You’re in good company
Results presentation
for the year ended 29 February 2012
Agenda
Highlights
Business model
Operational performance
Financial results
Board changes
Strategy and prospects
Results presentation 2012
2
Highlights
Highlights
11th successive year of record turnover and profits
– coming off an increasingly high base
Milestone R2
billion revenue exceeded
Milestone R400 million operating profit exceeded 15% growth on prior year
Operating margin maintained at record 19.1% strong “claw back” in second half
Net borrowing to equity improves to a 5 year low of 10%
Total dividends to shareholders 200 cents per share an increase of 29%
Attained landmark share price of 5
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000 cents
4
Highlights
Opened 146
2000
new restaurants, surpassing goal of
Traction gained in Africa: 21%
system-wide sales
Successful integration of
growth in
F2011 acquisitions
Manufacturing and distribution capability continue to
expand
Awarded 10th position in Sunday Times Top 100
Companies Survey
Clean sweep of all relevant Leisure Options
consumer awards
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Business model
Business model
Franchising Franchising
Division
Division
Food
Franchising Franchising
The MAD Lab Services
Division
Division
Division
International
Domestic
Domestic
(Mainstream (Developing
Brands)
Brands)
•!Wimpy UK
•!Steers
•!Giramundo
•!tashas
•!Wimpy
•!Brazilian Café
•!Vovo Telo
•!Debonairs
Pizza
•!FishAways
•!House of
Coffees
•!McGinty’s
•!Mugg &
Bean
•!The Brewers
Guild
•!KEG
•!O’Hagan’s
New
Business
Division
Development Procurement Manufacturing
Division
Division
Division
Logistics
Division
Corporate
Domestic Marketing,
Retail
(Theatre of Artistry and
and
Foods)
Design
Wholesale
•!Group
marketing
and social
media
•!Juicy Lucy
•!Steers
•!Site selection •!Drawings
•!Wimpy
•!Franchisee
selection
•!Procurement
•!Baltimore
•!Group
restaurant
design
•!TruFruit
•!Aqua
Monte
•!Group
product
development •!Mugg &
Bean
•!Costing
•!Lease
negotiation
•!Project
management
•!Strategic
alliance
management
•!Supplier
appointment
and audits
•!Price
negotiations
•!Sauces and
spices
•!Telesales
•!Human
Resources
•!Warehousing
•!Meat and
chicken
products
•!New business •!Bakery
integration
•!Ice-cream
•!Planning and
•!Fruit juice
forecasting
•!Finance
•!Distribution
•!Information
Technology
•!Legal
•!Mineral water
•!Milky Lane
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Operational performance
Franchising division
Results presentation
9
System–wide sales growth
25%
21,0%
20%
15%
10%
8,5%
7,7%
5%
0%
Domestic
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Rest of Africa
Total
10
Like-on-Like sales growth
8%
7,0%
7%
6%
5,2%
5,1%
5%
4%
3%
2%
1%
0%
Domestic
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Rest of Africa
Total
11
New restaurants opened
60
Total 146
48
50
40
30
20
19
21
17
12
9
10
5
2
6
1
1
1
2
2
0
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Franchise network
600
Total 2 043
533
521
500
400
371
300
200
121
100
123
128
81
48
24
14
4
19
4
12
2
9
8
8
13
0
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Trading footprint
South Africa
Rest of Africa
United Kingdom
1 767
155
121
UK 121
Dubai 2
Sudan 5
Ivory Coast 4
Kenya 12
Nigeria 3
Tanzania 3
Zambia 19
Botswana 26
Namibia 25
South Africa 1 767
Malawi 4
Mozambique 3
Zimbabwe 11
Mauritius 27
Swaziland 8
Lesotho 3
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Highlights – Domestic –
Mainstream Brands
Launched new Steers image and
positioning - REAL BURGERS
Innovation around core products
Increased focus on chicken
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15
Highlights – Domestic –
Mainstream Brands
New design roll-out
continues to gain momentum
Maiden entry into Mauritius
Re-focus on breakfast market
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16
Highlights – Domestic –
Mainstream Brands
Remains at forefront of per capita consumption
growth amongst Black consumers
Accountable for 40% of Group’s Africa turnover
First to market with technology, innovation,
trading format and value for money
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Highlights – Domestic –
Mainstream Brands
“On the Move” model with Total continues
to gain traction – ten new sites this year
Maiden entry into Zambia and Mauritius
“Metro” trading format launched in
Newcastle
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18
Highlights – Domestic –
Mainstream Brands
Competitive climate fuels
growth in the category
Record 15% growth in
system-wide sales
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19
Highlights – Domestic –
Mainstream Brands
New corporate identity launched
