| Mon 29 May 2006, 7:00 | | Famous Brands - Audited Group Results For The Year |
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FBR
FBR
Famous Brands - Audited Group Results For The Year Ended 28 February 2006
Famous Brands
Incorporated in the Republic of South Africa
Registration number 1969/004875/06
Share code: FBR & ISIN: ZAE000053328
("Famous Brands" or "the group")
AUDITED GROUP RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2006
- Up 44% Gross revenue R669,2 million (2005: R464,7 million)
- Up 34% Attributable profit R70,9 million (2005: R53,1 million)
- Up 38% Headline EPS 83,5 cents (2005: 60,7 cents)
- Up 67% Dividends 30 cents (2005: 18 cents)
Consolidated Income Statement
28 Feb 28 Feb
2006 2005 Change
R000"s R000"s %
Gross revenue 669 178 464 729 44
Operating profit 109 385 93 220 17
Net interest paid (7 942) (14 531)
Net income before taxation 101 443 78 689 29
Taxation (30 568) (25 628)
Attributable profit 70 875 53 061 34
Adjusted for:
- Impairment loss on intangible
assets 730 313
- Impairment on loan 881 -
- Loss on loans written off - 1 075
- Profit on disposal of non-current
assets - (2 564)
- Profit on disposal of tangible
fixed assets (416) (164)
Headline earnings 72 070 51 721 39
Weighted average numbers of shares
in issue 86 287 304 85 155 132
Operating margin 16,3% 20,1% (19)
Earnings per share - cents 82,1 62,3 32
Fully diluted earnings per
share - cents 77,4 58,5 32
Headline earnings per
share - cents 83,5 60,7 38
Fully diluted headline earnings
per share - cents 78,7 57,0 38
Dividends
- Interim 13,0 8,0
- Final (proposed) 17,0 10,0
Total dividend for the year 30,0 18,0
Consolidated Balance Sheet
28 Feb 28 Feb
2006 2005
R000"s R000"s
Assets
Non-current assets 304 204 240 707
Tangible fixed assets 80 454 35 642
Intangible fixed assets 218 457 200 019
Deferred taxation 4 468 3 303
Loans 825 1 743
Current assets 141 040 125 691
Inventory 50 041 29 055
Trade and other receivables 85 980 77 054
Cash and cash equivalents 5 019 19 582
Total assets 445 244 366 398
EQUITY AND LIABILITIES
Share capital and reserves 248 234 193 809
Ordinary shareholders" interest 248 234 193 809
Non-current liabilities 81 887 82 988
Interest-bearing borrowings 61 637 70 562
Deferred taxation 20 250 12 426
Current liabilities 115 123 89 601
Trade and other payables 80 873 67 474
Short-term portion of Interest-bearing
borrowings 25 215 20 326
Taxation 9 035 1 801
Total equity and liabilities 445 244 366 398
Consolidated Cash Flow Statement
28 Feb 28 Feb
2006 2005
R000"s R000"s
Net cash flow from operating activities 61 668 49 586
Cash generated by operations 107 063 98 749
Net interest paid (7 942) (14 531)
Taxation paid (17 670) (24 420)
Dividends paid (19 783) (10 212)
Net cash flow from investing activities (69 141) (15 766)
Expended on non-current assets (52 551) (17 615)
Investment in subsidiaries (18 213) 164
Proceeds from disposal of non-current assets 1 623 1 685
Net cash flow from financing activities (7 090) (11 066)
Movement in share capital and reserves 2 496 1 438
Decrease in interest-bearing
borrowings (9 586) (12 504)
Change in cash and cash equivalents (14 563) 22 754
Cash and cash equivalents at beginning of year 19 582 (3 172)
Cash and cash equivalents at end of year 5 019 19 582
Consolidated Statement of Changes in Equity
28 Feb 28 Feb
2006 2005
R000"s R000"s
Balance at beginning of year 169 461 135 543
- Adjustment on adoption of IFRS 24 348 14 127
Restated balance 193 809 149 670
Net gains not recognised in the
income statement - currency
translation differences 326 (503)
Shares based payments 550 632
Attributable profit 70 875 53 061
- As previously disclosed 43 472
- Adjusted on adoption of IFRS 9 589
Dividends (19 822) (10 205)
Disposal of minority interest - (143)
Issue of share capital 902 -
Issue to participants of Share
Incentive Trust 1 594 1 297
Ordinary shareholders" interest 248 234 193 809
Segment Report
28 Feb 29 Feb
2006 2005 Change
R000"s R000"s %
Gross Revenue
Franchising 182 796 157 114 16
Food Services 486 182 308 290 58
Corporate Services 36 383 34 883 4
Eliminations (36 183) (35 559) 2
Total 669 178 464 729 44
Operating Profit
Franchising 81 533 65 119 25
Food Services 22 935 20 595 11
Corporate Services 5 464 8 354 +100
Eliminations (547) (848) +100
Total 109 385 93 220 17
Notes
1. These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS). The date of transition to
IFRS is 1 March 2004.
