Slide 1: Results Presentation for the year ended February 2014
Results Presentation for the year ended 28 February 2014
Slide 2: Agenda
AGENDA • Performance highlights • 20th Anniversary highlights • Building capability – Group – Brands – Logistics – Manufacturing • Financial results • Strategy and Prospects 2
Slide 3: Performance Highlights
PERFORMANCE HIGHLIGHTS famous brands youre i good company
Slide 4: Strong results despite stressed middle income consumer
PERFORMANCE HIGHLIGHTS Strong results Notwithstanding stressed middle income consumer – evident during second half of the year 4
Slide 5: 13th consecutive year of record turnover and profits
PERFORMANCE HIGHLIGHTS 13th consecutive year of record turnover and profits 5
Slide 6: Operating margin 20%, best ever
PERFORMANCE HIGHLIGHTS Operating margin 20% best ever, achieved 1 year ahead of plan 6
Slide 7: Headline earnings per share increased 20%
PERFORMANCE HIGHLIGHTS Headline earnings per share increased 20% 7
Slide 8: Total dividends to shareholders up 20%
PERFORMANCE HIGHLIGHTS Total dividends to shareholders 300 cents per share up 20% 8
Slide 9: Share price breaks through R100 mark
PERFORMANCE HIGHLIGHTS Share price breaks through R100mark 9
Slide 10: Market capitalisation exceeds R10bn
PERFORMANCE HIGHLIGHTS Market capitalisation exceeds R10bn highest ever 10
Slide 11: Debt to equity ratio lowest ever
PERFORMANCE HIGHLIGHTS Debt to equity ratio (2.1)% lowest ever 11
Slide 12: Concluded 49% acquisition of Mr Bigg's Nigeria
PERFORMANCE HIGHLIGHTS Concluded 49% acquisition of Mr Bigg’s business in Nigeria 12
Slide 13: Commissioned Coega Cheese manufacturing plant
PERFORMANCE HIGHLIGHTS Commissioned Coega Cheese manufacturing plant in Coega Development Zone 13
Slide 14: Opened and revamped restaurants
PERFORMANCE HIGHLIGHTS Opened 165 restaurants and revamped 185 14
Slide 15: Restaurant count exceeds mark
PERFORMANCE HIGHLIGHTS exceeds 150 restaurant mark 15
Slide 16: Awarded Kruger National Park tender
PERFORMANCE HIGHLIGHTS Awarded Kruger National Park tender 16
Slide 17: Launched in London
PERFORMANCE HIGHLIGHTS Launched in London 17
Slide 18: Launched in Mumbai
PERFORMANCE HIGHLIGHTS Launched in Mumbai 18
Slide 19: Fit 4 Purpose model implementation concluded
PERFORMANCE HIGHLIGHTS Implementation of Fit 4 Purpose Business transformation model concluded • Closer to customer • Closer to consumer 19
Slide 20: Awarded 3rd place in Financial Mail Top Companies
PERFORMANCE HIGHLIGHTS Awarded 3 rd place in Financial Mail’s Top Companies Awards 20
Slide 21: Awarded 5th place in Business Times Top 100
PERFORMANCE HIGHLIGHTS Awarded 5 th place and Royal Company status in Business Times Top 100 Companies Survey 21
Slide 22: 20th Anniversary Since Listing
20TH ANNIVERSARY SINCE LISTING 23
Slide 23: 20 Year Performance Highlights
20 YEAR PERFORMANCE HIGHLIGHTS Compound 2014 1995 Growth % Revenue 22.4 R000 2 825 979 49 333 Operating profit 25.2 R000 565 517 6 313 Share price 23.4 cents 9 700 145 Market capitalisation 32.2 R000 9 626 516 36 395 Operating profit margin % 20.0 12.8 24
Slide 24: Building Capability
BUILDING CAPABILITY
Slide 25: Building Group Capability
BUILDING GROUP CAPABILITY Product Platform Expansion Strategy • Leverage Group’s Core Competencies • Leadership • Brands • Manufacturing • Logistics • Retail • Leverage Group’s strong cash generative balance sheet • Cautiously expand outside of Food Services Franchising into Leisure market 26
Slide 26: Building Brand Capability