and roll-out commencing
Successfully integrated into franchising
and supply chain structures
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Highlights – Domestic –
Mainstream Brands
Re-launch delayed due to Gauteng
liquor license moratorium
“Rehabilitation” of existing network
well under way
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Highlights – Domestic –
Customer acceptance
continues to grow
Developing Brands
Slow start but gaining
momentum –
McGinty’s OR Tambo
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2nd restaurant opened
in Musina and push
into mass market
commencing
22
Highlights – Domestic –
Theatre of Foods Brands
Phenomenal organic growth continues
Flagship “le parc” format launched at
Hyde Park to extraordinary acclaim
Export of concept under consideration
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Highlights – Domestic –
Theatre of Foods Brands
First to market in pioneering
artisan bakery category
Ready to expand to Western
Cape and KwaZulu Natal
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Highlights – Domestic –
Theatre of Foods Brands
Brand completely re-invented
Re-launch of high street
offering imminent
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25
Food for thought
Average monthly sales of key line items
1.5 million breakfasts
3.4 million burgers
4 million cups of coffee
2 million ice cream cones
1.8 million pizzas
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Highlights – United Kingdom
Severe economic conditions prevail - tough market to trade in
Nominal contributor to Group revenue (only 3.8%)
Right-sizing concluded, business is profitable, and no distraction to management
“The business isn’t shabby, it’s the UK that’s shabby”
Keith McLachlan, Thebe Securities
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27
Manufacturing division
Results
Results
presentation
presentation
2012
28
Gross Revenue % Growth - Manufacturing
Growth 12.6%
30%
27,3%
25%
20%
15,4%
15,1%
15%
11,0%
10%
7,7%
6,0%
5%
-2,9%
0%
-5%
Meat Plant
Bakery
Sauces &
Spices
WCP Meat
Plant
WCP Bakery
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Fruit Juice
Ice-Cream
29
Highlights - Manufacturing
Contended with 30% average increase
in beef price and 17% increase in
paraffin price
Operating margin unchanged at 11.7%
Chicken fillet plant commissioned in
November 2011
Successful take-on of Milky Lane soft
serve volumes concluded in October
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Logistics division
Results
Results
presentation
presentation
2012
31
Gross Revenue % Growth - Logistics
Growth 20.1%
60%
48,9%
50%
40%
30%
24,5%
20%
18,1%
17,4%
8,0%
10%
0%
Midrand, Gauteng
KwaZulu Natal
Western Cape
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Eastern Cape
Free State
32
Highlights - Logistics
Contended with 16% increase in diesel
price
Operating margin improves to best ever
at 3.5%
Take-on of all newly acquired brands
concluded: 43% increase in line items
ex-warehouse
Owner driver model continues to gain
momentum: 49% and 41% of volume
delivered from KZN and Western Cape
respectively
New Nelspruit depot commissioned
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33
Financial results
Salient features
F 2012
% Change
2 156
15
Operating profit (Rm)
413
15
Cash generated by operations
before changes in working capital (Rm)
452
15
Earnings per share (cents)
278
15
Headline earnings per share (cents)
278
15
Total dividends per share (cents)
200
29
Net debt/equity (%)
10
14 (py)
Dividend cover (times)
1.4
1.6 (py)
Return on equity (ROE) (%)
35
36 (py)
Revenue (Rm)
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Income statement
F 2012
F 2011
%
2 156
1 878
15
(1 233)
(1 065)
923
813
(510)
(455)
Operating profit
413
358
Net interest paid
(11)
(15)
Profit before tax
402
343
(134)
(112)
268
231
(1)
-
Headline earnings (Rm)
267
231
16
Headline earnings per share (cents)
278
242
15
Earnings per share (cents)
278
242
15
Rm
Revenue
Cost of sales
Gross profit
Selling and administrative expenses
Taxation
Profit for the year
Adjustments
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14
15
17
16
36
Revenue (Rm)
2500
2 156
2000
1 878
1 685
1 549
1500
1 190
1000
872
500
0
2007
2008
2009
2010
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2011
2012
37
Operating profit (Rm)
450
19,5%
19,1%
400
19,0%
19,1%
350
18,5%
18,3%
18,3%
300
18,0%
250
17,3%
17,5%
413
16,9%
200
358
17,0%
308
150
262
16,5%
217
100
151
50
16,0%
0
15,5%
2007
2008
2009
Operating Profit
2010
2011
2012
Operating Margin
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Statement of financial position (Rm)
F 2012
F 2011
Move
Property, plant and equipment
