| Tue 11 May 2010, 7:05 | | FBR - Famous Brands Limited - Audited results for the year ended 28 February |
|
FBR
FBR
FBR - Famous Brands Limited - Audited results for the year ended 28 February
2010
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 2010
REVENUE
Up 8% to R1,7 billion (2009: R1,5 billion)
OPERATING PROFIT Up 17% to R305 million (2009: R262 million) HEADLINE EARNINGS
PER SHARE Up 29% to 206 cents (2009: 159 cents) TOTAL DIVIDENDS FOR THE YEAR
Up 50% to 114 cents (2009: 76 cents)
CASH GENERATED BY OPERATIONS Up 25% to R346 million
(2009: R277 million)
NET BORROWINGS to equity improves to 28% (2009: 46%)
Commentary
Overview For the second consecutive year, Famous Brands experienced extremely
tough trading conditions as the global recession continued. Slight relief came
from stabilising raw material price increases, the drop in the petrol price
and reduced interest rates, but what little increase in consumer disposable
income there may have been, was directed at settling personal debt.
Consumer research continues to reveal a decline in the frequency of visits
across the total Quick Service and Casual Dining Restaurant markets, a trend
which accelerated during the second half of 2009. While much of the Group`s
growth in recent years has been driven by the emerging middle class, growth in
this market was curtailed significantly in the last year as a direct result of
some 900 000 jobs being shed in the South African economy.
Competition across the Quick Service and Casual Dining Restaurants landscape
continues to intensify, more so in brands clustered within similar competitive
sets, where there has been a fierce battle for market share as consumers are
driven to frequent more than one restaurant type.
Despite these negative trading conditions, Famous Brands is pleased to deliver
another strong set of results for the year ended 28 February 2010. The Group`s
footprint, as at 28 February 2010, extended to 1 779 restaurants across South
Africa, 17 other African countries and the United Kingdom (UK).
Financial results In the year under review, the Group grew revenue by 8% to
R1,7 billion (2009: R1,5 billion), lifting operating profit, before impairment
losses of R4 million, to R305 million (2009: R262 million), a satisfactory
increase of 17%. The operating margin increased to an impressive 18,2%
compared to 16,9% in 2009. The higher margin is a direct result of
productivity and efficiency gains within the Supply Chain business where
profitability has exceeded expectations. Strong cash flows, more effective
cash management, restructured foreign debt and lower interest rates all
contributed to a sharply reduced interest bill which was R26 million less than
last year`s R44 million. After accounting for an unchanged tax rate and
minority interests, headline earnings per share rose 29% to 206 cents per
share and earnings per share by 27% to 202 cents per share.
Cash generated from operations was exceptionally strong at R346 million (2009:
R277 million), an increase of 25%. After payment of interest, tax and
dividends, R129 million cash flow remained to cover investment activities.
Capital expenditure, net of disposals, was a modest R13 million, allocated
mainly to replacement activities. The Mugg & Bean acquisition, chiefly
trademarks, resulted in a net cash outflow of R96 million.
A further R44 million in capital expenditure has been approved for the year
ahead primarily for the relocation of the Western Cape Meat Processing and
Bakery plants to the new Logistics centre, building capacity for the take-on
of additional franchised business and phase 1 of our 3 year plan which
addresses an "under investment" in Information Technology.
The purchase of the minority interest and related debt restructure in Wimpy UK
lifted cash available by R33 million and net borrowings reduced from R225
million at February 2009 to R161 million at 28 February 2010. Net borrowings
as a percentage of total equity declined from 46% last year to 28% currently.
Interest cover is at a very healthy 17 times (2009:6 times). This provides
ample financial capacity to fund further expansion as and when appropriate
investment opportunities present themselves.
Dividends declared in respect of the financial year increased by 50%. The
interim dividend of 50 cents per share and final dividend of 64 cents per
share equates to total dividends of 114 cents per share declared for the year
ended 28 February 2010. This is higher than the growth in earnings and has
reduced the dividend cover to 1,8 times which is considered sustainable in the
light of the Group`s strong cash generating ability.
