Roadmap gives Famous Brands boost

By Sandile Mchunu Time of article published May 27, 2020

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DURBAN - Famous Brands leapt more than 10percent on the JSE yesterday after the food services franchisor announced that it was rolling out a three-year strategic roadmap following an improved operational performance for the year to end February.

The group said the roadmap was accelerated by the global coronavirus (Covid-19) pandemic to rightsize the business, reduce costs and preserve cash for balance sheet flexibility.

The franchiser said that the key areas of focus would include expansion, consolidation and a capital management as well as allocation programmes.

Chief executive Darren Hele said the group planned to use the expansion programme to grow its leading brands and retail business and build depth in the rest of Africa and Middle East (AME) footprint.

“The consolidation programme will include disinvesting from non-core brands, manufacturing and logistics facilities and intensify investment in high-return assets and lastly, a programme to optimise capital management and allocation,” Hele said.

The group’s leading brands include Steers, Wimpy, Mugg & Bean, Debonairs Pizza and Fishaways.

Hele said that the group planned to remain focused on generating free cash flow, reducing interest bearing debt and non-essential capital expenditure.

The group incurred R63million capital expenditure, primarily related to the commissioning of the two new distribution centres in the Western Cape and Free State.

Famous Brands has a vertically integrated business model which consists of a portfolio of 24 restaurant brands, represented by 2898 restaurants across South Africa, the AME and UK as well as the logistics and manufacturing operations.

In the year to end February, the group reported a 1percent increase in revenue to R7.8billion while operating profit rose 7.67percent to R912m, positively impacted by an improvement in Gourmet Burger Kitchen and the disposal of Coega Concentrate tomato paste plant, which reported an operating loss of R22m a year earlier.

Headline earnings per share shot up 32percent to 417cents, and earnings per share surged 175percent to 362c from a 484c loss as a result of the non-recurrence of costs and impairments recognised last year.

The group did not declare a dividend. It said in light of the Covid-19, the board deemed it prudent to preserve cash to facilitate balance sheet flexibility and no dividend was declared for the second six months.

Hele said the group anticipated that the operating environment would remain constrained in the post Covid-19 era and evolve with more challenges.

“Accordingly, our business will be focused on adapting and transforming to overcome the challenges and optimise on the opportunities presented,” he said.

Famous Brands closed 2.97 percent higher on the JSE yesterday at R 35.01.


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