Wrap Text
Unaudited condensed consolidated interim financial results for the six months ended 31 August 2016
Famous Brands Limited
Incorporated in the Republic of South Africa
Registration number: 1969/004875/06
JSE share code: FBR
ISIN: ZAE000053328
Unaudited condensed consolidated interim financial results
for the six months ended 31 August 2016
Highlights
Revenue up 23% to R2.45 billion
2015: R1.9 billion
Operating profit before exceptional items up 17% to R404 million
2015: R347 million
Net asset value up 14% to 1 728 cents per share
2015: 1 512 cents per share
Strategic acquisitions optimise business model
Successful integration of new businesses
GROUP PERFORMANCE OVERVIEW
In the context of challenging trading conditions experienced during the reporting period, the Group’s unwavering focus
on consistent improvement and investment in the business continued to deliver rewarding results. Management’s strategic
drive to build capability and capacity across its Brands, Logistics and Manufacturing operations continued apace, with
the successful integration of recently acquired businesses and the acquisition of additional new businesses.
Furthermore, per the schedule advised in December 2015, the transition in leadership from former Group Chief Executive,
Kevin Hedderwick, to incumbent, Darren Hele, was concluded, while the strategic role of unlocking of the Group’s growth
ambitions continues to be fulfilled by Kevin. The Board is satisfied that the Group has in place an accomplished and
experienced executive management team which is well positioned to execute the strategies required to achieve Famous
Brands’ robust future growth targets.
FINANCIAL RESULTS
The pleasing performance delivered for the review period is a reflection of both organic and acquisitive growth in the
Brand portfolio as well as in the Supply Chain operations.
Group revenue increased 23% to R2.451 billion (2015: R1.998 billion), while operating profit, including exceptional
items, rose 51% to R525 million. Exceptional items relate to a derivative gain of R141 million on the call option utilised
to hedge the purchase price of the Gourmet Burger Kitchen (GBK) Restaurants Limited acquisition, and an impairment loss
of R20 million recognised on the Group’s investment in the UAC Restaurants (UACR) Limited business in 2013 in Nigeria.
More detail regarding these items is discussed in the commentary under Subsequent Events and Rest of Africa in this
announcement.
Operating profit before exceptional items rose 17% to R404 million (2015: R347 million).
The operating margin declined to 16.5% (2015: 17.4%) primarily as a function of investment in resources to enhance
operational capabilities, a higher percentage of joint-venture entities in the system, and the incorporation of lower
margin manufacturing business. With the integration of GBK’s 80 company-owned restaurants over the forthcoming period,
softer margins are anticipated.
Basic earnings per share (EPS) grew 62% to 391 cents per share (2015: 242 cents per share), while headline earnings
per share (HEPS) increased 71% to 411 cents (2015: 241 cents). Basic EPS and HEPS, excluding exceptional items, improved
12% to 271 cents per share (2015: 242 cents) and 270 cents per share (2015: 241 cents) respectively.
Cash generated by operations before changes in working capital increased 19% to R457 million (2015: R385 million).
Working capital increases totalled R34 million; while net cash inflow from operating activities rose to R82 million
(2015: outflow of R55 million).
Net cash outflow from investing activities of R162 million (2015: R117 million) was incurred primarily on acquiring
controlling stakes in Salsa Mexican Grill, Lupa Osteria and the outright purchase of Lamberts Bay Foods Limited. Included
in this outflow is capital expenditure of R90 million (2015: R36 million) incurred on the acquisition of the Cape
Concentrate tomato paste facility, investment in information technology systems, as well as further enhancing Supply Chain
capabilities.
No borrowings were raised during the period.
OPERATIONAL REVIEWS
BRANDS
The Group’s Brands division comprises three regions, namely: South Africa; Rest of Africa and the Middle East; and the
United Kingdom (UK). As at 31 August 2016 the Group’s global footprint comprised 2 626 restaurants. Notwithstanding
the adverse trading environment, the Group opened 75 new stores across the brand portfolio, on par with the prior
comparative period.
Combined revenue reported for the six months grew 19% to R383 million (2015: R321 million), while operating profit
increased 14% to R205 million (2015: R181 million). System-wide sales across the total franchise network rose 14.2%,
while like-on-like sales improved 9.6%.
