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Famous Brands reports strong revenue recovery, return to profitability

27th October 2021

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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JSE-listed African food services franchisor Famous Brands’ revenue recovered to R3-billion and its operating profit to R222-million for the six months ended August 31.

The group’s operating profit margin improved to 7.4% from the comparable period in the prior year.

Headline earnings a share improved to 97c. No dividend was declared.

The group says its balance sheet remains resilient, with net assets of R471-million, representing net asset value a share of 470c.

Its cash reserves, after debt servicing requirements, were R391-million.

Famous Brands says this strong performance comes despite challenging operating conditions including civil unrest in South Africa in July, Covid-19 restrictions in several markets and a poor economic climate.

Consumer behaviour has 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,” says CEO Darren Hele.

Across the group’s Leading and Signature Brands, combined like-for-like sales increased by 75.6%. Like-for-like sales refer to sales reported by all restaurants across the network, excluding restaurants opened or closed during the period.

The operating profit for these brands was R134-million and the operating margin increased to 33%. 

Famous Brands has grown the take-away and delivery channel, including kerbside pick-up, own delivery and third-party delivery, order ahead options and increasing drive-through capacity.

REGIONAL

In South Africa, Covid-19 restrictions continue to impact financial performance. Moreover, there were 99 restaurants damaged and rendered non-operational in the July civil unrest.

The group’s logistics facility in Westmead, KwaZulu-Natal, was damaged and closed for three weeks before full operations could resume.

Famous Brands recorded a loss of 4 111 restaurant trading days owing to these closures.

In Africa and the Middle East, Covid-19 restrictions placed franchise partners and licensees under financial strain. System-wide sales in this region increased by 14.7%. The region’s revenue was R168-million. Operating profit decreased by 25% to R8-million.

Seventeen new restaurants were opened while two restaurants closed.

In the UK, Wimpy’s system-wide sales were up 7.5% on the previous year and close to pre-pandemic levels. Revenue in rand terms decreased to R64-million. Operating profit declined to R8-million, while the operating margin deteriorated to 13.1%.

SUPPLY CHAIN

The group’s vertically integrated supply chain comprises the manufacturing, logistics and retail businesses. Manufacturing revenue improved by 64.5% to R1.3-billion. Operating profit recovered to R129-million, 318% higher than the prior comparable period.

Logistics’ performance has improved owing to increased demand, although slowed down by the Covid-19 third wave and July’s civil unrest. Logistics’ turnover increased by 73.5% to R1.9-billion, with a positive recovery to a profit of R7-million.

In line with the trend towards increased home consumption, the retail business delivered a solid performance with a 46% increase in revenue to R105-million.

OUTLOOK

While the local economy remains weak, the gradual reduction of Covid-19 restrictions and the vaccine roll-out should support a sales recovery for restaurants over the short term. The possibility of a fourth wave in several markets could lead to more stringent restrictions.

In November, a fourth wave would have a lesser revenue impact for Famous Brands than a wave during the December and January holiday period.

Famous Brands anticipates some food inflation in the second half of the financial year driven by dry goods, perishables and packaging. Expected rand weakness will amplify inflation.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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