S.Africa's Famous Brands to enter Ghana, earnings up

South African fast-food restaurant group Famous Brands plans to enter Ghana this year as part of its drive to grow beyond a domestic market held back by high unemployment and sharply rising electricity costs.

However the company, which runs Steers, Debonairs Pizza and Wimpy restaurants, said on Monday it was pulling out of India less than two years after re-entering the country, and would mostly focus its future expansion in Africa on existing markets.

"The only box we haven't ticked is Ghana," Chief Executive Kevin Hedderwick said of Famous Brands' African expansion, as the firm reported a 15 percent rise in underlying annual profit.

The company currently has operations in South Africa, Britain, the Middle East and 16 countries in the rest of Africa.

It opened more than 40 restaurants in the rest of Africa in the year ended Feb. 28, and plans to open another 35 in those markets this financial year.

Despite the pressures on South African consumers, Famous Brands still sees plenty of opportunities to expand at home. It opened 213 restaurants in South Africa last financial year, and aims to add a further 202 in the current one.

Hedderwick said the company would be selective about foreign expansion, and that it had ended the master licence agreement with its partners in India, as well as closed the two Debonairs Pizza restaurants in the nation's largest city, Mumbai.

Weaker economic growth in India and tough competition made it difficult to turn a profit there, he said.

It was Famous Brands' second foray into India, having opened and closed a pizza restaurant near Delhi in 2003.

"Famous Brands will only go into markets where the country can at least support a few stores," said Jean Pierre Verster, an analyst at 36ONE Asset Management who supported its foreign expansion strategy, but added it was a long-term project.

The company said it made headline earnings per share (EPS) of 467 cents in the year ended Feb. 28, and raised its dividend by 18 percent to 355 cents.

Headline EPS, stripping out certain one-off items, is the main profit gauge in South Africa.

Famous Brands shares were down 1.4 percent by 1430 GMT. (Editing by Mark Potter)

Source: Reuters.com

By: TJ Strydom

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