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BURGER KING® GROWTH POTENTIAL There is a significant growth potential at current unit economics to grow EBITDA at over 5 times to 180 restaurants.

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Presentation on theme: "BURGER KING® GROWTH POTENTIAL There is a significant growth potential at current unit economics to grow EBITDA at over 5 times to 180 restaurants."— Presentation transcript:

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5 BURGER KING® GROWTH POTENTIAL
There is a significant growth potential at current unit economics to grow EBITDA at over 5 times to 180 restaurants

6 REVENUE GROWTH BURGER KING® tops a Billion Rand

7 REVENUE GROWTH Making BURGER KING® the 8th Biggest QSR in South Africa
*Euromonitor 2018

8 REVENUE GROWTH With the 2nd highest Average Restaurant Sales

9 REVENUE GROWTH Peers with significantly higher visibility in the market

10 RESTAURANT PROFITABILITY
BURGER KING® EBITDA profitable since course correcting in 2016

11 RESTAURANT PROFITABILITY
Doubling EBITDA for three consecutive years at 128% CAGR 128%

12 RESTAURANT PROFITABILITY
2018 was a tough trading environment impacted by taxes

13 RESTAURANT PROFITABILITY
Gross Margin Erosion

14 RESTAURANT PROFITABILITY
Beef up 28%, Beverages up 38%, VAT – 0.4%GM

15 RESTAURANT PROFITABILITY
Effectively lost a full financial year of EBITDA profitability

16 RESTAURANT PROFITABILITY
But Restaurant Unit Economics have been sound since 2016, let’s analyse

17 RESTAURANT PROFITABILITY
Average Restaurant Unit Economics

18 RESTAURANT PROFITABILITY
Average Restaurant Unit Economics, but some once offs in our margins

19 RESTAURANT PROFITABILITY
Average Restaurant Unit Economics, FC’s & IL’s mask DT potential

20 RESTAURANT PROFITABILITY
Average Restaurant Unit Economics, our new stores are outperforming forecast

21 RESTAURANT PROFITABILITY
So then let’s visualise the health of the entire network

22 UNIT ECONOMICS – Restaurant EBITDA

23 UNIT ECONOMICS – Restaurant EBITDA - 10 are Non-comping

24 Confidential and proprietary information of BURGER KING®
UNIT ECONOMICS – Restaurant EBITDA Run Rate R R Confidential and proprietary information of BURGER KING®

25 RESTAURANT PROFITABILITY
As we grow, the G&A gets diluted due to scale

26 RESTAURANT PROFITABILITY
So let’s straight line allocate the G&A to each restaurant based on days trading

27 UNIT ECONOMICS – Restaurant EBITDA after G&A = Company EBITDA

28 UNIT ECONOMICS – @ Run Rate, the additional EBITDA flows through

29 UNIT RESTAURANT PERFORMANCE
Let’s reconcile unit restaurant performance to EBIT

30 UNIT ECONOMICS – Underlying profitability is already there

31 UNIT ECONOMICS – Underlying profitability is already there @ run rate

32 UNIT ECONOMICS – Don’t forget the 4 closures

33 UNIT ECONOMICS – And we are consolidating, relocating & closing

34 So does BURGER KING® NEED CASH?
Generating cash since course corrected in 2016

35 So does BURGER KING® NEED CASH?
Making BURGER KING® self-funding in 2019

36 BK Turnaround

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38 BK TURNAROUND Sales Turnaround Consistent Strategy 1 2 3 4
Consistent marketing strategy and introduction of modern restaurant image have led to significant sales turnaround Sales Turnaround Consistent Strategy Brand Positioning Aligned advertising, merchandising, media, and restaurant image to one global brand positioning We have updated and improved our restaurant design to include a digitally integrated experience 1 Menu Architecture Filled key product and promotional gaps to reach guests with different needs, occasions and tastes 2 Product Innovation We grow new market segments with new product development 3 Data-Driven Decisions Data driven decisions and adequate testing resulting in impactful marketing with a high return on media spend 4

39 Sales campaigns driving consistent growth
BK TURNAROUND Sales campaigns driving consistent growth

40 BK TURNAROUND New restaurant image

41 BK TURNAROUND Driving Customer Experience

42 Prospects

43 HOW MUCH ROOM FOR GROWTH?
Assuming a baseline EBIT run rate potential at R22m, what does the pipeline add?

44 PIPELINE – 18 sites at an average EBIT of R1.1m

45 HOW MUCH ROOM FOR GROWTH?
18 sites can generate R35m EBITDA and EBIT of R21m for a R121m investment

46 A potential 85 new restaurants at R1m ARS
HOW MUCH ROOM FOR GROWTH? A potential 85 new restaurants at R1m ARS Western Cape Max Stores 49 Current stores 29 Gaps 16 McDonald's 59 Northern Cape Max Stores 6 Current stores 1 Gaps 3 McDonald's 6 North West Max Stores 16 Current stores 3 McDonald's 8 Mpumalanga Max Stores 19 Current stores 4 Gaps 2 McDonald's 9 Limpopo Max Stores 18 Current stores 2 Gaps 4 KZN Max Stores 43 Current stores 6 Gaps 15 Gauteng Max Stores 98 Current stores 41 Gaps 55 McDonald's 116 Free State Max Stores 14 McDonald's 4 Eastern Cape Max Stores 24 Gaps 10 McDonald's 15 R0 Urban Market Size R1 Billion Limpopo Mpumalanga North West Gauteng Free State KZN Northern Cape Eastern Cape Western Cape

47 HOW MUCH ROOM FOR GROWTH?
South Africans spend 4 Billion Rand a month on dining out. The Quick Service Industry grew by 7% from 2017 to 2018. Wealthy households spend roughly R a month on Quick Service Food (not including coffee or sweet treats and confectionaries) Lower Income households spend R50 a month on Quick Service Food. 70% (40 million people) of South Africa’s population eat Quick Service Food. According to the 2011 census, South African’s spend roughly 2% of their total disposable income on dining out. This has increased to 3% in 2018. This shows that although the average household income has remained relatively stable, people are increasing their spend on eating out to keep up with inflation. This indicates that eating out and convenience foods fall high on a typical South African’s budget. Stats SA 2011

48 Thank You Questions?


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