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.

FY26 was a year where we elevated our operational execution and lifted brand resonance, resulting in growing sales and profitability. We opened eight new restaurants, bringing the Australian Restaurant Network to 295 with a healthy pipeline for future builds. We also completed 33 remodels, including three supercharged remodels. Revenue grew 7.6% to $1,241 million. driven by new restaurants, strong digital growth, product innovation, and our team's focus on delivering operational excellence. Same-store sales were up 2.7%, a big improvement on the 0.3% recorded in FY25. Restaurant-level EBITDA increased 6.2% to $260 million on positive sales, lower commodity prices, and Productivity Games. The restaurant EBITDA percentage margin reduced 26 basis points to 21%, impacted by the successful change in KFC's delivery structure, which drove volumes and absolute profit, but initially impacted percentage margins. EBITDA was up 6.5% to 237 million and EBIT was 6.6% higher to 156 million with higher EBITDA partially offset by higher depreciation on investments made. KFC brand strength, menu innovation, and the expansion of customer usage occasions powered growth in FY26. Back-to-back core menu innovation, including Zinger Bar Mee and Hot and Crispy Wraps, plus returning favorites like Zinger Nachos, fed our customers' love of creative spins. The Protein Range campaign through social media also exceeded expectations. We are well-progressed in preparing the national rollout of Quench by KFC and most restaurants will be selling Quench by the end of financial year 27. KFC introduced Wicked Wednesdays and trialed the boxable range, bringing more excitement and consistency to our value proposition. The Liquid Gold's signature source was the first of KSC's new basket builders, another avenue for innovation and ticket growth. Slide 14 highlights the success of menu innovation and campaign activity throughout the year and continues to drive KSC's brand health results. KSC continues to show dominance across the QSR category, clearly demonstrated in brand index, Brand Satisfaction and Brand Recommendation as well as Brand Modernity remaining strong with Gen Z. KSC's consistent leadership is widening the brand buzz gap against competitors while strengthening our own results. Turning to a defining year for Collins in operational performance. FY26 was our best year ever on the KSC National Balance Scorecard. and many more. We were also recognized at the KFC Global Operations Conference for collaboration and partnership and its impact on our results. There is a direct correlation between operational execution and sales and profit outcomes and this is supported by Colin's employee engagement being up 4% over the prior year and customer overall satisfaction up 5% over prior year. I am very proud of our operational team. Their commitment to operational excellence and to delivering great experiences for their teams and their customers is reflected in our results. I will now hand over to Chris to cover KFC Europe.

Thanks, Crystal, and good morning, everyone. Before turning to KFC Europe, I'd like to take the opportunity to thank my Dutch and German teams in our restaurants and our above restaurant leaders in the Amsterdam and Dusseldorf offices for all the hard work over the last year. And the results I share today are the accumulation of their significant contributions. Starting on slide 17, profit improvement in the Netherlands and growth in Germany combined to deliver a materially stronger European result. Revenue was up 12.5% to 351 million or 7% on a constant currency basis. In Germany, total sales are up 10.1% on a constant currency basis, selling store sales up 3.7% against a decline of 3.3% in FY25, reflecting improved brand and in-restaurant execution and the benefit of the VAT reduction on dine-in customers from January 1st of this year. In the Netherlands, total sales are up 6.1% on a constant currency basis, with same-store sales flat, but up on the prior year, reflecting broader category challenges. EBITDA on a total Europe basis was up 14% to 44.9 million, with margins up 17 basis points to 12.8%, reflecting same-store sales growth in Germany, lower food waste, and higher labor productivity. Restaurant percent margins were slightly lower on higher poultry prices due to avian flu. EBIT of 14.9 million was up 94.7%. Reflecting higher EBITDA and lower depreciation. To slide 18. Investment in our team's training and effective performance rhythms is improving the customer experience. We continue to build talent and capability through the in-house Collins Academy with a heightened focus on our restaurant general managers. Both markets benefited from more marketing windows in calendar year 26 and a stronger pipeline of innovation-led limited time offers. Drawing on KFC Europe-wide collaborations and ensuring everyday value combined with targeted promotional offers protect gross margins. On margins, we've made considerable progress in unlocking efficiency through lower food waste and higher labour productivity. Moving to Germany on slide 20. Unit economics across the portfolio compare broadly with those in Australia despite lower restaurant density and network maturity. FY26 margins in absolute terms improved while percentage margins were slightly down on FY25 due to paltry cost pressure from the avian influenza. We expect this impact to dissipate over the FY27 year. The Munich acquisition completed on June 1st is progressing well to plan. We are accelerating investment in new site acquisition, construction and restaurant team capability to support the first pipeline. And we continue to deliver strong guest experiences. with KFC Listens and Google Review scores up 5 and 13 percentage points on the prior year. On slide 21, we expand on establishing Germany as our second strategic growth pillar. We continue to be very excited about the potential of Germany from a value creation perspective. With over 80 million consumers and only 217 KFC restaurants, compared with circa 1,400 McDonald's and 750 Burger King's, The KFC brand and the chicken category overall are underpenetrated. Following the Munich acquisition, Collins Foods is now the largest KFC franchisee in Germany by system sales, further reinforcing our leadership position with Young in the market. We continue to invest in people and organizational capability, as well as monitor for possible bolt-on acquisition opportunities to expand into complementary geographies in support of our longer-term growth ambitions. And finally, turning to the Netherlands on slide 23. Thank you for joining us. and our market share was up 0.2 percentage points to 9.2%. We've extended and restructured the Netherlands CFA during the FY26 year. Young brands will resume marketing responsibilities from January 1st, 2027, enabling Collins Foods to focus on what it does best, execute on its core role as restaurant operator. Back to you, Xavier.

