integrated annual report 2016 - famous brands · • engage the competition by strengthening our...

Integrated Annual Report 2016

About Famous Brands

This report contains icons and cross-references to assist the reader with navigating the information contained in this document, and are

devised to prevent repetition in cases where an item is referred to in more than one section.

The following icons relate to our strategy and material issues:

Brands Africa and selected international markets Information technology The Group

Manufacturing Transformation Potential growth opportunities Retail

Logistics People Environment

Highlights

• Stellar results evidence of competitive, hungry and high-performance culture

• 15th consecutive year of record turnover and profits

• Market share gains despite fierce local and global competition

• Acquired 51% stakes in:

• Mythos

• Lupa Osteria*

• Salsa Mexican Grill*

• Catch*

• Acquired Lamberts Bay Foods – frozen chips manufacturer*^

• Appointed SA licensed partner for global brand PAUL

• Opened pilot bespoke craft beer restaurant 14 On Chartwell

• Concluded integration of Retail Group Botswana

• Successful entry into Angola and Ethiopia

• Commissioned Crown Mines Distribution Centre – frozen and chilled

• Integrated Cater Chain Food Services and commenced take on of the Group’s pork basket

• Commissioned serviette manufacturing plant at Midrand

• Expanded FBFCC (Coega Cheese) to include manufacture of cream cheese and prepared for cheese slice manufacture

* Subsequent event.^ Subject to Competition Commission approval.

The Group’s stellar results and accomplishments achieved during the period are irrefutable evidence of how the business continues to flourish, despite the current environment.

BASTION GRAPHICS

Administration

Famous Brands Limited Incorporated in the Republic of South AfricaRegistration number: 1969/004875/06JSE share code: FBRISIN code: ZAE000053328

Directors NJ Adami, SL Botha (Independent Chairman), CH Boulle, P Halamandaris, P Halamandaris (Jnr), T Halamandaris, JL Halamandres, RM Kgosana, DP Hele (Group Chief Executive )*, NS Richards (Group Financial Director)* and BL Sibiya.*Executive

Company SecretaryK Ntlha

Registered office478 James Crescent, Halfway House, Midrand, 1685PO Box 2884, Halfway House, 1685Telephone: +27 11 315 3000Email: [email protected] address: www.famousbrands.co.za

Transfer secretariesComputershare Investor Services Proprietary LimitedRegistration number: 2004/003647/0770 Marshall Street, Marshalltown, 2001PO Box 61051, Marshalltown, 2107

SponsorThe Standard Bank of South Africa Limited Registration number: 1969/017128/0630 Baker Street, Rosebank, 2196

AuditorsDeloitte & Touche

BankersAbsa Bank LimitedBidvest Bank LimitedFirstRand Bank LimitedInvestec Bank Limited

01

Famous Brands Integrated Annual Report 2016

2011 2012 2013 2014 2015 2016

Headline earnings per shareup to 541 cents per share

+16%

242278

339406

467541

2011 2012 2013 2014 2015 2016

Operating margin

18.4%19.1 19.1 18.5

20.0 20.518.4

2011 2012 2013 2014 2015 2016

Operating profit up to R792 million

+18%

358413 466

566672

792

2011 2012 2013 2014 2015 2016

+14%

155200

250300

355405

Dividends up to 405 cents per share

2011 2012 2013 2014 2015 2016

Revenue up to R4.3 billion

+31%

1 8782 156

2 5162 826

3 283

4 308

Financial highlights

2011 2012 2013 2014 2015 2016

+9.4%

740874

1 0221 244

1 420 1 554

Net asset value per shareup to 1 554 cents per share

02


We pride ourselves on competing to win. Always. Every single day we commit to exploring opportunities across the operations to continuously improve, grow and ensure we are positioned to retain our market leadership in all those categories in which we compete.

Famous Brands Limited is a holding company listed on the JSE Limited under the category Consumer Services: Travel and Leisure, and is Africa’s largest branded food service franchisor. The company was listed in November 1994 at a price of R1 per share, equating to a market capitalisation of R25 million. The past two decades have witnessed the Group expand almost beyond recognition from the business it was then, comprising only the Steers brand and a limited Supply Chain component, to the enterprise it is now, with a market capitalisation in excess of R11.5 billion, positioned within the JSE’s top 100 companies. Famous Brands’ vertically integrated business model comprises a portfolio of 27 brands represented by a franchise network of 2 614 restaurants across South Africa, Rest of Africa, the United Kingdom and the Middle East, underpinned by substantial Logistics and Manufacturing operations.

Strategy 2020To become one of the leading branded leisure and consumer product businesses in Africa and selected international markets by 2020

Five-year key strategic thrusts• Fortify the foundation which exists within

Manufacturing and Logistics

• Shape the brand portfolio and ensure our key brands resonate across all consumer touch points

• Engage the competition by strengthening our gorilla brands

• Build superior routes-to-market and drive lowest cost producer status

• Prosper in Africa

• Execute on all aspects of B-BBEE

• Ensure strong focus on leadership and succession planning

• Expand the business through diversification

• Manage the transition from the existing outdated information technology platform

• Continue to drive the Group’s culture of high performance

Our business philosophy

About Famous Brands continued

03


Our visionTo become one of the leading branded leisure and consumer

product businesses in Africa and selected international

markets by 2020.

• We are about building capability and scale across Brands, Logistics and Manufacturing.

• We are obsessed with being close to our trading partners and consumers.

• We are passionate about flawless execution and continuous improvement.

• We are a team of results-oriented people, characterised by a unique culture of high performance.

• We are focused on organic and acquisitive growth in Africa and selected international markets.

Our business is focused on building capability and scale across Brands, Logistics and Manufacturing to position ourselves to compete aggressively in the leisure and consumer product sectors.

Our strategic intent Our guiding principlesGrowth, Speed, Agility, Quality, Innovation, Integrity, Humility.

Our growth agenda

04


FRA

NC

HIS

E N

ETW

OR

K A

ND

RET

AIL

Retail

The core thrust of this division is the extension of the Group’s trademarks into the FMCG retail and wholesale markets. A secondary market comprises supplying selected food service and catering customers where spare manufacturing capacity exists to do so.

The brands through which we compete in the retail and food services space include:

• Steers • Mugg & Bean • Aqua Monte

• Salsa Mexican Grill• Giramundo• Vovo Telo• tashas• Turn ‘n Tender• The Bread Basket• WakaberryTM

• Thrupps• PAUL• Mythos• Pubs:

– KEG – The Brewers Guild – O’Hagan’s

• Steers• Wimpy • Debonairs Pizza• FishAways• Mugg & Bean• Milky Lane• WakaberryTM

• Europa• Fego Caffé

• Mr Bigg’s• Pubs:

– KEG – O’Hagan’s

Our Brand, Logistics and Manufacturing capabilities are supported by a range of

Corporate Services which include:

Finance, Human Resources, Information Technology, Legal, Procurement, Logistics

Services and Operations Services.

Africa and selected international markets

Brand capabilities

Over the years we have deliberately embarked upon a strategy whereby we have developed a portfolio of brands, all of which

are designed to be best in their class, offering a compelling business proposition to our franchise partners as well as a quality solution to a

wide range of consumers.

Our Design and Development division provides a full turnkey service to all of our brands and their respective franchise partners.

Our central Marketing division is charged with ensuring that brands are properly positioned, are relevant and remain contemporary. All of our brands are supported via a

wide range of through-the-line strategic marketing initiatives.

Below-the-line marketing services are provided by Sauce Advertising which is an associate company.

Our brand portfolio comprises

• Wimpy • Milky Lane • Baltimore• TruFruit

• Steers• Wimpy• Debonairs Pizza• FishAways• Mugg & Bean• Milky Lane• Europa• Fego Caffé• Net Café• House of Coffees• Coffee Couture• 14 on Chartwell• Catch• Lupa Osteria

South Africa


Our business model

The platform for continued growth is firmly in place, comprising an accomplished executive management team, optimally structured business model and a pipeline of opportunities to continue to meet stakeholder expectations.


04

SUP

PLY

CH

AIN

The Manufacturing division represents a key part of the Group’s backward integration model, and is tasked with manufacturing a range of licensed products for use by both the franchise network and selected food service and retail customers.

Wholly owned

Product Location

Meat and chicken Gauteng and Western Cape

Bakery Gauteng and Western Cape

Sauces and spices Gauteng

Ice-cream Gauteng and KwaZulu-Natal

Fruit juice KwaZulu-Natal

Joint venture

Product Location

Coffee Gauteng

Cheese Eastern Cape (Coega)

Speciality breads Gauteng

Choice meat cuts Gauteng

Red meat, chicken, ribs and frozen storage Gauteng (City Deep)

Manufacturing capabilities

Logistics capabilities

The Logistics division represents the Group’s route-to-market, delivering to the franchise

network a comprehensive basket of products required to cater for brand-specific menus. The

Logistics function represents a key strategic and competitive advantage to the Group in terms of its overall franchise system.

The division is supported by six centres of excellence which are based in:

• Midrand (including Crown Mines)• Western Cape• Eastern Cape• Mpumalanga• KwaZulu-Natal• Free State

The centres of excellence enable us to get closer to our customers (our franchise partners) by aligning our Franchising and Logistics businesses.

The centres also provide training to our employees and franchise partners. SU

ctse etitive

e

e which

ur

Western Cape

Eastern Cape

KwaZulu-Natal

Mpumulanga

MidrandCrown Mines

Free State


05

06



Supporting South Africa’s economic growth

Famous Brands makes a substantial contribution to economic and social growth in South Africa through creating economic value and employment, providing training and skills development, upholding the country’s transformation agenda and supporting local communities.

This contribution is achieved through continued investment in the Group’s key relationships, particularly with our franchise partners and consumers.

Employment created

Direct employment –

Famous Brands

employees* 1 699

Indirect employment –

Employees of our

franchise partners

over 50 000

* Excluding Famous Brands in the UK (10 employees) and Botswana

(670 employees)

Distribution of direct wealth created

Contribution to South Africa’s gross domestic product

Wealth createdDirect – Famous Brands Group R1.4 billion (refer Value Added Statement, page 24)

Indirect – Franchise partners R1.9 billion

Tax revenue paid to the South African Revenue Services by Famous Brands Group:

• Corporate Tax R221 million

• Value Added Tax R211 million

• Pay As You Earn R76 million

• Skills Development Levy R4 million

Tax revenue paid to the South African Revenue Services by our franchise partners:

• Corporate Tax R533 million

• Value Added Tax R1.5 billion

Tax revenue

paid

Famous Brands is optimistic and enthusiastic about the opportunities presented by the food service industry in this country.

38%

16%

28%

2%

16%Salaries, wages and related benefits

Dividends to shareholders

Finance costs

Government (corporate tax)

Retained for future expansion and growth

07


Training and skills development(refer page 37)

Scale of our business operations

Raw materials and finished goodsBeef ....................................................................................................................7 322 Kgs (000)

Cheese ...........................................................................................................6 773 Kgs (000)

Pork ....................................................................................................................4 752 Kgs (000)

Chicken ..........................................................................................................4 065 Kgs (000)

Fish......................................................................................................................1 999 Kgs (000)

Milk used in cheese production 38 million litresCoega Cheese plant

Approximately 90% of the milk is procured from local farmers in Port Elizabeth.

Energy consumptionElectricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 957 Mwh

Diesel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 896 Kilolitres

Petrol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 Kilolitres

Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 Kilolitres

Packaging waste recycled . . . . . . . . . . . . . . . . . . . . . . . . 5 381 Tons

Environmental awareness (refer page 39)

Sports sponsorships

R14 million

Donation of product

R312 thousand

Other corporate social investment initiatives

R1.5 millionPurchases from local suppliers

R3.2 billion

20% Cases delivered by owner-drivers

28% Permanent female employees

80% Permanent black* employees

Franchise workshops

2 935 delegates

Brand product training

10 064 delegates

Fundamentals Restaurant Management training

3 347 delegates

Employees of Famous Brands trained –

certified training 138 delegates

Other ad-hoc training

6 924 delegates

Employees of our franchise partners trained

Supporting local communities (refer page 37)

Supporting South Africa’s transformation agenda(refer page 36)

* Black as defined by the Department of Trade and Industry Codes of Good Practice relating to B-BBEE.

08


Our brands


South Africa’s iconic burger brand has been serving South Africans its legendary 100% pure beef flame-grilled burgers and hand-cut chips for almost 50 years. Frequent winner of Best Burger and Best Chips accolades, Steers is the leader in its category.

Debonairs Pizza is the pioneer and leader of the takeaway and home delivery pizza category in Africa. As South Africa’s best loved pizza brand, Debonairs Pizza is multi-awarded for its high quality, innovative offering and service delivery.

FishAways is South Africa’s leading quick-service seafood restaurant. The brand offers fresh, nutritious quality seafood-based meals to the health-conscious consumer, whilst delivering excellent value for money.

Established in 1967, Wimpy, South Africa’s largest casual dining franchise with a footprint exceeding 500 restaurants, is loved for its sizzling selection of breakfasts, burgers, grills and its famous Wimpy coffee.

Famous for its bottomless coffee, giant muffins and substantial portion sizes, the spirit of generosity which epitomises Mugg & Bean ensures the brand is a South African favourite.

Milky Lane, the leader in the ice cream and indulgence category in South Africa, is the destination of choice for families, and is equally popular amongst teens. The brand serves signature ice cream-based treats, waffles, its trademark Whizzers and delicious coffees.

Europa is a traditional Italian-style restaurant that offers freshly prepared flavourful meals across all day parts. Europa is all about warmth, passion and ‘Vita Italiana’.

FEGO Caffé is the coffee connoisseurs’ choice for an extraordinary coffee experience and a tasty light meal in a comfortable café-style environment.

Awarded Best Steakhouse accolades on numerous occasions, Turn ’n Tender is the leader in the upmarket steakhouse category. The brand enjoys an enviable reputation for perfectly pairing great food and wine.

Mythos offers an authentic vibrant Greek dining experience serving both traditional Greek and contemporary cuisine. The brand has been awarded Best Greek Restaurant accolades over the past three years.

Consumers remain loyal to reputable brands that are relevant, offer value, afford convenience and are accessible. The Group’s portfolio is deliberately crafted to fulfil these requirements.

tashas is a bespoke boutique café concept that effortlessly brings together innovative comfort food, personalised service and chic signature design interiors to create memorable dining experiences.

Vovo Telo is an authentic artisan bakery that serves scrumptious hand-made bakery and deli products and sublime coffee.

The KEG chain of pub restaurants is a South African institution, serving traditional pub food and modern fare. A local hub for meetings, evenings out and televised sport, the KEG is enjoyed by the young and not-so-young.

Wakaberry is a self-service soft-serve frozen yoghurt bar which encourages customers to be the masters of their own colourful froyo creations.

The Bread Basket is a boutique food emporium that offers freshly baked specialist breads, pastries, confectionery and deli products.

09


Since the 1960s, House of Coffees has been respected as a purveyor of high quality freshly roasted and masterfully blended coffee.

A traditional Irish pub, O’Hagan’s serves hearty pub fare and an extensive selection of beverages in a friendly and vibrant setting.

Coffee Couture, represented in Mediclinic hospitals nationwide, is a specialised coffee shop, offering light meals, refreshments and a selection of gifts and retail items.

NetCafé is a bespoke restaurant concept situated in Netcare hospitals across South Africa, providing light meals to staff, patients and visitors.

Mr Bigg’s, a quick-service restaurant network represented across Nigeria, is the single largest food franchise brand in west Africa, north of South Africa. Its extensive offering ranges from pastries and pies to burgers and grilled chicken.

With a legacy dating back nearly 130 years to its origins in Northern France, PAUL is an internationally renowned artisanal boulangerie, patisserie and delicatessen.

Salsa is a contemporary Fast Casual dining concept centered on traditional Mexican food and beverages, served in an authentic festive environment.

Baltimore is our quality ice cream range served in our restaurants and sold to the catering services market.

Lamberts Bay Foods processes French fries and other value-added potato products for sale to wholesalers, retailers and restaurant chains.

Lupa’s full service casual family dining restaurants serve authentic craft-style food, including wood-fired oven pizza and home-made pasta, in a relaxed, neighbourhood trattoria ambience.

catch is a premium sushi and seafood restaurant that offers consumers a delectable culinary experience in a contemporary setting.

Aqua Monte produces still and sparkling bottled spring water which is sold in our restaurants and at select cinema outlets.

TRUFruit is a range of fruit juices manufactured for and sold in our restaurants, at select cinemas and to the catering market.

Brewer’s Guild is a business co-operative, developed to assist independent pubs and brewers to leverage Famous Brands’ logistics and procurement capabilities.

Thrupps, upmarket “Grocers of Distinction”, offer exclusive delicatessen and bakery products at a selection of Total’s premium-end metropolitan service stations.

Founded in Alexandra, Johannesburg, Giramundo is a quick-service restaurant franchise popular for its “perfectamundo” mouth-wateringly delicious flame-grilled peri peri chicken.

10


Trading footprint and franchise network


While competition continues to intensify, our results delivered for the year demonstrate the Group’s ability to not only compete, but thrive, amidst the heightened rivalry.

Total restaurants 2016: 2 614

UK 83

Sudan 6

Nigeria 144

Ivory Coast 5

Namibia 52

Angola 5

South Africa 2 171

Egypt 7

UAE 5

Kenya 9

Ethiopia 1

Tanzania 1

Malawi 7

Mauritius 21

Botswana 34

Swaziland 6

Mozambique 3

DRC 2

Zambia 44

Zimbabwe 8

11


Domestic International Total

Steers 542 49 591

Steers UK – 2 2

Wimpy 492 30 522

Wimpy UK – 81 81

Debonairs Pizza 473 90 563

FishAways 213 14 227

Mugg & Bean 187 14 201

Milky Lane 59 12 71

WakaberryTM 34 1 35

Fego Caffé 32 1 33

Net Café 20 – 20

Europa 16 1 17

Giramundo 16 – 16

KEG 11 4 15

tashas 14 1 15

Vovo Telo 15 – 15

The Bread Basket 6 7 13

Creative Coffees 11 – 11

Turn ‘n Tender 9 – 9

Mythos 7 – 7

House of Coffees 5 – 5

The Brewers Guild 4 – 4

O’Hagan’s 2 2 4

14 On Chartwell 1 – 1

Juicy Lucy 1 – 1

Thrupps 1 – 1

Mr Bigg’s – 134 134

Total number of restaurants 2 171 443 2 614

Performance overview

In this section14 Chairman’s statement

18 Group Chief Executive’s report

24 Value Added Statement

25 Performance at a glance

26 Six-year review

12


13


14


stellar results in challenging conditions

is a function of the Group’s unwavering

culture of competitiveness and desire to

win, combined with the relentless

energy and audacious ambition of its

management team and the people of

Famous Brands.

Results Revenue increased by 31% to R4.3 billion

(2015: R3.3 billion) and operating profit

before impairment losses grew 18% to

R792 million (2015: R672 million). An

impairment of R12 million was

recognised against the Wakaberry™

business in light of contracted growth in

the frozen yoghurt category.

Headline earnings per share improved

16% to 541 cents per share

(2015: 467 cents per share).

Cash generated by operations before

changes in working capital increased by

22% to R875 million (2015: R717 million).

Working capital grew by R156 million

(2015: R4 million) as a result of the

acquisition of Cater Chain Food Services

(Cater Chain) and Retail Group (Pty) Ltd

Botswana (Retail Group), as well as

organic growth. After changes in

working capital, cash generated by

operations increased by 1%

to R718 million (2015: R713 million).

Tax payments of R244 million (2015:

R202 million) and dividend payments of

R398 million (2015: R327 million), totalled

R642 million (2015: R529 million). Net

cash retained from operations reduced

to R76 million (2015: R184 million).

Total cash utilised in investing activities

of R202 million (2015: R96 million) was

incurred, R99 million of which was

utilised on the acquisition of the Mythos

trademark and controlling stakes in the

businesses of Cater Chain and Retail

Group. The balance of R103 million

was incurred on Supply Chain expansion,

fleet upgrade and enhancement of

information technology systems.

The Group has net cash on hand of

R6 million (2015: R126 million).

Entrepreneurship and enterprise developmentA key component of the Group’s

business model is the joint venture

partnerships it has developed with

aspiring entrepreneurs in enterprises

across its Franchising, Logistics and

Manufacturing operations. Among

others, these relationships have built

well-known brands such as Vovo Telo,

tashas and Turn ’n Tender; created

substantial markets and manufacturing

opportunities for Famous Brands Coffee

Company, Famous Brands Fine Cheese

Company and Cater Chain and

empowered former employees as

owner-drivers, who now distribute 20%

of the Group’s logistics volumes.

