RBD - Restaurant Brands

[skid]

For those who are really looking to get ahead,you could invest in RBD for divies and the healthcare sector for real profits LOL

[Snoopy]

For those who are really looking to get ahead,you could invest in RBD for divies and the healthcare sector for real profits LOL

You could have added a smilie to your post Skid.

Nevertheless for those who took your post literally, the NZX50 accumulation index has gone from about 2000 to 3500 over the last ten years, a gain of 75%. The RBD price has effectively gone nowhere over that same time period. However 88cps of dividends have been paid over that time. That is a gain of 44%. Put in a time value for money adjustment on all of those dividends and RBD will still have underperformed the index, but I would pick not by much. By the time you pay a 1% managment fee per annum on your index fund I would say there is virtually nothing in it.

So just buying and holding RBD for ten years, at not particularly favourable pricing, wouldn't be too far off buying an index fund.

Contrary to what you might think you can make real money from just buying and holding RBD long term. Of course for those of us with an average share purchase price far below $2, we have done an awful lot better than those index returns.

SNOOPY

[percy]

I see KFC guilty in Australia salmonella brain damage case.Must admit I have not gone near KFC for 15 years after I was ill with a stomach bug after a KFC meal.Must admit I have not gone near a Gin bottle for over 30 years .That was too much though. !!!!!

[kizame]

Had KFC the other night,first time in about a year,just to remind myself how disgusting it is.
Chicken pieces are way smaller than they used to be.Very quick service though at the drive thru.
Had pizza from pizza hut about 2 weeks ago for the same reasons as the KFC haha,called in and ordered,took forever,who said it's fast food.
For chain takeaways,you can't beat Subway,and for a real treat Burgerfuel,you don't feel like you've been fat raped just afterwords haha.

[CJ]

Kizame - just look at the general population - they dont mind getting fat raped as you put it.

Disc: hold

Offtopic: looking at Burgerfuels website, it looks like they are expanding in NZ again (disc: hold indirectly)

[Blendy]

Offtopic: looking at Burgerfuels website, it looks like they are expanding in NZ again (disc: hold indirectly)

Yes, I noticed their ad on the franchise.co.nz website yesterday - you can set up a Burgerfuel presumably anywhere in the country for $250-$350k. Although I'm not sure if that includes shop outfitting and cost of renting a retail space, legal fees etc. http://www.franchise.co.nz/franchise.../23-burgerfuel

[CJ]

Yes, I noticed their ad on the franchise.co.nz website yesterday - you can set up a Burgerfuel presumably anywhere in the country for $250-$350k. Although I'm not sure if that includes shop outfitting and cost of renting a retail space, legal fees etc. http://www.franchise.co.nz/franchise.../23-burgerfuel

The $350k figure would include everything you pay upfront including, initial franchise fee, fitout and even the initial training I think. The ongoing franchise fees, advertising fees, lease costs, stock, etc are normal monthly expenditure and are expected to be covered by sales (some stores obviously do better than others) so you would need to budget a bit extra for working capital as well.

[Snoopy]

Pizza Hut continues to be an unmitigated disaster, average store turnover is now $600,000 to $650,000. Pizza Hut makes an EBIT loss.

After taking time to read the FY2012 Annual Report, I think Star man has nailed the most important point.

Pizza Hut has always carried a lot of goodwill in the RBD books. This is a legacy of RBD buying out Eagle Boys all those years ago. Initially the buy out seemed to be working. But once the Dominos machine got going, Pizza Hut was exposed as a second rate Pizza chain that had failed to make the 21st century transition. The only way PH seem to be able to increase sales in NZ is through discounting. And if your current profit margin is zero, that can't be sustainable in the medium term.

I never could figure out why year after year the PH goodwill was valued in RBD accounts using forecast sales and profit margins. Year after year PH failed to achieve their sales targets and profit margins. Yet year after year that goodwill was largely untouched for value in the RBD annual accounts. (I say largely untouched because the more recent sell down of certain Pizza Hut store to private owners has forced RBD to crystallize the latent losses relating to the 'fictional goodwill' on those particular stores).

On p47 of the FY2012 Annual Report my question was finally answered:

"As a result of the review based on key assumptions (sales growth of 2% from 2013 to 2015, margin improvements and terminal growth of 2.5%) the calculation shows the recoverable amount approximates the current carrying amount (2011: headroom of $5.8m)."

This is the first time the word 'headroom' has been used in this context.

What this means is that in previous years RBD have modeled some fictional growth scenario which gives an answer for 'virtual goodwill' above the book figure. For the first time RBD have had to admit the fictional story telling scenarios are over. The stunning consequence is revealed in the small print on page 48. RBD are looking at a potential $8.4m write down if Pizza Hut sales do not recover from current levels! Of course this will be a non cash write down which may ease the pain. Long term shareholders will remember this was cash once though!

I haven't believed this Pizza Hut goodwill could be justified for many years. In my own modeling on the company I have continued to write off this goodwill at the rate that pre IFRS accounting rules demanded, an amount over $2m per year. That means I see Pizza Hut lost $7m in FY2012 (after allocating head office overheads, and net funding interest) whereas for others it 'only' lost $5m. I would argue that taking into account the p48 revelations, my treatment of the results looks more accurate. But neither figure is pretty and despite the sell down, the Pizza Hut divisions decline is accelerating.

Incredibly management don't seem to have a solution apart from sticking their head in the sand and putting their time resources into Carl Jr!

SNOOPY

[Sauce]

Good post snoopy.
i wonder if we will see a similar scenario play out with the book value of metlifecare's retirement villages portfolio.
regards
sauce

[Snoopy]

After taking time to read the FY2012 Annual Report..

One thing regarding General and Administrative expenses did confuse me. On p26 G&A Expenses were $11.333m. Yet if you turn to the segmental reporting on p41 the consolidated G&A expenses are listed at $10.002m.

I solved this discrepancy as follows (all figures taken from p41):

$11.333m ( G&A expenses in Statement of Comprehensive Income)

less $0.522m ('All Other' segment depreciation)
less $0.013m (loss on sale of 'All Other' PP&E)
less $0.082m (amortization all other segments)
less $0.714m (independent franchisee income, as described in Note 6)

=$10,002m

I took particular notice of this, because I think it hints at a possible growing future income stream for RBD. As all those PH stores are sold off, RBD should expect a contribution from the new owners towards a national advertising budget for Pizza Hut. $714,000 doesn't sound that significant but as those PH stores are sold it should grow. But something is wrong.

That $714,000 seems to be increasing G&A expenses. That means RBD are paying those new franchisees money not receiving it! Can this be correct? If not can someone please point out my blue!

SNOOPY