| Tue 17 May 2005, 9:14 | | Famous Brands - Audited Group Results For The Year |
|
Famous Brands - Audited Group Results For The Year Ended 28 February 2005
Famous Brands Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/004875/06)
Share code: FBR ISIN code: ZAE000053328
(`Famous Brands` or `the company`)
AUDITED GROUP RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2005
- Operating profit +100%
- Gross revenue +28%
- Headline EPS +48%
Consolidated Income Statement
28 Feb 29 Feb
2005 2004 Change
R000`s R000`s %
Gross revenue 464 727 362 988 28
Operating profit 81 683 40 837 100
Net interest paid (12 569) (2 994)
Net income before taxation 69 114 37 843 83
Taxation (25 642) (13 851)
Attributable profit 43 472 23 992 81
Adjusted for:
Amortisation of goodwill 7 764 2 786
Impairment loss on intangible
assets 294 1 468
Loss on loans written off 1 075 -
Profit on disposal of
Group-owned outlets (485) (291)
Profit on disposal of tangible
fixed assets (164) (1 183)
Profit on disposal of
subsidiaries (2 079) -
Headline earnings 49 877 26 772 86
Weighted average numbers
of shares in issue 85 155 132 67 646 920
Operating margin 17,6% 11,3% 56
Earnings per share - cents 51,1 35,5 44
Fully diluted earnings
per share - cents 48,1 35,0 37
Headline earnings
per share - cents 58,6 39,6 48
Fully diluted headline earnings
per share - cents 55,0 39,0 41
Dividends
- Interim 8,0 6,5
- Final (proposed) 10,0 4,0
Total dividend for the year 18,0 10,5
Consolidated Balance Sheet
28 Feb 29 Feb
2005 2004
R000`s R000`s
Assets
Non-current assets 202 535 205 883
Tangible fixed assets 28 865 15 835
Intangible fixed assets 168 624 180 255
Deferred taxation 3 303 5 658
Loans 1 743 4 135
Current assets 125 692 93 070
Inventory 29 055 27 287
Trade and other receivables 77 054 65 783
Cash and cash equivalents 19 583 -
Total assets 328 227 298 953
EQUITY AND LIABILITIES
Share capital and reserves 169 461 135 543
Ordinary shareholders` interest 169 461 135 400
Minority shareholders` interest - 143
Non-current liabilities 74 618 91 898
Interest-bearing borrowings 70 562 87 853
Other 4 056 4 045
Current liabilities 84 148 71 512
Trade and other payables 62 021 47 535
Short-term portion of Interest-
bearing liabilities 20 326 17 500
Taxation 1 801 3 305
Bank overdraft - 3 172
Total equity and liabilities 328 227 298 953
Consolidated Statement of Changes in Equity
28 Feb 29 Feb
2005 2004
R000`s R000`s
Balance at beginning of year 137 779 83 816
Change in accounting policy (2 379) (2 955)
Net gains not recognised in the
income statement - currency
translation differences (503) (820)
Attributable profit 43 472 23 992
Dividends (10 205) (4 030)
Net movement in Share Capital - 35 000
Issue to participants of
Share Incentive Trust 1 297 397
Ordinary shareholders` interest 169 461 135 400
Consolidated Cash Flow Statement
28 Feb 29 Feb
2005 2004
R000`s R000`s
Net cash flow from
operating activities 51 548 6 148
Cash generated by operations 98 748 35 704
Net interest paid (12 569) (2 994)
Taxation paid (24 419) (22 532)
Dividends paid (10 212) (4 030)
Net cash flow from investing activities (15 765) (100 388)
Expended on non-current assets (20 007) (7 816)
Investment in subsidiaries - (95 359)
Proceeds from disposal of
non-current assets 4 242 2 787
Net cash flow from financing activities (13 028) 81 225
Movement in share capital and reserves 1 438 35 396
(Decrease)/increase in interest-
bearing borrowings (14 466) 45 829
Change in cash and cash equivalents 22 755 (13 015)
Cash and cash equivalents at
beginning of year (3 172) 9 843
Cash and cash equivalents
at end of year 19 583 (3 172)
Segment Report 28 Feb 29 Feb
2005 2004 Change
R000`s R000`s %
Gross Revenue
Franchising 157 603 87 649 80
Food Services 309 190 278 802 11
Corporate Services 33 982 21 397 59
Eliminations (36 048) (24 860) 45
Total 464 727 362 988 28
Operating Profit
Franchising 54 348 23 311 133
Food Services 19 644 16 918 16
Corporate Services 8 057 728 +100
Eliminations (366) (120) +100
Total 81 683 40 837 100
Notes
1. These financial statements have been prepared in conformity with South
African Statements of Generally Accepted Accounting Practice, and the accounting
policies are consistent with those applied in the previous year ended 29
February 2004, except as detailed below in note 2.
