Collins Foods [ASX:CKF], a restaurant operator linked to fast food chains KFC, Taco Bell, and Sizzler, reported a statutory net profit after tax (NPAT) of $11 million for the half-year, down from the $26.4 million reported in 2022.
The company touted continued sales momentum and increasing revenue; however, investors were evidently not otherwise impressed.
Shares plummeted by 17.83% by mid-morning, taking the restaurant manager’s stock to a decrease of more than 38% in the year so far. Compared to the market average, CFK is down 34%.
Source: tradingview.com
Collins Foods’ half-year financials
Today CKF provided results for the half-year that ended on 16 October, focusing on its sales momentum and drawing attention to the 15% growth in revenue versus the same time last year.
However, while revenue moved up from $534.2 million in HY22 to $614.3 million, the statutory NPAT dropped from $26.4 million in HY22 to $11 million in HY23.
CFK’s statutory EBITDA slipped slightly from $92.5 million to $93.4 million, and underlying EBITDA reportedly increased 0.5%, from $94.9 million to $95.4 million.
Net Operating cash flow totalled $69.1 million, down from HY22’s total of $72.3 million, as funding new restaurants, remodelling, acquisitions, and dividends increased.
The company did manage to bring about a Net Debt reduction of $6.5 million, lowering the company’s debts from $197.6 million to $191.1 million — the company’s net leverage ratio also decreased from 1.41 to 1.31 HY22.
CKF offered a fully franked interim dividend of 12 cents per ordinary share, the same as last year.
KFC Australia revenue was up 10.6% from $433.7 million in HY22, following the Uber Eats rollout in July.
KFC Europe revenue grew 32% from $84.7 million, though an 11.8% Underlying EBITDA margin was down, reflecting inflation costs, increased labour, utilities and supply chain issues.
Taco Bell revenue increased 42.6% from HY22’s $14.8 million. However, an $11.9 million impairment occurred through eight ‘underperforming’ restaurants.
Sizzler Asia delivered a 100% increase in royalty revenue to $1.8 million ($0.9 million in HY22).
CEO, Drew O’Malley, commented:
‘In a challenging consumer landscape, we’ve seen the brand strength of KFC on full display in the first half. Top-line growth has continued at an impressive rate, which has allowed us to mitigate some of the considerable margin headwinds experienced across the business while maintaining the brand’s value proposition.
‘The resilience of the QSR, and KFC’s brand strength in particular, allow us to be well-positioned to appeal to consumers regardless of economic conditions. Whilst we expect inflationary pressures to remain in the near-term, we continue to pursue our long-term growth agenda, and will continue to invest in new restaurant builds, as well as equipment, technology, and operational innovations to provide unmatched experiences for our customers and our people.’
CKF still looks to grow
O’Malley acknowledged inflationary headwinds and continued margin pressure expected to remain throughout FY23.
The company is committed to achieving margin recovery and plans 9–12 new restaurants for Australia in FY23 and three in the Netherlands. A long-term target of up to 130 net new restaurants has been set by 2031.
‘Operating in the resilient QSR sector, we believe we are well positioned to navigate the current challenging environment,’ stated O’Malley.
‘When combined with Collins Foods’ focus on operational excellence, supported by a highly capable and experienced management team, and the flexibility that comes with a healthy balance sheet, we retain our recipe for success to deliver sustainable earnings growth over the long term.’
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Regards,
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For The Daily Reckoning Australia
