Collins Foods KFC Brand Strength Boosts FY22 Sales & Profits

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Collins Foods KFC Brand Strength Boosts FY22 Sales, Profits and Dividends

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  • Group revenue up by 11.1 percent to $1,184.5 million
  • KFC Australia revenue up 6.1 percent to $955.5 million
  • KFC Europe revenue up 41 percent to $190.4 million
  • Underlying Net Profit After Tax up 25 percent to $59.7 million or 51.1 cents earnings per share
  • 15 cents fully franked final dividend payable on 1 August, taking the full year dividend to 27 cents
  • Growth capital expenditure in FY22 funded from internally generated cash flow
  • Power of the KFC and Taco Bell brands and strong balance sheet supports positive earnings outlook.

Collins Foods Limited (Çollins Foods or the Group) is an ASX 200 company focused on restaurant operations, employing 15,000 KFC and Taco Bell employees throughout Australia, Europe and Asia. In January 2022 the Group commenced franchised operations in the Netherlands, where it will develop, market, operate and support the KFC franchise business. The agreement covers existing franchisees but importantly, provides for the development of up to 130 new KFC restaurants over the coming decade.

KFC brand strength drives FY22 sales and profit

The power of the KFC brand continues to drive Collins Foods’ sales, profit and dividend higher in FY22.

The financial year ended 1 May 2022 saw Group revenue increase by 11.1 percent to $1,184.5 million, an increase of $118.6 million. KFC Australia grew revenue by 6.1 percent to $955.5 million. KFC Europe recovered strongly with same store sales growth of 16.8 percent on the prior financial year and 11.2 percent improvement over the pre-pandemic FY19 level. Total KFC Europe revenue growth was 41 percent to $190.4 million, up from $134.9 million in FY21.

Underlying Net profit After Tax was up 25 percent to $59.7 million, which is equivalent to 51.1 cents earnings per share. Earnings per share in the prior financial year were 41 cents. A fully franked final dividend of 15 cents will be paid to shareholders on 1 August, taking the full year dividend to 27 cents per share. This represents an increase of 17.4 percent on the 23 cents fully franked dividend paid to shareholders in FY21.

 The Group’s balance sheet remains strong, supported by net operating cash flow of $156.3 million, a $28.1 million lift on FY21 cash flow of $128.2 million. Net debt was paid down by $2.5 million during the financial year, to $174.9 million. This reduction resulted in a lower net leverage ratio of 1.17, compared to 1.34 in FY21. This conservative leverage ratio leaves significant headroom to fund ongoing growth in new restaurants, which totalled 32 across the Group in FY22.

Outlook

Results for the first seven weeks of the new financial year are encouraging, especially in Europe, with all business units reporting positive same store sales growth. KFC Netherlands are up 13.2 percent on same store sales with KFC Australia up 4.1 percent on the same basis.

The ability of the Group to fund new restaurants, remodels and other growth initiatives from operating cash flow reflects the resilience of the business driven by the power of the KFC and Taco Bell brands. This is set to continue in FY23 with 20 to 29 new restaurants planned for FY23. This includes 9 to 12 new KFC Australia restaurants and 2 to 5 new KFC Europe restaurants.

This growth augurs well for higher earnings and higher dividends in the period ahead.

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at l.mosmann@kosec.com.au.

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