Thank you for standing by, welcome to the Collins Foods Limited H1FY2023 results. All participants are in a listen-only mode. There'll be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I would now like to hand the conference over to Mr. Drew O'Malley, Managing Director and Chief Executive Officer. Please go ahead. Thanks, Rachel. Good morning, everyone. I'm Drew O'Malley. With me on the call is Nigel Williams, our Group Chief Financial Officer. I'm very pleased to be able to take you through Collins Foods' results for the first half of the 2023 financial year, which was the 24-week period to the 16th of October 2022. Please note as we take you through today's results, financials are presented on a post-double AASB 16 basis, unless stated otherwise. Starting with a summary of our financial results on slide one of the presentation, if you're following along. Overall, despite an extraordinarily challenging landscape, Collins Foods has been able to maintain strong sales momentum, particularly in KFC Europe and Australia. A few of the first half results highlights include revenue was up 15% to AUD 614.3 million, with growth achieved across all of our business units. Underlying EBITDA was up slightly, increasing 0.5% to AUD 95.4 million. On a pre-double AASB 16 basis, EBITDA was down 6.3% to AUD 66.4 million, reflecting inflationary headwinds. Underlying NPAT was down 14.2% to AUD 24.8 million, with the equivalent on a pre-double AASB 16 basis down 11.6%. During the year, there were non-trading items that had a AUD 13.8 million impact on statutory NPAT, predominantly relating to the AUD 11.9 million after-tax impairment of 8 Taco Bell restaurants. Detail on non-trading items is presented on slide 33. Additional financial highlights include net operating cash flow of AUD 69.1 million, a year-on-year reduction in net debt to AUD 191.1 million, and net leverage to 1.31. Underlying basic earnings per share from continuing operations of AUD 0.212 per share. Lastly, the directors declared a fully franked interim dividend of AUD 0.12 per share. Moving to slide two as noted earlier, KFC same-store sales growth in our Australian and European operations was the key highlight in the first half of FY2023, as well as the addition of seven restaurants across the group. KFC Australia delivered same-store sales growth of 5.1%, which was predominantly driven by growth in e-commerce, including the launch of Uber Eats, as well as increased ticket. With brand and value metrics continuing at all-time highs, e-commerce represented over 22% of total sales, up from 16% at the end of FY2022. Two new restaurants were also opened, including our Queen Street Mall flagship store, and we acquired 1 restaurant from another franchisee. KFC Europe achieved same-store sales growth of 10.4%, reflecting a combination of increased ticket and growth in transaction volumes. The corporate franchise agreement or CFA in the Netherlands has enabled us to implement customer-centric price increases when necessary and improved marketing, underpinning same-store sales growth of 9.2% in that market. Two additional KFCs were opened by other franchisees in the period, and with three more Collins Foods KFCs expected in December, we are on track to meet our first-year development commitments under the CFA. Germany also performed strongly, with same-store sales growth of 14.6%. Taco Bell Australia same-store sales growth was disappointing, declining 7.8% as the brand works through the transition of a new marketing agency and a new Taco Bell International chief marketing officer in Australia. four new restaurants were opened, two in WA and two in Victoria, bringing the Collins total for Australia to 24 restaurants. We have paused new Taco Bell restaurant builds beyond sites already committed to, so that we can work with Yum! to regain traction on top line sales and profitability. Turning now to slide four and KFC Australia in more detail. Our solid top line growth mitigated margin headwinds. Total revenue was up 10.6% to AUD 479.6 million, underpinned by 5.1% same-store sales growth and the benefit of three new restaurants in the half, which is 10 additional restaurants versus 12 months prior. Our Australian footprint now stands at 264 restaurants for KFC. As I mentioned earlier, same-store sales growth was primarily driven by e-commerce, which was supported by the launch of Uber Eats as well as increased ticket. Transactions were broadly flat versus prior comparable period. Underlying EBITDA margin was 19.8% on a pre-double AASB 16 basis. Underlying EBITDA margin was 15.8%, which was down on prior year, but in line with internal forecasts for the half. As called out at our FY2022 results earlier this year, significant input cost inflation and higher than normal minimum wage increases were the key items impacting margin for the half. Moving now to slide five. The KFC brand continues to be well-positioned, retaining its leadership amongst KFC QSR brands in the critical value and quality metrics. Our value perception remains at historic highs and brand consideration continues to improve, which is a key indicator of brand health. KFC's brand strength and heritage are critical for weathering times of economic anxiety and low consumer confidence, and our permanent value layer supports affordability and engagement with regular customers as well as less frequent users. KFC's overall approach of maintaining pricing increases at or below CPI has reinforced KFC's value proposition, supporting consumer trust and perception of brand value. It is worth noting that more than 95% of our inputs are locally sourced, minimizing the impact of shipping costs, port disruption, and foreign exchange. KFC has worked to increase supply chain diversification to ensure continuity of supply and mitigate cost pressures more generally. As you can see from slide six, digital and delivery remain a key