New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Restaurant Brands NZ<br>FY20 Preview&nbsp;— Delivering through Disruption</h2>
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<p><strong>NEUTRAL</strong></p>
<p>Restaurant Brands (RBD) will release its FY20 results on Thursday, 25 February 2021&nbsp;— we expect RBD to deliver robust earnings growth following a period of disruption, with headline growth boosted by the first time inclusion of its California business. While sales growth has been strong, particularly in light of tough operating conditions, margin achieved will be of interest given channel/brand mix changes. We forecast FY20 normalised NPAT of NZ$45m, which we estimate implies +3% growth on the 12 months to 31 December 2019. A key area of focus at the result will be store investment commentary and growth outlook, with COVID-19 disruption likely to have impacted time frames.</p>
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<h3>Key issues to consider at&nbsp;RBD's&nbsp;FY20 result</h3>
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<li><strong>Sales strong but margin a question</strong> —&nbsp;FY20 store sales increased +2.1% on the prior year period (+8.4% when accounting for the acquisition of its California business). Although RBD will be&nbsp;benefitting&nbsp;from operating leverage, we expect to see group margin contraction driven by 1) mix changes with lower margin brands such as Pizza Hut Hawaii outperforming, and 2) an increase in cost to serve as a result of COVID-19 restrictions.</li>
<li><strong>Store roll out plans</strong>&nbsp;—&nbsp;RBD has a clear growth mandate with 1) further KFC store roll out/acquisitions in New&nbsp;Zealand&nbsp;and Australia, 2) Taco Bell New&nbsp;Zealand/Australia store roll out, and 3) the Taco Bell Hawaii refurbishment programme. An update on growth plans and time frames will be of interest, with COVID-19 related disruption to consents, construction, and building material supply chains all likely creating delays.</li>
<li><strong>California performance</strong>&nbsp;—&nbsp;The California acquisition settled in September 2020 (four months inclusion). Commentary suggests performance has been ahead of pre-purchase expectations.</li>
<li><strong>Customer response through various restriction levels</strong> —&nbsp;Despite in-store dining restrictions, RBD has clearly&nbsp;benefitted&nbsp;from disruption to the food service sector and the rise in in-home consumption. How RBD cycles these periods of unique trading conditions will be of interest.</li>
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<div><strong>Guy Hooper</strong></div>
<div><a href="mailto:guy.hooper@forsythbarr.co.nz" target="_blank" rel="noopener">guy.hooper@forsythbarr.co.nz</a></div>
<div>+64 4 495 5255</div>
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Restaurant Brands NZ FY20 Preview&nbsp;— Delivering through Disruption

NEUTRAL
Restaurant Brands (RBD) will release its FY20 results on Thursday, 25 February 2021&nbsp;— we expect RBD to deliver robust earnings growth following a period of disruption, with headline growth boosted by the first time inclusion of its California business. While sales growth has been strong, particularly in light of tough operating conditions, margin achieved will be of interest given channel/brand mix changes. We forecast FY20 normalised NPAT of NZ$45m, which we estimate implies +3% growth on the 12 months to 31 December 2019. A key area of focus at the result will be store investment commentary and growth outlook, with COVID-19 disruption likely to have impacted time frames.


Key issues to consider at&nbsp;RBD's&nbsp;FY20 result



Sales strong but margin a question —&nbsp;FY20 store sales increased +2.1% on the prior year period (+8.4% when accounting for the acquisition of its California business). Although RBD will be&nbsp;benefitting&nbsp;from operating leverage, we expect to see group margin contraction driven by 1) mix changes with lower margin brands such as Pizza Hut Hawaii outperforming, and 2) an increase in cost to serve as a result of COVID-19 restrictions.
Store roll out plans&nbsp;—&nbsp;RBD has a clear growth mandate with 1) further KFC store roll out/acquisitions in New&nbsp;Zealand&nbsp;and Australia, 2) Taco Bell New&nbsp;Zealand/Australia store roll out, and 3) the Taco Bell Hawaii refurbishment programme. An update on growth plans and time frames will be of interest, with COVID-19 related disruption to consents, construction, and building material supply chains all likely creating delays.
California performance&nbsp;—&nbsp;The California acquisition settled in September 2020 (four months inclusion). Commentary suggests performance has been ahead of pre-purchase expectations.
Customer response through various restriction levels —&nbsp;Despite in-store dining restrictions, RBD has clearly&nbsp;benefitted&nbsp;from disruption to the food service sector and the rise in in-home consumption. How RBD cycles these periods of unique trading conditions will be of interest.





Guy Hooper
guy.hooper@forsythbarr.co.nz
+64 4 495 5255




Restaurant Brands NZ: FY20 Preview — Delivering Through Disruption