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Collins Food Ltd (ASX: CKF) is a KFC franchisee in Australia and Europe, a Taco Bell franchisee in Australia as well as the owner of Sizzler restaurants in Australia and the franchisor for Sizzler in Asia. Collins food has a market capitalisation of A$1.1 billion.
What are the key results of Collins Foods HY20 result?
Key features are as follows:
- Revenue (underlying) for HY20 is $448.8 million, up 9.2% from the corresponding period.
- Net Profit after Tax (underlying) for HY20 is $23.9 million, up 9.1% from the corresponding period.
- Basic earnings per share (underlying) for HY20 is 20.5 cents, up 9.1% from the corresponding period.
- Dividends per share for HY20 is 9.5 cents, up 5.6% from the corresponding period.
What are the main drivers of this positive result?
The strong result can be attributed to top line revenue growth of 8.9% from KFC Australia. Also, 2 new restaurants built and opened in the first half of FY20 with 4 additional restaurants opened subsequent to half year for KFC Australia. This increase in stores completed allowed for further revenue generations for the half year.
Another contribution to the positive result was the 5th restaurant opened during first half of FY20, with additional restaurants opened subsequent to half year. This allowed for further revenue generation from Collins Food Taco Bell business operations in Australia.
Finally, Sizzler Australia store sales grew at 4% during the half year. Two restaurants closed during first half of HY20, bringing half year restaurant count to 10.
Collins Food CEO, Graham Maxwell said:
Our KFC Australia network is the largest franchisee of KFC restaurants in Australia. This business reported strong same store sales growth over the first half of the current financial year of 4.9%, and importantly all states delivered growth. The first half financial result demonstrates the success of past initiatives implemented including the expansion of delivery, a successful focus on operational excellence and an ongoing commitment to product innovation.
What is the outlook for Collins Food?
The outlook for Collins Food is positive with several new stores from KFC and Taco Bell opening around Australia and Europe. However, it is important to note that discretionary spending on fast food is depend on income generation of economic agents. If wage growth continues to be stagnated, and domestic economic conditions in Australia and Europe continue to weaken, this could limit the ability for consumers to purchase this type of food, as it is not a necessity and as cheap as other food sources.
What is the market reaction?
The market reaction to Collins Food is positive. Collins Food share price is up around 6.5% and is currently trading at A$10.36. Collins Food has a forward P/E ratio of in the mid-twenties and an annual dividend yield of 2% (fully franked).
Disclaimer:
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
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