Collins Foods Ltd (ASX: CKF) shares are down despite revealing more growth in its FY21 result.
Collins Foods is a fast food franchisee business. It operates a large number of KFCs across Australia and Europe. It also has a growing number of Taco Bells in Australia.
What did Collins Foods announce?
Total revenue increased 12.4% to $1.07 billion. KFC Australia revenue rose 13.8% to $900.4 million, with same store sales (SSS) growth of 12.9%.
KFC Europe SSS declined by 0.6% with the impact of COVID-19 on the business. Taco Bell revenue jumped 57.4% to $28 million.
Underlying EBITDA (EBITDA explained) increased 12.4% to $136.3 million, whilst statutory EBITDA went up 5.2% to $184.2 million.
Underlying net profit after tax (NPAT) rose 18.2% to $56.9 million whilst statutory net profit grew 5.1% to $32.9 million.
Balance sheet and dividend
Collins Foods generated net operating cash flow was $95.9 million, slightly down from $96.4 million last year.
Net debt improved from $203.2 million in FY20 to $177.4 million in FY21.
The Collins Foods board declared a fully franked final dividend of 12.5 cents – up 19%. That brought the full year dividend to 23 cents per share, up 15%.
Outlook for Collins Foods
The company ended the financial year with 16 Taco Bell restaurants, with 12 in Queensland and four in Victoria. Nine to 12 new restaurants are planned for FY22 as the rollout strategy ramps up.
In the Netherlands, the company has build targets of two to four new KFC restaurants per year. It acquired eight restaurants in the second half of FY21. These restaurants widen the geographic footprint beyond the existing restaurant network and will provide access to new development areas.
The company’s approach to deploying capital in Germany is expected to be more selective in the near term.
In Australia, it opened 11 new restaurants during the year.
Collins Foods said it’s now operating under a new development agreement to build a minimum of 66 new restaurants by 2028 and expects to build ahead of the required rate at nine to 12 new restaurants in FY22.
The business has plans to roll out kiosks in 30 to 50 restaurants and a further 60 digital menu boards in drive-thru lanes in FY22, towards an ultimate target of having digital menu boards in all restaurants within three years.
It also said it expects to open its first Taco Bell restaurants in Perth in late 2021.
Summary thoughts on Collins Foods and the share price
Collins Foods is one of those businesses that can keep steadily growing as it rolls out more stores/outlets. Europe is a big market that it can keep growing in for a long time to come. Taco Bell also has a promising future.
It’s a good business, but it’s close to its all-time high and it’s valued at a high price/earnings ratio. Whilst I’d like to have it in my portfolio, I think I’m happy sitting on the sidelines at this elevated price.