Operational reviews
Franchising Division - Local This division performed well and contributed
significantly to the Group`s overall performance. Revenue increased 14% to
R341 million (2009: R299 million) and operating profit was 9% higher at R203
million from R186 million a year earlier. The division`s operating profit
margin was 59,4% compared to 62,0% in the prior year. Operating profit
increased by 9%, in line with system-wide sales growth albeit at a diminished
operating margin. This dilution is a consequence of lower margin retail sales
in the company-owned tashas restaurant which has subsequently been franchised.
System-wide sales, which include new restaurant openings, grew 9%, whilst like-
on-like sales grew 4%, marginally below the average weighted menu price
increase.
Steers and Wimpy traded within a highly competitive and crowded landscape with
cash-strapped consumers increasingly extending their repertoire usage.
Conversely, Debonairs Pizza, FishAways, Mugg & Bean and tashas have leveraged
off their trading in "spaces of their own" with Debonairs Pizza, in
particular, recording significant market share gains mainly as a function of
the brands "first-to-market" strategies aimed more specifically at the emerged
market.
A total of 125 new restaurants were opened during the year and 72 existing
restaurants were revamped. Wimpy opened its 500th restaurant in August 2009
and FishAways opened its 100th restaurant in November 2009, an important
milestone for both brands.
The Group`s brands continue to enjoy leadership positions in those categories
in which they compete, which confirms that leading value-for-money brands
remain sought after by the consumer, more so in tight economic times.
Franchising Division - International The International Franchise division,
consisting of Wimpy UK, was affected by the trading conditions in the UK which
deteriorated further. Although some progress was made in transferring
intellectual capital from South Africa to the UK operation, the inability of
franchisees to access financing hampered the turnaround programme. Significant
cost cutting offset the trading decline and operating profit was eroded only
slightly in Sterling terms. Write-downs and costs of R4 million in respect of
company-owned outlets are not expected to recur and have been recognised as
impairment losses.
Supply Chain As part of the Group`s strategy, the Manufacturing and Logistics
divisions were consolidated into a single Supply Chain business.
- Manufacturing division The division reported revenue of R626 million (2009:
R568 million) and operating profit of R61 million (2009: R42 million)
resulting in an improved margin of 9,7% (2009: 7,3%). Manufacturing turnover
growth was 10%. These results are a function of improved efficiencies, planned
maintenance and quality control. Raw material and finished goods stockholding
was exceptionally well managed achieving a result that was 16% better than the
previous year.
- Logistics division This division performed exceptionally well during the
year, benefiting from lower fuel prices and productivity gains due to the take-
on of additional volumes. For the first time, revenue exceeded the R1 billion
level and revenue growth reached 13%. Revenue was R1 103 million (2009: R977
million) with operating profit at R33 million (2009: R23 million), resulting
in a higher margin of 3,0% up from 2,4% in 2009.
The implementation of a new Warehouse Management System at the Midrand
distribution centre resulted in improved warehouse efficiencies, accurate real-
time stock figures, reduction in credit notes and improved capacity
utilisation. The relocation of the Western Cape centre to new facilities, with
increased long-term capacity, has also been beneficial. Another achievement
was the rapid take-on of the Mugg & Bean "dry" basket of goods in November
2009.
Food Services Division After a strategic review, the Group decided to withdraw
from competing directly in the supply of product to the wider hospitality and
food services markets. This decision was made primarily due to the high cost
of entry and the over-reliance on price by this sector at the expense of
quality, a growing trend amongst hoteliers and restaurateurs in a bid to
improve margins. Famous Brands will continue to service this market via a
strategic alliance partnership with the Bidvest Group.
Corporate Actions
Mugg & Bean was acquired with effect from 1 September 2009, with all
conditions precedent for the acquisition finalised during November 2009. Mugg
& Bean`s after tax contribution included in the Group`s results for the three
months from 1 December 2009 amounted to R3 million. Profits from the period 1
September 2009 to 30 November 2009, accounting alignment changes and
assumption of net liabilities reduced the gross purchase consideration of R104
million by R6 million to R98 million.
In February 2010, the Group acquired the business of Blacksteer (Pty) Limited.
