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W E M E A N B U S I N E S S.
rEStAUrANt BrANdS N E W zE AlANd lIMItEd
RESTAURANT BRANDS NEW ZEALAND LTD.
2007 ANNUAL REPORT.
EDITORIAL
01. yEAR IN REvIEW
02. fINANcIAL hIghLIghTS
05. chAIRmAN’S REPORT
10. Kfc TRANSfORmATION
14. Kfc OPERATIONS
15. Kfc PARTNER PROfILE
17. PIZZA hUT NZ OPERATIONS
18. STARBUcKS cOffEE OPERATIONS
19. cONSOLIDATED INcOmE STATEmENT
STATUTORy REPORTS
21. fINANcIAL STATEmENTS
59. ShAREhOLDER INfORmATION
61. STATUTORy INfORmATION
64. STATEmENT Of cORPORATE gOvERNANcE
68. DIREcTORS’ PROfILES
69. DIREcTORy
00 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
• TotalsalesforNewZealandoperationswere$293.6million,up1.7%onprioryearwith samestoresalesup0.8%.
• RecordsalesforKFCat$182.7million(up7.1%onasamestorebasis)and StarbucksCoffee($31.3million,up3.2%samestore).
• GroupNetProfitafterTax(excludingnon-tradingitems)was$6.5million,down47%on prioryear,mainlybecauseofadisappointingresultforPizzaHut.
• SaleofthePizzaHutVictoriabusinesswaslargelycompletedwith27storessoldto independentfranchiseesorclosedandsaleandpurchaseagreementsonmostofthe remaining23.
• Non-tradingchargesof$14.4millionlargelyarisingfromexitcostsandwritedownsonthe PizzaHutVictoriainvestmentproducedareportedGroupNetLossafterTaxof$3.6million.
• KFCbrandtransformationcontinueditsrolloutwithsignificantsalesgrowthin 21transformedornewstoresandfurtherstoresplannedorunderconstructionforthenew fiscalyear.
• TheKFCmasterfranchiseforNewZealandwasrenewedninemonthsearlywithextra 10+10yearfranchisesfortransformedstores.
• Thefullyearfullyimputeddividendwasreducedto3.0centspersharepending improvementsinthecompany’stradingperformanceandcashflowposition.
PAGE NUMBER 01RESTAURANT BRANDS
2007 ANNUAL REPORT
02 03 04 05 06 07
Total Sales($NZ MILLION)
Total Store EBITDA($NZ MILLION)
Total Assets($NZ MILLION)
02 03 04 05 06 07 02 03 04 05 06 07
264.3 298.1
304.6
315.5
316.4
318.7
45.8
43.6
40.3 45.2
45.0
37.0
117.7
109.3
105.3
110.0
104.9
99.7
Allfigures$NZmunlessstated
2000 2002(1) 2003 2004 2005 2006(3) 2007
Financial Performance
Sales
KFC 175.9 177.1 175.1 171.1 173.0 171.8 182.7
PizzaHutNZ 47.8 69.4 75.7 81.3 87.6 89.1 79.7
StarbucksCoffee 10.4 17.8 22.8 23.1 24.9 27.9 31.3
PizzaHutVictoria 24.5 29.1 30.0 27.6 25.0
Total 234.1 264.3 298.1 304.6 315.5 316.4 318.7
StoreEBITDA
KFC 36.3 36.1 30.4(2) 25.6 27.8 29.6 31.2
PizzaHutNZ 4.1 7.9 11.2 12.3 13.6 11.8 5.1
StarbucksCoffee 0.5 1.8 2.6 3.0 3.7 3.9 3.6
PizzaHutVictoria (0.6) (0.6) 0.1 (0.3) (2.9)
Total 40.9 45.8 43.6 40.3 45.2 45.0 37.0
EBIT 19.3 35.2 19.6 14.7 19.1 11.3 (1.1)
NPAT(reported) 9.8 20.7 11.1 8.1 10.7 5.2 (3.6)
NPAT(adjustedfornon-trading) 11.8 12.5 11.0 8.1 11.0 12.3 6.5
Financial Position/Cash Flow
Sharecapital 18.6 19.9 25.8 24.5 25.3 25.6 25.6
Shareholdersfunds 27.9 40.9 52.0 49.7 51.1 43.9 32.6
Totalassets 133.4 99.7 110.0 104.9 105.3 109.3 117.7
Operatingcashflows 21.3 21.8 29.1 24.5 23.4 28.2 20.8
Shares
Sharesonissue(yearend) 92,104,71093,086,67494,815,16496,192,82696,843,47597,081,87597,128,956
Numberofshareholders(yearend) 8,651 8,858 9,776 9,190 7,992 7,067 6,733
Earningspershare(fullyearreported) 10.6c 22.3c 11.8c 8.5c 11.1c 5.4c (3.7)c
Ordinarydividendpershare 10.0c 10.0c 10.0c 10.0c 10.0c 10.0c 5.5c
Other Performance Indicators
Numberofstores(yearend)
KFC 87 87 87 88 87 88 87
PizzaHutNZ 82 86 89 91 101 107 103
StarbucksCoffee 17 29 35 35 39 44 47
PizzaHutVictoria 51 52 51 50 23
Total 186 202 262 266 278 289 260
Notes:
1. 2002resultsareunauditedandproforma.Theyhavebeenrestatedasthecompanyhadachangeofbalancedatethatyear.
2. KFCresultsfrom2003onwardsinclude$4.7millionofadditionalrentalcostfollowingthesaleandleasebackof51ofitsstores.
3.The2006resultshavebeenrestatedtoapostIFRSbasistoenablebettercomparisonwiththe2007year,dataprovidedpriorto2006areonapreNZIFRSbasis
throughoutthisreport.
02 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Kfc AchIEvED REcORD SALES
WITh ThREE cONSEcUTIvE yEARS
Of gROWTh.
($182.7 million, up 7.1% on a same store basis)
“ThE ADvANTAgES WE hAvE ARE OUR
STRONg mARKET POSITION AND cOmBINED
KNOWLEDgE Of hOW TO TURN A BUSINESS
AROUND By BRINgINg OPERATIONAL
ExcELLENcE AND cUSTOmERS BAcK
TO ThE BRAND.”
The2007fiscalyearwaschallengingforRestaurantBrands.Ontheonehand,thecompanysawgoodgrowth inour largestdivision,KFC,andthesmallerStarbucksCoffeebusiness. Ontheother,PizzaHutstruggledinNewZealand,inpartduetoaverycompetitivemarketenvironmentandinpartduetosuboptimalexecutiononourpart.AtthesametimeourexitfromthePizzaHutVictoriabusinesshasproventobefrustratinglyslow.
Maintaininggrowthacrossthreeinternationalbrands,eachwithadifferentmarketenvironmentanduniquecost pressures canbechallenging. Thatwas thecase in2007when twoof ourbrandsreachedrecordsales,whilethethirdfailedtodeliveranacceptablelevelofperformance.
The advantages we have are our strong market position and combined knowledge of how toturn a business around by bringing operational excellence and customers back to the brand.We expect to see good gains in sales and profitability as we continue to implement a largenumberofsignificantchangestodrivegrowthacrossallthreeofourbusinesses.
One significant highlight for the year was the renewal of our KFC franchise agreements ninemonths early with Yum. This has given us certainty as to the ongoing rights to our biggestearningsstreamandconsiderablymorecomfortinpursuingourassettransformationstrategyintheKFCbrand.
Date: 1March2006–28February2007
ORIGINatOR: eKvanarkel
SUBJeCt: Chairman’sReport
A chALLENgINg yEAR BUT WE ARE POSITIONED TO AchIEvE SIgNIfIcANT ImPROvEmENT.
PAGE NUMBER 05RESTAURANT BRANDS
2007 ANNUAL REPORT
fINANcIALS
Net profit after tax (excluding non-trading items) for the year ended 28 February 2007 was$6.5million,adecreaseof47%overtheprioryear.Thiswaslargelyduetothemajorfalloffinsalesandthe increasingpressureonPizzaHutmargins inNewZealandandoperating lossesfromPizzaHutVictoria.
Non-tradingitemstotalling$14.4million(pre-tax),primarilycomprisingthecostsandwritedownsofthePizzaHutVictoriaexit,meantareportedaftertaxlossfortheyearof$3.6million.
With the significant drop in earnings, operating cash flows fell to $20.8 million for the year.However the KFC transformation programme, other store and IT capital investment andpaymentofYumfranchiserenewalfeesmeantinvestingoutflowswere$29.7million,necessitatingasignificantincreaseinborrowingsbyyearendto$48.6million.
This is the company’s first annual report to shareholders to be completed under the newInternationalFinancialReportingStandards(IFRS).Fulldetailsarecontainedintheaccounts.One effect of the adoption has been that the company no longer amortises goodwill in itsaccounts, but completes an annual impairment test on the carrying value of its total assets.Following a detailed review of trading and the impact of our previously announced policy ofprogressivelyclosingredroofrestaurants,directorshaveresolvedtotakeanimpairmentchargetothePizzaHutNewZealandbusinessof$1.5million.
DIvIDEND
Given the performance of the Pizza Hut businesses and our ongoing investment in the KFCbrand,thedirectorsfeltitwasfinanciallyprudenttoreducethedividendforthefirsttimeinthecompany’sten-yearhistoryasapubliccompany.Aninterimdividendof2.5centspersharewaspaidon24November2006.
Directors have approved a final dividend of 3.0 cents per share. This dividend, which willbe fully imputed will be payable on 29 June and brings the total dividend for the year to5.5centspershare.
Kfc
We could not have achieved a record sales year without a commitment to the transformationprocess.KFCcontinuestogofromstrengthtostrength.
Duringtheyear,KFCcontinuedtogofromstrengthtostrengthaswerolledoutthesuccessfultransformation strategy. This success is a direct result of the transformation programme thatbegan in 2005. Almost a quarter of the network has now been through the store revampprogrammewith12storescompletedin2007(includingonenewstore)andeachandeveryoneisshowingasignificantincreaseinsalesgrowth.
Butwhatisevenmoreencouragingthanthesaleswearegeneratingfromthesenewstores,isthetrickledownimpactthebrandtransformationishavingonotherstoresinthenetwork.Newmenuitems,newmarketingeffortsandarenewedfocusonstafftrainingarebeginningtohaveanimpactacrosstheboardandwillincreasinglydrivesalesgrowthinthefuture.
KFCachievedrecordsalesat$182.7million,thethirdconsecutiveyearofsalesgrowthandsamestoresalesincreased7.1%,thehighestannualsamestoresalesgrowthinourcorporatehistory.
Iwouldliketoextendaspecialthankyoutoallofourpartnersinthisbusiness.Wecouldnothaveachievedarecordsalesyearwithouttheircommitmenttothetransformationprocess.Changeisnevereasybutthisteamhasembraceditandwehavetheresultstoproveit.
06 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
ItisthrillingtoseetheexcitementthathasdevelopedaroundthisbrandandtheenergyfromtheteamunderGeneralManager,RoddeVries’leadership.
Rod has been with the Company for 17 years and has twice been recognised internation-ally by our franchisor Yum, most recently for his outstanding contribution to the KFCtransformationprogramme.Hisbeliefofaclearbrandpromisewhichisdeliveredoverandoveragainhasseentheteamsuccessfullyimprovedeliveryofthekeycustomerexperiencesofquality,tasteandconvenience.
PIZZA hUT
ReturningPizzaHutNewZealandtogrowthisournumberonefocusfor2008.
PizzaHutfacedaverydifferentenvironmentin2007.
As New Zealand’s largest pizza chain, with 103 stores nationwide, we were hit harder thananticipatedbytheexpansionofourcompetitorsinthismarketoverrecentyears,withtotalsalesdown10.5%to$79.7million.
Wemustadapttothisnewenvironmentandhavealreadymadeanumberofsignificantchangestoouroperationstoensurewereturntoprofitablegrowth.Thisisournumberonefocusfor2008.
The new management team appointed mid year has carried out a full network review and isfocusingonbringingoperationalexcellenceintoeveryoneofourstores.Ourmarketingstrategyisfocussedonbringingourcustomersbackandatyearendwewerealreadystartingtoseethepositiveimpactofthesechanges.
Asaresultofournetworkreviewwemadethedecisiontoprogressivelyreplacetheremaining15redroofrestaurantswithdeliveryandtakeoutstores,whichbettermeetourcustomers’desireforspeedandconvenienceandareamoreprofitableinvestment.Withamuchsmallerstoreandcomparablesaleslevelsweexpecttoimproveourbottomline.
We still have a lot of work ahead of us in this business but have already achieved a lotbehind the scenes and look forward to seeing the results of these changes in our sales andearningsin2008.
PIZZA hUT vIcTORIA
TheexitofthePizzaHutVictoriabusinesshastakenfar longerthanweanticipatedduetothemanypartiesinvolvedinthesaleofstorestoindividualfranchisees.WearedoingeverythingwecantospeeduptheprocessbutarerestrainedbytheneedfornewfranchiseestocompletetherequiredYumtrainingbeforetakingownershipofthestoresandlandlord/leaseissues.
During the yearweclosedor soldmostof theoriginal50storeswith23stores remainingatbalancedateandattimeofwritingthesehadreducedto18withsaleandpurchaseagreementsonmostofthem.
Onceallofthesestoresaretransferredtothenewowners,whichweexpecttohappenbeforetheendof2007,shareholderswill seeasignificant improvement inourfinancialperformance.Wemadeprovisionsforthisinouryearendfinancialswithatotalexitcostfortheyear(includingwritedownofassets)of$9.9million.Withtheseprovisions,nofurthercostsareexpectedtobeincurredinthenewfinancialyear.
PAGE NUMBER 07RESTAURANT BRANDS
2007 ANNUAL REPORT
STARBUcKS cOffEE
Althoughamuchsmallercontributortoouroverallperformance,StarbucksCoffeecontinuedtodeliveritsthirdconsecutiveyearofgrowthonatotalandsamestoresalesbasis.In2007,salesincreased12.2%onprioryearto$31.3million.
Whilemanypeopledidnotbelievewecouldmakethisbusinesssuccessful,bringingbrandedcoffee to a market that was already relatively mature, we have succeeded with our 47 storenetworkindeliveringbothanappealingcustomerexperienceandpositiveearningsforthecompany.
TAKEOvER AcTIvITy
As notified to shareholders, during the year we were approached by a number of partiesinterestedinparticipatinginthefutureofRestaurantBrands.Acommitteeofindependentdirec-torshasassessedeachapproachandinsomecases,engagedinpreliminarydiscussions.Noneoftheseapproacheshaveresultedinaformaloffer.TheBoardwillobviouslykeepshareholdersupdatedonanymaterialdevelopmentsshouldanythingeventuateonthismatter.
AcKNOWLEDgEmENTS
IwouldliketoextendtheBoard’sdeepestappreciationtoalloftheteammembersofRestaurantBrands. Werecognise thehardwork that isbeingput intoeachandeveryday toensureourcustomersreceivethebestserviceinthefastesttimepossible.
TheBoarditselfexperiencedsomechangesduringtheyearwiththeresignationofBillFalconer,whochairedthecompanysinceitwentpublictenyearsago.WethankBillforhisleadershipdur-ingthistime.SueSucklingwasappointedasanindependentdirectorinJuneandisprovidingagreatcontributiontotheBoard.
TheBoardwouldliketoalsothankVickiSalmon,ChiefExecutiveandExecutiveDirectorofthecompanyforhercontributionto theCompanyandher leadershipuntilMarch2007. Whileweundertakethesearchprocesstoidentifyanappropriatereplacement,RusselCreedy,Commer-cialServicesDirector,takesthehelmasActingChiefExecutive,closelysupportedbytheseniormanagementteam.
IN cONcLUSION
Despitethetoughyear,directorsbelievetherightdecisionshavebeenmadeandtherightteamisinplacetoensurethatthe2008tradingyearbringsanimprovementinearnings.
OurfocusoverthecomingmonthsistoincreasethemomentumofKFCandStarbucksCoffeeandreturnPizzaHutNewZealandtogrowth.
TED vAN ARKEL
Chairman26April2007
08 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
“OUR fOcUS OvER ThE cOmINg mONThS
IS TO INcREASE ThE mOmENTUm Of Kfc
AND STARBUcKS AND RETURN
PIZZA hUT NEW ZEALAND TO gROWTh.”
JUST ThE LOOK ON ThEIR fAcES AS ThEy SEE ThE NEW-LOOK STORES IS ENOUgh TO mAKE ALL ThE hARD WORK WORThWhILE.
AtKFC,2007wasnothinglessthanextraordinary.
The brand achieved record sales of $182.7 million, the third consecutive year of solid salesgrowth–withaveryrespectable7.1%increaseinsamestoresales.Thetransformationprocesscontinuedtogofromstrengthtostrength,averaging20%growthfromupgradedstores,andnon-upgradedstoresbaskinginthishaloeffectwithnearly5%yearonyeargrowth.
The store transformation process continues apace with 21 new or upgraded stores complet-ed.Elevenof thesehavebeen in thepast12months,withmoreplanned forcompletionoverthenextyear.
Theseextensiverebuildsdonotcomecheaply,rangingfromseveralhundredthousanddollarstooveramilliondollars,buttheyaredeliveringthereturns.
Our KFC partners appreciate that the transformation process is not just a facility upgrade.Itisthewholecustomerexperiencethatneedstobeenhanced.Intensiveretraining,newmenudevelopmentandastrongfocusonall thecustomerexperiencekeyperformance indicators instoreensurethattheserviceandfoodofferingcomplementthefresh,newdécorandfacility.
RoddeVries,GeneralManager,leadstheKFCteamwithanunrelentingfocusonquality,tasteandconvenience, involvingamassiveprogrammetoachieveoperationalexcellence, increasedemphasis on serving, and operations retraining to focus on good honest basics and doingitwell,everytime.
10 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Date: 1March2006–28February2007
ORIGINatOR: RestaurantBrands
SUBJeCt: KFCtransformation
Over the 35 years we have been in New Zealand, our menu has expanded to includeeverything from fillet burgers, toasted twisters and salads to hot wings, popcorn chicken andoureverpopularzingers.ThisyearwesawconsumersfallinlovewithbonelesschickenandtheHotRodsspicyskewers.
WealsoheardaboutfourspecialcustomersinTimaruwhojustcouldnotwaitforourtransformationprogrammetobecompletedintheir localstore.Thefourwereexcitedto learntheir localKFCwouldbe receivinga revampbut theirexcitementsoon fadedwhen they learned that itwouldrequireaten-weekclosureforthestoreupgrade.Determinednottomissout,theymadearegularpilgrimagetoAshburton,74kilometresaway,justtovisitthenextclosestKFC.Asarewardfortheirdedication,ourTimarumanagerprovidedthemwithafreemealuponthestorereopening.
It isstories like this thatmakeusexcitedaboutopeningourstoreseverydayandserving the14millioncustomerswhocomethroughourdoorseveryyear.Ithasbecomeevenmoreexcitingaswe’veseenourcustomers’reactiontoourtransformationprogramme.Justthelookontheirfacesastheyseethenew-lookstoresisenoughtomakeallthehardworkworthwhile.
Anditisnotjustthesenewstoresthatareshowinggrowthbutotherstoresinournetworkthatarecontributingtooursuccess.Newmenuitems,greatpromotionsandnewoperatingpracticesareallcontributingtotheseresults.Comeandseeforyourselftheexcitementthathasdevelopedaroundthisbrandandtheenergyfromtheteammembers.
PAGE NUMBER 11RESTAURANT BRANDS
2007 ANNUAL REPORT
ROD DE vRIES,
Kfc gENERAL mANAgER.
12 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
PAGE NUMBER 13RESTAURANT BRANDS
2007 ANNUAL REPORT
Kfc TImARU – ANOThER SUccESSfUL TRANSfORmATION
TheKFCbrandagain improvedon itsstrongperformanceof theprevious2005/6year. Withnearlyaquarterof thenetworknowhavingreceivedsignificantasset refurbishments thestoretransformationprogrammecontinuedtoactasacatalyst inenhancingvirtuallyeveryaspectofbrandoperation.
KFCsalesreachedanewrecordat$182.7million,up$10.9millionor6.3%fortheyear.Thiswasdespite the impactof removalofdelivery fromsomestoresand the temporaryclosureofothersaspartofthetransformationprocess.Samestoresalesgrowthwasalsoarecord7.1%fortheyear.SeveralnewproductreleasesovertheyearsuchasbonelesschickenandHotRodsalsohelpeddrivesales.
