Annual Report 2009 - ShareData Online - South African ... · 02 our Vision, mission and Brands ......

Annual Report 2009

contEntS

01 financial Highlights

02 our Vision, mission and Brands

03 our milestones

04 our franchise network

04 our trading footprint

05 our Business model

06 Board of Directors

08 Key management

10 chairman’s Statement

14 chief Executive officer’s report

20 Value added Statement

21 Six-year review

22 corporate Governance report

28 annual financial Statements

78 Shareholder analysis and Shareholders’ Diary

79 notice of annual General meeting

83 form of Proxy

85 administration

financiaL HiGHLiGHtS

famoUS BranDS LimitED annual report 2009 01

Revenue

up 30% to R1 549 million

(2008: r1 190 million)

Headline earnings per share

up 11% to 159 cents

(2008: 144 cents)

Cash generated by operations

up 39% to R277 million

(2008: r199 million)

Dividends per share

up 15% to 76 cents

(2008: 66 cents)

Return on equity for 2009

is 33%

Operating profit

up 20% to R262 million

(2008: r217 million)

0

10

20

30

40

50

60

70

80

090807060504

11

18

30

48

66

76

Dividends per share (cents)

0

5

10

15

20

25

30

35

40

090807060504

24

34 35 36

38

33

Return on equity (%)

0

250

500

750

1 000

1 250

1 500

1 750

090807060504

363 46

5

669

872

1 19

0

1 54

9

Revenue (r million)

0

50

100

150

200

250

300

090807060504

41

93

109

138

217

262

Operating profit (r million)

0

50

100

150

200

090807060504

38

61

84

114

144 15

9

Headline earnings per share (cents)

0

50

100

150

200

250

300

090807060504

36

99 107

172 19

9

277

Cash generated by operations (r million)

02 famoUS BranDS LimitED annual report 2009

oUr ViSion, miSSion anD BranDS

oUr ViSion To, by any measure, be the most admired food service company by 2010.

oUr miSSion Our business is focused on growth and development of best-in-class food service franchise brands, supported by a unique backward integration model which maximises stakeholder value creation.

tHinGS wE carE aBoUtPeopleBrandsCustomersQualityInnovationWinning


oUr miLEStonES

2008

2007

2006

2005

2004

n Acquisition of a 51% interest in the tashas brand, a successful, upmarket casual-

dining café concept

n Cape Franchising master licence and business acquired

n Famous Brands acquires 75% interest in Wimpy UK

n Acquisition of Bimbo’s franchise agreements at selected Engen garage sites and

successful conversion to Steers

n Famous Brands acquires Trufruit (Proprietary) Limited, a manufacturer and distributor

of fruit juices

n Famous Brands acquires Baltimore Foods (Proprietary) Limited, a manufacturer and

distributor of ice-cream products

n The holding company changes its name from Steers Holdings Limited to Famous

Brands Limited, to reflect more accurately the diversity of the Group’s brand

portfolio

2003 n Famous Brands acquires Pleasure Foods (Proprietary) Limited, comprising the

Wimpy, Whistle Stop and Market Café brands

n Famous Brands acquires Creative Coffee Franchise Systems (Proprietary) Limited,

which is licensed to develop franchised coffee outlets under the House of Coffees,

Brazilian and ESP Illy Boutique branded trademarks

n Eastern Cape master licence agreement acquired


oUr francHiSE nEtworK

oUr traDinG footPrint

national international total

Steers 476 37 513

Wimpy Sa 471 19 490

Wimpy uK 183 183

Debonairs pizza 234 32 266

Fishaways 93 1 94

House of Coffees 32 32

Brazilian Café 22 22

tashas 2 2

total 1 330 272 1 602

Total number of restaurants at 28 February 2009

South africa (1 330)

angola (2)

Botswana (12)

ivory coast (4)

Kenya (12)

malawi (1)

mauritius (6)

mozambique (2)namibia (16)

nigeria (1)

Senegal (2)

UK (183)

Sudan (3)

Swaziland (4)

tanzania (4)

UaE (2)

Uganda (2)

Zimbabwe (8)

Zambia (8)


oUr BUSinESS moDEL

Franchising divisionInternational

Logistics division

Franchising divisionlocal

this division houses all of the Group’s offshore intellectual property and brands which, besides development of the existing Wimpy brand will, over time be used as a beachhead for the launch of certain of the Group’s other brands in the uK. the business is located in Marlow, Maidenhead, outside london.

Development division

this division houses all of the Group’s South african intellectual property and brands. Whilst contained within a single operating business unit, the model of “brand stewardship” or competition between brands is firmly entrenched through stand-alone strategic structures.

this division represents a key part of the Group’s backward integration model, tasked with the manufacture of a range of licensed products and brands for use by the franchise network as well as the greater retail, wholesale, food services and hospitality industry.

