A 140% hike in profit leads Famous Brands’s half-year recovery

However, the group’s performance remains subdued and has not bounced back to pre-pandemic levels.
Image: Moneyweb

A steady recovery is on the horizon for South African franchiser Famous Brands as the company reports a 140% surge in profit for the half year ended August 31, bolstered by an increase in take-away and delivery sales.

The JSE-listed company, in a Sens statement on Wednesday, reported headline earning per share (Heps) of 97 cents for the current period compared to a 240 cents loss reported in the previous comparable period.

Despite the improvement in profit, the group is still far from returning to pre-Covid-19 levels where it reported Heps of 159 cents for the comparable period.

Famous Brands – known for its Steers, Debonairs Pizza, Wimpy and Mugg & Bean brands –  also reported a 50% hike in revenue to R3.0 billion and a 302% rise in operating profit to R222 million, leading the group’s 7.4% improvement in its operating profit margin to 12.9.

“The group has improved its own delivery offering by optimising delivery zones, reducing drive distances, stimulating volume and tracking preparation and drive times,” Famous Brands said in a Sens statement.

“Delivery through third-party aggregators will continue to grow, slowing our own delivery growth to some degree while also representing growth through accessing a new customer base,” the company added.

The group also saw a 46% increase in revenue in its retail business to R105 million from R72 million in the previous period. This, the group said, is in line with the increasing popularity of consumer home consumption.

Read: Famous Brands hit  hard by pandemic

Still a long way ahead

Although the company has registered a recovery from the severe losses it saw a year ago, the continuing Covid-19 lockdown restrictions, the change in consumer behaviour, plus the destruction of the civil unrest seen in parts of KwaZulu-Natal (KZN) and Gauteng have stunted its performance.

“Trading activity remains muted due to Covid-19 restrictions related to sit-down dining, travel, seated capacity, trading times and alcohol sales,” the group said.

“The local restaurant industry faces headwinds due to Covid-19 restrictions, consumer apprehension regarding eating out and poor economic conditions,” it added.

Despite the group reporting a 75.6% increase in combined like-for-like sales for its leading and signature brands for the period, the group’s signature brands – which include Mythos, PAUL and Fego Caffe – are  also yet to recover to pre-Covid-19 performance levels.

“Our signature brands are particularly impacted by Covid-19 restrictions such as curfews, capacity reductions and alcohol restrictions. While sales improved, they do not compare favourably with pre-pandemic levels,” Famous Brands said.

“NetCafe, Coffee Couture and Fego Caffe, operating in the hospital and captive market segment, struggled due to hospital visitor number restrictions,” the company added.

The July civil unrest left 109 of the group’s stores damaged by looting. The group had to close 99 of its restaurants because of the damage, with only 55 of them being re-opened by the end of the reporting period. The group also had to close its logistics facility in Westmead, KwaZulu-Natal because of the damage seen as a result of the unrest.

The company decided to withhold the interim dividend until the group manages to reduce – for two consecutive periods – its net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio to less than 2.5 times.  The group last issued an interim dividend for the period in 2019.

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Making Money 101.
Cut costs and profits rise…
Mnnnnnn.

Famous Brands is a behemoth that has lost its way. Their brands are are tired and offer little valu with the sky high prices, low quality foo’ Their franchisees are glorified managers struggling to make real money. Its time for a serious overhaul or they will go down the toilet tubes along with the byproduct of their greasy fast food.

End of comments.

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