Research archive for FBR

Famous Brands is a company that we have held for years in some local portfolios. It remains a recommended Vestact stock, even though we have not bought them for anyone in quite a while. At this point, 63 clients own the shares and the aggregate value thereof is just R2,7 million.

This morning we received 6 month results form Famous Brands. The company now has 2 879 restaurants throughout a portfolio of 20 brands. As you know from our recent commentary, the UK business has been a disaster while SA has been OK. Let's see what the numbers say.

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.

Food Services business, Famous Brands, came out with their highly anticipated interim results. The company reported an interim loss of R544 million due to a pretax R874 million write-down of its U.K. chain, Gourmet Burger Kitchen (GBK). Coega Concentrate also delivered a R17.8 million loss to make matters worse, that business is now up for sale.

Famous Brands released a voluntary performance update yesterday. I remember a time not so long ago when anything below double-digit growth was considered disappointing. Times have certainly changed.

Yesterday Famous Brands released their full-year numbers, showing that it has been a tough year. I watched the results presentation online, a first for them. I think all companies should offer that option, at the moment it is the exception and not the norm.

On Monday Famous Brands released their 6-month results, which we already knew weren't going to be pretty reading. Year to date the stock is down 34%, reflecting lower consumer spend locally and the struggles they have had with their GBK acquisition in the UK.

Yesterday after the market closed, Famous Brands released an ugly looking trading update. The main focus was on GBK, their recent acquisition in the UK. That business produced a loss of 872 000 pounds. Here is what they had to say about GBK.

Yesterday we received a performance update from Famous Brands which certainly disappointed the market. The share closed down 7.9%. System wide sales grew 7% in South Africa for the six month period. If you exclude new stores, sales only increased 1.8%. 52 restaurants were opened in South Africa for the period.

Famous Brands released their annual results for their financial year to end February 2017. These include Gourmet Burger Kitchen, the UK burger franchise that Famous Brands bought for 1,8 billion Rand during the last financial year. They also bought a potato chip (french fries) plant, Lamberts Bay Foods for 73.5 million Rand. There was also the acquisition of half of Mexican Salsa (nearly 5 million Rand) and half of the Italian restaurant (early stages) Lupa Osteria. Other than Lamberts Bay, I have been to all of these, for some "market research". Of course there was also the purchase of 49.9 percent of "By Word of Mouth", a well known, especially around these parts, catering business.

Famous Brands delivered and served up six month results yesterday. At face value they are decent results, notwithstanding what is always a tough operating environment. The group have successfully transformed themselves into a food production business, along with the old core distribution and franchising front end. Production means that you can control the quality inside of the brands that you have acquired, something that becomes increasingly hard to do across multiple brands and many more stores. The group now has over 2600 stores of your good old favourites, and your new favourites too. The tried and tested Mugg & Bean to Debonairs, alongside the likes of Tashas. I mean, who do you know who doesn't like Tashas?

Famous Brands have released a trading update ahead of their results on the 24th of October. Those should be exciting, we were discussing Kevin Hedderwick the other day, in person he always downplays his role (a good characteristic), those who have dealt with him suggest that he is really good quality. Not just a chap from East London, someone who has certainly changed a mom and pop type business into a professional outfit with multiple irons in the fire. Recognising that there is a food revolution afoot, they also want to control the supply chain from top to bottom. Controlling the quality of all the ingredients will be key to the consumer coming back and back time again. My wife often tells my kids about her dad's saying, it is not how many people come, it is how many people come back. Quite right.

Not an earth shattering announcement this morning, bound to get some Sandton tongues wagging, that is for sure darling. This morning, there was an announcement from Famous Brands that they are acquiring a 49.9 percent stake in a business that you may well know well, if you live up here in Jozi. By Word of Mouth catering. 23 years on, husband and wife team Karen (founder in 1993) and Adrian (joined in 2003) will sell half to Famous Brands. Price? Well, this falls inside of the rules of having to notify the market, less than five percent of the market cap. Current market cap is 16.5 billion Rand, so less than 5 percent of that. Paul knows Karen, she actually runs with him. Eating all that marvellous food means that you HAVE to do lots of exercise, right?

Before the market opened yesterday, Famous Brands announced that they are expanding their operations in the UK. They are paying 120 million Pounds for Gourmet Burger Kitchen or "GBK", a 75 store premium burger restaurant. These 75 stores will add to the current 83 Famous Brand stores already in the UK. In terms of value for money, GBK had an EBITDA of around 9.6 million pounds for the 12 months ending June 2016, so not cheap but not overly expensive. The question that we were asking in the office, "What exchange rate did they get?". The company locked in an exchange rate of GBP/R 17.54, getting near the strongest levels of the post Brexit Pound crash. On that exchange rate it will cost them around R2.1 billion, Kevin Hedderwick on TV yesterday said Brexit saved them around R800 million, compared to the price they were first looking at paying.

News from Famous Brands this morning, they are buying a tomato paste manufacturer down in the Windy City. That is Port Elizabeth to you and I. The factory was bought in liquidation, Famous Brands also points out that the facility was manufactured for a total cost of around 200 million Rand. There is a shortage of tomato paste in the country, a pretty significant one at that. The country imports between 30 to 35 thousand tons of tomato paste, the company itself is responsible for 1500-2000 tons of that. Michael asked the best question. Sitting here next to me he said, then why did the company go bankrupt? Indeed. Good question, it must have been a pretty nasty experience.