RESULTS PRESENTATION for the year ended 28 February 2013
RESULTS PRESENTATIONfor the year ended 28 February 2013
• Performance highlights
• Financial results
• Strategy
• Prospects
• Building capability
- Brands- Logistics
- Group
- Manufacturing
2
PERFORMANCE HIGHLIGHTS
PERFORMANCE HIGHLIGHTS
• Strong results during a period of extreme margin pressure• 12th consecutive year of record turnover and profits• Exceeded four-year vision of doubling the size
of our business • Headline earnings per share increased 23%• Total dividends to shareholders 250 cents per share –
up 25%• Share price exceeds R90• Significant momentum achieved in building brand, logistics
and manufacturing capability • Overall brand performance good - 8.9% like-on-like
turnover growth
4
PERFORMANCE HIGHLIGHTS
• Opened 140 new restaurants and revamped 136• Rest of Africa gains traction - 45% growth in
system-wide sales• Concluded comprehensive Fit 4 Purpose business model
transformation project• Concluded ground breaking sports sponsorship
agreement with Varsity Sports – across six sporting codes
• Awarded 1st place and Overall Winner – Financial MailTop 100 Companies survey
• Awarded 5th place - Sunday Times Business TimesTop 100 Companies Awards
5
BUILDING GROUP CAPABILITY
2 key stakeholders
CONTEXT
• Preparing for another decade of growth
Getting closer to customersGetting closer to consumers
• Separated International business from South Africa• Created six decentralised SA regional centres
of excellence• Centralised all marketing
7
BUSINESS MODEL
International Operations
CorporateManufacturing
Central Office Marketing
SA Operations and Logistics
8
BUILDING BRAND CAPABILITY
SYSTEM–WIDE SALES GROWTH
11.2%
44.7%
13.1%
Domestic Rest ofAfrica
Total
10
LIKE-ON-LIKE SALES GROWTH
7.7%
28.3%
8.9%
Domestic Rest ofAfrica
Total
11
NEW RESTAURANTS OPENED
41
2420
1512
28
05
1015202530354045D
ebon
airs
Pizz
a
Stee
rs
Fish
away
s
Mug
g &
Bea
n
Wim
py
Emer
ging
Bra
nds
Total 140
12
FRANCHISE NETWORK
546 519
404
141 141 110
302
0
100
200
300
400
500
600St
eers
Wim
py
Deb
onai
rsPi
zza
Fish
away
s
Mug
g &
Bea
n
Wim
py U
K
Emer
ging
Bra
nds
Total 2 163
13
TRADING FOOTPRINT
Dubai 3
Kenya 13Tanzania 3
Malawi 4
Mozambique 3Mauritius 28
Swaziland 8Lesotho 3
4 Ivory Coast
8 Nigeria
27 Zambia
28 Botswana
27 Namibia
1 881 South Africa
110 UK
South Africa 1 881Rest of Africa 172United Kingdom 110
8 Zimbabwe
5 Sudan
14
BRAND HIGHLIGHTS
• Aggressive everyday value offering delivers double digit growth
• Solid like-on-like turnover performance –breakfast consumption growth fuelled by new entrants and aggressive pricing
• Trading format strategy continues to open new markets and fuel growth
• Growth in Rest of Africa surges, now accounts for 15.9% of brands total sales
15
BRAND HIGHLIGHTS
• Continues to record both strong organic and numeric growth, a function of increased category activity
• Intellectual property re-engineered
• Readiness for export progressing
• Artisan baking category gaining traction
16
BRAND HIGHLIGHTS
Strategy topursue growth in new markets is
progressing
17
BUILDING LOGISTICS CAPABILITY
GROSS REVENUE % GROWTH - LOGISTICS
23.020.4
15.8
9.5
16.4
Gauteng &Mpumalanga
KwaZulu Natal Western Cape Eastern Cape Free State
Total 19.5
19
LOGISTICS HIGHLIGHTS
• Commissioned Nelspruit logistics centre
• Relocated Bloemfontein logistics centre
• 9% increase in price of diesel and 16.5% increasein electricity tariffs
• Overall margin unchanged at 3.5%, anoutstanding achievement
20
BUILDING MANUFACTURING CAPABILITY
GROSS REVENUE % GROWTH - MANUFACTURING
23.9
-3.3
15.9
42.3
7.2