enabler of growth in our KFC Australia business. E-commerce sales, which include delivery, web, and app, accounted for more than 22% of total sales in the half, a sizable increase from the 16% at the end of FY2022. Delivery sales, including delivery as a service, were up strongly, with the addition of Uber Eats in July extending the brand presence to all aggregators. On a related note, we have seen minimal impact from Deliveroo's exit from the Australian market. Click and collect ordering through the app and kiosk sales steadily increased as consumer adoption grew. New versions of the app, website, and kiosk software were launched in September, with strong activation campaigns, including our left-handed menu. If you're wondering about the significance of 11, there are 11 KFC secret herbs and spices, and as it turns out, 11% of the population is left-handed. KFC app has also continued its strong following, with current CRM efforts actually doubling revenue from personalized offers. Turning to slide 7, innovation has played a key role in our development initiatives in KFC Australia. As mentioned earlier in the presentation, during the half we opened 2 new restaurants and acquired another, with 2 additional restaurants opened so far in the second half. This puts us well on track to build nine to 12 restaurants in FY2023, with this pace remaining ahead of development agreement requirements of seven to eight per annum. Particular highlight in the first half was the opening of our Queen Street Mall flagship KFC. This restaurant showcases enhanced consumer design, upgraded equipment efficiencies, and sustainability initiatives supporting recycling and clean energy. Continuing with the theme of sustainability, solar installations are now complete across all available drive-thru rooftops in our network, representing a total of 145 restaurants. Digital CapEx investments continue, with all restaurants planned for external digital menu boards by year-end and 32 restaurants are currently operating kiosks. Turning to our KFC Europe business on slide 9, which generated impressive same-store sales growth over the first half. Revenue was up 32% to AUD 111.8 million, underpinned by strong same-store sales growth of 10.4%, as well as the benefit of acquisitions made in FY2022. The same-store sales performance reflected both price and transaction growth, up 9.2% in the Netherlands and 14.6% in Germany. European EBITDA margins at 11.8% on a post-double AASB 16 basis or 5% on a pre-double AASB 16 basis, were impacted by unprecedented inflation throughout the first half, with significant rises in labor and utility costs, and across all supply chain categories. Moving to slide 10. The focus on core products and everyday value is resonating with consumers and has underpinned growth in European sales, which are now considerably above pre-COVID levels. In the Netherlands, a range of coordinated marketing tactics have underpinned top-line growth, which has partially mitigated short-term inflation and labor challenges. In addition, we also successfully launched and sustained our new veggie offering at one of the highest levels globally, providing a distinctive brand halo given growing consumer interest in plant-based products. To address margin headwinds and consumer uncertainty, we have implemented a range of initiatives, including focused price point promotions, pan-European supply tenders, and an updated digital roadmap. Turning to the next slide. The Netherlands development potential is being unlocked under the CFA, with restaurant numbers increasing and pipeline building. Two KFC restaurants were opened in the Netherlands by sub-franchisees, and Collins Foods will open a further three of our own in December. As a result, our expected total market growth of six in 2022 will unlock our CFA incentive. We have worked to expand our development team's capability to support new restaurant openings in both the Netherlands and Germany, and continue to monitor the franchisee landscape in Netherlands and Germany for possible acquisition opportunities. Slide 12 highlights some of the benefits that are already starting to show from the Netherlands CFA, underpinning Collins Foods position as a KFC growth partner. These include the successful integration of Yum! and Collins Foods support teams under Collins leadership, increased franchisee engagement and support, nimble marketing and pricing strategies to help cushion the impact of cost inflation, as well as innovations in restaurant design and e-commerce. We've had a positive response from Yum! on the results from the first year of the CFA, which has helped position Collins Foods as a leading partner for growth for Yum! in Europe. Moving now to Taco Bell Australia on slide 14. Revenue was up 42.6% to AUD 21.1 million, reflecting an increase in restaurant numbers from 17 to 24 year-on-year, including 4 openings during the half. With same-store sales declining 7.8%, our ability to translate revenue growth into earnings was challenging. With EBITDA below break-even pre and post AASB 16. EBITDA profitability at the restaurant level, excluding new restaurant opening costs and brand G&A, was AUD 1.2 million. The equivalent on a pre-AASB 16 basis was -AUD 0.29. As I mentioned earlier, we have taken an AUD 11.9 million non-cash impairment for eight Taco Bell restaurants in the half. Turning to slide 15 and a closer look at sales in Taco Bell. After seeing some positive signs in same-store sales at the end of our last financial year, we witnessed a reversion to negative numbers in the first half. We attribute this result to a few factors. First, consumers do tend to shift back towards more well-known brands during times of economic uncertainty, as we're experiencing now. Second, an increasingly competitive QSR landscape. Lastly, more internally, we have been managing through a transition to the new creative