Famous Brands Limited (FBR) Earnings Call Transcript & Summary

Welcome on behalf of myself and Neli to our end February '25 financial results presentation from our Midrand offices. Thank you for the interest that you've shown to register for this live audio webcast. It is much appreciated. Neli is now well entrenched having concluded another successful year-end process with the support of a great finance team across the business. Special welcome to our Board members of Famous Brands as well as the Famous Brands family from our various offices. These are results we've all worked hard to produce in a tough trading environment, and we're very, very proud to be presenting these results on behalf of all of us. Just to recap about the driving force in our business. And I've been on record for saying this many times, that nothing happens unless a sale is made in a restaurant and more specifically in our business, a franchise restaurant. And 30 years of being listed is a testament to the strong foundations of a family business that was built on solid fundamentals and values which we still live by today and those values that we're very proud of. In this set of results, you'll see that there's probably less movement than there has been over the past few years when we felt some bumps in the road, particularly in SA. But the underlying business anchored by our leading brands is rock solid, and we have numerous exciting platforms for growth, which you'll see within our results. In terms of the agenda today, I'm going to be talking through items 1 to 4, and then Neli will take over for the financial review, and I will come back for a brief strategy update and outlook, and then we'll take questions. We roughly hope the split will be around 50 minutes up until Item 6 and then 10 minutes for Q&A, which Ntando will handle on our side. The presentation, together with supplementary slides, which will be provided when the presentation is uploaded, we hope will assist to answer some obvious questions you may have. You can please log questions via the portal. It's on the top left of your screen, and you can make the full screen in your presentation in the bottom right-hand corner of your presentation of the block that you're seeing. In terms of the external environment, there's probably not much I can add to the conversation on the economy. We've been through a really tough period, and there's a lot of macro noise and distraction that we've traded through, particularly in this trading period. But it's all about the consumer, and we know that the consumer is under financial pressure, particularly in the SA context. But we've really focused on our strength and our strength in which we deeply believe. And that is our well-known brands and footprint provide an enduring competitive advantage. And consumers in these tough times continue to seek affordable yet indulgent moments. And we think we've been true to ourselves in what we've done and what the teams are focused on through this particular period. But make no mistake, it is tough out there. In terms of the retail and restaurant industry landscape, which is the driver of our business, we continue to focus on what we are at heart, and that is a franchisor in a competitive marketplace, and our responses focus on that. There are many trends shaping our industry, and there's some obvious ones on the left that you're probably familiar with and we've spoken about before and are very familiar in the SA space, but apply across many of the markets that we trade in. Probably the most universal and interesting one is the eighth one under the trends shaping our industry. And we are seeing a rapid growth in online gaming, certainly reducing discretionary income across a lot of markets. And the rapid is probably the most interesting part of that. But we all have to take headwinds into our stride and focus on those areas. And how we're responding is very, very important. And we continue to focus on various aspects across our business and offer value to consumers is the most important thing. But we continue to work on our own capabilities such as delivery, helping our franchise partners manage energy consumption, which is becoming a key issue and really supporting our franchise partners, as I'll talk about throughout the presentation as well as focusing on procurement, which in this kind of global environment is particularly important. But we really do believe that in our industry that the landscape is favored by franchise restaurants who have scale and have trusted consumer propositions. And we certainly believe that they will certainly rein over independence. In terms of the highlights for the year, always important to talk about some of our highlights and the things that we're very, very proud of. And really 30 years on and despite the tough macro environment, we are tenacious in growing our capacity and capability across our brands and supply chain as we've been doing throughout the years. A couple of key highlights for us, though, is that finalizing our warehouse management system and logistics, which has been over a 2-year journey, will help us to achieve operational efficiencies we desire, but will also need into the future. Our cold storage facilities that we will be relocating to our Midrand campus on the 1st of June are on time and within budget, and we're very proud of that. Once again, we continue our journey as a BBBE contributor in the South African context and that this year as a Level 1 contributor, we're very proud of for the first time. We continue to invest in our own business and simplify our business model. We have acquired the minority shares within our Famous Brands Coffee Company from the original founders, and we've integrated that into our manufacturing operations and testament to solidifying our manufacturing operations. Our investment in Munch, which is on the consumer-facing technology side, is starting to ramp up and really helping us achieve our strategic objectives in consumer-facing technology. And [indiscernible] and the team continuing leading brands to focus on our delivery side, having rolled out 22 delivery hubs this year, and the journey continues. And that is really about making the consumer experience better and making delivery seamless for our franchise partners. In terms of our brands, I think it's important that really, we just highlight that at the H1 period, we were under some pressure around new store rollouts. And in fact, I noticed that we, probably without substance, took some stick in the media around our store footprint and movements within that. And I'm really pleased to say that as promised, this turned around in H2, led by the Leading Brands team, which was really a fantastic turnaround, and we'll talk about some of the data later. And it's no surprise really in the SA context, particularly, but in Africa, too, that our 2 toughest trading periods being H2 and H1, H2 of F '24, should I say, and H1 of F '25 were some of the toughest the SA economy has seen and really just reflective that our brands are well integrated into people's lives. In terms of growing our brand network, we continue to focus on growing our business through Leading Brands and through the franchising model. And very proud again of the work that has been done. And for this year, particularly, we opened 153 new restaurants. We revamped 289 with the bulk of that driven through the Leading Brands team. As said and we're committed to strategically continue to grow our drive-thru footprint, which is not easy to