annual queensland conference - morgans
TRANSCRIPT
Slide 19 October 2013
SECTION 2 – KFC returns to growth
SECTION 3 – Sizzler in transition
SECTION 4 - Financial information
COLLINS FOODS LIMITED 2
COLLINS FOODS LIMITED 3
Our history and background
COLLINS FOODS LIMITED 4
KFC returns to growth
COLLINS FOODS LIMITED 5
Key statistics snapshot
Market share – major players
8.1% 10.0% 10.8% 18.2% 52.9%
Other (includes Quick Service Restaurants, Domino’s Pizza Enterprises Limited, Eagle Boys Dial-a- Pizza Pty Limited and Boost Juice)
McDonald’s Australia Holdings Limited (Industry brand names – McDonald’s)
Yum! Restaurants Australia Pty Limited (Industry brand names - KFC and Pizza Hut)
Competitive Foods Australia Pty Ltd (Industry brand names - Hungry Jack’s)
COLLINS FOODS LIMITED 6
– SSSG of 4.2% (FY12: down 1.8%)
– free-standing and service centre locations driving growth
– new restaurants performing well
• EBITDA down 4.9%* to $44.7m
– lower gross margin from input pressures and promotional discounting
– one-off labour savings in prior year
– energy cost increase in line with expectations, primarily from carbon tax
– labour productivity and energy reduction initiatives partly offsetting cost pressures
$million FY13 FY12* Change
Restaurants: – average – period end
EBITDA 44.7 47.0 4.9%
% margin 14.0% 15.6% 160bps
EBIT 33.3 35.7 6.7%
% margin 10.5% 11.9% 140bps
* FY12 numbers are pro forma measures, which differ from statutory presentation to reflect the full year impact of the operating and capital structure of the Group that was established upon the IPO and capital reconstruction together with the elimination of IPO costs and related adjustments which are not expected to recur in the future. 290
295
300
305
310
315
320
*FY2012 & FY2011 - Proforma Results
COLLINS FOODS LIMITED 7
KFC promotions driving sales…
• WOW dinners – 9 for $9.95 value offer, keeps showing increase in demand versus prior year
• Successful Spring Campaign with a new variant that mixes 2 ideas loved by Australians, KFC Zinger flavour and pies
• Breakfast trial including coffee, introduced in several stores in May/June, keeps strengthening its product demand
• ‘Goodification’ continuing with emphasis on preparation in-store, ingredients and providence
• Continued focus on increasing customer transactions in all store types through the Value Layer
…through targeted ‘value’ deals and new innovative menu items
COLLINS FOODS LIMITED 8
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
0.0
5.0
10.0
15.0
20.0
25.0
KFC Capex and Depreciation
Depreciaton Maint / Systems Refurbishment / Rebuild / Relocate New Units New Unit Builds
N e w
Opened 11 September 2013
Capital spend $1,169.5k Projected WSA $46.8k Actual WSA $58.5k (2 week average only)
Wurtulla
Opened 12 September 2013
Capital spend $1,222k Projected WSA $45.5k Actual WSA $70.5k (2 week average only)
Chinchilla
Re-opened 19 June 2013
Kallangur (REIMAGE)
Gympie (REBUILD)
• Overall revenue flat at $105.6m with Australian SSSG down 2.4%
− casual dining sector impacted more than QSR in current economic climate
− price sensitivity and ‘relevance’ continue to hamper sales
− restaurants outside of Brisbane performing better
• EBITDA down $0.6m to $10.1m
− margin tightened 60bps
limited price increases unable to fully offset input cost pressures
promotional discounting squeezing margins
labour productivity and energy reduction initiatives offsetting labour and utilities cost pressures
* FY12 numbers are pro forma measures, which differ from statutory presentation to reflect the full year impact of the operating and capital structure of the Group that was established upon the IPO and capital reconstruction together with the elimination of IPO costs and related adjustments which are not expected to recur in the future. ** Australia only
$million FY13 FY12* Change
Restaurants: – average** – period end**
− detailed menu development
− lunch menu implemented and dinner menu currently being tested
• Introducing more relevant and frequent food news through a stronger marketing calendar
• Using more effective promotional tactics to drive transactions during softer periods of trade specifically early week
• Leveraging and building on the ‘Now You’re Talking’ campaign and ‘The Legendary Salad Bar’
• Introducing a series of initiatives to improve in-store customer experience – from enhanced hospitality through to more physical aspects such as plateware, tableware and uniforms
• Continuing to review all areas of the business to identify ways to reduce costs
COLLINS FOODS LIMITED 14
Sizzler strategic review at core of transformation
