Collins Foods (CKF.AX): FY26 result

FY26 result (53 weeks ended 3 May 2026). Reporting currency: A$

Being physically in Europe on the day the result was released, in an un-air-conditioned hotel room, I can indeed attest it is too hot for fried chicken.

So while trading in the first 8 weeks of the new financial year in Europe looked challenging, attributing this in large part to the regional heatwave holds weight.

As for the Bavaria stores and Germany store expansion, I visited over 2 dozen QSR stores (KFC plus direct competitors) within two of CKF’s 3 regions, including visiting several of the newly acquired Bavaria stores.

The store network as a whole looks good, particularly the Bavaria stores - clean, modern, large, and good locations. Trading noticeably lagged McDonalds, but that is a powerhouse brand. On balance foot traffic was in-line to slightly ahead of Burger King (which has over 3x the store count as KFC in Germany).

Unit growth in city centres will likely be more challenging (for instance Munich is notoriously difficult and time consuming for new-builds), but site availability looks abundant in more regional and autobahn locations.

The low KFC store count in Germany is a product of managerial missteps through the years (at the brand owner and master franchisor levels, not CKF related) rather than anything with the product itself.

A watching brief on where the KFC and CKF store counts can get to in Germany, but on paper the opportunity is there.

No FY27 earnings guidance provided — MAINTAINED practice

No FY27 revenue, EBITDA, margin or NPAT guidance was issued (consistent with usual practice) although trading for the first 8 weeks of the new financial year was released.

Group capex FY27: c. A$80m–A$100m — ▲ NEW

~A$80m–$100m for FY27 growth and modernisation capex, versus A$52m PP&E outflow in FY26. Main expenditures include Kwench by KFC rollout, new restaurants, asset modernisation, cooker replacements and technology.

Restaurant development FY27: 7–10 Australia, c. 7 Germany — ▲ NEW

7–10 new restaurants in Australia (FY26: 8 opened) and ~7 in Germany (FY26: 1 organic plus 8 acquired in Munich). Germany FY27 build is predominantly in the North Rhine Westphalia state with Bavaria development opportunities building through the year.

Germany network target to FY30: 45–90 additional restaurants — ▲ RAISED

FY30 development target raised to 45–90 additional restaurants, from a prior 40–70. “[we] have established a solid development pipeline, with several sites approved." Germany FY27 capex approximately A$20m plus A$3m incremental upfront G&A to accelerate pipeline and build a scalable rollout model.

Cost environment FY27: relatively stable, mixed

"A relatively stable cost environment to prevail overall in FY27." Commodity inflation flat to modest in Australia; deflation anticipated in Europe as avian-influenza poultry cost pressure dissipates over FY27. Fuel impact modest to date. Labour inflation elevated in both regions (Australia c.4.75%, higher in Europe).

Junior wage rate change (Fair Work Commission decision) to create A$1m impact in FY27, growing to ~A$20m by FY31 when fully implemented, with mitigation targeted through the revenue line and Yum!-supported labour productivity/automation.

Taco Bell exit

Completion of the transfer of 20 restaurants to the Yum!/Restaurant Brands Australia joint venture expected July–August 2026; a material one-off non-cash gain on lease liability transition and reversal is anticipated in FY27. Trading and capex exposure on transferring restaurants ceased 1 April 2026.

Group FY26 revenue of A$1,593m (+8.6%) — a record, with growth in both Australia and Europe. The result includes a favourable FX translation contribution of A$16m and reflects a 53-week FY26 period versus 52 weeks in FY25.

Underlying EBITDA of A$245m (+6.3%) at a 15.4% margin, down 34 bps. Absolute profit rose but percentage margin compressed, driven by the change to the delivery fee structure, mid-year value investment, and higher protein costs in Europe.

Underlying NPAT of A$61m (+13.0%) vs statutory NPAT of A$47m (+280%, lapped a depressed FY25 base). Non-trading items include net impairments of A$6.5m, class action settlement and related costs of A$7.3m, and a A$1.4m wage-provision top-up.

Net operating cash flow of A$150m, down A$31m y/y, on the timing of royalty payments (14 versus 12) and higher tax paid, with cash conversion of 94%. Net debt reduced A$18m to A$120m and the net leverage ratio fell to 0.77 (pre-AASB 16). Total dividend of 28.0 cps fully franked (+7.7%), a record-equalling total with a 15.0 cps final.

Sales and profitability. Revenue A$1,241.3m (+7.6%) → a record, with SSS accelerating to +2.7% (FY25: +0.3%). Underlying EBITDA A$237.1m (+6.5%) at a 19.1% margin (down 19 bps) and underlying EBIT A$155.8m (+6.6%) at 12.6%. Result driven by SSS growth, new restaurants and productivity gains, with margin dilution from the delivery fee reset (volume-accretive, initially margin-lowering) and value investment for consumers, partly offset by lower commodity costs.

