k all up, peanuts when you look at the big picture. Could have turned it into a good publicity story, "Pizza Hut gives staff months redundancy as thanks for long service". NZ would have been thinking what a great company !!, now everyone thinks what a bunch of low life wallies.
Those staff where the first contact for many customers for many years and helped RBD sell Pizza's and get them were they are today, not their fault the internet has cost them their jobs.
Disc: I hold a few shares

[Harvey Specter]

Shows you the greedy, calous attitude of a lot of senior management now a days, and yes I work with some of them.
14 staff, if they had given them all a months wages as redundancy, whats that about 56k all up, peanuts when you look at the big picture. Could have turned it into a good publicity story, "Pizza Hut gives staff months redundancy as thanks for long service". They did!! (wel three weeks anyway).

They were entitled to 1 weeks and they were given 4 weeks (from my reading of the article).

The union probably wanted 4 weeks plus 1 for each year of service which for the old bird, would have resulted in 20+ weeks redundancy payout.

[In4a$]

They did!! (wel three weeks anyway).

They were entitled to 1 weeks and they were given 4 weeks (from my reading of the article).

The union probably wanted 4 weeks plus 1 for each year of service which for the old bird, would have resulted in 20+ weeks redundancy payout.
Thanks Harvey, artcle I read said nothing, there you go, dont believe everything you read. Sounds like they got a good deal to me.
Cheers

[Harvey Specter]

Thanks Harvey, artcle I read said nothing, there you go, dont believe everything you read. Sounds like they got a good deal to me.
CheersIt is in there (para 8):


"We've known many of these staff for a long time and we would offer a four-week notice period, which is three weeks more than we are contractually required to give," a spokeswoman said.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11292536

[vorno]

It is in there (para 8):

It does not mention anything about redundancy pay, merely a "four-week notice period". They don't go into any detail, however...what was is the title of the article?

On the flip-side any place of employment that does not automatically offer a "four-week notice period" is just trying to skim off the cream.
And in the case of redundancy - unless the company goes bust it should pay up a month, period. This occasion however, probably includes a clause to the effect of: "no redundancy payment if other jobs across the company are available".

[winner69]

hey blackcap whats up

RBD getting back to 3 bucks - not good

[couta1]

hey blackcap whats up

RBD getting back to 3 bucks - not good
The Bears have stolen all the pizza:cool:

[bull....]

Another attempt at the top of the range, a break should give a run to 3.30 me thinks. Weird this company so under- performed the nzx dont ya think when you look at similar companies in aus have gone gang-busters.
Reuters consensus is 3.2 at the moment but not sure if its updated for latest results

reached the target price 3.30 but seems stuck below it now.

[blackcap]

hey blackcap whats up

RBD getting back to 3 bucks - not good

I don't know winner, I eat there once a fortnight so its not from lack of trying.

[winner69]

Danny Diab get angry across the Tasman. Must be really pissed off suing Yum!



“It’s a financial nightmare”: Pizza Hut franchisees launch class action over price war with Domino’s
Monday, 25 August 2014 0:57

Eloise Keating

“It’s a financial nightmare”: Pizza Hut franchisees launch class action over price war with Domino’s




Tension is escalating between Pizza Hut franchisees and their parent company Yum! Restaurants, with a high-profile franchisee launching a class action against Yum! in the federal court this month.

The class action follows a failed bid by 80 Pizza Hut franchisees in June to stop Yum’s latest price strategy, which has seen the Pizza Hut chain go head-to-head in a discount price war with rival Domino’s, offering pizzas for as little as $4.95.

Diab Pty Ltd, a company owned by Sydney Pizza Hut franchisee Danny Diab, initiated legal proceedings against Yum! in the Federal Court on August 12.

Justice Annabelle Bennett scheduled a directions hearing for October 3 and in a court order gave applicant group members until October 28 to opt out of the action.

Fairfax reports the franchisees, the number of which is unclear at this point, are seeking damages from Yum! to cover the profits they have lost since the discount price strategy was introduced on July 1.

The franchisees are reportedly attempting to find out if Yum! breached its franchise agreements with its stores and engaged in unconscionable conduct by lowering prices.

An unnamed franchisee told Fairfax they are struggling to keep their business going and hopes the legal action will make Yum! “just listen to us for once”.

“Everyone’s struggling, it’s a financial nightmare,” they said.

“It’s been ongoing since the price cuts, this just puts the final nail in the coffin.”

SmartCompany contacted Pizza Hut but the head office declined to comment as the case is before the courts.

SmartCompany also contacted Jim Kartsounis, president of the Australasian Pizza Association and solicitor for the franchisees, but did not receive a response prior to publication.

Jason Gehrke, director of the Franchise Advisory Council, told SmartCompany the class action “certainly signals a growing level of unrest” between the two parties.

Gehrke says while this is not the first time a group of franchisees have banded together to launch a class action against a franchisor, “this is probably the first time in recent memory a class action has been unleashed over a pricing issue”.

He says the case “illustrates the danger of a discounting strategy” and given the directions hearing will not take place until early October, “it’s a long time to wait for franchisees who are hurting already”.

He says it appears Pizza Hut “has been a little flat footed” in moving to match the low prices offered by Domino’s, which as the chain to drop their prices to $4.95, likely had time to plan their strategy and improve their in-store efficiencies to cope with the lower margins.

But by “playing catch-up”, Pizza Hut franchisees have not had the same time to prepare in-store and supply chain efficiencies, says Gehrke.

“They haven’t brought the franchisees on the same journey,” he says.

Gehrke says it is highly unlikely Yum’s agreements with its franchisees would contain a duty of care for the franchisees to be profitable, which is essentially what the class action will rest on.

“There is usually nothing in a franchise agreement about profitability,” he says. “There is no legal obligation.”

[winner69]

reached the target price 3.30 but seems stuck below it now.

say things like that more often mate ....good for the shareprice

did I see 338 .... 350 next

[percy]

Danny Diab get angry across the Tasman. Must be really pissed off suing Yum!


[

“There is usually nothing in a franchise agreement about profitability,” he says. “There is no legal obligation.”

I think it is a case of "pissing in the wind" rather than being "pissed off."

[Hawkeye]

http://www.nbr.co.nz/article/restaurant-brands-2q-sales-rise-58-boosted-kfc-promotions-carls-jr-expansion-bd-16253

[Harvey Specter]

http://www.nbr.co.nz/article/restaurant-brands-2q-sales-rise-58-boosted-kfc-promotions-carls-jr-expansion-bd-16253I'm not sure whetehr to be happy as a shareholder or upset as a taxpayer who will be funding the medical bills of others in the future.

Very happy with its performance - nice uptrend.

[winner69]

Carls Jnr still averaging $38k a week a store

With 2 new stores by year end Carls sales just over $18m - up 27% on last year

Stil haven't worked if its this Carls growth or just overall growth (mainly KFC) that's driving the shareprice

Whose caring anyway......not me

[bull....]

