Thank you for standing by, and welcome to the Collins Foods Limited FY 2025 Full Year Result Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type it into the Ask a Question box and click Submit. I would now like to hand the conference over to Mr. Xavier Simonet, Managing Director and Chief Executive Officer. Please go ahead.
Thank you, Mel. Good morning, everyone. I'm Xavier Simonet, the CEO of Collins Foods. With me on the call today is our Group Chief Financial Officer, Andrew Leyden, our General Manager of Australian Operations, Krystal Zugno, and General Manager Europe, Chris Johnson. Normally on this call, we would have Andrew, our CFO, and myself, but because of the importance of the work we're doing in Australia and in Europe, we've decided to ask Krystal and Chris to join us. We are presenting the FY 2025 results, which we announced to the ASX earlier this morning. As always, we'll go through the investor presentation and then take questions.
First, before I start, I want to say a big thank you to our restaurant teams and our support center teams in both Europe and Australia for their work, energy, and also for their contribution to the success of Collins and KFC. If we move to slide one, since I joined back in November, my immediate priorities have been operational excellence across all our businesses, growth in our core market and scale, including accelerated German expansion. I have also made tough decisions on unprofitable business segments like Taco Bell. I moved swiftly to reset the leadership team, as announced in April. We have continued targeted investment in our core business. As also announced in April, we entered into a buying agreement with our franchisor partner to support accelerated growth in Germany.
Discipline, execution, and focus on operational excellence have seen improved underlying performance in H2 in a challenging market, as demonstrated by our results today. Looking ahead, I believe we are well positioned to take advantage of improving conditions. With strong cash flows and a robust balance sheet, we remain active and open to organic and inorganic growth opportunities, particularly in Germany. Moving on to slide two, we will focus on innovation and exceptional customer experience to drive same-store sales growth, profitable new restaurant development in Australia and Germany, and improved operational efficiency to lift our margin. With a focus on profitable growth, the decision was made to exit our Taco Bell business. Slide three provides an overview of our FY 2025 performance. Financials are presented on a post-AASB 16 basis, unless stated otherwise.
For those of you more accustomed to pre-AASB 16 numbers, we've made them available in the appendices to the investor presentation. In a challenging consumer environment, Collins Foods delivered a solid financial result with record revenues. Whilst underlying performance and profits for the year were lower, encouragingly, we delivered a much improved performance in the second half of the year. The period benefited from deflation in some input costs, easing cost of living pressures, and importantly, we are seeing the benefits of a stronger operational focus. Revenue from continuing operations was up 2.1% to a record AUD 1.519 billion, with growth in Australia partially offset by softness in Europe. Underlying EBITDA from continuing operations was flat at AUD 228 million, despite soft economic conditions and cost inflation, particularly in the first half. Underlying NPAT from continuing operations was down 14.8% to AUD 51.1 million due to higher depreciation on a larger store footprint.
This result reflects a relatively strong second half of the year. Andrew will cover off on the statutory earnings later in the presentation. We continue to generate exceptionally strong cash flows, and our balance sheet remains in great shape, with net debt lower than last year. As a result of a strong second half performance and a strong balance sheet, the board declared a fully franked final dividend of AUD 0.15 per ordinary share, bringing the total FY 2025 dividend to AUD 0.26 fully franked. Slide four shows the size of our KFC network by geographic market. Our Australian network now spans 288 KFC restaurants, and our Netherlands footprint totals 62 restaurants. While Germany is subscale at the moment at 16 restaurants, it will not be subscale for long, with Germany providing us, as I will talk to in more detail later on, a significant and exciting growth opportunity for Collins.
Our network is serviced by three Restaurant Service Centers, RSCs in Brisbane, Amsterdam, and Düsseldorf. Operational highlights are set out on slide five. Digital remains a key growth driver in all markets, and we continue to invest in channels which improve accessibility to the KFC brand for our customers. In FY 2025, we rolled out kiosks to a further 106 KFC restaurants in Australia, increasing the number of kiosks within our European store network. We also diversify our digital sales mix in Europe. Menu innovation and effective marketing and product campaigns, such as KFC FLG in Australia and Kipselen in the Netherlands, are introducing KFC to new customers and strengthening brand perceptions. We continue to expand our network, opening 10 new restaurants in Australia and four in the Netherlands during the year.
In addition to expanding our footprint, we're also modernizing the network, remodeling a further 53 stores, which included eight supercharged formats. These restaurants feature dual drive-through and T-line kitchens, unlocking sales capacity and improving customer experience. Turning to segment highlights on slide six, as I mentioned earlier, group performance benefited from a stronger second half, with KFC same-store sales improving in all markets. KFC Australia revenue increased 3% over the prior year, with same-store sales up 0.3%. Soft consumer conditions and cost inflation impacted margin down slightly on the prior corresponding period. The KFC brand remained strong, leading its QSR peers on key brand metrics. Digital is continuing to account for a larger proportion of revenue at 34% of sales, up 4.8 percentage points over the same period last year.
As I mentioned earlier, we opened 10 new restaurants and closed one due to a better location becoming available, bringing our national network in Australia to 288. Sales in KFC Europe were slightly lower than the prior period, with same-store sales down 2.7%, following two years of very strong growth. The Netherlands same-store sales were lower by 2.5%, with Germany lower by 3.3%. However, both experienced significant uplift in performance in the second half. Germany's performance over recent years, and particularly last year, was impacted by the disruption caused by the transition of the management of the market between Yum! Brands and the former master franchisee. Pleasingly, the German market has now stabilized under Yum!'s control. Despite the sales softness that I referred to earlier, KFC continued to grow market share in the region, driven by stronger brand health metrics and product innovation.
