ASX-200 listed Collins Foods Ltd has delivered positive results for the half-year ending October 15, 2023 (HY24), showcasing growth across revenue, same store sales (SSS) and earnings despite a challenging operational environment.
Collins, which owns KFC and Taco Bell restaurant operations in Australia and Europe, aims to become the world’s top restaurant operator. Its latest results show solid results toward this aim.
Key highlights of HY24 group results:
- Revenue from continuing operations increased by 14.3% to A$696.5 million, compared to A$609.4 million in HY23.
- Underlying EBITDA from continuing operations rose by 16.7% to A$109.9 million, up from A$94.2 million in HY23.
- Underlying NPAT from continuing operations surged by 28.7% to A$31.2 million, compared to A$24.2 million in HY23.
- Statutory NPAT stood at A$50.5 million, a significant increase from A$11.0 million in HY23, which includes a gain from the sale of Sizzler Asia amounting to A$20.2 million in HY24.
- Net debt was reduced to A$173.0 million, with a net leverage ratio of 1.12.
Collins Foods’ managing director and CEO Drew O’Malley said: “Performance in the first half has highlighted the underlying strength of our business and the resilience of the QSR sector in challenging economic conditions.
"Our approach to value has continued to deliver solid topline, same store sales and earnings growth across the group. This was underpinned by the strength of our world-class brands, our growing digital channels and value credentials.
"As higher cost-of-living pressures continue to impact consumers, offering great tasting food that provides exceptional value has never been more important.
“Our restaurant footprint continues to grow with five new builds added across the group over the first half. We remodelled a further 30 restaurants and continue to innovate format design to support the global shift towards digital and delivery channels.
"While inflationary pressures remain, we managed short-term cost impacts through margin support initiatives that improved profitability in the first half while prioritising long-term brand health and consumer trust. And as always, we have done this on the foundations of operational excellence at the heart of what Collins Foods stands for.”
Finger lickin’ increase
Collins Foods' KFC Australia has demonstrated a robust performance in its recent half-year results. The brand achieved a notable 9.0% increase in revenue, reaching A$522.9 million.
This growth was bolstered by a 6.6% rise in same store sales (SSS), a key indicator of the brand's growing popularity and customer retention. Furthermore, the underlying EBITDA for KFC Australia grew impressively by 11.1%, amounting to A$105.5 million, reflecting a healthy profit margin of 20.2%.
A significant contributor to this success was the digital and delivery services, which now account for 28.1% of the brand's total sales, highlighting the increasing importance of e-commerce in the fast food sector.
Looking ahead, Collins Foods has ambitious plans to expand its KFC presence in Australia, with nine to 12 new restaurants slated to open within the current fiscal year.
“Our KFC Australia operations have a proven track record of delivering year-on-year revenue growth, and we continue to do so in one of the most challenging consumer environment in recent years," O’Malley said.
"KFC is well-positioned in this economic climate, leading the QSR market across value, quality and consideration metrics. We continue to strengthen and elevate our value positioning, introducing new offerings at key price points,”
“Convenience provides additional growth opportunities for the business and we continue to see strong conversion in digital and delivery, with e-commerce channels up more than 25% on a year ago.
"We are confident this channel will account for an increasingly greater proportion of sales over the long-term.
"New and remodelled restaurants are benefitting from design and digital innovation. These investments are driving e-commerce sales, unlocking production capacity, improving speed of service and enhancing the customer experience.”
The extra wing
KFC Europe, another wing of Collins Foods, has also seen remarkable growth.
The revenue soared by 36.5% to A$148.5 million accompanied by an 8.8% increase in SSS. The underlying EBITDA in this region witnessed a significant boost of 53%, reaching A$20.2 million and achieving a margin of 13.6%.
This growth not only reflects strong operational performance but also an improvement in brand awareness and consideration compared to the previous year.
Currently, KFC Europe's footprint spans 72 restaurants and the company has plans to further expand in the Netherlands, aiming to open three additional restaurants in the latter half of FY24.
Growth fiesta
Taco Bell, a relatively newer venture for Collins Foods in Australia, has shown promising progress. The brand experienced an 18.9% growth in revenue, totalling A$25.1 million, and a positive SSS growth of 7.9%. The EBITDA at the restaurant level was A$1.4 million, with a margin of 5.8%.
New product innovations such as the Lava Crispy Chicken Burrito were driving this growth, which has been well-received by Australian consumers.
Taco Bell's expansion in Australia is on a steady rise, with the total number of restaurants reaching 27 across Queensland, Victoria and Western Australia, marking a significant footprint in the fast-food landscape down under.
“We are encouraged by Taco Bell’s return to positive same store sales and its current trajectory," O’Malley said.
"The brand is benefiting from the impact of improved product quality, successful marketing campaigns and a relentless focus on value. We are also leveraging collaborations with popular brands such as Vegemite to enhance local appeal and introduce new consumers to Taco Bell.
“Strong media investment is highlighting product innovation and lifting brand awareness, while greater accessibility via delivery channels is driving trial.
"We will continue to feature Taco Bell’s value credentials as a central element of its marketing strategy to bring new consumers into the brand and wow them with great tasting food at an affordable price.
"This has helped to support the recent growth in same store sales. And though we will begin to lap the rollout of Uber Eats in the second half, which will impact same-store-sales results, overall, we are pleased with the increasing strength in the foundations of the brand.”