Wrap Text
Summarised unaudited condensed consolidated interim financial results for the six months ended 31 August 2019
Famous Brands Limited
Incorporated in the Republic of South Africa
Registration number: 1969/004875/06
JSE share code: FBR
ISIN code: ZAE000053328
Summarised unaudited condensed consolidated interim financial results
for the six months ended 31 August 2019
Famous Brands published its condensed unaudited results for the six months ended 31 August 2019 on 28 October 2019.
The full announcement is available on http://www.famousbrands.co.za and on
https://senspdf.jse.co.za/documents/2019/jse/isse/fbr/HY_2019.pdf
FINANCIAL PERFORMANCE/HIGHLIGHTS
Revenue - R3.6 billion
Headline earnings per share - 159 cents
Operating profit - R405 million
Operating profit margin - 11.3%
Interim dividend per share - 90 cents
COMMENTARY
OVERVIEW
Famous Brands is Africa's leading food services franchisor. The Group's vertically integrated business model comprises a
portfolio of 20 restaurant brands, represented by 2 879 restaurants across South Africa (SA), the rest of Africa and the
Middle East (AME), and the United Kingdom (UK). The Brands division is underpinned by substantial Logistics and
Manufacturing operations.
OPERATING ENVIRONMENT
Across our trading markets, consumer behaviour continued to be driven by the demand for convenience, value, and enhanced
brand experiences.
SA
Locally, consumer and business confidence remained at low levels throughout the review period. Sustained financial
hardship and subdued economic growth were exacerbated by country-specific risk factors which continued to cause general
socio-political uncertainty and discontent.
UK
Uncertainty arising from the recent change in political leadership as well as progress regarding Brexit weighed heavily
on consumer sentiment and spend during the review period.
GROUP PERFORMANCE
The business delivered solid results in a challenging environment. Particularly pleasing was the good performance reported
in the Brands division. Disappointingly, this improved performance did not pull through to the Supply Chain, which
experienced weaker sales and significant margin pressure.
Rewarding progress was achieved across our key strategic focus areas:
- to ensure that the total value chain delivers franchisee profitability;
- to entrench the gold standard in the GBK Restaurants Limited (GBK) business resulting in a more focused and relevant
offering and an improvement in costs and efficiencies; and
- to focus on working capital management; ensure the best return on investment in key areas of the business; and exit non-
core business.
GROUP FINANCIAL RESULTS
Salient features Six Six %
months months change
ended ended
31 August 31 August
2019 2018
Cash generated from operations Rm 573.2 540.4 6
Net asset value per share Cents 1 624 1 375 453
Basic earnings/(loss) per share Cents 159 (572) 128
Net debt/equity (gearing) % 165 142 (23)
Revenue Rm 3 569.1 3 583.6 0
Headline earnings per share Cents 159 188 (15)
Dividend per share Cents 90 - 100
Operating profit before non-operational items Rm 405.0 421.8 (4)
OPERATIONAL REVIEWS
Brands
This portfolio is segmented into Leading brands and Signature brands, strategically positioned to appeal to a wide range
of consumers across the income and demographic spectrum and across meal preferences and value propositions.
During the review period, new store growth was notably lower than in prior years, with a total of 50 restaurants (2018:
79) opened. In light of the weak economy, the roll out of the brand footprint continues to be measured and conservative to
ensure the sustainable viability of the network.
Revenue reported for the review period increased by 11% to R481.1 million (2018: R432.2 million), with Leading brands
contributing R386.4 million (2018: R366.5 million), up 5%. Signature brands' revenue rose 44% to R94.7 million (2018:
R65.7 million), primarily due to the higher number of Company-owned stores which generate higher revenue than royalty-only
income from franchised stores. Operating profit rose 6% to R235.2 million (2018: R222.5 million), of which Leading brands
contributed R220.2 million and Signature brands' the balance.
The division's operating margin declined to 48.9% (2018: 51.5%), reflecting a significant investment in technology
capability in the Leading brands portfolio, sub-inflationary menu price increases and higher operating costs.
SA
Across our Leading and Signature brands, combined system-wide sales (including all restaurants opened during the period)
grew 7.1% and like-for-like sales (excluding all restaurants opened or closed during the period) rose by 3.6%.
Independently, Leading brands' system-wide sales increased 6.0% and like-for-like sales improved 4.0%. Signature brands'
system-wide sales grew 14.0% reflecting the increase in new stores, while like-for-like sales rose 1.4%.