• Review of Sizzler format, layout and design for a cost efficient and ‘investable’ model
− design and layout of a smaller footprint
− ideal seating capacity and flow
− salad bar format layout and design
− improved store economics
• Introduce a more contemporary store design that reflects next generation of Sizzler
• Reframe brand positioning to be more relevant to changing consumer landscape
• Integrate brand communication to effectively express brand proposition
• First new restaurant likely in FY15
COLLINS FOODS LIMITED 15
Gross profit 222,174 213,383
Occupancy expenses (33,327) (31,378)
Profit from continuing operations before finance income, finance costs and income tax (EBIT) 29,777 32,755
Finance income and costs (6,182) (25,663)
Share of net profit of associate accounted for using the equity method 92 87
Profit from continuing operations before income tax 23,687 7,179
Income tax (expense)/benefit (7,319) 4,250
Profit from continuing operations 16,368 11,429
Net profit attributable to members of Collins Foods Limited 16,368 11,429
For the reporting period ended 28 April 2013
COLLINS FOODS LIMITED 17
– strong cash flow generation
• Undrawn debt facilities of $40m
• Remain comfortably within debt covenants
– net leverage ratio of 1.72x (maximum 2.75x)
– lease adjusted cover ratio of 2.42x (minimum 1.75x)
• Successfully refinanced debt on improved terms in July 2013
Balance sheet
Property, plant and equipment
Total assets 340.8 334.3
Total liabilities 155.3 155.0
NET ASSETS 185.5 179.3
COLLINS FOODS LIMITED 18
– interest down $9.8m
– tax paid up $3.1m (tax losses utilised from prior period)
• Net investing cash outflows down $0.4m to $18.0m
– restaurant rollout and refurbishment program continues
• Cash outflow from financing down to $18.9m
– FY13 includes payment of maiden dividend (FY12) and interim FY13 dividend
– prior period reflects impact of IPO
• Strong cashflows enabled FY13 final fully franked dividend of 5.5 cps (FY12: 6.5 cps) and total FY13 fully franked dividends of 9.5 cps (FY12: 6.5 cps)
$million FY13 FY12
50.1 51.2
Net operating cash flows 41.2 35.6
Capex* (17.9) (18.8)
Other (0.1) 0.4
Net cash flow 4.3 (24.5)
* Capex reflects actual Capex spent, excludes accruals at period end
COLLINS FOODS LIMITED 19
• Revenue up 4.3%(i) to $423.9m
• EBITDA down 7.6%(i) to $47.2m
• NPAT of $16.4m in line with expectations vs FY12 statutory NPAT of $11.4m and FY12 pro forma(i) NPAT of $18.4m
• EPS of 17.6 cents up 22.2% vs FY12 statutory EPS of 14.4 cents and down 11.1% vs FY12 pro forma(i) EPS of 19.8 cents
• Operating cashflow up 15.7% to $41.2m
• Strong balance sheet with net debt down $4.2m to $81.1m
• Remain comfortably within covenants with $40m of undrawn debt facilities
• Final fully franked dividend of 5.5 cps bringing total FY13 dividend to 9.5 cps fully franked… 54% payout ratio (FY12: 6.5 cps fully franked)
(i) Pro forma measures, which are unaudited, differ from statutory presentation to reflect the full year impact of the operating and capital structure of the Group that was established upon the IPO and capital reconstruction together with the elimination of IPO costs and related adjustments which are not expected to recur in the future.
… with underlying business performance returning to growth
COLLINS FOODS LIMITED 20
• FY14 EBITDA and NPAT growth still expected
• Improving return on assets
• Capex spend of $15.0m - $17.5m … on five-seven new KFC restaurants and 12 KFC refurbishments; and approximately $8.0m on KFC and Sizzler maintenance and support centre (primarily IT related) capex
• Strong cashflows underpin capex spend and reduced net debt
• Expect to maintain dividend policy
• Expect to release half year results on 28 November 2013
• Gympie rebuild resulted in a sales record for the first seven days
• Three new KFC stores opened in July and September 2013
• On target to open one more new KFC store before December 2013 with three more to open late in the fourth quarter
• KFC same store sales performance flat
• KFC Food Court stores performance showing improvement due to operational initiatives undertaken
• Sizzler same store sales performance softer than expected
COLLINS FOODS LIMITED 21
Disclaimer
This presentation contains forward looking statements which may be subject to significant uncertainties beyond CKF’s control.
No representation is made as to the accuracy or reliability of forward looking statements or the assumptions on which they are based.
Circumstances may change and the forward looking statements may become outdated as a result so you are cautioned not to place undue reliance on any forward looking statement.
