Famous Brands Limited · JSE:FBR
Famous Brands — FY2011 Earnings Presentation
68 slides from Famous Brands's earnings presentation, 2011
Slide 1: famous brands
famous | brands You're in good company
Slide 2: Results presentation for the year ended 28 February 2011
Results presentation for the year ended 28 February 2011
Slide 3: Agenda
Agenda Highlights Company overview Operational performance Financial results Strategy and prospects 3
Slide 4: Highlights
Highlights Record turnover and profits - 10th successive year Operating margin improves to 19.1% (2010: 18.3%) Operating profits exceed R350 million - up 16% Strong cash generated by operations - up 13% to R397 million Net borrowing to equity improves to 14% - an all time low Total dividends to shar
Slide 5: Highlights
Highlights Landmark year featuring key acquisitions KEG McGinty’s O’Hagan’s Alignment with Giramundo expansion into leisure Vovo Telo Milky Lane Juicy Lucy 111 new restaurants opened 3 300 new jobs created indirectly Further strides made expanding Supply Chain basket, both manufacturing and distribu
Slide 6: Highlights
Highlights Depth of executive succession continues to improve Feted via numerous trade, industry and consumer awards Successfully leveraged 2010 FIFA World Cup™ event (June turnovers up 23.5% on prior year) 6
Slide 7: Company overview
famous | brands MITED Company overview
Slide 8: Strategic intent
Strategic intent Our business is focused on growth and development of best in class franchised leisure brands supported by a business model which maximises stakeholder value creation 8
Slide 9: Business model
Business model Franchising Franchising Franchising Franchising Division Division Division Division International Domestic Domestic Domestic (Mainstream (Developing (Theatre of Brands) Brands) Foods) • Wimpy • Steers •Giramundo • tashas • Wimpy • Brazilian Café •Vovo Telo • Debonairs • House of Pizza
Slide 10: Business model
Business model Supply Chain Franchising Franchising Franchising Franchising Procurement Development New Business Manufacturing Logistics Food Services Corporate Division Division Division Division Division Division Division Division Division Division International Domestic Domestic Domestic (Mainstr
Slide 11: Operational Performance: Franchising Division
Operational Performance Franchising Division
Slide 12: System-wide sales growth
System-wide sales growth Average = 12.3% 80% 70,2% 68,2% 70% 60% 50% 46,6% 40% 30% 18,7% 20% 15,4% 13,5% 14,1% 12,5% 10,0% 10,5% 10% 4,8% 0% Steers Wimpy KEG MMcGinty's Debonairs Pizza Mugg & Bean Brazilian Vovo Telo FishAways tashas O'Hagan's cGinty’s 12
Slide 13: Like-on-like sales growth
Like-on-like sales growth Average = 6.9% 35% 32,4% 30% 25% 21,6% 20% 15% 12,5% 11,6% 10% 8,5% 6,5% 4,6% 4,7% 4,8% 5% 3,9% 0% Wimpy FishAways KEG McGinty's Debonairs Pizza Mugg & Bean Brazilian tashas O'Hagan's Steers McGinty’s 13
Slide 14: New restaurants opened
0 5 10 15 20 25 30 35 19 Steers Total = 111 12 Wimpy 3 Wimpy UK 31 Debonairs Pizza 8 FishAways 13 Brazilian Café 3 tashas 18 Mugg & Bean 4 Giramundo New restaurants opened 14
Slide 15: Size of network
0 100 200 300 400 500 600 Steers 525 Wimpy 506 Wimpy UK Total = 1 861 131 Debonairs Pizza 327 FishAways 114 17 House of Coffes 50 Brazilian Café 7 tashas Mugg & Bean 113 9 Blacksteer 28 KEG 5 McGinty's M cGinty’s 22 O'Hagan's 4 Giramundo 3 Vovo Telo Size of network 15
Slide 16: Geographical network
