Wrap Text
Audited results for the year ended 28 February 2014
Famous Brands Limited
(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 2014
Financial highlights
Revenue up 12% to R2.83 billion
Operating margin at record high of 20.0% up from 18.5%
Profit before tax up 23% to R567 million
Headline earnings per share up 20% to 406 cents
Dividend up 20% to 300 cents per share
Market capitalisation exceeds milestone R10 billion
Group overview
GROUP PERFORMANCE
Famous Brands’ stated goal is to become Africa’s first choice integrated branded food services franchisor by 2015
by building capability across our brands, logistics and manufacturing operations, providing a holistic solution
to the Group’s investment partners and consumers. It is therefore satisfying to report on a year which featured
not only strong results but also substantial progress made on the programmes which will achieve this goal and
drive the Group’s future growth trajectory.
FINANCIAL RESULTS
In the Group’s 13th consecutive year of reporting record turnover and profit, revenue increased by 12% to
R2.83 billion (2013: R2.52 billion), while operating profit grew 21% to R566 million (2013: R466 million). The
operating margin attained a record high of 20.0%, up from 18.5% in the prior year, and one year ahead of plan.
This improvement is a remarkable achievement given higher input costs, and is a reflection of increased
system-wide sales, intensive cost containment and improved efficiencies across the business.
Headline earnings per share grew 20% to 406 cents per share (2013: 339 cents).
Cash generated by operations, after changes in working capital, increased by 23% to a healthy R594 million
(2013: R482 million).
After tax payments of R167 million and dividend payments of R271 million, totalling R438 million
(2013: R360 million), net cash retained from operations grew to R152 million (2013: R119 million).
Net capital expenditure of R112 million (2013: R162 million) was incurred on acquisitions of businesses and
associated companies, supply chain expansion, fleet upgrade and IT systems enhancement.
No bank finance was raised during the period (2013: R130 million), and loans of R101 million were repaid.
The Group is ungeared and has net cash on hand of R26 million. This strong position facilitates further growth,
whether by acquisition or organically.
OPERATIONAL REVIEWS
Franchising
The Group’s Franchising division comprises three regions, namely: South Africa, Rest of Africa and International
(United Kingdom, Middle East, India and Mauritius).
System-wide sales across the franchise network grew 13.0%, while like-on-like sales increased 6.7%. Across the
brand portfolio, the Group opened 165 new restaurants and revamped 185.
SOUTH AFRICA
Revenue increased 13% to R538 million (2013: R477 million), with operating profit rising in line with turnover
growth to R325 million (2013: R287 million). The operating profit margin improved to 60.4% from 60.1% in the
prior year.
System-wide sales, including new restaurants opened, increased 11.4%, while like-on-like sales grew 5.8%. During
the period 144 restaurants were opened locally and 181 were revamped.
Solid performances were reported by the mainstream brands across the portfolio, while the Group’s recently
acquired and emerging brands continued to gain traction in their respective markets and play an important
role in bolstering the repertoire.
An ambitious target of 243 new restaurants has been set for the year ahead.
REST OF AFRICA
The Group has traded in this region for almost 20 years and has a presence in 16 countries. Management foresees
operations in the Rest of Africa becoming increasingly significant to the Group over time.
This division reported an increase in system-wide sales of 32.5%, while like-on-like sales grew 17.9%. The Rest
of Africa region now comprises 8.5% of total system-wide sales. During the period 16 new restaurants were opened
and four revamped.
The plan is to open 41 new restaurants across the brand repertoire this year and to enter Angola and Ghana, where
the Group has no representation.
CORPORATE ACTION:
Acquisition of 49% stake in UAC Restaurants Limited
On 1 October 2013 the Group concluded an agreement with UAC of Nigeria PLC, a leading diversified conglomerate,
to acquire a 49% stake in their hitherto wholly-owned company UAC Restaurants Limited (“UACR”), which houses the
flagship Mr Bigg’s brand, the single largest food franchise brand in Africa, north of the South African border.
UACR comprises 165 franchised restaurants across Nigeria and a small logistics and manufacturing component. The
acquisition was funded out of cash reserves and fell below the threshold of a categorised transaction in terms
of the Listings Requirements of the JSE Limited.
The Group plans to grow the Mr Bigg’s footprint in Nigeria by 10 restaurants in the year ahead.
INTERNATIONAL
UNITED KINGDOM (UK)
Notwithstanding dire trading conditions in this market, the Group’s UK operation recorded one of its best-ever
results - a reflection of a significantly better-managed cost base.
Revenue Sterling decreased by 6%, while revenue in Rand terms improved 11% to R92 million (2013: R83 million).
Operating profit rose to R13 million (2013: R5 million) as no repeat impairment of the UK goodwill was required.
The operating profit margin grew strongly to 14.0% from 6.5% in the prior year.
