Collins Foods Limited Reports Record Revenue and Growth

Collins Foods Limited ((AU:CKF)) has held its Q2 earnings call. Read on for the main highlights of the call.

The recent earnings call for Collins Foods Limited painted a picture of robust performance, marked by record revenue and substantial growth in key financial metrics. The company’s operational excellence and sustainability achievements were highlighted as significant contributors to this success. However, the call also acknowledged challenges in Europe, particularly in the Netherlands, and concerns over potential wage underpayments and anticipated cost pressures.

Record Revenue and Growth

Collins Foods achieved its highest first half-year revenue in the company’s history, with a 6.6% increase compared to the previous year. This impressive growth was reflected in the underlying EBITDA, which rose by 11%, and the underlying NPAT, which saw a significant increase of 29.5%.

Debt Reduction and Strong Cash Flow

The company successfully reduced its net debt by $20 million, bringing it down to $138.9 million. This reduction was facilitated by strong cash flows, which also supported capital investment, dividend payments, and further debt reduction.

Operational Excellence and Margin Improvement

KFC Australia reported a 2.3% growth in same-store sales, with EBITDA up by 9.4% and margins improving by 80 basis points. These results were driven by a focus on operational improvements and investments in digital channels.

Sustainability Achievements

Collins Foods made notable strides in sustainability, achieving an 8% reduction in food waste in Australia and a 25% reduction in Europe. Additionally, the company installed its largest solar installation in Germany, underscoring its commitment to sustainable practices.

Challenges in Europe

The Netherlands faced cost of living pressures, resulting in only a 0.4% increase in same-store sales. Furthermore, avian flu-related poultry cost inflation hindered margin improvements in the region.

Taco Bell Australia Revenue Decline

Taco Bell Australia experienced a 3.9% decline in revenue, attributed to a weaker consumer environment. Discussions regarding the transition to new ownership are still ongoing.

Potential Wage Underpayments

Collins Foods has set aside a $1.3 million provision for potential wage underpayments related to previous years, highlighting ongoing compliance challenges.

Commodity and Labor Cost Inflation Concerns

The company anticipates a return to cost inflation for key commodities like poultry and continues to face labor inflation, which could impact future margins.

Forward-Looking Guidance

CEO Xavier Simonet emphasized the company’s record performance, with a 6.6% revenue increase to $750.3 million, driven by strong operational execution and product innovation. Despite challenging consumer environments, Collins Foods upgraded its full-year outlook, targeting NPAT growth in the mid- to high teens. The company declared a fully franked interim dividend of $0.13 per share, with ongoing investments in digital channels and new product launches.

In summary, Collins Foods Limited’s earnings call highlighted a strong overall performance, driven by record revenue and growth in key financial metrics. While operational excellence and sustainability achievements were notable, challenges in Europe and concerns over cost pressures and compliance issues were also addressed. The company’s positive forward-looking guidance reflects confidence in continued growth, despite potential headwinds.