do quickly given the construction times, but the team have delivered 8 new sites. Leading Brands continue to win the hearts and minds of consumers as reflected in awards. Our franchise partners continue to invest with us, and we continue to attract new franchise partners, but our existing franchise partners want to continue to invest with us. And in terms of expanding into new consumers' hearts and minds, both the AME team and the SADC team opened markets with 3 new markets opened in this particular year. Our brand networks continue to expand. And again, in H1, I think we got a fair bit of criticism around that. But if you look at the slide in front of you and the growth in the business, it's really, really exciting to see that we continue to grow. Not every category will grow all the time and in perfect harmony. But despite the tough H1 where we're behind the curve, a big well done to the Leading Brands team for the turnaround. We have seen some setback in the UAE, which I'll talk about a bit later, which has led to a reduction in the footprint, and that would affect Steers and Debonairs particularly. But despite that, we continue to respond to the ongoing changes in the trading environment in the SA landscape, and we also relocate restaurants as we need to, but the business continues. And Steers is the mother brand, continues to grow its presence, which is really pleasing and exciting to see. There's conversions of Fego to Mugg & Bean, which has worked well. And as you see, the Mugg & Bean brand continues to power ahead even with those 5 conversions, there's net restaurant growth and really been a fantastic year for the Mugg & Bean team. Fishaways after being hit by rocketing fish pricing has stabilized, and the team have done an incredible job on launching sushi mainstream, which has really helped to stabilize that business, and we look to grow that platform. And certainly, even the restaurant decline has stabilized. The net drop-off in Wimpy is probably a little bit deceiving. That reduction is only 1 in the SA space, 4 of those were outside of the SA in terms of U.K. and AME. And we've had a real positive run of store openings exceeding our expectations. Overall, we do think it remains a tenant's market, and there are great opportunities and runways for us to grow. And being consumer-led, there's still consumer appetite for our brands. There have been some challenges. If you look at the red block there, Signature Brands has felt some pressure in this particular marketplace, and we've really had a little bit of a setback there with some store closures, particularly around our fun dining business. In Nigeria, it's been a really disappointing time with Mr. Bigg's, largely as a response to the macroeconomic crisis there. And then just in the other portfolio is really around us just rationalizing some of the old concepts that we've had. In the SA space, particularly, our brands resonate with consumers. And we're unashamed to say, and I say it very often, is that brands at the heart of what we do and their performance drives the entire business. And they are a living, breathing organism that trade 24/7, 365 cross-border in most cases. But Leading Brands continues to have momentum as reflected in the revenue even though we had a subdued festive season, which was really disappointing. We had high hopes for the festive season in SA, and it was quite subdued, particularly given it built on a subdued season previously. We continue to introduce value offerings for our consumers and lots of restaurant revamp activity. And unfortunately, that does mean you've got to go slow to go fast. So with those restaurants being closed, there is a slowdown in sales, although you do pick up after. As I spoke about earlier, the restaurant growth continues in the SA space and our drive-thru footprint is now up to 71. And delivery continues to be a growth driver within our business. The sales revenue was certainly below our expectations for the year and not how we planned the year. But given the way it worked out, we're very comfortable in the SA space around the growth, both at system-wide and like-for-like levels, and I will unpack those as the presentation unfolds in a little bit more detail. I think before we get into some of the sales growth, I think it is important to just recap on pricing, particularly using the Leading Brands model, which is a basket of goods. So I would just be cautious about some of the interpretation. But what I'd really like to say is that we know that our product has become more expensive to consumers, and that is not unique to anybody else in the food space. So it's not unusual. And if you focus on the orange line, which is our basket of goods essentially that the consumer buys, you can see that in this year versus the 2-year period that it's starting to ease and to slow down. And we've definitely seen that over this 12-month period. However, the base is still elevated. And in our current year that we are trading in now, in the April and May menu pricing, it's definitely been a lot tamer and with the drop in food inflation definitely benefiting consumers. So we think we're at the end and in a stable period of a very high peak, as you can see there, which has made trading more difficult. And there's no doubt that there's an elasticity effect in the marketplace. From a Leading Brands perspective, we always look at the provincial lens, which we share with you. And looking at those -- the system-wide like-for-like numbers, I am pleased and proud to say that the H2 recovery is reflective. At like-for-like stage, we were actually at 1% at H1, and that's pushed up to 1.4% despite a difficult December period. And the system-wide has moved up to 3.9% from 3.2% at half year. The Western Cape is obviously more reflective of a more normalized trading environment with less local disturbances. But from our perspective, the Eastern Cape has recovered, which is really nice to see. It's notable in our business as of some of the other provinces, particularly KZN is the most exciting because that has been subdued for quite some time due to a whole lot of factors that have happened down there at local level. So from our perspective, the only province that hasn't recovered on a like-for-like basis from H1 and slipped back marginally is the Northwest province. Just to give you a different snapshot across the quarters. And again, I think it just shows you the tough trading period that we've come through in Q1 and Q4. And Q1 really came on the back of a very difficult H2 in the previous financial year. So again, those numbers are quite close to each other on a year-to-date basis at 3.6% and 4% for QSR, very much driven by the middle part of the year, which drove that performance. So again, reflecting the disappointing period. So when we spoke to you at interims, we were a lot more upbeat after having seen the Q2 and started to live through some of the Q3 data and it disappointed us in Q4. On a like-for-like basis, you can see that the pressure, which we believe is really driven largely by the high inflation and the affordability factor for consumers. But even then, we're starting to see good momentum and growing through. And the trends reflect similar to system-wide, much better middle part of the year topped and tailed by some very difficult periods. In terms of Signature Brands, we have some challenges there, both at like-for-like and system-wide. There's been some store closures there that have affected us and that deterioration, particularly in Q2 affected