Famous Brands’ chain of frozen-meals stores is performing ahead of expectations and the group plans to open more of these outlets across Gauteng, says CEO Darren Hele.
The owner of the Steers and Wimpy brands has opened four Frozen For You stores in the province, in partnership with the chain’s founders, Hele said.
“We’re very pleased with the performance thus far — it’s certainly meeting our expectations and probably exceeding them,” he said.
Frozen For You is Famous Brands’ first foray into the home meal replacement segment of the market. The unit sells ready-made frozen meals through its stores and online.
“The plan is to roll them out — we’re being cautious to see how it performs, but the early signs are encouraging.
“The big costs are in the back end, the factory reconfiguration, not the stores, and that’s why we need to build some scale, but not at any expense,” Hele said.
On Monday Famous Brands said group revenues in the six months to end-August rose 5.4% to R3.6bn. Headline earnings per share were up 10.6% at 188c.
That number excludes an R874m write-down of the group’s Gourmet Burger Kitchen (GBK) business in the UK, which it bought for £120m (R2.2bn) in 2016.
“Apart from the well-flagged weakness from GBK, the rest of the business delivered a solid set of results, with both the restaurant brands business and supply chain contributing to 10% growth in SA operating profit,” said Dirk van Vlaanderen, associate portfolio manager at Kagiso Asset Management.
Besides the write-down, Famous Brands has started a company voluntary arrangement (CVA) process to stabilise GBK. The process, unique to the UK, is used by financially distressed businesses to renegotiate their leases and shut stores.
“The CVA process, if approved by creditors, should provide sufficient breathing room for GBK to stem the losses and move back into a profitable position,” Van Vlaanderen said.
Hele said 17 stores could be closed as part of the process.
Meanwhile, Famous Brands decided to sell the tomato-paste plant in the Eastern Cape it had bought in 2016, he said.
“We’ve started discussions with somebody, so we’re optimistic we can conclude that.”
This followed an “extremely challenging” growing season in which production was substantially short of targeted volumes needed for the plant to be viable. The facility made an operating loss of R17.8m in the six-month period.
The group, which buys 50-million eggs a year for its leading brands portfolio, would buy only cage-free eggs by 2025, Hele said, in response to a campaign against cage-laid eggs.
Famous Brands was in talks with industry authorities and suppliers about the move to a cage-free procurement policy.
Famous Brands’ shares gained 1.94% to R102.60 on Monday.
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