Collins Foods Limited Half-Year Financial Report: Profit Declines Amid Modest Revenue Growth
CKF (CKF) Share Update December 2024 Monday 2nd
Collins Foods Limited Reports 52.1% Drop in Half-Year Net Profit
Collins Foods Limited (ASX: CKF), a major franchisee of KFC and Taco Bell in Australia and Europe, has announced its half-year financial results, revealing a significant decline in net profit despite a slight increase in revenue.
Instant Summary:
- Revenue increased by 1.2% to $703.5 million.
- Net profit dropped by 52.1% to $24.1 million.
- Interim dividend declared at 11.0 cents per share, down from 12.5 cents.
- EBITDA decreased by 6.6% due to inflationary pressures.
Financial Performance Overview
For the half-year ending 13 October 2024, Collins Foods Limited reported a modest revenue increase of 1.2%, bringing total revenue to $703.5 million. This growth was primarily driven by a 2.7% increase in revenue from Australian KFC restaurants, which totaled $536.8 million. However, the European KFC segment saw a decline of 3.4%, with revenues at $142.1 million, while Taco Bell revenues decreased by 2.0% to $24.6 million.
The company's net profit for the period was significantly impacted, falling by 52.1% to $24.1 million. This decline was exacerbated by the absence of a $20.2 million profit from the sale of Sizzler Asia, which was included in the previous year's results. The statutory net profit from continuing operations was also down by $5.2 million compared to the prior period.
Dividend and Cash Flow
Collins Foods declared an interim dividend of 11.0 cents per share, fully franked, payable on 6 January 2025. This represents a decrease from the previous interim dividend of 12.5 cents per share. The company's Dividend Reinvestment Plan remains active, allowing shareholders to reinvest dividends into additional shares.
Net cash flow from operations was $75.3 million, a decrease of $6.8 million from the previous period, reflecting lower EBITDA. Investment activities resulted in a net cash outflow of $34.9 million, due to continued investments in new restaurants, digital upgrades, and sustainability initiatives.
Challenges and Strategic Focus
The decline in net profit can be attributed to a combination of factors, including ongoing inflationary pressures affecting labor, energy, and cost of sales. Additionally, consumer disposable income challenges in Europe have impacted sales growth. Despite these challenges, Collins Foods continues to focus on expanding its restaurant network and enhancing operational efficiencies.
The significant drop in net profit and the reduced dividend payout could negatively impact Collins Foods' stock price, as investors may react to the lower-than-expected financial performance. The company's strategic focus on expansion and efficiency improvements will be crucial in regaining investor confidence.
Investor Reaction:
Analysts are likely to express concern over the profitability decline, particularly in the European market. The company's ability to navigate inflationary pressures and consumer spending challenges will be closely watched by investors.
Conclusion:
Investors should consider the potential long-term impacts of Collins Foods' strategic initiatives and market conditions. Monitoring the company's performance in upcoming quarters will be essential for assessing its recovery and growth prospects.