Fast food group Collins Foods (CKF) has boosted its final and full year dividends despite a full year loss after a big write down in the value of its faltering Sizzler chain.
Collins lifted its final dividend by half a cent to 6.5 cents a share, fully franked, which took the full year payout to 11.5 cents a share (10.5 cents a share previously).
That was despite the $10 million loss for the year to May 3 for the KFC franchise operator, after completing a strategic review of the Sizzler chain and writing down the business by $37.5 million.
Before the Sizzler write down, Collins said its underlying net profit rose 37.4% to $24.6 million, compared with an underlying profit of $17.9 million in 2014.
That improvement was due to the $55 million acquisition of 42 KFC stores from “Hungry” Jack Cowin in Western Australia and the Northern Territory last year and strong same-store sales growth at its existing KFC outlets.
Sales jumped 29.7% to $571.6 million, with same-store sales at KFC up 4.8% and offsetting the 8.5% slide in same-store sales at Sizzler.
Collins Foods said that as a result of the review, the 26 store Sizzler business (which has been fading for several years), is no longer considered core to the group.
That’s despite hints of a small improvement in the year in the wake of store refurbishments, menu upgrades and a new marketing campaign. Earnings before interest tax depreciation and amortisation fell 42.6% thanks to lower sales and rising costs crimped gross profit margins for another year.
CKF 1Y – Sizzler writedown sees Collins Foods post FY loss
"After careful consideration and due to the year-on-year under performance of the Sizzler Australia business, we no longer consider Sizzler to be a strategic growth prospect in Australia and therefore we will not be investing further capital into Sizzler Australia," said Collins Foods chief executive Graham Maxwell.
"We believe this is a necessary course of action in order to pursue more attractive growth opportunities," he said.
As a result Collins will start closing a small number of Sizzler restaurants in the next year and remaining restaurants will be closely monitored, with appropriate action taken as and when necessary, he said, without elaborating.
“Despite the decline in sales, Sizzler Australia is still forecast to generate a positive EBITDA contribution in 2016," Collins said in yesterday’s ASX release.
And Collins Foods plans to expand its Sizzler business in south east Asia, where it is the Sizzler franchisor, and will open up to four new franchised restaurants in the next year.
Collins shares rose 2.6% to $2.73 in yesterday’s weaker market.