Famous Brands profits jump, dividend surges 82%

Quick service and casual dining restaurant group Famous Brands saw its full-year profits jump nearly 40% as consumers returned to its restaurants to dine out following the Covid-19 pandemic years.

The group, which owns the Wimpy, Steers, and Debonairs fast food chains, reported its financial results on Monday, which showed headline earnings per share (Heps) soared 37% to 488 cents for the year to the end of February.

The group also increased its full-year dividend by 82% to 363 cents per share.

The company benefited from the lifting of  Covid-19 restrictions, which fell away in June 2022, and increased consumer spending on restaurants, travel and entertainment. Traffic into its stores and dwell time improved, especially in shopping centres.

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Famous Brands said that the company also got a boost from an increase in international travellers visiting the country, although these numbers are still not at the pre-pandemic level.

Despite the bumper profits reported, the company, much like many in the local food and retail industry, is taking strain from the extensive load shedding South Africa has experienced since September last year.

“The restaurant industry is highly vulnerable to load shedding as it results in lost revenue, increased operating costs and increased food waste,” Famous Brands said.

“Higher levels of load shedding also increases the incidence of generator breakdowns, which can lead to business disruptions.”

The company further said its post-pandemic recovery began to wane as its financial year progressed and the country’s economic conditions deteriorated.

Despite these factors, revenue was up 15% to R7.4 billion – higher than before the pandemic – compared to R6.5 billion in 2022.

Operating profit increased by 37% to R861 million from R630 million.

Sales in its Leading Brands segment, which houses Fishaways, Steers and others, improved by 14%, while its Signature Brands portfolio posted strong growth of 28% as patrons dined out more.

For the UK division of Wimpy, it was a challenging year due to the impact of Russia’s war in Ukraine, which caused energy costs to rise and triggered a cost of living crisis, the company said. Despite this, the UK segment recorded revenue of R142 million, up from R133 million in the previous period.

Famous Brands said it continues to see opportunities for growth and innovation in trading formats, technology and product development. Still, it added that load shedding and current South African economic headwinds remain challenging.

“We are concerned about South Africa’s weak economic prospects and high levels of load shedding.

“The local and global inflation picture remains elevated with consumers worldwide facing rising inflation, higher interest rates, and fuel and electricity price hikes. South Africa has country-specific challenges, including persistent load shedding, weak economic growth and high unemployment. A high level of bureaucracy and service delivery failures has made doing business more difficult for Famous Brands and our franchise partners,” the company said.

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