Famous Brands Limited (FBR) Earnings Call Transcript & Summary

Good morning, everybody. Welcome on behalf of myself, Darren, and Lebo, our Group FD to our end February '20 financial results presentation. I hope you're familiar with the 2 of us. Certainly, those who follow us would be. Thank you for the interest you've shown in registering for this audio webcast. A specific welcome to the [Audio Gap] for joining us today. And a special welcome to all the Famous Brands family members who've joined the webcast and are interested in following our results. We're hoping that, again, in this presentation, there'll be improved disclosures yet again which will be based on feedback from shareholders and potential shareholders over the past 12 months. We know it's never enough, but we have to balance competitive advantage, and we'll continue to listen and adjust as we move forward. And the same will apply to our integrated annual report, which gets released towards the end of June. In terms of the presentation, the split will be roughly 50 minutes for the presentation, and then 10 minutes questions. NT will take the questions and pass them through. If you could just log those on to the portal, you'll see there's an opportunity to do so on the actual web page. So if you could send those questions through during the presentation. That would be great. I'd also just ask that you maybe excuse some of the short statements at times as the focus is going to really be around a few key issues. Lebo, particularly, is going to focus around the IFRS impacts, namely 16 and 15, which are relatively new to our business this year. And I think you'll see that the results are quite clouded around those particular issues. As well as I'm going to be spending some time talking about the COVID-19 global pandemic, which, unfortunately, we're all dealing with right now. And obviously, these are not part of the results, but I think a part of where we're at right now. So some of the usual info that we have has actually been relegated to the supplementary section, and you can pick that up after the presentation when it gets uploaded to our website. In terms of the agenda, I'm going to kick off with the COVID-19 update and the performance overview. Lebo will handle financial results, and I'll come back and do item 4 and 5 on the agenda. And then together, we will handle questions. So again, just a reminder to please submit those questions via the portal. In terms of COVID-19, I'm going to get straight into that, and I think, really talk about the topic as it is. And I probably can't teach anybody anything about COVID-19 because we're all living with it together. I think what's important to note is that we have treated it as a post year event, which is correct in our financials. So what I'm going to try and do is share some insights about where we are. We really have no more insight on the trajectory out of this conundrum than anybody else does as the variables are significant and impact each industry differently. From our perspective, the next few slides will hopefully give you some insight as to what we've experienced and what we are experiencing currently. What I can say though is that financial year '21 is going to be clearly characterized by COVID-19. And I'm sure no surprise to you, we don't anticipate achieving any of our original budgets any month in this particular financial year. I'm going to try and talk as freely as I can on the individual slides and really I'll just give you some insight in terms of each particular issue. So it would be no surprise to you in a South African context, but I've really just tried to articulate on the slide the different interpretations of lockdowns by each respective government in 3 key markets that we trade in, particularly where we have company stores as well. And I think it's important, really, just to see the commonality between how each market has evolved over time in hindsight, isn't exact science. And it really is a great relief to be able to be -- having updated these slides yesterday with Level 3 being pronounced from the 1st of June from a South African context. So it really helps us to put -- I suppose, close the door on May around Level 4 and moving to Level 3. I think as I said, I will talk a little bit more detail around each of these, particularly on South Africa, a little bit later, and certainly for our international shareholders to get some context of the situation in South Africa. In terms of Level 5, I don't need to educate you around that. I'm really just trying to contextualize you from this slide around what happened in our business and what we had to do. So in Level 5, as we've repeatedly said in announcements, no material revenue was generated. And really, what we had to do was focus on what we could focus on in our particular business. In terms of our brands, we weren't permitted to trade. In terms of the supply chain, we only had one plant that was required to run even though we did have essential service status. And we -- and through our retail business, we did continue to supply retailers, certainly, through their DCs through the Level 5 stage. And in terms of our responses, they really were probably not fundamentally different to a lot of others, really focusing on what we could control in a very difficult situation. So focusing on our employees and really how we could preserve our own balance sheet and the things that we could do within our business. So lots of things have happened, and those have continued to happen post Level 5. So moving on to Level 4, which again is now becoming close to history. We've anticipated generating around 20% of our revenue. And that's because in our Brands business, we were -- we had delivery-only trade, which was permitted. However, though, the curfew did certainly reduce early morning trade and evening trade, which made things very difficult from our perspective and certainly limited operations. In the supply chain, there was primarily logistics-only support to our franchise partners who were trading, and some small-scale manufacturing was required but very minimal. And again, in retail, we continued to supply those retailers. I think critical, our response was really focused on reinstating delivery offering where it was practical to do so and trying to get that competence up, which from a standing start coming out of the lockdown wasn't easy on the 1st of May. We continued with everything that we've done in Level 5, but had to also mobilize our logistics business to support our franchise partners. And in Level 4, about 40% of the brand portfolio has been able to be adapted to the delivery-only model. And during that time, we've obviously made sure that we're preparing our Signature brands, particularly casual dining, around being compliant as the levels unfold So Level 4, we're all living with currently and we'll hopefully move out of on Sunday. So I think really try and focus on Level 3. And in Level 3, we anticipate that we would generate around 35% of our revenue in the month of June certainly. And in that environment, the impact on