Interim headline earnings per share in food outlet franchise operator Famous Brands, which holds brands such as Debonairs, Milky Way, Mugg & Bean and Wimpy, shot up 121% to 215 cents for the period to end August.
The firm delivered a 130c per share dividend in spite of intense competition and inflationary pressures that are eating into consumers’ disposable incomes.
For the same contrasting period last year, Famous Brands did not pay a dividend. Its dividend payment for the interim period to end August 2022 was underpinned by a 19% revenue surge to R3.6 billion, which drove up its operating profit by some 77% to R393 million.
The company has attributed the stronger operating profit out-turn to cost containment and revenue recovery post the pandemic.
“These results demonstrate a continued revenue recovery and the successful management of our cost base. This performance is gratifying considering a difficult operating environment with fierce competition and consumers facing increased financial pressures,” Darren Hele, the CEO for Famous Brands, said yesterday.
To strengthen its financial position, Famous Brands has also reduced its debt obligations, repaying about R150m of its primary borrowings. This has left it with R1bn in total interest-bearing debt compared to R1.3bn as at the end of the same period last year.
Famous Brands said the South African restaurant industry was benefiting from the lifting of Covid-19 restrictions, with consumers now returning to restaurants, events and shopping centres.
There have also been more tourists arriving in South Africa, propping up its revenues from the market by 31% to R534m attributable to “higher royalty payments” on the back of the recovery in restaurant turnovers.
There was “continued recovery in restaurant turnovers and a return to pre-pandemic consumer behaviour”, added Hele, highlighting, though, that “higher input costs meant we had to increase our menu prices in line with food inflation” trends.
The company also took a knock from the flooding-induced closures of restaurants in KwaZulu-Natal. This “impacted performance” as many restaurants closed and holidaymakers cancelled their Easter holiday trips.
Growth of the home delivery channel, however, slowed during the period as consumers returned to sit-down and takeaway orders. Its casual dining restaurants nonetheless experienced a strong recovery as consumers spent more time in restaurants.
In the rest of Africa market, Famous Brands’ trading activity has returned to pre-pandemic levels, with sales increasing by 42%. Regional market revenues also firmed up by 22% to R205m for the interim period to August 2022, while operating profit at R11m was higher compared to R8m for the previous contrasting period.
Botswana, Ethiopia, Kenya and Nigeria saw an improvement in the “home delivery channel”. Famous Brands has launched online ordering platforms for Debonairs Pizza and Steers in Zambia
In the UK, which has been rocked by elevated inflation, Famous Brands saw its Wimpy restaurants experience “a drop-off in home delivery sales”, although in-store sales “did not decline” by the same margin.
The unit slumped to a loss of R20m in terms of operating profit after factoring in the impact of a R31m impairment.
“Our Wimpy UK franchise partners are experiencing unprecedented challenges with high inflation, supply chain pressures, higher interest rates and looming energy and electricity increases,” the company explained.
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