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Famous Brands earnings increase

Food services company Famous Brands on Wednesday, 20 May 2009, reported that its headline earnings for the year to end February 2009 increased 11% to 159 cents from 144 cents the year before.
Famous Brands earnings increase

The group said satisfactory increases in revenue were recorded across all of the operating business units and enhanced by strong growth in the logistics division.

Revenue grew by 30% to R1.5 billion in the period from R1.2 billion a year ago and operating profit was lifted by 20% to R262 million from R217 million in 2008.

This resulted in an operating profit margin of 16.9%.

Famous Brands chief operating officer Kevin Hedderwick said the decline in the operating margin as due to both the deliberate margin absorption strategy within the manufacturing division and a 41% increase in revenue in the low margin logistics division where activities were expanded substantially to take on the Wimpy business.

A final dividend of 40 cents per share was declared, taking total dividends for the year to 76 cents per share, an increase of 15% on the 2008 distribution to shareholders of 66 cents per share.

Famous Brands is Africa's leading quick service restaurant and casual dining franchisor and is also represented in the UK.

The group's global footprint now stands at 1,602 franchised restaurants spread across South Africa, 17 other African countries and the UK.

Its brand portfolio includes Steers, Wimpy, Debonairs Pizza, FishAways, House of Coffees and Brazilian Caf.

In the period under review some of the challenges faced in the domestic market included lower disposable income from higher interest rates, spiraling food inflation and hikes in the price of petrol and diesel as well as raw materials, the group said in a statement to the JSE.

Like-on-like sales growth (net of new restaurant openings) in the Domestic Franchising division grew by 9%, with system-wide sales increasing by 14%.

Revenue increased by 15% to R299 million with an operating profit increase of 31% to R186 million.

During the year a total of 120 new restaurants were opened and a further 101 existing restaurants were revamped.

Internationally, the business in the UK was impacted by the deepening recession.

The division recorded a 4.1% drop in revenue in Sterling terms but in Rand terms, revenue was up 2.5% to R180 million.

Operating profit fell by 12.1% to R17 million recording some benefit from the weaker rand but offset by retrenchment costs of R2.7 million.

The manufacturing division was impacted by the deliberate marginabsorption strategy to protect retail turnovers and franchisee profitability.

The division recorded revenue of 568 million rand and operating profit of R42 million, resulting in a margin of 7.3%.

A number of structural and organisational changes have been brought about within this division, which we are confident will in the new year, see this business deliver on it's potential, said Hedderwick.

The logistics division embarked on an expansion drive, which resulted in revenue growth to R977 million and an operating profit of R23 million.

Looking ahead, Hedderwick said economic conditions are not expected to improve and indications are that consumers will experience greater financial strain with relief from interest rate cuts being directed at settling debt.

Towards the end of 2008, the group issued a cautionary announcement in relation to a proposed transaction but the group said this has been temporarily postponed until there is greater clarity surrounding prospects for the domestic and global economy.

Published courtesy of

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