agency and chief marketing officer in the brand. We are implementing a bold set of initiatives in the second half to regain traction in our sales momentum. First, by expanding our reach after a successful pilot. It's worth noting that in its first full week of launch, we noted significant positive same-store sales across the portfolio, which is encouraging. Secondly, a tighter focus on distinctive products at more traditional QSR price points. Further, we expect additional financial and marketing support from Yum! to help build the brand in Australia, and we continue to upgrade ingredient quality to further raise the bar on taste. The next slide covers our Taco Bell new restaurant development. four drive-thru restaurants were opened in the first half, increasing our total Taco Bell footprint to 24 restaurants overall across the three states of Queensland, Victoria, and Western Australia. Notably, after the completion of our five to six restaurants currently under development, we have made the decision to pause further development as we work with Yum! to strengthen the brand proposition and drive confidence, particularly in top line sales. Our renewed development rollout will be connected with achieving quarterly sales and profitability targets. We do continue to believe in the potential of the Taco Bell brand in Australia, where Mexican food is the fastest-growing QSR category. Look forward to recommencing the rollout in due course. Turning to Sizzler Asia on slide 18, where we have seen a positive recovery post-COVID. Royalty revenue of $1.8 million increased 100%, resulting in an EBITDA of $1.2 million. Strong results relative to the prior comparable period reflect the impact of COVID lockdowns in 2021 and positive momentum post-reopening. We'll now hand over to Nigel to provide an overview of Collins Foods' first half FY2023 financial performance. Thank you, Drew O'Malley. Turning to slide 20, net operating cash flow for the half was AUD 69.1 million on a post AASB 16 basis, and AUD 42.8 million on a pre-AASB 16 basis, slightly down on the prior half, in part due to lower EBITDA, but also due to a working capital outflow of about AUD 5 million, which was mostly connected to paying invoices for the construction of new restaurants built at the very end of our last financial year. The operating cash flow continues to support business investment and our dividend. Capital investment initiatives totaling AUD 30.9 million included AUD 14.5 million in new restaurants, AUD 8.1 million in remodels, and AUD 7.8 million towards digital, sustaining, and other initiatives. An interim fully franked dividend of AUD 0.12 per share has been declared. Turning to the balance sheet on slide 21, which reflects our growing restaurant footprint. The cash balance of AUD 93.4 million was down slightly from the end of FY2022. Property, plant, and equipment of AUD 211.4 million reflects the ongoing spend on new restaurants and acquisitions, less development depreciation. The right of use asset and corresponding liability are both up slightly due to the rental elements inherent within the opening of new restaurants. Net assets of AUD 395.7 million was up slightly from the FY2022 balance date. With a healthy balance sheet, our funding capacity remains strong, as shown on slide 22. Our net leverage ratio remained at comfortable levels, coming in at 1.31 times for the half, providing significant headroom to the covenant maximum of 2.75 times. Note here, the net leverage ratio is calculated on a pre-double AASB 16 basis, consistent with the measurement criteria in our syndicated facility agreement. Net debt has increased by AUD 16.2 million to AUD 191.1 million over the half, in part due to acquisition activities. However, as the cash flow shows, we've been able to continue to reinvest in the business, pay the dividend, and afford M&A activity comfortably within our covenant boundaries. With a current facility headroom of up to AUD 380 million, we maintain significant funding capacity to support future growth. I will now hand you back to Drew to talk through the outlook for the second half. Thanks, Nigel. On slide 24, let me provide some commentary by business unit concerning the outlook for the balance of the year and beyond. KFC Australia continues to trade well and has experienced 5.6% same-store sales growth for the first six weeks of the second half. Given additional supply cost pressure which materialized during the first half, we now expect FY2023 EBITDA margin pre-AASB 16 to compress into the 15% to 16% range. Additional menu pricing and procurement initiatives are expected to mitigate further cost inflation into FY2024, though a full recovery of margin may extend into FY2025 and beyond. We do expect further growth in our digital and delivery channels, already at more than 23% of sales in the second half, and we remain on track for nine to 12 new store developments this financial year. In KFC Europe, we have seen same-store sales growth of 14.8% in the first six weeks of the second half, including 15.1% in Netherlands and 13.9% in Germany. We do expect the significant margin headwinds to continue into FY2024 in this region, with some mitigation expected for menu pricing, sales leverage, and procurement. In terms of new restaurant developments in the second half, as previously mentioned, three new restaurants will be delivered in December, with the development pipeline continuing to expand for future years. We also continue to monitor the landscape for additional M&A opportunities in both European markets as well as in Australia. In Taco Bell Australia, while the first six weeks have remained challenging with an 8.5% decline in same-store sales, as noted, we achieved positive same-store sales in the first week of the Uber Eats rollout and are encouraged about the months to come. We are focused on returning to sustainable positive same-store