Results Presentation - Famous Brands · BRAND HIGHLIGHTS • Growing interest from landlords, investors and consumers • Opening of reformatted design in Umhlanga – maiden entry

Results Presentationfor the year ended 28 February 2014

AGENDA

2

• Performance highlights

• Building capability

• Financial results

• Strategy and Prospects

• 20th Anniversary highlights

– Brands– Logistics– Manufacturing

– Group

PERFORMANCE HIGHLIGHTS

4


Strong resultsNotwithstanding stressed middle income consumer– evident during second halfof the year

5


13thconsecutive year

of recordturnover and

profits

6


20%best ever,

Operating margin

achieved1 year ahead

of plan

7


20%increased

Headline earnings per share

8


300to shareholders

Total dividends

cents per share

20%up

9


R100breaksShare price

through

mark

10


R10bnexceeds

Market capitalisation

highest ever

11


(2.1)%lowest ever

Debt toequity ratio

12


49%Concluded

acquisition ofMr Bigg’s business

in Nigeria

13


CommissionedCoega Cheese manufacturing

plant inCoega

Development Zone

14


Opened

165 restaurants and

revamped

185

15


exceeds

restaurant mark

150

16


AwardedKruger National Park tender

17


Launched

in London

18


Launched

in Mumbai

19


Implementation of

Fit 4 PurposeBusiness transformation

model concluded• Closer to customer• Closer to consumer

20


Awarded3rdplace in

Financial Mail’s Top Companies

Awards

21


Awarded5th place and

Royal Company status in

Business TimesTop 100 Companies Survey

23

20TH ANNIVERSARY SINCE LISTING

24

20 YEAR PERFORMANCE HIGHLIGHTS

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

2014 1995Compound Growth %

BUILDING CAPABILITY

26

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 Franchisinginto Leisure market

BUILDING BRAND CAPABILITY

BRAND Repertoire

27

SYSTEM–WIDE SALES GROWTH

28

11.4%

Domestic

32.5%

Rest of Africa

13.0%

Total

LIKE‐ON‐LIKE GROWTH

29

5.8%

17.9%

6.7%

Domestic Rest of Africa Total

30

NEW RESTAURANTS OPENED

Total 165

Emergingbrands

22 20

45

28

14

36

31

FRANCHISE NETWORK

Total 2 378

551

621

446

167 154 171

72 60

136

Emergingbrands

32

TRADING FOOTPRINT

South Africa 1 935Rest of Africa 347

94 UK

179 Nigeria

4 Ivory Coast

30 Zambia

28 Botswana

35 Namibia

1 935 South Africa

3 DRC

Mozambique 2

Swaziland 7Zimbabwe 9

Mauritius 25

Tanzania 3Malawi 4

Kenya 10Sudan 5

India 2

Dubai 3

United Kingdom 94India 2

BRAND HIGHLIGHTS

33

• Despite slow down of casual dining category recorded a 7% growth in customer count

• Growing interest for the brand occurring in Rest of Africa

• Growth has been contained ‐ a function of aggressivecompetitive 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 incustomer count

• Growth in Rest of Africa continues to surge recording like‐on‐like turnovers of 26.3%

BRAND HIGHLIGHTS

• Growing interest from landlords, investors and consumers• Opening of reformatted design in Umhlanga – maiden entry into KZN

• 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 operating practises being implementedacross the business

• Proof that those who have money continue to spend it– 20% like‐on‐like growth versus prior year

• Dubai opening imminent – 1st international restaurant34

BRAND HIGHLIGHTS

35

• 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 concluded and conversion of non‐Keg sites toBrewers Guild continuing

• Roll‐out across Netcare group progressing well with 7 conversions concluded this year

36

BRAND RATIONALISATION

• Robust re–evaluation of existing brand repertoire remainsa 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 profitability of aboveis negligible

BUILDING LOGISTICS CAPABILITY

Midrand

Nelspruit

Bloemfontein

CapeTown Port Elizabeth

Pinetown

37

Total 11.5%

38

REVENUE GROWTH ‐ LOGISTICS

Mpumalanga

10.7% 10.4% 11.3% 10.5%12.6%

19.8%

Free StateEastern CapeWestern CapeKwa‐Zulu NatalGauteng

39

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 Eastern Cape distribution centre toCoega Development Zone

