Optimistic of further sales recovery with vaccine roll out and improved economic conditions, says Famous Brands
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FAMOUS Brands, the owner of Wimpy, Debonairs Pizza and Steers, anticipates some food inflation in the second half of the year as it recorded a pick up in sales during the half year ended August 2021.
The group said yesterday that the inflation was driven by dry goods, perishables and packaging as it posted improved sales during the half year ended August 2021.
“Expected brand weakness will amplify inflation,” said Famous Brands. Financial highlights included higher sales across its leading and signature brands, with combined like-for-like sales increasing by 75.6 percent. Revenue recovered to R3 billion representing a 50 percent jump compared to a year ago, while operating profit was up by 302 percent to R222 million.
The group said despite the weak economy, it was optimistic sales would recover further as vaccine programmes roll out and economic conditions improved.
“The possibility of a fourth wave in several markets could lead to more stringent Covid-19 restrictions. The timing of this fourth wave is also critical; an earlier fourth wave in November would have a lesser revenue impact than a wave during the December and January holiday period,” said the group.
Famous Brands, which is a significant player in South Africa’s dining industry, said headwinds due to Covid-19 restrictions, consumer apprehension regarding eating out, and poor economic conditions had weighed heavily on its performance.
Not only was capacity limited to 100 people or 50 percent of available capacity in the first three months of the financial year, for the second three months the capacity limit was 50 people. Sit-down dining was also barred for the first two weeks of July while alcohol and trading time restrictions due to curfews further dampened performance.
Chief executive Darren Hele said Famous Brand’s performance was strong despite challenging operating conditions including South Africa’s civil unrest in July, Covid-19 restrictions in several markets and poor economic climate. He said consumer behaviour had also changed in response to the pandemic.
“Covid-19 forced restaurants to rethink how they serve customers. We have embraced the take away and delivery channel and contactless technology while also prioritising value for money offerings,” Hele said.
A total of 99 restaurants were damaged in the civil unrest in Kwazulu-Natal and part of Gauteng and the group said it lost 4 111 restaurant trading days due to civil unrest related closures.
Famous Brand said initiatives to draw foot traffic, including revamping menus to simplify its restaurant, helped to boost revenue during the half year ended August 2021. The group also kept its menu price increases below food inflation and focused on value for money propositions, and said reduced trading hours have required a renewed focus on breakfast and lunch promotions. It embraced take away and delivery, including kerbside pick-up, own delivery, third-party delivery, order ahead options and increasing drive-through capacity
The group said it would not be paying an interim dividend after its primary banker called on the company to reduce debt levels.
“The restriction from our primary lender is that the group must reduce net debt to earnings before interest taxation depreciation and ammortisation (Ebitda) to be less than 2.5 times for two consecutive periods before resuming a dividend,” said the group.
Famous Branded opened 50 new restaurants, revamped 41 restaurants and closed 19 restaurants in the period.
BUSINESS REPORT ONLINE