The business consists of the company trademarks and 15 franchise agreements
and was acquired through a closed bid auction from the liquidators. The
purchase consideration amounted to R601 000 and this has been accounted for at
cost. Final conditions of the purchase were finalised in March 2010 and there
has been no income earned or recognised in this set of results.
Board changes
During the financial year no changes were made to the board of directors. On
10 May 2010, the Group announced that Mr. Kevin Hedderwick who has served as
Famous Brands` Chief Operating Officer for nine years, has been appointed as
Chief Executive Officer. It was further announced that Mr Theofanis
Halamandaris will take over as Executive Deputy Chairman. Mr John Halamandres,
previously Non-executive Deputy Chairman, will continue to serve Famous Brands
as a non-executive director.
Prospects
Market conditions as well as consumer spend are expected to remain under
pressure in the short to medium term. With Famous Brands` strong presence at
all national airports, transient motorway sites, shopping centres and coastal
resorts, the Group is well positioned to benefit from the upside of any
volumes which might accrue from the 2010 FIFA World Cup. A wide range of
strategies have been put in place to ensure that the Group leverages off this
huge event.
The Group, with its sound business model, excellent management team, strong
cash flows and growing portfolio of best-in-class brands, is poised for future
growth and to benefit from any short term recovery in the economy.
Dividend to shareholders
Notice is hereby given that a final dividend No 31 of 64 cents (2009: 40
cents) per ordinary share, payable out of income, has been declared in respect
of the year ended 28 February 2010. The salient dates are:
Last day to trade cum-dividend Friday, 9 July 2010
Shares commence trading ex-dividend Monday, 12 July 2010
Record date Friday, 16 July 2010
Payment of dividend Monday, 19 July 2010
Share certificates may not be dematerialised or rematerialised between Monday,
12 July 2010 and Friday, 16 July 2010, both dates inclusive.
On behalf of the board
P Halamandaris T Halamandaris
Non-Executive Chairman Chief Executive Officer
Midrand 10 May 2010
Condensed consolidated statement of comprehensive income
28 February 28 February
2010 2009 %
R000 R000 change
Revenue 1 674 331 1 549 244 8
Gross profit 712 974 631 016 13
Selling and administrative (407 802) (369 100)
expenses
Operating profit before 305 172 261 916 17
impairment losses
Impairment losses (4 507) -
Net interest paid (17 872) (44 090)
Profit before taxation 282 793 217 826 30
Taxation (91 153) (69 923)
Profit for the year 191 640 147 903 30
Foreign currency translation (26 300) ( 278)
differences
Total comprehensive income for 165 340 147 625
the year
Profit attributable to:
Equity holders of Famous 191 367 150 330 27
Brands Limited
Minority interests 273 (2 427)
Total comprehensive income
attributable to:
Equity holders of Famous 165 067 150 052
Brands Limited
Minority interests 273 (2 427)
Reconciliation to headline
earnings for the year
Earnings attributable to
equity holders
of Famous Brands Limited 191 367 150 330 27
Impairment losses 3 245 -
Profit on sale of company ( 382) -
owned restaurant
Loss/ (profit) on disposal of 76 ( 47)
property, plant and equipment
Headline earnings for the year 194 306 150 283 29
Earnings per share - cents
- basic 202 159 27
- diluted 199 159 25
Headline earnings per share -
cents
- basic 206 159 29
- diluted 202 159 27
Dividends to shareholders -
cents
- interim: dividend declared 50 36
- final: dividend declared 64 40
Total dividends for the year 114 76 50
Ordinary shares
- in issue net of treasury 94 894 435 94 397 435
shares
- weighted average 94 508 393 94 397 435
- diluted weighted average 97 678 393 96 417 435
Condensed consolidated segmental information - business unit and geographical
28 February 28 February
2010 2009 %
R000 R000 change
Revenue
Franchising 341 167 299 468 14
Supply chain 1 205 944 1 082 631 11
Manufacturing 625 988 567 706
