| Mon 19 May 2008, 8:00 | | FBR - Famous Brands - Audited Results For The Year |
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FBR
FBR
FBR - Famous Brands - Audited Results For The Year Ended 29 February 2008 and
dividend declaration
Famous Brands Limited
Incorporated in the Republic of South Africa
Registration number 1969/004875/06
JSE Share code: FBR
ISIN: ZAE000053328,
"Famous Brands" or "the Group"
www.famousbrands.co.za
Audited results for the year ended 29 February 2008
- Revenue increase - 36%
- Operating profit increase - 52%
- Headline earnings per share increase - 26%
- Dividend increase - 38%
Overview
Famous Brands continues to distinguish itself as a leader in the quick service
and casual dining restaurant industry with its stable of leading brands. This
strong market position has yielded consistently excellent financial performances
and the Group has delivered annual compounded earnings growth of 52% over the
last six years.
Testament to the strength of the Group`s brands is that we have grown our
business despite the current tougher trading conditions. We have continued to
benefit from the demand shift to out-of-home consumption and convenience, which
is becoming a way of life for time-poor and cash-rich customers, rather than
being seen as an occasional indulgence.
The year under review presented two distinct halves. In the first half, good
trading conditions were experienced. At the interim results stage we envisaged
an even better operating environment in the second half of the financial year,
which has traditionally been the case. However, trading conditions deteriorated,
succumbing to economic factors such as increases in interest rates, fuel prices,
raw material input costs and exceptionally high food inflation.
Financial results
The Group exceeded R1 billion in revenue for the first time in its history,
representing a 36% growth for the year. Operating profit of R210 million (2007:
R138 million) was 52% up on the prior year with strong performances being
reported across all business units. The operating margin, as a result, improved
from 15,8% a year ago to 17,6%.
Net interest paid increased from R6 million to R19 million mainly due to the
Wimpy UK acquisition and, to a lesser extent, increased levels of working
capital.
Earnings per share increased by 37% to 137 cents (2007: 100 cents). Headline
earnings per share increased by 26% to 144 cents (2007: 114 cents). Diluted
headline earnings per share increased by 33% to 141 cents (2007: 106 cents).
A final dividend of 33 cents per share has been declared, resulting in a per
share distribution to shareholders for the year of 66 cents compared to last
year`s 48 cents, an increase of 38%.
Net cash inflow from operating activities of R124 million was up on last year`s
R115 million in spite of a R54 million increase in working capital (2007: inflow
of R9 million). The Group has continued its fixed asset capacity, improvement
and replacement programme with a spend of R36 million (2007: R32 million). Net
investment in Wimpy UK was R43 million with cash received on disposal of
businesses of R16 million.
The balance sheet structure remains strong with net assets of R603 million
(2007: R359 million). Debt/ equity ratio is at an acceptable 30% (2007: 7%). The
profitability returns are exceptional with Return on Net Assets of 44% (2007:
38%) and Return on Equity of 38% (2007: 36%).
Operational reviews
Franchising Division - Local
Once again this division contributed significantly to the Group`s overall
performance, returning growth in revenue of 14% to R260 million (2007: R228
million), an operating profit increase of 27% to R142 million (2007: R112
million). The operating margin improved from 49% to 55%.
We opened 106 new restaurants in the year - which included 19 Whistle Stop to
Steers Diners conversions, which was somewhat disappointing when compared to the
151 opened in the prior year. This provides further indication of a slowing
economy and the impact of new developments being put on hold due to the national
power shortage. However, we completed no fewer than 116 revamps of existing
restaurants.
Following the international trend, South African consumers are increasingly
choosing quick service restaurants and casual out-of-home dining as a lifestyle
choice, which is being spurred by the growth in double income families and the
emerged middle class. The Group`s brands are well positioned to continue to
benefit from these trends.
Franchising Division - International
This division consists of Wimpy UK and the Group`s offshore financial holdings
in Cyprus.
The International Franchising division contributed R175 million in gross revenue
to the Group and operating profit of R15 million, translating into an operating
profit margin of 9%.The Wimpy franchise division, however, reported a 38%
operating margin which is encouraging given the stage at where the business is
currently.