KFC driving the share price because its there biggest earner

[Harvey Specter]

KFC driving the share price because its there biggest earnerI think it is both. The growth opportunities from Carl Jr are huge. Imagine if they had as many stores as BurgerKing - and still turned over as much as they are currently.

Forgot to add - and they can keep expanding from cashflow so no need to tap shareholders for extra capital.

[Beagle]

Carls Jnr still averaging $38k a week a store

With 2 new stores by year end Carls sales just over $18m - up 27% on last year

Stil haven't worked if its this Carls growth or just overall growth (mainly KFC) that's driving the shareprice

Whose caring anyway......not me

User feedback - I had high hopes for a decent burger and chips when Carl's Jnr first started up. To start with they were great, hot large burgers with plenty of fresh content and piping hot chips served with a smile to your table with good service and nothing was too much trouble, the staff always had tomato sauce sachets on hand and it was all good.

Fast forward many months and the service and product has really hit the skids and my favourite combo has gone up a dollar to $12.90.
Why is it that the burgers are NEVER hot, the chips are very seldom hot, (lukewarm is the norm for both burger and chips), the staff never have tomato sauce on hand so you have to wait till they go back and get it and by the time they eventually return your burger and chips are even less lukewarm than they were. Customers are voting with their feet and my closest store in Avondale Auckland has seldom got more than a handful of people in it.

The other day just for the sake of an experiment, we went to our local favourite Chinese takeaways just around the corner and I ordered an egg burger with an extra egg and fries for a total of $6. My wife had her usual favourite Chinese dish. All were served a few minutes later piping hot and there was plenty of hot fries. I'm over Carl's Jnr. I wouldn't feed my dogs with the rubbish the local KFC cooks up, likewise the local Pizza Hut.

Maybe I've become too discerning ?

[Snoopy]

User feedback -
<snip>
Maybe I've become too discerning ?


Perhaps you are not in Restaurant Brand's target market demographic Roger? Not every food consumer has the same needs or wants. That doesn't mean you can't invest in a company because it only satisfies the needs or wants of others.

From the employee standpoint, I don't think RBD discriminate in wages because of age. And they tend to pay above minimum wage rates too, IIRC.

SNOOPY

[Harvey Specter]

Perhaps you are not in Restaurant Brand's target market demographic Roger? Not every food consumer has the same needs or wants. That doesn't mean you can't invest in a company because it only satisfies the needs or wants of others.

From the employee standpoint, I don't think RBD discriminate in wages because of age. And they tend to pay above minimum wage rates too, IIRC.

SNOOPYI also dont think the Avondale one is a RBD one either. very confusing and could effect there reputation to have to master franchisors.

[percy]

Perhaps you are not in Restaurant Brand's target market demographic Roger? Not every food consumer has the same needs or wants. That doesn't mean you can't invest in a company because it only satisfies the needs or wants of others.

From the employee standpoint, I don't think RBD discriminate in wages because of age. And they tend to pay above minimum wage rates too, IIRC.

SNOOPY

Still must not pay enough, as half the staff at Linwood KFC did not turn up for work last Sunday.!

[psychic]

Gotta say I've shared Rogers experience, found em superb originally, wouldn't go out of my way now.
Grabbed a Carls in Singapore recently. Very plain. Irrelevant maybe but left me with the impression they not worried with consistency that perhaps Maccas are.
KFC on the other hand has seen me back lately after years of absence.
Just sayin...

[Beagle]

Perhaps you are not in Restaurant Brand's target market demographic Roger? Not every food consumer has the same needs or wants. That doesn't mean you can't invest in a company because it only satisfies the needs or wants of others.

SNOOPY

Maybe, maybe not, I've certainly always enjoyed a bloody good decent hot burger and fresh hot chips in a clean sit down environment, seems something of a shame I have to pay Burger Fuel prices to get that. Anyway speaking of lukewarm, looking at Reuters 2 analysts have RBD as outperform and one as underperform. Weighted average consensus EPS for Feb 2015 is 21.83 cps which put them on a forward PE of 15.7 times at $3.42. It does seem like there's some growth coming as consensus EPS is 24.53 cps for 2016.
I guess it sheets back to whether you believe in what they're doing or not or have more appetite elsewhere :)

[winner69]

On paper RBD has looked like a "cheap" or "value" stock for years. If one ignores the chart, and never visits the stores, I can easily see how they could rationalise buying RBD.

Before buying this stock, do three things and ponder one other.

To do :

(a) Call a Pizza Hutt "helpdesk", far removed from the store that makes and delivers your pizza. Note disinterested tone. Wait till pizza and the bill arrives - in an attempt to fight Hell Pizza, note they've half achieved this. Rather than being the "cheap family" option, Pizza Hutt have moved half way away from this - they are now not as cheap as Dominos, and not as good as Hell. Quality has improved. Prices have gone up a little. Where are they now? Slap bang in the middle. Who wants to be there?

(b) Call into your local Starbucks. Note that coffee takes a while to make. Snack food is crappy, ambience is minimal - it is all about the coffee. Coffee selection is vast and personalised - they can't prepare 25 cups in advance. Result? Slow. Limited space for staff to move around, limit to how many you could have. Labour intensive. Note what happens during peak time - sometimes a queue stretching outside. That sounds good - the reality is, this business can't "ramp up" or go much faster than it does. There is a reason most coffee shops are owned by owner operators who just own one. Henry Ford would struggle to "production line" this business any more than it currently is, and currently, its slow.

(c) Go into your local KFC. My god. Talk about little shop of horrors. How can this place be their jewel? 9/10 times staff of a certain ethnic group are having a great time talking to their friends. Have twice seen a ball game being enjoyed by staff and "customers" (their mates who don't buy stuff). Have observed product being handed out more than once. Have seen customers ignored for friends many times. No signs of management supervision. Food totally inconsistent. Have been into two revamped stores - all the bright, fresh backdrop did for me is highlight how bored, uncaring and unsupervised the staff were, and how drab the food is.

To ponder :

There are three things you need to sell chicken, coffee and pizza. Buildings, a business model, and management/staff.

As I understand it, they lease their buildings. They pay YUM a fee for the intellectual property, brand and business model.

What is left? What can Restaurant Brands as a company bring to the party?

Management and staff. The ONLY way there is upside in this stock (cheap as it always looks) is if management runs the stores a lot better, actually supervises the staff, and create an environment of real enthusiasm.

If profits accidentally improved by pure good luck, YUM would go for more money, the landlords would go for more money. Thats life - those two groups are working for themselves, not for shareholders.

The only people working for shareholders - and able to create wealth for shareholders - are management and staff.

Except they're not. Thats the problem. I see no signs of them fixing it.

