Famous Brands cheers results

Famous Brands group CEO CEO Kevin Hedderwick (Supplied)
Famous Brands group CEO CEO Kevin Hedderwick (Supplied)

Johannesburg - Famous Brands [JSE:FBR] opened a record number of 258 new restaurants during its financial year ending February 28 2015.

"During the reporting period Famous Brands successfully concluded achievement of this goal through our ongoing strategy of leveraging skills and scale across all three pillars of the business – Brands, Manufacturing and Logistics,” group CEO Kevin Hedderwick said on Monday.

“In the year ended February 28 2015, the group recorded its 14th consecutive year of growth, reporting record turnover, profit and margins. This strong set of results, delivered in extremely testing trading conditions, is a reflection of robust system-wide sales by the franchised brand portfolio and continued improvement in efficiencies and cost containment in the logistics and manufacturing divisions.”

Revenue increased by 16% to R3.3bn and operating profit rose by 19% to R672m. A best-ever operating margin of 20.5% was achieved. Headline earnings per share improved by 15% to 467 cents per share.

The board has declared a final gross dividend of 200 cents per ordinary share, payable out of income. This brings the total cash dividend to 355c/share for the 2015 financial year, an increase of 18%.  

The group’s franchising division consists of three regions: South Africa, rest of Africa and international (United Kingdom, the Middle East and Mauritius).

“Across the group’s total franchise network system-wide sales (which include new restaurants opened) increased 10%, while like-on-like sales grew 4%. A record number of 258 new restaurants were opened across the brand portfolio, bringing the total restaurant network to 2 545. During the period 160 restaurants were revamped,” said Hedderwick.

In the South African context he pointed to the continued pressure on consumers’ disposable income, but said solid results were reported across the group’s mainstream and emerging brands portfolios.

“Furthermore, our ambition is to expand the group’s presence in the table service evening dining environment, which affords strong growth opportunities for the business. Supplementing an internal focus on existing brands with offerings relevant to this market, management will also continue to explore suitable acquisition opportunities related specifically to this dining occasion,” he said.

"With 20 years’ of experience and representation in 16 countries, Famous Brands has a strong presence in the rest of Africa, and robust ambitions to up-weight that position."

In pursuit of the group’s stated strategy to win the race to Africa, the target for new restaurants in the year ahead is 35, including a maiden entry into Ghana.

While the economy showed signs of improvement in the UK, consumers remained cautious in discretionary spend.

“Notwithstanding this context, the division reported its best-ever performance, based on improved top-line growth in the Wimpy operation, intensified management of the cost base and right-sizing the business in alignment with current economic conditions,” said Hedderwick.  

During the period two new Wimpy restaurants were opened and three revamps were completed. Two further Wimpy restaurants are in the pipeline for the forthcoming year.

“The group’s stated intent has always been to use the Wimpy UK platform as a beachhead to grow Famous Brands’ footprint in the years ahead. Based on the health of our UK business, management is considering opportunities to expand activities and unlock the value of this investment, either via acquisition or joint ventures with suitable food services operators in the country,” said Hedderwick.

In the Middle East, Famous Brands continued to expand its footprint in this region with the opening of its maiden Steers and Tashas restaurants in Dubai.  

Forecast

The forecast for disposable income growth in the year ahead is conservative and continued uncertainty in the economic, political and labour environments will weigh further on consumer confidence, according to Hedderwick.

“In this context, growth in the forthcoming period is expected to be muted. However, the business’ strong investment proposition will continue to afford above-average returns for shareholders. Management is confident that Famous Brands is sufficiently resilient, agile and innovative to surmount the challenges faced.”

Hedderwick said the group has launched its 2020 strategy in preparation for the next five years of planned growth. The strategy centres on positioning Famous Brands to compete aggressively as one of the leading branded leisure and consumer product businesses in Africa and selected international markets.

The key tenet of this strategy is diversification of the group through leveraging capabilities and building scale across the business. Hedderwick concludes: "The necessary investment will continue to be made in people, processes and systems as required.”


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