OverviewIn my 2015 statement I discussed the

Group’s compelling 2020 strategic intent

to become a leading branded leisure

and consumer product business in

Africa and selected markets, through

building capability and scale across the

key pillars of the business. The rewarding

results which we record in this document

are a reflection of the momentum which

this programme has gained to date and

demonstrate the potential for growth

that it will realise in the run up to 2020.

The current adverse trading environment

is widely acknowledged and reported

on, and consumer-related businesses

are under pressure to improve

performance in a climate that features

political and social instability, subdued

economic conditions, and an

increasingly competitive landscape.

I am therefore constantly delighted and

impressed that Famous Brands

consistently delivers robust results

which belie their contextual reality. This

extraordinary year-on-year performance

should not be underestimated nor

go unrecognised. The commitment

required to turn in consecutive sets of

Chairman’s statement

Overview

The commitment required to turn in consecutive sets of stellar results in challenging conditions is a function of the Group’s unwavering culture of competitiveness and desire to win.

Highlights

• Delivered strong full-year results in adverse climate

• Progressed 2020 strategy through building business-wide capability and scale

• Created wealth of over R3.3 billion

• Reported R528 million in attributable profit to shareholders

• Employed 2 379 people directly and over 50 000 indirectly


15

to build capability and depth to ensure

the business achieves its ambitious

growth goals.

The Group’s Managers’ Challenge, a

management development programme,

successfully concluded its second year.

In total 15 selected delegates completed

the programme in November 2015 and

will continue to participate in ongoing

coaching experiences. This initiative will

be repeated in F2017.

During the year the Group’s Exco was

privileged to be invited by Wits Business

School (WBS) to participate in their MBA

Programme as adjudicators on MBA

candidate presentations. This interaction

proved beneficial to both the students

and Exco members and will hopefully

form the foundation of a long-term

relationship with the institution. In

F2017, in partnership with WBS, a

suitable Executive Education Course will

be identified, aimed at mentoring high-

potential candidates in the Group for

executive management positions.

Labour relationsOver the past financial year the industrial

relations climate within the Group has

been cordial and constructive. The

unionised workers comprise 77% of the

workforce. A National Recognition

Agreement is in place with SCMAWU,

which represents 97% of the unionised

workforce.

Broad-based black economic empowermentDuring the review period an expert

external financial institution was

retained to assist management in

In this regard, I am pleased to report on

a number of new alliances which have

been effected and will further bolster

the Group’s empowerment and joint

venture strategy:• Partnerships were created with four

emerging franchise restaurant brands,

Mythos, Catch, Lupa Osteria and Salsa

Mexican Grill. We welcome them into

the portfolio and are enthusiastic

about the potential which these

businesses have for their founders

and the Group.• A groundbreaking agreement was

signed with global brand, PAUL, to

become their South African licensed

partner for a 10-year period. PAUL is a

family owned French chain of bakery-

cafés established in 1889 in Northern

France. • In addition to the joint ventures

established, a strategic manufacturing

business, Lamberts Bay Foods

Limited, was acquired. The business

produces French fries and other

value-added potato products for sale

to wholesalers, retailers and

restaurant chains. Given the integral

nature of this offering to the Group’s

franchise and retail customers, this

acquisition is anticipated to add

significant value to the business.

These transactions are discussed in

more detail in the Group CE’s report on

page 18 of this document.

Human capital developmentContinued investment has been made in

senior management and executive

appointments in the reporting period, in

line with the Group’s strategic imperative

Santie Botha Independent Chairman

formulating proposed B-BBEE ownership

transactions. These proposals were

presented to the Board in November

2015, and approved in principle. The

project has been put on hold pending

further clarity in terms of B-BBEE

ownership transactions.

Having achieved a level 6 status of

compliance during the previous financial

year, the Group has set stringent targets

to comply with the revised codes.

The Social and Ethics Committee has

prioritised, and will manage, this

imperative to improve compliance

status.

Corporate social investmentThe Group implements meaningful

corporate social investment (CSI)

programmes in the communities in

which it operates through its major

brands, Steers, Mugg & Bean, Debonairs

Pizza and Wimpy. A number of rewarding

highlights were recorded in the review

period.

All four brands continued their

sponsorship alliance with Varsity Sports,

a programme which serves to bridge the

funding gap for athletes in the phase

between competing at school level and

turning professional, thereby promoting

the development of future sporting stars

in South Africa. Steers sponsored

cricket, rugby 7s and beach volleyball;

Mugg & Bean continued to support the

development of hockey, while Wimpy

funded athletics and netball activities,

and Debonairs Pizza sponsored football.

16


Chairman’s statement continued

Business sustainability: information technologyThe Group has commenced a project to

replace the existing outdated financial

management and reporting system with

a more robust and fit-for-purpose

Enterprise Resource Planning (ERP)

system, SAGE X3. The budgeted cost of

this project is R50 million, with

approximately R35 million committed in

F2017. Implementation of the new

system began on 1 March 2016 and

is scheduled to be operational from

1 July 2017. The introduction of this ERP

platform will ensure the business is

positioned to flawlessly support future

growth.

DirectorateAfter 16 years of exceptional service

to Famous Brands, Group Chief

Executive, Kevin Hedderwick, retired on

29 February 2016. We were delighted

therefore when he accepted the Board’s

offer to serve as Strategic Adviser to the

Group from 1 March 2016, for a

12-month period.

As part of this role, Kevin has

responsibility for pursuing and

evaluating new growth opportunities for

the Group and overseeing execution of

new acquisitions. He has a unique talent

and passion for M&A activity and his

continued management of this portfolio

is welcomed.

On Kevin’s retirement, Darren Hele,

formerly Chief Executive: Food Services,

was appointed Group Chief Executive.

Darren joined Famous Brands in 2003.

We are delighted that he is in place and

well qualified to succeed Kevin, bringing

to his new role extensive experience

in the Group and the industry. With

Darren’s appointment, the Board is

satisfied that the planned management

transition will be seamless and will

ensure the business is optimally

prepared for the next phase of its

growth.

The Group remains committed to

transforming the composition of the

Board to improve compliance with

relevant legislation and to enhance

the range of expertise and experience

available to the business. In this

regard, we are delighted to welcome

Moses Kgosana as an independent non-

executive director to the Board (effective

from 22 May 2015). Moses has

subsequently also been appointed as

Chairman of the Group’s Audit and Risk

Committee.

Moses is a Chartered Accountant (SA),

with more than 30 years of accounting,

auditing and advisory experience within

the public and private sectors. He was

formerly Chief Executive of KPMG

Southern Africa as well as Chairman

Since 2012, Mugg & Bean has supported

the Cupcakes 4 Kids with Cancer

Foundation. The aim of this organisation

is to raise awareness that early detection

of cancer can save a child’s life. In

November 2015, Mugg & Bean held its

‘Wall of Generosity’ activation, the first

of its kind in the South African restaurant

industry, centred on awarding

complimentary cupcakes to thousands

of consumers who signed up in the

stand against cancer. The programme

generated over R1 million worth of

awareness for the campaign. A further

R100 000 was donated by Mugg & Bean

to the Foundation from the sale of

cupcakes in its restaurants throughout

the year.

Wimpy supports the Reach for a Dream

foundation, an organisation which aims

to encourage and give hope to children

fighting life-threatening illnesses

through the fulfilment of their dreams.

Wimpy’s involvement in the recent

fundraising ‘Slipper Day’ event raised

R914 thousand for the charity and

created substantial awareness of its

activities.


17

of KPMG Africa. He also served as a

member of the KPMG International

Board as lead director.

Dividends and dividend policyThe final gross dividend of 215 cents per

share, together with the interim gross

dividend of 190 cents per share, equates

to total dividends of 405 cents per share

(2015: 355 cents per share) declared

for the year, an increase of 14%. The

dividend has been declared from

income reserves. The dividend cover is

1.3 times (2015: 1.3 times), and is

considered sustainable in light of

Famous Brands’ strong cash-generating

ability. In considering future dividend

declarations, the Board will be guided by

the Group’s cash requirements based

on future cash flow forecasts.

OutlookSouth Africa will remain an attractive

destination for global competitors, but

having contended with international

entrants for over 20 years, I am confident

that the Group has the determination,

experience, and energy to continue to

flourish in this challenging environment.

In line with the Group’s acquisitive

nature and in pursuit of Vision 2020,

Famous Brands will continue to explore

opportunities to grow its presence in the

casual evening dining segment, as well

as outside of the traditional food service

sector.

AppreciationI would like to thank Kevin for his

invaluable contribution, not only over

this past year – his last as Group CE –

but for all fourteen years during which

the Group was under his stewardship.

He hands over to the next generation a

business in superb condition – a much

respected company in South Africa, and

one which is structured for sustainable

long-term growth.

The Group’s Exco, management team

and all the people of Famous Brands

have contributed to another remarkable

performance in very difficult trading

conditions. Over the past decade and

a half, strong results have become

the norm at Famous Brands. This

achievement must be congratulated

and tribute paid to all involved.

I would also like to extend my

appreciation to our shareholders for

their continued investment; the Group’s

efforts are directed at ensuring the

business rewards your support.

Finally, I would like to thank my fellow

Board members for their astute

guidance and commitment to the

Group’s goals and strategies; your

encouragement is valued.

Santie Botha

Independent Chairman

18


Review of the Group’s performanceAfter fourteen years at the helm, in this, my last report as Group Chief Executive, it is a privilege to report on another exhilarating year in the remarkable journey of Famous Brands. The Group’s stellar results and accomplishments achieved during the period are irrefutable evidence of how the business continues to flourish, despite the current environment.

I believe that my legacy to the business is one which defines Famous Brands as competitive, hungry and possessed of high-voltage energy. Despite achieving industry-leader status we have never become complacent. We retain our “challenger” mentality from the early days. We pride ourselves on competing to win. Always. Innumerable times I have said we are “acquisitive by nature” (some 36 acquisitions over fourteen years demonstrates that), but equally, our growth is not based on acquisitions alone. Every single day we commit to exploring opportunities across the operations to continuously improve and grow organically, to ensure we are positioned to retain our market leadership in all those categories we participate in.

This philosophy has done us proud. Managing a business is not risk free, and failure is always a hazard, so while we have competed fiercely, we have never been rash. Our track record shows we have got substantially more right than wrong. Compound growth in revenue of 18% and profit of 17% over five years illustrate that.

ResultsIn our fifteenth consecutive year of record turnover and profits, Group revenue grew by 31% to R4.3 billion (2015: R3.3 billion) comprising organic and acquisitive growth. Operating profit rose 18% to R792 million (2015: R672 million), while the operating margin was 18.4% (2015: 20.5%).

The strong increase in revenue is attributable to healthy system-wide sales in the franchise Brand portfolio and integration of new business into the Logistics and Manufacturing operations. This integration of high-volume lower-margin business is reflected in the relatively lower Group operating margin percentage.

Divisional reportIndustry overviewDuring the review period, consumers spent R78 billion eating out – a figure which is growing annually, and is encouraging. Contextually, a number of trends were notable in the quick service (QS) and casual dining (CD) market segments: • The gradual shift which took place

away from QS restaurants to CD offerings over recent years retreated in light of sustained economic hardship, resulting in the evolution of Fast-Casual dining. This hybrid offering blurs trading formats, as traditional take-away restaurants seek to offer customers a pleasant sit-down experience;

• The emergence of new factors influencing the success of brands, including: millennials, digital advances,

Year in reviewMacro-economic environmentOperating in a consumer-driven industry we are ever-mindful of the impact that the broader environment has on consumer sentiment. In the context of continued socio-economic instability, discretionary spend remained subdued in the review period, as evidenced in a recent survey* citing that the impact of economic uncertainty is greater on South Africans than their global peers; 62% of local consumers are spending less; 21% are trading down to less expensive brands; and if incomes were to increase, South Africans do not plan to spend more.

Notwithstanding this bleak synopsis, Famous Brands remains optimistic and enthusiastic about the opportunities presented by the food service industry in the country. From experience we know that consumers remain loyal to reputable brands that are relevant, offer value, afford convenience and are accessible, and our portfolio is deliberately crafted to fulfil these requirements. While competition continues to intensify, our results delivered for the year demonstrate the Group’s ability to not only compete, but thrive, amidst the heightened rivalry.

(*McKinsey Consumer Sentiment Survey 2016)

Group Chief Executive’s report

Highlights

High-energy compete to win culture evident in:

• Unabated stellar growth

• Bold acquisitions

• Pioneering new brands

• Innovative new categories

• Significant vertical integration gains

• R1 billion operating profit target by February 2018

Four years ago, we set the goal of delivering R1 billion in operating profit by February 2018. This audacious target exemplifies our philosophy of competing to win.


19

Market penetrationIn the year under review, 151 restaurants were opened (2015: 221).

In my 2015 report, I noted that the Group’s goal was to expand its presence in the casual evening dining trade category, through two strategies: ex-tending trading hours and re-engineer-ing the menus of existing offerings, and exploring suitable acquisition opportuni-ties.

I am delighted to report positive outcomes on both strategies: tashas’ and Europa’s evening trade has gained momentum, and the footprint of steakhouse brand, Turn ’n Tender, has also been extended.

In addition we have launched new brand concepts and established a number of key joint ventures in the category:• the Group opened its pilot craft beer-

restaurant, 14 On Chartwell, in October 2015 in Umhlanga, KwaZulu-Natal, to popular acclaim. This bespoke restaurant, featuring artisanal beverages and food, is the Group’s first foray into the craft hospitality market, and has demonstrated its competence at creating unique (non-chain) format restaurants. Given the pleasing response to this concept, management will cautiously explore other similar opportunities.

• on 1 November 2015, the Group acquired a 51% controlling stake in contemporary Greek restaurant chain, Mythos. With like-on-like sales growth of 8%, the addition of two new restaurants during the period, and planned opening of a further four restaurants in the short term, this multi-awarded brand is proving to be a gratifying strategic coup.

The other acquisitions concluded in this category are Catch, Lupa Osteria and Salsa Mexican Grill, which are discussed under Subsequent Events on page 20 of this report.

fast food “refreshed”, value wars, customisation, premiumisation, experiences worth bragging about, wholesome eating, farm-to-table provenance, healthier options and mindful dining.

Management strives to be constantly alert, prepared and innovative to ensure the Group’s carefully structured brand portfolio anticipates and optimises on these emerging influences.

FranchisingThe Group’s Franchising division consists of the following regions: South Africa, Rest of Africa and the Middle East, and the United Kingdom (UK).

Across the total franchise network system-wide sales (which include new restaurants opened) increased 12%, while like-on-like sales grew 6.9%.

A total of 184 new restaurants were opened across the brand portfolio, bringing the total restaurant network to 2 614. During the period 205 restaurants were revamped.

The performance of the Group’s three franchise regions is reviewed below:

South AfricaOverviewRevenue grew 11% to R681 million (2015: R615 million). Operating profit improved by 7% to R389 million (2015: R365 million), while the operating profit margin reduced to 57.1% from 59.4% in the prior year. This decrease is primarily due to an investment in resources to build capability and capacity across our Franchising division.

System-wide sales increased 11.2% while like-on-like sales improved by 7.3%.

Kevin A HedderwickGroup Chief Executive

Mainstream brandsIn general this portfolio performed extremely well in a challenging environ-ment.

Brand highlightsStand-out performances were recorded by our mainstream brands:

Steers delivered a phenomenal performance, growing system-wide sales by 13.0% and like-on-like sales by 10.7%. Culminating from an extensive repositioning, the brand is refreshed and re-energised, and the positive response from consumers is reflected in the additional 1.2 million customers served versus the prior year.

Following an intensive review aimed at reinforcing Wimpy’s iconic status as a value breakfast and coffee offering, the brand has captured new customers and grown turnover in an extremely competitive landscape. Management is satisfied that the measures implemented will enable Wimpy to continue to gain market share.

Once again, Debonairs Pizza outperformed the market and its peers. System-wide turnover increased by 19.9%, while like-on-like sales grew 11.5% reflecting the strength of the brand’s offering and its appeal to the burgeoning middle-income consumer segment. Remarkably, 71 new restaurants were opened in South Africa during the period.

Celebrating its 20th anniversary in the year under review, Mugg & Bean improved system-wide sales by 13.5% and increased like-on-like sales by 8.5%. Nationally the brand served 500 000 more customers than the prior year. Mugg & Bean’s journey of generosity continued apace with the roll-out of its On the Move format, an offering which addresses consumers’ busy lifestyles, and which gained further traction in the review period.

20


Group Chief Executive’s report continued

Building brand capabilityOn 17 November 2015, the Group signed a landmark agreement with global brand, PAUL, to become their South African licensed partner for a 10-year period. PAUL is a family owned French chain of bakery-cafés established in 1889 in Croix, Northern France. Internationally, PAUL has partnered with operators across Europe, Africa, Asia, America and the Middle East, and is represented in 41 countries. This partnership is in line with the Group’s stated intent to enhance the contribution of its premium-end portfolio.

In terms of the agreement with PAUL, Famous Brands will open five restaurants over a five-year period in three trading formats. The first flagship PAUL restaurant is scheduled to open by the end of F2017. In the longer term, Famous Brands could provide PAUL with access to African countries outside of South Africa where the brand is not currently represented.

The Group’s existing relationship with strategic alliance partner, Total South Africa, was extended in late 2014 with the introduction of Thrupps, under Famous Brands’ management, to the upper-end metropolitan service stations in the petroleum supplier’s service station network. During the review period, the pilot store in Senderwood continued to trade extremely well, improving like-on-like turnover by 17%. In April 2016 a further store was opened at Total Hobart, in Bryanston, Gauteng. Initial trading results have been very positive, and endorse the planned opening of a further three stores in F2017.

The Group will continue to build capability across its South African brand portfolio with the opening of 235 planned new restaurants for the year ahead.

FishAways reported another very strong year, growing system-wide sales by 17.9% and like-on-like sales by 5.6% despite a general easing of consumer spend in this category. FishAways’ improved performance can be attributed to its deliberate premium offering positioning in the take-out seafood segment, and general disarray among competitors in this market.

Formerly regarded as one of the Group’s emerging brands, Milky Lane is rapidly taking on mainstream status. Eight new restaurants were opened in the review period, bringing the total footprint to 60. Almost 70% of the network has been converted to the new corporate identity and the positive impact on customers is evident in the increase in system-wide sales of 7.3% and improvement in like-on-like sales of 8.6%.

Emerging brandsAcross this portfolio the majority of brands delivered improved results.

Turn ’n Tender in particular, reported an outstanding performance. Three new restaurants were added during the period, bringing the total network to nine. The expanded footprint drove a 20% growth in system-wide turnover, while like-on-like sales increased 7.6%. In the Gauteng market the brand dominates the steakhouse segment, having once again been awarded Best Steakhouse status in the Best of Johannesburg and Ekurhuleni surveys. The goal is to extend the brand’s network both in Gauteng and wider afield.

While Wakaberry™ remains the clear brand leader in the frozen yogurt category and continues to enjoy strong consumer appeal, it was not unscathed by the continued contraction of this market segment, mirroring the decline experienced globally. In response, the business model is undergoing a stringent review of key components, including store locations, format size and extent of the offering.

Subsequent eventsOutlined in 2015, the Group’s stated intent is to expand its presence in the full-service casual dining category – one of the quickest growing segments in the restaurant industry over the past decade. In this regard, three acquisitions were made in the period subsequent to year-end, as follows:

Effective 9 March 2016, the Group acquired a 51% stake in Catch, a premium seafood and sushi brand. Complementing the single existing restaurant in Gauteng, the first franchised restaurant will open in July 2016 in Umhlanga. Management is confident that Catch will enjoy strong appeal in its niche segment.

Effective 1 May 2016, the Group acquired a 51% controlling stake in Lupa Osteria, an authentic Italian restaurant business trading in the family casual dining segment. Founded in 2013, and franchised in 2014, Lupa Osteria comprises three restaurants in KwaZulu-Natal: Hillcrest, Westville and Durban North. In the short term a further three restaurants will be opened in KwaZulu-Natal; over the long term, management is satisfied that a network of 35 restaurants in South Africa and select African countries is achievable.

With effect from 1 June 2016, a 51% controlling stake was acquired in recently launched Salsa Mexican Grill, a Fast-Casual dining concept centred on traditional Mexican food and beverages. The brand is currently represented by its maiden restaurant, opened in June 2015, in Fourways, Gauteng. Two additional franchised outlets are scheduled to open during the course of 2016. Over the longer term the intention is to grow the brand’s footprint nationally.

A multitude of initiatives have been identified and are planned for continuing to build capability and capacity across the three pillars of the business, Franchising, Logistics and Manufacturing.


21

The Mr Biggs business in Nigeria, comprising 134 restaurants, is still in repair mode, undergoing an ongoing programme to revamp stores and improve operational standards. The Group remains committed to the long-term potential this business offers as a substantial foothold in the region.

Building brand capabilityIn the forthcoming year, Mugg & Bean will enter Ghana and expand its presence in Kenya with On the Move outlets. The Group’s first ever Mugg & Bean drive thru is planned for Mauritius later in the 2016 calendar year.