The Group’s brand portfolio is strategically designed to be aspirational, and offer value and convenience to a wide
range of consumers across the income spectrum and across meal occasions. Both the mainstream and signature (emerging)
brand divisions delivered a gratifying performance. Central to their growth was intensified focus on key standard
operating disciplines and innovation implemented across the offering, including product, marketing and in-store
interaction.
South Africa
System-wide sales for the period increased 13.8% while like-on-like sales improved 10.4%. During the six months under
review, a total of 64 restaurants (2015: 64) were opened.
Several of the mainstream brands reported particularly notable performances:
- Debonairs Pizza entrenched its status as the market leader in a rapidly growing category, recording impressive
like-on-like and system-wide sales. This growth was underpinned by menu innovation and an improved convenience
offering illustrated by a substantial rise in omni-channel online sales.
- Having undergone an extensive corporate identity revamp, both Wimpy and Steers reported pleasing double-digit
growth, reflecting customers’ positive response to their contemporary new image. During the period Wimpy launched
its flagship restaurant in the high profile Mall of Africa in Gauteng to popular acclaim.
- Fishaways recorded another strong set of results, and having firmly established itself as the premium offering
in a cluttered category, retained and gained market share.
- In line with the strategy to expand its presence in the full-service casual dining category, the Group rounded off
its signature brand portfolio during the period, concluding joint-venture partnerships with Lupa Osteria, Salsa
Mexican Grill and Catch. All three of these brands were integrated seamlessly, gained good momentum and are well
positioned for future growth.
Rest of Africa and the Middle East
The Group trades in 17 countries in these territories. This division reported a 17.4% increase in system-wide sales
and contributed 9.7% (2015: 9.5%) of the total Brands portfolio’s system-wide sales.
Rest of Africa
Restricted access to foreign exchange for prospective franchisees and financial institutions’ tighter lending
criteria hampered new restaurant growth and revamps in the region, but despite these constraints, 10 restaurants
(2015: 11) were opened during the period.
Greater focus was paid to operating standards and locality marketing across the brand portfolio, with pleasing
results. In line with prior years, Debonairs Pizza and Mugg & Bean continued to spearhead like-on-like and
system-wide sales growth in the region.
Famous Brands’ Botswana business, acquired in August 2015, was fully integrated into the Group’s structures
over the past year. In a subdued economic climate, this business continued to exceed management’s expectations
in terms of revenue growth.
The UACR business, trading as Mr Bigg’s, remains in repair mode. In light of the prevailing difficult economic
climate in Nigeria, and the introduction of a flexible exchange rate policy and subsequent devaluation of the
Naira, the Group recognised a R20 million impairment on its investment in the UACR business. In addition, a number
of underperforming Mr Bigg’s restaurants were closed, while opportunities to open additional restaurants remain
constrained in the current economy, further tempering management’s outlook for this business in the short term.
During the review period, the Group exited its three restaurants in Tanzania and the Democratic Republic of
Congo given those markets’ lack of viability.
Middle East
Based on the success enjoyed by the tashas’ restaurant in Dubai, the brand’s footprint will be expanded in the
forthcoming period.
Sourcing suitable franchisees and sites remains the primary challenge restraining growth of the Steers and
Debonairs Pizza footprint in the region, however, management will continue to explore expansion opportunities.
United Kingdom (UK)
The Group’s UK business experienced a tough summer trading period, with August in particular proving a testing month.
Revenue in Sterling declined 2.6%, but grew 7.7% to R57.6 million in Rand terms (2015: R53.4 million) as a function of
foreign exchange translation. Operating profit rose by 2.9% to R10.1 million (2015: R9.8 million) while the operating
profit margin declined to 17.6% (2015: 18.4 %).
Management is satisfied that the business and the brand offering are structured to benefit from growth opportunities
as they arise.
SUPPLY CHAIN
Famous Brands’ integrated Supply Chain comprises its Logistics and Manufacturing businesses, which are managed
and measured separately. During the six months under review, consolidated revenue grew by 19% to R1.88 billion
(2015: R1.58 billion), while operating profit increased 49% to R215 million (2015: R144 million). The operating
margin rose to 11.4% (2015: 9.1%). These improved results are primarily due to organic growth in the front-end
of the business and integration of new business in the Supply Chain.
LOGISTICS
This division reported a 24% increase in revenue to R1.66 billion (2015: R1.35 billion), while operating profit
grew 14% to R49 million (2015: R43 million). The operating margin declined slightly to 2.9% (2015: 3.2%).
