| Mon 26 Oct 2009, 8:00 | | FBR - Famous Brands - Unaudited consolidated interim results for the six |
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FBR
FBR
FBR - Famous Brands - Unaudited consolidated interim results for the six
months ended 31 August 2009
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
2009
REVENUE
up 14% to R811 million (2008: R715 million)
HEADLINE EARNINGS PER SHARE
up 16% to 93 cents (2008: 80 cents)
CASH GENERATED BY OPERATIONS
of R159 million, up 64% (2008: R97 million)
OPERATING PROFIT
up 13% to R140 million (2008: R124 million)
INTERIM DIVIDEND
up 39% to 50 cents (2008: 36 cents)
NET BORROWINGS : EQUITY
improves to 22% (2008: 62%)
Commentary
Overview
Trading during the past six months has been exceptionally difficult, this
despite interest rate cuts and lower fuel prices. The modest gain in
consumer disposable income appears to have been directed at paying off
personal debt. However, low food price inflation coupled with astute
procurement practices has helped to protect margins and eased the pressure
on menu pricing.
The quick service and casual dining market remains fiercely competitive,
with all players focused on defending and growing market share. Competition
is particularly aggressive across those brands which form part of the same
or similar competitive set where we have seen a high degree of "switching"
between brands as consumers are swayed by aggressive marketing and
promotional activity. The same is not nearly as pronounced for brands like
our own Debonairs Pizza and FishAways, which remain at the forefront of
pioneering and developing new categories and markets.
Trading conditions in the developed world were even more difficult and our
Wimpy operations in the United Kingdom (UK) experienced a consequent
reduction in turnovers.
The Group`s footprint, including Mugg & Bean, extends to 1 723 restaurants
across South Africa, 17 other African countries and the UK.
Financial results
In the six months under review, Group revenue rose 14% to R811,4 million
(2008: R714,8 million). Operating profit of R139,8 million (2008: R123,9
million), up 13% reflected a hardly changed operating profit margin of
17,2%. After lower interest costs, offset by a higher estimated tax rate,
both earnings and headline earnings per share increased by 16% to 93 cents
(2008: 80 cents).
Cash generated from operations was exceptionally strong at R158,8 million
(2008: R96,6 million), an increase of 64%. After payment of interest, tax
and dividends, R82,2 million cash flow remained to cover investment
activities. There was a modest capital expenditure outflow of R11,5 million
allocated between a tashas company-owned restaurant and replacement
activities. Available cash was boosted further by a significant R34,3
million inflow from the reduction in minority interest and debt restructure
in Wimpy UK. This, together with a foreign currency translation reserve
adjustment of R11,4 million relating to our UK investment, are the main
reasons for the reduction in the intangible assets from R554,4 million to
R509,3 million. Net borrowings reduced from R225,3 million at February 2009
to R117,3 million at August 2009. Net interest-bearing borrowings as a
percentage of total equity declined from 62% last year to 22% currently.
Interest cover is at a very healthy 11,6 times (2008: 6,3 times). This
provides ample financial capacity to fund further expansion as and when
appropriate investment opportunities present themselves.
Net interest paid was 39% lower than a year ago, reflecting the benefits of
strong cash flows locally and the restructuring of debt in Wimpy UK. Easing
interest rates contributed further to the significant decline in financing
costs.
The board has declared an interim dividend of 50 cents per share, improving
the payment to shareholders by 39% on the prior comparative period.
Operational reviews
Franchising Division - Local
The division was again a major contributor to the Group`s performance,
posting revenue growth of 14% to R158,0 million (2008: R138,6 million).
Operating profit rose 10% to R94,2 million (2008: R85,9 million), amounting
to an operating margin of 59,6% (2008: 62,0%) , diluted by the opening of a
tashas company owned restaurant. System-wide sales, which include new
restaurant openings, grew 9,5%, with like-on-like sales growth of 4,0%. In
contrast, Debonairs Pizza and FishAways showed like-on-like sales growth of
13,4% and 16,6 % respectively, indicating the growing consumer equity for
these two brands within those categories in which they compete.
A total of 52 new restaurants were opened during the period and 43 existing
restaurants were revamped. Wimpy has long been an icon in South Africa and
marked the period with its 500th restaurant opening in August 2009.
FishAways will open its 100th restaurant in November 2009, an important
milestone in the brand`s short history. Some 83 new restaurant openings are
planned for the remainder of the financial year, along with 39 revamps. The
division continues to extend its footprint across strategic transient sites,
airports in particular, by way of our Wimpy, Steers and now Mugg & Bean
brands. This augurs well to capture traffic volumes during the 2010 FIFA
World Cup.
The strength of our brands was once again evident in Leisure Options rating
Steers as having the "best burger" for the 14th consecutive year and "best
chips" for the 12th consecutive year. Debonairs Pizza won "best pizza" for
the 10th time and Wimpy "best breakfast" for the 12th time. Our most recent
acquisition, Mugg & Bean, took "best coffee shop", yet another 10th time
winner now in our stable.
