| Wed 20 May 2009, 7:05 | | FBR - Famous Brands Limited - Audited results for the year ended 28 February |
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FBR
FBR
FBR - Famous Brands Limited - Audited results for the year ended 28 February
2009
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"
Audited results for the year ended 28 February 2009
Revenue increased by 30% to R1 549 million (2008: R1 190 million)
Operating profit increased by 20% to R262 million (2008: R217 million)
Headline earnings per share increased by 11% to 159 cents (2008: 144 cents)
Total dividends for the year increased by 15% to 76 cents (2008: 66 cents)
Cash generated by operations of R277 million, up 39% (2008: R199 million)
Commentary
Overview: This satisfactory set of results is again testament to the strength of
the Group`s brands, which enjoy leadership positions in most categories in which
the Group competes, demonstrating that classical brands probably fit better with
the current mood of the consumer. Some of the challenges faced in the domestic
market included lower disposable income from higher interest rates, spiraling
food inflation and hikes in the price of petrol and diesel and raw materials.
Internationally, the business in the United Kingdom (UK) was impacted by the
deep recession that has taken hold globally. To mitigate the effects of the
unyielding environment, and in line with our long-standing strategy, the Group
continued to deliberately absorb certain input cost increases to contain retail
selling prices and protect the profitability of our franchisees whilst
continuing to pursue innovative menu offerings and maintaining our value-for-
money positioning. This holistic strategy to bolster our franchisees against the
downturn has been well received.
Financial results: The Group`s stable of brands proved resilient with
satisfactory increases in revenue across all of the operating business units and
enhanced by particularly strong growth in the Logistics division. The Group grew
revenue by 30% to R1,5 billion in the period (2008: R1,2 billion) and lifted
operating profit by 20% to R262 million (2008: R217 million). This resulted in
an operating profit margin of 16,9% compared with 18,3% in 2008. The decline in
the operating margin is due to both the deliberate margin absorption strategy
and a 41% increase in revenue in the low margin Logistics division where
activities were expanded substantially to take on the Wimpy business. Expenses
were well controlled increasing at a level below the rate of increase in gross
profit. Net interest paid increased by 131% reflecting higher average borrowings
as well as a fair value adjustment of R2,9 million on foreign borrowings. The
increase in borrowings was mainly due to the acquisition of the Cape Franchising
business assets and the tashas brand. Cash generated from operations amounted to
a healthy R277 million, from which increased financing, tax and dividend
payments were easily met. Capital expenditure for the year amounted to R33
million, mainly in expanding the delivery fleet and modernising plant in the
manufacturing facilities.
After taking into account a higher tax rate offset by a minority interest
reversal, profit attributable to equity holders of the company increased by 17%.
Headline earnings per share rose by 11% to 159 cents (2008: 144 cents) due to
the impairment loss incurred last year.
A final dividend of 40 cents per share has been declared and together with the
interim dividend of 36 cents per share, amounts to total dividends for the year
ended 28 February 2009 of 76 cents per share. This equates to an increase of 15%
on the 2008 distribution to shareholders of 66 cents per share.
The balance sheet reflects a strong position with a net debt/equity ratio of
0,46 below a target range of 0,6 to 0,8. Profitability returns remain solid
represented by return on net assets of 37,4% (2008: 45,2%) and return on equity
of 33,4% (2008: 38,0%).
Franchising division - Local: This division performed well and contributed
significantly to the Group`s overall performance. Revenue increased 15% to R299
million (2008: R260 million) and operating profit increased 31% to R186 million
from R142 million. The division`s operating profit margin, enhanced by Cape
Franchising, was 62,0% compared to 54,6% in the prior year. The division
produced like-on-like sales growth of 9%, with system-wide sales (which includes
new restaurant openings) up 14%.
Steers recorded the opening of its 500th restaurant in July 2008, a special
honour for the Group. The brand took the award for Best Burger, for the 13th
consecutive year, and Best Chips, for the 11th consecutive year, as voted for by
Leisure Options.
