Wage Remediation and Taco Bell Ownership Pose Risks Despite Strong Results

Robust Growth Amid Cost Pressures

Collins Foods Limited (ASX, CKF) has posted a standout half-year performance for the six months ending October 2025, delivering record revenues of $750.3 million, a 6.6% increase over the previous year. This growth was underpinned by solid operational execution and new product innovations, despite ongoing cost of living challenges in both Australia and Europe.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 11.0% to $113.9 million, while underlying net profit after tax (NPAT) jumped an impressive 29.5% to $30.8 million. The company’s ability to expand margins and improve profitability reflects a disciplined focus on productivity and sales growth across its key markets.

Australian Market, Digital and Innovation Driving Momentum

KFC Australia remains the powerhouse within Collins Foods’ portfolio, with revenue climbing 5.0% to $563.8 million. Same-store sales grew 2.3%, a notable rebound from a slight decline in the prior year. Digital sales channels now represent 41.7% of total sales, boosted by investments in kiosks and delivery services, highlighting the brand’s successful adaptation to evolving consumer preferences.

Product innovation played a key role, with new menu items such as the Habanero and Zinger Kebab resonating well with customers and contributing to improved brand health metrics. The company also expanded its restaurant footprint, opening eight new locations and progressing with 37 remodels to enhance operational capacity and customer experience.

European Operations, Turning Challenges into Opportunities

In Europe, Collins Foods posted a 14.6% revenue increase to $162.9 million, driven by growth in the Netherlands and Germany. Same-store sales reversed previous declines, rising 1.4% overall. Underlying EBIT more than doubled to $6.9 million, reflecting improved operational leverage despite inflationary pressures from avian flu on poultry costs and labour.

The company is actively optimising its portfolio in the Netherlands, closing underperforming restaurants while opening new ones. Germany is positioned as a key growth market, with several new restaurant openings planned for 2026 and a focus on expanding in populous states with significant untapped potential.

Taco Bell and Wage Remediation Update

Taco Bell revenues declined slightly to $23.6 million, with ongoing discussions to transition ownership. Despite this, the brand maintained strong cost control and improved digital sales.

Collins Foods has increased its wage remediation provision to $10.5 million as part of its commitment to compliance with the Fair Work Act. The company is actively engaging with the Fair Work Ombudsman and has commenced payments to impacted employees.

Outlook and Dividend

Looking ahead, Collins Foods raised its full-year underlying NPAT growth guidance to mid to high teens percentage, reflecting confidence in continued operational momentum. The company declared a fully franked interim dividend of 13.0 cents per share, up from 11.0 cents last year, underscoring its strong cash flow generation and balance sheet strength.

CEO Xavier Simonet emphasised the company’s focus on operational execution, network expansion, and brand modernisation to sustain growth. The strategic emphasis on European market development, particularly in Germany, signals a long-term growth trajectory that investors will be watching closely.