Leading brands portfolio
This portfolio comprises our mainstream brands. In the six months under review, Debonairs Pizza, Steers and Fishaways
increased their share of the market, while Wimpy, Mugg & Bean, Fego Caffe and Milky Lane did well to stabilise share in a
subdued trading segment. Despite sub-inflationary menu increases, all of the brands in this portfolio reported pleasing
like-for-like growth.
Ongoing innovation and calculated investment positioned our brands to compete more effectively and enhance their
leadership status in their specific categories. Key focus remained on:
- prioritising resources to support the brands;
- improving the total customer experience through optimising opportunities in the online ordering and home delivery space,
and enhancing consumer-facing technology;
- improving accessibility to customers through new flexible, convenience-centred trading formats; and
- driving cost leadership to entrench the sustainability of the franchise model for our partners.
Signature brands portfolio
This portfolio comprises a wide range of bespoke niche casual dining offerings. During the review period, good progress
was achieved across the priority focus areas, namely: to drive margin growth; expand the footprint of those brands that
are scalable; and rationalise underperforming brands and restaurants to improve the returns on this portfolio. Further
opportunities to leverage these improvements exist.
While strong system-wide sales were largely derived from the expanded network, good like-for-like sales growth was
reported by certain of the brands, including Lupa Osteria, Coffee Couture and Vovo Telo, which traded ahead of the
industry in a lacklustre market segment.
AME
The Group is represented in 16 countries in this region. Revenue for the combined region grew by 13% in Rand terms to
R152.6 million (2018: R135.2 million). Operating profit decreased by 15% to R20.6 million (2018: R24.3 million), while the
operating margin declined to 13.5% (2018: 18.0%), primarily due to foreign currency translation.
System-wide sales improved by 10.3% (2018: 12.8%). Ten of our 15 markets delivered good system-wide sales, with five
recording double-digit growth.
The region contributed 8.3% (2018: 10.8%) to total system-wide Brands division sales. In line with the narrow and deep
strategy which we implement in the rest of Africa, management's core focus was on driving the contribution of our major
Leading brands in the territory, Debonairs Pizza, Steers, Wimpy and Mugg & Bean, which account for 80% of the Group's
turnover in the AME.
UK
Our UK operation comprises GBK (UK and Ireland) and Wimpy UK, which are managed and report independently of each other.
Wimpy UK
Capitalising on consumers' growing demand for home delivery, the business expanded its multi-partner offering across the
restaurant network, contributing to the positive like-for-like sales growth recorded. Revenue in Rands improved by 6% to
R60.8 million (2018: R57.4 million), while revenue in Sterling was 1% lower. In Rand terms, operating profit increased by
57% to R13.4 million (2018: R8.5 million), while the operating margin rose to 22.0% (2018: 14.9%), underpinned by foreign
currency translation gains.
GBK (UK and Ireland)
In line with management's projections, the business made good progress, benefiting from the extensive range of operational
improvements implemented, together with the Company Voluntary Arrangement (CVA) restructuring programme completed over the
past year.
Despite the subdued economy and general pressure experienced by the industry, GBK's like-for-like sales grew, attributable
to intensified focus on the quality of the offering (product and experience); a targeted reinvestment in refurbishments;
an intensified campaign to upweight online sales; and improved management of efficiencies and costs.
Revenue in Rand terms decreased by 7% to R640.7 million (2018: R691.6 million), while revenue in Sterling was 13% lower.
Notably, the business reduced its operating loss by 76% from (R45.4 million) in the prior corresponding period to
(R10.7 million). The operating margin improved from (6.6%) in the prior comparable period to (1.7%). The operating loss
improvement includes R16.2 million related to the adoption of IFRS 16, which has an impact of 2.5% on the operating margin
improvement.
System-wide UK sales (Sterling) declined by 12.5% (2018: decrease of 6.8%), due to the closure of 24 stores as part of the
CVA process, seven of which were closed during the review period. Significantly, like-for-like sales increased by 8.6%
(2018: decrease of 9.7%). While dine-in sales declined in line with sector trends, online and delivery sales grew
strongly, supported by promotional activity.
External benchmarks confirm that the business tracked ahead of the market during the six months. Notably, like-for-like
sales post the end of the review period have remained positive.
Three restaurants underwent full revamps, while 30 other sites received kerbside makeovers in the six months under review.
At the close of the reporting period, GBK's footprint comprised 73 stores.
