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Yum! Brands to return up oodles of cash after hiving off Chinese unit

Tuesday, October 11, 2016 6:17
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Yum! Brands Inc (NYSE:YUM) expects to be more focused cash-producing machines once it hives off its Chinese operations.

The owner of the KFC, Taco Bell and Pizza Hut brands plans to hive off Yum China at the end of this month.

The company said the spin-off of its operations in China would increase franchise restaurant ownership to 93% from its current level of 77%, putting it most of the way towards its target of 98% by the end of 2018.

“As a ‘pure play’ franchisor, the transformed Yum! Brands will become more efficient and capital light with an optimized capital structure, improved cash flow and laser-like focus on our key strategies to drive same-store sales and new unit growth worldwide,” claimed Greg Creed, chief executive of Yum! Brands.

That improved cash flow should underpin a commitment to return up to US$13.5bn to shareholders through share repurchase programs and dividends by the end of 2019.

Trading in Yum China (NYSE:YUMC) is expected to start trading on the New York Stock Exchange on 1 November.

“Yum China is a powerhouse business that will be one of China’s largest publicly traded retail companies,” said Micky Pant, chief executive officer of Yum China.

“With our unique market position and a rapidly growing middle class and urban population, we believe that we offer an unrivalled opportunity for sustained long-term growth in China,” he added.

The spin-off will come shortly after Yum’s Chinese operations had a below-par quarter.

Like-for-like sales fell 1% year-on-year in the three months to 3 September, which the company said was partly due to protests against Western companies following international criticism over the People’s Republic’s territorial claims in the South China Sea.

Story by ProactiveInvestors


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