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FBR - Famous Brands Limited - Audited results for the year ended 28 February

Release Date: 20/05/2009 07:05
Code(s): FBR
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FBR - Famous Brands Limited - Audited results for the year ended 28 February 2009 Famous Brands Limited Incorporated in the Republic of South Africa Registration number 1969/004875/06 JSE Share code: FBR ISIN: ZAE000053328 "Famous Brands" or "the Group" Audited results for the year ended 28 February 2009 Revenue increased by 30% to R1 549 million (2008: R1 190 million) Operating profit increased by 20% to R262 million (2008: R217 million) Headline earnings per share increased by 11% to 159 cents (2008: 144 cents) Total dividends for the year increased by 15% to 76 cents (2008: 66 cents) Cash generated by operations of R277 million, up 39% (2008: R199 million) Commentary Overview: This satisfactory set of results is again testament to the strength of the Group`s brands, which enjoy leadership positions in most categories in which the Group competes, demonstrating that classical brands probably fit better with the current mood of the consumer. Some of the challenges faced in the domestic market included lower disposable income from higher interest rates, spiraling food inflation and hikes in the price of petrol and diesel and raw materials. Internationally, the business in the United Kingdom (UK) was impacted by the deep recession that has taken hold globally. To mitigate the effects of the unyielding environment, and in line with our long-standing strategy, the Group continued to deliberately absorb certain input cost increases to contain retail selling prices and protect the profitability of our franchisees whilst continuing to pursue innovative menu offerings and maintaining our value-for- money positioning. This holistic strategy to bolster our franchisees against the downturn has been well received. Financial results: The Group`s stable of brands proved resilient with satisfactory increases in revenue across all of the operating business units and enhanced by particularly strong growth in the Logistics division. The Group grew revenue by 30% to R1,5 billion in the period (2008: R1,2 billion) and lifted operating profit by 20% to R262 million (2008: R217 million). This resulted in an operating profit margin of 16,9% compared with 18,3% in 2008. The decline in the operating margin is due to both the deliberate margin absorption strategy and a 41% increase in revenue in the low margin Logistics division where activities were expanded substantially to take on the Wimpy business. Expenses were well controlled increasing at a level below the rate of increase in gross profit. Net interest paid increased by 131% reflecting higher average borrowings as well as a fair value adjustment of R2,9 million on foreign borrowings. The increase in borrowings was mainly due to the acquisition of the Cape Franchising business assets and the tashas brand. Cash generated from operations amounted to a healthy R277 million, from which increased financing, tax and dividend payments were easily met. Capital expenditure for the year amounted to R33 million, mainly in expanding the delivery fleet and modernising plant in the manufacturing facilities. After taking into account a higher tax rate offset by a minority interest reversal, profit attributable to equity holders of the company increased by 17%. Headline earnings per share rose by 11% to 159 cents (2008: 144 cents) due to the impairment loss incurred last year. A final dividend of 40 cents per share has been declared and together with the interim dividend of 36 cents per share, amounts to total dividends for the year ended 28 February 2009 of 76 cents per share. This equates to an increase of 15% on the 2008 distribution to shareholders of 66 cents per share. The balance sheet reflects a strong position with a net debt/equity ratio of 0,46 below a target range of 0,6 to 0,8. Profitability returns remain solid represented by return on net assets of 37,4% (2008: 45,2%) and return on equity of 33,4% (2008: 38,0%). Franchising division - Local: This division performed well and contributed significantly to the Group`s overall performance. Revenue increased 15% to R299 million (2008: R260 million) and operating profit increased 31% to R186 million from R142 million. The division`s operating profit margin, enhanced by Cape Franchising, was 62,0% compared to 54,6% in the prior year. The division produced like-on-like sales