Collins Foods’ Margin Gains and Debt Reduction Signal Growth Amid Challenges

Strong Financial Performance Amid Operational Excellence

Collins Foods Limited has posted a robust half-year performance for HY26, delivering record revenues of $750.3 million, a 6.6% increase on the prior corresponding period. Underlying net profit after tax (NPAT) surged 29.5% to $30.8 million, reflecting the company’s sharpened focus on operational excellence and efficiency gains across its portfolio.

Underlying EBITDA rose 11.0% to $113.9 million, with margins expanding by 59 basis points to 15.2%. This improvement was driven by stronger same-store sales, productivity initiatives, and cost control measures, particularly in Australia and Europe. The net leverage ratio improved to 0.89, underscoring disciplined debt management and strong cash flow generation, which together provide capacity for further investment in growth initiatives.

Growth in Core Markets and European Expansion

In Australia, KFC same-store sales grew 2.3%, supported by product innovation and enhanced in-store execution. The company remains on track to open 8 to 10 new restaurants in 2025, alongside 37 remodels, including four ‘supercharged’ stores designed to boost customer experience and operational efficiency.

Europe continues to be a key growth pillar, with revenue up 14.6% to $162.9 million, aided by a favourable currency translation impact. Germany’s KFC network expanded with the opening of its 17th restaurant in Karlsruhe, and several new sites are approved for development. The Netherlands showed early signs of profitability improvement, supported by portfolio optimisation and digital investments. Despite challenges such as avian flu impacting poultry costs, margins are expected to improve in the second half of the year.

Technology, Sustainability, and Brand Strength

Collins Foods is investing heavily in digital channels, which now account for 41.7% of sales in Australia, driven by kiosks, delivery, and app-based ordering. These initiatives have enhanced customer satisfaction and operational efficiency. Sustainability efforts are advancing, including emission reduction pilots, food waste reduction, and the rollout of sustainable packaging. The company also launched a First Nations pre-employment program and improved safety culture, resulting in a 12% reduction in injury frequency rates.

The KFC brand continues to lead in brand health metrics, with strong consideration and satisfaction scores, particularly among younger consumers. Innovative product launches and marketing campaigns, such as the collaboration with Netflix’s Squid Game and the KWENCH beverage range trial, are helping to maintain momentum.

Outlook and Strategic Considerations

Collins Foods has upgraded its FY26 outlook, targeting mid to high teens percentage growth in underlying NPAT. The company anticipates margin expansion in the second half, supported by easing commodity inflation, improved operational execution, and a potential reduction in VAT rates in Europe. While Taco Bell operations remain stable, discussions continue regarding a transition plan, with no firm decisions announced.

Overall, Collins Foods is well-positioned to capitalise on its dual growth pillars in Australia and Europe, supported by a strong balance sheet and ongoing investments in technology and sustainability.