"There are two segments to the business, franchising (which is the face of the business and the part most people are familiar with) and their supply chain segment. In terms of revenue the supply chain generates R2.5 billion of the groups R3.3 billion revenue so it is a significant segment. On the operating profits side, the supply chain is less dominant but still significant with R261 million of the R672 million groups operating profits."
To market, to market to buy a penny bun. The market for that 'penny bun' may be closed in many parts of the world today though. The US has Memorial Day, which is a day to honour/ remember those who died serving in the US armed forces. The holiday is held on the last Monday of May (I like the idea of having public holidays on Mondays or Fridays; makes for a nice long weekend and is less disruptive of the work week?) and started way back in 1868, after the American Civil war. In parts of Europe it is Whit Monday, which happens 50 days after Easter and is the day after Pentecost (the day when the Holy Spirit came to Jesus's disciples). Then parts of East Asia, they are celebrating Buddha's Birthday, which is calculated by the moon and Chinese calendar, so this year it happens to fall on today. I wonder how many times these three holidays have coincided?
Unsurprising yesterday the Greeks came out and officially said that they won't be able to meet the IMF payment due on the 5th June. You would have to say that a deal will be made in the next 2 weeks because it is neither parties interest for Greece to default.
Sad news emerged yesterday evening that John Nash, 'A Beautiful Mind' Laureate, Dies in Crash. It seams that the taxi they were in lost control and crashed. His contribution to economics and mathematics is Game Theory', which tries to show how people compete or cooperate in order to get the best results for themselves. One of the most common terms from Game Theory is the 'Prisoners Dilemma', here is a short Youtube clip - The Prisoner's Dilemma Explained.
Company corner
One of our core holdings and one of my favourite companies (because their products taste so good) Famous Brands released their full year results this morning - Summarised Results For The Year Ended 28 February 2015. They had a solid year with revenue up 16% to R 3.3 billion (not huge in the grand scheme of things), HEPS up 15%, the dividend is up 18% and they added 258 new restaurants bringing the total to 2545.
On the South African front which accounts for 95% of revenues and 93.5% of the operating profit; they grew revenue by 14% and operating profits by 12%, the only negative was their operating margin which dropped from 60.4% to 59.4% (I would hardly call an operating margin of 59.4% a negative though!). The reason for the slight drop comes from the Steers and Wimpy brands who had "slightly softer performances". In the UK market their revenue dropped by 3% in sterling but thanks to the weaker Rand, revenue is up 11% to R102 million. Moving to India, they decided to close their two Debonairs Pizza restaurants, in Kevin Hedderwick's words, "they didn't want to throw good money after bad".
The big growth market going forward is their Rest of Africa operations, which accounts for 9% of the groups sales. Revenues were up 15% with the addition of 41 new restaurants and a further 35 planned for the coming year (with the first restaurant being planned for Ghana).
There are two segments to the business, franchising (which is the face of the business and the part most people are familiar with) and their supply chain segment. In terms of revenue the supply chain generates R2.5 billion of the groups R3.3 billion revenue so it is a significant segment. On the operating profits side, the supply chain is less dominant but still significant with R261 million of the R672 million groups operating profits.
The big thing to remember is that the company is currently unleveraged and is sitting on R126 million in cash. This gives them the war chest for further expansion plans which will be into the "table service evening dining sector" and what they call "leisure and consumer product businesses". It is not very clear what exactly the leisure and consumer product business will entail and what products they are aiming at but it has been something they have been talking about for the last year and CEO, Kevin Hedderwick says has been keeping him very busy, so I expect a big announcement in this regard in the near future. I think this is a great company, in a growing sector and have the management team to do really well over the long term. Still a buy.
MTN Nigeria have warned that due to fuel shortages in Nigeria, the network will be "Seriously degraded and customers will feel the impact". MTN run most of their base stations on diesel. Why would Nigeria, who is oil rich run out of fuel? The government has put an artificially low cap on the price of fuel, the result is that it is not profitable to import fuel. Nigeria is shutting down for business thanks to one of its worst fuel shortages
Things that we are reading
Here is one for the history books - Ireland has become the first country to approve same-sex marriage by a popular vote
This is almost in the the realm of science fiction, after being shut for maintenance the Large Hadron Collider (LHC) is up and running again - LHC smashes energy record with test collisions.
The emotive and very popular topic at the moment of income inequality, here is Buffett's view on it - Warren Buffett: Stop Blaming The Rich For Income Inequality. If You Really Want To Help, Do This. I think that a key line in what Buffett had to say was this, "Nor are the rich undeserving. Most of them have contributed brilliant innovations or managerial expertise to America's well-being. We all live far better because of Henry Ford, Steve Jobs, Sam Walton and the like.".
As far as technology goes curing blindness will be huge for millions of people - Bionic Eyes Give Second Sight to the Blind
Given the Monaco GP over the weekend, I found this one interesting. Pity all the big data didn't help in preventing the team "getting the maths wrong" and costing Hamilton the race - How Big Data Helps Lewis Hamilton Win Races
Home again, home again, jiggety-jig. The market is very quiet today given that it is a UK banking holiday, our markets get direction from the FTSE. Having a look at the markets this morning they are down 0.2%, MTN are down 1.5% on I suspect the news out of Nigeria. A stock that has had a tough time of late, Mediclinic is up 2.8%.
Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.
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