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Collins Foods shareholders get dividend increase

Shareholders in the fast-food group, Collins Foods (ASX:CKF), will receive an increase of half a cent in their interim dividend, bringing it to 12.5 cents per share. This comes after the operator of KFC and Taco Bell stores reported significant growth in revenue, same-store sales, and earnings for the first half of the 2023-24 financial year.

Revenues from continuing operations for the half-year period ending on October 15th surged by an inflation-beating 14.3% to $695.2 million, compared to the first half of 2022-23. The company achieved these gains despite facing what it described as “challenging conditions,” which it expects to persist into the current second half.

In the domestic KFC restaurant segment in Australia, revenues increased by 9% to $522.9 million, while the company’s European KFC restaurants segment saw a remarkable 35.3% increase to $147.2 million. Taco Bell revenues also rose to $25.1 million, marking an 18.9% increase. The company attributed this overall revenue growth to same-store sales growth and new restaurant openings, despite inflationary pressures.

As a result, the group’s underlying earnings before interest, tax, depreciation, amortisation, and impairment (EBITDA) surged by 16.7% to $109.9 million for the latest half.

Statutory net profit from continuing operations for the same period reached $29.4 million, an increase of $18.9 million compared to the previous corresponding period, which included the impairment of Taco Bell restaurant assets. Directors explained that “revenue growth of $85.7 million was partially offset by inflationary pressures in energy, labor, and food costs.”

The company’s cash and cash equivalents as of October 15, 2023, amounted to $98.1 million, up by $17.9 million from April 30, 2023, while net debt was reduced to $173 million from $191 million a year earlier.

The interim dividend was set at 12.5 cents per share, up from 12 cents per share previously.

CEO Drew O’Malley stated that the company’s performance in the first half underscores the underlying strength of their business in challenging economic conditions. He emphasised their commitment to delivering value to consumers and highlighted their growth in digital channels and value offerings.

O’Malley reported continued sales growth in the first six weeks of the second half, with positive trends in KFC and Taco Bell same-store sales. He expressed expectations of ongoing consumer pressures and operational challenges but reaffirmed the company’s focus on sustainable long-term growth and investments in new restaurants, digital innovation, and customer experience improvements.

Collins Foods plans to expand its KFC network and explore growth opportunities in the Netherlands and across Europe. They are encouraged by Taco Bell’s recent results in Australia and remain committed to delivering taste, value, and operational excellence for the brand’s success.

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