Thanks to Covid, fast-food giant Collins Foods turned in a better-than-expected full-year result with revenue topping the billion-dollar level for the first time.
Shareholders benefitted with a 19% boost to final dividend to 12.5 cents a share. That took the total for the year to 23 cents a share, up 15% from the 20 cents paid for 2019-20.
Investors, however, were unimpressed as the shares fell more than 5.6% to $11.98.
The KFC franchise owner told investors on Tuesday that revenue for the year to May 2 grew 12.4% to $1.07 billion, with underlying net profit after tax up 18.2% to $56.9 million.
KFC Australia drove most of these gains, with same-store sales for the division up 12.9% and underlying EBITDA soaring 21.6% to $161.4 million as Australians ordered in while locked down.
CEO Drew O’Malley said in the ASX release:
“Collins Foods successfully navigated the unprecedented challenges of COVID-19 to deliver another year of strong earnings growth in FY21.
“Our focus on people and operations was critical to this result, as our teams did an exceptional job of keeping our restaurants operating at a world-class level, often without the benefit of dine-in sales channels.”
As the world emerges from the COVID-19 crisis, we intend to build on this foundation with further investments in our core operations to provide unmatched experiences for our customers and our people.
“Digital and delivery continue to be pillars of our growth strategy for the KFC brand.
“KFC Europe had a more challenging operating environment with margins impacted by ongoing lockdowns and dining restrictions, in place for most of the year.
Nonetheless, we were able to leverage weakness in the market to advance our strategic interests there, recently executing a more favourable Development Agreement and increasing our footprint in the Netherlands with the acquisition of a (net) eight new restaurants. Both of these moves will position the European business unit for a favourable recovery.
The reborn Taco Bell Australia improved with 57% sales growth to $28 million (from a low base and footprint) and gain in store level profitability.
“In addition to strong same store sales growth, Collins Foods built and opened 18 new restaurants across the group, consisting of 11 for KFC Australia, four for Taco Bell and three for KFC Europe, funded out of strong operating cash flow.
“While maintaining an attractive dividend payout, surplus cash flow has been used to further strengthen our balance sheet, reducing Net Debt and affording capacity for further expansion opportunities as and when they arise,” Mr O’Malley said in the statement.
Collins opened 11 new KFCs during the year to May 2, did 17 major KFC remodels, 25 minor upgrades and added external digital menu boards, which are now at a third of drive-through KFCs stores.
Collins Foods plans to build nine to 12 new Taco Bells this financial year, adding to the existing 16, which are mainly in Queensland, while Victoria has four.
“We are now operating under a new development agreement to build a minimum of 66 new restaurants by 2028, and expect to build ahead of the required rate at nine to 12 new restaurants in financial year 2022,” Mr O’Malley said.
As with so many other retailers and other businesses, Collins now has a big focus on lifting its digital involvement, including contactless ordering, click and collect, kiosks currently being trialled in an initial 13 KFC restaurants and plans to roll them out in 30 to 50 restaurants this financial year.
All this will take money and perhaps that’s one of the reasons the shares fell more than 5% – investors just don’t like companies reinvesting in their businesses, no matter what they say.
