Famous Brands Delivers 14th Consecutive Year of Growth - Reporting Record Turnover, Profit and Margins

Famous Brands Delivers 14th Consecutive Year of Growth – Reporting Record Turnover, Profit and Margins

 

REVENUE
up 16% to R3.3 billion
OPERATING MARGIN
up to record high of 20.5%
DIVIDENDS
up 18% to 355 cents per share
OPERATING PROFIT
up 19% to R672 million
HEADLINE EARNINGS
per share up 15% to 467 cents
RECORD NUMBER OF NEW RESTAURANTS
opened: 258

Johannesburg; Monday, 25 May 2015: “The Group’s stated goal, set down in 2013, was ‘To become Africa’s first choice integrated branded food services franchisor by 2015 by building capability across the business and providing a holistic solution to investment partners and consumers’. During the reporting period Famous Brands successfully concluded achievement of this goal through our ongoing strategy of leveraging skills and scale across all three pillars of the business – Brands, Manufacturing and Logistics,” comments Group Chief Executive, Kevin Hedderwick.

FINANCIAL RESULTS: Hedderwick says, “In the year ended 28 February 2015, the Group recorded its 14th consecutive year of growth, reporting record turnover, profit and margins. This strong set of results, delivered in extremely testing trading conditions, is a reflection of robust system-wide sales by the franchised Brand portfolio and continued improvement in efficiencies and cost containment in the Logistics and Manufacturing divisions.”

Revenue increased by 16% to R3.3 billion (2014: R2.8 billion) and operating profit rose 19% to R672 million (2014: R566 million). A best-ever operating margin of 20.5% was achieved. Headline earnings per share improved 15% to 467 cents per share (2014: 406 cents per share).

Cash generated by operations, after changes in working capital, grew by 20% to R713 million (2014: R594 million). Net cash retained from operations increased to R184 million (2014: R152 million), after tax payments of R202 million (2014: R167 million) and dividend payments of R327 million (2014: R271 million), totalling R529 million (2014: R438 million).

Net capital expenditure of R96 million (2014: R112 million) was incurred. No bank finance was raised during the period. The Group remained ungeared and has net cash on hand of R126 million (2014: R91 million), positioning the business to capitalise on organic and acquisitive growth opportunities as they arise.

The Board has declared a final gross dividend of 200 cents (2014: 170 cents) per ordinary share, payable out of income. This brings the total cash dividends to 355 cents (2014: 300 cents) per share for the 2015 financial year, an increase of 18%.

OPERATIONAL REVIEWS

FRANCHISING: The Group’s Franchising division consists of three regions: South Africa, Rest of Africa and International (United Kingdom (UK), the Middle East and Mauritius).

Hedderwick notes, “Across the Group’s total franchise network system-wide sales (which include new restaurants opened) increased 10%, while like-on-like sales grew 4%. A record number of 258 new restaurants were opened across the brand portfolio, bringing the total restaurant network to 2 545. During the period 160 restaurants were revamped.”

SOUTH AFRICA: “In the context of continued pressure on consumers’ disposable income, solid results were reported across the Group’s mainstream and emerging brands portfolios,” says Hedderwick.

Revenue increased 14% to R615 million (2014: R538 million), while operating profit rose 12% to R365 million (2014: R325 million). The operating profit margin declined to 59.4% from 60.4% in the prior year reflecting slightly softer performances reported by Wimpy and Steers. This decrease is contextualised by the exceptionally high base which these brands come off, and constrained discretionary spend in the mainstream middle income market.

System-wide sales increased 10% while like-on-like sales improved by 4%.

In the year under review 213 restaurants were opened (2014: 144).

The Group has set a target of 202 new restaurants for the year ahead.

“Furthermore,” Hedderwick elaborates, “our ambition is to expand the Group’s presence in the table service evening dining environment, which affords strong growth opportunities for the business. Supplementing an internal focus on existing brands with offerings relevant to this market, management will also continue to explore suitable acquisition opportunities related specifically to this dining occasion.”

REST OF AFRICA: With 20 years’ of experience and representation in 16 countries, Famous Brands has a strong presence in the Rest of Africa, and robust ambitions to up-weight that position.

System-wide sales improved 18%, while like-on-like sales grew 5%. This region’s contribution to total system-wide Group sales is 9%.