the year and made it quite difficult. We have been hit by some other factors like liquor license delays, which have slowed down some of the new store opening revenue. I'm glad to say in Gauteng, that seems to have worked itself through, and we're getting licenses through a little bit quicker on some restaurants that we opened subsequent to the financial year-end. But overall, definitely less spending that we can see for fun dining and luxury categories across the board, particularly nighttime activity is still subdued, and we definitely didn't see as much of a peak around Christmas parties, et cetera, in the December period. In terms of SADC, so moving on from the SA space now. You can see across those 8 markets, we have a wide-ranging performance. They are diverse markets, and that block on the right of the graph is local currency performance. And really just thinking about our SADC business, we remain very upbeat. It's led by Dairy and the Leading Brands team, and we're really making good progress. The integration of this from AME is well embedded and the team are really starting to think about the business and how we can grow the business. You can see the nice revenue growth that is there. Most importantly is the Botswana business is starting to turn the corner. Post elections, we're seeing some stability and the macroeconomic conditions easing, although there are still some significant macro factors there. Zambia, again, trading nicely, but that's on the backdrop of high inflation, and there's been some tough pressure there around droughts and power shortages, which are directly linked to each other. And we've opened up the DRC, which has been led by our Zambia office, so well done to the Zambian team. And they actually subsequent to year-end, will be opening another site there. In terms of AME and U.K., I spoke a lot about this at the last presentation, big mind shift change for us. We're in start-up mode around this business and really focusing on building our brands, trying to achieve scale in certain markets and, of course, using consumer-facing technology and the learnings that we've got to make operating and systems a little bit easier. So across those 6 markets, there's lots of work taking place. The financial results are not where we want them to be, and Neli will talk about those later. And our profitability has declined primarily due to restaurant closures, and we're having some challenges, particularly in the UAE, where we have a very difficult relationship with a franchise partner at present. We continue to be cautious and focused around our growth approach. We're not just opening. We're very clear about what we want to achieve. And we have had some highlights in the [indiscernible] around Egypt, Kuwait, where we've opened and we're very focused. Also the work we've done in Mauritius, which has been very hands-on, getting back to basics, getting into company stores, that is progressing well. But some of the markets, you've got macro factors like severe inflation and depreciation as we've seen in Ethiopia and Nigeria in this past year. And the economic uncertainties in the U.K. make trading very, very difficult. But again, we're seeing some very positive results in some markets such as Côte d'Ivoire and Ethiopia. So in our supply chain, which is really a business that is in service of the front end, we really use this opportunity this year to build resilience despite sales growth being under pressure. And for 30 years, we've been listed, the supply chain business has been part of our DNA and continues to be part of that DNA and, as I said, is servicing the front end of our business. And we continue to work on the principles of same or better quality, price and service in our engagements with franchise partners. And the retail arm of this business has been there as part of our DNA, too, but continues to be a growth driver in our business. When one drills into supply chain, I'm going to talk first about manufacturing. And we've really had a really phenomenal year in manufacturing. It has helped with the downward food inflation. As you're seeing, pricing has been fairly easy there relative to where we've come from. And particularly in H2, we saw that easing. So we have, however, felt less demand from the front end. So the teams have been doing this in the very difficult conditions because demand is not where we want it to be, and it's been kind of creeping up slowly. And they've really managed to find efficiencies in the business. And of course, that has been a little bit easier without load shedding within the business. The mix was the challenge. As you can see on that graph, we had a slight drop off in mix. However, that has improved in H2 versus H1. And the retail part of the business also wasn't helpful as volume dropped there. So we've had to balance that off, and that has been a growth driver. The manufacturing plants that have been producing protein have felt a little less pressure than they have in previous years, and we've experienced some stability at gross margin across the year, which has really been helpful for the teams. However, coffee has really been tough on bean pricing, and that's put pressure on factory margins and ultimately on customer margins. And through the year, we also exited plant-based foods, and that was picked up by our LBF plant. So some of the work that we've done on plant-based, which we had a small plant for here is now being done down at Lamberts Bay. So again, a mix there. We would like volume to have been a bigger driver in that mix, but we're confident that's going to come back as the front end of the business starts to pick up again, which we're starting to see. On Logistics, logistics has had a very tough year because that demand has probably hurt them the most as well as some of the changes in mix have been harder on logistics. As you're aware, we don't just distribute our own manufactured products. I mean roughly 1/3 of SKUs are our own and 2/3 are from third-party suppliers. So we've really had to focus on improving efficiencies and the team have been doing that well. They've been rolling out a new warehouse management system, and we are confident that the shift of our cold storage facilities to Midrand is going to help them because we then have a complete network and almost in a situation where job is done, and we're able to focus hard on efficiencies. On Retail, very disappointing for us this year. We still remain very, very excited about this business. And the drop-off on the prior year is largely attributed to the chip category on which we had made good progress in the previous year. We continue to drive innovation, and we continue to build our trade marketing capabilities. So having launched 4 new products. But as you can see on the graph there, the biggest pressure has come in potato chips. So we've made big gains. Our competitors haven't made it easy for us. And you can also see that in coffee, we started to experience some setback there, but that makes sense given the extreme pricing. So ultimately, that pricing getting passed through is softening demand on the consumer end as well. But we have a healthy pipeline of product innovation, and we remain confident about this part of the business, and we're going to continue to drive forward and remain excited about it. So I'm going to now pause there, and I'm going to ask Neli to talk us through the all-important numbers. And hopefully, I'll just provide a little bit of context to those numbers. So Neli, thank you. Over to you.