sales growth in the second half through the Uber Eats rollout, continued upgrades to product quality, and enhanced marketing initiatives supported by increased commitment from Taco Bell International. We do expect continued margin pressure on the second half and are targeting to reestablish positive EBITDA at restaurant level on the half. We will also complete the build of the 5-6 additional restaurants already committed to prior to the pause in development. I'd like to close on slide 26 with a reiteration of Collins Foods' long-term success recipe, especially in the current environment. Most economic forecasts seem to anticipate that 2023 will be a challenging year for the consumer and most businesses. Our strengths at Collins Foods are well suited to navigate turbulent environments, as we have seen in recent years. We have a healthy balance sheet with world-class scalable brands. Our specialization is in the resilient, value-centric QSR sector. Our focus remains squarely on delivering operational excellence. We have an exceptional team of experienced QSR operators running our business. Lastly, we have a proven track record delivering growth by both M&A and new store builds. That concludes the formal presentation. I would now like to open the call for questions. Rachel, over to you. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you need to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. The first question comes from James Ferrier with Wilsons. Please go ahead. Hi, Drew and Nigel. Thanks for your time today. Could I first of all ask about the just margins in KFC Australia and your outlook commentary there? Could you provide a little bit more color on what the additional supply cost pressures are that you're seeing in that business? Yeah. Thanks. Good morning, James. Yes, indeed. Yes, as you'll recall on the, on the full year, we had anticipated, you know, about a 1% to 1.5% decrease in margins in FY2023, with more impact in the first half. Indeed, our current EBITDA percentage is in line with our internal forecasts. However, during the half, we did absorb some higher expected, higher than expected increases on some of our key inputs, that's reflected in our new pro-projection. Look, you know, like all businesses, we're certainly not immune to cost inflation. Some of the increases we've seen have been on core inputs, such as chicken, French fries, oil, so some of the key ones in our top 5 that were above expectations in the first half. Look, you know, I think overall, just kinda rounding back on the margin piece and supply, I think as you know, our track record, shows how disciplined we are around margins. To be clear, we're committed to full margin recovery, but it's just difficult to put a precise timeline on that in the current environment. One thing we can say for certain is we don't wanna do it at the expense of the long-term trust we've built up in our brands with consumers. Thanks, Drew. Following on from that, I think you had one or two of your poultry suppliers were due for a renewed contract toward the end of this calendar year, and that probably fits in with what you were just saying a moment ago around poultry as a core input contributing to that higher margin impact or greater margin impact. With respect to the new contracts and the pricing in them, just keen for a bit of color around the quantum of increase in the underlying pricing relative to what sort of agreement KFC have reached around the implementation or ongoing surcharges that have been a feature of that arrangement for a while now. Yeah. Thanks, James. Look, we have indeed noted that most of our chicken contracts or several of our chicken contracts go to the end of this calendar year. The renewal discussions are underway. As you might imagine, especially now, we're not able to disclose any specifics given the sensitivity of those discussions. you know, bear in mind we're having those conversations with multiple suppliers, so we need to be particularly careful on that front. We can confirm that we have already taken some increases in chicken costs during the current calendar year, you know, simply to provide some relief to our chicken suppliers, and that should flow through into next year. I'd say additionally, probably encouragingly, you know, some commodities appear to have peaked, and we're now seeing some of those costs starting to decline, and that may help to alleviate some of the pressure on input costs. Again, you know, the, the key around chicken prices is that, you know, right now is when we're looking at some of the renewal conversations. There's a lot of sensitivity, and I need to be a bit careful on sharing too much. Yeah. Understood. Last, question sort around margins then. Has there been any changes to your revenue assumptions that will have influenced the margin guidance, just given the interplay between the top and bottom line? No, I think, you know, generally we're seeing a lot of what we expected to see. I think generally, you know, we try to be. One of the things that as you're aware is really the lifeblood of this business is transactions, you know. Any time you take pricing, you create risk around transactions. Any, you know, decisions we make around areas like pricing need to keep this dynamic in mind. We're certainly aware of keeping the top line healthy and within that, keeping transaction growth strong, given the fact that, you know, we've been broadly flat on same-store transactions, which is to say there is still transaction growth overall, but same-store transactions are relatively flat. We do wanna be quite careful there. Margins are certainly something we're highly conscious of, but we do wanna make sure that the customer is at the forefront of the equation, and we keep top-line growth healthy. Yeah. That's, Thanks, Drew. That's a good segue into my next question. You mentioned that sort of on a