our business around brands is that we think that the lifting of the curfew and the opening up of additional channels is further going to assist our QSR business. And the Signature brands, we'll be able to trade, but still remain highly restricted. Our logistics business will evolve a little bit more in terms of supporting more number of outlets, and some additional manufacturing plants will be brought on stream. But again, we will be doing that on a very slow and methodical basis. And thankfully, we're going to continue to supply our retail customers through our retail business. So in terms of Level 3, I mean we've continued all the activities that we're focused on prior to that in Level 5 and Level 4, continued to flex the delivery channel. But we are able to see that our casual dining format is obviously going to have to adopt to more quick service restaurant posture and able to capitalize on the available channels in this particular level. In terms of activities, we're also going to continue to ramp up our logistics operation in support of our franchisees. And we think about 70% of our portfolio is going to be adaptable and will be able to trade under Level 3. And about 20% of the Signature brand portfolio will able to operate under Level 3. So certainly, a big improvement from where we were at Level 5, but definitely not the business, as they say, in terms of being able to get back to the kind of levels that we've anticipated. So we -- what we are seeing is that in Level 3 too is that you don't have movement of people, particularly across geographic borders and your transport hub is not opening up, and people moving around for occasions is not really conducive to an expanse of that turnover. But we are very comfortable that generating 35% of revenue, that we're starting to get back in the game. And now I suppose even while we're Level 3, you've got to have an eye on the end game. So we will continue to prepare for Level 2 and Level 1. We do fundamentally believe that because the food services, hygiene and food safety practices are ingrained in the businesses that we are experienced at safeguarding workplaces through those strong operational protocols, and we would be compliant with industry best practice, which we are learning from as overseas markets unfold faster than we have. We are gaining learnings in those particular environments. So I'm going to try and give you some actual data now in terms of how we've been trading. I mean the other is, I suppose, just giving you experiences around what happened, but this is the real stuff. And I think it's important to just highlight this in different phases. So from our business, we've looked at where we've been over the last kind of 2.5 months in 4 phases. And I think what one often forgets is that the damage that was done in Phase 1 where the awareness of COVID-19 was starting to come to the fore. And then there was the state of disaster in the South African context from the 16th of March. And even prior to the lockdown, there was a softening in business quite dramatically, particularly around casual dining and Signature brands. QSR held up a bit better during the state of disaster, but still felt the pain of restrictions. So Phase 3 is no surprise to anybody. I mean there was no revenue generated. So if you look and combine March and April for Leading brands, we were 62% down on the prior year, and in Signature brands, 72% down on the prior year at the end of April. So moving into the 1st of May, which is really the beginning of the end of the first quarter for us, being the end of May, I mean delivery started to pick up. And as I said previously, combined, around 20% of revenue anticipated in Level 4, which is this Phase 4. So quite a tough journey from the 15th of March or even from the 1st of March, to be honest, where people started to have some kind of awareness of this. There was definitely a behavior change in that sort of second week of March. All right. So what does that translate to in numbers? So from a South Africa perspective, we anticipate in May for the first -- using data from the 1st to the 17th of May, 40% of our stores would be trading, and we've realized 20% of budget in that particular Leading brand portfolio. In Signature brands, the picture is not as great, with 14% of stores trading, realizing 9% of budget. So quite tough for us, but are really comfortable that we are actually out there and generating revenue, which is far better than April. In June, the picture looks a lot better, where particularly in Leading brands, we expect 67% of the stores to start trading, generating 34% of their budget. In Leading brands, 20% of the stores generating 15% of their budget. So an improvement there. And you can expect that, that number pulls through fairly evenly on the supply chain, giving us the 35% that I spoke about in the earlier slide. From an Africa/Middle East perspective, I mean it's quite a mixed bag, so I'm not getting to a lot of detail here around certain businesses. But we do estimate that in May, we'll probably do about 35% of the sales of delivery sales. And the impact on March and April is not as significant as Leading brands and Signature brands you're seeing, that about a 30% decline across those 2 -- across those markets for March and April. So in terms of the May performance for Africa/Middle East, we estimate that about 74% of restaurants would be trading, generating 45% of their budget. So there's a slightly better picture in that landscape. That obviously does exclude some of the JV partner businesses that the team are involved, with but are not necessarily managed by this particular team. They're managed by the JV partners. In terms of just some slight detail on there, I'm not going to dwell on that information too much, but just giving you a sense of the projected sales for May and April by market. So quite a complex slide, but you can have a look at that in your own time, really just giving you a sense that there's quite a lot more activity across Africa and the Middle East. Some markets really feeling some pain, but have eased quicker out of April as the lockdown has been managed slightly differently. So generating a very different picture of revenue in AME versus South Africa. And then also just to give you a sense of the temporary store closures in May. So again, some markets are trading okay, others are completely locked down and others are sort of middle of the road, so to speak. So we continued to have some activity around those particular businesses. So really just wrapping up on the COVID-19 update and not wanting to dwell too much. I think it is important to talk about the U.K., although we have said that GBK is under cautionary, so we're going to be a little bit cautious around information. But the U.K. has gone through a very similar process, probably not as tight as South Africa. Our U.K. -- Wimpy U.K. business has traded around 50% of the business from the beginning of the lockdown, and that has been primarily through delivery and been able to operate effectively as a franchise network. GBK was found a