COLLINS SUPERSIZES IN EUROPE WITH PURCHASE OF 16 KFC RESTAURANTS IN THE NETHERLANDS

COLLINS Foods (ASX:CKF) has stepped up its European expansion through the purchase of 16 KFC restaurants in the Netherlands for 62.3 million (AU$87.7m) from Yum! Brands.

The deal includes a development agreement with Yum! which sets out a pipeline of 20 new Collins-owned KFC restaurants in the Netherlands by 2021.

It follows the completion of Collins' purchase of 11 German KFC restaurants in December 2016, a country where the Brisbane-based company is also planning a rollout of new stores.

Collins' plan mirrors that of its city-mate Domino's Pizza (ASX:DMP), which is pursuing an aggressive European expansion that is in its early stages.

Collins Foods managing director and CEO, Graham Maxwell, says the Netherlands is a highly attractive market which is under-penetrated for KFC restaurants.

"This transaction immediately increases our footprint in Europe to 28 KFC restaurants, providing increased economies of scale," he says.

"In addition, the development agreement lays a clear path to future growth in this market through to December 2021.

"The acquisition is expected to be mid-single digit earnings per share accretive for Collins Foods shareholders in the first full financial year of ownership, inclusive of expected new restaurant builds over this period."

Collins Europe will operate independently from the Australian KFC business. Mark van 't Loo, who has 17 years' experience with KFC in Europe, has been appointed CEO Europe.

The acquisition will be funded through a $54.5 million institutional placement at $5.25 per share, and extension of existing debt facilities.

In addition, eligible existing Collins Foods shareholders will be able to take part in a share purchase plan to a maximum of A$15,000 per shareholder to raise a maximum A$10.0 million.

As part of today's announcement, Collins also provided a trading update for the 20 weeks to 5 March, where it reported a 12.3 per cent increase in revenue to $247.2 million, compared to the previous corresponding period.

Underlying EBITDA is up 5.4 per cent to $30.7 million, while the underlying EBIDTA margin is down by 0.8 per cent to 12.4 per cent due to soft trading in Western Australia and increased costs associated with a change in product mix.

Collins is trading down 1.19 per cent at $5.880 per share at 11:16 AEDT today on the ASX.

Business News Australia