2. The accounting policies applied by the group are consistent with those
applied in the comparative financial periods, except for those which have arisen
due to the transition to IFRS.
3. 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.
4. The following items represent the significant changes to the group"s
accounting policies as a result of the adoption of IFRS:
IFRS 3 - Business Combinations
Business Combinations occurring after the date of transition to IFRS are
accounted for by applying the requirements of IFRS 3. The group has in terms of
the exemption provisions of IFRS 1, elected not to retrospectively apply IFRS 3
to business combinations occurring prior to the transition date.
In terms of IAS 3, Business Combinations, goodwill is no longer amortised, but
is subject to at least annual impairment reviews. The group previously
recognised goodwill on acquisition at cost and amortised it on a straight-line
basis over its expected useful life. Goodwill was reviewed for impairment when
events or changes in circumstances indicated that the carrying value was
potentially not recoverable. Goodwill amortisation, subject to the exemption
provisions of IFRS 1, previously recognised in the income statement has been
reversed with a resultant increase in equity.
IAS 16 - Property, Plant and Equipment
In terms of IAS 16, Property, Plant and Equipment, the residual value of
property, plant and equipment should be assessed at each balance sheet date. In
order to establish the depreciation charge on an annual basis the assets
depreciable amount is reduced by its residual value. In terms of SA GAAP the
estimated residual value was fixed on recognition of the asset and not re-
assessed annually.
A retrospective re-assessment of residual values for property, plant and
equipment has resulted in the carrying values of certain previously fully
depreciated assets being partially re-instated to reflect the applicable
residual value. Where items of property, plant and equipment have not been fully
depreciated, re-assessment of residual values has resulted in a reduction of
depreciation. Depreciation previously recognised in profit or lossd has thus
been reversed or reduced resulting in a corresponding increase in equity.
IAS 38 - Intangible Assets
In accordance with IAS 38, Intangible Assets, trademarks have been assessed to
be indefinite useful life intangibles. Trademarks are no longer amortised, but
are subject to at least annual impairment reviews. The group previously
amortised trademarks on a straight-line basis over their expected useful lives.
Trademarks were reviewed for impairment when events or changes in circumstances
indicated that the carrying value was potentially not recoverable. Trademark
amortisation previously recognised in the income statement has been reversed
with a resultant increase in equity.
5. The effect on equity as a result of the transition to IFRS is detailed below:
28 Feb 1 Mar
2005 2004
R000"s R000"s
Balance Sheet
Equity as previously reported 169 461 135 543
Restatement for IFRS and other adjustments 24 348 14 127
IFRS 3/IAS 26 - Goodwill amortisation
and impairment 7 756 -
IAS 16 - Property, plant and equipment 6 775 5 861
IAS 17 - Leases (2 896) (2 979)
IAS 38/IAS 36 - Intangible asset
amortisation and impairment 23 638 20 224
IAS 39 - Fixed interest rate adjustment (1 962) -
Deferred taxation (8 963) (8 979)
Restated equity per IFRS 193 809 149 670
Income statement
Net profit as previously reported 43 472
Restatement for IFRS and other adjustments 9 589
IFRS 2 - Share-based payments (632)
IFRS 3/IAS 26 - Goodwill amortisation and
impairment 7 756
IAS 16 - Property, plant and equipment 914
IAS 17 - Leases 83
IAS 38/IAS 36 - Intangible asset
amortisation and impairment 3 414
IAS 39 - Fixed interest rate adjustment (1 962)
Deferred taxation 16
Restated net profit per IFRS 53 061
Trading Environment, Overview and Group Performance: Famous Brands is Africa"s
leading Quick Service Restaurant "QSR"/casual dining franchisor, with 1 165
restaurants under franchise. The group"s brand portfolio comprises Steers,
Wimpy, Debonairs Pizza, FishAways, House of Coffees Coffee Shops, Brazilian
Coffee Shops and Whistle Stop. The group"s Food Services division supplies the
Franchise division with a wide range of dry goods, butchery, bakery and sauce
products and includes Pouyoukas Food, Baltimore ice cream and Trufruit Juice
Company businesses.