Thanks, Chris. Turning now to Tacoban on slide 25. We announced our exit from Tacoban on the 31st of March, 2026. Under the transition agreement, 20 restaurants will transfer to a joint venture between a subsidiary of Yam and Restaurant Brands Australia. Trading losses on the transferring restaurants ceased from 1 April 2026, with no royalty or advertising contributions from that date, and we expect completion of the transfer to occur in July or August. The seven remaining restaurants were closed during FY26. $1.7 million in total one-off closing costs relating to the exit of Sacrebel were recognised. We expect a material one-off gain relating to the lease liability transition and reversal in FY27. The exit extinguishes the associated losses and liabilities and allows us to focus on value creation through KFC. FY27 recaps our three strategic growth priorities. First, Sustainable growth in our core market Australia. Second, accelerating scale in Germany through profitable new openings complemented by acquisitions and leveraging Jams brand building investment to establish Germany as our second strategic growth pillar. Third, operational excellence across Europe and Australia. We remain laser focused on same store sales performance, productivity and efficiency. On our hand to Crystal and Chris for more detail on how we are accelerating growth in Australia and Europe. Crystal, over to you.

Thank you, Xavier. In FY27, our Australian operations are transforming with targeted investment across team experience, operations and the brand. Improving our team's experience is crucial to customer experience and operational excellence. and we are investing intentionally by increasing the number of field-based roles to support the restaurant teams and the creation of over a thousand new jobs for Australian youth. To set our teams up for success, we have expanded training initiatives within our restaurants, a key investment at this crucial growth stage. Operationally, we remain balanced scorecard focused and we'll continue to partner with KFC SOPAC to trial AI systems and tools. In addition, we will complete our cooker replacement program by the end of the year, improving safety, equipment consistency, product quality and productivity. KFC Australia has launched its brand new platform, GoFullChicken. It is committed to realising the ambition to deliver the most craveable food and a more dynamic restaurant experience. GoFull Chicken captures the heart of what makes KC Australia iconic. Its unapologetic obsession with chicken, its pride and care in what we serve to our customers and its culture in which restaurant teams bring to life every day. GoFull Chicken was launched two weeks ago with KFC Global's reimagined evolution of the world's most iconic chicken brand. It introduces a refreshed visual identity, product innovation, and modern restaurant design, celebrating the brand's legacy while meeting customers here and now. KFC will evolve the menu, enhancing core offerings such as boneless chicken, saucy platforms, limited time offerings, and points by KFC. KFC has shown its dominance in key brand health metrics and it is globally committed to set the standard for modding chicken in QSR. Our operational performance delivers continued growth. With our strong foundations in brand and operational execution, we are well-placed to start operating in key day parts that our competitors are already in. These day parts represent more than a third of the total day's potential Late Night and Breakfast are the two fastest growing QSR day parts and present a real opportunity for KFC to realise its fair share of the category. That is why we are investing in three strategic initiatives to build growth including national rollouts of Crunch by KFC and Late Night Trade and we have also committed to testing Breakfast. After a successful Cairns trial, Quench by KFC is in rollout phase across our network, targeting 80% rollout by April with capital expenditure of $35 million in FY27. Quench will improve consumer consideration for KFC and with high consumer appeal and strong trade-up potential, it offers value across dessert, snacking and add-ons. As national media is engaged, and Innovation is activated, we expect to see national sales growth beyond the Cairns trial results. Late night trade is the fastest growing segment for QSR and our menu architecture is already in place to take full advantage. We have already commenced extending trade to midnight through a staggered national rollout. Early results of the limited restaurants currently live have been very promising. Thank you, Crystal.