Geographical network South Africa 1 608 Africa 122 Botswana 18 Ivory Coast 4 Kenya 12 Lesotho 3 Malawi 4 Mauritius 17 UAE Mozambique 3 Namibia 22 Sudan Nigeria Nigeria 2 Ivory Coast Sudan 4 Uganda Swaziland 6 Kenya Tanzania 3 Tanzania UAE 1 Malawi Zambia Uganda 1 Zimbabwe Botswana Zambia 12 Namibia
Slide 17: Highlights: Domestic mainstream brands
Highlights Domestic – mainstream brands Get Real value burger range a key growth driver Leadership position in burger category retained, recognised as ‘best burger’ and ‘best chips’ 15th and 13th consecutive years respectively by Leisure Options New look trading format, overhaul of existing iconogra
Slide 18: Highlights: Domestic mainstream brands
Highlights Domestic – mainstream brands V8 revamp programme continues to gain traction Encouraging growth in usage by emerged market - key component of Wimpy strategy Leadership position in casual quick service dining category retained, awarded ‘best breakfast’ by Leisure Options and 2nd placed ‘coo
Slide 19: Highlights: Domestic mainstream brands
Highlights Domestic – mainstream brands Remains at the forefront of pizza consumption per capita a growth amongst emerged market Product, technology and trading format innovation an industry best practice Opened 300th milestone restaurant and first in SA pizza drive thru trading format Leadership po
Slide 20: Highlights: Domestic mainstream brands
Highlights Domestic – mainstream brands Record turnovers achieved during World Cup Mugg & Bean ‘Mini’ trading format successfully pioneered with Total petroleum company and set for aggressive roll out Mugg & Bean ‘Metro’ trading format set to launch later this year Plan to open 24 new restaurants in
Slide 21: Highlights: Domestic mainstream brands
Highlights Domestic – mainstream brands Greater consumer awareness generated via profile building television commercial Increased and aggressive competitor activity, new entrant, in this segment augurs well for growth of category per se 10 new restaurants planned for 2011 21
Slide 22: Highlights: Pub & Restaurant Division
Highlights Domestic – mainstream brands Pub & Restaurant Division All three brands have performed at acceptable levels since acquisition Strategic review of category and own brands concluded Complete overhaul of KEG brand concluded and ready to take to market (Group’s premium restaurant & pub brand)
Slide 23: Highlights: Domestic developing brands
Highlights Domestic – developing brands Four low profile Giramundo test sites have performed favourably Confidence remains high re ability to develop into mainstream flame grilled peri-peri chicken challenger brand Brazilian Café brand, a Shell petroleum forecourt offering, continues to gain tractio
Slide 24: Highlights: Theatre of foods brands
Highlights Domestic – Theatre of foods brands tashas’ remarkable performance continues and maiden entries into KZN and Western Cape markets concluded Vovo Telo brand “readiness for franchising” completed. Six new restaurants planned for 2011 combination of Grande (sit down) and Petite (take away) 24
Slide 25: Highlights: International
Highlights International Trading conditions in the UK amongst most difficult in past decade Limited disposable income further restrained by increase in VAT to 20% Loss making company stores exited Business right sized and operating margin improved to 11.3% (2010:10.1%) Revamp programme continuing an
Slide 26: Operational Performance: Manufacturing Division
Operational Performance Manufacturing Division
Slide 27: Manufacturing gross revenue % growth
