New horizons, new growth. Restaurant Brands New Zealand Limited Annual Report 2017 10 5 15 0 20 5 15 10 We’re on a steady, well-planned course. N With favourable conditions ahead. W E We’ve big growth ambitions and are tracking well to achieve them. Our acquisitions in Australia and Hawaii are part of a sharply focused strategy that will shift our company from being a domestic franchisee to being a multi-brand international business. It’s exciting, and S the prospects for controlled growth are significant. Contents 02 We’re flying 22 KFC operations 65 Independent international now 24 Starbucks Coffee auditors’ report 05 Acquired taste operations 70 Shareholder information 07 A fine formation 25 Carl’s Jr. operations 72 Statutory information Financial highlights 26 Board of Directors 75 Statement of corporate 08 Restaurant Brands New Zealand Limited operates the New Zealand outlets of KFC, Pizza Hut, Carl’s Jr. and 09 Year in review 28 Corporate social governance Starbucks Coffee, together with KFC in Australia, and Pizza Hut and Taco Bell in Hawaii and Guam. These brands responsibility 80 Corporate directory – five of the world’s most famous – are distinguished for their product, look, style, ambience, service and for the 10 Chairman’s and total experience they deliver to their customers in New Zealand, Australia, the US and around the world. Chief Executive’s 30 Consolidated 80 Financial calendar report to shareholders income statement 16 Navigating new markets 31 Non-GAAP financial measures 21 Pizza Hut operations 32 Financial statements Restaurant Brands New Zealand Ltd Annual Report 2017 01 ALOHA! G’DAY! Hawaii Total Stores 82 Australia Total Sales Total Stores $180m* 42 *FY18 estimate Total Sales $97m* *10 months FY17 We’re flying international now To our newly acquired international acquisitions, we look forward to applying our proven skills in marketing, facility and supply chain management. KIA ORA! The 42 KFC stores we purchased early last year in New South Wales (NSW) have boosted our turnover handsomely. They afford our company a strategic and profitable beachhead in Australia priming the business New Zealand for further acquisitions should they materialise and meet Total Stores our strict performance potential criteria. 170 Meanwhile our further afield acquisitions in Hawaii, Total Sales Guam and Saipan bring a further base of 82 successfully $400m* performing Pizza Hut and Taco Bell businesses. These are *FY17 set to boost our revenue and earnings further still. Restaurant Brands New Zealand Ltd Restaurant Brands New Zealand Ltd 02 Annual Report 2017 Annual Report 2017 03 Pizza Hut Founded in 1958 and a household name for pizza, Pizza Hut is an American restaurant chain and international franchise with over 16,000 locations in more than Taco Bell 100 countries. An American chain of quick service restaurants established in 1962, Taco Bell serves a variety of Tex-Mex foods, including tacos, burritos, quesadillas, nachos, and other specialty items in around 7,000 restaurants. Carl’s Jr. Established in 1941, this American burger quick service restaurant KFC chain serves the ‘best burgers on the KFC is the world’s most planet’ to customers at more than popular chicken restaurant 3,600 US and international locations. chain. Established by Colonel Harland Sanders over 70 years ago, it now has more than 20,000 locations in 125 countries. Acquired taste Chicken, beef, pizza, coffee, and now Mexican. We’re delighted to welcome Taco Bell, the world’s largest and most successful Mexican QSR brand, to our stable of brands and repertoire of taste experiences. In the US alone, Taco Bell boasts 7,000 restaurants and more than US$2 billion in sales. Russel Creedy is upbeat, “Taco Bell is a tremendous opportunity for our business as a group. While we learn more about the brand Starbucks Coffee through our experienced management team in Hawaii, we are From a single store in Seattle in 1971, Starbucks Coffee has grown into an also set to benefit from the innovative energy that has driven international coffeehouse chain now the success of the brand in the US.” operating in almost 24,000 locations worldwide. Restaurant Brands New Zealand Ltd Restaurant Brands New Zealand Ltd 04 Annual Report 2017 Annual Report 2017 05 HI HAWAII HI Kevin Kurihara Brent Matsumoto Hawaii CEO Hawaii CFO A fine NZ formation GROUP NEW ZEALAND NZ Managing an expanding