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Interim results, great revenue growth

Famous Brands released their interim results to end August 2015 yesterday, the market embraced the higher dividend and better revenues, the stock was up 3 percent by the close of trade. Revenues for the half increased a very healthy 27 percent to just shy of 2 billion Rand. Operating profits and Headline Earnings (241 cents) increased by "only" 14 percent. The dividend as we mentioned increased 23 percent to 190 cents, payable Monday 7 December. Famous Brands boosts your Xmas budget!


So why were revenues so much higher than profits? They explain in the release, if you read on, having followed the link: "this pleasing top-line turnover growth failed to translate into corresponding growth in operating profit, largely due to the sub-optimal integration of the new Supply Chain projects into the business. In addition, the final phase of the Group's Fit-4-Purpose initiative, a programme aimed at bringing the business closer to its customers (franchisees) and consumers, incurred further costs." There were significant costs in setting up the new Crown Mines Distribution Centre, expectations are that the logistics division margins should normalise and improve.


The brands and company is well positioned, we continue to like all in the space. At the same time we do appreciate that consumption patterns in rich people are changing, less quick service foods and more emphasis on healthier alternatives. All of the brands globally will give customers what they want, some will struggle as a result of their product (i.e. fried chicken is fried chicken, how do you change that?), other will adapt more easily. We continue to stay long this company, it represents a changing middle class in South Africa (and indeed across the continent) for all the right reasons.


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