Manufacturing division

this division exists in order to provide a full turnkey service to all of the brands and their respective franchise partners. It provides a full bouquet of services which covers the drawing of plans, appointing of contractors and project management of all new restaurant openings, revamps and relocations.

Food Services division

this division represents the Group’s route-to-market, delivering to the franchise network, a complete basket of products required to deliver against brand specific menus. this function represents a key strategic and competitive advantage to the Group in terms of its overall franchise system.

Houses all of the Group’s “back of house” functions which provide a service to the various operating business units.

Corporate

this division is tasked with the sourcing of quality food service and catering business where there exists spare manufacturing capacity to do so. It also represents the business unit responsible for forward integration of the Group’s brands into retail and wholesale.

Franchising division

International


Manufacturing division

Logistics division

Food Services division

CorporateFranchising

division

local

n wimpyn Steers

n Steersn wimpyn Debonairs Pizzan fishawaysn House of

coffeesn Brazilian cafén tashas

n Planningn Project

management

n Sauces and spices

n meat processingn Bakeryn ice-creamn fruit juice

n warehousingn Distribution

n Steersn wimpyn Baltimoren trufruitn aqua monten flav‘o’full

n Quality assurance

n Planning and forecasting

n Procurementn Hrn financen itn Legal

famous Brands Limited is africa’s leading Quick Service and casual Dining restaurant franchisor which also has representation in the United Kingdom.

the global footprint of the Group now stands at 1 602 franchised restaurants spread across South africa, 17 other african countries and the United Kingdom.

its brand portfolio includes Steers, wimpy, Debonairs Pizza, fishaways, House of coffees, Brazilian café and tashas.

the Group manufactures and supplies its franchisees, the retail trade and broader hospitality industry with a wide range of meat, sauce, bakery, ice-cream, fruit juice and mineral water products.


BoarD of DirEctorS

peter, a founding member of

the company, has made an

important contribution to the

Famous Brands Group since

1974. He has served on various

portfolios over the years,

assuming the position of

Chairman of the listed entity

since listing on 9 november

1994. as from 1 March 2007,

peter assumed the position of

non-executive Chairman.

after 28 years of 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 a non-

executive Deputy Chairman on

1 March 2001.

perikles 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. perikles

resigned from the board during

the course of 1999 to

concentrate on his private

business. on 1 March 2001 he

was reappointed to the board

as a non-executive Director.

theofanis has made an

important contribution to the

Group since 1974 through

the fulfilment of various

responsibilities. He assumed

the position of Chief executive

officer on 1 March 2001, after

serving as the Group Managing

Director for three years.

theofanis oversees the Famous

Brands’ executive committee,

a team established to ensure

the Group meets its strategic

goals and objectives.

1. PanaGiotiS HaLamanDariS (62)

non-executive chairman

member of the audit committee

2.

JoHn LEE HaLamanDrES (55)

non-executive Deputy chairman

member of the audit committee and remuneration committee

3.

PEriKLES HaLamanDariS (54)

non-executive Director

member of the remuneration committee

4.

tHEofaniS HaLamanDariS (58)

chief Executive officer

member of the remuneration committee

5 1

2

3

84

76

The board is governed by a board charter


Kevin joined the Group in

February 2000 as Managing

Director of the Steers Brand.

Kevin has an excellent business

record, combining food,

beverage and franchising. He

has held senior executive

positions in a number of blue-

chip companies including

SaB, Distell and Foodcorp.

prior to joining the Group,

Kevin was a partner and

Managing Director of Keg

Franchising. In March 2001

Kevin was appointed Chief

operating officer and is

accountable for the overall

strategic direction of the

Group.

BAdmin, MBA

Bheki is currently the executive

Chairman of Smartvest,

executive Chairman of

Capafrica, Chairman of Brait

South africa, Chairman of

pretoria portland Cement and

a Deputy Chairman of tiger

Brands limited. as a former

Chief executive officer of

Business unity South africa,

Bheki brings to the board a

wealth of expertise in Bee,

employment equity, change

management and corporate

governance.

CA(SA)

Stan is a Chartered accountant

and completed his articles with

Deloitte & touche. He was a

financial executive and director

within the edcon Group with a

career spanning 20 years from

1981 to 2001. thereafter he

was Finance Director, Card

Division at Standard Bank until

2007. He has consulted to

various groups including

nando’s and Master Card

africa Inc.

BCom, LLB, LLM, H Dip Tax

Law, H Dip Company Law

Hymie has been a non-

executive Director of Famous

Brands limited since its listing

on the JSe in 1994. In addition

he is a senior partner of H r

levin attorneys and his

experience spans more than

30 years. His areas of expertise

include corporate law, mergers,

local and international taxation,

acquisitions and listings. He is

also non-executive director of

several listed and non-listed

companies and is the chairman

of certain of them.

