Sign in
Research link-chevron Created with Sketch.
link-chevron Created with Sketch. Products and Services link-chevron Created with Sketch.
link-chevron Created with Sketch. Products and Services
Economics link-chevron Created with Sketch.
FX Report
The Loop
Inside China
Insights & Strategy
Equities link-chevron Created with Sketch.
Equities Enablement Lab
Analysts
Analysts
Help and Support
Help and Support
Corporate and Investment Bank
Standard Bank Group
Famous Brands 22 October 2026

Better value, weaker conversion

Tinashe Hofisi

Famous Brands' 1H27 result highlights elevated consumer pressure, with modest revenue growth and earnings pressure further impacted by heightened fuel costs (+29%). We believe FBR's widening pricing advantage relative to peers helped cushion demand, albeit our estimates suggest Leading Brands implied volume growth returned to negative territory after turning positive in 2H26. With selling price inflation expected to moderate further, we expect volumes to improve in 2H27E, supported by seasonally stronger festive period consumption. Elevated fuel costs remain a risk through potential second-round effects on food and distribution costs. FBR's valuation remains undemanding at c.7.5x 12m Fwd P/E, near historical lows (7.3x), leaving scope for re-rating should volumes and margins recover.

1H27 results highlights:

  • Group revenue increased 2.3% y/y to R4.34bn, while operating profit declined 4.7% y/y to R375m, compressing margin by c.70bps to 8.6%. HEPS declined 3.2% to 228c (SBGSe: 245c), while DPS increased 4.9% to 170c.
  • Leading Brands SA revenue was up 2.5%, system-wide sales up 2.7% and LFL sales up 0.8%. Signature Brands remained under pressure, with revenue down 8.4% and operating losses widening. Supply Chain was the key offset, with revenue up 5.5% and operating profit up 13%, partly supported by new distribution baskets including Coca-Cola and frozen retail products. 
 

We expect Leading Brands and Supply Chain to remain the key FY27E earnings anchors, but softer volumes and elevated fuel costs continue to limit margin expansion. Leading Brands pricing remains well below QSR and CDR sector inflation, supporting value perception. We have trimmed FY27E Leading Brands and Manufacturing margins to c.52% and 10.8%, respectively, while raising Logistics to c.2.3%. We remain cautious on non-SA operations, where losses are expected to persist through FY27E despite ongoing restructuring and a shift toward franchise and licence models.

Our earnings downgrade reflects softer revenue growth, lower margin assumptions and continued non-SA losses. We now forecast FY27E d.HEPS of 616c (+5.8% y/y; previously 640c) and FY28E d.HEPS of 684c (+11%; previously 730c). We expect better 2H27 volumes to provide earnings support, with September trading reflecting more encouraging trends relative to 1H27. However, pressure on consumer disposable income could limit performance.

Capital allocation is becoming increasingly supportive. Capex is expected to normalise following completion of the Midrand investment programme, with c.2% of revenue noted at the upper end of normalised capex intensity. The planned reduction in the Botswana Retail Group stake from 51% to 30% could further lower capital intensity and offshore operating exposure. We see increasing flexibility for opportunistic share buybacks and continued dividend growth.

We revise our FVVR to R54-R62 (previously R59-R64), reflecting lower earnings and margin assumptions. Key risks include a weaker volume recovery, persistent fuel-related cost inflation, stronger competition and a slower turnaround in non-SA operations.


Read PDF