Famous Brands Sees High-End Restaurants Accelerating Profit

By Aarti Bhana

  • South African company sees robust trading at likes of Tashas
  • Reiterates pledge to resume dividend after deal-related pause

Famous Brands Ltd., the owner of South African food chains including Debonairs Pizza and Steers burgers, said the performance of high-end restaurants such as Tashas helped boost trading even as the domestic economy struggled.

Operating profit excluding acquisition costs rose 18 percent to 938 million rand ($72 million) in the year through February, the Johannesburg-based business said in a statement on Monday. Sales jumped 33 percent, though that included 20 weeks of trading at U.K. acquisition Gourmet Burger Kitchen.

“Certainly people tend to be trading down, but we do get the top-end of the market” as well, Chief Executive Darren Hele said in a phone interview. Restaurants aimed at those on higher incomes tended to be more resilient to economic downturns than cheaper alternatives, he said.

Famous Brands joined retailer Massmart Holdings Ltd. and casino operator Tsogo Sun Holdings Ltd. in warning that South African consumer confidence had been weakened by the downgrading the country’s credit rating to junk by two ratings companies in early April. That came amid political uncertainty following the firing of respected Finance Minister Pravin Gordhan, while last year the economy grew at its slowest pace since a 2009 recession.

Staying Focused

“Notwithstanding this context, the group will remain strongly focused on growth,” Famous Brands said. Last year’s acquisition of the U.K.’s GBK for 120 million pounds ($154 million) has helped the company expand geographically and diversify earnings, it said.

The shares rose 1.9 percent to 127.90 rand on Monday in Johannesburg, paring a decline for the year to 18 percent.

Famous Brands reiterated a pledge to restore dividends in 2018 after a pause related to a string of acquisitions including GBK, which weakened the balance sheet. The payment to shareholders probably won’t be resumed at the same level as they were stopped, which was 4.05 rand a share, the CEO said.

Shares in Taste Holdings Ltd., a smaller rival of Famous Brands and the owner of the South African franchises of Starbucks Corp and Domino’s Pizza Group Plc, slumped 10 percent, the most since November, after reporting a wider full-year loss of 26.8 rand per share.

This article was originally published on Bloomberg.com 

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