KFC owner Collins Foods has taken an 88 per cent hit to profits, but record revenues show its European expansion could eventually pay off.
Collins grew its revenue 2.1 per cent to $1.5 billion in the financial year to April 27, impressing investors who have sent CKF shares more than 20 per cent higher in early trade.
It posted a statutory net profit after tax of $8.8 million, down 88.5 per cent from $76.7 million the year before, but that result was helped from its $20.2 million sale of Sizzler Asia.
Weighing on this year's result was $40.8 million in restaurant impairments, dominated by weak profitability in 16 Netherlands restaurants with a non-cash impact of $35 million due to tough regulatory conditions, energy access and zoning restrictions.
Higher-than-expected penalties from Fair Work Act breaches for unpaid 10-minute breaks over an eight year period also weighed on the balance sheet.
Collins Foods has extended its provision by $3.2 million for the infringements to $7.9 million.
Despite the hit to profits, market share in Australia and the Netherlands improved, managing director and chief executive Xavier Simonet said.
"While trading conditions were subdued, particularly in the first half, the strength of the KFC brand held firm," he said.
"In FY25, we sharpened our priorities to focus on same store sales growth and profitable network expansion in Australia and Europe."
Collins Foods will deliver a fully franked final dividend of 15.0 cents per share, taking the total dividend for 2025 to 26 cents per share, fully franked.
KFC Australia's revenue grew three per cent to $1.2 billion, with underlying earnings before tax, depreciation and amortisation up 0.5 per cent to $222.6 million.
Revenue from European restaurants fell 0.4 per cent to $312.3 million, with the war in Ukraine still impacting costs.
Despite still being subscale, revenue from German restaurants were already comparable to those in Australia.
Collins Foods are focused on two states - North Rhine Westphalia and Baden-Württemberg - where a single KFC restaurant currently services more than 390,000 people, compared to roughly 34,000 in Australia.
"We look forward to leveraging our operational expertise to scale this market, working with Yum! Brands to build KFC as a powerhouse QSR (quick service restaurant) brand in Germany," Mr Simonet said.
Collins is still looking for a buyer for its Taco Bell business, which posted a 2.5 per cent revenue decline over the period to $54.4 million, and has flagged a 12 month transition deadline.
"If a new operator cannot be identified or an agreement cannot be reached, other exit options will be explored," the company wrote.
On the back of a better performance in the second half across Australian and European KFC stores, Collins is targeting an 11-14 per cent improvement to underlying net profit after tax in the current financial year.
"In FY26, we will be laser focused on strengthening operational performance, driving same store sales growth and margin improvement," Mr Simonet said.
"Easing cost-of-living pressures provide a supportive backdrop for growth, while deflation in Australian input costs, particularly chicken and potatoes, and efficiency gains will assist in driving a higher margin."
