Collins Foods Limited

Thank you for standing by and welcome to the Collins Foods Limited full year 2026 results briefing. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question by the phones, you will be pressed the star key followed by the number one on your telephone keypad. If you would like to ask a question by the webcast, please answer 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, Darcy. Good morning, everyone. I'm Xavier Simonet, the Managing Director and Chief Executive Officer of Collins Foods. With me on the call today is our Chief Financial Officer, Andrew Leyden, our General Manager of Australian Operations, Chris Holzogno, and our General Manager of Europe, Chris Johnson. Today, we are pleased to present our FY26 full year results. announced to the ESX earlier this morning together with a trading update. As always, we will work through the presentation and then take your questions. I want to start today's presentation by thanking our 22,000 team members and particularly our restaurant teams across Australia and Europe for their energy, motivation and contribution to the success of Collins Foods. Moving on to slide two, FY26 was a record year for Collins Foods and a new milestone for the business. We're delighted to announce that we delivered record revenue of $1.59 billion up 8.6%, record underlying impact of $61.4 million up 13% and statutory impact of $47.1 million up 280%. I want our teams to feel proud of their performance in the year. These are continuing operations figures and I'm pleased to say that the records still hold, even excluding Taco Bell's contribution. This result reflects the strength of the KFC brand, our focus on operational excellence and discipline cost control achieved in a consumer environment that remains challenging. Moving to slide 3. Beyond the record results, there were several other significant achievements. In Australia, lifted performance through our laser focus on operational excellence. We invested in new growth opportunities, including trialling KFC's new global beverage platform, Quench by KFC, and we leveraged our network to drive same-store sales growth, profitability, and delivering great customer experiences. In Germany, the strategic growth pillar for Collins We signed new partnership agreements with LAM to drive accelerated growth and we acquired 8 restaurants in and around Munich enabling us to develop in Bavaria one of Germany's most populated and wealthiest states. With 25 restaurants in Germany we are now the largest KFC franchisee by revenue and are present in 3 key states from which we will grow. In the Netherlands We improved the profitability of the business and extended and restructured the CFA which simplifies our role in market allowing us to focus on what we do best, running great restaurants. Finally, we successfully negotiated an exit from the Taco Bell brand enabling continuity and releasing Collins Foods from material lease and other obligations. We are extremely pleased with the results delivered but also the very significant progress made on our strategic agenda. Now I'll hand over to Andrew for our financial performance and sustainability progress.

Thanks Xavier and good morning everybody. Turning to slide four which provides an overview of financial year 26 performance. Financials are presented on a post-AASB 16 basis unless stated otherwise with pre-AASB 16 financials available in the appendices. Just a reminder that financial year 26 was a 53-week reporting period. As Xavier has outlined, we were very pleased to report record revenue and underlying profits in financial year 26. Revenues were a little short of $1.6 billion, up 8.6% on the prior corresponding period. Underlying EBITDA was $244.5 million, 6.3% up on the prior year, whilst underlying MPAT was $61.4 million, 13% upon the prior year with improved net margins. Including Tackle Bell, which is the basis upon which we gave guidance, we delivered 60.1 million of net impact representing 17.6% growth on financial year 25, hitting the midpoint of our given range. Statutory impact from continuing operations was 47.1 million and I'll cover the reconciliation between underlying and statutory results on a subsequent slide. Cash flow balance sheet and return metrics were again very strong. Net operating cash flow was 150.1 million and net debt was reduced by 18.3 million to 119.6. With the net leverage ratio down yet again to 0.77 versus 0.93 at the end of financial year 25. Pleasingly return on equity increased 220 basis points to 14.5%. which demonstrated the combined benefit of earnings growth coupled with disciplined capital allocation. The board declared a final dividend of 15 cents per ordinary share, taking the total financial year 26 fully franked dividend to 28 cents per share against 26 cents per share for our year. This represents a 7.7% increase and equals the highest dividend declared in financial year 24. Slide 5 sets out our sustainability progress and pathway to 2030. Financial year 26 was the first year of mandatory climate reporting, which is included in our annual report. Some key highlights from the year include the diversion of 22.3% of waste from landfill, upcycling 100% of our cooking oil, including into aviation fuel, emission reduction pilots in restaurants using more sustainable refrigerants and optimized HVAC, Reducing food waste by nine basis points, completing almost 1,600 food safety inspections, raising $700,000 for charity partners and providing almost 11,300 meals to people in need. We employed 22,000 people from 104 nationalities with female leaders representing 46.2% of our population. Investments in safety culture delivered a 26.9% drop in our recordable injury frequency rate, and we employed five people through our First Nations pre-employment program. We will continue to focus on new sustainability initiatives and look forward to updating on our progress. Now to the financials on slide seven. Revenue financial year 26 was of 8.6%, as reported earlier on the prior year, to a record almost $1.6 billion. with growth in Europe and Australia. The results benefited from favourable currency translation contributing $16 million. Underlying EBITDA was up 6.3% to $244.5 million. Whilst absolute profits were up, percentage margins were slightly lower by 34 basis points which reflects a combination of three factors. The successful growth we saw in delivery after a change to the fee structure Some value investment made throughout the year and higher protein costs in Europe. Underlying EBIT was 130.7 million, up 10.1%, with margins up 11 basis points to 8.2% on higher EBITDA. Higher cash profits were partially offset by higher depreciation on increased investment. Underlying NPAC was 61.4 million, up 13% on the prior period, and underlying EPS 52 cents per share. up from 46.1 cents per share in the prior period. Statutory impact from continuing operations was 47.1 million versus 12.4 million in financial year 25. As covered earlier, strong cash flows enabled network investment, further debt reduction and dividend payments. The total financial year 26 dividend will be a record equaling 28 cents per share with the final dividend having a record date of 14th of July 2026 and a payment date of 11 August 2026. Slide 8 reconciles our statutory and underlying results. Revenue was $1.64 billion, which includes $47.7 million from our Taco Bell discontinued operation. On a continuing basis, revenue was just under $1.6 billion. The main non-trading items were the inclusion of $7.3 million on a post-tax basis, for the class action settlement and related costs. $4.8 million of non-cash impairment charges on previously impaired restaurants in Europe arising from lease changes and incremental capital spend in those restaurants. $2.7 million non-cash impairment on two KFC Australia restaurants was taken, along with a $1.4 million top-up to the provision for wage payments relating to prior years. Pleasingly, we saw a $1.1 million reversal of impairment on a restaurant in Germany. We made a $0.8 million gain on the sale of a land parcel and half a million dollar fair value gain on a previous debt modification after the earlier refinancing completed this year. Now turning to cash flow on slide nine. Strong cash generation remains a highly attractive feature of the Collins business. Net operating cash flow before interest and tax was $232.6 million. with the movement on prior year reflecting two extra periodic royalty payments to Young versus FY25. After interest and tax, net operating cash flow was $150.1 million with higher tax paid due to the increase in profit and the signing of deductions. Cash conversion was again strong at 94%. Investing cash outflows were $56 million. This included $3 million of contingent consideration on a FY24 European acquisition. $13.8 million was spent on new restaurants, $16.8 million on remodels, $6 million on digital and sustainability investments, and $15.3 million on asset renewal. Pronouncing cash outflows were $120 million, including $33 million in bank debt repayments, dividend payments of $31 million, and lease principal payments of $58 million. On to our balance sheet on slide 10. Collins Foods' balance sheet is in excellent shape. Thank you, Andrew.