Collins Foods Aktie

Thank you for standing by, and welcome to the Collins Foods Limited Full Year 2026 Results Briefing.

[Operator Instructions]

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, Krystal Zugno; and our General Manager of Europe, Chris Johnson.

Today, we are pleased to present our FY '26 full year results announced to the ASX earlier this morning, together with the 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 2. FY '26 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 NPAT of $61.4 million, up 13% and statutory NPAT 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 disciplined 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 trialing KFC's new global beverage platform Kwench by KFC, and we leveraged our network to drive same-store sales growth, profitability and delivering great customer experiences.

In Germany, a strategic growth pillar for Collins, we signed new partnership agreements with Yum! 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 4, 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 NPAT was $61.4 million, 13% up on the prior year with improved net margins. Including Taco Bell, which is the basis upon which we gave guidance, we delivered $60.1 million of net NPAT, representing 17.6% growth on financial year '25, hitting the midpoint of our given range. Statutory NPAT 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 million, 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 $0.15 per ordinary share, taking the total financial year '26 fully franked dividend to $0.28 per share against $0.26 per share prior 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 optimize HVAC, reducing food waste by 9 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 5 people through our First Nations preemployment program. We will continue to focus on new sustainability initiatives and look forward to updating on our progress.

Now to the financials on Slide 7. Revenue in financial year '26 was up 8.6% as reported earlier on the prior year to a record almost $1.6 billion, with growth in both Europe and Australia. The result benefited from favorable 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 3 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 NPAT was $61.4 million, up 13% on the prior period and underlying EPS $0.52 per share, up from $0.461 per share in the prior period. Statutory NPAT 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 $0.28 per share, with the final dividend having a record date of 14th of July 2026 and a payment date of the 11th of 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 noncash impairment charges on previously impaired restaurants in Europe arising from lease changes and incremental capital spend in those restaurants. $2.7 million noncash impairment on 2 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 the restaurant in Germany. We made a $0.8 million gain on the sale of a land parcel and $0.5 million fair value gain on a previous debt modification after the earlier refinancing completed this year.

Now turning to cash flow on Slide 9. 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 2 extra periodic royalty payments to Yum! versus financial year '25. After interest and tax, net operating cash flow was $150.1 million with higher tax paid due to the increase in profit and the timing of deductions. Cash conversion was again strong at 94%.

Investing cash outflows were $56 million. This included $3 million of contingent consideration on the financial year '24 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. Financing 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 with capacity to fund future profitable growth initiatives. Both net debt and net leverage ratio were reduced as covered earlier. And cash balances were down $25.2 million to $94 million, but primarily due to the paydown of debt of $33 million during the year.

And now having covered an extremely strong set of financials, I'm going to hand over to Krystal, who will take you through what's been happening at KFC Australia.

Thank you, Andrew. FY '26 was a year where we elevated our operational execution and lifted brand resonance, resulting in growing sales and profitability. We opened 8 new restaurants, bringing the Australian restaurant network to 295 with a healthy pipeline for future build. We also completed 33 remodels, including 3 supercharge 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 FY '25.

Restaurant-level EBITDA increased 6.2% to $260 million on positive sales, lower commodity prices and productivity gains. 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 that 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 FY '26. Back-to-back core menu innovation, including Zinger Banh Mi and Hot & Crispy Wrap 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 Kwench by KFC and most restaurants will be selling Kwench by the end of financial year '27.

KFC introduced Wicked Wednesdays and trialed the Boxfull range, bringing more excitement and consistency to our value proposition. The Liquid Gold Signature Sauce was the first of KFC'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 KFC's brand health results. KFC 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. KFC's consistent leadership is widening the Brand Buzz gap against competitors while strengthening our earn results.

Turning to a defining year for Collins in operational performance. FY '26 was our best year ever on the KFC National Balanced scorecard. 6 of the top 11 restaurant managers were from Collins Foods, and we won 4 of the 9 National Category awards plus Area Coach of the Year. 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 Collins employee engagement being up 4% over prior year and customer overall satisfaction up 5% over prior year.

I am very proud of our operational teams, 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, Krystal, 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 shared 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 were up 10.1% on a constant currency basis, same-store sales of 3.7% against a decline of 3.3% in FY '25, reflecting improved brand and in-restaurant execution and the benefit of the VAT reduction on dine-in customers from January 1 of this year. In the Netherlands, total sales were 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 teams, 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 labor 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. FY '26 margins in absolute terms improved while percentage margins were slightly down on FY '25 due to poultry cost pressure from the avian influenza. We expect this impact to dissipate over the FY '27 year. The Munich acquisition completed on June 1 is progressing well to plan. We are accelerating investment in new site acquisition, construction and restaurant team capability to support the growth 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 Kings, 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.

1And finally, turning to the Netherlands on Slide 23. We continue to direct our energy in this market to profitability improvement. We've lifted operational execution to support sales and the customer experience. Margins benefited from labor productivity gains and lower waste, along with lower depreciation as a result of prior year impairments. These gains were partially offset by the impact of avian flu on poultry products. In terms of brand development, awareness increased 1.1 percentage points to 71.1%, the strongest growth amongst our QSR peers, and our market share was up 0.2 percentage points to 9.2%. We've extended and restructured the Netherlands CFA during the FY '26 year. Yum! Brands will resume marketing responsibilities from January 1, 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 Taco Bell on Slide 25. We announced our exit from Taco Bell on the 31st of March 2026. Under the transition agreement, 20 restaurants will be transferred to a joint venture between a subsidiary of Yum! and Restaurant Brands Australia. Trading losses on the transferring restaurants ceased from the 1st of 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 7 remaining restaurants were closed during FY '26. $1.7 million in total one-off closing costs relating to the exit of Taco Bell were recognized. We expect a material one-off gain relating to the lease liability transition and reversal in FY '27. The exit extinguishes the associated losses and liabilities and allows us to focus on value creation through KFC.

Slide 27 recaps our 3 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 Yum!'s 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.

I'll now hand to Krystal and Chris for more detail on how we are accelerating growth in Australia and Europe. Krystal, over to you.

Thank you, Xavier. In FY '27, 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 1,000 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, GO FULL CHICKEN. It is committed to realizing the ambition to deliver the most craveable food and a more dynamic restaurant experience. GO FULL CHICKEN captures the heart of what makes KFC 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.

GO FULL CHICKEN was launched 2 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 offers and Kwench by KFC.

KFC has shown its dominance in key brand health metrics, and it is globally committed to set the standard for modern 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 1/3 of the total days potential. Late night and breakfast are the 2 fastest-growing QSR day parts and present a real opportunity for KFC to realize its fair share of the category.

That is why we are investing in 3 strategic initiatives to build growth, including national rollouts of Kwench by KFC and late night trade, and we have also committed to testing Breakfast. After a successful Cairns trial, Kwench by KFC is in rollout phase across our network, targeting 80% rollout by April with capital expenditure of $35 million in FY '27. Kwench 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. Breakfast presents a great opportunity for KFC. QSR Breakfast share is almost as big as lunch and is growing. We see the potential opportunity for this day part and have agreed to partner with the KFC SOPAC team to trial breakfast in some of our restaurants later this year. We are looking forward to accelerating growth through all of these strategic initiatives.

Over to Chris, who will share what we are planning in Europe.

Thanks, Krystal. 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 FY '27 innovation pipeline is strong across dump, sourced and loaded, all resonating with younger consumers. On category usage occasions, Yum! is preparing the first Western Europe pilots of Kwench by KFC in 2 markets, and Collins is working closely with Yum! 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 FY '27. FY '27 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're making a $3 million incremental upfront investment in FY '27 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 FY '30 with site 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 FY '27. For the first 8 weeks of trading in FY '27, Australia recorded 6.7% total sales growth and 4% same-store 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 4 weeks of trading from the Bavaria acquisition. Same-store sales growth was, however, negative by 7.2%. Netherlands reported revenues down 5.2% and same-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 FY '26. Higher fuel prices and uncertainty affected consumer confidence across the 2 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 heat wave across Europe, which is disrupting restaurant traffic. We are working actively with Yum!, the owner of KFC and our franchisor to stimulate demand and strengthen performance short term and long term.

On the cost side, we're seeing flat to modest level of commodity inflation in Australia, whereas in Europe, the effects of the avian flu that drove up poultry prices in FY '26 are expected to dissipate in FY '27. Commodities are expected to deflate in Europe overall. We're seeing a very modest impact from fuel price increases to date, while labor 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 FY '27. We're planning 7 to 10 new restaurants in Australia and approximately 7 new restaurants in Germany. We will continue to work with Yum!, our franchisor, to strengthen restaurant economics. We will continue to innovate core offerings while rolling out Kwench by KFC across our whole network in Australia and initiate Kwench trials in Europe. We will also expand Australian trading house 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 G&A will be made to drive growth. In Australia, we 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 million to $100 million in growth and modernization CapEx during FY '27. This is in addition to the cost of the Bavarian acquisition.

Consistent with our general practice, we will not be providing earnings guidance for FY '27 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 summarize on Slide 36, why we are excited about our strategic priorities and strongly believe that Collins is extremely well positioned for the future. So Slide 36. FY '26 was a record financial results. I'm delighted with these outcomes and very proud of our teams. We have a significant growth runway in both Australia and Germany in FY '27. And FY '27 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.

[Operator Instructions] Your first question from the phone comes from Sean Xu from CLSA.

My first question is around the Fair Work Commission decision on junior rate change impact on your cost base in Australia from FY '27 onwards. Now based on our previous communication, we're understanding there will be $20 million annual impact on FY '31 after full hedging. It's a big number. Could you please let us know what are the mitigation you can put to offset that impact, please?

Sean, Yes, 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. So 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 labor 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 labor 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 Yum! as a system to drive labor 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.

Andrew. Maybe I'll just move on to the second one on capital allocation. Now based on our recent industry call, understanding some of your KFC competitor in Germany does not consider region is a key focus area for the business. Given your balance sheet is sitting at a quite comfortable level, would you consider another German bolt-on acquisition in FY '27 or FY '28?

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 were 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 3 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.

Your next question comes from Tom Kierath from Barrenjoey.

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.

Tom, Yes. 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 percentage terms, they're slightly lower. So that -- I'd 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 3. It's -- I think quarter 4 was much more balanced in terms of the nature of the relationship between the limited time offers that we have in market, the innovation pipeline and the value that we provide to consumers. And we see movements like that typically throughout the year. But overall, I'd say delivery was maybe the biggest influencer. But we're very happy with the economics of the delivery channel overall.

Yes. Okay. And then just second, I think there's an extra trading week in this period. Should we think about that as just like a 2% tailwind for the profit this year and then kind of a 2% headwind like in round numbers for next year? Or is there some sort of accounting that we need to be aware of just when we're setting our forecast for next year?

No, it's broadly linear. I don't think you need to overthink it too much.

Your next question comes from Tim Plumbe from UBS.

Just 2 questions from me, if possible, please. Just wondering if there's any more color that you could give us around the early observations from Kwench 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? I mean, if I think back to when you introduced the staggered approach to third-party aggregator delivery, is it on the same sort of par as that or a lot less than that?

I'll start, Tim, and Krystal, if you want to complement with anything, please feel free. So Tim, we're not publishing the impacts of Kwench. I mean, suffice it to say, we've trialed Kwench 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 million, $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 and as we'd like. And it's -- Kwench as a category spans both beverages and desserts. So yes, 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.

And late night, again, pretty early days for late night. We've ran some trial, maybe not the right word, but we've 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 yes, I mean, these things, of course, they provide momentum to our trading performance in Australia.

If I can add something. Kwench is also important to us in terms of strengthening appeal 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 third-party aggregators?

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 Kwench, it's -- if you think about the brand equity metrics that we published, they're very strong. Kwench is another way of capitalizing on the strength of the brand 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.

Yes. I'd just add to that. Late night trade, as we -- 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 that will 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.

Your next question comes from Mac Ross from Morgan Stanley.

Look, there's been a question just now on margins. But just following up from that. So through FY '26, you called out labor productivity a number of times as the margins move forward, including when you gave guidance last year and then again at the half. 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 FY '27?

Mike, Yes. 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 of labor 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, revenue growth, which is transaction mix, new initiatives, the way we manage promotions, the way we balance value for consumers with margin structures, 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 labor 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 road shows and the way we deploy labor 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 Andrew said, we are doing some work with Yum! on how we can use AI tools to optimize labor and food. These are 2 huge cost buckets for Collins Foods. And if we can optimize labor and have the right 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.

Appreciate it. And maybe just one on breakfast, if I may. Just curious, like 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, Mac. We're not going to talk about product 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 trialed in some airport stores at Sydney Airport. It's going to be trialed in KFC's network in our network on the Gold Coast, but it's going to be trialed in other areas of the country as well.

Your next question comes from Sam Teeger from Citi.

Look, kudos to Krystal and her team for the stellar job in Australia. The Brand Buzz and index metrics provided on Slide 1, Slide 14 do look very good. Just wondering how do the 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?

Sam, 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 color in future roadshows. On the LTO piece, I think it's just worth stepping back around how the markets are set up. In Australia, I'm looking at Krystal to give me a thumbs up, I believe it's 13, 4-week pause roughly, give or take. And in Germany, historically, it's typically been 7- or 8-week -- 6 to 7 to 8 to 9-week pause. So in the German context, it's just 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 8 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 3 to 4 weeks. In the German context at the long end, it might be 7, 8 or even 9 weeks. So we're educating with Yum! really around taking the best practice from Australia and across the English channel in the U.K. We've also got 12 or 13 windows per year. To shorten the number of windows. It's higher intensity and looking at Krystal again, it's more difficult for our teams. But ultimately, in the market we're in today with the amount of ramping competition, Sam, we believe that the strong pipeline of LTOs speeding with pride from other markets is where the German market and to be fair, the Dutch market needs to go as well.

Sam, if I can add something. For KFC, Continental Europe is behind Australia and the U.K. in launching new day parts and new product platforms like Kwench. We're now launching Kwench in Australia. We're going to start testing Kwench in Continental Europe.

In 2 countries.

In 2 countries. So that we are behind in Europe. KFC is behind in Europe versus what's happened in Australia and the U.K. There is an opportunity for us with Yum!, our franchisor to accelerate and make sure that new global platforms when they're ready, are introduced in Continental Europe at faster speed.

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 don't want to be riding bikes around in this scotching 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 color for the Netherlands as well. There has been a slowdown in the delivery channel in the first half of this year, so the back end of FY '26 as well as the first 8 weeks. Yes, the heat wave, 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 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 impact 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 that the time zone difference in all honesty, the time zone difference, I mean, it's now 3:00 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 7 or 8 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.

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, FY '26 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 FY '27, and we're going to focus on execution and 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.

Thank you for standing by, and welcome to the Collins Foods Limited Investor Briefing. [Operator Instructions]

I would now like to hand the conference over to Mr. Xavier Simonet, Managing Director and Chief Executive Officer. Please go ahead.

Thanks very much, Harmony. Good morning, everyone. My name is Xavier Simonet. I'm the Managing Director and CEO of Collins Foods. Together with me today in Sydney, I have Andrew Leyden, our Group CFO; and we also have Chris Johnson, our General Manager, Europe, who's on the call from Germany.

We were very pleased last night to announce exciting news about Collins Foods' growth acceleration in Europe and particularly in Germany. We have previously communicated that Germany would become our second strategic growth pillar, and yesterday's ASX announcement reinforces this.

If we turn to Slide 2. This is actually a slide we presented at our October Strategy Day in Brisbane. Today, we're specifically addressing the acceleration of scale in Germany, our second pillar of growth alongside our core Australian KFC business. We announced yesterday evening, firstly, the acquisition of 8 KFC restaurants in Bavaria for EUR 31.1 million. Bavaria includes the city of Munich and the stores we've acquired are in Munich or around Munich. Secondly, the expansion of our development agreements with Yum! Brands, our franchisor in the German market, where our organic store development targets have been expanded. Thirdly, the extension and restructuring of our corporate franchise agreements with Yum! Brands in the Netherlands.

Turning to Slide 3. This slide provides more detail on the restaurant network we will acquire. We are buying a network of 8 restaurants, most of them in and around Munich, giving us an entry into the state of Bavaria, a state with the second highest population and the second highest GDP in Germany. It is a high-quality portfolio of restaurants in attractive locations with strong economics, superior to our existing German network.

The acquisition consideration is EUR 31.1 million, equivalent to an acquisition multiple of just below 6x restaurant level EBITDA in our first year of ownership post completion and is expected to be immediately EPS accretive for shareholders. Please note that the EBITDA we're referring to here is on a pre-AASB 16 basis. The acquisition increases our German store network by 50%, creating presence and scale in 3 key German states, including big cities as well like Düsseldorf, Munich, Cologne and Stuttgart. It also unlocks restaurant development opportunities in Bavaria and positions Germany very well as Collins' second strategic pillar.

I will now hand over to Chris Johnson, our General Manager, Europe, who will go through the reasons why Germany is an attractive market to invest in. Chris, over to you.

Thanks, Olivier. Thank you, and good evening, good morning from Munich. As you can see on Slide 4, from the chart on the top left, KFC is significantly underpenetrated in the German market compared to some of our major competitors. KFC has about 1/5 the number of restaurants of the market leader despite being well known and well regarded amongst consumers. From the chart on the bottom left, you can see that this underpenetration is even more pronounced in the states where Collins Foods is present. And the map on the right shows how we, once the acquisition is completed, are building a network across the southern part of Germany with Collins covering major cities of Munich, Düsseldorf, Cologne and Stuttgart, the most attractive parts of the German market.

Turning to Slide 5. The graph on the left and right show both the population and GDP by state in Germany. Collins will operate in the leading 3 states in both measures. And together, these states represent over 50% of the total population and GDP of the country. This gives us significant runway for expansion when you consider the underpenetration compared to competitors mentioned on the earlier slide.

I'll now hand over to Andrew, who will take you through some of the other aspects of what we announced yesterday. Over to you, Andrew.

Thank you, Chris. And let's move to Slide 6. In addition to the acquisition, we're also very pleased to announce the expansion of our German development agreements with Yum! Brands. We've lifted the development target to 45 to 90 new stores over the next 4 years compared to the previous target of 40 to 70. This extends the organic growth runway, and we are confident that we will be able to invest the capital the business is generating into high-returning new developments in Germany.