lot tougher and was effectively closed through lockdown up until the 1st of May. And from the 1st of May, the team have been ramping up stores at 3 a week, and we are now at 12 stores and continue to try and target 3 a week, probably up until around 19 stores that we think can effectively do delivery and safely do delivery as well as reach some kind of agreement with landlords. The Irish business of GBK has been particularly hard hit and has been closed from the beginning of lockdown and remains closed and probably will be closed until the end of June. So I'm going to move off COVID-19 now. And I'm sure where there are questions, we will be able to take them, and we will continue to provide the market insights as and when things unfold. But hopefully, you've got some kind of impact assessment of how it has affected our business. So what I -- obviously, the main purpose of today is to try and unpack our results, so -- and that was at the end of February. So I'd like to try and jolt you back to really focus on the year that's gone past, and I understand its history, so there's going to be a lot of pre-COVID talk going on here, but it is important that we do unpack these results for yourselves and for our team. And from our perspective, I guess probably not the best set of results to publish, especially around the SA business. But we think that despite setbacks, we made good strides. And the operating losses in the U.K. side, we have much to be proud of in some of these results. I acknowledge the slow revenue growth. But if you strip out GBK in totality out of the base as well, the core business grew around 3%. We've noted that the SA business really did feel the pressure this year, which we're probably not used to. And that pressure on operating profit as a result of the flat SA and the impact of the U.K. has been notable. Our operating profit was down at H1 at 8%, so some pullback from our perspective. So I think we've tightened up a lot in H2. And obviously, there are impacts of IFRS on these numbers, which I think Lebo will help you to understand a bit better. So every number does need to be looked at in the context of IFRS. From a group perspective, I mean we've had quite a busy year, and we ended our 2020 vision and have really refocused our strategy to be focused on the front end of the business with a narrow geographical expansion. And we've constructed our 2021 to 2023 road map, which we believe is the right focus in terms of being customer inspired and brand-led, with particular emphasis on our Leading brands. And from our perspective, believe that there's been a significant step change in the performance management, with real focus on cost leadership and return on investment, which every business focuses on, but I think we've done a particularly tough job this year of getting the team aligned around those issues. So if you look at the South African business in terms of just a quick snapshot of the year gone by, I mean we still believe our brands, our consumer brands and what we sell people put in their mouth, and I think that, that's an important part of our business, and we continue to win awards around those brands. And as you know, we've split them and we continue to drive that focus around Leading brands and Signature brands quite significantly, especially around correct allocation of resources. And Leading brands did feel some pressure in H2. I'll talk about that a bit later. And typically, as has been happening globally, quick service outperformed casual dining. In Signature brands, I mean we've continued to struggle there. I think there's a really overtraded market. And we continued to apply remedial measures to improve returns in that business, and I think that we're making good strides. And on the supply chain side, it's been a particularly tough, tough time with the rationalization of product lines coming through on Signature brands, but also weak front-end demand, low food inflation and having to take margin sacrifice to be more competitive. The supply chain also has probably felt some effect of the reallocation of corporate costs, which has really been a 2-year program. And we're comfortable that we're at the end of that program right now. And we have a much better handle on what each of these divisions cost us to run. In terms of Africa/Middle East, we think we've had a really good year there. The team has done a great job, lots of activity, a broad performance that I think has been very good in the bulk of the markets reporting solid growth. Some nice agreements being signed with some new players in the Middle East around some of our core brands. And also, really starting to get our feet a lot more entrenched in some of those African markets with opening company stores on a very cautious basis to really set the standard, as we've done in Lagos and Nairobi, and really feeling positive effect from those decisions. Wimpy U.K. has had a really good year. Our team has done a great job, particularly around capitalizing around delivery, work around the menu and some really positive stuff on revamps. GBK, as we've kept the market appraisers, had a really good year up till the end of Q3. So we've been quite comfortable with the remedial measures that we put in place. They have worked. But we've felt a slowdown in Q4. And we believe that the business was on track for the 3-year program. As you'll see later, we've met the targets that we set for the end of 2021. But 2022 is going to be really, really tough around the impacts of COVID-19. Ireland in the year gone by has certainly underperformed and not something that we are comfortable with, and lots of work to be done on the Irish business. It's had everything it needs to perform, and now there needs to be some work done around actually getting all that pulled together to happen. And as a group, we think we've built business capability this year, as we try and do every year. Some -- there's some consistency on this slide on the 6 items. So the first 4 items are really centered around things that we have probably been focused on for the past 2 years, so really bringing those to fruition and bringing them to an end. The last 2 items on there, being focused on strategic risk culture and really the Exco team build, I think, are quite big ticks for us this year and projects that we've completed. And I think the one is around a mindset change in terms of risk and really bringing that through and how we think about the business better. And I'm really pleased to say that I've got a great team that I work with. And I think that the Exco team has really started to come to the fore, and we've added experienced expertise and diversity to their team, so I'm really pleased to be working with a great team like that. And I'm sure that the business would agree that I think Exco has started to really help across the whole business. So I'm not going to dwell too much on those. Now I'm going to hand over to Lebo to really unpack the financial results. And I'll come back and really talk about a few of the other issues and close out. Lebo, over to you. Thank you.