2. In terms of the requirements of AC132, Consolidated Financial Statements and
Accounting for Investments in subsidiaries, the Steers Share Incentive Trust,
the Wimpy Marketing Fund (Proprietary) Limited and the Whistle Stop Marketing
Fund Trust, which now meet the definition of a subsidiary, were consolidated.
The comparative results for the period ended 28 February 2004 have been
accordingly restated.
3. These financial results have been audited by RSM Betty & Dickson and their
unqualified audit opinion is available for inspection at the company`s
registered office.
Overview: The year under review has been a favourable one, exceeding management
targets and meeting market expectations. Management`s strategic drive to unlock
intrinsic value in the group was favourably impacted by the buoyant trading
conditions that continued to benefit the retail sector. Low interest and
inflation rates boosted disposable income, creating one of the most conducive
macro economic environments experienced in the ten years since transition to
democracy.
Competing in the Quick Service Restaurant `QSR`/casual dining sector, Famous
Brands` franchise portfolio comprises Steers, Wimpy, Debonairs Pizza, FishAways,
House of Coffees Coffee Shops, Brazilian Coffee Shops and Whistle Stop
restaurants. The group`s brands participate in the major QSR/casual dining
categories and enjoy success for a range of reasons. The brand portfolio is
uniquely positioned to cater for South Africa`s evolving lifestyle trends:
wholesome, convenience-centred offerings talk to the demand for quality food and
home meal replacement, while the aspirational nature of the brands continues to
attract the rapidly growing middle class.
Through its centralised procurement and production operations, the group
supplies its franchise network with a wide range of dry goods, butchery, bakery
and sauce products.
Evidence of the strong demand for the group`s products was the addition of 107
new restaurants to the franchise network over this past year. Management is
confident that sustained demand for the offering will ensure that on average, 80
restaurants are opened per year across the total network over the next three
years.
Financial Results: Gross revenue improved 28% to R464,7 million (2004: R363,0
million), while operating profit increased 100% to R81,7 million (2004: R40,8
million). Headline earnings per share rose 48% to 58,6 cents (2004: 39,6 cents).
This enhanced performance is attributable to two key factors, namely the
continued buoyancy experienced in the retail sector, and the full year inclusion
of earnings attributable to the Wimpy and Whistle Stop brands (formerly Pleasure
Foods).
Key to the rationale for the acquisition of Pleasure Foods in 2003 are the
synergies to be extracted from backward integrating the food supply chain into
the group`s food services business. These results reflect the initial phases of
this integration.
Management is pleased to report that excellent progress has been made on the
comprehensive integration programme. The franchising division has already been
fully integrated, with consolidation of the operational platform across the
network and relocation of the former Pleasure Foods head office to Midrand. This
has provided for extraction of a range of synergies.
Integration of the other major component of the business, namely food services,
is in progress and will be focused on aggressively in the year ahead. Capital
expenditure has been allocated for investment in management information systems,
people development, and process enhancement, designed to modernise and expand
the scope of the business in order to harness the full potential of
opportunities afforded by this integration.
Franchising Division: Investment in brands was the main focus of this period.
Management worked closely with renowned brand architects to ensure that the
group`s brands remain strong and contemporary and are re-engineered where
necessary to capitalise on their inherent competitive advantages.
Famous Brands` repertoire continues to be strengthened by the model of brand
stewardship, which promotes healthy competition between brands as they vie for a
share of consumers` wallets.
Gross revenue increased 80% to R157,6 million (2004: R87,6 million), and
operating profit improved 133% to R54,3 million (2004: R23,3 million).
A key intervention in the business for the year ahead will be to enhance the
group`s marketing capability in order to drive growth, thereby ensuring that the
business captures its rightful share of the current buoyant market.
