Collins Foods Ltd (ASX: CKF) shares are on the move on Thursday morning.
At the time of writing, the ASX 200 stock is up 11% to $10.50.
Why is this ASX 200 stock rising today?
The catalyst for the move appears to be the release of an announcement from the quick service restaurant operator after the market close on Wednesday.
That announcement revealed plans to accelerate the ASX 200 stock’s expansion in Germany, alongside an update on its Netherlands operations.
According to the release, Collins Foods has signed an asset purchase agreement with JJ Restaurant to acquire eight KFC restaurants in Bavaria, centred around Munich. This will significantly increase its footprint in the region.
Management notes that the deal will increase the company’s German restaurant portfolio by almost 50%, providing greater scale in one of Germany’s most affluent and populous states.
In addition, Collins Foods has secured an expansion of its German development agreements, which will now target 45 to 90 new restaurant openings over the next four years.
The ASX 200 stock believes this will support its strategy of establishing Germany as its second key growth pillar.
Commenting on the news, the company’s managing director and CEO, Xavier Simonet, said:
There is a significant growth opportunity for Collins Foods in the German market, and we are pleased to be executing on our expansion in a disciplined manner. The KFC brand has substantial potential in Germany with approximately a fifth of the store footprint of the largest competitor, McDonald’s. Despite lower restaurant density, KFC enjoys strong brand awareness and consumer appeal in Germany, supporting a compelling opportunity to expand our market presence.
Collins Foods has agreed to pay 31.1 million euros (A$50.3 million) plus working capital.
It anticipates revenues of 28.2 million euros (A$45.6 million) and EBITDA of 5.3 million euros (A$8.6 million) from the acquired restaurants in the first 12 months of ownership post completion.
Netherlands agreement refocused
Alongside the German update, Collins Foods announced that it has signed a revised and extended corporate franchise agreement for the Netherlands with Yum! Brands.
Management advised that the updated agreement will allow the company to sharpen its operational focus and work toward improving profitability in the Dutch market.
Simonet explains:
The updated Netherlands CFA brings our responsibilities into closer alignment with our other operating markets and will enable us to focus more sharply on improving sales and profitability across our network.
Trading update
In addition, the ASX 200 stock provided the market with a trading update.
It revealed that Australia sales are up 6.2% so far in the second half, while Germany sales are up 9.1% and Netherlands sales are up 4.1%. Same store sales growth is 3.2%, 4.1%, and negative 0.3%, respectively.
The post Guess which ASX 200 stock is rocketing 11% on big Euro news appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro has positions in Collins Foods. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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.