More South Africans are skipping restaurants and coffee shops – and ordering food online

 ·28 Oct 2019

Listed restaurant and logistics group Famous Brands has published its interim results for the six months ended August 2019, saying that it has seen a sharp rise in South Africans ordering food for delivery at home – at the expense of restaurants and coffee shops.

The group reported flat revenue for the period at R3.57 billion (1H2018: R3.58 billion), with operating profit down 4% to R405 million.

Earnings before interest, tax, depreciation and amortisation (Ebitda) was up 6% to R559 million, but headline earnings per share dropped 15% to 159 cents per share.

Famous Brands declared and interim dividend of 90 cents per share.

The group, which includes Mugg & Bean, Tashas, Steers, Wimpy and Debonairs Pizza, attributed the flat results were down to a mix of good and bad across its portfolio, underpinned by the weak local economy in South Africa, as well as political uncertainty and Brexit worries in the UK.

The group’s food brands saw revenue increase over the period, jumping 11% to R481 million, with profitability also up 6% to R235 million.

However, its UK and Ireland operations, GBK, continued to make a loss, while overall logistics and manufacturing remained flat.

Famous Brands noted that even though roughly the same number of South African customers bought food from its branded stores, the actual foot traffic was lower, as more people opted for staying at home and ordering online for delivery.

It also saw a big move in customers towards fast food, as opposed to casual dining brands.

“Across our trading markets, consumer behaviour continued to be driven by the demand for convenience, value and enhanced brand experiences,” it said.

“Take-away and fast food outlets outperformed at the expense of restaurants and coffee shops, reflecting their perceived convenience and value propositions (and a) sustained strong move to online and home delivery – with a related decline in footfall in shopping malls, specifically major centres.”

Among its brand portfolio, in the six months under review, Debonairs Pizza, Steers and Fishaways increased their share of the market, while Wimpy, Mugg & Bean, Fego Caffé and Milky Lane did well to stabilise share in a subdued trading segment.

The group noted that new store openings were down, with 50 new outlet opened in the period under review, compared to 78 opened up over the same period in 2018.

Despite the challenges, it expects to boost sales in the remaining six months of the financial year, with particular optimism over Black Friday and the coming holiday season.

“In line with previous years, it is anticipated that Black Friday sales will produce lumpy results leading up to and following what is now one of the biggest trading weekends on the annual calendar.

“In terms of the holiday season, preparations are well advanced to capture disposable income over the peak December period and into the slower trading environment traditionally experienced in January,” it said.

The group said it will continue to focus on the the major shift to ”remote convenience” via online ordering and home delivery, which it says “will afford challenges and opportunities in equal measure”.

“Our priority will be to make optimal use of technology to improve the experience and service for our customers,” Famous Brands said.

Read: These are the biggest fast food franchises in South Africa

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