Digital sales were another growth driver, representing more than 60% of sales in both markets. The development agreement with Yum! will see us scale our footprint in Germany. We're very excited about that, and we're addressing profitability challenges in the Netherlands, which we will cover in more depth later. Our European portfolio now stands at 78 restaurants. Taco Bell Australia sales declined 2.5% over the prior year, impacted by a highly competitive consumer landscape. The network remains unchanged at 27 restaurants across Queensland, Victoria, and Western Australia. Discussions are ongoing to transition our Taco Bell operations to new ownership, with the intention to complete this process within 12 months. Our progress on sustainability is highlighted on slide seven. In FY 2025, we laid the foundations for upcoming sustainability reporting obligations, establishing a regulatory roadmap, completing a double materiality analysis, enhancing our data quality, and strengthening sustainability governance.
A climate risk and scenario analysis is also underway. We have a beyond compliance approach to sustainability and have already made significant strides towards our 2030 targets. Key FY 2025 progress includes rooftop solar installed on 190 restaurants, 13 more than last year, diverting 23% of waste from landfill. Our workforce of more than 21,000 people includes 43% female leaders. We've raised almost AUD 1 million for charity partners, and we're using 100% K3X and Better Life Chicken in Europe. I'll now hand over to Andrew Leyden, our Group CFO, to take you through our 2025 results for the full year ended 27 April 2025.
Thanks, Xavier, and good morning, everybody. Let's first move to our group results overview on slide nine. Revenue in financial year 2025 was up 2.1% over the prior year to just over AUD 1.5 billion, and that's a record for Collins Foods, as Xavier stated earlier. Growth in Australia was partially offset by softness in Europe, reflecting difficult consumer conditions, particularly in the first half. Second half performance improved markedly. Our performance overall underlines the resilience of our business in challenging economic times, but also the benefits of operational focus, which was sharpened in the second half. Underlying EBITDA was relatively flat at just under AUD 229 million, and that's despite weak consumer sentiment in both Europe and Australia in the period and persistent cost inflation, again, especially in the first half.
Underlying EBIT was AUD 117.1 million, down 5.7%, reflecting flat EBITDA, but with higher depreciation relating to new builds, remodels, and leases. The company continued to invest in network expansion and modernization, as well as in digital channels, all of which will benefit our business in coming periods. Underlying net profit after tax was AUD 51.1 million, down just under 15% on the prior year, and EPS was AUD 0.434 per share, down from AUD 0.51 per share in the prior period. As indicated, this result included a comparatively strong second half performance. Statutory impact was AUD 8.8 million compared with AUD 76.7 million in financial year 2024. Financial year 2024 included a AUD 20.2 million net profit after tax contribution from the sale of Sizzler Asia.
In financial year 2025, total restaurant impairments were AUD 40.8 million, inclusive of AUD 35 million relating to the Netherlands portfolio, as well as an AUD 3.2 million provision top-up for potential wage underpayments relating to prior years. The Netherlands impairments were slightly higher than the range flagged to the market in our announcement on the 15th of April this year, having now completed a full impairment review of all assets. As explained in April, the impairment charge in the Netherlands reflects a soft consumer environment and an increase in labor rates of over 30% over three years, which impacted the profitability of the whole QSR segment. With respect to the provision for potential wage underpayments, Collins Foods is committed to meeting its obligations under the Fair Work Act and takes wage compliance very seriously.
The company has been reviewing historical employment and wage data to determine whether employees may have been entitled to additional payments. We are constructively and proactively liaising with the Fair Work Ombudsman in relation to these matters and are committed to fully remediating any impacted team members. Cash flow again was a highlight for the year, with net operating cash flows totaling AUD 101.4 million, up on the prior year. Net debt was lowered by AUD 27.6 million to AUD 137.9 million, with strong cash flows funding capital investment, dividend payments for shareholders, and also debt reduction, further adding to the group's investment capacity for the future. Today, the board declared a fully franked final dividend of AUD 0.15 per share, which brings the total financial year 2025 dividend to AUD 0.26 per share, fully franked, compared with the prior year at AUD 0.28 per share.
The dividend record date will be the 8th of July 2025, with a payment date of the 5th of August. Now moving to slide 10, which reflects our second half performance. At a group level, our H2 performance was stronger than the same period last year, with higher revenues, EBITDA, and EBIT in absolute terms, while EBITDA margins also improved. Key drivers were brand health, impactful product innovation, commodity deflation in Australia, and the benefits of improved operational performance. Group H2 revenues increased 2.8% on the prior period to AUD 816 million and were higher in both Australia and Europe, up 3.2% and 2.3% over the prior period, respectively. EBITDA for H2 was up 5% over the prior period to AUD 125.8 million, with margins up 32 basis points to 15.4%. EBIT also grew 3.3% to AUD 64.6 million.
As well as overall sales being up, KFC same-store sales also improved in Australia and Europe in the second half. The graphs in the bottom left of the slide show same-store sales performance on a half-year basis, and pleasingly, performance lifted significantly in the second half, with Australia up at 0.7% over the first half, while the Netherlands and Germany improved 1.5% and 4.1%, respectively, versus the first half. This performance improvement continued into early financial year 2026, and more on that will follow later. Please note that the first half consisted of six four-week periods, while the second half was seven four-week periods. Moving on to our income statement on slide 11, which outlines the reconciling items between statutory and underlying results.
The most material item impacting the difference between statutory and underlying performance was the AUD 40.8 million non-cash impairment charge, of which AUD 35 million related to the Netherlands restaurants as previously flagged. The balance of the charge reflected single restaurant impairments in Australia and Germany, as well as small capital write-ups on previously impaired restaurants. The group also provided an additional AUD 3.2 million for potential wage underpayments relating to prior years. Underlying EPS was AUD 0.434 per share, while basic statutory EPS was AUD 0.075 per share. Now turning to cash flow on slide 12, strong cash generation remains an attractive feature of the Collins Foods business. In financial year 2025, net operating cash flows increased by AUD 5.1 million over the prior year to AUD 181.4 million. While EBITDA was lower than prior period, cash conversion was extremely strong at 120%.
