RBD - Restaurant Brands

[Snoopy]

quote:Originally posted by winner69

Why use the underlying profit?

They say that some non trading items will be in the vicinity of $2 million after tax.

What non trading items are you on about Winner? AFAIK the accounts are now clean.

quote:
But those non trading items look like things that were trading items not that long ago -- obviously been understating depreciation etc in the past if they now need to write a few things off.

The main write offs (goodwill and depreciation) relate to Australia - a result of the decision to exit. Ther was also a write off of goodwill in NZ on the Eagle Boys acquisition due to the 'Pizza Wars'. Unless you indugle in crystal ball accounting, there was nothing inappropriate in not writing off those amounts in earlier years.

SNOOPY

[winner69]

Snoopy - I was referring to the $2M already flagged for the 2008 year .... being "write offs associated with KFC store transformations and Pizza Hut facility rationalisation"

Seems like a catch up to me

Gut and renovate a new store ... write the value of whats left off etc

Companies that have regular one-offs / non trading / abnormals or whatever you want to call them have in essence overstated prior years profits ... think about it


It sort of becomes contagious .... ongoing

[Lizard]

quote:Originally posted by Snoopy
RBD has always been and will continue to be a cash generator. Even if earnings are flat the EBITDA over the next five years will be over $150m. That easily covers the $40m you suggest is required for total chain refurbishment.

Snoopy, as the books can testify, the "additional" refurbishment costs will be only part of the investment cashflows. You cannot ignore ongoing investing cashflow in this type of business, as it is part and parcel of their business and earnings generation. Read W69's post of 12 hours ago on the previous page which lays out exactly what sort of "cash generator" RBD has been. Once this round of refurbishments have finished, they may temporarily become a cash generator while they spend below depreciation for a few years until the next round...as Winner as suggested, the fact they need to write-off existing KFC investment as they refurbish may attest to the fact that their long term depreciation allowance is unrealistically low.

And yes, it seems that a good part of the increase in underlying profit this year will come simply from the reduction in costs associated with PH Australia, rather than the from the much-touted improvements in KFC sales.

Not going to debate this one any further. Not alot more to be gained by poring over the figures at this point.

[Snoopy]

quote:Originally posted by winner69

Snoopy - I was referring to the $2M already flagged for the 2008 year .... being "write offs associated with KFC store transformations and Pizza Hut facility rationalisation"

Seems like a catch up to me

Gut and renovate a new store ... write the value of whats left off etc

Companies that have regular one-offs / non trading / abnormals or whatever you want to call them have in essence overstated prior years profits ... think about it

It sort of becomes contagious .... ongoing

I have just read the Chairman's address for the first time and saw the quote. You are right Winner.

I think RBD have been somewhat cavalier about some of these write offs. It is an issue of co-ordinating the expiry of the lease with the expiry of the franchising agreement that applies to the same outlet. Unless both co-incide you are going to have a write off whenever a business unit is moved. But this kind of write off is unavoidable.

As for the write off of the internals of a building before expiry date, well that equipment should be able to be incorporated under the new roof. I agree with you that this kind of write off should come under the header 'normal business'.

One thing I am curious about. When these KFC stores are 'transformed' what happens to the workers? The site is out of action for six weeks or so. Do the workers just go home on full pay for a month? Or are they all sacked? Staff turnover -normally- is high enough for me not to know, being in the infrequent visior to my local store that I am.

SNOOPY

[Snoopy]

quote:Originally posted by winner69

SNOOPY - there has to be something fundamentally wrong with the RBD business model

Cumulative cash flows since 2000 pretty sad story

Operating cash flow (money from day to day operations) have been $167M

Spent $141M on franchise fees, capital assets and acquisitions (I have excluded the sale of buildings as this was really a financing issue)

So over 7 financial years they have only generated $26M of free cash..... pathetic

Again I am not sure where you are quoting your figures from Winner, but let's assume you are correct. I don't agree that you can disregard the sale of properties which brought some $54m onto the RBD company balance sheet. It was that capital injection that shored up the balance sheet to enable the expansion into Australia to proceed.

To disregard it is akin to saying:
"That joker across the street couldn't have afforded his new beach house if he hadn't won Lotto."
You can draw up all sorts of arguments saying that interest rate rises since purchase would have put him into a negatively geared situation, his wife and family would have left him cracking under the financial and social pressure of never seeing hubby at home as he worked three jobs to clear his debts....blah.. blah..blah.

The whole argument is bunkum because the guy did win Lotto. And if he hadn't won Lotto then he wouldn't have bought the house in the first place!