During the period the Group opened its first Steers UK restaurant, situated in Clapham, London. Three restaurants
were also added to the Wimpy network during the year.
In the forthcoming period the existing Wimpy Twickenham restaurant will be converted to the Steers brand and
an additional new Steers restaurant will be opened, while two new Wimpy restaurants are also planned.
INDIA
The Group opened its pilot Debonairs Pizza restaurant in Mumbai in July 2013 in collaboration with Master License
partner Diwa Hospitality Pvt Ltd; a further restaurant has subsequently also been opened in the city. Management
is satisfied with the progress delivered by these restaurants, and recognises that expansion in this market will
be slow but steady.
MIDDLE EAST
Famous Brands established a strong platform for growth in the Middle East and North Africa regions with the
signing of a Master License agreement for Saudi Arabia, Lebanon, Morocco, Iran and Egypt. The agreement applies
to the Steers, Wimpy and Debonairs Pizza brands in all of these countries, as well as the Mugg & Bean brand in
Morocco and Egypt. The Group’s premium offering, tashas, will open its first international restaurant in Dubai
in May.
Supply chain
The Group’s supply chain comprises its Logistics and Manufacturing businesses, which are managed and measured
separately. The results delivered by both divisions were extremely pleasing. Consolidated revenue increased by
12% to R2.15 billion (2013: R1.92 billion), while operating profit rose 27% to R204 million (2013: R161 million).
The operating margin was 9.5% up from 8.4% in the comparative period.
LOGISTICS
This division delivered strong growth, exceeding for the first time the milestone R2.0 billion mark, an
improvement of 12% over the prior year. This result is in line with our brands’ system-wide sales growth, together
with the additional turnover derived from growing the basket of products supplied to franchisees. The division’s
operating profit improved 29% to R82 million, while a best-ever operating margin of 4.0% (2013: 3.5%) was reported
despite a contextual environment characterised by above-inflation increases in labour and diesel and the impact of
e-toll costs. Capital expenditure of R8 million was employed on new and replacement fleet and warehouse racking.
A range of capability enhancing projects will be prioritised in the forthcoming period and capital expenditure
of R8 million has been budgeted for.
MANUFACTURING
This division reported very creditable results for the period, attributable to significant improvements in yields
and efficiencies and substantial savings on utilities usage.
Revenue increased by 30% to R927 million (2013: R715 million), while operating profit improved by 25% to
R122 million (2013: R98 million). The division’s operating margin declined to 13.1% (2013: 13.6%) due to deliberate
margin absorption in certain plants, in line with the Group’s strategy to support franchisees’ value offering
to consumers.
These results include the full-year contribution of Famous Brands Coffee Company for the first time and take on of
additional franchised brand coffee business. In addition, the Coega Cheese business was successfully turned around
after initial start-up shortcomings and produced an improved performance in the latter six months of the year. A
range of integration projects were successfully concluded and capital expenditure of R23 million was incurred in
the period.
Several capacity- and capability-building projects will be implemented over the next year aimed at leveraging
opportunities in the supply chain. Capital expenditure of R18 million has been budgeted for.
Subsequent event
Acquisition of Wakaberry™ Frozen Yoghurt Bar
With effect from 1 April 2014, the Group acquired a 70% stake in the Wakaberry™ Frozen Yoghurt Bar business,
the pioneer and brand leader in the frozen yoghurt category in South Africa. Established in 2011 in Durban,
this first-to-market self-serve frozen yoghurt brand currently consists of 33 franchised stores extending across
eight provinces. It is anticipated that by June 2014, the total network will comprise 40-plus restaurants, with
further openings scheduled for the balance of the year. The purchase consideration fell below the threshold of
a categorised transaction in terms of the Listings Requirements of the JSE Limited and was settled from cash
reserves.
Directorate
During the reporting period several changes were made to the composition of the Board in line with the Group’s
continued efforts to improve compliance with King III.
Non-executive Chairman, Panagiotis Halamandaris was succeeded by Lead Independent Director, Santie Botha, in
the position of Independent Chairman in October 2013. Mr Halamandaris remains on the Board as a Non-executive
Director.
Hymie Levin retired as a Non-executive Director in February 2014. Hymie served on and provided wise counsel
to the Board since 1994. The Group extends its sincere appreciation for his invaluable contribution to
Famous Brands.
Khumo Shuenyane was appointed as an independent Non-executive Director with effect from February 2014, while
Chris Boulle’s status changed from Alternate Non-executive Director to Non-executive Director.
Prospects
A major step-change strategy, aimed at ensuring the Group’s continued vigorous growth in future years, is in
the process of being implemented. This strategy centres on cautious expansion into the related leisure sector
by leveraging Famous Brands' core competencies: leadership, brands, manufacturing, logistics and retail, and
will be underpinned by the Groups' strong balance sheet.