We also announced a revised corporate franchise agreement with Yum! Brands in the Netherlands, including an extension of 3 years to the end of 2029. Under the revised agreement, Yum! will resume product and marketing responsibilities from the 1st of January 2027, more in line with the market management structure in place in Australia and Germany and indeed many other markets around the world. Our marketing team members will transfer to Yum! before the 1st of January 2027. The service fee we receive will be adjusted to reflect these changes. However, we don't anticipate the changes will have a material impact on the profitability of the Dutch business. Importantly, these changes will enable us to focus fully on what we do best, and that is running great restaurants and of course, continuing to focus on improving the profitability of our Dutch operations.

Now turning to Slide 7. This slide talks to the current trading, which reflects year-to-date trading through to the 8th of March 2026. Australia continued to grow in both total and same-store sales with both accelerating in the second half of financial year '26 to date, with total sales growth up 6.2% and same-store sales up 3.2%. Germany continued to see good momentum on total and same-store sales growth in H2 to date at 9.1% and 4.1%, respectively. In the Netherlands, total sales were up 4.1% in H2 to date, while same-store sales were slightly lower. And of course, our focus remains on operational profitability in the Dutch market.

We are pleased with these results, especially given that both Germany and the Netherlands were impacted by severe snow conditions during January. Finally, the company has reaffirmed the previously provided guidance for the full year with Collins targeting mid- to high teens growth in group underlying net profit after tax in financial year '26 versus financial year '25.

I'll now hand back to Xavier, who will round up.

Thank you, Andrew and Chris. On Slide 8, I would like to wrap up our presentation today by emphasizing the key investment highlights that Collins Foods represents for investors and existing shareholders.

Our Australian business is resilient and highly cash generative. We are well established across multiple states in Australia, and our network of restaurants accounts for around 35% of the total number of KFC restaurants in Australia. Our second growth pillar in Germany represents a significant opportunity for profitable growth for Collins Foods. We also continue to be laser-focused on operational excellence, driving all key operations metrics and controls to optimize customer and team experience and financial value for our shareholders.

We also have a long-term partnership with Yum! Brands, the owner of KFC and our franchisor. The announcement yesterday night is another milestone in what is now a very successful 50-year business relationship. As I said earlier, today's announcement or last night's announcement is all about our second growth pillar, Germany. The acquisition in Bavaria increases our German store network by 50%. We're accelerating building traction and driving profitable scale. We have now presence in the 3 most attractive German states with strong store economics in our existing store network and in the network we're acquiring.

The acquisition unlocks development opportunities for Collins in Germany, and we are increasing our organic store development targets in Germany to 45 to 90 new restaurants over the next 4 years. Finally, as Andrew just mentioned, we have reaffirmed our targets for the year. So thanks again for joining the call, and we now invite questions. We've got probably about 20 minutes. Thank you, Harmony.

[Operator Instructions] Your first question comes from Tim Plumbe from UBS.

Congratulations. It looks like a good acquisition there. I've got a bunch of questions, but I'll just keep it to 2 and then jump back in the queue. So the first one, if that's all right, on Germany and the assets. So 18.8% EBITDA margin, do we compare that to your German portfolio that I think did about 21.3% EBITDA margins in FY '25? And if that is the case, how do we think about synergies at the store level or store level optimization that you can do? And also, how do we think about incremental costs coming in at the corporate level for this part of the portfolio, please?

Yes. I'll start, Tim. It's Andrew here. Yes, I think we previously issued store economics for -- on a post-AASB 16 basis. So we don't know what the post-AASB 16 numbers will look like for this acquisition because we have to do that work and obviously, we've got to do the acquisition accounting. On a pre-basis, though, this portfolio delivers superior economics to the German network. And I expect that will be the case on a post basis as well. And the driver of that is just the size of the restaurants. The average revenue of the restaurants is about just under AUD 6 million per unit, whereas our existing portfolio is around about that AUD 4.5 million mark.

So because of the larger revenues coming through that, we get a bit -- we get better fixed cost coverage and we get better earnings as a percentage. So it's -- we're talking superior economics to the existing German portfolio. If you think about these restaurants, Tim, they are centrally located or located in central suburbs in Munich. And one of them in particular is right bang in the middle of Munich as well, so exposed to really high levels of traffic. So it's really a PSA-driven economic outcome.

And to answer the second part of your question, Tim, our immediate focus in Germany is twofold. The first one is to be able to build up the pipeline of great sites and open great restaurants that are going to hurdle, and we've got strong and disciplined financial metrics that we need to meet. So we're building up capability in the German market to be able to identify those sites and be able to accelerate our growth as quickly as possible in a disciplined manner. So that's one focus. The second focus is to make sure we've got the right structural place to operate the network of restaurants. And there's a format that is established in the Yum! KFC system that we're going to follow to make sure that we follow processes and are able to deliver operations excellence.

Great. And the second question, just on the Australian business. It looks like it's holding up quite nicely. Can you talk about the operating environment from a discounting perspective? Have you had to do more discounting than you did in the first half? And how do we think about the flow-through to that in terms of the GP margin? I think you did like 51.6% GP margins across the whole group in the first half '26.

Yes. Thanks, Tim. Yes, I mean, the profitability of our Australian business is as we predicted when we gave the guidance. So we normally do see a bit of a -- just by virtue of public holidays primarily, we normally see a slightly lower margin coming through the business in the second half, exactly what we predicted when we communicated to the market at the full year.

Great. But no material change from a discounting perspective?

Well, I think there's always been a focus on providing value for consumers. That's not changed. Some good innovation, providing value to consumers. It's an important part of the brand's architecture.

Your next question comes from Caleb Wheatley from Macquarie.

Wondering if you might give us a bit more detail in terms of exactly how this acquisition came about, particularly sort of the intent from the seller and what you sort of see as Collins being able to bring to the 8 restaurants rather than another owner, please?

Chris, do you want to answer that question?

Caleb, so the German franchise community is about 2 dozen strong, and Collins is well regarded. We're the only franchisee I've shared in the past that sits across all 3 of the Yum! boards, the ad Board, the ops Board and the business model committee. And we're in constant dialogue with a lot of franchisees, and we've just established good relationships. And we had dinner with the seller this evening, and he got a bit emotional in giving his almost farewell speech to his restaurant general managers who joined us for the dinner. And it came about through relationships, Caleb. And we're -- as I shared before, we're always on the lookout for portfolios that would be accretive or strategic or both in the market. So we're well pleased, well chuffed and as is the seller as they see Collins as the ideal buyer to take his restaurants and his portfolio to the next level.

If I can add one dimension, which is the relationship with Yum! Brands, our franchisor. As we mentioned, it's a 50-year relationship. We've been operating KFC restaurants in Australia for a long time. Our partnership in Europe is growing, and we want to support, of course, Yum! and KFC in the acceleration of their development in Germany, but also they're supporting us. So it's a great partnership we're enhancing and strengthening.

Okay. That's helpful. And then just a second question, if I could. You spoke to the 6x multiple from a restaurant level EBITDA point of view. Can you just give us a bit of a feel for sort of what typical transaction multiples might look like in Germany or Europe more broadly, if possible? And if I could, if we should be thinking about some incremental costs from an overhead point of view? Or is this sort of purely just sort of bolting the restaurants on, please?

I'll go first, and Chris, if you want to complement with any responses, please do. Yes, I'd say this is a typical transaction. There haven't been that many transactions historically. So arguably, we're setting a bit of a precedent, but we think it represents good value for the seller and good value for Collins shareholders. So I'd see it as relatively typical. The multiple changes when there's competition for assets. But as Chris outlined earlier, we have a good relationship with our franchisees, and we've ended up where we've ended up, and we're very happy with it. Chris, I don't know if there's anything you wanted to add to that.

Just on the incremental piece, Caleb, I'll just reiterate Xavier's comment from earlier, which is we're being incredibly deliberate around ensuring that the headcount that is going into the German market is not as a consequence of one acquisition, but as a consequence of our broader strategic intent, which is to build that pipeline of high-quality sites and ensure that we can train and then run them to the standards that we set. So I wouldn't necessarily attribute significant incremental G&A because of this acquisition at all.

And Caleb, maybe one final point. The acquisition, yes, it's accretive at an EPS level. It's 8 restaurants, highly profitable. So we're very happy with that. Clearly, the bigger opportunity is development and having presence in the state of Bavaria now and the other 2 states that we've outlined, which contain the most populous attractive cities is the big prize. That's why we're doing what we're doing. The development pipeline is the thing that we're very interested in. And clearly, we'll be disciplined about where we invest, but that's the really sizable opportunity.

Your next question comes from Sean Xu from CLSA.

Congratulations. Can I just follow up on this new development agreement target, 45 to 90 new restaurants is still a very wide range. What are the key gating factors we should consider here? Is the consumer environment in Germany, site availability or anything else we can consider here, please?

Yes, I'll start, Sean. Thanks for your question. Yes, look, we've left the range wide because clearly, we'd like to target the higher end of that scale. The key thing that we're going to find as we go through this journey around development is making sure that we find sites that meet our financial hurdles. And put simply, that's why we have a wide range. We want to make sure that we're investing in good locations that deliver really, really strong economics. And we'll do the work necessary to achieve that. And that's really understanding the demographic profile of locations, competition, potential cannibalization, all the things that you'd expect us to look at. And we want to make sure that we're developing good restaurants. We want to make sure they are high quality.

The acquisition is a great start for that because the economics are really strong. But we want to make sure we're delivering high-quality returns for shareholders, that means picking great sites. So we've got the range intentionally wide for that reason.

Our core message, Sean, is that we announced the strategy last year, and we're executing on that strategy through accelerated development in Germany, but also the acquisition of this network that complements our existing geographies. But we're still very focused on making sure that we're doing that in a very disciplined way and delivering a strong return to shareholders.

Great. Second question, just a very quick one. Could you please tell me what's the blended comp sales growth in Europe for second half today?

I mean we'd rather give the numbers out by country, Sean, and then you know how many restaurants we have in the Netherlands and how many we have in Germany. I think it's important to do that because the countries are operating differently at the moment. Germany has been growing strongly. The Netherlands, as you're aware, has been a challenging market for a while for different economic reasons, mostly macroeconomic. So we'd rather keep them separate. But if you want to blend them, feel free. But I think as a rule of thumb, you can use the number of restaurants that we have in the market to get that blended average.

And strategically, Sean, our objective is different as well. In Germany, it's all about accelerated growth, of course, based on strong metrics and strong returns, so it's about acceleration. In the Netherlands, the focus is more on making sure we turn the business around and drive profitability through our existing network of stores, and then we'll start again growing when we're ready.

Your next question comes from Mac Ross from Morgan Stanley.

Maybe just one. So do you have further appetite for acquisitions? Or is this it for now? Or do you still -- are you open to inorganic growth opportunities in Germany? If so, do you have enough capital? And then how do you balance future acquisitions against the pipeline that you signed up to?

Thank you, Mac. So our immediate focus is to integrate the networks we've acquired and make sure we continue accelerating on development. We're building up a strong pipeline of stores in Germany that meets a hurdle and then it takes time and effort to execute and build those stores and start operating them. So that's our immediate focus. Of course, as we've always said, we remain open to opportunities to acquire a business and other businesses and other networks of restaurants in Germany, but that's not an immediate focus for us.

There was a question on capital allocation there as well. Yes, I mean, clearly, this acquisition is one that we can absorb based upon our current capital structure. I think if we were to do other things, then we think about what the best way of allocating capital would be and what the right capital structure would be. But yes, clearly, this one is something we can embrace within the constraints of our current funding requirements. So no concerns around that. I think philosophically, we just want to invest where we can deliver a good return to shareholders. That's our goal, and we'll allocate capital accordingly.

Very clear. Maybe just one more, if I may. Just on German penetration as a whole. You guys have called out that KFC is underpenetrated relative to McDonald's, Burger King and Domino's. So what level of penetration do you and Yum! believe KFC can get to in time? How do you guys think about that internally?

Chris, do you want to answer that question?

With pleasure. Mac, I think the primary focus for the Western European team is setting a multiyear goal to overtake Burger King. So that's a whole country effort, and that's not a Collins-only effort. I think we've said it before that having multiple franchisees developing the market across Europe's biggest economy is what we need to nourish the advertising board to create more brand awareness to in turn drive sales. So the Yum! team are targeting those, I think it's 750 is in their sights to become the solid #2 in the market over the, call it, the medium term. And for us, to repeat, we've got this wide range of 50 to 90 (sic) [ 45 to 90 ] over the next 4 years. And my team in Germany with support of the Dutch team, we're hard at work in building that quality pipeline.

Your next question comes from James Ferrier from Canaccord Genuity.

First question is in relation to the higher unit economics for these 8 stores that you're acquiring. When you compare it to the existing stores that Collins Foods operates in Germany, some of those are legacy sites that were coming from a much lower starting point some time ago. So is it your view that these acquired stores and the unit economics that they're delivering right now, is that more indicative of where you see new store opening potential unit economics and perhaps future acquisitions? Is that the sort of unit economics we should be using? Or should we be reverting to what the existing store network is delivering and then what you've referenced in previous updates?

Yes, I'll start, James. And Chris, if there's anything I don't cover them, please jump in. I think in reality, James, it will be site by site that will determine what the economics are going to be. So if we find great locations in the middle of Cologne, for example, that's one city that we're very interested in. Then yes, I mean, I think it will all be dependent upon the PSAs that we predict, PSA being average weekly revenue from a restaurant. So we may get better outcomes there. Clearly, we've been looking outside of the city centers as well in high-traffic locations or high pass-through locations where there's a lot of car traffic, but clearly drive-through is a channel that's important to us as well. So I think it will be dependent on the sites, the availability of great locations. That will determine what the economics are going to be.

That said, we're not unhappy with our current German economics. As you know, they are -- at a gross margin level, they are comparable at an EBIT level, they're slightly lower than Australia, but still very strong. I wouldn't be unhappy if we developed at that level. But I think clearly, if we can lift our aspirations towards where the acquisition economics are then all well and good for shareholders. So I think time will tell. We'll continue to update the market. But clearly, site selection is a very important part of determining where our economics will end up. Chris, anything you wanted to add to that?

No, Andrew, I think you've nailed it. It is site by site. And the -- again, I think we said it 5 or 6 times on the call now, it's just being incredibly deliberate in these early stages to be sure that the first restaurants that go from pipeline to execution hit those hurdles so that we just gain -- continue to gain confidence in our ability to execute against the plan.

And then second question for me is the additional exclusivity and right of first refusal rights that you have in those 2 initial markets. Has that been extended to Bavaria or parts of Bavaria?

Chris?

Thanks, Xavier. James, so in the state of Bavaria, it's what you call open territories. So there is no exclusivity or right of first refusal. The ones that we've referenced in the past are maintained in Baden-Württemberg and North Rhine-Westphalia.

So if I can add, James and Chris, I think the important thing is that there's a lot of white space because there's such a big gap between KFC and the number of stores of KFC in Germany and the other brands that there's a lot of white space. And we want to try to be the first mover and be able to open early as many restaurants as possible, of course, within constraints, great sites, profitable, great return, but there's a lot of white space.

Yes. And James, maybe just to complement Xavier's comments around white space. So clearly, there is a lot of white space, and we don't think that exclusivity is necessary, frankly, in some of the regions that we're operating in. And there are other franchisees, of course, that I think Yum! would want to encourage development with as well. So yes, we're not worried about that. I think this is a high-quality opportunity. It's down to us to be disciplined about where we select our sites.

Your next question comes from Elijah Mayr from Goldman Sachs.

I'll be quick. Just a couple. Can you give us, I guess, an update in the current market of what the time line is from identification to opening of a site? Like how long does that take in Germany?

Chris, as the guy in Germany right now, do you want to take that one?

Elijah, it's -- yes, we're not being evasive, but that really is site dependent. So live examples would be we target an existing restaurant in a city center that has a permit or a zone for the specific use. We could open the site in under 100 days, all dependent on how quick we can get contractors activated to be on site. Maybe other more complex greenfield or rezoned projects might be multi-quarter or even multiyear long-term strategic projects. Of course, we're targeting more of the former and not the latter.

So it really depends on the specific micro site. And it's why we're building pipeline multiyears out to be sure that we've got the balance of sites that we can convert quickly, but also ensure that we're giving ourselves the breathing space and enough time to convert slightly more tricky but also more strategic sites that take longer to convert from a permitting perspective.

I guess following on from that, can you actually give us a number of the sites that are within the pipeline just to give investors confidence that the organic store growth will come through just after, I guess, the experience we've had in the Netherlands. Can you kind of give us a number of like what is sitting in that pipeline at the moment? Like is there enough to reach the bottom end of that range given it is kind of a 4-year period and some of the rollout can take a couple of years? Just any idea of like how much is actually in process or in the pipeline at the moment?

We're not sharing the specifics of the pipeline, Elijah, but we've got -- the pipeline is multiyear across 4. And yes, we're hard at work to be sure that we don't just meet the base, but achieve as we can when we find the sites that hurdle. But we're not going to share a specific number tonight.

Elijah, I'll just add a comment on top of Chris'. I mean, suffice it to say that the pipeline is building all the time. And we're confident we'll find good sites. I think that what we'll do is prosecute those sites to make sure they're going to deliver good returns for shareholders. Your comment in relation to the Netherlands is not about not being able to find sites. We've intentionally held back on development to resolve some of the economic challenges that the macroeconomic situation in the market has forced upon the QSR sector. But that's intentional. It's -- we could go out and find sites tomorrow, but we've made a decision in the interest of shareholder value to focus on profitability. And at the right time, I think the Netherlands will be an attractive market. I just don't see that happening in the short term.

Germany conversely is a highly -- a high-quality shareholder value creation opportunity, and that's why we're grabbing it with both hands. So yes, I think we just need to make sure that we're delivering good returns to shareholders. I just want to make that point again and again because it's not just about store numbers, it's about the profitability of the locations we select. So -- but yes, look, we're confident in the pipeline and the pipeline continues to build.

To come back to the point we've made before, Elijah, in terms of resources, this is our key focus in Germany, investing in resources that drive development and acquisition to be able to continue building up a good pipeline of profitable restaurants and be able to execute on that as quickly as we can. Yes, go ahead, Elijah.

I said no problem. I was just going to say if I could just quickly squeeze in to see if you guys could quantify the impact of weather in Gera on the same-store sales growth.

I haven't done the math, Elijah, if I'm really honest. I mean we did have severe weather events, particularly in the Netherlands. But as you've seen from our numbers, we've been able to absorb that impact and we've ended up delivering, I think, reasonably good same-store sales numbers and reasonably good total sales numbers year-to-date. So I couldn't tell you what the maths were, but clearly, in the days of the impact, I mean, that impact was material. But obviously, once the weather dissipated, we were able to recover our position.

Harmony, I'm not sure if we have more questions, but we're probably going to have to wrap up.

Thank you. Not a problem. I will just hand back to Mr. Simonet for closing remarks.