The leverage fromhigher sales volumesandcontinuingefficiencies in storeoperations sawasolidincreaseinearningswithEBITDAup$1.6milliononlastyeartoreach$31.2million(17.1%of sales). This isparticularlypleasinggiven the increases in input costs fromminimumwagelegislation,andpriceincreasesinrawmaterials.
With the sevenearlier upgraded storesperformingwell, a further eleven storeswere similarlyextensivelyrefurbished,allwithsignificantimprovementsintradingresults.Thisbringsthetotalnumberofnewandrefurbishedstoresto21,nearlyaquarterofthenetwork.Therefurbishmentprogrammeisbeingactivelypursuedinthenewfinancialyear.
Twostores (OrewaandMtRoskill)wereclosedat leaseendandanewstorewasopened inRototuna,nearHamilton,bringingstorenumbersto87atyearend.
Customer service measures as reflected in the CHAMPS mystery shopper score at 95.0%continuedatclosetoprevioushighsandstillremainedthehighestscoreinboththeNewZealandandAustralianKFCmarkets.Thein-storeoperationalperformancemeasure(CER)continuestoimproveoperationalperformancewithascoreof77%,upfrom71%thepreviousyearandagainthehighestinAustralasia.
Partnerturnovercontinuedtoholdat74%fortheyear.Thisisconsideredanexcellentresultfortheindustry.
Thetransformationofthebrandrequirestraininglevelstobeataveryhighstandard.Asattheendoftheyear94%ofmanagersand100%ofshiftsupervisorswerefullytrainedfortheirroles.
The impact of the facility upgrades in the transformation programme has underscored thecontinuedimprovementsacrossalloftheKFCbusiness,whichinturnhaskeptthecustomerscomingbackanddrivingsalestonewhighs.
14 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
02 03 04 05 06 07 02 03 04 05 06 07 02 03 04 05 06 07
93.0
92.0
89.0
95.4
95.5
177.1
175.1
171.1
171.8 182.7
36.1
30.4
25.6
27.8
29.6
31.2
95.0
Customer Service Scores(CHAMPS CHECK %)
Annual Sales($NZ MILLION)
* A 53-week year ($169.9 million on a 52-week basis)
EBITDA($NZ MILLION)
173.0*
cALL mE LOyAL.
LeanneWalkercertainlyunderstandsthemeaningofloyalty.
HavingbegunhercareerwithKFCatHuntlyasa15yearoldparttimeteammember,Leanne
became a full time team member at 17. A rapid career progression followed with Leanne, at
20, becoming one of the youngest KFC managers ever, taking charge of the Frankton store
inHamilton.
TheresponsibilityforthisrolewasenormousastheFranktonstorewasthepilotforthecompany’s
KFCstoretransformationstrategy.Assuchitsmanagementandpartnersneededtobeflexible,
innovativeandatthetopoftheirgame.Leanneandherteamdeliveredtherequiredperformance
andmore,withthesuccessofthisstorepromptingthecompanytoembarkonafullrolloutof
KFCstoretransformationsacrosstherestofthecountry.
Leanne’sdedicationresultedinherbeingnamedRestaurantManageroftheYearforKFClastyear
largelybecauseofheroutstandingperformanceasmanagerofFrankton,andearningheraplacein
Yum’sChampions’Club,anelitegroupofthetop5%ofmanagersfortheSouthPacificregion.
LeanneandfourfellowchampionsflewtoAustraliatoattendtheChampions’ClubConference
onQueensland’sHaymanIsland,howeveraratherunwelcomeguestarrivedintheformofCyclone
Larry.InLeanne’stypicalpositivemannershecommented,“Wemayhavebeencaughtupinthe
cyclonebutwedidn’tletitspoilourtrip”.
ShehasnowmovedontotakeupthechallengeofmanagingabrandnewKFCstoreatRototuna,
notfarfromtheFranktonstorethatshesosuccessfullypiloted.
Leannelovesthechallengesthatherjobprovides.“TheworkisstimulatingandrewardingandI
enjoythevarietythatthejoboffersasnotwodaysarethesame”.
YoucanbesurethatLeanne,whohastakenupCerocclassesasawaytorelaxandunwindafter
work,willbedancingherwaytothetop!
PAGE NUMBER 15RESTAURANT BRANDS
2007 ANNUAL REPORT
NaMe: LeanneWalker
aGe: 20
BRaND: KFC
POSItION: RestaurantManager
“ThE PIZZA hUT BUSINESS IS
STILL cLEARLy mARKET LEADER fOR PIZZA
cONSUmPTION IN NEW ZEALAND AND IS
PREPARED TO AggRESSIvELy DEfEND
ThAT POSITION.”
ThePizzaHutNewZealandbusinesshashadaverydifficultyear.Theimpactofintensecompetitoractivityandasofteningpizzamarketmeantasalesdeclineof$9.4million(10.5%)onprioryeartoatotalof$79.7million.Salesweredown11.8%onasamestorebasis.
Thesalesdeleverage,togetherwithsomesubstantial increasesin inputcosts(primarily labourwiththeminimumwagelegislation)andsomerawmaterialandfreightcostssawearningsdropsubstantially.EBITDAfortheyearwas$5.1million,down$6.7millionor57.2%onprioryear.Thisrepresents6.3%ofsales.
Newstorebuildssloweddownconsiderablyover theyearwithonlyonenewstoreopening inHobsonStreet,Auckland.Therewerethreestorerelocationsandfivestoreclosuresasthebrandbegansomenetworkrationalisation.Mostoftheclosureswereredroofrestaurantsaspartofaprogressivemoveoutofthesefacilitiesasleasesexpire.Byyearendtherewere103storesthroughoutthecountry.
Customer service levels as measured by the CHAMPS mystery shopper score remainedfairly constant at 96.4%, continuing to outperform the Australian and most other internationalmarkets.
Staffturnoverat77%hasshownamarkedimprovementontheprioryear’s93%andmanagementturnoverhasalsostabilisedat40%(vs51%intheprioryear).Stafftraininglevelshaveimprovedwith 79% of managers and 90% of shift supervisors now fully certified under the Pizza HutManagerDevelopmentProgramme.
Despitethesignificantdropoffinfinancialperformanceinthe2006/7year,thePizzaHutbusinessisstillclearlymarketleaderforpizzaconsumptioninNewZealandandispreparedtoaggressivelydefendthatposition.
PAGE NUMBER 17RESTAURANT BRANDS
2007 ANNUAL REPORT
02 03 04 05 06 07 02 03 04 05 06 07 02 03 04 05 06 07
94.8
95.1
92.3 96.7
96.4
69.4
75.7
81.3
87.6
89.1
79.7
7.9
11.2
12.3
13.6
11.8
5.1
96.4
Customer Service Scores(CHAMPS CHECK %)
Annual Sales($NZ MILLION)
EBITDA($NZ MILLION)
02 03 04 05 06 07
Customer Service Scores(CHAMPS CHECK %)
Annual Sales($NZ MILLION)
EBITDA($NZ MILLION)
02 03 04 05 06 07 02 03 04 05 06 07
94.6
90.9
89.0
92.0
93.0
91.2
17.8
22.8
23.1
24.9
27.9
31.3
1.8 2.6 3.0 3.7
3.9
3.6
TheStarbucksCoffeeoperationhadasteadyyearwithsalescontinuingtoclimb,butasmalldropinprofitability.
Thebranddeliveredfullyearsalesof$31.3millionup12.2%intotalandup3.2%onasamestorebasis.
Profitabilitywasadverselyimpactedbyaweakeningintheexchangerateandmoreimportantlyincreased labourcostswithminimumwage increases. This lead toanEBITDAresultof$3.6million($0.3milliondownonprioryear).
Customerservicescoresat91.2%weredownmarginallyontheprioryearbutstillatacceptablelevels. Thebusinesswillbefocusingonproducinganevenbettercustomerexperienceinthecomingyear.
Partnerturnoverat70%wassignificantlybetterthanthe74%achievedintheprioryear.
Stafftraininglevelsweredownslightlyonprioryearwith93%ofallmanagersfullycertifiedintheirroleandbaristacertificationat83%.
Storegrowthslowedsomewhatcomparedwiththeprioryear.NewstoreswereopenedinSylviaParkandSymondsStreet inAucklandandChartwell inHamilton. Thebrandfinishedtheyearwith47storesinitsnetwork.
18 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Consolidated Income Statement
28 February 2007 vs Prior 28 February 2006
Audited % Audited
NZ$’000s
Continuing Operations:
Sales
KFC 182,673 6.3 171,812
PizzaHut 79,721 (10.5) 89,086
StarbucksCoffee 31,252 12.2 27,865
Total Sales 293,646 1.7 288,763
OtherRevenue 415 6.7 389
Total Operating Revenue 294,061 1.7 289,152
CostofGoodsSold (239,750) (6.0) (226,097)
Gross Margin 54,311 (13.9) 63,055
DistributionExpenses (5,965) 14.5 (6,977)
MarketingExpenses (19,329) (0.2) (19,288)
General&AdministrationExpenses (11,082) 5.2 (11,694)
EBIT before non-trading 17,935 (28.5) 25,096
Non-trading–other (4,424) (128.6) (1,935)
EBIT 13,511 (41.7) 23,161
InterestIncome 440 3,285 13
InterestExpense (3,847) (53.7) (2,503)
Netexchangegain/(loss) - n/a 95
Net Profit Before Tax 10,104 (51.3) 20,766
TaxationExpense (3,797) 43.2 (6,684)
Net Profit After Tax from continuing operations 6,307 (55.2) 14,082
Discontinued Operations:
(Loss)fromdiscontinuedoperationsnetoftax* (9,861) (11.0) (8,885)
Total (Loss) Profit after Tax (NPAT) (3,554) (168.4) 5,197
Total NPAT excluding non-trading 6,542 (46.9) 12,326
EBITDA before G&A % sales % sales
KFC 31,216 17.1 5.4 29,630 17.2
PizzaHut 5,060 6.3 (57.2) 11,812 13.3
StarbucksCoffee 3,645 11.7 (7.6) 3,946 14.2
Total New Zealand 39,921 13.6 (12.0) 45,388 15.7
PizzaHutVictoria* (2,931) (11.7) (788.2) (330) (0.1)
*PizzaHutVictoriaisadiscontinuedoperationCostofGoodsSoldaredirectcostsofoperatingstores:food,paper,freight,labourandstoreoverheadsDistributionExpensesarecostsofdistributingproductfromstoreMarketingExpensesarecallcentre,advertisingandlocalstoremarketingexpensesGeneral&AdministrationExpenses(G&A)areabove-storeoverheads
PAGE NUMBER 19RESTAURANT BRANDS
2007 ANNUAL REPORT
STATUTORY RepORTS.
TheDirectorsarepleasedtopresenttheFinancialStatementsofRestaurantBrandsNewZealandLimitedfortheyearended
28February2007containedonpages22to57.
ForandonbehalfoftheBoardofDirectors:
E K van Arkel D A Pilkington
Chairman Director
26April2007 26April2007
22. IncOme STATemenT AnD STATemenT OF RecOGnISeD
IncOme AnD eXpenSeS
23. BAlAnce SheeT
24. STATemenT OF cASh FlOwS
25. STATemenT OF SIGnIFIcAnT AccOUnTInG pOlIcIeS
34. nOTeS TO The FInAncIAl STATemenTS
58. AUDITORS’ RepORT
59. ShARehOlDeR InFORmATIOn
61. STATUTORY InFORmATIOn
64. STATemenT OF cORpORATe GOveRnAnce
STATUTORY RepORTS.
PAGE NUMBER 21RESTAURANT BRANDS
2007 ANNUAL REPORT
Income Statement for the year ended 28 February 2007
Group Group Company Company
NZ$’000s Note 2007 2006 2007 2006
Continuing operations
Storesalesrevenue 1 293,646 288,763 - -
Otherrevenue 1 415 389 7,769 9,694
Total operating revenue 294,061 289,152 7,769 9,694
Costofgoodssold (239,750) (226,097) - -
Gross profit 54,311 63,055 7,769 9,694
Distributionexpenses (5,965) (6,977) - -
Marketingexpenses (19,329) (19,288) - -
Generalandadministrativeexpenses (11,082) (11,694) - -
Results from operating activities (EBIT) before non trading 17,935 25,096 7,769 9,694
Nontrading 4 (4,424) (1,935) - -
Earnings before interest and taxation (EBIT) 13,511 23,161 7,769 9,694
Interestrevenue 440 13 - -
Interestexpense (3,847) (2,503) (3,697) (2,534)
Netforeignexchangegain - 95 - -
Netfinancingexpenses (3,407) (2,395) (3,697) (2,534)
Profit before taxation 10,104 20,766 4,072 7,160
Taxationexpense 5 (3,797) (6,684) 1,219 836
Profit after taxation from continuing operations 6,307 14,082 5,291 7,996
Discontinued operations
Loss from discontinued operations (net of taxation) 2 (9,861) (8,885) - -
Total (loss)/ profit after taxation attributable to shareholders 1 (3,554) 5,197 5,291 7,996
Basic earnings per share from continuing operations (cents) 15 6.49 14.52 5.45 8.25
Basic earnings per share from discontinued operations (cents) 15 (10.15) (9.16) - -
Basic earnings per share from total operations (cents) 15 (3.66) 5.36 5.45 8.25
Thedifferencebetweenbasicanddilutedearningspershareisnotmaterial.
Statement of Recognised Income and Expenses for the year ended 28 February 2007
Group Group Company Company
NZ$’000s Note 2007 2006 2007 2006
(Loss)/ profit after taxation (3,554) 5,197 5,291 7,996
Foreigncurrencytranslationreserve 12 (9) 111 - -
Othermovementsinreserves 12 (8) (49) - (57)
Total recognised revenues and expenses (3,571) 5,259 5,291 7,939
22 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Balance Sheet as at 28 February 2007
Group Group Company Company
NZ$’000s Note 2007 2006 2007 2006
Non-current assets
Property,plantandequipment 6 82,006 73,869 - -
Investmentsinsubsidiaries 8 - - 150,396 150,396
Intangibleassets 7 27,886 27,404 - -
Deferredtaxasset 9 2,098 1,380 - -
Total non-current assets 111,990 102,653 150,396 150,396
Current assetsInventories 10 2,022 2,253 - -
Tradeandotherreceivables 11 891 1,653 - -
Incometaxreceivable 1,294 698 - -
Cash 1,100 2,033 - -
Assetsclassifiedasheldforsale 3 437 - - -
Total current assets 5,744 6,637 - -
Total assets 117,734 109,290 150,396 150,396
Equity
Sharecapital 14 25,622 25,576 25,622 25,576
Reserves 12 187 189 85 70
Retainedearnings 12 6,822 18,145 (21,477) (18,999)
Total equity 12 32,631 43,910 4,230 6,647
Non-current liabilities
Provisionsanddeferredincome 18 5,189 4,086 - -
Loansandfinanceleases 16 49,171 33,100 48,580 32,365
Total non-current liabilities 54,360 37,186 48,580 32,365
Current liabilities
Bankoverdraft - - 981 504
Loansandfinanceleases 16 795 674 - -
Creditorsandaccruals 17 24,550 25,524 312 207
Provisionsanddeferredincome 18 1,868 1,996 - -
Amountspayabletosubsidiarycompanies - - 96,293 110,673
Liabilitiesclassifiedasheldforsale 3 3,530 - - -
Total current liabilities 30,743 28,194 97,586 111,384
Total liabilities 85,103 65,380 146,166 143,749
Total equity and liabilities 117,734 109,290 150,396 150,396
PAGE NUMBER 23RESTAURANT BRANDS
2007 ANNUAL REPORT
Statement of Cash Flows for the year ended 28 February 2007
Group Group Company Company
NZ$’000s Note 2007 2006 2007 2006
Cash flows from operating activities
Cash was provided by (applied to):
Receiptsfromcustomers 320,014 318,542 - -
Paymentstosuppliersandemployees (295,870) (283,000) - -
Dividendsreceived - - 7,769 9,694
Netinterestpaid (3,301) (2,300) (3,590) (2,412)
Receipt/(payment)ofincometax 5 (4,998) 1,808 1,569
Net cash from operating activities 21 20,848 28,244 5,987 8,851
Cash flows from investing activities
Cash was provided by (applied to):
Paymentofintangibles 7 (2,860) (690) - -
Purchaseofproperty,plantandequipment (24,987) (22,133) - -
Netproceedsfromdisposalofproperty,plantandequipment 33 97 - -
Saleofdiscontinuedoperations 2 (1,851) - - -
Advancestosubsidiarycompany - - (14,366) (3,624)
Net cash (used in) investing activities (29,665) (22,726) (14,366) (3,624)
Cash flows from financing activities
Cash was provided by (applied to):
Cashreceivedontheexerciseofoptions 12 46 279 46 279
Netincreaseloans 16 16,405 5,020 16,215 5,020
Netdecreasefinanceleases 16 (213) - - -
Dividendspaidtoshareholders (7,769) (9,694) (7,769) (9,694)
Supplementarydividendspaid (590) (733) (590) (733)
Net cash used in financing activities 7,879 (5,128) 7,902 (5,128)
Net (decrease)/ increase in cash held (938) 390 (477) 99
Effectofexchangeratefluctuationsoncashheld 5 1 - -
Net (decrease)/ increase in cash held (933) 391 (477) 99
Reconciliation of cash balancesCash at the beginning of the year: 2,033 1,642 (504) (603)
Cash at the end of the year:
Cashonhand 358 381 - -
Cashatbank 742 1,652 (981) (504)
1,100 2,033 (981) (504)
Net (decrease)/ increase in cash held (933) 391 (477) 99
24 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Statement of Significant Accounting Policies for the year ended 28 February 2007
Reporting EntityRestaurantBrandsNewZealandLimited,acompanydomiciledinNewZealand,isregisteredundertheCompaniesAct1993and
islistedontheNewZealandStockExchange(“NZX”).ThecompanyisanissuerintermsoftheFinancialReportingAct1993.
TheconsolidatedfinancialstatementspresentedarethoseforRestaurantBrandsNewZealandLimited(theCompany)andthe
RestaurantBrandsGroup(theGroup).TheGroupconsistsoftheCompanyanditssubsidiaries.
Statement of ComplianceThefinancialstatementshavebeenpreparedinaccordancewithNewZealandGenerallyAcceptedAccountingPractice
(“NZGAAP”).TheycomplywithNewZealandequivalentstoInternationalFinancialReportingStandards(“NZIFRS”),and
otherapplicableFinancialReportingStandards,asappropriateforprofit-orientedentities.CompliancewithNZIFRSensures
thatthefinancialstatementsalsocomplywithInternationalFinancialReportingStandards(“IFRS”).ThesearetheGroup’s
firstfullyearauditedfinancialstatementsunderNZIFRSandNZIFRS1hasbeenapplied.Thefinancialstatementswere
approvedbytheBoardofDirectorson26April2007.
AnexplanationofhowthetransitiontoNZIFRShasaffectedthereportedfinancialpositionandfinancialperformanceis
providedinNote26.
Basis of PreparationTheconsolidatedfinancialstatementscomplywiththeFinancialReportingAct1993andcomprisestatementsofthefollowing:
incomestatement,statementofrecognisedincomeandexpenses,balancesheet,cashflows,significantaccountingpolicies,aswell
asthenotestothesestatements.
TheconsolidatedfinancialstatementsarepresentedinNewZealanddollarswhichistheCompany’sfunctionalcurrency.
Thefinancialinformationhasbeenroundedtothenearestthousand.
TheGroupdividesitsfinancialyearintothirteen4-weekperiods.The2007fullyearresultsarefor52weeks(364days).
Occasionallya“leapyear”of53weeksisrequiredtoadjusttheaccountingyeartoacalendarbasis.
Accounting ConventionTheconsolidatedfinancialstatementshavebeenpreparedonthehistoricalcostbasis,exceptforfinancialderivativeswhich
arestatedattheirfairvalueandarediscussedfurtherbelow.
Thepoliciessetoutasfollowshavebeenconsistentlyappliedtothecomparativeyearandopeningbalancesheetasat
1March2005,andhavebeenappliedconsistentlybyGroupentities.
Estimates and JudgmentsThepreparationoffinancialstatementsrequiresmanagementtomakejudgments,estimatesandassumptionsthataffectthe
applicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydiffer
fromtheseestimates.
Inparticular,informationaboutsignificantareasofestimation,uncertaintyandcriticaljudgmentinapplyingaccountingpolicies
thathavethemostsignificanteffectontheamountrecognisedinthefinancialstatementsare:goodwillimpairmentinNote7in
relationtoPizzaHutNewZealand,andcostsrelatedtotheexitofPizzaHutVictoriainNote2.
Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedinthe
periodinwhichtheestimateisrevisedandinanyfutureperiodsaffected.
PAGE NUMBER 25RESTAURANT BRANDS
2007 ANNUAL REPORT
Basis of Recognising Components of the Financial Statements
Thefollowingsignificantaccountingpolicieshavebeenadopted:
Basis of Consolidation SubsidiariesareentitiescontrolledbytheGroup.ControlexistswhentheGrouphasthepowertogovernthefinancialand
operatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Inassessingcontrol,potentialvotingrightsthat
presentlyareexercisablearetakenintoaccount.Thefinancialstatementsofsubsidiariesareincludedintheconsolidated
financialstatementsfromthedatethatcontrolcommencesuntilthedatethatcontrolceases.
Intragroupbalancesandprofitsresultingfromintragrouptransactionsareeliminatedinpreparingtheconsolidated
financialstatements.
Foreign CurrencyTransactionsinforeigncurrenciesaretranslatedtotherespectivefunctionalcurrenciesofindividualGroupentitiesatexchange
ratesatthedatesofthetransactions.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthereportingdateare
retranslatedtothefunctionalcurrencyattheexchangerateatthatdate.Theforeigncurrencygainorlossonmonetaryitemsis
thedifferencebetweenamortisedcostinthefunctionalcurrencyatthebeginningoftheperiod,adjustedforeffectiveinterestand
paymentsduringtheperiod,andtheamortisedcostinforeigncurrencytranslatedattheexchangerateattheendoftheperiod.
Non-monetaryassetsandliabilitiesdenominatedinforeigncurrenciesthataremeasuredatfairvalueareretranslated
tothefunctionalcurrencyattheexchangerateatthedatethatthefairvaluewasdetermined.Foreigncurrencydifferences
arisingonretranslationarerecognisedinprofitorloss,exceptfordifferencesinrespectofthenetinvestmentinforeign
operations(seebelow).
Theassetsandliabilitiesofforeignoperations,includinggoodwillandfairvalueadjustmentsarisingonacquisition,aretranslated
toNewZealanddollarsatexchangeratesatthereportingdate.Theincomeandexpensesofforeignoperations,aretranslatedto
NewZealanddollarsatexchangeratesatthedatesofthetransactions.
Exchangedifferencesarisingfromthetranslationofthenetinvestmentinforeignoperationsarerecognisedintheforeign
currencytranslationreserveandarereleasedtotheincomestatementupondisposal.Alldifferenceswhicharosepriorto
1March2005have,uponadoptionofNZIFRS,beentransferredtoretainedearnings.
Financial InstrumentsNON-DERIVATIVEFINANCIALINSTRuMENTS
Non-derivativefinancialinstrumentscomprisetradeandotherreceivables,whicharerecognisedatcostlessimpairmentlosses,
cashandcashequivalents,loansandborrowing,andtradeandotherpayableswhicharestatedatcost.
Non-derivativefinancialinstrumentsarerecognisedinitiallyatfairvalueplusanydirectlyattributabletransactioncosts,except
asdescribedbelow.Allchangesinfairvaluearerecordedthroughtheincomestatement.
AfinancialinstrumentisrecognisediftheGroupbecomesapartytothecontractualprovisionsoftheinstrument.Financial
assetsarederecognisediftheGroup’scontractualrightstothecashflowsfromthefinancialassetsexpireoriftheGroup
transfersthefinancialassettoanotherpartywithoutretainingcontrolorsubstantiallyallrisksandrewardsoftheasset.
Regularwaypurchasesandsalesoffinancialassetsareaccountedforattradedate,i.e.thedatethattheGroupcommitsitselfto
purchaseorselltheasset.FinancialliabilitiesarederecognisediftheGroup’sobligationsspecifiedinthecontractexpireorare
dischargedorcancelled.
Cashandcashequivalentscomprisecashbalancesandcalldeposits.Bankoverdraftsthatarerepayableondemandandforman
integralpartoftheGroup’scashmanagementareincludedasacomponentofcashandcashequivalentsforthepurposeofthe
statementofcashflows.
26 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Accountingforfinanceincomeandexpenseisdiscussedbelow.
DERIVATIVEFINANCIALINSTRuMENTS
TheGroupholdsderivativefinancialinstrumentstohedgeitsforeigncurrencyandinterestraterisksarisingfromoperational,
financingandinvestmentactivities.TheGroupdoesnotholdderivativefinancialinstrumentsfortradingpurposes.However,
derivativesthatdonotqualifyforhedgeaccountingareaccountedforastradinginstruments.Embeddedderivativesare
separatedfromthehostcontractandaccountedforseparatelyiftheeconomiccharacteristicsandrisksofthehostcontractand
theembeddedderivativearenotcloselyrelated.Aseparateinstrumentwiththesametermsastheembeddedderivativewould
meetthedefinitionofaderivative,andthecombinedinstrumentisnotmeasuredatfairvaluethroughprofitorloss.
Derivativesarerecognisedinitiallyatfairvalue,attributabletransactioncostsarerecognisedinprofitorlosswhen
incurred.Subsequenttoinitialrecognition,derivativesaremeasuredatfairvalue,andchangesthereinareaccountedfor
asdescribedbelow.
Thefairvalueofforwardexchangecontractsisbasedontheirlistedmarketprice,ifavailable.Ifalistedmarketpriceisnot
available,thenfairvalueisestimatedbydiscountingthedifferencebetweenthecontractualforwardpriceandthecurrent
forwardpricefortheresidualmaturityofthecontractusingarisk-freeinterestrate(basedongovernmentbonds).Thefairvalue
ofinterestrateswapsisbasedonbrokerquotes.Thosequotesaretestedforreasonablenessbydiscountingestimatedfuturecash
flowsbasedonthetermsandmaturityofeachcontractandusingmarketinterestratesforasimilarinstrumentat
themeasurementdate.
CASHFLOwHEDGES
Changesinthefairvalueofthederivativehedginginstrumentdesignatedasacashflowhedgearerecogniseddirectlyin
equitytotheextentthatthehedgeiseffective.Totheextentthatthehedgeisineffective,changesinfairvaluearerecognised
inprofitorloss.
Ifthehedginginstrumentnolongermeetsthecriteriaforhedgeaccounting,expiresorissold,terminatedorexercised,thenhedge
accountingisdiscontinuedprospectively.Thecumulativegainorlosspreviouslyrecognisedinequityremainsthereuntilthe
forecasttransactionoccurs.whenthehedgeditemisanon-financialasset,theamountrecognisedinequityistransferredtothe
carryingamountoftheassetwhenitisrecognised.Inothercasestheamountrecognisedinequityistransferredtoprofitorloss
inthesameperiodthatthehedgeditemaffectsprofitorloss.
Revenue RecognitionGOODSSOLDANDSERVICESRENDERED
Revenuefromthesaleofgoodsismeasuredatthefairvalueoftheconsiderationreceivedorreceivable,netofreturnsand
allowances,discountsandvolumerebates.Revenueisrecognisedwhenthesignificantrisksandrewardsofownershiphave
beentransferredtothebuyer,recoveryoftheconsiderationisprobable,theassociatedcostsofpossiblereturnofgoodscanbe
estimatedreliably,andthereisnocontinuingmanagementinvolvementwiththegoods.
GRANTS
Agrantisrecognisedinthebalancesheetinitiallyasdeferredincomewhenthereisreasonableassurancethatitwillbereceived
andthattheGroupwillcomplywiththeconditionsassociatedwiththegrant.GrantsthatcompensatetheGroupforthecostof
anassetarerecognisedintheincomestatementonasystematicbasisovertheusefullifeoftheasset.
PAGE NUMBER 27RESTAURANT BRANDS
2007 ANNUAL REPORT
NETFuNDINGCOSTS
Netfundingcostscomprise:interestpayableonborrowingscalculatedusingtheeffectiveinterestratemethod;interestreceived
onfundsinvestedcalculatedusingtheeffectiveinterestratemethod;foreignexchangegainsandlosses;gainsandlosseson
certainfinancialinstrumentsthatarerecognised(i.e.unhedgedderivatives)intheincomestatement;unwindingofthediscount
onprovisionsandimpairmentlossesonfinancialassets.
LEASEPAyMENTS
• Finance leases
Minimumleasepaymentsunderfinanceleasesareapportionedbetweenthefinancechargeandthereductionoftheoutstanding
liability.Thefinanceexpenseisallocatedtoeachperiodduringtheleasetermsoastoproduceaconstantperiodicrateofinterest
ontheremainingbalanceoftheliability.Contingentleasepaymentsareaccountedforbyrevisingtheminimumleasepayments
overtheremainingtermoftheleasewhentheleaseadjustmentisconfirmed.
• Operating leases
Paymentsmadeunderoperatingleasesarerecognisedintheincomestatementonastraightlinebasisoverthetermofthelease.
Leaseincentivesreceivedarerecognisedasanintegralpartofthetotalleaseexpense,overthetermofthelease.
INCOMETAXEXPENSE
Incometaxexpensecomprisescurrentanddeferredtax.Incometaxexpenseisrecognisedinprofitorlossexcepttotheextent
thatitrelatestoitemsrecogniseddirectlyinequity,inwhichcaseitisrecognisedinequity.Currenttaxistheexpectedtax
payableonthetaxableincomefortheyear,usingtaxratesenactedorsubstantivelyenactedatthereportingdate,andany
adjustmenttotaxpayableinrespectofpreviousyears.Deferredtaxisrecognisedusingthebalancesheetmethod,providingfor
temporarydifferencesbetweenthecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesandtheamounts
usedfortaxationpurposes.Deferredtaxisnotrecognisedforthefollowingtemporarydifferences:theinitialrecognitionof
goodwill,theinitialrecognitionofassetsorliabilitiesinatransactionthatisnotabusinesscombinationandthataffectsneither
accountingnortaxableprofit,anddifferencesrelatingtoinvestmentsinsubsidiariesandjointlycontrolledentitiestotheextent
thattheyprobablywillnotreverseintheforeseeablefuture.Deferredtaxismeasuredatthetaxratesthatareexpectedtobe
appliedtothetemporarydifferenceswhentheyreverse,basedonthelawsthathavebeenenactedorsubstantivelyenactedbythe
reportingdate.Adeferredtaxassetisrecognisedtotheextentthatitisprobablethatfuturetaxableprofitswillbeavailable
againstwhichtemporarydifferencecanbeutilised.Deferredtaxassetsarereviewedateachreportingdateandarereducedto
theextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealised.Additionalincometaxesthatarisefromthe
distributionofdividendsarerecognisedatthesametimeastheliabilitytopaytherelateddividendisrecognised.
Intangible AssetsGOODwILL
Goodwillarisesontheacquisitionofsubsidiariesandbusinesscombinations.
• Acquisitions prior to 1 March 2005
AspartofitstransitiontoNZIFRS,theGroupelectedtorestateonlythosebusinesscombinationsthatoccurredonor
after1March2005.Inrespectofacquisitionspriorto1March2005,goodwillrepresentstheamountrecognisedunder
previousNZGAAP.
28 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
• Acquisitions on or after 1 March 2005.
Foracquisitionsonorafter1March2005,goodwillrepresentstheexcessofthecostoftheacquisitionovertheGroup’sinterest
inthenetfairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesoftheacquiree.whentheexcessisnegative
(negativegoodwill),itisrecognisedimmediatelyinprofitorloss.
Goodwillismeasuredatcost,lessaccumulatedimpairmentlosses.Goodwillisallocatedtocashgeneratingunitsandistested
annuallyforimpairment.
• Franchise costs
Franchisecostsarethoseincurredinobtainingfranchiserightsorlicencestooperatequickserviceandtake-awayrestaurant
concepts.Theyinclude,forexample,theinitialfeepaidtoasystemfranchisorwhenanewstoreisopened.Thesearemeasured
atcostlessaccumulatedamortisationandaccumulatedimpairmentlosses.Amortisationisonastraight-linebasisoverthelife
oftheapplicablefranchiseorlicenseagreement.
• Concept development costs and fees
Conceptdevelopmentcostsandfeesincludecertaincosts,otherthanthedirectcostofobtainingthefranchise,associated
withtheestablishmentofquickserviceandtake-awayrestaurantconcepts.Theseinclude,forexample,professionalfeesand
consultingcostsassociatedwiththeestablishmentofanewbrandorbusinessacquisition.
Thesecostsarecapitalisedwheretheconceptisproventobecommerciallyfeasibleandtherelatedfutureeconomicbenefitsare
expectedtoexceedthosecostswithreasonablecertainty.Thesearesubsequentlymeasuredatcostlessaccumulatedamortisation
andaccumulatedimpairmentlosses.Amortisationisrecognisedonastraightlinebasisovertheperiodwhichfutureeconomic
benefitsarereasonablyexpectedtobederived.
Property, Plant and EquipmentOwNEDASSETS
Propertyplantandequipmentaremeasuredatcostlessaccumulateddepreciationandimpairmentlosses.whereappropriate,
thecostofproperty,plantandequipmentincludessitepreparationcosts,installationcostsandthecostofobtaining
resourceconsents.
whenpartsofanitemofproperty,plantandequipmenthavedifferentusefullives,theyareaccountedforasseparateitems
(majorcomponents)ofproperty,plantandequipment.
Thecostofreplacingpartofanitemofproperty,plantandequipmentisrecognisedinthecarryingamountoftheitemifitis
probablethatthefutureeconomicbenefitsembodiedwithinthepartwillflowtotheGroupanditscostcanbemeasuredreliably.
Thecostsoftheday-to-dayservicingofproperty,plantandequipmentarerecognisedinprofitorlossasincurred.
LEASEDASSETS
LeasesintermsofwhichtheGroupassumessubstantiallyalltherisksandrewardsofownershipareclassifiedasfinanceleases.
Assetsacquiredbywayoffinanceleasesarestatedinitiallyatanamountequaltothelowerofitsfairvalueandpresentvalue
ofthefutureminimumleasepayments.Subsequenttoinitialrecognitiontheassetisaccountedforinaccordancewiththe
accountingpolicyapplicabletothatasset.
OtherleasesareoperatingleasesandarenotrecognisedontheGroup’sbalancesheet.TheGroupalsoleasescertainplant,
equipment,landandbuildingsbywayofoperatinglease.Thecostofimprovementstoleaseholdassetsiscapitalisedasbuildings
orleaseholdimprovementsandthendepreciatedasoutlinedbelow.
PAGE NUMBER 29RESTAURANT BRANDS
2007 ANNUAL REPORT
CAPITALwORKINPROGRESS
Allcostsrelatingtoanassetarefirstrecordedincapitalworkinprogress.Onceallassociatedcostsforanassetareestablished
withrelativecertainty,theassetisthentransferredfromworkinprogressandcapitalisedintofixedassets.
STORESTARTuPCOSTS
Costsincurredinconnectionwiththeassessingthefeasibilityofnewsitesareexpensedasincurredwiththeexceptionof
franchisecostsandcertaindevelopmentcostsandfeesasdiscussedabove.
DEPRECIATION
Depreciationisrecognisedintheincomestatementandiscalculatedonastraightlinebasistoallocatethecostofanasset,less
anyresidualvalue,overitsestimatedusefullife.Leasedassetsaredepreciatedovertheshorteroftheleasetermandtheiruseful
lives.Theestimatedusefullivesoffixedassetsareasfollows:
Leaseholdimprovements 5–20years
Plantandequipment 3–12.5years
Motorvehicles 4years
Furnitureandfittings 3–10years
Computerequipment 3–5years
Depreciationmethods,usefullivesandresidualvaluesarereassessedatthereportingdate.
InventoriesInventoriesaremeasuredatthelowerofcostandnetrealisablevalue.Netrealisablevalueistheestimatedsellingpriceless
theestimatedcostsofmarketing,sellinganddistribution.Thecostofinventoriesisbasedonthefirst-infirst-outprincipleand
includesexpenditureincurredinacquiringtheinventoriesandbringingthemtotheirexistingconditionandlocation.
Statement of Cash FlowsThefollowingaredefinitionsofthetermsusedintheStatementofCashFlows:
a)Cashcomprises;cashatbank,cashonhandandoverdraftbalances;
b) Investingactivitiesarethoseactivitiesrelatingtotheacquisition,holdinganddisposaloffixedassetsandofinvestments;
Investmentscanincludesecuritiesnotfallingwithinthedefinitionofcash;
c) Financingactivitiesarethoseactivitieswhichresultinchangesinthesizeandcompositionofthecapitalstructureof
thecompany;
d)Operatingactivitiesincludealltransactionsandothereventsthatarenotinvestingorfinancingactivities.
DividendsDividendsareaccruedintheperiodthattheyareauthorised.
ImpairmentThecarryingamountsoftheGroup’sassetsexceptforinventoriesanddeferredtaxassetsarereviewedateachbalancesheet
datetodeterminewhetherthereisanyindicationofimpairment.Ifanysuchindicationexiststhentheasset’sCashGenerating
unit’sor(CGu’s)recoverableamountisestimated.Forgoodwillandintangibleassetsthathaveindefinitelivesorthatarenot
yetavailableforuse,therecoverableamountisestimatedateachreportingdate.Animpairmentlossisrecognisedwhenever
thecarryingamountofanassetorCGuexceedsitsrecoverableamount.ACGuisthesmallestidentifiableassetgroupthat
generatescashflowsthatarelargelyindependentfromotherassetsandgroups.
TherecoverableamountofanassetorCGuisthegreaterofitsvalueinuseanditsfairvaluelesscoststosell.Inassessing
valueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingadiscountratethatreflectscurrent
marketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Impairmentlossesdirectlyreducethecarrying
amountofassetsandarerecognisedintheincomestatement.
30 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
ImpairmentlossesrecognisedinrespectofCGu’sareallocatedfirsttoreducethecarryingamountofanygoodwillallocatedto
theunitsandthentoreducethecarryingamountoftheotherassetsintheunit(groupofunits)onaproratabasis.
Exceptforimpairmentlossesongoodwill,impairmentlossesrecognisedinpriorperiodsareassessedateachreportingdate
foranyindicationsthatthelosshasdecreasedornolongerexists.Animpairmentlossisreversediftherehasbeenachange
intheestimatesusedtodeterminetherecoverableamount.Animpairmentlossisreversedonlytotheextentthattheasset’s
carryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciationoramortisation,ifno
impairmentlosshadbeenrecognised.Animpairmentlossinrespectofgoodwillisnotreversed.
Share CapitalIncrementalcostsdirectlyattributabletotheissueofordinarysharesandshareoptionsarerecognisedasadeduction
fromequity.
Earnings Per ShareTheGrouppresentsbasicanddilutedearningspershare(EPS)dataforitsordinaryshares.BasicEPSiscalculatedbydividing
theprofitorlossattributabletoordinaryshareholdersoftheCompanybytheweightedaveragenumberofordinaryshares
outstandingduringtheperiod.DilutedEPSisdeterminedbyadjustingtheprofitorlossattributabletoordinaryshareholders
andtheweightedaveragenumberofordinarysharesoutstandingfortheeffectsofalldilutivepotentialordinaryshares,which
compriseshareoptionsgrantedtoemployees.
Employee BenefitsOTHERLONG-TERMEMPLOyEEBENEFITS
TheGroup’snetobligationinrespectoflong-termemployeebenefitsistheamountoffuturebenefitthatemployeeshaveearned
inreturnfortheirserviceinthecurrentandpriorperiods.Thebenefitisdiscountedtodetermineitspresentvalue.
SHARE-BASEDPAyMENTTRANSACTIONS
Thegrantdatefairvalueofoptionsgrantedtoemployeesisrecognisedasanemployeeexpense,withacorrespondingincrease
inequity,overtheperiodinwhichtheemployeesbecomeunconditionallyentitledtotheoptions.Theamountrecognisedasan
expenseisadjustedtoreflecttheactualnumberofshareoptionsthatvest.Thefairvalueoftheoptionsgrantedismeasured
usinganoptionspricingmodel,takingintoaccountthetermsandconditionsuponwhichtheoptionsweregranted.Theamount
recognisedasanexpenseisadjustedtoreflecttheactualnumberofshareoptionsthatvestexceptwhereforfeitureisonlydueto
sharepricesnotachievingthethresholdforvesting.
SHORT-TERMBENEFITS
Short-termemployeebenefitobligationsaremeasuredonanundiscountedbasisandareexpensedastherelatedserviceis
provided.Aprovisionisrecognisedfortheamountexpectedtobepaidundershort-termcashbonusiftheGrouphasapresent
legalorconstructiveobligationtopaythisamountasaresultofpastserviceprovidedbytheemployeeandtheobligationcanbe
estimatedreliably.
