The Collins Foods Ltd (ASX: CKF) share price has jumped 7% in reaction to the FY24 result.
This business operates hundreds of KFC restaurants across Australia and Europe, and it also has a relatively small Taco Bell network in Australia.
FY24 result
Here are some of the highlights from the 12 months to 28 April 2024:
- Revenue rose 10.4% to $1.49 billion
- Underlying EBITDA grew 12% to $229.8 million
- Underlying net profit after tax (NPAT) rose 15.6% to $60 million
- Operating cashflow improved 20.7% to $176.4 million
- Statutory NPAT jumped $64 million to $76.7 million
- Annual dividend per share increased 3.7% to $0.28
- Net debt improved $46.7 million year on year to $165.5 million
The business added 17 net new restaurants across the group and increased digital sales. Profit improved over the year thanks to sales growth, greater operational efficiency, and cost control. Improving profit margins is helpful for the Collins Foods share price because it suggests profit can accelerate.
KFC Australia experienced same store sales (SSS) growth of 3.8% in FY24, while KFC Europe SSS growth was 4.9%.
Nine new builds were added to the ASX share’s Australian KFC network, taking the national footprint to 279 locations. It also upgraded more than 70 restaurants to improve the customer experience, operational capacity and efficiency.
Pleasingly, Taco Bell saw revenue growth of 11.7% to $54.4 million, with SSS growth of 3.5%. Taco Bell’s underlying EBITDA was a loss of $0.7 million, down from a loss of $1.5 million in FY23.
Outlook for the Collins Foods share price
The company said sales in the first seven weeks of FY25 reflected the “continuation of a weaker consumer environment in Australia and Europe, as well as the lapping of strong growth in the prior year.”
KFC Australia’s total sales increased 1.5% during the period. Collins Foods said same-store sales were down 0.8%, it was “partially impacted by short-term cannibalisation” from the addition of new restaurants.
Total KFC Europe sales remained “relatively stable”, down 0.1%, with same store sales down 2.3% in Netherlands and down 2.8% in Germany.
These numbers may be better than what some investors had feared.
However, Taco Bell’s positive momentum has continued in FY25, with same store sales up 0.6%.
I think the outlook for the Collins Foods share price is very positive, particularly if the company can expand into new geographies. Collins Foods interim CEO and Managing Director Kevin Perkins said:
Current conditions remain challenging, however, they have not dampened our enthusiasm for growth. We’re continuing to grow our KFC network with Australian expansion in FY25 expected to be a little ahead of our development agreement commitment, and a number of new restaurants are planned for the Netherlands.
We’re also exploring and evaluating M&A opportunities for KFC in existing markets as well as complementary new geographies. Alongside our expanding KFC footprint, modernising our portfolio will drive continued growth through digital and delivery channels and elevate customer experience.
I think it’s one of the more promising ASX dividend shares on the market, so I’d be happy to buy some shares today.