Just to say thank you to investors and analysts for joining the call. We look forward to continuing to work with you, and have a great day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Collins Foods Limited HY '26 Results Conference Call and Webcast. [Operator Instructions]

I would now like to hand the conference over to Mr. Xavier Simonet, Managing Director and Chief Executive Officer. Please go ahead.

Thanks very much, Harmony. Good morning, everyone. I'm Xavier Marie Simonet, the Chief Executive Officer of Collins Foods. With me on the call here in Brisbane, I've got Group Financial Officer, Andrew, General Manager; of Australian operations, Krystal and General Manager of Europe, Chris Johnson, representing the first half 2016 results announced to the ASX earlier this morning as well as providing a trading update and refreshed outlook. As always, we will go through the presentation, and then we will take questions.

Slide 2, executive summary. I joined the business just over 1 year ago. And to start today, I would like to touch on the main highlights of the past year and our priorities have been. We have a strong focus on operational excellence across our businesses, and the results we are presenting today show the progress we are making.

We are sustaining growth momentum and achieved record revenues this first half with earnings and margins up on last year. We are delivering strong cash flow, resulting in a significant reduction in net debt compared to prior year and broadly in line with position at the end of FY '25.

Together with the debt refinancing we announced a few months ago, this means we have significant capacity to fund future growth initiatives.

We continued to invest in our core businesses, both in our restaurants and in technology to enhance customer experience. Our focus on operational execution has resulted in a strong underlying performance in HY '26 in a challenging market, demonstrated by our results today. We are, therefore, pleased to announce a favorable upgrade to our full year outlook, and I will come back to this in more detail towards the end of the presentation.

With strong cash flows and a robust balance sheet, we remain open to organic and inorganic growth opportunities, particularly in Germany.

Moving on to Slide 3. I would like on this slide to give an update on our growth priorities. If we first look at Australia, we are showing strong same-store sales growth in KFC in Australia, outperforming the overall QSR market due to product innovation and strong execution. We made good progress on productivity and waste improvement, which has contributed to margins improving, and we remain disciplined on costs while continuing to invest both in our restaurants, our brand and our digital channels.

On the Taco Bell exit process, discussions continue, but we have no firm update to give you yet.

Looking at Europe. Germany is our second growth pillar and is now coming to life. We opened our 17th restaurant Karlsruhe during the period and have several sites approved for development with the pipeline building.

We are also encouraged in Yum!'s approach to building the brand in the German market. People capabilities lifting and purposeful investment in brand initiatives is benefiting KFC.

Finally, on operational excellence. We are laser-focused on driving same-store sales, margins and customer service levels. We have new operational leadership in place for both Australia and Europe, and their deep market experience is helping us execute on our plans.

Portfolio optimization in the Netherlands has commenced with 2 new restaurants opening since half year-end, replacing restaurants which are underperforming from a profitability perspective. There has been 1 closure in November and a further planned closure in January.

Moving on to the financial highlights on Slide 4. So Slide 4 provides an overview of HY '26 performance. Financials are presented on a post-AASB 16 basis, unless stated otherwise. For those more accustomed to pre AASB 16 numbers, we have made them available in the appendices to the investor presentation. Andrew will shortly take you through more detailed financials, so I will focus on some of the highlights for the first half.

In summary, Collins Foods delivered record level of revenues and strong improvements in profits and margins. This achieved despite a consumer environment that, in particular for our target demographic, remains challenging. The results highlights from my perspective are, first, we recorded the highest first half year revenue in the company's history, up 6.6% compared to last year. Second, underlying EBITDA grew by 11% and our underlying NPAT by 29.5%.

Pleasingly, our return on equity increased by 190 basis points to 14.1%, which is good news for our shareholders. As a result of strong cash flows and balance sheet, the Board declared a fully franked interim dividend of $0.13 per ordinary share.

Moving on to Slide 5, ESG. Our progress on sustainability is highlighted on Slide 5. We are on track with preparing for our first mandatory AASB S2 climate report this year, having recently completed our risks and opportunities assessment.

While recent developments in Europe have resulted in our entities, they are being out of scope for mandatory reporting, we will continue with our voluntary disclosures beyond climate.

Actions across our ESG Gen are tracking well with some first half highlights, including our food waste reduction program is tracking well with an 8% reduction delivered in Australia and 25% in Europe compared to FY '25. We installed our largest solar installation yet in our new German restaurant in Karlsruhe.

We launched the pilot to support restaurant leaders career development with certified leadership and management deployments. Our First Nations Preemployment Program was launched, enabling unemployed used to obtain hospitality skills experience and job opportunities.

Investments in safety culture resulted in a 12% drop in recordable injury frequency versus FY '25. And we participated in the inaugural QSR industry roundtable on modern slavery. It's pleasing to report on progress with respect to our sustainability agenda.

And with that, I'll now hand over to Andrew Leyden, our Group CFO, to take you through our results. for the first half.

Thanks, Xavier, and good morning, everyone. Let's move to our group results overview on Slide 7. Revenue in the first half of financial year 2016 was up 6.6% over the prior period to $750.3 million. That's a record for Collins, as Xavier stated earlier. This was driven by growth in both Europe and Australia.

In addition, the result benefited from favorable currency translation relative to prior year, which contributed $12.7 million for the current year.

Our revenue performance overall underlines the benefits of operational execution of the investment being made in our networks and in technology, the advantages of healthy brand equity and also the resilience of our business at a time where consumers and especially our consumers are still grappling with cost of living pressures.

Underlying EBITDA was up 11% to $113.9 million, with margins up 59 basis points. This was the result of a return to same-store sales growth in addition to productivity gains.

Underlying EBIT was $63 million, up 20%, reflecting the growth in EBITDA and stable depreciation compared to the half year in the financial year '25.

And underlying NPAT was $30.8 million, up 29.5% on the prior period. Underlying EPS was $0.61 per share up from $0.202 per share in the prior period.

As Xavier highlighted earlier, we are now publishing return on equity measures on an underlying basis, and this measures the quality of shareholder returns.

Return on equity was 14.1% on a trailing 13-period basis, up 190 basis points on the prior corresponding period.

Statutory NPAT was $27.2 million, and that compared to $24.1 million in the half year financial year '25.

In H1 '266, total restaurant impairments were $3.1 million as well as a $1.3 million provision top-up for potential wage under payments relating to prior years to $10.5 million.

With respect to the provision for potential wedge under payments, Collins is committed to meeting its obligations under the Fair Work Act and takes wage compliance very seriously. The company has been reviewing historical employment and wage data to determine whether employees may have been entitled to additional payments. We are constructively and proactively liaising with the Fair Work ombudsman in relation to these matters and are committed to fully remediating any impacted team members. The process of remediation commenced in November 2025.

In September, we announced that we had successfully refinanced our debt facilities, where we also adjusted the blend of Australian dollar and euro borrowings to further support our growth strategy in Australia and moreover, in Europe with more euro-denominated facilities.

Net operating cash flows were $69.1 million, down on the prior period due to higher tax payments in the period. Net debt was reduced by $20 million to $138.9 million compared with the half year '25, with strong cash flows, funding capital investment, dividend payments for shareholders and also debt reduction, further adding to the group's investment capacity for the future.

As referenced earlier, as a result of a strong fiscal position, the Board declared a fully franked interim dividend of $0.13 per share, which is an increase of $0.02 per share on the prior corresponding period. The dividend record date will be the 8th of December 2025 with a payment date of the 5th of January 2026.

Now moving to the income statement on Slide 8, which outlines the reconciling items between statutory and underlying results. The most material item impacting the difference between statutory and underlying performance was a $3.1 million impairment on previously impaired restaurants. The group also provided an additional $1.3 million for potential wage under payments relating to prior years as referred to earlier.

Other reconciling items include a small gain on the previous debt refinancing modification and a small gain on the settlement of a Taco Bell lease liability. Underlying EPS was $0.261 per share whilst basic statutory EPS was $0.23 per share.

Now turning to the cash flow on Slide 9. Strong cash generation remains a highly attractive feature of the Collins' business. In the half year '26, ,net operating cash flows were very strong, a little lower than the prior year by $6.2 million to $69.1 million, with the reduction due to higher tax payments in the first half compared with the first half in the prior year as a result of timing impacts relating to capital expenditure and other deductions, which differed from accounting and tax purposes. Cash conversion was again very strong at 92%.

Operating cash flows were applied to fund disciplined investment, dividend payments and net debt reduction.

Investing cash outflows were $26.9 million, mainly reflecting capital investment in the store network and digital technology.

New restaurant investment was $5.1 million Remodels, including supercharge remodels were $7.3 million, and digital and sustainability investments were $1.6 million. Asset renewal spend was $8.9 million.

Additionally, contingent consideration of $2.9 million was paid as a result of the acquisition of 8 restaurants in the Netherlands in May 2023.

Financing cash outflows were $59.9 million, which included $17.9 million in bank debt repayments, dividend payments of $17 million and lease principal payments of $27.1 million.

Net cash movement was an outflow of $17.7 million for the half year compared with a $4.6 million inflow in the half year '25, most of which reflected the payment.

Now moving to the balance sheet on Slide 10. Collins Foods' balance sheet is in exceptional shape and provides capacity for investment in growth opportunities. Net debt was broadly unchanged from the end of financial year '25 at $138.9 million, with cash generation strong and allocation of capital discipline.

Cash balances were down $17.5 million to $101.6 million due to paying down debt since the end of the last financial year.

Bank debt fell from $257.2 million at the end of financial year '25 to $238.9 million at the end of the half, a reduction of $18.3 million in the period.

Property, plant and equipment was down $7.4 million from financial year '25 to $240 million due to impairment, net of additions and depreciation.

Right-of-use assets of $516.1 million and total lease liabilities of $643.3 million both increased on 3 net restaurant additions and lease renewals.

The net leverage ratio ended the period at a very comfortable 0.89, down from 0.93 at the financial year '25.

And now having covered the financials, I will hand over to Crystal, who will take you through the results and the commentary for KFC Australia.

Thank you, Andrew. Moving to Slide 12. Brand strength and improved operational execution saw momentum build in the first half of FY '26, continuing on the strong momentum that we exited FY '25 with.

Revenue increased 5% over the prior period to $563.8 million, driven by new restaurants, strong digital growth, product innovation and operational excellence. Same-store sales were up 2.3%, which represents a material positive shift compared to the negative 0.1% same-store sales performance recorded during half year '25.

Restaurant-level EBITDA increased by 8.7% to $121.8 million due to stronger store sales and the focus on productivity improvement. This was partially offset by investment in value for our customers through the promotional calendar.

EBITDA was up 9.4% to $111.8 million with margins up 80 basis points on the prior corresponding period to 19.8%.

EBIT was 11.6% higher to $75.5 million on the back of increased EBITDA.

Turning to Slide 13 and KC Australia's brand health. Consumer spending remains soft across QSR. However, the KFC brand continues to build on its very strong foundations positioning itself for continued growth. KFC has delivered several successful limited time offers and strong brand moments like the Christmas and July campaign. These have contributed to the growth in sales and brand health metrics.

KFC brand is leading the category across key brand health metrics like consideration, which is a measure of willingness to buy, satisfaction and brand modernity, are strong, especially with our Gen Z customers.

Today, it is the launch of KWENCH by KFC trial in 7 of the Collins restaurants in Cairns. KWENCH by KFC is a range of innovative temperatures, including lemonades, refreshes and shakes that will not only offer our customers a broader beverage choice but also upsized opportunities and different [indiscernible] for KFC.

Slide 14 shows the KFC brand is continuing to outperform its QSR peers. The charts show the impacts of brand campaigns, digital investment, product innovation and everyday value. These have helped continue to build KFC's decision ahead of key QSR competitors on Brand Index, which comprises results across quality, value, reputation, satisfaction, recommendation and impressions. This work, combined with back-to-back innovation across items like Habanero Chicken, Zinger Kebab and Sweet Tokyo Holden Hot and Crispy have increased our brand products results. Results for Gen Z population remains significantly higher with improved cut through with the consumers.

Turning to Slide 15, where I will provide more details on what we are doing on operational excellence and network investments.

With regard to investments in our restaurants, we are still targeting 7 to 10 new restaurants annually and have a development pipeline of now over 50 restaurants.

In calendar year 2025, we opened 8 new restaurants and have 1 more to come before the end of 2025. We will have remodeled 37 restaurants, including 4 supercharger remodels by the end of this year.

The work we've done across the other 2 columns of the slide has driven an increase in the customer overall satisfaction metric by 5 percentage points over the prior corresponding period. We have elevated performance through delivering innovation across restaurant layout design, driving productivity and increasing capacity in peak periods. This includes things like dual-lane drive-thrus, T-lines kitchen layouts and connected kitchens. We have implemented rostering tools to drive labor efficiency and optimizing our restaurant investments. And all restaurants now have AI-powered forecasting to better predict demand, which, in turn, will allow us to optimize our customer experience, drive sales and better manage waste and labor.

In terms of modernizing the customer experience, we continue to invest in digital. We also improve the accessibility to the brand and optimize operational efficiency. We achieved an 8 percentage point uplift compared to last year with 42% of sales now coming through our KFC app, kiosk and delivery channels.

Our kiosk rollout to the remaining 87 restaurants is expected to be completed within the next 12 months. Delivery fees or aggregated have been lowered to $3.95, which is providing customer value as well as helping lift our transaction value.

Previously, I spoke about 3 key areas of prioritizing that aligned with our strategic focus on operations excellent. Firstly, is on optimizing operational processes to leverage our digital investments; secondly, unlocking opportunities with AI, particularly through increased sales forecasting accuracy; and lastly, elevating the customer experience. With a solid half year '26 result, I will continue to impact across these 3 key priorities moving forward.

Our positive start to the second half, which Xavier will outline later in the presentation reflects a healthy brand and improved operating disciplines. I'm very proud and thankful to our operational team's commitment to operational excellence and delivering great customer experiences reflected in the financial results we are delivering.

I'll now hand over to Chris to cover the performance of KFC Europe.

Thank you, Crystal, and good morning, everyone. Turning now to KFC Europe on Slide 17. Our FY '26 performance reflects a challenging economic environment in Europe, particularly in the Netherlands, which is still experiencing cost of line pressures and inflation. Revenue of $162.9 million was up 14.6% from the same period last year, with same-store sales up 1.4%. There was also a currency benefit in the period, which Andrew took you through earlier.

Netherlands same-store sales increased by 0.4% while Germany was up 4.8%, reflecting improved brand and in-restaurant execution and compare favorably versus the same period last year when same-store sales were in decline in both markets.

Leadership and management of the German market reverted back to Yum! directly in mid-December last year, and their teams have been fully focused on rebuilding team structures, processes and importantly, our focus on building the brand with significant investments. Pleasingly, we're now seeing positive results of this, and our collaboration with Yum! continues to move from strength to strength. was up 19.6% to $20.4 million, with margins up 53 basis points to 12.6% in due to the return of same-store sales growth and favorable fixed cost leverage.

Avian flu-related poultry cost inflation held back the margin improvement, and we expect the effects of this to start to dissipate in 2026.

EBIT of $6.9 million was up 142% over the prior period, reflective of higher EBITDA.

On Slide 18, I'll touch on some of our key priorities in KFC Europe. We're investing in training and people capability, which is improving the team and customer experience in the Netherlands. Pleasingly, we're seeing the result of this with customer satisfaction scores and Google ratings at all-time highs.

Similarly to Australia, T-line kitchen apps have been well established in the Netherlands, which is improving both speed and accuracy of order with both increasing customer satisfaction. We'll be trying this initiative in Germany during 2026.

We're continuing our digital investments, which is driving transaction volumes with positive customer outcomes. We've increased menu innovation in the Netherlands, which has supported market share gains. Initiatives such as Kipsalon and Kaas, Kaas, Kaas; cheese, cheese, cheese in English have driven consumer engagements.

We have also been strong supporters of the marketing calendar pivot in Germany, which continues to drive insight-led innovation. Similar to what Krystal was describing, we are focused on improving sales forecasting in both our European markets to reduce food waste and to improve labor productivity. Finally, we're expecting that poultry prices will ease as the market recovers from the impacts of Avian influenza.

Moving to Slide 20 and a more detailed look at our Netherlands operations. We are seeing early positive signs of our efforts to reset higher profitability in the Netherlands. We have a refreshed leadership team and the necessary operational experience and a clear cost focus. We are completely focused on driving same-store sales, improving the team and customer experience, increasing labor productivity and reducing food waste.

Through continued investment in marketing, digital and menu innovation, we're elevating the KFC brand and KFC value perception to continue to drive sales. We've also started with portfolio optimization with 2 new developments replacing some of our poorer performing restaurants. In the second half of FY '26, we've opened 2 new restaurants and 1 underperforming restaurant was closed with another to close in the near future.

Slide 21 looks at KFC's brand strength in the Netherlands. Awareness increased to 72%, and our QSR market share increased by 0.3 percentage points to 9.4% over the same period last year.

Our improvement in modernity was pleasing, particularly with consumers recognizing KFC as a brand that stays on top of trends. Product innovators such as the collaboration with Netflix' Squid Game tapped into current pop culture trends and drove engagement with younger consumers.

In 2026, we will build on the success we've had in 2025 by using the local insights we've developed to further innovate products, collaborate with the right partners and accelerate the everyday value we offer our customers.

Digital channels remain a key contributor to growth, representing almost 67% of all sales in the Netherlands, up 6.5 points on the prior period. This has been driven by investment in kiosks and growth in third-party delivery aggregators.

And now turning to Slide 23. I'd like to make a few points about the German opportunity and how it's progressing. Germany is a significant growth opportunity for Collins. It's the largest economy in Europe, where QSR spend is outpacing overall GDP growth. KFC as well as the broader chicken category is significantly underpenetrated in Germany compared to other categories.

During the half, we opened our 17th restaurant and are actively building a significant pipeline of development opportunities, including several already approved developments for 2026. We're targeting between 40 and 70 new restaurants over the next 5 years with mid- to single-digit build target for the 2026 calendar year.

To enable delivery of this pipeline, we're investing in people capability especially in the areas of development, construction, area coaches who help us run clusters of restaurants and training to port restaurant operations.

We're also open to acquisition opportunities in Germany that can help us drive scale, penetrate complementary geographies and accelerate development in a market that will become our second strategic growth pillar. Back to you, Xavier.

Thanks, Chris. Turning now to Taco Bell Australia on Slide 25. Revenue of $23.6 million was down 3.9% over the prior year, with sales impacted by a weaker consumer environment. Due to stronger cost control, the small loss from operations reduced slightly despite lower revenues. The network remains unchanged at 27 restaurants.