Slide 32 covers how we're accelerating brand relevance in KFC Europe in partnership with Yum. On the menu, bonus and hot wings are gaining traction as preferred formats. Marketing collaborations remain a key pillar for Europe, and our FY27 innovation pipeline is strong across dunked, sourced, and loaded, all resonating with younger consumers. On category usage occasions, Yum is preparing the first Western Europe pilots of Quench by KFC in two markets. and Collins is working closely with Young on the business case and launch mechanics with an intent to start a trial in Germany during H2 of this financial year. Slide 33 sets out our plans for what we expect will be a record German development year in FY27. FY27 capital expenditure will be approximately 20 million, focused on mid-single-digit new restaurant builds predominantly in the North Rhine-Westphalia state. with Bavaria Development Opportunities building through the year as our acquisition team embeds the newly entered territory. We are making a $3 million incremental upfront investment in FY27 to accelerate pipeline delivery and build a scalable rollout model. Our ambition is to grow the network by between 45 and 90 additional restaurants by FY30, with site accessibility remaining the critical determinant of the pace and trajectory of our rollout. Throughout, we remain laser focused on performance and unit economic discipline. Back to you Xavier.

Thanks Chris. Slide 35 shows our sales performance in early FY27. For the first 8 weeks of trading in FY27, Australia recorded 6.7% total sales growth and 4% central sales growth on the back of effective innovation and impactful promotions. There is a strong plan in place with good innovation and effective limited time offers that the team is executing well. KFC Australia, our dominant profit engine, continues to perform strongly. In the same period, sales in Europe were disappointing and below last year. Germany reported 26.4% total sales growth, which included four weeks of trading from the Bavaria acquisition. Sensor sales growth was however negative by 7.2%. Netherlands reported revenues down 5.2% and SIM store sales were negative 7.8%. The conflict in the Middle East had a negative impact on sales in Europe from the beginning of March, with a deceleration in sales trends in the last quarter of FY26. Higher fuel prices and uncertainty affected consumer confidence across the two markets. KFC's limited-time offers also underperformed expectations, in addition to the brand lapping a very strong commercial collaboration with Squid Game at the same time last year. These factors were exacerbated by the prolonged impact of the heatwave across Europe, which is disrupting restaurant traffic. We are working actively with Yam, the owner of KFC and our franchise off, Thank you very much. while labour inflation remains high in all markets. In Australia, recent cases of bird flu were detected in wild birds in Western and South Australia. There have been no cases in poultry, currently, and suppliers have heightened biosecurity measures in response. I also reassure shareholders that KFC has very strong contingency plans in place to mitigate any supply disruption should it occur. We remain confident in our strategy for the long term and for long term value creation and we will continue to invest behind it in FY27. We are planning 7 to 10 new restaurants in Australia and approximately 7 new restaurants in Germany. We will continue to work with YAM, our franchisor, to strengthen restaurant economics. We will continue to innovate core offerings while rolling out Quench by KFC across our whole network in Australia and initiate Quench trials in Europe. We will also expand Australian trading hours to capture the fast-growing late-night trade and we will partner with KFC on a breakfast trial later this year. In that context, targeted investments in GNI will be made to drive growth. in Australia will invest an incremental $2 million in additional training to support the initiatives outlined earlier, while in Germany we will invest an incremental $3 million to enhance our German restaurant network development capabilities and grow the pipeline of new sites. We also expect to spend between $80 to $100 million in growth and modernization capex during FY27. This is in addition to the cost of the Bavarian acquisitions. Consistent with our general practice, we will not be providing earnings guidance for FY27 today. While our trading update for the first 8 weeks of the financial year gives an indication of short-term trends, it is very early in the year. Before moving on to Q&A, I would like to quickly summarise on slide 36 why, We are excited about our strategic priorities and strongly believe that Collins is extremely well positioned for the future. Slide 36. FY26 was a record financial result. I'm delighted with these outcomes and very proud of our teams. We have a significant growth runway in both Australia and Germany in FY27 and FY27 will be a year of preparing for further acceleration. We have a resilient business model A very strong balance sheet and a conviction to invest in profitable growth opportunities to create value for shareholders. Thank you and let's now turn to questions. Back to you Darcy.

