COLLINS BACK IN THE BLACK

Written on the 4 September 2013

COLLINS BACK IN THE BLACK

KFC’s return to sales growth last financial year pleased Collins Foods Limited (ASX:CKF) CEO and managing director Kevin Perkins, but there is still much work to do on the Sizzler business.

The company’s revenue is up 4.3 per cent to $423.9 million, while earnings per share is 17.6 cents, up 22.2 per cent compared to the previous year. Operating cash flow is up 15.7 per cent to $41.2 million.

The fried chicken restaurant recorded same store sales growth of 4.2 per cent in FY13, a significant improvement from the negative result seen in the previous year.

“The subdued retail environment over the 2013 financial year saw customers increasingly driven to value deals, which have been important in driving sales growth,” says Perkins at the company’s AGM today.

“Importantly, we were able to successfully generate growth in a way that did not cannibalise existing sales, allowing us to sustainably grow revenues.”

Perkins says the company’s summer advertising campaign, headed by its cricket sponsorship, was successful in driving the positive sales trend.

The company is on track with its KFC rollout and 12-store refurbishment program and there are plans for between five and seven new restaurants this financial year, with four scheduled to open before December.

Perkins says new restaurants have performed strongly and the further rollout of new stores will seek to capitalise on the popularity of the popularity of free standing and service station restaurants.

“Food court stores continue to be hampered by the weak retail environment showing signs of improvement during the current year as a result of operational initiatives that have been undertaken.”

Sizzler is still battling a downturn in the casual dining sector and recorded a decline in same store sales growth of 2.4 per cent, an improvement on 2012. There are few signs of improvement in FY14.

“Sizzler same store sales performance has been softer than expected in the first few months of 2014, with price sensitivity and relevance continuing to hamper sales, although restaurants outside the Brisbane region have been performing better.”

Perkins says a strategy for the sustainable growth of Sizzler is in its early stages. It will review the format, layout and design of the restaurants, aiming to build an “investable” business model while reframing the brand.

CKF shares were trading down 1.12 per cent today at $1.77 per unit.


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