Gross revenue % growth Manufacturing Growth = 6% 20% 15% 13,6% 14,0% 10% 5,2% 5,6% 5% 1,8% 0% -5% -3,9% -10% -10,6% -15% Bakery Meat Plant Sauce & Spice Ice-cream Fruit Juice WCP Meat WCP Bakery Plant 27
Slide 28: Highlights: Manufacturing
Highlights Manufacturing Achieved best ever operating margin of 11.7% (2010: 9.7%) Expansion of in house manufactured basket of products continued i.e. seasoning salt, sachets, sugar tubes, soft service and Wimpy buns Consolidation of Western Cape Manufacturing and Logistics under one roof concluded
Slide 29: Operational Performance: Logistics Division
Operational Performance Logistics Division
Slide 30: Logistics gross revenue % growth
Gross revenue % growth Logistics 50% Growth = 14% 45% 43,9% 40% 35% 29,7% 30% 25% 20% 14,6% 15% 12,5% 10% 7,4% 5% 0% Midrand, Kwazulu Natal Eastern Cape Orange Free State Western Cape Johannesburg 30
Slide 31: Highlights: Logistics
Highlights Logistics Best practice operating margin of 3% maintained All distribution centres except Midrand now have multi temperature capability Take on of Mugg & Bean refrigerated basket in Eastern Cape, Orange Free State, and KwaZulu Natal completed Take on of Wimpy refrigerated basket in Wester
Slide 32: Financial Performance
famous | brands Financial Performance
Slide 33: Salient Features
Salient Features 2011 % Change Revenue (Rm) 1 878 + 11 Operating profit (Rm) 358 + 16 Cash generated by operations (Rm) 397 + 13 Earnings per share (cents) 242 + 20 Headline earnings per share (cents) 242 + 17 Total dividends per share (cents) 155 + 36 Dividend cover (times) 1.56 1.81 (PY) ROE (%) 3
Slide 34: Income Statement
Income Statement Rm 2011 2010 % Change Revenue 1 878 1 685 11 Cost of sales (1 065) (969) Gross profit 813 716 14 Selling and administrative expenses (455) (408) Operating profit before impairment losses 358 308 16 Impairment losses - (4) Net interest paid (15) (21) Profit before tax 343 283 21 Taxa
Slide 35: Revenue
Revenue Compound growth 23% 2000 1800 18 1878 1600 1685 1549 1400 1200 1190 1000 800 872 600 669 400 200 0 2006 2007 2008 2009 2010 2011 35
Slide 36: Operating Profit
Operating Profit 400 19,5% Compound growth 26% 19,1% 19 1 350 19,0% 358 8 18,3% 18.3% 18,5% 300 308 18,0% 250 262 17,3% % 17,5% 200 217 17,0% 16,6% 6,6% 150 16,9% 151 16,5% 100 111 16,0% 50 15,5% 0 15,0% 2006 2007 2008 2009 2010 2011 Operating Profit Operating Margin 36
Slide 37: Segmental Analysis
Segmental Analysis 2011 2010 Change % of Total Rm Rm % Revenue Franchising - Local 21 386 327 18 Supply Chain 74 1 383 1 206 15 International 5 95 138 (31) Corporate 14 14 100 1 878 1 685 11 Operating profit Franchising - Local 66 235 204 15 Supply Chain 32 116 94 24 International 3 11 14 (23) Corpo
Slide 38: Operating Profit: Local Franchising
Operating Profit Local Franchising Compound growth 23% 250 70% 235 5 62,5% 60% 62,0% 60,9% 60,9% 200 204 54,8% 50% 186 49,3% 150 45,3% 3% 40% 142 30% 100 112 82 20% 50 10% 0 0% 2006 2007 2008 2009 2010 2011 Operating Profit Operating Margin % 38
Slide 39: Operating Profit: Supply Chain
Operating Profit Supply Chain Compound growth 38% 140 8,4% 9,0% 8,1% 7,8% 8,0% 120 116 7,0% 100 5,7% 5,6% % 6,0% 94 80 4,7% 7% 5,0% 60 4,0% 61 61 3,0% 40 36 2,0% 20 23 1,0% 0 0,0% 2006 2007 2008 2009 2010 2011 Operating Profit Operating Margin % 39
Slide 40: Operating Margin Percentages: Supply Chain
Operating Margin Percentages Supply Chain 14 11,7 12 9,5 9,7 10 8 7,3 6 4 3,0 3,0 2,4 2,1 2 0 2008 2009 2010 2011 Manufacturing Logistics 40
Slide 41: Operating Margin Percentages by Division