like-to-like basis, transactions are flat in Australia. What was the trend rate sort of towards the back end of the half, and how is it trending early in the second half? I think broadly you'd have to kind of look at, you know, we share the first six weeks, you know, sales results, and you're seeing, you know, pretty similar numbers to what you saw in the first half. You can, you know, take some, you know, can probably take some measure of understanding out of that. You know, generally, as I think we've also alluded to, you know, in terms of consumer shifts within the category, you do tend to see a bit more growth in the dinner, and delivery occasions. You know, lunch a little bit less so. You know, typically dinner would be a higher ticket occasion than, you know, you'd see in earlier in the day. There's a few of those dynamics going into effect. Generally speaking, you're seeing, you know, still strong continuity in same-store sales, which is encouraging. Mm-hmm. Thanks, Drew. On Taco Bell, if I heard you correctly there's a new sort of Yum!-appointed or Yum! employee, chief marketing officer in Australia. Did I get that language correct, or is this an employee of Collins Foods? No, this is actually a Taco Bell International or Yum, more broadly employee. His name is Andrew Howie. He's so he's fully employed and paid for by Taco Bell International. We're very excited about Andrew. He's got a great background. It's not QSR per se, but certainly in the digital space. He's former Amazon. We think he's just got the absolutely the right approach to the brand. Again, you know, he's been on the ground in the first half. You know, I think we're seeing some real, you know, intriguing ideas and initiatives that we expect to see in the second half. That's Andrew Howie, and he is employed directly by Taco Bell International. Okay. Thanks, Drew. Just a quick one for Nigel, if I may. Nigel, just what your revised thoughts are around D&A CapEx and corporate costs for the full year, please. Yeah. Sure, James. look, I think depreciation's gonna be in and around AUD 50 million. CapEx is probably gonna be late AUD 80s, early AUD 90s. Central costs, I think you could probably assume there's a 5% to 10% year-on-year increase by the time we get to the end of the year. Your next question comes from Alexander Mees with Morgans. Please go ahead. Thanks very much. Good morning to Nigel. Just with regard to Europe to start with. I wonder if I can just clarify if your previous guidance to margins in 2023 is still valid of a 1 to 2 percentage point headwind. Then we've got an incremental 2 to 3 percentage points on top of that in 2024. If that's correct, I'm just wondering what has happened to make it incrementally that much worse in 2024 at this stage. Yeah. Yeah, that's fine, Alex. Yeah, it's 2% to 3% down in the current year, and we're expecting that to continue consistently into FY2024. So in terms of- No, no. 24 and 23 flat. Correct. Okay. Cool. That's that makes more sense. Thank you. Then just with regard to KFC Australia, I'm just trying to understand if you have 5% same store sales growth, which is very good, I'm just wondering what the ticket did during that period and if by implication, volumes I think Drew you referred to them being flat. Is that the right way to think of it? That 5% ticket increase and volumes flat. Yeah, that's exactly right. We generally don't try to break it down too much. I think that's probably about as much guidance as we've, you know, given before, it is the right way to think about it. Okay. That's including e-commerce, so presumably stores were a little negative. I'm sorry. With that, in terms of the flat volumes, is that across the piece, so e-commerce as well as stores? That would be overall. I'd say that one further note to bear in mind is remember that, you know, we do wear some impact from cannibalization as we build new stores, which can be as much as a point or a bit over a point on same-store sales. Some of that does impact things like transactions as well. Overall transactions are up for the business, but on same-store they've been roughly flat. Excellent. Thank you. just quickly on Taco Bell. how should we interpret the impairment of those 8 stores? Is that specific to these 8 stores or just a reflection on where the brand is at this moment in time? Yeah. Thanks, Alex. It's purely store asset impairment. There's no goodwill in the brand. It's 8 restaurants that we've impaired. Yeah. I'd say just, you know, going on a little bit more on Taco Bell. Look, we, you know, we certainly witnessed in the first half was, you know, simply a bit more of a delta between our internal targets and actual brand performance that was a bit higher than we'd liked. With the impairment of the eight additional stores, you know, I think pausing development was a bit of a pragmatic decision until we see more of the sustainable traction and key metrics like sales. Overall, you know, we still have strong belief in the brand and think that there's a great opportunity for Taco Bell in Australia. Yeah. I hope you're right. Just finally, and I know you're not gonna answer this, how long is the pause likely to be? I guess I'm gonna assume that you open no Taco Bells in FY2024. Any guidance would be helpful. Yeah, I don't think we've put a specific timeline on it. The way we do think about it, Alex, is we have quarterly milestones that we've crafted. Every quarter, I think we're gonna evaluate where we are and look at performance in line with those targets. I think as soon as we see results that I think meet our criteria and we believe in the sustainability of those results, then we would unlock growth again. We can't put a specific timeline on it, but we're hoping it's in the near future. Excellent. Thanks so much, Drew and Nigel. Thank you. Thank you. For anyone on the question queue, if you could just limit to three questions