Listen: Famous Brands CEO Darren Hele discusses the group’s interim results with Nompu Siziba
Leading South African food services franchisor Famous Brands has been severely impacted by the stringent Covid-19-induced lockdown regulations and will hold onto its final dividend.
Its interim results show that the group – known for its Wimpy, Debonairs Pizza, Steers, and Mugg & Bean brands – suffered a revenue decline of 48% to R2 billion in the six months to end-August.
The group has 23 restaurant brands, represented by 2 838 restaurants across South Africa, the rest of Africa, the Middle East, and the UK.
It has reported an operating loss of R110 million for the period, compared to an operating profit of R376 million in the prior comparable period.
Mostly back to business
Famous Brands CEO Darren Hele says that while the gradual easing of restrictions in SA and the UK in the second half of the review period enabled it to reopen parts of the business, significant components remained in hibernation until July.
Approximately 95% of the group’s store network has reopened, with a small balance temporarily closed. Hele says the group’s focus over the past six months was on rightsizing the business, reducing costs, and preserving cash to facilitate balance sheet flexibility.
This is in alignment with its 2021-2023 strategic roadmap, which has been accelerated by the pandemic.
“This focus, together with a range of mitigating measures which we swiftly implemented across the business, has seen the group weather the worst of the pandemic’s impact,” says Hele.
He adds that the pandemic has however had an adverse impact on new store openings, which is “a key driver of brand momentum”.
Unpredictable consumer behaviour
As Black Friday and the holiday season approach – traditionally the industry’s peak trading period – the group is finding it difficult to predict consumer spending behaviour.
“The school holidays will be both later and shorter than previously, international tourism is likely to be muted, and domestic travel and leisure activities will be constrained by reduced disposable income,” says Hele.
“Continued health and safety concerns and protocols may also curtail traditional festive season pursuits.”
Hele says the group will balance the balance sheet through its expansion programme, but the current state of the economy is of concern.
“We remain concerned about the weak state of the economy which, together with the financial and psychological impact of the pandemic, will constrain consumer discretionary spend and sentiment.”
Ultimately, however, Hele is positive that Famous Brands will bounce back.
“Barring any further unforeseen events, management is cautiously optimistic that the second half of the current financial year will deliver stronger growth than the first half. This optimism is based on the very weak base of H1, during which there was one month of no trade and three months of tightly restricted trade.”
He says consumer activity has increased in line with the phased easing of restrictions, as reflected by the group’s upward sales trend over the last three months – and particularly post the review period.
Famous Brands announced in August that it had sold its controlling 51% stake in boutique café brand tashas, to the founding Sideris family, who held the remaining 49%. It said the sale “is in line with the group’s three year-strategic roadmap
which includes a narrower focus of investment of resources in the Signature brands portfolio, which includes tashas.” The deal was effective August 1, 2020.