Operating cash flows were applied to fund disciplined investments, dividend payments, and net debt reduction. Investing cash outflows were AUD 67.9 million, mainly reflecting capital investment in the store network and digital technology. New restaurant investment was AUD 17.4 million. Remodels absorbed AUD 26.1 million, and digital and sustainability investments totaled AUD 7.1 million. Asset renewal investment was AUD 15.2 million. Financing cash outflows were AUD 78 million, which included AUD 10 million in bank debt repayments, dividend payments of just shy of AUD 30 million, and lease principal payments of AUD 42.2 million. Net cash movement was an inflow of AUD 35.6 million for the year, compared with a AUD 3.9 million inflow in financial year 2024. Now onto our balance sheet on slide 13. Collins Foods' balance sheet is in exceptional shape and provides significant capacity for investment in growth opportunities.
Net debt was reduced by AUD 27.6 million over the prior year to AUD 137.9 million, driven by strong cash generation and disciplined allocation of capital. Cash balances increased AUD 35.3 million -AUD 119.1 million. Property, plant, and equipment was down AUD 7.9 million over the year to AUD 247.4 million, reflecting new restaurant builds and remodels, less depreciation, and impairment. Right-of-use assets of AUD 503.3 million and total lease liabilities of AUD 634 million, both increased on net restaurant additions, as did other non-current assets consisting mainly of movements in intangibles. The net leverage ratio ended the period at a very comfortable 0.93, down from 1.07 in the prior year. Now, slide 14 outlines our capital allocation priorities. Collins has a disciplined approach to capital management, focused on, firstly, investing in profitable growth opportunities.
Secondly, maintaining a strong balance sheet and also paying consistent fully franked dividends, and then contemplating capital management activities should suitable investment opportunities not be available. However, our major growth focus areas for capital allocation are investments in growth and ensuring our balance sheet remains healthy. Xavier will provide commentary on how we see the outlook for the company later, and as always, happy to take questions at the end of the presentation. For now, I'll hand over to Krystal, who's going to take you through KFC Australia's performance.
Thank you, Andrew. Turning to slide 16. The headlines on the KFC Australia FY 2025 performance are as follows. We've delivered effective execution with a focus on operational excellence, strong brand metrics demonstrating resilience in a challenging environment, digital investment has produced attractive results, and margin improvement in the second half. Our positive start to FY 2026, which Xavier will outline later in the presentation, reflects enhanced operating disciplines and improved consumer conditions demonstrated by strong same-store sales growth. Our results are a true reflection of our restaurant team's commitment to operational excellence and delivering great customer experiences. Moving to slide 17, our solid FY 2025 performance reflects the resilience of the world-class KFC brand, which remains as relevant today as it was when it first launched in Australia more than 50 years ago.
As Andrew mentioned earlier, brand strength and improved operational execution saw momentum build in the second half of the year, which has continued into FY 2026. Revenue increased 3% over the prior period to AUD 1.2 billion, driven by new restaurants, strong digital growth, product innovation, and operational excellence. Same-store sales were up 0.3% following two years of strong growth, with same-store performance improving in the second half to + 0.6%. EBITDA was up 0.5% to AUD 222.6 million, with margins down 46 basis points on the prior corresponding period to 19.3%. This was due to relatively flat same-store sales and inflation across key import lines. Margins in the second half of the year improved 48 basis points over the first half to 19.5%. Encouragingly, this was 12 basis points higher than the same period in FY 2024. EBIT was slightly lower due to higher depreciation on network investments. Slide 18 shows our network.
Collins Foods is the largest KFC franchisee in Australia, operating more than a third of the nation's KFC restaurants. As you can see, the majority of our network is located in Queensland and Western Australia. Onto our development pipeline on slide 19, pictured are some of our newest restaurants. While Australia is one of the most penetrated KFC markets in the world, we see further opportunities for profitable network growth. We continue to expand our restaurant network with 10 new builds added in FY 2025, as well as one closure due to a better location becoming available. Over the year ahead, we're targeting 7-10 new restaurants and remain on track to expand into even more communities as we look to deliver 28-30 new restaurants by 2028.
We continue to prioritize the modernization of our existing restaurant portfolio, targeting approximately 30 remodels in FY 2026, which will further enhance customer experience and create greater operational capacity through our supercharged remodels, which we expect to drive top-line growth. Turning to slide 20 and KFC Australia's brand health. Despite soft consumer spending, the KFC brand continues to go from strength to strength, leading its QSR peers on key brand health metrics. Consideration, a measure of willingness to buy, is now at a four-year high, and across the second half has recorded the highest score in the QSR market. Brand health is essential in advance of a consumer-led recovery, which we started to realize toward the end of FY2025. Improving brand health has been assisted by menu innovation, including standout performers such as Zing and Nachos, proving to be consumer favorite.
We've also strengthened our everyday value bundles, adding items such as the Luxe Lunch for AUD 9.95. Slide 21 shows the KFC brand is continuing to outperform its QSR peers. As you can see in the YouGov graph, the impacts of digital investment, product innovation, and everyday value have assisted in placing KFC as the clear market leader against our competitor set on Brand Index. Brand Index comprises results across quality, value, reputation, satisfaction, recommendation, and impression. The KFC FLG launch has not only modernized and energized the brand, it's resonated with consumers, and this is seen in the Brand Buzz results, continuing to improve with KFC leading the category. Brand Buzz results in the Gen Z population are significantly higher, with improved cut-through with these consumers. Turning to slide 22.
On our strategic focus of operational excellence, which is at the heart of everything we do, we continue to invest in restaurant modernization and digital channels to elevate the customer experience. In FY 2025, we remodeled 40 stores and added kiosks to more than 100 restaurants. We're also seeing high rates of KFC app adoption and conversion driven by exclusive offers. Increased brand accessibility is a key growth driver, with DigitalNow accounting for 34.2% of sales, up 480 basis points over the same period last year. Remodeled restaurants are enhancing all customer interaction points, while improved operational systems such as vendor-managed inventory and KFC Listens are lifting efficiency, product quality, and engagement. Lastly, having been with Collins Foods for over 24 years now, I am personally energized to be back leading KFC Australia. We have amazing operation and restaurant teams who work hard and achieve great results.