just so we can get through everyone. Your next question comes from Ross Curran with Macquarie. Please go ahead. Good day, guys. I'll just focus on one question. Just around Taco Bell, can we just go into, again, the write-off in some bit more detail? Can you help us understand the eight restaurants versus the portfolio of 24, why the write-down is limited to those eight? Is there anything specifically that those eight restaurants were doing that the other ones weren't, that it's leading to a different outcome in terms of what you assess the value there? Yeah. Look, thanks, Ross. Look, I'll give a preliminary answer, and then Drew might wanna make some extra comments. Effectively, the majority of those eight were kind of earlier built restaurants. I think there's some learnings that have been put into later restaurants that have contributed to some of those earlier restaurants and are not necessarily being precisely where we'd like them. I think overall it's just that, you know, those eight haven't, you know, gained the traction that we expected them to, whereas, you know, the balance of the portfolio have probably, you know, performed a little bit more closely in line with what we expected. It's purely a specific to those assets in those trade zones. They've reached a level of maturity where you can say, "Hey, we thought it's gonna be at X, and it's at Y." Is that the right way of thinking of it? Yeah, that's right. That's right. Yeah. I would think- Sorry, if the current reduction same store sales continues. N Is there a risk that the remaining part of portfolio has additional write-downs? Yeah. Look, I think there is a risk, Ross. We've called it out in the account. We've put some pretty fulsome disclosure in the financial statements towards the back in the section where we talk about asset value. You'll be able to draw your conclusions if you scour through that note. We've been pretty clear on what we've assumed and what would happen if those assumptions don't turn out to be fully true. Yeah. Thank you. Thanks, Ross. The next question comes from Elijah Mayr with CLSA. Please go ahead. Hello, guys. Just a couple of questions from me. Maybe just on KFC Australia, just on the price increases that the FY2022 results back in June noted there was, I think 1% to 2% in January, 1% to 2% in June, and then another four in the year ahead. Can you just talk about if that's gone through, and how much that price rise was and how you're sort of thinking about price increases going into calendar year 2023? Yeah. Look, I'd say generally we've gotta be a bit careful. We, you know, try not to disclose specific% on pricing too much for competitive reasons. I would say certainly any decisions made along these lines have been very thoughtfully done with the customer in mind. As a number of you are aware, we do a lot of, you know, consumer-centric pricing studies to, you know, really understand how consumers perceive the brand, willingness to pay, et cetera. We keep a close eye on how where customers are. You know, we certainly in this landscape where you see, you know, you're certainly seeing inflation across the landscape. We do those pricing studies with increasing frequency, and we keep a close eye on how customers are impacted by changes in cost of living. We wanna keep the brand affordable, and we want them to be able to come in and get a great, you know, great quality meal at a reasonable price. That's our North Star, especially at a time like this where I think most accounts would have next year looking to be challenging. We just wanna be very thoughtful around keeping our brand metric, our value metrics high. Thanks. Maybe just on the digital side of the business, are you able to sort of quantify, I guess, the contribution from Uber? I think previously you stated it was expecting to generate around 2 percentage points of percent for sales growth. Are you sort of able to quantify that and maybe the contribution from the kiosks that you've rolled out to date as well? Yeah. I think the Uber Eats performance has been broadly in line with expectations. Kiosks has done well. It's still in a relatively small percentage of the portfolio. Having said that, we do have 12 kiosks in our location in Queen Street Mall to be the highest number in a restaurant in Australia, and we're very pleased with the performance. Yeah, it is a part of the business that we think is important as we build, you know, the digital credentials for the brand. You know, generally speaking, we see it as another digital means by which consumers can interact with the brand. Yeah. Understood. Maybe just one final one just around acquisitions in the pipeline. Are you able to talk to if there's anything, I guess, in the KFC franchise in Australia or Europe, or if there's any sort of acquisition of brands outside of KFC brand that you're looking at as well? Look, I think it's fair to say we're always keeping our eyes, you know, on the landscape. Certainly KFC would be the sweet spot of what we'd be looking for. I think it's fair to say that, you know, we'd certainly keep our eyes open in the geographies of, you know, Germany, Netherlands, as well as Australia. Australia, typically you haven't seen too much activity given the strength of the brand. Europe, you'll have noted in recent years we have done some acquisitions there, and we do think there could be further opportunity in front of us, especially in an environment like this one. That's kind of our sweet spot, and that's probably what we're gonna continue to put most of our M&A attention on. Perfect. Thanks, guys. Thank you. Your next question comes from Tim Plumbe with UBS. Please go ahead. Hi, guys. Just three questions from me if possible, please. Just the first one, Drew, around chicken pricing and associated pricing increases. Appreciate you're in the process of negotiating those. At that lower 15% EBITDA