Despite economic constraints and restrained consumer spending, Famous Brands, who are responsible for franchises such as Mugg & Bean, Steers and Debonairs Pizza, experienced an increase in revenue, for the six month period ended August 2015.
Famous Brands has also been involved in projects which aim “to integrate new high-volume low-margin business into its manufacturing and logistics operations.” This also proved a challenge to the business, being more difficult than originally expected.
Kevin Hedderwick, Group chief executive noted: “[This] pleasing top line turnover growth failed to translate into corresponding growth in operating profit, largely due to the sub-optimal integration of the new supply chain projects into the business. In addition, the final phase of the Group’s Fit-4-Purpose initiative, a programme aimed at bringing the business closer to its customers (franchisees) and consumers, incurred further costs. This investment has now been concluded and the resulting structure will play a significant role in building capacity and capability for the Group’s ongoing growth.”
The results
According to the business, revenue increased by 27% to R1.998 billion. Operating profit increased by 14% to R347 million, while operating margin decreased by 17.4%. This was as a result of margin erosion within the logistics business, according to Famous Brands.
Famous Brands has operations in South Africa, Africa, and the United Kingdom and the Middle East. In South Africa, Hedderwick highlighted that all of the Group’s brands, during the six months under review, experienced good growth. “System-wide sales, including new restaurants, grew 9.1% and same store sales increased 5.2%.”
In the past six months, 64 new restaurants have been opened in the local market, with plans to open a further 116 restaurants in the next six months.
The local market
“Mugg & Bean delivered a standout performance during the period, recording robust double digit growth. This brand continues to demonstrate extreme resilience as well as strong long-term growth potential, not only in South Africa but across the Rest of Africa as well. We are confident that Mugg & Bean, together with the Group’s other bouquet of niche coffee-related brands, will withstand competition from new global entrants,” revealed Hedderwick.
Furthermore, Debonairs Pizza also reported good performance numbers, with both organic and numeric growth. This is despite the introduction of new players into the pizza market within the last year, such as Dominos and Pizza Hut.
“As predicted by management, the much-publicised arrival of new participants in the pizza category has done nothing to slow down the performance of this brand, and in contrast, has served to grow the category, a development which Debonairs Pizza continues to benefit from,” said Hedderwick.
In addition, Hedderwick pointed out that some of the Group’s brands have undergone revamps. This includes Steers, which has seen a change to their brand’s creative platform, menu and promotional offering.
According to Hedderwick, “in the period since this intervention was implemented, strong growth has been reported [by Steers].”
Hedderwick highlighted: “We are resolute in our pursuit of growth strategies outlined at the start of the year, and despite the current challenges, remain focused on capitalising on the opportunities presented.”