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Famous Brands reports triple-digit FY profit surge

Restores dividend at 200 cents per share.
The owner of well-known fast food brands Steers, Debonairs, and Fishaways also posted a significant recovery in other key metrics. Image: Moneyweb

JSE-listed Famous Brands reported a 568% rise in headline earnings per share (Heps) to 365 cents for the year ended February 28, coming off a low base in 2021 marked by Covid-19 lockdown restrictions, supply chain challenges and alcohol bans.

The owner of well-known fast food brands Steers, Debonairs, and Fishaways also posted a significant recovery in other key metrics. Group revenue increased by 38% to R6.5 billion, whilst operating profit climbed 428% to R630 million compared to the previous year.

“Our operating environment has changed fundamentally in response to Covid-19, and we have adapted accordingly. Some of these changes will be enduring and beneficial to our business and franchise partners in the long term,” the group announced in a Sens statement on Tuesday (May 31).

However, despite the improved performance coming out of a tough trading environment in 2020 and 2021 characterised by significantly lower foot traffic at its locations, Famous Brands says its recovery this period was lower than expected.

“Our recovery was slowed by continued Covid-19 trading restrictions, weak economic conditions in all markets, and to a lesser extent, the civil unrest experienced in South Africa in July 2021,” the group said.

“All our divisions performed better in this financial year and benefited from our initial financial management measures in response to the pandemic.”

The group restored its dividend at 200 cents per share for the period.

Relocations on the cards

In its forward-looking statements for logistics, Famous Brands announced that it will be taking steps to expand its logistics capacity. This after the logistics division increased turnover by 35% to R4.1 billion, increased operating margin to 1.5% and improved its national case volumes by 54%.

“Our next steps are to relocate our KwaZulu-Natal (KZN) Distribution Centre, move our Gauteng cold storage centre and secure a cross-docking facility near Mthatha.”

Famous Brands CEO Darren Hele told Moneyweb during the group’s results presentation that its decision to relocate its KZN distribution centre is not linked to the civil unrest that took place in the province last year.

“We have been looking for a new facility in KZN for a long time because we are out of capacity there. I think Covid-19 probably allowed us to delay the decision but we also had to find the right facility, Hele said.

Hele added that the KZN distribution centre will remain within the province but will be moved closer to the north coast.

Inflationary pressures

High food inflation is one of the key markers characterising the environment the group has had to operate in during the 2022 financial year both in its United Kingdom and Southern Africa markets.

“The UK restaurant industry faces challenges due to significant utility price increases, rising food inflation, supply chain disruptions, fuel cost increases and poor labour availability.”

In South Africa, the group said food inflation peaked at 6.9% during the year, seeing significant price pressure from meat, diary coffee and oil products.

“Over the year, South Africa has seen significant food inflation, peaking at 6.9%. Our basket price pressures were mainly from beef, green coffee beans, milk and whey powders, oil and spices. The stronger rand has helped soften some significant increases in commodity prices.”

Read: Supply chain pressures now worse than during Covid-19 peak – PwC 

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