quote:Originally posted by Lizard

From sales data yesterday, it looks like FY profit will come in before write-downs at approx $10.4m. ie. underlying P/E about 12 at current price ($1.28). However, write-downs of Pizza Hut and commentary on margin squeeze will not help sentiment. Outlook for 2007 looks to me to be for a similar profit ($10.5m underlying). The hard call is on dividends...still possible they will cut to save cash for investment in KFC transformation. Or perhaps they will try to maintain for now and hope to use cash from sale of underperforming PH Aust outlets. 50:50 call - a dividend cut would certainly undermine the shares for a while.

I believe it would be risky to be in these shares at the moment, as there appear to be several negative threats to shareholder sentiment in the form of lower earnings, write-downs, mention of margin squeeze and a possible risk to dividends, with little short term upside likely (barring another takeover offer!).
FY NPAT before write-downs came in at $10.5m. The dividend was preserved - although it could be viewed that debt was increased in order to do so. Snoopy will no doubt prefer to see it as the debt being incurred as an investment in the KFC re-vitalisation. But note they are talking about refurbishment of the remaining 80 KFC stores over the next 2-3 years - seems a larger financial undertaking than the 6 stores refurbished last year. They mention "higher depreciation and interest costs", implying at least some of it comes from additional debt.