The N1 City Wimpy: the restaurant industry is highly exposed to load shedding with impacts including lost revenue, increased operating costs, and food waste, says Famous Brands. Picture Courtney Africa/African News Agency (ANA)
Famous Brands, which holds brands such as Debonairs, Milky Way, Mugg & Bean and Wimpy hiked its annual dividend by more than 80%, saying this year it had achieved a recovery in revenue and improved its cash generation from operations, despite ongoing load shedding strain.
Its shares leapt 4% to an intra-day high of R65.01 on the JSE following the announcement.
In its results for the year ended February 28, 2023, the group said its dividends per share rose by 82% to 363c. Its revenue increased 15% to R7.4 billion – materially higher than pre-pandemic-levels. Operating profit was up 37% to R861 million. Headline earnings per share increased by 37% to 488c.
Famous Brands CEO Darren Hele said a constrained consumer and a competitive environment meant the group must compete even harder for a share of the wallet.
“The strain of ongoing load shedding had an impact across all our divisions. The lifting of Covid-19 trading restrictions in June 2022 supported a recovery in consumer spending on restaurants, travel and entertainment.
“Foot counts and dwell times in shopping centres improved, positively impacting restaurants in these locations. South Africa welcomed more tourists, although this still lags below pre-pandemic-levels,” he said.
Hele said the local and global inflation picture remained elevated, and South Africa had country-specific challenges, including persistent load shedding, weak economic growth, and high unemployment.
Famous Brands said with many consumers working in hybrid and remote jobs, mealtimes had become more flexible and spread across the day.
“Evening sit-down trade has not recovered to pre-pandemic-levels and consumers tend to make earlier bookings,” it said.
While the lifting of Covid-19 restrictions boosted restaurant activity, local trading conditions remained challenging, the group said.
“All brands had to manage menu price increases carefully to balance protecting franchise partner profitability while offering value to consumers in an increased inflationary environment. This required careful price management and robust negotiations with suppliers,” it said.
“The restaurant industry is highly exposed to load shedding with impacts including lost revenue, increased operating costs, and food waste. We are working with our franchise partners to mitigate the worst impacts of load shedding,” Hele said.
The group is concerned about South Africa’s weak economic prospects and the high levels of load shedding, it said.
“In our manufacturing division, we will continue to drive operational efficiencies, improve product quality, and explore ways to reduce our environmental footprint.
“Our logistics strategy is progressing well with plans to relocate our Gauteng cold-storage facilities to the Midrand Campus. Increasingly, technology enables our logistics strategy and we plan to grow our share of the overall basket of franchise partners through a targeted online strategy,” it said.
Famous Brands said in 2023 several African economies encountered strong headwinds.
“These include high inflation, which mostly exceeded central bank inflation targets and long-term trends. Double-digit inflation rates were recorded in Zambia, Botswana, Angola, Nigeria, and Ghana. Countries that depend on tourism, including Botswana, Namibia, and Mauritius are yet to experience a total recovery in that sector,” it said.
The group said this year had been challenging for the UK due to the impact of the Russia-Ukraine war, with higher energy costs and a cost of living crisis.
Looking ahead, the group said despite ongoing macroeconomic challenges, it saw opportunities for growth and innovation in trading formats, technology and product development.
“In our brands division, we will grow our footprint through franchising, master licences, strategic partnerships, and company-owned stores. Our diverse menu options, strong brands, and resilient franchise partners will stand us in good stead, despite continuing economic headwinds.
"In 2023 we opened three drive-thru restaurants in South Africa and will focus on growing this format in 2024. The format meets consumers’ growing requirements for convenience and security. We are investing in delivery technology to improve our last-mile efficiency. Partnerships with third-party platforms will remain crucial,” it said.
BUSINESS REPORT
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