A guide into Famous Brands

Famous Brands, Africa’s largest branded food services franchisor has been putting a smile on South Africans’ faces with good food for years. The group, which owns some of the country’s most well-known food franchising brands, has done well to establish its, and its latest financial results bear testament to this.

Last week saw the announcement by the group of a 71 % increase in headline earnings per share in the past financial year.

“Basic earnings per share (EPS) grew 62% to 391 cents per share (2015: 242 cents per share), while headline earnings per share (HEPS) increased 71% to 411 cents,” said the group’s CEO, Darren Hele.

Among their strong set of results they also boasted a 23% growth in revenue and a 17% growth in operating profit.

“In the context of challenging trading conditions experienced during the review period, the Group’s unwavering focus on consistent improvement and investment in the business continued to deliver rewarding results,” Hele commented.

He added: “Management’s strategic drive to build capability and capacity across our brands, logistics and manufacturing operations continued apace, with the successful integration of recently acquired businesses and the acquisition of additional new businesses.”

Brands within Famous Brands

The franchisor group’s business model ‘comprises a portfolio of 30 brands represented by a franchise network of 2 626 restaurants across South Africa, the rest of Africa, the Middle East and the United Kingdom.’

Brands have increasingly done well, from their quick service category brands like Steers, Debonairs, Milky Lane, Wakaberry, and Fishaways to their casual dining category, for example Wimpy, Vovo Telo, Tashas, and Mugg & Bean, to name a few.

“The pleasing performance delivered for the review period is a reflection of both organic and acquisitive growth in the Brand portfolio as well as in the supply chain operations,” Hele explained.

The group’s brand portfolio is strategically designed to be aspirational, and offer value and convenience to a wide range of consumers across the income spectrum and across meal occasions, Hele further highlighted.

He observed: “Both the mainstream and signature (emerging) brand divisions delivered a gratifying performance. Central to their growth was intensified focus on key standard operating disciplines and innovation implemented across the offering, including product, marketing and in-store interaction.” 

In the period going forward the group has plans to place strong emphasis on ensuring the business is positioned to benefit from the upcoming peak holiday season.

“Our brands are represented at all major consumer hubs across the country and therefore optimally situated to capitalise on discretionary spend during the holiday period,” added Hele.

Furthermore, in expanding the group’s footprint, Hele highlighted the following: “Expanding the restaurant footprint will continue in line with market demand, while the extensive revamp programme currently underway will gain momentum in the forthcoming months, designed to ensure the group’s brands remain contemporary, appealing and top of mind. Opportunities to leverage growth of the Gourmet Burger Kitchen (GBK) business will also be explored. The group is also looking forward to opening up South Africa’s first PAUL restaurant in late February 2017. The flagship store will be situated in the Melrose Arch Precinct in Gauteng and will encompass a bakery café take away offering with a full table service restaurant.”

The group is also known for its experimental edge where they’ve brought in restaurants Mythos and Salsa Mexican Grill, which has the potential to take off locally as seen abroad.

Should you invest?

In order to achieve the robust growth targets, the group recently made a number of acquisitions, including its largest to date, the GBK transaction in the UK.

“In this regard, the group's gearing is substantially higher than in prior years, and the board has therefore resolved that no interim dividend will be declared for the review period. The board will closely monitor the group's operating requirements as well as future strategic acquisitions to determine future dividend payments. It is anticipated that, subject to future acquisitions, payment of dividends will resume in the 2018 financial year,” added Hele.

“This is a good company, it ticks all the boxes, its dominant in its space, it has a strong focus on vertical integration,” stated independent analyst, Petri Redelinghuys.

Despite sharing a market with strong established competitors, like Taste Holdings and Spur Corp., the Famous Brands group remain the strongest out of the local pick, stated Redelinghuys.

Hele concluded: “Management is on track to execute its strategies, and optimistic that if the opportunities outlined are capitalised on, the business will deliver solid growth in the forthcoming period.”

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