-12.2
15.1
MeatPlant
Bakery Sauces& Spices
WCP MeatPlant
WCPBakery
FruitJuice
Ice-Cream
Total 24.8*
* Includes Famous Brands Coffee Company acquisition22
MANUFACTURING HIGHLIGHTS
• Strong growth fuelled by soft serve, chicken fillet, beef patty, boerewors and lamb sausage volumes
• 16.5% increase in electricity tariffs and volatile beef prices
• Overall margin declined to 13.6% (15.3%) due to deliberate margin absorption in Meat Processing Plant
23
FINANCIAL RESULTS
SALIENT FEATURES
F 2013%
changeRevenue (Rm) 2 516 17
Operating profit (Rm) 466 13
Cash generated before changes in working capital (Rm) 503 11
Earnings per share (cents) 338 22
Headline earnings per share (cents) 339 22
Total dividends per share (cents) 250 25
Net debt / equity (%) 8 10 (py)
Dividend cover (times) 1.4 1.4 (py)
Return on equity (%) 36 35 (py)
25
INCOME STATEMENT
Rm F 2013 F 2012%
changeRevenue 2 516 2 156 17Cost of sales (1 463) (1 233)Gross profit 1 053 923 14Selling and administrative expenses (587) (510) 15Operating profit 466 413 13Net interest paid (4) (11)Profit before tax 462 402 15Taxation (131) (134)Profit for the year 331 268 24Adjustments (1) (1)Headline earnings 330 267 23Headline earnings per share (cents) 339 278 22Earnings per share (cents) 338 278 22
26
REVENUE (Rm)
1190
15491685
18782156
2516
0
500
1000
1500
2000
2500
3000
2008 2009 2010 2011 2012 2013
27
OPERATING PROFIT
217262
308358
413466
18.3
16.9
18.3
19.1 19.1 18.5
15.5
16.0
16.5
17.0
17.5
18.0
18.5
19.0
19.5
050
100150200250300350400450500
2008 2009 2010 2011 2012 2013
Rm %
28
STATEMENT OF FINANCIAL POSITION
Rm F 2013 F 2012 MoveAssetsProperty, plant and equipment 194 156 38Intangible assets 800 695 105Working capital 135 128 7
1 129 979 150
FundingEquity 1 000 840 160Net borrowings 81 82 (1)Deferred liabilities and current tax balances 48 57 (9)
1 129 979 150
29
CASH FLOW (Rm)
4185
-500
50100150200250300350400450500550600
Opening cash Closing cash
482Cash from operations
137Tax
223Dividends
162Capex (net)
4 Interest
88Funding
raised (net)
30
SEGMENTAL ANALYSIS
% of total F 2013 F 2012%
changeRevenue (Rm)Franchising – Domestic 20 495 440 12Supply Chain 76 1 919 1 614 19United Kingdom 3 83 82 1Corporate 1 19 20
100 2 516 2 156 17Operating Profit (Rm)Franchising – Domestic 64 300 265 13Supply Chain 35 161 141 14United Kingdom 1 5 7 (28)
100 466 413 13Operating Margin (%)Franchising – Domestic 60.6 60.2Supply Chain 8.4 8.7United Kingdom 6.5 9.2Group 18.5 19.1
31
PRODUCTIVITY AND MARGIN RATIOS
45.540.7 42.5 43.3 42.8 41.8
27.223.8 24.2 24.2 23.7 23.3
18.3 16.9 18.3 19.1 19.1 18.5
05
101520253035404550
2008 2009 2010 2011 2012 2013
Gross Profit Margin (%) Expense to Turnover (%) Operating Margin (%)
%
32
RATIOS
4.35.2
6.27.4
8.7
10.2
30.3
45.8
27.5
14.39.7 8.1
05101520253035404550
0
2
4
6
8
10
12
2008 2009 2010 2011 2012 2013
Net asset value per share NAV - (R) Debt/Equity (%)
NAVDebt/Equity %
33
STRATEGY
STRATEGY
BUILD GROUP CAPABILITY
• Execute and implement Fit 4 Purpose
BUILD BRAND CAPABILITY
• Unlock potential of recent acquisitions
• Launch Steers in Clapham, London
• Launch Debonairs Pizza, Mumbai• Leverage Varsity Sports and SA
National Hockey sponsorships• Leverage centralisation of
marketing• Open 208 new restaurants in
South Africa and 55 International35
STRATEGY
BUILD LOGISTICS CAPABILITY
• Re-locate and commission Port Elizabeth logistics centre
• Explore potential of new Polokwane logistics depot
BUILD MANUFACTURING
CAPABILITY
• Conclude take-on of all Famous Brands coffee roasting business
• Commission Coega Cheese • Integrate Famous Brands Great
