Collins Foods shares are tanking as KFC acquisitions drag on profit

Photo: KFC/ Facebook.

Fast food operator Collins Foods posted a 17.5% fall in half year profit to $12.74 million, hit by the cost of expanding its KFC empire.

Revenue was 14% higher at $282.49 million. Underlying net profit after tax — adjusted to exclude the restaurant acquisitions — was up 3.7% to $17.4 million.

A short time ago, Collins Food shares were down 5.7% to $5.88.

Collins Foods, also the owner of Sizzler restaurants in Australia and the franchisor for Sizzler in Asia, announced in June it was paying $110.2 million to acquire another 28 KFC restaurants in Tasmania, South Australia and Western Australia.

The deal with Yum! Brands gives the company 225 KFC restaurants in Australia, making Collins Foods the country’s largest KFC chain, as this map shows:

Source: Collins Foods

Collins Foods is also expanding in Europe, acquiring 16 restaurants in the Netherlands to add to its chain in Germany.

CEO Graham Maxwell says the company has invested for future growth.

“Leveraging our success in Australia, the integration of our offshore acquisitions is progressing,” he says.

“Our Netherlands business is performing to expectations, and a transformation of our German business is underway.”

This month, Collins Foods launched its first Taco Bell store at Annerley, Queensland. The company plans to launch a second restaurant in the first half of the 2018 calendar year

“Taco Bell presents an exciting opportunity to introduce a new Mexican food brand to Australia,” says Maxwell.

“Already, we are pleased with the customer acceptance of the Taco Bell brand and look forward to the rollout of additional stores in 2018.”

Revenue at Sizzler restaurant is down 23% to $24 million due to fewer restaurants in Australia, where are just 14 still operating.

However, Sizzler Asia continues to expand, with two restaurants opened in Thailand and one in China, bringing the regional total to 71.

Collins Food has decided to exit the Snag Stand by year end.

The company declared a steady fully franked interim dividend of 8 cents a share.

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