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Sri Lanka Equity Forum » Stock Market & Forum Help » Stock Market News » Investors welcome Cargill’s tie-up with TGI Friday’s

Investors welcome Cargill’s tie-up with TGI Friday’s

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Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Investors reacted positively to Cargills (Ceylon) Plc’s last week’s announcement of its tie-up with world famous restaurant chain TGI Friday’s, with the former’s share price gaining by 2% or Rs. 2.90 to Rs. 158.90 after hitting an intra-day high of Rs. 159.
The counter saw 8.501 shares traded between a high of Rs. 159 and a low of Rs. 156.90 before closing at Rs. 158.90.
As part of the market’s rebound last week Cargills hit a high of Rs. 175 but closed at Rs. 156, down by Rs. 15.40. In that context the gain yesterday, though modest, was welcome by analysts.
In its announcement, which Daily FT reported on Saturday, Cargills said it had struck a deal to be TGI Friday’s exclusive franchise in Sri Lanka.
TGI Friday is a member of the US-based Carlson Group.
Cargills plans to open the first TGI Friday’s in Sri Lanka by the fourth quarter of FY13.
Cargills Group also represents the other world famous restaurant chain, KFC, in Sri Lanka.
The Carlson Group operates over 900 TGI Friday’s restaurants around the world in over 60 countries. Carlson is a global hospitality company with presence in 150 countries, operating over 1,300 hotels including Radisson Blu, Radisson, Park Plaza, etc.
Analysts expect the latest addition will further boost Cargill’s earnings from the restaurant business. In the FY12, the existing restaurant business saw revenues grow by 24% to Rs. 1.38 billion, whilst profit before tax reached the Rs. 200 million mark, up by 26% over FY11. Profit after tax was Rs. 192 million, up by 54% and accounted for 18% of the Group figure, up from 12% in FY11.
“We are pleased at the rate of growth in turnover and profits in the restaurant sector which have exceeded our expectations year on year,” Cargills said, adding that in the year ahead it would be investing Rs. 434 million to maximise the growth opportunity in the restaurant segment.
In the Annual Report for FY12, Cargills said the restaurant sector was on an upward trend with the Central Bank reporting 43% growth in private consumption expenditure in the Hotels, Cafes and Restaurants segment in 2010/2011. The spending on leisure and entertainment has also increased by 38.6% in the same period. The number of standalone casual and fine dining restaurants in Colombo City has increased steadily over the year while the semi-urban market is also seeking a more sophisticated dining experience that serves as an outing for the entire family.
The sector is also benefitting from the increased number of tourist arrivals to the country. The 41% growth in arrivals in the year concluded also saw a shift to new markets from the traditionally strong Western Europe to India and Middle East. This has led to a rise in demand for off-premise restaurants that offer a variety of dining experiences outside the city hotels.
During the year the KFC chain added three new restaurants to its fold taking the total count to 18 and retaining its leadership in the Quick-Service-Restaurant (QSR) category.
Negombo, Katugastota and Jawatta outlets reported an excellent response from the local clientele. The new financial year would see it opening the KFC experience in Wattala, Marine Drive, Galle and Ratnapura.
Cargills said KFC was now taking its concept well beyond the boundaries of the conventional metropolis to regional cities that are showing an increasing appetite for this novel dining experience. The response to its restaurants beyond Colombo has surpassed expectation and it has been encouraged to take KFC islandwide.
The interiors of KFC are also seeing a rapid transformation with more exciting colour schemes and warm interiors, complete with a variety of zones for families and youth. In line with this all the new restaurants would be complete with family dining and play areas.
KFC delivery has now launched its operation with the service available in all restaurant trade areas. The concept of dining-out at home is now a growing trend among busy middle class families and the KFC delivery service has been well received.
Innovation continues to be the key strength of this sector. ‘Chicken Fried Rice’ was added on to the localised offering along with ‘Hot Wings’ that serves as a spicier and more locally appealing variant. It has also introduced the better-for-you Kentucky Grilled Chicken for health-conscious customers who enjoy the great taste of KFC. Currently testing at its QSR in Rajagiriya, the product has been well received.
KFC has also introduced the exciting beverage range ‘Krushers’ to Sri Lanka. The foodie drink offering a unique taste sensation is available in three variants and is now the most popular beverage choice at its restaurants.

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