Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 August 2014
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.
Unaudited condensed consolidated interim results
for the six months ended 31 August 2014
Financial highlights
Revenue up 14% to R1.57 billion
Operating profit up 19% to R303 million
Headline earning per share up 18% to 212 cents per share
Dividends per share up 19% to 155 cents per share
Earning per share up 18% to 212 cents per share
Net asset vale per share up 16% to 1 306 cents per share
Overview
The strength of the Group’s integrated business model is evident in the results reported for the period. While the
front-end franchised operation delivered a satisfactory performance, reflecting reduced consumer spend across certain
mainstream brands, the back-end Logistics and Manufacturing businesses recorded robust results, making a significant
contribution to the Group’s overall improved results for the period.
During the six months under review, management’s focus was on two key strategic interventions: institutionalisation of
the Fit 4 Purpose business transformation model designed to optimise the Group’s relationship with its customers
(franchisees) and consumers, and implementation of the Product Platform Expansion strategy, a major step-change
initiative developed to grow the business outside of the Food Services Franchising arena into the greater leisure
market. Fit 4 Purpose has already started to deliver substantial benefits and the Product Platform Expansion strategy,
although still in the initial phases of the programme, is anticipated to secure the Group’s long-term growth ambitions.
FINANCIAL RESULTS
Group revenue increased by 14% to R1.57 billion (2013: R1.38 billion), while operating profit rose 19% to R303 million
(2013: R254 million). The operating margin grew to 19.3% (2013: 18.4%).
These improved results are primarily a function of enhanced contributions from the Logistics and Manufacturing
operations and improved efficiencies and cost containment achieved across the entire business.
Basic earnings per share (“EPS”) and headline earnings per share (“HEPS”) both improved by 18% to 212 cents per share.
Diluted EPS rose 18% to 212 cents per share, while diluted HEPS grew by 17% to 211 cents per share.
Cash generated by operations before changes in working capital increased by 17% to R318 million (2013: R271 million).
Working capital absorbed R71 million, resulting in a net cash flow from operating activities of R162 million (2013:
R164 million).
Net cash outflow from investing activities of R60 million (2013: R43 million) was incurred primarily on supply chain
expansion and upgrades, IT systems enhancement and acquisition of businesses and associated companies.
There were no borrowings raised during the period and loans of R32 million were repaid. The Group’s net borrowings of
R25 million (2013: R47 million) represent a low net debt/equity ratio of 2% (2013: 4%).
OPERATIONAL REVIEWS
Franchising
As at 31 August 2014, Famous Brands’ global footprint comprised 2 461 restaurants. Combined revenue recorded by the
Franchise Division, net of the United Kingdom business which is reported on separately, increased 15% to R311 million
(2013: R271 million), while operating profit improved 10% to R183 million.
System-wide sales across the total franchise network grew 9.6%, while like-on-like sales increased 3.8%. The Group
opened 110 restaurants during the period.
SOUTH AFRICA
The Group’s franchised brands traded in a highly challenging and fiercely competitive environment. Under these
conditions, it is testament to their best-in-class status that the Group’s brands generally retained their market
share.
System-wide sales, including new restaurants, rose 9.1% and same store sales increased 3.4%. While improved
like-on-like sales were reported across many of the Group’s brands, those brands which delivered strongest growth
are the ones catering for the upper-end of the LSM spectrum. This trend is a direct reflection of local economic
conditions, in which middle and lower income consumers have experienced the greatest decline in disposable income.
During the period 96 (2013: 53) new restaurants were opened across the South African network. In the second half of
the year the Group plans to open a further 136 restaurants in its home market.
REST OF AFRICA
The Group trades in 16 countries in this region. System-wide sales reported by the division grew by 15.5%, while
like-on-like sales increased 8.9%. This territory now contributes 8.6% (2013: 8.1%) of total franchise
system-wide sales.
Fourteen restaurants were opened during the period, and a further 32 are planned for the balance of the year,
including Debonairs Pizza’s maiden entry into Angola. New restaurants were opened across the Group’s mainstream brand
portfolio, with Debonairs Pizza’s footprint specifically, continuing to grow apace, driven by the sustained growth of
the pizza category in the region.