growth of 9%, with system-wide sales (which includes new restaurant openings) up 14%. Steers recorded the opening of its 500th restaurant in July 2008, a special honour for the Group. The brand took the award for Best Burger, for the 13th consecutive year, and Best Chips, for the 11th consecutive year, as voted for by Leisure Options. To retain customer interest, relevance and appeal, Wimpy launched a new generation restaurant design in October 2008 and to date, 23 Wimpy restaurants have been revamped and are trading well. Wimpy received a number of accolades during the period, including: Best Breakfast in 2008, Leisure Options; 2nd "Coolest Place to Eat Out", Generation Next, Sunday Times Survey 2008. A major growth driver for Debonairs Pizza during the year has been the entry into the emerged market where the brand has met with phenomenal success. It launched the Debonairs Pizza Express concept, which has proven to be hugely successful in areas with high foot traffic. This concept is unique in that it caters specifically to the mass market consumer in search of speed and convenience. Four Debonairs Pizza Express outlets were opened during the year and are trading successfully. FishAways was involved in the commissioning of a new restaurant design and a national roll out is planned for the year ahead. The brand overtook its direct Quick Service Restaurant (QSR) seafood competitor to become the leading and largest QSR seafood brand in South Africa and in the process turned in a positive 27,5% system-wide sales growth. A strategic alliance with the Shell Petroleum Company has been concluded to extend the Brazilian Cafe business model to incorporate their existing bakery offering. A total of six such sites were opened during the year with a further 30 sites being planned for the year ahead. The year also heralded a new look for House of Coffees and a new smaller trading format was launched presenting new opportunities for the brand particularly within suburban markets. Effective 1 July 2008, Famous Brands acquired a 51% controlling stake in tashas, a successful upmarket casual-dining cafe concept. The business consists of two franchised restaurants and a further three new restaurant openings are planned for the year ahead. Franchising division - International: This year was characterised by the extraordinary economic challenges faced in the UK and the division recorded revenue, in Sterling terms, down 4,1% but in rand terms, up 2,5% to R180 million (2008: R175 million). Operating profit fell 12,1% to R17 million recording some benefit from the weaker rand offset by retrenchment costs of R2,7 million. Debt servicing and hedge-related finance costs absorbed much of this profit leaving the division marginally profitable for the year. The planned revamp programme, initiated in the previous year, which is the cornerstone of the Group`s strategy to turn the UK operation around, slowed down as the global credit crunch hit. However, seven revamps were concluded, with all trading to expectation. The unplanned expenses accrued in the period, which were required to further right size the business, will start to show benefits in the new financial year. In line with the initial strategy to use the Wimpy UK acquisition as a beachhead for the roll out of other Group brands, plans are now well advanced to open the first Steers restaurant in Earlsfield outside of London. Manufacturing division: This division reported revenue of R568 million (2008: R506 million) and operating profit of R42 million (2008: R48 million), resulting in a margin of 7,3% (2008: 9,5%). The Manufacturing division was impacted by the deliberate margin absorption strategy in order to protect retail turnovers and franchisee profitability. A number of structural and organisational changes have been implemented within this division, which has not yet delivered to its full potential. Logistics division: The division embarked on an expansion drive and through the skilful management of this programme continues to grow in stature within the Group. Volumes grew markedly and revenue for the year was R977 million (2008: R692 million) with operating profit at R23 million (2008: R15 million), and a margin of 2,4% (2008: 2,1%). Information technology systems have been introduced to optimise routing and scheduling of vehicles, reduce kilometres travelled and improve customer service. A warehouse management system is currently being piloted in Midrand and is expected to improve efficiencies, capacity utilisation and reduce