JSE-listed Famous Brands on Monday posted a double-digit decline in earnings for the six months ended August 31, as the group faced a local environment that CEO Darren Hele described as one of the toughest in management’s recollection.
However, Hele felt that the branded food services franchisor delivered satisfactory half-year results considering the trading conditions the group found itself in.
“The immediate challenges being experienced in the UK do not overshadow the potential which Gourmet Burger Kitchen (GBK) holds, nor the solid and exciting business we have here in the local market,” he said, telling Engineering News Online during an interview that the South African brand’s portfolio holds some exciting prospects for the next six months.
While Famous Brands’ 2016 acquisition, GBK, underperformed against the group’s expectations amid an adverse economic and sociopolitical environment, the South African business delivered satisfactory organic growth, and is well-positioned and emerging as a stronger and better brand.
During the interim period under review, basic earnings a share fell 56% to 171c, while headline earnings a share decreased 59% to 170c.
The company’s operating profit, before non-operational items, remained stable at R406-million, while the operating margin, before non-operational items, decreased from 16.5% in the first half of 2016 to 11.9% in the first six months of this year, owing to a higher percentage of company-owned restaurants in the UK.
Group revenue expanded by 39% to R3.4-billion during the first six months of this year.
Despite the challenging trading markets, Famous Brands kept its focus on growth, with a range of strategies initiated, including building capability and scale in the business and instilling “unrelenting focus” on innovation and improvement to deliver unique customer experiences in the branded franchise and food services space.
During the period under review, Famous Brands optimised and integrated all recent, scale-adding acquisitions in South Africa and advanced the integration of GBK.
Synergies were also leveraged to achieve the planned improved efficiencies across the operations, while management remains resolute in its commitment to cost containment and focus on core competencies.
“The operating environment in both the local and UK markets is expected to remain testing, with prevailing conditions anticipated to persist for at least the next six months domestically and possibly longer in the UK,” Hele noted.
Despite the peak trading holiday season looming, consumer sentiment is not expected to improve, leaving Famous Brands further challenged to leverage the market position of its brands and prioritise strategies to capitalise on “all opportunities to capture disposable income”.
“We remain receptive to prospective local acquisitions that align with the group’s core competencies and which will further our goal to be the leading innovative branded franchise and food services business in South Africa and selected international markets by 2020,” Hele concluded.
Famous Brands did not declare an interim dividend for the period under review.