Even 8 years ago RBD was stuffed and a dog with no future and a shareprice wallowing around the $1 mark

Seems they just keep selling greasy chicken, warm burgers, crappy pizzas and coffee and chocolate drinks under the guise of a coffee shop .....and churning out the cash

Way it's going shareprice over 4 bucks this year .....what's to stop it

[BIRMANBOY]

Some people make the mistake of needing to "believe" in and "understand" an investment. The old saying comes to mind.."there's money in muck" and WHS and RBD are perfect examples that spring to mind. What would you rather do sell a million burgers and make good money on the volume or sell a fraction by making the best burger but costing twice as much. Depends on your market. NZ is cough.cough...sorry but lets face it.....if you are talking volume, its WHS and RBD territory. I prefer to eat at Logan Brown but every now and then want something fast and cheap that's perfectly adequate so go Hell, MAccas, BK, KFC etc . So it gets the customers it has targeted and the occasional bonus of people like me. Even Logan Brown has gone down market here in Wellington and opened a more affordable burger type place. Demographics dictate how, when and how high ....and if companies don't listen and study demographics they fail. WHS and RBD wont fail, will continue expanding, will continue providing employment for thousands of NZ's and will continue to make money...everything else is just immaterial and self indulgent piffle.

[winner69]

Some people make the mistake of needing to "believe" in and "understand" an investment. The old saying comes to mind.."there's money in muck" and WHS and RBD are perfect examples that spring to mind. What would you rather do sell a million burgers and make good money on the volume or sell a fraction by making the best burger but costing twice as much. Depends on your market. NZ is cough.cough...sorry but lets face it.....if you are talking volume, its WHS and RBD territory. I prefer to eat at Logan Brown but every now and then want something fast and cheap that's perfectly adequate so go Hell, MAccas, BK, KFC etc . So it gets the customers it has targeted and the occasional bonus of people like me. Even Logan Brown has gone down market here in Wellington and opened a more affordable burger type place. Demographics dictate how, when and how high ....and if companies don't listen and study demographics they fail. WHS and RBD wont fail, will continue expanding, will continue providing employment for thousands of NZ's and will continue to make money...everything else is just immaterial and self indulgent piffle.

Well said Birman

One other thing is that punters expect 'growth' and then more 'growth'

wHS RBD and NPX aren't n that game. They just keep selling plenty of things and make plenty of money. If making more than your cost of capital is a measure of financial success than all three are successful companies. They are not wealth destroyers by any stretch of the imagination.

But boring stocks to follow though. But right up your alley with those dividends eh!

And they will be around in 10 years ...and still making money. And some of these current hotshots probably won't be around.

From a trading perspective good buy opportunities do come along every ow and again. I have RBD and held longer Han I ever imagined but as it heads to 4 bucks why sell, from a traders perspective that is.

[winner69]

User feedback - I had high hopes for a decent burger and chips when Carl's Jnr first started up. To start with they were great, hot large burgers with plenty of fresh content and piping hot chips served with a smile to your table with good service and nothing was too much trouble, the staff always had tomato sauce sachets on hand and it was all good.

Fast forward many months and the service and product has really hit the skids and my favourite combo has gone up a dollar to $12.90.
Why is it that the burgers are NEVER hot, the chips are very seldom hot, (lukewarm is the norm for both burger and chips), the staff never have tomato sauce on hand so you have to wait till they go back and get it and by the time they eventually return your burger and chips are even less lukewarm than they were. Customers are voting with their feet and my closest store in Avondale Auckland has seldom got more than a handful of people in it.

The other day just for the sake of an experiment, we went to our local favourite Chinese takeaways just around the corner and I ordered an egg burger with an extra egg and fries for a total of $6. My wife had her usual favourite Chinese dish. All were served a few minutes later piping hot and there was plenty of hot fries. I'm over Carl's Jnr. I wouldn't feed my dogs with the rubbish the local KFC cooks up, likewise the local Pizza Hut.

Maybe I've become too discerning ?

You be careful Roger

Birman pretty creative ......he might just recompose this replacing burgers and chips wih airline experiences.

[Beagle]

Some people make the mistake of needing to "believe" in and "understand" an investment. The old saying comes to mind.."there's money in muck" and WHS and RBD are perfect examples that spring to mind. What would you rather do sell a million burgers and make good money on the volume or sell a fraction by making the best burger but costing twice as much. Depends on your market. NZ is cough.cough...sorry but lets face it.....if you are talking volume, its WHS and RBD territory. I prefer to eat at Logan Brown but every now and then want something fast and cheap that's perfectly adequate so go Hell, MAccas, BK, KFC etc . So it gets the customers it has targeted and the occasional bonus of people like me. Even Logan Brown has gone down market here in Wellington and opened a more affordable burger type place. Demographics dictate how, when and how high ....and if companies don't listen and study demographics they fail. WHS and RBD wont fail, will continue expanding, will continue providing employment for thousands of NZ's and will continue to make money...everything else is just immaterial and self indulgent piffle.

Fair comment but I'm not so sure you can clump WHS and RBD into the same category even though they appear to fit the same demographic. Five years ago WHS were $4.50 and RBD were $1.20. Seems cheap greases' never go out of fashion :)

[winner69]

Fair comment but I'm not so sure you can clump WHS and RBD into the same category even though they appear to fit the same demographic. Five years ago WHS were $4.50 and RBD were $1.20. Seems cheap greases' never go out of fashion :)

Shareprice movements more a measure of sentiment rather than company performance

Like you Roger best burgers and chips at local Chinese takeaway. If one needs to 'dine' nice table across the road at the beach

[Beagle]

Shareprice movements more a measure of sentiment rather than company performance

Like you Roger best burgers and chips at local Chinese takeaway. If one needs to 'dine' nice table across the road at the beach

Cut it out you're making me hungry lol

[winner69]

Cut it out you're making me hungry lol

A few weeks ago I shouted myself oysters and chips for lunch and sat on the sea wall watching the boats and ferries coming and going ......cool

[percy]

A few weeks ago I shouted myself oysters and chips for lunch and sat on the sea wall watching the boats and ferries coming and going ......cool

We are very lucky to live in a wonderful country, where such great simple pleasures are so affordable.

[winner69]

In February 2010 the RBD shareprice was $1.77 (up from $0.69 at Feb 2009 because RBD got their **** together and made some money)

That $1.77 was 8.8 times 2010 earnings of $20m, a PE of 8.8

Since February 2010 they have made no more money. The 2014 earnings were $18.9m. But maybe they can get to $21m this year (analysts say so)

Essentially no increase in earnings over 4 plus years but shareprice has almost doubled from $1.77 to the $3.45 yesterday.

The market / punters just love RBD, their love measured by a PE ratios of nearly 16.

Probably low interest rates and the dividend hounds have had a lot to do with the increase in the shareprice, rather than how much more money RBD are making out of selling greasies.

Can this love affair continue?

Who knows. I thought it might have ended well before now but the squiggly line stays within that linear regression channel so I continue to hold. The divies go towards the oysters and chips.

Market a funny place eh. A perennial unloved perceived poor performer doubles it shareprice in 4 plus years without making any more money that it was back then.

Maybe fundamental analysis means squat all. Market sentiment means heaps more in my view and those squiggly lines represent that well.

Wonder why Milford and ACC are the biggest shareholders, maybe that's how they see the situation as well.

