Famous Brands has pressed pause on dividend payments for the first time in 13 years after a full-year trading period punctuated by seven acquisitions — one of which was the group’s largest to date.

The CEO of the restaurant franchising group, Darren Hele, said that barring significant changes in the company’s outlook and fortunes, the group would resume dividends in the 2018 financial year.

“This doesn’t mean that we are changing strategy. We will always be acquisitive by nature, but it is unlikely that we will have a year like the one we just had,” Hele said.

“The new financial year won’t see the same kind of activity. We are mindful of paying dividends, but if a great acquisition comes our way, we won’t say no. Ultimately, it is a balancing act.”

At the close of the JSE on Monday, the Famous Brands share price had risen 1.91% to R127.90, valuing the company at about R12.9bn.

Avior Capital Markets analyst De Wet Schutte said the company’s results had shown an all-round solid performance but that the supply-chain growth and margin expansion was “commendable”. The group’s supply-chain division comprises its logistics and manufacturing businesses.

In the year to end-February, Famous Brands reported consolidated revenue of R4bn, an 18% increase on the previous year, while operating profit rose 31% to R455m.

The operating profit margin improved to 11.4%, from 10.3% in the year-earlier period.

“Our concerns are with headwinds that are mostly due to external factors, such as the challenging consumer environment in SA and post-Brexit fallout,” Schutte said. “That said, both the integration strategy and brand acquisitions that Famous Brands pursued over recent years are allowing it to continue on a steady growth trajectory despite these concerns.”

Schutte said SA was widely expected to remain a challenging place for most consumer-facing businesses.

“But we believe that efficiency gains on the one hand, and ongoing menu innovations on the other, could well allow Famous Brands to continue growing ahead of nominal GDP. Further, if their investment in UK gourmet burger market pays off, it has the potential to be a far more meaningful contributor to the overall profit pool a few years down the line,” he said.

In the period under review, Famous Brands reported a 33% increase in revenue to R5.7bn. The figure includes 20 weeks of turnover contribution from the Gourmet Burger Kitchen business, which was acquired with effect from October 2016.

Famous Brands owns Wimpy, Mugg & Bean, Europa, Tasha’s, Steers, Debonairs Pizza, Fishaways, Milky Lane, The Bread Basket, and others. (Business Day SA)

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