Segment ReportingSegmentinformationispresentedinrespectoftheGroup’sbusinessandgeographicalsegments.Theprimaryformat,business
segments,isbasedontheGroup’smanagementandinternalreportingstructure.Inter-segmentpricingisdeterminedonanarm’s
lengthbasis.Segmentresults,assetsandliabilitiesincludeitemsdirectlyattributabletoasegmentaswellasthosethatcan
beallocatedonareasonablebasis.unallocateditemscomprisemainlyinvestmentsandrelatedrevenue,loansandborrowings
andrelatedexpenses,corporateassets(primarilytheCompany’s)andheadofficeexpenses,andincometaxassetsandliabilities.
Segmentcapitalexpenditureisthetotalcostincurredduringtheperiodtoacquireproperty,plantandequipment,andintangible
assetsotherthangoodwill.
PAGE NUMBER 31RESTAURANT BRANDS
2007 ANNUAL REPORT
BuSINESSSEGMENTS
TheGroupcomprisesthefollowingmainbusinesssegments:
• KFC
• PizzaHutNewZealand
• StarbucksCoffee
• PizzaHutVictoria
Themainactivitiesofthesebusinesssegmentsistheoperationofquick-serviceandtake-awayrestaurantconcepts.
GEOGRAPHICALSEGMENTS
TheKFC,PizzaHutNewZealandandStarbucksCoffeesegmentsaremanagedandoperatedinNewZealand.PizzaHut
VictoriaismanagedandoperatedinthestateofVictoria,Australia.
Goods and Services TaxTheincomestatementandstatementofcashflowhavebeenpreparedexclusiveofGoodsandServicesTaxation.
Non-Current Assets Held for SaleNon-currentassets(ordisposalgroupscomprisingassetsandliabilities)thatareexpectedtoberecoveredprimarilythroughsale
ratherthanthroughcontinuinguseareclassifiedasheldforsale.Immediatelybeforeclassificationasheldforsale,theassets(or
componentsofadisposalgroup)areremeasuredinaccordancewiththeGroup’saccountingpolicies.Thereaftergenerallythe
assets(ordisposalgroup)aremeasuredattheloweroftheircarryingamountandfairvaluelesscosttosell.Impairmentlosses
oninitialclassificationasheldforsaleandsubsequentgainsorlossesonre-measurementarerecognisedinprofitorloss.Gains
arenotrecognisedinexcessofanycumulativeimpairmentloss.
Discontinued OperationsAdiscontinuedoperationisacomponentoftheGroup’sbusinessthatrepresentsaseparatemajorlineofbusinessorgeographical
areaofoperationsthathasbeendisposedof,orisheldforsale,orisasubsidiaryacquiredexclusivelywithaviewtoresale.
Classificationasadiscontinuedoperationoccursupondisposalorwhentheoperationmeetsthecriteriatobeclassifiedasheld
forsale,ifearlier.whenanoperationisclassifiedasadiscontinuedoperation,thecomparativeincomestatementisrestatedasif
theoperationhasbeendiscontinuedfromthestartofthecomparativeperiod.
ProvisionsAprovisionisrecognisedif,asaresultofapastevent,theGrouphasapresentlegalorconstructiveobligationthatcanbe
estimatedreliably,anditisprobablethatanoutflowofeconomicbenefitswillberequiredtosettletheobligation.Provisionsare
determinedbydiscountingtheexpectedfuturecashflowsatapre-taxratethatreflectscurrentmarketassessmentsofthetime
valueofmoneyandtherisksspecifictotheliability.
RESTRuCTuRING
AprovisionforrestructuringisrecognisedwhentheGrouphasapprovedadetailedandformalrestructuringplan,andthe
restructuringeitherhascommencedorhasbeenannouncedpublicly.Futureoperatingcostsarenotprovidedfor.
ONEROuSCONTRACTS
AprovisionforonerouscontractsisrecognisedwhentheexpectedbenefitstobederivedbytheGroupfromacontractare
lowerthantheunavoidablecostofmeetingitsobligationsunderthecontract.Theprovisionismeasuredatthepresentvalueof
theloweroftheexpectedcostofterminatingthecontractandtheexpectednetcostofcontinuingwiththecontract.Beforea
provisionisestablished,theGrouprecognisesanyimpairmentlossontheassetsassociatedwiththatcontract.
32 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
New Standards and Interpretations not yet adoptedAnumberofnewstandards,amendmentstostandardsandinterpretationsarenotyeteffectivefortheyearended28February
2007,andhavenotbeenappliedinpreparingtheseconsolidatedfinancialstatements:
• NZIFRS7FinancialInstruments:DisclosuresandtheAmendmenttoNZIAS1PresentationofFinancialStatements:
CapitalDisclosuresrequireextensivedisclosuresaboutthesignificanceoffinancialinstrumentsforanentity’sfinancial
positionandperformance,andqualitativeandquantitativedisclosuresonthenatureandextentofrisks.NZIFRS7and
amendedNZIAS1,whichbecomesmandatoryfortheGroup’s2008financialstatements,willrequireadditionaldisclosures
withrespecttoGroup’sfinancialinstrumentsandsharecapital.
• NZIFRIC8ScopeofNZIFRS2Share-basedPaymentaddressestheaccountingforshare-basedpaymenttransactionsin
whichsomeorallofgoodsorservicesreceivedcannotbespecificallyidentified.NZIFRIC8whichbecomesmandatoryfor
theGroup’s2008financialstatements,withretrospectiveapplicationrequired.Theadoptionofthisinterpretationisnot
expectedtohaveanyimpactontheconsolidatedfinancialstatements.
• NZIFRIC9ReassessmentofEmbeddedDerivativesrequiresthatareassessmentofwhetherembeddedderivativesshouldbe
separatedfromtheunderlyinghostcontractshouldbemadeonlywhentherearechangestothecontract.NZIFRIC9,which
becomesmandatoryfortheGroup’s2008financialstatements,isnotexpectedtohaveanyimpactontheconsolidated
financialstatements.
• NZIFRIC10InterimFinancialReportingandImpairmentprohibitsthereversalofanimpairmentlossrecognisedina
previousinterimperiodinrespectofgoodwill,andinvestmentinanequityinstrumentorafinancialassetcarriedatcost.
NZIFRIC10,becomesmandatoryfortheGroup’s2008financialstatements,andwillapplytogoodwill,investmentsin
equityinstruments,andfinancialassetscarriedatcostprospectivelyfromthedatethattheGroupfirstappliedthe
measurementcriteriaofNZIAS36andNZIAS39respectively(i.e.1March2005),andisnotexpectedtohaveanyimpact
ontheconsolidatedfinancialstatements.
• NZIFRIC11NZIFRS2GroupandTreasurySharesTransactionsrequiresashare-basedpaymentarrangementinwhichan
entityreceivesgoodsorservicesasconsiderationforitsownequity-instrumentstobeaccountedforasanequity-settled
share-basedpaymenttransaction,regardlessofhowtheequityinstrumentsneededareobtained.NZIFRIC11becomes
mandatoryfortheGroup’s2008financialstatements,withretrospectiveapplicationrequired.TheGrouphasnotyet
determinedthepotentialimpactoftheinterpretation.
• NZIFRIC12ServiceConcessionArrangementsaddresseshowserviceconcessionoperatorsshouldapplyexisting
NewZealandEquivalentstoInternationalFinancialReportingStandards(NZIFRS)toaccountfortheobligationsthey
undertakeandrightstheyreceiveinserviceconcessionarrangements.NZIFRIC12becomesmandatoryfortheGroup’s
2009financialstatements.NZIFRIC12isnotrelevanttotheGroup’soperation.
• NZIFRS8OperatingSegmentsrequiresanentitytoadoptthe‘managementapproach’toreportingonthefinancial
performanceofitsoperatingsegments.Generally,theinformationtobereportedwouldbewhatmanagementusesinternally
forevaluatingsegmentperformanceanddecidinghowtoallocateresourcestooperatingsegments.Suchinformationmaybe
differentfromwhatisusedtopreparetheincomestatementandbalancesheetandwouldthereforerequireexplanationof
thebasisonwhichthesegmentinformationispreparedandreconciliationstotheamountsrecognisedintheincome
statementandbalancesheet.NZIFRS8iseffectiveforaccountingperiodsbeginning1January2009.TheGrouphasnot
yetdeterminedthepotentialimpactofthestandard.
PAGE NUMBER 33RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 1 - Segmental Reporting
KFC Pizza Hut NZ Starbucks Coffee Pizza Hut Victoria Other* Consolidated Continued Discontinued Continued Discontinued
NZ$’000s 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2007 2006 2006Business Segments
Storesalesrevenue 182,673 171,812 79,721 89,086 31,252 27,865 25,068 27,589 - - 318,714 316,352 293,646 25,068 288,763 27,589
Otherrevenue 415 389 415 389 415 - 389 -
Total operating revenue 182,673 171,812 79,721 89,086 31,252 27,865 25,068 27,589 415 389 319,129 316,741 294,061 25,068 289,152 27,589
Concept EBITDA before general and administration expenses 31,216 29,630 5,060 11,812 3,645 3,946 (2,931) (330) - - 36,990 45,058 39,921 (2,931) 45,388 (330)
Depreciation (4,922) (3,846) (3,686) (2,890) (1,722) (1,463) - (1,838) (732) (961) (11,062) (10,998) (11,062) - (9,102) (1,896)
Amortisation (186) (41) (183) (154) (206) (208) - (158) - - (575) (561) (575) - (403) (158)
Segment result (EBIT) before non-trading 24,171 23,883 (417) 7,044 733 1,342 (3,921) (3,548) (7,264) (8,130) 13,302 20,591 17,935 (4,633) 25,096 (4,505)
Impairmentonproperty,plantandequipment (840) (429) (502) (786) - (425) (5,862) (3,681) - - (7,204) (5,321) (1,342) (5,862) (1,640) (3,681)
Impairmentonintangibles - - (1,142) - - - (702) (3,434) - - (1,844) (3,434) (1,142) (702) - (3,434)
Othernon-trading (1,188) (105) 213 (436) - - (3,371) (167) (965) 246 (5,311) (462) (1,940) (3,371) (295) (167)
Segment result 22,143 23,349 (1,848) 5,822 733 917 (13,856) (10,830) (8,229) (7,884) (1,057) 11,374 13,511 (14,568) 23,161 (11,787)
Operating profit (loss) (EBIT) (1,057) 11,374 13,511 (14,568) 23,161 (11,787)
Netfinancingcosts (3,409) (2,310) (3,407) (2) (2,395) 85
Net profit (loss) before taxation (4,466) 9,064 10,104 (14,570) 20,766 (11,702)
Incometax(expense) 912 (3,867) (3,797) 4,709 (6,684) 2,817
Net profit (loss) after taxation (3,554) 5,197 6,307 (9,861) 14,082 (8,885)
Net profit after taxation excluding non-trading 6,542 12,326 9,645 (3,103) 15,316 (2,990)
Segmentassets 48,516 33,136 48,990 50,085 15,595 15,972 437 8,387 1,770 331 115,308 107,911
unallocatedassets 2,426 1,379
Total assets 117,734 109,290
Segmentliabilities 13,754 8,605 6,170 6,880 1,493 1,564 3,530 3,799 1,628 1,239 26,575 22,087
unallocatedliabilities 58,528 43,293
Total liabilities 85,103 65,380
Capitalexpenditureincludingintangibles 22,028 9,408 5,310 8,186 1,715 2,942 97 1,272 1,345 530 30,495 22,338
*Otherisgeneralandadministrationsupportcentreexpenses.
New Zealand Australia Unallocated Consolidated
NZ$’000s 2007 2006 2007 2006 2007 2006 2007 2006
Geographical Segments
Totaloperatingrevenue 294,061 289,152 25,068 27,589 - - 319,129 316,741
Segmentassets 114,871 99,524 437 8,387 2,426 1,379 117,734 109,290
Capitalexpenditureincludingintangibles 30,398 21,066 97 1,272 - - 30,495 22,338
Fortheyearended28February2007
34 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 1 - Segmental Reporting
KFC Pizza Hut NZ Starbucks Coffee Pizza Hut Victoria Other* Consolidated Continued Discontinued Continued Discontinued
NZ$’000s 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2007 2006 2006Business Segments
Storesalesrevenue 182,673 171,812 79,721 89,086 31,252 27,865 25,068 27,589 - - 318,714 316,352 293,646 25,068 288,763 27,589
Otherrevenue 415 389 415 389 415 - 389 -
Total operating revenue 182,673 171,812 79,721 89,086 31,252 27,865 25,068 27,589 415 389 319,129 316,741 294,061 25,068 289,152 27,589
Concept EBITDA before general and administration expenses 31,216 29,630 5,060 11,812 3,645 3,946 (2,931) (330) - - 36,990 45,058 39,921 (2,931) 45,388 (330)
Depreciation (4,922) (3,846) (3,686) (2,890) (1,722) (1,463) - (1,838) (732) (961) (11,062) (10,998) (11,062) - (9,102) (1,896)
Amortisation (186) (41) (183) (154) (206) (208) - (158) - - (575) (561) (575) - (403) (158)
Segment result (EBIT) before non-trading 24,171 23,883 (417) 7,044 733 1,342 (3,921) (3,548) (7,264) (8,130) 13,302 20,591 17,935 (4,633) 25,096 (4,505)
Impairmentonproperty,plantandequipment (840) (429) (502) (786) - (425) (5,862) (3,681) - - (7,204) (5,321) (1,342) (5,862) (1,640) (3,681)
Impairmentonintangibles - - (1,142) - - - (702) (3,434) - - (1,844) (3,434) (1,142) (702) - (3,434)
Othernon-trading (1,188) (105) 213 (436) - - (3,371) (167) (965) 246 (5,311) (462) (1,940) (3,371) (295) (167)
Segment result 22,143 23,349 (1,848) 5,822 733 917 (13,856) (10,830) (8,229) (7,884) (1,057) 11,374 13,511 (14,568) 23,161 (11,787)
Operating profit (loss) (EBIT) (1,057) 11,374 13,511 (14,568) 23,161 (11,787)
Netfinancingcosts (3,409) (2,310) (3,407) (2) (2,395) 85
Net profit (loss) before taxation (4,466) 9,064 10,104 (14,570) 20,766 (11,702)
Incometax(expense) 912 (3,867) (3,797) 4,709 (6,684) 2,817
Net profit (loss) after taxation (3,554) 5,197 6,307 (9,861) 14,082 (8,885)
Net profit after taxation excluding non-trading 6,542 12,326 9,645 (3,103) 15,316 (2,990)
Segmentassets 48,516 33,136 48,990 50,085 15,595 15,972 437 8,387 1,770 331 115,308 107,911
unallocatedassets 2,426 1,379
Total assets 117,734 109,290
Segmentliabilities 13,754 8,605 6,170 6,880 1,493 1,564 3,530 3,799 1,628 1,239 26,575 22,087
unallocatedliabilities 58,528 43,293
Total liabilities 85,103 65,380
Capitalexpenditureincludingintangibles 22,028 9,408 5,310 8,186 1,715 2,942 97 1,272 1,345 530 30,495 22,338
*Otherisgeneralandadministrationsupportcentreexpenses.
New Zealand Australia Unallocated Consolidated
NZ$’000s 2007 2006 2007 2006 2007 2006 2007 2006
Geographical Segments
Totaloperatingrevenue 294,061 289,152 25,068 27,589 - - 319,129 316,741
Segmentassets 114,871 99,524 437 8,387 2,426 1,379 117,734 109,290
Capitalexpenditureincludingintangibles 30,398 21,066 97 1,272 - - 30,495 22,338
PAGE NUMBER 35RESTAURANT BRANDS
2007 ANNUAL REPORT
For the year ended 28 February 2007
Note 2 - Discontinued Operations
Group Group
NZ$’000s 2007 2006
Results of discontinued operations
Revenue 25,068 27,589
Costofgoodssold (22,491) (24,214)
Distributionexpenses (2,005) (2,234)
Marketingexpenses (3,502) (3,428)
Generalandadministrationexpenses (1,703) (2,218)
Resultsfromoperatingactivities (4,633) (4,505)
Incometaxcredit 1,530 1,515
Resultsfromoperatingactivities,netofincometax (3,103) (2,990)
Nontrading (3,371) (167)
Netfinancingcosts (2) 85
Lossonsaleofdiscontinuedoperations(impairment) (6,564) (7,115)
Incometaxonlossonsaleofdiscontinuedoperations 3,179 1,302
(Loss) for the period (9,861) (8,885)
Basic(loss)centspershare (10.15) (9.16)
Cash flows from discontinued operations
Netcash(usedin)operatingactivities (6,380) (2,216)
Netcash(usedin)investingactivities (1,851) (1,567)
Netcash(usedin)fromfinancingactivities (30) 15
Netcash(usedin)discontinuedoperations (8,261) (3,768)
Thelossfortheperiodreflectstherealisedandunrealisednetlossesonstoredisposalsof$2.0millionincludingcostsof
disposalandfeespaidtothefranchisor,yumRestaurantsInternational(yum),impairmentoffranchisefeesof$0.7millionand
fixedassetimpairmentof$5.9million.
Becausethefranchiseagreementswithyuminthismarketnowcreateobligationsthatareonerousinnature,thesefuturefinancial
obligationsrelatingtotheasyetunsoldstoreshavebeenestimatedandtakenupinthisfinancialyearasaprovisionforonerous
contractsunderNZIFRS37.Theseareinthesumof$1.3million.
AstheGroupisintheprocessofexitingthePizzaHutVictorianbusinessithasreclassifiedtheseassetsandliabilitiesasheldfor
saleandtheresultsfromtradingasdiscontinuedoperations.
Note 3 - Non-current Assets Held for SalePizzaHutVictoriaispresentedasadisposalgroupheldforsalefollowingthecommitmentoftheGroup’smanagement,toaplanto
sellthebusiness.Saleofthedisposalgroupisexpectedtobecompletedinthenewfinancialyear.Allotherassetsheldbythe
disposalgrouphavebeenimpairedtonil.
Group
NZ$’000s 2007
Assets classified held for saleInventories 104
Tradeandotherreceivables 333
437
Liabilities classified as held for sale
Tradeandotherpayables 3,530
LossesattributedtothediscontinuedoperationsofPizzaHutVictoriawereasfollows:
36 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
For the year ended 28 February 2007
PAGE NUMBER 37RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 4 - Analysis of Expenses
Thesurplusbeforetaxationiscalculatedafterchargingthefollowingitems:
Group Group Company Company
NZ$’000s 2007 2006 2007 2006
Auditors’remuneration:
ToKPMGforstatutoryauditservices 100 94 - -
ToKPMGforotherassuranceservices 25 24 - -
ToKPMGforfinancialadvisoryservices 37 62 - -
ToKPMGfortaxationservices 34 59 - -
Governmenttraininggrants(includedingeneralandadministrationexpenses) (165) (160) - -
Governmenttraininggrants(includedincostofsales) (159) (884) - -
Amortisationofintangibles(includedincostofsales) 575 561 - -
Royaltiespaid 18,908 18,780 - -
Operatingrentalexpenses 21,190 19,994 - -
Netlossondisposalofproperty,plantandequipment 1,408 516 - -
Donations - 30 - -
Directors’fees 226 260 - -
Interestexpense(net) 3,256 2,345 3,697 2,534
Financeleaseinterest 153 60 - -
Non–trading items
Pizza Hut Victoria:
ImpairmentofPizzaHutVictoriagoodwill - 3,023 - -
ImpairmentofPizzaHutVictoriaproperty,plantandequipment 5,862 3,681 - -
ImpairmentofPizzaHutVictoriaotherintangibles 702 411 - -
Otherstoreclosurecosts 3,371 50 - -
Otherstorerelocationandrefurbishmentcosts - 117 - -
9,935 7,282
New Zealand:
ImpairmentofPizzaHutNZgoodwill 1,142 - - -
Otherstoreclosurecosts 1,335 1,283 - -
Otherstorerelocationandrefurbishmentcosts 2,075 846 - -
Otherrevenue (128) (194) - -
4,424 1,935
Group Group
NZ$’000s 2007 2006
Personnel Expenseswagesandsalaries 84,061 80,133
(Decrease)inliabilityforlong-serviceleave (43) (16)
Equity-settledshare-basedpaymenttransactions 15 24
84,033 80,141
Theparentcompanyhasnopersonnelexpense(2006:nil).
