Collins Foods Ltd (ASX: CKF) this morning announced the settlement of Federal Court proceedings against the company. The Collins Foods share price is up 1.15% at the time of writing, and has climbed 13% to $9.67 this month from a low of $8.54 at the end of January.
Taco Bell settlement
In November, Taco Bill Mexican Restaurants (Australia) Pty Ltd took action against Collins Foods seeking to prevent it from operating Taco Bell restaurants in Victoria and Albury, New South Wales. Taco Bill claimed that members of the public would be mislead or deceived to believe the Taco Bell restaurants were operated by Taco Bill.
Collins Foods is a franchisee for Taco Bell in Australia and has been working with the Taco Bell brand to bring the offering to Australians. There are more than 7,100 Taco Bell restaurants operating worldwide.
Today, it was announced that a settlement has been agreed between Taco Bill, Taco Bell, and Collins Foods that will allow Collins Foods to continue to own and operate Taco Bell restaurants in Victoria. The settlement is subject to certain conditions including the filing of final orders in the Federal Court.
Collins Foods brands
Collins Foods also operates KFC outlets throughout Europe and Australia as well as Sizzler restaurants in Australia and Asia. Sizzler restaurants have suffered a decline in popularity in Australia over the last decade, with locations gradually closing.
Sizzler closure
This week, the closure of the Sizzler located in Rockhampton's Stockland Shopping Centre was announced. The restaurant will be shut down due to redevelopment plans for the mall. Collins Foods has confirmed Sizzler Rockhampton will not reopen when renovations of the mall are complete, with the restaurant shutting its doors after 31 years.
The closure leaves the number of Sizzler restaurants operating in Australia at just 9, located across Queensland, New South Wales, and Western Australia.
HY20 results
Despite the decline of the Sizzler brand, Collins Foods reported revenue up 9.2% to $448.8 million in HY20, with underlying net profit after tax (NPAT) up 9.1% to $23.9 million.
Net debt decreased $8.9 million with the company's net leverage ratio decreasing to 1.84 from 2.08 due to strong operating cash flow. Underlying earnings per share increased by 1.7 cents to 20.5 cents. A fully franked interim dividend of 9.5 cents was declared, up from 9 cents in HY19.