Thank you, Darren. Good morning, ladies and gentlemen. I mean, this year, our financial year, we've had to navigate a number of tailing headwinds that Darren has already addressed in his divisional performance overview. We are very proud that our results are characterized by the success in the execution of our strategy and the consumer continued to show preference for our brands despite a challenging operating environment. Testament to the resilience of our business, you can see our historical performance results. We maintained our growth momentum despite a challenging operating environment and some of those pressures you are able to observe in our 2024 results already mentioned earlier, where our results had a slight decline. Notwithstanding those pressures, we have stable earnings demonstrated by the 15% HEPS growth over the last 4 years. And since resuming our payout, our dividends also reflect this performance. Hence, we have grown our dividend from February 2024. If we compare our results to last year, revenue has increased by 3.2% to ZAR 8.2 billion. Despite the pressure in our input costs, our gross margin marginally improved across our supply chain operations. Operating profit was ZAR 102 million higher compared to the prior year. Thus, our operating profit margin also improved from 10.1% to 11%. We achieved double-digit growth of 11.9% in our reported headline earnings of ZAR 5.20 per share, and this was a function of cost management initiatives and a reduction in our finance charges. And due to the increase in EBITDA and continuous decline in our levels of debt, our leverage has improved by 21.5% to 0.89x, and this is after mandatory and voluntary debt repayment, which were partially offset by the cold storage development funding. And even with the headwinds in our operating environment, we have sustained a set of resilient results. And it's at the back of these results that we are paying a dividend of ZAR 1.95 per share this year, which brings our total dividend to ZAR 3.45 per share that is being distributed to our Famous Brands shareholders. I might add that this payout has been guided by the principles of prudent capital management and the outlook of our market. Our operating revenue marginally increased by ZAR 259 million from the prior year, and this is a reflection of the mix in our volumes and the pricing. And there's also the pressure which is coming through from the trading environment, which you are able to see in some of our divisional performance. At the front end, Leading Brands portfolio continues to maintain performance, mainly attributed to the consumer preference of our brands and the work that the teams have done in our value propositions. While our Signature Brands portfolio reported a mixed result across the various brands, but ultimately, the performance declined due to changes in our consumer casual dining preferences. At the back end, manufacturing and logistics revenue was driven by a combination of price inflation and volume that Darren has already shown earlier, but also that there has been a change in our menu offerings and value proposition in respect of our consumer demand, which has resulted in the shift in our product mix. Our retail business, the revenue there was below our expectations, but we still remain optimistic in terms of the supply of what we can be able to do there. Revenue growth in our SADC market was also driven by the restaurant growth in Botswana. And I might add that despite exiting our Saudi Arabia business and some of the closures which you've seen in our Nigerian markets, we have opened franchise in new markets, which has contributed to the AME revenue growth. And lastly, the U.K. revenue decline was mainly due to the pressures in that economy. Operating profit gains, that were largely made in terms of our cost management and operational efficiency initiatives across the business. Some of the overhead savings that contributed to the growth in our operating profit, you will recall a lot. In 2024, we had high volumes of load shedding, those costs which are in our base for 2024. However, in 2025, we have managed to save those. So costs related to the usage of diesel and generator maintenance in our supply chain as well as the support which we provided to our franchise partners who traded during load shedding in the form of energy breaks. In addition to those costs that contributed to the savings, we will realize that one of our highest cost is employee expenses. And in this financial year, we took a decision that we're going to reduce our bonus pools and defer salary increases for our admin staff and our executive teams. The savings, unfortunately, if you don't use diesel, you are using electricity. So the increase in our electricity usage as well as the related price increase led to offsetting some of those gains. In Signature Brands, our operating costs continue to outweigh its profitability because of some of the restaurant closures that have taken place in this financial year. Our corporate segment improved by 58%, mainly due to our final liquidation dividend that we've received from GBK as well as the put option, which we have in our Botswana operations where we've had to do remeasurements there. AME operating losses were mainly due to the restaurant closures and the fixed overheads, which were offsetting those gains. In the U.K., the decline was mainly due to its operating overheads. And I might just -- in conclusion of this slide is that our -- the impairment that you're observing there is related to some of the intangibles that are in Signature Brands. Operating profit margins were under pressure due to some of the costs. However, some of the margins they reflect the focus on cost management initiatives that have been undertaken, particularly in South Africa. We continue to monitor our costs to drive margin improvement. And where relevant, the margin is reported after impairment losses. Our balance sheet is robust. It is strong. And if you look at our net working capital, this has increased by ZAR 399 million, in line with the operational needs of the business. The inventory holdings that are there are similar to the prior year, and they reflect our pricing optimization. Our trade payables are driven by our procurement activity. And similarly, the trade receivables reflect the performance of the business. In terms of our credit risk, this has stabilized over time. And this year, what we've done is we've increased our allowance slightly in line to reflect the increase in our receivables. From a total assets perspective, in the prior year, we announced that we are shifting our investment plans to focus on manufacturing. And this year, we have spent ZAR 41 million to deliver on those plans. From our investment in Nigeria, we have recognized a ZAR 12 million impairment loss on the loan to our associate. And this then means that we have written off the full outstanding balance to that entity. From a borrowings perspective, our debt exposure, our long-term debt, of which I might add is majority legacy debt currently stands at ZAR 1.1 billion. This balance includes the bond financing of our Midrand campus, which we acquired in 2023. And we also secured project funding for our cold storage development, and this asset is planned to be completed at the end of May for occupation on 1st of June [indiscernible]. We are proud to say that because of those efforts, we have maintained our covenant compliance on our credit facilities, and we do have sufficient headroom in terms of those levels. From a cash perspective, our cash balances have increased by 25% for the year-end, and we have paid ZAR 314 million as dividends to Famous Brands shareholders. Our cash generated from operations has increased by 3.2%. And it's at the back of this that we have proceeded with the following capital objectives. We have distributed dividend payment to Famous Brands and noncontrolling shareholders and allocated capital expenditure on projects for both maintenance and normal operations. We have made mandatory and voluntary debt repayments. And because of the effort that has been put in and commitment from our executives, we have settled the long-term incentive scheme obligation, which as listed in June 2024. We also continued with the development of our cold storage facility for a relocation of our Crown Mines operations. In addition to our closing balance, we have access to ZAR 233 million in undrawn borrowing credit facilities. This is indication that we have sufficient liquidity and flexibility and the business has stable funding. We focus on critical investments to deliver on our strategy. And our capital expenditure for this financial year was 2.6% of revenue, and this is in line with our historical trends. We are very prudent in terms of our capital expenditure. And though we have approved capital budgets, these are still being evaluated before we allocate funding. The spend for this year was mainly driven by the land and buildings for our construction of our cold storage facilities. Critical to the business is the investments that we do in rolling out our network in terms of our setup markets and the revamps that have to be done in those markets as well as essentially, we have invested in our consumer-facing technology. In terms of the investments in supply chain, those were mainly for operational efficiency and some of the technology refurbishments. In my conclusion, ladies and gentlemen, our results demonstrate the resilience of our business in a challenging environment. Our balance sheet strength provides us with sustainable leverage levels and there is sufficient liquidity to explore viable assets for growth. We remain focused on the execution of our plans, as you will hear on the strategy update next from Darren. Thank you.