Significant progress has been made across the recently acquired Mr Bigg’s business in Nigeria, with the
implementation of best operating practices and key business processes which will ensure improved fiscal discipline. In
addition, a range of opportunities has been identified to enhance efficiencies and upgrade skills sets which will
deliver good gains in the near future.
INTERNATIONAL
UNITED KINGDOM (UK)
The Group’s UK operation delivered pleasing results. Revenue in Sterling was in line with the prior comparative
period, while revenue in Rand terms increased 21% to R53 million (2013: R44 million). Operating profit grew by 88% to
R8.8 million (2013: R4.7 million); the operating profit margin rose to 16.4% (2013: 10.6%). This division’s improved
results are a function of management of the cost base and favourable foreign currency translation gains made during
the period.
Two new Wimpy restaurants will be opened in the balance of the current fiscal year.
MIDDLE EAST
During the period the Group’s premium brand, tashas, opened its first international restaurant in Dubai, to popular
acclaim from both patrons and prospective franchisees. In light of this favourable response, suitable opportunities
to expand the footprint in this emirate will be explored.
The Group will also make its maiden entry into Abu Dhabi in November 2014 with the opening of a Steers restaurant.
Supply chain
Famous Brands’ integrated Supply Chain comprises its Logistics and Manufacturing businesses, which are managed and
measured separately. In the review period both divisions reported strong results. Consolidated revenue increased by 13%
to R1.20 billion, while operating profit rose 33% to R108.2 million. The operating margin was 9.1% (2013: 7.7%).
LOGISTICS
For the first time, this division exceeded the one billion Rand turnover milestone for a six-month period, reporting
revenue of R1.04 billion (2013: R946 million), an increase of 10%. Operating profit rose 22% to R38 million.
Despite above-inflation increases in input costs, including fuel, labour and toll fees, the business improved its
operating margin to 3.7% (2013: 3.3%).
These robust results are a reflection of management’s steadfast campaign to improve efficiencies and cost management
in the operation. The significantly enhanced Centralised Planning Function and investment in strategic IT systems and
business processes have delivered anticipated benefits, while the formation of six decentralised, fully accountable,
Centres of Excellence has led to an intensified focus on profitability.
The Group’s Owner-driver programme continues to gain momentum. The number of cases delivered by Owner-drivers increased
to 40.14% from 37.74% in the prior period.
MANUFACTURING
This division reported an increase in revenue of 33% to R597 million, while operating profit rose 40% to R70 million.
The operating margin was 11.7% (2013: 11.1%). These strong results are attributable to a range of factors, most
significant of which was the turnaround achieved at the Coega Cheese manufacturing plant from a loss-making position in
the previous corresponding six months. There remains strong upside potential to grow this operation’s contribution to
Group profitability.
Additional factors underpinning this division’s strong results were improved management of utilities and integration
of additional brand business into the Famous Brands’ Coffee Company, Choice Meats Company and Great Bakery Company
operations.
RETAIL
Sales of the Group’s retail products have consistently outperformed the sluggish growth experienced in the general
retail sector, recording a 27% increase on the prior comparative period. Key to this improvement has been the
continued focus on branded product innovation and differentiation, and the introduction of new line extensions.
Subsequent event
In September 2014 the Group announced that it had expanded its existing relationship with strategic alliance partner,
Total South Africa, to introduce a new retail offering, in conjunction with Thrupps, to the upper-LSM metropolitan
service stations in the petroleum supplier’s service station network. Each Thrupps site will be supported by a Mugg
& Bean On-The-Move offering. The pilot Thrupps-Mugg & Bean model will open at an existing Total site in Senderwood,
Gauteng, at the end of October.
Prospects
Management anticipates that current trading conditions will persist for some time, and in the absence of a significant
turnaround in the economy, all operating activities at the front- and back-ends of the business will be geared to
capitalise on existing opportunities in the industry and across the operations. The Group’s Fit 4 Purpose model has
been successfully bedded down and will continue to deliver strong results. Additionally, the Product Platform Expansion
strategy will start to unlock value as suitable prospects are explored within the broader leisure sector.