Note 5 - Income Tax Expense in the Income Statement
Reconciliationofeffectivetaxrate
Group Group Company Company
NZ$’000s Note 2007 2006 2007 2006
Total(loss)/profitfortheperiod 1 (4,466) 9,064 4,072 7,160
Totalincometaxcredit(expense) 1 912 (3,867) 1,219 836
(Loss)/profitexcludingincometax (3,554) 5,197 5,291 7,996
IncometaxusingtheCompany’sdomestictaxrate 33.0% 1,474 (33.0%) (2,991) (1,344) (2,363)
Non-assessableincome - - 2,563 3,199
Non-deductibleexpenses (10.5%) (467) (12.6%) (1,138) - -
Changeinrecognitionofdeferredtaxasset (2.1%) (95) 2.9% 262 - -
Total income tax credit (expense) 20.4% 912 (42.7%) (3,867) 1,219 836
Current tax expense
Currenttaxcredit/(expense) 1,231 (5,433) 1,219 836
Reclassifiedasdeferredtax (1,231) - - -
- (5,433) 1,219 836
Deferred tax expense
Deferredtax(expense)/credit 1,007 1,285 - -
Prior period adjustments
(Over)/underprovidedinpriorperiods (95) 281 - -
Nettaxcredit/(expense) 912 (3,867) 1,219 836
Income statement taxation expense
Incometax(expense)fromcontinuingoperations (3,797) (6,684)
Incometaxcreditfromdiscontinuedoperations
(excludinglossonsale) 2 1,530 1,515
Incometaxexpense(excludingtaxonsaleofdiscontinuedoperations) (2,267) (5,169)
Incometaxexpenseonlossonsalefrom
discontinuedoperations 2 3,179 1,302
Total income tax credit (expense) 1 912 (3,867)
Group Company
NZ$’000s 2007 2006
Imputation creditsImputationcreditsat1March2006 6,949 5,987
NewZealandtaxpayments,netofrefunds (44) 4,993
Imputationcreditsattachedtodividendsreceived 9 5
Imputationcreditsattachedtodividendspaid (3,236) (4,037)
Other - 1
Imputation credits at 28 February 2007 3,678 6,949
For the year ended 28 February 2007
38 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 6 - Property, Plant and Equipment
NZ$’000s
CostBalance as at 1 March 2005 55,191 50,187 1,135 404 6,092 113,009
AdditionsforyearendedFeb2006 - 1,139 373 1,401 18,735 21,648
TransferfromworkinprogressforyearendedFeb2006 11,786 6,368 - - (18,154) -
DisposalsforyearendedFeb2006 (993) (2,216) (334) (90) - (3,633)
MovementinexchangeratesforyearendedFeb2006 200 137 5 - 5 347
Balance as at 28 February 2006 66,184 55,615 1,179 1,715 6,678 131,371
AdditionsforyearendedFeb2007 - 2,529 193 395 24,518 27,635
TransferfromworkinprogressforyearendedFeb2007 16,270 5,396 - - (21,666) -
DisposalsforyearendedFeb2007 (11,090) (8,879) (227) (99) - (20,295)
MovementinexchangeratesforyearendedFeb2007 237 159 4 1 12 413
Balance as at 28 February 2007 71,601 54,820 1,149 2,012 9,542 139,124
Accumulated depreciation
Balance as at 1 March 2005 (13,935) (28,484) (651) (212) - (43,282)
ChargeforyearendedFeb2006 (4,759) (5,724) (283) (232) - (10,998)
DisposalsforyearendedFeb2006 104 1,834 272 53 - 2,263
MovementinexchangeratesforyearendedFeb2006 (74) (73) (2) - - (149)
Balance as at 28 February 2006 (18,664) (32,447) (664) (391) - (52,166)
ChargeforyearendedFeb2007 (5,145) (5,075) (201) (641) - (11,062)
DisposalsforyearendedFeb2007 5,688 6,781 198 32 - 12,699
MovementinexchangeratesforyearendedFeb2007 (98) (95) (3) - - (196)
Balance as at 28 February 2007 (18,219) (30,836) (670) (1,000) - (50,725)
Impairment provision
Balance as at 1 March 2005 (721) (80) - - - (801)
ChargeforyearendedFeb2006 (5,161) (160) - - - (5,321)
utilised/disposedfortheyearendedFeb2006 681 74 - - - 755
MovementinexchangeratesforyearendedFeb2006 31 - - - - 31
Balance as at 28 February 2006 (5,170) (166) - - - (5,336)
ChargeforyearendedFeb2007 (3,883) (3,166) (136) (19) - (7,204)
utilised/disposedforyearendedFeb2007 4,599 1,328 3 4 - 5,934
MovementinexchangeratesforyearendedFeb2007 88 119 5 1 - 213
Balance as at 28 February 2007 (4,366) (1,885) (128) (14) - (6,393)
Impairmentchargesincurredandutilised/disposedarerecognisedinnontradingintheincomestatement.
Carrying amounts
Balanceasat1March2005 40,535 21,623 484 192 6,092 68,926
Balanceasat28February2006 42,350 23,002 515 1,324 6,678 73,869
Balanceasat28February2007 49,016 22,099 351 998 9,542 82,006
Leasehold Plant Motor Leased Capital Total Improvements Equipment Vehicles Plant and Work in and Fittings Equipment Progress
For the year ended 28 February 2007
PAGE NUMBER 39RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 7 - Intangibles
NZ$’000s
Cost
Balance as at 1 March 2005 38,960 4,017 1,994 44,971
AdditionsforyearendedFeb2006 - 690 - 690
MovementinexchangeratesFeb2006 82 18 11 111
Balance as at 28 February 2006 39,042 4,725 2,005 45,772
AdditionsforyearendedFeb2007 - 2,728 132 2,860
MovementinexchangeratesFeb2007 18 4 2 24
Balance as at 28 February 2007 39,060 7,457 2,139 48,656
Accumulated amortisation
Balance as at 1 March 2005 (12,174) (1,469) (693) (14,336)
ChargefortheyearendedFeb2006 - (413) (148) (561)
MovementinexchangeratesFeb2006 (16) (4) (3) (23)
Balance as at 28 February 2006 (12,190) (1,886) (844) (14,920)
ChargefortheyearendedFeb2007 - (472) (103) (575)
Effectivemovementinexchangerates (3) (1) (1) (5)
Balance as at 28 February 2007 (12,193) (2,359) (948) (15,500)
Amortisationchargeisrecognisedincostofsalesintheincomestatement.
Impairment provision
Balance as at 1 March 2005 - - - -
ChargefortheyearendedFeb2006 (3,023) - (411) (3,434)
MovementinexchangeratesFeb2006 (9) - (5) (14)
Balance as at 28 February 2006 (3,032) - (416) (3,448)
ChargefortheyearendedFeb2007 (1,142) (702) - (1,844)
Effectivemovementinexchangerates (15) 38 (1) 22
Balance as at 28 February 2007 (4,189) (664) (417) (5,270)
Impairmentchargesarerecognisedinnontradingintheincomestatement.
Carrying amounts
Balanceasat1March2005 26,786 2,548 1,301 30,635
Balanceasat28February2006 23,820 2,839 745 27,404
Balanceasat28February2007 22,678 4,434 774 27,886
Theparentcompanyhasnointangibleassets(2006:nil).
GoodwillIntheyearended28February2006,thedirectorsconsideredthecarryingamountofgoodwillinthecompany’sinvestmentin
PizzaHutVictoria.Itwasdetermined,thatgiventhetradingpositionofthebusiness,thevalueofthegoodwillascurrently
recordedwasnotsubstantiated.AccordinglythefullamountofthecarryingvalueofthePizzaHutVictoriagoodwillwasfullyimpaired,
resultinginanimpairmentlossof$3.0millionintheincomestatement.
Goodwill Franchise Concept Total Fees Development Costs
For the year ended 28 February 2007
40 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Franchise costsDuringthecurrentyear,theGroupsignedanewKFCMasterFranchiseAgreementwithyum,thefranchisorforitsKFCand
PizzaHutbrands.undertheagreement,approximatelyfiftypercentoftheKFCstorefranchiseswererenewedfor$2.6million.
TheremainingKFCstoreswillberenewedinMay2007,onpaymentofasimilarrenewalfee.Thepaymentof$2.6millionis
includedunderintangibleassets.
Impairment testing for cash-generating units containing goodwillForthepurposeofimpairmenttesting,goodwillisallocatedtotheGroup’soperatingdivisionswhichrepresentthelowestlevel
withintheGroupatwhichthegoodwillismonitoredforinternalmanagementpurposes.
Theaggregatecarryingamountsofgoodwillallocatedtoeachunitareasfollows:
Group Group
NZ$’000s 2007 2006
KFC 1,348 1,348
PizzaHutNewZealand 21,330 22,472
Therecoverableamountofeachcash-generatingunitwasbasedonitsvalueinuse.Therewasanimpairmentlossidentifiedforthe
PizzaHutNewZealandsegment.
Valueinusewasdeterminedbydiscountingthefuturecashflowsgeneratedfromthecontinuinguseoftheunitandwasbasedon
thefollowingkeyassumptions:
KFC
Valueinusewasdeterminedbydiscountingthefuturecashflowsgeneratedfromthecontinuinguseoftheunit.Cashflowswere
projectedbasedonthe3yearstrategicbusinessplanasapprovedbytheboardofdirectors.Thecashflowswerebasedonsales
growthof6–9%paover2008–2010.Adjustmentsweremadeforoperatingexpenses,capitalexpenditureandtaxation.
Aterminalyearwascalculatedbasedonthe2010yearandassumesacontinuousgrowthofaminimumofprojectedinflation
estimatesof2.5%.
Thediscountrate,appliedtofuturecashflowsisbasedonaweightedaveragecostofcapitalapplicabletoRestaurantBrands.
PIZZA HUT NEW ZEALAND
Valueinusewasdeterminedbydiscountingthefuturecashflowsgeneratedfromthecontinuinguseoftheunit.Cashflowswere
projectedbasedonthe3yearstrategicbusinessplanasapprovedbytheboardofdirectors.Thecashflowswerebasedonsales
growthofadecreaseof2%in2008,anduptoanincreaseof5.4%paover2009–2010.Adjustmentsweremadeforoperating
expenses,capitalexpenditureandtaxation.Aterminalyearwascalculatedbasedonthe2010yearandassumesacontinuous
growthofaminimumofprojectedinflationestimatesof2.5%.
ThedownturninperformanceinPizzaHutNewZealandinthecurrentfinancialyearbecauseofsignificantcompetitoractivity
ledtoareviewoffutureoperatingactivitiesandtheboardofdirectorshasdecidedtoimpairPizzaHutNewZealand
goodwillby$1.1million.
Thediscountrate,appliedtofuturecashflowsisbasedonaweightedaveragecostofcapitalapplicabletoRestaurantBrands.
Thevaluesassignedtothekeyassumptionsrepresentmanagement’sassessmentoffuturetrendsintheindustryandare
basedonbothexternalsourcesandinternalsources(historicaldata).
Theaboveestimatesareparticularlysensitiveinthefollowingareas:
PIZZA HUT NEW ZEALAND
AtenpercentdecreaseinfutureplannedEBITDAwouldincreasetheimpairmentby$6.4million.
Anincreaseofonepercentagepointinthediscountratewouldincreasetheimpairmentby$4.5million.
For the year ended 28 February 2007
PAGE NUMBER 41RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 8 - Investment in subsidiariesThesubsidiarycompanies,allofwhicharewhollyowned,havea28Februarybalancedate,andhavebeenownedforthe
fullfinancialyear,areasfollows:
RESTAuRANTOPERATINGCOMPANIES INVESTMENTHOLDINGCOMPANIES
RestaurantBrandsLimited RBHoldingsLimited
RestaurantBrandsAustraliaPtyLimited RBPHoldingsLimited
(incorporatedinVictoria,Australia) RBDNZHoldingsLimited
RBNHoldingsLimited
PROPERTyHOLDINGCOMPANIES
RestaurantBrandsPropertiesLimited NONTRADINGSuBSIDIARyCOMPANIES
RestaurantBrandsPizzaLimited
EMPLOyEESHAREOPTIONPLANTRuSTCOMPANy KentuckyFriedChickenLimited
RestaurantBrandsNomineesLimited
Note 9 - Deferred tax assets and liabilitiesRecogniseddeferredtaxassetsandliabilitiesareattributabletothefollowing:
Group Assets Liabilities Net
NZ$’000s 2007 2006 2007 2006 2007 2006
Property,plantandequipment 1,701 1,830 (880) (570) 821 1,260
Inventory 42 33 - - 42 33
Debtors 7 5 - - 7 5
Provisions 3,307 3,528 - - 3,307 3,528
Intangibles 192 - (3,499) (3,443) (3,307) (3,443)
Other - - (3) (3) (3) (3)
TaxLosses 1,231 - - - 1,231 -
6,480 5,396 (4,382) (4,016) 2,098 1,380
Theparentcompanyhasnodeferredtaxassetsorliabilities(2006:nil).
Movementintemporarydifferencesduringtheyear:
Group
NZ$’000s
Property,plantandequipment (199) 1,457 2 1,260 (289) (150) 821
Inventory 10 23 - 33 10 (1) 42
Debtors 2 3 - 5 2 - 7
Provisions 2,314 1,207 7 3,528 (94) (127) 3,307
Intangibles (2,041) (1,402) - (3,443) 147 (11) (3,307)
Other - (3) - (3) - - (3)
TaxLosses - - - - 1,231 - 1,231
86 1,285 9 1,380 1,007 (289) 2,098
Recognitionofthetaxlossesof$1.2millionisdependentupontherequirementsofincometaxlegislationbeingmetandtheseare
expectedtobeutilisedwithinthenextyear.
Note 10 - Inventories Group Group
NZ$’000s 2007 2006Rawmaterialsandconsumables 2,022 2,253
Allinventoriesarevaluedatcost.
Balance Recognised Recognised Balance Recognised Recognised Balance 1 March in Income in Equity 28 February in Income in Equity 28 February 2005 Statement 2006 Statement 2007
For the year ended 28 February 2007
42 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Share Share Foreign Hedging Retained Total Capital Option Currency Reserve Earnings Reserve Translation Reserve
Note 11 - Trade and other receivables
Group Group Company Company
NZ$’000s 2007 2006 2007 2006
Prepayments 575 1,408 - -
Otherdebtors 316 245 - -
891 1,653 - -
Includedinotherdebtorsareforeigncurrencydebtorsofnil,(2006:$17,000,AuD$16,000).
Note 12 - Reconciliation of movement in capital and reserves
GroupNZ$’000s
Balance as at 1 March 2005 (25,297) (46) (57) (22,642) (48,042)
Totalrecognisedincomeandexpense (111) 49 (5,197) (5,259)
Sharebasedpayments (24) (24)
Netdividendsdistributed 9,694 9,694
Optionsexercised (279) (279)
Balance as at 28 February 2006 (25,576) (70) (111) (8) (18,145) (43,910)
Balance as at 1 March 2006 (25,576) (70) (111) (8) (18,145) (43,910)
Totalrecognisedincomeandexpense 9 8 3,554 3,571
Sharebasedpayments (15) (15)
Netdividendsdistributed 7,769 7,769
Optionsexercised (46) (46)
Balance as at 28 February 2007 (25,622) (85) (102) – (6,822) (32,631)
Company
NZ$’000s
Balance as at 1 March 2005 (25,297) (46) (57) 17,301 (8,099)
Totalrecognisedincomeandexpense 57 (7,996) (7,939)
Sharebasedpayments (24) (24)
Netdividendsdistributed 9,694 9,694
Optionsexercised (279) (279)
Balance as at 28 February 2006 (25,576) (70) – – 18,999 (6,647)
Balance as at 1 March 2006 (25,576) (70) 18,999 (6,647)
Totalrecognisedincomeandexpense (5,291) (5,291)
Sharebasedpayments (15) (15)
Netdividendsdistributed 7,769 7,769
Optionsexercised (46) (46)
Balance as at 28 February 2007 (25,622) (85) – – 21,477 (4,230)
For the year ended 28 February 2007
PAGE NUMBER 43RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 12 - Reconciliation of movement in capital and reserves (continued)
Share option reserveTheshareoptionreservecomprisesthenetchangeinoptionsexercisedduringtheperiodandthecumulativenetchangeof
sharebasedpaymentsincurred.
Foreign currency translation reserveTheforeigncurrencytranslationreservecomprisesallforeigncurrencydifferencesarisingfromtransactionsofthefinancial
statementsoftheforeigncurrencyoperation.
Hedging reserveThehedgingreservecomprisestheeffectiveportionofthecumulativenetchangeinthefairvalueofcashflowhedging
instrumentsrelatedtohedgingtransactionsthathavenotyetincurred.
Note 13 - Dividend distribution
Group Group Company Company
NZ$’000s 2007 2006 2007 2006
Interimdividendof2.5centspersharepaid(2006:4.5centspershare) 2,429 4,367 2,429 4,367
Finaldividendof5.5centspersharepaidfortheyearended
28February2006(2006:5.5centspershare) 5,340 5,327 5,340 5,327
7,769 9,694 7,769 9,694
Note 14 - EquityTheissuedcapitaloftheCompanyis97,128,956(2006:97,081,875)ordinaryfullypaidupshares.Allissuedsharescarryequal
rightsinrespectofvotingandthereceiptofdividends,anduponwindinguprankequallywithregardtotheCompany’sresidualassets.
SharesBalanceatbeginningofyearordinaryshares 97,081,875 25,576 96,843,475 25,297
Movements in reported capital:
Ordinaryshares 47,081 46 238,400 279
Balanceatendofyear 97,128,956 25,622 97,081,875 25,576
Group & Group & Group & Group & Company Company Company Company 2007 2007 2006 2006 number $’000 number $’000
For the year ended 28 February 2007
44 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 15 - Earnings per shareThecalculationofbasicearningspersharefortheyearended28February2007wasbasedontheprofitfromcontinuingoperations
attributabletoordinaryshareholdersof$6.3millionandaweightedaveragenumberofordinarysharesoutstandingduringtheyearof
97,113,095sharescalculatedasfollows:
Weighted average number of 2007 2006
ordinary shares for the period 000’s of shares 000’s of shares
IssuedordinarysharesatFebruary2005 96,843
EffectofsharesissuedinMay2005 6
EffectofsharesissuedinJuly2005 83
EffectofsharesissuedinAugust2005 21
EffectofsharesissuedinSeptember2005 13
EffectofsharesissuedinOctober2005 2
EffectofsharesissuedinDecember2005 2
IssuedordinarysharesatFebruary2006 97,082 -
EffectofsharesissuedinMarch2006 6 -
EffectofsharesissuedinMay2006 14 -
EffectofsharesissuedinJune2006 1 -
EffectofsharesissuedinJuly2006 10 -
EffectofsharesissuedinFebruary2007 - -
Weighted average number of ordinary shares 97,113 96,970
Group Group Group Group
2007 2007 2006 2006 earnings $’000 earnings $’000 per share per share (cents) (cents)
Profit/(loss)attributabletoordinaryshareholders’continuedoperations 6.49 6,307 14.52 14,082
(Loss)/profitattributabletoordinaryshareholders’discontinuedoperations (10.15) (9,861) (9.16) (8,885)
(Loss)/profitattributabletoordinaryshareholders’totaloperations (3.66) (3,554) 5.36 5,197
Note 16 - Loans and finance leasesThisnoteprovidesinformationaboutthecontractualtermsoftheGroup’sinterest-bearingloansandborrowings.Allexistingbank
loans,loansandfinanceleasesaredenominatedinNewZealanddollars,(2006$0.03millionoffinanceleasesweredenominatedin
Australiandollars).FormoreinformationabouttheCompany’sexposuretointerestrateandforeigncurrencyriskseenote19.
Group Group Company Company
NZ$’000s 2007 2006 2007 2006
Non–current liabilitiesFinanceleases 591 735 - -
Securedbankloans 48,580 32,365 48,580 32,365
49,171 33,100 48,580 32,365
Current liabilities
Financeleases 605 674 - -
Otherloans 190 - - -
795 674 - -
For the year ended 28 February 2007
PAGE NUMBER 45RESTAURANT BRANDS
2007 ANNUAL REPORT
Surplus Store Employee Deferred Group lease space closure costs entitlements income Total
Note 16 - Loans and finance leases (continued)Securedbankloanswererenewedin2007.Renewalsareforthreeyears.
Thesecuredbankloan$48.6million,isunhedgedforinterestraterises(2006:$32.4million).Theloanisfloatingatan
interestrateof7.58%(2006:7.55%)atbalancedate.Thebankloansarestructuredasarevolvingwholesaleadvancefacilitywith
portionsofthefacilityrenewingonaregularbasis.