• Achieved best‐ever operating margin of 4%

BUILDING MANUFACTURING CAPABILITY

EasternCape

Midrand/Cape Town

Midrand/Cape Town

Midrand Baynesfield Centurion/Pinetown

SunderlandRidge

40

CoffeeFruit JuiceIce CreamSauce and Spice

BakeryMeat Processing

Total 29.6%

41

REVENUE GROWTH ‐MANUFACTURING

9.1% 6.3%13.8% 10.1% 5.9%

121.9%

42

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 sauce products into Sauce andSpice Plant

• Integration of various speciality breads into FBGBC• Integration of Steers brand business into FBCMC

• Operating margin declined to 13.1% a function of deliberate margin absorption

FINANCIAL RESULTS

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)

Dividend cover (times) 1.4 1.4 (py)

Return on equity (%) 36 36 (py)

44

SALIENT FEATURES

F 2014 % changeRm

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 23

Taxation (162) (131) 24

Profit for the year 406 331 2245

INCOME STATEMENT

F 2013 % changeF 2014Rm

15491685

18782156

2516

2826

0

500

1000

1500

2000

2500

3000

2009 2010 2011 2012 2013 2014

46

REVENUE

Rm

262 308358

413466

56616.9

18.3

19.1 19.118.5

20.0

15

16

17

18

19

20

21

0

100

200

300

400

500

600

2009 2010 2011 2012 2013 2014

47

OPERATING PROFIT

%Rm

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 current tax balances 48 48 ‐

1 257 1 129 128

48

STATEMENT OF FINANCIAL POSITION

F 2013 MoveF 2014Rm

85 910

100

200

300

400

500

600

700

800

Opening cash Closing cash49

CASH FLOW

594Cash from operations

167Tax

271Dividends

112

3 Interest

35

Rm

Funding raised (net)

Capex (net)

RevenueFranchising and development – Domestic 19 538 477 13Supply Chain 76 2 145 1 919 12Manufacturing 33 927 715 30Logistics 72 2 021 1 812 12

Corporate ‐ 1 1 ‐South Africa 95 2 684 2 397 12International (Rest of Africa and UK) 5 142 119 19UK 3 92 83 11Rest of Africa 2 50 36 39

100 2 826 2 516 12

50

SEGMENTAL ANALYSIS

F 2013 % changeF 2014% of totalRm

Operating Profit Franchising and development – Domestic 58 325 287 13Supply Chain 36 204 161 27Manufacturing 22 122 98 24Logistics 14 82 63 30

Corporate ‐ 1 1 ‐South Africa 94 530 449 18International (Rest of Africa and UK) 6 36 17 112UK 2 13 5 160Rest of Africa 4 23 12 92

100 566 466 21

51

SEGMENTAL ANALYSIS

F 2013 % changeF 2014% of totalRm

Operating marginFranchising and development – Domestic 60.4 60.1Supply Chain 9.5 8.4Manufacturing 13.1 13.6Logistics 4.0 3.5

CorporateSouth Africa 19.7 18.7International (Rest of Africa and UK) 25.3 15.0UK 14.0 6.5Rest of Africa 46.1 34.8

Group 20.0 18.5

52

SEGMENTAL ANALYSIS

F 2013F 2014%

40.7 42.5 43.3 42.8 41.8 43.4

23.8 24.2 24.2 23.7 23.3 23.4

16.918.3 19.1 19.1 18.5 20.0

05

101520253035404550

2009 2010 2011 2012 2013 2014

Gross Profit Margin (%) Expense to Turnover (%) Operating Margin (%)

53

PRODUCTIVITY AND MARGIN RATIOS

%

5.26.2

7.48.7

10.2

12.445.8

27.5

14.39.7 8.1

(2.1)

‐10

0

10

20

30

40

50

0

2

4

6

8

10

12

14

2009 2010 2011 2012 2013 2014

Net asset value per share (R) Debt/Equity (%)