Australia growth initiatives

Kwench by KFC: national rollout targeting 80% of Australian national network by April 2027 and 100% by mid-2027, capex A$35m FY27 and A$10m FY28, following the Cairns trial (from Dec 2025) that delivered an initial 2%–3% sales increase. Kwench is a specialty beverage range for dessert, snacking, add-ons and trade ups

Late night: staggered national rollout through FY27, extending trade to midnight.

Breakfast: trial later in FY27 on the Gold Coast and other areas.

Menu innovation. Innovation on core included Zinger Banh Mi, Upside Down Double and Hot & Crispy Wrap, with the return of favourites Zinger Nachos and Works Burgers. The KFC Signature Sauce launch with Liquid Gold introduced the first of the new "Basket Builders." The protein range social media campaign exceeded expectations, and a KFC-first brand collaboration was run with Stranger Things.

Expanding usage occasions. In addition to Kwench, introduced "Wicked Wednesdays" and trialled the "Boxfull" range, focused on delivering best value for customers consistently.

Brand. KFC dominated the QSR category on Brand Index and led on Brand Satisfaction and Brand Recommendation, with clear outperformance on Brand Buzz and strong brand modernity with Gen Z.

Channel and network. Digital reached 43.2% of sales (FY25: 34.2%; +9.0 ppt), driven by app adoption, kiosk investment and delivery. Network 295 restaurants (+7; 8 opened, 1 closure, 1 relocation; 33 remodels including 3 supercharged).

Segment total. Revenue A$351m (+12.5%; +7.0% constant currency), underlying EBITDA A$45m (+14.0%) at a 12.8% margin (+17 bps), and underlying EBIT A$15m (+94.7%) at 4.2% (FY25: 2.4%). European footprint 80 restaurants (+2). Result driven by SSS growth in Germany, lower food waste and higher labour productivity, partly offset by higher poultry prices from avian influenza.

Growth and execution. Total sales +10.1% (constant currency) with SSS +3.7% (FY25: (3.3)%), a reversal of trend, reflecting improved brand and in-restaurant execution and the VAT reduction on dine-in from 1 January 2026; digital 76.2% of sales.

Munich acquisition and Bavaria entry. Acquisition of 8 KFC restaurants in and around Munich, completed 1 June 2026, marking entry into Bavaria — one of Germany's most populated and wealthiest states. Integration is progressing to plan, with the acquired restaurants carrying higher unit revenue and profit than the existing portfolio.

Network expansion. The 17th restaurant (KFC Karlsruhe) opened mid-August 2025; the Munich acquisition lifts the count to 25, making Collins Foods the largest KFC franchisee in Germany by system sales. The Group operates in 3 key states and 5 of the 10 largest German cities (Munich, Stuttgart, Cologne, Essen, Düsseldorf). The FY30 development target was raised to 45–90 additional restaurants (from 40–70).

Addressable market and store economics. 80 million+ consumers with only 217 KFC restaurants (versus c.1,400 McDonald's and c.750 Burger King) — the brand and chicken category under-penetrated. Existing unit economics are comparable to Australia despite lower restaurant density and network maturity. FY27 is expected to be a record German development year (capex approximately A$20m; A$3m incremental G&A), with new restaurant performance targeted in line with existing economics against hurdle KPIs including EBITDA, IRR, payback and NPV.

Profitability focus. Total sales +6.1% (constant currency) with SSS 0.0% (FY25: (2.5)%), flat but improved on prior year against broader category challenges; digital 67.2% of sales. Restaurant EBIT margin improved from 6.7% to 8.5%, driven by labour productivity, lower waste and lower depreciation (prior-year impairments), partly offset by avian influenza on protein prices.

Brand and CFA. Brand awareness rose 1.1 ppt to 71.1% (the strongest growth among QSR peers) and QSR market share rose 0.2% to 9.2%. The Corporate Franchise Agreement was extended (3 years, to 31 December 2029) and restructured, with Yum! Brands resuming marketing responsibilities from 1 January 2027, allowing Collins Foods to focus on its core role as restaurant operator. Portfolio optimisation continued (2 opened, 2 closed, 1 acquired).

Headline growth benefited by an extra week and FX — underlying momentum is lower. Revenue rose 8.6% to $1,592.6m, but FY26 was a 53-week period versus 52 weeks in FY25 (the extra week is "broadly linear," ≈ $30m or ~1.9% of revenue) and favourable FX translation added $16m (~1.1%). Stripping both, implied like-for-like constant-currency revenue growth is ~5.5%.

Australia's delivery reset traded margin for volume — profit quality is better than the margin optics. The aggregator delivery fee was cut from $8.95 to $3.95, lifting digital mix to 43.2% of sales (from 34.2%; +9.0 ppt) but compressing restaurant-level EBITDA margin 26 bps to 21.0%. Absolute restaurant-level EBITDA still rose 6.2% to $260.5m.

