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FBR - Famous Brands - Press Release - Famous Brands Quarterly Review FAMOUS BRANDS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1969/004875/06) Share code: FBR & ISIN code: ZAE000053328 ("Famous Brands" or the "company") PRESS RELEASE - FAMOUS BRANDS QUARTERLY REVIEW GROWTH DRIVES FAMOUS BRANDS FORWARD Highlights (quarter March - May 2007) System wide retail sales growth of 14.8% Like on like retail sales growth of 4.6% Opened 18 new restaurants Total franchised network, including the UK, reaches 1492 restaurants Steers, Debonairs Pizza and Wimpy voted amongst Top 10 "Coolest Brands" Johannesburg, 12 July 2007 - The quarter from March to May 2007 has seen an interest rate hike, a petrol price increase and much talk regarding implementation of the National Credit Act. These events have begun to put pressure on consumer spending, a trend being evidenced by the Group`s restaurants situated in major shopping malls where turnover trends have been below the national average. For the quarter ending May 2007, the group reported system wide retail sales growth of 14.8%, while like on like retail sales growth came in at 4.6%. Kevin Hedderwick, Chief Operating Officer said, "The trading environment, although robust, is beginning to lag and margins are being affected by increased input prices. Double digit price increases have been felt in meat, poultry and dairy products. In this regard we have recently appointed an external consultant who has been briefed to robustly examine taking costs out of the Group`s supply chain in order to protect both our own as well as franchisee margins." Furthermore the Group has invested R25 million in imported beef which should enable Famous Brands to hold price increases to the consumer to October 2007 at least. FRANCHISING DIVISION - INTERNATIONAL: Darren Hele, MD of the Wimpy UK business, who was seconded from SA, has settled in well and in a short period of time has done an excellent job of re- energising the staff, the franchise network and supplier base in the UK. Work is in progress to open the first new look Wimpy restaurant in Benfleet, Essex towards the end of September 2007, which will be used as the benchmark for upgrading the entire UK footprint going forward. In addition, an entirely new menu aimed at re-positioning the brand away from being a predominantly burger business will be launched nationally in October this year. Benfleet has also opened the way for a shift in the business model towards a royalty based income stream, a process which has begun to gain acceptance across the network. In addition to the Benfleet accomplishment, the Wimpy UK brand has successfully negotiated entry into three football stadiums on commencement of the new season, namely Crystal Palace, Charlton Athletic and Coventry City. Hedderwick says "turnover from the UK operation is trending upwards and although marginal at this stage we are well on track with implementation of our plan to turn this network around over the next two years." Franchising Division - Domestic: This quarter has seen the Group open 18 new restaurants, taking the total global footprint to 1492 restaurants with the milestone of 1500 restaurants being passed at the end of June 2007. The successful conversion of Whistle Stop restaurants to Steers Diner`s continues, with converted sites returning turnover growth in excess of 40%. This conversion programme is well on track and it is envisaged that the remaining 19 sites will be converted by end November 2007. Debonairs Pizza, Wimpy and Steers brands all made it into the Top 10 "Coolest Brands" list in the Sunday Times Generation Next survey, further proof of the Group`s mainstream brands continual demonstration of "best in their class" positioning. Further accolades enjoyed this quarter include The Star`s Best of the Best survey where Steers was voted "best burger" and "best take away", Debonairs Pizza "best pizza" and Wimpy "best breakfast" and "best dessert menu". The exponential growth of the FishAways brand is further evidenced via the brand making its national television debut towards the end of July 2007. MANUFACTURING DIVISION: The manufacturing division has turned in a strong performance, 34% ahead of budget, with good growths being recorded by the meat processing plant, sauce plant and juice plants in particular. This division continues to make good progress regarding the extraction of better margins via increased efficiencies. HACCP accreditation is progressing well, more so within the Bakery and Sauce Plants. LOGISTICS DIVISION: This division has shown an increase of 2.4% versus budget for the quarter under review. Relocation of the expanded Durban warehouse and distribution facility was successfully concluded on 1 June 2007 and work on the Port Elizabeth warehouse and distribution facility expansion programme is progressing well. Plans are at an advanced stage whereby the logistics division will commence with the distribution of own manufactured Wimpy products to the Wimpy franchise network. FOOD SERVICES DIVISION: As previously advised, forward integration of the Wimpy Tomato Sauce and Wimpy Mustard products is progressing, and the group expects to have these products available in selected supermarket chains across the country towards the end of July 2007. GROUP FINANCIAL DIRECTOR: With effect from 20 August 2007 Craig McLeary has been appointed Group Financial Director and Company Secretary. Craig, who holds a BCom (Hons) and is a Chartered Accountant, was previously with Sappi and Barloworld. PROSPECTS: Despite increased pressure on disposable income, management continues to hold the view that the Group`s brands are relatively resilient in a recessionary environment and continue to be driven by the ongoing consumer trend towards convenience and out of home consumption. Hedderwick concludes "that for as long as we ensure that our brands and their respective offerings continue to remain relevant, aspirational and offer value for money, the robust profit and earnings objectives set for the Group this year and beyond should be achievable." Johannesburg 12 July 2007 Sponsor Java Capital (Proprietary) Limited Date: 12/07/2007 08:00:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department.