SECTION 2 – KFC returns to growth
SECTION 3 – Sizzler in transition
SECTION 4 - Financial information
COLLINS FOODS LIMITED 2
COLLINS FOODS LIMITED 3
Our history and background
COLLINS FOODS LIMITED 4
KFC returns to growth
COLLINS FOODS LIMITED 5
Key statistics snapshot
Market share – major players
8.1% 10.0% 10.8% 18.2% 52.9%
Other (includes Quick Service Restaurants, Domino’s Pizza Enterprises Limited, Eagle Boys Dial-a- Pizza Pty Limited and Boost Juice)
McDonald’s Australia Holdings Limited (Industry brand names – McDonald’s)
Yum! Restaurants Australia Pty Limited (Industry brand names - KFC and Pizza Hut)
Competitive Foods Australia Pty Ltd (Industry brand names - Hungry Jack’s)
COLLINS FOODS LIMITED 6
– SSSG of 4.2% (FY12: down 1.8%)
– free-standing and service centre locations driving growth
– new restaurants performing well
• EBITDA down 4.9%* to $44.7m
– lower gross margin from input pressures and promotional discounting
– one-off labour savings in prior year
– energy cost increase in line with expectations, primarily from carbon tax
– labour productivity and energy reduction initiatives partly offsetting cost pressures
$million FY13 FY12* Change
Restaurants: – average – period end
EBITDA 44.7 47.0 4.9%
% margin 14.0% 15.6% 160bps
EBIT 33.3 35.7 6.7%
% margin 10.5% 11.9% 140bps
* FY12 numbers are pro forma measures, which differ from statutory presentation to reflect the full year impact of the operating and capital structure of the Group that was established upon the IPO and capital reconstruction together with the elimination of IPO costs and related adjustments which are not expected to recur in the future. 290
295
300
305
310
315
320
*FY2012 & FY2011 - Proforma Results
COLLINS FOODS LIMITED 7
KFC promotions driving sales…
• WOW dinners – 9 for $9.95 value offer, keeps showing increase in demand versus prior year
• Successful Spring Campaign with a new variant that mixes 2 ideas loved by Australians, KFC Zinger flavour and pies
• Breakfast trial including coffee, introduced in several stores in May/June, keeps strengthening its product demand
• ‘Goodification’ continuing with emphasis on preparation in-store, ingredients and providence
• Continued focus on increasing customer transactions in all store types through the Value Layer
…through targeted ‘value’ deals and new innovative menu items
COLLINS FOODS LIMITED 8
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
0.0
5.0
10.0
15.0
20.0
25.0
KFC Capex and Depreciation
Depreciaton Maint / Systems Refurbishment / Rebuild / Relocate New Units New Unit Builds
N e w
Opened 11 September 2013
Capital spend $1,169.5k Projected WSA $46.8k Actual WSA $58.5k (2 week average only)
Wurtulla
Opened 12 September 2013
Capital spend $1,222k Projected WSA $45.5k Actual WSA $70.5k (2 week average only)
Chinchilla
Re-opened 19 June 2013
Kallangur (REIMAGE)
Gympie (REBUILD)
• Overall revenue flat at $105.6m with Australian SSSG down 2.4%
− casual dining sector impacted more than QSR in current economic climate
− price sensitivity and ‘relevance’ continue to hamper sales
− restaurants outside of Brisbane performing better
• EBITDA down $0.6m to $10.1m
− margin tightened 60bps
limited price increases unable to fully offset input cost pressures
promotional discounting squeezing margins
labour productivity and energy reduction initiatives offsetting labour and utilities cost pressures
* FY12 numbers are pro forma measures, which differ from statutory presentation to reflect the full year impact of the operating and capital structure of the Group that was established upon the IPO and capital reconstruction together with the elimination of IPO costs and related adjustments which are not expected to recur in the future. ** Australia only
$million FY13 FY12* Change
Restaurants: – average** – period end**
− detailed menu development
− lunch menu implemented and dinner menu currently being tested
• Introducing more relevant and frequent food news through a stronger marketing calendar
• Using more effective promotional tactics to drive transactions during softer periods of trade specifically early week
• Leveraging and building on the ‘Now You’re Talking’ campaign and ‘The Legendary Salad Bar’
• Introducing a series of initiatives to improve in-store customer experience – from enhanced hospitality through to more physical aspects such as plateware, tableware and uniforms
• Continuing to review all areas of the business to identify ways to reduce costs
COLLINS FOODS LIMITED 14
Sizzler strategic review at core of transformation
• Review of Sizzler format, layout and design for a cost efficient and ‘investable’ model