These solid results are a function of successfully stabilising and optimising the Crown Mine Distribution Centre
operation which now manages the previously outsourced frozen and chilled product basket in Gauteng; the
integration of new brand business into the distribution network; and a significant increase in fleet capacity
to enhance efficiencies.
In September 2016, the Group commissioned its new Long Meadow (Gauteng) Primary Distribution Centre to
warehouse dry goods. This facility is designed to improve efficiencies centrally and expand capacity of
existing facilities to accommodate further growth.
During the period, capital expenditure of R10 million was incurred on facility and fleet upgrades.
MANUFACTURING
Revenue increased by 53% to R1.30 billion (2015: R848 million) for the period, while operating profit rose
64% to R166 million (2015: R101 million). This strong performance was driven by significant growth in the
Fine Cheese Company, the Sauce and Spice plant and the Midrand Meat plant, which benefited from organic
growth in the Brand and Retail divisions; the commissioning of the cream cheese production line; as well
as take-on of a portion of the previously outsourced pork and Halaal product basket.
The operating margin improved to 12.8% (2015: 11.9%). Management’s strategic focus in the forthcoming period
will be to continue to rationalise and adjust the product mix to incorporate more licensed product business.
Capital expenditure of R80 million was incurred on plant upgrades, machinery and equipment.
Further to the Group’s goal to build capability across its operations, two strategic manufacturing businesses
were acquired in the period:
Lamberts Bay Foods Limited (LBF)
Effective 1 August 2016, the Group acquired this manufacturer of French fries and other value-added potato
products to supply licensed product to the Group’s franchise network and other retail clients. In its first
month in the Group’s stable, LBF delivered a satisfying operating profit. Integration of LBF’s IT systems
into the Group’s platform is currently underway and proceeding smoothly. Management is optimistic that the
business is well positioned to capitalise on the forthcoming peak trading season.
Coega Concentrate Tomato Paste Plant
Effective 24 June 2016, the Group acquired a state-of-the-art tomato paste manufacturing plant, formerly Cape
Concentrate, situated in the Coega precinct in the Eastern Cape. The facility was bought out of liquidation
at a significantly discounted purchase consideration. The plant will manufacture product for the Group’s
franchise network as well as third-party retail customers. It is anticipated that the operation will be
partially commissioned by the end of February 2017. Development of the grower-supply network has commenced,
but management expects the completion of the process to take some time.
INFORMATION TECHNOLOGY - BUSINESS SUSTAINABILITY
The Group is in the process of replacing its current financial management and reporting system with a robust,
fit-for-purpose Enterprise Resource Planning system, designed to support future growth. The project commenced in
March 2016 and is on schedule to conclude in July 2017. In line with budget, R10 million of the R36 million
committed for fiscal 2017 has been incurred. The total project is budgeted at R50 million.
SUBSEQUENT EVENTS - ACQUISITIONS
Gourmet Burger Kitchen (GBK) Restaurants Limited
With effect from 7 October 2016 Famous Brands acquired the entire issued share capital of GBK, pioneer of
the burger revolution in the UK. GBK comprises 80 company-owned restaurants across the UK and is widely renowned
as the market leader in the premium burger category. The best-in-class business has a strong financial track
record, secure pipeline of sites to support a bold restaurant expansion programme, and affords the Group the
opportunity to earn hard currency outside of Africa. In terms of the contractual agreement, GBK’s existing
team will continue to manage the business.
Stakeholders were advised in the SENS announcement on 1 September 2016 that the transaction would be funded
by way of cash accumulated from business operations as well as short-term bridging finance. Subsequently, a
debt-financing syndication process was initiated and longer-term facilities of R2.4 billion and GBP30 million
were raised for financing and expansion purposes.
By Word Of Mouth (Pty) Ltd
As announced on SENS on 3 October 2016, subject to Competition Commission approval, Famous Brands has acquired
a 49.9% stake in the multi-awarded commercial catering company, By Word of Mouth (Pty) Ltd, advancing the
Group’s strategy to expand into the broader leisure and consumer product sector. The purchase consideration
fell below the threshold of a categorised transaction in terms of the Listings Requirements of the JSE Limited.
