Famous Brands Plans U.K. Drive to Diversify From Rand

  • South African restaurant owner seeking faster growth in U.K.
  • Debonairs Pizza owner targets 1 billion rand operating profit

Famous Brands Ltd. is planning further U.K. expansion as the South African owner of fast-food chains including Debonairs Pizza and Steers seeks faster growth in the country and increased revenue from currencies other than the rand.

“I have spent a lot of time going back and forth looking for a suitable asset so we can get some momentum in the U.K.,” Strategic Adviser and former Chief Executive Officer Kevin Hedderwick said in phone interview on Monday. The Johannesburg-based restaurant owner has just completed its best-ever year in the U.K. yet the business is still “pedestrian” by company standards, he said.

Revenue in the U.K. gained 13 percent to 116 million rand ($5 million) in the year to end February, yet fell by 2 percent in pounds, Famous Brands said in an earlier statement. Total sales were up 31 percent to 4.3 billion rand, while operating profit gained 18 percent. The company plans to add five more Wimpy outlets in the country this year and one Steers restaurant as part of a wider store-opening plan across international and domestic markets.

South African retailers have been expanding in the U.K. and elsewhere in part to diversify away from the rand, which has weakened almost 30 percent against the U.S. dollar in the past 12 months. Clothing chain The Foschini Group Ltd. has bought two British chains since early 2015, while investment company Brait SE acquired fashion retailer New Look.

Middle East Slow

Famous Brands is targeting operating profit of 1 billion rand in the year through February 2018, Hedderwick said, up from 792 million rand in 2016. The company is planning 292 new franchise restaurants this fiscal year, building on an end-Feb total of more than 2,600. The company is reviewing its licensing agreement in the Middle East as growth in the region has been “a little bit slow,” Hedderwick said.

Famous Brands shares gained 2.1 percent to 119.50 rand as of 1:29 p.m. in Johannesburg, valuing the company at 11.9 billion rand. The stock is down 8 percent this year, compared with a 7.1 percent increase on the FTSE/JSE Africa All Share Index.

“I can confidently say that the objective is doable and we are well on track,” said the ex-CEO, who stepped down from the top role in February to make way for Darren Hele.

(Corrects spelling of CEO’s surname in final paragraph of story published on May 30.)
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