156
131
25
Intangible assets
695
660
35
Working capital
128
77
51
979
868
111
840
709
131
Net borrowings
82
101
(19)
Deferred liabilities and current tax balances
57
58
(1)
979
868
111
Assets
Funding
Equity
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39
Cash flow (Rm)
500
11 Interest
450
132
400
Tax
350
300
399
250
Cash from
operations
200
159
Dividends
!%&$
!"#$
150
84
Capex (net)
100
58
50
Funding (net)
86
41
0
Opening cash
Closing cash
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40
Segmental analysis
% of
Total
F 2012
Rm
F 2011
Rm
Change
%
Franchising – Local
20
440
386
14
Supply chain
76
1 614
1 383
17
4
82
95
(13)
20
14
100
2 156
1 878
15
Franchising – Local
64
265
235
13
Supply chain
34
141
116
21
United Kingdom
2
7
11
(30)
Corporate
-
-
(4)
100
413
358
%
%
60.2
60.9
Supply chain
8.7
8.4
United Kingdom
9.2
11.3
19.1
19.1
Revenue
United Kingdom
Corporate
Operating Profit
Operating Margin
Franchising – Local
Group
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15
41
Board changes
Board changes
Panagiotis Halamandaris
Periklis Halamandaris
Theofanis Halamandaris
Stanley Aldridge
John Lee Halamandres
Kevin Hedderwick
Bheki Sibiya
Hymie Levin
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Christopher Boulle
43
Strategy and prospects
Strategy
Pursue acquisitive brand growth in new markets
Build manufacturing capability, push for new business existing plants and new opportunities
Expand logistics capability - capacity and owner driver
Build procurement capability and further develop
“lowest cost producer” status
Open 250 new restaurants - 47 in rest of Africa
Leverage our exclusive Netcare hospital service
provider status
Embark on a major step change surrounding
innovation - leverage our investment in “the Mad Lab”
Improve and expand our retail and wholesale
market presence
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Prospects
Consumer spending, especially middle income,
expected to be muted
Competitive climate and category fragmentation will
persist
Margins will continue to come under pressure, across
the total business
Speed, convenience, innovation and value for money
will remain key drivers
The Group will remain a sound business / investment
proposition
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Questions
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47
You’re in good company
Results presentation
for the year ended 29 February 2012
Group information
Strategic intent
Our business is focused on
growth and development of
best-in-class franchised leisure
brands supported by a
business model which
maximises stakeholder value
creation
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Famous Brands “Recipe”
Our primary orientation remains that of an integrated
franchise system
Building great and enduring brands will always be
our obsession
Our franchisees are our #1 customer and we must
unshakeably offer them a business model that works
We must be consumer driven – always affordable,
available and accessible
Within our industry we will be the lowest cost producer
We will stay out of anything that is not leisure, food
and beverage
Remain a ‘family’ but never lose our high
performance culture
South Africa and rest of Africa are our #1 priority
trading markets
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Business model
Franchising division
International - Houses the Group’s offshore intellectual property
and brands This division is responsible for development of the
existing Wimpy brand
Domestic Mainstream Brands - Houses the Group’s brands
that are of a mainstream nature, namely those brands which
have broad consumer appeal and are wholly-owned trademarks.
Whilst contained within a single business unit, the model of
‘brand stewardship’, or competition between brands is firmly
entrenched through standalone strategic structures
Domestic Developing Brands - Houses brands that are in a
development phase, or are being restructured to compete
tactically within clearly defined trade channels
Theatre of Food Brands - Houses the Group’s niche brand
trademarks which are held through joint venture partnerships in
which the Group has a controlling interest
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Business model
MAD Lab
MAD is the acronym for Marketing . Artistry . Design. This newly
created business unit has been established to bring about a
significant step change in the Group’s marketing, new product
development and restaurant design functions
Food Services
Responsible for extending the Group’s trademarks into the FMCG
retail and wholesale markets
Procurement
Custodian of the Group’s centralised procurement function.