Europe's EBIT nearly doubled, but the inflection is partly a depreciation tailwind. Europe underlying EBIT rose 94.7% to $14.9m while underlying EBITDA rose only 14.0% to $44.9m. The gap reflects lower depreciation following prior-year impairments, plus G&A leverage.

Late night — incremental transactions on a largely fixed cost base. Late night/post-midnight represents 8.8% of Australian QSR spend and is the fastest-growing day part; KFC is currently inactive/under-penetrated there. Extending trade to midnight via a staggered national rollout through FY27, with early results described as "very promising" and an 8–10 p.m. window already improving.

Breakfast — a large addressable day part, but still only a trial (optionality, not a forecast). Breakfast is ~27.5% of Australian QSR spend ("almost as big as lunch" and growing faster than lunch or dinner), yet KFC's entry is a trial later in FY27 (Gold Coast and other areas), partnered with KFC South Pacific, with no coffee offering confirmed. Together, breakfast and late night address "more than 1/3 of the total day's potential."

Balance-sheet capacity funds the entire FY27 growth agenda without stretching leverage. Net debt fell $18.3m to $119.6m and net leverage dropped to 0.77 (from 0.93), against operating cash flow of $150.1m and 94% cash conversion. Capex requirements are fundable from internal cash generation, leaving headroom for a further German bolt-on the company is "happy to consider."

Q: Mitigation of the junior wage-rate cost impact.
A: FY27 impact "about $1 million," growing to "about $20 million" when fully implemented in FY31. Mitigation "primarily through revenues" — "the best mitigator for any margin pressure" — plus working with Yum! to drive labour productivity "particularly through the automation of the back of house."

Q: Appetite for another German bolt-on acquisition in FY27/FY28.
A: "Happy to consider another German acquisition if the opportunity occurs" — "very disciplined, very strategic," requiring "a quality network, delivering already quality financial results" and continued density in "the 3 key states." Current focus is integrating Munich, which "started really, really well."

Q: Cause of the second-half Australian EBITDA margin decline.
A: Seasonally weaker H2 on public holidays; delivery was "maybe the biggest influencer" on percentage margins. The aggregator fee changed "from $8.95 to $3.95," so delivery economics "are improved" — "very healthy" in absolute terms, "slightly lower" in percentage terms. Also "a little bit of value investment in quarter 3."

Q: Whether the extra trading week is a ~2% tailwind now and headwind next year.
A: "No, it's broadly linear. I don't think you need to overthink it too much."

Q: Early Kwench and late-night store performance versus the portfolio.
A: "We're not publishing the impacts of Kwench." Trialled in Cairns, with FY27 capital spend of "$35 million, $36 million" behind it — "We wouldn't do that if we weren't confident in it." It is "the addition of a day part" spanning "both beverages and desserts." Late night is "pretty early days… happy with its outcomes."

Q: How the late-night opportunity compares to when third-party aggregator delivery was introduced.
A: "I don't think we think about it in the same way at all." Kwench is "another way of capitalizing on the strength of the brand to penetrate new day parts and build revenue." Late night is "very early in the rollout phase… very promising," with improvement also in "our 8 to 10 p.m. window"; "way too early" to compare to prior initiatives.

Q: Whether margins can improve into FY27 given elevated wages and a sticky delivery mix.
A: "We're not giving margin guidance… far too early." The best lever is the revenue line; labour costs are "rising 4.75%, a little bit more in Europe." Productivity "has improved," with "more to come" via demand planning and technology-led labour deployment, and work with Yum! on "AI tools to optimize labour and food."

Q: Rationale for trialling breakfast in Australia/the Gold Coast, and whether coffee is included.
A: "We're not going to talk about product items at this stage. It's going to be a trial." Not the only franchisee trialling breakfast in Australia; it "has been trialed in some airport stores at Sydney Airport," and will be trialled on the Gold Coast "and other areas of the country."

Q: German brand metrics, and why LTOs (limited time offers) land in Australia but not Germany.
A: German Brand Buzz metrics not shared "as Yum! run the market… not Collins." Marketing windows differ — Australia "13, 4-week" windows versus Germany's "6 to 7 to 8 to 9-week" windows, so a weak window is carried far longer. Educating with Yum! to adopt Australia/UK best practice of "12 or 13 windows per year," shortening windows.

Q: German delivery versus dine-in performance amid the heat.
A: "There has been a slowdown in the delivery channel in the first half of this year." The heatwave means "riders on bicycles… shouldn't be riding and aren't." In Germany the slowdown is "also related… to the quality and the Brand Buzz of the LTOs" — a weak LTO isn't "drawing consumers via the app either."

Q: World Cup impact on KFC Germany, including Germany's elimination.
A: Given time-zone differences, overnight matches have "no impact at all on sales," while evening matches (7–8pm) are "good for sales because there's a little bit of delivery bump." Overall "not been high intensity or high visibility in Europe," and Germany's exit won't "have a meaningful impact on how we forecast the H1."