Looking forward with a strong KFC customer base and improving consumer conditions, over the next 12 months, my team and I will be particularly focused on optimizing operational processes to leverage our digital investments, unlocking opportunities with AI, particularly through increased sales forecasting accuracy, and elevating the customer experience. These three areas are aligned with our strategic focus on operational execution to enable growth in customer experience measures, sales, and margins. I will now hand over to Chris to cover the performance of KFC Europe.
Thank you, Krystal, and good morning, everyone. Turning now to KFC Europe on slide 24. Our FY 2025 performance reflects a challenging economic environment in Europe, particularly in the Netherlands, which was impacted by cost of living pressures and significant cost inflation. Revenue of a little over AUD 312 million was slightly lower than the same period last year, with same-store sales down 2.7%, cycling a very strong FY 2024 and FY 2023. Same-store sales were stronger in the second half of the year at negative 1.7%. On a full-year basis, Netherlands' same-store sales declined 2.5 percentage points, while Germany was down 3.3. Sales in Germany were impacted by instability created by the transition of the market management between Yum! Brands, the franchisor, and the previous master franchisee. The German market returned back to the leadership of Yum! Brands in mid-December 2024, and their teams have been fully focused on rebuilding core team structures and processes.
Pleasingly, the market is now stable, and Collins and Yum! are working together to capitalize on clear growth opportunities in Germany. More on that later. EBITDA was down 7.5% to AUD 39.4 million, with margins down 96 basis points to 12.6% due to subdued trading conditions in both markets, as well as elevated labor cost increases in the Netherlands, which have amounted to more than 30% over the last three years. EBIT of AUD 7.6 million was down 37.1% over the prior period on lower EBITDA and higher depreciation on our growing restaurant network. Moving to slide 26 and a more detailed look at our Netherlands operations. The graphs on the left show average annual restaurant revenues by geographic market at the top and underlying EBITDA and EBIT margins at the bottom. As you can see, KFC Netherlands had healthy average restaurant revenues in FY 2025 of AUD 4.1 million.
However, its EBITDA and EBIT margins were the lowest of the group. Margins were impacted by challenging consumer conditions given cost of living pressures, cost inflation, particularly in labor, and variable performance and productivity across our network. Regulatory challenges, including zoning and permitting, as well as access to energy, have hindered our development progress. As a result of lower profitability, 16 Netherlands restaurants were impaired with a non-cash impact of AUD 35 million. Onto slide 27. Restoring profitability in the Netherlands is our number one priority over the year ahead. Improving brand strength and operational standards are key to our sales growth, as are efforts to enhance the team member and guest experience and ensure we maximize efficiency gains throughout the entire P&L. Brand health will be underpinned by a renewed focus on bringing excitement and relevant and distinctive products to our menu boards, balancing media spend across value and core.
We're also doubling down on digital investments into our own KFC.nl website and e-commerce app, as well as menu and bundling innovations. The stabilizing labor cost inflation environment will support the bottom line. Whilst we focus on optimizing operations, we're moderating our development pace in this market over the short term. Slide 28 looks at KFC's growing brand strength in the Netherlands. In a soft consumer environment, taste and new local Dutch product innovations such as the Kipselen and Lava Sauce delivered market share gains and strengthened our brand metrics. Awareness increased to 70%, and consideration rose 0.9 percentage points over the same period last year. Digital channels remain a key contributor to growth, representing almost 63% of all sales in the Netherlands, benefiting from our continued investment in kiosks and third-party delivery services. I'll hand back to Xavier to talk about the German opportunity in more detail.
Thanks, Chris. Turning to slide 30. Before Chris goes into more detail about our German business, I'd like to make a few key points. Germany is a very significant growth opportunity for Collins. It's the largest economy in Europe and a large and stable QSR market. Our recent agreements with Yum! will accelerate our presence in these large consumer markets where both the KFC brand and chicken, more broadly, are under-penetrated. The KFC brand is a solid number three player in Germany, with plenty of room for growth as the market moves towards scale. McDonald's and Burger King, respectively, have seven times and four times more restaurants in Germany than KFC. This gap opens opportunities for accelerated growth and scale for Collins in Germany.
Despite having the lowest number of restaurants amongst its QSR peers, it has been the fastest-growing brand in Germany since 2019, outperforming competitors on both food quality and taste. We are targeting 40-70 new restaurants over the next five years, with a period of exclusivity within the North Rhine-Westphalia and Baden-Württemberg regions, areas where we already operate restaurants. We will also consider acquisition opportunities in Germany that can help us drive scale and accelerate development in a market that will become our second strategic growth pillar. Back to you, Chris.
Thank you, Xavier. Slide 31 takes a closer look at these regions. The biggest opportunities for accelerated growth come from two of the most populated regions in Germany, North Rhine-Westphalia, home to cities like Düsseldorf and Cologne, and Baden-Württemberg, its capital being the city of Stuttgart. A single KFC currently services approximately 400,000 people across these regions. The graphs in the bottom left show how this compares to McDonald's locally, as well as KFC Australia, where one KFC services just 34,000 people. Whilst we're initially focused on scaling our footprint in these two areas, over time, we'll also look to buy and build opportunities in other regions. Turning to slide 32. Despite the market's relative instability over the past few years, with changing master franchisees and an inflationary environment, our German restaurants have performed well. Finally, on slide 33, moving to restaurant economics.
Our German restaurants are some of the best performing in the group. As you can see, in FY 2025, Germany had the group's highest average store revenues at AUD 4.4 million, with restaurant margins broadly comparable with KFC Australia, with the exception of property-related costs, which are higher historically. These unit economics are more encouraging given the market is subscale, reinforcing our confidence in Germany's long-term growth potential. The market will also benefit from significant investment and capability, including brand marketing from Yum! I'll now hand back to Xavier to take you through Taco Bell Australia's performance and outlook for the year ahead.
