ASX 300 stock tumbles despite strong first half profit growth and guidance upgrade

Collins Foods Ltd (ASX: CKF) shares are on the slide on Tuesday morning.

In morning trade, the ASX 300 stock is down almost 4% to $11.14.

This follows the release of the quick service restaurant operator’s half year results.

ASX 300 stock tumbles on results day

For the six months ended 12 October, Collins Foods reported a 6.6% increase in revenue to a record $750.3 million. This was driven by growth in Australia and Europe, which reflects an enhanced focus on operational execution and new product launches despite persistent cost of living pressures.

KFC Australia revenue was up 5% to $563.8 million, with same store sales growing 2.3%. Whereas KFC Europe revenue was up 14.6% to $162.9 million, with same store sales growth of 1.4%.

This offset a 3.9% decline in Taco Bell revenue to $23.6 million. Management advised that discussions with Taco Bell International to transition the business to new ownership are ongoing.

Growing at a quicker rate was the ASX 300 stock’s earnings. Management advised that its underlying EBITDA was up 11% over the prior corresponding period to $113.9 million. This reflects total and same store sales (SSS) growth and productivity gains.

KFC Australia underlying EBITDA was up 9.4% to $111.8 million and KFC Europe underlying EBITDA was up 19.6% to $20.4 million. Taco Bell posted a small EBITDA loss for the half.

On the bottom line, the company’s underlying net profit after tax was up 29.5% to $30.8 million.

This allowed the ASX 300 stock’s board to declare a fully franked interim dividend of 13 cents per share, which is up 18.2% on the prior corresponding period.

Management commentary

Commenting on the company’s performance, Collins Foods’ managing director and CEO, Xavier Simonet, said:

In HY26, we executed on our operational priorities by driving profitable same store sales growth and network expansion in Australia and Europe. Our teams delivered strong performance against key priorities in an environment where consumers are still grappling with cost of living challenges. The KFC brand strengthened, underpinned by improvements in brand health, compelling marketing campaigns, product innovation, and investments in everyday value initiatives.

Our business again generated very strong cash flows, which, combined with disciplined capital deployment, ensures we remain in a very strong financial position with the flexibility and capacity to invest in future growth. This was supported by the successful refinancing of Group debt facilities in September.

Outlook

The ASX 300 stock has started the second half in a positive fashion.

Management advised that sales growth in the first seven weeks of the second half continued positively, with KFC total sales up 5.3% in Australia, 5.6% in the Netherlands, and 7.8% in Germany. Same store sales growth for the same period was 3.6% in Australia, (0.5)% in the Netherlands, and 2.3% in Germany.

In light of this strong performance, management has upgraded its guidance for FY 2026. It now expects “mid to high-teens” profit growth, which is up from “low to mid-teens” growth previously.

Mr Simonet said:

Our HY26 performance was encouraging. In H2 FY26, we will again be laser focused on driving operational performance, sales and margins. We are investing in growth, through network expansion and brand modernisation in Australia, elevating the customer experience to support brand health, which is key to lifting sales. In Europe, we will balance near-term optimisation in the Netherlands with creating long-term opportunity in Germany, through profitable network development.

We are excited about the potential of this key strategic opportunity and have made progress on execution. Finally, the cash-generative nature of our business and our strong balance sheet provide us with plenty of capacity to fund organic and inorganic future growth opportunities.

The post ASX 300 stock tumbles despite strong first half profit growth and guidance upgrade appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Collins Foods. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.