Our opinion on the current state of FAMBRANDS(FBR)
Famous Brands (FBR) is Africa's largest branded fast-food franchisor, operating 2925 restaurants across seventeen brands, with 2574 restaurants in South Africa, 62 in the UK, and 76 in other parts of Africa and the Middle East. The company owns iconic South African brands such as Wimpy, Debonairs Pizza, and Steers. For the last two years, even before COVID-19, Famous Brands has faced challenges in a tough economic environment, with South African consumers hit hard by rising fuel costs, load shedding, unemployment, and high indebtedness. The retail fast-food industry has become increasingly competitive, further complicating the company's growth prospects.
Famous Brands has been working to grow its signature brands, but these have not yet performed as well as its leading brands like Wimpy and Steers. The acquisition of Gourmet Burger Kitchen (GBK) in the UK in 2016, just before the Brexit vote, proved to be a major misstep. Purchased for R2.3 billion, GBK's performance was disappointing, and Famous Brands was forced to write off the value of the acquisition and cease financing it in April 2020. On 14th October 2020, the company announced that GBK was placed into administration in the UK.
During the COVID-19 lockdown, many of Famous Brands' restaurants were not allowed to trade, which further impacted its operations. In response, the company has simplified its menus to focus on the most profitable offerings and improved its take-away and delivery options.
In its results for the six months ending 31st August 2024, Famous Brands reported:
- Revenue up 2%
- Headline earnings per share (HEPS) up 9%
The company attributed these results to prudence in managing its cost base, although its operating profit margins were impacted by lower volumes and overhead cost pressures. The share has been performing well since hitting a low on 10th June 2024 (at 4774c), starting a new upward trend.
With a P:E ratio of 13.76 and a dividend yield of 3.77%, the share is still considered reasonable value. As a leading player in South Africa's fast-food industry, Famous Brands serves as a barometer of consumer confidence and spending, making it a key stock to watch in the South African market.
Famous Brands has been working to grow its signature brands, but these have not yet performed as well as its leading brands like Wimpy and Steers. The acquisition of Gourmet Burger Kitchen (GBK) in the UK in 2016, just before the Brexit vote, proved to be a major misstep. Purchased for R2.3 billion, GBK's performance was disappointing, and Famous Brands was forced to write off the value of the acquisition and cease financing it in April 2020. On 14th October 2020, the company announced that GBK was placed into administration in the UK.
During the COVID-19 lockdown, many of Famous Brands' restaurants were not allowed to trade, which further impacted its operations. In response, the company has simplified its menus to focus on the most profitable offerings and improved its take-away and delivery options.
In its results for the six months ending 31st August 2024, Famous Brands reported:
- Revenue up 2%
- Headline earnings per share (HEPS) up 9%
The company attributed these results to prudence in managing its cost base, although its operating profit margins were impacted by lower volumes and overhead cost pressures. The share has been performing well since hitting a low on 10th June 2024 (at 4774c), starting a new upward trend.
With a P:E ratio of 13.76 and a dividend yield of 3.77%, the share is still considered reasonable value. As a leading player in South Africa's fast-food industry, Famous Brands serves as a barometer of consumer confidence and spending, making it a key stock to watch in the South African market.
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