5.

KEVin aLEXanDEr HEDDErwicK (56)

chief operating officer

6.

BHEKi SiBiYa (52)


7.

StanLEY aLDriDGE (56)

Group financial Director and company Secretary

8.

HYmiE rEUVin LEVin (64)


chairman of the audit committee

chairman of the remuneration committee


KEY manaGEmEnt

terry started his career in food franchising in

1991 working for the Steers and Debonairs

pizza brands as a franchise manager within

the KwaZulu-natal region and four years

ago was appointed operations executive

for the Debonairs pizza brand. terry was

recently appointed Managing executive of

the Group’s Coffee/Café brands portfolio

which includes House of Coffees, Brazilian

Café and tashas.

arlene has extensive experience in the field

of Human resources (Hr), having started

her career in the brewing industry whilst

completing a postgraduate Diploma in

Management at Wits Business School. She

later joined the soft drink industry and

thereafter spent time in the multi-national

tobacco environment, before joining

Famous Brands. arlene currently manages

all Hr related issues for the Group.

tErrY BoarDman (37)

managing Executive

Coffee/Café Brands

arLEnE BotHa (46)

Group Human resources Executive

Derrian’s passion for food franchising was

sparked while at hotel school. Since

graduating 12 years ago, he spent time in

the restaurant and catering industry before

joining Famous Brands in early 2000. In

2005 he was appointed as General Manager

of the Group’s Coffee brands portfolio

before moving on to the Wimpy brand as

operations executive, a position he held

for three years. He was appointed

Managing executive at Debonairs pizza in

november 2008.

a few years after completing his university

degrees, Graeme opened his first Debonairs

pizza franchise in 1995, and subsequently

owned a number of Debonairs pizza

restaurants. In 2000 he joined Famous

Brands as the Debonairs pizza national

operations Manager. Since then he has

held a number of positions in Famous

Brands. For the past two years he has been

the Steers Managing executive.

DErrian naDaULD (35)

managing Executive

Debonairs pizza

GraEmE morriSon (39)

managing Executive

Steers


Val completed a two-year diploma through

prISa (“public relations Institute of South

africa”) before starting her career with

fashion retailers Greatermans/Garlicks. She

moved onto edgars where she was

appointed Marketing Director. a move into

the food industry saw her appointed

Marketing Director Debonairs pizza and

then later Senior Vice president for rich

product Corporation Sa. after a brief spell

as Managing Director tequila/tBWa she

returned to Famous Brands in 2007 as

Managing executive Wimpy Sa.

Steven completed his Bachelor of

architecture at the university of the

Witwatersrand and thereafter completed

his professional registration as an architect.

He ran his own architectural practice before

joining a listed restaurant franchisor as a

design manager. Steven joined Famous

Brands in 2002 and has 12 years’

experience in the restaurant industry. He

heads up the Development division which is

responsible for the development of all new

restaurants as well as the revamping and

relocating of existing restaurants.

StEVEn DiKE (39)

managing Executive


VaLEntinE BoUrDoS (47)

managing Executive

Wimpy Sa

Darren started his career at pleasure Foods

limited whilst studying for and completing

a BCom degree. He started out in the

finance department, then moved into

operations and later procurement. 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. Darren

is currently the Managing Director of

Wimpy uK.

Henriette started her career managing

various Quick Service restaurant outlets

and joined Famous Brands in 1996 as a

franchise manager. In her 13 years with

the company she has held a number of

operational and management positions

and has been at the helm of the

Fishaways brand for the past four years.

DarrEn HELE (37)

managing Director

Wimpy uK

HEnriEttE SEnEKaL (36)

managing Executive

Fishaways

tony started his career as an operations

trainee with South african Breweries Beer

Division, and spent the next 23 years with

SaB in various sales and distribution

roles within South africa, as well as in

Botswana and Zambia. He joined Famous

Brands in 2005 and assumed responsibility

for the newly acquired Baltimore Ice-cream

and trufruit businesses. In 2005 tony was

appointed head of the Group’s logistics

division. In March 2009 responsibility for

the Manufacturing division was added to

his portfolio and he is now responsible for

the Group’s entire inward and outbound

Supply Chain.

pedja started his career in a family trading

business with his father whilst studying

engineering at Sarajevo university. upon

arrival in South africa, he joined Steers

Holdings in 1994 and has been in the

Group ever since holding down a number of

executive positions.

