Our opinion on the current state of FBR

Famous Brands (FBR) is Africa's largest branded fast-food retail franchisor with seventeen brands and 2898 restaurants. It has 2522 restaurants in South Africa, 65 in the UK and 311 in the rest of Africa and the Middle East. The company owns well-known South African brands like Wimpy, Debonairs Pizza and Steers. For the last two years, even before COVID-19, the company has been battling to grow in an environment where the consumer has been hammered by rising fuel costs, loadshedding, rising fuel costs, unemployment, and high indebtedness. The retail fast food industry has become increasingly cut-throat. Famous Brands had been aggressively growing its signature brands, but as yet they were not performing as well as its leading brands (Wimpy, Steers etc.). The acquisition of GBK in the UK appears to be a major blunder just before the Brexit vote. This was purchased in late 2016 for R2,3bn and Famous Brands is being forced to write off what was paid for it and has finally ceased financing it in April 2020. On 14th October 2020, Famous Brands announced that GBK was put into administration in the UK. During lockdown, most of its restaurants were not allowed to trade. The company has simplified its menus to focus on the most profitable offerings and improved its take-away and delivery options. In its results for the six months to 31st August 2023 the company reported revenue up 10% and headline earnings per share (HEPS) down 7%. The company's net asset value (NAV) increased 20% to 941c per share. The company said, "The Group's finance costs increased by 35% (excluding the settlement of the interest rate swap in the prior period) mainly due to cumulative interest hikes of 275 basis points during the review period and the drawdown of our credit facility". The share has been recovering since the impact of COVID-19 in March 2020. We believe it will continue to perform well.