The above situation is exactly analagous with RBD and their Australian business purchase. The fact that RBD lost millions in Australia and the fact that our Lotto winner over the road had his beach house wiped out by a tsunami have nothing to do with the affordability, in cashflow terms, of the original purchase.

quote:
With future capex at pretty high levels hard to see this sort of performance changing much over the next few years

High capital requirements with low margins not a good mix

I agree that if management makes another blunder, like the Australian expansion, things will not look good for RBD. But what you are assuming here is that management have learned nothing from their failed Ozzie experience and they will to continue to expand recklessly even though they no longer have the house to mortgage.

This time the expansion (KFC transformation) capex is producing the increased sales expecte. That was never the case in the PH Australia expansion.

Also the margins for KFC are not that low in retail terms, better than the Warehouse Red Sheds in fact.

SNOOPY

[Scuffer]

Hi Winner69 I've been around kicking a can amusing myself in some depraved manner waiting for someone to say something to make my ears prick up, it hasn't happened and I think Bling is right RBD are heading to 80 cents.I will re-assess my situation when they hit 80 cents might buy some more.

[winner69]

quote:Originally posted by Snoopy

quote:Originally posted by winner69

SNOOPY - there has to be something fundamentally wrong with the RBD business model

Cumulative cash flows since 2000 pretty sad story

Operating cash flow (money from day to day operations) have been $167M

Spent $141M on franchise fees, capital assets and acquisitions (I have excluded the sale of buildings as this was really a financing issue)

So over 7 financial years they have only generated $26M of free cash..... pathetic

Again I am not sure where you are quoting your figures from Winner, but let's assume you are correct. I don't agree that you can disregard the sale of properties which brought some $54m onto the RBD company balance sheet. It was that capital injection that shored up the balance sheet to enable the expansion into Australia to proceed.

To disregard it is akin to saying:
"That joker across the street couldn't have afforded his new beach house if he hadn't won Lotto."
You can draw up all sorts of arguments saying that interest rate rises since purchase would have put him into a negatively geared situation, his wife and family would have left him cracking under the financial and social pressure of never seeing hubby at home as he worked three jobs to clear his debts....blah.. blah..blah.

The whole argument is bunkum because the guy did win Lotto. And if he hadn't won Lotto then he wouldn't have bought the house in the first place!

The above situation is exactly analagous with RBD and their Australian business purchase. The fact that RBD lost millions in Australia and the fact that our Lotto winner over the road had his beach house wiped out by a tsunami have nothing to do with the affordability, in cashflow terms, of the original purchase.

quote:
With future capex at pretty high levels hard to see this sort of performance changing much over the next few years

High capital requirements with low margins not a good mix

I agree that if management makes another blunder, like the Australian expansion, things will not look good for RBD. But what you are assuming here is that management have learned nothing from their failed Ozzie experience and they will to continue to expand recklessly even though they no longer have the house to mortgage.

This time the expansion (KFC transformation) capex is producing the increased sales expecte. That was never the case in the PH Australia expansion.

Also the margins for KFC are not that low in retail terms, better than the Warehouse Red Sheds in fact.

SNOOPY

Of course we have forgotten about all those divies haven't we

In the same period cash divies were $62.6M .... so the $52.1M from the propert sales have gone to divies ... or avoided the need to borrow to pay the divies.

Benevolent company that RBD ..... win Lotto and give it all to the family members (shareholders that is) ..... to keep the family members happy so they don't leave home

[Bling_Bling]

quote:Originally posted by Scuffer

Hi Winner69 I've been around kicking a can amusing myself in some depraved manner waiting for someone to say something to make my ears prick up, it hasn't happened and I think Bling is right RBD are heading to 80 cents.I will re-assess my situation when they hit 80 cents might buy some more.

You coming onto the Bling wagon? At 80 cents this pup will be a corporate play. Bling dont know when and if, but at that level it is tempting for a predictor who has the ability and firepower to make RBD work. Those that crunch too much numbers are blinded by the pure business itself and the future potential.

[Scuffer]

I'm with you on this one Bling its just a matter of time before the big boys start to look in the RBD direction then it will be all on, this co. has potential with the right direction, circles and cycles thats what its all about for the big money.Rbd has to be almost at the bottom if not below it, 80cents is looking good.

[OneUp]

Cobb & Co used to be a great restaurant chain.

Tastes change. Competition intensifies. Not too many Cobb & Cos left now.

Don't assume this will bounce back. The brands are sick (except Starbucks).