Discussions regarding transition to new ownership continue but firm decisions have not yet been made. We will update the market as soon as we have further news to report.

Slide 27. which is the outlook. I'd like to provide an update on our outlook for FY '26 as set out on Slide 27.

While overall consumer sentiment remains challenging, our stronger performance in the first half continued into the early weeks of the second half with total sales in the first 7 weeks increasing in all markets. We continue to benefit from increased operational focus across the group.

KFC's Australia's total sales rose 5.3% in the first 7 weeks while same-store sales were up 3.6%. Operational initiatives and the growing network are expected to drive sales and enhance customer experience. However, performance in the second half will compare with a much stronger performance in the prior period where we saw a material improvement versus the first half of FY '25. We expect to see continued investment in value for consumers to continue to face cost of living challenges. We also expect to see a return to cost inflation across key commodities such as poultry after a period of deflation, and inflation continues to be a feature of the Australian labor market. And of course, we are a labor-intensive business.

Capital and construction costs also continue to inflate, reflecting an imbalanced supply and demand in the sector, which we are, of course, exposed to.

Total sales in the Netherlands for the first 7 weeks increased 5.6%, with same-store sales slightly down by 0.5% as a result of tight consumer conditions, as indicated by Chris earlier. Improving profitability is a key priority here for us, and we expect operational excellence will improve sales productivity and efficiency in this market.

Margins are expected to benefit from improving poultry prices in the second half as the effect of Avian flu dissipates. We'll also focus further on waste and labor optimization and keep G&A tight. Labor inflation remains prevalent in the Dutch market.

Total sales in Germany increased 7.8% in the first 7 weeks while same-store sales were up 2.3%.

We continue to face on operational excellence and good work is taking place on brand and menu innovation, simplification and optimal pricing strategies. Market management capability also will further improve under Yum!'s stewardship.

As in the Netherlands, we expect poultry prices in Germany to reduce in the second half. We expect VAT to fall in early 2026 as a result of the government decision, which will stimulate sales and margin. Yet, while there are margin tailwinds, we continue to see pressure on labor costs, which are likely to rise above CPI in 2026. As a result of all those factors and a solid first half result, we are targeting year-on-year group underlying NPAT post-AASB 16 growth in the mid- to high teens on a percentage basis, up from the low to mid-teens range previously announced.

Finally, I would like to thank our Board for its guidance, our shareholders for their trust and support, our management team and all our team members, particularly our restaurant teams for their motivation, energy and unwavering commitment to our business success.

And I'll now pass to Harmony for questions.

[Operator Instructions] Your first question comes from Sean Xu from CLSA.

Can you hear me okay?

Yes, very good. Thank you.

It's great to see your Seller same-store sales growth for the 3 weeks into is doing even better very strong this half. My question is around, given the cost of living pressure remaining with consumers, I'm just curious to know what sort of the overall promotion intensity in the market you're seeing? And I wonder if the acceleration of the sales growth in [ 6.5 ] common expenses of profitability. This is referring to the share market, please?

Sean, I might take off this. It's Krystal here. What we've seen in the first 7 weeks of the second half is our continued investment in value, and we will see that continue for the rest of this financial year. But that's been supported by strong LTO offers as well that has really driven transaction driving transactions into the business as well.

So it is true that we are investing in value still, but the LTO calendars are quite strong in innovation place. Xavier, did you want to add something?

No, just defining LTO.

Sorry. LTO is limited time offer stop there.

Maybe...

If I can add something, Sean. We've also done a lot of work on everyday value and making sure that we deliver to customers everyday value, which means a big [indiscernible] but focusing on bundled deals and activities that deliver value for our customers in restaurants every day.

Yes. That's very clear. If I can just to follow up, this is more about your medium to longer-term out in Australia. I'm just curious though, what's your approach to drive additional growth in Australia in acquired penetrated market. The recent industry feedback in some of your competitors are paying very, very extensive brand for quality sites. I'm just curious to know how sustainable is your annual store opening target while maintaining a similar margin profile.

Sean, Yes. Look, I think the long-term projections for our business, and we think about same-store sales growth is critically important, I think, just for the overall health of the network. So that both from a brand perspective and from an operational perspective is a real -- it is the main focus for our business always should be. Other Elements, of course, are really making sure that the margin structures remain healthy, whether that be labor, whether that be cost of sales. And then capital expenditures. And yes, we've been competing with competitors for sites for long term.

It's that's not a new trend. It's with us. It's present. We compete to sites with other QSR operators. In fact, we often compete together for the same sites. We often [indiscernible] on the same sites. And in fact, we quite like that because those sites be destination for QSR centric consumers.

So I think it's just kind of business as in our in the sort of in the QSR segment that we operate in.

I think the good thing is that we offer value, we offer affordable value. We appeal to a lot of consumers. We have scale in our business. We've got repeatability. We have an extremely strong brand. And if you think about the long-term trajectory of the brand, there's clearly a lot going on in terms of improving brand health. That's evident in the numbers now, but is that focus won't [indiscernible].

And there's a lot that we're looking at in terms of what news we can bring to the brand. We talked about KWENCH a little earlier. We talked about the fact that don't compete in other dayparts around and this is an international issue. We don't compete in all the dayparts, which some of our competitors do. So there's upside for us. And I think managing the financial structure of the business and managing capital expenditure and making sure all those things remain in balance is critically important to us.

And Sean, if I can add a couple of things. What has driven sales and margin growth for us in the first half of FY '26 is operational excellence and the focus we're putting on executing really well in the restaurants. It's about leadership, it's about processes. It's about driving all the KPIs in the restaurants and enhancing customer experience and unlocking capacity as well. So that's one, and we'll continue doing that.

The second aspect is, of course, product launches and activities around motivating customers to come to our restaurants and getting them excited through social media and digital marketing, which we're doing particularly with Yum!. product launches, new product launches is, of course, a big lever as well.

Your next question comes from Tim Plumbe from UBS.

Two questions from me, if that's all right. First one around KFC Australia. It's a bit of a continuation from Sean's question. So obviously, a lot of moving bits within the business, but very high level. Is it fair to say it sounds like you're kind of seeing a continuation of the same-store of consumer environment and the competitive environment that you experienced in the first half and a similar COGS environment? And if that's the case, if we look back historically, pre-AASB 16 EBITDA throughout the year, the first half split has kind of been between like 46% and 48% of the full year. All else equal, are there any factors that we need to take into consideration that would materially change that kind of 47% first half skew figure uplift to marketing that you would usually have in the second half?

So I'll make a comment on consumer sentiment and then hand over to Andrew. Consumer centric lifting a little, but we do not see a meaningful change. And we're concerned about interest rates [indiscernible], the fact that interest rates are not continuing to go down at pace.

So I don't think in the first half that an uplift in consumer sentiment has actually driven much for us. I think our sales growth and margin growth results more from the focus on operational excellence and successful product launches. I don't see much improvement in consumer sentiment to tell you the truth.

Yes. And maybe just to follow on, Tim. I know you and I had a brief conversation earlier. I think if you look at what's happening in first half to second half, I think consumer sentiment is actually one of the things that's playing out in terms of implied assumptions within our outlook. We think consumers are still struggling with the cost of living. We continue to provide value as a consequence of that.

Typically, as well, we do have a bit of seasonality in our business. So we talked about the long-term outlook for the brand with Sean's question earlier. But first half, second half, we typically see a bit of a dip in margins H2 to H1. It's primarily driven by the number of public holidays. It sounds like a strange thing, but we have a lot more public holidays in the second half than we pay premiums in those periods, and that affects our restaurant profitability in the second half.

I mentioned as well that cost inflation will become a feature again. I'm not suggesting it will be pronounced. I'm talking about normal modest levels of cost inflation. And we expect that to start to impact the business at the end of the first quarter. And remember, at the same time in the prior year, we started to see cost deflation. So [indiscernible] that reversing a little bit as well in the second half. So -- and of course, labor inflation continues to fail across the QSR industry. That's the reason why we focus on productivity is because rate is an issue that we have to deal with in all parts of our business.

So I think the long-term prognosis around balancing same-store sales and productivity and the economics of restaurants and capital expenditure. is, as I mentioned, with another the question we responded to with Sean. I think there is clearly a first half, second half change with respect to some of those factors that I just mentioned there.

But overall, it's good to it's been good to sort of upgrade our guidance for the full year. I think appropriately, we've reflected that in our announcement this morning as well.

That's useful. Then just the second question around KFC Europe. Again, a more challenging top line, European business comes up against marginally tougher comps in the second half of '26. But then offsetting that, you guys have got cost relief, as you mentioned, particularly in terms of chicken. You've spoken about year-on-year margin improvement. If you take all of that into the mix is it still the intention to get EBITDA growth year-on-year. So is the cost improvement and to offset a slightly more challenging top line?

Sean, it's Chris. Thanks for the question. Short answer is yes. we sorry, Tim, yes, we definitely do, and that's in both journey and in the Netherlands. The VAT reduction in Germany is anticipated. And we've modeled with Yum! scenario where it will be in play from January 1 and what that means for menu board printing and margin and what and if it's not in place for January 1. So outside of that externality with near flat year-to-date same-store sales growth in the Netherlands as poultry prices glides down, we do foresee margin expansion, and that's true in [indiscernible] as well.

Your next question comes from Tom Kierath from Barrenjoey.

Just on the trading update, I noticed there's a bit of a slowdown across Europe, Netherlands and Germany. Can you maybe just talk to what the drivers are there? Is it kind of broader market or whether you think it's kind of specific to your business?

Tom, it's calendar driven. So in the German context, it's the 7 weeks that we've provided for H2 to date spans the back end of Windows 7 and the Window 8 has just started, and the same holds true in the Netherlands. Although in the Dutch context, cost of living pressures and the QSR category under overarching pressure is the main driver.

I said earlier, of course, we're quite happy that KFC has grown its market share even though QSR as a whole is under pressure. But we do see both in the German context with Yum! now back in the market and also just a different view on the length of it Windows and LTO -- sorry, limited time offer introductions in the Netherlands. that we're well placed to take advantage of the January windows that start with the value across both markets.

Yes. Okay. Cool. And then like reading between the lines, you're saying Netherlands margins will be up or you're targeting them to be up and the same with Germany, but you're not actually saying that in Australia in the second half, and you're actually commenting about commodity inflation. Like is it fair to assume that maybe expanding margins in the second half is going to be difficult? Like is that the right interpretation of that poultry?

Yes. To put simply, yes. I mean we seasonally, we tend to see lower margins in the second half than we do in the first. That doesn't change our long-term trajectory, of course, that remains, as I mentioned earlier, in the but we're focused on driving same-store sales revenue entering dayparts, [indiscernible] on beverages, that sort of thing. But in the short term, yes, we do seasonally see a bit of a dip in margins in the second half. It's primarily driven by the timing of certain events, but also things like commodity changes, but also the number of public holidays. It just affects the labor rates that we pay, and we tend to see a bit of margin contraction in the second half as a consequence of that. So yes, I mean, your assertion is correct.

And what about sort of year-on-year, like I get the whole second half versus first half, what about second half versus second half.

I think as we mentioned earlier, we're just a little cautious about how the consumer is feeling right now. We had a good second half last year. We're just -- a little word is probably too strong, but we're just keeping an eye on tumor sentiment. We are going to have to support the limited time offers with investments in value. We found that as we towards the late part of the first half as well. we've seen more investment in value.

So we're just looking and watching to see how the consumer is responding to promotion. And then obviously, there's a degree of flexing that takes place in terms of investments in value.

Your next question comes from Caleb Wheatley from Macquarie.

My first question on this value discussion, which has come up a few times already. But just keen to hear if you had any additional comments on how your peers are responding to the environment from competition point of view. And any additional comments you can make on pricing or promotional intentions going into the second half, i.e., is it potentially going to get worse before it gets better in terms of the value that you're trying to offer to your customers, please?

Maybe I'll start. Got a few key areas. One is we still see men's value in driving operational excellence, and there are still improvements we can make across Australia and Europe. So we see [indiscernible] value, and we've shown that over the last few months.

The second point is we've got exciting product launches happening also in the second half. This is -- as we've experienced in the first half, this is delivering strong potential sales growth as well as engagement with customer and good customer experience.

In terms of value, as Andrew mentioned, yes, we're cautious about consumer sentiment and how things are going to evolve in terms of macroeconomics, particularly with interest rates because this will have an impact, positive or negative, on our activity and we'll adjust also the value we need to deliver to our customers. So we don't know how it's going to pan out, which is very cautious, but with a strong focus, again, on the value we can still deliver through operational excellence and through successful product launches.

And Krystal mentioned KWENCH. So we're launching KWENCH as a new platform or trial in 7 stores in Cairns with Yum!. This week is really exciting. We'll see what that outcome is, better focus on launching new platforms, new products, new dayparts, it's something we're focusing on with Yum!, and we'll see how it goes in Cairns.

Yes. Do you get the sense that your peers on the more sort of value end of the QSR channel are also pushing quite hard on price? Just sort of trying to get a feel for if there's sort of broader pricing credits or this is more of a deliberate internal decision from Collins?

Caleb, it's Crystal. I think the QSR landscape has been highly value driven for quite some time now, considering the consumer sentiment. I don't see -- I don't think our competitors have changed direction from what they had been doing the last 6 to 12 months. However, we are seeing price increases taken from our competitors at different points in time and what they see fit.

The decision on how we [indiscernible] our calendar and how we approach value is not done by Collins. That's done by Yum!, and we sit on the council to help assist those decisions.

We've got a customer-first mindset on those sorts of decisions. So anything to do with pricing, anything to do with value plays in our innovate calendar is all driven by what we think the consumers are saying they want to need and that time period. And we can be agile, as Xavier said before. So if we need to, we can pivot on those decisions to kind of go with what the trends are coming through in the numbers.

Caleb, I was going to add was give me things to different consumers. And some consumers want abundant value. Others want a share price. There's one really interesting bundles that stimulate them it means different things to different people. I think it's more of a nuanced conversation than just making an assumption that we're dropping prices because that's really not the case. It's a complex set of compositions that ultimately leads to the way that we present LTO, limited time offers, and then how we support them with value-based promotions.

And Caleb, if I can add something we're cautious about consumer sentiment. But the backdrop is we've got a very strong brand. And brand health metrics for KFC in Australia and Europe are very, very strong. Engagements with consumers through social media and digital marketing, advertising is very strong. We're launching new exciting products and going to continue doing that in the first half they've really shown success.

We're testing KWENCH. We're focusing on operational excellence and customer engagement, unlocking capacity. So there's a lot going on that gives us confidence that we can make a difference. Of course, within the context that consumer sentiment is still a question mark.

Okay. That's clear very detailed. And just a final very quick one, maybe one for Chris. That Avian flu benefit called out since it's going to be quite meaningful. Can you just give us a sense for what the [indiscernible] was of Avian flu when that first started to get in terms of the cost increase there? Just trying to get a sense of kind of what the leverage is as we're now rolling out of it on the other side, please?

Caleb, thanks for the question. We haven't shared what the impact was. It was different across our 2 geographies. It was more pronounced in Germany, and that's purely given a source of supply from Polish poultry was higher in Germany.

In terms of restitution, the light part is starting in terms of pricing coming down. Yum! are working really hard, and they run and manage 1 system supply chain across Continental Europe, working really hard on not only testing for the existing supply but also on diversification, Caleb, which is probably the one big learning that came out of this whole process was there are other low-cost producing markets out there that KFC should or could target from.

We're not, at this stage sharing, where we'll end up in terms of the Avian flu upside, but it is it started and will continue into early 2026.

Okay. Great. Thank you. We've got a few more questions. We've got 5 to 10 minutes max. So we'll try to answer your questions as much as possible.

Your next question is from Ben Gilbert from Jarden.

So I try to be quick, just two questions. So I appreciate all the comments we made around macro. But it feels to me, looking at the numbers, looking at the NPD pipeline in terms of new menu launches there the case to be more optimistic today for the outlook for Australian 6 months ago. Is that fair? Because that's how Yum!'s comments for the other day with the update talking to Australia as well.

Just repeat that. Sorry, I didn't quite catch the question.

I'm sorry, just there's obviously a bit of discussion on macro. My if I look at your numbers, and then I tie that in with the numbers that Yum! has put out, and you talk to the pipeline of products coming through, it feels to me that the case to be more optimistic about the next 6 months for Australian QSR and KFC space in it than there was probably, say, 6 to 12 months ago. Is that fair?

I'm going to invite Krystal to talk to the Australian position. I think if you look at the strength of the brand, I think we'd all love to see higher level same-store sales growth because the brand is in really rude health. And if you think about the opportunities ahead of us, we talked about KWENCH, we talked about day parts and coupled with the strength of the brand which has been that's a trend that's been in place for quite some time, we don't love to see same-store sales growth. You can see that we're still hovering between 2% and 3% at the moment. So despite all the news and the LTOs, and we're still running at that level. In the first 7 weeks are at that level.

We feel optimistic and confident, but I think we've still got to convert that in same-store sales performance at a higher level. I don't know whether that's something you want to talk to, Krystal?

Yes. I think just to add to that, Ben, I mean that we might have said a little bit earlier, but the same-store sales growth that we've experienced in the first half and even in the first 7 weeks of this half, it has come as a mixture of the innovative calendar that we are excited about but also our continued investment in value and roll that continued investment in value will be there in the everyday value calendar, there have been times as needed to really add that up with the consumer sentiment being where it is. And that's where the hesitancy comes in for what's to come in the next couple of months.

So while we're confident in the innovative calendar, we also haven't seen it -- we haven't had the opportunity to remove the level of investment and value yet. And we don't see that coming in the foreseeable future.

That's really that's helpful. It's clear. And then just second one quickly, just the bat change in Germany as obviously a pretty material part, is the view in the market because some of your competitors seem to be talking about the take some price and not necessarily pass the full reduction through? Do you think that's sort of where the market is going to be leaning in Germany from Jan 1st?

Ben, so we don't know. It would be the short answer is we don't have a clear line of sight into what the big 2 players are doing. From a KFC perspective, like I shared earlier, we have modeled with a third-party [indiscernible] who Yum! engaged to help us with a wide view on pricing and tiered pricing.

What it could mean for us? I think it would be fair to say that we don't anticipate brands being able to take the full price to the bottom line, and that I think consumers as it's highly publicized, as you can imagine, that consumers would be expecting for something to be given back. What that looks like, we'll all have to wait and see until January 1, KFC included. But it wouldn't be fair to model the full flow through of the VAT decrease.

And again, just as a reminder, it's only on the dine-in portion of the sales mix and yes, the government has proposed it moved from 19% to 7%.