PrEDraG (PEDJa) tUranJanin (41)

Group Procurement andQuality assurance Executive

tonY StEPHEnS (47)

managing Executive

Supply Chain


cHairman’S StatEmEnt

PanagiOTiS HaLaManDaRiS

non-executive chairman

n Record revenue of R1.5 billion, up 30% from 2008

n Cash generated by operations up 39% to R277 million

n Total dividends to shareholders of 76 cents per share, an increase of 15%

n Ranked 10th amongst Business Times’ Top 100 companies.

In the year under review, the Group posted revenue

growth of 30% to r1.5 billion (2008: r1.2 billion), and

operating profit of r262 million (2008: r217 million),

20% up on the prior period. this resulted in operating

profit margins of 16.9% compared to 18.3% in 2008. the

decline in operating margin is due to both the deliberate

margin absorption strategy and a 41% increase in revenue

in the low margin logistics division where activities were

expanded substantially to take on the Wimpy business.

Headline earnings per share rose 11% and earnings per

share by 16%. total dividends of 76 cents per share were

declared for the year ended 28 February 2009.

this satisfactory set of results is again testament to the

strength of the Group’s brands, which enjoy leadership

positions in most categories in which we compete,

demonstrating that classical brands probably fit better

with the current mood of the consumer.

the local Franchising division produced like-on-like sales

growth of 8.7%, with system-wide sales (which includes

new restaurant openings) up 13.7%. We opened 120 new

restaurants over the year, taking our total number of

restaurants to 1 602. the strength of our individual brands

was confirmed with Steers opening its 500th restaurant,

Debonairs pizza its 250th restaurant and Fishaways

becoming the largest Seafood Quick Service restaurant

brand in South africa with more than 90 restaurants

operating nationally. In July 2008 the Group acquired

a 51% controlling interest in tashas, an upmarket

tHE YEar in oVErViEw

In the last year Famous Brands experienced one of its

toughest trading years since inception. our operations

and our customers were severely affected by multiple

economic factors, exacerbated by the speed and extent

of the global economic meltdown. Some of the challenges

faced in the domestic market included lower disposable

income from high interest rates, spiralling food inflation

and hikes in the price of petrol and diesel, as well as raw

materials. Internationally, our business in the united

Kingdom was heavily impacted by the deep recession

that has taken hold globally.

It is gratifying that despite these unprecedented challenges,

we continue to enjoy a market leadership position within

the quick service and casual dining restaurant industry

reflected also in a proud line-up of corporate financial

awards and achievements. our most noteworthy corporate

achievements include being ranked tenth in the respected

2008 Business times’ top 100 Survey of leading South

african companies, which recognised our compound

annual growth in shareholders’ wealth over the last five

years of 62.6%. We also attained sixth place in the 2008

Financial Mail Companies’ Survey which measured

financial performance over a five-year period. the most

recent achievement is fourth position in the top 200

FinWeek Survey of March 2009, measured by return

on equity.

cHairman’S StatEmEnt ContInueD


an over time objective to earn a weighted average cost of

capital of 10%.

our Manufacturing and logistics divisions remain a key

component of the Group’s unique backward integration

franchise system enabling pricing flexibility at point-of-sale

and franchisee convenience. In addition to these strategic

advantages, the return on net assets from the combined

activities is satisfactory.

the Manufacturing division was impacted by our deliberate

margin absorption strategy in order to protect retail

turnovers and franchisee profitability. a number of

structural and organisational changes have been

implemented within this division, which has not yet

delivered to its full potential.

the logistics division has been further improved and

consolidated. Information technology systems have been

introduced to optimise routing and scheduling of vehicles,

reduce kilometres travelled and improve customer service.

a Warehouse Management System is being piloted in

Midrand in april 2009, and is expected to improve

efficiencies, capacity utilisation and reduce inventories.

PoSt-BaLancE SHEEt EVEnt

the negotiations referred to above with our minority

partner, Bank of Scotland, are progressing and, subject to

formalities, we expect to conclude an agreement which will

result in their equity stake reducing to 5% and Famous

Brands limited acquiring their loan claims of r106 million

for an all-in consideration of r71 million. additional detail

on the payment structure is disclosed in the report of

the Directors.

casual-dining café concept. the decision to acquire the

Cape Franchising business last year has proved successful

and this business has been fully integrated into the Group

with minimum disruption. Improved operational efficiencies

and greater strategic flexibility have been attained but, as

anticipated, after financing there has not been a major

impact on bottom line results.

against the backdrop of a deepening economic recession,

the international Franchising division has seen declining

turnovers, shrinking operating margins and delays in its

restaurant revamp programme. reflecting the extent of

the economic contraction, in the last quarter of 2008, no

less than 141 restaurants across the uK closed their

doors accounting for 45% of industry insolvencies, a

rise of 32% on the year before. While Wimpy uK remains

sound at the operating profit level, servicing its debt

repayments is proving challenging and negotiations with

our 25% investment banking partner, who is also our loan

provider, have commenced and are expected to reach

finality on or about 31 May 2009. the economic climate

has led to a sharp reversal in profit including non-recurring

costs in excess of r5 million. these relate to rightsizing

the business and a fair value adjustment in respect of a

fixed interest rate hedge. the board has given careful

consideration to the carrying value of our uK investment.

