Collins Foods sees profit boost with KFC stores

Posted by AFN Staff Writers on 29th June 2016

KFCASX-listed food group, Collins Foods, has reported profit growth for the 2016 financial year largely thanks to its KFC restaurants.

Collins Foods, which owns KFC and Sizzler restaurants throughout Australia, reported an underlying earnings before interest, taxes, depreciation and amortization (EBITDA) of $74.6 million. This was a 10.7 per cent increase on its 2015 financial year result.

The company’s revenue increased by 0.5 per cent to $574.3 million.

KFC’s performance

Chief Executive Officer of Collins Foods’, Graham Maxwell, said its KFC stores performed strongly across the past 12 months.

“The performance of the KFC restaurants in Western Australia and Northern Territory which we acquired in 2014 has continued to improve and the recent transactions to acquire 13 KFC restaurants in the New South Wales/Victoria border area provides further opportunities for growth across Australia,” Maxwell said.

Throughout the financial year Collins Foods built six new KFC stores, performed major remodels on 20 and saw overall same store sales increase by 3.1 per cent.

“Strong sales across our KFC restaurants were driven by excellent core product offerings combined with new product innovations and good value offers that kept customers coming back,” Maxwell said.

“We continue to take a disciplined approach to controlling costs and improving efficiency and have achieved further margin improvements across all restaurants.”

Sizzler down in Australia but steady in Asia

Collins Foods says its Sizzler restaurants within Australia continue to be managed as a non-core business and were not allocated any capital for growth in the financial year.

“Despite the decline in sales, our ongoing focus on cost management enabled margins to be held, which in turn led to a positive EBITDA contribution for the period,” Maxwell said.

Sizzler’s revenue however declined throughout the year, falling by 17.9 per cent when compared to the prior financial year. The fall was partly attributed to the closure of four restaurants.

Collins Foods reported that its Asian-located Sizzler restaurants continue to contribute steady earnings and offer some development opportunities.

“During FY17 we will continue to monitor our remaining restaurants closely and take appropriate action where necessary,” Collins Foods’ release to the Australian Securities Exchange said.

Snag Stand

Collins Foods said it has decided to buy the remaining share of the gourmet sausage chain it did not own.

“We are focused on refining the brand and economic model for Snag Stand in order to position it for further growth in the future,” Maxwell said.

Snag Stand was first established in Australia in 2011 by entrepreneur, Philip Blanco, who worked on growing Gloria Jeans and T2 tea stores prior to setting up Snag Stand.

Collins Foods now owns six Snag Stands across Australia and there is one franchised store.

Strategy and top priorities

“Our priorities for KFC are to focus on top line growth, continue the disciplined approach to operational management to maintain margins in Queensland and to unlock further margin opportunities in Western Australia and Northern Territory,” Maxwell said.

The company says it plans to open up to eight new KFC stores in its 2017 financial year and it hopes to undertake further major remodels. It says it will evaluate further acquisition opportunities.

“We will also embed control of Snag Stand and continue to refine its brand positioning and economic model,” Maxwell said.

“Sizzler Asia will continue to grow with plans for several new restaurant openings across Thailand and China in FY17.

“With further growth anticipated in the 2017 financial year, we expect continued increased shareholder returns as we deliver on our growth plans,” Maxwell stated.