Thank you, Darren. Good morning, ladies and gentlemen. I will unpack our F 2020 financial results in the next 9 slides. At the start of his presentation, Darren discussed the impact of the COVID-19 pandemic on our operations. And before I continue with the salient features, it is important to highlight that the financial impact of the pandemic was treated as a non-adjusting post balance sheet event. At this stage, it is not practical to determine the full financial impact of the pandemic given how fluid the development regarding the pandemic have been. Accordingly, our F 2020 financial results have not been adjusted to take into account the financial impact of COVID-19 on the business. Moving on to our salient features. Overall, our results reflect the challenging trading conditions that persisted during the F 2020 reporting period across the markets in which we operate. Despite the challenges, we are pleased that our cash generated from operations normalized for the impact of the new leases accounting standard, IFRS 16, remains strong at ZAR 1.1 billion, representing an increase of 11% compared to prior year. The normalized cash realization rate improved to 107% from 97% last year. A summary of the impact of IFRS 16 on our results is provided on the next slide, which we'll attend to shortly. On a comparable basis, EPS grew 180%, mainly as a result of a substantially lower GBK-related impairment of up to [ ZAR 3 million ] compared to the 874 million in the prior year. As noted in the recent cautionary announcement, the Board has decided to not provide any further financial assistance to GBK following the severe impact of the COVID-19 pandemic on the business. We also informed shareholders that this decision may result in our investment in GBK being impaired in full. Shareholders will be kept appraised in this regard. The carrying amount of GBK's cash-generating unit at the end of F 2020 was GBP 119 million, which is about ZAR 2.4 billion at the year-end exchange rate of ZAR 20, gross of the IFRS 16 lease liability of GBP 51 million, which is about ZAR 1 billion. In the event that GBK's value is impaired in full, the IFRS 16 lease liability as well as other liabilities recognized at GBK level would remain recognized in full until further resolution, notwithstanding the impairment of assets. On a comparable basis, HEPS, which is not affected by impairment, grew 40%, mainly due to GBK reporting a lower operational loss compared to prior year. This is testament to the success achieved by the timely implementation of the CVA process. The increase in our gearing level to 143% reflects the impact of IFRS 16 on our balance sheet. With ZAR 1.4 billion, these liabilities added to our net debt position. On a comparable basis, our gearing would have shown an improvement to 66% compared to 109% in the prior year. We have previously communicated that our medium-term target for net debt, excluding IFRS 16 lease liabilities, is between ZAR 1 billion and ZAR 1.5 billion. At the end of the reporting period, our net debt level, excluding IFRS 16, was ZAR 1.2 billion, and that's within our medium-term target. Our approach to our gearing levels and debt maturity profile is conservative and proactive given the business' high level of cash generation. In this regard, we successfully concluded in March this year the refinancing of the debt structure we published last year, which included a ZAR 600 million bullet payment scheduled for December 2021. Details of our refinanced debt structure, as set out in the subsequent events note in our summarized financial results published on SENS in Note 20. In context of the anticipated headwinds related to the impact of the COVID-19 pandemic, we secured an additional ZAR 300 million general banking facility at the end of April. In this regard, we wish to extend our appreciation to our primary lender, Nedbank, whose support of our business has been unwavering during these challenging and unprecedented times. As at today, the ZAR 300 million facility remains unutilized. Also linked to the financial considerations related to COVID-19, we have considered the group's current cash position and available facilities, and are of the view that while we will be able to service our debt obligations in the foreseeable future, under the current circumstances, it is deemed prudent to preserve cash to facilitate balance sheet flexibility. Accordingly, the Board has taken the decision not to pay a dividend for the second 6 months of the reporting period. A matter to note before moving on to the next slide is that our results for the year ended 2019 have been restated to account for marketing funds, revenue and expenditure as part of the group's income statement, in line with the requirements of IFRS 15. Marketing funds or funds contributed by franchisees for the marketing of brands. Previously, the group accounted for marketing funds by recording the marketing fund surplus or deficit on the balance sheet. The restatement followed legal advice received during the reporting period, which clarified that the marketing funds do not legally belong to franchisees, notwithstanding that the group retains the legal and statutory obligation to report on the use and management thereof. We remain fully compliant with the requirements of the Consumer Protection Act. The restatement had a negligible impact on the group's operating profit, EPS and HEPS. Details of the restatement are set out in our summarized financial results published on SENS in Note 21. This slide provides an overview of the impact that IFRS 16 had on our full year results. On the income statement at operating profit level, IFRS 16 adoption resulted in the operating profit increasing by ZAR 43 million. The reason for the favorable impact on operating profit is that the depreciation charge under IFRS 16 is typically lower than the rental that would have been expensed under the old lease standard. The depreciation under IFRS 16 is calculated on IFRS 16 right-of-use assets, which are capitalized at the discounted value of rental payments and depreciated over the lease term. However, offsetting this favorable impact is the IFRS 16 interest resulting from unwinding the interest on the IFRS 16 lease liabilities. The impact on the cash flow is due to the presentation requirements for the cash flow statement. In short, the ZAR 194 million improvement in the cash generated from operations is offset by the separately disclosed IFRS 16 interest and rental portion of payments made to lessors and financing activities. It is also worth noting that the majority of the IFRS 16 impact on our group results relates to our GBK business, which is predictable given the company-owned store model. A key part of our focus over the past financial year was on embedding the discipline to ensure that costs are allocated to the correct segments in order to enhance the accurate presentation of our segmental performance. This discipline was implemented about 2 years ago, and we are pleased with the progress made in this regard. Linked to segmental performance is the measurement of return on capital employed, ROCE, for our reported segments. As part of our endeavor to continuously improve our disclosures, we have provided on this slide the ROCEs achieved by our different segments. While the returns from our U.K. segment remain negative due to our GBK business, we are pleased with the group's ROCE of 20%, which measures favorably relative to the group's weighted average cost of capital of about 12% post tax. I will analyze the revenue and operating profit lines when focusing on the segmental performance in the next few slides. Net finance costs of ZAR 218 million include a net summing to ZAR 1 million interest costs relating to IFRS 16. Excluding the impact of IFRS 16 interest, net finance costs would have improved to ZAR 147 million from ZAR 227 million in the prior year, mainly as a result of the lower interest rate on the refinanced debt structure. The ZAR 219 million tax expense represents an effective tax rate of 34%, of which 3% mainly relates to unutilized tax losses and a further 2% relates to the impairment recognized. Our SA revenue is up 3%, mainly driven by the solid performance from our Brands portfolio. This gain was reversed at group level due to the decline in GBK's top line. Revenue related to marketing funds is now disclosed as part of our segmental report. While the revenues are significant, the impact on operating profit is neutral, as the funds collected are spent on the marketing activities of the respective brands. Overall, from a revenue perspective, 78% of the group's revenue is generated from South Africa. Key to highlight on this slide is that, while 78% of the group's revenues generated from South Africa, from a profitability perspective, 93% of the group's profits are derived from South Africa. While showing a decline on prior year due to the overall weak economic environment, our SA business delivered a strong operating profit of ZAR 845 million for the review period. Details of our corporate costs are set out in the full segmental report included in our summarized financial results published on SENS on Page 17. As indicated earlier, the majority of the group's IFRS 16 impact relates to GBK. While GBK's operating loss improved from ZAR 82 million last year to a loss of ZAR 11 million this year. ZAR 25 million of this improvement relates to the adoption of IFRS 16. The group's margin of 11.7% would have been 11.2% on a comparable basis, that is after adjusting for the impact of IFRS 16. A supplementary slide has been provided to show the comparable margins at divisional level. The reduction in South Africa's margin from 53.2% to 48.5% is largely a function of the following 5 items: one, significant investment in our technology capability for the Leading brands portfolio; two, margin pressures across our business resulting from sustained low food inflation and higher operating costs; three, relocation of our Leading brands team to new offices to ease congestion at our Midrand Head Office Campus; four, ones-off relocation costs relating to the commissioning of 2 logistics distribution centers; and five, margin sacrifices to remain competitive. The AME margin was positively impacted by the nonrecurrence of the remeasurement of the put option we have in place with our JV partner in Botswana, which had a material adverse impact on the prior year margin. The key changes on our balance sheet compared to prior year are related to the adoption of IFRS 16, which we covered earlier. As also referred to earlier, our net debt position at the end of the reporting period, excluding IFRS 16 liabilities, was ZAR 1.2 billion. When I presented our results last year, I referred to our business having a strong economic mode. The group's strong cash generation during the reporting period is testament that the mode remained robust. We paid out a dividend of ZAR 190 million to our shareholders during the reporting period, while deleveraging our balance sheet by ZAR 430 million. As we look forward to navigating the unprecedented challenges created by the COVID-19 pandemic, we are confident that the capabilities we have continued to build over many years in our brands, manufacturing and logistics businesses will ensure that we are well positioned to overcome the anticipated headwinds. With that, I will hand back to Darren.

