Famous Brands’ recovery is starting to sizzle


Famous Brands’ recovery is starting to sizzle


Published Date: 2021-09-14 | Source: INCE|Community | Author: The Finance Ghost

Famous Brands’ recovery is starting to sizzle

Famous Brands is one of the more interesting companies to follow at the moment, with market updates that speak to the realities of operating under varying lockdown levels.

Internationally, quick-service restaurants (like Domino's) did extremely well during lockdowns. People stayed home and ate pizza on the couch. Locally, Famous Brands' takeaway brands like Steers put in a resilient performance during the pandemic, but did not experience the growth that overseas brands enjoyed.

Unfortunately, the full-service restaurants took a hiding. When you can't sell alcohol, it's very difficult to make a meaningful profit in the restaurant game.

Famous Brands has now released a voluntary update for the six months to end-August 2021, which includes the worst of lockdowns in 2020 in the base for comparable purposes.

It's therefore unsurprising to see that Leading brands (the fancy word for Steers, Wimpy, Debonairs and similar businesses in the group) posted like-for-like sales growth of 72%. Signature brands (like Turn 'n Tender) increased like-for-like sales by 149%.

The base effect is far less significant in Rest of Africa and Middle East, with system-wide sales up by approximately 15%. The difference between system-wide sales and like-for-like sales is that the former includes the impact of restaurants opened during the period.

Famous Brands makes much of its money in the supply chain, as the company follows a franchise model. Manufacturing revenue is up 65% and logistics revenue is up 74%.

The division supplying retailers with branded products (like Steers Barbeque Sauce) has grown its sales from R72m in the comparable period to R105m in this period. That's an impressive result, as lockdown was generally a strong period for retail products as people stocked up their pantries. This division doesn't have the "easy base effect" that the restaurant divisions do.

Famous Brands hasn't issued a trading statement for this six-month period, but one could reasonably deduce that a strong profit recovery is on the cards based on these sales numbers.

The company's share price is trading just below R60 vs. around R80 at the start of 2020. Year-to-date, the share price has climbed nearly 25%.


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