[blackcap]

In February 2010 the RBD shareprice was $1.77 (up from $0.69 at Feb 2009 because RBD got their **** together and made some money)

That $1.77 was 8.8 times 2010 earnings of $20m, a PE of 8.8

Since February 2010 they have made no more money. The 2014 earnings were $18.9m. But maybe they can get to $21m this year (analysts say so)

Essentially no increase in earnings over 4 plus years but shareprice has almost doubled from $1.77 to the $3.45 yesterday.

The market / punters just love RBD, their love measured by a PE ratios of nearly 16.

Probably low interest rates and the dividend hounds have had a lot to do with the increase in the shareprice, rather than how much more money RBD are making out of selling greasies.

Can this love affair continue?

Who knows. I thought it might have ended well before now but the squiggly line stays within that linear regression channel so I continue to hold. The divies go towards the oysters and chips.

Market a funny place eh. A perennial unloved perceived poor performer doubles it shareprice in 4 plus years without making any more money that it was back then.

Maybe fundamental analysis means squat all. Market sentiment means heaps more in my view and those squiggly lines represent that well.

Wonder why Milford and ACC are the biggest shareholders, maybe that's how they see the situation as well.

A couple of reasons I think Winner. One, back in 2010, it was uncertain if this improved earnings was but a flash in the pan, or if it was sustainable. Now however 4 years later RBD have proven that it was not a one off and thus the PE goes up. Secondly, Milford and ACC and Kiwisaver in general the money has to go somehwhere... RBD or NPX or CAV or..... or .... RBD pay pretty good divvies and mine goes to buying some KFC for dinner tonight :)

[percy]

I think they have a place in a diversified portfolio,steady earnings,and paying a good dividend.

[Snoopy]

Back in 2010, it was uncertain if this improved earnings was but a flash in the pan, or if it was sustainable. Now however 4 years later RBD have proven that it was not a one off and thus the PE goes up.


In 2010 Pizza Hut NZ was still in big trouble, and RBD shareholders were still in the shadow of their disastrous foray into Pizza Hut in Victoria. Whereas now PH sales and operating profits are increasing in absolute terms even as the store numbers decrease - a huge turnaround. So the PH growth inhibiting millstone is being ground away.

In 2010 Starbucks was still a growth story, but stores were being opened without regard to profitability. Now Starbucks is being retained as a smaller more profitable core.

Also in 2010, actual serious future growth looked to be resting on the introduction of Taco Bell, which had failed in Australia. So shareholders had a right to be sceptical and not to price in a growth premium. Nowdays with Carl's Junior, there is a clear growth path forwards that is putting runs on the board already.

IMO the implied growth premium, which has seen the PE multiple blow out from 8.8 to 16 is justified, despite no more actual net profit being earned - yet.

SNOOPY

[Beagle]

I agree Snoopy that their prospects are improved compared to how things looked in 2010 and that Carl's Jnr probably has far wider market appeal than Taco Bell, provided they can execute with consistency.
No review of their performance and analysis of the PE expansion over the last four years can be complete without due consideration of the significant PE expansion that's occurred to the market overall.
I understand the average forward P.E of the NZX 50 is now approximately 18 a record all time high. Yes they've cleaned up their act a bit but to a large extent I think the current PE is explained by record prevailing PE's. Personally speaking I won't give my local Carl's, Pizza Hut or KFC another opportunity to disappoint and won't invest in something that I don't personally believe in unless it makes a compelling case for itself which this doesn't in my opinion. The recent sales result demonstrates some reasonable prospects but much like the menu at Carl's Jnr it looks fully priced to me for what you get....wanders off to get another excellent burger and chips from his local Chinese.

[BIRMANBOY]

Yes its grown hasn't it. Not a great time to buy in now...SP is highest its been in quite a long time and dividend yield if you buy now is consequently not so attractive. The right time to have gotten in was some time ago. Personally its giving me almost 11% gross div yield and obviously showing good SP gain as well. Keep an eye on it periodically in your wanderings. Its definitely a holder if you can catch it at the right time.
I agree Snoopy that their prospects are improved compared to how things looked in 2010 and that Carl's Jnr probably has far wider market appeal than Taco Bell, provided they can execute with consistency.
No review of their performance and analysis of the PE expansion over the last four years can be complete without due consideration of the significant PE expansion that's occurred to the market overall.
I understand the average forward P.E of the NZX 50 is now approximately 18 a record all time high. Yes they've cleaned up their act a bit but to a large extent I think the current PE is explained by record prevailing PE's. Personally speaking I won't give my local Carl's, Pizza Hut or KFC another opportunity to disappoint and won't invest in something that I don't personally believe in unless it makes a compelling case for itself which this doesn't in my opinion. The recent sales result demonstrates some reasonable prospects but much like the menu at Carl's Jnr it looks fully priced to me for what you get....wanders off to get another excellent burger and chips from his local Chinese.

[tosspot]

Wow not a bad result seems people are caring less and less about their health, the SP has performed extremely well over the last few months

[RGR367]

Wow not a bad result seems people are caring less and less about their health, the SP has performed extremely well over the last few months
And what sort of study said that eating chicken or KFC for that matter is unhealthy? :p

[Harvey Specter]

And what sort of study said that eating chicken or KFC for that matter is unhealthy? :pExactly. It is part of my new low carb, high fat diet. Its finger licken good.

Disc: Skinny enough to be banned from being a Glassons model (I'm actually a guy but you get the point)

[bull....]

finger licken good all right :t_up: seen the new kfc burger on tv double chicken breasts an bacon looks bloody good although im been wondering how anyone will fit it in there mouth lol

[BIRMANBOY]

Perhaps you could change your avatar name to Harvey Spectre then in the spirit of full disclosure.
Exactly. It is part of my new low carb, high fat diet. Its finger licken good.

Disc: Skinny enough to be banned from being a Glassons model (I'm actually a guy but you get the point)

[percy]

A very good result.

[winner69]

reached the target price 3.30 but seems stuck below it now.

What's your target price now bull ........well over 4 bucks I hope

The squiggly line just keeps going up eh ......and every now and again they put a decent amount in my bank ......is that the dividend or something?

who would have ever thought RBD doing heaps better for me than Heartland

[percy]

What's your target price now bull ........well over 4 bucks I hope

The squiggly line just keeps going up eh ......and every now and again they put a decent amount in my bank ......is that the dividend or something?

who would have ever thought RBD doing heaps better for me than Heartland

Sell your losers and add to your winners, winner69!

[winner69]

Sell your losers and add to your winners, winner69!

The 4 I have at the moment are winners Percy, if I was going to sell the worst one it would be Heartland

[Beagle]

Go down to KFC today, order a huge helping of greasy chicken, get a window seat and watch the world go by and as you're scoffing it down you'll be mumbling under your breath, I'm well positioned :)

[winner69]

Go down to KFC today, order a huge helping of greasy chicken, get a window seat and watch the world go by and as you're scoffing it down you'll be mumbling under your breath, I'm well positioned :)

prefer the oysters and chips sitting on the beach, watching the AIR planes coming in to land

[Beagle]

Sounds good and no doubt quite entertaining on a windy day !!

