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Famous Brands has mastered the art of selling burgers, fries and pizzas in tough trading conditions and the company has emerged stronger with record revenue growth. Now, the group wants to try and re-enter the chicken market.

May 20, 2008

By SLINDILE KHANYILE

Durban – Famous Brands has mastered the art of selling burgers, fries and pizzas in tough trading conditions and the company has emerged stronger with record revenue growth. Now, the group wants to try and re-enter the chicken market.

The owner of Steers, Debonairs and Wimpy has exceeded R1 billion revenue for the first time with a 36 percent increase in the year to February.

Operating profit was 52 percent up to R210 million, while earnings a share grew by 37 percent to R1.37 and headline earnings a share shot up by 26 percent to R1.41.

Kevin Hedderwick, the chief operating officer at Famous Brands, said: “One glaring obvious gap in our business is that we are not in the chicken business.

“It’s important to get into mainstream chicken because it’s a strong growth area in the country and it has all the healthy connotations to it.”

Five years ago, the company tried the chicken business after signing a licence agreement with the US-based AFC International to roll out Church’s Chicken stores in South Africa and 18 African countries over five years.

Howerver, one year after launching 12 stores in the country at a cost of R5 million, the group walked away from the deal. It is not yet clear if Famous Brands will expand its menus to offer more chicken meals or whether it is eyeing an acquisition.

Hedderwick said the firm would explore all options.

Overall, the group was able to offset the negative effect of high food inflation, fuel and interest rates hikes as well as a drop in customer frequency. But there were some setbacks as a result of load shedding.

The group wanted to open 120 stores in the period under review but it only managed 106 because some developments were put on hold because of the national power shortage.

Hedderwick said: “I believe we would at least be on 116 new stores had it not been for the delay in new developments. But there were also times when we benefited from load shedding, depending on where the store is situated.

“Those in the suburbs had more people coming in when the power went out because people needed food.”

Famous Brands entered the UK market by buying Wimpy UK 14 months ago.

Hedderwick said the brand was shaping up and they would look into introducing their other brands once the turnaround strategy of Wimpy UK had been completed.

Quinton Ivan, an investment analyst at Coronation Fund Managers, said the quality of the firm’s brands as well as the continuing trend of eating out of home and convenience would still result in Famous Brands delivering good earnings growth.

Famous Brands share price yesterday was unchanged at R15.80, while the leisure and hotels sector fell 1.35 percent.