BUILDING BRAND CAPABILITY BRAND Repertoire 27
Slide 27: System-wide Sales Growth
SYSTEM–WIDE SALES GROWTH 32.5% 13.0% 11.4% Domestic Rest of Africa Total 28
Slide 28: Like-on-like Growth
LIKE‐ON‐LIKE GROWTH 17.9% 5.8% 6.7% Domestic Rest of Africa Total 29
Slide 29: New Restaurants Opened
NEW RESTAURANTS OPENED Total 165 45 36 28 22 20 14 Emerging brands 30
Slide 30: Franchise Network
FRANCHISE NETWORK Total 2 378 621 551 446 167 154 171 136 72 60 Emerging brands 31
Slide 31: Trading Footprint
TRADING FOOTPRINT South Africa 1 935 United Kingdom 94 Rest of Africa 347 India 2 94 UK Dubai 3 179 Nigeria India 2 4 Ivory Coast Sudan 5 3 DRC Kenya 10 Tanzania 3 30 Zambia Malawi 4 28 Botswana Mauritius 25 35 Namibia Mozambique 2 1 935 South Africa Zimbabwe 9 Swaziland 7 32
Slide 32: Brand Highlights
BRAND HIGHLIGHTS • Growth has been contained ‐ a function of aggressive competitive pricing • Continues to hold its coffee and breakfast leadership position despite “war zone” surrounding this day part • Another year of strong results recording 18.6% growth in customer count • Growth in Rest of Afri
Slide 33: Brand Highlights
BRAND HIGHLIGHTS • Another year of phenomenal organic and numeric growth underpinned by 20.7% increase in customer count • Growth fuelled by quality and premium positioning versus “fish & chip shop” competitor offerings • Stabilisation and consolidation process has commenced • Famous Brands’ best op
Slide 34: Brand Highlights
BRAND HIGHLIGHTS • Reformatted look and feel for both brands concluded and revamp programme gaining momentum • Strong potential for Fego partnership with Shell Ultra City sites based on successful trial at Middelburg • New look and feel concluded. Revamps progressing, albeit slowly • Overhaul of IP
Slide 35: Brand Rationalisation
BRAND RATIONALISATION • Robust re–evaluation of existing brand repertoire remains a constant strategy • Brands exited during the year and or being scaled back include: • House of Coffees • Brazilian Café • Juicy Lucy • Blacksteer Home of Shisanyama • McGinty’s • Contribution to Group turnover and pr
Slide 36: Building Logistics Capability
BUILDING LOGISTICS CAPABILITY Nelspruit Midrand Bloemfontein Pinetown Cape Town Port Elizabeth 37
Slide 37: Revenue Growth - Logistics
REVENUE GROWTH ‐ LOGISTICS Total 11.5% 19.8% 12.6% 10.7% 10.4% 11.3% 10.5% Gauteng Kwa‐Zulu Natal Western Cape Eastern Cape Free State Mpumalanga 38
Slide 38: Logistics Highlights
LOGISTICS HIGHLIGHTS • Contextual environment characterised by above‐inflation increases in labour, diesel and costs of e‐tolls • Exceeded R2 billion annual turnover for the first time • Owner Driver contribution to total case sales delivered reaches 40.2% (2013: 26.8%) • Completed relocation of Eas
Slide 39: Building Manufacturing Capability
BUILDING MANUFACTURING CAPABILITY Eastern Midrand/ Midrand/ Midrand Baynesfield Centurion/ Sunderland Cape Cape Town Cape Town Pinetown Ridge 40
Slide 40: Revenue Growth - Manufacturing
REVENUE GROWTH ‐ MANUFACTURING Total 29.6% 121.9% 13.8% 9.1% 6.3% 10.1% 5.9% Meat Bakery Sauce and Ice Cream Fruit Juice Coffee Processing Spice 41
Slide 41: Manufacturing Highlights
MANUFACTURING HIGHLIGHTS • Review period characterised by significant improvements in yields, efficiencies and utility usage • Strong growth fuelled by full year Coffee Company turnover and take‐on of additional franchised brand business • Launch of Mugg & Bean retail • Integration of Turn ‘n Tender