Operating Margin Percentages by Division 70 62,0 62,5 60,9 60 54,8 49,3 50 45,3 40 30 18,3 18,3 19,1 20 16,6 17,3 16,9 10,9 10,1 11,3 9,6 10 8,1 7,8 8,4 4,7 5,6 5,7 0 2006 2007 2008 2009 2010 2011 Local Franchising Group International Franchising Supply Chain 41
Slide 42: Balance Sheet
Balance Sheet Rm 2011 2010 Move Assets Property, plant and equipment 131 115 16 Intangibles 660 613 47 Working capital 77 84 (7) 868 812 56 Funding Equity 709 584 125 Net borrowings 101 160 (59) Deferred liabilities and current tax balances 58 68 (10) 868 812 56 42
Slide 43: Cash Flow
Cash Flow Rm 500 15 Interest 124 450 Tax 400 397 350 Cash from operations 128 300 Dividends 130 250 Cash flow 40 Capital expenditure 200 44 Acquisition 150 130 4 Intangibles 100 66 Borrowings (15) Share capital Opening Closing 50 95 95 86 cash cash 0 Feb 10 Feb 11 43
Slide 44: Ratios
Ratios Return Times 50,0 4,0 45,2 45,0 42,0 42,5 37,4 38,2 40,0 3,5 34,8 35,0 38,0 36,1 36,1 35,7 34,5 30,0 33,4 3,0 25,0 2,8 20,0 2,5 2,5 15,0 2,4 2,2 2,2 2,2 10,0 2,1 2,1 2,1 2,0 5,0 1,8 1,6 0,0 1,5 2006 2007 2008 2009 2010 2011 RONA (%) ROE (%) Div Cover (Times) NA Turn (Times) 44
Slide 45: Ratios
Ratios NAV Debt/Equity % 8,0 50,0 45,8 45,0 7,0 7,4 40,0 6,0 34,2 6,2 35,0 5,0 30,3 5,2 27,5 30,0 4,0 4,3 25,0 3,5 20,0 3,0 14,2 2,8 15,0 2,0 7,0 10,0 1,0 5,0 0,0 0,0 2006 2007 2008 2009 2010 2011 Net Asset Value per share (R) (NAV) Debt/Equity (%) 45
Slide 46: Strategy and Prospects
famous | brands Strategy and Prospects
Slide 47: Strategy
Strategy F2012 a period of consolidation, not to be read as ‘lazy balance sheet’ Embark on leveraging of franchise estate - make the retail space sweat Store within store Re-brand Ramp up presence within captive markets where representation is weak drawing on Developing Brand repertoire flexibility
Slide 48: Strategy
Strategy Conclude overhaul of Milky Lane trading formats and take on supply of soft serve product Drive hard ‘surprise and delight’ strategies for our ‘Gorilla brands’ Steers Wimpy Product, trading format, marketing Debonairs Pizza and technology innovations Mugg & Bean Continue our push into Africa
Slide 49: Strategy
Strategy Open 176 new restaurants, break through 2000 franchised restaurant mark Drive interventions that will deliver improved franchisee profitability Development Division, explore backward integration opportunities New Business Division, leverage size and scale with landlords/ developers Procurem
Slide 50: Strategy
Strategy Proceed with labour saving initiatives within Midrand Meat Processing and Sauce Plants (technology versus labour intensity) Roll out of Owner Driver programme to Western Cape and Midrand Pursue expanding the basket opportunities within Supply Chain - must always be the ‘elephant in the room
Slide 51: Prospects
Prospects Comparable turnovers in real terms without the benefit of the World Cup will remain under pressure Consumer spending expected to be muted But we are going to be bloody busy ! 51
Slide 52: Vision
Vision To embark boldly on a journey which doubles the size of our business by 2013 52
Slide 53: Questions
famous | brands You're in good company Questions
Slide 54: Thank you
famous | brands You're in good company Thank you
Slide 55: Company Background Information
Company Background Information
Slide 56: Exco
Exco Arlene Darren Kevin Pedja Stan Steven Tony Botha Hele Hedderwick Turanjanin Aldridge Dike Stephens Group Human Chief Operating Chief Executive Group Group Financial Managing Managing Resources Officer – Officer Procurement and Director Executive – Executive – Executive Franchising Quality Assur
