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This year. We're going Beyond.

HY21 report: Collins Foods (ASX:CKF) reveals delicious profit growth

KFC outlet business Collins Foods Ltd (ASX: CKF) shares are up 10% after announcing more profit growth in its FY21 profit result.

Here’s what Collins Foods reported

Collins Foods, which is a large franchisee of KFC restaurants in Australia and Europe, as well as Taco Bells in Australia reported that revenue grew by 11.3% to $499.6 million.

KFC Australia revenue grew by 15.6% to $415.5 million with same store sales (SSS) growth of 12.4%. Sizzler closed in Australia on 15 November 2020, whilst Sizzler Asia is improving with dining restrictions leading to a 49% decrease in royalty revenue.

KFC Europe sales rose 1.1% to $64.3 million whilst SSS declined 4.2%. Delivery is available for plenty of its outlets. Only one new restaurant was opened in the Netherlands during HY21, with a target of one to three more openings in the second half.

The company shifted Taco Bell towards takeaway channels in response to COVID-19. The expansion has been delayed, but there is a “strong pipeline in place for FY22”. Sales in free standing restaurants have now fully recovered to pre-COVID-19 levels. No new restaurants were opened during the period. It’s focused on reaching scale in the south east of Queensland and Melbourne within the next three to five years.

Underlying EBITDA (EBITDA explained) went up 10.5% to $63.7 million. Statutory EBITDA was $79.6 million. The key KFC Australia business saw underlying EBITDA grow by 22.4% to $77.2 million whilst its EBITDA margin improved from 17.5% last year to 18.6% in this result.

Underlying net profit grew by 15.1% to $27.5 million whilst statutory net profit came in at $16.5 million. Net operating cash flow increased by $23.6 million to $57.3 million.

Balance sheet and dividend

Collins Foods reported that its net debt was down to $170.7 million (down from $217.3 million a year ago) and the net leverage ratio improved to 1.35x, down from 1.84x.

The board of Collins Foods decided to declare a fully franked interim dividend of 10.5 cents per share, which was an increase of 10.5%.

Summary thoughts

Collins Foods has been impressive over the years. It continues to steadily grow its same store sales, its network and the profit. It has been a solid dividend share as well. I’m not sure if it’s a buy today because of the search for yield (and growth) by some investors. I do believe Collins Foods will keep growing profit growth.

However, I think there are other ASX growth shares that could be better value for the next few years such as Pushpay Holdings Ltd (ASX: PPH).

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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