Wrap Text
Audited results for the year ended 28 February 2013
Famous Brands Limited
(Famous Brands or the Group)
(Incorporated in the Republic of South Africa)
(Registration number 1969/004875/06)
JSE Share code: FBR
ISIN code: ZAE000053328
Audited results for the year ended 28 February 2013
Revenue up 17% to R2 516 million
Headline earnings per share up 22% to 339 cents per share
Cash generated by operations up 21% to R482 million
Dividends per share up 25% to 250 cents per share
Overview
Despite the subdued macro-economic climate, the Group delivered a strong performance. Robust
results were reported across our franchising, manufacturing and logistics businesses. In addition, key
acquisitions were made and joint venture partnerships established to bolster both our brand portfolio
and supply chain capability. Towards the end of the period a comprehensive business model
transformation project was implemented which has positioned the Group for continued growth during the
decade ahead.
Financial results
The Group succeeded in surpassing its four-year vision to double the size of the business. Revenue
improved by 17% to R2,52 billion (2012: R2,16 billion) while operating profit rose 13% to R466
million (2012: R413 million), exceeding our milestone goal of R450 million. Group operating margin
was 18,5% (2012: 19,1%). Headline earnings per share grew by an impressive 22% to 339 cents per share
(2012: 278 cents).
Net interest paid decreased 64% to R4 million (2012: R11 million) due to a combination of reduced
interest rates and a well-managed working capital cycle.
The Groups tax rate declined to 28,3% (2012: 33,3%) in the reporting period due to the
replacement of Secondary Tax on Companies with the Dividends Tax levied on shareholders.
Cash generated by operations before changes in working capital increased by 11% to R503 million
(2012: R452 million). Working capital requirements absorbed R21 million due to increased business
activity, including a marked impact following expansion of our newly acquired coffee business. After
changes in working capital, cash generated by operations improved by 21% to a robust R482 million
(2012: R399 million). Tax and dividend payments were R360 million, 24% higher than last year. Net
financing raised of R82 million included proceeds from a well-priced two-year loan as well as a cash
contribution from the Coega Cheese (Pty) Ltd. non-controlling shareholder.
Net capital expenditure of R162 million (2012: R84 million) was incurred. This included R85
million for the acquisition of the Europa and Fego Caffé trademarks, R7 million for the acquisition
of Java Lava Beverage Manufacturers (Pty) Ltd. together with coffee roasting equipment of R5 million,
R33 million for the Coega Cheese plant, as well as Supply Chain expansion activities. R47 million in
aggregate has been approved for the year ahead.
The low level of borrowings, net of cash and bank balances, is unchanged from last years R81
million and represents merely 8% of equity (2012: 10%), enabling capacity to grow our business
organically or by acquisition.
Operational reviews
FRANCHISING DIVISION - DOMESTIC
The Domestic Franchising division, which comprises operations in South Africa and 15 other African
countries, performed well, with each one of the brands delivering satisfying results. Combined revenue
increased 12% to R495 million. Operating profit rose slightly ahead of revenue growth to R300 million.
The operating profit margin was 60,6%, primarily due to increased system-wide sales and intensive
cost containment achieved through attaining critical mass across the network.
System-wide sales across the Groups total brand portfolio (including new restaurants opened)
increased 13,1%, comprising an improvement of 11,2% in the South African operations and a 45% increase
in our rest of Africa region. Like-on-like sales for the Group grew 8,9%, comprising a 7,7% increase
in South African sales, while our rest of Africa turnover grew by 28%. The Groups rest of Africa
division now comprises 7,3% of total sales.
Average weighted menu price increases were contained to 5,6%, illustrating the strong real growth
achieved by this division.
A total of 140 new restaurants were opened across our brand portfolio during the period, 110 of
them in South Africa. In addition, 130 restaurants were revamped or relocated in South Africa and a
further six in Africa, north of our borders. This is a creditable performance given the general
slow-down in new property developments. We are particularly pleased with our entry into new rural
South African markets in which we were previously under-represented.
FRANCHISING DIVISION - INTERNATIONAL
Wimpy United Kingdom experienced another challenging year and reported a 9% decrease in revenue
Sterling and a 1% increase in Rand terms to R83 million. Operating profit declined 28% to R5 million.