Your next question comes from James Ferrier from Canaccord Genuity.

Maybe one for Chris to start with in relation to Germany. You're referring to bolt-on acquisitions there to broaden the geographic presence. Is that within the 2 existing states that you're currently focused on? Or are you looking to move into other states with that comment?

James, it's a great question. I think primarily, we're looking for acquisitions that would make sense. We have, of course, our 2 hubs in North Rhine Westphalia and Baden-Wurttemberg. We'd be open to states that would open up significant geographies for us to further build out and not acquisition just to sit on our hands. However, that being said, our primary focus, of course, is organic growth, and that's what we've shared. We're well underway in terms of building out that pipeline and the new build numbers for next year.

And is your pipeline only focused on those 2 states, i.e., would you need bolt-ons to go into new states? Or are you looking at greenfield in new states as well?

As it stands, we're focusing solely on North Rhine Westphalia and Baden-Wurttemberg, the 2 states where we're in today, and that is to leverage our current operational expertise and the resources that sit within those markets.

Understood. And then second question, maybe for Krystal. It's been a few months now since the change in the delivery fee structure in Australia. I'm interested in what sort of change you've seen in the sales growth for that channel? In particular, is it just the basket going up, given the menu price adjustments that have been made? Or have you seen transaction growth accelerate as a consequence of that lower delivery fee?

Yes. Thanks, James. So we've seen a few things happen since the first transition to DoorDash was 1st of July and then Uber came a little bit to that. In both instances, we did see transactions go up as well as the basket size increase, which what you alluded to is correct through the pricing increase on the platform as well. So we've actually seen both.

Our mix in delivery has increased around 2% since both DoorDash and Uber lift the pricing. So we're delighted by those changes actually and how that's transforming our business and operations are being able to cope with those delivery orders coming through the channel.

Thanks, James. I'm afraid Harmony, we've got to wrap up. And unfortunately, close the meeting. Thank you very much for joining and looking forward to the roadshow this week.

And that does conclude our conference for today. Thank you for participating. You may now disconnect.

Good morning, everyone. My name is Robert Kaye, and I'm the Chair of Collins Foods Limited. I'd like to welcome all that are joining us, and thank you for attending the company's 2025 Annual General Meeting. We're pleased that shareholders are taking advantage of technology that enables us to meet online and allows our shareholders to engage with us in real time from different locations.

At this Annual General Meeting, only shareholders, their appointed proxies corporate representatives or attorneys are entitled to make comments, ask questions or vote. All other attendees are, of course, welcome as observers. Under the Collins Foods Limited constitution, a quorum is 2 shareholders and our company secretary has informed me that we have a quorum present, and it's also 9:30 a.m., and I declare the meeting open.

Before I go further, I'd like to introduce your Board of Directors present at the meeting today. To my immediate right is Xavier Simonet, our Managing Director and CEO. Next to him is Nicki Anderson. Nicki is the Chair of the company's People, Culture and Nominations Committee. We then have Nigel Clark, who is based in the United Kingdom, an independent nonexecutive director. And besides Nigel is Mark Hawthorne, an independent nonexecutive director who is up for reelection at this AGM. We then have Christine Holman, Chair of the Audit and Risk Committee; and Kevin Perkins, a Nonexecutive Director, who is also up for reelection at this AGM.

To my left is Tracey Wood, our Chief Legal and Risk Officer and Company Secretary for Collins Foods. We're also joined in the room by some of our executive team, including Andrew Leyden, to the front of me, who is our Group CFO; Jo Matthews, the Group Chief People and Culture Officer, feel free to raise your hand. And Krystal Zugno, our General Manager for Australian operations. Michael Crowe, representing the group's auditor, PricewaterhouseCoopers, is also in attendance, thanks, Michael. And you'll also find biographies of each of the directors and the executive team on the company's website.

So after outlining a few matters of procedure, I'll begin with a review of the 2025 financial year. Following this, Xavier, our MD and CEO, will provide an update on our focused strategy to continue to deliver earnings growth to shareholders. Following those addresses, we'll take questions, allowing the shareholders an opportunity to consider responses to those questions before moving to the formal business of the meeting.

A copy of the Notice of Meeting dated the 25th of July 2025 has been distributed with the 2025 annual report to shareholders. And if there are no objections, it will be taken as read. The Notice of Meeting and the company's web page provided shareholders with information on how to participate ask questions and vote at the AGM online using a desktop or mobile device.

I'll now remind shareholders of the process to submit a question and vote online. Text questions can be submitted through the online meeting platform at any time from now onwards. So to ask a question, simply press the Q&A icon. Type your question into the text box and once you finish typing, please press the send button. To ask a verbal question, please follow the instructions written below the broadcast. If you're a shareholder in Brisbane and wish to ask a verbal question at the time, verbal questions will be taken. Please wait for a microphone so that your name and question may be heard clearly by all.

As indicated earlier, questions will be addressed later in this meeting. These questions will be moderated to avoid repetition. And if questions are particularly lengthy, we may need to summarize them in the interest of time. Depending on the question asked, I'll make the decision whether I'll answer it or will ask a member of management, another director or the auditor to respond. In the unlikely event that we run out of time to answer all the questions, we will respond to it separately after this meeting. I do encourage you to submit your questions as soon as you can.

All items of business will be decided on a poll. I'll open the polls now, and I'll keep them open so you can vote at any time during the meeting. If you're eligible to vote at this meeting, and have logged into the online platform, a voting icon that looks like a page will appear on your device screen or navigation bar. When you click this icon, the resolutions will appear on your screen and you can select a voting option. There's no need to select the submit or enter button as the vote is automatically recorded.

Shareholders will have the ability to change their vote during the meeting until I declare the polls closed. I'll close the polls at the end of question time, and so I encourage you to vote as soon as possible. For the shareholders and proxy holders here in Brisbane, you may choose to complete your voting card in its entirety. Jesse Yerma from Computershare will act as returning officer for the purposes of conducting and determining the results of the poll, the results of which will be announced to the ASX when final results are known.

I now declare the poll open. The voting icon should soon appear if it hasn't already. Please submit your votes any time from now until the resolutions have been read. If you're having any difficulties in locating the voting or voting icon, please refer to the detailed guides available on Collins Foods' website. You'll be pleased to hear that Xavier will be speaking to you in a moment. But I wanted to start off by making just a few brief remarks.

FY '25 was a transformative year for Collins Foods. Under the leadership of our new MD and CEO, Xavier and his executive team, we reviewed our strategic focus and laid the foundations for long-term growth. Our strategic road map centers on the profitable expansion of the KFC brand in Australia and Germany supported by the consistent delivery of operational excellence across all our operations. We also made the strategic decision to exit the Taco Bell business, allowing us to concentrate resources on our core growth pillars.

In Australia, our KFC operations continue to be a strong engine of growth and profitability. We are expanding our network, innovating across products and services and consistently improving restaurant operations. Our long-standing partnership with Yum! Brands remains a key enabler of this success. Germany is our second strategic growth pillar. Through a new agreement with Yum! Brands, we plan to accelerate restaurant development, targeting 40 to 70 new KFC restaurants over the next 5 years.

With more than 80 million consumers and low KFC market penetration, Germany presents a compelling opportunity. Despite being subscale today, our restaurant economics are strong, and we're excited about the potential of this market.

Turning to the Netherlands. Our immediate priority is improving profitability. We're focused on delivering high-quality customer experiences to drive sales, support brand health, and enhance productivity. As a result, our development aspirations in this market have been moderated in the short term.

In November, the Board appointed Xavier Simonet as MD and CEO. Xavier is a highly experienced global executive with a proven track record of driving growth and profitability across diverse markets. His previous roles include Group CEO and Managing Director of Kathmandu Holdings, CEO of Austrade and CEO of Radley London. He's hit the ground running at Collins Foods and the Board is confident that we have the right executive team in place focused on clear priorities.

We also acknowledge the contribution of Kevin Perkins, who served as Interim Managing Director and CEO before resuming his executive director role. On behalf of the Board, I'd like to thank Kevin for his steady leadership during a challenging period for the QSR sector.

Collins Foods demonstrated the underlying strength of its business in FY '25, delivering a robust financial performance in challenging trading conditions. Group revenue in FY '25 surpassed a record $1.5 billion. Underlying EBITDA was relatively stable at $228.5 million despite cost inflation and weaker consumer sentiment. Underlying NPAT was $51.1 million, lower than prior year. However, performance strengthened in the second half with year-on-year revenue growth in revenue and underlying profits.

Following our strategic review, we did impair 16 restaurants in the Netherlands resulting in a noncash impact of $35 million. This reflects the impact of cost of living pressures and significant labor inflation on profitability of restaurants in that market. To deliver value to our shareholders, we declared a final dividend of $0.15 per share, bringing the total dividend for FY '25 to $0.26.

At Collins Foods, our people are at the heart of everything we do. As part of our commitment to our now 21,000 team members, we have undertaken a comprehensive wage compliance review supported by external advisers. This covers a range of employee entitlements across various roles and time periods. The review, however, remains ongoing, and we anticipate being in a position to commence remediating impacted team members shortly. We remain actively engaged with the Fair Work Ombudsman and are committed to fairness, transparency and doing the right thing by our team.

Collins Foods is well positioned to capitalize on improving market conditions with a clear road map for long-term growth a world-class brand in KFC and deep operational expertise, we're confident in our ability to deliver sustainable value. Our strong balance sheet and disciplined capital allocation framework will support investment in current and future growth opportunities.

Sustainability is increasingly central to consumer trust and long-term brand value. In FY '25, we refined our sustainability priorities and strengthened data quality, governance and compliance readiness ahead of upcoming mandatory reporting standards. Our sustainability report 2025 outlines key achievements, including more responsible resource use and set out our future goals. Our sustainability efforts are not only about compliance, they're central to building enduring trust and shareholder value.

And finally, thank you to our loyal shareholders for your ongoing support to our team members for their dedication and resilience and of course, to my fellow directors for their valuable governance and oversight of your company throughout the year. Collins Foods has entered FY '26 with a clear growth strategy, strong leadership and a commitment to creating long-term value for our shareholders.

I'd now like to welcome Xavier, our MD and CEO, to address you.

Thank you very much, Robert. Good morning, everyone. It's a pleasure to be here today. Since joining Collins Foods as Managing Director and CEO back in November, my focus has been sharpening our strategic priorities to grow the business, improve profitability and create long-term shareholder value. We have a clear strategic direction, grow our KFC Australia operations, accelerate expansion in Germany as a second growth pillar, improve profitability in the Netherlands, and drive operational excellence to deliver even better customer experiences.

Over the past 10 months, we've made significant progress. Performance improved in the second half of FY '25, and this momentum has continued into FY '26. And at this stage, I'd like to acknowledge the 21,000 team members at Collins Foods and thank them for their resilience at a time of change and some disruption, but also their contribution to our performance, particularly our RSC, restaurant support centers team members in Dusseldorf, in Amsterdam and here in Brisbane as well as our teams in the restaurants. And I suggest we give them a round of applause for their work.

I'd like also to give a special shout out to Nick Antonello, who's managing our Taco Bell business. As you know, Taco Bell is transitioning. And the team has done a superb job in terms of focusing on operational excellence and driving the business the best they can in a time of transition. Disciplined capital allocation toward profitable growth opportunities is our priority. As part of this, we made the strategic decision to exit our Taco Bell operations. We're working closely with Taco Bell International to transition the business during FY '26.

To support our strategic priorities, I've also made several leadership changes to strengthen our focus on operational excellence. Krystal Zugno was promoted to lead KFC Australia. She's an outstanding operator. Chris Johnson returned to Collins Foods and has now been appointed as General Manager, Europe on a permanent basis is also an outstanding operator. Importantly, the world-class KFC brand remains in strong health in all markets, supported by menu and service innovation and a continued focus on digital customer engagement.

In a challenging market, we delivered a solid underlying financial results. Group revenue reached a record $1.5 billion. Underlying NPAT was $51.1 million, down 14.8% year-on-year. Encouragingly, macro shifts including easing commodity prices, interest rate cuts and early signs of a consumer-led recovery emerged in the second half of the financial year and continue in FY '26. Statutory NPAT of $8.8 million included $35 million impairment of 16 KFC Netherlands restaurants, smaller impairments to a single restaurant in each of Australia and Germany, a $3.2 million provision top-up for potential wage underpayments.

Our balance sheet remains very strong, providing capacity for investment in future growth opportunities. Strong cash flows enabled net debt reduction and facilitated network and technology reinvestment. KFC Australia. Australia remains our largest and most profitable market, generating nearly $1.2 billion in revenue in FY '25, up 3% year-on-year.

Growth was supported by 10 new builds and 40 remodeled restaurants, including 8 supercharged formats. These new and upgraded restaurants unlock operational capacity in peak periods. Digital sales accounted for 34.2% of revenue, up from 29.4% last year, driven by increased kiosk availability and app penetration. Kiosks were installed in an additional 106 restaurants. KFC continues to lead its QSR peers on key brand metrics, including brand index, taste and consideration, which reached a 4-year high.

Now KFC Europe. FY '25 was challenging for our European operations and for our team, given negative consumer sentiment. Revenue was $312 million, slightly down year-on-year. Same-store sales declined 2.5% in the Netherlands and 3.3% in Germany. Same-store sales performance improved modestly in the second half. Sales in Germany were impacted by the transition of the management of the German market between Yum! Brands and the previous master franchisee.

In the Netherlands, profitability was impacted by soft consumer spending, coupled with significant labor inflation over the last 3 years. As a result, we have moderated our development aspirations in the short to medium term and the immediate focus in FY '26 is on innovation and operational excellence to drive same-store sales and profitability.

In Germany, our priority is accelerating profitable restaurant development. Despite being subscale in Germany, average restaurant revenues and margins are broadly comparable to KFC Australia. We will initially focus development on 2 large German states with significant development potential North Rhine Westphalia and Baden-Wurttemberg, where a single KFC restaurant currently services 391,000 and 407,000 people, respectively, which compares with under 30,000 people in Queensland as a point of reference. In time, we look at penetrating other states with targeted acquisitions and development.

Our strong performance in the second half of FY '25 has continued into the new fiscal year. Total company sales in the first 18 weeks are up 6.7% on the prior corresponding period, driven by same-store sales growth in all markets. KFC total sales were up 5.1% in Australia, plus 4.8% in the Netherlands and plus 8.4% in Germany. KFC same-store sales growth for the same period was plus 2.3% in Australia, plus 1.2% in the Netherlands and plus 5.8% in Germany.

Our sales outcomes continue to show strong improvement since our last update to the market, reflecting the benefits of enhanced product innovation and a sharper focus on execution and operational excellence in restaurants. We remain immensely focused on improving customer engagement to grow sales, lifting labor productivity and managing costs in a disciplined way to deliver margin improvement for our shareholders. For FY '26, we reiterate our target of year-on-year group underlying NPAT growth in the low to mid-teens on a percentage basis.

Thank you. And I'll now hand back to Robert.

Yes. Thanks again, Xavier. I'd now like to provide shareholders with an opportunity to ask general questions. A reminder that we'll take questions relating to the formal business of the meeting prior to considering those items of business. As indicated on the screen, hopefully, to type a question, press the Q&A icon and as I said earlier, type your question into the text box. Once you finish typing, please press the send button. To ask an audio question, please follow the instructions written below the broadcast.

For shareholders attending in person, please wait for a microphone so that your name and question may be clearly heard. So to begin with, are there any general business questions not related to the resolutions that from shareholders in the room. I think we have a question there from...

Good morning, Robert. Stephen Mayne is my name, representing the Australian Shareholders' Association today. I just want to say thanks again to you and the Board for another constructive engagement this year and the generally good governance and how shareholder-friendly we think you are. So I appreciate that over the last year. I know we've got some specific director elections coming up, but just a general request first and then question. We'd love to see a more detailed Board skills matrix going forward where you really broke out the individual skills of the directors rather than the kind of general format that you have at the moment, just to make it a bit easier for folks that are considering which way they're going to vote.

And the second question here was more tied to what you presented today around Germany representing a big opportunity for the business. Is there any consideration being given to adding a director that might have significant experience in this industry or quick service restaurants in Europe. I know we've got Nigel that's based in the U.K., which is great, but we're thinking here is someone that's a real QSR expert that might be able to help Xavier and the team with oversight and support.

Yes. Yes. Look, as always, firstly, thank you for your support as well and our continued engagement. And Collins genuinely appreciates these opportunities to engage through the out of cycle as it were, not just at AGMs. And as I say, that's appreciated. Look, I'll take on board, if I may, the matrix. We've got these screens in front of me, which I apologize for that. Hopefully, you can see me. I can see you're a little bit distorted through that -- yes, I feel like Donald Trump sometimes Hopefully, I won't behave accordingly.

The -- look, I think you raised a valid issue there. I'm quite happy to deal with that. And in fact, I wouldn't mind perhaps even online engaging with you on that just to see, I guess, what best practice looks like. I could speak to the -- obviously, the particular attributes of particular directors. I think that would be unhelpful at the moment, particularly given the elections that are about to occur. But I think that's a very valid comment, and I'll certainly take them on board.

As to your second question or comment around Germany, look, it's an interesting one. The -- as you'll appreciate, and that's probably relevant to some of the things that are going to happen over the next year or 2. Obviously, Board succession is a continual process. And we strive to ensure that Board membership reflects diversity but not only diversity. It's a question also of ensuring that we have a sufficiently wide and diverse competency, skills, experience matrix and so on, we think we've struck the right balance.

I think -- and obviously, in the next couple of years, there will be changes on the Board. And I didn't make any secret out of that at the last AGM. And certainly, that's probably going to become more prominent in terms of our attention over the coming year or 2. What I would say about Europe is that fortunately, we've been able, as Xavier has briefly alluded to, to appoint a very, very astute and individual to effectively general manage our European business, Chris Johnston. The Board has had considerable engagement with him as obviously as our management. And we have a lot of confidence that I mean, he has deep QSR skills.

That doesn't quite answer your question. Look, I agree with you. I think that's certainly worthy of consideration in relation to the next appointment. I would say in relation to Nigel Clark, who sits here. He isn't just a pretty face. He's that too, that he's very much engages with our management on the ground in Europe. And obviously, there are convenience factors, but also he's been heavily involved in the business even before his formal appointment a few years ago. for some years. So he has a very good grasp of sort of headline issues and indeed challenges facing the QSR industry.