The Group`s entry into the UK market, via the acquisition of the Wimpy brand,
remains on track. Once stabilised this business will provide a springboard to
launch the Group`s other brands. When we assumed control of Wimpy UK, every
aspect of the business was interrogated and a process of consolidation and
continuous improvement implemented. Key projects were completed in the last
year, which have established a solid platform on which we can build. The
branding of our UK business has been aligned with that of our South African
business, while also establishing a new footprint and image that meets the needs
of the British consumer.
Food Services restructuring
Last year we reported on the restructuring of the Group`s business model to
create autonomous functional business units, all with profit accountability.
This model has now been successfully entrenched in the way we do business. In
particular, the new approach has ensured the necessary focus in our capex
intensive Manufacturing and Logistics businesses. The required operating and
efficiency improvements have begun to materialise as reflected in the overall
results of these divisions. Combined turnover of R756 million (2007: R645
million) increased by 17%, operating profit of R61 million (2007: R35 million)
increased by 71% with margin improving from 5,6% to 8,1%
Manufacturing Division
Operating profit for this first year of separate reporting was R48 million and
revenue R506 million, resulting in a margin of 10%.
This performance was mainly due to:
* Increased operating efficiencies - resulting from investments in plant and
equipment
* Rationalisation and outsourcing of non-profitable line items
Management remains of the opinion that further value can be unlocked by aligning
our investments in plant and equipment with this division`s human resource
requirements, the necessary recruitment and training surrounding which is being
actively pursued.
Logistics Division
This division is a key component of our unique backward integrated franchise
system and continues to grow in stature. Revenue for the year was R692 million
with operating profit at R15 million, resulting in a margin of 2,1%. Highlights
achieved during the year include:
* Completing the first phase take on of the Wimpy distribution business
* Completing the relocation of the KwaZulu-Natal regional warehouse and
distribution centre
* Completing the Eastern Cape regional warehouse and distribution capacity
upgrade
In the year ahead the take on of the Wimpy distribution business will be
accelerated, requiring a significant investment in fleet as well as the
extension of our existing Midrand hub by a further 2000m2.
Food Services Division
We continue to make encouraging gains in this division, whose primary function
is to source quality business for the Group`s brands where spare manufacturing
capacity exists.
We have continued to strengthen our presence in the retail and wholesale trade
with our forward integration strategy, evidenced by the very successful launch
into these markets of our Wimpy tomato sauce and mustard variants.
Corporate actions
At the beginning of the current financial year, our acquisition of 75% of Wimpy
UK became unconditional. The remaining 25% continues to be held by Halifax Bank
of Scotland.
During the year under review we announced the sale of our coffee roasting
business, Coffee Contact, to Ciro Alliances, a division of AVI Limited. This
transaction has resulted in a stronger relationship with Ciro, which will ensure
that Famous Brands continues to benefit from having a best-in-class supplier,
while also enabling us to focus on our core competencies.
The Group also disposed of Pouyoukas Foods during the period. The sale of Coffee
Contact and Pouyoukas Foods resulted in a cash inflow of R16 million.
In November 2007 we announced the acquisition of the Cape Franchising
(Proprietary) Limited master licence business with a 1 March 2008 effective
date. This represents a strategically important acquisition which allowed Famous
Brands to take back full ownership of the Franchising, Manufacturing and
Distribution businesses in the Western Cape. This master licence agreement still
had 10 years left to run with a further 25-year option. The acquisition
consideration of around R150 million is expected to deliver a number of
synergistic benefits. All previously reported litigation between the parties has
been settled as a condition of the acquisition. This transaction concludes
earlier initiatives by the Group to buy back all master licences in South
Africa.
Directorate and Company Secretary
In May 2007, Mr Paris Papageorgiou, Company Secretary, left South Africa to
relocate to Cyprus to manage the Group`s offshore financial holdings.
In June 2007, Paris was replaced by Mr Craig McLeary who subsequently resigned
from Famous Brands in October 2007. In February 2008, we welcomed Mr Tom
Pritchard as Financial Director. Tom also fulfils the role of Company Secretary.
With a career spanning 25 years, he brings deep experience which is already
adding significant value to the Group.
