Guess which ASX 200 stock crashed 8% on first-half profit decline and dividend cut

It has been a tough six months for this fried chicken seller.

| More on:
A businesswoman exhales a deep sigh after receiving bad news, and gets on with it.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Collins Foods Ltd (ASX: CKF) shares are on the slide on Tuesday morning.

In early trade, the ASX 200 stock was down as much as 8% to $7.95.

The KFC restaurant operator's shares have rebounded a touch since then but remain down 3% at the time of writing.

This follows the release of the company's half year results this morning.

ASX 200 stock tumbles on half year results

  • Revenue from continuing operations up 1.2% to $703.5 million
  • Underlying EBITDA from continuing operations down 6.6% to $102.7 million
  • Underlying net profit after tax down 23.8% to $23.7 million
  • Fully franked interim dividend down 12% to 11 cents per share

What happened during the half?

For the six months ended 13 October, Collins Foods had a tough time due to the challenging consumer environment impacting same store sales (SSS) and persistent inflation weighing on margins.

For the first half, the ASX 200 stock reported a modest 1.2% increase in revenue from continuing operations to $703.5 million. This reflects modest growth in Australia being offset by softness in Europe.

KFC Australia revenue was up 2.7% to $536.8 million, whereas KFC Europe revenue was down 3.4% to $142.1 million. The smaller Taco Bell business posted a 2% decline in revenue to $24.6 million.

The company's underlying EBITDA from continuing operations was down 6.6% to $102.7 million, with margins impacted by a combination of flat same-store sales and ongoing inflationary pressures.

And on the bottom line, underlying net profit after tax from continuing operations was down 23.8% to $23.7 million. This was due to lower EBITDA and higher depreciation on an increasing store footprint.

In light of its lower profits, the Collins Foods board was forced to cut its fully franked interim dividend by 12% to 11 cents per share.

One positive was that the ASX 200 stock continued to generate strong cash flows and ended the period with lower net debt. Management believes that this leaves it with significant capacity for investment in growth opportunities.

Outlook

Management revealed that sales in the first seven weeks of the second half reflected the continuation of a weaker consumer environment in Australia and Europe.

KFC Australia's total sales increased 3.9% in the first seven weeks with SSS up 0.8% representing a continuation of the gradual improvement in sales trends during HY25. Total KFC Europe sales were down 1.6% over the period.

Looking ahead, management expects its underlying EBITDA margin to be in range of 14.2% to 14.7% for the full year. This compares to 14.6% for the first half.

The ASX 200 stock's CEO, Xavier Simonet, said:

I am delighted to be leading Collins Foods and am excited about the potential of our business moving forward. The Company operates world-class brands in an exceptionally resilient category and in attractive markets. The business has strong fundamentals and is well positioned to benefit as consumer confidence returns.

Broker reaction

Goldman Sachs has been looking at the result and was pleased with what it saw. It commented:

New Collins CEO, Xavier Simonet, has reported the company's first result under his leadership with the 1H25 numbers in-line at the Ebitda level and above expectations at Npat. Ebitda margins are guided to be challenged in 2H25, although current consensus numbers are within the guided range. Importantly the sales growth trend in KFC Australia has incrementally improved.

Motley Fool contributor James Mickleboro has positions in Collins Foods. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Earnings Results

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Consumer Staples & Discretionary Shares

Guess which ASX 200 stock is rocketing 26% on better than expected results

The KFC operator has delivered on expectations with its FY 2025 results.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Earnings Results

Which ASX 200 stock is up 5% to a 52-week high on results day?

This blue chip is having a strong start to the week. Let's find out why.

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Web Travel share price rockets 13% on market leading full-year growth

Investors are sending Web Travel shares soaring today. Here’s why.

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

A woman looks up at a plane flying in the sky with arms outstretched as the Flight Centre share price surges
Earnings Results

Up 78% since April, why is the Webjet share price taking off again today?

Webjet shares have soared 78% since 4 April and are lifting off again today. But why?

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Industrials Shares

Guess which ASX 200 stock is crashing 24% on results day

Investors were not impressed with this result. But why?

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Technology Shares

ASX 300 tech stock charges 7% higher to record high on stellar results

This tech stock delivered another impressive result this morning.

Read more »

a group of people sit around a computer in an office environment.
Earnings Results

Guess which ASX 200 tech stock is rocketing 12% on record results

Another half, another record result from this high-quality company.

Read more »