Food services franchisor Famous Brands has recorded an uptick in its operating profit for the year ended February 28, to R861-million, from R630-million in the prior year.

The group declared a dividend of 233c apiece, with the total dividend coming to 363c apiece for the year. This marks an 82% increase in dividends paid year-on-year.

Headline earnings a share increased by 37% to 488c apiece, from 356c apiece in the prior year.

Famous Brands says its revenues are now exceeding pre-pandemic levels, after the group focused on improving cash generation from operations and controlling its cost base tightly, despite high inflation, input cost increases and loadshedding.

Notably, the Brands division, with its 17 restaurant brands, reported a 21% year-on-year increase in revenue to R1.1-billion, with Leading Brands accounting for R904-milion of revenue and Signature Brands contributing R203-million to revenue. This contributed to the groupwide 15% increase in revenue to R6.5-billion in the year under review.

CEO Darren Hele says trading conditions in South Africa remain challenging, with the restaurant industry being highly exposed to loadshedding. All brands have had to manage menu price increases carefully to balance protecting franchise partner profitability, while offering value to consumers in a high inflation environment.

In the year under review, the Leading Brands portfolio expanded by 85 new restaurants and saw 143 restaurants revamped, and 31 closed. “While the marketplace remains highly competitive as brands fight to retain market share, we continue to experience good brand growth, revamp activity and demand for our brands from potential franchise partners,” Hele notes.

Signature Brands initially experienced a recovery in consumers to restaurants; however, as the year progressed, interest rate hikes and fuel price increases eroded disposable income and affected restaurant trade.

At the African and Middle Eastern operations, Famous Brands encountered strong headwinds, including significantly high inflation and lower-than-desired tourism levels.

While system-wide sales increased by just under 31% in Famous Brands’ African operations, operating profit decreased by R10-million to R24-million in the period under review. the operating profit margin also deteriorated to 5.7%, from 9.9% in the prior financial year.

Famous Brands says the home delivery channel gained traction in several countries, with online ordering platforms launched and franchise partners investing in call centres and centralised kitchens.

While Famous Brands opened 48 restaurants and closed 31 restaurants in the Middle East and rest of Africa region, company-owned restaurants in Africa grew by 15 in Nigeria and six in Botswana.

Debonairs Pizza opened its first restaurants in Oman and Saudi Arabia, while the Steers brand was introduced to the United Arab Emirates.

In the UK, Famous Brands experienced high energy costs and noted the impact of consumers’ high living costs, while supply chain disruptions continued throughout the 2023 financial year. This resulted in inventory shortages and major input cost increases.

The company’s operations in the UK recorded an operating profit increase of 12% year-on-year to R19-million, before impairments, nonetheless.

Famous Brands’ vertically integrated Supply Chain division comprises manufacturing, logistics and retail divisions. The divisions had mixed results in terms of profitability, with Manufacturing operating profit increasing by 0.8% year-on-year to R302-million, but the Retail division’s operating profit decreasing by 91% from R2-million in the prior year.

The Logistics division reported an operating profit increase of 89% year-on-year to R114-million.

Looking ahead, Hele expects South Africa’s weak economy and severe loadshedding levels to continue weighing on consumer spending in the coming year.

Famous Brands, nonetheless, sees many opportunities for growth and innovation in trading formats, technology and product development. “Our diverse menu options, strong brands and resilient franchise partners will support our continued growth in the 2024 financial year,” Hele concludes.