The Collins Foods Ltd (ASX: CKF) share price has jumped after reporting its FY24 first-half result.
Collins Foods is a major KFC franchisee business in Australia and Europe. It also has a growing franchisee Taco Bell business in Australia.
HY24 result
Collins Foods reported various numbers including its underlying continuing operations (CO) which excludes Sizzler Asia. Here are some of the highlights from the report for the first six months of FY24:
- CO revenue rose 14.3% to $696.5 million
- CO EBITDA (EBITDA explained) grew 16.7% to $109.9 million
- CO EBIT rose 23.1% to $ 61.5 million
- CO net profit after tax (NPAT) jumped 28.7% to $31.2 million
- Statutory NPAT of $50.5 million, up $40 million
- Net operating cash flow grew $25.1 million to $82.2 million
- Interim dividend per share rose by 4.2% to $0.125
Profit growth is good, and is an important driver of the Collins Foods share price.
The company said that KFC Australia HY24 same store sales (SSS) growth was 6.6%, with margins up 37 basis points (0.37%) though higher labour and energy prices are “continuing to exert pressure”. It opened four new outlets in HY24, and it’s on track to open nine to 12 new locations in FY24.
KFC Europe saw SSS growth of 8.8%, with Netherlands SSS of 7.9% and Germany SSS of 11.7%. One new restaurant was opened by a sub-franchisee and it completed the acquisition of eight restaurants in the Netherlands. It’s building a pipeline of acquisition opportunities.
Taco Bell reported SSS growth of 7.9% following product quality improvements, marketing spending and delivery growth. It opened one new restaurant in August and closed two in May, taking the network to 27 restaurants.
Outlook for the Collins Foods share price
In the first six weeks of the second half of FY24, KFC SSS growth was 2.9% in Australia, 8.1% in the Netherlands and 8.6% in Germany. Taco Bell has seen SSS growth of 8.7%.
It’s expecting to expand its KFC network, organically grow in the Netherlands and acquire and develop other opportunities.
I think this is business isn’t going to shoot the lights out, but it’s steadily growing its network, revenue and profit over the long-term, which is the type of business that can deliver good returns. It has recovered from the tricky FY23 period. The growing dividend is a useful boost too.
