SOUTH AFRICA – Famous Brands reported a 71% increase in headline earnings per share on Monday, as the company continued to build capability and capacity amid its merger and acquisition spree.

However, the company said it would withhold paying dividends until 2018, due to a higher gearing that resulted from its acquisitions.

The owner of Steers and Wimpy saw revenue increase by 23% to R2.451bn and operating profit by 17% for the six months ended 31 August, it said in a statement on Monday.

Famous Brands CEO Darren Hele said the group’s “unwavering focus on consistent improvement and investment in the business continued to deliver rewarding results”.

Famous Brands has been on an acquisition spree this year, which has resulted in the firm withholding dividends until 2018, it said.

There was a net cash outflow from investing activities of R162m on acquiring controlling stakes in Salsa Mexican Grill and Lupa Osteria and the outright purchase of Lamberts Bay Foods Limited.

“Included in this outflow is capital expenditure of R90m incurred on the acquisition of the Cape Concentrate tomato paste facility, investment in IT systems, as well as further enhancing supply chain capabilities,” the group said.

It also noted a derivative gain of R141m on the call option utilised to hedge the purchase price of the Gourmet Burger Kitchen (GBK) Restaurants acquisition.

“In order to achieve our robust growth targets, the group has recently made a number of acquisitions, including its largest ever, the GBK transaction in the UK,” said Hele. 

“In this regard, the group’s gearing is substantially higher than in prior years, and the board has therefore resolved that no interim dividend will be declared for the review period.”  

“The board will closely monitor the group’s operating requirements as well as future strategic acquisitions to determine future dividend payments,” he said.

“It is anticipated that, subject to future acquisitions, payment of dividends will resume in the 2018 financial year.”

October 28, 2016;