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Famous Brands Limited - Unaudited Consolidated Interim Results
FAMOUS BRANDS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1969/004875/06)
Share code: FBR & ISIN: ZAE000053328
("Famous Brands" or "the group")
UNAUDITED CONSOLIDATED INTERIM RESULTS for the six months ended 31 August 2005
Operating profit +34%
Gross revenue +38%
Dividends +62,5%
Headline EPS +49%
COMMENTARY
Overview: Famous Brands has delivered robust results for the six months ended 31
August 2005. A strong performance was reported by the Franchise division across
all brands countrywide. This in turn accelerated growth in the Food Services
division. Organic growth from existing franchises has been complemented by the
opening of a further 50 restaurants across the franchise network over this
review period. Management is confident that its goal of 80 new restaurants for
the full year will be achieved, if not exceeded.
With 1116 branded restaurants under franchise, Famous Brands is Africa"s leading
Quick Service Restaurant ("QSR")/casual dining franchisor. The group"s brand
portfolio comprises Steers, Wimpy, Debonairs Pizza, Fishaways, House of Coffees
Coffee Shops, Brazilian Coffee Shops and Whistle Stop restaurants. The group"s
Food Services division supplies to the franchise network a wide range of dry
goods, butchery, bakery and sauce products. Trufruit Juice company "Trufruit",
Baltimore Ice Cream "Baltimore" and Pouyoukas Foods are also housed in this
division.
Drivers of the group"s positive performance remain its repertoire of best-in-
class brands fuelled by the favourable economic climate, the heightened demand
for convenience and a growing trend to out-of-home consumption.
The competitive trading landscape has remained aggressive, and the group is
vigilant in ensuring that its brands remain contemporary and relevant to the
needs of the South African consumer. Whilst intensified competition was
experienced from traditional food retailers, it is considered that they served
to fuel the concept of out-of-home consumption and to grow the market, rather
than erode the group"s market share.
Financial results: Gross revenue increased 38% to R304,9 million (2004: R220,8
million), while operating profit improved 34% to R56,2 million (2004: R41,9
million). Headline earnings per share rose 49% to 42,7 cents (2004: 28,7 cents).
Investment in people, processes and equipment in the Food Service Division,
undertaken to accommodate planned future expansion, resulted in a slight decline
in operating margin to 18,4% (2004: 19,0%). A dividend of 13 cents (2004: 8
cents) has been declared, an improvement of 62,5%
Progress is on track to achieve the group"s strategic intent of growing its
position as the leading branded QSR/casual dining franchisor in Africa using
this platform to diversify into an integrated food and beverage company. This
goal continued to be advanced though optimal integration of acquisitions,
strategic capital expenditure and by growing the group"s brands.
Franchising division: Creditable turnover and profit growth was experienced
across the group"s brand portfolio. The Franchising division"s operating profit
increased 44% to R42,3 million (2004: R29,4 million) on the back of improved
gross revenue of R86,1 million (2004: R72,5 million).
These results are attributable to management"s ongoing commitment to renovation
and innovation, witnessed by retail footprint upgrades and constant menu re-
engineering across the total brand portfolio. Further to management"s stated
commitment to enhance marketing capability to drive growth, the group has
attracted high-calibre skills, cemented communications partnerships, and ensured
that media spend remains ahead of market share in order to endeavour to best
optimise on buoyant market conditions.
The group enjoyed success from new restaurants opened in and on the fringes of
traditional black areas, as well as in downtown metropolitan markets undergoing
the worldwide phenomenon of urban renewal. Strong growth opportunities abound in
these markets countrywide.
Food Services division: The vigorous performance delivered by the Franchise
operation escalated growth in the Food Services division. This together with the
inclusion of revenue from newly acquired Baltimore and Trufruit, improved gross
revenue by 50% to R222,8 million (2004: R148.8 million), while operating profit
increased 20% to R13,9 million (2004: R11,6 million).
