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Operator: 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.
Xavier Marie Simonet: Thanks very much, Harmony. Good morning, everyone. I'm Xavier 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. We're presenting the first half '26 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 what 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 the 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 continue 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 in Karlsruhe during the period and have several sites approved for development with the pipeline building. We are also encouraged in Yan's approach to building the brand in the German market, people capability is 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 one 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 of you 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 was achieved despite a consumer environment that, in particularly 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 ASB S2 climate report this year, having recently completed our risk and opportunities assessment. While recent developments in Europe have resulted in our entities there being out of scope for mandatory reporting, we will continue with our voluntary disclosures beyond climate. Actions across our ESG agenda 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 a pilot to support restaurant leaders' career development with certified leadership and management diplomas. Our First Nations preemployment program was launched, enabling unemployed use 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.
Andrew Leyden: 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 '26 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 to 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 a 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 financial year '25. And underlying NPAT was $30.8 million, up 29.5% on the prior period. Underlying EPS was $0.261 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 compares with $24.1 million in the half year financial year '25. In HY '26, total restaurant impairments were $3.1 million as well as a $1.3 million provision top-up for potential wage underpayments relating to prior years to $10.5 million. With respect to the provision for potential wage underpayments, 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 have 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 underpayments 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 Foods business. In the half year of '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, a result of timing impacts relating to capital expenditure and other deductions, which differed for 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 debt repayment. 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 disciplined. 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 end of financial year '25. And now having covered the financials, I will hand over to Krystal, who will take you through the results and the commentary for KFC Australia.
Krystal Zugno: 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 KFC 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 in 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 is the launch of Kwench by KFC trial in 7 of the Collins restaurants Cairns. Kwench by KFC is a range of innovative beverages, including lemonades, refreshes and shakes that will not only offer our customers a broader beverage choice, but also upside opportunities and different education 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 position ahead of key QSR competitors on brand index, which comprises results across quality, value, reputation, satisfaction, recommendation and impression. This work, combined with back-to-back innovation across items like Habanero Chicken, Zinger Kebab and Sweet Tokyo Hot & Crispy have increased our brand buzz results. Results for Gen Z population remained significantly higher with improved cut-through with these 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 more to come before the end of 2025. We will have remodeled 37 restaurants, including 4 supercharge 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, which helps to 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 fee for aggregators have been lowered to $395, which is providing customer value as well as helping lift our transaction value. Previously, I spoke about 3 key areas us prioritizing that align with our strategic focus on operations excellence. Firstly, our focus 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 drive 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.
Chris Johnson: Thank you, Krystal, and good morning, everyone. Turning now to KFC Europe on Slide 17. Our HY '26 performance reflects a challenging economic environment in Europe, particularly in the Netherlands, which is still experiencing cost of living 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, are focused 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. EBITDA was up 19.6% to $20.4 million, with margins up 53 basis points to 12.6% 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 early 2026. EBIT of $6.9 million was up 142% over the prior period, reflective of the 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 layouts have been well established in the Netherlands, which is improving both speed and accuracy of order with both increasing customer satisfaction. We'll be trialing 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 Kass, Cheese Cheese cheese in English have driven consumer engagement. 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're seeing early positive signs of our efforts to restore 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 growing 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 innovations, such as the collaboration with Netflix's 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 key 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 are 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 support 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.
Xavier Marie Simonet: 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 Australia's total sales rose 5.3% in the first 7 weeks, while same-store sales were up 3.6%. Operational initiatives and a 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 who 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 continued 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 imbalance of 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 focus 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! 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: [Operator Instructions] Your first question comes from Sean Xu from CLSA.
Sean Xu: Can you hear me okay?
Xavier Marie Simonet: Yes, very good. Thank you.
Sean Xu: It's great to see your Australia same-store sales growth for the 7 weeks into second half 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 the second half come in expenses of profitability. This is referring to the Australian market, please.
Krystal Zugno: Sean, I might take off this is Krystal here. What we see 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 have 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 plays. Xavier, Do you want to add something?
Xavier Marie Simonet: No, just defining LTO.
Krystal Zugno: Sorry. LTO is limited time offer. Stop there.
Sean Xu: Maybe, If I can add, If I can add...
Xavier Marie Simonet: If 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 avoiding big peaks and troughs, but focusing on bundled deals and activities that deliver value for our customers in the restaurants every day.
Sean Xu: Yes. That's very clear. If I can just follow up, this is more about your medium to longer-term outlook in Australia. I'm just curious to know what's your approach to drive additional growth in Australia in a quite penetrated market. The recent industry feedback is some of your competitors are paying very, very expensive rent for quality sites. I'm just curious to know how sustainable is your annual store opening target while maintaining a similar margin profile?
Andrew Leyden: Sean, Yes, look, I think the long-term projections for our business, I mean, 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 expenditure, of course. And yes, we've been competing with competitors for sites for a long time. I mean that's not a new trend. It's with us, it's present. We compete the sites with other QSR operators. In fact, we often compete together for the same sites. We often co-reside on the same sites. And in fact, we quite like that because those sites become a destination for QSR-centric consumers. So I think it's just kind of business as usual 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 that focus won't dissipate. 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 we don't compete in all the 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.
Xavier Marie Simonet: 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.
Operator: Your next question comes from Tim Plumbe from UBS.
Tim Plumbe: 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 parts within the business. But very high level, is it fair to say that it sounds like you're kind of seeing a continuation of the same sort of consumer environment and the competitive environment that you experienced in the first half of '26 and a similar COGS environment? And if that is the case, if we look back historically, pre-AASB 16 EBITDA throughout the years, 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, like a bigger uplift to marketing than you would usually have in the second half?