margin, can you give us a bit of a sense in terms of what you're factoring into that guidance range? Are you assuming that you can kind of absorb half of the chicken pricing cost increases or 75% or all of it? First of all, good morning, Tim. I was a little worried. You're usually one of the first guys with questions, so it's good to hear that you're on the call. Look, I'd love to share more on that. We absolutely can't. I can't tell you enough that we are absolutely in the middle of these conversations right now. You know, I know Michael Clark, who runs supply chain for Yum!, and, you know, we've really gotta respect the sensitivity of that. I think to share sort of backward-looking or forward-looking information right now, I think would put him at a disadvantage. We need to respect that. Understood. Understood. Okay, second question around pricing. I think I've done this right, but our analysis suggests that some pretty material pricing increases going through in Netherlands in November in terms of burgers, meal, boxed meal deals, combo meal deals. Can you confirm? I understand if you don't wanna talk about percentages, but if you have put through some material pricing increases in November or if my analysis is wrong? Yeah, look, I think it's fair to say Europe is seeing, you know, even more inflationary pressure than Australia and certainly a lot of supply chain pressure to go along with it. You know, look, the same principles apply in terms of pricing in Australia and Europe. You know, certainly that's been a lever to a large degree that's been unavoidable in Europe. Without quoting, as you say, the specific percentages, what we can say is, you know, because of the size of the market and because of the position we're in as managing the corporate franchise agreement, we can be a little bit quicker, a little bit more nimble on pricing. I think it's also fair to say that given the relative size disparity of KFC, still, you know, pretty small versus some of the larger chains. We tend to be a bit more of a fast follower, if you will, around pricing, versus I think in Australia we really kinda run our own race. I'd say those principles apply in Europe. Overall, again, it starts with the consumer in mind, really making sure that in a period like this where there's a lot of economic anxiety, that we are being very thoughtful, very deliberate, very careful about price increases because we wanna respect the trust of the consumer for the brand. Got it. Then just the last question, maybe one for Nigel. Just in terms of interest costs. Nigel, how should we be thinking about FY2023, and given where interest rates are, maybe if you can give us a sense of run rate interest costs at the current interest rates? Yeah. Look, well, you're right. I mean, we're not immune to that, either. We, we do have a few, you know, fixed price deals in to insulate us a little bit over the next 18 months or so. You know, you will see an increase, but perhaps not quite as much as the market's gone up, recently, because we do have some fixed deals in place. Any chance of getting kind of a quantum or? Well, you know, I would say it's probably, you know, a couple of million higher than it's been. Probably AUD 2 or AUD 3 million. Sorry, sec. Sorry, second half? No, yeah. Sure. I'm talking year on year. Okay. Right. Run rate, not FY2023. Correct. Okay. Thanks. Thanks, guys. Appreciate it. Thanks, Tim. Thanks, Tim. The next question comes from TJ Marx with Barrenjoey. Please go ahead. Morning, guys. Can I just clarify the European margin guidance? If I'm understanding correctly now, you're expecting margins to be about 4% in FY2023 and FY2024? Because I was reading the presentation, I thought it was gonna be another step down into FY2024. Just to clarify that. The description you just gave of those percentages is correct. Yeah. Okay, great. Then within that, is there any major differences between Germany and the Netherlands in those margins? Netherlands has always been the stronger market, as we've probably described many a time on calls like this. That still remains the case. It's the one that's closer up to scale, closer to scale than Germany and a variety of reasons like that. There is a disparity between the two margins, with the Netherlands one being the stronger one. Peter, just to add on there. I think, you know, also anytime, you know, we certainly tried over the last couple of calls to provide as much, you know, kind of forward-looking information, which is a bit atypical for us, given the, given the landscape. We do have to, you know, always put the caveat on it that we're still in a very uncertain environment. Going forward, you know, we're giving you kind of our view based on the information we have today. We'll always have to stress that there's still a lot of uncertainty out there in terms of forward-looking projections. Yeah, makes sense. Then how are the other franchisees in the Netherlands looking? Like, obviously you're the biggest player over there, you should have the, assuming you have the best margins. Is there any distress with any other franchisees in the Netherlands? No, we're not aware of any distress from other franchisees in the Netherlands. You know, we're, you know, I'd say, you know, quite to the contrary, they've been quite pleased with Collins now being in charge of the market. You know, they're very big fans of Hans Miete, who's our CEO, who's Dutch over there. I think the way that he's, you know, the transparency with which he's worked with them. We've got a good relationship with them. You know, we obviously encourage the other franchisees to build. You've seen some evidence of that in the current year. It benefits the brand and all of us if all partners continue to build in the landscape. So far we're quite encouraged and they are as well. Even in the difficult landscape, we think that the partnership is working