2021 Annual Report COLLINS FOODS LIMITED ABN 13 151 420 781 We create unmatched experiences for our customers and people. B ANNUAL REPORT 2021 COLLINS FOODS LIMITED Contents 02 Our vision, mission and values 03 Our financial performance 04 Our year in review 06 Our positive impact 07 Our brands 08 Chairman’s message 09 Managing Director & CEO’s report 11 Financial report 13 Directors’ report 24 Letter from the Chair of the Remuneration and Nomination Committee 25 Remuneration report 49 Auditor’s independence declaration 51 Consolidated income statement 52 Consolidated statement of comprehensive income 53 Consolidated balance sheet 54 Consolidated statement of cash flows 55 Consolidated statement of changes in equity 56 Notes to the consolidated financial statements 119 Directors’ declaration 120 Independent auditor’s report 125 Shareholder information 128 Corporate directory Key dates Full year 2021 results announcement Tuesday, 29 June 2021 Record date for final dividend Thursday, 8 July 2021 Final dividend payment Thursday, 22 July 2021 Annual General Meeting Friday, 27 August 2021 End of half year 2022 Sunday, 17 October 2021 Half year 2022 results announcement Tuesday, 30 November 2021 Record date for interim dividend Tuesday, 7 December 2021 Interim dividend payment Wednesday, 22 December 2021 ANNUAL REPORT 2021 COLLINS FOODS LIMITED 1 Our VISION, MISSION and values 2 ANNUAL REPORT 2021 COLLINS FOODS LIMITED Our FINANCIAL PERFORMANCE Revenue Statutory NPAT Underlying EBITDA (post-AASB 16) (Continuing operations, pre-AASB 16) 12.4% 5.4% 12.4% to $1.07b to $32.9m to $136.3m (FY20: $948.1m) (FY20: $31.3m) (FY20: $121.2m) Underlying NPAT Total FY21 Fully (Continuing operations, pre-AASB 16) Franked Dividends 18.3% 23.0CPS to $56.9m (up 15%) (FY20: $48.1m) (FY20: 20.0cps) Net Operating Cashflow (post-AASB 16) $148.0m (FY20: $149.3m) ANNUAL REPORT 2021 COLLINS FOODS LIMITED 3 Our Year in Review We operate We are focused on operational 319 excellence and the restaurants highest of health in Australia, Germany and and safety standards the Netherlands, and are for our customers the franchisor of 64 in Japan and Thailand. and our people. The Company employs over 15,000 people in Australia, Germany, and the Netherlands. 4 ANNUAL REPORT 2021 COLLINS FOODS LIMITED We're fanatical about driving performance and getting it right every time. The Group has In FY21 we built and opened continued to generate strong earnings growth, 18 new a testament to great restaurants products, strong brands, across the Group, 11 for and the commitment of KFC Australia, 4 for Taco Bell our extraordinary team. and 3 for KFC Europe. Our continued emphasis on operational execution, people development, and excellence in restaurant development will underpin our pursuit of sustainable growth. ANNUAL REPORT 2021 COLLINS FOODS LIMITED 5 OUR positive impact Creating unmatched Making a Being PEOPLE POSITIVE BRILLIANT experiences IMPACT AT THE BASICS People and OUR PILLARS communities Planet Governance Establish Collins Foods Reduce our carbon Commitment to Giving as a best-in-class footprint by achieving a continuous signature program by 2026 with 25% reduction improvement in greenhouse gas emissions in best-practice by 2026 governance standards 75%+ in all our business OUR PRIMARY GOALS OUR PRIMARY enrolment Increase diversion of activities waste from landfill by 25% by 2026 • Safety management system that • Renewable energy: • We expect our people and underpins strong safety culture 100+ additional solar panel those who conduct business FY21: LTIFR 14.20 systems over the next year with us to act with integrity, ethically and with openness, • Collins Foods Giving employee • Reducing Scope 1 greenhouse honesty and fairness participation rate in FY21: 31% gases (GhG) despite increasing restaurants: FY21: 471 CO2-e (tonnes) • Food safety management • Collins Family Fund: new system underpins strong food program launched in 2020 • Reducing energy consumption of safety culture restaurant network: FY21: 1,177GJ* • Equitable employee profile: FY21: 50% female and 50% male • Reduce waste to landfill by INITIATIVES & OPPORTUNITIES INITIATIVES workforce, no GPG* diverting, reusing, recycling or upcycling waste. FY21: total • Employing young Australians: waste 9,609 tonnes 518 traineeships with 285 completed in FY21 • Opportunity: water management • Expansion of participation in food recovery programs to include KFC restaurants in Tasmania and Western Australia * Gender Pay Gap * gigajoules 6 ANNUAL REPORT 2021 COLLINS FOODS LIMITED OUR BRANDS KFC KFC TACO AUSTRALIA EUROPE BELL KFC Australia enjoyed a step KFC Europe was significantly Taco Bell firmly anchored change in sales thanks to impacted by COVID-19 itself in the Quick Service excellent operational execution, restrictions and lockdowns. Restaurant segment, offering high trust in the KFC brand, Operational focus remained high great value price points and growth in e-commerce sales in both markets and the business and focusing on driving and product innovation. is well-positioned to improve awareness and trial. margins as restrictions are eased. 