Slide 42: Financial Results
FINANCIAL RESULTS
Slide 43: Salient Features
SALIENT FEATURES Rm F 2014 % change Revenue (Rm) 2 826 12 Operating profit (Rm) 566 21 Cash generated before changes in working capital (Rm) 602 20 Earnings per share (cents) 406 20 Headline earnings per share (cents) 406 20 Total dividends per share (cents) 300 20 Net debt / equity (%) (2) 8 (py) D
Slide 44: Income Statement
INCOME STATEMENT Rm F 2014 F 2013 % change Revenue 2 826 2 516 12 Cost of sales (1 599) (1 463) 9 Gross profit 1 227 1 053 17 Selling and administrative expenses (661) (587) 13 Operating profit 566 466 21 Share of profit of associates 5 ‐ 100 Net interest paid (3) (4) (19) Profit before tax 567 462
Slide 45: Revenue
REVENUE Rm 3000 2826 2516 2500 2156 2000 1878 1685 1549 1500 1000 500 0 2009 2010 2011 2012 2013 2014 46
Slide 46: Operating Profit
OPERATING PROFIT Rm % 600 21 20.0 500 20 19.1 19.1 400 18.5 19 18.3 300 18 566 16.9 466 200 413 17 358 308 262 100 16 0 15 2009 2010 2011 2012 2013 2014 47
Slide 47: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Rm F 2014 F 2013 Move Assets Property, plant and equipment 206 194 12 Intangible assets 870 800 70 Investments in associates 53 ‐ 53 Working capital 128 135 (7) 1 257 1 129 128 Funding Equity 1 235 1 000 235 Net borrowings (26) 81 (107) Deferred liabilities and curren
Slide 48: Cash Flow
CASH FLOW Rm 800 700 3 Interest 600 167 Tax 500 594 400 Cash from 271 operations Dividends 300 200 112 Capex (net) 35 100 Funding raised (net) 85 91 0 Opening cash Closing cash 49
Slide 49: Segmental Analysis - Revenue
SEGMENTAL ANALYSIS Rm % of total F 2014 F 2013 % change Revenue Franchising and development – Domestic 19 538 477 13 Supply Chain 76 2 145 1 919 12 Manufacturing 33 927 715 30 Logistics 72 2 021 1 812 12 Corporate ‐ 1 1 ‐ South Africa 95 2 684 2 397 12 International (Rest of Africa and UK) 5 142 119
Slide 50: Segmental Analysis - Operating Profit
SEGMENTAL ANALYSIS Rm % of total F 2014 F 2013 % change Operating Profit Franchising and development – Domestic 58 325 287 13 Supply Chain 36 204 161 27 Manufacturing 22 122 98 24 Logistics 14 82 63 30 Corporate ‐ 1 1 ‐ South Africa 94 530 449 18 International (Rest of Africa and UK) 6 36 17 112 UK
Slide 51: Segmental Analysis - Operating Margin
SEGMENTAL ANALYSIS % F 2014 F 2013 Operating margin Franchising and development – Domestic 60.4 60.1 Supply Chain 9.5 8.4 Manufacturing 13.1 13.6 Logistics 4.0 3.5 Corporate South Africa 19.7 18.7 International (Rest of Africa and UK) 25.3 15.0 UK 14.0 6.5 Rest of Africa 46.1 34.8 Group 20.0 18.5 52
Slide 52: Productivity and Margin Ratios
PRODUCTIVITY AND MARGIN RATIOS % 50 42.5 43.3 42.8 41.8 43.4 45 40.7 40 35 30 23.8 24.2 24.2 23.7 23.3 23.4 25 20 15 18.3 19.1 19.1 18.5 20.0 16.9 10 5 0 2009 2010 2011 2012 2013 2014 Gross Profit Margin (%) Expense to Turnover (%) Operating Margin (%) 53
Slide 53: Ratios
RATIOS Debt/ NAV Equity % 14 45.8 50 12.4 12 40 10.2 10 27.5 8.7 30 8 7.4 6.2 20 6 5.2 14.3 9.7 8.1 10 4 (2.1) 2 0 0 ‐10 2009 2010 2011 2012 2013 2014 Net asset value per share (R) Debt/Equity (%) 54
Slide 54: Strategy and Prospects
famous brands youre m goad company
Slide 55: Building Group Capability
BUILDING GROUP CAPABILITY • Cautiously embark on Product Platform Expansion Strategy • Continue to show gains as a function of Fit 4 Purpose model • Closer to the customer • Closer to the consumer • Progress BBBEE initiative • Progress Executive management succession • Progress Board transformation