To retain customer interest, relevance and appeal, Wimpy launched a new
generation restaurant design in October 2008 and to date, 23 Wimpy restaurants
have been revamped and are trading well. Wimpy received a number of accolades
during the period, including: Best Breakfast in 2008, Leisure Options; 2nd
"Coolest Place to Eat Out", Generation Next, Sunday Times Survey 2008.
A major growth driver for Debonairs Pizza during the year has been the entry
into the emerged market where the brand has met with phenomenal success. It
launched the Debonairs Pizza Express concept, which has proven to be hugely
successful in areas with high foot traffic. This concept is unique in that it
caters specifically to the mass market consumer in search of speed and
convenience. Four Debonairs Pizza Express outlets were opened during the year
and are trading successfully.
FishAways was involved in the commissioning of a new restaurant design and a
national roll out is planned for the year ahead. The brand overtook its direct
Quick Service Restaurant (QSR) seafood competitor to become the leading and
largest QSR seafood brand in South Africa and in the process turned in a
positive 27,5% system-wide sales growth.
A strategic alliance with the Shell Petroleum Company has been concluded to
extend the Brazilian Cafe business model to incorporate their existing bakery
offering. A total of six such sites were opened during the year with a further
30 sites being planned for the year ahead.
The year also heralded a new look for House of Coffees and a new smaller trading
format was launched presenting new opportunities for the brand particularly
within suburban markets.
Effective 1 July 2008, Famous Brands acquired a 51% controlling stake in tashas,
a successful upmarket casual-dining cafe concept. The business consists of two
franchised restaurants and a further three new restaurant openings are planned
for the year ahead.
Franchising division - International: This year was characterised by the
extraordinary economic challenges faced in the UK and the division recorded
revenue, in Sterling terms, down 4,1% but in rand terms, up 2,5% to R180 million
(2008: R175 million). Operating profit fell 12,1% to R17 million recording some
benefit from the weaker rand offset by retrenchment costs of R2,7 million. Debt
servicing and hedge-related finance costs absorbed much of this profit leaving
the division marginally profitable for the year.
The planned revamp programme, initiated in the previous year, which is the
cornerstone of the Group`s strategy to turn the UK operation around, slowed down
as the global credit crunch hit. However, seven revamps were concluded, with all
trading to expectation. The unplanned expenses accrued in the period, which were
required to further right size the business, will start to show benefits in the
new financial year. In line with the initial strategy to use the Wimpy UK
acquisition as a beachhead for the roll out of other Group brands, plans are now
well advanced to open the first Steers restaurant in Earlsfield outside of
London.
Manufacturing division: This division reported revenue of R568 million (2008:
R506 million) and operating profit of R42 million (2008: R48 million), resulting
in a margin of 7,3% (2008: 9,5%). The Manufacturing division was impacted by the
deliberate margin absorption strategy in order to protect retail turnovers and
franchisee profitability. A number of structural and organisational changes have
been implemented within this division, which has not yet delivered to its full
potential.
Logistics division: The division embarked on an expansion drive and through the
skilful management of this programme continues to grow in stature within the
Group. Volumes grew markedly and revenue for the year was R977 million (2008:
R692 million) with operating profit at R23 million (2008: R15 million), and a
margin of 2,4% (2008: 2,1%). Information technology systems have been introduced
to optimise routing and scheduling of vehicles, reduce kilometres travelled and
improve customer service. A warehouse management system is currently being
piloted in Midrand and is expected to improve efficiencies, capacity utilisation
and reduce inventories.
Food Services division: This division made good progress during the year
penetrating further, the retail and wholesale trade channels through the launch
of our Wimpy Tomato Sauce and Mustard variants. Our mineral water brand Aqua
Monte was launched to the franchise network, and the Trufruit brand was extended
into all major cinema outlets across the country.
Corporate actions
Towards the end of 2008, the Group issued a cautionary announcement in relation
to a proposed transaction, which was subsequently temporarily postponed until
there is greater clarity surrounding prospects for the domestic and global
economy. The acquisition of the Cape Franchising business late last year has
been completed and effectively integrated into the Group.
