Investment Committee report

“As the Investment Committee, we interrogate all investments against the overall business strategy. We also consider the difficult operating environment, including present and emerging risks, to make prudent investment choices.”

Mandate

The purpose of the Investment Committee is to assist the Board in discharging its oversight responsibilities regarding the Company’s investment strategy and policy. The Committee assists the Board in considering investment opportunities, approving acquisitions, disposals and capex, and reviewing the performance of previous investments.

Attendance and composition

South Africa faces serious socio-economic challenges with low growth, high unemployment and an increasingly under-pressure consumer. This environment means that we must look critically at the growth potential of our primary market, assess our current investment and seek opportunities outside our borders. We must grow our brand footprint in the AME region and investing in on-the-ground resources to support this footprint.

As a Committee, we provide oversight on the Group’s technology investments. In 2023, we tasked management with charting all the Group’s technology touchpoints. This includes where technology currently plays a critical role in the business or could potentially play such a role and how we can improve our technology enablement. Our aim with technology is to improve our service delivery to our franchise partners and consumers.

Read more about our consumer-facing technology.

Not all our investments are consumer-facing. For example, we have invested in implementing a best-in-class warehousing management system and automating processes in our Logistics division. This has unlocked significant operational efficiencies compared to manual warehousing management or alternative systems. In the new KwaZulu-Natal Distribution Centre, we realised a step change in productivity from implementing the system. While premium systems can be expensive, they are important to unleashing value and ultimately reducing overhead costs.

Evaluating investments in technology demands asking management the right questions.

This includes interrogating whether the investment matches the business need and seeking expert independent technical opinions.

From a business strategy perspective, we must find ways to ensure the business is more resilient. This includes investing to make the business more energy resilient. The escalation of load shedding has meant that investments in own generation are no longer optional. These include investments in more efficient and powerful generators to continue operating effectively. Famous Brands has begun installing solar plants on some operational sites. Increased load shedding expected electricity rate hikes and tax incentives have strengthened the business case for solar.

Focus areas for 2023

The Committee reviewed and approved the annual workplan and Committee Charter. The Committee evaluated key investment projects, including:

• Investments related to the completed relocation of the KwaZulu-Natal Distribution Centre.
• The acquisition of the Midrand Campus with the aim of redeveloping the property (read more on page 18).
• Approving the purchase of a 51% shareholding in the Lexi’s Healthy Eatery brand.
• Approving investment in newer, more efficient generators at operational sites and solar installations.
• Approving further investment in PAUL1 in the form of a flagship restaurant in the Victoria & Alfred Waterfront to open in 2024.
• Evaluating the continued relevance and role of our Signature Brands portfolio.
• Approval of the creation of a cell captive insurance vehicle which Famous Brands will fund smaller and regular claims.
• Reviewed the weighted average cost of capital calculation and impairments.
• Postponed the investment in the new dough plant due to a poor weighted cost of capital calculation.
• Considered and approved the capex for strategic technology projects.
• Considered the current and future investment needs for the Company-owned restaurant portfolio.

Focus areas for 2024

Our focus areas for 2024 include the following:

• Deciding on a path forward for Signature Brands portfolio, including a potential sale.
• Investing further in technology enablement at the front end and back end.
• Investing in the redevelopment of the Midrand Campus to unlock greater operational efficiencies.

I confirm that the Committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the financial year. I will be present at the AGM to answer any questions regarding the activities of the Committee.

Fagmeedah Petersen-Cook

Chairman: Investment Committee