Prospects
We expect the challenging conditions to continue in the year ahead. In difficult
times, it is well known that consumers will target their spending at well-known
and trusted brands. The Group`s portfolio of best-in-their-class brands will
provide a welcome counter to tightening consumer spending. It follows that the
thrust of our strategy is to ensure that our brands remain relevant and deliver
value for money. Brand strength and leading market shares will be fundamental in
weathering difficult trading conditions in the years ahead.
The Group`s unique model of backward integration into our manufacturing and
logistics businesses will also shore up our competitiveness, helping to ensure
that price increases are contained and efficiency benefits are passed on to our
customers.
Famous Brands remains a South African-based company and we will continue to
leverage the competencies and experience of our home base to enhance and grow
our UK network.
Distribution to shareholders
In lieu of the interim dividend (prior year 18,0 cents), a capital distribution
to shareholders of 33,0 cents per share was distributed on 26 November 2007 by
means of a reduction in share premium.
Notice is hereby given that a final dividend (No 27) of 33 cents per ordinary
share has been declared in respect of the year ended 29 February 2008.
Salient dates
Last day to trade cum-dividend Friday, 4 July 2008
Shares commence trading ex-dividend Monday, 7 July 2008
Record date Friday, 11 July 2008
Payment of dividend Monday, 14 July 2008
Share certificates may not be dematerialised or rematerialised between Monday, 7
July 2008 and Friday, 11 July 2008, both dates inclusive.
On behalf of the board
P Halamandaris T Halamandaris
Non-Executive Chairman Chief Executive Officer
Midrand
16 May 2008
Condensed income statement
29 February 28 February %
2008 2007 change
R000 R000
Revenue 1 190 301 872 151 36
Operating profit (note 4) 209 576 137 812 52
Net interest paid (19 117) (6 275)
Profit before taxation 190 459 131 537 45
Taxation (59 378) (44 423)
Profit for the year 131 081 87 114 50
Attributable to:
Equity holders of the company 128 642 87 114 48
Minority interest 2 439
Profit for the year 131 081 87 114 50
Earnings per share - cents
- basic 137 100 37
- diluted 134 93 44
Additional information
Headline earnings (R000) (note 5) 135 193 99 686 36
Headline earnings per share (cents)
- basic 144 114 26
- diluted 141 106 33
Distribution to shareholders (cents)
- interim: capital distribution 33 18
- final: dividend declared 33 30
Total distribution for the year 66 48 38
Ordinary shares
- in issue net of treasury shares 94 397 435 87 394 583
- weighted average 94 120 964 87 523 898
- diluted weighted average 95 670 304 94 596 090
Condensed balance sheet
29 February 28 February
2008 2007
R000 R000
Assets
Non-current assets 525 227 318 957
Property, plant and equipment 110 965 95 574
Intangible assets 407 472 217 670
Deferred taxation 6 608 4 815
Loans 182 898
Current assets 330 906 354 418
Inventory 85 372 56 326
Taxation 808 -
Trade and other receivables 123 963 109 701
Cash and cash equivalents 120 763 188 391
Total assets 856 133 673 375
Equity and liabilities
Capital and reserves attributable to equity 405 872 303 480
holders of the company
Issued capital 944 874
Reserves 404 928 302 606
Minority interests 2 439 -
Total equity 408 311 303 480
Non-current liabilities 228 114 93 958
Interest-bearing borrowings 188 333 75 745
Deferred taxation 39 781 18 213
Current liabilities 219 708 275 937
Trade and other payables 128 538 124 675
Short-term portion of interest-bearing 50 438 42 729
borrowings
Taxation 37 824 20 259
Bank overdraft 2 908 88 274
Total liabilities 447 822 369 895
Total equity and liabilities 856 133 673 375
Condensed cash flow statement
29 February 28 February
2008 2007
R000 R000
Cash flow from operating activities 124 098 115 225
Cash generated by operations 187 863 172 054
Net interest paid (19 117) (6 275)
Taxation paid (44 766) (35 902)
Dividends paid 118 (14 652)
Cash flow from investing activities (30 638) (28 776)
Expended on property, plant and equipment (36 077) (31 561)
Expended on intangible assets (16 397) (59)
Investment in subsidiaries (8 690) (3 794)
Investment in outside shareholders` interest 2 439 -
Movement in foreign currency translation 8 697 -