well. Great. Just quickly on Taco Bell. If, you know, if you can't turn that business around, is it possible for you to exit completely? You know, would that, if you were to wanna go down that path, the economics just weren't stacking up, would that impact any of the other agreements that you have with Yum, say, in the Netherlands or Australia? Yeah. There's no interplay. There's no interconnection. There's no development agreements we have in place at the moment around Taco Bell, to be clear. look, we're a long way away from even going down that road. We're still, you know, quite positive on the brand. We've got some great short-term initiatives in the second half to help us get the traction that we want. We've got a massive commitment from Taco Bell International that they see Australia as a strategic market. we're fully committed to making that work. that's the way we're looking at the brand right now in Australia. Okay. That's great. Thank you guys. Sure. Thank you, Peter. Your next question comes from Wilson Wong with Jarden. Please go ahead. A what? Good morning, guys. Thanks very much. Sorry, it's Ben over here. Apologies, I thought I had the wrong name in there. Just a first question from me was just around the Uber Eats side of things, just how you're seeing that in terms of margin impact? On, on KFC? Yeah, on KFC. Has it been dilutive to margin or not? Yeah. Look, I think the only thing we'd say, we're happy overall with the way that the deal is working. I think in terms of margin, one thing that we've shared in the past that, you know, we started in the delivery space was looking at it being margin neutral. I think the way we look at the business today is, you know, we do wanna make sure that we're getting our fair share of market share within the delivery segment. We do look at margins for the business holistically. Overall, I think from a margin perspective, we can say we're seeing what we expected to see on Uber. It is a profitable channel. You know, it fits well into, I think the, the sales channel portfolio that we have for the brand. Just a second one from me, apologies. I know you've had a few questions on this. Just in terms of the headwinds that you're facing from a cost perspective in Europe, I suppose what we're seeing at the moment is we're hearing things like utilities are going from sort of 2% to 3% of sales up closer to sort of 10%. Sort of set a pretty big minimum wage increase in Germany. Given that you're sort of expecting steady margins into 2024, are you sort of the view that you're gonna be able to recover that in price, or are you assuming quite a big normalization particularly around energy? This is where I'd start with that caveat on forward-looking. What I will say is to a couple of the points that you raised, yes, utilities has been a significant pressure in Europe. You know, the quantum of increase, you know, is two to three times, you know, what we saw last year. The percentages that you've quoted don't apply to our business. Nonetheless, there's been significant pressure. Having said that, you know, Germany, the government, I think, has supported, you know, to some degree, you know, some price relief for businesses and consumers. We haven't seen as much of that yet in Netherlands, it's still a bit of a volatile picture. Nonetheless, you know, what I shared earlier, if there's anything encouraging, I think on the supply cost headwind, it is that, you know, some of the supply costs appear to have peaked. You know, the energy cost piece is obviously has a lot to do with Russia and the conflict or the war in Ukraine. From a supply cost perspective, it's encouraging that, you know, the ports in Ukraine, in Odessa are reopened, and that certainly takes a bit of pressure off of things like grain prices and sunflower, you know, which is a big part of what comes out of that part of the world. You're right. There's further pressure still to come on the wage side. It's still a volatile environment, again, you know, we still feel good about where we are. As hard as it is to project where the business is gonna be going forward, we do anticipate that we can continue to keep the top line strong. For the long term, that's the most important piece of the business. Great. Just final one for me, just on that last point that you made. When you sort of look back over the last sort of 10, 15, 20+ years, sort of through these tougher macro backdrops, how do you sort of feel that KFC, whether it's Australia or globally, the network performs and the QSR category more broadly? I suppose what I'm getting at is do you feel that you should be able to deliver that sort of GDP plus type growth even in tougher macro because it is a bit more of a value treat yourself, pe ople trade down into that category? Yeah. You're doing my work for me. That's exactly right. We, we use the word resilience a lot to describe the sector, which is, you know, we can see trade down of people who wanna dine out, who trade down, you know, from other concepts into QSR. We do think that affordability piece and the value piece allows the sector to be resilient. KFC is especially strong in, you know, within that segment, and it's been one of the areas I think Yum! has done a very, very good job globally with KFC, is developing a very nuanced strategy around value and thinking about, you know, different approaches to abundant value, low price point value, et cetera, to ensure that, you know, again, you're relevant for the customer during difficult times. We're seeing a bit of that this year and, you know, I think it's fair to say that we're expecting to see more of it next year. We do like the positioning of the brand in a, in a time like this. Great. Thanks, Drew. Appreciate it. Thank you. Thank you. There are no further questions at this time. That does conclude the conference for today. Thank you for participating. You may now disconnect.