the original objectives when investing were to develop the

Wimpy brand in the uK and, in due course, to use the

uK infrastructure to launch certain of the Group’s other

brands in the region. these objectives remain intact but

the original time-frame will extend. accordingly our return

expectations have been trimmed. the board has

concluded that there has been no impairment in line with


although our brands and business remain well positioned

for further growth, the new financial year will serve as a

period of consolidation, in which we will focus on

extracting maximum value from our existing businesses

and making productivity and efficiency gains across

the entire Group.

aPPrEciation

the Group’s resilient performance has been underpinned

by a strong management team, our staff, a solid base of

exceptional franchise partners and long serving suppliers.

Your hard work, dedication and contribution in the face of

difficulty is highly appreciated. to my colleagues on the

board, thank you for your invaluable guidance during

these challenging times.

to our customers, we extend our appreciation for your

loyal support. We will continue to strive to ensure that our

brands remain your brands of choice.

PanagiOTiS HaLaManDaRiSnon-executive chairman

DiViDEnDS

the interim dividend of 36 cents per share and final

dividend of 40 cents per share equates to total dividends

of 76 cents per share declared for the year ended

28 February 2009. this amounts to an 15% increase on

the 2008 total distribution of 66 cents per share.

BoarD cHanGES

on 12 September 2008, thomas pritchard resigned as

Financial Director and Company Secretary and, with

effect from 1 november 2008, Stanley aldridge was

appointed Financial Director and Company Secretary of

Famous Brands limited. Stanley brings with him more

than 25 years of financial management experience in

the retail and banking sectors and has already made

a valuable contribution to our board.

ProSPEctS

We do not expect economic conditions to improve in the

year ahead. all indications are that consumer spending

will remain under pressure as a result of local and global

economic conditions. In South africa, some respite will

come from further interest rate cuts, although households

are likely to use any additional discretionary income to pay

down debt.


(2008: r1.2 billion) and lifted operating profit by 20% to

r262 million (2008: r217 million). the operating margin

decreased to 16.9% compared to 18.3% in 2008.

Headline earnings per share rose by 11% to 159 cents

(2008: 144 cents).

Capital expenditure for the year amounted to r33 million,

mainly in expanding the delivery fleet and modernising

plant in the manufacturing facilities. a further r16.3 million

in capital expenditure has been approved for the year

ahead with r4.5 million, or 27.5% thereof, being

provided for the first phase of an enterprise-

wide software program to be implemented in our

manufacturing facilities.

across the Group 120 new restaurants were opened,

despite the economic slowdown and a further 101

restaurants were revamped. System-wide sales growth

across our total brand portfolio was 13.7%, and

like-on-like restaurant growth was 8.7%.

francHiSinG DiViSion – LocaL

this division performed well and contributed significantly

to the Group’s overall performance. revenue increased

15% to r299 million (2008: r260 million) and operating

profit increased 31% to r186 million from r142 million.

the division’s operating profit margin was 62.0%

compared to 54.6% in the prior year.

rEViEw of PErformancE

We are pleased to record a satisfactory set of results

despite 2009 being possibly the most challenging year in

the history of the Group. During the year signs of a

positive shift in the local economy were outweighed as the

global economy took a turn for the worse, putting

consumers and franchise partners under increasing strain.

these macroeconomic factors served to constrain

consumer spending and frequency of restaurant usage in

the process affecting turnovers and margins.

to mitigate the effects of the unyielding environment, and

in line with our longstanding strategy, the Group continued

to deliberately absorb certain input cost increases to

contain retail selling prices and protect the profitability of

our franchisees. the impact of the depressed economy

was felt most acutely by the emerged market, which holds

much promise for our business. In the face of these tough

economic trading conditions the Group continued to

revamp its restaurant brands, pursued innovative menu

offerings and maintained its value for money positioning.

this holistic strategy to bolster our franchisees against the

downturn has been well received.