Great. Thanks, Neli. You've made it easy for me because with those numbers, it really just underpins the great proposition that we have and why invest in Famous Brands. But from a more subjective perspective, I'd really just like to give you 6 reasons. Firstly, the 30-year track record as much as it doesn't determine tomorrow's future, it does help when you have the largest franchise network in SA, the kind of portfolio of brands that we have, it offers a quality consumer solution, and we believe that we have exposure to growth markets. Not all markets are going to be easy. They will go through difficult times. But as we've seen over the years with our investment in SADC, those results start to bear fruit. Probably more subjective of our own, but we have an experienced Board that's backed and supported by an entrepreneurial management team. And we believe that we're quite unique in our culture and that strategy that we have is very focused. And again, we think that acquisitions remain an opportunity for us, although cautious, and they are limited in certain categories, we keep our eyes peeled and continue to look at the marketplace. One of the key parts of our business and one of the strongest assets we have are our resilient franchise partners. And again, testament to that are those that continue to wish to invest with us and the strong demand from our brands from potential franchise partners. We believe that these are key reasons for our investment proposition being so strong. We have economies of scale with a vertically integrated supply chain. As much as it's unique to our business, we believe it does bring value. Yes, there are other people that have outsourced supply chains. In our case, it works for us, and it's part of our business and has been forever. Menu options are diverse across our business. As much as we don't have a mainstream chicken offering, we do have a diverse protected menu strategy. And we also have a potential retail offering that we think is going to offer high growth. And we've seen that despite the setback this year as we've penetrated new categories. Clearly, competitors will push back, but we're not going away. As Neli has well-articulated, we have a very strong financial position and the fact that we've reduced our debt so significantly over a period of time has been positive and testament again to the cash-generative operations that we have that have proven themselves over 30 years. And very important, and I know that it's probably maybe going a little bit out of fashion at the moment, but definitely not going off our radar screen is around ESG mindfulness, and we continue to focus and be responsible citizens in the work that we're doing. There's probably a lot more work that we do behind the scenes than we actually put forward, and we need to put those credentials forward and our journey to embed best-in-class sustainability practices continues, and we're very proud of that work. So our strategy and vision remain stable. For those of you who have been following us, you'll understand that for the last couple of years, we've really built consistency around this. And we think that, that's been appropriate to challenging and coping with the resilient business that we have and the tough trading conditions. So we think that there's a link between the 2. The strategic intent remains the same. We keep focused on a few key issues around that. And the 4 strategic objectives that we have around supply chain and leading in the categories that we compete in, particularly with focus on Leading Brands and prioritizing our franchise partners who are resilient but require our support at all times, not just when we think it's necessary. It's a constant part of what we do. It's our role as a responsible franchisor, and we continue to provide that. And as Neli again has articulated, we have a strong view around our capital management. We engage robustly with shareholders about that and with potential shareholders. And I hope that they understand what it is that we're trying to achieve. And really, our vision has been consistent, and we plan to be and continue to be the leading innovative branded franchise and food services business in South Africa as well as selected markets. Just in terms of that strategy, I spoke about a tough market. I think really just giving you some examples of the 4 levers there. In terms of the supply chain of the future, it's easy to talk about, but when you put your money where your mouth is around new cold storage facility, which will be opening on the 1st of June. Our warehouse management system is already starting to deliver efficiencies. We've got lots of work to do to extract more value from it, but we're seeing progress. And our investment into modern manufacturing technology continues and has certainly gained good momentum this year with some investment in our meat plant and in the upcoming year at our LBF plant, and there's lots of work to do and also at our source manufacturing facility. So the teams have got some great ideas and technology cuts across all industries, not just consumer-facing. So we need to make sure that we're investing in our manufacturing business and the investment in logistics having been nearly completed and job done, we can now focus on manufacturing. Again, I spoke earlier about prioritizing our franchise partners. We continue to assist them with rental negotiations. As the market is quite volatile right now, we also need to really look at energy management. And I mean there's so much going on in that space. At the same time, you've got some distraction, which is unusual around alternative water solutions. And the team are doing a wonderful job around supporting franchise partners who are delivering, not all are in terms of improving efficiencies in the delivery hub program and with all its sort of moving parts together are delivering those efficiencies and helping us to focus on our franchise partners. Again, leading in the categories we compete in is important, and that really means continued investment in consumer-facing technology is important as the consumer evolves. Our retail product innovation, as you've seen us penetrate new categories. And as much as the Leading Brands team are focused on brand building and a lot of other things, they also continue to focus on menu innovation. And every year, we have some real good victories in that space. It takes a lot of hard work to get one victory, and we do have some losses along the way, but the team are very, very focused around that menu innovation. And again, capital