Supply Chain
The integrated strategic Supply Chain comprises the Group's Logistics and Manufacturing operations in SA. Combined revenue
for the review period decreased by 1% to R2.22 billion (2018: R2.25 billion). Operating profit declined by 18% to R209.1
million (2018: R256.0 million), while the operating margin reduced to 9.4% from 11.4% in the prior comparable period.
This disappointing performance is a reflection of weaker sales, sustained low food inflation which restricted
opportunities to increase pricing, and the marked deterioration in the Logistics division's margin. Management is
satisfied that the margin will improve to acceptable levels when the once-off and temporary expenses incurred in the
Logistics business during the period have been addressed.
Capital expenditure of R34.3 million was incurred across the Supply Chain.
LOOKING FORWARD
While trading conditions are likely to remain challenging across our markets, the Board and management are satisfied that
good progress has been made in positioning the business for growth. Across the operations, focus will remain on driving
profitability by capitalising on opportunities internally and in the market. Cost optimisation across the operation will
continue to be prioritised.
PROSPECTS
Management is cautiously optimistic that wide ranging initiatives to provide consumers with ease of access to our brands
and to deliver unique customer experiences at every touchpoint will provide the Group with a competitive advantage during
the forthcoming holiday season. Notwithstanding macro-economic challenges faced in the Supply Chain, an improved
performance in the Brands division should filter through and positively impact on the Manufacturing and Logistics
divisions.
In the GBK operation our focus will remain on leveraging efficiencies achieved over the period and driving profitability
and margin growth across the operation. The trading environment is expected to remain challenging for at least the medium
term, and a return to profitability is not anticipated before the end of the 2022 financial year.
DIVIDEND
The Board is pleased to declare a dividend payment of 90 cents (2018: nil) for the review period. The Board will continue
to monitor the trading environment, the Group's future performance, its operating requirements and acquisition
opportunities to determine further dividend payments.
The salient dates for the payment of the dividend are detailed below:
Dividend declaration date Monday, 28 October 2019
Last day to trade cum-dividend Tuesday, 3 December 2019
Shares commence trading ex-dividend Wednesday, 4 December 2019
Record date Friday, 6 December 2019
Payment of dividend Monday, 9 December 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 4 December 2019 and Friday, 6 December
2019, both dates inclusive.
In terms of dividends tax legislation, the following additional information is disclosed:
- the local dividend tax rate is 20%;
- the net local dividend amount is 72 cents (2018: nil) per share for shareholders liable to pay the dividends tax and 90
cents (2018: nil) per share for shareholders exempt from paying the dividends tax;
- the issued share capital of Famous Brands is 100 083 547 (2018: 99 977 435) ordinary shares; and
- Famous Brands' tax reference number is 9208085846.
AUDIO WEBCAST
A live audio webcast of the Group?s Interim results presentation will be held at 10:00 (SAST) on 28 October 2019.
To pre-register link to: http://www.corpcam.com/FamousBrandsOctober2019
On behalf of the Board
SL Botha DP Hele
Chairman Chief Executive Officer
Midrand
28 October 2019
Full announcement
The contents of this short form announcement are the responsibility of the Board of Directors of the Company ("the Board")
and have not been reviewed or reported on by the Group's external auditors. Shareholders are advised that this short form
announcement represents a summary of the information contained in the full announcement, published on
https://senspdf.jse.co.za/documents/2019/jse/isse/fbr/HY_2019.pdf and on Famous Brands' website http://www.famousbrands.co.za on
28 October 2019, and does not contain full or complete details of the financial results.
Any investment decisions by investors and/or shareholders should be based on consideration of the full announcement as a
whole and shareholders are encouraged to review the full announcement. The full announcement is also available for
inspection at the registered office of the Company and at the offices of Famous Brand's sponsor, The Standard Bank of
South Africa Limited. Inspection of the full announcement is available to investors and/or shareholders at no charge,
during normal business hours.
ADMINISTRATION
Directors
NJ Adami, SL Botha (Independent Chairman), CH Boulle, DJ Fredericks,N Halamandaris, JL Halamandres, DP Hele (Chief
Executive Officer)*, AK Maditse, ET Mashilwane, K Ntlha (Group Financial Director)*.
* Executive
Company Secretary
C Appollis
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
Transfer Secretaries
Computershare Investor Services Proprietary Limited
Registration number: 2004/003647/07
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
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
20 Woodlands Drive
The Woodlands
Woodmead
2052
http://www.famousbrands.co.za
Date: 28/10/2019 07:06:00
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