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FBR
FBR
FBR - Famous Brands Limited - Unaudited consolidated interim results for the six
months ended 31 August 2007
Famous Brands Limited
Incorporated in the Republic of South Africa
Registration number 1969/004875/06
Share code: FBR
ISIN: ZAE000053328
"Famous Brands" or "the group"
UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2007
Gross revenue up 27% R514,1 million (2006: R406,3 million)
Operating profit up 56% R109,4 million(2006: 70,1 million)
Operating margin up 23% to 21,3%(2006: 17,3%)
Interim distribution to shareholders 83% up to 33 cents (2006: 18 cents)
CONSOLIDATED INCOME STATEMENT
unaudited unaudited % audited
six months six months change year ended
ended ended 28 February
31 August 31 August 2007
2007 2006 R000
R000 R000
Gross revenue 514 132 406 280 27 872 151
Operating profit 109 356 70 145 56 137 812
Net interest paid (11 127) (3 602) (6 275)
Net income before taxation 98 229 66 543 48 131 537
Taxation (28 375) (21 164) (44 423)
Attributable profit 69 854 45 379 54 87 114
Itemised Reconciliation:
Attributable profit 69 854 45 379 87 114
Adjusted for:
Impairment loss on 12 777
intangible fixed assets
Outside shareholders (1 201)
interest
Impairment on loan 70
(Profit)/loss on disposal of (426) 38 (275)
non-current assets
Headline earnings 68 227 45 417 50 99 686
Weighted average numbers of 93 995 868 87 594 583 87 523 898
shares in issue
Weighted average diluted 95 545 208 94 200 374 94 596 090
numbers of shares in issue
Operating margin - % 21,3 17,3 23 15,8
Earnings per share - cents 73,0 51,8 41 99,5
Fully diluted earnings per 73,6 48,6 51 93,1
share - cents
Headline earnings per share 72,6 51,8 40 113,8
- cents
Fully diluted headline 73,1 48,7 51 106,3
earnings per share - cents
CONSOLIDATED BALANCE SHEET
unaudited unaudited audited
six months six months year ended
ended ended 28 February
31 August 31 August 2007
2007 2006 R000
R000 R000
ASSETS
Non-current assets 510 768 300 748 318 957
Tangible fixed assets 98 803 80 973 95 574
Intangible fixed assets 407 383 218 482 217 670
Deferred taxation 3 963 4 815
Loans 619 1 293 898
Current assets 336 766 173 332 266 144
Inventory 77 412 70 265 56 326
Accounts receivable 165 127 83 181 109 701
Bank 94 227 19 886 100 117
Total assets 847 534 474 080 585 101
EQUITY AND LIABILITIES
Share capital and reserves 378 771 279 085 303 480
Ordinary shareholders` interest 363 453 279 085 303 480
Outside shareholders` interest 15 318
Non-current liabilities 232 168 71 735 93 958
Interest bearing borrowings 213 813 56 393 75 745
Deferred taxation 18 355 15 342 18 213
Current liabilities 236 595 123 260 187 663
Accounts payable 164 599 73 829 124 675
Short-term portion of long-term 29 995 25 994 42 729
liabilities
Taxation 42 001 23 437 20 259
Total equity and liabilities 847 534 474 080 585 101
SEGMENT REPORT
unaudited unaudited % audited
six months six months change year ended
ended ended 28 February
31 August 31 August 2007
2007 2006 R000
R000 R000
Gross revenue
Franchising 122 329 106 749 15 227 988
Manufacturing/retail/ 358 301 298 443 20 645 420
logistics
Manufacturing 244 925
Logistics 328 392
Inter-segment revenue (215 016)
International 33 892
Elimination (390) 1 088 (136) (1 257)
Total 514 132 406 280 27 872 151
Operating profit
Franchising 67 839 52 619 29 112 127
Manufacturing/retail/ 26 682 15 506 72 35 954
logistics
Manufacturing 22 866
Logistics 8 580
Elimination (4 764)
(manufacturing/logistics)
International 12 435
Corporate services 2 400 2 020 19 2 507
Total 109 356 70 145 56 150 588
CONSOLIDATED CASH FLOW
unaudited unaudited audited
six months six months year ended
ended ended 28 February
31 August 31 August 2007
2007 2006 R000
R000 R000
Net cash flow from operating 22 483 29 585 115 225
activities
Cash generated by operations 67 970 55 279 172 054
Net interest paid (11 127) (3 602) (6 275)
Taxation paid (5 892) (7 201) (35 902)
Capital reduction and dividends (28 468) (14 891) (14 652)
Net cash flow from investing (20 611) (10 254) (28 776)
activities
Expended on non-current assets (22 883) (10 256) (31 620)
Proceeds from disposal of non 12 600 471 5 581
current assets
Investment in subsidiaries (11 226) (3 794)
(Increase) in loans receivable 898 (469) 1 057
Net cash inflow from financing (7 762) (4 464) 8 649
activities
Increase/(decrease) in share 19 656 (18 418)
capital and reserves
(Decrease)/increase in long-term (27 418) (4 464) 27 067
liabilities
Change in cash and cash equivalents (5 890) 14 867 95 098
Cash and cash equivalents at 100 117 5 019 5 019
beginning of period
Cash and cash equivalents at end of 94 227 19 886 100 117
period
CONSOLIDATED CHANGES IN EQUITY
unaudited unaudited audited
six months six months year ended
ended ended 28 February
31 August 31 August 2007
2007 2006 R000
R000 R000
Balance at beginning of period 303 480 248 234 248 234
Net profit not recognised in the 1 717 288 1 054
income statement - currency
translation differences
Attributable earnings 68 652 45 379 87 114
Capital reduction and dividends (28 334) (14 891) (30 735)
Issued to participants of Share 860 (2 537)
Incentive Scheme
Net movement in share capital 17 078
Share-based payments 75 350
Outside shareholders` interest 15 318
Balance at end of period 378 771 279 085 303 480
NOTES
1) These results have not been audited or reviewed by the company`s
auditors.