Board changes
On 12 September 2008, Tom Pritchard resigned as Financial Director and Company
Secretary and with effect from 1 November 2008, Stanley Aldridge was appointed
Financial Director and Company Secretary of Famous Brands. Stanley brings with
him more than 25 years of financial management experience in the retail and
banking sectors and has already made a valuable contribution to the board.
Prospects
Economic conditions are not expected to improve in the year ahead. All
indications are that consumer spending will remain under pressure as a result of
local and global economic conditions. In South Africa, some respite will come
from further interest rate cuts, although households are likely to use any
additional discretionary income to pay down debt. Our brands and business remain
well positioned for further growth and in the new financial year, the focus will
be on extracting maximum value from our existing businesses and making
productivity and efficiency gains across the entire Group.
Dividend to shareholders
Notice is hereby given that a final dividend (No 29) of 40 cents per ordinary
share payable out of income has been declared in respect of the year ended 28
February 2009. Salient dates are:
Last day to trade cum dividend Friday, 3 July 2009
Shares commence trading ex dividend Monday, 6 July 2009
Record date Friday, 10 July 2009
Payment of dividend Monday, 13 July 2009
Share certificates may not be dematerialised or rematerialised between Monday, 6
July 2009 and Friday, 10 July 2009, both dates inclusive.
On behalf of the Board
P Halamandaris
Non-Executive Chairman
T Halamandaris
Chief Executive Officer
Midrand
20 May 2009
Condensed income statement
28 February 29 February %
2009 2008 change
R000 R000
Revenue 1 549 244 1 190 301 30
Operating profit before impairment 261 916 217 383 20
loss
Impairment loss - (7 807)
Net interest paid (44 090) (19 117)
Profit before taxation 217 826 190 459 14
Taxation (69 923) (59 378)
Profit for the year 147 903 131 081 13
Attributable to:
Equity holders of the company 150 330 128 642 17
Minority interest (2 427) 2 439
Profit for the year 147 903 131 081 13
Earnings per share - cents
- basic 159 137 16
- diluted 159 134
Additional information
Headline earnings (R000) (note 5) 150 283 135 190 11
Headline earnings per share (cents)
- basic 159 144 11
- diluted 159 141
Dividends to shareholders (cents)
- interim: dividend declared 36 33
- final: dividend declared 40 33
Total dividends for the year 76 66 15
Ordinary shares
- in issue net of treasury shares 94 397 435 94 397 435
- weighted average 94 397 435 94 120 964
- diluted weighted average 96 417 436 95 670 304
Business unit and geographical segmental information
28 February 29 February %
2009 2008 change
R000 R000
Revenue
Franchising 299 468 259 513 15
Food Services 1 082 631 756 114 43
Manufacturing 567 706 506 193
Logistics 976 688 691 553
Eliminations (461 763) (441 632)
Corporate 53 355 50 598
Eliminations (65 732) (51 097)
South Africa 1 369 722 1 015 128 35
International (UK) 179 522 175 173
Total 1 549 244 1 190 301 30
Operating profit
Franchising 185 520 141 953 31
Food Services 61 466 61 453 0
Manufacturing 41 513 48 154
Logistics 23 055 14 705
Eliminations (3 102) (1 406)
Corporate (2 768) (5 615)
Eliminations 485 -
South Africa 244 703 197 791 24
International (UK) 17 213 19 592
Total 261 916 217 383 20
Condensed cash flow statement
28 February 29 February
2009 2008
R000 R000
Cash flow from operating activities 97 349 75 731
Cash generated by operations 277 184 198 998
Net interest paid (44 090) (19 117)
Taxation paid (70 673) (44 766)
Dividends paid (65 072) (59 384)
Cash flow from investing activities (200 484) (41 774)
Expended on property, plant and equipment (33 107) (36 077)
Acquisition of business (155 000) -
Investment in subsidiaries (5 000) (8 690)
Expended on intangible assets (8 168) (16 397)
Proceeds from disposal of non-current assets 609 18 671