our stable of “best-in-class” brands, which hold leading

positions in those categories in which we compete,

proved resilient and satisfactory revenue growth was

achieved across all of our operating business units. the

Group grew revenue by 30% to r1.5 billion in the year

cHiEf EXEcUtiVE officEr’S rEPort

THEOFaniS HaLaManDaRiS

chief Executive officer

n System-wide sales, a key driver of profitability, up 13.7% in line with budget

n Deliberate margin absorption strategy, a key driver of revenue growth

n Remains Africa’s leading quick service and casual dining restaurant group

n Return on equity comfortably above 30% for the past five years

cHiEf EXEcUtiVE officEr’S rEPort ContInueD


Debonairs pizza reached a number of milestones during

the year and continues to benefit from the growth in

consumption per capita for pizza as a category across

both South africa and the rest of africa. Debonairs pizza

opened its 250th restaurant in the year. a major growth

driver in the year has been our entry into the emerged

market where we have met with phenomenal success. In

this regard we launched the Debonairs pizza express

concept, which has proven to be hugely successful in

areas with high foot traffic. this concept is unique in that

it requires a site as small as 50 m2, has reduced capital

investment requirements and a menu offering that caters

specifically to the mass market consumer in search of

speed and convenience. Four Debonairs pizza express

outlets were opened during the year and are trading

successfully. During the year, Debonairs pizza received

the following accolades: Best pizza, leisure options; Best

pizza, Star readers Choice awards and 2nd “Coolest

place to eat out”, Generation next Sunday times Survey

2008. the brand’s consistent and focused advertising

strategy has resulted in significant improvements in

spontaneous awareness, trial, regular usage, conversion,

share of visits and growth in market share.

as with many of our brands, this year involved the

commissioning of a new restaurant design for Fishaways

and a national roll-out is planned for the year ahead. In the

year under review we overtook our direct Quick Service

restaurant (“QSr”) seafood competitor to become the

leading and largest QSr seafood brand in South africa

with over 90 restaurants and in the process turning in a

positive 27.5% system-wide sales growth.

We were pleased to conclude a strategic alliance with the

Shell petroleum Company to extend our Brazilian Café

new franchisee enquiries for the financial year reached

12 714 compared to 15 448 for the previous year, a

contraction of 14.4%, a function of the retraction of the

economy and the reluctance of banks to extend loan

finance.

In the 1960s the Steers steakhouse concept was

introduced to South africa and we were proud to record

the opening of the 500th Steers restaurant in July 2008, a

special honour for the Group. We unveiled our new look

drive-through concept in november 2008 which has

proven to be a great success. the Steers franchise is no

stranger to accolades and this year was no exception – it

took the award for Best Burger, for the 13th consecutive

year, and for Best Chips, for the 11th consecutive year, as

voted for by leisure options.

as a strong South african icon, our Wimpy brand

continues to stay at the forefront of innovation, value for

money, quality and convenience. Wimpy Sa launched two

new and exciting restaurant formats during the year: the

Seatless Wimpy, occupying around 65 m2 of retail space,

ideal for food courts and high-traffic sites; and the Coffee

Moments Kiosk, occupying a mere 1.5 m2 of retail space,

used with great success at fuel station sites. to retain

customer interest, relevance and appeal, Wimpy launched

a new generation restaurant design in october 2008 and

to date, 23 Wimpy restaurants have been revamped and

are trading well. true to form, Wimpy received a number

of accolades during the year, including: Best Breakfast in

2008, leisure options; 2nd “Coolest place to eat out”,

Generation next Sunday times Survey 2008; and winner

in the Best Dessert Menu and Best Breakfast categories,

Your Choice Star Survey 2008.


home and led the uK economy into recession. a study by

consultancy pricewaterhouseCoopers stated:

“UK restaurants have been hit harder by the recession

than the other parts of the hospitality sector, accounting

for 45% of the industry insolvencies. In the 2008 quarter

before Christmas, 141 restaurants went to the wall. In

2008, a total of 363 restaurants suffered insolvency, a

32% rise on the year before.”

the unplanned expenses accrued in the year, which were

required to further rightsize the business, will start to show

benefits in the next financial year.

We did, however, conclude seven revamps, with all trading

to expectation. the brand’s uK blueprint has now been

established and a base for future growth has been laid.

In line with our initial strategy to use the Wimpy uK

acquisition as a beachhead for the roll-out of other Group

brands, plans are now well advanced to open the first

Steers restaurant in earlsfield outside of london.

manUfactUrinG DiViSion

this division reported revenue of r568 million

(2008: r506 million) and operating profit of r42 million

(2008: r48 million), resulting in a margin of 7.3%

(2008: 9.5%). While there have been gradual

improvements in the Manufacturing business during the

year, its overall performance was adversely affected by

our strategy to deliberately absorb input cost increases.

a number of structural and organisational changes have

been brought about within this division and we are

confident that in the new financial year we will see this

business start to deliver on its potential.

business model to incorporate their existing bakery

offering. a total of six such sites were opened during the

year with a further 30 sites being planned for the year

ahead.

the year under review also heralded a new look for House of

Coffees, with the first such restaurant being opened in

potchefstroom. at the same time, a new smaller trading

format was launched, which lowers the capital investment

required by prospective franchise partners presenting new

opportunities for the brand particularly in suburban markets.

effective 1 July 2008, Famous Brands acquired a 51%

controlling stake in tashas, a successful upmarket casual-

dining café concept. the business consists of two

restaurants, one in Bedfordview and the other in Sandton.