Thank you, Lebo. I'll move on quite swiftly. What I can say though is that I'm very proud that this year, in terms of our key strategic imperatives, that we are well on track and we have done what we said we're going to do, and I think that's the most important thing in business. And you're going to face many challenges, but doing those things is important. From a brand perspective, I think it's really important to highlight that the main brands are at the heart of what we do and their performance drives the whole business. They are 24/7, 365 and cross-border. And our franchise partners do a phenomenal job in operating those businesses. So from a brand perspective, this is really what drives the heart of the business. And in the SA business, at 6.4% growth this past year, I think it's very acceptable in the current environment. The AME number, obviously affected by exchange rates, but a very good performance as well across Africa/Middle East, and really felt some pain around GBK because of the store closures in the prior period and the 8 store closures this year on system-wide. From a brand perspective on system-wide, Signature brands due to store openings leading the way there, and Leading brands at 5.7%, giving us overall of 6.4% because of the contribution of Signature brands being much smaller. From a like-for-like perspective, which is a key measure -- and I mean this slide is really what we focus on primarily in our business around driving growth. The Leading brands like-for-like growth performance was very good at 3.5%. We're very, very comfortable with that particular figure. Signature brands really found it difficult and at half year was at 1%, so second half drop, leading us to come 0.8%, really tough, bringing the group number down to 2.9%. But the standout performer there being Leading brands. And when I talk about the second half, you can see there on that slide around like-for-like on a month-over-month basis is that we just didn't have that nice peak that we typically have in December from a growth perspective. It was probably one of the more muted months out of those various months. And Signature brands was pretty flat throughout the whole year. But you can see, particularly H2 was rather tough. From a GBK perspective, the like-for-like though was very pleasing at 2.7%. And you will recall that, at H2, that number were looking much better, but we had a really, really tough Q4, which has really put some pressure on the business across the board. From a retail perspective, again, I think you're going to hear, retail has spoken about a lot more as the way we've restructured the business, which I'll talk about later. But again, slightly off the pace there at 0.5% decline in our business, and there's work to do there. But I'm comfortable we're making good, good progress around that particular area of focus. In terms of restaurants opened, probably one of the slowest years we've had in a long, long time, at 122 restaurants opened across the group. From our perspective, not what we are accustomed to, and there's work to do in that regard. So from our perspective in terms of growing brand capability, I think the most important aspect from our side is really achieving the goals that we set for ourselves. And unfortunately, we didn't achieve all of them, and we really have work to do around driving margin on Signature brands. And I think we've set ourselves a target of 25%, which wasn't for this year-end, but certainly, it was 18 months from when we said it, so that's in the current year ahead. And that's going to be particularly challenging now with COVID. We also have fallen behind slightly on what our expansion plans were in UAE. And innovating customer-facing technology also had a setback in that we didn't launch the Wimpy app when we said we were going to launch it, and there's some various technical issues around that, so a disappointment for us. What I am comfortable though, on the other 6 aspects that we've really achieved what we wanted to achieve. So some work to do on execution, but overall, comfortable that we've done the right things. So moving out of brands and to just talk about GBK for a second. I mean typically, we unpack GBK a lot more. But as you know, sort of 12 months ago, we've put a plan up here in terms of what we would achieve, and we have achieved that for F '20, so we've beaten the targets that we set out. And we believe that at year-end, we're well on track for F '21 and F '22, but that was pre-COVID. And I think we have to be honest, it's highly unlikely that we are going to achieve these objectives, certainly, in F '21, and hence, the strong review taking place for GBK right now. In terms of supply chain, so I've moved on relatively quickly around brands, but supply chain has really had quite a tough year in a low inflation environment. From a logistics perspective, we've continued to build capability, with the key being able to in-source retail distribution, which not many people are able to do in this climate. There are supplementary slides around that in terms of some further information. And really, a big project was relocating our Western Cape and Free State facilities in line with Project Decade. And again, there is an update on Project Decade in the supplementary slides in terms of how we've adapted that project to the new COVID-19 realities. And once again, also some details around what the factors have been that have impacted logistics so heavily this year from a profit perspective, and really just to give investors comfort that there are, I suppose, a perfect storm scenarios there that really combined and have eroded margins. So we still remain confident about our logistics business, but it is important to understand that it's going through a transition phase currently. In terms of our growth, I mean logistics had pleasing growth, considering at the half year, we're at 3%. We ended up the year at 4%, a nice spread across the business. Export continues to decline, largely as a result of localization of the supply chain in Africa and really sometimes experiencing border closures, which we again experienced in the past year through various countries for temporary measures. The Project Decade project, I'm not going to dwell on too much. Again, please refer to those supplementary slides. But we have flawlessly execute on that project. We've done what we said we were going to do in this particular financial year. In terms of manufacturing, probably felt a lot more pain than it has in many years previously. But I'm comfortable to say that the team remained focused on the capability focus and really focusing on the embedding the blueprints on asset care as well as focusing on key KPIs around productivity, and some key plants benefited from that, particularly bakery, sauce & spice plant and Lamberts Bay Foods. So really good progress made there on getting the fundamentals reset and becoming a way of life. It was a tale of 2 stories, though, because our own plants declined 6.3%, largely as a result of the low inflation and some margin sacrifice. I'm not going to dwell too much on Lamberts Bay because we reported that on 3 periods now. We're at the end of the losing of a customer nearly 2 years ago, which we've now annualized. To say that the business is in good shape is the right thing to say, although that sales number doesn't necessarily reflect that. The Serviette plant is an anomaly. I'm not sure there's anything that we are doing particularly right there. There has been some inflation on paper, but we also can't determine how consumers utilize the product. So it's not necessarily a sales-driven plant, whereas the others all link directly to brand performance and menu performance. In terms of our JV plants, a particularly pleasing year at 10.5% growth, which really kept manufacturing up. Even though we were 5% down, you see the figure versus the previous number, the JV plants managed to pull our overall manufacturing facility up. TruBev is not quite a true reflection of the picture as it's not a full year that it's comparing to. But again, as we brought the water plant online, very pleasing. Cheese Company expanding the basket. Coffee Company losing some independent customers and feeling some low inflation. And Great Bakery Company feeling the pressure around menu mix and change. And Cater Chain, again, also not quite a fully comparative period because we had industrial action