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1 FY13 HALF YEAR RESULTS 30 November 2012 COLLINS FOODS LIMITED 0

2 Today s agenda SECTION 1 HY13 IN REVIEW SECTION 2 FINANCIAL PERFORMANCE SECTION 3 KFC SECTION 4 SIZZLER SECTION 5 INDUSTRY DYNAMICS AND MARKET OUTLOOK COLLINS FOODS LIMITED 1

3 HY13 IN REVIEW COLLINS FOODS LIMITED 2

4 HY13 results snapshot Statutory results Revenue up 5.6% to $197.9m driven by increased restaurant numbers and positive KFC SSSG NPAT of $7.4m (HY12: $0.6m) Operating cashflow up 64% to $18.1m Strong balance sheet no change to debt remain comfortably within covenants with $40m of undrawn debt facilities HY13 fully franked dividend of 4.0 cps (HY12: nil) Pro forma results (i) EBITDA down 5.7% to $21.5m, due to: weaker gross margin energy and labour cost increases NPAT down 7.5% to $7.4m (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. A reconciliation of HY12 NPAT from statutory to proforma was included in the HY12 Results presentation. COLLINS FOODS LIMITED 3

5 HY13 operational snapshot Improved trading conditions, still highly competitive KFC sales up with SSSG of 3.6% Sizzler trading improving, below long term trend margin pressures from value offers and higher input costs New store rollouts continue 1 new KFC restaurant, 2 rebuilds and 2 refurbishments completed returns on growth Capex improving Continued focus on brand building and marketing campaigns positive response to Goodification campaign continues success with KFC targeted value play - 9 for $9.95 Tuesdays Legendary Sizzler Salad Bar brand campaign Sizzler promotions targeted at soft trade periods Focus on efficiency and service productivity initiatives and new service flow methods KFC online ordering pilot commenced in Townsville COLLINS FOODS LIMITED 4

6 FINANCIAL PERFORMANCE COLLINS FOODS LIMITED 5

7 Growth returns to top line COLLINS FOODS LIMITED 6

8 Recovery is in progress $million HY13 Actual HY12 Proforma (a) Change Avg # restaurants (b) Revenue % % Growth 5.2% (1.3%) Gross profit % % margin 52.5% 52.7% 20bps EBITDA % % margin 10.9% 12.1% 120bps EBIT % % margin 6.9% 8.0% 110bps NPAT % % margin 3.7% 4.3% 60bps Revenue up 5.2% to $197.9m improved sales growth value offers brand and product initiatives new stores EBITDA down 5.7% to $21.5m weaker gross margins energy cost increases carbon tax (in line with expectations) labour and admin cost increases NPAT down 7.5% to $7.4m (a) (b) 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. Excludes Asian franchise restaurants COLLINS FOODS LIMITED 7

9 Strong balance sheet Balance Sheet $m 14 October April 12 Cash & Equivalents Current assets Non current assets Total assets Debt (net of capitalised costs $0.4m) Current liabilities Non current liabilities Total liabilities NET ASSETS Cash of $12.5m (down $6.7m) maiden dividend paid $6.0m final buyback of shares of former parent $9.4m Non-current assets up due to restaurant roll-out and refurbishment programme Undrawn debt facilities of $40m Remain comfortably within debt covenants Net Leverage Ratio of 1.86x Lease Adjusted Cover Ratio of 2.51x COLLINS FOODS LIMITED 8

10 Strong cash generation $million Net operating cash flows before interest and tax HY13 Actual HY12 Actual Net interest paid (3.0) (11.0) Income tax paid (1.3) (0.1) Net operating cash flows Capex (1) (9.6) (8.6) Other (0.1) 0.5 Net cash flow from investing Net cash flow from financing (9.7) (8.1) (15.2) (41.7) Net cash flow (6.8) (38.8) (1) Capex reflects actual Capex spent and excludes accruals at period end Operating cashflow up 64% to $18.1m interest down $8.0m rate and debt down on prior year tax paid up $1.2m (tax losses utilised in prior period) Net investing cash outflows up $1.6m to $9.7m increase in growth capex Cash outflow from financing down to $15.2m HY13 includes payment of maiden dividend and final payment for buyback of shares of former parent prior period reflects impact of IPO Strong position has enabled HY13 fully franked dividend of 4.0 cps (HY12: nil) COLLINS FOODS LIMITED 9