The operating profit margin was 6,5%. This division comprises a very small component of the
business, making only a nominal contribution to Group revenue and operating profit, namely 3,3% and
1,2% respectively.
The Group is currently preparing for the maiden launch of our Steers brand in the UK market, in
Clapham, London, scheduled for July 2013.
We also recently announced Famous Brands expansion into India with the launch of a pilot
Debonairs Pizza restaurant scheduled for opening in Mumbai in July 2013.
SUPPLY CHAIN
Consolidated revenue grew by 19% to R1,92 billion, whilst operating profit rose 14% to R161
million. The operating margin was 8.4%.
Manufacturing
This division reported a 25% improvement in turnover to R715 million, derived from increased
revenue contributions from the coffee company, ice-cream and chicken fillet plants, first-time
revenue from the new boerewors and lamb sausage plant, and significantly increased beef patty
volumes.
Operating profit improved 11% to R98 million, resulting in a margin of 13,6%.
The revenue from warehousing activities previously reported on under the Manufacturing divisions
results has been transferred to the Logistics divisions results. Accordingly the prior year
comparative figures have also been adjusted.
In pursuit of the deliberate strategy to build and expand our manufacturing capability and
leverage opportunities in the supply chain, two key transactions were concluded:
- Effective 1 July 2012, the acquisition of a 60% controlling stake in Java Lava Beverage
Manufacturers (Pty) Ltd. - subsequently renamed the Famous Brands Coffee Company - which
supplies coffee and related hot beverage products to the Groups franchised network and the
retail market.
- Effective 1 October 2012, the establishment of a ground-breaking joint venture partnership with
the Coega Dairy company to form Coega Cheese (Pty) Ltd., which is 51% controlled by Famous Brands,
and will produce Mozzarella, cheese slices and cheese spread for the Group.
Logistics
This business grew both revenue and operating profit by 20% to R1,8 billion and R63,1 million
respectively, producing an operating margin of 3,5% unchanged from the prior year, which is an
outstanding achievement given exorbitant price increases in diesel and electricity. Key to these
results was the commissioning of a new distribution centre in Nelspruit and the relocation of the
Free State distribution centre.
Corporate action
ACQUISITION OF EUROPA AND FEGO CAFFÉ
The Groups strategy to acquire best-in-class brands which fill gaps in our repertoire and
establish a presence in market segments where we currently have limited or no representation was
strengthened with the acquisition of the Europa and Fego Caffé brands, effective 1 December 2012.
Subsequent events
ACQUISITION OF THE BREAD BASKET
Effective 2 April 2013 the Group acquired a 51% controlling stake in bakery and delicatessen brand,
The Bread Basket. This transaction will build the Groups manufacturing capability in specialist
baked products and confectionery, much of which is currently outsourced to external third-party
suppliers.
ACQUISITION OF TURN N TENDER
Further extending the Groups presence in the casual dining sector, we acquired a 51% stake in the
family steakhouse restaurant group Turn n Tender, effective 1 June 2013. The business currently
comprises five successful steakhouse restaurants and a choice-cuts butchery which will in time supply
brand-specific choice-cut meat products to the wider Famous Brands franchised network.
Directorate
Group Financial Director, Stanley Aldridge, will be retiring on 30 June 2013. He will be succeeded
by Norman Richards who joined Famous Brands in 2012 as Change Management Executive.
Prospects
There is little evidence to indicate that current trading conditions will improve materially in
the foreseeable future. General economic uncertainty will continue to hamper sentiment and spend,
and value will remain the key watchword in our industry. We anticipate that 2014 fiscal will be
another period of intense margin pressure and concerted competition.
In this environment, the Groups continued growth at above-industry rates will be derived from a
range of strategic initiatives aimed at getting closer to our customers and our consumers, and
further optimisation of the business model to ensure that every component performs at its peak.
Management is confident that the group-wide overhaul accomplished through the business
transformation project will position Famous Brands optimally to reach even greater heights in the
forthcoming years.
