Forensic Analysis: Collins Foods ASX:CKF

🗓 June, 2025
🌐 Website: www.collinsfoods.com

Here is a forensic financial analysis of Collins Foods (ASX:CKF), based on its Appendix 4E and 2025 Annual Report for the year ended 27 April 2025.

📊 Balance Sheet

Risk Indicator	Status	Comments
Goodwill >25% of Assets	✅	Not flagged in summary; likely below material threshold.
Rising Receivables Days	✅	No evidence of adverse receivables movement or commentary on deterioration.
Inventory Growth vs Profit	🔹 Not Applicable	Inventory commentary not disclosed; restaurant model limits relevance.
High Borrowings	✅	Net debt fell to $137.9M with leverage ratio down to 0.93 from 1.07.
Loans to Related Parties	✅	No indication of such transactions.
Idle Cash	✅	Cash deployed toward growth and dividend; not excessive idle cash noted.

📈 Income Statement

Risk Indicator	Status	Comments
Revenue vs Profit Divergence	🔴	Revenue up 2.1%, but statutory NPAT plunged 88.5% to $8.8M.
Capitalised R&D/Interest	✅	No evidence of aggressive capitalisation.
Extraordinary Items	🔴	$42.3M in non-trading items (impairments, compliance provisions).
Tax Rate Drop	✅	Effective tax rate stable YoY.
Profit vs Cash Flow	✅	Operating cash flow ($181.4M) well above NPAT; strong conversion.
One-Off Gains Boosting Profit	✅	No abnormal gains in FY25 (FY24 included Sizzler Asia sale).

🏩 Governance, Disclosure & Audit

Risk Indicator	Status	Comments
Auditor Changes	✅	No change noted.
Audit Qualifications	✅	Clean audit opinion.
Exec Departures	🔶	CEO turnover in FY25 with handover to new MD; managed transition.
Transparency Issues	✅	Clear disclosures, especially on impairments and provisions.
Board Weakness	✅	Experienced, diversified board with relevant industry expertise.
Executive Pay Misalignment	🔶	STI forfeited due to low NPAT; LTI vesting tied to performance.
Promotional Language	🔶	Optimistic tone present, but balanced with discussion of challenges.

🧠 Strategic Risk Factors

Risk Indicator	Status	Comments
Chronic Unprofitability	✅	Underlying NPAT $51.1M; not chronically unprofitable.
Revenue < Capex	✅	Capex and expansion aligned to revenue scale.
Funding Dependency	✅	No equity raises in FY25; debt reduction evident.
Customer Concentration	✅	QSR model, diversified locations; no concentration risk noted.
Pre-commercial Product Risk	✅	Fully commercial model.
Short Cash Runway	✅	Strong operating cash flow and reduced leverage.
Regulatory/Compliance Exposure	🔶	Wage compliance issue noted, under remediation with regulator.
Leadership Turnover During Expansion	🔶	CEO handover during strategy reset and Taco Bell exit.

✅ Final Summary

Category	🔴 Red Flags	🔶 Amber Flags
Balance Sheet	0	0
Income Statement	2	0
Governance / Disclosure	0	3
Strategic Risk Factors	0	2

🔴 Total Red Flags: 2
🔶 Total Amber Flags: 5

🔶 Amber & 🔴 Red Flag Overview

🔴 Revenue vs Profit Divergence: Statutory NPAT collapsed despite record revenues.
🔴 Extraordinary Items: Heavy impairments and provisions weighed on earnings.
🔶 Exec Departures: CEO change during a critical transition period.
🔶 Executive Pay Misalignment: STI forfeited, LTI aligned but past payouts suggest performance sensitivity.
🔶 Promotional Language: Optimistic tone despite subdued results.
🔶 Regulatory/Compliance Exposure: Wage review and Fair Work liaison ongoing.
🔶 Leadership Turnover During Expansion: New CEO amid European and structural repositioning.

Disclaimer: This report is for educational purposes and does not constitute financial advice. It does not account for personal circumstances. All investors should conduct their own research or consult a qualified adviser before making financial decisions.