Bakery Company and Famous Brands Choice Meats Company
36
PROSPECTS
PROSPECTS
• Constrained consumer spending
• Competitive climate will intensify
• Margin pressure will remain an industry “battle cry”
• Value, convenience and accessibility will continueto drive volumes
• Brands will win
• Rest of Africa has become the new “playground”
• Restructured for further growth
38
ANOTHER DECADE OF GROWTH
Our business is focused on building capability across
brands, logistics and manufacturing, providing a total
solution to our investment partners and consumers
39
RESULTS PRESENTATIONfor the year ended 28 February 2013
BRAND PORTFOLIO
41
BOARD OF DIRECTORS
Stanley Aldridge John Halamandres Kevin Hedderwick
Panagiotis Halamandaris Theofanis Halamandaris Periklis Halamandaris
Bheki Sibiya Hymie Levin Christopher Boulle
Santie Botha Darren Hele 42
SHAREHOLDER ANALYSIS FEBRUARY 2013
Coronation Life Managers
20.2%
Peter Halamandaris
11.1%
Theofanis Halamandaris
10.2%
Arisaig Africa Consumer Fund
9.7%
Periklis Halamandaris
8.0%
John Halamandres
5.5%
Enderle SA (Pty) Ltd
5.0%
Other30.3%
43
MACRO ENVIRONMENT
• Subdued growth in consumer spending
• Fiercely competitive
• Margin pressure a common denominator
44
SHIFTING CONSUMER PROFILE
• In 2004 the black middle class comprised 1.6 million people, now 4.2 million
• The spending power of black middle class is R400 billion while white spend is estimated at R380 billion
• Since 2004 black middle class disposable income has increased by 35%
Source: UCT Unilever Institute of Strategic Marketing
45
VALUE IS THE NEW BLACK
• Consumers have been trained to look for value
• Value is about price, quality, relevance and convenience
46
CONVENIENCE MATTERS (A LOT)
• The market no longer eats three meals a day
• Traditional three are degenerating into “nibbles and bites”
• Snacks account for one in five eating occasions
• Accessibility and speed are key
• “If it fits into your car cup holder, if you can eat it with one hand or even better, with two fingers” is the norm
47
BREAKFAST AND COFFEE (ALL THE TIME)
• Breakfast and coffee are key drivers of growth
• “All Day Breakfast” is the future
• Coffee drinkers are more discerning
• Coffee increasingly purchased as a “snack”
48
OPERATING PROFIT – DOMESTIC FRANCHISING
142186 204
235265
30054.8
62.0 62.5
60.960.2
60.6
48.0%
50.0%
52.0%
54.0%
56.0%
58.0%
60.0%
62.0%
64.0%
0
50
100
150
200
250
300
350
2008 2009 2010 2011 2012 2013
Operating Profit (Rm) Operating Margin (%)
64
62
60
58
56
54
52
50
48
Rm %
49
OPERATING PROFIT – SUPPLY CHAIN
61 6194
116141
161
8.1
5.7
7.8 8.4 8.7
8.4
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
020406080
100120140160180
2008 2009 2010 2011 2012 2013
Operating Profit (Rm) Operating Margin (%)
109876543210
Rm %
50
OPERATING MARGINS BY DIVISION
54.862.0 62.5 60.9 60.2 60.6
18.3 16.9 18.3 19.1 19.1 18.510.9 9.6 10.1 11.3 9.2 8.4
8.1 5.7 7.8 8.4 8.7 6.50
10
20
30
40
50
60
70
2008 2009 2010 2011 2012 2013
Domestic Franchising Group
%
51
OPERATING MARGINS – SUPPLY CHAIN
12.4
9.6
11.8
15.3 15.313.6
2.1 2.4 3.0 3.0 3.5 3.5
02468
1012141618
2008 2009 2010 2011 2012 2013
Manufacturing Logistics
%
52
RATIOS
45.2
37.4 38.242.5 44.5 43.6
38.033.4
36.1 35.7 34.5 35.92.5
2.2 2.1 2.2 2.3 2.4
2.2 2.11.8
1.61.4 1.4
1.0
1.5
2.0
2.5
3.0
3.5
4.0
05
101520253035404550
2008 2009 2010 2011 2012 2013
RONA (%) ROE (%) Net Asset Turn (times) Dividend Cover (times)
Times%
53
CONTACT INFORMATION
Kevin HedderwickChief Executive +27 11 651 5812
Stan AldridgeGroup Financial Director +27 11 651 5902
Del-Maree EnglishInvestor Communications +27 83 395 8608
www.famousbrands.co.za
54