Integral to this strategy is the continued growth of the Group’s bedrock Food Services business through
organic, numeric and acquisitive growth of franchising; down-stream growth through expansion of logistics
and manufacturing services and products; and up-stream growth through expanding our retail range. Potential
expansion prospects in the leisure sector must meet the following key criteria: provide synergistic
opportunities which grow the existing business; enhance shareholder value; and ensure continued market
confidence.
Management anticipates the period ahead to feature intense competition as operators strive to retain and gain
market share; new and non-traditional participants joining the industry will exacerbate this competitiveness.
Value and quality will remain the key drivers of growth as cash-strapped consumers selectively spend reduced
disposable income. Margin pressure, which has been the watchword for several years will become more acute, both
at Group and franchisee level. The Rest of Africa will remain an appealing expansion prospect for South African
and international players; in this regard, the race to be first-to-market will intensify. The Group’s
long-standing experience, sought-after brands and solid partnerships in the region will continue to facilitate
its strong position.
Famous Brands’ cash generative, integrated business model is optimally structured to
continue to satisfy all stakeholders as we build further capability across the organisation through our existing
business and explore new opportunities in the leisure sector to optimise our growth prospects.
On behalf of the Board
S L Botha K A Hedderwick
Independent Chairman Group Chief Executive
Declaration of ordinary dividend
Notice is hereby given that a final gross dividend No. 39 of 170 cents (2013: 142 cents) per ordinary share payable
out of income has been declared in respect of the financial year ended 28 February 2014. This will bring the total
cash dividends to 300 cents (2013: 250 cents) per share for the 2014 financial year, an increase of 20%.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade cum-dividend Friday, 4 July 2014
Shares commence trading ex-dividend Monday, 7 July 2014
Record date Friday, 11 July 2014
Payment of dividend Monday, 14 July 2014
Share certificates may not be dematerialised or rematerialised between Monday, 7 July 2014 and Friday, 11 July 2014,
both dates inclusive.
In terms of the 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 144,5 cents per share
for shareholders liable to pay the Dividends Tax and 170 cents per share for shareholders exempt from paying
the Dividends Tax.
• The issued share capital of Famous Brands is 99 242 435 ordinary shares.
• Famous Brands’ tax reference number is 9208085846.
By order of the Board
J G Pyle
Company Secretary
Midrand
15 May 2014
Condensed consolidated statement of comprehensive income
For the year ended 28 February 2014
%
2014 2013 change
R000 R000
Revenue 2 825 979 2 516 287 12
Gross profit 1 227 396 1 052 566 17
Selling and administrative expenses (661 879) (586 724)
Operating profit 565 517 465 842 21
Share of profit of associates 5 140 -
Net interest paid (3 212) (3 969)
Profit before taxation 567 445 461 873 23
Taxation (161 985) (130 821)
Profit for the year 405 460 331 052 22
Foreign currency translation differences 59 029 19 337
Total comprehensive income for the year 464 489 350 389
Profit attributable to
Equity holders of Famous Brands Limited 401 637 328 805 22
Non-controlling interests 3 823 2 247
Total comprehensive income attributable to
Equity holders of Famous Brands Limited 460 666 348 142
Non-controlling interests 3 823 2 247
Reconciliation to headline earnings for the year
Earnings attributable to equity holders of Famous Brands Limited 401 637 328 805 22
Impairment of goodwill - 1 469
Loss/(profit) on disposal of property, plant and equipment and shares 433 (86)
Less the re-measurements included in equity-accounted earnings of associates (128) -
Headline earnings for the year 401 942 330 188 22
Earnings per share - cents
- basic 406 338 20
- diluted 405 334 21
Headline earnings per share - cents
- basic 406 339 20
- diluted 405 335 21
Dividends to shareholders - cents
- interim dividend declared 130 108 20
- final dividend declared 170 142 20
Total dividends for the year 300 250 20
Ordinary shares
- in issue 99 242 435 97 827 435
- weighted average 98 942 130 97 377 435
- diluted weighted average 99 577 130 99 377 435
Condensed consolidated statement of financial position
At 28 February 2014
2014 2013
R000 R000
ASSETS
Non-current assets 1 139 928 1 006 137
Property, plant and equipment 205 575 194 080
Intangible assets 870 344 800 470
Investments in associates 52 934 -
Deferred taxation 11 075 11 587
Current assets 552 911 504 330
Inventories 177 511 167 277
Taxation 6 834 2 780
Trade and other receivables 277 867 249 537
Cash and cash equivalents 90 699 84 736
Total assets 1 692 839 1 510 467
EQUITY AND LIABILITIES
Equity attributable to equity holders of Famous Brands Limited 1 224 365 991 743