In Nigeria, optimising the potential of the Mr Biggs pie factory will be prioritised, and ten new restaurants will be opened.

The target is to open a total of 48 new restaurants in the Rest of Africa region in the year ahead.

Middle EastIn the period under review, the Debonairs Pizza and Steers restaurants in this region continued to deliver solid results.

tashas’ maiden restaurant, opened in Dubai in 2015, traded strongly over the past year, and plans are well advanced to open the brand’s second restaurant in Dubai in F2017.

Management will be renewing its focus on this region in F2017 with a view to growing the Group’s presence.

InternationalUnited KingdomOverviewIn the context of slightly improved consumer sentiment and spend, the UK business reported record profits and margins. The business is healthier than it has ever been, positioning the operation for future growth.

The purchase consideration in each of the above mentioned transactions was below the threshold of a categorised transaction in terms of the Listings Requirements of the JSE Limited.

Rest of AfricaOverviewThe Group has a strong presence in the Rest of Africa, with representation in 17 countries and over 20 years’ of experience in the region. The business pursues a narrow-and-deep strategy based on considered expansion in its existing territories and cautious investigation of new opportunities in untapped markets.

System-wide sales increased 19.3%, while like-on-like sales improved 2.6%. This region’s contribution to total system-wide Group sales is 9.5% (2015: 9%).

Market penetrationDuring the period the Group opened 33 (2015: 47) new restaurants in the region. Debonairs Pizza made its debut in Ethiopia, to encouraging response, and opened a further four outlets in Angola, in conjunction with partner, Shoprite Checkers. Mugg & Bean entered Malawi for the first time with an On the Move offering in conjunction with partner, Total.

In August 2015, the Group acquired a 51% controlling stake in its master licence partner, Retail Group (Pty) Ltd, Botswana. During the year this business was fully integrated into Famous Brands’ structures. The business comprises 30 restaurants, 22 of which are company owned, and the balance are franchised. To date the unit’s trading performance has exceeded expectations; highlights include the opening of two Mugg & Bean restaurants and the opening of a second Steers restaurant.

Revenue in Sterling decreased by 2% while revenue in Rand terms grew 13% to R116 million (2015: R102 million). The foreign currency translation gain amounted to R15 million (2015: R12 million). Operating profit increased 59% to R33 million (2015: R21 million) and the operating profit margin rose to 28.2% from 20.1% in the comparable period.

Building brand capabilityIt is planned to open five Wimpy and two Steers restaurants in the year ahead.

The Group’s goal continues to be to deploy the existing UK platform as a beachhead to grow Famous Brands’ footprint and improve its opportunities to earn hard currency in the years ahead.

Supply chainThe Group’s Supply Chain consists of its Logistics and Manufacturing businesses, which are managed and measured separately.

At the half-year it was reported that the Group had undertaken a range of ambitious projects to integrate new high-volume lower-value business into its Manufacturing and Logistics operations, which had proved more onerous than anticipated. While turnover grew, it failed to translate into corresponding growth in operating profit, largely due to the sub-optimal integration of the new Supply Chain projects.

In this regard, it is pleasing to report that notwithstanding the setbacks experienced in the first half of the year, both divisions have made strides in incorporating the additional volumes, and recorded rewarding results for the full period.

22


Group Chief Executive’s report continued

increased by a remarkable 43% to R248 million (2015: R173 million). The division’s operating margin remained at 13.7%.

These satisfying results are attributable to a range of projects which were successfully implemented during the year, including:• integration of the previously

outsourced cream cheese business into Famous Brands Fine Cheese Company. Remarkably, the operation processed 37% more milk than the prior year, equating to 38 million litres processed for the year;

• integration of the Cater Chain business, and take-on in October 2015 of 30% of the Group’s pork requirements and a further 30% of volumes during April;

• the successful introduction of Steers’ frozen patties to the retail market;

• take-on of the Mpumalanga region’s formerly outsourced burger bun business by Famous Brands Great Bakery Company; and

• the successful commissioning of the Group’s serviette plant. This plant manufactures serviettes for the entire business and has already recouped the initial cost of investment.

Building Manufacturing capabilityThe business should derive further strong growth from the implementation of the following integration projects scheduled for the forthcoming year: • the currently outsourced Wimpy

muffin business will be taken on by Famous Brands Great Bakery Company;

• Famous Brands Fine Cheese Company will prepare to take on the currently outsourced sliced cheese business, which comprises approximately 25% of the Group’s total cheese requirement; and

Consolidated revenue grew by 34% to R3.4 billion (2015: R2.5 billion), while operating profit increased 33% to R348 million (2015: R262 million). The operating margin was 10.33% compared to 10.44% in the prior period due to the newly integrated product mix, which includes a larger basket of lower margin business.

Divisional reportLogisticsThe Crown Mines Distribution Centre, commissioned in May 2015, designed to take on the Gauteng region’s previously outsourced frozen and chilled product basket, has bedded down well and the initial set-up costs have stabilised. Enhanced efficiencies and extraction of economies of scale have assisted in normalising margins, which should continue to improve over time.

Revenue improved strongly by 31% to R2.9 billion, while operating profit rose 12% to R100 million. The operating profit margin declined to 3.4% from 4.0% but management is confident that as integration of additional new business gains momentum, historical margins will be achievable.

Building Logistics capabilityIn the year ahead the division will prioritise the relocation of ambient primary distribution from Midrand to a new site to alleviate space constraints at the existing facility.

Capital expenditure of R8.3 million has been budgeted for the forthcoming period.

Divisional reportManufacturingThis division delivered an excellent performance in the review period. Revenue grew by 43% to R1.8 billion (2015: R1.3 billion), while operating profit

• take-on of Halaal meat products with effect from July 2016 and integration of an additional 30% of the Group’s pork basket by October 2016 at Famous Brands Meat Company’s City Deep facility (formerly known as the Cater Chain business).

Capital expenditure of R13.5 million has been budgeted for the year ahead.

Subsequent eventsSubject to Competition Commission approval, the Group has acquired 100% of the business of Lamberts Bay Foods Limited, a wholly owned subsidiary of JSE-listed Oceana Group Limited. The business produces French fries and other value-added potato products at its factory in Lambert’s Bay for sale to wholesalers, retailers and restaurant chains.

This acquisition will serve to enhance the Group’s capability to manufacture licensed product for its franchise network and retail clients, as well as provide security of supply in respect of a significant strategic menu item.

The purchase consideration was below the threshold of a categorised transaction in terms of the JSE Limited.

The FutureBuilding Group capabilitySubstantial investment has been made in replacing the current accounting system with a fit-for-purpose Enterprise Resource Planning solution, an initiative which will provide the Group with the required capacity to support anticipated future growth. This project is discussed in more detail in the Chairman’s Statement and Strategic Imperatives document on pages 15 and 30.

Managing a business is not risk free, and failure is always a hazard, so while we have competed fiercely, we have never been rash. Our track record shows we have got substantially more right than wrong.


23

This audacious profit target exemplifies the theme throughout this report – that winning is our overriding goal – limited only by a lack of desire and a fear of failure. Famous Brands is equal to the challenge and we relish the opportunity.

AppreciationIn 1969, Famous Brands was conceived as a family business, and over the decades the core family values of hard work and honest endeavour have remained intact. Even today the sense of family is what sets us apart from other businesses.

I am humbled to have enjoyed the trust and belief bestowed on me by the founding families – the Halamandaris’ and Halamandres’ – to shape the company into what it is today. They welcomed me as one of their own and I will ever be thankful for the opportunities they afforded me.

Over the fourteen years in which I headed up this company, the franchisees have also become like family to me. They are the true heroes of this business and my gratitude to them is boundless.

To my own family, it is fair to say Famous Brands has been all-consuming over the years. I recognise and appreciate your support and understanding and look forward to addressing the imbalance.

As outlined in this report, a multitude of initiatives have been identified and are planned for continuing to build capability and capacity across the three pillars of this business, Franchising, Logistics and Manufacturing. In addition to organic growth opportunities, exciting new prospects are presented with the opening of 292 franchise restaurants in the year ahead; assimilating the new joint venture brands, PAUL, Lupa Osteria, Catch and Salsa Mexican Grill; and integrating the manufacturing operation of Lamberts Bay Foods.

ProspectsIt has been an honour to lead this Group over the past decade and a half, and I am satisfied that we have achieved the strategic and operational ambitions I formulated at the outset of my tenure.

The platform for continued growth is firmly in place, comprising an accomplished executive management team, optimally structured business model and a pipeline of opportunities to continue to meet stakeholder expectations.

Four years ago, we, as a management team, set the goal of delivering R1 billion in operating profit by February 2018. Excluding the potential positive impact of proposed acquisitions, we are satisfied that this goal is achievable given the existing scope to substantially up-weight the business.

For so long I have been the “face” of Famous Brands, and Darren, the executive managers and staff have not always received the accolades they deserve. Suffice it to say that each and every one of them plays an invaluable role in making Famous Brands the extraordinary company it is.Over the years, it has been a pleasure doing business with our strategic alliance partners, suppliers, financiers, property developers and landlords. We have come a long way together and I would like to thank you for your contribution to the success of this business. Finally to our loyal customers, under the new leadership team you can expect more of the same from Famous Brands: bold, innovative, groundbreaking offerings which continue to exceed your

expectations.

Kevin A HedderwickGroup Chief Executive

24


2015R000 %

Wealth createdTurnover 4 308 318 3 283 342Cost of materials and services (2 928 114) (2 171 390)Share of (loss)/profit from associates (622) 7 608Finance income 20 466 13 281

1 400 048 100 1 132 841 100

Wealth distributedEmployeesSalaries, wages and related benefits 535 186 38 398 039 35

Providers of capitalDividends to shareholders 398 389 28 327 389 29Finance costs 27 375 2 13 550 1

425 764 30 340 939 30

Government

Corporate tax 221 011 16 194 651 17

Wealth retained for future expansion and growthAmortisation of intangibles and depreciation of property, plant and equipment 52 910 41 889Retained income 165 177 157 323

218 087 16 199 212 18

1 400 048 100 1 132 841 100

2016R000 %

Value Added Statementfor the year ended 29 February 2016

The Value Added Statement shows the wealth that the Group has created through its activities and how this wealth has been distributed to stakeholders. The statement reflects the amounts retained and reinvested in the Group for the replacement of assets and the development of future operations.

Distribution of wealth created:

2016

38%

16%

30%

16%

Employees

Retained for futureexpansion and growth

Government

Providers of capital

2015

35%

17%

30%

18%

Employees

Retained for futureexpansion and growth

Government

Providers of capital


25

Performance at a glance

2015

Financial measuresRevenue R000 4 308 318 3 283 342Operating profit margin % 18.4 20.5Cash realisation rate % 85.0 99.9Net debt/equity % (0.4) (8.9)Headline earnings per share cents 541 467Dividends per share cents 405 355Wealth created R000 1 400 048 1 132 841Return on net assets % 49.0 50.0Return on equity % 36.4 35.1

Non-financial measuresNumber of restaurants 2 614 2 545

Domestic 2 171 2 100International 443 445

Number of employees 2 598 1 630Permanent 2 379 1 482Non-permanent 219 148

Accidents frequency rate* 1.02 1.16Disabling injury frequency rate* Nil Nil

Fatalities* Nil Nil

*Safety record with respect to Occupational Health and Safety.

2016

26


Six-year review

Growth%* 2015 2014 2013 2012 2011

Statement of profit or loss and other comprehensive income and cash flowsRevenue 18.1 R000 4 308 318 3 283 342 2 825 979 2 516 287 2 155 615 1 878 036 Operating profit before impairment losses 17.2 R000 792 108 672 024 565 517 465 842 412 656 358 453 Operating profit margin % 18.4 20.5 20.0 18.5 19.1 19.1 Profit after taxation R000 551 566 484 712 405 460 331 052 268 054 230 999 Cash generated by operations R000 718 370 713 235 593 559 482 279 398 710 396 929 EBITDA before impairment losses R000 845 018 713 913 603 943 499 397 441 692 384 486 Cash realisation rate % 85.0 99.9 98.3 96.6 90.3 103.2 Headline earnings for the year 18.5 R000 539 611 465 201 401 942 330 188 267 438 230 502 Statement of financial positionTotal assets R000 2 408 283 1 852 260 1 692 839 1 510 467 1 221 169 1 139 312 Total equity 17.0 R000 1 550 599 1 417 154 1 234 948 1 000 088 840 370 708 594 Net assets R000 1 798 373 1 388 519 1 300 070 1 152 796 985 227 871 200 Net debt R000 (5 884) (126 228) (25 699) 81 091 81 572 101 389 Profitability and asset managementReturn on total assets % 36.6 37.9 35.3 34.1 35.0 32.4 Return on net assets % 49.0 50.0 46.1 43.6 44.5 42.5 Return on equity % 36.4 35.1 36.0 35.9 34.5 35.7 Net asset turn times 2.7 2.4 2.3 2.4 2.3 2.2 Interest cover times 114.7 2 498.2 176.1 117.4 38.7 24.0 Net debt/equity % (0.4) (8.9) (2.1) 8.1 9.7 14.3 Shareholders’ ratiosBasic earnings per share cents 528.7 467.7 405.9 337.6 277.6 241.8 Headline earnings per share cents 540.6 467.2 406.2 339.1 278.3 242.0 Dividends per share 21.2 cents 405 355 300.0 250.0 200.0 155.0 Dividend cover times 1.3 1.3 1.4 1.4 1.4 1.6 Net tangible asset value per share cents 455.6 495.5 358 204 151 51 Net asset value per share cents 1 554 1 420 1 244 1 022 874 740 Stock exchange statisticsMarket value per share– at year-end cents 11 560 11 200 9 700 8 350 4 405 3 850 – highest cents 14 143 11 518 11 095 8 350 4 650 4 525 – lowest cents 10 290 9 550 8 072 4 431 3 510 2 456 Closing dividend yield % 3.5 3.2 3.1 3.0 4.5 4.0 Closing earnings yield % 4.7 4.2 4.2 4.1 6.3 6.3 Closing price to earnings ratio times 21.4 24.0 23.9 24.7 15.9 15.9 Number of shares issued (excluding treasury shares) 99 812 435 99 807 435 99 242 435 97 827 435 96 192 435 95 817 596 Market capitalisation 25.6 Rm 11 538 11 178 9 627 8 169 4 237 3 689 *Five-year compound growth % p.a.

2016

Famous Brands is competitive, hungry and possessed of high-voltage energy. Despite achieving industry-leader status we have never become complacent. We retain our “challenger” mentality from the early days.


27

Definitions

Basic earnings per share: Net profit for the year divided by the weighted average number of ordinary shares in issue during the year.

Cash realisation rate: This ratio is calculated by expressing cash generated by operations as a percentage of EBITDA and reflects the proportion of cash operating profit realised after working capital movements.

Closing dividend yield: Dividends per share as a percentage of market value per share at year-end.

Closing earnings yield: Headline earnings per share as a percentage of market value per share at year-end.

Closing price to earnings ratio: Market value per share divided by headline earnings per share at year-end.

Dividend cover: Headline earnings per share divided by dividends per share declared out of earnings for the year.

EBITDA: Earnings before interest, tax, depreciation, amortisation and impairment losses.

Headline earnings: Net profit for the year adjusted for profit/loss on sale of property, plant and equipment, investments and impairment losses.

Headline earnings per share: Headline earnings divided by the weighted average number of ordinary shares in issue during the year.

Interest cover: Operating profit divided by net finance costs. (Measures the capability to service borrowing obligations from current profit.)

Net assets: Total assets other than cash, bank balances and deferred tax assets less interest-free trading liabilities.

Net asset turn: Revenue divided by average net assets.

Net asset value per share: Ordinary shareholders’ equity divided by number of shares in issue.

Net debt: Total interest-bearing borrowings less cash. It is calculated by adding current and non-current interest-bearing borrowings and bank overdrafts and deducting positive cash balances.

Net tangible asset value per share: Ordinary shareholders’ equity less intangible assets divided by the number of shares in issue.

Operating profit: Profit before impairment losses, interest and tax.

Operating profit margin: Operating profit as a percentage of revenue. (Measures the return on revenue of the operating activities of the Group.)

Return on equity: Headline earnings as a percentage of average shareholders’ interest. (Measures the return earned on the capital provided by the shareholders.)

Return on net assets: Operating profit as a percentage of average net assets. (Measures the effectiveness with which the net assets were utilised.)

Return on total assets: Operating profit as a percentage of average total assets. (Measures the effectiveness with which the total assets were utilised.)

28

Strategic imperatives, Material issues and Sustainability

In this section30 Strategic imperatives and Material issues

32 Our key relationships

34 Human capital

36 Transformation

37 Corporate Citizenship

38 Safety, Health and the Environment


29


30


Strategic imperatives and Material issues

Overview

This table outlines the Group’s key strategic imperatives, identifies the material risks and issues which might impact on the implementation of those imperatives, and specifies the mitigating actions and responses which are employed to counter such risks.

Strategic imperative

1. Fortify the foundation which exists within Manufacturing and Logistics

2. Shape the brand portfolio and ensure our key brands resonate across all consumer touch points

3. Engage the competition by strengthening our gorilla brands

4. Build superior routes-to-market and drive lowest cost producer status

5. Prosper in Africa

6. Execute on all aspects of B-BBEE

7. Ensure strong focus on leadership and succession planning

8. Expand the business through diversification

9. Manage the transition from the existing outdated information technology platform

10. Continue to drive the Group’s culture of high performance

Strategic imperative


31

Material risk/issue Our response

Restricted access to capital to fund activities

• The business is highly cash generative and has a strong balance sheet• Acquired Cater Chain Food Services business to take on the Group’s previously

outsourced pork and halaal meats business• Commission low-cost Gauteng primary distribution centre to alleviate capacity

constraints at Midrand

Under-representation in the casual sit-down evening dining segment

• Extended the trading hours of appropriate existing restaurants (tashas and Europa) and will continue to do so where suitable opportunities arise

• Concluded acquisitions which specifically cater for this evening dining occasion (Mythos, Lupa Osteria, Catch and Salsa Mexican Grill). Further opportunities to build presence in this market segment will continue to be explored

Underperformance of the Wimpy and Steers brands

• Concluded a 360-degree evaluation of both brands in terms of all consumer touch points. Steers’ repositioning has resulted in a significant improvement in performance. Wimpy’s review programme is gaining momentum; early signs of market share gains are encouraging

Group Logistics Services and/or Group procurement functions stall

• Continue up-weighting of investment in people and processes• Institutionalise demand replenishment planning across entire Supply Chain• Re-visit cost/benefit structure of Phase 2 of owner-driver model • Ensure that new fit-for-purpose Enterprise Resource Planning (ERP) system aligns with

route-to-market strategies

Global competitors intensify focus on expansion into Africa

• Launched maiden entry into Ethiopia and Angola with Debonairs Pizza. The brand’s maiden entry into Ghana will take place in calendar year 2016

• Acquired controlling equity stake in existing Botswana Master Licence business • Leverage the Group’s first-to-market and narrow-and-deep expansion strategy• Continue with UACR repair process• Fortify the Group’s strategic alliance partnership with Total Petroleum in targeted African

countries

B-BBEE ownership transaction currently under development fails to secure shareholder approval

• Proposed B-BBEE ownership structures were presented to the Board and approved in principle. The project has been put on hold pending further clarity in terms of B-BBEE ownership transactions

• Continue to prioritise initiatives to ensure compliance with the revised B-BBEE codes

• Affordability of key personnel, resulting in margin pressure

• Existing share option scheme proves unattractive in terms of retention

• Acknowledge that this intervention is key to sustainability and needs to be regarded as an investment not an expense

• Continue to robustly review Exco organisational structures• With shareholder approval, the existing share option scheme was converted to a Share

Appreciation Scheme

Absence of suitable targets that align with our strategy

• In conjunction with leading reputable financial institutions, a range of investment targets were investigated in detail. While none has met the Group’s stringent criteria to date, the identification of potential diversification opportunities will remain a key strategic thrust

• Cost of investment• Sub-optimal management of

existing system while transition is under way

• The Board has approved an extensive restructuring of the existing outdated information technology platform to be replaced by an ERP system, Sage X3

• This R50 million programme is currently under way and is scheduled to commence operation in July 2017. The new platform will ensure the business is optimally positioned to seamlessly support future growth

Existing human resource diagnostic interventions are not optimally employed

• Robustly manage and measure implementation of the Group’s integrated performance management programme across the business

• Conduct regular reviews of all existing processes, enhancing them as and where required

Material risk/issue Our response

32


Stakeholder group How we engage with our stakeholders

Shareholders, market analysts and

funding institutions

• JSE SENS announcements• Media releases covering key developments within the Group• Integrated Annual Reports• Annual General Meetings• Company’s website• Results presentations• One-on-one interactions with investors and funding institutions

Customers (franchisees) • National franchisee forums• Personal contact• Operations audits and reviews• Operations campaigns• Web and call-in support • Annual brand conferences

Consumers and communities • Web and call-in support • Digital and social media• Integrated Annual Reports

Suppliers and business partners • Regular procurement interactions

Employees and unions • Business feedback sessions• Employee surveys• Performance reviews and development discussions

Government and regulatory bodies • Regular interactions with the relevant government institutions and

regulatory bodies

Our key relationships

We are committed to creating value for our key stakeholders in the short, medium and long term. Our Value Added Statement on page 24 sets out the value the Group created for our stakeholders for the year ended 29 February 2016.

