Collins Foods share price jumps 11% on FY22 results

This KFC restaurant operator had a strong year…

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Key points

  • Collins Foods has released its full year results and delivered solid revenue and profit growth
  • This was driven by growth across the business
  • Management revealed that FY 2023 has started positively

The Collins Foods Ltd (ASX: CKF) share price is on the charge on Tuesday morning. This follows the release of the KFC restaurant operator's full-year results.

At the time of writing, the company's shares are up 11% to $9.95.

Collins Foods share price higher on full year results

  • Revenue up 11.1% to $1,184.5 million
  • Statutory earnings before interest, tax, depreciation and amortisation (EBITDA) up 12.5% to $297.2 million
  • Underlying EBITDA up 12.6% to $209.2 million
  • Underlying net profit after tax up 25% to $59.7 million
  • Fully franked final dividend up 20% to 15 cents per share

What happened during FY 2022?

For the 12 months ended 1 May, Collins Foods delivered an 11.1% increase in revenue to $1,184,5 million. This was driven by a combination of same store sales growth and new store openings.

For the KFC Australia business, where the company was cycling record same store sales, the company reported a 6.1% increase in revenue to $955.5 million. This was underpinned by same store sales growth of 1.4% and the opening of 10 new restaurants. Supporting this growth was its digital and delivery offering, which accounted for 16.9% of sales in the second half.

In Europe, Collins Foods reported a 41.2% jump in revenue to $190.4 million. This reflects a 16.8% increase in same store sales, the acquisition of 15 restaurants, and the opening of 3 new restaurants.

The Taco Bell business delivered a 27.5% increase in revenue to $35.8 million in FY 2022. This was driven by the opening of 4 new restaurants, which offset an 8.1% decline in same store sales. Pleasingly, the business returned to same store sales growth in the fourth quarter.

Finally, the Sizzler Asia business posted a 10.8% increase in revenue to $2.8 million.

On the bottom line, thanks to stronger margins, Collins Foods' underlying net profit after tax grew 25% to $59.7 million. This allowed the board to declare a final fully franked dividend of 15 cents per share, bringing its full-year dividend to 27 cents per share. This represents a 17% year on year increase.

Management commentary

Collins Foods managing director and CEO, Drew O'Malley, was pleased with the company's performance. He said:

KFC Australia managed to deliver positive same store sales growth for the full year, despite cycling unprecedented growth in the prior year. The KFC brand has never been stronger in Australia, and metrics around quality, value, and purchase intent are at record levels, particularly important in times like these. At the same time, we continue to amplify our strengths in convenience with further growth in digital, delivery and innovation, including the introduction of drone delivery and, more recently, UberEats.

KFC Europe had an impressive year of recovery, with same store sales growth and margins above pre-COVID FY19 levels. We cemented our position in the Netherlands with acquisitions taking us to 55% of the franchisee market and the commencement of the Netherlands Corporate Franchise Agreement. We are already seeing the benefits of effective control with improved marketing campaigns and an expanding development pipeline, as we build toward scale in this market.

Taco Bell returned to positive same store sales growth in Q4 FY22. We have been making additional investments in media to support core brand positioning around taste and value. We have also seen new store openings perform ahead of expectations, providing confidence in the brand's potential as we look to accelerate the pace of development.

Outlook

O'Malley remains positive on the company's outlook despite the challenges it is facing from inflation and supply chain shortages. He commented:

The global environment continues to exhibit unprecedented challenges with inflationary pressures and supply chain shortages. Our QSR brands are nonetheless in excellent shape to navigate this landscape. Their proven track record of consumer appeal regardless of economic conditions, combined with our relentless pursuit of operational excellence, ensures we are well positioned to manage through the current inflationary environment.

He also revealed that sales results over the first seven weeks of FY 2023 have been encouraging. This is particularly the case in Europe, with all business units reporting positive same store sales.

And while there has been some "unavoidable" short term pressure on margins, management expects them to recover in the mid-term.

Finally, over the next 12 months, the company is expecting to grow its store footprint by 20 to 29 new restaurants.

O'Malley concludes:

Collins Foods possesses the key ingredients to weather turbulent times – a strong balance sheet, world-class brands, and a passionate and dedicated team of experienced operators. We continue to monitor the landscape for acquisition opportunities that fit our portfolio and capabilities. And ultimately, we believe that by staying focused on providing unmatched experiences for our customers and people, our long-term prospects are as bright as ever.

Motley Fool contributor James Mickleboro has positions in Collins Foods Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Collins Foods Limited. The Motley Fool Australia has recommended Collins Foods Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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