Famous Brands defies slump to deliver strong quarterly results

Famous Brands has reported robust results across the Group’s business – encompassing its branded franchise network, logistics, and manufacturing operations – for the quarter March to May 2013. System-wide franchise sales increased 16.8%, comprising a 16% improvement in South Africa and a 27.2% improvement in sales in the rest of Africa region. Like-on-like sales grew 9.6%, with South Africa and the rest of Africa operations delivering growth of 9.3% and 13.2% respectively. The average weighted menu price increase was 4.25% illustrating the real growth achieved. Famous Brands CE Kevin Hedderwick comments, “These results derive from our extensive portfolio of brands turning in a strong first quarter performance, underpinned by our growing logistics and manufacturing capability.” He says, “Our ‘gorilla’ brands all performed exceptionally well with most of them recording comparable year-on-year double-digit growth, notwithstanding the sheer size of these individual businesses and the fact that their growth comes off a huge base. He adds, “It was not just our brands which talk to mainstream South Africa that delivered stellar results, but also the likes of tashas at the premium niche end of the spectrum, which produced astonishing growth, turning in a 22% rise in sales versus the prior year.” During the quarter 34 new restaurants were opened. Hedderwick notes, “Of the 30 restaurants opened in South Africa, 18 are in new emerging markets. We are especially pleased with our entry into these markets where we were previously under-represented and where our brands are viewed as aspirational. This penetration into new emerging markets is part of a deliberate strategy to make our brands available, accessible and affordable.” “While a moratorium on new liquor licences had hampered the Gauteng roll-out of the revamped Keg brand, the Group successfully launched its flagship Keg & Thistle in Durban – the original home of the brand; two further restaurants, the Keg & Goose in Krugersdorp and the Keg & Copperfield in Lusaka, will open in June and July respectively, providing encouraging evidence that our Keg brand is gaining some momentum,” he says. New restaurant openings across the brand portfolio will ramp up in the second quarter of 2013, with 46 restaurants planned. The Group also recently announced that it would be opening its first Steers restaurant in Clapham, London, and Debonairs Pizza restaurant in Mumbai, India. Hedderwick says that while the Group’s primary focus is on the African continent, where there is a strong business case and obvious demand for their brands (such as Clapham and Mumbai), international markets will be considered. “We’ve long considered exporting Steers to the UK, fuelled by the constant requests from expatriates living in London craving a taste of home. Having researched the market we believe that the timing of this launch is right, and that our flame-grilled offering will create as much excitement and recognition in the UK as in South Africa.” Hedderwick notes that in the current socio-economic environment the food services industry continues to evolve. He elaborates on the key trends shaping the sector at present:
  • A shifting consumer profile (the black middle class has grown from 1.6 million people in 2004 to 4.2 million, and their disposable income has increased by 35%);
  • Value is ‘the new black’ (the competitive trading environment and general economic downturn has trained consumers to look for value – which they perceive as price, quality, relevance and convenience); and
  • Convenience matters (a lot). Consumers are no longer eating three traditional meals a day – these are fragmenting into nibbles and bites at non-traditional times – with snacks accounting for one in five eating occasions. Accessibility and speed are paramount.
Hedderwick adds, “Particularly strong drivers of growth in the industry are breakfast and coffee – with ‘all-day’ breakfasts identified as a key future trend; while coffee is no longer seen as a meal accompaniment, but is increasingly being purchased as a snack meal.” Expanding on the quarterly results, Hedderwick says, “Growth in our other components of the business was also impressive. The Supply Chain delivered a 20.8% increase in sales with the Logistics division contributing 15.8% of that improvement and the Manufacturing division recording growth of 34.6%, including the new Famous Brands Coffee Company contribution (23.2% excluding the coffee business). Hedderwick states, “There is a range of opportunities which we plan to capitalise on in the period ahead. Amongst those is to unlock the potential of our new acquisitions including Turn ‘n Tender, The Famous Brands Great Bakery Company (The Bread Basket’s specialist bakery facility), Famous Brands Choice Meats Company and of course growing the volumes and range out of our Coega Cheese company.” “Additionally, we are enthusiastic about the potential to grow our presence on the African continent. The rest of Africa is fast becoming the playground for opportunistic investors and with more than 12 years’ experience in the region, we believe our strategy to deepen our presence in specifically targeted markets will continue to serve us well,” says Hedderwick. He concludes, “In the current doom-and-gloom environment, I am encouraged by these results and believe they set the tone for the Group’s performance for the balance of the current fiscal year.” This announcement has not been reviewed or reported on by the Group’s external auditors.     Notes to editors:
The Group’s brand portfolio at 31 May 2013 comprised 2 175 restaurants. The Group also manufactures and supplies its franchisees and the retail trade with a wide range of meat, sauces, spices, cheese, bakery, ice cream, fruit juice, mineral water, coffee and other hot beverage products.
For further information:
Kevin Hedderwick Chief Executive Officer Famous Brands Ltd Telephone: 011 651 5812 Del-Maree English Investor Communications Mobile: 083 395 8608