The bad news continues for Collins Foods, the largest float of 2011, with a leaked memo directing staff to go into “crisis management” mode and cut spending on discretionary items such as stationery and photocopying.
Shares in Collins, which operates KFC and Sizzler restaurants, were down 4.25% this morning to $1.25, exactly half the price it listed at last year.
According to an email from chief executive officer Kevin Perkins seen by the Australian Financial Review, the company is in a “results crisis” in the eyes of shareholders.
“For the remaining 11 weeks of our fiscal year we move into crisis management mode,” Perkins writes.
“Rest assured we do not have a financial crisis as we are very solvent, but in the eyes of the shareholders we have a results crisis.”
In the email dated February 14, Perkins tells staff that “nothing is too small” to cut costs.
“Everything is up for review – look at items like unnecessary photocopying, double-sided documents, limit colour copying, turn off lights, don’t waste stationery, etc.”
“Think twice and spend once.”
Other changes include a deferral on discretionary spending until May, senior staff working four days per week and using up leave on the fifth day, and staff business meals being consumed in company-operated stores, the report says.
Perkins will also forgo his fourth-quarter salary and there is a pay and hiring squeeze, according to the leaked email.
Collins was contacted for comment this morning but was not available prior to publication. It is due to update the market next week.
The company defied a weak initial public offering market by listing in August last year at $2.50 per share. Pacific Private Equity sold a 52% stake but management retained about 10% of the listed entity.
At the time, Perkins said Collins was “well positioned for future growth via new restaurant roll-outs and refurbishments, expansion of the product range and day parts as well as ongoing operating initiatives.”
The money was earmarked for paying down debt facilities and to fund the acquisition from existing investors.
Shortly after listing, it cut its net profit guidance citing fragile consumer demand. Having originally flagged a full-year profit of $24.7 million, it flagged a pro forma net profit after tax of between $18 and $20 million.
Collins opened its first KFC restaurant in Queensland in 1969, and has hundreds of KFC and Sizzler restaurants across Australia, as well as Asian operations.