Famous Brands has published its interim financial results for the six months ended 31 August 2021, with the group posting solid results despite the impact of lockdown and violent looting in July.
The group – which carries brands such as Steers, Debonairs and Wimpy – reported revenue of R3 billion, up 50% compared to the previous period. Headline earnings per share increased to 97 cents (+140%) while operating profit increased to R222 million (+302%).
Despite the strong figures, Famous Brands noted that Covid-19 has forced restaurants to adapt quickly and changed the way consumers experience dining.
“Some of these shifts include the adoption of contactless technology, a rise in takeaway and delivery sales, a preference for outdoor dining, adjusted staffing levels, and menu rationalisation,” it said.
“Trading activity remains muted due to Covid-19 restrictions related to sit-down dining, travel, seated capacity, trading times and alcohol sales. Research indicates that fear of contracting Covid-19 is a first or second barrier to consumers eating at a sit-down restaurant. This has led to a dramatic rise in takeaway and delivery channels.”
Famous Brands noted that consumers remain under financial pressure in most markets, and many can no longer eat out or increasingly seek value purchases. It added that as consumers work from home, they tend to cut back on the frequency of eating at casual dining restaurants.
The group said that it was responding to consumer trends to draw foot traffic and boost revenues in the following ways:
- Re-engineering menus to simplify restaurant operations and ensure high-quality takeaway products;
- Keeping menu price increases below food inflation and focusing on value for money propositions;
- Reduced trading hours has required a renewed focus on breakfast and lunch promotions;
- Embracing take away and delivery, including kerbside pick-up, own delivery, third-party delivery, order ahead options and increasing drive-through capacity;
- Reassuring customers regarding our stringent Covid-19 health and safety protocols;
- Maintaining the highest brand and quality standards to offer a superior customer experience.
“The local restaurant industry faces headwinds due to Covid-19 restrictions, consumer apprehension regarding eating out and poor economic conditions,” Famous Brands said.
“For the first three months of the financial year, capacity was limited to 100 people or 50% of the available capacity. For the second three months, the capacity limit was 50 people. Sit-down dining was not permitted for the first two weeks of July. Alcohol and trading time restrictions due to curfews further dampened performance.”
In light of these issues, home delivery played a vital role in the group’s success in the past six months, with 14% year-on-year turnover growth across own and third-party aggregators, it said.
Famous Brands added that it plans to make ongoing investments in technology and internal capabilities to streamline last mile home delivery.
“The group has improved its own delivery offering by optimising delivery zones, reducing drive distances, stimulating volume and track preparation and drive times. Delivery through third-party aggregators will continue to grow, slowing our own delivery growth to some degree while also representing growth through accessing a new customer base.
“We continue to invest in our own delivery capacity to remain competitive within high-density delivery nodes.”
Famous Brands said that its focus for the remainder of the year would be on creating further operational efficiencies, prioritising core long-term operations, improving franchise partners’ investment returns, and managing cash flows.
Despite the weak economy, the group said it is optimistic that sales will recover further as vaccine programmes roll out and economic conditions improve.
“The possibility of a fourth wave in several markets could lead to more stringent Covid-19 restrictions. The timing of this fourth wave is also critical; an earlier fourth wave in November would have a lesser revenue impact than a wave during the December and January holiday period.
“We anticipate higher food inflation in the second half of the year, mainly driven by dry goods, perishables and packaging. Expected currency weakness in the period ahead will further intensify margin pressure for manufacturing.”