Stakeholder group How we engage with our stakeholders


33

Our stakeholder groups’ key interests and concerns Further information

• Return on investment and dividends• Sustainable earnings growth through acquisitive and organic growth• Corporate Governance, ethical and competent leadership

• Page 30, Strategic imperatives and

Material issues• Page 46, Corporate Governance report

• Strong brands• Efficient, effective and competitive Supply Chain• Marketing spend• Location of restaurants• Franchise and business management support• Product quality


Material issues

• Page 37, Transformation (skills development) • Page 38, Safety, Health and the Environment

(food safety)

• Strong brands and value offering• Location accessibility, convenience and positive total consumer experience• Sponsorships and other corporate social investments


Material issues • Page 37, Corporate Citizenship

• Timely payment• Continuity of supply• Fair treatment • B-BBEE compliance

• Page 37, Transformation (preferential

procurement and enterprise development)

• Job security• Remuneration and recognition• Equal opportunities and career development• Training and skills development• Safe working environment

• Page 34, Human Capital• Page 30, Strategic imperatives and

Material issues• Page 38, Safety, Health and the Environment

(employee health and safety)

• Tax revenues• Compliance with legislation and other regulatory frameworks• Transformation• Supporting communities• Responsible usage of natural resources

• Page 24, Value Added Statement• Page 46, Corporate Governance report• , Transformation• Page 37, Corporate Citizenship• Page 38, Safety, Health and the Environment

(environment)

Our key stakeholders’ interests and concerns are important to us. We have taken these into account in determining material issues and risks set out on page 30, as well as other matters that are material for inclusion in this Integrated Annual Report. The table below provides an overview of our key stakeholder groups, how we engage with them, and their key interests and concerns.

Our stakeholder groups’ key interests and concerns Further information

34


Human Capital

Empowerment and talent management Human Capital is considered a core corporate asset at Famous Brands, with the calibre of our people being a key ingredient to our success. This means hiring the best and helping them fulfil their potential thus building management capability. Key competitive advantages arise from a team of motivated, well-trained employees passionate about what they do. At Famous Brands, we believe that true empowerment gives people responsibility and also the freedom to live up to that responsibility.

Talent management (performance and potential) is measured through our bi-annual Human Capital reviews. Per-formance is assessed through a scorecard measurement process against clearly defined accountability criteria or goals set out at the commencement of the year. Potential is identified through ranking employees and managing training and development opportunities arising from that intervention. Remuneration recommen-dations including discretionary per-formance-based bonuses are linked to the assessment process.

Key to the sustainability and future of our business is managing the succession pipeline, in particular, of senior and executive employees. Our target is to ensure a 1:2 succession cover ratio of the leadership level, meaning that each leader has at least two potential successors. One who can fill the position within a short time span and the second, in the long-term. Key performance indicators (KPIs) are included in executive and management scorecards in support of this sustainability imperative. Famous Brands believes in motivating the entire workforce and has an annual recognition ceremony (Growth Champions) where appreciation is shown to those specific employees who have demonstrated dedication, devotion and commitment to their work beyond the norm.

Internal recruitment and promotion is a natural part of our growth culture whereby employees are positioned to align their capabilities with our business plan. Where additional skills are needed they are recruited externally in an efficient, rigorous and cost-effective process. Sourcing suitable talent from the external market remains a challenge.

Employee satisfaction and moraleAnnual morale measurements serve as an indicator of overall organisational health. Our climate survey scores translate into Business Unit action plans and our effectiveness is monitored by successfully utilising this tool as the “people barometer” of the business. Our most recent surveys which were conducted in 2015 for Bargaining Unit employees and for Administration employees indicated a high level of employee engagement and motivation.

Legislative complianceThe Group continues to comply with legislation governing the employment relationship in line with the requirements of the Departments of Labour and Culture, Arts, Tourism, Hospitality, Sport and Education Training Authority. This includes the Labour Relations Act, Employment Equity Act and the Skills Development Act. There are systems in place to monitor changes to legislation and if changes occur, the implications on our operations are assessed and communicated to relevant stakeholders.


35

Labour relationsThe Group’s workforce comprises 955 (2015: 911) employees belonging to the Bargaining Unit, of whom 77% (2015: 77%) are unionised. The table below sets out trade union representation with respect to the number of unionised employees.

2015

Union name

Abbreviated union name

Number of

employees

% of unionised

employees

% of total Bargaining

Unit employees

Security, Cleaning, Manufacturing and Allied Workers Union SCMAWU 715 97.2 74.9 667 95.4 73.3Hotel, Liquor, Catering Commercial and Allied Workers Union of South Africa HOTELICCA 11 1.5 1.2 11 1.6 1.2National Security Commercial and General Workers Union NASECGU 3 0.4 0.3 3 0.4 0.3Food and Allied Workers Union FAWU 2 0.3 0.2 2 0.3 0.2Metal and Electrical Workers Union of South Africa MEWUSA 2 0.3 0.2 2 0.3 0.2South African Transport and Allied Workers Union SATAWU 2 0.3 0.2 13 1.9 1.4Professional Transport and Allied Workers’ Union of South Africa PTAWU 0 0.0 0.0 1 0.1 0.1

Number of Bargaining Unit employees belonging to a union 735 100.0 77.0 699 100.0 76.7

Number of Bargaining Unit employees not belonging to a union 220 23.0 212 23.3

Total number of Bargaining Unit employees 955 100.0 911 100.0

The Group Human Resources Executive, together with two appointed line executives, engages with the unions regarding negotiations and various other Bargaining Unit employee-related matters. The Group has a grievance policy, which together with the disciplinary procedures manual, is contained in the staff services manual. The content of the staff services manual is covered during employee induction and copies are available to employees electronically or in hard copy. During the 2016 financial year, there were no incidents of industrial action in the Group.

2016

Number of

employees

% of unionised

employees

% of total Bargaining

Unit employees

36


Transformation

Famous Brands supports the principles of Broad-Based Black Economic Empowerment (B-BBEE) and measures its transformation progress against the Generic Tourism Sector Code and targets aligned to the Department of Trade and Industry’s B-BBEE Codes of Practice. Through its main operating wholly-owned subsidiary, the Group holds a level 6 (2015: level 6) B-BBEE status, which was independently verified by Empowerdex, an economic empowerment rating agency.

The Group has a transformation policy and strategy in place. Our executive leadership is responsible for the implementation of the strategy in their respective functional areas. Progress is monitored by the Group’s Transformation Manager, who has ongoing executive support, to ensure that transformation initiatives are carried out across the organisation with integrity and conviction. The Chairman of the Social and Ethics working group reports on the

Group’s transformation progress to the Social and Ethics Committee.

OwnershipThe Group’s score of 0.92/20 remained unchanged during the year under review. The Board believes that improving the scorecard with regard to the ownership element is a business imperative in context of the Group’s growth agenda, and is in the process of exploring opportunities to address this.

Management controlWhile the Board acknowledges that management control is one of the key transformation challenges it is faced with, as reflected in the Group’s score of 2.63/12 (2015: 1.18/12), progress has been made over the past few years with regard to Board transformation. The Nominations Committee takes Board transformation into account when recommending new appointments to the Board.

The Group employs 1 699 (2015: 1 472) permanent employees in South Africa and 219 (2015: 148) non-permanent employees. Our female employees constitute 28% (2015: 29%) of our total permanent workforce. The Group’s score improved from 3.32/12 in the prior year, to 4.07/12 in the financial year under review. The table below sets out the racial and gender profile of our permanent workforce by occupation level:

2015Occupational level Male Female Total Black* White

Top management 3 – 3 – 3 3 – 3 – 3Senior management 42 13 55 5 50 34 13 47 3 44Professionally qualified and experienced specialists and mid-management 113 83 196 60 136 70 71 141 51 90Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents 196 170 366 220 146 138 152 290 148 142Semi-skilled and discretionary decision-making 561 118 679 651 28 505 101 606 580 26Unskilled and defined decision- making 316 84 400 400 – 302 83 385 385 –

Total permanent employees 1 231 468 1 699** 1 336 363 1 052 420 1 472** 1 167 305

* Black as defined by the Department of Trade and Industry Codes of Good Practice relating to B-BBEE.** Excludes 10 (2015: 10) Famous Brands employees in the UK and 670 (2015: Nil) Famous Brands employees in Botswana.

2016Male Female Total Black* White

Employment equityThe objectives of the Group’s employment equity policy and plan are to achieve equity in the workplace through the promotion of equal opportunities for and fair treatment of its workforce, as well as applicants for employment by:• eliminating unfair discrimination

that may exist in policies, practices, procedures and the work environment;

• implementing affirmative action measures to redress the disadvantages experienced by designated groups in the past;

• promoting diversity and respect for all employees; and

• achieving equitable representation of all demographic groups at all levels and in all categories of the workforce as the ultimate tangible objective.


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Skills developmentWe are committed to creating a culture of learning. The Group has a forum in place whose objective is to enforce implementation of the Employment Equity and Skills Development Acts. Compliance is monitored via accepted procedures and guidelines. Reporting to the Social and Ethics working group is a nominated skills representative who is

responsible for monitoring targets and progress against our committed plans.

Our registered Skills Development Facilitator is tasked with the submission of plans and reports (including workplace skills plan and actual training report) to the Departments of Labour and Culture, Arts, Tourism, Hospitality, Sport and Education Training Authority on an

Over and above developing the skills of our employees, we conduct extensive training for our franchisees and their employees via our centres of excellence in each of our six regions. The table below sets out the number of delegates trained during the year under review:

Region

Gauteng 988 3 948 2 715 3 225Mpumalanga 925 953 111 1 989Free state – 721 113 634KwaZulu-Natal – 2 415 123 –Eastern Cape 22 930 99 1 041Western Cape 1 000 1 097 186 35

Total number of delegates trained 2 935 10 064 3 347 6 924

Number of delegates trained

Franchisee workshops

Brand product training

Fundamentals Restaurant

ManagementAd-hoc

training

While the table above reflects the Group’s commitment to training its franchise partners and their employees, franchisee training does not count towards the Group’s skills development score as the delegates are not direct employees of the Group. The Group’s skills development score improved from 4.82/18 in the prior year, to 9.18/18 in the financial year under review as a result of our continued efforts to strengthen the skills of our employees.

The company undertook an internship initiative with the Nelson Mandela Metropolitan University in the prior financial year and we retained the two interns who graduated from the programme as permanent employees of Famous Brands.

Preferential procurementThe Group’s procurement processes take into account the B-BBEE status of all our suppliers and potential suppliers. Our score of 18.62/20 improved from 17.77/20 in the prior year.

Enterprise developmentDespite the lower score of 1.09/10 relative to the full score in the prior year, the Group remains committed to supporting the growth of small business enterprises.

Socio-economic developmentThe Group maintained its score of 10/10 with respect to socio-economic development, which is reflective of our commitment to being a responsible corporate citizen. Our corporate social investments are set out below.

annual basis. The budget for skills development is measured accordingly, and deviations from the set plan are managed. During the course of the year, 107 (2015: 93) black employees, of whom 14 (2015: 14) were female, received certified training in the following areas: financial management, information technology, customer care, and health and safety.

Corporate Citizenship

We believe that the communities we serve should be better off as a result of our presence.

Consequently, our franchisees invest in locality projects, and our employees are engaged in voluntary community service initiatives, which included visits to various charity organisations during the year under review.

In addition to this, the Group supported a range of community-based projects as set out in the table below:

2015 R

Sports sponsorships 14 137 092 8 813 251Donation of products 312 088 529 565Other corporate social investment initiatives 1 452 927 2 083 190

Total 15 902 107 11 426 006

2016 R

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Safety, Health and the Environment

The Group is committed to sustainable business practices and acknowledges its responsibility for providing a healthy and safe working environment for its employees, adhering to high food safety standards and conducting business in an environmentally responsible manner. The Group has policies and controls in place to measure and monitor its sustainability performance. Where necessary, material issues and risks related to employee health and safety, food safety and the environment are escalated to the Social and Ethics Committee via the Chairman of the Social and Ethics working group and to the Audit and Risk Committee where appropriate.

Employee health and safetyThe Group complies with the requirements prescribed by the Occupational Health and Safety Act. Safety, Health, Environment and Quality assurance (SHEQ) Committees are in place across the Group’s operations and conduct monthly meetings. All accidents and/or occupational diseases associated with our production and/or manufacturing activities are recorded, reported and acted on.

Health and safety risk assessments are conducted by an approved inspection authority every three years. The latest inspection was conducted during the financial year ended 2014. The assessments highlight areas for improvement and the required corrective actions are incorporated into management’s Key Performance Indicators for ongoing monitoring. The Group has programmes and procedures in place to mitigate key health and safety risks. All necessary precautions and measures are taken to ensure the safety of employees. Management is committed to adhering to strict guidelines in terms of monitoring and implementing health and safety requirements at all its premises. This is

done through SHEQ committees as well as appointed responsible people in terms of the Occupational Health and Safety Act. Health and safety training in respect of fire prevention and fire fighting, as well as basic first aid, is mandatory for all staff. The Group uses the industry standard Disabling Injury Frequency Rate (DIFR) and Accidents Frequency Rate to measure its safety record. The Group maintained a Nil DIFR record for both the year under review and the prior year. The Accidents Frequency Rate was 1.02 (2015: 1.16). There were no fatalities during the year (2015: Nil fatalities).

There is recognition that HIV/Aids, among other challenges faced by South African businesses, is a serious concern and thus Famous Brands is in full support of the government in the fight against the pandemic. In alignment with the Employment Equity Act, No. 55 of 1998, which focuses on non-discrimination against employees diagnosed with the disease, Famous Brands ensures a high level of confidentiality in this regard. We partner with an outsourced third party, Occupational Care South Africa, a level 3 empowered supplier, to address the wellness needs of our employees. Assistance takes the form of on-site primary and occupational care in addition to external referrals for professional and medical support. This service includes the management of life-threatening diseases where the company is committed to providing education and, in instances, medication to improve the quality of life of affected employees.

The benefits of this confidential programme are:• the Group bears the costs of this

intervention;• referrals to general practitioners are

paid for by the Group;

• costs of medication are paid for by the Group;

• assistance with access to and delivery of medication to affected employees;

• employees are attended to by experienced counsellors who educate the patient and the family about the disease; and

• treatment and monitoring during pregnancy to reduce the risk of mother to child transmission.

Food safetyThe Group is committed to the highest food safety standards as embodied in our corporate Total Quality and Food Safety and Management (TQFSM) commitment policies supported at the highest level. Famous Brands has developed a documented TQFSM system based on the internationally recognised Global Food Safety Initiative-benchmarked Food Safety System Certification (FSSC) 22000 standard for all its business units. This system has been implemented company-wide.

Our coffee manufacturing facility obtained FSSC 22000 certification during the year under review. The Group’s aim is to ensure that all manufacturing facilities are FSSC 22000 certified by 2017.

All of our manufacturing facilities were successfully audited by an independent, accredited auditing body against the strict food safety assessment retail audit standard that covers food safety management systems, prerequisite programmes and HACCP criteria.

The TQFSM system is centrally managed by a highly competent technical team supported by skilled quality and food safety co-ordinators who manage the day-to-day aspects of food safety and quality at plant level.


39

Environment The Social and Ethics working group is responsible for monitoring the Group’s environmental practices and reports to the Social and Ethics Committee on its activities. The Group has an Environmental and Climate Change policy in place. The policy sets out the Group’s commitment to responsible environmental practices and identifies key areas of focus and objectives with respect to climate change, air pollution

reduction and eco-efficiency. These objectives include:• optimisation of transport efficiencies

with regard to our Logistics fleet;• ongoing review and implementation

of energy saving initiatives;• conversion of paraffin fuelled boilers

to Compressed Natural Gas (CNG);• investigating alternative cleaner fuel

and energy options (with lower GHG emission factors);

• efficient water usage and effluent management; and

In the prior year, the Group communicated its goal to implement an energy efficient lighting project, as well as convert its paraffin fuelled boilers to natural gas. Both initiatives were successfully implemented during the year under review. The Group’s energy consumption during the year under review is represented in the table below:

2015

Source of energyUnit of

measureNumber of units

Emissions(Tons)

Electricity Mwh 20 957 21 167 12 191 13 044Diesel Kilolitres 896 2 399 1 152 3 075Petrol Kilolitres 712 1 637 567 1 321Paraffin Kilolitres 51 108 490 1 225

LPG Kilolitres 29 6 – –

Gas Kilolitres 350 65 – –

Total carbon emissions Tons 25 382 18 665

Prior year figures for electricity consumption and the related carbon emissions were incorrectly reflected as 12 191 033 Mwh and 13 044 406 tons, respectively, in the 2015 Integrated Annual Report. These have been corrected and restated to 12 191 Mwh and 13 044 tons, respectively, in this report. The increase in the current year’s electricity consumption is due to organic growth, as well as the inclusion of our joint venture partners and our newly acquired businesses in the current year figures.

WaterThe Group has water-saving initiatives in place which are aimed at reducing underground water leakage. A water reduction awareness initiative aimed at behavioural changes is also in place. As part of this initiative, our irrigation water requirements are met using ground water.

Packaging and waste managementThe Group’s waste management procedures are well entrenched across its manufacturing facilities. The table below sets out the percentage of packaging waste recycled at our Gauteng manufacturing sites:

Packaging waste

2015

Recycled(Tons)

Recycled(%)

Cardboard 2 079 38 1 457 45Plastic 1 806 34 772 24General waste 1 496 28 1 027 31

5 381 100 3 274 100

2016

Number of units

Emissions(Tons)

2016

Recycled(Tons)

Recycled(%)

• maximising recycling opportunities for our general waste as part of our waste management initiatives.

EnergyThe sources of energy primarily utilised in our business operations include electricity, paraffin, diesel and Liquefied Petroleum Gas used at our manufacturing facilities and our corporate premises. The Group owns a fleet of trucks and motor vehicles which use diesel and petrol.


40


41

Governance and Remuneration

In this section42 Board of Directors

44 Executive leadership

46 Corporate Governance report

52 Remuneration report

53 Social and Ethics Committee’s report

42


Governance and Remuneration continued

Group Chief Executive

Appointed to the Board in March 2001Attends the Audit and Risk Committee meetings by invitationAttends the Remuneration Committee meetings by invitationAttends the Nominations Committee meetings by invitation

Directorships in other listed entities:Holdsport Limited Non-executive director

Kevin joined the Group in February 2000 as Managing Director of the Steers brand. He has an excellent business record, combining food, beverage and franchising expertise. Kevin has held senior executive positions in a number of blue-chip companies including SA Breweries, Distell and Foodcorp. In March 2001, Kevin was appointed Chief Operating Officer, a position he held for nine years, before being appointed Chief Executive of Famous Brands in May 2010. With effect from 1 March 2014, Kevin assumed the role of Group Chief Executive.

BAdmin, MBAIndependent non-executive director

Appointed to the Board in March 2004Member of the Remuneration Committee (Chairman)Member of the Audit and Risk Committee Member of the Social and Ethics Committee

Directorships in other listed entities:Pinnacle Holdings Non-executive

directorTiger Brands Deputy Chairman

and non-executive director

Bheki brings to the Board a wealth of expertise in BEE, employment equity, change management and corporate governance gained as former Chief Executive of the Chamber of Mines, Chief Executive Officer of Business Unity South Africa, director of the Wits Business School, and from experience attained in a range of positions held at companies including Transnet, Tongaat Hulett Sugar, SA Breweries and Ford Motor Company.

BEcon HonoursChairman of the Board and independent non-executive director

Appointed to the Board in June 2012Chairman of the Nominations CommitteeMember of the Remuneration CommitteeAttends the Audit and Risk Committee meetings by invitation

Directorships in other listed entities:Curro Holdings Chairman and non-executive

directorLiberty Holdings Non-executive directorTelkom Non-executive directorTiger Brands Non-executive director

Santie is currently the Chancellor of the Nelson Mandela Metropolitan University in Port Elizabeth. She served as an executive director of the MTN Group (2003 to 2010) and prior to that, of Absa Bank (1996 to 2003). She commenced her career at Unilever. Santie has received a range of awards including Marketer of the Year (2002) and Business Woman of the Year (2010).

