Famous Brands - Reinstates Dividend

Yesterday Famous Brands released full-year results. As expected the UK business is struggling whilst the rest of the business is doing alright. Revenues were up 2% to R7.2bn, operating profit was down 5% to R850 million and headline earnings per share was down 19% to R3.19.

In SA, sales amongst their brands increased by 6%. In the Rest of Africa and the Middle East where they now operate in 15 countries, sales grew by 7%. In the UK, GBK sales declined by 7% and lost GBP4.6 million. The supply chain business which supplies all the brands in SA grew revenues by 4% to R4.4bn and operating profit improved slightly from R509m to R513m. This is still a crucial part of the business.

The following table shows you exactly what is going on under the hood.



There is no doubt that Famous Brands bought a dud in GBK. It has cost them a few billion Rand. But the rest of the business is decent and should continue to bumble along until the SA economy turns. Once that happens Famous Brands is perfectly positioned to thrive from a growing middle class. Management is even confident enough to reinstate the dividend, they will pay R1 a share. We are not actively buying this stock but if you own them, we advise you hold.