Thank you. If you would like to ask a question by the phone, you will press the star key followed by the number 1 on your telephone keypad. To cancel your request, please press star 2. If you are using a speakerphone, please pick up the handset to ask your question. If you'd like to ask a question via the webcast, please type your question into the Ask a Question box and click Submit. If time permits, that will be addressed today. Your first question from the phone comes from Sean Zhu from CLSA. Please go ahead.

Good morning, Sean. Morning Timm, thanks a lot for taking my question. My first question is around the Fair Work Commission decision on junior rate change impact on your course base in Australia around FY27 onwards. Now, based on our previous communication, we're understanding there will be $20 million annual impact on FY31 after full patient. It's a big number. Could you please let us know what are the mitigation levels you can put to offset that impact, please?

Yeah, hi, Sean. Yeah, so the impact in the fiscal year 27 is relatively modest, so about $1 million. Obviously, that grows as the discount on the junior rates changes over the years. So, financial year 31 will be the first year where it's fully implemented. It is about $20 million. and there are ways in which we can mitigate that. Clearly the way that we manage our revenue line is the best mitigator for any margin pressure irrespective of whether it's labour or whether it's food inputs and we have a lot of time to work on that. It's known by the whole system. The whole system is aware that it will impact the rate of labour relative to revenue and we'll be working on not just revenue based initiatives and obviously there are lots of them. You've heard that from the presentation, but we'll be working as well with Yarmada system to drive labour productivity as well, particularly through the automation of the back of house. So there are lots of things, I can't go into too much detail with you here, but obviously the impact is very, is well known, it's right across the system, it doesn't just affect KFC, it clearly affects anyone that hires young people and we have strong plans in place to mitigate both through the revenue line and through the cost line.

Thanks, Andrew. Maybe I'll just move on to the second one on capital allocation. Now, based on our recent industry call, we understand in South York, TFC Compact in Germany does not consider region as the key focus area for the business. Given your balance sheet is sitting at a quite comfortable level, would you consider another German dollar acquisition FY27 or FY28?

Thanks, Sean. We're happy to consider another German acquisition if the opportunity occurs. We want to be very disciplined, very strategic, and if we're to acquire another network of restaurants in Germany, we want to make sure that it's a quality network delivering already quality financial results. We would also want to make sure that we are continuing to be focused on building density in the three key states where we are, and that we do not start investing all over Germany. So at the moment our focus is to make sure we integrate the Munich network well and it started really, really well but we also continue to develop and strengthen the existing restaurants we have in our existing territories.

Thank you. Thanks a lot, Xavier and T. Thank you.

Thank you. Your next question comes from Tom Kira from Baron Joey. Please go ahead. Morning guys.

Morning. My question is just on the Aussie EBITDA margins in the second half. I think they fell a bit over 100 basis points. You're saying that commodity costs were down, productivity gains have kind of come through. Is it delivery that's causing that big reduction in the margin and If it is, could you maybe just step through how you kind of alleviate that or how you price for it? Because obviously it looks like it's a pretty big headwind for the business.

Yeah, hey Tom. Yeah, so I think you're aware that seasonally we do see a slightly weaker margin in the second half, really a consequence of the number of public holidays in the second half. So we do see that pretty typically in any normal year. specifically this year yes delivery had an impact on percentage margins it's actually a very profitable channel we like it and we've competed very well in it this year I think you're aware that there was a change in the delivery fee structure right across the aggregators from $8.95 to $3.95 clearly there's greater consumer sensitivity to that delivery price than there is on the premium on the food so The economics of the delivery channel subsequently are improved. In absolute terms, they are very healthy. In potentiaries terms, they're slightly lower. So I say that would explain one of the movements, probably the main movement in the second half. Probably the other one is there's a little bit of value investment in quarter three. I think quarter four was much more balanced in terms of the you know the nature of the relationship between the limited time office that we have in market the innovation pipeline and the value that it provides consumers and we see movements like that typically throughout the year but overall I'd say delivery was maybe the biggest the biggest influencer so we're very happy with the economics of the delivery channel overall.

Yeah okay thanks Andrew and then just second I think there's an extra trading week in this period should we think about that as just like a two percent Thank you. Your next question comes from Tim Plumb from UBS. Please go ahead. Morning Tim.