Furthering the goal to become an integrated food and beverage company, the
period under review witnessed the division"s capital expenditure of R19 million
on facilities, skills development and management information systems. The
enhanced-capacity sauce production facility has been commissioned, and
improvements to the bakery and meat-processing facilities will be operational by
the end of November 2005. Management is satisfied that these enhancements will
position the group to start integrating the bulk of the Wimpy food services
business. It is envisaged that this large-scale integration programme will
comprise a two-phased process, with the initial phase focused on the
manufacturing component, and the second phase comprising the warehousing and
distribution component. The initial phase is currently under way, while the
latter phase will be implemented in approximately 18 months. Integration of the
manufacturing component alone is anticipated to augment group revenue by some
R80 million per annum.
With regard to the group"s recent acquisitions, both Trufruit and Baltimore have
been fully integrated into the business and have performed beyond management"s
expectations. Serviced by a joint sales organisation, these units now have
access to an increased number of food services customers and have consequently
grown turnover by 25% and 40% respectively. In anticipation of further growth, a
new facility has been leased for Baltimore in Cape Town, and some R6 million
will be expended on enhancing its capacity nationwide. These businesses are
expected to contribute approximately 7,5% of the Food Services division"s
operating profit.
Prospects: Approximately 70% of the capex budgeted by the group to enhance
capacity to take on the bulk of the Wimpy food services business has been
incurred and the group is now positioned to aggressively pursue that strategy.
QSR/casual dining trends experienced globally are rapidly gaining hold in South
Africa. With the growth of the emerged middle class and rapid development of
double income families, the shift to convenience and home meal replacement is
becoming a norm. Statistics reveal that out-of-home food consumption in
developed economies is as high as 80% whilst in South Africa it is as low as
20%. As global macro-lifestyle changes continue to evolve and become entrenched
in this country, it is expected that quick service restaurants and casual dining
will increasingly become a way of life.
Management anticipates an enhanced performance by the group in the forthcoming
six months based on the conventional upward trading trend over the peak holiday
season.
The group"s compelling business model complemented by favourable macro-economic
lifestyle patterns should continue to drive solid earnings growth.
Dividends: The Board of Directors has resolved to declare an interim dividend
(number 25) of 13 cents per ordinary share (2004 interim: 8 cents). The last
date to trade in order to participate in the dividend will be Friday, 4 November
2005. The shares will commence trading "ex" dividend from Monday, 7 November
2005. The dividend will be payable to all shareholders recorded in the books of
the company at the close of business on Friday, 11 November 2005 "record date".
The dividend will be payable on Monday, 14 November 2005. No dematerialisation
or rematerialisation of share certificates may take place between Monday, 7
November 2005 and Friday, 11 November 2005, both days inclusive.
On behalf of the Board
P Halamandaris T Halamandaris
Chairman Chief Executive Officer
19 October 2005
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited
Unaudited restated restated
six months six months year
ended ended Change ended
R000"s 31 Aug "05 31 Aug "04 % 28 Feb "05
Gross revenue 304 944 220 757 38 464 727
Operating profit 56 225 41 945 34 92 428
Net interest paid (2 710) (6 638) (14 531)
Net income before
taxation 53 515 35 307 52 77 897
Taxation (16 617) (10 368) (24 950)
Attributable profit 36 898 24 939 48 52 947
Adjusted for:
Impairment loss on
intangible fixed assets 294
Loss on loans written off 1 075
Profit on disposal of
non-current assets (138) (540) (2 728)
Headline earnings 36 760 24 399 51 51 588
Interest 414 422 847
Fully diluted headline