11 KFC COLLINS FOODS LIMITED 10

12 KFC performance reflects improved sales momentum $million Restaurants Average Period end HY13 Actual HY12 Actual Change Revenue % % SSSG 3.6% 0.0% EBITDA % % margin 14.0% 15.5% 150bps Revenue up 5.6% to $148.2m increase in average restaurant numbers SSSG up to 3.6% free-standing restaurants driving growth food courts continue to struggle EBITDA down 4.6% to $20.7m margin tightened 150 bps lower gross margin from input pressures and promotional discounting indirect labour restructuring costs energy cost increases COLLINS FOODS LIMITED 11

13 Growth capex focused on KFC Maintenance $2.1m Refurbishment $1.9m HY13 Total $9.6m New restaurants $0.9m Rebuilding $4.7m Growth CAPEX = $7.5m Maintenance=$2.1m Total capex of $9.6m in line with expectations new restaurants 1 rebuilding - 2 completed and existing site in Gladstone purchased refurbishments 2 completed On track with refurbishments required as part of Yum! agreement New restaurants tracking in line with historical average returns Refurbished stores improving, still below historical average returns Project to improve returns on capex continues COLLINS FOODS LIMITED 12

14 New stores Valley Metro opened Aug 2012 Financial Snapshot Capital Spend $ 843,000 Sales Variance (Actual v Capex Sales) +4.2% COLLINS FOODS LIMITED 13

15 Rebuilds and refurbishments Browns Plains refurbishment opened Aug 2012 Financial Snapshot post refurb Capital Spend $ 1,581,000 Sales Variance (Actual v Capex Sales) +12.2% Rockhampton North - rebuild - opened Oct 2012 Financial Snapshot post rebuild Capital Spend (est) $ 2,550,000 Sales Variance (Actual v Capex Sales) +11.4% COLLINS FOODS LIMITED 14

16 Marketing campaigns rebuilding and growing core business COLLINS FOODS LIMITED 15

17 Focus on innovation in product development and targeted value offers Ongoing development of non-fried products new grilled product developed - launch before year end Value offers resonating well with customers Family Dinner Box and WOW Dinner 9 pieces for $9.95 and 2 sides for $5 Tuesday only Successful Winter campaign with a new chicken on the bone variant (Sweet Sesame Chicken) Breakfast offering being trialled by Yum! COLLINS FOODS LIMITED 16

18 Initiatives to improve operating efficiencies New service flow methodologies rolled out in select stores Online ordering trial Indirect labour restructuring Rollout of Small Ticket Pre Approved payment facility (for up to $35 payments) commenced New maintenance system and streamlined processes Tandem drive thru trial underway in 3 stores COLLINS FOODS LIMITED 17

19 Online and mobile ordering trial underway On trial in 7 stores in Townsville Slow take up to date Average order values higher than average credit/debit payment in store Conducting customer research to address barriers and improve processes COLLINS FOODS LIMITED 18

20 Key priorities for 2H13 2 new stores and 4 refurbishments Innovative brand marketing campaigns Summer Cricket Campaign local area marketing activities to leverage involvement with KFC T20 Big Bash COLLINS FOODS LIMITED 19

21 Key priorities for 2H13 (cont d) Core product building burger campaign launch Product development with Better for You range launches grilled product kids menu Establishing a permanent sustainable value layer Ongoing trials of online ordering Breakfast pilot in New Year with Yum! Operational improvement initiatives COLLINS FOODS LIMITED 20