DIRECTORATE
During the period and as announced on SENS, the Board of Directors was restructured as follows:
- With effect from 1 June 2016, Ms Thembisa Dingaan was appointed as an independent non-executive director;
- Effective 1 July 2016, Mr Norman Richards, formerly Group Financial Director was appointed Group Commercial
Executive and Ms Kelebogile Ntlha, formerly Group Financial Executive and Company Secretary, was appointed
Group Financial Director; and
- Mr Ian Isdale assumed the position of Company Secretary on a consultancy basis for six months with effect
from 31 August 2016. A permanent appointment will be made at the end of this contract period.
PROSPECTS
The Group will continue to focus on building capacity and capability across its operations.
Strong emphasis will be placed on ensuring the business is positioned to benefit from the peak holiday trading
season. The Group’s brands are represented at all major consumer hubs across the country and therefore
optimally situated to capitalise on discretionary spend during the holiday period.
Brands
- Expanding the restaurant footprint will continue in line with market demand, while the extensive revamp
programme currently underway will gain momentum in the forthcoming months, designed to ensure the
Group’s brands remain contemporary, appealing and top of mind.
- Opportunities to leverage growth of the GBK business will be explored.
- The Group will open South Africa’s first PAUL restaurant in late February 2017. The flagship store will be
situated in the Melrose Arch Precinct in Gauteng and will encompass a bakery café take away offering with
a full table service restaurant.
Logistics
This division’s priority will be to entrench the Long Meadow Primary Distribution Centre and extract
further gains from the Crown Mines facility, ensuring both operations contribute to substantially
improved efficiencies in the integrated Supply Chain.
Manufacturing
A range of capacity building projects will be implemented by this division in the next six months, including
the commissioning of Coega Concentrate Tomato Paste Plant and the sliced cheese operation in the Group’s
Fine Cheese Company. In line with the Competition Commission’s phased timetable (a condition of the
acquisition), a further 30% of the Cater Chain pork basket was integrated in October 2016, with the
final 10% to be taken on in April 2017.
Leisure and Consumer
Subject to the acquisition becoming unconditional, By Word of Mouth will be integrated into the Group’s
structures, and opportunities to expand the business in the commercial catering and home meal replacement
segments will be explored.
In conclusion, management is on track to execute its strategies, and optimistic that if the opportunities
outlined herein are capitalised on, the business will deliver solid growth in the forthcoming period.
DIVIDEND
In order to achieve its robust growth targets, the Group recently has made a number of acquisitions,
including its largest ever, the GBK transaction in the UK. In this regard, the Group’s gearing is
substantially higher than in prior years, and the Board has therefore resolved that no interim dividend
will be declared for the review period. The Board will closely monitor the Group’s operating requirements
as well as future strategic acquisitions to determine future dividend payments. It is anticipated that,
subject to future acquisitions, payment of dividends will resume in the 2018 financial year.
On behalf of the board
SL Botha DP Hele
Independent Chairman Chief Executive Officer
Midrand
24 October 2016
Condensed consolidated statement of financial position
at 31 August 2016
Unaudited Unaudited Audited
31 August 31 August 29 February
2016 2015 2016
R000 R000 R000
ASSETS
Non-current assets 1 488 811 1 340 727 1 436 377
Property, plant and equipment 353 221 251 816 286 448
Intangible assets 1 101 312 1 022 226 1 095 888
Investments in associates 32 983 58 106 52 746
Deferred tax 1 295 8 579 1 295
Current assets 1 766 602 754 204 971 906
Inventories 367 740 287 740 301 625
Current tax assets 182 921 55 635 60 786
Derivative financial instruments 189 837 - 100
Trade and other receivables 573 911 410 829 463 261
Cash and cash equivalents 452 193 - 146 134
Total assets 3 255 413 2 094 931 2 408 283
Equity and liabilities
Equity attributable to owners of
Famous Brands Limited 1 633 293 1 463 046 1 474 780
Non-controlling interests 92 325 46 024 75 819
