RBD - Restaurant Brands

[Snow Leopard]

quote:Originally posted by duncan macgregor

quote:Originally posted by Paper Tiger

It is a pity they did not have the deja vu a little earlier.

Also: Hindsight is wonderful I just wish it came a little earlier.

Pity you dont pay attention to old macdunk more often PT. Who needs hindesight, when a little bit of foresight is all that is required.
Your old mate keeping you on track as usual. macdunk

Now, why would this pussy want to pay attention to someone like you?
Why do you think I have ever owned this one, Mr "I am one of the few to tell what I have bought" MacDunk?

[duncan macgregor]

quote:Originally posted by Paper Tiger

Now, why would this pussy want to pay attention to someone like you?
Why do you think I have ever owned this one, Mr "I am one of the few to tell what I have bought" MacDunk?
[/quote]
JEEZE paper boy you must have had a few over the lunch break to print that. Your old mate macdunk

[Snoopy]

Short Term Effect: 2005 Profit Downgrade.

Half-year profit has been downgraded to $2.5m - $3m from ongoing operations compared to $6m from the previous year. This is not indicative of what the declared half-year profit will be. The one off financial arrangements associated with the exit from Pizza Hut Victoria will determine that.

The announcement makes it clear that sales are not decreasing. This points more to a blowout in costs rather than any serious undermining of the business concepts as a long-term prospect. There have been extensive negotiations with the parent company of the Pizza Hut and Restaurant Brands, YUM Brands of the United States. The way the first big franchise renewal deal was announced, contingent on a $35m store refurbishment program for KFC, sounds like YUM were playing hard ball with Vicky and the rest of the RBD management team. $12.5m was spent on the first 15 KFC stores during the transformation process. At that rate $35m will cover the rebuilding of 42 stores over the next three years. All information tabled to date suggests that this store refurbishment is a profitable strategy, which nevertheless has some short term costs. IMO, any reduction in profitability due to KFC refurbishment does not represent a weakening of RBDs position in the market. Nevertheless, I think it is a useful exercise to try and quantify the short term effects of the refurbishment.

The first KFC store to be refurbished in the South Island is not too far away from me. Thus I have observed first hand the ‘revenge of the chickens’ where a bulldozer was driven through the old restaurant and the signature KFC bucket was toppled from its tower to lie battered and forlorn amongst the rubble. The Riccarton Road KFC restaurant was out of action for around six weeks. That doesn’t mean that six weeks of trading was lost to RBD as regular customers may have sought out other KFC outlets (there is another one in the food court of the nearby Westfield Mall). But the extravagant promotion that surrounded the opening (flying billboards, huge radio promotion) would have occurred unusual expenses that -for we shareholders- are the *equivalent* of lost sales. So I’m sticking to my six weeks of lost sales as a good estimate of the short-term effect of building a new KFC premises.

Eight KFC stores out of a total of 104 were refurbished over the first half reporting period. Annual turnover for KFC was around $175m before this refurbishment program started. That means the reduction in turnover as a result of the refurbishment program for this half-year can be estimated as:

$175m x 6/52 x 8/104 = $1.55m

Adding to this loss will be the interest loss effect of the borrowed funds that is needed to carry out the redevelopment. If we assume redevelopment costs for 8 stores of $6.66m (total) and an interest rate of 8% over an average period of 3 months I get:

0.08 x $6.66m x ¼= $130,000

I think it is a fair assumption that this loss of turnover and extra interest payable without any associated income will come straight off RBD’s profit for the half. Taking into account the 'after tax' effect that equates to a summed reduction in profit of:

0.67 x $1.68m = $1.13m per half.

In summary, this means the predicted normalized profit for this half is $3.6m-$4.6m (not the headline $2m-$3m figure). That is a 23-40% profit reduction on the previous period. Now factor in a 10% reduction in last years NPAT over the second half of the financial year:

0.9 x$5.3m= $4.8m

We are looking at a full year forecast of $8.4m-$9.4m normalized profit, or 8.6-9.6cps. Based on a share price of 95c this gives a forecast P/E of 10-11.

Of further note is the debt position of the company. An extra $3.2m in franchise renewal fees for 40 odd KFC restaurants is now on the balance sheet. We need to add to this, the amount borrowed to refurbish 15 KFC stores ($12.5m). If we add those figures to last years $33m of debt on the books, I get $48.7m. That gives a minimum debt repayment time of 5

[zac]

Grasping at feathers

[duncan macgregor]

SNOOPY, Please explain to an old ignorant landlord What the hell is going on.
This dog sold its kennels for a holiday in Australia. Tell me is it doing up the landlords premises to lease back?, or am i missing something. On second thoughts dont answer that last question or you might upset my mate PT. macdunk

[Stranger_Danger]

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.

[biker]

Have you tried Starbucks in Queenstreet by Imax?
As I walked in a pidgeon flew out of the kitchen area.Looking around, there were several birds in the mezzanine area above, with pidgeon shi t down the walls and over the floor. The workers seemed oblivious and unconcerned.A mirror of management?
The pidgeons were shi tting, and it seems, the chickens were coming home to roost.

[BRICKS]

quote:Originally posted by Stranger_Danger

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.

Stranger_Danger we have heard all that crap BEFORE so if you dont like , dont BUY it.. [8D]

[biker]

Or EAT it,or DRINK it.

[BRICKS]

quote:Originally posted by biker

Or EAT it,or DRINK it.

ITS always up to YOU..[8D]