Famous Brands delivers rewarding results for stakeholders despite difficult trading conditions

FAMOUS BRANDS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1969/004875/06) Share code: FBR ISIN code: ZAE000053328 (“Famous Brands”) REVENUE up 14% to R1.57 billion HEADLINE EARNINGS PER SHARE up 18% to 212 cents EARNINGS PER SHARE up 18% to 212 cents OPERATING PROFIT up 19% to R303 million DIVIDENDS PER SHARE up 19% to 155 cents NET ASSET VALUE PER SHARE up 16% to 1306 cents
Johannesburg; Monday, 27 October 2014: The strength of Famous Brands’ integrated business model is evident in the pleasing results reported for the six months ended 31 August 2014. Group Chief Executive, Kevin Hedderwick says, “While the front-end franchised operation delivered a satisfactory performance, reflecting reduced consumer spend across certain mainstream brands, the back-end Logistics and Manufacturing businesses recorded robust results, making a significant contribution to the Group’s overall improved results for the period. Enhanced efficiencies and cost containment were achieved across the entire business.” FINANCIAL RESULTS: Group revenue increased by 14% to R1.57 billion (2013: R1.38 billion), while operating profit rose 19% to R303 million (2013: R254 million). The operating margin grew to 19.3% (2013: 18.4%). Basic earnings per share (“EPS”) and headline earnings per share (“HEPS”) both improved by 18% to 212 cents per share. Diluted EPS rose 18% to 212 cents per share, while diluted HEPS grew by 17% to 211 cents per share. Cash generated by operations before changes in working capital increased by 17% to R318 million (2013: R271 million). Net cash outflow from investing activities of R60 million (2013: R43 million) was incurred primarily on supply chain expansion and upgrades, IT systems enhancement and acquisition of businesses and associated companies. There were no borrowings raised during the period and loans of R32 million were repaid. The Group’s net borrowings of R25 million (2013: R47 million) represent a low net debt/equity ratio of 2% (2013: 4%). The Board has declared an interim gross dividend of 155 cents (2013: 130 cents) per ordinary share, payable out of income. SOUTH AFRICA: The Group’s franchised brands traded in a highly challenging and fiercely competitive environment. Hedderwick comments, “Under these conditions, it is testament to their best-in-class status that the Group’s brands generally retained market share.” System-wide sales, including new restaurants, rose 9.1% and same store sales increased 3.4%, a particularly creditable result achieved in light of the Group’s consistently high performance base. “While improved like-on-like sales were reported across many of the Group’s brands, those brands which delivered strongest growth are the ones catering for the upper-end of the LSM spectrum, reflecting local economic conditions in which middle and lower income consumers have experienced the greatest decline in disposable income,” notes Hedderwick. REST OF AFRICA: The Group trades in 16 countries in this region. System-wide sales reported by the division grew by 15.5%, while like-on-like sales increased 8.9%. This territory now contributes 8.6% (2013: 8.1%) of total franchise system-wide sales. New restaurants were opened across the Group’s mainstream brand portfolio, with Debonairs Pizza’s footprint specifically, continuing to grow apace. “Significant progress has been made across the recently acquired Mr Bigg’s business in Nigeria. A range of opportunities has been identified to enhance efficiencies and upgrade skills sets which will deliver good gains in the near future,” says Hedderwick. UNITED KINGDOM: This operation delivered pleasing results. Revenue in Sterling was in line with the prior comparative period, while revenue in Rand terms increased 21% to R53 million (2013: R44 million). Operating profit grew by 88% to R8.8 million (2013: R4.7 million); the operating profit margin rose to 16.4% (2013: 10.6%). This division’s improved results are a function of management of the cost base and favourable foreign currency translation gains made during the period. SUPPLY CHAIN: The Group’s integrated Supply Chain comprises its Logistics and Manufacturing businesses. In the review period both divisions reported strong results. Consolidated revenue increased by 13% to R1.20 billion, while operating profit rose 33% to R108.2 million. The operating margin was 9.1% (2013: 7.7%). LOGISTICS: “For the first time, this division exceeded the one billion Rand turnover milestone for a six month period, reporting revenue of R1.04 billion (2013: R946 million), an increase of 10%,” notes Hedderwick. Operating profit rose 22% to R38 million. Despite above-inflation increases in input costs, including fuel, labour and toll fees, the business improved its operating margin to 3.7% (2013: 3.3%). “These robust results are a reflection of management’s steadfast campaign to improve efficiencies and cost management in the operation,” he says. MANUFACTURING: This division reported an increase in revenue of 33% to R597 million, while operating profit rose 40% to R70 million. The operating margin was 11.7% (2013: 11.1%). Hedderwick comments, “These strong results are attributable to a range of factors, most significant of which was the turnaround achieved at the Coega Cheese manufacturing plant.” PROSPECTS: Management anticipates that current trading conditions will persist for some time, and in the absence of a significant turnaround in the economy, all operating activities at the front- and back-ends of the business will be geared to capitalise on existing opportunities in the industry and across the operations. Hedderwick says, “Despite constrained consumer discretionary income management is optimistic about the forthcoming peak trading period. The foodservice sector will continue to grow, fuelled by the demand for convenience. Accordingly, aggressive promotional campaigns for our mainstream brands, supported by innovative, strong value propositions, will be implemented nationally and will peak over the November-December summer holidays.” He adds, “Our brands are represented at all major consumer hubs across the country and are therefore well positioned to capture any available spend. By December 2014 Famous Brands’ total network will have exceeded 2 500 restaurants, further increasing the brands’ accessibility to customers.” “As reflected in these results, the integrated Supply Chain plays a vital role in underpinning the success of the brands and profitability of the business as a whole. Ongoing improvement in efficiencies in both the Logistics and Manufacturing operations will ensure that the back-end of the business continues to grow its contribution to the Group’s performance,” concludes Hedderwick.     For further information:
Kevin Hedderwick Group Chief Executive Famous Brands Ltd Telephone: 011 651 5812 Julian Gwillim Aprio Mobile: 082 452 4389