Despite constrained consumer discretionary income, management has high expectations for the forthcoming peak trading
period. The foodservice sector will continue to grow, fuelled by the demand for convenience. Accordingly, aggressive
promotional campaigns for the mainstream brands, supported by strong value and innovation propositions, will be
implemented nationally and will peak over the November-December summer holidays. The Group’s brands are represented at
all major consumer hubs across the country and are therefore well positioned to capture any available spend. By December
2014 Famous Brands’ total network will have exceeded 2 500 restaurants, further increasing the brands’ accessibility to
customers.
As reflected in these results, the integrated Supply Chain plays a vital role in underpinning the success of the
brands and profitability of the business as a whole. Ongoing improvement in efficiencies in both the Logistics and
Manufacturing operations will ensure that the back-end of the business continues to grow its significant contribution
to the Group’s performance.
On behalf of the board
SL Botha KA Hedderwick
Independent Chairman Group Chief Executive
Midrand
22 October 2014
Notice of interim dividend declaration number 40 and salient features
Notice is hereby given that an interim gross dividend of 155 cents (2013: 130 cents) per ordinary share, payable out
of income, has been declared in respect of the six months ended 31 August 2014.
The salient dates for the payment of the interim dividend are detailed below:
Last day to trade cum-dividend Friday, 28 November 2014
Shares commence trading ex-dividend Monday, 1 December 2014
Record date Friday, 5 December 2014
Payment of dividend Monday, 8 December 2014
Share certificates may not be dematerialised or rematerialised between Monday, 1 December 2014 and Friday, 5 December
2014, both dates inclusive.
In terms of Dividends Tax legislation, the following additional information is disclosed:
• The local Dividends Tax rate is 15%.
• The net local dividend amount is 131.75 cents per share for shareholders liable to pay the Dividends Tax
(2013: 110.5 cents) and 155 cents per share for shareholders exempt from paying the Dividends Tax (2013: 130 cents).
• No STC credits have been utilised.
• The issued share capital of Famous Brands is 99 712 435 ordinary shares.
• Famous Brands’ tax reference number is 9208085846.
By order of the board
K Gina
Company Secretary
Midrand
22 October 2014
Condensed consolidated statement of profit or loss and other comprehensive income
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2014 2013 change 2014
R000 R000 % R000
Revenue 1 571 682 1 376 948 14 2 825 979
Gross profit 685 215 582 468 18 1 227 396
Selling and administrative expenses (382 199) (328 828) 16 (661 879)
Operating profit 303 016 253 640 19 565 517
Net interest expense (323) (695) (3 212)
Share of profit of associates 3 056 - 5 140
Profit before taxation 305 749 252 945 21 567 445
Taxation (85 623) (72 751) (161 985)
Profit after taxation for the period 220 126 180 194 405 460
Exchange differences on translating
foreign operations* (4 810) 33 748 59 029
Total comprehensive income for the period 215 316 213 942 464 489
Profit after taxation attributable to:
Owners of Famous Brands Limited 210 513 177 462 401 637
Non-controlling interests 9 613 2 732 3 823
Total comprehensive income attributable to:
Owners of Famous Brands Limited 205 703 211 210 460 666
Non-controlling interests 9 613 2 732 3 823
Earnings per share
Basic earnings per share (cents) 212 180 18 406
Diluted earnings per share (cents) 212 179 18 405
* This item may be reclassified subsequently to profit or loss
Primary (business units) and secondary (geographical) segment report
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2014 2013 change 2014
R000 R000 % R000
Revenue
Franchising and Development 298 976 260 712 15 537 817
Supply Chain 1 190 146 1 048 682 13 2 145 105
Manufacturing 596 631 450 237 33 1 010 541
Logistics 1 044 827 946 188 10 1 937 787
Eliminations (451 312) (347 743) 30 (803 223)
Corporate 719 672 1 355
South Africa 1 489 841 1 310 066 14 2 684 277
International (Rest of Africa and UK) 81 841 66 882 22 141 702
UK 53 432 44 071 21 91 916
Rest of Africa 28 409 22 811 25 49 786
Total 1 571 682 1 376 948 2 825 979
Operating profit
Franchising and Development 173 908 158 370 10 324 925
Supply Chain 108 159 81 258 33 203 513
Manufacturing 69 889 49 770 40 126 663
Logistics 38 270 31 488 22 76 850
Corporate 1 457 347 1 248
South Africa 283 524 239 975 18 529 686
International (Rest of Africa and UK) 19 492 13 665 43 35 831
UK 8 767 4 656 88 12 872
Rest of Africa 10 725 9 009 19 22 959
Total 303 016 253 640 565 517
* The Retail business within the Supply Chain segment has been reclassified from Logistics to
Manufacturing.
