Collins Foods Limited reported record revenue of $1.52 billion for FY25, up 2.1%, but statutory net profit plunged 88.5% due to significant impairments and wage provisions. The company declared a fully franked final dividend of 15 cents per share, signaling confidence despite challenges.
- Record group revenue of $1.52 billion, up 2.1%
- Statutory net profit after tax down 88.5% to $8.8 million
- Significant $35 million impairment on 16 Netherlands restaurants
- Final fully franked dividend declared at 15.0 cents per share
- Strategic focus on KFC expansion in Australia and Germany, exit from Taco Bell
Record Revenue Masks Profit Challenges
Collins Foods Limited (ASX – CKF) has delivered a mixed full-year result for the 52 weeks ended 27 April 2025, posting record group revenue of $1.52 billion, a 2.1% increase over the prior year. However, this topline growth belies a sharp decline in statutory net profit after tax (NPAT), which fell 88.5% to just $8.8 million. The steep profit drop was primarily driven by a $35 million impairment charge related to 16 underperforming restaurants in the Netherlands and a $3.2 million provision for potential wage underpayments.
Underlying Performance and Dividend
On an underlying basis, excluding non-recurring items such as impairments and wage remediation provisions, NPAT declined 14.8% to $51.1 million. Despite the profit pressures, the Board declared a fully franked final dividend of 15.0 cents per share, bringing total dividends for FY25 to 26.0 cents per share. This dividend reflects the company’s strong cash generation, with net operating cash flow rising to $181.4 million and net debt reduced to $137.9 million, underscoring a robust balance sheet.
Strategic Priorities and Market Focus
Under the leadership of newly appointed CEO Xavier Simonet, who took the helm in November 2024, Collins Foods is sharpening its strategic focus. The company is prioritising profitable expansion of its core KFC brand in Australia and Germany, where it has signed a binding agreement with Yum! Brands to accelerate growth with 40 to 70 new restaurants targeted over the next five years. Germany represents a significant growth opportunity given its large population and relatively low KFC penetration.
Meanwhile, the company is working to improve profitability in the Netherlands, where cost inflation and regulatory challenges have weighed on performance. Collins Foods has moderated its development ambitions in this market to focus on operational excellence and innovation. In a notable strategic shift, Collins Foods has decided to exit its Taco Bell operations in Australia, with a transition to new ownership expected within the next 12 months.
Operational Highlights and Digital Growth
KFC Australia remains the company’s largest and most profitable segment, delivering $1.15 billion in revenue, up 3.0%. Growth was supported by 10 new restaurants and 40 remodels, including ‘supercharged’ formats designed to enhance operational capacity and customer experience. Digital sales channels continue to gain traction, accounting for 34.2% of sales, up from 29.4% the prior year, driven by increased kiosk availability and app engagement.
Despite a challenging consumer environment marked by cost inflation and softer spending, Collins Foods saw improving sales and profitability metrics in the second half of FY25, with early signs of consumer recovery continuing into FY26. The company remains focused on operational excellence, cost discipline, and menu innovation to sustain momentum.
Sustainability and Risk Management
Collins Foods continues to embed sustainability into its operations, with initiatives including expanding solar panel installations to 196 restaurants, reducing emissions per store by 21% since 2019, and cutting single-use plastics in Europe by 37%. The company is also proactively addressing wage compliance risks, engaging with the Fair Work Ombudsman and setting aside provisions to remediate any underpayments.
Other key risks identified include food safety, supply chain disruptions, regulatory compliance, and cyber security. The company maintains a strong governance framework and risk management policies to mitigate these exposures.
Bottom Line?
As Collins Foods navigates profit headwinds and strategic transitions, investors will watch closely how its European turnaround and Taco Bell exit unfold in FY26.
Questions in the middle?
- How will Collins Foods manage the financial and operational impact of exiting Taco Bell in the next 12 months?
- What specific initiatives will drive improved profitability in the Netherlands amid cost and regulatory pressures?
- How sensitive are the impairment assumptions to changes in market conditions, and could further write-downs be required?