Non-executive directors Executive directors

Bachelor of Business Science (Hons), MBAIndependent non-executive director

Appointed to the Board in February 2015Member of the Audit and Risk Committee Member of the Nominations Committee

Directorships in other listed entities:Allied Electronics Corporation Limited (Altron) Non-executive director

Norman has had an extensive career with SABMiller, which commenced at SAB (Pty) Ltd in 1979. He was appointed Managing Director of SAB in 1994 and Chairman in 2000. In 2003, he was installed as President and Chief Executive Officer of the newly acquired Miller Brewing Company. In 2006, he was appointed President and Chief Executive Officer of SABMiller Americas. In this position he was responsible for Miller Brewing Company and SABMiller’s South and Central American business units. In October 2008, he once again took on the role of Managing Director and Chairman of SAB Limited. He retired from SABMiller on 31 October 2014.

He is also a partner in Stud Game Breeders, one of the pre-eminent groups leading the emergence of South Africa’s burgeoning game breeding industry, which has made great strides in revitalising threatened animal species and in creating sustainable employment in many rural areas.

BCom, LLB, LLMNon-executive director

Appointed to the Board in December 2011Member of the Social and Ethics Committee (Chairman)Member of the Remuneration Committee Attends the Audit and Risk Committee meetings by invitation

Directorships in other listed entities:Advtech Chairman and

non-executive directorAmalgamated Chairman and Electronic Corporation non-executive director

Chris is a commercial, corporate finance, tax and trust attorney and his expertise includes cross-border transactions, mergers and acquisitions, BEE transactions and advising on stock exchange listings both locally and internationally. His experience as a non-executive director of listed companies spans over a decade.

Board of directors

BCompt (UNISA), BCompt Hons (UNISA), CA(SA)Independent non-executive director

Appointed to the Board in May 2015Member of the Audit and Risk Committee (Chairman) Member of the Social and Ethics Committee Member of the Nominations Committee

Directorships in other listed entities:Alexander Forbes Group Holdings Limited Non-executive directorImperial Holdings Limited Non-executive directorMassmart Holdings Limited Non-executive directorTransaction Capital Non-executive director

Moses is the former Chief Executive and Senior Partner of KPMG Southern Africa as well as Chairman of KPMG Africa. He is currently Executive Chairman of his own property investment company, Peduco Properties Investments Proprietary Limited. He also served as a member of the KPMG International Board as lead director. Moses has 33 years of Accounting, Auditing and Advisory experience within the Public and Private Sectors. Previously, he was Chairman of the Policy Board and Executive director of Consumer Markets for KPMG South Africa.

Bheki Lindinkosi Sibiya (59) Kevin Alexander Hedderwick (63)Santie Botha (51)

Norman Adami (62)Christopher Hardy Boulle (44) Moses Kgosana (57)


43

Non-executive director

Theofanis has made a significant contribution to the Group since 1974 through the fulfilment of various responsibilities. He assumed the position of Chief Executive Officer in March 2001, after serving as the Group Managing Director for three years. After retiring as Chief Executive Officer in May 2010, Theofanis took over from John Lee Halamandres as Deputy Chairman of the Group. In 2014, he became a non-executive director.


Attends the Audit and Risk Committee meetings by invitationMember of the Nominations Committee

Peter has made an important contribution to the Famous Brands Group since 1974. He has served on various portfolio committees over the years, assuming the position of Chairman of the company upon listing in November 1994. As from March 2007, Peter assumed the position of non-executive Chairman. On 24 October 2013, Peter retired as non-executive Chairman. He has remained on the Board as a non-executive director.

FCIS, MBAGroup Financial Director

Appointed to the Board in July 2013 Attends the Audit and Risk Committee meetings by invitationAttends the Social and Ethics Committee meetings by invitation

Norman joined Famous Brands in September 2012 as Change Management Executive, responsible for managing and driving the Fit 4 Purpose business model transformation intervention. Norman is a 21-year veteran of SA Breweries Beer division, where he held a number of executive positions in finance, both locally and internationally. Prior to joining Famous Brands, Norman founded and managed two consulting companies and a software services company, all within the supply chain field. Norman assumed the role of Group Financial Director with effect from 1 July 2013.

Founding members of the company


Member of the Nominations CommitteeMember of the Remuneration Committee

With experience in all aspects of Famous Brands’ business, John retired from executive management in March 2001. A founding member of the company, he served as Managing Director from November 1994 until March 1997, after which he assumed the role of Chief Executive Officer until his appointment as non-executive Deputy Chairman in March 2001, a position he held until May 2010. John continues to serve on the Famous Brands Board in the capacity of non-executive director.


Periklis was one of the original founding members of the Group and has in excess of 20 years’ experience in the food and franchising industry. He was appointed to the Board of Famous Brands Limited in 1994 and was responsible for expanding the operations of the Group beyond the borders of South Africa. Periklis resigned from the Board during the course of 1999 to concentrate on his private business. In March 2001, he was re-appointed to the Board as a non-executive director.

BComChief Executive Officer – Food Services

Appointed to the Board in January 2013Attends the Social and Ethics Committee meetings by invitation

Darren commenced his career at Pleasure Foods Limited while studying for and completing a BCom degree. After participating in the management buyout of Pleasure Foods in 1996 he held executive roles at Whistle Stop and Wimpy before joining Famous Brands in 2003. He served as Managing Director of Wimpy in South Africa and later the United Kingdom. He was appointed Chief Operating Officer – Franchising division in May 2011 and in January 2013 assumed the position of Chief Operating Officer for the Group. With effect from 1 March 2014, Darren assumed the role of Chief Executive Officer – Food Services. With effect from 1 March 2016, Darren was appointed Chief Executive Officer.

John Lee Halamandres (62)Periklis Halamandaris (61)Darren Paul Hele (44)

Theofanis Halamandaris (65)Panagiotis (Peter) Halamandaris (69)Norman Richards (62)

44



Managing Executive – Franchising and Logistics

Derrian joined Famous Brands in May 2000 as a member of the Debonairs Pizza’s operations team. Over the past 15 years, he has held various operational, management and executive roles within Debonairs Pizza, Steers, Coffee Brands and Wimpy. Between November 2008 and December 2011, Derrian served as Managing Executive of Debonairs Pizza and was appointed Managing Executive of Wimpy in January 2012. In March 2013 he was appointed Chief Marketing Officer, whereafter he served as Managing Executive – International Markets and subsequently as Managing Executive – Debonairs Pizza. In March 2016, Derrian was appointed Managing Executive of Franchising and Logistics.

Group Human Resources Executive

Arlene has extensive experience in the human resources field, having started her career in the brewing industry while completing her postgraduate Diploma in Management – Human Resources at Wits Business School. She later joined the soft drinks industry and thereafter spent some time with a multi-national tobacco company, before joining Famous Brands in October 2008.

Executive Leadership

Managing Executive – Joint Venture Business Units

Steven completed his Bachelor of Architecture at the University of the Witwatersrand in 1994 and thereafter completed his professional registration as an Architect. He managed his own architectural practice before joining a listed restaurant franchisor as a Design Manager in 1998. Steven joined Famous Brands in 2002 and has 18 years’ experience in the franchising and restaurant industry. He held the position of Group New Business and Development Executive until 2014 when he was appointed to the role of Managing Executive – Joint Venture Business Units. In his current role he is responsible for the management of the Joint Venture and Emerging Brands Business Units at Famous Brands.

Group Procurement Executive

Pedja began his career in a family business with his father, while studying engineering at Sarajevo University. Upon arrival in South Africa in 1991 he joined Steers Holdings. After gaining experience at Steers Restaurants he moved into operations and thereafter into Manufacturing and Logistics. Pedja was appointed Group Procurement and Quality Assurance Executive and later Managing Executive – Developing Brands and Markets. In November 2012 he resumed the position of Group Procurement Executive.

Derrian Nadauld (43)Arlene Botha (53)

Pedja Turanjanin (48) Steven Dike (46)


45

Acting Manufacturing and Technical Executive

Susan holds a Bachelor of Commerce degree from the University of North West. After a successful career at The Cold Chain (ICS Group, Barlows) where she was General Manager for one of the branches, she joined Famous Brands as Logistics Financial Manager in July 2008. Susan was promoted to an executive role in August 2010. She played a critical role in managing the accounting system project when the company’s Manufacturing and Logistics divisions were combined into the Supply Chain division, as well as in the restructuring of Operations Finance as part of implementing the Fit 4 Purpose business model. With effect from 1 April 2016, Susan was appointed Acting Manufacturing and Technical Executive.

Group Financial Executive and Company Secretary

Lebo is a Chartered Accountant (SA) and holds an MBA degree (awarded cum laude) from Wits University. She completed her articles with PricewaterhouseCoopers in 2007, after which she gained extensive experience in International Financial Reporting Standards (IFRS) in her roles as Group Technical Accounting Adviser at Eskom and Group Reporting Manager at African Oxygen Limited. Lebo has had responsibility for various functions within finance, including ensuring compliance with the JSE Listings Requirements. She joined Famous Brands in July 2014.

Chief Marketing Officer

After completing her Bachelor of Social Science degree at the University of Natal, Linda joined the pharmaceutical industry and for 10 years held various sales management and marketing positions. In 2000 she joined Adcock Ingram, a division of Tiger Brands, as a brand manager. While at Tiger Brands, Linda was promoted to Category Marketing Manager on the Condiments and Ingredients portfolio. In 2007 she joined Famous Brands as Marketing Executive for Debonairs Pizza and has managed various Marketing Executive portfolios since then. In 2015, Linda was appointed Chief Marketing Officer.

Managing Executive – New Business and Development

Rui has had an extensive career for over 20 years in the franchising and restaurant industry both locally and internationally in the United Kingdom. Rui also worked in the construction and property industry before joining Famous Brands in 2011 where he held various operational and executive positions. He was appointed to the role of Managing Executive – New Business and Development at the end of 2015 and in his current role is responsible for the management of the Development Business Unit at Famous Brands.

Susan Venter (53) Kelebogile (Lebo) Ntlha (33)

Rui Correia (41) Linda Thomas (43)


46


Statement of commitmentThe Board of Directors of Famous Brands is fully committed to business integrity, fairness, transparency and accountability in all of its activities. In support of this commitment, the Group’s executive leadership subscribes to sound corporate governance in all aspects of the business and to the ongoing development and implementation of best practices. In line with our guiding principles of sustainable growth and integrity, Famous Brands has a code of ethics (the code) in place which articulates the Group’s commitment to doing business ethically. The code is included in the Group’s Board induction pack and is distributed

Corporate Governance report

to new employees when they join the Group. The code requires all directors and employees to act with honesty and integrity, and to maintain the highest ethical standards. It deals with compliance with laws and regulations, conflicts of interest, relationships with customers and suppliers, remuneration, outside employment and confidentiality. The code further prohibits employees from accepting bribes, provides guidelines with respect to receiving gifts and informs directors and employees about the Group‘s confidential reporting service to which unlawful or fraudulent activity can be reported. The Group does not make donations to political parties.

Our governance structureThe Board and Board Committees are supported by appropriate management structures and governance processes, which are reviewed continually to ensure that they remain effective in delivering against the company’s strategic objectives.

BOARD

Executive directors at 29 February 2016Group Chief Executive: Kevin Hedderwick

Chief Executive – Food Services: Darren HeleGroup Financial Director: Norman Richards

Audit and Risk Committee

Social and Ethics Committee

Remuneration Committee

Nominations Committee

MANAGEMENT STRUCTURES

Executive Leadership (refer page 44)

IT Steering Committee

Safety, Health and Environment Committee

Social and Ethics working group

Governance frameworkThe Board takes guidance from the following regulatory and good governance frameworks in defining the Group’s governance and compliance framework:• King III; • The Companies Act of South Africa;• JSE Listings Requirements; and • IIRC Integrated Reporting Framework.

Details of our King III compliance can be found on the company’s website at www.famousbrands.co.za.


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Board composition As at 29 February 2016, the Board comprised nine non-executive directors and three executive directors. Of the nine non-executive directors, four are founding members of the company. Although five of the non-executive directors are not independent in terms of the King III independence criteria, the company has a unitary Board and no individual member of the Board has unfettered powers of decision making. Future appointments to the Board will be proposed mindful of King III independence criteria. The company has an Independent non-executive Chairman, whose role is separate from the role of the Group Chief Executive, thus ensuring that there is a balance of authority with regard to the Board’s decision-making processes. A separation of these roles achieves the necessary segregation of duties between the Chairman’s duty to provide overall leadership to the Board, which has responsibility for approving the company’s strategy, and the Group Chief Executive’s role, which has responsibility for the execution thereof. The Group Chief Executive is guided by an approvals framework, which sets out the respective responsibilities of the Board and executive management.

The composition of the Board is re-viewed continually to ensure that the Board, collectively, has a balance of the necessary skills, knowledge and experience to assist in effectively dis-charging its duties and responsibilities.

Board appointment, retirement and rotation Appointments to the Board are made in a formal and transparent manner and are a matter for the Board as a whole, as assisted by the Nominations Committee. The Nominations Committee is guided by an approved policy document. Taking into consideration the skills and expertise required by the Board, any of the directors may propose an individual to serve on the Board. Such a nomination will only be effective once approved by a majority of directors passed in a properly constituted manner. Appointments made by the directors require approval by shareholders at the next Annual General Meeting (AGM).

A tailored induction programme for newly appointed directors is in place.

There are no service contracts with non-executive directors. Executive directors’ service agreements may be terminated with three months’ notice.

In terms of the Memorandum of Incorporation (MOI), at least one-third of the Board must retire by rotation at each year’s AGM. The retiring directors may offer themselves for re-election. Brief curricula vitae of the directors retiring by rotation (as set out on page 74) and offering themselves for re-election are set out on pages 42 and 43 of this Integrated Annual Report. The appointment of new directors is subject to confirmation by shareholders at the first AGM after their appointment.

Board charterThe Board’s general powers and terms of reference are outlined in the company’s MOI and the company’s Board charter. The primary functions of the Board are to:• review and approve corporate

strategy;• determine the Group’s purpose and

values;• retain full and effective control of the

Group;• approve and oversee major capital

expenditures, acquisitions and disposals;

• review and approve annual budgets and business plans;

• monitor operational performance and management;

• endeavour to ensure that information technology (IT) governance is appropriate for the size and complexity of the business;

• endeavour to ensure that the Group complies with sound codes of business behaviour;

• endeavour to ensure that appropriate control systems are in place for the proper management of risk, financial control and compliance with all laws and regulations;

• appoint the Group Chief Executive and ensure succession planning for executive management is in place;

• regularly identify and monitor key risk areas;

• oversee the company’s disclosure and communication process; and

• ensure that enlightened practices are in place to attract talent and provide meaningful employment in a transforming society.


48


Board Committees and chartersTo enable the Board to discharge its numerous responsibilities and duties, certain of these responsibilities have been delegated to Board Committees. The following committees have been constituted:• Audit and Risk Committee;• Remuneration Committee;• Social and Ethics Committee; and• Nominations Committee.

Charters approved by the Board govern the activities of these Committees. All are chaired by non-executive directors and are directly responsible to the Board, which retains ultimate responsibility.

Audit and Risk CommitteeCompositionAs at 29 February 2016, the Audit and Risk Committee comprised three directors, all of whom are Independent non-executive. The Committee meets at least three times a year. The Group Chief Executive, Group Financial Director, as well as internal and external auditors attend meetings as invitees. Both internal and external auditors have unfettered access to the Chairman of the Audit and Risk Committee.

Audit and Risk Committee membersMoses Kgosana^ Chairman and

Independent non-executive director

Bheki Sibiya Independent non-executive director

Norman Adami Independent non-executive director

Chris Boulle^^ Non-executive director

^Appointed May 2015. ̂ ^ Resigned October 2015 as a member of the

Audit and Risk Committee. Remains a member of the Board.

Roles and responsibilitiesThe Committee provides support to the Board on good corporate governance and on the risk profile and risk management of the Group. While the Committee is responsible for overseeing the Group’s risk management policy, management is responsible for the identification, evaluation and mitigation of the Group’s risks. This entails formulating a risk management plan and monitoring implementation and compliance thereto.

In addition, the role of the Committee is, inter alia:• to review the effectiveness of the

Group’s systems of internal controls, including financial controls and business risk management, and to endeavour to ensure that effective internal control systems are maintained;

• to satisfy itself of the expertise, resources and experience of the company’s finance function;

• to monitor and supervise the effective functioning and performance of the internal audit function;

• to ensure that the scope of the internal audit function has no limitations imposed by management and that there is no impairment of its independence;

• to evaluate the independence, effectiveness and performance of the external auditors and obtain assurance from the auditors that adequate accounting records are being maintained;

• to appoint the external auditors on an annual basis;

• to ensure that the respective roles and functions of external audit and internal audit are sufficiently clarified and co-ordinated; and

• to review financial statements and the Integrated Annual Report for proper and complete disclosure of timely,

reliable and consistent information and to confirm that the accounting policies used are appropriate.

Group Financial Director evaluationThe Committee is entirely satisfied with the competence and expertise of the Group Financial Director and has reported as such to the Board, which endorses the recommendation.

Social and Ethics CommitteeCompositionThe Social and Ethics Committee comprised three non-executive directors for the year under review. The Committee meets at least twice a year. The Chief Executive Officer – Food Services, the Group Financial Director, the Human Resources Executive and the Transformation Manager are invitees to the Committee meetings.

Social and Ethics Committee membersChris Boulle Chairman and

non-executive director

Bheki Sibiya Independent non-executive director

Moses Kgosana^ Independent non-executive director

^ Appointed May 2015

Roles and responsibilitiesThe duties of the Committee are to:• review and approve the policy,

strategy and structures to manage social and ethics issues within the Group;

• oversee the monitoring, assessment and measurement of the company’s activities relating to good corporate citizenship, including the Group’s promotion of equality, prevention of unfair discrimination, reduction of corruption, contribution to development of the communities in which its activities are predominantly

Corporate Governance report continued


49

conducted or within which its services are predominantly marketed, and record sponsorship, donations and charitable giving;

• determine clearly articulated ethical standards (code of ethics) to be adopted by the Group, thus achieving a sustainable ethical corporate culture;

• assisted by the Social and Ethics working group, regularly review the Group’s code of ethics and compliance therewith;

• review the adequacy and effectiveness of the Group’s engagement and interaction with its stakeholders;

• research, evaluate and make recommendations to the Board regarding the appropriate nature, extent and methods of implementation of transformation at all levels within the Group;

• create an enabling environment within the Group which encourages and develops a new way of doing business which embraces and celebrates diversity;

• as a business substantially invested in South Africa, develop a skilled and motivated workforce whose profile is representative of the demographics of the country;

• report to the Board on the transformation work undertaken, and the extent of any action taken by management to address areas identified for improvement;

• oversee the monitoring, assessment and measurement of the Group’s consumer relationships, including the Group’s advertising, public relations and compliance with consumer protection laws; and

• oversee the monitoring of the Group’s labour and employment practices, including the Group’s standing in terms of the International Labour

Organisation Protocol on decent work and working conditions, the Group’s employment relationships and its contribution towards the educational development of its employees.

Remuneration CommitteeCompositionAs at 29 February 2016, the Remuneration Committee comprised three directors. The Committee meets at least twice a year.

Remuneration Committee membersBheki Sibiya Chairman and

Independent non-executive director

Santie Botha Chairman of the Board and Independent non-executive director

Chris Boulle Non-executive director

Roles and responsibilitiesThe key mandate of the Committee is to compile emolument proposals in accordance with the Group’s remuneration strategy. This is designed and tailored to:• continue to attract, retain and

motivate executives of the highest calibre;

• enable the Group to remain an employer of choice; and

• ensure a blend of skills that consistently achieves predetermined business objectives and targets.

The Committee approves the appointment terms and remuneration for all executive directors. It is also responsible for making recommendations to the Board on all fees payable by the company to non-executive directors for membership of

both the Board and Board Committees. Impartial directors consider such recommendations prior to submission to shareholders for approval. The Committee plays an integral role in succession planning, particularly in respect of the Group Chief Executive and executive management.

Nominations CommitteeCompositionAs at 29 February 2016, the Nominations Committee comprised five non-executive directors. The Committee meets at least twice a year.

Nominations Committee membersSantie Botha Independent

Chairman of the Board and the Nominations Committee

Norman Adami Independent non-executive director

Moses Kgosana Independent non-executive director

John Lee Halamandres


Panagiotis (Peter) Halamandaris


Roles and responsibilitiesThe mandate of the Committee includes assisting the Board with:• the identification and evaluation of

suitable candidates for appointment to the Board;

• the annual evaluation of the performance and effectiveness of the Board, Board Committees and individual directors; and

• succession planning.