Assecurityovertheloansandbankoverdraft,thebanksholdanegativepledgedeedbetweenRestaurantBrandsNewZealandLimited
andallitssubsidiarycompanies.Thenegativepledgedeedincludesallobligationsandcrossguaranteesbetweentheguaranteeing
subsidiaries.Theotherloanisatafixedinterestrateof11%andisrepayablewithinayear.
Note 17 - Current creditors and accruals
Group Group Company Company
NZ$’000s 2007 2006 2007 2006
Tradecreditors 8,732 11,800 - -
Othercreditorsandaccruals 8,418 5,650 312 207
Employeeentitlements 5,531 5,613 - -
Indirectandothertaxes 1,869 2,461 - -
24,550 25,524 312 207
Includedintradecreditorsareforeigncurrencycreditorsof$218,000(Au$7,000;uS$149,000),(2006:NZ$2,625,000;Au$2,181,000;
uS$133,000)whicharenothedged.ThetradecreditorsincludedinliabilitiesheldforsaleasperNote3areNZ$1,253,000(Au$1,121,000)
andarenothedged.
Note 18 - Provisions and deferred income
NZ$’000s
Balanceat1March2006 698 364 475 4,545 6,082
Provisionscreatedduringtheperiod 227 250 377 2,515 3,369
Provisionsusedduringtheperiod (509) (258) (361) (1,035) (2,163)
Provisionsreleasedduringtheperiod (41) (86) - - (127)
unwindofdiscount (26) (19) - - (45)
Provisionsreclassifiedasheldforsale - - (59) - (59)
Balance at 28 February 2007 349 251 432 6,025 7,057
2007
Non-current - - 432 4,757 5,189
Current 349 251 - 1,268 1,868
349 251 432 6,025 7,057
2006
Non-current - - 475 3,611 4,086
Current 698 364 - 934 1,996
698 364 475 4,545 6,082
TheprovisionforsurplusleasespacereflectsleasecommitmentsthattheGrouphasonpropertiesleasedthataresurplustoits
currentoperatingrequirements.TheGroupiscurrentlyseekingtenantstosub-leasetheexcessspacethatithas.Theprovisionhas
beenusedintheperiodtooffsetpaymentsmadetolessors.
Theprovisionforstoreclosurecostsreflectstheestimatedcostsofmakegoodanddisposaloffixedassetsforstorescommittedforclosure.
Theprovisionfordeferredincomerelatestonon-routinerevenuefromsuppliersandlandlordsandisrecognisedintheincome
statementonasystematicbasisoverthelifeoftheassociatedcontract.
Theprovisionforemployeeentitlementsislongserviceleave.Theprovisionisaffectedbyanumberofestimates,includingtheexpectedlengthof
serviceofemployeesandthetimingofbenefitsbeingtaken.
46 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 19 - Financial instrumentsExposuretocredit,interestrateandcurrencyrisksarisesinthenormalcourseoftheGroup’sbusiness.Derivativefinancial
instrumentsaresometimesusedtohedgeexposuretofluctuationsinforeignexchangeratesandinterestrates.
(A) FOREIGNCuRRENCyRISK
TheGroupisexposedtoforeigncurrencyriskonpurchasesthataredenominatedinacurrencyotherthantheNewZealanddollar.The
currenciesgivingrisetothisriskareprimarilyu.S.dollarsandAustraliandollars.
Thedirectexposuretoforeigncurrencyriskissmallandisprimarilyconfinedtorawmaterialpurchases,someitemsof
capitalequipmentandsomefranchisefeepayments.whereanyoneitemissignificant,thecompanywillspecificallyhedgeitsexposure.
TheGrouphasanindirectexposuretoforeigncurrencyriskonsomeofitslocallysourcedingredients,wherethoseingredientsin
turnhaveahighimportedcomponent.wherethisissignificanttheGroupcontractstoaknownpurchasepricewithitsdomestic
supplierbasedonaforwardcoverpositiontakenbythatsupplieronitsimportedcomponents.
TheGrouphasaresidualforeigncurrencyriskonitsassetsandliabilitiesthataredenominatedinAustraliandollarsaspartof
itsremainingAustralianinvestment.
(B) INTERESTRATERISK
TheGrouphedgesitsexposuretochangesininterestratesprimarilythroughtheuseofinterestrateswaps.Thereareno
minimumprescribedguidelinesastolevelofhedging.
TheGroupclassifiesinterestrateswapsascashflowhedgesandstatesthematfairvalue.Thefairvalueofswapsareadjusted
againsttheopeningbalanceofthehedgingreserveatthatdate.
Nointeresthedgeexistsat28February2007(2006:nil).
(C)REPRICINGANALySIS
InrespectoftheGroup’sincomeearningfinancialassetsandinterestbearingfinancialliabilities,thefollowingtableindicates
theireffectiveinterestrateatbalancedateandtheperiodsinwhichtheyreprice.
NZ$’000s
Group 2007Cash 6.75% 2,081 2,081 -
Bankoverdraft 9.15% (981) (981) -
Otherloans 11.0%* (190) (190) -
Banktermloans 7.58% (48,580) (48,580) -
Financeleases (1,196) (605) (591)
(48,866) (48,275) (591)
*Otherloansareafixedinterestrate
Group 2006Cash 1.00% 2,537 2,537 -
Bankoverdraft 9.15% (504) (504) -
Banktermloans 7.55% (32,365) (32,365) -
Financeleases (1,409) (674) (735)
(31,741) (31,006) (735)
Effective Total 12 months 12 months interest rate or less or more
PAGE NUMBER 47RESTAURANT BRANDS
2007 ANNUAL REPORT
48 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 19 - Financial instruments (continued)Thebanktermloansareatfloatinginterestratesandtheotherloanisatafixedinterestandisrepayablewithinayear.Thebank
termloansarenotdueforpaymentwithin12months,howevertheyarestructuredasarevolvingwholesaleadvancefacilitywith
portionsofthefacilityrenewingonaregularbasis.Thisleadstotheloansbeingsensitivetointerestratemovementin12monthsorless.
Thecompanypositionforboth2007and2006reflectstheGrouppositioninthecaseofthebanktermloansandtheoverdraft.
(D) CREDITFACILITIES
TheGrouphasbankfundingfacilities,excludingoverdraftfacilities,of$70million(2006:$50million)availableatvariablerates.The
amountundrawnatbalancedatewas$21.4million(2006:$17.6million).
(E) CREDITRISK
Nocollateralisrequiredinrespectoffinancialassets.Managementhasacreditpolicyinplaceandtheexposuretocreditriskis
monitoredonanongoingbasis.Thenatureofthebusinessresultsinmostsalesbeingconductedonacashbasisthatsignificantly
reducestheriskthattheGroupisexposedto.Reputablefinancialinstitutionsareusedforinvestingandcashhandlingpurposes.
Atbalancedatetherewerenosignificantconcentrationsofcreditriskandthemaximumexposuretocreditriskisrepresentedby
thecarryingvalueofeachfinancialassetinthestatementoffinancialposition.Thereisnoexposuretocreditriskarisingfrom
derivativefinancialinstrumentsasthenetdifferentialpaidorreceivedonforwardexchangecontractsisrecognisedasacomponentof
interestexpenseovertheperiodoftheagreement.
(F) FAIRVALuES
Thecarryingvaluesofbankloansandfinanceleasesarethefairvalueoftheseliabilities.AGroupset-offarrangementisin
placebetweencertainbankaccountsoperatedbytheGroup.
Sensitivity analysis InmanaginginterestrateandcurrencyriskstheGroupaimstoreducetheimpactofshort-termfluctuationsontheGroup’searnings.
Overthelongerterm,however,permanentchangesinforeignexchangeandinterestratesonaweightedaveragebalancewillhavean
impactonprofit.
At28February2007itisestimatedthatageneralincreaseofonepercentagepointininterestrateswoulddecreasetheGroup’s
profitbeforeincometaxbyapproximately$0.4million(2006:$0.3million).
AgeneralincreaseofonepercentagepointinthevalueoftheNewZealanddollaragainstotherforeigncurrencieswouldhave
minimalimpactonthecostoftheGroup’sdirectlyimportedingredientsdenominatedinforeigncurrencies.
Note 20 - Commitments(A) CAPITALCOMMITMENTS
TheGrouphascapitalcommitmentswhicharenotprovidedforinthesefinancialstatements,asfollows:
Group Group
NZ$’000s 2007 2006
StoreDevelopment 650 1,520
KFCFranchisefeerenewal 2,588 -
(B) OPERATINGLEASECOMMITMENTS
Non-cancellableoperatingleaserentalsarepayableasfollows:
Group Group
NZ$’000s 2007 2006
Notlaterthanoneyear 17,684 19,363
Laterthanoneyearbutnotlaterthantwoyears 15,831 17,237
Laterthantwoyearsbutnotlaterthanfiveyears 33,578 36,124
Laterthanfiveyears 19,152 22,682
86,245 95,406
Note 20 - Commitments (continued)(C)RENEwALRIGHTSOFOPERATINGLEASES
TheGrouphasenteredintoanumberofoperatingleaseagreementsforretailpremises.Theleaseperiodsvaryandmanyhavean
optiontorenew.Leasepaymentsareincreasedaspertheleasecontractstoreflectmarketrentals.Thetablebelowsummarisesthe
Group’sleaseportfolio.
Numberofleaseswith: Rights of renewal No rights of renewal
NZ$’000s 2007 2006 2007 2006
Leases expiring in:
Notlaterthanoneyear 34 31 10 13
Laterthanoneyearbutnotlaterthantwoyears 23 30 5 11
Laterthantwoyearsbutnotlaterthanfiveyears 63 74 36 46
Laterthanfiveyears 76 90 26 14
(D) FINANCELEASECOMMITMENTS
ThecarryingamountoffinanceleasesfortheGroupasat28February2007is$1.0million,(2006:$1.3million).
Non-cancellablefinanceleaserentalsarepayableasfollows:
Group Group
NZ$’000s 2007 2006
Notlaterthanoneyear 659 733
Laterthanoneyearbutnotlaterthantwoyears 556 550
Laterthantwoyearsbutnotlaterthanfiveyears 226 406
1,441 1,689
Futureleasefinancecharges (245) (280)
Netfinanceleaseliability 1,196 1,409
Current 605 674
Non-current 591 735
Note 21 - Net cash flow from operating activitiesThefollowingisareconciliationbetweenthesurplusaftertaxationfortheyearshownintheincomestatementandthe
netcashflowfromoperatingactivities.
Group Group Company Company
NZ$’000s 2007 2006 2007 2006
(Loss)/profit after taxation (3,554) 5,197 5,291 7,996
Add items classified as investing/financing activities:
Lossondisposaloffixedassets 1,408 516 - -
Othernon-operatingcostsofexitingPizzaHutVictoria 1,851 - - -
3,259 516 - -
Add/(less) non-cash items:
Depreciation 11,062 10,998 - -
Increase/(decrease)inprovisionforexitcosts 1,362 - - -
(Decrease)/increaseinprovisions (432) 517 - -
Amortisationofintangibleassets 575 561 - -
ImpairmentonPizzaHutVictoriagoodwill - 3,023 - -
ImpairmentofPizzaHutVictoriaintangiblesandproperty,plantandequipment 6,564 4,092 - -
PAGE NUMBER 49RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 21 - Net cash flow from operating activities (continued)
Group Group Company Company
NZ$’000s 2007 2006 2007 2006
ImpairmentofNZproperty,plantandequipment 1,342 1,640 - -
ImpairmentofPizzaHutNewZealandgoodwill 1,142 - - -
(Decrease)indeferredtaxliability (718) (1,294) - -
Sharebasedpayments 15 24 - -
20,912 19,561 - -
Add/(less) movement in working capital:
Decrease(increase)ininventories 127 (192) - -
Decreaseintradedebtorsandotherreceivables 435 538 589 733
Increase/(decrease)intradecreditorsandotherpayables (323) 2,484 107 122
(Increase)/decreaseinincometaxreceivable (8) 140 - -
231 2,970 696 855
Net cash from operating activities 20,848 28,244 5,987 8,851
Note 22 - Contingent liabilitiesTherearenocontingentliabilitiesthatthedirectorsconsiderwillhaveasignificantimpactonthefinancialpositionoftheCompanyandGroup.
Note 23 - Related party disclosuresPARENTANDuLTIMATECONTROLLINGPARTy
TheimmediateparentoftheGroupisRestaurantBrandsNewZealandLimited.
IDENTITyOFRELATEDPARTIESwITHwHOMMATERIALTRANSACTIONSHAVEOCCuRRED
Note8identifiesallentitieswithintheGroup.AlloftheseentitiesarerelatedpartiesoftheCompany.
Inaddition,thedirectorsandkeymanagementpersonneloftheGrouparealsorelatedparties.
TRANSACTIONSwITHRELATEDPARTIES
Keymanagementpersonnelcompensationcomprisedshort-termbenefitsfortheyearended28February2007of$2.3million(2006:$2.1
million).Directors’feeswere$0.2million(2006:$0.3million).
DuringtheyeartheGrouppurchasedproperty,plantandequipmentof$0.1million(2006:$0.3million)fromPremierStainlessPty
Limited,acompanyofwhichRestaurantBrandsdirectorDannyDiabisadirectorandashareholder.Therewasnilowingasat
28February2007(2006:nil).
MaterialtransactionswithintheGroupareloansandadvancestoandfromGroupcompaniesanddividendpayments.Allintercompanygroup
loansintheparentcompanyarenoninterestbearing,repayableondemandanddisclosedasacurrentliability.
wheretheCompanyentersintofinancialguaranteecontractstoguaranteetheperformanceorindebtednessofothercompanieswithinthe
Group,theCompanyconsidersthesetobeinsurancearrangementsandaccountsforthemassuch.Inthisrespect,theCompanytreatsthe
guaranteecontractsasacontingentliabilityuntilsuchtimeasitbecomesprobablethattheCompanywillberequiredtomakea
paymentundertheguarantee.
Note 24 – Senior Executive Share Option PlanOncompletionofthelistingoftheCompanyin1997,seniorexecutivesweregranted852,271non-transferableoptionstosubscribefor
sharesintheCompany.Nooptionshavebeenexercisedorlapsedsincegranted,and653,408havebeenforfeitedonterminationof
individual’semployment.Noamountwaspayableonthegrantoftheoptions,andtheoptionexercisepriceofeachoptionwasthe
finalpriceoftheinitialpublicoffer(220centspershare)plus10%(aresultingpriceof242centspershare).
50 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 24 – Senior Executive Share Option Plan (continued)Eachoptionprovidestheexecutivewiththeentitlementtosubscribeforoneshare(adjustedforbonusshareissues).Subjectto
insidertradinglegislationandotherapplicablelaws,theoptionsareexercisableaslongastherelevantexecutiveremainsanemployeeof
theCompany,althoughinexceptionalcircumstancestheBoardhasdiscretiontoallowoptionstobeexercisedsubjecttoconditions,ifthe
executiveisnolongeranemployee.IfitappearsthatcontroloftheCompanywillchange,theBoardisabletoallowoptionstobe
exercised,againsubjecttoconditionstheymayimpose.
NonewoptionswereissuedunderthePlanduringtheyear.Seniorexecutivesexercisednooptionsduringtheyear.
Thesharesissuedunderthisschemewillrankequallywithothershares.
Note 25- Employee Share Growth Share Option PlanTheCompanyhadestablishedanemployeeshareoptionplan(‘thePlan’)forcertainemployees,underwhichitissuedoptionsatno
costforsharesintheCompanytotheemployees.Theholderofanoptionisentitledtosubscribeforonefullypaidshareforeachoptionheld
(adjustedforbonusshareissues),atanexercisepricethatisdeterminedbyreferencetothemarketpriceatthetimeofissueoftheoptions.
Ontheanniversarydateofissueineachsubsequentyear,20%oftheoptionsissuedbecomeexercisable.Optionsonlyremainexercisable
(subjecttocertainconditionsandlegislativeprovisions)whilstholdersremainemployedbytheCompany.Theoptionsterminate10years
fromthedatetheyareissuedandareequitysettled.PrincipalOfficersandemployeesoftheCompanythatparticipatedinthePlan
receivedanannualissueofoptionsinrespectofthenumberofsharesequaltoapproximately10%oftheireligibleearningsdividedby
theexercisepricepershare.
OptionsissuedandoutstandingunderthePlan
Date of issue Exercise Issued Exercised Exercised Forfeited Outstanding Price to 28 in year Options Options at 28 February 2006 February 2007
5-Jun-97 $2.20 546,213 - - (381,676) 164,537
31-Aug-98 $0.94 1,318,062 (474,625) (19,603) (646,472) 177,362
15-Sep-99 $1.32 1,078,467 (203,228) - (610,363) 264,876
11-Sep-00 $1.05 1,494,368 (407,333) (25,950) (748,153) 312,932
12-Sep-01 $1.50 1,010,122 (76,018) - (568,618) 365,486
13-Sep-02 $1.85 905,128 - - (541,209) 363,919
23-Sep-03 $1.39 1,228,423 (34,486) - (598,035) 595,902
Total 7,580,783 (1,195,690) (45,553) (4,094,526) 2,245,014
InApril2003theEmployeeSharegrowthplanwasterminatedandthefinalallocationofoptionswastheSeptember
2003allocation.Allexistingrightswithrespecttooptionswhichhavealreadybeengrantedwillbemaintained.
Percentageoftotalsharesonissue2.3%(2006:2.6%).
InMarch2000therewasa1:12taxablebonusshareissue.Thereforeoptionsissuedpriortoandexercisedafterthisdatewillhavea
correspondingadjustmenttothenumberofsharesissued.
Note 26 - Explanations of transition to New Zealand equivalents to International Financial Reporting Standards (NZ IFRS)ThesearetheGroup’sfirstconsolidatedfinancialstatementspreparedinaccordancewithNZIFRS.
Theaccountingpoliciessetoutinthefrontofthefinancialstatementshavebeenappliedinpreparingthefinancialstatementsfor
theyearended28February2007,thecomparativeinformationpresentedinthesefinancialstatementsfortheyearended
28February2006andinthepreparationofanopeningNZIFRSbalancesheetat1March2005(theGroup’sdateoftransition).
Theimpactofadjustmentsonthefinancialstatementsissetoutasfollows:
RE-MEASuREMENTOFBuSINESSCOMBINATIONS
TheGrouphaselectednottoapplyNZIFRStobusinesscombinationsthathaveoccurredpriortotheadoptionofNZIFRS.
PAGE NUMBER 51RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 26 - Explanations of transition to New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) (continued)
INTANGIBLEASSETS
underNZIFRSinternallygeneratedelementsofintangibleassetscannotberecognised.Thishasresultedin$0.08million
intangibleassetspreviouslyrecognisedunderNZGAAPbeingwrittenofftoretainedearningsintheyearended28February2005.
NZIFRSdoesnotpermitgoodwilltobeamortised,butsubjectsittoanannualimpairmenttest.Thishasincreasedearningsby
$2.1millionintheyearended28February2006inrelationtotheNewZealandbusiness.ThegoodwilloftheAustralianbusiness
hadbeenfullyimpairedintheyearended28February2006.
TAXATION
NZIFRSrequirestheuseofthe“balancesheet”approachratherthanthe“profitandlossaccount”approachrequiredunder
NZGAAPincalculatingdeferredtaxation.Adjustmentstodeferredtaxationof$1.5millionfortheyearended28February
2005resultingfromchangeinearningsissetoutintheattachedtables.
FINANCIALINSTRuMENTS
AccountingforfinancialinstrumentsunderNZIFRSinvolvessomemajorchangesfromNZGAAP.IFRSisveryprescriptiveon
whenafinancialderivativecanbeconsideredaneffectivehedgeofanunderlyingpositionorfuturecashflow.Allderivative
contractswillbecarriedatfairvalueontheGroup’sbalancesheet.Ifaderivativefinancialtransactiondoesnotqualifyfor
hedgeaccounting,themark-to-marketfairvaluemovementwillbetakentoearnings.Ifaderivativefinancialtransactiondoes
qualifyforcashflowhedgeaccounting,themark-to-marketfairvaluemovementwillbetakentoareservewithinequity.Allofthe
financialderivativeinstrumentsenteredintoaretohedgetheGroup’sfuturecashflowsandarenotspeculativeinnature;themajority
ofinstrumentswillqualifyforhedgeaccounting.uponfirsttimeadoptionofNZIFRS,amark-to-marketfairvaluegainof$0.06
millionwasrecognisedat1March2005.Thiswasrecognisedintheparentcompany.