management, as I spoke about, we're building a track record, again, of proof of that capital management. We prioritize dividend payments. We've continued to spend our CapEx, we think, in the right places around looking for efficiencies. We've invested capital in buying back our own investments essentially with buying out minority partners, and we continue to reduce the legacy debt in our business, and that's coming down steadily. And with the interest rate cycle where it's going, we hope that we'll be able to continue to come down at a faster rate. So I've spoken a bit about consumer-facing technologies, and I wanted to just spend a quick brief second on this and really talk about the strong and agile technology ecosystem that we're building and what we've achieved. So we've done a lot of work over years, but it's quite fragmented. And the investment in Munch is helping us to pull some of that together. It will take time. But really, it's around focusing on that digital enablement of restaurants. So the way consumers interact in our industry is no different to other retail industries, and we need to continue to invest in that. That needs to flow through to our delivery hub model where we're already seeing benefits of that as well as loyalty programs and Mugg & Bean and Wimpey have done particularly well in the work on loyalty programs. The call center capability within our business is still a key strength of ours, and we continue to do work and grow that market. And of course, as every consumer is experiencing around contactless payments and that industry, again, is evolving, and we need to try and just make sure we keep pace with it, and that hasn't been easy, but we continue to do that. But as we move beyond this year, we need to continue that focus on payment capabilities. Our e-commerce platforms require improvement. We're in the game. We're doing well, but that market evolves and we need to evolve with it. Our consumer engagement platform, we just invested in, we again got work around how you talk to people outside of the normal media channels and how you talk to them on a one-on-one basis. And then the delivery hub model, implementing that and integrating that with Munch, as an example, is also important as we move forward. So lots of work going on there. I'm really talking broad brush strokes, but lots of time spent within the business as well as capital and human capital spent on trying to move forward with these technologies. And of course, they're also moving forward at a rapid pace. So doing stuff in a rapidly evolving marketplace is that much harder. And of course, a lot of it is dollar-based, so not easy to continue the investment, and we have to find shrewd ways of making sure that we're able to keep up. In terms of our outlook and priorities, so really just on the last slide as we move into Q&A, the headwinds are obvious, and I'm not going to talk too much about those. I mean you could probably add a lot more to those. Some of them are macro and some of them relate to our industry, but nothing has changed around a difficult trading environment. We've got high energy costs. It's always been a competitive environment. It continues to be that way. We've got some of our own challenges to face, and that's around Signature Brands remain subscale. We continue to do work there. We're investing ahead of revenue in AME, and you're seeing that in the lack of profitability and the loss coming through. We continue to do work on chicken, but we don't have a mainstream chicken offering. And we do believe that even though we've got a strong position, we're seeing that the coffee environment is overtraded. There's significant numbers of new outlets opening and definitely the coffee environment is not growing at that pace to match the number of outlets that are opening. But of course, nice to have some tailwinds. We haven't had some of those for a while. So we'll take them and the lower food inflation is nice to see. We don't like it too low, but it was definitely at a point that it was extremely high and hurting the consumer and ultimately hurting us. The interest rates, anybody's guess, but definitely better than the cycle that we've just lived through, which has been a steep rise. We have a healthy store opening pipeline, particularly on the Leading Brands side. The team is very optimistic this year. We're likely to beat this year's number fairly easily, and the team are focused and very optimistic around that. And that is supported by strong interest from new and existing franchise partners, and we're thankful for that, and we work hard to make sure that we meet the expectations. Consumer-facing technology, I won't talk too much, but a lot of the hard work that we've done is starting to pay off, and we're starting to see some benefit of the slog that we've been through. And of course, we need to extract value from the supply chain investments, but a lot of that work has done particularly on logistics, and we're now able to become more efficient and work on it. So in terms of that, it's really translating into an ability to focus our marketing a little bit more on data-led rather than just pure mass mainstream. We're offering value to consumers, and that has been happening. The consumer-facing technology investment will and has been improving the consumer experience. We are certainly pushing chicken across our menus, and that is helpful because the market is more conducive to that. And of course, we have to remain a responsible franchisor, and that's what we've been doing for 30 years. We're not going to get lured into rapid rollout of concepts that we don't think are sustainable. And also as the property market opens up because there's lots of lettable space, we need to make sure that we're avoiding marginal sites. And the teams are very good around that, and that's really underpinned by our focus on ethical franchising. So probably more tailwinds than headwinds as we go, some victories. We're feeling really confident at the moment around the momentum that we have. We need to capitalize on that momentum and very optimistic around the year ahead. And we believe that the results that we've delivered talk to that. So always areas to fix, areas of strength that we have. So I'm going to pause there and move straight into Q&A. And hopefully, you believe the momentum that we have is the right one. So I'll determine from your questions. So Ntando Ndaba, our Group Risk Executive, as always, is going to take the mic. He's fiercely independent. So I know you'll ask the hard questions. So Ntando, over to you.