54

RATIOS

Debt/Equity %NAV

STRATEGY AND PROSPECTS

56

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

57

BOARD CHANGES

Retirement ofMr Peter Halamandaris as Non Executive Chairman (retained as Non Executive Director)

Retirement ofMr Hymie Levin asNon Executive Director

Appointment ofMs Santie Botha as Independent Chairman

Appointment ofMr Chris Boulle asNon Executive Director

Appointment ofMr Khumo Shuenyaneas IndependentNon Executive Director

58

BUILDING BRAND CAPABILITY

• Build momentum ‐ first‐to‐market in Rest of Africa

• Continue with repair, consolidation and growth strategy forMr. 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 expand national footprint

• Conclude and take to market re‐engineered Wimpy brand

• Conclude and take to market repositioned Steers brand

• Continue to exploit Debonairs Pizza per capita consumption growthin parallel with chicken category

• Open 300 new restaurants

59

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 (distribution routing andscheduling model)

60

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 up profitability and contribution from Coega Cheese

• Conclude commissioning of pastry manufacturing plant in Lagos

61

PROSPECTS

• Mainstream middle income consumers will remain “stressed”

• Competitive climate will remain fierce ‐ “battle” for market share

• Increase in non‐traditional competitors in food servicespace / landscape

• Race to be first‐to‐market in Rest of Africa will intensify

• Value and quality will remain key drivers of growth

• Marketing will become an ever increasing strategic advantage‐ “chess versus darts”

• Margins will remain under pressure ‐ franchisor and franchisee

62

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 logistics and manufacturing services and products

• Upstream growth – exploring opportunities to expand our retail range

• Cautiously explore opportunities outside the classical food service arena, where we can leverage our core competencies

Results Presentationfor the year ended 28 February 2014

INDUSTRY TRENDS DRIVERS

65

TECHNOLOGY

• Consumers are always “on” andalways engaging

• Local retailers are adopting online loyalty and value programmes to help gain and retain share of wallet

66

DAY PARTS

• Introduction of new day parts and blurringof occasions

•Meal times moving away from the traditional 3 square meals a day, to eating “on the fly”

67

PREMIUMISATION

• The overall market has shifted into “premiumisation”

•Mainstream brands are starting to shift into more premium “gourmet” type products

68

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

69

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

Source: Stats SA Food & Beverage Statistical Release

55.7%

58.6%

61.2%62.5%

2010 2011 2012 2013

70

THE CATEGORY IN REVIEW

Source: AMPS 2009‐2013

2 200

2 438

2 632

2 757

2 889

AMPS

J‐J 2

009

AMPS

J‐J 2

010

AMPS

J‐J 2

011

AMPS

J‐J 2

012

AMPS

J‐J 2

013

000s30

.0

28.0

26.5

23.1

18.8

70.0

72.0

73.5 76.9 81.2

AMPS

J‐J 2

009

AMPS

J‐J 2

010

AMPS

J‐J 2

011

AMPS

J‐J 2

012

AMPS

J‐J 2

013

< R50 > R50

38.8

40.2

35.8

34.9

36.1

40.7

42.3 46.8

43.2

44.2

AMPS

J‐J 2

009

AMPS

J‐J 2

010

AMPS

J‐J 2

011

AMPS

J‐J 2

012

AMPS

J‐J 2

013

Weekly Monthly

MORE PEOPLE… VISITING LESS… SPENDING MORE…

71

QSR CATEGORY MARKET PENETRATION TRENDS

Source: AMPS 2010 ‐2013

53.1

19.6

13.1

4.5

58.0

21.1

14.6

5.6

59.0

20.8

14.9

6.6

59.1

21.2

15.1

7.3

0

10

20

30

40

50

60

70

Chicken Burgers Pizza Fish

2010 2011 2012 2013

15.3%8.2%

11.3%

62.2%

UNDERSTANDING CONSUMERS IN THEMANY AFRICAS

73

“African consumers are

eager tospend,

buying makes

them happy”Source: BCG’s 2013 Africa Consumer Sentiment Survey

74

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 personal values, and provide a sense of belonging.”