But having said all that, look, that will definitely be an option for us and leave it with us and kind of watch this space. At the end of the day, very comfortable with the diversity of skills around sort of QSR in particular, on the Board at the moment. Obviously, Kevin and Mark and in terms of FMG, Nicki and Christine, they've all got vast experience in this area. But I agree in terms of the sort of euro-centric issue, which is clearly very important for us given the statements you've heard around our kind of refocus, I mean, we're always focused, but accelerating, if you like, the focus on particularly Germany. I think that's a very apt observation.

Any other questions unrelated as it were to the items of general business? If not, I'm going to pull this paper -- all right. So again, just a reminder, because I'm being told to remind everyone, shareholders that the poll will be closed at the end of question time. So if you haven't done so already, please submit your votes. Good. Please proceed.

Mr. Chair, there is a question with respect to general business from a shareholder before we move to the next section. Are you happy to take that?

I am.

So this question is from shareholder, Stephen Mayne, and it's directed to you actually. So can Robert Kaye confirm that he won't be seeking reelection when his current term expires in 2027?

Yes. Stephen, did that make your day? Any other questions?

That's all, Mr. Chair.

Thanks, Adrian. All right. So as indicated at the beginning of the meeting, the Notice of Meeting dated the 25th of July 2025, and the resolutions set out in that notice are taken as read.

The proxy results should now be displayed on your screen. As you can see from the proxy results, as voting presently stands, all resolutions have been passed. The 2025 annual report contains the financial report, the directors' report and the independent auditor's report. The financial report has been approved by the directors and audited by Collins Food Limited's independent auditors, PwC. As required by Section 317 of the Corporations Act, I now lay before the meeting the financial report, the directors' report and the independent auditor's report for the financial period ended 27 April 2025. Are there any questions for the auditors, PwC, regarding the conduct of the audit preparation and content of the auditor's report, accounting policies adopted in the preparation of the financial statements or independence of PwC in relation to the conduct of the audit? Adrian, are there any online written or verbal questions?

No, Mr. Chair, there are no questions forward.

Thank you. I'll now turn to Resolution 2 regarding the reelection of Mark Hawthorne, who being a Director of the company, retires and being eligible, offers himself for reelection. Are there any questions relating to the reelection of Mark Hawthorne as a Director from shareholders? Yes.

So Mark, noting your considerable experience with competitors and in the industry Firstly, a comment, I think we're appreciative that you made the decision to end the Taco Bell business. We're complementary that you had a crack at it. And obviously, if it wasn't working to reallocate that capital in other ways. So no complaints there. But in terms of your experience and knowledge of the competitive industry, just a general comment on how you feel KFC is positioned in Australia with an aggressive competitor in GYG. Are you feeling optimistic and confident about the prospects for KFC in Australia, particularly in the next few years?

Do you want to come up here?

Yes. Thanks for the question. Good question. The answer is yes. When I left GYG, I felt KFC had the biggest upside out of all the legacy brands. And part of that thinking is that if you look at an average unit volume sense of the competitors, McDonald's is the highest at160 a week talking drive-thrus. GYG is second at 120 and then KFC is about 80. So I look at the 80, I think it's a great brand, KFC, fried food. It's a very much loved brand. I personally believe there is quite a bit KFC can do to bridge that gap.

When you look at the things that McDonald's and GYG do differently. So I remain very confident about KFC's business and enjoying helping management work at what to what to do with that. And hopefully, we'll do that for the next 3 years.

If I could just add just one small comment. I mean, obviously, Mark's input on operational issues is invaluable. There are, as you'd be aware, independent assessments made in relation to brand strength and so on, which obviously, we've got constant access to. And I find it -- and I think we've had some conversations around this in years gone past, and the position hasn't changed. It actually astounds me the brand strength of KFC after all these years. It just goes from strength to strength.

So even in times when there are obviously there's obviously the consumer sentiment is perhaps not quite where we'd like it to be and inflationary pressures and the like. it holds up. And you might have the odd temporary trough, but it always seems to rise to the occasion. And I'm personally and I know as a Board, we're very confident that will continue to be the case. Thanks for the question.

Adrian, are there any other questions in relation to that resolution?

No, there aren't, Mr. Chair.

Thank you. So I turn to Resolution 3 regarding the reelection of Kevin Perkins. I don't think Kevin needs a lot of introduction, but he was last reelected as a director on Friday, the 27th of August 2021. At that last AGM, he was serving as the company's Interim Managing Director and CEO. We had dragged him out of kind of executive retirement. And accordingly, Kevin was not required in this new build. He wasn't required to stand for reelection, while holding that executive office. Having since concluded, obviously, that interim role and resumed his position as an NED as a Nonexecutive Director, he now retires and being eligible, offers himself for reelection.

Are there any questions relating to the reelection of Kevin Perkins as a Director from shareholders? Adrian is there any from the room? Adrian, are there any online written or verbal questions?

No, Robert. There are no questions on this resolution.

Thank you. I'll now turn to Resolution 4 regarding the adoption of the remuneration report for the 2025 financial year. Are there any questions regarding Resolution 4?

There are none.

Robert, a question, sorry. So firstly, a comment, I just want to commend the board on not using any discretion last year to override your remuneration plan. I know that probably cost Xavier a little bit of money, but it was great that you applied your remuneration plan accurately and fairly. So that's always a shareholder-friendly option. The LTI plan, the hurdles that you've got set there are quite challenging we think, which is a great thing. We don't have any complaints with double-digit earnings per share growth as one of the targets.

So how -- Nicki, maybe a question for you or Xavier. How are you feeling about that over the next few years, having that 11% to 16% range, I think it is of where LTI kicks in and ramps up. Is that a concern for Xavier. And is the Board considering those metrics at the moment?

Thanks for the question. It's a challenging question because I'm still new in the business and discovering the business. So I need a bit more time to understand the business and challenge ourselves. Yes, it's a high target and it's challenging. I think we've shown over the last 10 months that we can adjust the business model quite quickly. And by just focusing on core capabilities, core metrics and operational excellence, we can really drive growth and profitable growth. So that's really my focus.

We've said also that beyond Australia, beyond Europe, and we're trying to accelerate in Germany, there's also the opportunity to acquire businesses. We've not been too precise because we want to be open-minded. We've just said that we want to be disciplined, have a really disciplined approach. We want to make sure that any target we would consider is aligned with our strategic priorities and also want to make sure that it will deliver high returns to shareholders. By experience from experience, I'm aware also that a lot of acquisitions never work and I plan for shareholders rather than a benefit. I'm very conscious of that.

I can commit that we'll never make an acquisition if we don't fully believe that they will deliver strong shareholder return aligned with our key priorities and our discipline. So I think all in all, between all of that, we're going to try to do our best. I strongly believe that there's immense value for shareholders in us focusing on our core business. and focusing on managing our stores better, delivering on key operational metrics and driving the team and having a very motivated team that's excited to drive the numbers and give great customer experiences.

Robert, just apologies for interrupting. There is another question with respect to this resolution, which I could read out for you as well.

Yes, sure.

So this question is from Stephen Mayne. It's quite a lengthy question. It's even got a little bit of editorial in it as well, but let me go through it. Thank you for disclosing the proxies early and well done on achieving such strong support. When disclosing the outcome of voting on all resolutions today, including this remuneration item, please advise the ASX how many shareholders voted for and against each item similar to with the scheme of arrangement.

This will provide a better gauge of retail shareholder sentiment on all resolutions and insight into the chronically low retail shareholder participation rate. The likes of Qantas, ASX, Suncorp, Tabcorp and even the world's biggest share registry provider, Computershare, have all voluntary provided this data at their most recent AGMs. You've got the data, so why not let the sun shine in?

I never hide the sunshine. But look, thanks, Stephen, for the question. And look, I think it's a -- at first blush, I don't think it's an unreasonable request. I'll take it on board, if I may. And with respect, if I had known about the issue earlier, and maybe you've raised it earlier and it just hasn't been communicated to me, I certainly would have attempted to address it in advance. I have no issue in principle with disclosing numbers of shareholders. I'm not going to comment, obviously, on the practices of other companies. I'm not acquainted with those. But at first blush, it doesn't appear to me but to be objectionable and it's something that I'll look at.

Can I just add something in response to the earlier question, if I may. And thanks, Xavier, for that comprehensive answer. We've gone, obviously, to some lengths under the very strong guidance I might add of Nicki Anderson as Rem Chair to create a remuneration regime and structure that's fit for purpose. As you'd appreciate it's not an easy thing to do. And it's -- there always will be sort of outliers where you can't fully address. But I think that the fundamental changes that have been made and some are nuanced have been very well received. And for what it's worth, the proxy advisers, we obviously engage with on these issues have been almost unanimously supportive of the current regime.

If you're talking about incentivizing, yes, I think that's a real issue, if I may say so, with every remuneration structure that I've come along that I've seen, both on this company and others over the last decade. It's how do you make it real? How does it -- how do you make -- how do you ensure that it truly incentivizes so it's workable because otherwise, it's just a piece of paper. And look, that's something that we're very conscious of. And we do encourage and we do, in fact, engage with management on these issues to ensure that the incentivization element is there and obviously, retention.

Thanks for the question. Are there any other online written or verbal questions in relation to that resolution, Adrian?

No, Robert.

Thank you. Turning to Resolution 5, to approve the grant of performance rights to Xavier Simonet. Are there any questions regarding Resolution 5. There are none in the room, Adrian, any online, written or verbal questions in relation to Resolution 5?

There's one from Stephen Mayne, which I can read out Is Xavier aware that the share price has shot up 7% this morning after the update, well done. What impact does this have on his STI and LTI plans, including this incentive grant?

Look I'm going to take that question, if I may, Stephen. Firstly, I've just been informed, obviously, by you of that. I'm not going to give an off-the-cuff answer to the impact. There are obviously a number of issues around impact. And I don't think it would be feasible or wise to be giving you, as I say, an off-the-cuff answer. But obviously, that will play out. And again, if you're interested in pursuing that question, which I'm happy for you to do. I will take it online once we see where the share price lands over the next few days.

Any other questions, Adrian?

No, there are no other questions, Robert.

In that case, we'll turn to Resolution 6 being the ratification of the previous issue of shares under the ownership share plan. Are there any questions regarding Resolution 6? There are no questions in the room, Adrian, are there any online written or verbal questions?

Yes, Robert, from Stephen Mayne. His question is, do we really need to put this resolution up given it's such a small amount of shares comprising such a tiny proportion of the 15% cap. Can you avoid doing this next year as it sends a message that you'd like placements when pro rata capital raisings are the fairest way to go?

Look, with respect, I take Stephen, a slightly different view to that. I agree that in terms of proportionality, it's not particularly material. But I think the ownership share plan for Collins is a significant element of our overall remuneration package. It is also one of many vehicles for attracting and retaining staff. And I think putting some emphasis on that is warranted. Happy to again talk about it with you offline, but I'd probably take a different view. Are there any other online written or verbal questions in relation to that resolution?

There are no other questions, Robert?

Thank you. So that brings the formal business of the meeting to an end. As indicated, I will shortly close the poll. If you haven't yet voted or wish to change your vote, having had an opportunity to hear questions and the response to those questions, please do so now. Members of the Computershare team will now collect your voting cards here in Brisbane and we'll just pause whilst those cards are collected.

Good. Well, I declare the poll closed and confirm as indicated earlier in the meeting that the final results will be announced by the ASX once the final results are known. I thank you all for your attendance this morning and look forward to a successful and prosperous year for Collins Foods and its shareholders and equally importantly, all it's our team. Thank you.

Thank you for standing by, and welcome to the Collins Foods Limited FY '25 Full Year Results Call. [Operator Instructions]

I would now like to hand the conference over to Mr. Xavier Simonet, Managing Director and Chief Executive Officer. Please go ahead.

Thank you, Mel. Good morning, everyone. I'm Xavier Simonet, the CEO of Collins Foods. With me on the call today is our Chief Executive -- Group Chief Financial Officer, Andrew Leyden; our General Manager of Australian Operations, Krystal Zugno; and General Manager Europe, Chris Johnson. Normally, on this call, we would have Andrew, our CFO, and myself, but because of the importance of the work we're doing in Australia and in Europe, we've decided to ask Krystal and Chris to join us.

We are presenting the FY '25 results, which we announced to the ASX earlier this morning. As always, we'll go through the investor presentation and then take questions. But first, before I start, I want to say a big thank you to our restaurant teams and our support center teams in both Europe and Australia for their work, energy and also for their contribution to the success of Collins and KFC.

So if we move to Slide 1, since I joined back in November, my immediate priorities have been operational excellence across all our businesses, growth in our core markets and scale, including accelerated German expansion. I've also made up decisions on profitable business segments like Taco Bell. I move swiftly to reset the leadership team as announced in April. We have continued targeted investment in our core business. And as also announced in April, we entered into a binding agreement with our franchisor partner to support accelerated growth in Germany. And disciplined execution and focus on operational excellence has seen improved underlying performance in H2 in a challenging market, as demonstrated by our results today. So looking ahead, I believe we are well positioned to take advantage of improving conditions. With strong cash flows and a robust balance sheet, we remain active and open to organic and inorganic growth opportunities, particularly in Germany.

Moving on to Slide 2, we will focus on innovation and exceptional customer experience to drive same-store sales growth, profitable new restaurant development in Australia and Germany and improved operational efficiency to lift our margin. With a focus on profitable growth, the decision was made to exit our Taco Bell business.

Slide 3 provides an overview of our FY '25 performance. Financials are presented on a post-AASB 16 basis, unless stated otherwise. For those of you more accustomed to pre-AASB 16 numbers, we've made them available in the appendices to the investor presentation. In a challenging consumer environment, Collins Foods delivered a solid financial result with record revenues. Whilst underlying performance and profit for the year were -- whilst underlying profits for the year were lower, encouragingly, we delivered a much improved performance in the second half of the year. The period benefited from deflation in some input costs, easing cost of living pressures, and importantly, we are seeing the benefits of a stronger operational focus.

Revenue from continuing operations was up 2.1% to a record $1.519 billion, with growth in Australia, partially offset by softness in Europe. Underlying EBITDA from continuing operations was flat at $228 million, despite soft economic conditions and cost inflation, particularly in the first half. Underlying NPAT from continuing operations was down 14.8% to $51.1 million due to higher depreciation on a larger store footprint. This result reflects a relatively strong second half of the year. Andrew will cover from the statutory earnings later in the presentation.

We continue to generate exceptionally strong cash flows, and our balance sheet remains in great shape with net debt lower than last year. As a result of a strong second half performance and a strong balance sheet, the Board declared a fully franked final dividend of $0.15 per ordinary share, bringing the total FY '25 dividend to $0.26 fully franked.

Slide 4 shows the size of our KFC network by geographic market. Australia network now spans 288 KFC restaurants and our Netherlands footprint total 62 restaurants. While Germany is subscale at the moment at 16 restaurants, it won't be subscale for long with Germany providing us, as I will talk to in more detail later on, a significant and exciting growth opportunity for Collins. Our network is serviced by 3 restaurant service centers, RSCs in Brisbane, Amsterdam and Dusseldorf.

Operational highlights are set out on Slide 5. Digital remains a key growth driver in all markets, and we continue to invest in channels, which improve accessibility to the KFC brand for our customers. In FY '25, we rolled out kiosks to a further 106 KFC restaurants in Australia, increasing the number of costs within our European store network. We also diversified our digital sales mix in Europe.

Menu innovation and effective marketing and product campaigns such as KFC FLG in Australia and Kapsalon in the Netherlands are introducing KFC to new customers and strengthening brand perceptions. We continue to expand our network, opening 10 new restaurants in Australia and 4 in the Netherlands during the year. In addition to expanding our footprint, we're also modernizing the network, remodeling a further 53 stores, which included 8 supercharged formats. These restaurants feature dual drive-through and T-line kitchens, unlocking sales capacity and improving customer experience.

Turning to segment highlights on Slide 6. As I mentioned earlier, group performance benefited from a stronger second half with KFC same-store sales improving in all markets. KFC Australia revenue increased 3% over the prior year, with same-store sales up 0.3%. Soft consumer conditions and cost inflation impacted margin, down slightly on the prior corresponding period.

The KFC brand remains strong, leading its QSR peers on key brand metrics. Digital is continuing to account for a larger proportion of revenue at 34% of sales, up 4.8 percentage points over the same period last year. As I mentioned earlier, we opened 10 new restaurants and closed 1 due to a better location becoming available, bringing our national network in Australia to 288.

Sales in KFC Europe were slightly lower than the prior period, with same-store sales down 2.7%, following 2 years of very strong growth. The Netherlands same-store sales were lower by 2.5% with Germany lower by 3.3%. However, both experienced significant uplift in performance in the second half. Germany's performance over recent years and particularly last year was impacted by the disruption caused by the transition of the management of the market between Yum! brands and the former master franchisee. Pleasingly, the German market has now stabilized under Yum!'s control.

Despite the self softness that I referred to earlier, KFC continue to grow market share in the region, driven by stronger brand health metrics and product innovation. Digital sales were another growth driver, representing more than 60% of sales in both markets. The development agreement with Yum! will see us scale our footprint in Germany. We're very excited about that, and we're addressing profitability challenges in the Netherlands, which we will cover in more depth later. Our European portfolio now stands at 78 restaurants.

Taco Bell Australia sales declined 2.5% over the prior year, impacted by a highly competitive consumer landscape. The network remains unchanged at 27 restaurants across Queensland, Victoria and Western Australia. Discussions are ongoing to transition our Taco Bell operations to new ownership, with the intention to complete this process within 12 months.

Our progress on sustainability is highlighted on Slide 7. In FY '25, we laid the foundations for upcoming sustainability reporting obligations, establishing a regulatory road map, completing a double materiality analysis, enhancing our data quality and strengthening sustainability governance. The climate risk and scenario analysis is also underway. We have a beyond compliance approach to sustainability and have already made significant strides towards our 2030 targets.

Key FY '25 progress includes rooftop solar installed on 196 restaurants, 13 more than last year, diverting 23% of waste from landfill. Our workforce of more than 21,000 people, and include 43% female leaders. We've raised almost $1 million for charity partners, and we're using 100% cage free eggs and Better Life chicken in Europe.

I'll now hand over to Andrew Leyden, our Group CFO, to take you through our 2025 results for the full year ended 27 April 2025.

Thanks, Xavier, and good morning, everybody. Let's first move to our group results overview on Slide 9. Revenue in financial year '25 was up 2.1% over the prior year to just over $1.5 billion, and that's a record for Collins Foods, as Xavier stated earlier.

Growth in Australia was partially offset by softness in Europe, reflecting difficult consumer conditions, particularly in the first half. Second half performance improved markedly. Our performance overall underlies the resilience of our business in challenging economic times, but also the benefits of operational focus, which was sharpened in the second half.