Slide 57: Current shareholding
Current shareholding Coronation Life Managers Limited Peter Halamandaris 29.3% 27,8% Theofanis Halamandaris Perikles Halamandaris 5,1% John Halamandres 12,0% 6,7% Enderle SA (Pty) Ltd 8,5% 10,6% Others 57
Slide 58: Share Price and Volumes
cents 50 350 650 950 1250 1550 1850 2150 2450 2750 3050 3350 3650 3950 4250 4550 09-Mar-01 09-Jul-01 09-Nov-01 09-Mar-02 09-Jul-02 09-Nov-02 09-Mar-03 09-Jul-03 09-Nov-03 09-Mar-04 09-Jul-04 09-Nov-04 09-Mar-05 09-Jul-05 09-Nov-05 Price 09-Mar-06 09-Jul-06 09-Nov-06 Volume 09-Mar-07 09-Jul-07 09-Nov
Slide 59: Share Price and Market Capitalisation
cents 0 500 1000 1500 2000 2500 3000 3500 4000 4500 09-Mar-01 09-Jul-01 09-Nov-01 09-Mar-02 09-Jul-02 09-Nov-02 09-Mar-03 09-Jul-03 09-Nov-03 09-Mar-04 09-Jul-04 09-Nov-04 09-Mar-05 09-Jul-05 09-Nov-05 Price 09-Mar-06 09-Jul-06 09-Nov-06 09-Mar-07 Market cap 09-Jul-07 09-Nov-07 09-Mar-08 09-Jul-08 0
Slide 60: Job creation
Job creation Past 5 years Administration Bargaining Unit Total Headcount growth +127 +319 +446 Headcount growth trend 46.5% 56.5% 53.2% Turnover growth trend 115% Indirect job creation Average staff complement per Number of employees Total franchise network restaurant “dependent” on Famous Brands 1
Slide 61: Business Model
Business Model Franchising Division International Houses the Group’s offshore intellectual property and brands. This division is responsible for development of the existing Wimpy brand, and will in time be used as a beachhead for the launch of certain of the Group’s other brands in the UK Franchisin
Slide 62: Business Model
Business Model Franchising Division Domestic (Developing Brands) Houses brands that are in a development phase, or are being restructured to compete tactically within clearly defined trade channels. With the exception of Giramundo, the Group has no intention of growing these into typical high street
Slide 63: Divisions
Divisions Procurement Responsible for the procurement and price negotiation of all products that form the basis of individual brand offerings. Also has accountability for quality assurance and compliance with product standards and specifications Development Provides a turnkey service to all of the G
Slide 64: Divisions
Divisions New Business Responsible for the centralised processing and approval of all new franchisee and landlord / developer enquiries. Accountable also for all lease negotiations ensuring optimum rental agreements are negotiated on behalf of our franchise partners Manufacturing Represents a key pa
Slide 65: Divisions
Divisions Logistics Represents the Group’s route-to-market, delivering to the franchise network a complete basket of products required to deliver against brand- specific menus Food Services Responsible for extending the Group’s trademarks into the FMCG retail and wholesale markets Corporate Houses t
Slide 66: Network segmentation
Network segmentation SA only Development type Total Shopping Centre : Major 229 Shopping Centre : 15 000 - 30 000 386 Convenience Centre : Anchor Tenant 278 Petroleum Partnerships 321 Suburban stand alone 347 Captive 47 TOTAL 1 608 66
Slide 67: Petroleum partnerships
Petroleum partnerships Petroleum company Restaurant numbers 8 4 131 90 12 76 TOTAL 321 67
Slide 68: Contact Information
Contact Information Kevin Hedderwick Chief Executive Officer +27 11 651 5812 Stan Aldridge Group Financial Director +27 11 651 5902 Del-Maree English Investor Communications +27 83 395 8608 68