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KFC expansion fuels Collins Foods growth

AAP logoAAP 29/11/2016 Petrina Berry

Australia's largest KFC restaurant operator Collins Foods will pursue more acquisitions domestically and wants to use its recent buys in Germany to expand the fried chicken brand across Europe.

Collins Foods, which also owns Sizzler restaurants and emerging hot dog outlets Snag Stand, made a net profit of $15.4 million for the first half of the year, up 7.8 per cent from the same period a year ago.

Revenue was up 4.7 per cent at $282.5 million for the six months to October 16, despite KFC same store sales declining 0.6 per cent on the previous half. The company said the decline came in the wake of strong comparable growth a year ago.

Total KFC sales were up 6.4 per cent at $249.6 million in the latest half, due to the increase in restaurant numbers following acquisitions.

Collins Foods bought 13 KFC outlets in NSW and Victoria during the half-year, establishing itself as the biggest KFC franchisee in Australia with 190 stores.

The acquisitions contributed $7.8 million in revenue.

"We will continue to pursue further acquisition opportunities as they arise, while also continuing to grow and refurbish our existing portfolio of restaurants," chief executive Graham Maxwell said on Wednesday.

He said Queensland and Western Australia, both hit by the mining slowdown, had begun to pick up again with sales growing.

"Queensland is still stronger than WA. The Queensland economy benefits more from tourism and education. It has a more balanced economy," he said.

Flat prices for chicken compared to rising beef prices helped give KFC a competitive advantage over its "burger compatriots," Mr Maxwell added.

Collins Foods is making its first foray into Europe, announcing in October that it is buying 11 KFC restaurants in Germany.

"There's significant growth opportunity for us in the world's fourth-biggest economy, where there's significant under-representation of the KFC brand," Mr Maxwell said.

"For every 37,000 people in Australia there is one KFC, while in Germany there's only one KFC per 580,000 people."

He said Germany's 142 KFC restaurants were up against 1,500 MacDonalds and 700 Burger Kings because the brand was a late entrant into the market.

Sizzler's statutory revenue was down 11.1 per cent at $31.1 million.

However, its same store sales growth improved on the previous year. It was down just 0.6 per cent compared to the 12 per cent fall in the same period the previous year.

The better sales growth drove Sizzler's earnings before interest, taxes, depreciation and amortization up 27.3 per cent to $2.7 million.

The results have impressed investors who pushed Collins Foods' share price 30 cents, or 5.4 per cent, higher to $5.90 at 1522 AEDT.

KFC EXPANSION LIFTS GROUP:

* Net profit up 7.8pct to $15.4m

* Revenue up 4.7pct to $282.5m

* Interim dividend up two cents to 8.0 cents, fully franked.

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