Slide 56: Board Changes
BOARD CHANGES Appointment of Ms Santie Botha as Independent Chairman Retirement of Mr Peter Halamandaris as Non Executive Chairman (retained as Non Executive Director) Appointment of Mr Chris Boulle as Non Executive Director Retirement of Mr Hymie Levin as Non Executive Director Appointment of Mr Kh
Slide 57: Building Brand Capability
BUILDING BRAND CAPABILITY • Build momentum ‐ first‐to‐market in Rest of Africa • Continue with repair, consolidation and growth strategy for Mr. Bigg’s Nigeria • Find solutions for entry into Ghana and Angola • Position FB UK as a beachhead for “global” growth • Complete integration of Wakaberry and
Slide 58: Building Logistics Capability
BUILDING LOGISTICS CAPABILITY • Conclude Midrand capacity project which includes: • Potential to take‐back frozen distribution in Gauteng • Option of new distribution centre in Polokwane • Implementation of Demand Replenishment Planning (DRP) across total business • National roll‐out of FLO (distrib
Slide 59: Building Manufacturing Capability
BUILDING MANUFACTURING CAPABILITY • Expand Coffee Company range • Take‐on of frozen yoghurt product manufacture for Wakaberry • Take‐on of KZN bakery business at Midrand, currently outsourced • Conclude commercial case for commissioning of: • Serviette manufacture • Milky Lane retail offering • Ramp
Slide 60: Prospects
PROSPECTS • Mainstream middle income consumers will remain “stressed” • Competitive climate will remain fierce ‐ “battle” for market share • Increase in non‐traditional competitors in food service space / landscape • Race to be first‐to‐market in Rest of Africa will intensify • Value and quality wil
Slide 61: Famous Brands - You're in Good Company
FAMOUS BRANDS – YOU’RE IN GOOD COMPANY • Continue to exploit runway which the Food Service landscape presents by way of: • Acquisitive growth – “best in class” franchised brands • Organic growth – like‐on‐like turnover • Numeric growth – new restaurant openings • Downstream growth – expansion of log
Slide 62: Results Presentation for the year ended February 2014
Results Presentation for the year ended 28 February 2014
Slide 63: Industry Trends Drivers
INDUSTRY TRENDS DRIVERS famous | brands youre in good company
Slide 64: Technology
TECHNOLOGY • Consumers are always “on” and always engaging • Local retailers are adopting online loyalty and value programmes to help gain and retain share of wallet 65
Slide 65: Day Parts
DAY PARTS • Introduction of new day parts and blurring of occasions • Meal times moving away from the traditional 3 square meals a day, to eating “on the fly” 66
Slide 66: Premiumisation
PREMIUMISATION • The overall market has shifted into “premiumisation” • Mainstream brands are starting to shift into more premium “gourmet” type products 67
Slide 67: Value for Money
VALUE FOR MONEY • Value for money has been redefined since the start of the recession in 2008 • Value is about delivering against the need for best quality products, big portions and good service, not just price 68
Slide 68: QSR Market Usage
QSR MARKET USAGE • 62.5% of all South Africans aged 15+ visit QSR/CD outlets at least once a month or more • Visits have increased by 13% in the past 4 years 62.5% 61.2% 58.6% 55.7% 2010 2011 2012 2013 Source: Stats SA Food & Beverage Statistical Release 69
Slide 69: The Category in Review