Underlying EBITDA was relatively flat at just under $229 million, and that's despite weak consumer sentiment in both Europe and Australia in the period and persistent cost inflation, again, especially in the first half. Underlying EBIT was $117.1 million, down 5.7%, reflecting flat EBITDA, but with higher depreciation relating to new builds, remodels and leases. The company continued to invest in network expansion and modernization as well as in digital channels, all of which will benefit our business in coming periods.

Underlying net profit after tax was $51.1 million, down just under 15% on the prior year, and EPS was $0.434 per share, down from $0.51 per share in the prior period. As indicated, this result included a comparatively strong second half performance. Statutory NPAT was $8.8 million compared with $76.7 million in financial year '24. Financial year '24 included a $20.2 million net profit after tax contribution from the sale of Sizzler Asia. In financial year '25, total restaurant impairments were $40.8 million, inclusive of $35 million relating to the Netherlands portfolio, as well as a $3.2 million provision top-up for potential wage under payments relating to prior years.

The Netherlands impairments was slightly higher than the range flagged to the market in our announcement on the 15th of April this year, having now completed a full impairment review of all assets. As explained in April, the impairment charge in the Netherlands reflects the soft consumer environment and an increase in labor rates of over 30% over 3 years, which impacted the profitability of the whole QSR segment.

With respect to the provision for potential wage under payments, Collins Foods is committed to meeting its obligations under the Fair Work Act and takes wage compliance very seriously. The company has been reviewing historical employment and wage data to determine whether employees may have been entitled to additional payments. We are constructively and proactively liaising with the Fair Work Ombudsman in relation to these matters and are committed to fully remediating any impacted team members.

Cash flow, again, was a highlight for the year, with net operating cash flows totaling $101.4 million, up on the prior year. Net debt was lowered by $27.6 million to $137.9 million with strong cash flows, funding capital investment, dividend payments for shareholders and also debt reduction, further adding to the group's investment capacity for the future.

And today, the Board declared a fully franked final dividend of $0.15 per share, which brings the total financial year '25 dividend to $0.26 per share, fully franked compared with the prior year at $0.28 per share. The dividend record date will be the July 8, 2025, with a payment date of the 5th of August.

Now moving to Slide 10, which reflects our second half performance. At a group level, our H2 performance was stronger than the same period last year with higher revenues, EBITDA and EBIT in absolute terms, while EBITDA margins also improved. Key drivers were brand health, impactful product innovation, commodity deflation in Australia and the benefits of improved operational performance.

Group H2 revenues increased 2.8% on the prior period to $816 million and were higher in both Australia and Europe, up 3.2% and 2.3% over the prior period, respectively. EBITDA for H2 was up 5% over the prior period to $125.8 million with margins up 32 basis points to 15.4%. EBIT also grew 3.3% to $64.6 million.

As well as overall sales being up, KFC same-store sales also improved in Australia and Europe in the second half. The graphs on the bottom left of the slide show same-store sales performance on a half year basis. And pleasingly, performance lifted significantly in the second half, with Australia up 0.7% over the first half, while the Netherlands and Germany improved 1.5% and 4.1%, respectively, versus the first half. This performance improvement continued into early financial year '26, and more on that will follow later. Please note that the first half consisted of 6 4-week periods, while the second half was 7 4-week periods.

Moving on to our income statement on Slide 11, which outlines the reconciling items between statutory and underlying results. The most material item impacting the difference between statutory and underlying performance was a $40.8 million noncash impairment charge, of which $35 million related to the Netherlands restaurants as previously flagged. The balance of the charge reflected single restaurant impairments in Australia and Germany, as well as small capital write-ups on previously impaired restaurants. The group also provided an additional $3.2 million for potential wage under payments relating to prior years. Underlying EPS was $0.434 per share, while basic statutory EPS was $0.075 per share.

Now turning to cash flow on Slide 12. Strong cash generation remains an attractive feature of the Collins Foods business. In financial year '25, net operating cash flows increased by $5.1 million over the prior year to $181.4 million. While EBITDA was lower than prior period, cash conversion was extremely strong at a 120%. Operating cash flows were applied to fund disciplined investments, dividend payments and net debt reduction. Investing cash outflows were $67.9 million, mainly reflecting capital investment in the store network and digital technology. New restaurant investment was $17.4 million, remodels absorbed $26.1 million and digital and sustainability investments totaled $7.1 million. Asset renewal investment was $15.2 million.

Financing cash outflows were $78 million, which included $10 million in bank debt repayments, dividend payments are just shy of $30 million and lease principal payments of $42.2 million. Net cash movement was an inflow of $35.6 million for the year compared with a $3.9 million inflow in financial year '24.

Now on to our balance sheet on Slide 13. Collins Foods balance sheet is in exceptional shape and provides significant capacity for investment in growth opportunities. Net debt was reduced by $27.6 million over the prior year to $137.9 million, driven by strong cash generation and disciplined allocation of capital. Cash balances increased $35.3 million to $119.1 million.

Property, plant and equipment was down $7.9 million over the year to $247.4 million, reflecting new restaurant builds and remodels, less depreciation and impairment. Right-of-use assets of $503.3 million and total lease liabilities of $634 million, both increased on net restaurant additions as did other noncurrent assets consisting mainly of movements and intangibles. The net leverage ratio ended the period at a very comfortable 0.93 down from 1.07 in the prior year.

Now Slide 14 outlines our capital allocation priorities. Collins has a disciplined approach to capital management, focused on: Firstly, investing in profitable growth opportunities; secondly, maintaining a strong balance sheet and also paying consistent fully franked dividends and then contemplating capital management activities should suitable investment opportunities not be available. However, our major growth focus areas for capital allocation, our investments in growth and ensuring our balance sheet remains healthy.

Xavier will provide commentary on how we see the outlook for the company later and as always, happy to take questions at the end of the presentation. But for now, I'll hand over to Krystal, who's going to take you through KFC Australia performance.

Thank you, Andrew. Turning to Slide 16. The headlines on the KFC Australia FY '25 performance are as follows. We've delivered effective execution with a focus on operational excellence, strong brand metrics demonstrating resilience in a challenging environment, digital investment has produced attractive results, and margin improvement in the second half.

Our positive start to FY '26, which Xavier will outline later in the presentation, reflects enhanced operating disciplines and improved consumer conditions demonstrated by strong same-store sales growth. Our results are a true reflection of our restaurant team's commitment to operational excellence and delivering great customer experiences.

Moving to Slide 17, our solid FY '25 performance reflects the resilience of the world-class KFC brand, which remains as relevant today as it was when it first launched in Australia more than 50 years ago. As Andrew mentioned earlier, brand strength and improved operational execution saw momentum build in the second half of the year, which has continued into FY '26.

Revenue increased 3% over the prior period to $1.2 billion, driven by new restaurants, strong digital growth, product innovation and operational excellence. Same-store sales were up 0.3% following 2 years of strong growth with same-store performance improving in the second half to positive 0.6%.

EBITDA was up 0.5% to $222.6 million, with margins down 46 basis points on the prior corresponding period to 19.3%. This was due to relatively flat same-store sales and inflation across key input lines.

Margins in the second half of the year improved 48 basis points over the first half to 19.5%. Encouragingly, this was 12 basis points higher than the same period in FY '24. EBIT was slightly lower due to higher depreciation on network investments.

Slide 18 shows our network. Collins Foods is the largest KFC franchisee in Australia, operating more than 1/3 of the nation's KFC restaurants. As you can see, the majority of our network is located in Queensland and Western Australia.

On to our development pipeline on Slide 19, pictured are some of our newest restaurants. While Australia is one of the most penetrated KFC markets in the world, we see further opportunities for profitable network growth. We continue to expand our restaurant network with 10 new builds added in FY '25 as well as 1 closure due to a better location becoming available. Over the year ahead, we're targeting 7 to 10 new restaurants and remain on track to expand into even more communities as we look to deliver 28 to 30 new restaurants by 2028.

We continue to prioritize the modernization of our existing restaurant portfolio, targeting approximately 30 remodels in FY '26, which will further enhance customer experience, and create greater operational capacity through our supercharge remodels, which we expect to drive top line growth.

Turning to Slide 20, and KFC Australia's brand health. Despite soft consumer spending, the KFC brand continues to go from strength to strength, leading its QSR peers on key brand health metrics. Consideration, a measure of willingness to buy is now at a 4-year high and across the second half has recorded the highest score in the QSR market. Brand health is essential in advance of the consumer-led recovery, which we started to realize towards the end of FY '25. Improving brand health has been assisted by menu innovation, including standout performers, such as Zinger Nachos, proving to be consumer favorite. We've also strengthened our everyday value bundles, adding items such as the Luxe Lunch for $9.95.

Slide 21 shows the KFC brand is continuing to outperform its QSR peers. As you can see in the YouGov graph, the impacts of digital investment, product innovation and everyday value has assisted in placing KFC as the clear market leader against our competitor set on Brand Index. Brand Index comprises results across quality, value, reputation, satisfaction, recommendation and impression. The KFC FLG launch has not only modernized and energized the brand, it's resonated with consumers, and this is seen in the Brand Buzz results, continuing to improve with KFC leading the category. Brand Buzz results in the Gen-Z population are significantly higher with improved cut through with these consumers.

Turning to Slide 22. On our strategic focus of operational excellence, which is at the heart of everything we do, we continue to invest in restaurant modernization and digital channels to elevate the customer experience. In FY '25, we remodeled 40 stores and added kiosks to more than 100 restaurants. We're also seeing high rates of KFC app adoption and conversion driven by exclusive offers.

Increased brand accessibility is a key growth driver with digital now accounting for 34.2% of sales, up 480 basis points over the same period last year. Remodeled restaurants are enhancing all customer interaction points, while improved operational systems such as vendor managed inventory and KFC Listens are lifting efficiency, product quality and engagement.

Lastly, having been with Collins for over 24 years now, I am personally energized to be back leading KFC Australia. We have amazing operation and restaurant teams who work hard and achieve great results. Looking forward with a strong KFC customer base and improving consumer conditions, over the next 12 months, my team and I will be particularly focused on optimizing operational processes to leverage our digital investments, unlocking opportunities with AI, particularly through increased sales forecasting accuracy and elevating the customer experience. These 3 areas are aligned with our strategic focus on operational execution to enable growth in customer experience measures, sales and margins.

I will now hand over to Chris to cover the performance of KFC Europe.

Thank you, Krystal, and good morning, everyone. Turning now to KFC Europe on Slide 24. Our FY '25 performance reflects a challenging economic environment in Europe, particularly in the Netherlands, which was impacted by cost of living pressures and significant cost inflation. Revenue of a little over $312 million was slightly lower than the same period last year, with same-store sales down 2.7%, cycling a very strong FY '24 and FY '23. Same-store sales were stronger in the second half of the year at negative 1.7%. On a full year basis, Netherlands same-store sales declined 2.5 points (sic) [ 2.5% ], while Germany was down 3.3%. Sales in Germany were impacted by instability created by the transition of the market management between Yum!, the franchisor, and the previous master franchisee. The German market returned back to the leadership of Yum! in mid-December 2024, and their teams have been fully focused on rebuilding core team structures and processes. Pleasingly, the market is now stable, and Collins and Yum! are working together to capitalize on clear growth opportunities in Germany. More on that later.

EBITDA was down 7.5 points to $39.4 million, with margins down 96 basis points to 12.6% due to subdued trading conditions in both markets as well as elevated labor cost increases in the Netherlands, which have amounted to more than 30% over the last 3 years. EBIT of $7.6 million was down 37.1% over the prior period on lower EBITDA and higher depreciation on our growing restaurant network.

Moving to Slide 26, and a more detailed look at our Netherlands operations. The graphs on the left show average annual restaurant revenues by geographic market at the top and underlying EBITDA and EBIT margins at the bottom. As you can see, KFC Netherlands had healthy average restaurant revenues in FY '25 of $4.1 million. However, its EBITDA and EBIT margins were the lowest of the group.

Margins were impacted by challenging consumer conditions given cost of living pressures, cost inflation, particularly in labor and variable performance and productivity across our network. Regulatory challenges, including zoning and permitting as well as access to energy have hindered our development progress. As a result of lower profitability, 16 Netherlands restaurants were impaired with a noncash impact of $35 million.

On to Slide 27. Restoring profitability in the Netherlands is our #1 priority over the year ahead. Improving brand strength and operational standards are key to our sales growth as our efforts to enhance the team member and guest experience and ensure we maximize efficiency gains throughout the entire P&L. Brand health will be underpinned by a renewed focus on bringing excitement and relevant and distinctive products to our menu boards, balancing media spend across value and core. We're also doubling down on digital investments into our own [ kfc.nl ] website and e-commerce app as well as menu and bundling innovations. The stabilizing labor cost inflation environment will support the bottom line. Whilst we focus on optimizing operations, we're moderating our development pace in this market over the short term.

Slide 28 looks at KFC's growing brand strength in the Netherlands. In a soft consumer environment, taste and new local Dutch product innovations such as the Kapsalon and Lava Sauce delivered market share gains and strengthened our brand metrics. Awareness increased to 70% and consideration rose 0.9 percentage points over the same period last year. Digital channels remain a key contributor to growth, representing almost 63% of all sales in the Netherlands, benefiting from our continued investment in kiosks and third-party delivery services.

I'll hand back to Xavier to talk about the German opportunity in more detail.

Thanks, Chris. Turning to Slide 30. Before Chris goes into more detail about our German business, I'd like to make a few key points. Germany is a very significant growth opportunity for Collins. It's the largest economy in Europe and a large and stable QSR market. Our recent agreement with Yum! will accelerate our presence in these large consumer markets where both the KFC brand and chicken more broadly are underpenetrated. The KFC brand is a solid #3 player in Germany with plenty of room for growth as the market moved towards scale. McDonald's and Burger King, respectively, have 7x and 4x more restaurants in Germany than KFC. This gap opens opportunities for accelerated growth and scale for Collins in Germany.

Despite having the lowest number of restaurants amongst its QSR peers, it has been the fastest-growing brand in Germany since 2019, outperforming competitors on both food quality and taste. We are targeting 40 to 70 new restaurants over the next 5 years with a period of exclusivity within the North Rhine Westphalia and Baden-Wurttemberg regions, areas where we already operate restaurants. We will also consider acquisition opportunities in Germany that can help us drive scale and accelerate development in a market that will become our second strategic growth pillar.

Back to you, Chris.

Thank you, Xavier. Slide 31 takes a closer look at these regions. The biggest opportunities for accelerated growth comes from 2 of the most populated regions in Germany, North Rhine Westphalia, home to cities like Dusseldorf and Cologne, and Baden-Wurttemberg, its capital being City of Stuttgart. A single KFC currently services approximately 400,000 people across these regions. The graphs on the bottom left show how this compares to McDonald's locally as well as KFC Australia, where 1 KFC services just 34,000 people. Whilst we are initially focused on scaling our footprint in these 2 areas over time, we'll also look to buy and build opportunities in other regions.

Turning to Slide 32. Despite the market's relative instability over the past few years with changing master franchisees and an inflationary environment, our German restaurants have performed well.

Finally, on Slide 33, moving to restaurant economics. Our German restaurants are some of the best performing in the group. As you can see, in FY '25, Germany had the group's highest average store revenues at $4.4 million, with restaurant margins broadly comparable with KFC Australia, with the exception of property-related costs, which are higher historically. These unit economics are more encouraging given the market is subscale, reinforcing our confidence in Germany's long-term growth potential. The market will also benefit from significant investment in capability, including branch marketing from Yum!.

I'll now hand back to Xavier to take you through Taco Bell Australia's performance and outlook for the year ahead.

Thanks, Chris. Turning now to Taco Bell Australia on Slide 35. Revenue of $53 million was down 2.5% over the prior year, results impacted by weaker consumer sentiment. Cost inflation, marketing investment and softer sales all impacted profitability. The network remains unchanged at 27 restaurants across Queensland, WA and Victoria. Collins has made the decision to exit our Taco Bell operations. We're continuing to work with Taco Bell International and Yum! to transition the business to new ownership, aiming to complete this process within 12 months.

Now moving on to Slide 37. FY '25 has been an important year for Collins, and we enter the year ahead in a stronger position. In summary, there has been strong execution with operational excellence driving growth and margins. We have strong brand metrics, demonstrating resilience in a challenging advanced. We are well positioned to take advantage of improving conditions with momentum building. Strong cash generation and our healthy balance sheet provided capacity to invest in future profitable growth opportunities. As I mentioned before, we remain active and open to organic and strategically sensible inorganic growth opportunities.

Now I will provide our outlook for FY '26 as set out on Slide 37. While trading conditions remain challenging, our stronger performance in H2 has continued in FY '26 with total sales in the first 8 weeks, increasing in all markets. We're seeing a more favorable cost environment in Australia and are benefiting from increased operational efficiency across the group. KFC Australia's total sales rose 4.9% in the first 8 weeks, with same-store sales up 1.6%. Operational initiatives and a growing network are expected to drive sales and enhance customer experience over the year ahead, supported by improving consumer sentiment as cost of living pressures ease, increased labor productivity and commodity cost deflation will also deliver margin improvement.

The Netherlands total sales for the first 8 weeks increased 2.6% with same-store sales down 0.2%. Improving profitability is the key priority in the Netherlands in FY '26, with operational excellence expected to drive sales, productivity and efficiency. Recent cost pressure on poultry is expected to continue in FY '26, given the impact of the Avian flu in Europe, and we're continuing to optimize our portfolio under a reshape development agreement with Yum!.

Total sales in Germany increased 2.4% in the first 8 weeks with same-store sales slightly lower at 1.3%. While sales have been impacted by the transition of market management, increased marketing and capability investment by Yum! and Collins is expected to drive sales growth over the year ahead. Our first restaurant under the new agreement with Yum! will open in August, targeting 40 to 70 over the next 5 years. As in the Netherlands, cost pressure on poultry will continue in FY '26.

In FY '26, Collins Foods is targeting year-on-year group underlying NPAT growth in the low to mid-teens on a percentage basis. I want to again take the opportunity to say a big thank you to our great restaurant teams and RSA teams in Australia and in Europe and thank them for their work, their energy and their contribution to our success.

And I will now pass to Mel, our operator.

[Operator Instructions] Your first phone question comes from Tim Plumbe with UBS.

Just 2 questions from me, please. The first one around the Australian cost base, if possible, please. Margin in the second half was a fair bit stronger than you guys have guided to. So I was hoping that you might be able to give us a bit of color as to some of the key items that caused that outperformance first year, what you're expecting originally? And the productivity improvements that you're flagging for FY '26, did you get any of those benefits in FY -- in the second half of '25? Or is that a '26 story?