Both operations have been converted into franchised

restaurants and a further three new restaurant openings

are planned for the year ahead.

francHiSinG DiViSion – intErnationaL

this year was characterised by the extraordinary economic

challenges faced in the united Kingdom (“uK”). the division

recorded revenue, in Sterling terms, down 4.1% but in

rand terms, up 2.5% to r180 million (2008: r175 million).

operating profit fell 12.1% to r17 million from r20 million

and the operating profit margin was 9.6% compared to

11.2% in the prior year.

embarking on our second year of ownership of the Wimpy

uK business, we had planned to continue the revamp

programme initiated in the previous year, which is the

cornerstone of our strategy to turn around what has been

an underperforming business. our optimism was

unfortunately short-lived as the global credit crunch hit

cHiEf EXEcUtiVE officEr’S rEPort ContInueD


LoGiSticS DiViSion

this division embarked on an expansion drive and through

the skilful management of this programme grows in

stature within the Group. Volumes grew markedly and

revenue for the year was r977 million (2008: r692 million)

with operating profit at r23 million (2008: r15 million),

and a margin of 2.4% (2008: 2.1%).

this division continued to extract synergies and efficiencies,

with highlights in the year including:

n successful take-on of the Wimpy “dry” and “frozen”

basket of products within the KwaZulu-natal and

eastern Cape operations and the conversion of the fleet

at both sites to a multi-temperature operation;

n successful take-on of the Wimpy “dry” basket of

products within the Midrand, Western Cape and Free

State operations;

n conversion of the Free State distribution centre from

a small ice-cream facility into a full-service Famous

Brands facility; and

n commissioning of an additional 2 024 m2 of warehousing

at the Midrand hub.

together with improvements to land and buildings, we

introduced an integrated information technology system

in the form of Fleet logistics optimiser software which

makes routing and scheduling of vehicles more efficient. It

also reduces kilometres travelled and improves customer

service. a new Warehouse Management System is being

piloted at Midrand during april 2009, which is expected to

improve warehouse efficiencies, deliver 99% real-time

stock accuracy, reduce credit notes and inventories,

improve capacity utilisation and reduce the potential of

losses. once fully installed at Midrand the system will

be rolled out to all of our major logistics centres across

South africa.

fooD SErVicES DiViSion

this division made good progress during the year under

review and achieved the following:

n successful launch into the retail and wholesale trade

channels of our Wimpy tomato Sauce and Mustard

range;

n introduction of two new Steers sauce range variants,

purple peppa and prego;

n launch to the food service trade of a catering specific

flav‘o’full sauce range;

n launch, through our franchise network, of our aqua

Monte mineral water brand; and

n extension of the trufruit brand into all major cinema

outlets across the country.

corPoratE actionS

towards the end of 2008, the Group issued a cautionary

announcement in relation to a proposed transaction,

which was subsequently temporarily postponed until we

have greater clarity surrounding prospects for the domestic

and global economy.

the acquisition of the Cape Franchising business late last

year has been completed and effectively integrated into

the Group.

the acquisition of a controlling interest in tashas came

into effect in July 2008 and expansion of the concept will

be accelerated in the new year with the opening of a

further three restaurants.


HUman rESoUrcES

In the year the Group embarked on a process of

succession planning surrounding key senior executives.

our approach to securing the talent we need to realise our

strategic objectives is based on developing people from

within the Group to deepen our internal talent pool. to

inform our retention strategy, each year the Group

conducts an attitudinal survey which continues to be

successfully used as a barometer to measure morale.

the well-being of our staff is critical to the Group’s

ongoing success and we introduced an on-site clinic,

managed by occupational Care South africa (“oCSa”),

which operates out of our Midrand facility. this service

meets legislative requirements. Some 1 200 staff members

have attended the clinic in the past 12 months. an HIV/

aids programme was added to the oCSa service in

December 2008, providing voluntary counselling and

testing as well as antiretroviral and associated treatment.

ProSPEctS

all indications are that consumers will experience greater

financial strain in the year ahead with the relief from falling

interest rates being directed at settling debt.

notwithstanding the squeeze on consumer spending, we

expect the growth in “out-of-home” consumption among

double-income and time-poor families to continue,

although the frequency of consumption has reduced. the

Famous Brands Group remains well positioned for growth

as a result of our strong stable of leading brands and

value for money positioning.

We will use the 2010 financial year to consolidate and

extract maximum value from our existing businesses,

underpinned by a heightened focus on productivity and

efficiency gains across the Group.