Morning guys, just two questions from me if possible please. Just wondering if there's any more colour that you could give us around the early observations from Quench and late-night strategy in terms of store performance versus the rest of the portfolio. How should we think about these into the second half of 27 and the sort of tailwinds that that could add to the business? If I think back to when you introduced the staggered approach to third-party aggregated delivery, is it on the same sort of par as that or a lot less than that?

I'll start, Tim, and Chris, if you want to complement with anything, please feel free. So, Tim, we're not publishing the impacts of Quench. I mean, suffice it to say, we've trialled Quench in Cairns. quite important to trial it in an area so you can get right behind it. The teams are delivering it consistently and you can absorb some regional media to support it. We've given an indication of the capital spend for financial year 27, so 35, 36 million behind the initiative. We wouldn't do that if we weren't confident in it. It's a good initiative, delivers good outcomes for us. I'm not going to give you the same store sales number but It's the addition of a day part. We currently don't compete as effectively in as we'd like. Quench is a category that spans both beverages and desserts. So, yeah, very excited about it. I can't give you the numbers, unfortunately. Maybe in time we can. But clearly we're just about to roll it out nationally. Late night, again, pretty early days for late night. We've run some Trial, maybe not the right word, but we tested it in certain parts of the country. Again, we're happy with its outcomes. Not at a point where we can share that with the market yet, but yeah, I think these things, of course, they provide momentum to our trading performance in Australia. If I can add something to that.

The question is also important to us in terms of strengthening a kid of KFC to Gen Z consumers which are core to our business and the same for late night as well.

Got it. And just like your thoughts in terms of the opportunity from late night relative to the introduction of third party aggregator. I mean if you look at it as a percentage of the areas that you operate in currently it's like a 17% uplift. How are you thinking about it relative to the introduction of

I don't think we think about it in the same way at all, to be honest with you. I think the way we think about Quench, if you think about the brand equity metrics that we publish, they're very strong. Quench is another way of capitalizing on the strength of the brands to penetrate new day parts and build revenue that way. The way channels are different, the way we bring the proposition to consumers through the channels that we operate, I think we think very differently about.

Yeah, I'd just add to that As I indicated earlier, we are very early in the rollout phase. It is very promising, but these are hours that we're not trading in currently across most of our network. In addition to that, we're seeing improvement in our 8 to 10 p.m. window. So we're excited to see what they'll look like across the network but it's way too early to be determining what that would look like or even comparing that to other initiatives that we've rolled out previously.

Okay, thanks guys.

Thank you. Your next question comes from Mac Ross from Morgan Stanley. Please go ahead.

Hi, good morning. Thanks. Good morning, thanks for taking my question. Look, there's been a question just now on margins, but just following up from that. So through FY26, you called out labour productivity a number of times as a margin support, including when you gave guidance last year and then again at the half. You know, margins have obviously stepped back in the second half year on year. But with wages stepping up again, sort of 4.8%, delivery mix unlikely to reverse. Do you think margins can improve from here into FY27?

Hey, mate. Yeah, look, we're not giving margin guidance. I think it's far too early in the year to give margin guidance, but we're always interested in improving our margins. Of course we are. And the best way of thinking about that is through the revenue line. Leveraging the revenue line is always the best way to leverage your margin structure. So we acknowledge that the costs are rising 4.75%. A little bit more in Europe. We're kind of used to it. It's a bit of a norm. And that's consistent across the QSR category. I think our job is to work out how we mitigate that, but primarily through revenues. You know, revenue growth, which is transaction mix, new initiatives, the way we manage promotions, the way we balance value of consumers with margin structures. You know, all of those things come into the mix. So there are many levers I'm not going to give guidance on what it is but there are many levers that we can use to mitigate cost increases. The other thing that we're looking at as well is productivity and productivity has improved whether we look at that on a dollar basis or a transaction per labour hour basis it has improved and there's more to come on that particularly the relationship between demand planning that we talked about on previous roadshows and the way we deploy labour through the use of technology. So we'll talk more about that as we visit everybody on the roadshow, but there are different mechanisms that we can use to mitigate cost increases.

And to add to what Dan said, Mac, we are doing some work with Ian on how we can use AI tools to optimise labour and food. These are two huge cost buckets for funding food and if we can optimise and other white people in the right restaurants at the right time and the same for food, that would give us an opportunity to improve our margins. So a lot of work is being done in this area.

Thanks, appreciate it. And maybe just one on breakfast if I may. Just curious, why does Yum Global believe Australia, and then I guess more specifically the Gold Coast, is the best market for trial breakfast? Considering, and correct me if I'm wrong, but KFC breakfast, at least the offering, has not really worked at scale elsewhere in other markets. And then maybe just to add on to that, are you able to confirm if you'll have a coffee offering attached to your breakfast offering? Thanks.