During the period 41 (2014: 16) new restaurants were opened in the region, of which 15 were Debonairs Pizza restaurants, including the brand’s maiden offering in Benguela in Angola. After several years’ absence, the Steers brand re-entered Botswana, opening a restaurant in Gaborone.

Hedderwick notes, “In pursuit of the Group’s stated strategy to win the race to Africa, the target for new restaurants in the year ahead is 35, including a maiden entry into Ghana.”

INTERNATIONAL

UNITED KINGDOM: While the economy showed signs of improvement, consumers remained cautious in the allocation of discretionary spend.

“Notwithstanding this context, the division reported its best-ever performance, based on improved top-line growth in the Wimpy operation, intensified management of the cost base and right-sizing the business in alignment with current economic conditions,” comments Hedderwick.

Revenue in Sterling decreased by 3% while revenue in Rand terms improved 11% to R102 million (2014: R92 million). The foreign currency translation gain amounted to R12 million. Operating profit rose 60% to R21 million (2014: R13 million). The operating profit margin improved to a record high of 20.1% from 14.0% in the comparative period.

During the period two new Wimpy restaurants were opened and three revamps were completed.

It is planned to open two further Wimpy restaurants in the forthcoming year.

Hedderwick remarks, “The Group’s stated intent has always been to use the Wimpy UK platform as a beachhead to grow Famous Brands’ footprint in the years ahead. Based on the health of our UK business, management is considering opportunities to expand activities and unlock the value of this investment, either via acquisition or joint ventures with suitable food services operators in the country.”

MIDDLE EAST: Famous Brands continued to expand its footprint in this region with the opening of its maiden Steers and tashas restaurants in Dubai.

SUPPLY CHAIN: The Group’s Supply Chain consists of its Logistics and Manufacturing businesses, which are managed and measured separately.

“Both divisions recorded exceptional results for the review period,” says Hedderwick. Consolidated revenue increased by 17% to R2.5 billion (2014: R2.1 billion), while operating profit rose 29% to R262 million (2014: R204 million). The operating margin improved to 10.4% from 9.5% in the comparative period.

LOGISTICS: Revenue reported by this division increased 15% to R2.2 billion, while operating profit rose 16%. The operating profit margin remained in line with the prior year at 4%.

The division has budgeted capital expenditure of R36 million for the forthcoming year.

MANUFACTURING: This division delivered a particularly impressive performance, derived from substantial improvements in yields, further enhancements in cost management and a very strong full-year contribution from the Coega Cheese business.

Revenue grew by 24% to R1.3 billion (2014: R1.0 billion), while operating profit increased by a remarkable 36% to R173 million (2014: R127 million). The division’s operating margin improved to 13.7% from 12.5% in the prior year.

Capital expenditure of R18 million has been budgeted for the year ahead to boost capacity and capability in the business.

PROSPECTS: The forecast for disposable income growth in the year ahead is conservative and continued uncertainty in the economic, political and labour environments will weigh further on consumer confidence.

“In this context,” says Hedderwick, “growth in the forthcoming period is expected to be muted; however, the business’ strong investment proposition will continue to afford above-average returns for shareholders. Management is confident that Famous Brands is sufficiently resilient, agile and innovative to surmount the challenges faced.”

Hedderwick notes, “In preparation for the next five years of planned growth, the Group has launched its 2020 strategy which centres on positioning Famous Brands to compete aggressively as one of the leading branded leisure and consumer product businesses in Africa and selected international markets. The key tenet of this strategy is diversification of the Group through leveraging capabilities and building scale across the business.” He concludes, “The necessary investment will continue to be made in people, processes and systems as required.”

 

 

Notes to editors:

The Group’s brand portfolio at 08 March 2015 comprised 2 545 restaurants, namely: Steers (588), Wimpy including UK (616), Debonairs Pizza (508), FishAways (215), Mugg & Bean (180), Milky Lane (64), Fego Caffé (34), Europa (21), Mr Bigg’s (153) and emerging brands (166) including tashas, Vovo Telo, O’Hagan’s, Giramundo, KEG, The Brewers Guild, Coffee Couture, Net Café, Turn ‘n Tender, The Bread Basket and House of Coffees. The Group also manufactures and supplies its franchisees and the retail trade with a wide range of meat and chicken products, bread and bakery products, sauces and spices, ice cream, fruit juice, coffee and cheese.

For further information:

Kevin Hedderwick
Group Chief Executive
Famous Brands Ltd
Telephone: 011 651 5812
Julian Gwillim
Aprio
Mobile: 082 452 4389