Food services franchiser Famous Brands is heading in a better direction in the second half of its financial year, with incremental gains, following a relatively subdued first six-month performance, CEO Darren Hele said yesterday.
The group, which owns many of South Africa's iconic restaurant brands, including Steers, Mug & Bean and Fishaways, raised its interim dividend 9% to 150 cents, reflecting a stable financial position, performance and cash flows.
Although the trading environment was challenging due to constrained consumer disposable incomes, the dividend was a positive indicator of future performance, he said in a telephone interview.
Total first half revenue increased by only 2% to R4.02 billion. Operating profit was flat at R371 million.
Headline earnings a share performed better at 218 cents a share versus 199 cents in 2023, largely due to vigilance on the cost base, and even though operating profit margins were impacted by lower volumes and overhead cost pressures.
Hele said from their perspective, the group and its customers would benefit from lower interest rates and lower fuel prices, as well as municipalities that provided proper services. The group's franchisees were also facing very high power costs, he said.
“The first quarter saw pre-election uncertainty. A degree of cautious optimism is apparent post the formation of the Government of National Unity in mid-June. Green shoots of consumer confidence are not yet materialising in spending resulting in pressure on our franchise partners,” he said.
Famous Brands plans to open 89 new stores across the group in the second half of the 2024 financial year. The group has 2 839 franchised restaurants, with 2 574 in South Africa, 213 restaurants in SADC, 62 restaurants in the UK and 76 restaurants in AME.
The Brands segment comprises Famous Brands’ portfolio and includes the mainstream Leading Brands category and niche Signature Brands category. Leading Brands revenue increased by 0.8% to R469m. System-wide sales improved by 3.2%, while like-for-like sales grew by 1%.
Signature Brands revenue decreased by 10.4% to R94m, primarily due to lack of consumer discretionary income for luxury dining.
In the SADC region, revenue increased by 3.8% to R218m. Revenue from the Africa and the Middle East (AME) segment increased by 105% to R35m, mainly due to the acquisition of Mauritius company-owned restaurants in November 2022, and their were currency distortions, said Hele.
Wimpy UK revenue decreased by 17% to R69m mainly due to lower footfall as the country faced economic uncertainty during the election period.
Supply chain revenue grew slightly to R2.8bn. Manufacturing revenue was in line with the prior period at R1.6bn, with operating profit increasing by 10.3% to R150m.
Hele said they entered the second half of 2024 with slightly less uncertainty in the macroeconomic environment, considering the strengthening of the Rand. Interest rate cuts may also provide scope for a more positive consumer outlook.
“The company will continue to focus on value-added offerings, affordability, and cost-cutting,” he said.
A R185m frozen food warehouse situated in Midrand was expected to be completed in May.
Hele said the group had a solid pipeline of promotional activity planned for the peak summer season and would continue supporting its franchise partners with energy efficiency management and cost savings.
BUSINESS REPORT