Franchising Division - International
The extreme economic conditions arising from the global credit crunch
persisted in the UK and hampered recovery of the Wimpy brand. Like-on-like
sales growth was down 6,3% for the period. One new restaurant was opened and
two restaurants were revamped, with growth being hampered due to the
reluctance by banks to grant loan finance to franchisees in the current
economic climate. Key Easter and summer holiday trading volumes were down on
last year, also exacerbated by the closure of restaurants as part of an
upgrade to the network and alignment of the estate with Group operating
standards. Although the division reduced fixed costs, the drop in sales
resulted in unavoidable erosion in trading profit. Finance costs were
reduced via settlement of the Bank of Scotland loan.
Manufacturing Division
The division posted revenue of R300,3 million (2008: R261,2 million) which
was 15% up on the previous period, in the process turning in an operating
profit of R25,2 million (2008: R17,4 million), up 45%. These results reflect
the marked turnaround in this division as critical objectives to consolidate
and stabilise operations were achieved through a strong focus on yields,
preventative maintenance, productivity and efficiencies. Lower raw material
input costs on certain lines further enabled the division to claw back
margin erosion of a year ago whereby operating profit margins for the period
exited at 8,4% (2008: 6,7%). This was achieved with stockholding a
substantial 27% lower than last year. A number of volume enhancement
initiatives are currently being assessed aimed at expanding this division`s
offering with certain of these expected to materialise in the second half of
the financial year.
Logistics Division
The division continued to grow on the back of increased volumes as well as
improved effiencies, the latter which included commissioning of a Warehouse
Management System at the Midrand Distribution Centre designed to improve
warehouse utilisation and prevent the need for additional real estate
expansion and capital expenditure. Revenue was R524,1 million for the
period, up 21% on the prior year (2008: R434,7 million). Despite
transporting significantly increased volumes, growth in expenses was held at
6,4%, a function of reduced fuel prices and improved fleet utilisation. This
yielded operating profit of R13,2 million (2008: R8,5 million) and a margin
of 2,5% (2008: 2,0%). The division is preparing for the first phase take on
of distribution to our Mugg & Bean restaurants, a programme which is
expected to commence on 1 November 2009.
Food Services Division
The division continued to record good growth of 7% and 17% respectively from
sales into the retail and wholesale trade channels of our Steers and Wimpy
sauces, salad dressings and marinade ranges. Penetrating the general food
service and hospitality industry in the current economic climate is proving
challenging due to the competitive nature of this business.
Corporate actions
During the period, the Group successfully concluded the acquisition of the
South African and African business of Mugg & Bean, brand leader in the
unique fast-casual, coffee-themed category for a gross purchase
consideration of R104 million. Although the effective date of the
transaction was 1 September 2009, the final conditions and cash settlement
are expected to occur on 1 November 2009. The process of extracting
synergies and supply chain efficiencies is well underway. Nine new
restaurants will be opened during the remainder of the fiscal year, a
programme which includes strategic sites at Cape Town, Durban (La Mercy) and
East London airports. Eight revamps will also be concluded during this
period. There were no warranties in place and the financial effects of the
transaction are expected to leave earnings and headline earnings per share
neutral.
Prospects
Whilst the Group usually experiences a better second half, we expect the
current difficult trading conditions to continue during the period ahead. We
remain confident though that our best in class brand portfolio will continue
to serve us well and that we are well positioned to capitalise on any upward
trend which may emerge during the months ahead and in particular during the
holiday season through our strong representation at transient sites, coastal
resorts and major shopping centres.
The Famous Brands business model remains a compelling strategic advantage,
especially the Group`s unique backward integration model.
Dividend to shareholders
Notice is hereby given that an interim dividend No 30 of 50 cents per
ordinary share payable out of income has been declared in respect of the six
months ended 31 August 2009. Salient dates are:
Last day to trade cum-dividend Friday, 13 November 2009
Shares commence trading ex-dividend Monday, 16 November 2009
Record date Friday, 20 November 2009
Payment of dividend Monday, 23 November 2009
Share certificates may not be dematerialised or rematerialised between
Monday, 16 November 2009 and Friday, 20 November 2009, both dates inclusive.