Thanks, Chris. Turning now to Taco Bell Australia on slide 35. Revenue of AUD 53 million was down 2.5% over the prior year, with sales impacted by weaker consumer sentiment. Cost inflation, marketing investment, and softer sales all impacted profitability. The network remains unchanged at 27 restaurants across Queensland, Western Australia, and Victoria. Collins has made the decision to exit our Taco Bell operations, continuing to work with Taco Bell International and Yum! to transition the business to new ownership, aiming to complete this process within 12 months. Now, moving on to slide 37. FY 2025 has been an important year for Collins, and we enter the year ahead in a stronger position. In summary, there has been strong execution with operational excellence driving growth and margins. We have strong brand metrics demonstrating resilience in a challenging environment. We are well-positioned to take advantage of improving conditions with momentum building.
Strong cash generation and our healthy balance sheet provide the capacity to invest in future profitable growth opportunities. As I mentioned before, we remain active and open to organic and strategically sensible inorganic growth opportunities. Now, I will provide our outlook for FY 2026 as set out on slide 37. While trading conditions remain challenging, our stronger performance in H2 has continued in FY 2026, with total sales in the first eight weeks increasing in all markets. We're seeing a more favorable cost environment in Australia and are benefiting from increased operational efficiency across the group. KFC Australia's total sales rose 4.9% in the first eight weeks, with same-store sales up 1.6%. Operational initiatives and a growing network are expected to drive sales and enhance customer experience over the year ahead.
Supported by improving consumer sentiment as cost of living pressures ease, increased labor productivity and commodity cost deflation will also deliver margin improvement. The Netherlands' total sales for the first eight weeks increased 2.6%, with same-store sales down 0.2%. Improving profitability is the key priority in the Netherlands in FY 2026, with operational excellence expected to drive sales, productivity, and efficiency. Recent cost pressure on poultry is expected to continue in FY 2026, given the impact of the avian flu in Europe, and we're continuing to optimize our portfolio under a reshaped development agreement with Yum!. Total sales in Germany increased 2.4% in the first eight weeks, with same-store sales slightly lower at 1.3%. While sales have been impacted by the transition of market management, increased marketing and capability investment by Yum! and Collins is expected to drive sales growth over the year ahead.
Our first restaurant under the new agreement with Yum! will open in August, targeting 40-70 over the next five years. As in the Netherlands, cost pressure on poultry will continue in FY 2026. In FY 2026, Collins Foods is targeting year-on-year group underlying NPAT growth in the low to mid-teens on a % basis. I want to again take the opportunity to say a big thank you to our great restaurant teams and RSC teams in Australia and in Europe, and thank them for their work, their energy, and their contribution to our success. I will now pass to Mel, our operator.
Thank you. If you wish to ask a question, please press Star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star two. If you're on a speakerphone, please pick up the handset to ask your question. If you wish to ask a question via the webcast, please type it into the Ask a Question box and click Submit. Please limit yourself to two questions per person. If you wish to ask further questions, please rejoin the queue. Your first phone question comes from Tim Plumbe with UBS. Please go ahead.
Morning, Tim.
Morning, guys. Just two questions from me, please. The first one around the Australian cost base, if possible, please. Margin in the second half was a fair bit stronger than you guys had guided to, so I was hoping that you might be able to give us a bit of color as to some of the key items that caused that outperformance versus what you were expecting originally and the productivity improvements that you're flagging for FY 2026. Did you get any of those benefits in the second half of 2025, or is that a 2026 story?
Yeah, so Tim, thanks for your question. That was three questions, I think, but anyway, that's okay. Yeah, there are probably three factors that have led to some margin improvement in Australia. First of all, as you've seen from the trends, our same-store sales performance improved. Clearly, we want to continue to see that rise. It was relatively stable in the first eight weeks, but we'd like to see that rise a little bit. That strengthening same-store sales performance, albeit modest, gives us a little bit of leverage in the P&L. The second factor is probably deflation on two material commodity inputs, one of which is poultry, the other one is potatoes. If you think about our menu, that comprises a fair proportion of our menu.
We've seen deflation in both those categories, and that impact started to bite just at the end of the third quarter of the fiscal, so we've not had a full year of that. That will continue into financial year 2026. Probably the third element, which has only been partially realized, is productivity. Our productivity did improve in the second half. More to come on that as we get more precise about matching labor supply with volume demand, and there's a lot of work going into that whole program. Clearly, it's important that we match supply with demand for every single hour that we operate our restaurants, and there's more to come on that. It's an area that both Chris and Krystal are very focused on. Those are the factors driving the change in the second half.
I know it's a little bit atypical because normally we'd see a stronger first half than second half, but all of those elements combine to give us a better outcome in the second half, and clearly more to come in 2026.
Great. Thanks. I'll jump back in the queue for another question. Cheers.
Thanks.
Thanks.
Thank you. The next question comes from Sean Xu with CLSA. Please go ahead.
Morning, Sean.
Oh, thanks, team. Morning. Just to follow up on Tim's question, can I ask for some color what sort of the same-store sales growth will be required to achieve your top end of the FY 2026 impact guidance? Because I'm assuming you were expecting a pretty material uplift in front of your first eight-week trading period to achieve this. Is that a fair assessment?
No, our assessment of same-store sales is we're not going to see a dramatic rise given where the consumer environment sits. Whilst we think conditions are modestly improving, I wouldn't say that consumers feel flush with cash at the moment. We think a low single-digit same-store sales rate will prevail. We want to see it lift. Of course, we'll do our best to lift it as far as we can. I think we'll continue to see a favorable cost environment in 2026 as well. We'll continue to see the prices that we're seeing on chicken and potatoes will continue favorably throughout the year, and we'll also see more work done on productivity. No, I think, Sean, we're not expecting to see radical increases in same-store sales performance.