252 46 16 restaurants restaurants restaurants $900.4m $134.9m $28.0m Revenue Revenue Revenue 12.9% -0.6% 3.9% Same Store Same Store Same Store Sales growth Sales DECLINE Sales growth* 22.2% 7.3% 0.7% EBITDA margin EBITDA margin EBITDA margin (post-AASB 16) (post-AASB 16) (post-AASB 16) (18.1% pre-AASB 16) (-0.7% pre-AASB 16) (-5.7% pre-AASB 16) * Seven restaurants that have been opened for a minimum of 18 months ANNUAL REPORT 2021 COLLINS FOODS LIMITED 7 CHAIRMAN'S MESSAGE FY21 marked an excellent year for Collins Foods, Positive Impact strategy delivering another record result reflecting robust This year we are pleased to release our inaugural Positive Impact Report, sales and earnings growth despite challenging global which provides us with an Environment, Social and Governance (ESG) operating conditions. framework to report against. ESG practices have long been embedded in Collins Foods’ operations and we are now focused on three key pillars — people and communities, planet, and governance. We remain committed to Brand strength driving growth our Collins Foods Giving program, reducing our carbon footprint, diverting During this challenging year, we saw customers focus on what they trust. waste from landfill by 25% over the next five years, and maintaining best The trust we have built in our restaurant operations by engaging with our practice governance standards. stakeholders and staying true to our values has paid off. Eleven new Australian KFC restaurants were opened during FY21 bringing Positive outlook for continued growth the total number of KFC Australia restaurants we operate to 252. In FY22, Collins Foods is well-positioned to further grow its KFC Australia KFC Australia continued to perform ahead of expectations, delivering operations, and build market share for KFC in Europe and Taco Bell in same store sales growth of 12.9%. The business capitalised on its brand Australia. strength, focusing on signature, core and value menu items and best-in- Our strong balance sheet provides the flexibility to take advantage of strategic class guest experiences. Meanwhile, new digital and delivery initiatives organic and acquisition opportunities across the Group over the coming year. catered to increased consumer demand for digitally-enabled channels and convenience. E-commerce now accounts for around 14% of total KFC For KFC Australia, digital and delivery initiatives will be key to improving Australia sales, reflecting the evolution of consumer dining preferences. customer experience alongside new back-of-house technology to drive efficiency. KFC Europe is poised for recovery as COVID-19 restrictions ease, Results in Europe were impacted by COVID-19, where ongoing lockdowns and we are aiming to double our presence in this market by 2026. We will and dining restrictions were far more significant than in Australia. The continue to scale the Taco Bell brand in Australia, supported by a clear safety of our people and customers were our primary focus, given the restaurant rollout strategy and marketing support to drive awareness and trial. health risk posed by the pandemic. Despite these challenges, Collins Foods leveraged the operating environment to progress its strategic initiatives in Board changes the Netherlands, signing a new Development Agreement and undertaking Less than a year after taking over as CEO, we were pleased to welcome three franchisee acquisitions. We now operate 17 restaurants in Germany Drew O’Malley to the Board as Managing Director. Drew has made a and 29 in the Netherlands. significant contribution to Collins Foods since he joined in 2017, particularly Emerging brand Taco Bell showed strong sales growth of 57.4% during the over the past year where he successfully steered the business through the year, driven by a larger footprint of 16 restaurants and differentiated value COVID-19 pandemic. Drew’s appointment further increases the Board’s proposition. An additional nine to 12 new restaurants are planned for FY22. operational expertise and we look forward to leveraging his global Quick Alongside brand awareness and trial initiatives, Taco Bell is expected to Service Restaurant (QSR) knowledge and experience. benefit from increased consumer adoption of Mexican category products. As part of our Board succession plan, Newman Manion will retire as a With a marketing mix reinforcing value and our core operational strengths Non-executive Director of the Company at the conclusion of this year’s around convenience, we see a bright future for the brand. Annual General Meeting. Over the past 10 years, Newman has been a highly valued member of the Board, enabling Collins Foods to benefit Continued growth in dividend from his significant experience in the food franchise industry, obtained Collins Foods delivered another record result in FY21, with revenue over more than 38 years working in Yum! and the KFC brand globally. increasing 12.4% to $1,065.9 million. Growth was driven by strong same store He retires with sincere thanks from the Board and we all wish him well sales growth and new restaurant openings.