Decrease in loans receivable 182 719
Cash flow from financing activities 74 487 (16 219)
Movement in share capital and reserves - 17 941
Increase/(decrease) in interest-bearing 75 721 (35 953)
borrowings
Share incentive scheme issues (1 234) 1 793
Change in cash and cash equivalents (28 648) 17 738
Cash and cash equivalents at beginning of 117 855 100 117
year
Cash and cash equivalents at end of year 89 207 117 855
Condensed Balance sheet
28 February 29 February
2009 2008
R000 R000
ASSETS
Non-current assets 693 774 525 227
Property, plant and equipment 130 404 110 965
Intangible assets 559 611 407 472
Deferred taxation 3 759 6 608
Loans receivable - 182
Current assets 358 433 330 906
Inventories 89 720 85 372
Taxation 2 006 808
Trade and other receivables 165 362 123 963
Cash and bank balances 101 345 120 763
Total assets 1 052 207 856 133
EQUITY AND LIABILITIES
Equity attributable to equity holders of the 492 278 405 872
company
Minority interests 12 2 439
Total equity 492 290 408 311
Non-current liabilities 293 490 230 654
Interest-bearing borrowings 249 378 188 333
Deferred taxation and lease liabilities 44 112 42 321
Current liabilities 266 427 217 168
Trade and other payables 151 603 125 998
Short-term portion of interest-bearing 65 114 50 438
borrowings
Taxation 37 572 37 824
Bank overdraft 12 138 2 908
Total liabilities 559 917 447 822
Total equity and liabilities 1 052 207 856 133
Condensed statement of changes in equity
28 February 29 February
2009 2008
R000 R000
Balance beginning of year 408 311 303 479
Net (loss)/profit not recognised in the (278) 8 697
income statement - foreign currency
translation reserve
Share-based payments 2 722 4 824
Attributable profit 147 903 131 081
Distributions to shareholders (65 134) (59 502)
Issue of share capital - 17 939
Share incentive scheme issues (1 234) 1 793
Balance at end of year 492 290 408 311
Notes
1. Basis of preparation
These annual financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), 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 comparative financial periods, except for the adoption
of improved, revised or new standards and interpretations. The
aggregate effect of these changes in respect of the year ended 29
February 2008 is nil. Certain prior year numbers have been reclassified
to enhance comparability.
3. Auditors
These financial statements have been audited by RSM Betty & Dickson
(Johannesburg) and their unqualified audit opinion is available for
inspection at the company`s registered office.
28 February 29 February
2009 2008
R000 R000
4. Operating profit
The following have been accounted for in
operating profit:
- Auditors` remuneration 4 013 2 296
- Depreciation of tangible assets 19 359 16 455
- Foreign exchange (profit)/loss (2 037) 2 599
- Impairment loss of intangible assets - 7 807
- Intangible asset amortisation 531 -
- Net (profit) on sale of businesses - (1 833)
- Operating lease charges on immovable 26 810 15 559
property
- Operating lease charges on movable 452 -
property
- (Profit)/loss on disposal of tangible (47) 574
fixed assets
- Transfer of share-based payment reserve 2 722 4 823
5. Reconciliation to headline earnings
Earnings for the year 150 330 128 642
- Impairment of intangible assets - 7 807
- (Profit) on disposal of businesses - (1 833)
- (Profit)/loss on disposal of tangible (47) 574
fixed assets
Headline earnings for the year 150 283 135 190
6. Capital commitments
Capital expenditure approved not 16 296 39 056
contracted
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) SJ Aldridge (Group Financial Director)
Registered office: 478 James Crescent, Halfway House 1685, PO Box 2884, Halfway
House 1685
E-mail: Investorrelations@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: Standard Bank (Registration number 1969/017128/06), 3 Simmonds Street,
Johannesburg 2001
Date: 20/05/2009 07:05:03 Produced by the JSE SENS Department.
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