It's the combination of all three that leads to where we've positioned ourselves with respect to net profit after tax projections for the coming year.
Sure. That's helpful. Thank you. My second question, just a quick one. Your Germany target of 40 shops-70 shops over the next five years, what sort of the are you able to give me? It's more like a more back-end weighted, or what sort of the profile in terms of timing-wise?
Yeah, I can take that one, Sean. Yeah, so clearly, it takes a little while for the pipeline to emerge. There is a lot of work that goes into developing a pipeline in areas that we think will drive enough traffic to drive profitability. I do want to emphasize that we are not going to build restaurants for the sake of building restaurants. They need to be in the right place with the right traffic, with the right productivity outcomes. We are going to financial year 2026 will be modest. The real ramp-up starts in 2027. We think that five to six restaurants, maybe five- seven, that sort of range, and then it will grow beyond that. What the numbers will be in the subsequent years just depends on how successful we are in targeting sites.
Cool. Thank you. That's clear.
Thanks, Sean.
Thank you, Sean.
Thank you. Your next question comes from Peter Marks with Barronj oey. Please go ahead.
Morning, Peter.
Morning, Xavier. Morning, Andrew. Just a quick question on Australia first. Did you see any impact on the business from Cyclone Alfred? I think it was in late March. Was there any restaurants closed or sales lost or extra costs you took there? I guess just to follow up on Tim's question, given you had the guidance out there that you did not expect the margins to improve until 2026, I understand the drivers, but which of those surprised you? It does not feel like the same-store sales growth accelerated significantly versus what you might have expected. Just interested if either of those things on the cost side of it surprised you to the upside.
Yeah. Hi, Peter. Firstly, on the same-store sales, it might seem modest, but a movement from - 0.3-+ 1.6 is meaningful in the context of our business. That has a big impact. In terms of the cyclone, yeah, we did see impacts. Obviously, our business is very exposed to Queensland, so we basically took the brunt of it, with particular impacts in southeast Queensland, where the impacts were pretty significant. We did have closures. All of that is reflected in our same-store sales number. I mean, they're not unique events, cyclones in Queensland. They seem to happen fairly frequently. Yes, we dealt with it. Was there an impact? Yes. Very hard to quantify what the impact was. It's probably modest, but we dealt with it, and it's included in the same-store sales numbers.
Did the cost relief you got on the input side or the wages, was there a big surprise there on what you were able to achieve in the half?
Look, it's great to see deflation. I mean, we don't always know exactly where it's going to come out until the negotiations complete. I think it didn't surprise us. We thought we'd get deflation, just not maybe it's come out more favorably than we expected, but that's after a period of inflation. To some extent, it's rebalancing. The area where we've really knuckled down is on productivity. Whilst there's more to come in 2026, we definitely started that program in the second half. We've always focused on productivity, but we really doubled down on it in the second half, and we saw some benefits, particularly in the last quarter. Normally, it takes a little longer to get those benefits to be realized, but yeah, we definitely saw better outcomes in quarter four.
If I can add something, of course, we are driving same-store sales growth. It is really important for us, and we want to drive growth for Collins. We see also immense value in driving same-store sales growth, productivity, and operational excellence in both Australia and in Europe.
Thank you. Your next question comes from Elijah Mayr with Goldman Sachs. Please go ahead.
Good morning, Elijah.
Hi Elijah .
Hi, just a couple from me. Maybe just firstly on the FY 2026 guidance, can you confirm that that includes Taco Bell and perhaps what your expectations are within that guidance for Taco Bell into FY 2026?
Yes. The short answer, yes, our guidance includes Taco Bell. We're including it in the consolidation both years. If that changes, obviously, we'll inform the market. We're expecting the position on Taco Bell to remain relatively flat.
Noted. Excellent. Then second question, just on KFC Australia kiosks, noted that in the presentation, there was a 106 increase in FY 2025. Could you kind of confirm that was the case just for Australia or for the group? And sort of where are you at in the Australian network in terms of stores that have the digital kiosk?
Yeah, thanks, Elijah. It's Krystal here. We did add a further 106 kiosks just in the KFC Australia network. That takes us to about two-thirds of our restaurants having kiosks now, and they're performing strongly. We're looking at how we best spend our capital to invest further in digital formats.
Elijah, maybe just a comment on Europe, and then maybe Chris can answer this, but penetration of kiosks in Europe is already very high. Yeah, just thought Chris might add some color to that.
Morning, Elijah. The European journey for kiosks started a few years prior as the channel mix in Europe is traditionally different, Australia, of course, being a high drive-through market. Given the city network in Europe, we're a higher dine-in and front-counter business. 100% of our restaurants in both Germany and the Netherlands have kiosks with an average of four to six kiosks per restaurant. Some of our busier restaurants have up to 15, 14 kiosks within them. That is reflected in our digital sales mix at 63% in the Netherlands and 67% in Germany.
Excellent. Appreciate the color.
Thank you.
Thank you.
Thank you. Your next question comes from Ben Gilbert with Jarden. Please go ahead.
Morning. Good morning, Lachlan. Thanks for the time this morning. Just in terms of the Netherlands, just in terms of the actions you've taken, obviously impaired the last update, how quickly do you think you can get those margins back up? Because obviously, HARB's disposability will be a bit lower if we're looking at a post-EBIT basis. Do you expect to see quite a material uplift in terms of some initiatives or things like headwinds, etc., and poultry that are going to remain pretty benign through fiscal 2026?
Yeah, Ben, sorry, I'll pick that one first, and I'll invite Chris to comment. Our intention is to get that business to a meaningful level of profitability as fast as we can. Can we make immediate change in performance? Yes, of course. That's the intention. We do want to see a change in the trajectory of that business in financial year 2026. I'll let Chris talk about the things that are happening in that market, but we want that business to earn its keep and to generate an appropriate level of return on the investment that we've made. Impairments are always unfortunate, of course. I mean, we can't write restaurants up. We can only address them on the downside. Our intention, despite the impairment, is to drive as much profitability as we can out of that network as possible.
