Famous Brands resumes dividend pay
DURBAN – Famous Brands, a leading food services franchisor, has resumed dividend payments in the six months to end August after it skipped a dividend payment last year caused by an impairment charge in its UK subsidiary Gourmet Burger Kitchen (GBK).
The group, with brands including Steers, Wimpy and Debonairs Pizza, declared an interim dividend of 90c a share.
The resumption in the dividend payment comes as the group yesterday reported basic earnings per share of 159 cents a share compared to a loss of 572c reported last year.
In last year’s results, the group reported an impairment of R874 million in the GBK UK business. There were no impairment charges in the current financial period.
Despite improved trading conditions, chief executive Darren Hele said consumer and business confidence locally remained at low levels throughout the six months under review, while in the UK uncertainty arising from the change in political leadership and progress regarding Brexit weighed heavily on consumer sentiment and spend.
“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 we will maintain intense focus on driving profitability by capitalising on opportunities internally and in the market. Cost optimisation across the operation will continue to be prioritised,” Hele said.
Revenue was flat at R3.57 billion compared to last year's R3.58bn, while operating profit before non-operational items declined by 4 percent to R405m, down from R421.8m.
Its headline earnings per share decreased to 159c compared to last year’s 188c.
Its GBK UK and Ireland division reported a 7 percent decline in revenue in rand terms to R640.7m and 13 percent lower in sterling terms.
However, the business reduced its operating loss by 76 percent to R10.7m compared to R45.4m last year.
Its system-wide UK sales declined by 12.5 percent, due to the closure of 24 stores as part of the company voluntary arrangement process, seven of which were closed during the review period.
The rest of Africa and the Middle East division, which consists of 16 countries, reported a 13 percent increase in revenue to R152.6m in rand terms. However, operating profit decreased by 15 percent to R20.6m and system-wide sales improved by 10.3 percent.
“Rewarding progress was achieved across our key strategic focus areas to ensure the total value chain delivers franchisee profitability, to entrench the gold standard in the 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,” Hele said.
Nolwandle Mthombeni, an investment analyst at Mergence Investment Managers, said the performance of the South African brands had been good, however, Famous Brands generated an operating profit of R405m, which was the same profit generated in August 2016.
“To date, GBK has detracted from profitability. It has offset the growth of the other brands. When you acquire an asset, a return on that investment is expected. Until GBK actually starts generating a return investors will keep pricing in zero growth,” Mthombeni said.
Famous Brands share price closed 2.76 percent lower at R79.35 on the JSE yesterday.