Non-controlling interests 10 583 8 345
Total equity 1 234 948 1 000 088
Non-current liabilities 53 735 130 456
Interest-bearing borrowings - 77 313
Deferred taxation and lease liabilities 53 735 53 143
Current liabilities 404 156 379 923
Trade and other payables 327 622 281 752
Short-term portion of interest-bearing borrowings 65 000 88 514
Taxation 11 534 9 657
Total liabilities 457 891 510 379
Total equity and liabilities 1 692 839 1 510 467
Condensed consolidated segmental information - business unit and geographical
For the year ended 28 February 2014
%
2014 2013 change
R000 R000
Revenue
Franchising and Development 537 817 476 896 13
Supply Chain 2 145 105 1 919 400 12
Manufacturing 926 911 715 418
Logistics 2 021 417 1 812 358
Eliminations (803 223) (608 376)
Corporate 1 355 1 296
South Africa 2 684 277 2 397 592 12
UK 91 916 83 030 11
Rest of Africa 49 786 35 665 40
Total 2 825 979 2 516 287 12
Operating profit
Franchising and Development 324 925 286 639 13
Supply Chain 203 513 160 694 27
Manufacturing 121 855 97 618
Logistics 81 658 63 076
Corporate 1 248 722
South Africa 529 686 448 055 18
UK 12 872 5 391
Rest of Africa 22 959 12 396 85
Total 565 517 465 842 21
Condensed consolidated statement of changes in equity
For the year ended 28 February 2014
2014 2013
R000 R000
Balance at beginning of year 1 000 088 840 370
Group total comprehensive income for the year 460 666 348 142
Group dividends to shareholders (269 067) (222 866)
Share-based payments 3 248 5 456
Movement in share capital 37 775 26 219
Increase in non-controlling interests 2 238 2 767
Total equity 1 234 948 1 000 088
Condensed consolidated statement of cash flows
For the year ended 28 February 2014
2014 2013
R000 R000
Cash generated before changes in working capital 601 756 503 396
Increase in inventories (9 955) (47 281)
Increase in receivables (22 674) (46 911)
Increase in payables 24 432 73 075
Cash generated by operations 593 559 482 279
Net interest paid (3 212) (3 969)
Taxation paid (166 748) (136 507)
Dividends paid (271 125) (223 173)
Net cash retained from operating activities 152 474 118 630
Cash flow from investing activities
Acquisition of businesses including intangible assets (14 522) (92 257)
Net cash outflow on disposal of subsidiary (221) -
Net cash outflow on acquisition of associates (47 794) -
Expansion capital expenditure of:
- property, plant and equipment (25 642) (49 608)
- intangible assets (7 492) (4 291)
Replacement capital expenditure on property, plant and equipment (18 428) (18 433)
Proceeds from disposal of property, plant and equipment and intangibles 2 059 2 239
Net cash flow from investing activities (112 040) (162 350)
Cash flow from financing activities
Movement in share capital and reserves 37 775 26 219
Cash contributed by non-controlling shareholders 17 061 12 283
Interest-bearing borrowings raised - 130 000
Decrease in interest-bearing borrowings (100 827) (86 325)
Net cash flow from financing activities (45 991) 82 177
Change in cash and cash equivalents (5 557) 38 457
Foreign currency effect 11 520 5 699
Cash and cash equivalents at beginning of year 84 736 40 580
Cash and cash equivalents at end of year 90 699 84 736
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 Companies Act of South Africa and the Listings Requirements
of the JSE Limited. These condensed results were prepared under the supervision of NS Richards, 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 28 February 2013 is Rnil.
3. Auditors
These condensed 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 28 February
2014 2013
R000 R000
4. Operating profit
The following have been accounted for in operating profit:
- Amortisation of intangible assets 4 871 3 083
- Auditors' remuneration 3 998 3 635
- Depreciation of property, plant and equipment 33 555 30 472
- Foreign exchange profit (508) (270)
- Impairment of goodwill - 2 040
- Loss/(profit) on sale of property, plant, equipment, intangibles and shares 602 (119)
- Operating lease charges on immovable property net of recoveries from sub-leases 28 197 42 958
- Operating lease charges on movable property 3 554 2 750
- Share of profit of associates 5 140 -
- Share-based payments - equity-settled 3 248 5 456
- Share-based payments - cash-settled 2 068 691
5. Capital commitments
Capital expenditure approved not contracted 52 389 46 942
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.
Directors and administration
Non-executive:
SL Botha (Independent Chairman), CH Boulle, P Halamandaris, P Halamandaris (Jnr),
T Halamandaris, JL Halamandres, KL Shuenyane, BL Sibiya.
Executive:
KA Hedderwick (Group Chief Executive), DP Hele (Chief Executive Officer Food Services),
NS Richards (Group Financial Director).
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),
30 Baker Street, Rosebank 2196.
Contact information
Tel: +27 11 315 3000
investorrelations@famousbrands.co.za
www.famousbrands.co.za
Date: 19/05/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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