for a period within the 24-month analysis. So you do have a little bit of a lift there, but also have some line additions at Cater Chain, which have brought in some new revenue. In terms of manufacturing, we've done what we said we were going to do, which is the most important in this particular business. So well done to the team. These were the goals we set for ourselves, and we've achieved them. Our retail business, I'm not going to dwell on too much because I did talk about this at half year, and we were in the throes at half year of bringing retail back into our own fold from a logistics perspective. So all we outsource now is the merchandising. So we have a stand-alone viable business. Although if you look at the numbers in the current financials, it doesn't look that way, but I think you need to let us annualize those numbers and finish what we are doing here. At a revenue of approximately ZAR 170 million per annum, we think we've got a nice business platform to leverage and to move on from. We haven't in-sourced the distribution on frozen product. We continue to have a third-party who does that, but obviously, we do the manufacturing. So this is the nice, exciting part of the business. I think something we've added this year and is starting to become a core competency. And it might be small now, but we believe it has opportunity to grow into the future. So I'm going to really start closing up now in terms of what's the importance and what are the imperatives for the future and definitely over the next few months, more importantly. So this, as you can imagine, has been very difficult to navigate. While you're never getting COVID, you don't want to take your eye off a long-term prize, but you have to manage what's in front of you. So although we've updated our vision strategy marginally over the next 3 years, we do believe it's still applicable, and we still believe that we're on the right track from a vision perspective. We achieved our 2020 vision, and we have set this road map for the next 3 years. And we believe that being the leading innovative branded franchise and food services business in SA and selected markets is us, and that's what we will be. And we're very confident around the strategic intent to achieve that. And the whole organization is focused around that particular vision, and we've been working hard internally to make sure that everybody is aligned. Although the outlook, in general, is probably this slide, as you can imagine, has changed quite a lot as COVID has evolved. And we know that conditions in all of our markets are going to remain challenging. I showed you some of the performance for the first quarter. And we think that the restaurant landscape is going to be irrevocably transformed, and it will look different, and we're going to be a player in that market. We're not -- certainly not going to give up in that market. And we have to be honest in that casual dining is going to be slow. It's going to be a tough comeback, and it's going to likely be a high attrition rate across the industry. The other real issue is that, besides the local economy opening up, the global tourism is certainly going to make a difference. We are quite reliant on that in SA, and there's no doubt that it's going to have an impact on our business. But we are like everybody else, we don't have a crystal ball, but we're fairly sure that the new normal is certainly only going to be evident in the next 12 to 18 months. What we're seeing today is a phase that we're going through, and we have to adapt to that new normal. So these are probably a few important call-outs in terms of closing out the presentation. And really, our key focus on capital management and allocation is going to be very, very important moving forward. We think that cash generation is still a core part of our business and a core strength. We think that the low overhead cost structure positions us well for recovery, and we're going to continue focusing on that free cash flow. We have been and continue to drive cost reduction initiatives. We have made it very clear to the market that we are not able to provide financial systems to GBK from the SA balance sheet. And we are trading under cautionary to be able to find a solution that fits for GBK to ensure the long-term sustainability of that business. Our cost drivers around supply chain continue to be a key focus area. Even though we've done so much work on that over the past 2 years, it continues to be an important area. Lebo spoke about the ZAR 300 million earlier, and we really want to make sure that we reduce that temporary facility if we use it, and that will be prioritized above dividends or share buybacks. We are going to be funding to a very immaterial basis, PAUL and By Word of Mouth, PAUL which we hold in the license, so our part of the business are going to require assistance. And we think that there's 2 smaller businesses that may require some assistance which is not material, being our design business and our Nigeria business, in which we're a JV partner, which both as a result of the COVID-19 pandemic. So from a capital management allocation, really just to assure the market that we are very, very focused around this particular matter and have the full support of the Board around that. We also intend focusing on a consolidation program. We continue to rationalize our Signature brand activities and really focus on what counts there. We will be exiting some noncore manufacturing operations and really focusing on what counts and what's important in terms of our core facilities. And if necessary, we will outsource nonviable low-volume business. We have to continue to reduce our shared services and corporate costs. We have a good handle on those now and continue to make good strides in how those costs are allocated. And of course, like any other business, we are going to be very, very tight on CapEx, and we'll only focus on essential CapEx. And Project Decade has really been turned on its head in terms of focusing on rationalization around logistics as we're expecting lower volumes going forward. But it's not all doom and gloom. I mean we continue to have an appetite for growth. We continue to want to expand and we do believe that the current challenges will also present opportunities. And we are very confident that we are well positioned to do that. We think we can still grow scalable Signature brands, and we make good progress in that regard. We will continue to innovate and reinvigorate our Leading brands to gain market share, which is really a key part of the business. A lot of work has been done on that in the past year. And I really believe the team has got good traction and making good progress. The focus on aligning costs in the supply chain to assist our franchise network is critical, and that's something we're not giving up on. The back end is in support of the front end, and we continue to follow that philosophy. Very excited about AME. We think that the contribution from Africa/Middle East about leveraging existing brands and markets is there. We have a nice footprint to work with. Yes, it's small, but I think you've seen the benefits this year coming through in the results, and we continue to be excited about those opportunities. And I touched on the retail business that we've taken back in-house. So again, other than the merchandising, we think we have a nice position that we can leverage there, and we're going to improve our competitive posture in the retail business. So while all of those are going on, we think that, in summary, we've got a solid business model, with competent teams. So we're definitely going to be able to facilitate our group's recovery post COVID-19. And we think that our diverse portfolio is well structured and it's a very strategic portfolio. We have agility as a business, which is an important aspect, and we've seen that through the COVID-19 pandemic. And we also have the ability to innovate across brands and formats, which is going to be key to driving growth in the new normal. So we have lots to be excited about, and we think that this slide captures where we are, both on our 3-year plan, but also in the post-COVID period. So I'm going to close out there and really just ask TV if any questions have come through. Unfortunately, we have run few minutes over we planned, but we're happy to stay and answer those questions. And TV, have there been any questions?