22 SIZZLER COLLINS FOODS LIMITED 21

23 Sizzler sales showing signs of improvement $million Restaurants Average Period End HY13 Actual HY12 Actual Change Revenue % % SSSG (0.1%) (4.8%) EBITDA % % margin 8.7% 8.8% 10bps Revenue up 4.0% to $49.7m increase in restaurant numbers (Mackay opened Dec 2011) SSSG down 0.1% (substantial improvement on HY12) EBITDA up 2.4% to $4.3m margin tightened 10 bps labour cost increases energy cost increases lower advertising spend (timing related) COLLINS FOODS LIMITED 22

24 Solely maintenance capex HY13 Total $0.9m Maintenance capex Maintenance capex spend primarily on restaurant facilities All Sizzler refurbishments on hold in FY13 until revised capital strategy finalised COLLINS FOODS LIMITED 23

25 Brand and product campaigns to reconnect with customers Legendary Sizzler Salad Bar sub-brand launched increase value perception COLLINS FOODS LIMITED 24

26 Product development and promotional initiatives New Winter Menu and combos rolled out Soft trade period opportunities targeted early week promotions day part offers including special light lunches one trip salad bar Key event promotions such as Mother s Day resonated well with guests Special offers introduced including 20% student discount Facebook competitions COLLINS FOODS LIMITED 25

27 Key priorities for 2H13 Continued focus on brand building Legendary Sizzler Salad Bar campaign Targeted promotional and value plays, with focus on soft trade periods add on promotion 2 for 1 Tuesdays value priced lunch meals New product and promotional initiatives with menu price increase Seafood Spectacular Summer Salad Bar new grill meals Online booking system (testing Xmas 2012) Productivity and efficiency initiatives New stores in China and Thailand Explore further growth avenues COLLINS FOODS LIMITED 26

28 INDUSTRY DYNAMICS AND MARKET OUTLOOK COLLINS FOODS LIMITED 27

29 QSR landscape Product innovation is key to stimulating demand Need to focus on increasing average transaction value Retail is doing it tough in multi-speed economy Margin pressures persist... discounting to drive sales and increased costs QSR sales trend appears to be improving for both domestic and international operators... casual dining sector continues to lag COLLINS FOODS LIMITED 28

30 Growth rate (%) Qld retail trading environment appears to be showing some signs of improvement amidst ongoing volatility QLD retail indicators 2011 to 2012 (yoy ) 3 2.3% 2.2% Household consumption 0.1% Household savings ratio* Inflation 0.0% Unemployment Retail trade % -4 Sources: Australian Bureau of Statistics; Melbourne Institute Queensland Treasury * National growth rate COLLINS FOODS LIMITED 29 29

31 FY13 outlook Return to same store sales growth KFC FY13 SSSG expected of 4.8% Sizzler FY13 SSSG expected of 1.9% Carbon Tax is impacting as expected ($2.5m pre-tax for FY13) current trading conditions do not allow CKF to pass on full cost increases Further increases in labour and raw material input costs expected in Q4 Working to counter part of labour and cost increases with productivity improvements FY13 earnings outlook remains unchanged COLLINS FOODS LIMITED 30

32 In summary HY13 financial performance driven by improved KFC top line offset by margin compression Strong balance sheet HY13 fully franked dividend of 4.0 cps Continued focus on growing and rebuilding core businesses new KFC stores to leverage attractive opportunities in key growth corridors continued commitment to innovation & product development new brand building marketing campaigns use of technologies to generate operating efficiencies Macro environment remains challenging, although signs of improvement continue to emerge COLLINS FOODS LIMITED 31

33 THANK YOU & QUESTIONS COLLINS FOODS LIMITED 32

34 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. All financial amounts contained in this presentation are expressed in Australian currency and rounded to the nearest $0.1 million unless otherwise stated. Any discrepancies between totals, sums of components and differences in tables and percentage variances calculated contained in this presentation are due to rounding. COLLINS FOODS LIMITED 33