2) The unaudited results of the group for the six months ended
31 August 2007 have been prepared in accordance with International
Financial Reporting Standards.
3) The accounting policies applied by the group are consistent with
those applied in the comparative financial periods.
4) The interim results have been prepared in accordance with IAS34
Interim Financial Reporting.
COMMENTARY
Overview and trading environment: Famous Brands Limited is Africa`s leading
Quick Service Restaurant and Casual Dining franchisor which also has
representation in the United Kingdom. The group currently comprises 1 502
franchised restaurants spread across its brand portfolio which includes Steers,
Wimpy, Debonairs Pizza, FishAways, House of Coffees and Brazilian Cafe. The
group manufactures and supplies its franchisees, the retail trade and broader
hospitality industry with a wide range of meat, sauces, bakery, ice cream and
fruit juice products.
The group experienced challenging macro-economic trading conditions during the
first half of the year characterised by a series of interest rate increases, a
general tightening of economic spend and high food inflation. Despite these
circumstances, management is pleased with the interim results for the six months
ended 31 August 2007 which reflect a 27% growth in gross revenue translating
into a 56% improvement in operating profit and 48% growth in fully diluted
earnings per share.
Key drivers surrounding the above performance are the continued shift by
consumers towards convenience and out of home consumption being fuelled by the
emerged middle class. In this regard a recent Nielsen Omnibus Survey reveals
that a total of 67% of all consumers surveyed have visited a Quick Service
Restaurant in the past 4 weeks versus 52% in 2003. Growth is shown to have
occurred across all race groups. The group`s strong, relevant and contemporary
brand portfolio continues to benefit from these trends driving both organic and
new restaurant growth.
Financial results: All divisions within the group have contributed to the
delivery of an excellent performance. Gross revenue was enhanced by 27% to
R514,1 million (2006: R406,3 million). Operating profit improved 56% to R109,4
million (2006: R70,1 million) and attributable profit increased 54% to R69,9
million (2006: R45,4 million). Headline earnings per share increased by 40% to
72,6 cents (2006: 51,8 cents). During the period under review Investec exercised
their right to convert their R9 million loan into 5,8 million shares. Had this
not occurred, the headline earnings per share would have increased by an amount
closer to earnings.
Particularly pleasing in this set of results is the strong improvement in
operating margin up to a record high of 21,3% versus the 17,3% of a year ago.
This strong result is underpinned by improved efficiencies across the entire
business and a realisation of a significant investment in capex over the past
two years particularly within the Manufacturing division.
Franchising division - Domestic: Whilst like on like sales net of new restaurant
openings grew by 8,4% compared to the previous year, system wide sales grew by
15,6%. This resulted in an increase in revenue of 15% to R122,3 million up from
the R106,7 million in the prior year. The increase in gross revenue translated
into a 29% improvement in operating profit from R52,6 million to R67,8 million.
New restaurant openings during the period totalled 34 with a further 70 planned
between now and end of the group`s fiscal year.
The implementation of astute procurement strategies and extraction of synergies
from the Manufacturing and Logistics divisions have allowed the group`s brands
to remain competitive and consequently menu price increases have been maintained
below that of food inflation.
Franchising division - International: Overall trading during the period has met
management`s expectations and the two year turnaround plan for this business
remains well on track. On gross revenue of R33,8 million, the International
division achieved operating profit of R12,4 million, which equates to a healthy
operating profit margin of 36,7%.