Total equity 1 725 618 1 509 070 1 550 599
Non-current liabilities 220 429 69 312 214 690
Derivative financial instruments 130 363 - 124 821
Lease liabilities 14 641 7 703 10 858
Deferred tax 75 425 61 609 79 011
Current liabilities 1 309 366 516 549 642 994
Non-controlling shareholder loans 21 198 23 458 24 988
Lease liabilities - - 1 689
Trade and other payables 629 221 428 748 464 354
Current tax liabilities 121 513 19 643 11 713
Bank overdrafts 537 434 44 700 140 250
Total liabilities 1 529 795 585 861 857 684
Total equity and liabilities 3 255 413 2 094 931 2 408 283
Condensed consolidated statement of profit or loss and other comprehensive income
for the six months ended 31 August 2016
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 29 February
2016 2015 % 2016
R000 R000 change R000
Revenue 2 451 327 1 997 831 23 4 308 318
Cost of goods sold (1 373 418) (1 165 248) (2 469 947)
Gross profit 1 077 909 832 583 30 1 838 371
Selling and administrative expenses (673 413) (485 872) 39 (1 046 263)
Operating profit before exceptional items 404 496 346 711 17 792 108
Impairment loss (20 000) - (12 000)
Derivative gain 140 602 - -
Operating profit after exceptional items 525 098 346 711 51 780 108
Finance costs (17 263) (7 185) (27 375)
Finance income 8 991 8 270 20 466
Share of profit/(loss) of associates 2 688 1 938 (622)
Profit before tax 519 514 349 734 49 772 577
Tax (108 953) (96 625) 13 (221 011)
Profit after tax for the period 410 561 253 109 62 551 566
Exchange differences on translating
foreign operations* (33 898) 38 248 65 753
Total comprehensive income for the period 376 663 291 357 617 319
Profit after tax attributable to:
Owners of Famous Brands Limited 390 702 241 291 527 699
Non-controlling interests 19 859 11 818 23 867
410 561 253 109 551 566
Total comprehensive income attributable to:
Owners of Famous Brands Limited 356 804 279 539 593 452
Non-controlling interests 19 859 11 818 23 867
376 663 291 357 617 319
Earnings per share
Basic earnings per share (cents)^ 391 242 62 529
Diluted earnings per share (cents)^ 389 240 62 528
* This item may be reclassified subsequently to profit or loss.
^ The increase in basic earnings and diluted earnings per share before exceptional items is 12%.
Condensed consolidated statement of changes in equity
for the six months ended 31 August 2016
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 29 February
2016 2015 2016
R000 R000 R000
Balance at the beginning of the period 1 550 599 1 417 154 1 417 154
Total comprehensive income for the period 376 663 291 357 617 319
Payment of dividends (218 429) (204 552) (398 389)
Recognition of share-based payments 13 371 1 593 10 173
Issue of capital and share premium 6 121 23 217
Changes in ownership interests in
subsidiaries (2 173) (8 452) (3 906)
Additional non-controlling interests
arising on business combination 1 033 11 947 24 889
Recognition of put opinions over
non-controlling interests - - (118 426)
Contingent consideration (1 568) - 1 568
Balance at the end of the period 1 725 617 1 509 070 1 550 599
Condensed consolidated statement of cash flows
for the six months ended 31 August 2016
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 29 February
2016 2015 2016
Note R000 R000 R000
Cash generated before changes in working capital 456 575 384 814 874 733
Increase in inventories (27 767) (71 667) (84 357)
Increase in receivables (74 783) (74 567) (131 452)
Increase in payables 68 960 38 396 59 446
Cash generated from operations 422 985 276 976 718 370
Net interest (paid)/received (859) 1 085 (205)
Tax paid (121 680) (128 569) (243 993)
Cash available from operating activities 300 446 149 492 474 172
Dividends paid (218 078) (204 552) (398 003)
Net cash inflow/(outflow) from operating activities 82 368 (55 060) 76 169
Cash utilised in investing activities
Additions to property, plant and equipment (76 457) (34 789) (82 199)
Intangible assets acquired (13 087) (1 477) (42 749)
Proceeds from disposal of property, plant
and equipment 9 921 2 033 2 527
Net cash outflow on acquisition of subsidiaries 7 (82 474) (83 894) (83 989)
Net cash outflow on change in ownership in
investment in subsidiary (2 173) - -
Dividends received from associate 2 450 1 400 4 200
Net cash outflow utilised in investing activities (161 820) (116 727) (202 210)
Cash flow from financing activities
Acquired from non-controlling interest in subsidiary (4 522) (9 612) (18 084)
