Collins Foods Feathering the Nest Nicely

“Take my money” is the catchcry for KFC’s current marketing campaign and, after Collins Foods’ 2021-22 annual results yesterday, it’s no wonder investors thought the same way after looking at the figures.

The KFC franchise holder reported higher revenue, higher earnings, higher dividends from its KFC, Taco Bell and Sizzler operations here and in Europe and Asia for the 12 months to May 1.

Investors listened, read the annual result and chased the shares more than 14% higher to $10.14 before they eased to end the day at $9.97, still up 11.5%.

As solid as that rise was, it still left the shares more than 40% under their 52-week high of $14.30 late last November.

The company told the market on Tuesday that revenue rose 11.1% to $1.185 billion, while in turn statutory after-tax earnings rose 47% to nearly $55 million, while on an underlying basis full year earnings were up 25% to $59.7 million.

As a result, shareholders will get a fully franked final of 15 cents a share, up from 12.5 cents a year ago. That will take the annual dividend to 27 cents a share (fully franked) which is up more than 17% from 2020-21’s figure.

Collins Foods CEO, Drew O’Malley, said in Tuesday’s statement:

“KFC Australia managed to deliver positive same store sales growth for the full year, despite cycling unprecedented growth in the prior year. The KFC brand has never been stronger in Australia, and metrics around quality, value, and purchase intent are at record levels, particularly important in times like these.

“At the same time, we continue to amplify our strengths in convenience with further growth in digital, delivery and innovation, including the introduction of drone delivery and, more recently, UberEats.

“KFC Europe had an impressive year of recovery, with same store sales growth and margins above pre-COVID FY19 levels. We cemented our position in the Netherlands with acquisitions taking us to 55% of the franchisee market and the commencement of the Netherlands Corporate Franchise Agreement. We are already seeing the benefits of effective control with improved marketing campaigns and an expanding development pipeline, as we build toward scale in this market.

“Taco Bell returned to positive same store sales growth in Q4 FY22. We have been making additional investments in media to support core brand positioning around taste and value. We have also seen new store openings perform ahead of expectations, providing confidence in the brand’s potential as we look to accelerate the pace of development.

“A total of 32 restaurants were added across the group in FY22, including 17 openings. This significant reinvestment in the business was funded out of strong operating cash flow, enabling continued healthy dividends and a further strengthening of our balance sheet. As such, we remain well capitalised to pursue our long-term growth agenda, while navigating near term inflationary headwinds.”

KFC Australia was the star with a record performance as revenue rose 6.1% to $955.5 million (meaning it will probably top the billion-dollar mark in the current financial year). Same store sales were up 1.4%, slowing from the 12.9% lockdown-driven surge a year earlier.

Underlying EBITDA earnings rose 3.5% to $207 million from $196 million.

In Europe, Collins Foods reported a 41.2% jump in revenue to $190.4 million. This reflected a 16.8% increase in same store sales, the acquisition of 15 restaurants, and the opening of 3 new restaurants.

The Taco Bell business delivered a 27.5% increase in revenue to $35.8 million in 2021-22. This was driven by the opening of 4 new restaurants, which offset an 8.1% decline in same store sales. Collins said the business returned to same store sales growth in the fourth quarter.

And the Sizzler Asia business posted a 10.8% increase in revenue to $2.8 million.

Looking at the new financial year the company revealed that sales results over the first seven weeks of FY 2023 have been encouraging. This was particularly the case in Europe, with all business units reporting positive same store sales.

And while there has been some “unavoidable” short term pressure on margins, management expects them to recover in the mid-term. And the next 12 months will see the company growing its store numbers by 20 to 29 new restaurants.

Mr O’Malley added “The global environment continues to exhibit unprecedented challenges with inflationary pressures and supply chain shortages. Our QSR brands are nonetheless in excellent shape to navigate this landscape. Their proven track record of consumer appeal regardless of economic conditions, combined with our relentless pursuit of operational excellence, ensures we are well positioned to manage through the current inflationary environment.”

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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