inventories. Food Services division: This division made good progress during the year penetrating further, the retail and wholesale trade channels through the launch of our Wimpy Tomato Sauce and Mustard variants. Our mineral water brand Aqua Monte was launched to the franchise network, and the Trufruit brand was extended into all major cinema outlets across the country. Corporate actions Towards the end of 2008, the Group issued a cautionary announcement in relation to a proposed transaction, which was subsequently temporarily postponed until there is greater clarity surrounding prospects for the domestic and global economy. The acquisition of the Cape Franchising business late last year has been completed and effectively integrated into the Group. Board changes On 12 September 2008, Tom Pritchard resigned as Financial Director and Company Secretary and with effect from 1 November 2008, Stanley Aldridge was appointed Financial Director and Company Secretary of Famous Brands. Stanley brings with him more than 25 years of financial management experience in the retail and banking sectors and has already made a valuable contribution to the board. Prospects Economic conditions are not expected to improve in the year ahead. All indications are that consumer spending will remain under pressure as a result of local and global economic conditions. In South Africa, some respite will come from further interest rate cuts, although households are likely to use any additional discretionary income to pay down debt. Our brands and business remain well positioned for further growth and in the new financial year, the focus will be on extracting maximum value from our existing businesses and making productivity and efficiency gains across the entire Group. Dividend to shareholders Notice is hereby given that a final dividend (No 29) of 40 cents per ordinary share payable out of income has been declared in respect of the year ended 28 February 2009. Salient dates are: Last day to trade cum dividend Friday, 3 July 2009 Shares commence trading ex dividend Monday, 6 July 2009 Record date Friday, 10 July 2009 Payment of dividend Monday, 13 July 2009 Share certificates may not be dematerialised or rematerialised between Monday, 6 July 2009 and Friday, 10 July 2009, both dates inclusive. On behalf of the Board P Halamandaris Non-Executive Chairman T Halamandaris Chief Executive Officer Midrand 20 May 2009 Condensed income statement 28 February 29 February % 2009 2008 change
R000 R000 Revenue 1 549 244 1 190 301 30 Operating profit before impairment 261 916 217 383 20 loss Impairment loss - (7 807) Net interest paid (44 090) (19 117) Profit before taxation 217 826 190 459 14 Taxation (69 923) (59 378) Profit for the year 147 903 131 081 13 Attributable to: Equity holders of the company 150 330 128 642 17 Minority interest (2 427) 2 439 Profit for the year 147 903 131 081 13 Earnings per share - cents - basic 159 137 16 - diluted 159 134 Additional information Headline earnings (R000) (note 5) 150 283 135 190 11 Headline earnings per share (cents) - basic 159 144 11 - diluted 159 141 Dividends to shareholders (cents) - interim: dividend declared 36 33 - final: dividend declared 40 33 Total dividends for the year 76 66 15 Ordinary shares - in issue net of treasury shares 94 397 435 94 397 435 - weighted average 94 397 435 94 120 964 - diluted weighted average 96 417 436 95 670 304 Business unit and geographical segmental information 28 February 29 February % 2009 2008 change
R000 R000 Revenue Franchising 299 468 259 513 15 Food Services 1 082 631 756 114 43 Manufacturing 567 706 506 193 Logistics 976 688 691 553 Eliminations (461 763) (441 632) Corporate 53 355 50 598 Eliminations (65 732) (51 097) South Africa 1 369 722 1 015 128 35 International (UK) 179 522 175 173 Total 1 549 244 1 190 301 30 Operating profit Franchising 185 520 141 953 31 Food Services 61 466 61 453 0 Manufacturing 41 513 48 154 Logistics 23 055 14 705 Eliminations (3 102) (1 406) Corporate (2 768) (5 615) Eliminations 485 - South Africa 244 703 197 791 24 International (UK) 17 213 19 592 Total 261 916 217 383 20 Condensed cash flow statement 28 February 29 February 2009 2008 R000 R000 Cash flow from operating activities 97 349 75 731 Cash generated by operations 277 184 198 998 Net interest paid (44 090) (19 117) Taxation paid (70 673) (44 766) Dividends paid (65 072) (59 384) Cash flow from investing activities (200 484) (41 774) Expended on property, plant and equipment (33 107) (36 077) Acquisition of business (155 000) - Investment in subsidiaries (5 000) (8 690) Expended on intangible assets (8 168) (16 397) Proceeds from disposal of non-current assets 609 18 671 Decrease in loans receivable 182 719 Cash flow from financing activities 74 487 (16 219) Movement in share capital and reserves - 17 941 Increase/(decrease) in interest-bearing 75 721 (35 953) borrowings Share incentive scheme issues (1 234) 1 793 Change in cash and cash equivalents (28 648) 17 738 Cash and cash equivalents at beginning of 117 855 100 117 year Cash and cash equivalents at end of year 89 207 117 855 Condensed Balance sheet 28 February 29 February 2009 2008 R000 R000
