| Mon 21 May 2012, 7:05 | | FBR - Famous Brands Limited - Audited results for the year ended 29 February |
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FBR
FBR
FBR - Famous Brands Limited - Audited results for the year ended 29 February
2012
Famous Brands Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/004875/06)
JSE Share code: FBR
ISIN code: ZAE000053328
("Famous Brands" or "the Group")
Audited results for the year ended 29 February 2012
Revenue up 15% to R2 156 million
Operating profit up 15% to R413 million
Headline earnings per share up 15% to 278 cents
Dividends per share up 29% to 200 cents
Cash generated before changes in working capital up 15% to R452 million
Net borrowings to equity improved to 10%
Condensed consolidated statement of comprehensive income
29 February 28 February
2012 2011 %
R000 R000 change
Revenue 2 155 615 1 878 036 15
Gross profit 922 967 813 152 14
Selling and administrative expenses (510 311) (454 699)
Operating profit 412 656 358 453 15
Net interest paid (10 652) (14 934)
Profit before taxation 402 004 343 519 17
Taxation (133 950) (112 520)
Profit for the year 268 054 230 999 16
Foreign currency translation 7 837 (5 182)
differences
Total comprehensive income for the 275 891 225 817
year
Profit attributable to:
Equity holders of Famous Brands 266 811 230 260 16
Limited
Non-controlling interests 1 243 739
Total comprehensive income
attributable to:
Equity holders of Famous Brands 274 648 225 078
Limited
Non-controlling interests 1 243 739
Reconciliation to headline earnings
for the year
Earnings attributable to equity
holders of
Famous Brands Limited 266 811 230 260 16
Loss on sale of company-owned 455 406
restaurants
Loss/(profit) on disposal of 172 (164)
property, plant and equipment
Headline earnings for the year 267 438 230 502 16
Earnings per share - cents
- basic 278 242 15
- diluted 272 237 15
Headline earnings per share - cents
- basic 278 242 15
- diluted 272 237 15
Dividends to shareholders - cents
- interim: dividend declared 80 70 14
- final: dividend declared 120 85 41
Total dividends for the year 200 155 29
Ordinary shares
- in issue 96 192 435 95 817 435
- weighted average 96 102 435 95 245 418
- diluted weighted average 99 937 435 98 905 257
Condensed consolidated statement of financial position
29 February 28 February
2012 2011
R000 R000
ASSETS
Non-current assets 859 304 793 323
Property, plant and equipment 155 739 130 847
Intangible assets 694 977 659 668
Deferred taxation 8 588 2 808
Current assets 361 865 345 989
Inventories 119 987 75 552
Taxation 1 386 1 468
Trade and other receivables 199 912 182 572
Cash and cash equivalents 40 580 86 397
Total assets 1 221 169 1 139 312
EQUITY AND LIABILITIES
Equity attributable to equity holders of 834 792 703 674
Famous Brands Limited
Non-controlling interests 5 578 4 920
Total equity 840 370 708 594
Non-current liabilities 106 624 177 032
Interest-bearing borrowings 52 216 122 011
Deferred taxation and lease liabilities 54 408 55 021
Current liabilities 274 175 253 686
Trade and other payables 191 523 180 631
Short-term portion of interest-bearing 69 936 65 775
borrowings
Taxation 12 716 7 280
Total liabilities 380 799 430 718
Total equity and liabilities 1 221 169 1 139 312
Condensed consolidated statement of cash flow
29 February 28 February
2012 2011
R000 R000
Cash generated before changes in working 451 636 392 133
capital
(Increase)/decrease in inventories (44 430) 4 592
Increase in receivables (15 690) (23 039)
Increase in payables 7 194 23 243
Cash generated by operations 398 710 396 929
Net interest paid (10 652) (14 934)
Taxation paid (131 719) (123 895)
Net cash flow from operating activities 256 339 258 100
Dividends paid (159 165) (127 817)
Net cash retained from operating activities 97 174 130 283
Acquisition of businesses including (30 896) (43 800)
intangibles
Expansion capital expenditure:
Property, plant and equipment (45 793) (15 794)
Intangible assets (1 030) (3 893)
Replacement capital expenditure on (9 776) (25 546)
property, plant and equipment
Proceeds from disposal of property, plant 3 263 1 818
and equipment
Cash flow from investing activities (84 232) (87 215)
Movement in share capital and reserves 5 657 15 245
Decrease in interest-bearing borrowings (65 634) (67 399)
Cash flow from financing activities (59 977) (52 154)
Change in cash and cash equivalents (47 035) (9 086)
Foreign currency effect 1 218 963
Cash and cash equivalents at beginning of 86 397 94 520