LONGSERVICELEAVE
Longserviceleaveiscurrentlyrecognisedwhenitvests,whereasunderNZIFRSthisisrecognisedonanactuarialbasisfromthe
dateanemployeeisfirstemployed.Theimpactonfirstadoptionwas$0.4millionagainstretainedearningsasat1March2005.
FOREIGNCuRRENCyTRANSLATIONRESERVE
Thebalanceoftheforeigncurrencytranslationreserveof$1.7millionat28February2005hasbeentransferredtoretained
earningsfromtheforeigncurrencytranslationreserveonfirsttimeadoptionofIFRS.Therehasbeennoimpactonearningsor
equityfromthischange.
REVENuERECOGNITION
ThetimingofrevenueforcertaintransactionsistreateddifferentlyunderNZIFRS.Theimpactofthisistoreversetothebalance
sheetadeferredportionofrevenuepreviouslyrecognisedunderNZGAAP.Theimpactonfirstadoptionwas$4.1millionagainst
retainedearnings.
SHARE-BASEDPAyMENTS
TheemployeesharegrowthshareoptionplanallowedcertaincompanyemployeestoacquiresharesoftheCompany.under
NZIFRSthefairvalueofoptionsgrantedisrecognisedasanemployeeexpensewithacorrespondingincreaseinequity.Onlythe
23September2003issueofoptionswasaffected.Thefairvalueismeasuredatgrantdateandspreadovertheperiodduringwhich
theemployeesbecomeunconditionallyentitledtotheoptions.Thefairvalueoftheoptionsgrantedismeasuredusinganoptions
pricingmodel,takingintoaccountthetermsandconditionsuponwhichtheoptionsweregranted.Theamountrecognisedasan
expenseisadjustedtoreflecttheactualnumberofshareoptionsthatvestexceptwhereforfeitureisonlyduetosharepricesnot
achievingthethresholdforvesting.Thishasresultedin$0.04millionbeingtransferredtoshareoptionreserveat1March2005in
theparentcompany.
52 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Income Statement for the year ended 28 February 2006 Reported Adjustments Reported using to comply using NZ GAAP* with IFRS IFRS
NZ$’000s
Totalstoresalesrevenue 316,352 316,352
Otherrevenue 1,413 (1,024) 389
Total operating revenue 317,765 (1,024) 316,741
Costofgoodssold (250,794) 483 (250,311)
Gross profit 66,971 (541) 66,430
Distributionexpenses (9,211) (9,211)
Marketingexpenses (22,716) (22,716)
Generalandadministrationexpenses (13,920) 8 (13,912)
Othernon-trading (2,225) 123 (2,102)
Amortisationofgoodwill (2,733) 2,733 -
ImpairmentofPizzaHutVictoria (6,985) (130) (7,115)
EBIT 9,181 2,193 11,374
Interestrevenue 13 13
Interestexpense (2,490) (2,490)
Netforeignexchangegain 167 167
Netfinancingexpenses (2,310) (2,310)
Profit before taxation 6,871 2,193 9,064
Taxationexpense (3,492) (375) (3,867)
Profit after taxation 3,379 1,818 5,197
Earnings per share from total operations 3.48 5.36
*Thestatementoffinancialperformancehasbeenreclassifiedinordertocomplywiththefunctionaldisclosuresrequired
underNZIFRS.PizzaHutVictoriahasbeenreclassifiedasadiscontinuedoperationinthefinancialstatementsto
28February2007.
Thecashflowstatementfortheyearended28February2006hasnotbeenadjustedfortheadoptionofNZIFRS.However,
anumberofcashflowitemshavebeenreclassifiedinordertoalignthepresentationofthefinancialstatementswiththecurrentformat.
PAGE NUMBER 53RESTAURANT BRANDS
2007 ANNUAL REPORT
Asat28February2005
Reported Using Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Reported
NZ GAAP* Intangibles Revenue Financial Instruments First Time adoption Share-based Employee Benefits Deferred Tax Using
February 2005 Start Up Costs FCTR payments NZ IFRS
Share Options February 2005
NZ$’000s Note
Current assets
Inventories 10 2,061 2,061
Financialassets - 57 57
Accountsreceivable 11 1,889 1,889
Incometaxreceivable 105 105
Cash 1,642 1,642
5,697 5,754
Assets
Fixedassets 6 68,926 68,926
Investmentsinsubsidiaries 8 - -
Deferredtaxasset - 86 86
Intangibleassets 7 30,713 (78) 30,635
99,639 99,647
-
Total assets 105,336 105,401
Current Liabilities
Bankoverdraft - -
Creditors&accruals (25,395) (632) (26,027)
Amountspayabletosubsidiaries - -
16–18 (25,395) (26,027)
Non-Current Liabilities
Deferredtaxliability 9 (1,424) 1,424 -
Provisions/accruals - (3,447) (439) (3,886)
BankloansandLeases 16 (27,446) (27,446)
(28,870) (31,332)
Total Liabilities (54,265) (57,359)
Net Assets 51,071 (78) (4,079) 57 - - (439) 1,510 48,042
Equity 14
Sharecapital (25,297) (25,297)
ShareOptionreserve - (46) (46)
FCTR 1,684 (1,684) -
Hedgingreserve - (57) (57)
Otherreserves (27,458) 78 4,079 1,684 46 439 (1,510) (22,642)
(51,071) 78 4,079 (57) - - 439 (1,510) (48,042)
*The balance sheet has been reclassified in order to comply with the disclosures required under NZ IFRS.
54 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Asat28February2005
Reported Using Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Reported
NZ GAAP* Intangibles Revenue Financial Instruments First Time adoption Share-based Employee Benefits Deferred Tax Using
February 2005 Start Up Costs FCTR payments NZ IFRS
Share Options February 2005
NZ$’000s Note
Current assets
Inventories 10 2,061 2,061
Financialassets - 57 57
Accountsreceivable 11 1,889 1,889
Incometaxreceivable 105 105
Cash 1,642 1,642
5,697 5,754
Assets
Fixedassets 6 68,926 68,926
Investmentsinsubsidiaries 8 - -
Deferredtaxasset - 86 86
Intangibleassets 7 30,713 (78) 30,635
99,639 99,647
-
Total assets 105,336 105,401
Current Liabilities
Bankoverdraft - -
Creditors&accruals (25,395) (632) (26,027)
Amountspayabletosubsidiaries - -
16–18 (25,395) (26,027)
Non-Current Liabilities
Deferredtaxliability 9 (1,424) 1,424 -
Provisions/accruals - (3,447) (439) (3,886)
BankloansandLeases 16 (27,446) (27,446)
(28,870) (31,332)
Total Liabilities (54,265) (57,359)
Net Assets 51,071 (78) (4,079) 57 - - (439) 1,510 48,042
Equity 14
Sharecapital (25,297) (25,297)
ShareOptionreserve - (46) (46)
FCTR 1,684 (1,684) -
Hedgingreserve - (57) (57)
Otherreserves (27,458) 78 4,079 1,684 46 439 (1,510) (22,642)
(51,071) 78 4,079 (57) - - 439 (1,510) (48,042)
*The balance sheet has been reclassified in order to comply with the disclosures required under NZ IFRS.
PAGE NUMBER 55RESTAURANT BRANDS
2007 ANNUAL REPORT
Asat28February2006
Reported Using Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Reported
NZ GAAP* for changes to IFRS Intangibles Intangibles Revenue Financial Instruments Share-based Employee Benefits Deferred Income Deferred Tax Using
February 2006 February 2005 Start Up Costs Amortisation payments NZ IFRS
Share Options February 2006
NZ$’000s Note
Current Assets
Inventories 10 2,253 2,253
Financialassets - 57 (49) 8
Accountsreceivable 11 1,645 1,645
Incometaxreceivable 698 698
Cash 2,033 2,033
6,629 6,637
Non-Current Assets
Fixedassets 6 73,269 600 73,869
Investmentsinsubsidiaries 8 - -
Intangibleassets 25,365 (78) 38 2,079 27,404
Deferredtaxasset 245 86 1,049 1,380
98,879 102,653
-
Total Assets 105,508 109,290
Current Liabilities
Bankoverdraft - -
Creditors&accruals (27,260) (632) (222) (80) (28,194)
AmountsPayabletosubsidiaries - -
16–18 (27,260) (28,194)
Non-Current Liabilities
Deferredtaxliability 9 - 1,424 (1,424) -
Provisions/accruals - (3,886) 356 (36) (520) (4,086)
BankloansandLeases 16 (33,100) (33,100)
(33,100) (37,186)
Total Liabilities (60,360) (65,380)
Net Assets 45,148 (3,029) 38 2,079 134 (49) - (36) - (375) 43,910
Equity 14
Sharecapital (25,576) (25,576)
ShareOptionreserve - (46) (24) (70)
FCTR 1,571 (1,684) 2 (111)
Hedgingreserve - (57) 49 (8)
Otherreserves (21,143) 4,816 (38) (2,079) (134) 24 34 375 (18,145)
(45,148) 3,029 (38) (2,079) (134) 49 - 36 - 375 (43,910)
*ThebalancesheethasbeenreclassifiedinordertocomplywiththedisclosuresrequiredunderNZIFRS.
56 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Asat28February2006
Reported Using Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Adjustment Reported
NZ GAAP* for changes to IFRS Intangibles Intangibles Revenue Financial Instruments Share-based Employee Benefits Deferred Income Deferred Tax Using
February 2006 February 2005 Start Up Costs Amortisation payments NZ IFRS
Share Options February 2006
NZ$’000s Note
Current Assets
Inventories 10 2,253 2,253
Financialassets - 57 (49) 8
Accountsreceivable 11 1,645 1,645
Incometaxreceivable 698 698
Cash 2,033 2,033
6,629 6,637
Non-Current Assets
Fixedassets 6 73,269 600 73,869
Investmentsinsubsidiaries 8 - -
Intangibleassets 25,365 (78) 38 2,079 27,404
Deferredtaxasset 245 86 1,049 1,380
98,879 102,653
-
Total Assets 105,508 109,290
Current Liabilities
Bankoverdraft - -
Creditors&accruals (27,260) (632) (222) (80) (28,194)
AmountsPayabletosubsidiaries - -
16–18 (27,260) (28,194)
Non-Current Liabilities
Deferredtaxliability 9 - 1,424 (1,424) -
Provisions/accruals - (3,886) 356 (36) (520) (4,086)
BankloansandLeases 16 (33,100) (33,100)
(33,100) (37,186)
Total Liabilities (60,360) (65,380)
Net Assets 45,148 (3,029) 38 2,079 134 (49) - (36) - (375) 43,910
Equity 14
Sharecapital (25,576) (25,576)
ShareOptionreserve - (46) (24) (70)
FCTR 1,571 (1,684) 2 (111)
Hedgingreserve - (57) 49 (8)
Otherreserves (21,143) 4,816 (38) (2,079) (134) 24 34 375 (18,145)
(45,148) 3,029 (38) (2,079) (134) 49 - 36 - 375 (43,910)
*ThebalancesheethasbeenreclassifiedinordertocomplywiththedisclosuresrequiredunderNZIFRS.
PAGE NUMBER 57RESTAURANT BRANDS
2007 ANNUAL REPORT
Note 27 - Subsequent eventSubsequenttobalancedate,thedirectorshavedeclared3.0centspersharefinaldividendfortheyearended28February2007.
Fortheyearended28February2007
To the shareholders of Restaurant Brands New Zealand Limited wehaveauditedthefinancialstatementsonpages22to57.Thefinancialstatementsprovideinformationaboutthepast
financialperformanceandfinancialpositionofthecompanyandgroupasat28February2007.Thisinformationisstatedin
accordancewiththeaccountingpoliciessetoutonpages25to33.
Directors’ responsibilities TheDirectorsareresponsibleforthepreparationoffinancialstatementswhichgiveatrueandfairviewofthefinancial
positionofthecompanyandgroupasat28February2007andtheresultsoftheiroperationsandcashflowsfortheyearended
onthatdate.
Auditors’ responsibilities ItisourresponsibilitytoexpressanindependentopiniononthefinancialstatementspresentedbytheDirectorsandreportour
opiniontoyou.
Basis of opinion Anauditincludesexamining,onatestbasis,evidencerelevanttotheamountsanddisclosuresinthefinancialstatements.
Italsoincludesassessing:
• ThesignificantestimatesandjudgmentsmadebytheDirectorsinthepreparationofthefinancialstatements;
• whethertheaccountingpoliciesareappropriatetothecompany’sandgroup’scircumstances,consistentlyappliedand
adequatelydisclosed.
weconductedourauditinaccordancewithNewZealandAuditingStandards.weplannedandperformedourauditsoasto
obtainalltheinformationandexplanationswhichweconsiderednecessaryinordertoprovideuswithsufficientevidenceto
obtainreasonableassurancethatthefinancialstatementsarefreefrommaterialmisstatements,whethercausedbyfraudorerror.
Informingouropinionwealsoevaluatedtheoveralladequacyofthepresentationofinformationinthefinancialstatements.
Ourfirmhasalsoprovidedotherservicestothecompanyandcertainofitssubsidiariesinrelationtotaxationandgeneral
accountingservices.Partnersandemployeesofourfirmmayalsodealwiththecompanyandgrouponnormaltermswithin
theordinarycourseoftradingactivitiesofthebusinessofthecompanyandgroup.Thesemattershavenotimpairedour
independenceasauditorsofthecompanyandgroup.Thefirmhasnootherrelationshipwith,orinterestin,thecompanyorany
ofitssubsidiaries.
Unqualified opinionwehaveobtainedalltheinformationandexplanationswehaverequired.
• properaccountingrecordshavebeenkeptbythecompanyasfarasappearsfromourexaminationofthoserecords;
• thefinancialstatementsonpages22to57:
– complywithNewZealandgenerallyacceptedaccountingpractice;
– giveatrueandfairviewofthefinancialpositionofthecompanyandgroupasat28February2007andtheresultsof
theiroperationsandcashflowsfortheyearendedonthatdate.
Ourauditwascompletedon26April2007andourunqualifiedopinionisexpressedasatthatdate.
Auckland
58 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
PAGE NUMBER 59RESTAURANT BRANDS
2007 ANNUAL REPORT
1. Stock exchange listingTheCompany’sordinarysharesarelistedontheNewZealandStockExchange.
2. Distribution of security holders and security holdings
Size of holding Number of security holders Number of securities
1to999 1,220 18.29% 663,329 0.68%
1,000to4,999 3,525 52.86% 6,671,986 6.87%
5,000to9,999 885 13.27% 5,743,319 5.91%
10,000to49,999 906 13.59% 16,368,600 16.85%
50,000to99,999 73 1.10% 4,395,483 4.53%
100,000to499,999 51 0.76% 8,479,399 8.73%
500,000+ 9 0.13% 54,806,840 56.43%
6,669 100.00% 97,128,956 100.00%
Geographic distribution
NewZealand 6,454 96.75% 91,175,460 93.87%
Australia 119 1.82% 5,214,328 5.37%
Restofworld 96 1.43% 739,168 0.76%
6,669 100.00% 97,128,956 100.00%
3. 20 Largest registered holders of quoted equity securities
NewZealandCentralSecuritiesDepositoryLimited 36,560,630 37.64
AMPCustodialInvestmentsNo1Limited 9,296,896 9.57
DiabInvestmentNZLimited 3,444,300 3.55
ASBNomineesLimited 1,500,000 1.54
AssetCustodianNomineesLimited 1,228,868 1.26
LeveragedEquitiesFinanceLimited 972,056 1.00
MoonChulChoi&KeumSookChoi 655,000 0.67
FNZCustodiansLimited 636,090 0.65
ForsythBarrCustodiansLimited 513,000 0.53
JASeoKoo&youngRanKoo 401,000 0.41
ClimeAssetManagementLimited 350,000 0.36
ASBNomineesLimited 300,000 0.31
HochlunchPtyLimited 300,000 0.31
RocatiPtyLimited 300,000 0.31
KevinKoo 275,000 0.28
MarkAlbertHorsfall 257,146 0.26
JohnNelsonMatthews&CarolBarbaraMatthews&GrahamClydeChapman 250,000 0.26
CustodialServicesLimited 244,397 0.25
JAHongKoo&PyungKeumKoo 219,000 0.23
TimothyJamesSchwaiger 200,000 0.21
57,903,383 59.61
Asat1April2007
NZCSD(NewZealandCentralSecuritiesDepositoryLimited)isadepositorysystemwhichallowselectronictradingofsecuritiestoits
members.Asat1April2007,theNZCSDholdingsinRestaurantBrandswere: Numbers of Percentage Ordinary of Ordinary Shares Shares
TrackerNominees-AMPInvestments 56,000 0.06
ANZNomineesLimited 5,452,630 5.61
AMPSuperannuationTrackerFund 179,200 0.18
CitibankNominees(NewZealand)Limited 3,127,519 3.22
HSBCNominees(NZ)Limited 21,426,471 22.06
NationalNomineesNewZealandLimited 3,008,399 3.10
NZGuardianTrustInvestmentNomineesLimited 2,000 0.00
GuardianTrustInvestmentNominees(RwT)Limited 32,850 0.03
PublicTrustO/APermanentNomineesLimitedTowerNZEquityTrust 36,600 0.04
NZSuperannuationFundNomineesLimited 163,992 0.17
TeaCustodiansLimited 570,000 0.59
CustodyAndInvestmentNomineesLimited 2,488,717 2.56
westpacNominees(NZ)Limited 16,250 0.02
westpacBankingCorporation-ClientAssetsNo2 2 0.00
36,560,630 37.64
4. Substantial Security HoldersThefollowingpersonshavegivensubstantialsecurityholdernoticesaccordingtothefilemaintainedbytheCompanyundersection25
oftheSecuritiesMarketsAct1988. Voting securities Number %
AMPHendersonGlobalInvestors(NewZealand)Limited 9,296,896 9.57
TowerAssetManagementLimited 4,890,293 5.03
5. Shares on issueAsat1April2007,thetotalnumberofordinarysharesonissuewas97,128,956.
6. Directors’ Security Holdings Equity securities held 2007 2006
EKvanArkel 50,000 50,000
VJSalmon* 86,000 86,000
DDiab 3,444,300 3,444,300
*VJSalmonresignedasChiefExecutiveOfficeranddirectoron14March2007.
7. Stock Exchange WaiverNowaiversweresoughtfromNZXduringtheyear.
Asat1April2007
60 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
1. DirectorshipsTAHallresignedasadirectorofRestaurantBrandsNewZealandLimitedon22March2006.SHSucklingwasappointedasa
directoron9June2006.wJFalconerresignedasChairmanandadirectorofRestaurantBrandsNewZealandLimitedon21July
2006.EKvanArkelwasappointedasChairmanoftheBoardon21July2006.JABallresignedasadirectorofRestaurantBrands
AustraliaPtyLimitedon29December2006.CJStewartwasappointedasadirectorofRestaurantBrandsAustraliaPtyLimitedon
29December2006.
ThenamesofthedirectorsoftheCompanyasat28February2007aresetoutintheCorporateDirectory,ontheinsideoftheback
coverofthisannualreport.
Thefollowingaredirectorsofallsubsidiarycompaniesofthegroup:EKvanArkel,VJSalmon*andDAPilkington.
ThefollowingaredirectorsofRestaurantBrandsAustraliaPtyLimited:EKvanArkel,VJSalmon*,DAPilkington,
CJStewartandGREllis.
*VJSalmonresignedasChiefExecutiveOfficeranddirectoron14March2007.