Yes. So Tim, thanks for your question. That was 3 questions, I think. But anyway, that's okay. Yes, there are probably 3 factors that have led to some margin improvement in Australia. First of all, as you've seen from the trends, our same-store sales performance improved. Clearly, we want to continue to see that rise, is relatively stable in the first 8 weeks, but we'd like to see that rise a little bit. But that's strengthening same-store sales performance, albeit modest, gives us a little bit of leverage in the P&L.

The second factor is probably deflation on 2 material commodity inputs, one of which is poultry, the other one is potatoes. And if you think about our menu, that comprise a fair proportion of our menu. We've seen deflation in both those categories and that impact started to bite just at the end of the third quarter of the fiscal. So we've not had a full year of that, that will continue into financial year '26.

And then probably the third element, which has only been partially realized as productivity. Our productivity did improve in the second half. More to come on that as we get more precise about matching labor supply with volume demand, and there's a lot of work going into that whole program. Clearly, that's important that we match supply with demand for every single hour that we operate our restaurants. And there's more to come on that scenario, and that both Chris and Krystal are very focused on. So those are the factors driving the change in the second half. I know it's a little bit atypical because normally we'd see a stronger first half than second half. But all of those elements combined to give us a better outcome in the second half and clearly more to come in '26.

Our next question comes from Sean Xu with CLSA.

Just to follow up on Tim's question. Can I ask for some color what sort of the same-store sales growth will be required to achieve your top end of the FY '26 NPAT guidance? Because assuming you were expecting a pretty material uplifting from your first 8 weeks trading period to achieve these. Is that a fair assessment?

No. Our assessment of same-store sales is -- we're not going to see a dramatic rise given where the consumer environment sits. Whilst we think conditions are modestly improving, I wouldn't say that consumers feel flushed with cash at the moment. So we think a low single-digit same-store sales rate will prevail. We want to see it lift. Of course, we'll do our best to lift it as long as we can. But I think we'll continue to see a favorable cost environment in '26 as well. We'll continue to see -- the prices that we're seeing on chicken and potatoes will continue favorably throughout the year, and we'll also see more work done on productivity.

So no, I think, Sean, we're not expecting to see radical increases in same-store sales performance. It's a combination of all 3 that lead to where we positioned ourselves with respect to net profit after tax projections for the coming year.

Sure. That's helpful. My second question, just a quick one. Your Germany target of 40 to 70 shops over the next 5 years, what sort of the -- are you able to give me it's more like a more and weighted? Or what sort of the profile in terms of timing wise?

Yes, I can take that one, Sean. Yes. So clearly, it takes a little while for the pipeline to emerge. And there's a lot of work that goes into developing a pipeline in areas that we think will drive enough traffic to drive profitability. And I do want to emphasize that we're not going to build restaurants for the sake of building restaurants. They need to be in the right place with the right traffic with the right productivity outcomes. But -- we're going to -- financial year '26 will be modest. The real ramp-up starts in '27. We think that 5 to 6 restaurants, maybe 5 to 7, that sort of range, and then it will grow beyond that. So -- and what the numbers will be in the subsequent years just depends on how successful we are in targeting sites.

Your next question comes from Peter Marks with Barrenjoey.

Just a quick question on Australia first. Did you see any impact on the business from Cyclone Alfred, I think it was in late March. Was there any restaurants closed or sales lost or extra costs you took there? And I guess just a follow-up on Tim's question. Like, given you had the guidance out there that you didn't expect the margins to improve until '26, like I understand the drivers, but which of those surprised you? Because it doesn't feel like the same-store sales growth accelerated significantly versus what you might have expected. So just interested if either of those things on the cost side of it surprised due to the upside.

Yes, Peter. Firstly, on the same-store sales, it might seem modest, but a movement from minus 0.3 to plus 1.6 is meaningful in the context of our business that has a big impact. And in terms of the cyclone, yes, we did see impacts. Obviously, our business is very exposed to Queensland so we basically took the brunt of it, with particular impacts in Southeast Queensland, where the impacts were pretty significant. We did have closures. All of that is reflected in our same-store sales number. We, I mean they're not unique events cyclones in Queensland. It seems to happen fairly frequently. So yes, we dealt with it. Was there an impact? Yes. Very hard to quantify what the impact was. It's probably modest but we dealt with it, and it's included in the same-store sales numbers.

And just like did the cost relief you got on the input side or the wages, was there a big surprise there on what you're able to achieve in the half?

Well, look, it's great to see deflation. I mean, we don't always know exactly where it's going to come out until the negotiations complete. So I think it didn't surprise us. We thought we'd get deflation just not -- maybe it's come out more favorable than we expected, but that's for a period of inflation. So to some extent, it's rebalancing. The area where we've really knuckled down is on productivity. And so whilst there's more to come in '26, we definitely started that program in the second half. We've always focused on productivity, but we really doubled down on it in the second half, and we saw some benefits, particularly in the last quarter. So normally, it takes a little longer to get those benefits to be realized. But yes, we definitely saw better outcomes in quarter 4.

And if I can add something, of course, we are driving same-store sales growth. It's really important for us, and we want to drive growth for Collins. But we see also immense value in driving same-store sales growth, productivity and operational excellence in both Australia and in Europe.

Your next question comes from Elijah Mayr with Goldman Sachs.

Just a couple from -- maybe just firstly on the FY '26 guidance. Can you confirm that, that includes Taco Bell and perhaps what your expectations are within that guidance for Taco Bell into FY '26?

Yes. So the short answer, yes, our guidance includes Taco Bell. We're including it in the consolidation in both years. If that changes, obviously, we'll inform the market. We're expecting the position on Taco Bell to remain relatively flat.

And then second question, just on KFC Australia kiosks noted that in presentation that increase in FY '25. Can you kind of confirm that was the case just for Australia or it group? And sort of where are you at in the Australian network in terms of the stores that have the digital kiosk?

Yes. Thanks, Elijah. It's Krystal here. We did add a further 106 kiosks just in the KFC Australia network. That takes us to about 2/3 of our restaurants having kiosks now, and they're performing strongly. So we're looking at how we best spend our capital to invest further in digital formats.

Elijah, maybe just a comment on Europe and then maybe Chris can answer this, but penetration of kiosk in Europe is already very high. But yes, just Chris might add some color to that.

Elijah, the European journey for kiosks started a few years prior as the channel mix in Europe is traditionally different, Australia, of course, being a high drive-through market. And given the city network in Europe were a higher dine-in and front counter business. 100% of our restaurants in both Germany and the Netherlands have kiosks with an average of 4 to 6 kiosks per restaurant and some of our busier restaurants have up to 15, 14 kiosks within them, and that's reflected in our digital sales mix at 63% in the Netherlands and 67% in Germany.

Your next question comes from Ben Gilbert with Jarden.

Just in terms of Netherlands, just in terms of the actions you've taken, obviously impaired the last update, how quickly do you think you can get those margins back up? Because you obviously have spent a bit lower to look on a post EBIT basis. Are you expecting to see quite a material uplift in terms of initiatives? Or it seems like headwinds, et cetera, and poultry mean that they're going to remain pretty benign through fiscal '26?

Yes, Ben. I'll pick that one first, and I'll invite Chris to comment. Our intention is to get that business to a meaningful level of profitability as best as we can. And so can we make immediate change in performance? Well, yes, of course. That's the intention. So we do want to see a change in the trajectory of that business in financial year '26. I'll let Chris talk about the things that are happening in that market. But we want that business to earn its keep and to generate an appropriate level of return on the investment that we've made. Impairments are always unfortunate, of course. I mean, we can't write restaurants up. We can only address them on the downside. But our intention, despite the impairment is to drive as much profitability as we can add out of that network as possible.

And maybe, Chris, if you want to provide some color?

The brand is in good health, as shared earlier, and KFC in the Netherlands celebrated 50 years in 2022. So the brand is also has a long heritage and is a solid #2 in the market, with a 50% bigger network than the #3 being Burger King or Hungry Jacks, I think we call it here locally. The market is definitely responding to a renewed focus on labor productivity and food waste, cost of sales management. And with our more moderated view on pipeline development and new restaurant goal, we feel confident to make meaningful changes in FY '26.

And just a second one for me. Just in terms of -- you've always got a pretty strong balance sheet position, probably gives you a lot of optionality. Where do you see the highest return, incremental return you're able to generate at the moment? It feels like how you're talking through the presentation as Germany and looking to buy existing change in that market. Is that the preference of priority? Or are you still looking to greenfield master franchise agreements, which you've alluded to in the past in Europe?

So it's Xavier here. Obviously, we have a strong balance sheet, which is great, and it provides us with optionalities and capacity for organic and inorganic growth opportunities. I can't say much more in the sense that we want to be open, but we need to have a disciplined approach based on profitable strategic growth. And of course, we want to deliver shareholder value. Germany is upscale. As you mentioned, the store economics are pretty strong. So we want to drive accelerated growth in Germany through buy and build. We've got nothing in mind at the moment in terms of M&A opportunity. But certainly, we will look at acquisition opportunities in Germany, they occur to accelerate in this market, which we believe should become our second growth pillar.

Your next question comes from James Ferrier with Wilsons Advisory.

First question I wanted to ask one and perhaps it's one for Krystal. In the Australian business, I'm keen to hear your thoughts on the menu performance. How you're reading it in terms of the success of innovation, the product mix and the benefit you're seeing flow through to gross margin. It seems like it's been a big focus for the franchise community and for KFC and interested in how you're reading the improvement there? And then how much perhaps more improvement is left when we look forward into FY '26?

Yes. Thanks, James. The everyday value strategy that came into play over the last 12 months actually has continued to strengthen as time has gone on. And what it's really done is providing great value entry points that really makes us the more affordable to the everyday consumer when they really need that affordability the most. That's been coupled with a stronger product innovation, which help upsell the customer in our core LTOs. What we look forward to in FY '26 is actually quite a strong and persistent pipeline of product innovation that is quite craveable products that are coming this year.

That's good to hear. Second question, maybe one for Xavier or Chris, just in the German market there, I'm interested in what color you can provide on some of the other initiatives that are underway there, whether it's new store opening plans from other stakeholders or restaurant buyback plans, refurbs, et cetera, brand-building campaigns from Yum!. Just any further color you can give on the broader plans for the brand in Germany?

With pleasure, James. Historically, KFC Germany has had one of the lower remodel compliances across Europe. However, one of the bright spots over the last 18 months is the German market has heavily invested in what they called the remodel acceleration program to bring not just restaurants close to Collins, but across the entire estate up to latest look and feel. And the market is now at [ 45 ] last touched within 5 years, which is at the normal standard. At the same time, as alluded to earlier, the market is realigning its teams and processes, specifically around brand and marketing.

And a new CMO, who is ex McDonald's, has joined the market 2 weeks ago as well as a new Head of Digital, and we're very encouraged by the first signs. And given Collins' strategic importance too young in that market. We also have the benefit of sitting on not only the advertising co-op but also the Ops Committee, the development committee and the business model committee. So Collins has a voice at the table with Yum! on a quarterly basis across key priorities and projects.

Your next question comes from Caleb Wheatley with Macquarie.

Just a couple of follow-up questions from me. The first 1 on the kiosk front, particularly in Australia. So you mentioned 2/3 of the stores in Australia have been now. Where do you see this getting to over the coming 12 to 18 months? So it seems like a fairly big opportunity on both the revenue and the cost side for the Aussie business. So how should we think about the opportunity there, please?

I think the penetration of kiosk will continue to rise. I mean every time we do remodels, we install kiosks. There are 1 or 2 of our -- or some of our restaurants, a handful where installing kiosks is very, very challenging, just by virtue of its physical dimensions and location. But I think I expect to see us increase our penetration over time. Every single remodel comes with kiosk installations. So it's -- as always, it's making sure we get the return on the investment that we target when we put any investment into our network.

Okay. Got it. And I have sort of been touching a little bit throughout some of the other questions. But maybe just a bit more specifically on CapEx across the business as we go into FY '26. Just noting, obviously, store openings to come in Australia and Germany and the remodels you've called out as well. How should we think about moving in CapEx as you work through some of those programs through FY '26, please?

Yes. Look, I think for the next couple of years will be -- our CapEx levels will be similar to what we've got this year. And really, what drives that is the fact that the ramp-up in Germany doesn't really commence until '27. So I expect our CapEx to be relatively consistent for the next couple of years and start ramping up as we start to develop out the German market.

Your next question comes from Sam Teeger with Citi.

Just on Germany, after the changes in KFC in Germany, can you talk through who are the other main players with you at those key committees who are looking out to the other states? And based on your discussions with them, what do you think of their willingness and ability to invest and repair the KFC brand across the whole of Germany with you?

Sam, it's Chris here. I'll field that one. So for context, across the 210 KFCs in Germany, there are 24 other franchisees. And I'm sure you can appreciate that will be some second or even third generation low single-unit operators all the way through to other multinational listed, AmRest, or a franchisee that you may be aware of who operate multiple brands across Europe. And in those forums that you've alluded to, we have a good mix of voices at the table and Collins, along with AmRest are the only franchise partners that are present in all 4, which is great as we've got capital and commitment as Collins, I won't speak for AmRest. But we've got a good mix of franchisees and across states as well. So it's not a very narrow forum, but they're quite large there.

But do you think the rest of them or most of them are willing to invest in marketing to really repair the brand after what happened under [ IS ] management. Or is it just going to be you kind of carrying the load yourself?

We have committed spend. So one thing that is clear is that we're all contributing to the national co-op. And as answered a few minutes ago, the remodel compliance has really ramped up. That was a bright spot over the last 18 months, and that's a real commitment by franchisees, not just Collins, deploying their capital in remodel. So we're -- we've had very good conversations, and we're also a member of the franchise committee, as you would imagine, in Germany. And those are very constructive and broadly, people want to move on and build the brand and do right by our customers and our team members.

And Sam, maybe just to add to that, I think as you see in Australia, you've got franchise partners that want to grow and invest and you've got others that don't. And I don't think Germany will be any different. But we don't expect we'll be the only partner developing in Germany.

And just to add to that as well, Sam, I was in Germany a few weeks ago and spent quite some time with [ Jan ] in Germany and Yum! in Europe. There's a strong commitment on the Yum!'s side to drive growth in Germany for various reasons. KFC is far beyond McDonald's and their strong willingness to drive that and invest behind growth. And obviously, we want to contribute as a key pilot to that. There's no success for KFC in Europe without success in Germany considering the size of the market. So there's strong willingness on Yum!'s side to drive that growth for KFC.

Your next question comes from James Bales with Morgan Stanley.

Firstly, maybe on Germany, when you think about the M&A opportunities that you might come across there, can you help us understand, are you after the ability to open up additional states? Or are you after grade assets or assets that you can put capital into and materially improve? How should we think about the equation there?

So a few key points. First, we want to have a strong focus on a few regions. We don't want to spread our resources around across too many states. We want to focus and develop. So at the moment, our focus is across 2 areas. One is around Stuttgart, the other one is around Dusseldorf, where we have our store network. If the opportunity occurs to acquire another network in another region and build a third region, that would be fantastic. If we acquired a network, we would acquire a network to build scale and accelerate but also to be able beyond the stores we would acquire to actually develop more restaurants and leverage the teams and the capacity and the capability on the ground to accelerate development beyond just the acquisition.

Got it. And then you also made reference in the presentation to a new agreement with Yum! in the Netherlands. Can you maybe help us understand what's changed as part of that agreement? And what does Yum! really care about in terms of your phase of slowing down the rollout and improving profitability?

James, yes, I mean, the agreement really is to moderate development. I think there's a common understanding that there are some unique challenges in the Dutch market that we don't see in other markets. And so the moderation of development sort of reflects that because we've got a knuckle down and resolve profitability challenges in that market. So that's in everybody's interest because having a profitable franchisee network makes sense for all parties concerned. So that's the nature of the changes there. Obviously, we still run the market. And as we flagged in a previous announcement, what that looks like moving forward is yet to be determined and will be subject to negotiation. So that's the piece of work that is as yet unfinished. Sorry, I'm not sure I answered all your questions, James.

No, no. That gives me a good sense.

We'll just take one more question because we've got to run afterwards.

No problem. Your final question comes from Michael Toner with RBC.

Look, very, very quickly. So I can see that revenue sort of came in line or maybe sort of marginally below this year, but you've called out operational improvements on a fewer case throughout the presentation. I was wondering if you could be a little bit more specific as to exactly what initiatives you guys have put in place and sort of whether there's further room to run from a productivity perspective, particularly given it's very too half-weighted it looks like?

I could start and maybe invite Krystal and Chris to comment. Just your comments on sales. I'm not sure what the comparator is that you're running as again. I mean, our sales performance has improved since the first half in every dimension. So second half improved on first half and same-store sales in the first 8 weeks have improved upon half 2. So we've seen a gradual improvement in trend, whichever way you look at it. So we're pleased about that, more to do. We're definitely pleased about that.

Productivity, put simply, obviously, there are things that we can do to drive efficiency and technology plays a role in that. But fundamentally, it's about getting better at matching supply and demand. So making sure that we are supplying labor when the volume demand is there. And so if I just want to simplify the whole equation, that's really what we're trying to do, and we're trying to leverage technology to do that, working with Yum!. It's a system-wide issue, and we all acknowledge that's an area where we can drive further benefit.

But Krystal and Chris, any specific issues related to Australia and Europe?

Yes, I can talk to what we've been trialing in my first 8 weeks, which is a really great tool that assists in what Andrew has been alluding to. And in the trial so far, we've seen significant improvement in ensuring we have the right people on at the right time, which has unlocked sales and also customer experience metrics. So we are strengthened by the tools that we have in place. The trial is moving forward. So we do see that operating discipline adding further benefit in FY '26.

And in the European context, halfway through Q4 in mind, then first 8 weeks, we've rolled out across both Germany and the Netherlands biweekly sales forecasting and team member hour assessments, as well as extreme focus on productivity and the so-called best when busiest, and this is showing dividends. This has rolled through and is really gaining momentum in the first 8 weeks of this year. And then further opportunity, which is important for us in Europe is around waste and waste management, not only for the P&L, but also in terms of our ESG commitments, and we've seen big improvements in cooking to demand and using the technology appropriately in both Netherlands and Germany.

That's all the time we have for our question-and-answer session. I'll now hand back to Xavier for closing remarks.

Thank you very much. Thank you for joining the meeting. We're going to follow up and make sure we answer other questions. I just want to say on behalf of our executive team, that we're very energized and excited about the year ahead. Very happy about the underlying results that have been delivered. And I want to thank again our shareholders for their support and encouragement. Have a great day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.