Thanks, Darren. We do have a number of questions on the deck. So in the interest of time, I'll jump straight into it. We do have a couple of questions from Timothy Olls from Laurium Capital. So Timothy, I'll be cheeky. I'll take one or two of your questions, but I'll probably start with the last one. It is good to see the recovery in operating margins in Leading Brands and Manufacturing. Are these margins sustainable?

Neli, do you want to pick that up?

Thanks, Darren. So the growth is sustainable. I mean, we have set plans for ourselves. We do acknowledge that some of the pressure had come through over the last couple of years, but we are looking at both our cost base and we're driving growth from our team's perspective around network growth. So as much as there's pressure in terms of our revenues, the costs are also an important lever that we are looking at from our perspective. So those 2 levers for us, we see them as drivers. And in that perspective, seeing that the trend of recovery in terms of our margins is headed in that direction.

Thank you, Neli. Another question from Timothy is the rollout of Leading Brand stores really picked up in H2. Does this mean you are seeing an improvement in the outlook relative to the last few years? And can the FY '25 net store growth of 65 stores per annum be maintained into the future?

Yes, Timothy. I think it's a combination of more than just that. So yes, we are confident that there's still runway. We always have been. The numbers turning are also as a result of a few things. I mean the kind of closure and attrition rate post-COVID has slowed down. And as we've probably shaken out some tough demographic changes, the kind of deterioration we've seen in some markets like CBDs, we think we've got through the worst part. We also -- H1 last year was particularly challenging after the tough H2 in 2024. But if you think about the negativity around election time and where we were, we definitely saw a pullback in terms of not just consumer confidence, but anybody looking to invest and franchise partners would form part of that as would we and as well as obviously some landlord developments and investments in bricks and mortar slowing down. So we think that where we're getting back to is a more normalized number. So I don't think it's just growth. I think it's the fact that some of the negative factors have also fallen away and the Leading Brands team has done a great job to get back after H1 of last year. So there were some unique circumstances in H1 last year.

Thanks, Darren. So the next question from [indiscernible] from Coronations. Please, may you unpack what drove the swing in the corporate administration cost line? This swing seems to have driven the steep reduction in corporate costs.

[indiscernible]. So what we have recognized there is we've got 2, say, once-off drivers that have happened. Firstly, we received -- historically, we had to do a liquidation of our GBK investment in the U.K. And over time, we have -- as the liquidators have gone through the process, if you recall 2023, I think '22 -- '23, sorry, we received a portion of that dividend. And in this financial year, we have received that as well. So if you look in our financials, we've got about ZAR 25 million that we've received from GBK with regards to that. And then the second one is that we have a put option that is in Botswana for our noncontrolling shareholders. Basically, in our side, it's a call. And for the noncontrolling shareholders, it's a put option. And that is remeasured every year based on the performance of the investee. And in this year, we've had to remeasure that, and that has also contributed a gain of about ZAR 25 million. So essentially, there's about ZAR 50 million, ZAR 51 million that is sitting in this set of results, which came through as those one-offs. So because they're not necessarily part of any of the operations, those are sitting in our Corporate segment.