[bull....]

a winner cant see why 4 bucks wouldnt come about one day (slow grind higher this one) good div yield still good growth happening, long as everyone keeps eating the chicken why not
consensus analysts 3.65 now

[RGR367]

a winner cant see why 4 bucks wouldnt come about one day (slow grind higher this one) good div yield still good growth happening, long as everyone keeps eating the chicken why not
consensus analysts 3.65 now

Especially if you remember that you got them when it was still hovering between 56 and 92 cents :t_up:

[okay]

This takes the meaning of comfort food to a whole new level

http://www.msn.com/en-nz/lifestyle/relationships/chinese-woman-spends-entire-week-in-kfc-after-dumping/ar-BBaCeka?ocid=mailsignout

[Beagle]

Can't help wondering where she slept. Story a little embellished ?

[okay]

Can't help wondering where she slept. Story a little embellished ?

The dailymail has some pics of her.

http://www.dailymail.co.uk/news/article-2803459/Comfort-eating-Chinese-woman-26-spends-entire-WEEK-KFC-dumped-boyfriend.html

[Beagle]

The dailymail has some pics of her.

http://www.dailymail.co.uk/news/article-2803459/Comfort-eating-Chinese-woman-26-spends-entire-WEEK-KFC-dumped-boyfriend.html

Thanks. I got a good laugh from some of the comments, here's my favourite

I want to give her a hug and tell her everything is gonna be okay... after she takes a bath and washes her hair. Then I'll go and make her a salad and help her detox!

[Snoopy]

Wow not a bad result seems people are caring less and less about their health, the SP has performed extremely well over the last few months


"Net Profit excluding non-trading items was also $11.5 million, up $2.7 million or 30.2% on the prior period."

Wow, where did this come from? The market got a shock too with the share price closing up nearly 5% today to $3.67, an all time high. Even with that share price jump the PE and yield still look OK. I thought I had far too many of these, before today.

"Brand EBITDA was up $4.4 million to $31.6 million. The bulk of the increase came from KFC, but all four brands delivered an improved profit performance."

<snip>

Looking at the KFC result alone

"EBITDA ($m) 26.2 22.8 +3.4 (+14.8%)"

KFC has been on a slow grind lower over the last few years, so this really is significant news.

"Not a bad result"? You are a hard man to please tosspot, or maybe just a little understated.

SNOOPY

[bull....]

Smart bringing all the carls jnr under there umbrella

[Harvey Specter]

Smart bringing all the carls jnr under there umbrella$10m for 7 stores looks cheap to me. I assumed they have been trying form the start but had been blocked by unrealistic asking price.

[Beagle]

Does this mean I might finally be able to order a burger and chips at the Avondale Carl's Jr and they actually arrive hot...just once every second or third time would be a vast improvement on never being hot !!!
How do they consistently get it so wrong ?

[Rep]

$10m for 7 stores looks cheap to me. I assumed they have been trying form the start but had been blocked by unrealistic asking price.

Given that RBD has only managed to get CJ's profitable recently and they have critical mass of their bulk purchasing power, it's conceivable that a small operator like the Forsgrens would have struggled to produce a significant amount of positive cashflow and EBITDA from their 7 stores. So perhaps it was a 'stalking horse' for RBD while they watched their cash burn?

The purchase price might seem cheap but it depends on how many multiples of EBITDA that RBD paid for the business - although they will be factoring how adding another 7 stores does to their overall number of stores in terms of what they can do in terms of supplier leverage and critical mass for their marketing spend - so they are probably considering their future cashflow in terms of a larger cohort of stores and what RBD forecast they can produce from these stores with network synergy.

RBD took their materials warehousing and distribution in house recently so this will also mean more throughput for their CJs inventory and an opportunity to rationalise the supply chain if Forsgren wasn't using them (noting that the Forsgren Group established CJ's here before RBD got involved and initially anyway appear to have had set up their own supply chain given some stock issues around some of their openings)

Apart from RBD, there realistically aren't that many purchasers available either.

[bunter]

Back in March 13 RBD said CJ stores would be immediately profitable.
My notes say 400k/a NPAT per CJ store, when running well.

Those profits haven't been achieved yet - various excuses and explanations.

But if they can get CJ running well, there's good growth for RBD.

I thought the CJ sublicensing announcement was good news - mean there will be someone on-site who cares about the store.
FWIW, after their October announcement I revised dividend growth estimate to 12.5% pa and the fair value price to $5.28

[winner69]

Sales still chugging along nicely

Share price 4 bucks by next announcement I reckon

[winner69]

Carls sales are a bit of a worry though, esp in the context of this comment the brand has consolidated at post initial opening sales levels and is in a phase of building awareness and loyalty across the total network......

Averages weekly sales per store was only $33.2k which is way done on the $38.3k average over the prior three quarters (only 1 new store opening in that period)

Quite a big drop this quarter ......c'mon Russell get out there and drum up some more business. Things are meant to be booming, Stats NZ have recent sector sales up nearly 10%

[bunter]

Carl's Jr was supposed to be the 'growth story' for RBD, but it's not going nearly as well are RBD thought it would.
Seems people go to new stores when they open but don't go back.

My take on CJ is the food is unhealthy, excessive (portions too big), expensive and a little slow - maybe consumers are wising up?
Too soon to write CJ off, but I'm losing patience.

KFC is 75% of RBD's turnover and it's booming, with same-store sales up 10%.
So RBD's growth has come from the old workhorse (and a little, surprisingly, from Pizza Hut).

In retrospect opening more KFC stores might have been better than going into CJ.

[winner69]

Milford sold a million or so over the last few weeks but still hold heaps

Good investment for the NZ Super Fund ......encourage the young to eat lots of greasy stuff equals a good investment and then hope they die before they reach the sixties equals less pensions to pay out.

We should encourage this unethical investing practice eh

[Baa_Baa]

@bunter "In retrospect opening more KFC stores might have been better than going into CJ."


Good supposition, perhaps weighing up whether to diversify and grow with CJ , or risk saturating a mature KFC market footprint.


@W69 As for luring the youth into an accelerated demise, as you contend, I say you've missed the point, the market is much bigger than young people.

[winner69]

a winner cant see why 4 bucks wouldnt come about one day (slow grind higher this one) good div yield still good growth happening, long as everyone keeps eating the chicken why not
consensus analysts 3.65 now

Bull , Wethinks we will see 4 bucks next week, at least this month

Getting there faster than we thought eh

Still no reason to even contemplate selling

[bull....]

hey winner yea looking good for more gains unfortunately im out (nothing wrong with the company ) just switched to collins aus same thing but wanted the currency angle gain one day.

[Snoopy]

Bull , Wethinks we will see 4 bucks next week, at least this month

Getting there faster than we thought eh

Still no reason to even contemplate selling

A cracker 4Q sales result. Closed on the highs today at $4. A bit behind the Winner prediction, but I won't hold that against him! Still my biggest NZX holding. Still no reason to sell!

