The Collins Foods Ltd (ASX: CKF) share price is pushing higher on Tuesday morning following the release of its full year results.
At the time of writing, the KFC-focused quick service restaurant operator's shares are up 4% to a record high of $13.25.
How did Collins Foods perform in FY 2021?
For the 12 months ended 2 May, Collins Foods reported a 12.4% increase in revenue to $1.07 billion. This was driven largely by its KFC Australia business, which reported a 13.8% increase in revenue to $900.4 million thanks to new store openings and same store sales growth of 12.9%.
This was supported by a 57.4% increase in Taco Bell revenue to $28 million, which offset a 0.6% same store sales decline from the KFC Europe business.
In respect to earnings, Collins Foods reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations (pre AASB 16) of $136.3 million, which was up 12.4% on the prior corresponding period.
On the bottom line, underlying net profit after tax from continuing operations was up 18.2% to $56.9 million.
This strong form allowed the company to declare a fully franked final dividend of 12.5 cents per share, bringing its total dividend to a fully franked 23 cents per share. This represents a 15% increase on FY 2020's dividend.
Management commentary
Collins Foods' CEO, Drew O'Malley, said: "Collins Foods successfully navigated the unprecedented challenges of COVID-19 to deliver another year of strong earnings growth in FY21. Our focus on people and operations was critical to this result, as our teams did an exceptional job of keeping our restaurants operating at a world-class level, often without the benefit of dine-in sales channels."
"KFC Australia was the standout performer with same store sales growing at a record rate of 12.9% and Underlying (pre AASB 16) EBITDA margins reaching 17.9%. As consumers turned to trusted brands and sought convenience, we responded with powerful brand marketing, combined with exciting initiatives in digital and an expansion of our delivery network. Digital and delivery continue to be pillars of our growth strategy for the KFC brand," he added.
And while things were not as positive in Europe, management remains positive on its prospects in the potentially lucrative market.
Mr O'Malley explained: "KFC Europe had a more challenging operating environment with margins impacted by ongoing lockdowns and dining restrictions, in place for most of the year. Nonetheless, we were able to leverage weakness in the market to advance our strategic interests there, recently executing a more favourable Development Agreement and increasing our footprint in the Netherlands with the acquisition of a (net) eight new restaurants. Both of these moves will position the European business unit for a favourable recovery."
Outlook
No guidance was provided for the year ahead. However, management spoke positively about the future both at home and overseas.
Mr O'Malley said: "With continuing strong cash generation and a healthy balance sheet, Collins Foods is well positioned to continue to pursue strategic organic and acquisition growth opportunities across the Group in the year ahead."
In Australia, the company has signed an agreement to build a minimum of 66 new KFC restaurants by 2028. Whereas in Europe it has been incentivised to drive growth and expects up to four new builds per year in the Netherlands going forward. Collins Foods is also monitoring the landscape for opportunities to increase openings in Germany following improvements in business performance.
Finally, Taco Bell is on track for accelerated development in FY 2022. This will be supported by ongoing consumer demand for Mexican food in Australia, and a refined marketing approach. It is looking at 9 to 12 new restaurants being opened in the year ahead.
The CEO concluded: "Our team remains aligned on delivering on our core mission of Restaurants Done Better. Our continued emphasis on operational execution, people development, and excellence in store development will underpin our pursuit of sustainable growth in FY22 and beyond."