The first six months post the acquisition of Wimpy in the United Kingdom have
been used to initiate the strategic plan for the business as well as entrench
the group`s operating policies and principles. Internal rationalisations were
necessary and have taken place in order to right-size the business.
Numerous brand alignment initiatives have commenced and will be implemented in
the second half of the year.
A restaurant upgrade programme has been launched based on a new Wimpy UK retail
footprint, the first of which was recently opened in Essex and is trading well
ahead of expectations.
Manufacturing and Logistics divisions: During the review period the Food
Services division was separated out to reflect two stand-alone Manufacturing and
Logistics divisions intended to bring about a much needed focus across two
highly specialised and capital intensive business units. The segregation also
better aligns these divisions with the group`s strategic business model. The
combined gross revenue of these two divisions increased by 20% to R358,3 million
(2006: R298,4 million). The combined operating profit grew by 72% to R26,6
million from R15,5 million.
Manufacturing division
The period under review has seen a robust recruitment and training programme
take place within the Manufacturing division, putting in place the skills
necessary to extract efficiencies after two successive years of substantial
capital investment.
An intensive process of benchmarking and best operating practices has been
implemented across all manufacturing plants. Robust range rationalisation has
taken place as well as the outsourcing of non profitable low volume line items.
These factors have positively contributed towards the group`s overall margin
improvement.
The division`s Bakery plant was recently awarded HACCP accreditation and its
Sauce plant is on track to achieve the same status by the end of the fiscal
year.
Logistics division
The group`s Logistics division continues to develop as a key strategic
competitive advantage. Outsourcing of non franchisee business to third party
distributors, better equipped to service the broader hospitality and food
service market, has been completed. At the same time work is progressing well
with the Logistics division taking on the previously outsourced distribution of
product to the Wimpy franchisee network.
Commissioning of the group`s new logistics centres in Durban and Port Elizabeth
have been completed whilst work is in progress adding capacity to the existing
Bloemfontein centre.
Disposals: During the period under review the group took a strategic decision to
divest the non core businesses of Pouyoukas Foods and Coffee Contact. These
transactions resulted in cash inflows of R12,6 million and the effect on the
full year results will be immaterial.
Litigation: As noted during the group`s last annual report, Cape Franchising
(Pty) Ltd the group`s Western Cape regional licensee and distributor has,
through an arbitration process, been awarded the right to distribute all the
group`s products (including Wimpy products) in that region. The arbitration
process dealt with some, but not all the items of dispute in the 1992
distribution agreement. During the period under review further arguments
surrounding this litigation matter have continued.
Directorate: During the period Craig McLeary was appointed Group Financial
Director and Company Secretary replacing Paris Papageorgiou who in future will
be heading up the group`s offshore businesses operating out of Cyprus.
Prospects: Whilst a "cooling off" of the economy, as experienced over the past
six months, is expected to continue the nature of the group`s business is such
that it historically, and due to seasonality factors performs better during the
second half of the year. The group`s overall brand health and strong new
restaurant opening programme should benefit from this trend.
The Manufacturing and Logistics divisions` performance will continue to be
driven primarily by the performance of the group`s brands and franchise network,
whilst in the process extracting improved efficiencies and productivity during
the latter half of the year.
Management is confident that the group is well positioned to deliver growth in
earnings for the full year not different from those of a year ago.
Distribution to shareholders: Notice is hereby given that in lieu of an interim
dividend, a capital reduction and distribution of 33 cents per share will be
declared on the ordinary shares of the group in respect of the six months ended
31 August 2007, in terms of the general authority received from the shareholders
held on Wednesday, 27 June 2007. Full details in respect of the capital
reduction and distribution, including salient dates and financial effects
thereof, will be published by Friday, 2 November 2007.
On behalf of the Board
P Halamandaris T Halamandaris
Non-Executive Chairman Chief Executive Officer
29 October 2007
Directors:
P Halamandaris (Chairman)*, T Halamandaris (Chief Executive Officer),
KA Hedderwick, JL Halamandaris*, HR Levin*, P Halamandaris (Junior)*,
B Sibiya* *Non-Executive
E-mail: investorrelations@famousbrands.co.za
Registered office: 478 James Crescent, Midrand 1685. PO Box 2884, Halfway House
1685.
Transfer secretaries: Link Market Services (Pty) Limited (Registration number
2000/007239/07) 11 Diagonal Street, Johannesburg 2001. PO Box 4844, Johannesburg
2000
Sponsor
Java Capital (Proprietary) Limited
Date: 29/10/2007 09:25:01 Produced by the JSE SENS Department.
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