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Board meetings and procedures The Board meets at least quarterly. The Board and Board Committee meetings are guided by formal agendas which are distributed to the Board and Board Committee members prior to the meetings. The Company Secretary assists the Chairman of the Board and the Chairmen of the Board Committees with the drafting of the agendas. Board and Board Committee packs are distributed to the Board and Board Committee members prior to the meetings.

During the year under review, the Board met as follows:

Date Key objective for the meeting

May 2015 Approval of the Group’s Annual Financial Statements and Integrated Annual Report for the year ended 28 February 2015

October 2015 Approval of the Group’s interim financial results for the six months ended 31 August 2015

November 2015 Strategy session

February 2016 Approval of the budget for the year ending 28 February 2017

Attendance at Board and Board Committee meetings during the year ended 29 February 2016

Board

Audit and Risk

committee

Social and Ethics

CommitteeNominations

CommitteeRemuneration

Committee

Number of meetings 4 4 2 3 3Board/Committee membersNJ Adami 2/4 3/4 n/a 2/3 n/aA Botha (HR Executive) n/a n/a 2/2^ n/a 3/3^

SL Botha 4/4 3/4 n/a 3/3 3/3CH Boulle 4/4 4/4 2/2 2/3 3/3P Halamandaris 3/4 2/4^ n/a 3/3 n/aP Halamandaris (junior) 2/4 n/a n/a 0/3 n/aT Halamandaris 2/4 n/a n/a 1/3 n/aJL Halamandres 3/4 n/a n/a 3/3 3/3KA Hedderwick 4/4 4/4^ n/a 3/3^ 3/3^

DP Hele 4/4 n/a 2/2 n/a n/aRM Kgosana (appointed May 2015) 3/4 3/4 1/2 2/3 n/aK Ntlha (Company Secretary) 4/4 4/4 2/2 n/a n/aJ Legote (Transformation Manager) n/a n/a 2/2^ n/a n/aNS Richards 4/4 4/4^ 2/2^ n/a n/a

BL Sibiya 4/4 4/4 2/2 2/3 3/3^ By invitation.

Date Key objective for the meeting

Corporate Governance report continued


51

Conflicts of interest and other directorshipsThe company’s directors comply with the provisions of the Companies Act of South Africa with respect to the declaration of personal financial interests and a register of directors’ declarations of interests is maintained.

Company SecretaryThe directors have unlimited access to the advice and services of the Company Secretary, Ms Kelebogile Ntlha. The Board is satisfied that the Company Secretary has maintained an arm’s length relationship with the Board, is competent and has the appropriate qualifications and experience required by the Group. Her biographical details and curriculum vitae are set out on page 45 of this Integrated Annual Report.

Dealings in the company’s securities and insider tradingIn compliance with the JSE Listings Requirements and good governance, the company has a policy in place with respect to dealings in the company’s securities. The policy requires directors and the Group’s Company Secretary to obtain prior written clearance from the Chairman of the Board before dealing in the securities of Famous Brands during an open period. The policy further prohibits the company’s directors, the Company Secretary and senior employees from dealing in the company’s securities during closed periods, and at any time when in possession of inside information as defined in the Financial Markets Act, 2012.

The Company Secretary assists the Chairman of the Board with the enforcement of the policy and maintains a record of requests for dealings and clearances therefore. Dealings by directors in the company’s securities are published in line with the JSE Listings Requirements on the JSE’s Securities Exchange News Service via the company’s sponsor.

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Remuneration philosophyThe Remuneration Committee (the Committee) has adopted a remuneration policy. Famous Brands has an ambitious growth objective that requires the Group’s remuneration strategies to be sufficiently robust and innovative to attract and retain people with the requisite skills. The remuneration policy and practices support the vision, mission and strategies of the Group.

This policy has as its objectives to:• continue to attract, retain and

motivate employees of the highest calibre;

• enable the Group to remain an employer of choice;

• ensure that appropriately talented and trained people are available to achieve the business strategy;

• determine the package of executives above a certain level using the policy as a guideline; and

• align the Group with relevant and related market data and practices.

Responsibility for governing remunerationThe primary role of the Committee is to assist the Board in fulfilling its corporate governance responsibilities with regard to remuneration. The Committee sets and closely monitors executive remuneration for the Group. In allocating awards, the Committee is guided by actual individual performance delivered against individual scorecard goals. Management is guided by the remuneration policy and is responsible for its implementation. The Committee revises the policy when necessary and as circumstances change.

Service contractsThere are no service contracts with non-executive directors. Executive directors’ service agreements may be terminated with three months’ notice.

Remuneration of directorsThe remuneration of directors for the financial year ended 29 February 2016 is

set out in Note 26 to the full set of the audited Annual Financial Statements which is available on the company’s website at www.famousbrands.co.za.

Remuneration of key management and employeesThe Committee approves the remuneration packages of key management, including the total discretionary bonus pool available for distribution to management. Executive compensation comprises a guaranteed cost to company pay package paid monthly and two variable elements:• short-term cash incentives in the form

of performance bonuses expressed as a percentage of total package; and

• long-term incentives in the form of a Share Options Scheme and a Long-Term Incentive (LTI) Scheme.

Both variable incentives have been created within the Group for the purposes of executive retention and to enable executives to create individual long-term wealth as they align their personal interests with those of the company. Performance is measured via a three plus one scorecard mechanism. The scorecard comprises three technical goals plus one development goal. The technical goals include Operational profit, HEPS growth at CPI plus 50% of CPI, EBITDA growth at CPI plus 50% of CPI, market share and customer service components.• The LTI Scheme has performance

and retention components. For the performance component, Share Ap-preciation Rights are allocated, and for the retention component shares are allocated.

• The allocation is based on a multiple of the Executive’s package at base. This multiple may be altered for supe-rior company or individual perfor-mance.

• Vesting conditions are in line with King III and international best practice whereby vesting takes place in three equal tranches, with the first tranche vesting at the end of the third year.

Upon vesting an executive will have had to score an average Performance Score of at least three for the Share Appreciation Rights to vest. This ensures that performance is consist-ent and aligned with shareholder interests.

• Retention shares vest regardless of the average performance score as these are issued with a retention purpose. Therefore if the employee is still employed by the company after three years the purpose has been achieved.

• Superior achievement over the three-year period results in a vesting improvement aligned to the allocation methodology.

The LTI Scheme has replaced the Share Options Scheme (refer Note 27 to the full set of the audited Annual Financial Statements).

The remuneration process for other employees is as follows:• management assesses performance

of Administration employees against measurable scorecards aligned with the business objectives on an annual basis;

• employee rewards are influenced by individual and company performance and employees are recognised by way of a discretionary performance bonus; and

• aggregate bonus pool amounts are reported to the Committee.

Bargaining Unit employees enjoy a “basic plus benefits remuneration scheme” where Famous Brands contributes to their provident fund. They also qualify for a guaranteed bonus. Famous Brands remains committed to equitable and competitive pay practices when compared to the national market and regular benchmarking with credible institutions confirms this. The Committee is accountable for ensuring that enlightened remuneration objectives are achieved.

Remuneration report


53

The Social and Ethics Committee (the Committee) is constituted as a formal Committee of the Board in terms of the Companies Act (the Act) and this report is prepared in compliance with the requirements of the Act.

The composition, roles and responsibilities of the Committee are set out on page 48 of this Integrated Annual Report.

The Committee met twice during the financial year ended 29 February 2016 and carried out its functions, inter alia, as follows:• reviewed and reported to the Board

on the Group’s Employment Equity performance relative to the Group’s Employment Equity Plan;

• reviewed and accepted manage-ment’s feedback regarding the Group’s activities, having regard to the

relevant legislation and best practice, matters relating to:– social and economic development;– good corporate citizenship;– the environment, health and public

safety;– consumer relationships; and– labour and employment;

• reviewed and approved the Group’s Code of Ethics;

• reviewed and reported to the Board on the Group’s detailed B-BBEE strategy; and

• reviewed and recommended to the Board for approval the non-financial disclosures contained in the Integrated Annual Report. These include, inter alia, the Sustainability disclosures as well as the Governance and Remuneration disclosures.

The Committee is satisfied that Famous Brands is committed to ensuring that the Group is sustainable in the short, medium and long-term, and embraces its responsibilities with regard to the health and safety of its employees, the Group’s impact on the community and the environment.

CH BoulleChairman of the Social and Ethics Committee27 May 2016

Social and Ethics Committee’s report

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Summarised financial statements and other information

In this section56 Directors’ report

58 Audit and Risk Committee’s report

58 Company Secretary’s certificate

59 Approval of the summarised consolidated financial statements

60 Summarised consolidated financial statements

72 Shareholder spread

73 Shareholders’ diary

74 Notice to shareholders

79 Form of proxy

80 Notes to the form of proxy

IBC Administration

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56


Directors’ report

The directors have pleasure in submitting their report for the year ended 29 February 2016.

Nature of businessFamous Brands Limited (Famous Brands) is a holding company listed on the JSE Limited (JSE) under the category Consumer Services: Travel and Leisure. The Group is Africa’s leading branded food services franchisor.

Famous Brands’ vertically integrated business model comprises a portfolio of 27 brands represented by a franchise network of 2 614 restaurants across South Africa, the Rest of Africa, the United Kingdom, and the Middle East, underpinned by substantial Logistics and Manufacturing operations.

Directors’ responsibilitiesThe responsibilities of the company’s directors are detailed on page 59 of this report.

Financial statements and resultsThe Group’s results and financial position are reflected in summarised consolidated financial statements on pages 60 to 71 as well as in the full set of the audited Annual Financial Statements which are available on the company’s website at www.famousbrands.co.za.

Corporate GovernanceThe Corporate Governance report is set out on pages 46 to 51.

Tangible and intangible assetsThere was no major change in the nature or the use of the property, plant and equipment and intangible assets owned by the company or any of its subsidiaries during the year under review.

DividendsThe following information relates to the dividends in respect of the year under review:

Interim dividendThe directors declared an interim gross ordinary dividend number 42 of 190 cents per ordinary share, which was paid on 7 December 2015 to ordinary shareholders recorded in the books of the company at the close of business on 4 December 2015.

Final dividendThe directors declared a final gross ordinary dividend number 43 of 215 cents per ordinary share, payable on 11 July 2016 to ordinary shareholders recorded in the books of the company at the close of business on 8 July 2016.

Share capitalThe authorised and issued share capital of the company at 29 February 2016 is set out in Note 10 to the full set of the audited Annual Financial Statements which are available on the company’s website at www.famousbrands.co.za.

Issued during the yearThe company issued nil (2015: 570 000) ordinary shares for a cash subscription of nil (2015: R24 million) to participants of the 2012 Famous Brands Share Incentive Scheme.

Shareholder spread and material shareholdersIn terms of the JSE Listings Requirements, Famous Brands complies with the minimum shareholder spread requirements, with 72% (2015: 70%) of ordinary shares being held by the public at 29 February 2016. Details of the company’s shareholder spread and material shareholders are set on page 72 of this report.

Staff Share Incentive SchemeDetails are reflected in Note 27 to the full set of the audited Annual Financial Statements which are available on the company’s website at www.famousbrands.co.za.

Directors and Company SecretaryThe names of the directors and the Company Secretary at the date of this report are detailed on pages 42 to 43 and 45.

Changes to the Board up to the date of this report were as follows:• 1 March 2016: Retirement of Mr K Hedderwick as the Group

Chief Executive and executive director.• 1 March 2016: Appointment of Mr D Hele as the Group Chief

Executive.• 27 May 2016: Appointment of Ms T Dingaan as Independent

non-executive director with effect from 1 June 2016.• 27 May 2016: Resignation of Mr N Richards as Group Financial

Director with effect from 1 July 2016.• 27 May 2016: Appointment of Ms K Ntlha as Group Financial

Director with effect from 1 July 2016.


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Subsidiaries and associatesDetails of the Group’s investments in associates and subsidiaries are set out in Note 3 and Note 4 to the full set of the audited Annual Financial Statements which are available on the company’s website at www.famousbrands.co.za.

ImpairmentThe Group recognised an impairment of R12 million (2015: Nil) with respect to its Wakaberry™ trademark, which arose due to the challenges experienced in the frozen yoghurt industry.

AcquisitionsDuring the year under review, the Group acquired the following controlling stakes:• 75% in Cater Chain Food Services (Pty) Ltd (effective 1 April

2015);• 51% in Retail Group (Pty) Ltd (Botswana) (effective 1 August

2015); and• 51% in Mythos restaurant chain (effective 1 November 2015).

Subsequent eventsAcquisition of 51% stakes in Catch, Lupa Osteria and Salsa Mexican Grill, and 100% of Lamberts Bay Foods Limited

Outlined in 2015, the Group’s stated intent is to expand its presence in the full-service casual dining category. In this regard, three acquisitions were made in the period subsequent to year-end, as follows:

On 9 March 2016, the Group acquired a 51% stake in Catch, a premium seafood and sushi brand.

Effective 1 May 2016, the Group acquired a 51% controlling stake in Lupa Osteria, an authentic Italian restaurant business trading in the family casual dining segment.

With effect from 1 June 2016, the Group acquired a 51% controlling stake in recently launched Salsa Mexican Grill, a fast-casual dining concept centered on traditional Mexican food and beverages.

Further to the Group’s strategy to build capability across the business, and as announced on SENS, a strategic manufacturing business was acquired in the period subsequent to year-end.

Subject to Competition Commission approval, the Group acquired 100% of the business of Lamberts Bay Foods Limited, a wholly owned subsidiary of JSE-listed Oceana Group Limited. The business produces French fries and other value-added potato products at its factory in Lambert’s Bay for sale to wholesalers, retailers and restaurant chains.

This acquisition will enhance the Group’s capability to manufacture licensed product for both its franchise network and retail clients, as well as provide security in respect of a significant menu item.

With regard to the above mentioned acquisitions, the purchase consideration was below the threshold of a categorised transaction in terms of the Listings Requirements of the JSE Limited.

Special resolutionsOn 31 August 2015, shareholders approved the following special resolutions:• approval of non-executive directors’ remuneration for

services as directors;• general authority to repurchase shares of the company; and• general authority to provide financial assistance to related or

inter-related entities.

At the next AGM to be held on 29 July 2016 shareholders will be asked to renew the above three approvals as set out in the notice to shareholders (refer page 74).

Borrowing powersThe company has unlimited borrowing powers in terms of its Memorandum of Incorporation.

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• reviewed the Group’s top risks and evaluated the mitigating controls and action plans, which the committee found to be satisfactory;

• reviewed and approved the Group’s IT charter;• reviewed the status of the Group’s tax affairs, which the

committee found to be satisfactory; • evaluated and reported to the Board on the effectiveness of

risk management controls and governance processes;• reviewed and recommended the interim and Annual Financial

Statements to the Board for approval; and • reviewed and recommended the Integrated Annual Report to

the Board for approval.

The Audit and Risk Committee is entirely satisfied with the competence and expertise of the Group Financial Director.

The Audit and Risk Committee recommended the Annual Financial Statements for the year ended 29 February 2016 for approval to the Board. The Board has subsequently approved the Annual Financial Statements which will be open for discussion at the forthcoming annual general meeting.

RM KgosanaChairman of the Audit and Risk Committee

27 May 2016

In terms of section 94 of the Companies Act of South Africa, the report by the Audit and Risk Committee, which is chaired by Mr RM Kgosana, is presented below.

During the financial year ended 29 February 2016 in addition to the duties set out in the Audit and Risk Committee’s charter (a summary of which is provided on page 48 of our Integrated Annual Report, which is available on the company’s website at www.famousbrands.co.za the Audit and Risk Committee carried out its functions, inter alia, as follows:• nominated the appointment of Deloitte & Touche as the

registered independent auditor after satisfying itself through enquiry that Deloitte & Touche and Ms S Nelson are independent as defined in terms of the Companies Act of South Africa;

• determined the fees to be paid to Deloitte & Touche and its terms of engagement;

• ensured that the appointment of Deloitte & Touche complied with the legislation relating to the appointment of auditors;

• approved a non-audit services policy which determines the nature and extent of any non-audit services which Deloitte & Touche may provide to the Group;

• reviewed the external auditors’ report on the year-end audit;• reviewed and recommended the Group’s Approval and Limits

of Authority Framework to the Board for approval;• reviewed an assessment prepared by management of the

going concern status of the company and made recommendations to the Board accordingly. The committee concurs that the adoption of the going concern premise in the preparation of the financial statements is appropriate;

In my capacity as the Company Secretary, I hereby certify that Famous Brands Limited has lodged with the Companies and Intellectual Property Commission for the financial year ended 29 February 2016, all such returns and notices as are required of a public company in terms of the Companies Act of South Africa and that all such returns are to the best of my knowledge and belief true, correct and up to date.

K NtlhaCompany Secretary

27 May 2016

Company Secretary’s certificate

Audit and Risk Committee’s reportfor the year ended 29 February 2016


59

Approval of the summarised consolidated financial statements

The directors are required by the Companies Act of South Africa to maintain adequate accounting records and are responsible for the content and integrity of the summarised consolidated financial statements and related financial information included in this report. It is their responsibility to ensure that the summarised consolidated financial statements and the full set of the audited Annual Financial Statements present fairly the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the year then ended, in conformity with International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Council, the Companies Act of South Africa and the Listings Requirements of the JSE Limited.

The external auditors are engaged to express an independent opinion on the Annual Financial Statements. The Annual Financial Statements are prepared in accordance with IFRS and are based on appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The summarised consolidated financial statements were derived from the full set of the audited Annual Financial Statements for the year ended 29 February 2016 available on our website at www.famousbrands.co.za.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the Board of Directors sets standards for internal control aimed at reducing the risk of error or loss in a cost-effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk.

These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a

manner that, in all reasonable circumstances, is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The Audit and Risk Committee, together with the internal auditors, perform an oversight role in matters related to financial and internal controls.

The directors are of the opinion that, based on the information and explanations given by management, the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the Annual Financial Statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the Group’s cash flow forecast for the subsequent year and, in light of this review and the current financial position, they are satisfied that the Group has access to adequate resources to continue in operational existence for the foreseeable future.

The summarised consolidated financial statements and the full set of audited Annual Financial Statements, which have been prepared on the going concern basis, were approved by the Board of Directors on 27 May 2016 and are signed on its behalf by:

Santie Botha Kevin HedderwickIndependent Chairman Group Chief Executive

27 May 2016

60


Summarised consolidated financial statements

Summarised consolidated statement of financial positionat 29 February 2016

2015R000

ASSETSNon-current assets 1 436 377 1 196 839 Property, plant and equipment 286 448 208 951 Intangible assets 1 095 888 922 576 Investments in associates 52 746 57 568 Deferred tax 1 295 7 744 Current assets 971 906 655 421 Inventories 301 625 186 513 Current tax assets 60 786 26 404 Derivative financial instruments 100 –Trade and other receivables 463 261 316 276 Cash and cash equivalents 146 134 126 228

Total assets 2 408 283 1 852 260

EQUITY AND LIABILITIESEquity attributable to owners of Famous Brands Limited 1 474 780 1 389 388 Non-controlling interests 75 819 27 766

Total equity 1 550 599 1 417 154

Non-current liabilities 214 690 58 702 Derivative financial instruments 124 821 –Lease liabilities 10 858 2 937 Deferred tax 79 011 55 765 Current liabilities 642 994 376 404 Non-controlling shareholder loans 24 988 24 449 Lease liabilities 1 689 –Trade and other payables 462 481 329 769 Shareholders for dividends 1 873 1 487 Current tax liabilities 11 713 20 699 Bank overdrafts 140 250 –

Total liabilities 857 684 435 106

Total equity and liabilities 2 408 283 1 852 260

2016R000


61

Summarised consolidated statement of profit or loss and other comprehensive incomefor the year ended 29 February 2016

Note2015R000

%change

Revenue 4 308 318 3 283 342 31Gross profit 1 838 371 1 450 820 27Selling and administrative expenses (1 046 263) (778 796) 34

Operating profit before impairment loss 792 108 672 024 18Impairment loss (12 000) –

Operating profit after impairment loss 780 108 672 024 16Finance costs** (27 375) (13 550)Finance income** 20 466 13 281Share of (loss)/profit of associates (622) 7 608

Profit before tax 772 577 679 363 14Tax (221 011) (194 651)

Profit for the year 551 566 484 712 14

Other comprehensive income, net of tax:Exchange differences on translating foreign operations* 65 753 (2 957)

Total comprehensive income for the year 617 319 481 755

Profit for the year attributable to:Owners of Famous Brands Limited 527 699 465 756 Non-controlling interests 23 867 18 956

551 566 484 712

Total comprehensive income attributable to:Owners of Famous Brands Limited 593 452 462 799 Non-controlling interests 23 867 18 956

617 319 481 755

Earnings per share (cents)Basic earnings per share 5 529 468 13

Diluted earnings per share 5 528 468 13

* This item may be reclassified subsequently to profit or loss.** These amounts have been disclosed gross.

