JSE-listed food services franchisor Famous Brands has reported that its financial performance for the six months ended August 31 demonstrated strong momentum, with positive results across key financial metrics.

In its unaudited condensed consolidated interim financial results for the period, the group notes that revenue increased by 5.6% year-on-year to R4.2-billion and operating profit by 5.8% year-on-year to R393-million.

The group's operating profit margin was 9.3%. Headline earnings per share increased by 8% year-on-year to 236c, while basic earnings per share increased by 6.8% year-on-year to 236c.

The company says sustained consumer preference for its South African Leading Brands portfolio, particularly for the quick service restaurant (QSR) brands, led to robust revenue growth, which in turn lifted the performance of its manufacturing and logistics divisions.

In addition, the company says it experienced strong growth in its brand footprint.

Famous Brands notes that it continued to pursue operational efficiencies and cost containment initiatives which included the opening of its cold storage facility in June, which was completed on time and within budget.

The company says the new facility will increase capacity, reduce transport costs and result in savings from more energy efficient refrigeration technologies.

The group's total borrowings position as at August 31 was R1.1-billion. During the review period, the company repaid R62-million of borrowings and raised a similar amount for the development of the cold storage facility.

The group's finance costs on borrowings decreased by 23% compared with the same period in 2024, owing to a reduction in debt and interest rate cuts of 50 basis points.

The company also notes that it invested R140-million in capital expenditure – compared with R91-million in 2024 – allocating capital in line with the group's strategy.

Meanwhile, the board declared an interim dividend of 162c a share. The dividend will be paid from profits for the review period, amounting to a total of R162-million.

OPERATIONAL CONTEXT

As a food services franchisor, Famous Brands has restaurants in South Africa, the Southern African Development Community (SADC), the rest of Africa and the Middle East (AME) and the UK.

Its vertically integrated business model comprises four pillars, namely brands, manufacturing, logistics and retail.

The company notes that South Africa's economic growth increased to 0.8% in the second quarter of this year, a rebound from the growth of 0.1% recorded for the first quarter.

Other positive developments include the cessation of loadshedding, improvements to the national logistics network and relative political stability. In addition, traffic has increased, supported by return-to-office mandates, boosting restaurant sales.

The company notes, however, that consumer spending remains constrained owing to high unemployment, household indebtedness and elevated inflation.

It describes competition for consumer spending as intense, especially in the QSR category, as brands invest in campaigns to promote core categories at competitive prices.

The company says consumers seek value in an increasingly competitive environment, including competition from supermarket retailers' rapid delivery offerings.

OPERATIONAL REVIEW

Famous Brands notes that revenue for South Africa increased by 6.3% to R599-million while operating profit declined by 0.4% to R231-million.

The company explains that system-wide sales across its South African brand portfolio improved by 5.5% and like-for-like sales increased by 2.4%.

Leading Brands' system-wide sales increased by 6%, and like-for-like sales increased by 2.6%.

Famous Brands says restaurant sales were boosted by an uptick in local tourism and increased traffic resulting from return-to-office mandates. The group says its QSR brands performed strongly owing to their competitive value offerings, successful promotions and prudent cost management.

Additionally, Leading Brands experienced strong growth in its brand footprint, with 27.8% of new restaurants allocated to existing franchise partners.

“We expanded our footprint of smaller restaurant formats and drive-throughs to meet consumer demand for convenience. The pleasing revamp activity demonstrates franchise partners' trust in our brands and willingness to reinvest in their businesses,” says Famous Brands.

Meanwhile, the Signature Brands portfolio in South Africa delivered softer results than anticipated, driven by lower consumer demand for premium dining out.

Like-for-like sales and system-wide sales declined by 0.6% and 0.4%, respectively. Operating loss margin was 7%.

Further, Famous Brands notes that the SADC region experienced steady growth, with revenue increasing by 2.7% to R224-million.

Operating profit declined by 11.8% to R24-million and the operating profit margin was 10.9%.

Botswana's system-wide restaurant sales decreased by 2.3%, and like-for-like sales declined by 5.5% compared to the prior period. Zambia's system-wide sales were 4.8% higher than the prior period, while like-for-like sales declined by 3.2%.

In the AME region, revenue declined by 5.4% to R33-million.

The company explains that several markets are experiencing tough trading conditions and high inflation, noting that its brand presence remains sub-scale in the region.

The operating loss was R19-million while the operating loss margin was 57.2%.

Meanwhile, Famous Brands notes that the UK restaurant industry has been battling with cost pressures, cautious consumers and economic uncertainty, resulting in constrained sales.

Revenue in the sector declined by 5.7% to R65-million and operating profit decreased to R1-million. Operating profit margin was 2.2%.

LOOKING FORWARD

Looking ahead, Famous Brands says it remains cautiously optimistic about the remainder of its 2026 financial year, with modest but positive growth predicted for South Africa, underpinned by recovering domestic demand, lower inflation and interest rates and a more stable energy supply.

The company says competitive intensity, especially from value-driven offerings, is expected to increase, requiring strategic flexibility to maintain market share and profitability.

This involves agility with menu options, promotions and loyalty programmes.

“We will leverage our new consumer engagement platform to provide compelling, personalised offers to our customer base,” the company says.

Famous Brands says the restaurant pipeline is healthy with demand for Leading Brands and Signature Brands, adding that the principle of two separate portfolios is working well, with resources being dedicated appropriately to the relevant growth opportunities.

The company says expansion in the SADC region will follow a targeted focus on specific markets.

“We will remain cautious in the AME markets. We are committed to reducing the drag on our profitability from the AME and Signature Brands portfolios.”

Famous Brands says the manufacturing division is deploying manufacturing technology, processes and resource planning to increase capacity, improve production yields and reduce waste.

The company says it will also grow revenue by increasing the range of products offered to franchise partners and the retail market.

It explains that the logistics division will improve its efficiencies through fleet mix optimisation, route planning, bringing retail frozen distribution in-house and taking on the distribution of the Coca-Cola beverage basket in eight provinces.

Famous Brands says its warehouse management system will support better planning and decision-making.

The company says there are strong indications that retail performance will improve in the remainder of the 2026 financial year, noting that it is executing a retail marketing strategy to secure new product listings and promote our ranges to consumers.

“We have confidence in our ability to innovate and grow, supported by dedicated franchise partners. Improved profitability will be supported by our ongoing efforts to contain costs and improve efficiency.

“We are committed to improving shareholder returns, reducing our legacy debt and supporting the sustainability of our franchise partners,” the company says.