year
Cash and cash equivalents at end of year 40 580 86 397
Condensed consolidated segmental information - business unit and geographical
29 February 28 February
2012 2011 %
R000 R000 change
Revenue
Franchising 439 946 386 015 14
Supply chain 1 613 907 1 382 778 17
Manufacturing 747 244 663 812
Logistics 1 516 375 1 262 325
Eliminations (649 712) (543 359)
Corporate 19 829 14 577
South Africa 2 073 682 1 783 370 16
Franchising (UK) 81 933 94 666 (13)
Total 2 155 615 1 878 036 15
Operating profit
Franchising 264 685 234 971 13
Supply chain 140 508 116 233 21
Manufacturing 87 784 77 788
Logistics 52 724 38 445
Corporate (40) (3 489)
South Africa 405 153 347 715 17
Franchising (UK) 7 503 10 738 (30)
Total 412 656 358 453 15
Condensed consolidated statement of changes in equity
29 February 28 February
2012 2011
R 000 R000
Balance at beginning of year 708 594 583 926
Group comprehensive income for the year 274 648 225 078
Group dividends to shareholders (158 565) (127 629)
Equity settled share-based payments 9 378 7 339
Movement in share capital and reserves 5 657 15 245
Increase in non-controlling interests 658 4 635
Total equity 840 370 708 594
NOTES:
1. Basis of preparation
These condensed annual financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS), the AC 500 standards
as issued by the Accounting Practices Board and its successor, the South
African Companies Act, No. 71 of 2008 and the Listings Requirements of the
JSE Limited. These condensed results were prepared under the supervision of
Mr SJ Aldridge CA(SA), in his capacity as Group Financial Director.
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 2011 is Rnil.
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.
29 February 28 February
2012 2011
R000 R000
4. Operating profit
The following have been accounted for in
operating profit:
- Amortisation of intangible assets 1 795 1 631
- Auditors` remuneration 3 053 3 462
- Depreciation of property, plant and 27 241 24 402
equipment
- Foreign exchange losses 298 245
- Operating lease charges on immovable 42 508 27 145
property net of recoveries from sub-leases
- Operating lease charges on movable 2 102 1 930
property
- (Profit)/loss on sale of property, plant, (1 203) 337
equipment and restaurants
- Transfer of share-based payment reserve 9 378 7 339
5. Capital commitments
Capital expenditure approved not contracted 35 328 43 968
Commentary
Overview
Despite talk of early signs of economic recovery in the country, the period
under review remained challenging for retailers. Pessimistic consumer
sentiment prevailed in an environment featuring continued high levels of
unemployment and indebtedness, limited real wage increases, and consumer
spend pressured by rising power and fuel costs and widespread food inflation.
In this broad economic context, the food services sector experienced a range
of discernible new trends, most apparent of which was unprecedented
fragmentation, reflected by aggressive price cutting and promotional
activities; divergence by established brands from traditional core menu
offerings; entry into unrelated categories; and portion size re-engineering.
Additional pressure was exerted by traditional retailers attempting to gain
market share from conventional convenience-centred food services operators.
Significantly, whilst the number of consumers increased across the food
services category, the frequency of visits declined by 10% to their lowest
level in twelve years, and in line with 2005.
Notwithstanding these testing conditions, Famous Brands has delivered
creditable results for the year ended 29 February 2012, achieved through
intensified focus and improvements in the front and back ends of the
business.
Financial results
Following a phase of intense acquisitive growth in the past two years, the
Group undertook to focus on consolidating and integrating its new businesses,
a programme which has been concluded and is reflected in the improvements in
revenue and profitability of the Franchising and Supply Chain divisions.
Group revenue and operating profit grew by 15% to R2,16 billion (2011: R1,88
billion) and R413 million (2011: R358 million) respectively. The operating
margin remained steady at the record level of 19,1% achieved in the prior
comparative period.
Net interest paid decreased 29% to R11 million (2011: R15 million) due to
reduced net borrowings arising from sustained strong cash flows and the
prevailing low interest rate environment.