AMPS J‐J 2009 2 200 AMPS J‐J 2010 2 438 Source: AMPS 2009‐2013 AMPS J‐J 2011 2 632 000s AMPS J‐J 2012 2 757 AMPS J‐J 2013 2 889 MORE PEOPLE… AMPS J‐J 2009 38.8 40.7 AMPS J‐J 2010 40.2 42.3 Weekly AMPS J‐J 2011 35.8 46.8 AMPS J‐J 2012 34.9 43.2 Monthly VISITING LESS… AMPS J‐J 2013 36.1 44.2 AMPS J‐J
Slide 70: QSR Category Market Penetration Trends
QSR CATEGORY MARKET PENETRATION TRENDS 2010 2011 2012 2013 11.3% 70 60 58.0 59.0 59.1 53.1 50 40 8.2% 30 15.3% 19.6 21.1 20.8 21.2 20 14.9 15.1 62.2% 13.1 14.6 10 6.6 7.3 4.5 5.6 0 Chicken Burgers Pizza Fish Source: AMPS 2010 ‐2013 71
Slide 71: Understanding Consumers in the Many Africas
UNDERSTANDING CONSUMERS IN THE MANY AFRICAS
Slide 72: African consumers are eager to spend
“African consumers are eager to spend, buying makes them happy” Source: BCG’s 2013 Africa Consumer Sentiment Survey 73
Slide 73: Power and Promise of Brands
POWER AND PROMISE OF BRANDS “Brands are powerful in Africa, but favourites vary by country and age group. A one‐size‐fits‐all approach won’t work on this diverse continent. According to our survey, almost 70 percent of Africans feel that brands represent who they are, validate and communicate their
Slide 74: Percentage of Consumers Willing to Increase Spending
PERCENTAGE OF CONSUMERS WILLING TO INCREASE SPENDING OVER THE NEXT YEAR South Algeria Angola Egypt Ghana Kenya Morocco Nigeria TOTAL Africa Take‐out meals, restaurants ‐30 ‐21 ‐17 ‐7 3 ‐21 ‐2 26 ‐6 Breakfast cereals, foods ‐10 ‐4 2 20 36 ‐1 21 32 16 Packaged foods ‐22 ‐4 ‐1 2 15 ‐2 24 30 8 Coffee, t
Slide 75: Percentage of Buyers Willing to Trade Up
PERCENTAGE OF BUYERS WILLING TO TRADE UP IN SPECIFIC CATEGORIES South Algeria Angola Egypt Ghana Kenya Morocco Nigeria TOTAL Africa Take‐out meals, restaurants 32 17 12 33 31 23 29 32 27 Breakfast cereals, foods 31 22 33 33 46 19 34 32 32 Wine 45 20 20 18 47 33 28 34 28 Packaged foods 29 14 30 21 32
Slide 76: Supplementary Information
SUPPLEMENTARY INFORMATION
Slide 77: Operating Profit - Domestic Franchising
OPERATING PROFIT – DOMESTIC FRANCHISING Rm % 350 62.5 64 62.0 300 60.9 60.1 60.4 62 60.2 60 250 58 200 56 150 325 265 287 54 235 100 186 204 52 50 50 0 48 2009 2010 2011 2012 2013* 2014* Operating Profit (Rm) Operating Margin (%) *This item includes Development division 78
Slide 78: Operating Profit - Supply Chain
OPERATING PROFIT – SUPPLY CHAIN Rm % 250 9.5 10 8.4 8.7 8.4 9 7.8 200 8 7 5.7 150 6 5 100 204 4 161 3 141 50 116 2 94 61 1 0 0 2009 2010 2011 2012 2013 2014 Operating Profit (Rm) Operating Margin (%) 79
Slide 79: Operating Margins - Supply Chain
OPERATING MARGINS – SUPPLY CHAIN % 18 15.3 15.3 16 13.6 13.1 14 11.8 12 9.6 10 8 6 4.0 3.0 3.0 3.5 3.5 4 2.4 2 0 2009 2010 2011 2012 2013 2014 Manufacturing Logistics 80
Slide 80: Ratios
RATIOS % Times 50 44.5 46.1 4.0 42.5 43.6 45 37.4 38.2 3.5 40 35 3.0 36.1 35.7 34.5 35.9 36.0 30 33.4 2.3 2.4 2.3 25 2.2 2.2 2.5 2.1 20 15 2.0 2.1 10 1.8 1.5 5 1.6 1.4 1.4 1.4 0 1.0 2009 2010 2011 2012 2013 2014 RONA (%) ROE (%) Net Asset Turn (times) Dividend Cover (times) 81
Slide 81: Shareholder Analysis February 2014
SHAREHOLDER ANALYSIS FEBRUARY 2014 82
Slide 82: Board of Directors
BOARD OF DIRECTORS John Halamandres Theofanis Halamandaris Periklis Halamandaris Santie Botha Kevin Hedderwick Panagiotis Halamandaris Bheki Sibiya Darren Hele Norman Richards Christopher Boulle Khumo Shuenyane 83
Slide 83: Contact Information
CONTACT INFORMATION Kevin Hedderwick Group Chief Executive +27 11 651 5812 Norman Richards Group Financial Director +27 11 554 4788 Del‐Maree English Investor Communications +27 83 395 8608 www.famousbrands.co.za 84