SNOOPy

[bull....]

yes a great result kfc rocks still no reason it wont keep going higher

[percy]

And our Russell will enjoy his well earned $1mil bonus.!

[Baa_Baa]

Sold out @ $3.99 today, been a good run over 3 years, ~+34% inc divi. Just looks very toppy to me and I want that profit & capital to use elsewhere for awhile. No disrespect to RBD or dedicated holders.

All the best,
BAA

[bull....]

standing out from the crowd with there stand on zero hr contracts - smart move if they remain the only ones as they will get the best employees

[winner69]

NBR is on the ball today with what is probably a good article


Analysts predict strong results for Restaurant Brands

We all know it is going to be a good year ....as will next year

Hey bull .....I sense 5 bucks by year end, or really close to it

[RGR367]

NBR is on the ball today with what is probably a good article


Analysts predict strong results for Restaurant Brands

We all know it is going to be a good year ....as will next year

Hey bull .....I sense 5 bucks by year end, or really close to it

That would probably explain why not too many sellers out there. And hope it make it to that price as I have started unloading mine at 4 bucks since last month. As Baa Baa said, nothing personal. And not that I don't like this stock anymore but there's too much on the table already considering I started accumulating this between 56 to 89 cents several years ago. One of those shares that really award your timing and for being patient. I can now truly well time my re-entry into it if ever I get drawn to it again. :t_up: GL folks.

[winner69]

That would probably explain why not too many sellers out there. And hope it make it to that price as I have started unloading mine at 4 bucks since last month. As Baa Baa said, nothing personal. And not that I don't like this stock anymore but there's too much on the table already considering I started accumulating this between 56 to 89 cents several years ago. One of those shares that really award your timing and for being patient. I can now truly well time my re-entry into it if ever I get drawn to it again. :t_up: GL folks.

I stopped that practice years ago, it cost me money and lowered returns. I never sell winners jst for the sake of rebalancing. Let them run until they stop going up is my mantra and never regretted it.

Only sell if still going up if you have something better to go into, like something that will go up faster. Last year I sold my beloved DLX (because the price growth slowed down) and topped up with HNZ - DLX did keep going up but HNZ went up faster.

I still have the RBD I got like you years ago. Is beginning to get overvalued but as long as punters love it and the price keeps going up will keep them. Can't really find anything better to replace them at the moment.

I might be different to you in that I never want to have any more than 3 or 4 stocks on the go at once (except for the gambling money part)

[winner69]

Good day today, up to 418

That 5 bucks really on the cards by year end now I reckon

Wow, 5 bucks - that would be a 30% plus gain for the year plus a 7% divie

Can't do much better than that

[percy]

Good day today, up to 418

That 5 bucks really on the cards by year end now I reckon

Wow, 5 bucks - that would be a 30% plus gain for the year plus a 7% divie

Can't do much better than that

You have done with HNZ over the past SEVEN months.!

[winner69]

You have done with HNZ over the past SEVEN months.!

Good eh

But past performance doesn't always predict the future and the way HNZ is going another 30% in SEVEN months not looking likely .....at least the greasy chicken and hamburger place is going up at the moment

[percy]

Good eh

But past performance doesn't always predict the future and the way HNZ is going another 30% in SEVEN months not looking likely .....at least the greasy chicken and hamburger place is going up at the moment

Could be an interesting seven months??!!!
Do RBD do well in the winter months?

[Rep]

Could be an interesting seven months??!!!
Do RBD do well in the winter months?

Typically, KFC seems to do better over school holidays and long holiday weekends based on looking at the quarterly sales reports over past years (reference point being where Easter falls in relation to School Holidays).

Pizza Hut probably does better with delivery on wet weekends and looking at Starbucks it seems to be very busy near ports in Cruise Ship Season, it's always filled with students during University term in Auckland and Queenstown Mall seems very busy in morning in winter.

Their second quarter is 16 weeks though... So will always tend to be higher than the other 12 week quarters.

[Rep]

They do good sales for families going back to the islands. Have always wondered why they don't have a travel pack promotion out buy the airport

They built a brand new Carl's and a KFC next to Auckland Airport! And you can buy a catering pack if you want enough pieces - believe me I've seen them get loaded into the overhead locker!

[percy]

They built a brand new Carl's and a KFC next to Auckland Airport! And you can buy a catering pack if you want enough pieces - believe me I've seen them get loaded into the overhead locker!

I can smell them from here.!!! lol.

[bull....]

NBR is on the ball today with what is probably a good article


Analysts predict strong results for Restaurant Brands

We all know it is going to be a good year ....as will next year

Hey bull .....I sense 5 bucks by year end, or really close to it

very nice uptrend in place winner so as they say trend is your friend and if they keep up the good work 5 bucks should be attainable

[bull....]

finger licken good a

[winner69]

finger licken good a

450 tomorrow and then 5 bucks beckons

Yes finger lickin good

[JayRiggs]

I'm eagerly awaiting my annual KFC voucher.
I don't ever want to sell, just so I can keep getting the voucher every year!

[blackcap]

I'm eagerly awaiting my annual KFC voucher.
I don't ever want to sell, just so I can keep getting the voucher every year!

Yeah same here. I split my holding in 2 via an off market transfer last year and hope to get 2 vouchers this time :)

[percy]

Yeah same here. I split my holding in 2 via an off market transfer last year and hope to get 2 vouchers this time :)

Classic.!!!!!!!!!!

[JayRiggs]

Yeah same here. I split my holding in 2 via an off market transfer last year and hope to get 2 vouchers this time :)

Double delights for you :cool:

Any wagers to what the next voucher will be?
I'm guessing it'll be popcorn chicken + nuggets lunch box. We've had burgers in recent years, so I doubt it'll be another burger this time.... unless it's a Double Down!

[blackcap]

Double delights for you :cool:

Any wagers to what the next voucher will be?
I'm guessing it'll be popcorn chicken + nuggets lunch box. We've had burgers in recent years, so I doubt it'll be another burger this time.... unless it's a Double Down!

I don't think it will be a double down burger unfortunately as they do tend to keep the freebies at the lower end of the $ scale... but its a treat none the less.
Actually had some local KFC today (have not had any for a while mind as I have been training for a marathon which was completed 3 weeks ago) as my brother came to visit. Was actually quite pleasant this time and the service was outstanding. It is normally pretty average.

[winner69]

Last quarters sales more than solid ......almost brilliant

that 5 bucks even closer now blackcap

https://www.nzx.com/companies/RBD/announcements/265205

[bull....]

awesome kfc sales and the double down is back yum

[nextbigthing]

How are you chaps valuing this company? Anybody kind enough to share?

Going from the ASB and ANZ data, earnings in millions for the last few years have gone $20, 24, 17, 16, 20, 24 (most recent). So the last couple of years have shown good growth but really only back towards previous levels.