The Group`s tax rate increased to 33,3% (2011: 32,8%) in the reporting period
due mainly to the impact of the increased capital gains tax rate on deferred
tax balances. This was significantly offset by prior year tax adjustments.
Headline earnings per share and earnings per share both increased by 15% to
278 cents per share.
Cash generated from operations before changes in working capital increased by
15% to R452 million (2011: R392 million). After changes in working capital,
cash generated from operations amounted to a healthy R399 million (2011: R397
million). Tax payments of R132 million were 6% up on the prior year. Capital
expenditure of R88 million was incurred and comprised mainly R31 million for
the acquisition of the Milky Lane and Juicy Lucy trademarks on 1 March 2011
as well as Supply Chain expansion activities. These included R18 million for
the chicken fillet plant in the Manufacturing Division and R6 million for a
new Logistics depot in Nelspruit which commenced deliveries in April 2012.
After payment of R159 million (2011: R128 million) in dividends, cash flows
were sufficient to pay down net borrowings by R19 million (2011: R58
million). The low level of borrowings, net of cash and bank balances, of R82
million (2011: R101 million) represents a mere 10% of equity, (2011: 14%),
affording ample scope to grow the business organically or by acquisition.
Operational reviews
FRANCHISING DIVISION - LOCAL
The Local Franchising division, which comprises operations in South Africa
and 15 African countries, reported a satisfactory performance in an extremely
competitive environment. In South Africa system-wide sales across the brand
portfolio increased by 8%, while like-on-like sales grew 5%; the Group`s
African market improved system-wide and like-on-like sales by 21% and 7%
respectively. Combined revenue for the South African and African operations
increased 14% to R440 million (2011: R386 million), whilst operating profit
in this division rose 13% to R265 million (2011: R235 million). The operating
profit margin was 60,2% compared with 60,9% in the prior year, slightly
lower, effectively a function of investing in newly acquired and developing
brands in advance of royalty collections.
The Group surpassed its 2 000 restaurant milestone, opening a total of 146
new restaurants during the year (2011: 111), 113 of them in South Africa and
the balance of 33 in Africa; the latter achievement is a reflection of Famous
Brands` success in gaining traction in the region. In addition, 99
restaurants were revamped (2011: 81), 92 of them in South Africa and the
balance in Africa.
Once again the Group`s brands were acknowledged by loyal consumers via the
annual consumer survey, Leisure Options, achieving a clean sweep of awards
across all major categories in which the Group`s brands compete.
FRANCHISING DIVISION - INTERNATIONAL
The results delivered by the International Franchise division, comprising
Wimpy United Kingdom, are a reflection of the dire trading conditions
experienced in that country. Revenue in Sterling declined 19%, and in Rand
terms by 13% to R82 million (2011: R95 million). Operating profit decreased
30% to R8 million (2011: R11 million). This division makes a nominal
contribution to Group revenue and operating profit, namely 3,8% and 1,8%
respectively.
SUPPLY CHAIN
The Supply Chain division, comprising the Group`s Manufacturing and Logistics
operations delivered another gratifying performance. Consolidated revenue
grew by 17% whilst operating profit rose 21%. Increased volumes and tight
management of costs ensured that the operating margin improved to 8,7% from
8,4% notwithstanding the Group`s deliberate strategy in the first half of the
year to absorb margin pressure created by rampant beef price increases.
Manufacturing
This division increased revenue by 13% to R747 million (2011: R664 million).
Operating profit rose 13% to R88 million (2011: R78 million), resulting in a
margin of 11,7% (2011: 11,7%).
The following projects were concluded during the period and contributed to
this business unit`s strong performance:
- Full commissioning of a chicken fillet plant which commenced supplying
product to the franchise network with effect from November 2011;
- Take-on of the soft serve component for Milky Lane.
Logistics
This division reported a 20% increase in revenue to R1,52 billion (2011:
R1,26 billion). Operating profit rose 37% to R53 million (2011: R38 million),
producing a record margin of 3,5% (2011: 3,1%).
This stellar result was derived from attaining critical mass in line items
handled, which increased by 43% during the period, and productivity
improvements in the Owner Driver programme.
Corporate action
The Group extended its Theatre of Foods portfolio with the creation of a new
business, Creative Coffee Franchise Systems (Pty) Ltd (Creative Coffees).