Logistics 1 102 709 976 688
Eliminations (522 753) (461 763)
Corporate (10 511) (12 377)
South Africa 1 536 600 1 369 722 12
Franchising (UK) 137 731 179 522 (23)
Total 1 674 331 1 549 244 8
Operating profit
Franchising 202 808 185 520 9
Supply chain 93 690 61 466 52
Manufacturing 60 725 41 513
Logistics 33 210 23 055
Eliminations ( 245) (3 102)
Corporate (5 214) (2 283)
South Africa 291 284 244 703 19
Franchising (UK) 13 888 17 213 (19)
Total 305 172 261 916 17
Condensed consolidated statement of cash flows
28 February 28 February
2010 2009
R000 R000
Cash flow from operating activities 129 410 97 349
Cash generated by operations 346 392 277 184
Net interest paid (17 872) (44 090)
Taxation paid (114 089) (70 673)
Dividends paid (85 021) (65 072)
Cash flow from investing activities (79 854) (200 484)
Acquisition of businesses, subsidiaries (96 351) (160 000)
and intangibles
Expended on property, plant and (18 570) (33 107)
equipment
Expended on intangible assets (3 337) (8 168)
Purchase of minority interest and debt 33 137 -
restructure in foreign subsidiary
Proceeds from disposal of property, 5 267 791
plant and equipment
Cash flow from financing activities (44 243) 74 487
Movement in share capital and reserves 7 524 (1 234)
(Decrease)/increase in interest-bearing (51 767) 75 721
borrowings
Change in cash and cash equivalents 5 313 (28 648)
Cash and cash equivalents at beginning 89 207 117 855
of year
Cash and cash equivalents at end of 94 520 89 207
year
Condensed consolidated statement of financial position
28 February 28 February
2010 2009
R000 R000
ASSETS
Non-current assets 733 687 693 774
Property, plant and equipment 115 583 130 404
Intangible assets 613 312 559 611
Deferred taxation assets 4 792 3 759
Current assets 337 141 358 433
Inventories 80 157 89 720
Taxation 1 159 2 006
Trade and other receivables 161 305 165 362
Cash and cash equivalents 94 520 101 345
Total assets 1 070 828 1 052 207
EQUITY AND LIABILITIES
Equity attributable to equity holders 583 640 492 278
of Famous Brands Limited
Minority interests 285 12
Total equity 583 925 492 290
Non-current liabilities 242 068 293 490
Interest-bearing borrowings 189 206 249 378
Deferred taxation and lease liabilities 52 862 44 112
Current liabilities 244 835 266 427
Trade and other payables 157 355 151 603
Short-term portion of interest-bearing 65 979 65 114
borrowings
Taxation 21 501 37 572
Bank overdraft - 12 138
Total liabilities 486 903 559 917
Total equity and liabilities 1 070 828 1 052 207
Condensed consolidated statement of changes in equity
28 February 28 February
2010 2009
R000 R000
Balance at beginning of year 492 290 408 311
Total comprehensive income for the year 165 340 147 625
Dividends to shareholders (84 983) (65 134)
Share-based payments 3 754 2 722
Movement in share capital and reserves 7 524 (1 234)
Balance at end of year 583 925 492 290
NOTES
1. Basis of preparation
These annual financial statements have been prepared in
accordance with International Financial
Reporting Standards (IFRS), the AC500 Standards as issued by
the Accounting Practices Board and its successor, 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 28 February 2009 is
nil.
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 28 February
2010 2009
R000 R000
4. Operating profit
The following have been accounted
for in operating profit before
impairment losses:
- Amortisation of intangible 1 244 531
assets
- Auditors` remuneration 3 349 4 013
- Depreciation of property, plant 22 381 19 359
and equipment
- Foreign exchange profit (289) (2 037)
- Net profit on sale of property, (339) (47)
plant and equipment
- Operating lease charges on 32 672 26 810
immovable property
- Operating lease charges on 874 452
movable property
- Transfer of share-based payment 3 754 2 722
reserve
5. Capital commitments
Capital expenditure approved not 44 473 16 296
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 1969/017128/08),
3 Simmonds Street, Johannesburg, 2001
www.famousbrands.co.za
Date: 11/05/2010 07:05:18 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