Proceeds from issue of equity instruments
of Famous Brands Limited 6 121 23 217
Cash (repaid to)/contributed by non-controlling
shareholders - (991) 539
Net cash inflow/outflow from financing activities 1 599 (10 580) (17 328)
Net decrease in cash and cash equivalents (77 853) (182 367) (143 369)
Foreign currency effect (13 272) 11 439 23 025
Cash and cash equivalents at the beginning
of the period 5 884 126 228 126 228
Cash and cash equivalents at the end of the period (85 241) (44 700) 5 884
Primary (business units) and secondary (geographical) segment report
for the six months ended 31 August 2016
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 29 February
2016 2015 % 2016
R000 R000 change R000
Revenue
Franchising and Development 382 572 321 374 19 681 364
Supply Chain 1 881 967 1 581 594 19 3 363 929
Manufacturing 1 299 052 848 102 53 1 799 958
Logistics 1 664 820 1 346 252 24 2 911 061
Eliminations (1 081 905) (612 760) 77 (1 347 090)
Corporate 1 401 1 287 2 562
South Africa 2 265 940 1 904 255 19 4 047 855
International 184 725 93 576 97 260 463
UK 57 560 53 457 8 115 696
Rest of Africa 127 165 40 119 217 144 767
Total 2 450 665 1 997 831 23 4 308 318
Operating profit before
exceptional items
Franchising and Development 205 204 180 697 14 389 282
Supply Chain 214 738 143 908 49 347 653
Manufacturing 165 903 101 046 64 247 455
Logistics 48 835 42 862 14 100 198
Corporate (48 587) (389) (11 239)
South Africa 371 355 324 216 15 725 696
International 33 141 22 495 47 66 412
UK 10 117 9 830 3 32 640
Rest of Africa 23 024 12 665 82 33 772
Total operating profit before
exceptional items 404 496 346 711 17 792 108
Franchising and Development
Impairment loss (20 000) - (12 000)
Corporate
Derivative gain 140 602 - -
Net finance costs (8 272) 1 085 (6 909)
Share of profit/(loss) of associates 2 688 1 938 (622)
Tax (108 953) (96 625) (221 011)
Profit for the period 410 561 253 109 62 551 566
Statistics and ratios
for the six months ended 31 August 2016
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August % 29 February
2016 2015 change 2016
Earnings per share (cents)
Basic earnings per share 391 242 62 529
Basic earnings before exceptional items* 271 242 12 529
Diluted earnings per share 389 240 62 528
Headline earnings per share 411 241 71 541
Headline earnings before exceptional items* 270 241 12 541
Diluted headline earnings per share 408 240 70 540
Dividends per share (cents) 405
Interim - 190 190
Final - - 215
Ordinary shares (000)
In issue 99 862 99 812 99 812
Weighted average 99 821 99 809 99 810
Diluted weighted average 100 455 100 464 99 892
Operating profit margin (%) 16.5 17.4 18.4
Net debt/equity (%) 4.9 3.0 (0.4)
Net asset value per share (cents) 1 728 1 512 1 554
Dividend cover on headline earnings (times) 1.3 1.3
* Exceptional items being: an impairment loss of R20 million recognised on the Group’s investment made in UAC
Restaurants Limited business in 2013 in Nigeria, and a R141 million derivative gain on the call option utilised
to hedge the purchase price of Gourmet Burger Kitchen (GBK) Restaurants Limited acquisition.
Notes to the condensed consolidated interim financial statements
for the six months ended 31 August 2016
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 unaudited condensed consolidated interim financial statements have been prepared in accordance with the
framework concepts and the measurement and recognition requirements of International Financial Reporting
Standards (“IFRS”) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, and contains at
a minimum the information required by IAS 34 Interim Financial Reporting, the JSE Listings Requirements,
and the Companies Act of South Africa.
2. Basis of preparation
The accounting policies applied in the presentation of the condensed consolidated interim financial
statements are consistent with those applied for the year ended 29 February 2016, except for the new
standards that became effective for the Group’s financial period beginning 1 March 2016, refer to
note 3.
The condensed consolidated interim financial statements were prepared on the historical cost basis, under the
supervision of Kelebogile Ntlha, 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 2016.
- IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28
Investments in Associates;
- IAS 1 Presentation of Financial Statements; and
- IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets.
