Collins Foods posted record FY26 revenue and underlying profit, exited Taco Bell to focus on KFC growth, and outlined ambitious expansion plans in Germany and Australia.
- Record $1.59 billion revenue and $61.4 million underlying NPAT
- Exited Taco Bell, focusing solely on KFC brand
- Expanded German footprint with eight new KFC restaurants
- Introduced new remuneration metrics emphasizing capital returns
- Early FY27 trading shows strong sales growth in Australia and improving European trends
Record Financial Year with Strategic Refocus
Collins Foods Limited (ASX:CKF) delivered a landmark FY26, posting record revenue of $1.59 billion and underlying net profit after tax (NPAT) of $61.4 million, a 13% increase on the prior year. This performance came despite tough economic conditions in the quick service restaurant sector, reflecting disciplined execution across its markets. The company also reduced net debt to $119.6 million and lowered its net leverage ratio to 0.77, highlighting strong cash generation and balance sheet management.
Crucially, Collins Foods completed its exit from Taco Bell in August 2026, transferring 20 restaurants to a joint venture and closing the remainder. This strategic move allows the company to concentrate fully on the KFC brand in Australia and Europe, aligning with its growth ambitions.
Growth and Profitability Focus in Australia and Europe
Australia remains Collins Foods’ largest and most profitable market, with KFC Australia generating record revenue of $1.24 billion, up 7.6%, and same-store sales growth of 2.7%. Digital sales surged to 43.2% of total sales, driven by increased kiosk usage and a revamped delivery fee model. The company is investing in new initiatives, including national rollout of the Kwench beverage platform, extended late-night trading hours, and breakfast trials commencing on the Gold Coast, targeting fast-growing dayparts.
Europe showed promising momentum with revenue up 12.5% to $351.3 million and underlying EBITDA rising 14%. In Germany, Collins Foods expanded its footprint by acquiring eight KFC restaurants in Munich, increasing its portfolio to 25 and becoming the largest KFC franchisee by revenue. The company raised its FY30 target to 45-90 new restaurants but emphasised capital discipline and strict investment hurdles. Meanwhile, the Netherlands prioritises profitability over network growth, extending its Corporate Franchise Agreement to 2029.
Addressing Compliance and Governance
Collins Foods is actively managing wage compliance, with a provision of $8.3 million for estimated underpayments and ongoing engagement with the Fair Work Ombudsman. The company also agreed to a $9 million settlement in a class action over 10-minute rest breaks, pending court approval. Safety improvements were notable, with a 27% reduction in injury frequency in Australia and a program to replace older pressure cookers underway.
Board changes include the retirement of two directors and the appointment of Meredith Scott, who will chair the Audit and Risk Committee subject to shareholder approval. The company is also proposing amendments to its long-term incentive plan, replacing relative total shareholder return with a post-tax return on capital employed metric, reflecting a focus on capital efficiency amid growth.
Early FY27 Trading and Market Outlook
Trading in the first 17 weeks of FY27 shows a mixed but improving picture. Total company sales rose 6.6% on a constant currency basis, with KFC Australia up 6.4%, Germany surging 44%, and the Netherlands down 2.5%. Same-store sales growth was positive in Australia (3.4%) but declined in Europe, though recent weeks have seen a material rebound, particularly in the Netherlands where a new Halal-certified product range has been well received.
Management acknowledges challenges in Europe, including consumer confidence and tough prior-year comparisons, but remains optimistic about the market’s strategic potential. The company plans to maintain a disciplined approach to capital allocation and operational excellence, aiming to drive sustainable sales growth and profitability.
Bottom Line?
Collins Foods enters FY27 with a robust balance sheet and clear growth plans, but European market challenges demand careful execution and capital discipline.
Questions in the middle?
- How will Collins Foods sustain momentum in Germany amid competitive pressures and consumer uncertainty?
- What impact will the new remuneration metrics have on management’s capital allocation decisions?
- Can breakfast trials and beverage innovations significantly close the revenue gap in Australia’s competitive quick service market?