Thanks, Neli. Next question from Cobus Cilliers, All Weather Capital. I'd like to inquire on the view of the investment committee on the Board on what capital structure that is the gearing or net debt-to-EBITDA level that will maximize the value of the company and how this level can be achieved. Unfortunately, the Board is not yet to respond, but what's your view there, Neli?

Cobus. So in terms of our levels, we don't necessarily have published those ones in terms of our target structures. But what I can say to Cobus with regards to this one, if you look at our net debt structure at this point, our leverage rather in our gearing, we're sitting at levels of about less than 1 in terms of our gearing as well. So those levels for us, we would say, is comfortable levels from a capital allocation perspective. But it shouldn't escape us to say that whilst we are reducing or we are making improvements in terms of those levels that we still have this legacy debt that we're just also trying to manage and basically pay down in our business because that is not earning us any income. So at this point, while we look at our balance sheet and we know and we understand that it's quite a strong balance sheet, and it gives us those levers for us to go and make investments and have a healthy negotiation in terms of where we are around those levels, we are not necessarily seeking to, say, change those in terms of those extremely, but we're happy with where we are right now.

Thanks, Neli. So another question from -- let me take a question from Peter [indiscernible], Major Market. How much headroom does Famous Brands have available for acquisitions? Following on to that is, can you also speak to the ZAR 450 million debt facility manufacturing in August this year? So we'll start with the acquisition headroom and then probably the conversation around the debt facility.

So from a headroom, I think if you have a look at what we've got in our covenants right now, the bank -- our covenant levels from a leverage, we need about 2.5% to -- for us to be below that, right? And what we've reported now is we have less than 1x. So looking at that, saying our debt is about ZAR 1 billion, and we can then be able to grow our debt with another about ZAR 1.5 billion. So that gives us then the headroom for us to explore any acquisition, whether it is -- sorry, any investment rather, whether it be an acquisition or any of the capital projects, which has been identified in terms of our strategy. Okay. If I then move on to your second question on the ZAR 450 million. So that's not necessarily an investment in manufacturing, but I think maybe it's a reference to the debt, which we had previously reported in our current liabilities last year. So what we have done for our year-end because -- I think because of the good relationship and the strength of the balance sheet that we have, our primary financier has -- we have negotiated an extension of that debt. So whilst it was due to be repaid now in August 2025, that has been extended to August 2026, which you will see in our financial statements in detail. But that debt is basically given -- that runway now has given us about 18 months before we have to service that bullet payment.

Okay. Thanks for that. The next question, probably this one is for you, Darren, from [indiscernible]. Given we are almost done with May, can you guide us on how Q1 sales are going? Are you able to share that, Darren?

Yes. We tend to look at March and April together. So I'm very pleased to say that we are happy with March and April performance. We're marginally below our expectations. It would certainly be too early to call May, but March and April are important because of Easter, and that creates a lot of activity in our business. And I mean, compared to where we were this time last year, we're in a much better place. I mean this time last year, you saw the data. And even if you include May, we were starting to head backwards and going into uncertain times with the election. So from our perspective, we're comfortable, as I said, marginally behind our own expectations, but we're there or thereabouts. Trade is positive. I mean the consumer is still under some pressure. So it's not across the board. We still have some pockets of work to do. But by and large, I'd be taking this position versus where we were this time last year any day.

Okay. Thanks. I think in the interest of time, I'll take one last question from [indiscernible]. I'm being very kind to [indiscernible] here. So, [indiscernible] Coronation. Please, may you quantify the benefit of lower diesel costs in the manufacturing division? To what extent was this benefit offset by higher electricity costs?

So last year, we had, I think, about ZAR 22 million odd, which we had paid towards diesel in the 2024 financial year. And so for this financial year, we only had 1 month, which is the month of March. So for 11 months of our business, we didn't have any of those costs. And then electricity pricing, that I'll just have to maybe just reconfirm and provide that as an additional information to [indiscernible] on the exact numbers. But we were able to -- whatever gains that we did have, I mean in our operations because there is intensity around electricity usage, and we had electricity rate increases, I think, are about 18%. So that also then had an impact on the cost of our electricity services.

So it's probably more material.

Yes, it's not -- the gains are, I would say, not materially that offset to say.

Okay. Thanks, Darren. I think I'll leave it there. And I think I'll hand it back to you to close out.

Great. Thanks, Ntando. I don't know if it's just the luck of the draw, but it seems to be a lot more questions for finance. So I can say to my operations colleagues, we must be doing a great job. Things are running smoothly. But really just a thanks to the finance team for putting all of this together, a lot of pressure. I've gone out probably the earliest that we've gone out. So thank you to the team. Special thanks to KPMG and in particular, Brenda [indiscernible] for a lot of work there. As always, Nedbank for being very supportive to us as a single lender solution and our sponsor, Standard Bank for all the work behind the scenes. And to everybody at FB, thank you, especially our franchise partners for getting us here. To the Board and my executive colleagues for the personal support, it's really appreciated, especially to Chris Boulle, our new Chairman, and he's managed to facilitate a really smooth transition and he's always decisive, available and supportive. So thank you, Chris. And lastly, to Celeste, Laura and the eng team and [indiscernible] for putting all of this together and running smoothly. So thank you very much, and I look forward to catching up with individual shareholders, potential shareholders, but also see you at interims.