The adoption of the new standards and amendments to 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 29 February
2016 2015 2016
R000 R000 R000
4. Earnings per share
4.1 Reconciliation between earnings and
diluted earnings
Profit attributable to equity holders of
Famous Brands Limited 390 702 241 291 527 699
Diluted earnings 390 702 241 291 527 699
Earnings per share (cents)
Basic 391 242 529
Diluted 389 240 528
4.2 Reconciliation between headline earnings
and diluted headline earnings
Profit attributable to equity holders
of Famous Brands Limited 390 702 241 291 527 699
After taxation profit on disposal of property,
plant and equipment (732) (464) (88)
Impairment loss 20 000 - 12 000
Headline earnings 409 970 240 827 539 611
Diluted headline earnings 409 970 240 827 539 611
Headline earnings per share (cents)
Basic 411 241 541
Diluted 408 240 540
5. Financial instruments
Accounting classifications and fair values
The table below sets out the classification of each class of financial assets and liabilities, as well as a
comparison to their fair values.
The different fair value levels are described below:
Level 1: Quoted prices (adjusted) in active markets for identical assets or liabilities that the Group can
access at the measurement date.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly or
indirectly.
Level 3: Unobservable inputs for the asset or liability.
Unaudited Unaudited Unaudited Unaudited Audited Audited
six months six months six months six months year year
ended ended ended ended ended ended
31 August 31 August 31 August 31 August 29 February 29 February
2016 2016 2015 2015 2016 2016
Carrying Fair Carrying Fair Carrying Fair
amount value amount value amount value
R000 R000 R000 R000 R000 R000
Financial assets
Loans and receivables
Trade and other receivables 573 911 573 911 402 403 402 403 444 069 444 069
Cash and cash equivalents 452 193 452 193 - - 146 134 146 134
Fair value through profit or loss
Derivative financial instruments 189 837 189 837 - - 100 100
1 215 941 1 215 941 402 403 402 403 590 303 590 303
Financial liabilities
Measured at amortised cost
Trade and other payables 626 997 626 997 420 969 420 969 367 494 367 494
Bank overdrafts 537 434 537 434 44 700 44 700 140 250 140 250
Non-controlling shareholder loan 21 198 21 198 23 458 23 458 24 988 24 988
Shareholders for dividends 2 224 2 224 - - 1 873 1 873
Lease liabilities 14 641 14 641 - - 12 547 12 547
Fair value through profit or loss
Derivative financial instruments 130 363 130 363 - - 124 821 124 821
1 332 857 1 332 857 489 127 489 127 671 973 671 973
Level 3 sensitivity information
The fair values of the level 3 financial liabilities as disclosed in the tab le above were determined by
applying an income approach valuation method including a present value discount technique. The fair value
measurement includes inputs that are not observable in the market. Key assumptions used in the valuation
of these instruments include the probability of achieving set profit targets and the discount rates. An
increase/(decreas e) of 1% in the discount rate would result in decrease/(increase) of R5 million
(31 August 2015: Rnil) and (29 February 2016: R5 million)
Movements in level 3 financial instruments at fair value
The following tables illustrate the movements during the period of level 3 financial instruments carried at fair value:
Unaudited Unaudited Unaudited Unaudited Audited Audited
six months six months six months six months year year
ended ended ended ended ended ended
31 August 31 August 31 August 31 August 29 February 29 February
2016 2016 2015 2015 2016 2016
Put options over non-controlling interests
Carrying value at beginning of the period 124 821 124 821 - - - -
Initial recognition in equity for new acquisitions - - - - 118 426 118 426
Unwinding of discount 5 542 5 542 - - 6 395 6 395
130 363 130 363 - - 124 821 124 821
6. 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.
7. Business combinations
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 29 February
2016 2015 2016
R000 R000 R000
Summary of cash outflow on acquisition of subsidiaries during the six months ended 31 August 2016
Lupa Osteria 3 958
Salsa Mexican Grill 4 985
Lamberts Bay Foods 73 531
Total cash outflow on acquisition of subsidiaries 82 474
Effective 1 May 2016, a 51% share was acquired in Lupa Osteria, for a consideration of R4 million.
R3.9 million was allocated to goodwill because of the anticipated scale and merger benefits related to
franchising a manufacturing and logistics capability.
Fair value of assets and liabilities acquired
Property, plant and equipment 866
Trade and other receivables 16
Cash and cash equivalents 42
Trade and other payables (793)
Current tax liabilities (5)
Net assets acquired 126
Non-controlling interests measured at their share
of the fair value of net assets (62)
Amount capitalised 64
Goodwill 3 936
Purchase price 4 000
Cash and cash equivalents (42)
Cash outflow from acquisition 3 958
Effective 1 June 2016, a 51% share was acquired in Salsa Mexican Grill, for a consideration of R6.2 million.