Thanks, Matt. We're not going to talk about products and other items at this stage. It's going to be a trial. We're not going to be the only franchisee in the KFC network in Australia to trial breakfast. Breakfast has been trialled in some airport stores at Sydney Airport. It's going to be trialled in KFC's network, in our network on the Gold Coast, but it's going to be trialled in other areas of the country as well.

Darcy. Thank you. Your next question comes from Sam Teager from Citi. Please go ahead.

Hello, Sam. Hi there. Good morning. Look, kudos to Crystal and her team for this general job in Australia. The brand bars and index metrics provided on slide 14 do look very good. Just wondering how do these metrics compare in Germany and what do you think the reason why innovation and LTOs seem to be hitting the mark in Australia, but they're not having the same success in Germany.

Hey Sam, good morning. Thanks for the question. We haven't shared any brand buzz or similar metrics for Germany as Yum run the market, as you know, not Collins, and we just don't have them to hand. It's a good shout out and we'll look to see if we can maybe provide some colour in future roadshows. On the LTO piece, I think it's just worth stepping back around how the markets are set up. In Australia, looking at Crystal to give me a thumbs up, I believe it's 13 four-week pods, roughly, give or take. And in Germany, historically, it's typically been seven or eight-week, six to seven to eight to nine-week pods. So, you know, in the German context, it's just, you know, longer marketing windows, Sam. And when we've got, as we've called out, as part of the reason for the underperformance in the first eight weeks of the year, when we've got a window that just hasn't hit the mark. In the Aussie context, you need to swallow it for three to four weeks. In the German context, at the long end, it might be seven, eight, or even nine weeks. So we're agitating with Yam really around taking the best practice from Australia and across the English Channel in the UK. They've also got 12 or 13 windows per year. To shorten the number of windows, it's higher intensity. And looking at Crystal again, it's more difficult for our teams. but ultimately in the market we're in today with the amount of rampant competition Sam we believe that this strong pipeline of LTOs speeding with pride from other markets is where the German market and to be fair the Dutch market need to go as well.

Sam if I can add something for KFC continental Europe is behind Australia and the UK in launching new departs and new product platforms like Quench We're now launching Qwench in Australia. We're going to start testing Qwench in continental Europe.

In two countries.

In two countries. So we are behind in Europe. KFC is behind in Europe versus what's happening in Australia and the UK. There is an opportunity for us with IAM, our franchise, to accelerate and make sure that new global platforms, when they're ready, are introduced in continental Europe at the fastest pace.

Great, and just digging into that Germany update in more detail, can you talk to how the performance of delivery has gone versus dining? I imagine some of the drivers want to be riding bikes around in the scorching heat.

That is the truth, Sam. So what we've seen, and it's quite consistent across both, I know your question was on Germany, but I'll give some colour for the Netherlands as well. There has been a slowdown in the delivery channel in the first half of this year, so at the back end of FY26 as well as the first eight weeks. Yes, the heatwave, the intensity and the duration has caused a number of days where riders on bicycles just from a duty of care perspective shouldn't be riding and aren't. We are seeing, however, that it's in the German context The delivery slowdown is probably also related not just to the weather, Sam, but the quality and the brand buzz of the LTOs as well. So when that LTO is not working in a restaurant, it's not drawing consumers via the app either.

Right. And has the Football World Cup been a positive or negative impact for KFC in Germany and now with Germany out, how will that affect sales?

Well, my hometown of South Africa got knocked out yesterday, so we can share one later in the week. So I think, Sam, given the time zone difference, the time zone difference, I mean, it's now three o'clock in the morning in the Netherlands and the Netherlands are playing. No impact at all on sales, right? No, it's not relevant. When the matches are at seven or eight in the evening, it's good for sales because there's a little bit of delivery bump. but in all honesty the World Cup it's not been high intensity or high visibility in Europe just given the time zone challenges and I don't expect that with Germany being knocked out a couple of hours ago that it will have a meaningful impact on how we forecast the H1 Alright, thank you Thank you Sam, Darcy we're going to have to move on but I'd like to thank you all for joining this call obviously FY26 was a record financial result

and we're very delighted about that and very thankful to our teams for their work. We've got very strong strategic initiatives in place for 27 and we're going to focus on execution operational excellence. So thank you for your support and have a great day.

That does conclude our conference for today.

Thank you for participating.

You may now disconnect.