earnings 37 174 24 821 50 52 435
Weighted average number
of shares in issue 86 179 583 85 043 249 85 155 132
Weighted average diluted
number of shares in issue 93 253 374 90 977 040 92 228 923
Operating margin - % 18,4 19,0 (3) 19,9
Earnings per share -
cents 42,8 29,3 46 62,2
Fully diluted earnings
per share - cents 40,0 27,5 45 58,3
Headline earnings
per share - cents 42,7 28,7 49 60,6
Fully diluted headline
earnings per share -
cents 39,9 26,9 48 56,9
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited
Unaudited restated restated
six months six months year
ended ended Change ended
R000"s 31 Aug "05 31 Aug "04 % 28 Feb "05
Assets
Non-current assets 253 894 219 190 222 907
Tangible fixed assets 44 512 21 633 29 002
Intangible fixed assets 206 671 191 455 190 734
Deferred taxation 413 2 391 1 428
Loans 2 298 3 711 1 743
Current assets 126 956 100 884 125 691
Inventory 39 002 32 507 29 055
Accounts receivable 80 466 53 061 77 054
Bank 7 488 15 316 19 582
Total assets 380 850 320 074 348 598
EQUITY AND LIABILITIES
Share capital and
reserves 216 974 166 145 188 421
Ordinary shareholders"
interest 216 974 166 002 188 421
Outside shareholders"
interest - 143 -
Non-current liabilities 65 104 77 390 72 944
Interest-bearing
borrowings 63 346 75 576 70 562
Other 1 758 1 814 2 382
Current liabilities 98 772 76 539 87 233
Accounts payable 70 811 46 606 64 958
Short-term portion of
long-term liabilities 16 575 22 195 20 326
Shareholders for dividend 187 155 148
Taxation 11 199 7 583 1 801
Total equity and
liabilities 380 850 320 074 348 598
SEGMENT REPORT
Unaudited Unaudited
Unaudited restated restated
six months six months year
ended ended Change ended
R000"s 31 Aug "05 31 Aug "04 % 28 Feb "05
Gross revenue
Franchising 86 147 72 481 19 157 603
Food Services 222 823 148 789 50 309 190
Corporate Services 14 323 15 241 (6) 33 982
Journals (18 349) (15 754) 16 (36 048)
Total 304 944 220 757 38 464 727
Operating profit
Franchising 42 295 29 359 44 63 858
Food Services 13 873 11 559 20 21 453
Corporate Services 1 352 937 44 8 278
Journals (1 295) 90 (100) (1 161)
Total 56 225 41 945 34 92 428
CONSOLIDATED CHANGES IN EQUITY
Unaudited Unaudited
Unaudited restated restated
six months six months year
ended ended ended
R000"s 31 Aug "05 31 Aug "04 28 Feb "05
Restated balance at beginning
of period 188 421 144 255 144 255
Balance at the beginning of the
period as previously stated 169 460 135 400 135 400
Cumulative effects of IFRS
adoption 18 961 8 855 8 855
Net loss not recognised in the
income statement - currency
translation differences (1) (107) (503)
Attributable earnings 36 898 24 939 52 947
Net income for the period as
previously stated 36 898 19 549 43 472
Effects of IFRS adoption 5 390 9 475
Dividends (8 618) (3 401) (10 205)
Net movement in share capital - - 1 296
Share-based payments 274 316 631
Balance at end of period 216 974 166 002 188 421
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited
Unaudited restated restated
six months six months year
ended ended ended
R000"s 31 Aug "05 31 Aug "04 28 Feb "05
Net cash flow from operating
activities 40 828 33 299 51 547
Cash generated by operations 58 009 48 656 100 710
Net interest paid (2 710) (6 638) (14 531)
Taxation paid (5 892) (5 317) (24 420)
Dividends paid (8 579) (3 402) (10 212)
Net cash flow from investing
activities (38 803) (7 895) (15 766)
Expended on non-current assets (19 216) (8 831) (20 007)
Proceeds from disposal of
non-current assets 138 785 1 849
Investment in subsidiaries (19 170) - -
Decrease/(increase) in loans
receivable (555) 151 2 392
Net cash inflow from financing
activities (14 119) (6 916) (13 027)
(Decrease)/increase in share
capital and reserves - - 1 439
(Decrease)/increase in long-term
liabilities (14 119) (6 916) (14 466)
Change in cash and cash
equivalents (12 094) 18 488 22 754
Cash and cash equivalents at
beginning of period 19 582 (3 172) (3 172)
Cash and cash equivalents at end
of period 7 488 15 316 19 582
RECONCILIATION OF PREVIOUS GAAP TO IFRS
1. The unaudited results of the group for the six months ended 31 August 2005
have been prepared in accordance with accounting policies that comply with
International Financial Reporting Standards (IFRS), with the date of transition
to IFRS for the group being 1 March 2004.