With effect from 1 May 2011, the trademarks and franchise agreements of the
House of Coffees and Juicy Lucy brands were moved into Creative Coffees and
merged with the business of Kairuz Holdings (Pty) Ltd, a company specialising
in servicing the retail and food offerings in the private hospital industry.
Famous Brands retains a 61% controlling shareholding in the new company.
Directorate
Shareholders are advised that Christopher Hardy Boulle was appointed as an
alternate non-executive director to Hymie Reuvin Levin, with effect from 1
December 2011. He will also serve as Chairman of the social and ethics
committee and as a member of the audit committee.
Dividend
In respect of the new Dividends Tax, shareholders are advised that the final
dividend has been increased to 120 cents (2011: 85 cents) and thus ensures
that shareholders are in an improved cash position notwithstanding the
introduction of this tax. The dividend cover for the financial year has been
reduced to 1,4 times, which is considered sustainable given Famous Brands`
strong cash generating ability. In considering future dividend declarations,
the board will be guided by the Group`s cash requirements according to future
cash flow forecasts.
Prospects
Consumer disposable income will remain pressured by escalating electricity
tariffs, fuel costs and general food inflation. The bulk of consumers in
payment arrears are middle-class earners, the traditional target market for
food services operators. To entice them to resume previous levels of spending
will demand intensified innovation, particularly should interest rates
increase and economic uncertainty persist.
Despite the negative effect which these factors will have on the industry,
the Group`s all-encompassing business model, exceptional personnel and best-
in-class leisure brands position Famous Brands for continued growth.
In this regard, the Group will undertake a range of initiatives in the period
ahead aimed at unlocking further value for shareholders. This will include
centralising the Group`s procurement function enabling Famous Brands to
become an even lower cost producer; extending the Group`s presence in market
segments where it currently has no representation, including identifying new
joint venture partnerships; and continuing to explore opportunities to
leverage the synergies afforded by Famous Brands` supply chain.
On behalf of the board
P Halamandaris K A Hedderwick
Non-executive Chairman Chief Executive Officer
Declaration of ordinary dividend
Notice is hereby given that a final dividend No. 35 of 120 cents (2011: 85
cents) per ordinary share payable out of income has been declared in respect
of the 2012 financial year. This will bring the total cash dividends to 200
cents per share for the 2012 financial year, an increase of 29% when compared
to total dividends of 155 cents in 2011.
The salient dates for the payment of the final dividend are detailed below:
Last day to trade cum-dividend Friday, 6 July 2012
Shares commence trading ex-dividend Monday, 9 July 2012
Record date Friday, 13 July 2012
Payment of dividend Monday, 16 July 2012
Share certificates may not be dematerialised or rematerialised between
Monday, 9 July 2012 and Friday, 13 July 2012 both dates inclusive.
In terms of the new Dividends Tax effective 1 April 2012, the following
additional information is disclosed:
- The local dividend tax rate is 15% before utilisation of Secondary Tax on
Companies (STC) credits.
- STC credits available amount to 1.13543 cents per share;
- There are no further STC credits to carry forward. The net local dividend
amount is 102.17031 cents per share for shareholders liable to pay the new
Dividends Tax and 120 cents per share for shareholders exempt from paying the
new Dividends Tax.
- The issued share capital of Famous Brands as at declaration date is 96 192
435 ordinary shares; and
- Famous Brands` tax reference number is 9208085846.
By order of the board
J G Pyle
Company Secretary
Midrand
18 May 2012
Directors and administration:
Non-executive:
P Halamandaris (Chairman), JL Halamandres, P Halamandaris (Jnr), HR Levin, CH
Boulle, BL Sibiya
Executive:
KA Hedderwick (Chief Executive Officer), T Halamandaris (Executive Deputy
Chairman), SJ Aldridge (Group Financial Director)
Registered office:
478 James Crescent, Halfway House 1685, PO Box 2884, Halfway House 1685
Email:
investorrelations@famousbrands.co.za
Transfer secretaries:
Link Market Services (Pty) Ltd, (Registration number 2000/007239/07), Rennie
House, 19 Ameshoff Street, Braamfontein 2001, PO Box 4844, Johannesburg 2000
Sponsor:
The Standard Bank of South Africa Limited
(Registration number 1969/017128/06), 3 Simmonds Street, Johannesburg 2001
Date: 21/05/2012 07:05:24 Produced by the JSE SENS Department.
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