Collins Foods has delivered a record year with revenue reaching $1,592.6 million, up 8.6% on the prior year, and underlying net profit after tax climbing 13.0% to $61.4 million. The 53-week reporting period compared to 52 weeks in FY25 masks particularly strong operational leverage, with earnings growth outpacing revenue growth. This indicates the company’s strategic focus on operational efficiency and cost management is yielding tangible results for shareholders.
The balance sheet has materially strengthened alongside operational performance. Net debt decreased by $18.3 million to $119.6 million, while the net leverage ratio improved to 0.77 from 0.93 in the prior year. This deleveraging provides Collins Foods with greater financial flexibility to fund growth initiatives, return capital to shareholders, or navigate potential economic challenges. Return on equity improved 220 basis points to 14.5%, signalling the company is deploying capital more effectively than in the past.
The dividend was increased to 28.0 cents per share from 26.0 cents, representing 7.7% growth and demonstrating management’s confidence in cash generation capacity. The company maintains fully franked dividends, which proves particularly valuable for Australian investors. This decision reflects underlying cash generation of $150.1 million in operating cash flows, though this declined from $181.4 million in the prior year, warranting attention to working capital movements and capital intensity.
Australia remains the core driver of earnings, with operational improvements and the Kwench by KFC trial supporting momentum. Germany presents an emerging growth opportunity, with new development agreements and an eight-restaurant acquisition in Munich expanding the pipeline. The Netherlands showed improved profitability following restructuring of the corporate franchise agreement and stronger operational execution. Critically, Collins Foods has exited Taco Bell, transferring operations to new ownership and allowing concentrated focus on KFC brand development across all regions.
The statutory net profit of $47.1 million jumped 280% year-on-year, but this largely reflects prior year write-downs and one-off items. Adjusting for impairments, litigation settlements, and related costs totalling around $15 million, the underlying earnings of $61.4 million provides a clearer picture of operational performance.
Investors should monitor several factors as the year progresses. The success of the Kwench trial in sustaining growth momentum in Australia requires close attention. German expansion pace and returns will prove critical to validating the growth strategy. The company faces ongoing exposure to food inflation and labour cost pressures in multiple jurisdictions. Lastly, whether improved leverage and returns can be sustained through a potentially more challenging macroeconomic environment will test the durability of these improvements. This announcement is price sensitive and has been flagged as material to the ASX.
View the full ASX announcement (PDF)
About Collins Foods Limited (ASX: CKF)
Collins Foods Limited is the largest KFC franchisee in Australia and operates both KFC and Taco Bell restaurants across multiple countries. The company operates approximately 275 franchised KFC restaurants and 27 Taco Bell locations in Australia, with additional KFC operations in Germany and the Netherlands. Its primary revenue is generated from the operation and management of these quick-service restaurant franchises.
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