No Famous Brands dividends, despite R426m profit

Franchise group Famous Brands, which is known for its Wimpy, Debonairs Pizza, Steers and Tasha’s brands, will hold on to its final dividend after reporting that the Covid-19-induced lockdown has had a severe impact on its finances.

During its annual results presentation on Tuesday for the year to end-February, it admitted it had been hit hard by the lockdown and no dividend would be paid for the second six months of the reporting period, despite it recording a profit of R426 million.

“The Covid-19 global pandemic and subsequent lockdown measures implemented across the group’s various trading jurisdictions have had a significant adverse financial impact on the business,” it acknowledged.

There was a “likely breach of the currently agreed debt covenant requirements” for this year. This is why it “proactively” engaged its primary lender to restructure its future debt maturity profile and debt covenants.

It has long-term borrowings of R1.65 billion and a net debt/ equity ratio of 143%.

The group says the 2021 financial year is going to be “severely” characterised by Covid-19, even though it has enough cash flow to service its current debts.

During lockdown Level 5, the group had no material revenue generated as its businesses were not permitted to trade. Only one plant could continue to work.

“What we could do is really not that different from what other businesses did during this period which is to focus on our employees, and also really preserve our own balance sheet and things we could do within our business,” said chief executive Darren Hele.

In Level 4, as lockdown regulations eased, it could deliver takeaways and the company was able to gain at least 20% of its usual revenue, with only 40% of its stores trading.

“However, the curfew made things very difficult from our perspective and certainly limited operations,” Hele says.

The group anticipates it will generate 35% of its usual revenue in June as the country eases lockdown restrictions further as its signature brands will be able to trade under strict regulations.

It reported an 11% year-onyear increase in cash from operations to R1.1 billion, which resulted in a cash realisation rate of 107%.

The company says considering the weak trading conditions, it has a taken a deliberate decision to scale back on new store openings, as it anticipates the downturn to continue to the 2021 financial year.

This has been amid a challenging operating environment with SA edging into recession in the latter half of the reporting period, compounded by the country’s specific adversities, “including the sluggish pace of transformational socio-economic reforms, frequent load shedding, sustained poor community service delivery, and evidence of unsanctioned corruption”.