Accountable for procurement of all product, capital equipment,
services and the like. Also serves as the Group’s sales forecasting
and stock movement resource
Development
Provides a turnkey service to all of the Group’s brands and their
respective franchise partners, offering a comprehensive range of
services surrounding all new restaurant openings, revamps and
relocations
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Business model
New business
Responsible for the centralised processing and approval of all new
franchisee and landlord / developer enquiries. Accountable for all
lease negotiations ensuring optimum rental agreements are
negotiated on behalf of our franchise partners. Resourced also to
manage the Group’s strategic alliance partners
Manufacturing
Represents a key part of the Group’s backward integration model,
tasked with manufacturing a range of licensed products for use by
the franchise network. Also accountable for quality assurance of all
manufactured and outsourced products required by the various
brands
Logistics
Represents the Group’s route-to-market, delivering to the franchise
network a complete basket of products required for brand-specific
menus
Corporate
Houses the Group’s ‘back of house’ functions which provide a
service to the various operating business units
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54
Current shareholding
Other
Coronation Life
Managers
28.7%
29.7%
5.0%
Enderle SA (Pty)
Ltd
11.7%
6.3%
8.2%
John
Halamandres
10.4%
Perikles
Halamandaris
Results presentation 2012
Peter
Halamandaris
Theofanis
Halamandaris
55
Operating profit – Local franchising
Rm
300
64%
62,5%
62,0%
ar
5 ye
200
nd
pou
62%
60,9%
9%
250
h1
rowt
60,2%
g
60%
com
58%
150
56%
265
235
54,8%
100
186
54%
204
52%
142
50
112
50%
49,3%
0
48%
2007
2008
2009
Operating Profit
2010
2011
2012
Operating Margin
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56
Operating profit – Supply chain
Rm
160
10%
140
8,4%
8,1%
8,7%
7,8%
9%
8%
120
7%
100
5,7%
5,6%
6%
80
5%
141
60
4%
116
3%
94
40
61
20
2%
61
36
1%
0
0%
2007
2008
2009
Operating Profit
2010
2011
2012
Operating Margin
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57
Operating margin percentages – by division
70
60
62,0
62,5
18,3
16,9
10,9
9,6
60,9
60,2
18,3
19,1
19,1
10,1
11,3
7,8
8,4
8,7
2010
2011
2012
54,8
49,3
50
40
30
20
17,3
9,2
10
0
5,6
2007
8,1
2008
Local Franchising
5,7
2009
Group
United Kingdom
Results presentation 2012
Supply chain
58
Operating margin percentages – Supply chain
14
11,7
12
10
11,7
9,7
9,5
7,3
8
6
4
2,1
3,0
3,0
2010
2011
2,4
3,5
2
0
2008
2009
Manufacturing
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2012
Logistics
59
Ratios
%
Times
50
4,0
45,2
45
42,5
42,0
37,4
40
35
36,1
38,0
36,1
2,4
35,7
34,5
3,0
2,5
2,2
20
3,5
38,2
33,4
30
25
44,5
2,4
2,2
15
2,1
2,2
2,3
2,5
2,0
2,1
1,8
10
1,5
1,6
5
1,4
0
1,0
2007
Rona (%)
2008
ROE (%)
2009
2010
Net Asset Turn (times)
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2011
2012
Dividend Cover (times)
60
Ratios continued
NAV
Debt/Equity %
10
50
45,8
8,7
9
7,4
8
7
6
5,2
5
4
40
35
6,2
30,3
45
30
27,5
25
4,3
3,5
20
14,3
3
15
9,7
2
10
7,0
1
5
0
0
2007
2008
2009
2010
Net asset value per share (R) (NAV)
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2011
2012
Debt/Equity (%)
61
Consumer Recognition
BEST burger for the 16th consecutive year
BEST chips for the 14th consecutive year
BEST pizza for the 12th time
BEST coffee shop for the 12th consecutive year
BEST Breakfast
BEST New Restaurant
Source: Leisure Options
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62
Contact information
Kevin Hedderwick
Chief Executive Officer
+27 11 651 5812
Stan Aldridge
Group Financial Director
+27 11 651 5902
Del-Maree English
Investor Communications +27 83 395 8608
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63
You’re in good company
Results presentation
for the year ended 29 February 2012