Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Famous Brands Ltd (FMBRY, Financial) achieved a level one, triple B contributor status, up from level two, indicating improved performance and contribution to South African society.
- The company reported a 9.5% increase in headline earnings per share, driven by a reduction in finance costs and debt capital repayment.
- Famous Brands Ltd (FMBRY) is on track to open 89 new restaurants in the second half of the year, indicating strong growth potential.
- The company has seen positive momentum in September and October trading, suggesting a recovery from the challenging first half.
- Famous Brands Ltd (FMBRY) has a healthy balance sheet with sufficient liquidity and flexibility to fund business operations, supported by undrawn credit facilities.
Negative Points
- The company faced a challenging trading environment in the first half of the year, particularly in Q1, due to pre-election uncertainty and severe load shedding.
- Signature Brands underperformed, with closures in South Africa and cost pressures impacting performance.
- The retail revenue was below expectations due to a significant decline in demand for potato chips, affected by increased competition and imports.
- Manufacturing volumes were down, while logistics volumes increased, indicating a disconnect in the supply chain.
- The coffee sector is considered over-traded, similar to the craft beer market a decade ago, posing challenges for players in this segment.
Q & A Highlights
Q: Anthony Clark from Small Daily Talk Research asked about the increased pull-through of chicken products and whether consumers are opting for cheaper chicken over beef patties.
A: Darren Hele, CEO, confirmed an increased interest in chicken, attributing it to consumer preference rather than a direct trade-off from beef due to cost. He noted a growing interest in both fried and grilled chicken, but not necessarily a shift from beef due to pricing.
Q: Nompilo Goba from Business Day inquired about the period and reasons for restaurant closures mentioned in the presentation.
A: Darren Hele explained that the closures occurred during the six-month period under review, primarily due to demographic changes and challenging trading precincts, rather than losing to competitors.
Q: Matthew James from Laurium Capital asked about the differences in sales between Q1 and Q2 and the impact of post-election trading.
A: Darren Hele noted that Q1 was particularly tough due to pre-election uncertainty and seasonal timing issues. He mentioned that September showed positive momentum, and October was building on that trend.
Q: Peter Cumbrek from Measure Market asked about the preferred structure for refinancing debt maturing in August 2025.
A: Nelisiwe Shiluvana, Group Financial Director, stated that they are in early discussions about the refinancing structure, emphasizing the need for flexibility to support strategic goals while maintaining healthy leverage and gearing.
Q: Ian from Ergo asked about the role of dark kitchens in the strategy, given the shift towards digital platforms.
A: Darren Hele acknowledged that dark kitchens are part of their offering, especially in markets like Dubai. However, he noted that the margin benefit is more significant for franchisees than for the franchisor, and the market for dark kitchens is stable rather than growing rapidly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