Earnings yield is only 5.5% That's earning yield not even divvy. So what growth are you factoring in to get to the current price of $4.44?

Cheers NBT

[blackcap]

Last quarters sales more than solid ......almost brilliant

that 5 bucks even closer now blackcap

https://www.nzx.com/companies/RBD/announcements/265205

Hi Winner, looks like another NPX here too.... following similar squiggly lines. I am a fundamental investor.... but am starting to realise the value of those lines you keep going on about. $5 here we come and time to sell a few :)

[Beagle]

How are you chaps valuing this company? Anybody kind enough to share?

Going from the ASB and ANZ data, earnings in millions for the last few years have gone $20, 24, 17, 16, 20, 24 (most recent). So the last couple of years have shown good growth but really only back towards previous levels.

Earnings yield is only 5.5% That's earning yield not even divvy. So what growth are you factoring in to get to the current price of $4.44?

Cheers NBT
I would like to "second" that question. KFC is in my opinion pure filth, absolutely toxic to the body of anyone trying to live a healthy lifestyle. Its amongst the very worst kinds of junk food you could possibly eat.

[Regi]

I would like to "second" that question. KFC is in my opinion pure filth, absolutely toxic to the body of anyone trying to live a healthy lifestyle. Its amongst the very worst kinds of junk food you could possibly eat.

I agree Roger. Speaking from a health standpoint, KFC and Carls Jr are up there as some of the worse food options.
I personally live a very healthy and active life style and I can count the amount of times I have had KFC and Carls on one hand. And 4 out of the 5 times is because I had no other option.
But you can't deny RBD has solid management because despite the global trend of healthy eating and years of media abuse towards these sorts of establishments... they have continued to grow. Although their 'innovations' don't stretch much further than including Rugby balls to promote their support of Rugby... it simply works. That latest sales promotion was a huge success and then there is their Zinger range, Double downs and 'special recipe chicken' etc, all things iconic - and popular - to the KFC brand.
You may (like me) not support, love, or eat it but the fact is a lot of people DO. I feel as though people are more educated about healthy eating these days but they continue to slip into the trap of fast food. Whether it is because we lead busy lives and want something cheap and quick or simply because it is satisfying, I don't know. But it is there... always. And it works.

I haven't discussed much about the fundamentals or numbers but I think the simple fact that it has continued to thrive in an industry constantly hit with abuse says something about RBD. I'm a happy holder but you would rarely find me in one of their stores. Goes against most of my personal rules when investing (e.g I fly AIR whenever possible, but I wouldn't eat KFC whenever possible lol!) so i'm conflicted but I've made an exception for RBD.

[gv1]

You would find them in low socio-economic zones...these are the people who eat these kind of foods. If you drive through eastern suburbs etc you can't see any of these outlets. They say that there is pandemic of diseases and illness such as diabetes, over weight etc. At the expense of peoples lives....others are making money.

[Harvey Specter]

I personally live a very healthy and active life style Same but I think it is finger licking good. Have it about 1 a month as a treat. And seriously, if you have done a hard workout, the protein in a double down will be far more beneficial than the bad stuff is detrimental.

Moderation is the key which is what most people overlook. Having said that, a bit disappointing that the new brand they decided to introduce was Carls Jr. A healthier mexican offering would have been better for the country.

Still in an uptrend so that is all I need to know.

[blackcap]

. I'm a happy holder but you would rarely find me in one of their stores. Goes against most of my personal rules when investing (e.g I fly AIR whenever possible, but I wouldn't eat KFC whenever possible lol!) so i'm conflicted but I've made an exception for RBD.

Tell you wahat Regi... If you give me your address I will send you a pre-paid self addressed envelope and I will gladly take your annual voucher off your hands :P :) (jokes aside, I have been living healthily lately too and find I do tend to go there less and less. Had some KFC after completing my marathon but it was a lot less satisfying than I can remember. So maybe the body is telling me something)

[Regi]

if you have done a hard workout, the protein in a double down will be far more beneficial than the bad stuff is detrimental.
...more beneficial than, er, what? I think I get what you are saying in the sense of consuming protein after a work out - I always do. But I would never get it from a double down with everything else there is on offer! I'd take a Whey shake over a DD any day... although like you said, it IS mighty good. But hey, cheat day am I right?


Moderation is the key which is what most people overlook. A healthier mexican offering would have been better for the country.
Couldn't agree more... I'm holding out for Chipotle to come here!!

[Regi]

Tell you wahat Regi... If you give me your address I will send you a pre-paid self addressed envelope and I will gladly take your annual voucher off your hands :P :) (jokes aside, I have been living healthily lately too and find I do tend to go there less and less. Had some KFC after completing my marathon but it was a lot less satisfying than I can remember.

You've got dibs on it now! Will save me the temptation of using it myself, because who doesn't like free stuff??

I've always found alcohol and fast food brands sponsoring sports events and teams ironic. At least it has progressed from ciggy brands! But like anything, in moderation it's fine indulging in this stuff occasionally! :)

P.S If post-marathon is the only time you eat at KFC now... do more of them and get their sales up for my lack of presence! hehe

[JayRiggs]

I am extremely impressed with the latest KFC shareholder voucher.
A 2 PIECE QUARTER PACK!!! :p
Best voucher so far in the past 5 years.
I dunno about you guys, but I intend to enjoy my free treat at the new KFC in Albany. LOL :D

[Beagle]

I agree Roger. Speaking from a health standpoint, KFC and Carls Jr are up there as some of the worse food options.
I personally live a very healthy and active life style and I can count the amount of times I have had KFC and Carls on one hand. And 4 out of the 5 times is because I had no other option.
But you can't deny RBD has solid management because despite the global trend of healthy eating and years of media abuse towards these sorts of establishments... they have continued to grow. Although their 'innovations' don't stretch much further than including Rugby balls to promote their support of Rugby... it simply works. That latest sales promotion was a huge success and then there is their Zinger range, Double downs and 'special recipe chicken' etc, all things iconic - and popular - to the KFC brand.
You may (like me) not support, love, or eat it but the fact is a lot of people DO. I feel as though people are more educated about healthy eating these days but they continue to slip into the trap of fast food. Whether it is because we lead busy lives and want something cheap and quick or simply because it is satisfying, I don't know. But it is there... always. And it works.

I haven't discussed much about the fundamentals or numbers but I think the simple fact that it has continued to thrive in an industry constantly hit with abuse says something about RBD. I'm a happy holder but you would rarely find me in one of their stores. Goes against most of my personal rules when investing (e.g I fly AIR whenever possible, but I wouldn't eat KFC whenever possible lol!) so i'm conflicted but I've made an exception for RBD.

Very good post but I think you'll find the investment metrics have expanded in recent years faster than regular eaters waistlines :)

[Rep]

Roger,

You also have to consider some other factors. I'm sure Snoopy can expand on this but here goes...