Darren, there are some questions off the platform now. I've got a question from Florian in LGM. And the question is, can you please provide an update of the financial strength of the franchisees? And will 100% of them reopen? And this is subsequent, obviously, to COVID and the lockdown.

Yes. So I mean the -- I mean, it will be difficult to talk on behalf of every franchisee. I mean there's absolutely no doubt, like every business, they are stressed because they have been restrained from trading. But there are lots of measures in place that they are able to tap into, and they are doing that. So we've seen -- I think if you look at the 1st of May, a bounce back with people getting back into the businesses and getting back into delivery, I think, is testament to that. So yes, we accept that the franchisees are going to be stressed financially as are we, but we know that there's going to be lots of help out there from banks, landlords, ourselves, to be able to help them navigate that, as well as from the government in terms of UIF, et cetera. So we think it's going to be tough, but we are not worried that there's going to be a sudden massive attrition rate. But I will say that landlords do hold the key in terms of how we navigate that return. And already, the property industry group in South Africa has been very engaging. So as an example, in South Africa, there was a directive that 0 rent will be paid in April. Now that really helps the franchisee hibernate their business.

Perfect. Next one is from Vanessa Van Vuuren from Sanlam Investments. She says, thanks for the update. Could you elaborate on the ability to ramp up on your delivery initiatives versus dependence on third-party online delivery platforms? And when they reach capacity, they shut down, and also, they seem to take significant amount of the revenue. Also, preparedness for collection in Level 3. Are the stores ready?

Yes. So thanks, Vanessa. I mean we are very confident in our delivery abilities. I mean we believe it's a competitive advantage. And as you know, we have never spoken delivery stats in these presentations for that very reason. I think the aggregators fulfill a very, very important job. But I mean it's like any business. You can only plan for x amount of capacity. So we're very sympathetic to the challenges that they are experiencing. And to be honest with you, we have experienced similar challenges in our own business. You're dealing with an extreme demand situation in a very tight capacity environment, with curfews, COVID regulation. So I think what they've been going through is understandable, but we're very confident in our ability to ramp up our own delivery, and have been doing so from 1st of May. It wasn't new for us. We've been doing it for quite some time. And yes, there are economic costs to using aggregators, and we balance those out. I think there's much that's been said in the press around that. But I think they service a market at a price, and you're welcome to use them if you wish to. I think they invest significantly in tech, and we use those platforms as well as our own platform. So there's nothing that one could argue there that they're not doing a good job. But we continue to keep our own delivery capability. And yes, this week is going to be very critical about ramping up for Level 3. And we are confident in our ability, both from a safety perspective as well as an operational perspective, to manage that, although I will say, Vanessa, that the regulations are not out yet. So the devil is in the detail, and we would be -- feel a lot more comfortable about making that statement to answering your question fully when the regulations are out, I think either today or tomorrow.

Perfect. Thanks, Darren, for that. Next question is from Omri Thomas from Abax Investments. Thanks for your candid presentation of a very challenging time in the rich history of our lead fooding franchisee. If GBK gets fully impaired, it will wipe out more than the equity within the business, leaving FBR technically insolvent. How would you address this? And one of the options considered was the right issue here by Omri.

Yes. I think -- I mean I think we're well aware of that issue. And Lebo can potentially answer that one.

Yes. Okay. Thank you for that question. The issue that you're thinking of, it relates to technical insolvency. So we have considered all aspects related to that, and we're comfortable that from a solvency perspective, particularly the requirements of the Companies Act, are more aimed at commercial insolvency as opposed to book value insolvency that's especially triggered by an impairment. So from a commercial perspective, we're comfortable that we wouldn't be in a position where we are unable to meet our obligations because this would be a noncash impact.

Perfect. The next question is from [ David Abril ], from [ Torchlight Capital Management ]. He indicated, thanks for the update. We're trying to understand what the new normal will be like. Could you kindly give some color on the unit economic impacts for your sit-down restaurants? Presumably, patrons have to be spaced out more. What kind of capacity loss do you anticipate? Is there a plan to turn tables over faster or raise prices to compensate for the lower restaurant capacity?

