Tawanda Karombo
After sinking R214 million into expanding and maintaining its quick serve restaurants in the past year, Famous Brands will invest more into Drive-Thru offerings and smaller delivery formats to meet consumer demands at a time revenues have been squeezed.
Over the 12 month period to the end of February 2025, Famous Brands – which franchises and operates Debonaires Pizza, Steers, Wimpy and other counters – was affected by increased competition in the food industry and deteriorating infrastructure such as electricity and water.
Famous Brands now expects low growth and low consumer discretionary spend within the South African market. However, it foresees tailwinds that include lower inflation, further interest rate cuts, improved business and investor confidence and a better national energy security in the outlook.
“Economic headwinds in South Africa have significantly curtailed consumer spending. This means consumers prioritise essential spending and seek value for money,” said Darren Hele, CEO of Famous Brands on Monday.
“Competition remains fierce, with increasing advertising activity and a higher frequency and depth of value deals and promotions.”
Hele also said the South African business landscape now favours franchised brands over independent restaurants. The company’s scale and well-known brands were helping to provide an enduring competitive advantage, with consumers seeking affordable yet indulgent moments.
To better stand the competition, Famous Brands was investing further into its delivery channels, smaller formats and drive thrus to meet consumer demand for convenience.
“As our revenue comes under pressure, we look to become more efficient. We are refurbishing our manufacturing plants with investments phased over the next three years,” added Hele.
This includes introducing modern manufacturing technology to enhance capacity, processes and yields, while also reducing waste.
Despite encountering difficulties, Famous Brands raised its dividend for the full-year under review by 14.2% to 195 cents after growing revenues by 3.2% to R8.3 billion and boosting operating profits by 12.6% to R914m. Headline earnings per share for the period amounted to 520 cents, up 11.9% on the prior year.
At the end of February, Famous Brands’ had total borrowings of R1.1bn against R1.2bn a year earlier. Its finance costs on borrowings eased by 5.1%, after repayment of R160.6m.
Shares in Famous Brands inched up 0.19% to R58.28 in afternoon trade on the JSE on Monday, extending its 0.14% and 12.95% positive run in the past seven and 30 days, respectively.
“We are managing and reducing our debt in the medium term. This includes adhering to stringent working capital measures and funding growth through internally generated cash flow,” said the company.
Apart from South Africa, Famous Brands also operates in regional southern African countries that include Zimbabwe, Angola, Botswana, Lesotho and Zambia among others. It opened an initial of two franchised restaurants in the Democratic Republic of Congo during the year to end February 2025.
However, it emphasised that in several markets, its franchise partners were facing “significant pressure due to sharp increases in food input costs, electricity, diesel expenses” and labour costs.
Famous Brands also operates in other African countries such as Cote d’Ivoire, Egypt, Ethiopia, Kenya, Kuwait, Nigeria, Mauritius as well as in the United Arab Emirates.
After opening its first franchised restaurants in Egypt and Kuwait during the period under review, the company exited Saudi Arabia.
Its operations in the UK experienced a challenging year, marked by significant economic uncertainties, with revenues there declining 18.5% to R132m and the operating profit decreasing to R7m.
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