2016R000

62


Summarised consolidated financial statements continued

Summarised consolidated statement of changes in equityfor the year ended 29 February 2016

2015R000

Balance at the beginning of the year 1 417 154 1 234 948 Issue of capital and share premium 217 24 106 Recognition of share-based payments 10 173 1 992 Recognition of put-options over non-controlling interests (118 426) – Total comprehensive income for the year 617 319 481 755 Payment of dividends (398 389) (327 389)Additional non-controlling interest arising on business combination 24 889 1 742 Change in ownership interests in subsidiaries (3 906) – Contingent consideration 1 568 –

Balance at the end of the year 1 550 599 1 417 154

2016R000


63

Summarised consolidated statement of cash flowsfor the year ended 29 February 2016

2015R000

Cash generated before working capital changes 874 733 716 902 Increase in inventories (84 357) (5 066)Increase in trade and other receivables (131 452) (36 694)Increase in trade and other payables 59 446 38 093

Cash generated from operations 718 370 713 235 Net interest paid (205) (269)Tax paid (243 993) (201 524)

Cash available from operating activities 474 172 511 442 Dividends paid to owners of Famous Brands Limited (398 003) (326 969)

Net cash inflow from operating activities 76 169 184 473

Cash utilised in investing activitiesAdditions to property, plant and equipment (82 199) (46 124)Intangible assets acquired (42 749) (9 382)Proceeds from disposal of property, plant and equipment 2 527 3 098 Proceeds from disposal of intangible assets – 375 Net cash outflow on acquisition of subsidiaries (83 989) (47 334)Dividends received from associates 4 200 2 975

Net cash outflow from investing activities (202 210) (96 392)

Cash flow from financing activitiesBorrowings repaid – (65 000)Cash contributed by/(repaid) to non-controlling shareholders 539 (4 895)Proceeds from issue of equity instruments of Famous Brands Limited 217 24 106 Acquired from non-controlling interest in subsidiaries (18 084) –

Net cash outflow from financing activities (17 328) (45 789)

Net (decrease)/increase in cash and cash equivalents (143 369) 42 292 Foreign currency effect 23 025 (6 763)Cash and cash equivalents at the beginning of the year 126 228 90 699

Cash and cash equivalents at the end of the year 5 884 126 228

Comprising: Cash and cash equivalents 146 134 126 228Bank overdrafts (140 250) –

5 884 126 228

2016R000

64


Primary (business units) and secondary (geographical) segment reportfor the year ended 29 February 2016


2015R000

%change

RevenueFranchising and Development 681 364 615 038 11Supply Chain 3 363 929 2 506 610 34

Manufacturing 1 799 958 1 257 691 43Logistics 2 911 061 2 223 196 31Eliminations of inter-segment revenue (1 347 090) (974 277) 38

Corporate 2 562 1 740

South Africa 4 047 855 3 123 388 30International 260 463 159 954 63

UK 115 696 102 470 13Rest of Africa 144 767 57 484 152

Total 4 308 318 3 283 342 31

Operating profitFranchising and Development 389 282 365 353 7Supply Chain 347 653 261 725 33

Manufacturing 247 455 172 538 43Logistics 100 198 89 187 12

Corporate (11 239) 1 349

South Africa 725 696 628 427 15 International 66 412 43 597 52

UK 32 640 20 584 59Rest of Africa 33 772 23 013 47

Total operating profit before impairment loss 792 108 672 024 18

Franchising and Development (12 000) –Impairment loss (12 000) –

Corporate (228 542) (187 312)Net finance costs (6 909) (269)Share of (loss)/profit of associates (622) 7 608Tax (221 011) (194 651)

Profit for the year 551 566 484 712

2015%

Operating margin

Franchising and Development 57.1 59.4Supply Chain 10.3 10.4

Manufacturing 13.7 13.7Logistics 3.4 4.0

South Africa 17.9 20.1

International 25.5 27.3

UK 28.2 20.1Rest of Africa 23.3 40.0

Operating profit 18.4 20.5

2016R000

2016%


65Statistics and ratiosfor the year ended 29 February 2016

2015%

change

Earnings per share (cents)Basic earnings per share 529 468 13Diluted earnings per share 528 468 13Headline earnings per share 541 467 16Diluted headline earnings per share 540 467 16

Dividends per share (cents) 405 355 Interim 190 155 23Final 215 200 8

Ordinary shares (000)In issue 99 812 99 807 Weighted average 99 810 99 581 Diluted weighted average 99 892 100 236

Operating profit margin (%) 18.4 20.5 Net debt/equity (%) (0.4) (8.9)Net asset value per share (cents) 1 554 1 420

Dividend cover on headline earnings (times) 1.3 1.3

2016

66


Notes to the summarised consolidated financial statementsfor the year ended 29 February 2016


Famous Brands Limited (the “company”) is a South African registered company. The summarised consolidated financial statements of the company comprise the company and its subsidiaries (together referred to as the Group) and the Group’s interest in associates.1. Statement of compliance

These summarised consolidated financial statements have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, and contains at a minimum the information required by IAS 34 Interim financial reporting, the JSE Listings Requirements, and the Companies Act of South Africa.

2. Basis of preparationThe summarised consolidated financial statements do not include all the information and disclosures required for the full set of audited consolidated financial statements, and should be read in conjunction with the full set of the audited Annual Financial Statements which are available on our website at www.famousbrands.co.za.

The Group’s audited Financial Statements and the summarised consolidated financial statements as at and for the year ended 29 February 2016 were prepared on the going concern basis. The accounting policies applied in the presentation of the summarised consolidated financial statements are consistent with those applied for the year ended 28 February 2015, except for new standards that became effective for the Group’s financial period beginning 1 March 2015, refer to Note 3.

The summarised consolidated financial statements were prepared on the historical cost basis, under the supervision of Norman Richards, Group Financial Director.

3. Changes in accounting policies

The Group has adopted all the new, revised or amended accounting standards which were effective for the Group from 1 March 2015, none of which had a material impact on the Group.

2015R000

4. Capital expenditure and commitmentsInvested 142 154 55 506 Property, plant and equipment 82 199 46 124 Intangible assets 59 955 9 382 Authorised, not yet contracted 169 815 83 265 Property, plant and equipment 156 917 68 028 Intangible assets 12 898 15 237

2016R000


67

2015R000

5. Earnings and headline earnings per shareReconciliation between earnings and diluted earningsProfit attributable to equity holders of Famous Brands Limited 527 699 465 756 Adjustment for:After tax interest receivable on future share placements – 3 348

Diluted earnings 527 699 469 104

Earnings per share (cents)Basic 529 468

Diluted 528 468

Reconciliation between headline earnings and diluted headline earningsProfit attributable to equity holders of Famous Brands Limited 527 699 465 756 After tax profit on disposal of property, plant and equipment (88) (526)After tax re-measurements included in equity-accounted earnings of associates – (29)Impairment loss 12 000 –

Headline earnings 539 611 465 201 Adjustment for:After tax interest receivable on future share placements – 3 348

Diluted headline earnings 539 611 468 549

Headline earnings per share (cents)Basic 541 467

Diluted 540 467

6. Related party transactions

The Group entered into various sale and purchase transactions with related parties, in the ordinary course of business, on an arm’s length basis. The nature of related party transactions is consistent with those reported previously.

7. Financial instrumentsAccounting classifications and fair valuesThe table below sets out the classification of each class of financial assets and liabilities, as well as a comparison to their fair values. The different fair value levels are described below:Level 1: Quoted prices (adjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.Level 3: Unobservable inputs for the asset or liability.

Group

2015 2015Carryingamount

Fairvalue

Level R000 R000

Financial assetsLoans and receivables:Trade and other receivables 444 069 444 069 309 065 309 065Cash and cash equivalents 146 134 146 134 126 228 126 228

Fair value through profit or loss:Derivative financial instruments (foreign currency options) 2 100 100 – –

590 303 590 303 435 293 435 293

2016R000


Fairvalue

R000 R000

Notes to the summarised consolidated financial statements continued

for the year ended 29 February 2016

68


Group


Fairvalue

Level R000

7. Financial instruments continued

Financial liabilitiesMeasured at amortised cost:Trade and other payables 367 494 367 494 263 337 263 337Non-controlling shareholder loans 24 988 24 988 24 449 24 449Shareholders for dividends 1 873 1 873 1 487 1 487 Lease liabilities 12 547 12 547 2 937 2 937Bank overdrafts 140 250 140 250 – –

Fair value through profit or loss:Derivative financial instruments (put options over non-controlling interests) 3 124 821 124 821 – –

671 973 671 973 292 210 292 210

Level 3 sensitivity informationThe fair values of the level 3 financial liabilities of R125 million (2015: Rnil) were determined by applying an income approach valuation method including a present value discount technique. The fair value measurement includes inputs that are not observable in the market. Key assumptions used in the valuation of these instruments include the probability of achieving set profit targets and the discount rates. An increase/(decrease) of 1% in the discount rate would result in decrease/(increase) of R5 million.

Movements in level 3 financial instruments carried at fair value:Put options over non-controlling interests:Carrying value at beginning of the year – – – –Initial recognition in equity for new acquisitions 118 426 118 426 – –Unwinding of discount 6 395 6 395 – –

Carrying value at end of the year 124 821 124 821 – –


Fairvalue

R000 R000


69

2015R000

8. Business combinationsSummary of cash outflow on acquisition of subsidiariesCater Chain Food Services and City Deep Cold Storage 38 082 –Retail Group 45 907 –WakaberryTM Holdings – 47 334

Total cash outflow on acquisition of subsidiaries 83 989 47 334

Effective 1 April 2015, a 75% share was acquired in both Cater Chain Food Services and City Deep Cold Storage, for a consideration of R30 million. R15.1 million was allocated to goodwill because of anticipated scale and merger benefits related to franchising, manufacturing and logistics capability.Fair value of assets and liabilities acquiredProperty, plant and equipment 21 245 Intangible assets 6 609 Trade and other receivables 19 471 Inventories 28 970 Current tax assets 787 Bank overdraft (8 082)Deferred tax (3 871)Trade and other payables (45 296)Net assets acquired 19 833 Non-controlling interests measured at their share of the fair value of net assets (4 958)Amount capitalised 14 875 Goodwill 15 125 Purchase price 30 000 Bank overdraft 8 082 Cash outflow on acquisition of subsidiary 38 082 Effective 1 August 2015, a 51% interest was acquired in Retail Group (Pty) Ltd (Botswana), for a consideration of R61.8 million. R40.9 million was allocated to goodwill because of anticipated scale and merger benefits related to franchising, manufacturing and logistics capability.Fair value of assets and liabilities acquiredProperty, plant and equipment 16 781Trademarks 27 515Trade and other receivables 2 473 Inventories 1 519 Receivables from shareholders 56 Current tax assets 1 942 Cash and cash equivalents 15 918 Borrowings (1 232)Deferred lease liabilities (923)Deferred tax (6 159)Trade and other payables (16 923)Non-controlling shareholder loans (75)Net assets acquired 40 892Non-controlling interests measured at their share of the fair value of net assets (20 038)Amount capitalised 20 854Goodwill 40 971Purchase price 61 825 Cash and cash equivalents (15 918) Cash outflow on acquisition of subsidiary 45 907

The business combinations have been accounted for on a provisional basis.

2016R000

Notes to the summarised consolidated financial statements continued

for the year ended 29 February 2016

70


2015R000

8. Business combinations continuedEffective 1 April 2014, a 70% interest was acquired in both WakaberryTM Holdings (Pty) Ltd and 4E Holdings (Pty) Ltd, the company in which the WakaberryTM trademark is registered, for a consideration of R49.4 million. R45.4 million was allocated to goodwill because of anticipated scale and merger benefits related to franchising, manufacturing and logistics capability.Fair value of assets and liabilities acquiredProperty, plant and equipment 979 Trademarks 12 Trade and other receivables 3 823 Inventories 3 979 Cash and cash equivalents 2 082 Deferred tax (1)Trade and other payables (3 160)Current tax liabilities (1 910)

Net assets acquired 5 804 Non-controlling interests measured at their share of the fair value of net assets (1 740)

Amount capitalised 4 064 Goodwill 45 352

Purchase price 49 416 Cash and cash equivalents (2 082)

Cash outflow on acquisition of subsidiary 47 334

9. Subsequent events

– With effect from 9 March 2016, the Group acquired a 51% stake in Catch, a premium seafood and sushi brand.

– Effective 1 May 2016 the Group acquired a 51% controlling stake in Lupa Osteria, an authentic Italian restaurant business trading in the family casual dining segment. Founded in 2013, and franchised in 2014, Lupa Osteria comprises three restaurants in KwaZulu-Natal: Hillcrest, Westville and Durban North. In the short term, a further three restaurants will be opened in KwaZulu-Natal; over the long term, management is satisfied that a network of 35 restaurants in South Africa and select African countries is achievable.

– With effect from 1 June 2016, the Group acquired a 51% controlling stake in recently launched Salsa Mexican Grill, a Fast-Casual dining concept centered on traditional Mexican food and beverages. The brand is currently represented by its maiden restaurant, opened in June 2015, in Fourways, Gauteng. Two additional franchised outlets are scheduled to open during the course of 2016. Over the longer term the intention is to grow the brand’s footprint nationally.

– Subject to Competition Commission approval, the Group has acquired 100% of the business of Lamberts Bay Foods Limited, a wholly owned subsidiary of JSE-listed Oceana Group Limited. The business produces French fries and other value-added potato products at its factory in Lambert’s Bay for sale to wholesalers, retailers and restaurant chains. This acquisition will serve to enhance the Group’s capability to manufacture licensed product for its franchise network and retail clients, as well as provide security of supply in respect of a significant strategic menu item.

– Due to the timing of these acquisitions, the initial accounting for these business combinations is incomplete and therefore the disclosure of the acquisition date fair values and related impact cannot be made at this time.

2016R000


71

10. Audit opinionThese summarised consolidated financial statements for the year ended 29 February 2016 have been derived from the audited consolidated financial statements of Famous Brands Limited for the year ended 29 February 2016, on which the auditors, Deloitte & Touche, have expressed an unmodified audit opinion. These summarised consolidated financial statements have themselves not been audited.

A copy of the auditor’s report, together with the accompanying financial information, can be obtained from the company’s registered office. The auditor’s report and the audited consolidated financial statements are available on the company’s website (www.famousbrands.co.za).

The Board of Directors of Famous Brands takes full responsibility for the preparation of this report and for ensuring that the financial information has been correctly extracted from the underlying financial statements.

72


28 February 2015

Number of share-

holders %Number

of shares %

Analysis of shareholdersHoldings1 – 10 000 9 694 95.57 10 467 115 10.49 8 990 95.06 10 388 284 10.4110 001 – 50 000 320 3.15 6 663 808 6.68 335 3.54 7 053 569 7.0750 001 – 100 000 41 0.40 3 018 865 3.02 61 0.65 4 577 352 4.59100 001 – 1 000 000 74 0.73 22 551 384 22.59 59 0.62 17 958 955 17.991 000 001 and more 14 0.15 57 111 263 57.22 12 0.13 59 834 275 59.94

10 143 100.00 99 812 435 100.00 9 457 100.00 99 812 435 100.00

Analysis of holdingIndividuals 7 844 77.33 33 009 672 33.07 7 378 78.02 35 166 449 35.23Insurance companies 14 0.14 508 779 0.51 16 0.17 654 378 0.66Investment trusts 1 345 13.26 18 082 174 18.12 1 132 11.97 15 550 785 15.58Other companies and corporate bodies 940 9.27 48 211 810 48.30 931 9.84 48 440 823 48.53

10 143 100.00 99 812 435 100.00 9 457 100.00 99 812 435 100.00

Major shareholders (holding more than 5% of the shares in issue) excluding directors

Public Investment Corporation 10 612 874 10.63 9 369 087 9.39

Arisaig Africa Consumer Fund 5 080 652 5.09 9 175 293 9.19Pictet and Cie (Europe) SA AIF 5 884 032 5.90 5 254 405 5.26

21 577 558 23 798 785

Shareholder spreadPublic* 10 136 99.93 71 621 327 71.76 9 450 99.93 70 417 088 70.37Non-public* 7 0.07 28 191 108 28.24 7 0.07 29 395 347 29.63Directors’ holdings* 7 0.07 28 191 108 28.24 6 0.06 29 390 347 29.62Own holdings (Treasury shares) – – – – 1 0.01 5 000 0.01

10 143 100.00 99 812 435 100.00 9 457 100.00 99 812 435 100.00

* 2015 holdings have been updated by 175 000 shares from 29 390 347 shares in order to reflect a director’s trade which was duly disclosed via a SENS announcement, but had not yet been updated on the 2015 shareholder register.

29 February 2016

Number of share-

holders %Number

of shares %

Shareholder spread


73

Shareholders’ diary

Financial year-end 29 February Annual General Meeting Friday, 29 July 2016 Reports Announcement of annual results for the year ended 29 February 2016 Monday, 30 May 2016Posting of the Integrated Annual Report for the year ended 29 February 2016 Tuesday, 28 June 2016 Announcement of interim results for the half-year ended 31 August 2016 Monday, 24 October 2016 Final dividend Dividend declaration date Monday, 30 May 2016Last day to trade cum-dividend Friday, 1 July 2016Shares commence trading ex-dividend Monday, 4 July 2016Record date Friday, 8 July 2016Payment of dividend Monday, 11 July 2016

Share certificates may not be dematerialised or rematerialised between Monday, 4 July 2016 and Friday, 8 July 2016, both dates inclusive.

74


Notice to shareholders

Famous Brands Limited(Registration number 1969/004875/06)(Incorporated in the Republic of South Africa)(Famous Brands or the company)JSE share code: FBR ISIN: ZAE000053328

Notice is hereby given that the 22nd Annual General Meeting (AGM) of shareholders of the company will be held at the offices of the company, 478 James Crescent, Halfway House, Midrand, on Friday, 29 July 2016 at 14:00 for the purpose of (i) dealing with such business as may lawfully be dealt with at the meeting, and (ii) considering and, if deemed fit, passing, with or without modification, the resolutions set out hereunder in the manner required by the Companies Act of South Africa (the Act), which meeting is to be participated in and voted at by shareholders recorded in the company’s securities register as at the record date of Wednesday, 20 July 2016.

Kindly note that meeting participants (including proxies) will be required to provide reasonably satisfactory identification before being entitled to attend or participate in the meeting. Forms of identification include valid identity documents, driver’s licences and passports.

Ordinary resolutionsThe percentage of voting rights required for an ordinary resolution to be adopted is more than 50% (fifty percent) of the voting rights exercised on the resolution at a quorate meeting.

1. Ordinary resolution No. 1: Adoption of the Annual Financial Statements and reports

“RESOLVED THAT the Annual Financial Statements of the Group and the company for the year ended 29 February 2016, together with the directors’ report, the report of the independent auditors, and the reports of the Audit and Risk Committee and the Social and Ethics Committee, be and are hereby received and adopted.”

2. Ordinary resolution No. 2: Reappointment and remuneration of auditors

“RESOLVED THAT Deloitte & Touche be reappointed as the independent auditors of the company, it being noted that S Nelson is the registered individual auditor who will undertake the audit. The Audit and Risk Committee is authorised to determine the auditor’s remuneration for the past year.”

3. Ordinary resolution No. 3: Re-election and appointment of directors

“RESOLVED to individually re-elect and appoint the following directors (ordinary resolutions 3.1 to 3.5):

The Board recommends the re-election of these directors, who retire by rotation in terms of the Memorandum of Incorporation (MOI) and being eligible, thereto make themselves available for re-election (ordinary resolutions 3.1 to 3.3).”

3.1 Ordinary resolution No. 3.1: Re-election of Panagiotis (Peter) Halamandaris.

3.2 Ordinary resolution No. 3.2: Re-election of Periklis Halamandaris.

3.3 Ordinary resolution No. 3.3: Re-election of Santie Botha.

The Board recommends the appointment of these directors (ordinary resolutions 3.4 to 3.5):

3.4 Ordinary resolution No. 3.4: “RESOLVED THAT the appointment of Thembisa Dingaan as an Independent non-executive director effective 1 June 2016, be and is hereby confirmed”. Thembisa, (BProc, LLB, LLM, HDip Tax), is a qualified attorney, admitted to the New York State Board in 1998. She obtained her BProc and LLB qualifications from the University of Natal, a Master of Laws (LLM) degree from Harvard University and a Higher Diploma in taxation from the University of the Witwatersrand.

Thembisa holds directorships on the boards of Absa Bank Limited, Telkom SOC Limited, Imperial Holdings Limited and Sumitomo Rubber South Africa (Pty) Limited. She was formerly a Board member of the Development Bank of South Africa.

3.5 Ordinary resolution No. 3.5: “RESOLVED THAT the appointment of Kelebogile (Lebo) Ntlha as Group Financial Director effective 1 July 2016, be and is hereby confirmed”. Lebo’s brief curriculum vitae is included on page 45 of this Integrated Annual Report.