Yes, David. I mean I wish I could answer that other than giving you a thesis. I mean there are so many variables in that answer. And unfortunately, it's going to be determined by the authorities, not by ourselves. So if you see what is happening in certain markets, where they're talking about 30% capacity, there's not a standard number that's emerging. But you're absolutely right in terms of -- the question is that around unit economics. There are going to have to be changes. So whether that be in the cost structure, whether it be in the rental structure, I suspect that it probably won't be in consumer pricing. So I think you asked that in the question. It's more than likely going to be around the structure of the P&L and also trying to make sure that the consumer experience is not a sterile one. So I wish I could answer your question in detail. There are lots of scenarios around that and trying to understand the new normal. And I think one also there has to be mindful is that, clearly, that is only going to be temporary. I mean, again, I can't see where this thing is going to land up, but there's going to clearly be a phase in period where capacity is obviously reduced, as you've said, for social distancing, but it's likely, over time, things will get back to normal. The other issue is, besides the unit economics, is the consumer going to want to come back? So it's really around how you repurpose those restaurants for delivery, for takeaway and to accommodate social distancing. But there's lots of thought going into that, and we're already starting to see some of that happening in global markets.

Okay. Perfect. The next question is from Donatas from LGM Investments. And the question is, do you see an opportunity for a larger M&A in SA? Is there a situation where you might need to raise more capital?

Yes. I mean I wouldn't like to speculate on the capital structure. I think it was made clear about what we've gone and done in the short term. We don't know where the long term is, but we've got the history of never having raised equity. So yes, we're feeling, right now, very confident in the plan for the next 12 months. Now regarding M&A, we'll obviously always look. But right now, our primary focus is on ourselves and our franchise partners and making sure we navigate through this particular issue. And I'm not sure that M&A is the solution to do that. I think one has to do the hard yards right now and navigate through this crisis and really dealing with all the operational detail and making sure you keep your balance sheets in a shape that can actually accommodate the challenges that you're getting through every day.

Perfect. Darren, I think there's another question from Richard Hasson from Electus Fund Managers. And the question is around that, what is the percentage of your franchisee base do you expect to permanently close as a result of COVID insolvencies? And what will be the impact on profitability as a result of this?

Yes. So I mean we don't have an answer to that question. I mean it's very early days. I mean we're still navigating this crisis. I mean it's impossible to determine whether a franchisee is going to reopen or not when you're dealing with the hypothetical situation. So obviously, this week will be a key week to understand that, now that Level 3 has been announced, but that's only 2 days old. So to assess the impact on the earnings is going to almost be impossible. But as I said earlier in -- around the model, I mean there are a lot of factors that will determine whether a franchisee can reopen or not. Not just his own ability because you've got landlords, you've got banks, you've got ourselves, you've got staff. So he's got to bring all those factors together. We are not seeing that our franchisees are having any particular challenge that is worse for them than anybody else. So if all those factors come together and we are working hard around making sure those happen, we're not expecting a significant attrition rate, although it would naive of me not to believe that there is going to be some attrition. That's just the nature of what COVID has done. Demand, simply, is going to be less than where it was. But it's really too early to tell in terms of that. I think at half year, we'll probably have a much better indication of what that base looks like.

Perfect. And a question from Florian again. What is deemed to be core, and what is under consideration for these investments?

Yes. So I mean we're not publicly going out there and talking about the details. I mean we work through that slowly. But as I said, it's around -- so the key areas that I've spoken in the presentation, if you summarize them, there's still some Signature brand activity which we need to rationalize. There's some manufacturing capacity and operations that we think may be superfluous. And there is some logistics rationalization. In other words, Project Decade was around expansion. We think it's now turning into contraction. So those are really the 3 areas. And then obviously, we have made it very clear around the fact that we are not willing to put further capital into GBK from the SA balance sheet. That clearly, there's a conversation to be had there. It doesn't mean that GBK doesn't have a future in any shape or form. It just means that from -- we don't have the ability right now to make decisions about putting money in the U.K.

Okay. Perfect. I've got a question from [ Patrice ] at [ Moriah ]. Leading -- with regards to Leading brands, the question is around the percentage of effectively, I think, stores that are set at malls versus outlets, which are going to be sitting and drive-throughs and other stand-alones effectively. I think that's really what Patrice is trying to add on this one.

Yes. Let me -- I don't want to interpret the question, but let me say what I'm thinking it might be. We don't disclose the percentage of our state in different channels. But I mean it's not rocket science to work out that there will be a significant number. Some of those are able to obviously deliver, but very few. And they will obviously be able to do takeaway depending on what those regulations are. So I'm working on an assumption there. But there's no doubt that mall traffic is going to take time to come back. So -- but we do think that QSR and our brands and casual dining are well positioned to work on lower volumes if landlords work with us and the franchise partner to come up with a commercial model that works with it. The reality is you're not going to be able to have the same old structures you had going into COVID.

Thanks, Darren. I think last question that we'll take on is from [ Derek ]. The question is, please, can you give me an indication of the fixed cost of the business, preferably excluding GBK and how you have reduced this with the COVID in mind?

Yes. We certainly haven't disclosed that number and probably not likely to. We have a very, very good handle on that number. And it's probably a lot lower than people believe. So yes, but we haven't disclosed that number. I think it's certainly a question that we can take into account and think about for half year.

Perfect. Thanks, Darren. I think that's it. The rest of the questions, I think, will -- management will definitely attend to as soon as possible.

All right. Thanks, NT. I'd like to just then close out, if possible, and really just say thank you to a lot of people that have been involved in trying to get this process to come to an end. It's been quite a tough audit, particularly in a lockdown period. I mean the audit really just started as lockdown started. So particularly, thank you to Deloitte, for all the work that they've done, and Shelly, to you, really been fantastic in a really tough environment; to Nedbank for working with us; our sponsor, Standard Bank, and really to everybody at Famous Brands, including our franchise partners for all the efforts over the past year; and to my Board and executive colleagues for their personal support, really have helped me a lot. And it's always nice to have some support, particularly as you see through a crisis like this that one has lived through and really how people stand up in tough times; and a personal thank you to Santie Botha, our Chairman, who's always gone way and above the call of duty and is always personally a great support to me, so thank you. And then lastly, just to the team that puts us together, to [ GMF ], to [ Yolanda ] and [ Dalmary ] behind the scenes, thank you. And we look forward to catching up with you at individual sessions, in terms of shareholder and non-shareholder, but also at our half year results. So thank you very much.