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Famous Brands full year numbers

One of our core holdings and one of my favourite companies (because their products taste so good) Famous Brands released their full year results this morning - Summarised Results For The Year Ended 28 February 2015. They had a solid year with revenue up 16% to R 3.3 billion (not huge in the grand scheme of things), HEPS up 15%, the dividend is up 18% and they added 258 new restaurants bringing the total to 2545.

On the South African front which accounts for 95% of revenues and 93.5% of the operating profit; they grew revenue by 14% and operating profits by 12%, the only negative was their operating margin which dropped from 60.4% to 59.4% (I would hardly call an operating margin of 59.4% a negative though!). The reason for the slight drop comes from the Steers and Wimpy brands who had "slightly softer performances". In the UK market their revenue dropped by 3% in sterling but thanks to the weaker Rand, revenue is up 11% to R102 million. Moving to India, they decided to close their two Debonairs Pizza restaurants, in Kevin Hedderwick's words, "they didn't want to throw good money after bad".

The big growth market going forward is their Rest of Africa operations, which accounts for 9% of the groups sales. Revenues were up 15% with the addition of 41 new restaurants and a further 35 planned for the coming year (with the first restaurant being planned for Ghana).

There are two segments to the business, franchising (which is the face of the business and the part most people are familiar with) and their supply chain segment. In terms of revenue the supply chain generates R2.5 billion of the groups R3.3 billion revenue so it is a significant segment. On the operating profits side, the supply chain is less dominant but still significant with R261 million of the R672 million groups operating profits.

The big thing to remember is that the company is currently unleveraged and is sitting on R126 million in cash. This gives them the war chest for further expansion plans which will be into the "table service evening dining sector" and what they call "leisure and consumer product businesses". It is not very clear what exactly the leisure and consumer product business will entail and what products they are aiming at but it has been something they have been talking about for the last year and CEO, Kevin Hedderwick says has been keeping him very busy, so I expect a big announcement in this regard in the near future. I think this is a great company, in a growing sector and have the management team to do really well over the long term. Still a buy.


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