Collins Foods Ltd (ASX: CKF) shares are on the slide on Tuesday morning.
In early trade, the ASX 200 stock was down as much as 8% to $7.95.
The KFC restaurant operator's shares have rebounded a touch since then but remain down 3% at the time of writing.
This follows the release of the company's half year results this morning.
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ASX 200 stock tumbles on half year results
- Revenue from continuing operations up 1.2% to $703.5 million
- Underlying EBITDA from continuing operations down 6.6% to $102.7 million
- Underlying net profit after tax down 23.8% to $23.7 million
- Fully franked interim dividend down 12% to 11 cents per share
What happened during the half?
For the six months ended 13 October, Collins Foods had a tough time due to the challenging consumer environment impacting same store sales (SSS) and persistent inflation weighing on margins.
For the first half, the ASX 200 stock reported a modest 1.2% increase in revenue from continuing operations to $703.5 million. This reflects modest growth in Australia being offset by softness in Europe.
KFC Australia revenue was up 2.7% to $536.8 million, whereas KFC Europe revenue was down 3.4% to $142.1 million. The smaller Taco Bell business posted a 2% decline in revenue to $24.6 million.
The company's underlying EBITDA from continuing operations was down 6.6% to $102.7 million, with margins impacted by a combination of flat same-store sales and ongoing inflationary pressures.
And on the bottom line, underlying net profit after tax from continuing operations was down 23.8% to $23.7 million. This was due to lower EBITDA and higher depreciation on an increasing store footprint.
In light of its lower profits, the Collins Foods board was forced to cut its fully franked interim dividend by 12% to 11 cents per share.
One positive was that the ASX 200 stock continued to generate strong cash flows and ended the period with lower net debt. Management believes that this leaves it with significant capacity for investment in growth opportunities.
Outlook
Management revealed that sales in the first seven weeks of the second half reflected the continuation of a weaker consumer environment in Australia and Europe.
KFC Australia's total sales increased 3.9% in the first seven weeks with SSS up 0.8% representing a continuation of the gradual improvement in sales trends during HY25. Total KFC Europe sales were down 1.6% over the period.
Looking ahead, management expects its underlying EBITDA margin to be in range of 14.2% to 14.7% for the full year. This compares to 14.6% for the first half.
The ASX 200 stock's CEO, Xavier Simonet, said:
I am delighted to be leading Collins Foods and am excited about the potential of our business moving forward. The Company operates world-class brands in an exceptionally resilient category and in attractive markets. The business has strong fundamentals and is well positioned to benefit as consumer confidence returns.
Broker reaction
Goldman Sachs has been looking at the result and was pleased with what it saw. It commented:
New Collins CEO, Xavier Simonet, has reported the company's first result under his leadership with the 1H25 numbers in-line at the Ebitda level and above expectations at Npat. Ebitda margins are guided to be challenged in 2H25, although current consensus numbers are within the guided range. Importantly the sales growth trend in KFC Australia has incrementally improved.