Source: BCG’s 2013 Africa Consumer Sentiment Survey

75

PERCENTAGE OF CONSUMERS WILLING TO INCREASE SPENDING OVER THE NEXT YEAR

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, tea ‐4 ‐13 ‐5 5 26 ‐3 6 23 6

Wine ‐28 ‐17 ‐27 ‐6 25 ‐21 ‐12 26 0

Snack food ‐18 ‐25 ‐16 ‐17 5 ‐11 2 29 ‐2

Soft drinks, non‐alcoholic beverages ‐15 ‐12 ‐9 ‐14 13 ‐16 ‐7 29 ‐2

Beer ‐26 ‐15 ‐33 ‐11 ‐6 ‐18 ‐18 30 ‐2

Alcoholic beverages ‐22 ‐23 ‐31 ‐17 ‐7 ‐21 ‐22 26 ‐5

Chocolate, candy 6 ‐30 ‐22 ‐27 ‐19 1 ‐7 23 ‐7

Egypt GhanaAngolaAlgeria Nigeria South AfricaMoroccoKenya TOTAL


76

PERCENTAGE OF BUYERS WILLING TO TRADE UP IN SPECIFIC CATEGORIES

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 27 34 33 28

Alcoholic beverages 2 29 12 20 15 27 29 31 31 26

Beer 38 19 12 12 33 36 27 31 26

Coffee, tea 28 15 10 15 34 25 28 28 24

Chocolate, candy 41 14 11 14 19 16 25 28 22

Snack foods 30 14 18 15 25 15 24 29 22

Soft drinks, non‐alcoholic beverages 27 13 8 16 32 16 23 27 21

Egypt GhanaAngolaAlgeria Nigeria South AfricaMoroccoKenya TOTAL


SUPPLEMENTARY INFORMATION

186 204 235 265 287325

62.0 62.560.9 60.2 60.1 60.4

48

50

52

54

56

58

60

62

64

0

50

100

150

200

250

300

350

2009 2010 2011 2012 2013* 2014*

Operating Profit (Rm) Operating Margin (%)

78

OPERATING PROFIT – DOMESTIC FRANCHISING

Rm %

*This item includes Development division

6194 116

141 161204

5.7

7.88.4 8.7 8.4

9.5

012345678910

0

50

100

150

200

250

2009 2010 2011 2012 2013 2014

Operating Profit (Rm) Operating Margin (%)

79

OPERATING PROFIT – SUPPLY CHAIN

Rm %

9.6

11.8

15.3 15.313.6 13.1

2.43.0 3.0 3.5 3.5 4.0

024681012141618

2009 2010 2011 2012 2013 2014

Manufacturing Logistics80

OPERATING MARGINS – SUPPLY CHAIN

%

37.4 38.242.5 44.5 43.6

46.1

33.436.1 35.7 34.5 35.9 36.0

2.2 2.1 2.2 2.3 2.4 2.3

2.11.8

1.61.4 1.4 1.4 1.0

1.5

2.0

2.5

3.0

3.5

4.0

05

101520253035404550

2009 2010 2011 2012 2013 2014

RONA (%) ROE (%) Net Asset Turn (times) Dividend Cover (times)81

RATIOS

Times%

82

SHAREHOLDER ANALYSIS FEBRUARY 2014

Santie Botha

Panagiotis Halamandaris

83

BOARD OF DIRECTORS

Theofanis Halamandaris John Halamandres

Periklis Halamandaris

Kevin HedderwickBheki Sibiya

Darren Hele Norman Richards Khumo ShuenyaneChristopher Boulle

CONTACT INFORMATION

Kevin HedderwickGroup Chief Executive +27 11 651 5812

Norman RichardsGroup Financial Director +27 11 554 4788

Del‐Maree EnglishInvestor Communications +27 83 395 8608

www.famousbrands.co.za

84

Documents

Results Presentation - Famous Brands · BRAND HIGHLIGHTS • Growing interest from landlords, investors and consumers • Opening of reformatted design in Umhlanga – maiden entry