Famous Brands" strong results for the year ended 28 February 2006 reflect the
combination of favourable macro-economic conditions, positive industry trends
and management"s achievements in unlocking value inherent in the business.
Potency of the group"s brands and optimisation of capital expenditure and
investment produced vigorous performances in both the Franchise division and
Food Services division. Record turnover was reported for the year by both
operations.
The primary drivers propelling the category remain robust, namely the
exponential growth of the emerged middle class, the pursuit of lifestyle
convenience and the evolving trend of out of home consumption.
Competition in the QSR/casual dining sector is aggressive and the challenge is
to deliver a consistent, contemporary and relevant offering. In this regard
attention is focused on the cornerstones of the group"s brand portfolio:
affordability (value for money), accessibility (situated within arms" reach of
desire), and appeal (high quality innovative offerings). At the forefront of
management"s strategy is to establish the concept of quick service and casual
dining restaurants as a way of life.
During the review period a decision was taken to realign the business model. The
group"s two major divisions, Franchising and Food Services, were
compartmentalised into four operating divisions: Franchising (housing the
group"s brands and intellectual property); Food Services (comprising production,
warehousing and distribution facilities servicing predominantly the franchising
business); Catering Services (consisting of the Trufruit Juice company,
Baltimore Ice Cream and Pouyoukas Foods); and Retail Services (exclusively
servicing the retail and hospitality industry). The long-term strategy is to
establish the independence of the Catering and Retail Services divisions,
reducing reliance on the group as a customer.
This realignment, which commenced on 1 March 2006, is aimed at capitalising on
core competencies and best effecting 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.
Financial Results: Gross revenue increased 44% to R669,2 million (2005: R464,7
million). Operating profit improved 17% to R109,4 million (2005: R93,2 million),
and attributable profit rose 34% to R70,9 million (2005: R53,1 million). Whilst
margin squeeze was experienced in the Food Services Division due to operating
and capital expenditure, this investment has substantially strengthened the
group"s strategic position to capitalise on growth opportunities. Operating
margins in the Franchise division continued to improve. Headline earnings per
share grew 38% to 83,5 cents (2005: 60,7 cents).
Franchise Division: Without exception, each of the group"s brands improved
system wide turnover and like-on like sales (which exclude new restaurants).
Across the network, system wide sales for the year increased 22,7%.
Strong organic turnover was boosted by the opening of a further 64 restaurants
across the network.
Notwithstanding sub-inflationary menu price increases, gross revenue increased
16% to R182,8 million (2005: R157,1 million), whilst operating profit rose 25%
to R81,5 million (2005: R65,1 million).
The philosophy of "renovation and innovation" continues to be vigorously applied
to the brand portfolio via ongoing upgrades of the individual restaurants"
retail footprints and introduction of new menu offerings which are innovative
and customer-driven. Investment in powerful communications campaigns proved
successful in underpinning these strategies.
The group"s brands are represented in rival categories, each vying for a share
of consumer spend; consequently, the model of brand stewardship and healthy
competition between brands continues to deliver real benefits. This does not,
however, preclude sharing best practice across the group"s portfolio.
The aspirational value attached to the group"s brands is evidenced by the
growing usage amongst the emerged middle class.
The expansion of Famous Brands" target audience, and the sector as a whole,
continues to present the group with new markets, illustrated most recently by
the successful opening of several new restaurants in and on the fringes of
traditional black residential areas.
Previously the international component of the franchise business was managed as
an independent entity. This structure has subsequently been streamlined and
integrated into the group"s brand functions facilitating alignment and integrity
of brands locally and internationally.