2. The accounting policies are consistent with those applied in the comparative
financial periods, except for those which have arisen due to the transition of
IFRS.
3. The audited results for the 12 months ended 28 February 2005 have been
restated as unaudited due to the IFRS adjustments not having been audited by the
company"s auditors.
4. The disclosures required concerning the transition to IFRS and the resultant
changes in accounting policies are set out below:
Unaudited Unaudited Unaudited
restated restated restated
12 months six months IFRS
ended ended transition
R000"s 28 Feb "05 31 Aug "04 1 Mar "04
Balance Sheet
Equity as previously reported 169 460 135 400 135 400
Restatements for IFRS 18 961 8 855 8 855
- Intangible fixed assets -
Goodwill 7 741 - -
- Intangible fixed assets -
Trademarks 14 369 10 940 10 940
- Operating leases - application
of straight line basis (2 016) (2 085) (2 085)
- Property, Plant and Equipment 137 - -
- Financial Instruments (1 962) - -
- Deferred taxation 692 - -
Restated equity - IFRS 188 421 144 255 144 255
Income Statement
Net profit as previously reported 43 472 19 549
Restatement for IFRS 9 475 5 390
- Goodwill amortisation reversal 7 741 3 619
- Trademark amortisation reversal 3 429 1 772
- Operating lease adjustment 69 250
- Share based payments (631) (316)
- Depreciation of tangible assets 137 68
- Financial instruments
adjustment (1 962) -
- Deferred taxation effects 692 (3)
Restated attributable profit -
IFRS 52 947 24 939
5. The conversion to IFRS, with the exception of the items detailed below, did
not result in any material adjustments to the equity or profit and loss.
Accordingly no additional disclosure has been provided in terms of IFRS1 and IAS
34.
6. Intangible Fixed Assets - Goodwill In terms of IAS 3, Business
Combinations, goodwill is no longer amortised, but is subject to at least annual
impairment reviews. The group previously recognised goodwill on acquisition at
cost and amortised it on a straight line basis over its expected useful life.
Goodwill was reviewed for impairment when events or changes in circumstances
indicated that the carrying value was potentially not recoverable. Goodwill
amortisation previously recognised in the income statement has been reversed
with a resultant increase in equity.
7. Intangible Fixed Assets - Trademarks In accordance with IAS 38, Intangible
Assets, trademarks have been assessed to be indefinite useful life intangibles.
Trademarks are no longer amortised, but are subject to at least annual
impairment reviews. The group previously amortised trademarks on a straight line
basis over their expected useful lives. Trademarks were reviewed for impairment
when events or changes in circumstances indicated that the carrying value was
potentially not recoverable. Trademark amortisation previously recognised in the
income statement has been reversed with a resultant increase in equity.
8. Business combinations Business combinations occurring after the date of
transition to IFRS are accounted for by applying the requirements of IFRS3. The
group has not, in terms of the exemption provisions of IFRS1, retrospectively
applied IFRS3 to business combinations occurring prior to transition date.
During the period under review, the group acquired 100% interest in the equity
of Baltimore Foods (Proprietary) Limited and Trufruit (Proprietary) Limited for
an aggregate amount of R19,4 mio. The aggregate value of the underlying assets
at the date of acquisition was as follows:
Non-current assets R6 351 815
Inventory R1 831 676
Accounts receivable R4 269 789
Interest-bearing liabilities R5 178 215
Accounts payable R5 439 606
Directors: P Halamandaris (Chairman), T Halamandaris (Chief Executive Officer),
KA Hedderwick, JL Halamandaris*, HR Levin*, P Halamandaris (Junior)*, B Sibiya*
*Non-executive
E-mail: investorrelations@famousbrands.co.za
Website: www.famousbrands.co.za
Registered office 478 James Crescent, Midrand 1685
PO Box 2884, Halfway House 1685
Transfer secretaries: Ultra Registrars (Pty) Limited
(Registration number 2000/007239/07)
11 Diagonal Street, Johannesburg 2001
PO Box 4844, Johannesburg 2000
Date: 19/10/2005 08:00:17 AM Supplied by www.sharenet.co.za
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