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Highlights
- Collins Foods (CKF) reports challenging first-half results for FY25.
- KFC Australia revenue showed growth, but profits faced pressure from inflation and costs.
- Plans include seven new restaurants by the end of FY25, signaling future expansion.
Collins Foods (ASX:CKF), a prominent franchise operator for KFC and Taco Bell, has announced its half-year results for FY25, reflecting a mix of performance trends. While revenues showed marginal growth, the company faced significant headwinds from inflationary pressures and operational costs.
Collins Foods operates KFC outlets across Australia and Europe, along with Taco Bell locations in Australia. In the six months ending 13 October 2024, revenue from continuing operations rose modestly by 1.2% to $703.5 million. However, underlying net profit fell 23.8% to $23.7 million, and statutory net profit declined 52.2% to $24.1 million.
The company attributes these declines to increased labor and energy costs, alongside higher depreciation from its recent expansions and remodels. Net operating cash flow dropped 8.4% to $75.3 million, while the dividend per share was reduced by 12% to $0.11.
Performance by Segment
KFC Australia showed resilience, with revenue climbing 2.7% to $536.8 million. In contrast, KFC Europe witnessed a decline of 3.4% to $142.1 million. Taco Bell's Australian revenue also fell by 2% to $24.6 million. The company expanded its network by opening six new KFC outlets in Australia during the period.
A trading update highlighted early signs of recovery in some areas. Over the first seven weeks of the second half of FY25, KFC Australia recorded a 3.9% rise in total sales, with same-store sales increasing 0.8%. Conversely, KFC Europe faced continued challenges, with total sales down 1.6%. Taco Bell's sales remained flat, with a slight decline in same-store sales.
Future Outlook
Collins Foods noted improvements in Australia's cost landscape, anticipating slight deflation in certain product categories. However, labor and energy costs remain high. European operations have seen stabilizing costs, particularly in labor.
The company plans to open seven new restaurants in FY25's second half, with three in Australia and four in the Netherlands, reflecting its focus on strategic growth. Net debt has also reduced by $14.1 million, enhancing the company’s financial flexibility for further investment.
While Collins Foods faces ongoing sector competition and profitability challenges, its focus on expansion and network scale indicates a strategy aimed at long-term resilience in the fast-food industry.