2. Directors and remunerationThefollowingpersonsheldofficeasdirectorsduringtheyearto28February2007andreceivedthefollowingremunerationandother
benefits:
In NZ dollars Directors Other Fees Remuneration
EKvanArkel 52,273 -
VJSalmon - 450,000
SRBeck 40,000 -
DDiab 40,000 -
DAPilkington 40,000 -
SHSuckling 29,091 -
TAHall 1,538 -
wJFalconer 23,182 -
226,084 450,000
3. Entries recorded in the interests registerThefollowingentrieswererecordedintheinterestregisteroftheCompanyanditssubsidiariesduringtheyear:
a) Share Dealings of Directors
Therewerenosharedealingsbydirectorsduringthefinancialyearended28February2007.
b) Loans to Directors
Therewerenoloanstodirectorsduringthefinancialyearended28February2007.
c) General Disclosure of Interest
InaccordancewithSection140(2)oftheCompaniesAct1993,directorsoftheCompanyhavemadegeneraldisclosuresofinterestin
writingtotheboardofpositionsheldinothernamedcompaniesorpartiesasfollows:
Name Position Party
EKvanArkel Chairman Charlie’sGroupLimited(andsubsidiaries)
Chairman unitecNewZealandLimited(andsubsidiaries)
Director LangPropertiesLimited
Director VanArkel&CoLimited
Director LaGrouwCorporationLimited
Director AlliedworkForceGroupLimited
Fortheyearended28February2007
PAGE NUMBER 61RESTAURANT BRANDS
2007 ANNUAL REPORT
Name Position Party
EKvanArkel(continued) Director DanskeMoblerLimited
Director TheNationalPropertyTrustLimited(andsubsidiaries)
Director PaperPlusNewZealandLimited
Director SuperpointsNewZealandLimited(andsubsidiaries)
Director AucklandRegionalChamberofCommerceandIndustry
Director AucklandRegionalTransportAuthority(ARTA)
SHSuckling Chairperson NewZealandQualificationsAuthority
Chairperson BarkerFruitProcessorsLimited
Chairperson HSRGovernanceLimited
Chairperson NationalInstituteofwaterandAtmosphericResearch
Director TyTMDevelopmentLimited
Director AcemarkHoldingsLimited
Member TakeoversPanel
SRBeck Director wellingtonDriveTechnologiesLimited(andsubsidiaries)
Director PencarrowPrivateEquityLimited(andsubsidiaries)
Director EasternEquitiesCorporationLimited(andsubsidiaries)
Director TourismEnterprisesLimited
Director PacificHorizonLimited(andsubsidiaries)
Director KiwiKatLimited
Director HomeIdeasGroupLimited(andsubsidiaries)
Director TaborLimited(inliquidation)
DAPilkington Chairman RuapehuAlpineLiftsLimited
Chairman PrevarLimited
Chairman OldFashionedFoodsLimited
Director BallanceAgriNutrientsLimited(andsubsidiaries)
Director ZespriGroupLimited(andsubsidiaries)
Director DouglasPharmaceuticalsLimited
Director NZBiotechnologiesLimited
Director PortsofTaurangaLimited
Director RangatiraLimited
Director ExcelsaAssociatesLimited
Member wellingtonCityCouncilAuditandRiskManagement
Sub-Committee
Trustee NewZealandCommunityTrust
DDiab Director DiabInvestmentsNZLimited
Director DiabPtyLimited
Director DiabInvestmentsPtyLimited
Director MainplayInvestmentsPtyLimited
Director DiabInvestmentsIIPtyLimited
Director PizzaHutAdcoPtyLimited
Director MirrapolHoldingPtyLimited
President NationalPizzaAssociation
62 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Fortheyearended28February2007
PAGE NUMBER 63RESTAURANT BRANDS
2007 ANNUAL REPORT
d) Specific Disclosures
DAPilkingtonhasdisclosedthathehasacircuitousfamilylinktoRedRoosterChickenthroughhiswife’sfamilybutthathehasno
involvementofanysortwiththeRedRoosterbusiness.
e) Directors’ indemnity and insurance
TheCompanyhasinsuredallitsdirectorsandthedirectorsofitssubsidiariesagainstliabilitiestootherparties(excepttheCompany
orarelatedpartyoftheCompany)thatmayarisefromtheirpositionasdirectors.Theinsurancedoesnotcoverliabilitiesarisingfrom
criminalactions.
TheCompanyhasexecutedaDeedofIndemnity,indemnifyingalldirectorstotheextentpermittedbysection162ofthe
CompaniesAct1993.
4. Employees’ remunerationDuringtheyearthefollowingnumberofemployeesorformeremployeesreceivedremunerationofatleast$100,000:
Number of employees 2007 2006
$100,000-$110,000 9 6
$110,000-$120,000 5 5
$120,000-$130,000 4 4
$130,000-$140,000 2 0
$150,000-$160,000 1 1
$160,000-$170,000 2 0
$170,000-$180,000 0 1
$210,000-$220,000 2 0
$220,000-$230,000 0 1
$260,000-$270,000 1 0
$270,000-$280,000 0 1
$290,000-$300,000 1 1
$300,000-$310,000 0 1
$400,000-$410,000 1 0
$450,000-$460,000 1 0
$570,000-$580,000 0 1
Fortheyearended28February2007
64 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
OverviewTheboardofRestaurantBrandsNewZealandLimitediscommittedtotheguidingvaluesoftheCompany:integrity,respect,continuous
improvementandservice.whilstnotformallyconstitutedintoacodeofethics,itexpectsthatmanagementandstaffultimately
subscribetothesevaluesandusethemasaguidetomakingdecisions.Thesevaluesarereflectedinaseriesofformalpoliciescovering
suchmattersas:
• conflictsofinterest
• useofcompanyproperty
• useofcompanyinformation
• compliancewithapplicablelaws
ResponsibilityTheBoardisresponsiblefortheproperdirectionandcontroloftheCompany’sactivities,includingsettingstrategicdirection,approval
ofsignificantexpenditures,policydetermination,stewardshipoftheCompany’sassets,identificationofsignificantbusinessrisks,legal
complianceandmonitoringmanagementperformance.
DelegationTheBoardhasdelegatedresponsibilityfortheday-to-dayleadershipandmanagementoftheCompanytotheChiefExecutiveOfficer
(CEO)*whoisrequiredtodosoinaccordancewithboarddirection.TheCEOistheonlyexecutiveofficerontheBoardofthe
Company.TheCEO’sperformanceisreviewedeachyearbytheBoard.Thereviewincludesaformalperformanceappraisalagainst
measuredobjectivestogetherwithaqualitativereview,includinga360feedbackprocess.
*Asatthedateofthisannualreport,theCompanydoesnothaveapermanentCEO.Thestatementabovewasapplicabletotheformer
CEOandislikelytoapplytoapermanentCEOonappointment.
TheBoardhasapprovedascheduleofdelegatedauthoritiesaffectingallaspectsoftheCompany’soperation.Thisisreviewedfrom
timetotimeastoappropriatenessandlevelsofdelegation.
Composition and focusAsat28February2007theBoardcomprisedoffivenon-executivedirectors(includingtheChairman)andoneexecutivedirector
(ChiefExecutiveOfficer).InadditiontoCommitteeresponsibilities(below)individualBoardmembersworkdirectlywithmanagement
inmajorinitiativessuchasacquisitionsandassetrationalisations.
EKvanArkel,DAPilkingtonandSHSucklingareconsideredbytheboardtobeindependentundertheNZSXListingRules.
SRBeck,DDiabandVJSalmon*areconsiderednottobeindependentastheyeitherrepresentedsignificantshareholdingsorwere
employedbytheCompany.williamFalconer(whoresignedasChairmanon9June2006)andTAHall(whoresignedon
22March2006)werebothconsideredindependentdirectors.TheBoarddoesnothaveapolicyonaminimumnumberof
independentdirectors.
*VJSalmonresignedasChiefExecutiveOfficeranddirectoron14March2007.
CommitteesFromamongstitsownmembers,theboardhasappointedthefollowingpermanentcommittees:
• AuditCommittee.ThemembersoftheauditcommitteeareDAPilkington(Chairman),EKvanArkelandSHSuckling.
TheauditcommitteeisconstitutedtomonitortheveracityofthefinancialdataproducedbytheCompanyandensurecontrolsare
inplacetominimisetheopportunitiesforfraudormaterialerrorintheaccounts.
Theauditcommitteemeetsatleastthreetimesayear,withexternalauditorsoftheCompanyandexecutivesperforminginternalaudit
managementfromwithintheCompany.Theexternalauditorsalsomeetwiththecommitteewithnocompanyexecutivepresent.
Fortheperiodended28February2007
PAGE NUMBER 65RESTAURANT BRANDS
2007 ANNUAL REPORT
Thecommitteehasadoptedanauditchartersettingouttheparametersofitsrelationshipwithinternalandexternalauditfunctions.
Thecharterrequires5yearlyreviewsoftheexternalauditrelationshipandauditpartnerrotation.
• AppointmentsandRemunerationCommittee.ThemembersoftheappointmentsandremunerationcommitteeareSRBeck,
EKvanArkel,DDiabandSHSuckling.Thiscommitteeisconstitutedtoapproveappointmentsandtermsof
remunerationforseniorexecutivesoftheCompany,principallytheCEOandthosereportingdirectlytotheCEO.Italso
reviewsanycompany-wideincentiveandshareoptionschemesasrequired.Theappointmentsandremunerationcommitteehas
adoptedawrittencharter.
TheBoarddoesnothaveaformalnominationscommitteeasallnon-executivedirectorsareinvolvedintheappointmentof
newdirectors.
Othersub-committeesmaybeconstitutedandmeetforspecificadhocpurposesasrequired.
Board appraisal and trainingTheBoardhasadoptedaperformanceappraisalprogrammebywhichitannuallymonitorsandassessesindividualand
Boardperformance.
TheCompanydoesnotimposeanyspecifictrainingrequirementsonitsdirectors.TheBoardbelievesalldirectorshaveconsiderable
trainingandexpertise.Newdirectorscompleteaninductionprogrammewithcompanyseniormanagement.
Insider tradingAlldirectorsandseniormanagementoftheCompanyarefamiliarwithandhaveformallyacknowledgedacceptanceofan“Insider
TradingCode”thatrelatestodealingsinsecuritiesbydirectorsandemployees.Theprovisionsofthecodearesubstantiallyin
accordancewiththe“InsiderTrading(ApprovedProcedureforCompanyOfficers)Notice”issuedundertheSecurities
MarketsAct,1988.
SizeTheconstitutionprescribesaminimumofthreedirectorsandasatbalancedatethereweresixmembersoftheboard.
(VJSalmonresignedasadirectoron14March2007).
Re-electionunderthetermsoftheconstitution,onethirdofthedirectors(two)arerequiredtoretirefromofficeattheannualmeetingofthe
Companybutmayseekre-electionatthatmeeting.TheChiefExecutiveOfficer,asanexecutivedirector,isexemptfromtherequirement
toretirebyrotation.
MeetingsTheBoardnormallymeetseighttotentimesayearand,inadditiontoreviewingnormaloperationsoftheCompany,approvesa
strategicplanandannualbudgeteachyear.
Boardmeetingsareusuallyscheduledannuallyinadvance,althoughadditionalmeetingsmaybecalledatshorternotice.
Directorsreceiveformalproposals,managementreportsandaccountsinadvanceofallmeetings.
ExecutivesareregularlyinvitedtoattendBoardmeetingsandparticipateinBoarddiscussion.Directorsalsomeetwithsenior
executivesonitemsofparticularinterest.
Fortheperiodended28February2007
Boardmeetingattendancefortheyearended28February2007wasasfollows:
EKvanArkel 9
VJSalmon 9
SRBeck 9
DDiab 9
DAPilkington 9
SHSuckling 7
wJFalconer 3
TAHall 1
Board remunerationDirectors’feesfortheyearended28February2007were$60,000fortheChairmanand$40,000foreachnon-executivedirector.
RefertotheStatutoryInformationsectionoftheannualreportformoredetail.
Nodirectorscurrentlytakeaportionoftheirremunerationunderaperformancebasedequitycompensationplan,althoughanumberof
directorsdoholdsharesintheCompany.
Thetermsofanydirectors’retirementpaymentsareasprescribedintheconstitutionandrequirepriorapprovalofshareholdersin
generalmeeting.Noretirementpaymentshavebeenmadetoanydirector.
Directors’ indemnity and insuranceTheCompanyhasinsuredallitsdirectorsandthedirectorsofitssubsidiariesagainstliabilitiestootherparties(excepttheCompany
orarelatedpartyoftheCompany)thatmayarisefromtheirpositionasdirectors.Theinsurancedoesnotcoverliabilitiesarisingfrom
criminalactions.
TheCompanyhasexecutedaDeedofIndemnity,indemnifyingalldirectorstotheextentpermittedbysection162oftheCompanies
Act1993.
Risk managementInmanagingtheCompany’sbusinessriskstheboardapprovesandmonitorspolicyandprocessinsuchareasas:
• Internalaudit–Regularchecksareconductedbyoperationsandfinancialstaffonallaspectsofstoreoperations.
• Treasurymanagement–ExposuretointerestrateandforeignexchangerisksismanagedinaccordancewiththeCompany’s
treasurypolicy.
• Financialperformance–Fullsetsofmanagementaccountsarepresentedtotheboardateverymeeting.Performanceismeasured
againstanannualbudgetwithperiodicforecastupdates.
• Capitalexpenditure–Allcapitalexpenditureissubjecttorelevantapprovallevelswithsignificantitemsapprovedbytheboard.
Theboardalsomonitorsexpenditureagainstapprovedprojectsandapprovesthecapitalplan.
• Insurance–TheCompanyhasinsurancepoliciesinplacecoveringmostareasofrisktoitsassetsandbusiness.Theseinclude
materialdamageandbusinessinterruptioncoveratallofitssites.Policiesarereviewedandrenewedannuallywith
reputableinsurers.
ShareholdingThereisnoprescribedminimumshareholdingfordirectorsalthoughsomedoholdsharesintheCompany(refertotheStatutory
Informationsectionofthereportformoredetail).
Directorsmaypurchasesharesuponprovidingpropernoticeoftheirintentiontodosoandincompliancewiththeoperationofthe
Company’s“InsiderTradingCode”(seeabove).
66 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Fortheperiodended28February2007
Interests registerTheBoardmaintainsaninterestsregister.InconsideringmattersaffectingtheCompany,directorsarerequiredtodiscloseany
actualorpotentialconflicts.whereaconflictorpotentialconflicthasbeendisclosedthedirectortakesnofurtherpartinreceiptof
informationorparticipationindiscussionsonthatmatter.
Shareholder communicationTheBoardplacesimportanceoneffectiveshareholdercommunication.Halfyearandannualreportsarepublishedeachyearandposted
ontheCompany’swebsite,togetherwithquarterlysalesreleases.FromtimetotimetheBoardmaycommunicatewithshareholdersby
mailoutsidethisregularreportingregime.
Consistentwithbestpracticeandapolicyofcontinuousdisclosure,externalcommunicationsthatmaycontainmarketsensitivedata
arereleasedthroughNZXinthefirstinstance.Furthercommunicationisencouragedwithpressreleasesthroughmainstreammedia.
TheBoardformallyreviewsitsproceedingsattheconclusionofeachmeetingtodeterminewhethertheremaybearequirementfora
disclosureannouncement.
ShareholderattendanceatannualmeetingsisencouragedandtheBoardallowsextensiveshareholderdebateonallmattersaffecting
theCompany.
Auditor independenceTheBoardmanagestherelationshipwithitsauditorsthroughtheauditcommittee.TheCompany’sexternalauditorsarepermittedto
providenon-auditservicestotheCompanywiththeapprovaloftheauditcommittee.
Auditor’sremunerationisdisclosedinNote4ofthefinancialstatements.
Nzx corporate governance best practice codeInalmostallrespectstheCompany’scorporategovernancepracticesconformwiththeNZXCorporateGovernanceBestPracticeCode
(the“Code”).TheonlyareasinwhichtheCompany’spracticesvaryfromtheCodeare:ithasnotadoptedaformalcodeofethics,does
notremuneratedirectorsunderaperformancebasedequitycompensationplan,doesnotimposespecifictrainingrequirementsonits
directorsanddoesnothaveanominationscommittee.
PAGE NUMBER 67RESTAURANT BRANDS
2007 ANNUAL REPORT
Fortheperiodended28February2007
68 PAGE NUMBER RESTAURANT BRANDS
2007 ANNUAL REPORT
Eduard (Ted) Koert van Arkel FNZIM
CHAIRMAN
MrvanArkelwasappointedtotheboardinSeptember2004andelectedchairmaninJuly2006.Heisnowaprofessionaldirector
havingretiredasManagingDirectorofProgressiveEnterprisesLimitedinNovember2004followingthesuccessfulintegrationof
woolworthsNZLimitedintotheProgressiveGroup.HehadpreviouslyworkedforPlaceMakers,BingHarrisSargoodandwoolworths.
HecurrentlyservesasChairmanofCharlie’sGroupLimitedandunitecNewZealandLimited.HeisalsoadirectoroftheAuckland
RegionalChamberofCommerceandIndustryLimited,AucklandRegionalTransportAuthority,AlliedworkForceGroupLimited,
LaGrouwCorporationLimited,TheNationalPropertyTrustLimited,DanskeMoblerLimited,PaperPlusNewZealandLimited,
SuperpointsNewZealandLimited,LangPropertiesLimitedandhisconsultingcompany,VanArkel&CoLimited.MrvanArkelsitson
theBoard’sauditcommitteeandremunerationcommittee.
Sue H Suckling B.Tech(Hons),M.Tech(Hons),OBE
DIRECTOR
MsSucklingisaprofessionaldirectorwithover20yearsgovernanceexperience,withpublicandprivatecompanies.Shewasappointed
totheBoardinJune2006.SheiscurrentlyChairpersonofBarkerFruitProcessorsLimited,HSRGovernanceLimited,National
InstituteofwaterandAtmosphericResearchandNewZealandQualificationsAuthorityandadirectorofTyTMDevelopmentLimited
andAcemarkHoldingsLimited.MsSucklingisalsoamemberoftheTakeoversPanelandsitsontheBoard’sauditcommitteeand
remunerationcommittee.
Shawn R Beck BA,MBA
DIRECTOR
MrBeckhasbeenadirectorofRestaurantBrandsfor6years.HeisafoundingdirectorofPencarrowPrivateEquityLimited.
Pencarrowisaprivateinvestmentmanagementfirmspecialisinginprivateequity.MrBeckiscurrentlyadirectorofwellingtonDrive
TechnologiesLimited,EasternEquitiesCorporationLimited,PacificHorizonHoldingsLimited,TourismEnterprisesLimited,Home
IdeasGroupLimitedandKiwiKatLimited(tradingasKawauKat).MrBecksitsontheBoard’sremunerationcommittee.
Danny Diab FAICD,DipCD,DipCM,FICM
DIRECTOR
MrDiabisbasedinAustraliaandownsandoperatesanumberofPizzaHutrestaurantsinSydneyinadditiontootherbusiness
interests.HewasappointedtotheBoardinOctober2002.Hehashadmorethan20years’experienceinthepizzaindustryandis
regardedasoneoftheleadingPizzaHutfranchiseesinAustralia.HeiscurrentlypresidentofthePizzaHutFranchisees’Association
inAustralia.MrDiabsitsontheBoard’sremunerationcommittee.
David A Pilkington BSc,BE(Chem),DipDairySci&Tech
DIRECTOR
TheformerManagingDirectorofNewZealandMilkLimited,MrPilkingtonisalsoChairmanofPrevarLimited,RuapehuAlpineLifts
andOldFashionedFoodsLimited.HeisalsoadirectorofDouglasPharmaceuticalsLimited,BallanceAgri-NutrientsLimited,
PortsofTaurangaLimited,RangatiraLimitedandZespriGroupLimited.MrPilkingtonisalsoashareholderanddirectorofNZ
BiotechnologiesLimitedandhisownconsultingcompany,ExcelsaAssociatesLimited.Heisanindependentappointeetothewellington
CityCouncilAuditandRiskManagementSub-CommitteeandatrusteefortheNewZealandCommunityTrust.MrPilkingtonwas
appointedtotheBoardinJuly2004andchairstheBoard’sauditcommittee.
Corporate Directory
Directors:
EK(Ted)vanArkel(Chairman)
SueHelenSuckling
ShawnRichardBeck
DannyDiab
DavidAlanPilkington
Registered Office:
Level3,westpacBuilding,CentralPark,
666GreatSouthRoad,Penrose,
Auckland,NewZealand
Share Registrar:
ComputershareInvestorServicesLimited
PrivateBag92119
Auckland1020
NewZealand
Telephone:(09)4888700
Auditors:
KPMG
Solicitors:
BellGully
HarmosHortonLusk
MeredithConnell
Bankers:
westpacBankingCorporation
ANZNationalBankLimited
Contact Details
PostalAddress:
POBox22-749,Otahuhu
Auckland1640,NewZealand
Telephone: (09)525-8700
Fax: (09)525-8711
E-mail: investor@restaurantbrands.co.nz
Financial Calendar
Annual Meeting:
28June2007
Close of Register for Final Dividend:
15June2007
Final Dividend Paid:
29June2007
Interim Profit Announcement:
October2007
Interim Dividend Paid:
November2007
Financial Year End:
28February2008
Annual Profit Announcement:
April2008
PAGE NUMBER 69RESTAURANT BRANDS
2007 ANNUAL REPORT
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