Famous Brands HY HEPS down 7%

Famous Brands, a South African company, recently announced a slip in headline earnings per share of 7%, attributing the performance downturn to the country's ongoing power crisis. Darren Hele, the CEO of Famous Brands, addressed the financial results in an exclusive interview with CNBC Africa. He clarified that while the top-line revenue showed growth, the bottom line was impacted by a one-off cost from the previous year, specifically a liquidation dividend. However, when excluding this cost, the operating profits were up by around 17%, indicating a positive trend in the company's performance. Hele expressed confidence in the sustainability of the revenue generated and emphasized that the business is on a growth trajectory. One of the key factors affecting Famous Brands' operations is the load shedding situation in South Africa. Despite the challenges posed by power outages, Hele highlighted that there have been both positive and negative aspects for the company. On the positive side, the demand for dining out during load shedding periods has increased, benefiting some of their establishments. However, the lack of alternative power solutions has resulted in the closure of certain restaurants during these periods, albeit the number of affected outlets has been decreasing over time. Hele mentioned that approximately 18% of their sales were generated during load shedding, showcasing the company's ability to adapt and continue operating in challenging conditions. In terms of mitigating the impact of load shedding, Famous Brands has made investments in solar power and diesel backup systems to ensure continuity of operations. While progress has been made in the supply chain, especially in non-restaurant locations, the reliance on diesel generators remains a primary challenge for their dining outlets. Hele acknowledged that transitioning to alternative power sources like gas has been slower in restaurant settings. Looking ahead to the forecast for load shedding, he expressed hope for a more stable power supply, aligning with the positive outlook presented by the Minister of Electricity for 2024. Regarding Famous Brands' business in the United Kingdom, Hele noted that despite constituting a small fraction of their total sales, the market has shown positive growth. The company has maintained a cautious approach to the UK operations, focusing on franchise growth opportunities while leveraging the benefit of exchange rate fluctuations. He emphasized the strong brand presence and consumer loyalty in the UK market, detailing a strategy of sustained growth without significant capital investment in the region. In closing, Hele entertained the idea of expanding Famous Brands' footprint to international airport locations like Heathrow, recognizing the potential for brand recognition and customer appeal in such high-traffic areas. The CEO highlighted the opportunities for growth and innovation within the company's established legacy business, underscoring a commitment to meeting consumer demand and exploring new market avenues. Despite the challenges posed by the power crisis and economic conditions, Famous Brands remains optimistic about its future prospects and strategic direction.