Chris, if you want to provide some color.
The brand is in good health, as shared earlier. KFC in the Netherlands celebrated 50 years in 2022. The brand also has a long heritage and is a solid number two in the market, with a 50% bigger network than the number three, being Burger King or Hungry Jack's, I think we call it here locally. The market is definitely responding to a renewed focus on labor productivity and food waste, cost of sales management. With our more moderated view on pipeline development and new restaurant build, we feel confident to make meaningful changes in FY 2026.
I think just a second one from me. Just in terms of you've always got a pretty strong balance sheet position that gives you a lot of optionality. Where do you see the highest return, incremental return, your average generated at the moment? It feels like how you're talking through the presentation, it's Germany and looking to buy existing chains in that market. Is that the preference or priority, or are you still looking to greenfield master franchise agreements, which you've sort of alluded to in the past in Europe?
Xavier here. Obviously, we have a strong balance sheet, which is great, and it provides us with optionalities and capacity for organic and inorganic growth opportunities. I can't say much more in the sense that we want to be open, but we need to have a disciplined approach based on profitable strategic growth. Of course, we want to deliver shareholder value. Germany is subscale. As you mentioned, the store economics are pretty strong. We want to drive accelerated growth in Germany through buy and build. We've got nothing in mind at the moment in terms of M&A opportunity, but certainly, we will look at acquisition opportunities in Germany if they occur to accelerate in this market, which we believe should become our second growth pillar.
Thank you. Your next question comes from James Ferrier with Wilsons Advisory. Please go ahead.
Good afternoon, team. Thanks for your time. First question I wanted to ask, one and perhaps it's one for Krystal, in the Australian business, I'm keen to hear your thoughts on the menu performance, how you're reading it in terms of the success of innovation, the product mix, and the benefit you're seeing flow through to gross margin. It seems like it's been a big focus for the franchise community and for KFC and interested in how you're reading the improvement there and then how much perhaps more improvement is left when we look forward into FY 2026.
Yeah, thanks, James. The everyday value strategy that came into play over the last 12 months actually has continued to strengthen as time has gone on. What it's really done is provided great value entry points that really make us seem more affordable to the everyday consumer when they really need that affordability the most. That's been coupled with a stronger product innovation, which helps upsell the customer and our core LTOs. What we look forward to in FY 2026 is actually quite a strong and persistent pipeline of product innovation that is quite craveable products that are coming this year.
Okay. Thank you. That's good to hear. Second question, maybe one for Xavier or Chris. Just in the German market there, I'm interested in what color you can provide on some of the other initiatives that are underway there, whether it's new store opening plans from other stakeholders or restaurant buyback plans, refurbs, etc., brand building campaigns from you. Just any further color you can give on the broader plans for the brand in Germany.
With pleasure, James. Historically, KFC Germany has had one of the lower remodel compliances across Europe. However, one of the bright spots over the last 18 months is the German market has heavily invested in what they've called the remodel acceleration program to bring not just restaurants close to Collins, but across the entire estate up to latest look and feel. The market is now at four-fifths last touched within five years, which is at the normal standard. At the same time, as alluded to earlier, the market is realigning its teams and processes specifically around brand and marketing. A new CMO who is ex-McDonald's has joined the market two weeks ago, as well as a new head of digital. We are very encouraged by the first signs.
Given Collins' strategic importance to Yum! in that market, we also have the benefit of sitting on not only the advertising co-op, but also the ops committee, the development committee, and the business model committee. Collins has a voice at the table with Yum! on a quarterly basis across key priorities and projects.
Thanks, Chris. Appreciate the color.
Thank you. Your next question comes from Caleb Wheatley with Macquarie. Please go ahead.
Good morning. Good afternoon.
Good afternoon.
Yeah, sorry.
Good afternoon, Xavier. Apologies for that. Just a couple of follow-up questions from me. The first one on the kiosk front, particularly in Australia. You mentioned two-thirds of the stores in Australia have them now. Where do you see this getting to over the coming 12 months-18 months? It still seems like a fairly big opportunity on both the revenue and the cost side for the Aussie business. How should we think about the opportunity there, please?
I think the penetration of kiosks will continue to rise. I mean, every time we do remodels, we install kiosks. There are one or two of our or some of our restaurants, a handful, where installing kiosks is very, very challenging just by virtue of its physical dimensions and location. I think you expect to see us increase our penetration over time. Every single remodel comes with kiosk installation. As always, it's making sure we get the return on the investment that we target when we put any investment into our network.
Okay. Got it. I've sort of been touched on a little bit throughout some of the other questions, but maybe just a bit more specifically on CapEx across the business as we go into FY 2026. Just noting, obviously, store openings to come in Australia and Germany and the remodels you've called out as well. How should we think about moving in CapEx as you work through some of those programs through FY 2026, please?
Yeah. Look, I think for the next couple of years, our CapEx levels will be similar to what we've got this year. Really, what drives that is the fact that the ramp-up in Germany does not really commence until 2027. Expect our CapEx to be relatively consistent for the next couple of years and start ramping up as we start to develop out the German market.
Thank you.
Thank you. Your next question comes from Sam Teeger with Citi. Please go ahead.
Good afternoon, Sam.
Hey, Xavier. Hey, Andrew. Thanks for taking the question. Just on Germany, after the changes in KFC in Germany, can you talk through who the other main players with you at those key committees who are looking after the other states? Based on your discussions with them, what do you think of their willingness and ability to invest and repair the KFC brand across the whole of Germany with you?
Hey, Sam. It's Chris here. I'll field that one. For context, across the 210 KFCs in Germany, there are 24 other franchisees. As I'm sure you can appreciate, that will be some second or even third-generation low single-unit operators all the way through to other multinational listeds. AmRest are a franchisee that you may be aware of who operate multiple brands across Europe. In those forums that you've alluded to, we have a good mix of voices at the table. Collins, along with AmRest, are the only franchise partners that are present in all four, which is great as we've got capital and commitment as Collins. I won't speak for AmRest, but we've got a good mix of franchisees and across states as well. It's not a very narrow forum, but they're quite large, Sam.