On behalf of the Board
P Halamandaris T Halamandaris
Non-Executive Chairman Chief Executive Officer
Midrand 21 October 2009
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2009 2008 % 2009
R 000 R 000 change R 000
Revenue 811 447 714 751 14 1 549 244
Operating profit 139 801 123 854 13 261 916
Net interest paid (12 042) (19 782) 39 (44 090)
Profit before taxation 127 759 104 072 23 217 826
Taxation (40 132) (28 042) (69 923)
Profit for the period 87 627 76 030 15 147 903
Foreign currency (15 588) (910) (278)
translation differences
Total comprehensive income 72 039 75 120 147 625
for the period
Profit attributable to:
Equity holders of Famous 87 639 75 264 150 330
Brands Limited
Minority interests (12) 766 (2 427)
Total comprehensive income
attributable to:
Equity holders of Famous 72 051 74 354 150 052
Brands Limited
Minority interests (12) 766 (2 427)
Reconciliation to headline
earnings for the period
Earnings attributable to 87 639 75 264 150 330
equity holders of Famous
Brands Limited
Profit on disposal of (91) (75) (47)
tangible fixed assets
Headline earnings for the 87 548 75 189 16 150 283
period
Earnings per share - cents
- basic 93 80 16 159
- diluted 91 78 17 159
Headline earnings per
share - cents
- basic 93 80 16 159
- diluted 91 78 17 159
Dividends to shareholders
- cents
- interim: dividend 50 36 36
declared
- final: dividend declared 40
Total dividends 50 36 39 76
Oridnary shares
- in issue net of treasury 94 427 435 94 397 435 94 397 435
shares
- weighted average 94 402 435 94 360 140 94 397 435
- diluted weighted average 98 224 435 96 469 479 96 417 435
Condensed consolidated segmental information - business unit and
geographical
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2009 2008 % 2009
R 000 R 000 change R 000
Revenue
Franchising 158 003 138 648 14 299 468
Supply chain 575 641 481 171 20 1 082 631
Manufacturing 300 335 261 156 567 706
Logistics 524 094 434 652 976 688
Eliminations (248 788) (214 637) (461 763)
Corporate (12 377)
South Africa 733 644 619 819 18 1 369 722
Franchising (UK) 77 803 94 932 (18) 179 522
Total 811 447 714 751 14 1 549 244
Operating profit
Franchising 94 185 85 926 10 185 520
Supply chain 38 432 25 940 48 61 466
Manufacturing 25 221 17 407 41 513
Logistics 13 211 8 533 23 055
Eliminations - - (3 102)
Corporate 117 2 517 (2 283)
South Africa 132 734 114 383 16 244 703
Franchising (UK) 7 067 9 471 (25) 17 213
Total 139 801 123 854 13 261 916
Notes
1) These results have not been audited by the company`s auditors
2) The unaudited results of the Group for the six months ended 31st August
2009 have been prepared in accordance with International Financial Reporting
Standards.
3) The accounting polices 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.
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2009 2008 2009
R 000 R 000 R 000
Cash flow from operating activities 82 241 5 875 97 349
Cash generated by operations 158 751 96 581 277 184
Net interest paid (12 042) (19 782) (44 090)
Taxation paid (26 695) (39 756) (70 673)
Dividends paid (37 773) (31 168) (65 072)
Cash flow from investing activities 24 201 (166 168) (200 484)
Acquisition of business - (143 296) (155 000)
Investment in subsidiaries - (5 000) (5 000)
Reduction in minority interest and
debt restructure
in foreign subsidiary 34 346 - -
Expended on intangible assets (645) - (8 168)
Expended on property, plant and (10 862) (18 229) (33 107)
equipment
Proceeds from disposal of non- 1 362 175 182
current assets
Decrease in loans receivable - 182 609
Cash flow from financing activities (131 383) 134 434 74 487
Movement in share capital and - 2 497 -
reserves
(Decrease)/increase in interest (131 743) 131 937 75 721
bearing borrowings
Share incentive scheme issues 360 - (1 234)
Decrease in cash and cash (24 941) (25 859) (28 648)
equivalents
Cash and cash equivalents at 89 207 117 855 117 855
beginning of year
Cash and cash equivalents at end of 64 266 91 996 89 207
period
Condensed consolidated statement of changes in equity
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2009 2008 2009
R 000 R 000 R 000
Balance at beginning of year 492 290 408 311 408 311
Total comprehensive income for the 72 039 75 120 147 625
period
Dividends to shareholders (37 758) (31 168) (65 134)
Share-based payments 2 351 - 2 722
Net movement in share capital 348 (315) (1 234)
Balance at end of period 529 270 451 948 492 290
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2009 2008 2009
R 000 R 000 R 000
ASSETS
Non-current assets 643 172 691 907 693 774
Property, plant and equipment 129 311 131 111 130 404
Intangible assets 509 323 554 416 559 611
Deferred taxation 4 538 6 380 3 759
Current assets 355 495 410 526 358 433
Inventories 85 043 117 621 89 720
Taxation 2 697 808 2 006
Trade and other receivables 203 489 188 291 165 362
Cash and bank balances 64 266 103 806 101 345
Total assets 998 667 1 102 433 1 052 207
EQUITY AND LIABILITIES
Equity attributable to equity 529 270 449 824 492 278
holders of the company
Minority interests - 2 124 12
Total equity 529 270 451 948 492 290
Non-current liabilities 173 300 336 015 293 490
Interest-bearing borrowings 135 363 296 534 249 378
Deferred taxation and lease 37 937 39 481 44 112
liabilities
Current liabilities 296 097 314 470 266 427
Trade and other payables 198 197 201 780 151 603
Short-term portion of interest 46 160 74 174 65 114
bearing borrowings
Taxation 51 740 26 706 37 572
Bank overdraft - 11 810 12 138
Total liabilities 469 397 650 485 559 917
Total equity and liabilities 998 667 1 102 433 1 052 207
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 1969/017128/08), 3 Simmonds
Street, Johannesburg, 2001
www.famousbrands.co.za
Date: 26/10/2009 08:00:01 Produced by the JSE SENS Department.
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