ASSETS Non-current assets 693 774 525 227 Property, plant and equipment 130 404 110 965 Intangible assets 559 611 407 472 Deferred taxation 3 759 6 608 Loans receivable - 182 Current assets 358 433 330 906 Inventories 89 720 85 372 Taxation 2 006 808 Trade and other receivables 165 362 123 963 Cash and bank balances 101 345 120 763 Total assets 1 052 207 856 133 EQUITY AND LIABILITIES Equity attributable to equity holders of the 492 278 405 872 company Minority interests 12 2 439 Total equity 492 290 408 311 Non-current liabilities 293 490 230 654 Interest-bearing borrowings 249 378 188 333 Deferred taxation and lease liabilities 44 112 42 321 Current liabilities 266 427 217 168 Trade and other payables 151 603 125 998 Short-term portion of interest-bearing 65 114 50 438 borrowings Taxation 37 572 37 824 Bank overdraft 12 138 2 908 Total liabilities 559 917 447 822 Total equity and liabilities 1 052 207 856 133 Condensed statement of changes in equity 28 February 29 February 2009 2008 R000 R000
Balance beginning of year 408 311 303 479 Net (loss)/profit not recognised in the (278) 8 697 income statement - foreign currency translation reserve Share-based payments 2 722 4 824 Attributable profit 147 903 131 081 Distributions to shareholders (65 134) (59 502) Issue of share capital - 17 939 Share incentive scheme issues (1 234) 1 793 Balance at end of year 492 290 408 311 Notes 1. Basis of preparation These annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the South African Companies Act (1973) and the Listings Requirements of the JSE Limited. 2. Accounting policies The accounting policies applied by the Group are consistent with those applied in the comparative financial periods, except for the adoption of improved, revised or new standards and interpretations. The aggregate effect of these changes in respect of the year ended 29 February 2008 is nil. Certain prior year numbers have been reclassified to enhance comparability. 3. Auditors These financial statements have been audited by RSM Betty & Dickson (Johannesburg) and their unqualified audit opinion is available for inspection at the company`s registered office. 28 February 29 February 2009 2008
R000 R000 4. Operating profit The following have been accounted for in operating profit: - Auditors` remuneration 4 013 2 296 - Depreciation of tangible assets 19 359 16 455 - Foreign exchange (profit)/loss (2 037) 2 599 - Impairment loss of intangible assets - 7 807 - Intangible asset amortisation 531 - - Net (profit) on sale of businesses - (1 833) - Operating lease charges on immovable 26 810 15 559 property - Operating lease charges on movable 452 - property - (Profit)/loss on disposal of tangible (47) 574 fixed assets - Transfer of share-based payment reserve 2 722 4 823 5. Reconciliation to headline earnings Earnings for the year 150 330 128 642 - Impairment of intangible assets - 7 807 - (Profit) on disposal of businesses - (1 833) - (Profit)/loss on disposal of tangible (47) 574 fixed assets Headline earnings for the year 150 283 135 190 6. Capital commitments Capital expenditure approved not 16 296 39 056 contracted Directors Non-Executive: P Halamandaris (Chairman), JL Halamandres (Deputy Chairman), P Halamandaris (Jnr), HR Levin, B Sibiya Executive: T Halamandaris (Chief Executive Officer), KA Hedderwick (Chief Operating Officer) SJ Aldridge (Group Financial Director) Registered office: 478 James Crescent, Halfway House 1685, PO Box 2884, Halfway House 1685 E-mail: Investorrelations@famousbrands.co.za Transfer secretaries: Link Market Services (Pty) Limited (Registration number 2000/007239/07), 11 Diagonal Street, Johannesburg 2001, PO Box 4844, Johannesburg 2000. Sponsor: Standard Bank (Registration number 1969/017128/06), 3 Simmonds Street, Johannesburg 2001 Date: 20/05/2009 07:05:03 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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