Reserve
Proceeds from disposal of non-current assets 19 390 6 638
Cash flow from financing activities (75 722) 8 649
Movement in share capital and reserves (39 769) (18 418)
Increase/(decrease) in interest-bearing (35 953) 27 067
borrowings
Change in cash and cash equivalents 17 738 95 098
Cash and cash equivalents at beginning of year 100 117 5 019
Cash and cash equivalents at end of year 117 855 100 117
Condensed statement of changes in equity
29 February 28 February
2008 2007
R000 R000
Balance at beginning of year 303 479 248 234
Net gains not recognised in the income 8 697 1 054
statement - currency translation differences
Share-based payments 4 824 350
Attributable profit 131 081 87 114
Distribution to shareholders (59 502) (30 735)
Issue of shares 17 939 -
Issue to participants of Share Incentive 1 793 (2 537)
Scheme
Balance at end of year 408 311 303 480
Primary segmental information - business units
29 February 28 February %
2008 2007 change
R000 R000
Gross revenue
Franchising 434 686 227 988 91
Food services 756 114 645 420 17
Manufacturing 506 193
Logistics 691 553
Eliminations (441 632)
Corporate services 50 598 43 816 15
Eliminations (51 097) (45 073) 13
Total 1 190 301 872 151 36
Operating profit
Franchising 156 960 112 127 40
Food services 61 453 35 954 71
Manufacturing 48 154
Logistics 14 705
Eliminations (1 406)
Corporate services (1 030) 2 507 (141)
Total (excludes impairment write-offs) 217 383 150 588 44
Secondary segmental information - geographical
29 February 28 February %
2008 2007 change
R000 R000
Gross revenue
South Africa 1 015 129 872 151 16
United Kingdom and Cyprus 175 172 -
Total 1 190 301 872 151 36
Operating profit
South Africa 202 376 150 588 34
United Kingdom and Cyprus 15 007 -
Total (excludes impairment write-offs) 217 383 150 588 44
Notes
1. Basis of preparation
These results have been prepared in accordance with International
Financial Reporting Standards (IFRS) (including IAS34), the South
African Companies` Act (1973) and the Listings Requirements of the
JSE Limited.
2. Accounting policies
The accounting policies applied by the Group are consistent with
those applied in the prior financial year, except for the adoption
of improved, revised or new standards and interpretations.
3. Auditors
These results have been audited by RSM Betty & Dickson
(Johannesburg) and their unqualified audit opinion is available for
inspection at the company`s registered office.
29 February 28 February
2008 2007
R000 R000
4. Operating profit
The following have been included in the
operating profit:
- Impairment of intangible assets 7 810 12 777
- Auditors` remuneration 2 296 1 959
- Depreciation of tangible assets 16 455 12 889
- Foreign exchange loss 2 599 22
- Net (profit) on sale of businesses (1 833) (316)
- Operating lease charges on immovable 15 559 12 305
property
- Loss/(profit) on disposal of tangible 574 (275)
assets
- Transfer of share-based payment reserve 4 823 350
5. Reconciliation to headline earnings
Earnings for the period 128 642 87 114
- Impairment of intangible assets 7 810 12 777
- Net (profit) on disposal of business (1 833) -
- Impairment of loan - 70
- Loss/(profit) on disposal of tangible 574 (275)
assets
Headline earnings for the year 135 193 99 686
6. Capital commitments
Capital expenditure approved not 39 056 35 659
contracted
7. Share capital
The company issued 5 806 452 shares to Investec Bank Limited in
settlement of a R9 million loan.
In addition 646 400 ordinary shares were issued to fund the
acquisition of Coffee Contact (Proprietary) Limited of R8 645 319.
The company issued 400 000 ordinary shares for cash to participants
of the Employees` Share Incentive Scheme.
Board of directors: Non-Executive: P Halamandaris (Chairman), JL Halamandres
(Deputy Chairman), P Halamandaris (Jnr), HR Levin, B Sibiya. Executive: T
Halamandaris (Chief Executive Officer), KA Hedderwick (Chief Operating Officer),
T Pritchard (Financial Director and Company Secretary) Registered office: 478
James Crescent, Halfway House 1685, PO Box 2884 , Halfway House 1685 E-Mail:
Investorrelations@famousbrands.co.za Website: www.famousbrands.co.za 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: 19/05/2008 08:00:01 Produced by the JSE SENS Department.
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