<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
SIMON BROWN: I\u2019m chatting now with Darren Hele, CEO of Famous Brands. Results for six months ending August saw revenue up 2.3%, Heps down 3.2%, and a dividend up 4.9%.<\/p>\n
Darren, appreciate the time. Let\u2019s start with the dividend. As I said there, Heps down, operating profit also down, the dividend up; also 57 million of shares bought back.<\/p>\n
You are obviously happy, confident with both cash flow and the state of your balance sheet.<\/p>\n
DARREN HELE: Yes, particularly. We\u2019ve been through obviously quite a robust period of reinvestment in the business, and we know that trading is challenging right now. But with our capex number we\u2019re through the worst and life\u2019s a little easier in that sense; and we are in good control of our debt and are absolutely confident around the cash generation.<\/p>\n
Read:
Famous Brands bets on expansion and efficiency amid weaker earnings
Famous Brands boosts dividend despite profit decline
Famous Brands warns of up to 33% drop in interim earnings
Famous Brands facing a tough market<\/p>\n
SIMON BROWN: You mentioned the tough period, and this obviously would have been kicked off on the 1st of March. April then saw fuel price increases. We\u2019ve also had inflation higher; we\u2019ve had prime rates up.<\/p>\n
It\u2019s been a tough six months for the consumer and, in many senses, I thought there would have been a tougher sense in the numbers because, if I take Botswana out of the numbers, the consumer is actually there.<\/p>\n
DARREN HELE: Yes, correct. Botswana \u2013 there\u2019s a big kind of overhang there, so you\u2019re quite right. It\u2019s not booming, but the consumer, we\u2019ve been surprised, month on month is holding up.<\/p>\n
It\u2019s not booming, but if you think about the cost that\u2019s been passed on around fuel and how people must be mitigating that, they\u2019ve certainly still got an appetite to spend on food.<\/p>\n
Read:
Famous Brands delivers double-digit dividend growth on strong fast-food demand
Famous Brands approves 5% share buyback<\/p>\n
SIMON BROWN: I\u2019m thinking here of your Leading Brands, which is your casual sit-down, you QSRs [quick-service restaurants]. I can\u2019t help thinking that to some degree these are time-pressed consumers \u2013 and that\u2019s been a Famous Brands story forever and a day.<\/p>\n
I also can\u2019t help thinking that your QSR is almost a treat these days, whereas before it might have been a staple \u2013 and that keeps it going a bit.<\/p>\n
DARREN HELE: Yes, you\u2019re quite right. We prefer it when people are kind of time-poor, cash-rich \u2013 and then you\u2019re part of the eating segment. But I do think that the indulgent part is there and people will still use it for that. They\u2019re not going to cut it out, but you may not be doing as much home meal replacement as you would have liked in a growing economy.<\/p>\n
But then I do think it\u2019s a matter of people balancing their time but, as you say, also treating themselves. Look, cooking at home is not cheap either. I think with the energy prices, et cetera, it\u2019s not as easy as it used to be.<\/p>\n
Read:
Spur Corp: More than just juicy burgers \u2026
Famous Brands profit up 6% as restaurant network tops 3 000
Why is Spur eating Famous Brands\u2019s lunch?<\/p>\n
SIMON BROWN: It certainly isn\u2019t. Sixty60 must be a competitor of yours to a degree, because it is to a degree that convenience. And I take your point absolutely on price, but there is a convenience aspect as well.<\/p>\n
DARREN HELE: Absolutely. All of these home-delivery players are competitors. I suppose with some of the aggregators we are what we call frenemies \u2013 we compete and we\u2019re friends \u2013 but things like Sixty60 or Spar or Woolies are definitely cutting into the convenience space.<\/p>\n
We\u2019ve seen that and we saw that from the beginning. I think we\u2019re trying hard to compete. We don\u2019t compete head-on around the occasion, but we do compete around the convenience aspect, there\u2019s no doubt.<\/p>\n
Read:
Is Spar most exposed to the Checkers Sixty60 threat?
