FAMOUS BRANDS LIMITED - Voluntary Performance Update and Trading Statement

Voluntary Performance Update and Trading Statement

FAMOUS BRANDS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1969/004875/06)
Share code: FBR
ISIN code: ZAE000053328
(“Famous Brands” or “the Company” or “the Group”)


VOLUNTARY PERFORMANCE UPDATE AND TRADING STATEMENT

VOLUNTARY PERFORMANCE UPDATE

The Group’s results for the year ended 28 February 2019 will be
published on or about 29 May 2019.

In the interim, it is appropriate to provide shareholders with
a brief voluntary performance update on the business. This
update pertains to the twelve months ended 28 February 2019 for
the Group’s South Africa (“SA”) and rest of Africa and Middle
East (“AME”) regions.    The United Kingdom (“UK”) operation
narrative relates to the Gourmet Burger Kitchen Restaurants
Limited (“GBK”) business for the 52-week period ended 24
February 2019. Collectively this reporting period is referred
to as the “review period”.

During the review period, economic and political uncertainty
persisted across all our markets. Challenging trading conditions
constrained consumer discretionary spend and keen competitor
activity intensified margin pressure. In the SA market,
inconsistent power supply further worsened consumer sentiment
and negatively impacted on the Company’s operations.

BRANDS

The Group’s restaurants trade in three primary markets, SA, AME
and the UK. The brand portfolio is categorised into Leading
(mainstream) and Signature (niche) brands.

SA

While strong organic growth was reported by the Group’s Leading
brands in the first six months of the current financial year,
trading slowed down over the latter six months, with the Group’s
traditional peak holiday period results, specifically, failing
to meet management’s expectations.
In line with recent performance trends, the Group’s Leading
brands delivered solid results. On balance, the Group’s
Signature brands under-performed management’s expectations, and
they remain the subject of critical review.

Across our Leading and Signature brands, combined system-wide
sales* increased 6.0%, while like-for-like sales** grew by 2.5%.
Independently, Leading brands# system-wide sales rose 5.3%, with
like-for-like sales up 2.9%. Signature brands^ system-wide sales
increased 10.7%, while like-for-like sales declined by 0.6%.

AME

Our AME operations continued to deliver a good return on
investments made over recent years, with pleasing performances
reported in the region by Debonairs Pizza, Steers, Wimpy and
Mugg & Bean. System-wide sales rose 5.9% in Rand terms.

GBK UK

During the review period, system-wide sales (Sterling) in the
UK declined by 7.0%, while like-for-like sales decreased by 4.2%
compared to the previous year.

Notwithstanding this decline, management is optimistic that
remedial actions underway are starting to gain momentum,
reflected by the stronger trading results reported for the
second 26 weeks (“H2”) of the review period compared to the
first 26 weeks (“H1”). H1 like-for-like sales were -9.7% while
H2 sales were +1.6%.

Furthermore, in the 16 weeks to 24 February 2019, GBK traded
ahead of the market, reporting an increase in like-for-like
sales of 4.0%.

On 11 December 2018, the Group notified shareholders that the
board of directors of GBK had formally completed a Company
Voluntary Arrangement (“CVA”) aimed at improving the long-term
financial viability and sustainability of the business.

In line with management’s projections at the outset of the
project, the once-off CVA cost is expected to be in the order
of £18.3 million. This includes non-cash store write down costs
totalling £14.4 million, as well as professional fees,
redundancy payments, compensation fund costs and store strip-
out charges, totalling £3.9 million.

Twenty four GBK stores were closed during the period in the UK,
including closures which took place prior to the announcement
of the CVA, as well as those which were part of the CVA close-
out process.

SUPPLY CHAIN: MANUFACTURING AND LOGISTICS

Management’s sustained drive to leverage efficiencies continued
to enhance performance across the operations, but lower sales
and persistently lower food inflation have started to impact on
this division’s volumes and sales.


* System-wide sales refer to sales reported by all restaurants across
the network, including new restaurants opened during the period.

** Like-for-like sales refer to sales reported by all restaurants
across the network, excluding restaurants opened or closed during the
period.

# Leading brands’ sales refer to sales of the Leading brands trading
in SA.

^ Signature brands’ sales refer to SA sales as well as sales cross
border only where the brand is a Joint Venture partnership and the
brand is not managed by its AME management team.


TRADING STATEMENT

The board of directors of Famous Brands (“Board”) does not have
the required degree of certainty to provide details of the
anticipated range expected for earnings per share (“EPS”) for
the year ended 28 February 2019. The Board does however have the
required degree of certainty that EPS will be below those of the
previous year by more than 20%, hence the reason for this trading
statement.

As and when the Board has the required degree of certainty to
provide a further update on this Trading Statement, it will do
so.

The financial information on which this voluntary performance
update and Trading Statement is based has not been reviewed or
reported on by the Group’s external auditors.

11 March 2019
Midrand

Sponsor
The Standard Bank of South Africa Limited





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