SOUTH AFRICA – South African restaurant franchisor, Famous Brands has reported a 121% rise in half-year earnings, to 215 cents for the period to end August from 97 cents a year earlier.

The group’s improved financial performance was mainly driven by increased revenue across the business, with total revenue having increased by 19% to R3.5 billion (US$190.6m), while operating profit increased by 77% to R393-million.

Its Leading Brands’ revenue was up 25% to R431 million (US$23.4m), while Signature Brands’ revenue improved by 68% to R103million (US$5.6m).

Meanwhile, growth of the home delivery channel slowed as consumers returned to sit-down and take-away orders, adding that casual dining restaurants experienced a strong recovery as consumers spent more time in restaurants.

South Africa’s hospitality industry had been one of the hardest hit by various restrictions imposed from 2020 to early last year to curb the spread of the coronavirus, including the closure of all restaurants and no alcohol sales.

To this end, the company has benefited from the lifting of Covid-19 restrictions, with consumers now returning to restaurants, resume travel and attend sporting events. This has supported improved restaurant turnovers and restaurant marketing spend.

There have also been more tourists arriving in South Africa, propping up its revenues from the market by 31% to R534m (US$29m) attributable to “higher royalty payments” on the back of the recovery in restaurant turnovers.

In the rest of Africa market, Famous Brands’ trading activity returned to pre-pandemic levels, with sales increasing by 42%.

Regional market revenues also firmed up by 22% to R205m (US$11.17m) for the interim period to August 2022, while operating profit at R11m (US$600,000) was higher compared to R8m (US$440,000) for the previous contrasting period.

In the UK, which has been rocked by elevated inflation, Famous Brands saw its Wimpy restaurants experience “a drop-off in home delivery sales”, although in-store sales “did not decline” by the same margin.

The unit slumped to a loss of R20m (US$1.09m) in terms of operating profit after factoring in the impact of a R31m (US$1.69m) impairment.

“These results demonstrate a continued revenue recovery and the successful management of our cost base. This performance is gratifying considering a difficult operating environment with fierce competition and consumers facing increased financial pressures,” said CEO Darren Hele in a statement accompanying the results.

To strengthen its financial position, Famous Brands also reduced its debt obligations, repaying about R150m of its primary borrowings.

This has left it with R1 billion (US$54.4m) in total interest-bearing debt compared to R1.3 billion (US$70m) as at the end of the same period last year.

Despite the recovery attained, consumers’ spending was hampered by less disposable income due to an inflationary environment, it added.

Famous Brands, like many restaurants, had to increase menu prices in line with food inflation trends due to higher input costs, such as fuel and food. More hikes are anticipated for the remainder of the year, it said.

“We will develop menus which offer and provide good quality at a cost that consumers perceive as good value. Famous Brands will continue to invest in delivery technology to enhance our last mile efficiency for own delivery,” highlighted the company

Even as economies battle rising inflation, and economic uncertainty, Famous Brands is striking an optimistic note for trade at its quick-service dining, takeaway and restaurant businesses as it heads into the traditionally lucrative festive period with a combination of the upcoming Soccer World Cup in Qatar and Black Friday specials.

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