Where much of Sixty60\u2019s magic lies<\/p>\n
SIMON BROWN: Your Signature Brands \u2013 your sort of more fancy sit-down \u2013 are hurting. A lot of that seems to be poor.<\/p>\n
DARREN HELE: Yes, but it\u2019s interesting. It\u2019s the brand that seems to have been the hardest hit with the downturn. I think because it has a luxury connotation we\u2019ve seen that sort of spend contract quite quickly. There are always some things where I suppose we look at ourselves and could do better. But it has been quite interesting.<\/p>\n
We\u2019ve obviously got a strong Joburg bias and that has been interesting too.<\/p>\n
So obviously a very competitive space too, and not necessarily our core space that we trade in. But there\u2019s definitely a link to the consumer and the spend side.<\/p>\n
Read: Famous but not so fabulous<\/p>\n
SIMON BROWN: Your supply chain \u2013 which is manufacturing, logistics, retail \u2013 collectively had not a bad period at all. Profit up 13%.<\/p>\n
You talked around capex; you talked around efficiencies. I imagine a lot of this is coming out of the supply-chain part.<\/p>\n
DARREN HELE: Yes, some of it has been masked with a bit of extra volume that we\u2019ve had with basket growth \u2013 so that that has come at the right time. We\u2019re very grateful for it. Volumes typically haven\u2019t grown to the sense that they were versus the 5% that we\u2019ve put up there \u2013 which has largely been around growing the basket.<\/p>\n
And in particular we have brought a big beverage basket into the business to make our one-stop-shopping to franchisees better, and we have improved service level. That really has helped us in a difficult time.<\/p>\n
SIMON BROWN: This is where I imagine you get hit on the fuel bill. Much as my diesel cost is up, I imagine your fuel bill in the supply chain must also be taking pressure.<\/p>\n
DARREN HELE: Yes, significantly. We have been able to recover some of that from our franchise partners through a mechanism that we agree jointly; so some of it we have recovered because they understood and there was some margin there in terms of food pricing that had come down.<\/p>\n
Read:
Godongwana slashes fuel levies
More panic buying looms as record fuel prices set to kick in
Diesel surge threatens inflation, interest rates and consumer spending
Climate change is making these grocery items more expensive this year<\/p>\n
You know, food pricing has been a little slower on inflation that we all anticipated, so we actually recovered some of that early \u2013 and it has definitely helped us in these results. But it\u2019s purely a temporary relief because none of us really knew how long this would go on for. We took the pain in April and May, and then we introduced the levy from June onwards \u2013 and that has definitely softened the blow.<\/p>\n
SIMON BROWN: What about two of the big costs \u2013 beef and coffee? I watch the prices both as someone interested in markets, but someone who likes a steak and likes a cup of coffee. Those have been massively volatile. How are those holding up, or perhaps improving for yourselves?<\/p>\n
DARREN HELE: They\u2019ve definitely come down from where we were \u00a0probably when we last spoke, but not to the degree we would have liked. Beef is quite stubborn, but it stopped that rampant rise that it was on.<\/p>\n
Coffee has come down notably, and of course there\u2019s some exchange-rate benefit there because virtually all coffee is imported. So the exchange rate helped a little too.<\/p>\n
Beef has definitely stabilised, but it hasn\u2019t reverted to the levels that we would have hoped, and in fact currently there\u2019s some increase that\u2019s coming through \u2013 which normally happens pre-Christmas.<\/p>\n
Read:
Chicken or beef?
Spur sees healthy profit rise
Coffee\u2019s coming glut may not be enough to calm volatile prices
High-end coffee supply tightens<\/p>\n
But it seems to be a bit early this year. We are hoping that it\u2019s going to stabilise a bit, and it helped in this reporting period too. We have had some deflation on both beef and coffee.<\/p>\n
SIMON BROWN: Obviously Famous Brands is well known for the brands out there, the QSRs, the Casual, the Signature.<\/p>\n
But you\u2019ve also a lot of tech. You talk around tech at your point of sale, you talk around using AI as well. Both of these are helping to grow revenues, streamline business, and take out some costs, I imagine.<\/p>\n
DARREN HELE: Definitely. We\u2019d like to do more and do faster, as you\u2019re seeing in the marketplace, but it\u2019s an investment our franchisees need to make alongside of us.<\/p>\n
We can only do so much, but the uptake has been good and as we get a singular system it\u2019s really helped and we took the initiative to invest. I think it will accelerate even more and there are definitely efficiencies that can be gained.<\/p>\n
Read:
Food giants and discount stores adapt to a weaker consumer
The hot new Dubai restaurant run by an AI chef<\/p>\n
But most important is just providing a better experience to the consumer. The consumer has become used to it, and there\u2019s no reason why they would not expect it in every channel of their life \u2013 as you said in banking, et\u00a0cetera.<\/p>\n
SIMON BROWN: It is, I suppose, just where it is \u2013 and we see it everywhere. And I suppose, yes, we kind of expect it everywhere.<\/p>\n
Darren Hele, CEO of Famous Brands, appreciate the time.<\/p>\n
#Famous #Brands #navigates #tough #trading #conditions #product #price #decreases<\/p>\n","protected":false},"excerpt":{"rendered":"
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