− design and layout of a smaller footprint
− ideal seating capacity and flow
− salad bar format layout and design
− improved store economics
• Introduce a more contemporary store design that reflects next generation of Sizzler
• Reframe brand positioning to be more relevant to changing consumer landscape
• Integrate brand communication to effectively express brand proposition
• First new restaurant likely in FY15
COLLINS FOODS LIMITED 15
Gross profit 222,174 213,383
Occupancy expenses (33,327) (31,378)
Profit from continuing operations before finance income, finance costs and income tax (EBIT) 29,777 32,755
Finance income and costs (6,182) (25,663)
Share of net profit of associate accounted for using the equity method 92 87
Profit from continuing operations before income tax 23,687 7,179
Income tax (expense)/benefit (7,319) 4,250
Profit from continuing operations 16,368 11,429
Net profit attributable to members of Collins Foods Limited 16,368 11,429
For the reporting period ended 28 April 2013
COLLINS FOODS LIMITED 17
– strong cash flow generation
• Undrawn debt facilities of $40m
• Remain comfortably within debt covenants
– net leverage ratio of 1.72x (maximum 2.75x)
– lease adjusted cover ratio of 2.42x (minimum 1.75x)
• Successfully refinanced debt on improved terms in July 2013
Balance sheet
Property, plant and equipment
Total assets 340.8 334.3
Total liabilities 155.3 155.0
NET ASSETS 185.5 179.3
COLLINS FOODS LIMITED 18
– interest down $9.8m
– tax paid up $3.1m (tax losses utilised from prior period)
• Net investing cash outflows down $0.4m to $18.0m
– restaurant rollout and refurbishment program continues
• Cash outflow from financing down to $18.9m
– FY13 includes payment of maiden dividend (FY12) and interim FY13 dividend
– prior period reflects impact of IPO
• Strong cashflows enabled FY13 final fully franked dividend of 5.5 cps (FY12: 6.5 cps) and total FY13 fully franked dividends of 9.5 cps (FY12: 6.5 cps)
$million FY13 FY12
50.1 51.2
Net operating cash flows 41.2 35.6
Capex* (17.9) (18.8)
Other (0.1) 0.4
Net cash flow 4.3 (24.5)
* Capex reflects actual Capex spent, excludes accruals at period end
COLLINS FOODS LIMITED 19
• Revenue up 4.3%(i) to $423.9m
• EBITDA down 7.6%(i) to $47.2m
• NPAT of $16.4m in line with expectations vs FY12 statutory NPAT of $11.4m and FY12 pro forma(i) NPAT of $18.4m
• EPS of 17.6 cents up 22.2% vs FY12 statutory EPS of 14.4 cents and down 11.1% vs FY12 pro forma(i) EPS of 19.8 cents
• Operating cashflow up 15.7% to $41.2m
• Strong balance sheet with net debt down $4.2m to $81.1m
• Remain comfortably within covenants with $40m of undrawn debt facilities
• Final fully franked dividend of 5.5 cps bringing total FY13 dividend to 9.5 cps fully franked… 54% payout ratio (FY12: 6.5 cps fully franked)
(i) Pro forma measures, which are unaudited, differ from statutory presentation to reflect the full year impact of the operating and capital structure of the Group that was established upon the IPO and capital reconstruction together with the elimination of IPO costs and related adjustments which are not expected to recur in the future.
… with underlying business performance returning to growth
COLLINS FOODS LIMITED 20
• FY14 EBITDA and NPAT growth still expected
• Improving return on assets
• Capex spend of $15.0m - $17.5m … on five-seven new KFC restaurants and 12 KFC refurbishments; and approximately $8.0m on KFC and Sizzler maintenance and support centre (primarily IT related) capex
• Strong cashflows underpin capex spend and reduced net debt
• Expect to maintain dividend policy
• Expect to release half year results on 28 November 2013
• Gympie rebuild resulted in a sales record for the first seven days
• Three new KFC stores opened in July and September 2013
• On target to open one more new KFC store before December 2013 with three more to open late in the fourth quarter
• KFC same store sales performance flat
• KFC Food Court stores performance showing improvement due to operational initiatives undertaken
• Sizzler same store sales performance softer than expected
COLLINS FOODS LIMITED 21
Disclaimer
This presentation contains forward looking statements which may be subject to significant uncertainties beyond CKF’s control.
No representation is made as to the accuracy or reliability of forward looking statements or the assumptions on which they are based.
Circumstances may change and the forward looking statements may become outdated as a result so you are cautioned not to place undue reliance on any forward looking statement.