When RBD achieved its best result the P/E ratio reflected the yields at the time, they were still finishing the refurbishments of the KFC stores, Pizza Hut's long term viability was being questioned and they had begun selling down some of the franchises (and the $5 pizza offer was still a year away)... They also did not have any growth options on the table either - they stopped building Starbucks stores by then and had started closing poorly performing ones,

Since then they have been able to sustain KFC growth without losing much margin, finished much of the refurbs and built more stores, Pizza Hut has addressed their main competitor and taken a lot of market share back that it had been bleeding as well as selling down about 40 regional stores.

They have also put a growth option by adding Carl's Jr to the portfolio although they are still having to work hard to get some margin on those sales, picked up the Forsgren stores at a price that would appear to me to be not much more than cost of building the stores to get some critical mass. The CJ piece of the puzzle also means that competitors that had been looking at dipping into KFC's market (remember McWings? You probably don't because they vanished) have now had to respond in their own market with better and more costly ingredients (Wendy's new patties) and up their instore service models.

Despite the investment in new stores and growth, they can still sustain a growth in dividend out of operating cashflow so the investment metrics reflect some expectation that CJ's will settle with a reasonable level of revenue per store and some good margins in due course - although the jury is out as what that margin will be. They will have economies of scale with some items but probably not in beef until they get enough stores...

I have to add I do hold some of these and it has shown some reasonable returns even inside the last 18 months... It's a different company from the one that Tower bailed out their 10% stake at 55 cents per share...

[blackcap]

Do ppl not realise its ex-div or is there something cooking in the kitchen? (or should that read frying)

[Snoopy]

450 tomorrow and then 5 bucks beckons

Yes finger lickin good


I think some earnings growth will be required to breach the $5 barrier. I had thought that Carl's Junior might provide that incremental growth springboard. But then I read this on p55 of the FY2015 annual report:

"Cash flows were projected based on a three year strategic business plan as approved by the Board of Directors. The cash flows were based on sales growth of 75.5% in 2016 (full year impact from the acquisition of seven stores in 2015) then 2.3% to 3.2% over 2017-2018. A terminal year was calculated based on the 2018 year and assumes a continuous growth of a minimum of projected inflation estimates of 2.5%."

Did read that correctly? 2016 will be spent bedding in the new stores acquired in Auckland from Michael Jones. From that point forward, growth will be at the rate of inflation. So no more new stores planned? Carl's Junior will remain a largely Auckland based niche player? Lots of puff in the annual write up about the dynamism and hunger for change of the senior managment team. So why has such a low ball steady as she goes multi year strategic plan for Carl's Junior been ticked off by the board?

SNOOPY

[Rep]

I think some earnings growth will be required to breach the $5 barrier. I had thought that Carl's Junior might provide that incremental growth springboard. But then I read this on p55 of the FY2015 annual report:

"Cash flows were projected based on a three year strategic business plan as approved by the Board of Directors. The cash flows were based on sales growth of 75.5% in 2016 (full year impact from the acquisition of seven stores in 2015) then 2.3% to 3.2% over 2017-2018. A terminal year was calculated based on the 2018 year and assumes a continuous growth of a minimum of projected inflation estimates of 2.5%."

Did read that correctly? 2016 will be spent bedding in the new stores acquired in Auckland from Michael Jones. From that point forward, growth will be at the rate of inflation. So no more new stores planned? Carl's Junior will remain a largely Auckland based niche player? Lots of puff in the annual write up about the dynamism and hunger for change of the senior managment team. So why has such a low ball steady as she goes multi year strategic plan for Carl's Junior been ticked off by the board?

SNOOPY

I think you might be taking that note completely out of context. The note that you are referring to relates to the impairment test of the CJ intangible asset - the projections are a 'value in use' based on the existing asset base. In determining the 'value in use' for the existing asset base, you are not able to include cash flows from future stores as this is a test that the cashflow being derived from your current asset base is sufficient to support the 'cash generating unit' asset base. In other words, the current book value of the business (fixed assets plus intangibles) has to be less than the estimated discounted future cashflow of those assets.

Management have to use reasonable estimates of the future cashflow from the existing asset base. Given that the Forsgren stores cashflow will be annualised in 2016 (acquired during 2015), it would be reasonable to take up the annual cashflow this year and prudent to take up growth in the next few years at a rate that would be slightly ahead of inflation given the track record to date. The terminal year calculation assumes a growth rate in perpetuity offset by the discount factor from the WACC of 8.2% post tax.

Have a read of accounting policy (r) in the notes for further explanation - please remember what goodwill actually is... it's the difference between the fair value of the CGU acquired less the fair value of the net assets acquired.

[winner69]

Snoopy, you really need to read that in the context of what Note 8 (Intangibles) is all about - which is supporting / justifying the carrying value of the cash generating brands (impairment testing)

Even though it says a Board approved plan the growth factors essentially are just very reasonable assumptions to test that carrying value, in case of Carls $1.5m. In this case Carls passed - no impairment needed.

Guarantee that the real plan is different, at least the one Russell's bonus is based on.

Believe those assumption even you Snoopy would be disappointed that they only expect KFC growth to be 2.5%pa in 2018 and beyond, the same as Pizza Hut

Wouldn't read too much into those assumptions - always very conservative for impairment purposes to avoid auditors challenging them

Had to use that high 75% for Carls (pretty good eh) because its in the bag already.

[winner69]

Hey Rep types faster but I think we said the same thing.

But then again might have only been winding us up and down paying RBD prospects.

C'mon that 5 bucks ...it's not far away

[percy]

Hey Rep types faster but I think we said the same thing.

But then again might have only been winding us up and down paying RBD prospects.

C'mon that 5 bucks ...it's not far away

Will "our Russell" get another $1mil if the price hits, and stays above $5.00....?

[winner69]

Will "our Russell" get another $1mil if the price hits, and stays above $5.00....?

I don't think he has got one yet .....doesn't come into effect until July 15. This From AR-


d) Long term incentive scheme

On 28 July 2014 the Group entered into a long term incentive scheme (“LTI Scheme”) with the Chief Executive Officer (“CEO”). The scheme provides that if in the two year period starting 25 July 2015:
1. the Group’s share price is at $4 or above for a continuous period of 40 trading days or; 2. the Group is subject to a successful takeover at or above $4 share price then the CEO will be paid a one-off $1 million bonus net of tax.

A condition of the payment is that the CEO must remain employed for a period of at least 6 months immediately following the eligibility criteria being met.

The directors believe it is likely that the conditions will be met during the eligibility period. The fair value of the liability (refer Note 21) at balance date was assessed at $0.3 million and has been taken up as a charge to general and administration expenses in the statements of comprehensive income.


I think it pretty safe bet he will get it eh, if he hasn't yet.

Do you think he deserves it or were the Group over generous with our money?

[percy]

He certainly deserves it.The group got a bargain.!!
RBD was a serial under performer.
Various CEOs promised a lot,and never delivered.
I remember our "old friend" Arthur Lim,every year saying his pick was RBD.
In the end it was a bit of a joke."This year RBD Arthur"???????????????? lol.
Then they promoted "our Russell" from within,and the company has never looked back.