Xavier Marie Simonet: So I'll make a comment on consumer sentiment and then hand over to Andrew. Consumer sentiment is lifting a little, but we do not see a meaningful change. And we're concerned about interest rate increases or 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.
Andrew Leyden: Yes. And maybe just to follow on, Simon. I know you and I had a brief conversation earlier. I think if you look at what's happening 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 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 would 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 and we pay premium rates. 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 we do see that reversing a little bit as well in the second half. So -- and of course, labor inflation continues to prevail 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 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.
Tim Plumbe: Great. That's useful. Then just the second question around KFC Europe. Again, a more challenging top line. The 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 enough to offset the slightly more challenging top line?
Chris Johnson: Sean, it's Chris. Thanks for the question. Short answer is yes. We -- sorry, Tim, yes, we definitely do, and that's in both Germany 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 pricing and margin and what if -- 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 glide down, we do foresee margin expansion, and that's true in Germany as well.
Operator: Your next question comes from Tom Kierath from Barrenjoey.
Thomas Kierath: 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?
Chris Johnson: 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 Window 7 and Window 8 has just started. And then 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. As 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 calendar 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 value across both markets.
Thomas Kierath: 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 in -- is that the right interpretation of that [indiscernible]?
Andrew Leyden: Yes. Tom 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, where we're focused on driving same-store sales revenue entering dayparts, focusing 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.
Thomas Kierath: 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.
Andrew Leyden: 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 -- fluid is probably too strong, but we're just keeping an eye on consumer 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.
Operator: Your next question comes from Caleb Wheatley from Macquarie.
Caleb Wheatley: 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 a 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?
Xavier Marie Simonet: Maybe I'll start. got a few key focus areas. One is we still see immense value in driving operational excellence, and there are still improvements we can make across Australia and Europe. So we see immense 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. We're just 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 product platform for trial in 7 stores in Cairns with Yum!. This week. It's really exciting. We'll see what that outcome is, but the focus on launching new platforms, new products, new dayparts is something we're focusing on with Yum!, and we'll see how it goes in Cairns.
Caleb Wheatley: 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 pressures or this is more just a deliberate internal decision from Collins.
Krystal Zugno: Caleb, it's Krystal. 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 that 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 structure 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 with 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 and our innovative calendar is all driven by what we think the consumers are saying they want to need in that time period. And we can be agile, as i 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.
Andrew Leyden: Caleb, the only thing I was going to add was value means different things to different consumers. And some consumers want abundant value, others want a sharp price. Others want 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 conversations that ultimately leads to the way that we present LTOs, or limited time offers and then how we support them with value-based promotions.
Xavier Marie Simonet: And Caleb, if I can add something. Yes, 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. Engagement with consumers, 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.
Caleb Wheatley: Okay. That's clear, very detailed. And just a final very quick one, maybe one for Chris. avian flu benefit called out seems like it's going to be quite meaningful. Can you just give us a sense for what the impact was of avian flu when it first started to hit in terms of the cost increase there? Just trying to get a sense for kind of what the leverage is as we're now rolling out of it on the other side, please?
Chris Johnson: 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 source of supply from Polish poultry was higher in Germany. In terms of restitution, the glide path is starting in terms of pricing coming down. Yum! working really hard, and they run and manage the system supply chain across Continental Europe, working really hard on not only pricing for the existing supply but also -- 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 started and will continue into early 2026.
Xavier Marie Simonet: 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.
Operator: Your next question is from Ben Gilbert from Jarden.
Ben Gilbert: 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.
Andrew Leyden: Just repeat that. Sorry, I didn't quite catch the question.
Ben Gilbert: I'm just -- there's obviously a bit of discussion around 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 there's a case to be more optimistic about the next 6 months for Australian QSR and KFC space than there was probably, say, 6 to 12 months ago. Is that fair?
Andrew Leyden: 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 levels of same-store sales growth because the brand is in really good health. And if you think about the opportunities ahead of us, we talked about Kwench, we talked about dayparts 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'd all 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 good news in 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 into same-store sales performance at a higher level. I don't know whether that's something that you want to talk to, Krystal?
Krystal Zugno: Yes. I think just to add to that, then, something 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 while that continued investment in value will always be there in the everyday value calendar, there have been times where we 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 in value yet, and we don't see that coming in the foreseeable future.
Ben Gilbert: That's really -- that's helpful. That's clear. And then just second one quickly. Just with the VAT change in Germany, it's obviously a pretty material part. Is the view in the market because some of your competitors seem to be talking about the ability to 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?
Chris Johnson: Ben, so we don't know. It would be the short answer is we don't have 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, Simon Kocher, who -- Yum! have engaged to help us with a country-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 1st, 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 have proposed it moves from 19% to 7%.
Operator: Your next question comes from James Ferrier from Canaccord Genuity.
James Ferrier: 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?
Chris Johnson: James, thanks for the 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-Württemberg. 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.
James Ferrier: 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?
Chris Johnson: As it stands, we're focusing solely on North Rhine Westphalia and Baden-Württemberg, so the 2 states where we're in today, and that allows us to leverage our current operational expertise and the resources that sit within those markets.
James Ferrier: 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?
Krystal Zugno: Yes. Thanks, James. So we've seen a few things happen since the first transition for DoorDash was 1st of July and then Uber came a little bit after 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 move the pricing. So we're excited 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.
Xavier Marie Simonet: 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.
Operator: And that does conclude our conference for today. Thank you for participating. You may now disconnect.