Fast Food Apparently a Staple in Lockdown

The recent lockdowns in Sydney, the ACT and Melbourne and a very strong performance in Europe clearly boosted the performance of Collins Foods (ASX: CKF), the parent company of KFC and Taco Bell in Australia for the six months to September 30.

And in turn that clearly boosted the company’s share price which surged 12.6% to $14.10 on Tuesday.

Collins Foods reported that a 9.5% jump in revenue to $534.2 million saw a 31.6% increase in underlying net profit to $28.9 million. Statutory net after tax profit from continuing operations rose to $26.4 million from $20.9 million a year ago.

That strong performance saw directors boost the fully franked interim dividend to 12.0 cents a share declared from the 10.5 cents a share paid for the first half of 2020 -21 year.

The shares touched an all-time high of $14.25 in trading on Tuesday and the close of $14.02 was highest so far. the shares came back a little in late trading.

CEO Drew O’Malley said the company’s KFC Europe business was the “standout performer”, with the first half of the 2021-22 financial year seeing KFC Europe’s revenue and earnings return to pre-pandemic levels.

The company also signed a franchise agreement in KFC Netherlands which Mr O’Malley said would “significantly scale” (expand) its footprint over the next decade.

Taco Bell Australia saw solid revenue growth of 33% to $14.8 million, while KFC Australia grew revenue by a modest 4.4% to $433.7 million and remains the core business for the company.

Mr O’Malley said Taco Bell Australia would have a bigger presence in the coming years.

“We are leveraging our KFC operational excellence and QSR know-how to scale our Taco Bell Australia business over the next three to four years,” he said.

“We are investing in a refined marketing strategy to build brand awareness and drive trial, capitalising on strong demand in the attractive Mexican segment. We have a unique value proposition, delivering a great tasting menu at a more affordable price point than others in the category.”

“Collins Foods increased its restaurant footprint by nine to 322 in HY22, and we remain on track to open a record number of new restaurants this financial year. We have a significant organic growth pipeline and attractive opportunities to reach scale in KFC Netherlands and Taco Bell Australia, while adding to our core KFC Australia footprint,” the CEO said.

There are currently 12 Taco Bell restaurants in Queensland, four in Victoria and one in Western Australia and Collins wants to add another 12 new restaurants across the 2022 financial year.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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