Franchise network as at 28 February 2006
Brand Nat- Inter-
ional national Total
Steers 346 39 385
Wimpy 416 16 432
Debonairs Pizza 172 30 202
FishAways 52 0 52
House of Coffees 36 0 36
Brazillian Coffee Shop 20 2 22
Whistle Stop 31 0 31
Market Cafe 5 0 5
Total 1 078 87 1 165
Food Services Division: This division benefited from three important inputs:
strong growth experienced by the franchise division; implementation of strategic
capital expenditure; and integration of an initial portion of the Wimpy
manufacturing component. Income derived from Trufruit, Baltimore and Pouyoukas
is reflected in this division"s results.
Gross revenue increased 58% to R486,2 million (2005: R308,3 million), while
operating profit improved 11% to R22,9 million (2005: R20,6 million). The lower
operating margin of 4,7% (2005: 6,7%) is mainly attributable to increased
operating and capital expenditure incurred to position the division to
capitalise on growth opportunities.
Some R33,9 million was invested in the review period culminating in the
commissioning of additional capacity in the butchery, bakery and sauce
production plant. This enhancement facilitated improved integration of the
manufacturing component of Wimpy"s business. In December 2005, the group
recorded its highest ever production and sales figures for both the butchery and
bakery.
Further capacity expansion is envisaged through sourcing additional warehousing
and distribution facilities in Durban, as well as installation of additional
manufacturing equipment in the sauce plant at Midrand.
In addition to opportunities for the manufacturing component under these
conducive conditions, management is also optimistic about the prospects afforded
via the group"s extensive warehousing and distribution infrastructure which
provides Famous Brands with much sought after route to market. With improved
resources in the logistics division, the feasibility of taking on the Wimpy
distribution business will be thoroughly investigated.
Catering Services Division: Trufruit and Baltimore, the group"s fruit juice and
ice cream businesses reported record year on year sales, reflecting improvements
of 65% and 49% respectively. Re-engineering of Pouyoukas Foods continues, with
strong focus now directed at the catering services and the hospitality
industries.
Opportunities within the franchising division continue to be extracted, and
uptake of the products across the group"s network is comprehensive. Based on
strong demand, a new Baltimore plant will be commissioned in Durban, commencing
operation in October 2006.
It is a key strategic imperative that this division aggressively targets the
broad food services and hospitality industries.
Acquisitions: During the year under review the company acquired the following
investments:
On 1 March 2005 the entire issued share capital of Trufruit (Pty) Limited, a
fruit juice manufacturing business, for R4,61 million.
On 1 April 2005 the entire issued share capital of Baltimore Foods (Pty)
Limited, an ice-cream manufacturing company, for R13,9 million.
On 9 November 2005, the Bimbo"s franchise agreements linked specifically to
Engen Petroleum sites, for R4,75 million.
All suspensive conditions with regards the above acquisitions have been
fulfilled.
Events after Balance Sheet Date: No items subsequent to the end of the year,
material to the appreciation of the results for the period and the financial
position of the company as at the end of the year, have come to the attention of
the company or its directors.
Prospects: A review of the business reveals an organisation that is favourably
resourced in terms of depth of talent, expert skills and capital investment to
deliver against the ambitious goals which management has outlined for the
future.
The realignment of the business to capitalise on its core competencies will re-
energise the company and continue to improve returns for stakeholders.
Management is satisfied that efforts and initiatives implemented during the
review period position Famous Brands to unlock further value. Whilst the group
is realistic that sustained compound growth at current levels will be
challenging, management is confident that Famous Brands is now better structured
to capitalise on opportunities across the group in the franchise, food services,
retail and catering services businesses.
Dividends: The Board of Directors has resolved to declare a final dividend
(number 26) of 17 cents per ordinary share (2005: 10 cents). The last date to
trade in order to participate in the dividend will be Friday, 21 July 2006. The
shares will commence trading "ex" dividend from Monday, 24 July 2006. The
dividend will be payable to all shareholders recorded in the books of the
company at the close of business on Friday, 28 July 2006 "record date". The
dividend will be payable on Monday, 31 July 2006. No dematerialisation or
rematerialisation of share certificates may take place between Monday, 24 July
2006 and Friday, 28 July 2006, both days inclusive.
On behalf of the Board
P Halamandaris T Halamandaris
Chairman Chief Executive Officer
29 May 2006
Directors
P Halamandaris (Chairman), T Halamandaris (Chief Executive Officer), KA
Hedderwick, JL Halamandaris*, 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
Date: 29/05/2006 07:00:16 AM Produced by the JSE SENS Department