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
31 August 31 August 28 February
2014 2013 2014
R000 R000 R000
ASSETS
Non-current assets 1 176 611 1 066 796 1 139 928
Property, plant and equipment 202 250 204 986 205 575
Intangible assets 910 936 849 567 870 344
Investments in associates 54 240 810 52 934
Deferred taxation 9 185 11 433 11 075
Current assets 568 622 572 492 552 911
Inventories 214 729 209 633 177 511
Taxation receivable 6 165 2 032 6 834
Trade and other receivables 339 751 290 033 277 867
Cash and cash equivalents 7 977 70 794 90 699
Total assets 1 745 233 1 639 288 1 692 839
EQUITY AND LIABILITIES
Equity attributable to owners of
Famous Brands Limited 1 281 891 1 102 751 1 224 365
Non-controlling interests 20 434 15 923 10 583
Total equity 1 302 325 1 118 674 1 234 948
Non-current liabilities 50 370 92 070 53 735
Interest-bearing borrowings - 32 500 -
Deferred taxation and lease liabilities 50 370 59 570 53 735
Current liabilities 392 538 428 544 404 156
Trade and other payables 316 587 309 324 298 278
Non-controlling shareholder loans 30 142 22 926 29 344
Short-term portion of interest-bearing
borrowings 32 513 84 920 65 000
Taxation payable 13 296 11 374 11 534
Total liabilities 442 908 520 614 457 891
Total equity and liabilities 1 745 233 1 639 288 1 692 839
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2014 2013 2014
R000 R000 R000
Cash generated before changes in
working capital 318 026 271 053 601 756
Increase in inventories (33 258) (41 881) (9 955)
Increase in receivables (59 205) (37 422) (22 674)
Increase in payables 21 321 40 367 24 432
Cash generated from operations 246 884 232 117 593 559
Net interest paid (323) (695) (3 212)
Taxation paid (84 460) (66 950) (166 748)
Cash available from operating activities 162 101 164 472 423 599
Dividends paid (169 090) (142 650) (271 125)
Net cash (outflow)/inflow from operating
activities (6 989) 21 822 152 474
Cash flow from investing activities
Additions to property, plant and equipment (14 881) (28 857) (44 070)
Intangible assets acquired (1 644) (4 620) (7 492)
Proceeds from disposal of property, plant
and equipment 1 483 5 135 1 809
Proceeds from disposal of intangible assets 375 - 250
Proceeds on disposal of business - 274 -
Net cash outflow on disposal of subsidiary - - (221)
Net cash outflow on acquisition of business
operations - (14 522) (5 500)
Net cash outflow on investment in subsidiary (47 033) - (9 022)
Net cash inflow/(outflow) on investment in
associates 1 750 (810) (47 794)
Net cash outflow from investing activities (59 950) (43 400) (112 040)
Cash flow from financing activities
Borrowings repaid (32 487) (47 633) (100 827)
Proceeds from issue of equity instruments of 19 983 37 775 37 775
Famous Brands Limited
Cash contributed by non-controlling shareholders 799 10 643 17 061
Net cash (outflow)/inflow from financing
activities (11 705) 785 (45 991)
Net decrease in cash and cash equivalents (78 644) (20 793) (5 557)
Foreign currency effect (4 078) 6 851 11 520
Cash and cash equivalents at the beginning of
the year 90 699 84 736 84 736
Cash and cash equivalents at the end of the year 7 977 70 794 90 699
Condensed consolidated statement of changes in equity
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2014 2013 2014
R000 R000 R000
Balance at the beginning of the year 1 234 948 1 000 088 1 000 088
Group total comprehensive income for the period 215 316 213 942 464 489
Group dividends to shareholders (170 506) (141 880) (270 946)
Share-based payments 929 3 216 3 248
Issue of share capital 19 983 37 776 37 775
Non-controlling interest arising on business
combination 1 655 5 532 508
Disposal of non-controlling interest - - (214)
Balance at the end of the period 1 302 325 1 118 674 1 234 948
Statistics and ratios
Unaudited Unaudited % Audited
six months six months change year
ended ended ended
31 August 31 August 28 February
2014 2013 2014
Earnings per share (cents)
Basic earnings per share 212 180 18 406
Diluted earnings per share 212 179 18 405
Headline earnings per share 212 180 18 406
Diluted headline earnings per share 211 180 17 405
Dividends per share (cents) 300
Interim 155 130 19 130
Final 170
Ordinary shares (000)
In issue 99 712 99 242 99 242
Weighted average 99 440 98 662 98 942
Diluted weighted average 99 605 99 297 99 577
Operating profit margin (%) 19.3 18.4 20.0
Net debt/equity (%) 1.9 4.2 (2.1)
Net asset value per share (cents) 1 306 1 127 1 244
Dividend cover on headline earnings (times) 1.4 1.4 1.4
Notes to the condensed consolidated interim financial statements
Famous Brands Limited (the “company”) is a South African registered company. The condensed consolidated interim financial statements
of the company comprise the company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates.
1. Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards (IFRS), the presentation as well as disclosure requirements of IAS 34
Interim financial reporting, the SAICA financial reporting pronouncements issued by the Financial Reporting Standards Council,
the JSE Listings Requirements, and the Companies Act of South Africa.
2. Basis of preparation
The condensed consolidated interim financial statements do not include all the information and disclosures required for the audited
consolidated financial statements. The condensed consolidated interim financial statements should be read in conjunction with the
audited consolidated financial statements. The audited consolidated financial statements for the Group as at and for the year ended
28 February 2014 were prepared on the going-concern basis and are available for inspection at the company’s registered office and on
the Famous Brands website at www.famousbrands.co.za.
The accounting policies applied in the presentation of the condensed consolidated interim financial statements are consistent with
those applied for the year ended 28 February 2014, except for new standards that became effective for the Group’s financial period
beginning 1 March 2014, refer note 3.
The condensed consolidated interim financial statements were prepared on the historical cost basis, under the supervision of
Norman Richards, Group Financial Director.
3. Changes in accounting policies
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards,
with a date of initial application of 1 March 2014:
- Amendments to IFRS 10, IFRS 12 and IAS 27; and
- IAS 32 Financial Instruments: Presentation.
The adoption of the new standards listed above did not have a significant impact on the Group’s condensed consolidated interim financial
statements.
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2014 2013 2014
R000 R000 R000
4. Earnings per share
4.1 Reconciliation between earnings and diluted earnings
Profit attributable to equity holders of Famous 210 513 177 462 401 637
Brands Limited
Adjustment for:
After taxation interest receivable on future share
placements 240 690 1 487
Diluted earnings 210 753 178 152 403 124
Earnings per share (cents)
Basic 212 180 406
Diluted 212 179 405
4.2 Reconciliation between headline earnings and diluted
headline earnings
Profit attributable to equity holders of Famous 210 513 177 462 401 637
Brands Limited
After taxation loss on disposal of property, plant (193) 357 433
and equipment
After taxation remeasurements included in - - (128)
equity-accounted earnings of associates
Headline earnings 210 320 177 819 401 942
Adjustment for:
After taxation interest receivable on future share
placements 240 690 1 487
Diluted headline earnings 210 560 178 509 403 429
Headline earnings per share (cents)
Basic 212 180 406
Diluted 211 180 405
5. Related-party transactions
The Group entered into various sale and purchase transactions with related parties, in the ordinary course of business, on an arm’s
length basis. The nature of related-party transactions is consistent with those reported previously.
Directors and administration
Non-executive:
SL Botha (Independent Chairman), CH Boulle, P Halamandaris, JL Halamandres,
P Halamandaris (Jnr), T Halamandaris, KL Shuenyane, BL Sibiya.
Executive:
KA Hedderwick (Group Chief Executive), DP Hele (Chief Executive Officer - Food Services),
NS Richards (Group Financial Director).
Company secretary:
K Gina
Registered office:
478 James Crescent, Halfway House, Midrand, 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.
Website address: www.famousbrands.co.za
Date: 27/10/2014 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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