R5.2 million was allocated to goodwill because of the anticipated scale and merger benefits related to
franchising a manufacturing and logistics capability.
Fair value of assets and liabilities acquired
Property, plant and equipment 2 566
Inventories 137
Trade and other receivables 34
Cash and cash equivalents 1 197
Trade and other payables (1 220)
Non-controlling shareholder loans (732)
Net assets acquired 1 982
Non-controlling interests measured at their share
of the fair value of net assets (971)
Amount capitalised 1 011
Goodwill 5 171
Purchase price 6 182
Cash and cash equivalents (1 197)
Cash outflow from acquisition 4 985
Effective 1 August 2016, a 100% share was acquired in Lamberts Bay Foods, for a consideration of R70 million.
R31.9 million was allocated to goodwill because of the anticipated scale and merger benefits related to
manufacturing capability.
Fair value of assets and liabilities acquired
Property, plant and equipment 11 584
Inventories 38 361
Trade and other receivables 36 880
Current tax assets 1 314
Deferred tax (1 411)
Trade and other payables (45 059)
Bank overdraft (3 531)
Net assets acquired 38 138
Non-controlling interests measured at
their share of the fair value of net assets -
Amount capitalised 38 138
Goodwill 31 862
Purchase price 70 000
Bank overdraft 3 531
Cash outflow from acquisition 73 531
The accounting of the business combinations has been prepared on a provisional basis.
8. Subsequent events
Gourmet Burger Kitchen (GBK) Restaurants Limited
With effect from 7 October 2016 Famous Brands acquired the entire issued share capital of GBK, pioneer of
the burger revolution in the UK. GBK comprises 80 company-owned restaurants across the UK and is widely
renowned as the market leader in the premium burger category. The best-in-class business has a strong
financial track record, secure pipeline of sites to support a bold restaurant expansion programme, and
affords the Group the opportunity to earn hard currency outside of Africa. In terms of the contractual
agreement, GBK’s existing team will continue to manage the business.
Stakeholders were advised in the SENS announcement on 1 September 2016 that the transaction would be funded
by way of cash accumulated from business operations as well as short-term bridging finance. Subsequently, a
debt-financing syndication process was initiated and longer-term facilities of R2.4 billion and GBP30 million
were raised for financing and expansion purposes.
By Word Of Mouth (Pty) Ltd
As announced on SENS on 3 October 2016, subject to Competition Commission approval, Famous Brands has acquired
a 49.9% stake in the multi-awarded commercial catering company, By Word of Mouth (Pty) Ltd, advancing the Group’s
strategy to expand into the broader leisure and consumer product sector. The purchase consideration fell below
the threshold of a categorised transaction in terms of the Listings Requirements of the JSE Limited.
Due to the timing of these acquisitions, the initial accounting of the business combinations is incomplete and
therefore the disclosure of the acquisition date fair values and the related impact cannot be made at this time.
Directors and administration
Directors
NJ Adami, SL Botha (Independent Chairman), CH Boulle, P Halamandaris, P Halamandaris (Jnr), T Halamandaris,
JL Halamandres, RM Kgosana, DP Hele (Chief Executive Officer)*, K Ntlha (Group Financial Director)*,
BL Sibiya and T Dingaan
*Executive
Company Secretary
IWM Isdale
24 October 2016
Registered office
478 James Crescent, Halfway House, Midrand, 1685
PO Box 2884, Halfway House, 1685
Telephone: +27 11 315 3000
Email: investorrelations@famousbrands.co.za
Website address: www.famousbrands.co.za
Transfer secretaries
Computershare Investor Services Proprietary Limited
Registration number: 2004/003647/07
70 Marshall Street, Marshalltown, 2001
PO Box 61051, Marshalltown, 2107
Sponsor
The Standard Bank of South Africa Limited
Registration number: 1969/017128/06
30 Baker Street, Rosebank, 2196
Auditors
Deloitte & Touche
Bankers
Absa Bank Limited
Bidvest Bank Limited
FirstRand Bank Limited
Investec Bank Limited
Nedbank Limited
Standard Bank Limited
Contact information
Tel: +27 11 315 3000
investorrelations@famousbrands.co.za
478 James Crescent,
Midrand, South Africa, 1685
www.famousbrands.co.za
Date: 24/10/2016 07:05:00 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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