portfolio of brands and geographies demands a clear strategy and strong management capability and experience. To that end, Restaurant Brands is adopting an international group structure comprising three discrete geographies each with their respective on-the-ground, and proven, leadership. Ian Letele Herman Pretorius NZ CEO NZ CFO To our Restaurant Brands New Zealand business, we have added Restaurant Brands Australia and this year, Restaurant Brands Russel Creedy Grant Ellis Hawaii covering our interests in Hawaii, Guam and Saipan. Group CEO Group CFO AU AUSTRALIA AU Adrian Holness Ashley Jones Australia CEO Australia CFO Restaurant Brands New Zealand Ltd Restaurant Brands New Zealand Ltd 06 Annual Report 2017 Annual Report 2017 07 Financial Highlights Year in Review Group net profit after tax was $26.0 million Historical Summary (24.1 cents per share), up $1.9 million (+7.8%), Total Sales ($NZm) All figures in $NZ millions unless stated 2012 2013 2014 2015 2016 2017 on prior year. Net Profit after Tax (excluding non-trading items) was $30.6 million (28.4 cents Financial performance 497.2 per share), up 26.3% on prior year. Sales* 387.6 359.5 497.2 were $497.2 million, KFC 236.3 237.0 241.5 265.0 282.5 296.5 329.3 Total Group store sales 308.2 311.9 387.6 up $109.6 million (+28.3%) on prior year, Pizza Hut 45.5 47.9 48.4 48.4 44.9 40.5 359.5 308.2 311.9 329.3 primarily because of the contribution from Starbucks Coffee 26.5 25.1 25.0 26.1 26.8 26.7 497.2 497.2 the KFC business in Australia, but also assisted 387.6 Carl's Jr. - 1.9 14.3 20.1 33.4 36.3 359.5 387.6 359.5 308.2 311.9 329.3 by continued strong growth from KFC 308.2 311.9 329.3 359.5 3 87.6 308.2 311.9 329.3 Total Sales – New Zealand 400.0 New Zealand. 12 13 14 15 16 17 KFC Australia - - - - - 97.2 continued to perform 12 13 14 15 16 17 New Zealand operations Total Sales 308.2 311.9 329.3 359.5 3 87.6 497.2 well, delivering total sales of $400 million and a Total Store EBITDA ($NZm) store EBITDA of $71.2 million of the $86.2 million EBITDA before G&A* 12 13 14 15 16 17 12 13 14 15 16 8617.2 reported for the Group. KFC 45.6 45.3 44.5 50.8 57.2 61.4 86.2 Pizza Hut 2.1 3.8 5.5 6.4 4.9 4.1 66.9 The acquisition of Pacific Island 61.5 Starbucks Coffee 3.7 2.9 3.5 4.3 4.4 4.8 66.9 Restaurants Inc (“PIR”) in Hawaii was 53.5 61.5 86.2 completed on 7 March 2017 (after balance date). Carl's Jr. - (0.5) - 0.2 0.4 1.0 51.4 51.5 86.2 53.5 Total – New Zealand 51.4 51.5 53.5 61.5 66.9 71.2 66.9 were $47.9 million, up 51.4 51.5 66.9 Operating cash flows 61.5 $3.6 million; however investing cash outflows KFC Australia - - - - - 15.0 61.5 12 13 14 15 16 53.5 17 increased from $15.3 million to $79.0 million 51.4 51.5 53.5 Total EBITDA 51.4 51.5 53.5 61.5 66.9 86.2 51.4 51.5 12 13 14 15 16 17 with the purchase of the Australian business. EBIT 24.4 22.7 28.2 33.4 34.1 39.4 26.0 contributed 23.8 24.1 KFC Australian operations NPAT (reported) 16.9 16.2 20.0 23.8 24.1 26.0 Total 12NPAT 13($NZm2140.0) 15 16 26.017 sales of $97.2 million and store EBITDA of 12 13 14 23.815 2416.1 17 NPAT (excluding non-trading) 18.4 17.7 18.9 22.5 24.2 30.6 16.9 16.2 $15.0 million for the 10 month period 20.0 16.9 16.2 commencing with the settlement of the Financial position/cash flow 26.0 23.8 24.1 26.0 KFC Australian purchase in April 2016. 23.8 24.1 Share capital 26.6 26.7 26.8 26.8 26.8 143.4 20.0 20.0 16.9 16.2 of 13.5 cents Total equity 59.8 60.3 64.7 71.2 75.6 192.1 16.9 16.2 A final fully imputed dividend per share will be paid on 23 June, making a Total assets 104.9 111.8 108.3 144.6 139.8 302.4 12 13 14 15 16 17 full year dividend of 23.0 cents (up 9.5% on the Operating cash flows 29.8 34.8 32.2 36.5 44.3 47.9 12 13 14 15 16 17 previous year). Shares 12 13 14 15 16 17 Shares on issue (year end) 97,809,0 01 97,850,110 97,871,09 0 97,871,09 0 97,871,09 0 122,843,191 12 13 14 15 16 17 Number of shareholders (year end) 5,675 6,015 6,112 6,019 6,018 6,294 302.4 Basic earnings per share Total Assets ($NZm) 302.4 (full year reported) 17.3c 16.5c 20.4c 24.3c 24.6c 24.1c Ordinary dividend per share 16.0c 16.0c 16.5c 19.0c 21.0c 23.0c 144.6 139.8 111.8 144.6 104.9 108.3 139.8 302.4 Other 111.8 104.9 108.3 Number of stores (year end) 144.6 139.8 KFC 88 89 90 91 91 92 144.6 139.8 12 111.813 14 15 16 17 104.9 111.8 108.3 Pizza Hut 71 57 51 46 39 35 104.9 108.3 12 13 14 15 16 Starbucks Coffee 35 29 27 26 25 24 17 Carl's Jr.