Brief curricula vitae of the directors who have offered

themselves for appointment or re-election in terms of ordinary resolutions No. 3.1 to 3.3 are included on pages 42 to 43 of this Integrated Annual Report.


75

4. Ordinary resolution No. 4: Re-election of the Chairman and members of the Audit and Risk Committee

“RESOLVED to individually re-elect the following directors (ordinary resolutions No. 4.1 to 4.3) of the company as the Chairman or members of the Audit and Risk Committee until the conclusion of the next AGM of the company. The Board recommends the re-election and appointment of these members.”

4.1 Ordinary resolution No. 4.1: Re-election of Moses Kgosana as Chairman and as member of the Audit and Risk Committee.

4.2 Ordinary resolution No. 4.2: Re-election of Bheki Lindinkosi Sibiya as a member of the Audit and Risk Committee.

4.3 Ordinary resolution No. 4.3: Re-election of Norman Adami as a member of the Audit and Risk Committee.

5. Ordinary resolution No. 5: To place 3% (three percent) of the unissued shares under directors’ control

“RESOLVED THAT 3% (three percent) of the authorised but unissued share capital of the company, from time to time, be placed under the control of the directors of the company until the next AGM with the authority to allot and issue all or part thereof for the purposes of issuing shares which have vested in terms of share scheme grants, subject to section 38 of the Act, and the JSE Listings Requirements and the company’s MOI.”

6. Ordinary resolution No. 6: Authority for directors or Company Secretary to implement resolutions

“RESOLVED to authorise and empower any two directors or the Company Secretary and any director signing together, to do all such things and sign all such documents and take all such actions as they consider necessary, to implement the resolutions set out in the notice convening the 22nd AGM of the company.”

7. Non-binding resolution No. 1: Endorsement of remuneration policy

“RESOLVED THAT shareholders endorse Famous Brands’ remuneration policy and its implementation through a non-binding advisory vote. The Remuneration report is set out on page 52 of this Integrated Annual Report.”

Explanatory note In terms of the King Code of Governance Principles, an

advisory vote should be obtained from shareholders on the company’s annual remuneration policy. The vote allows shareholders to express their view on the remuneration policies adopted and their implementation, but will not be binding on the company.

Special resolutionsThe percentage of voting rights required for a special resolution to be adopted is at least 75% (seventy-five percent) of the voting rights exercised on the resolution at a quorate meeting.

8. Special resolution No. 1: Approval of non-executive directors’ remuneration for their services as directors

“RESOLVED THAT in terms of section 66(9) of the Act, payment of the remuneration for the services as non-executive directors of Famous Brands is approved for the period from 1 June 2016 as set out in the following table.”

Proposed non-executive directors’ fees Payment per attendance at meetings only

Per meetingFrom June

2015Rand

BoardChairman 508 800 84 800Member 249 524 58 300Audit and Risk CommitteeChairman 159 000 26 500Member 113 420 26 500Nominations CommitteeChairman 84 800 –Member 84 800 –Remuneration CommitteeChairman 114 480 21 200Member 90 736 21 200Social and Ethics CommitteeChairman 108 883 21 200Member 90 736 21 200

* Fees represent an annual retainer payable quarterly in arrears based on meeting attendance.

Annual fee*From June

2016Rand

76


Notice to shareholders continued

Explanatory note

This resolution is proposed in order to comply with the

requirements of the Act. In terms of section 65(11)(h) of

the Act, read with sections 66(8) and 66(9), remuneration

may only be paid to directors for their services as

directors in accordance with a special resolution

approved by the shareholders within the previous two

years.

9. Special resolution No. 2: General authority to

repurchase shares

“RESOLVED THAT the company approves, as a general

approval contemplated in section 48 of the Act, the

acquisition by the company (or by a subsidiary of the

company) of ordinary shares issued of the company on

such terms and conditions and in such amounts as the

directors of the company may decide, but subject

always to the provisions of the Act and the JSE Listings

Requirements, which general approval shall endure

until the next AGM of the company (when this approval

shall lapse unless it is renewed at that AGM, provided

that it shall not extend beyond 15 (fifteen) months from

the date of registration of this special resolution),

subject to the following limitations:

(a) the repurchase of securities is implemented

through the order book of the JSE’s trading

system, without any prior understanding or

arrangement between the company and the

counterparty;

(b) the company is so authorised by its MOI;

(c) the general purchase is limited to a maximum of

10% (ten percent) in aggregate of the company’s

issued share capital in any one financial year;

(d) the general purchase by the subsidiaries of the

company is limited to a maximum of 10% (ten

percent) in aggregate of the company’s issued

share capital;

(e) the general purchase is not made at a price

greater than 10% (ten percent) above the

weighted average of the market value for the

securities for the five business days immediately

preceding the date on which the transaction

was effected;

(f) the repurchase does not take place during a

prohibited period as defined in paragraph 3.67 of

the JSE Listings Requirements unless there is a

repurchase programme in place and the dates

and quantities of shares to be repurchased during

the prohibited period are fixed (not subject to any

variation) and has been submitted to the JSE in

writing prior to the commencement of the

prohibited period. The issuer must instruct an

independent third party, which makes its

investment decisions in relation to the issuer’s

securities independently of, and uninfluenced by,

the issuer, prior to the commencement of the

prohibited period to execute the repurchase

programme submitted to the JSE;

(g) the company publishes an announcement after it

or its subsidiaries has cumulatively acquired 3%

(three percent) of the number of ordinary shares

in issue at the time that the shareholders’

authority for the purchase is granted and for each

3% (three percent) in aggregate of the initial

number acquired thereafter; and

(h) the company appoints only one agent at any point

in time to effect any repurchases on its behalf.

“After considering the aggregate effect of the maximum

repurchase, the directors of the company are of the

opinion that for a period of 12 (twelve) months after the

date of this notice of the AGM:• the company and the company’s subsidiaries (the

Group) shall satisfy the solvency and liquidity test in

the manner contemplated by the Act and the JSE

Listings Requirements;• the company and the Group will be able, in the

ordinary course of business, to repay their debts;• the assets of the company and the Group, fairly

valued in accordance with IFRS, will be in excess of

the liabilities of the company and the Group;


77

• the share capital and reserves of the company and

the Group will be adequate for ordinary business

purposes;• the working capital of the company and the Group

will be adequate for ordinary business purposes; and• the company’s sponsor will confirm the adequacy of

the company’s working capital for the purposes of

undertaking the repurchase of shares in writing to

the JSE prior to the company (or any subsidiary)

entering the market to proceed with the repurchase.”

Explanatory note

The reason for and effect of special resolution No. 2 is to

authorise the company and its subsidiaries, by way of

general approval, to acquire the company’s issued

ordinary shares on terms and conditions and in amounts

to be determined by the directors of the company,

subject to certain statutory provisions and the JSE

Listings Requirements.

10. Special resolution No. 3: General authority to

provide financial assistance to related or inter-

related entities

“RESOLVED THAT the Board of Directors of the company

be and is hereby authorised, to the extent required by

and subject to sections 44 and 45 of the Act and the

requirements, if applicable of (i) the MOI; and (ii) the JSE

Listings Requirements, to cause the company to provide

direct or indirect financial assistance to a related or

inter-related company or to a shareholder of a related

or inter-related company, provided that no such

financial assistance may be provided at any time in

terms of this authority after the expiry of two years from

the adoption of this special resolution No. 3.”

Explanatory note

Notwithstanding the title of section 45 of the Act, being

“Loans or other financial assistance to directors”, on a

proper interpretation, the body of the section may also

apply to financial assistance provided by a company to

related or inter-related companies, including, among

others, its subsidiaries, for any purpose. Furthermore,

section 44 of the Act may also apply to the financial

assistance so provided by a company to related or

inter-related companies, in the event that financial

assistance is provided for the purposes of, or in

connection with, the subscription of any option, or any

securities, issued or to be issued by the company or a

related or inter-related company, or for the purchase of

any securities of the company or a related or inter-

related company. Both sections 44 and 45 of the Act

provide, among others, that the particular financial

assistance must be provided only pursuant to a special

resolution of the shareholders, adopted within the

previous two years, which approved such assistance

whether for the specific recipient, or generally for a

category of potential recipients, and the specific

recipient falls within that category and the Board of

Directors must be satisfied that (a) immediately after

approving the financial assistance, the company would

satisfy the solvency and liquidity test; and (b) the terms

under which the financial assistance is proposed to be

given are fair and reasonable to the company.

In the normal course of business the company is often

required to grant financial assistance, including but not

limited to loans, guarantees in favour of third parties,

such as financial institutions, service providers and

counterparties (in respect of the provision of banking

facilities, acquisition transactions and debt capital) for

the obligations of the company or a related or inter-

related company, or to a shareholder of a related or

inter-related company, or to a person related to any

such company. Special resolution No. 3 will enable the

company to provide such financial assistance to

subsidiaries and juristic persons in the Famous Brands

Group or other person that is or becomes related or

inter-related to the company for any purpose in the

normal course of business.

Directors’ statement regarding the utilisation of the

authority sought

The directors of the company have no specific intention

to effect the provisions of this special resolution, but

will, however, continually review the company’s

position, having regard for the prevailing circumstances

and market conditions, in considering whether to effect

the provisions of this special resolution.

78


Notice to shareholders continued

Other disclosures in terms of section 11.26 of the JSE Listings

Requirements

The following additional information, some of which may

appear elsewhere in the Integrated Annual Report of which this

notice forms part, is provided in terms of the JSE Listings

Requirements for purposes of this general authority:• major beneficial shareholders – page 72 of this Integrated

Annual Report; and• share capital of the company – Note 10 of the Audited

Financial Statements available on our website at www.famousbrands.co.za.

Litigation statement

The directors of the company whose names appear on pages 42

to 43 of the Integrated Annual Report of which this notice forms

part, are not aware of any legal or arbitration proceedings

including proceedings that are pending or threatened, that may

have or had in the recent past (being at least the previous

12 months) a material effect on the Group’s financial position.

Material changes

Other than the facts and developments reported on in the

Integrated Annual Report, there have been no material changes

in the affairs or financial position of the company and its

subsidiaries since the date of signature of the audit report and

up to the date of this notice.

Voting and proxies

A shareholder of the company entitled to attend, speak and

vote at the AGM is entitled to appoint a proxy or proxies to

attend, speak and on a poll to vote, in his/her stead. The proxy

need not be a shareholder of the company. A form of proxy is

attached for the convenience of any certificated shareholder

and “own name” registered dematerialised shareholder who

cannot attend the AGM, but who wishes to be represented.

Additional forms of proxy may also be obtained on request

from the company’s registered office. The completed forms of

proxy must be deposited at, posted or faxed to the transfer

secretaries at the address set out on the inside back cover to

be received by no later than 14:00 on Wednesday, 27 July 2016.

Any shareholder who completes and lodges a form of proxy will

nevertheless be entitled to attend and vote in person at the

AGM should the shareholder subsequently decide to do so.

On a show of hands, every shareholder of the company present

in person or represented by proxy shall have one vote only. On

a poll, every shareholder of the company present in person or

represented by proxy shall have one vote for every share held

in the company by such shareholder.

Shareholders who have dematerialised their ordinary shares

through a Central Securities Depository Participant (CSDP) or

broker, other than “own name” registered dematerialised

shareholders, and who wish to attend the AGM must request

their CSDP or broker to issue them with a letter of representation.

Alternatively, dematerialised shareholders other than “own

name” registered dematerialised shareholders, who wish to be

represented, must provide their CSDP or broker with their

voting instructions in terms of the custody agreement between

them and their CSDP or broker in the manner and timeframe

stipulated.

By order of the Board

K Ntlha

Company Secretary

27 May 2016


79

Form of proxy

Famous Brands Limited(Registration number 1969/004875/06)(Incorporated in the Republic of South Africa)(Famous Brands or the company)Share code: FBR ISIN: ZAE000053328

For use by the holders of the company’s certificated ordinary shares (certified shareholders) and/or dematerialised ordinary shares held through a Central Securities Depository Participant (CSDP) or broker who have selected “own name” registration (own name dematerialised shareholders) at the 22nd Annual General Meeting of the company to be held at 478 James Crescent, Midrand, on Friday, 29 July 2016 at 14:00 and at any adjournment thereof.

Not for the use by holders of the company’s dematerialised ordinary shares who are not “own name” dematerialised shareholders. Such shareholders must contact their CSDP or broker timeously if they wish to attend and vote at the Annual General Meeting and request that they be issued with the necessary authorisation to do so, or provide the CSDP or broker timeously with their voting instructions should they not wish to attend the Annual General Meeting in order for the CSDP or broker to vote thereat in accordance with their instructions.

I/We

of (address)

being the registered owner/s of ordinary shares in

the company hereby appoint

or failing him/her

or failing him/her, the Chairperson of the Annual General Meeting, as my/our proxy to act for me/us and on my/our behalf at the Annual General Meeting which will be held for the purpose of considering and, if deemed fit, passing, with or without modification, the resolutions to be proposed thereat and at any adjournment thereof; and to vote for and/or against the resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our name(s), in accordance with the following instructions:

* Please indicate with an “X” in the appropriate spaces below how you wish your votes to be cast. Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.

Number of votes

For* Against* Abstain*

1. Ordinary resolution No. 1:Adoption of the Annual Financial Statements and reports

2. Ordinary resolution No. 2:Reappointment and remuneration of auditors

3. Ordinary resolution No. 3:Re-election and appointment of directors3.1 Re-election of Panagiotis (Peter) Halamandaris3.2 Re-election of Periklis Halamandaris3.3 Re-election of Santie Botha3.4 Appointment of Thembisa Dingaan3.5 Appointment of Kelebogile (Lebo) Ntlha

4. Ordinary resolution No. 4:Re-election and appointment of the Chairman and members of the Audit and Risk Committee4.1 Appointment of Moses Kgosana as Chairman and re-election as a member of the Audit and Risk

Committee4.2 Re-election of Bheki Lindinkosi Sibiya as a member of the Audit and Risk Committee4.3 Re-election of Norman Adami as a member of the Audit and Risk Committee

5. Ordinary resolution No. 5:To place 3% (three percent) of the unissued shares under directors’ control

6. Ordinary resolution No. 6:Authority for directors or Company Secretary to implement resolutions

7. Non-binding resolution No. 1:Endorsement of remuneration policy

8. Special resolution No. 1:Approval of non-executive directors’ remuneration for their services as directors

9. Special resolution No. 2:General authority to repurchase shares

10. Special resolution No. 3:General authority to provide financial assistance to related or inter-related entities

Signed this day of 2016

Signature

Assisted by (if applicable)

Please read the notes on the reverse.

80


Notes to the form of proxy

1. This form of proxy is to be completed only by those shareholders who:

(a) hold shares in a certificated form; or (b) are recorded in the sub-register in electronic

form in their “own name”.

2. Shareholders who have dematerialised their shares and wish to attend the Annual General Meeting must contact their CSDP or broker who will furnish them with the necessary authority to attend the Annual General Meeting, or they must instruct their CSDP or broker as to how they wish to vote in this regard. This must be done in terms of the agreement entered into between the shareholders and their CSDP or broker.

3. Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder(s) of the company) to attend, speak and, on a poll, vote in place of that shareholder at the Annual General Meeting.

4. A shareholder may insert the name of a proxy or the names of two alternative proxies of the shareholder’s choice in the space provided, with or without deleting “the Chairperson of the Annual General Meeting”. The person whose name stands first on the form and who is present at the Annual General Meeting will be entitled to act as proxy to the exclusion of those whose names follow.

5. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate box(es) provided. Failure to comply with the above will be deemed to authorise the Chairperson of the Annual General Meeting, if the Chairperson is the authorised proxy, to vote in favour of the resolutions at the Annual General Meeting, or any other proxy to vote or to abstain from voting at the Annual General Meeting as he/she deems fit, in respect of all the shareholder’s votes exercisable thereat.

6. A shareholder or his/her proxy is entitled but not obliged to vote in respect of all the ordinary shares held by such shareholder. The total number of votes for or against the resolutions and in respect of which any abstention is recorded may not exceed the total number of shares held by such shareholder.

7. Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the company’s transfer secretaries or waived by the Chairperson of the Annual General Meeting.

8. The Chairperson of the Annual General Meeting may accept or reject any form of proxy which is completed and/or received other than in accordance with these instructions, provided that he shall not accept a proxy unless he is satisfied as to the manner in which a shareholder wishes to vote.

9. Any alterations or corrections to this form of proxy must be initialled by the relevant signatory(ies).

10. The completion and lodging of this form of proxy does not preclude the relevant shareholder from attending the Annual General Meeting and speaking and voting in person to the exclusion of any proxy appointed by the shareholder.

11. A minor must be assisted by his/her parent/guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the company’s transfer secretaries.

12. Where there are joint holders of any shares, only that holder whose name appears first in the register in respect of such shares need sign this form of proxy.

13. Forms of proxy must be lodged at, posted or faxed to Computershare Investor Services Proprietary Limited, 70 Marshall Street, Marshalltown, 2001 (PO Box 61051, Marshalltown, 2107) to reach the company by no later than 14:00 on Wednesday, 27 July 2016.

Contact informationTel: +27 11 315 3000

[email protected]

478 James CrescentHalfway House, South Africa, 1685

Contents

Flap About our Integrated Annual Report

IFC About Famous Brands

IFC Highlights

1 Financial highlights

2 Our business philosophy

4 Our business model

6 Supporting South Africa’s economic growth

8 Our brands

10 Trading footprint and franchise network

12 Performance overview

14 Chairman’s statement

18 Group Chief Executive’s report

24 Value Added Statement

25 Performance at a glance

26 Six-year review

28 Strategic imperatives, Material issues and Sustainability

30 Strategic imperatives and Material issues

32 Our key relationships

34 Human Capital

36 Transformation

37 Corporate Citizenship

38 Safety, Health and the Environment

40 Governance and Remuneration

42 Board of Directors

44 Executive Leadership

46 Corporate Governance report

52 Remuneration report

53 Social and Ethics Committee’s report

55 Summarised consolidated financial statements and other information

56 Directors’ report

58 Audit and Risk Committee’s report

58 Company Secretary’s certificate

59 Approval of the summarised consolidated financial statements

60 Summarised consolidated financial statements

72 Shareholder spread

73 Shareholders’ diary

74 Notice to shareholders

79 Form of proxy

80 Notes to the form of proxy

IBC Administration

MaterialityOur Integrated Annual Report focuses on information that is material to our business. It provides a concise overview of our performance, prospects and ability to create value for our key stakeholders on a sustainable basis. The legitimate interests of all our key stakeholders were taken into account in determining information that is considered to be material for inclusion in this report.

AssuranceThe Board of Directors of the company (the Board), assisted by the Audit and Risk Committee, is responsible for ensuring the integrity of the Integrated Annual Report. Accordingly, the Group applies the combined assurance model by using a combination of external and internal audit assurance, as well as assurance obtained from executive management. The audit opinion expressed by the external auditors on the Group’s Annual Financial Statements is available online.

Forward-looking statements disclaimerThis report contains forward-looking statements which are based on assumptions and best estimates made by management with respect to the company’s performance in the future. Such statements are, by their nature, subject to risks and uncertainties which may result in the company’s actual performance in future being different from that expressed or implied in any forward-looking statements. These statements have not been audited by the company’s external auditors.

The company neither accepts any responsibility for any loss arising from the use of information contained in this report, nor undertakes to publicly update or revise any of its forward-looking statements.

Approval of the Integrated Annual ReportThe following reporting frameworks were applied and complied with in preparing this report:• The Companies Act of South Africa;• The Listings Requirements of the JSE

Limited (JSE Listings Requirements);• King III;• International Financial Reporting

Standards (IFRS), in particular IAS 34 Interim financial reporting; and

• International Integrated Reporting Council (IIRC) Integrated Reporting Framework.

The Board acknowledges its responsibility to ensure the integrity of this report, and has applied its collective mind in the preparation thereof. The Board believes that the report has, in all material respects, been presented in accordance with the IIRC Integrated Reporting Framework.

Santie BothaIndependent Chairman

Kevin HedderwickGroup Chief Executive

27 May 2016

Introduction and scope of the reportWe are pleased to present our 2016 Integrated Annual Report. The report covers the performance of Famous Brands Limited (Famous Brands or the company) and its subsidiaries (together referred to as the Group) as well as its associates for the year ended 29 February 2016.

Our Integrated Annual Report contains summarised consolidated financial statements for the year ended 29 February 2016. A full set of the Group’s audited 2016 Annual Financial Statements and the King Code of Corporate Governance for South Africa, 2009 (King III) checklist are available on the company’s website at www.famousbrands.co.za. Feedback on our Integrated Annual Report can be emailed to us on [email protected].

About our Integrated Annual Report

Santie Botha

integrated annual report 2016 - famous brands · • engage the competition by strengthening our...

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