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Collins Foods Limited HY20 Results – Strong Result

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

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.

Collins Food Ltd - Strong Result

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).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

 

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