Do you think the rest of them or most of them are willing to invest in marketing to really repair the brand after what happened under IS management? Or is it just going to be you kind of carrying the load yourself?
We have committed spend. One thing that is clear is that we're all contributing to the national co-op. As answered a few minutes ago, the remodel compliance has really ramped up. That was a bright spot over the last 18 months. That is real commitment by franchisees, not just Collins deploying their capital in remodels. We have had very good conversations. We are also a member of the franchise committee, as you would imagine, in Germany. Those are very constructive and broadly people want to move on and build the brand and do right by our customers and our team members.
Maybe just to add to that, I think, as you see in Australia, you've got franchise partners that want to grow and invest, and you've got others that don't. I don't think Germany will be any different. We don't expect we'll be the only partner developing in Germany.
Just to add to that as well, Sam, I was in Germany a few weeks ago and spent quite some time with Yum in Germany and Yum in Europe. There is a strong commitment on Yum's side to drive growth in Germany for various reasons. KFC is far behind McDonald's. There is strong willingness to drive that and invest beyond growth. Obviously, we want to contribute as a key partner to that. There is no success for KFC in Europe without success in Germany, considering the size of the market. There is strong willingness on Yum's side to drive that growth for KFC.
Thank you. Your next question comes from James Bales with Morgan Stanley. Please go ahead.
Good afternoon, James.
Hi guys. Thanks for taking my questions. Firstly, maybe on Germany, when you think about the M&A opportunities that you might come across there, can you help us understand, are you after the ability to open up additional states, or are you after great assets or assets that you can put capital into and materially improve? How should we think about the equation there?
A few key points. First, we want to have a strong focus on a few regions. We do not want to spread our resources around across too many states. We want to focus and develop. At the moment, our focus is across two areas. One is around Stuttgart. The other one is around Düsseldorf, where we have our store network. If the opportunity occurs to acquire another network in another region and build a third region, that would be fantastic. If we acquired a network, we would acquire a network to build scale and accelerate, but also to be able, beyond the stores we would acquire, to actually develop more restaurants and leverage the teams and the capacity and the capability on the ground to accelerate development beyond just the acquisition.
Got it. You also made reference in the presentation to a new agreement with Yum! Brands in the Netherlands. Can you maybe help us understand what's changed as part of that agreement, and what does Yum! really care about in terms of your phase of slowing down the rollout and improving profitability?
James, hi. Yeah. I mean, the agreement really is to moderate development. I think there's a common understanding that there are some unique challenges in the Dutch market that we don't see in other markets. The moderation of development sort of reflects that because we've got to knuckle down and resolve profitability challenges in that market. That's in everybody's interest because having a profitable franchisee network makes sense for all parties concerned. That's the nature of the changes there. Obviously, we still run the market. As we flagged in a previous announcement, what that looks like moving forward is yet to be determined and will be subject to negotiation. That's a piece of work that is as yet unfinished. Sorry, I'm not sure I answered all your questions there, James.
No, no. That gives me a good sense. Thank you.
Okay. Okay.
Thank you. Your next question comes from.
We'll just take one more question because we've got to run afterwards.
No problem. Your final question comes from Michael Toner with RBC. Please go ahead.
Hi, team. Thanks for taking my question. Look, very, very quickly, I can see that revenue sort of came in line or maybe sort of marginally below this year, but you've called out operational improvements on a few occasions throughout the presentation. I was wondering if you could be a little bit more specific as to exactly what initiatives you guys have put in place and sort of whether there's further room to run from a productivity perspective, particularly given it's very two-half weighted, it looks like.
I could start and maybe invite Krystal and Chris to comment. Just your comments on sales, I'm not quite sure what the comparator is that you're running us against. I mean, our sales performance has improved since the first half in every dimension. Second half improved on first half, and same-store sales in the first eight weeks have improved upon half two. We have seen a gradual improvement in trend, whichever way you look at it. We are pleased about that. More to do, but definitely pleased about that. Productivity, put simply, obviously, there are things that we can do to drive efficiency, and technology plays a role in that. Fundamentally, it is about getting better at matching supply and demand. Making sure that we are supplying labor when the volume demand is there.
If I just want to simplify the whole equation, that's really what we're trying to do, and we're trying to leverage technology to do that working with Yum! . It's a system-wide issue, and we all acknowledge that it's an area where we can drive further benefit. But Krystal and Chris, any specific issues relating to Australia and Europe?
Yeah, I can talk to what we've been trialing in my first eight weeks, which is a really great tool that assists in what Andrew's been alluding to. In the trial so far, we've seen significant improvement in ensuring we have the right people on at the right time, which has unlocked sales and also customer experience metrics. We are strengthened by the tools that we have in place. The trial is moving forward, and we do see that operating discipline adding further benefit in FY 2026.
In the European context, halfway through Q4, in my then first eight weeks, we have rolled out across both Germany and the Netherlands biweekly sales forecasting and team member hour assessments, as well as extreme focus on productivity and so-called best when busiest. This is showing dividends. This has rolled through and is really gaining momentum in the first eight weeks of this year. Further opportunity, which is important for us in Europe, is around waste and waste management, not only for the P&L, but also in terms of our ESG commitments. We have seen big improvements in cooking to demand and using the technology appropriately in both Netherlands and Germany.
Thank you.
Thank you very much.
That's all the time we have for our question and answer session. I'll now hand back to Xavier for closing remarks.
Thank you very much. Thank you for joining the meeting. We're going to follow up and make sure we answer other questions. I just want to say on behalf of our executive team that we're very energized and excited about the year ahead. Very happy about the underlying results that have been delivered. I want to thank again our shareholders for their support and encouragements. Have a great day.
That does conclude our conference for today. Thank you for participating. You may now disconnect.