As at 28 February 2005, the group`s franchised network comprised:
South Africa Rest of Africa Total
Steers 324 41 365
Wimpy 392 17 409
Debonairs Pizza 159 30 189
FishAways 41 0 41
House of Coffees 32 0 32
Brazilian Coffee
Shops 20 2 22
Whistle Stop 33 0 33
Market Cafe 10 0 10
Total 1 011 90 1 101
Food Services Division: The Food Services division reported a very sound
performance for the year. Gross revenue increased 11% to R309,2 million (2004:
R278,8 million), while operating profit rose 16% to R19,6 million (2004: R16,9
million).
Increased revenue was derived from traditional streams, namely organic growth of
existing restaurants, while numerical growth of the network saw a further 107
outlets added.
Management is cognisant that to optimise capacity to existing customers and
provide additional capacity for new customers, including the Wimpy business,
investment is required to be made in terms of manpower, management information
systems and facilities. In this light R34,7 million has been allocated to fast
track modernisation of the meat processing plant, bakery and sauce production
facilities.
Events after balance sheet date: In order to realise the group`s strategic
intent to grow its position as the leading branded QSR/casual dining franchisor
in Africa using this platform to diversify into an integrated food and beverage
company, management`s policy is to seek out appropriate, complementary
acquisitions.
In March 2005 Famous Brands acquired Trufruit (Pty) Ltd, `Trufruit`, a
manufacturer of fresh and pasteurised premium fruit juices supplying the food
services, hospitality catering and recreation sectors. The business currently
supplies product to three of the group`s operations, namely Steers, Debonairs
Pizza and FishAways, which comprises roughly 30% of its gross revenue. The aim
is to grow Trufruit`s revenue by supplying product to other brands in the
group`s franchise network, as well as to external food services vendors in the
hospitality and leisure sector. It is anticipated that the acquired business
will contribute approximately 2% to the group`s operating profit.
Advancing this strategy, in April 2005, the group acquired Baltimore Foods (Pty)
Ltd, `Baltimore`, vendors of soft-serve and hard ice-cream for a purchase
consideration of R14 million. It is anticipated that in its present form, the
business will contribute 5% to the group`s operating profit, with favourable
potential expected in the medium term. Famous Brands Wimpy franchise network
currently contributes 40% to Baltimore`s turnover. With the uptake of additional
business from Famous Brands` other brands, it is expected that turnover could be
boosted by some 25%. This acquisition is conditional on the successful findings
of a due diligence investigation.
Prospects: Famous Brands` strategic intent to become an integrated food and
beverage company centres on three key tenets: optimising profitability along the
entire value chain; knowing and understanding the customer; and prioritising the
consumers` desires and expectations.
This strategic intent will remain the primary driver in the forthcoming year.
Growing the group`s brands and optimal integration of acquisitions into the food
services division will advance achievement of this goal, and appropriate capital
expenditure and management input will be dedicated to achieving this.
Management is cognisant that at this point in the country`s growth, the group`s
products are accessible to a narrow percentage of the potential long term
market, which augurs well for the company`s prospects.
As greater numbers of the population enter the mainstream economy, and South
Africans adopt the global tendency to view casual dining and quick service
restaurants as a way of life, rather than a luxury, Famous Brands should
continue to prosper in this market.
Dividends: The Board of Directors has resolved to declare a final dividend
(number 24) of 10 cents per ordinary share. The last date to trade in order to
participate in the dividend will be Friday, 1 July 2005. The shares will
commence trading `ex` dividend from Monday, 4 July 2005. The dividend will be
payable to all shareholders recorded in the books of the company at the close of
business on Friday, 8 July 2005 `record date`. The dividend will be payable on
Monday, 11 July 2005. No dematerialisation or rematerialisation of share
certificates may take place between Monday, 4 July 2005 and Friday, 8 July 2005,
both days inclusive.
On behalf of the Board
P Halamandaris T Halamandaris
Chairman Chief Executive Officer 17 May 2005
Directors
P Halamandaris (Chairman), T Halamandaris (Chief Executive Officer), KA
Hedderwick, JL Halamandres*, HR Levin*, P Halamandaris (Junior)*, B Sibiya*
*Non-executive
Registered office
478 James Crescent, Midrand 1685
PO Box 2884, Halfway House 1685
E-mail: investorrelations@famousbrands.co.za
Website: www.famousbrands.co.za
Transfer secretaries
Ultra Registrars (Pty) Limited
(Registration number 2000/007239/07)
11 Diagonal Street, Johannesburg 2001
PO Box 4844, Johannesburg 2000
Rosebank
16 May 2005
Sponsor
Java Capital (Pty) Ltd