On behalf of the board
P Halamandaris K A Hedderwick
Non-executive Chairman Chief Executive
Declaration of ordinary dividend
Notice is hereby given that a final gross dividend No. 37 of 142 cents (2012: 120 cents) per
ordinary share payable out of income has been declared in respect of the financial year ended
28 February 2013. This will bring the total cash dividends to 250 cents (2012: 200 cents) per
share for the 2013 financial year, an increase of 25%.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade cum-dividend Friday, 5 July 2013
Shares commence trading ex-dividend Monday, 8 July 2013
Record date Friday, 12 July 2013
Payment of dividend Monday, 15 July 2013
Share certificates may not be dematerialised or rematerialised between Monday, 8 July 2013 and
Friday, 12 July 2013 both dates inclusive.
In terms of Dividends Tax legislation, the following additional information is disclosed:
The local dividend tax rate is 15% before utilisation of Secondary Tax on Companies (STC)
credits.
There are no STC credits used or to carry forward. The net local dividend amount is 120,7 cents
per share for shareholders liable to pay the Dividends Tax and 142 cents per share for shareholders
exempt from paying the Dividends Tax.
The issued share capital of Famous Brands is 97 827 435 ordinary shares.
Famous Brands tax reference number is 9208085846.
By order of the board
J G Pyle Midrand
Company Secretary 22 May 2013
Condensed consolidated statement of comprehensive income
28 February 29 February
2013 2012 %
R000 R000 change
Revenue 2 516 287 2 155 615 17
Gross profit 1 052 566 922 967 14
Selling and administrative expenses (586 724) (510 311)
Operating profit 465 842 412 656 13
Net interest paid (3 969) (10 652)
Profit before taxation 461 873 402 004 15
Taxation (130 821) (133 950)
Profit for the year 331 052 268 054 24
Foreign currency translation differences 19 337 7 837
Total comprehensive income for the year 350 389 275 891
Profit attributable to
Equity holders of Famous Brands Limited 328 805 266 811 23
Non-controlling interests 2 247 1 243
Total comprehensive income attributable to
Equity holders of Famous Brands Limited 348 142 274 648
Non-controlling interests 2 247 1 243
Reconciliation to headline earnings for the year
Earnings attributable to equity holders of 328 805 266 811 23
Famous Brands Limited
Impairment of goodwill 1 469 455
(Profit)/loss on disposal of property, plant, equipment
and intangibles (86) 172
Headline earnings for the year 330 188 267 438 23
Earnings per share - cents
- basic 338 278 22
- diluted 334 272 23
Headline earnings per share - cents
- basic 339 278 22
- diluted 335 272 23
Dividends to shareholders - cents
- interim dividend declared 108 80 35
- final dividend declared 142 120 18
Total dividends for the year 250 200 25
Ordinary shares
- in issue 97 827 435 96 192 435
- weighted average 97 377 435 96 102 435
- diluted weighted average 99 377 435 99 937 435
Condensed consolidated segmental information - business unit and geographical
28 February 29 February
2013 2012 %
R000 R000 change
Revenue
Franchising 494 850 439 946 12
Supply Chain 1 919 400 1 613 907 19
Manufacturing 715 418 573 436
Logistics 1 812 358 1 516 375
Eliminations (608 376) (475 904)
Corporate 19 007 19 829
South Africa 2 433 257 2 073 682 17
Franchising (UK) 83 030 81 933 1
Total 2 516 287 2 155 615 17
Operating profit
Franchising 299 886 264 685 13
Supply Chain 160 694 140 508 14
Manufacturing 97 618 87 784
Logistics 63 076 52 724
Corporate (129) (40)
South Africa 460 451 405 153 14
Franchising (UK) 5 391 7 503 (28)
Total 465 842 412 656 13
Condensed consolidated statement of changes in equity
28 February 29 February
2013 2012
R000 R000
Balance at beginning of year 840 370 708 594
Group total comprehensive income for the year 348 142 274 648
Group dividends to shareholders (222 866) (158 565)
Share-based payments 5 456 9 378
Movement in share capital 26 219 5 657
Increase in non-controlling interests 2 767 658
Total equity 1 000 088 840 370
Condensed consolidated statement of cash flows
28 February 29 February
2013 2012
R000 R000
Cash generated before changes in working capital 503 396 451 636
Increase in inventories (47 281) (44 430)
Increase in receivables (46 911) (15 690)
Increase in payables 73 075 7 194
Cash generated by operations 482 279 398 710
