Famous Brands reports solid financial growth

The subdued macro-economic climate experienced in the year ended February 2013 did not prevent the Famous Brands group from delivering a strong performance. Robust results were reported across its franchising, manufacturing and logistics businesses; key acquisitions were made and joint venture partnerships established to bolster supply chain capability; and a comprehensive business model transformation project was implemented to position the group for continued growth.

This is according to chief executive Kevin Hedderwick, who also says the group ‘succeeded in surpassing its four-year vision to double the size of the business’. Revenue improved by 17 per cent to R2.52 billion, and profit before tax rose 15 per cent to R462 million. ‘This exceeds our milestone goal of R450 million,’ he adds.  Though the operating margin was 18.5 per cent, slightly lower than 2012, headline earnings per share grew by 22 per cent to 339 cents. A final dividend of 142 cents per share was declared, which brings the total cash dividends to 250 cents per share for the 2013 financial year, an increase of 25 per cent.

After changes in working capital, cash generated by operations improved by 21 per cent to R482 million. Net capital expenditure of R162 million – almost double the previous year – was incurred. This included R85 million for the acquisition of the Europa and Fego Caffé trademarks, and R7 million for Java Lava Beverage Manufacturers (subsequently renamed Famous Brands Coffee Company). It also included coffee roasting equipment of R5 million, R33 million for the Coega Cheese plant, and supply chain expansions. A R47 million in aggregate is approved for the year ahead.

The domestic franchising division, comprising operations in South Africa and 15 other African countries, saw a combined revenue increase of 12 per cent to R495 million. Operating profit rose slightly ahead of revenue growth to R300 million. The operating profit margin was 60.6 per cent, primarily owing to increased system-wide sales and intensive cost containment, achieved through attaining critical mass across the network. Within the international franchising division, Wimpy United Kingdom reported a nine per cent decrease in revenue Sterling, and a one per cent increase in Rand terms to R83 million.

Consolidated revenue for the supply chain business unit grew by 19 per cent to R1.92 billion, while operating profit rose 14 per cent to R161 million. The operating margin was 8.4 per cent.

The manufacturing division reported a 25 per cent improvement in turnover to R715 million, derived from increased revenue contributions from the coffee company, ice-cream, and chicken fillet plants, first-time revenue from the new boerewors and lamb sausage plant,  and significantly increased beef patty volumes.  Operating profit improved 11 per cent to R98 million, resulting in a margin of 13.6 per cent.

The logistics division grew both revenue and operating profit by 20 per cent to R1.8 billion and R63.1 million respectively, producing an operating margin of 3.5 per cent, unchanged from the prior year. Key to these results was the commissioning of a new distribution centre in Nelspruit and relocation of the Free State distribution centre to a new facility.