Net interest paid (3 969) (10 652)
Taxation paid (136 507) (131 719)
Net cash flow from operating activities 341 803 256 339
Dividends paid (223 173) (159 165)
Net cash retained from operating activities 118 630 97 174
Acquisition of businesses including intangible assets (92 257) (30 896)
Expansion capital expenditure of
- property, plant and equipment (49 608) (45 793)
- intangible assets (4 291) (1 030)
Replacement capital expenditure on property, plant and equipment (18 433) (9 776)
Proceeds from disposal of property, plant and equipment 2 239 3 263
Cash flow from investing activities (162 350) (84 232)
Movement in share capital and reserves 26 219 5 657
Cash contributed by non-controlling shareholder 12 283 -
Interest-bearing borrowings raised 130 000 -
Decrease in interest-bearing borrowings (86 325) (65 634)
Cash flow from financing activities 82 177 (59 977)
Change in cash and cash equivalents 38 457 (47 035)
Foreign currency effect 5 699 1 218
Cash and cash equivalents at beginning of year 40 580 86 397
Cash and cash equivalents at end of year 84 736 40 580
Condensed consolidated statement of financial position
28 February 29 February
2013 2012
R000 R000
ASSETS
Non-current assets 1 006 137 859 304
Property, plant and equipment 194 080 155 739
Intangible assets 800 470 694 977
Deferred taxation 11 587 8 588
Current assets 504 330 361 865
Inventories 167 277 119 987
Taxation 2 780 1 386
Trade and other receivables 249 537 199 912
Cash and cash equivalents 84 736 40 580
Total assets 1 510 467 1 221 169
EQUITY AND LIABILITIES
Equity attributable to equity holders of Famous Brands Limited 991 743 834 792
Non-controlling interests 8 345 5 578
Total equity 1 000 088 840 370
Non-current liabilities 130 456 106 624
Interest-bearing borrowings 77 313 52 216
Deferred taxation and lease liabilities 53 143 54 408
Current liabilities 379 923 274 175
Trade and other payables 281 752 191 523
Short-term portion of interest-bearing borrowings 88 514 69 936
Taxation 9 657 12 716
Total liabilities 510 379 380 799
Total equity and liabilities 1 510 467 1 221 169
Notes
1. Basis of preparation
These condensed annual financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the South African Companies Act, No. 71 of 2008 and the Listings Requirements of the
JSE Limited. These condensed results were prepared under the supervision of S J Aldridge CA(SA), in
his capacity as Group Financial Director.
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 2012 is Rnil.
3. Auditors
These condensed annual financial statements have been audited by RSM Betty & Dickson (Johannesburg) and their
unqualified audit opinion is available for inspection at the companys registered office.
4. Operating profit
28 February 29 February
2013 2012
R000 R000
The following have been accounted for in operating profit
- Amortisation of intangible assets 3 083 1 795
- Auditors' remuneration 3 635 3 053
- Depreciation of property, plant and equipment 30 472 27 241
- Foreign exchange (profit)/loss (270) 298
- Impairment of goodwill 2 040 1 242
- Profit on sale of property, plant, equipment and intangibles (119) (1 203)
- Operating lease charges on immovable property net of recoveries
from sub-leases 42 958 42 508
- Operating lease charges on movable property 2 750 2 102
- Transfer of share-based payment reserve 5 456 9 378
5. Capital commitments
Capital expenditure approved not contracted 46 942 35 328
Directors and administration
Non-executive: P Halamandaris (Chairman), JL Halamandres, P Halamandaris (Jnr),
T Halamandaris (Deputy Chairman), HR Levin, CH Boulle (Alternate to HR Levin), BL Sibiya,
SL Botha (Lead Independent Director).
Executive: KA Hedderwick (Chief Executive), SJ Aldridge (Group Financial Director),
DP Hele (Chief Operating Officer).
Registered office:
478 James Crescent, Halfway House 1685, PO Box 2884, Halfway House 1685
Email: investorrelations@famousbrands.co.za
Transfer secretaries:
Link Market Services (Pty) Ltd., (Registration number 2000/007239/07),
Rennie House, 19 Ameshoff Street, Braamfontein 2001, PO Box 4844, Johannesburg 2000.
Sponsor:
The Standard Bank of South Africa Limited
(Registration number 1969/017128/06),
3 Simmonds Street, Johannesburg 2001.
www.famousbrands.co.za
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