Bolstered by our strong brands, sound business model

and proven management, we will continue to position the

Group for long-term growth as we weather the current

economic storm.

aPPrEciation

I would like to thank each and every Famous Brands’

employee for their effort and loyalty in ensuring that

Famous Brands retains its status as the leading quick

service and casual dining restaurant group in africa.

THEOFaniS HaLaManDaRiSchief Executive officer


VaLUE aDDED StatEmEnt

2009 2008

r000 % r000 %

wEaLtH crEatEDturnover 1 549 244 1 190 301Cost of materials and services (1 110 611) (811 954)other income 35 528 25 852

474 161 100 404 199 100

wEaLtH DiStriBUtED

EmployeesSalaries, wages and related benefits 157 357 33 152 316 37

Providers of capitalDividends to shareholders 65 134 59 502Interest paid on borrowings and finance charges 79 618 44 969

144 752 31 104 471 26

GovernmentCompany tax 63 395 59 186tax on dividends 6 517 —other taxes 12 192

69 924 15 59 378 15

retained for future growthDepreciation of property, plant and equipment 19 359 16 455retained income 82 769 71 578

102 128 21 88 033 22

474 161 100 404 199 100

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 takes into account the amounts retained and reinvested in the Group for the replacement of assets and the development of future operations.

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

cash generated by operations: Comprises cash receipts from customers less cash paid to suppliers and employees as reflected in the cash flow statement. It can be broadly seen as eBItDa less working capital changes.

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/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. It represents cash operating profit.

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

DEfinitionS

33%

31%

15%

21%

2009

37%

26%

15%

22%

2008

Employees

WEALTH DISTRIBUTED

Providers of capital

Government

Retained for future growth


SiX-YEar rEViEw

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

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 liabilities less cash. It is calculated by adding interest-bearing liabilities such as current and non-current borrowings and bank overdraft less positive cash balances.

operating profit margin: operating profit before interest and taxation as a percentage of revenue. (Measures the return on the operating activities of the group.)

return on equity: Headline earnings as a percentage of average shareholders’ interest. (Measures the earning power of the suppliers of share capital.)

return on net assets: operating profit before interest and taxation as a percentage of average net assets. (Measures the earning capacity of net assets.)

return on total assets: operating profit before interest and taxation as a percentage of average total assets. (Measures the effectiveness with which the total assets were utilised.)

DEfinitionS (continued)

2009* 2008* 2007* 2006* 2005* 2004

incomE StatEmEnt anD caSH fLowrevenue r000 1 549 244 1 190 301 872 151 669 178 464 729 362 988operating profit before impairment losses r000 261 916 217 383 150 659 111 173 93 833 42 288operating profit margin % 16.9 18.3 17.3 16.6 20.2 11.6profit for the year r000 147 902 131 081 87 114 70 875 53 061 23 975Cash generated by operations r000 277 184 198 997 172 054 107 063 98 748 35 704eBItDa r000 281 806 233 838 163 549 122 344 99 255 47 566Cash realisation rate % 98.4 85.1 105.2 87.5 99.5 75.1 Headline earnings for the year r000 150 283 135 189 99 686 72 070 51 792 26 755

BaLancE SHEEttotal assets r000 1 052 208 856 133 673 375 527 588 409 920 322 089total equity r000 492 291 408 311 303 480 248 234 169 461 137 922net assets r000 796 089 603 661 358 864 359 109 280 612 254 099net debt r000 225 286 123 846 21 337 84 935 74 201 111 559

ProfitaBiLitY anD aSSEt manaGEmEntreturn on total assets % 27.4 28.4 25.1 23.7 25.6 17.9return on net assets % 37.4 45.2 42.0 34.8 35.1 24.4return on equity % 33.4 38.0 36.1 34.5 33.7 24.4net asset turn times 2.2 2.5 2.4 2.1 1.7 2.1net debt/equity % 45.8 30.3 7.0 34.2 43.8 80.9

SHarEHoLDErS’ ratioSBasic earnings per share cents 159.3 136.7 99.5 82.1 62.3 34.2Headline earnings per share cents 159.2 143.6 113.8 83.5 60.8 38.2Dividends per share cents 76 66 48 30 18 10.5Dividend cover times 2.1 2.2 2.4 2.8 3.4 3.6net asset value per share cents 521 432 346 283 195 158

StocK EXcHanGE StatiSticSMarket value per share– at year-end cents 1 475 1 624 1 590 1 240 725 275– highest cents 1 800 2 050 1 660 1 250 750 290– lowest cents 1 200 1 500 980 620 280 130Closing dividend yield % 5.15 4.06 3.02 2.42 2.48 3.82Closing earnings yield % 10.8 8.8 7.2 6.7 8.4 13.9p/e ratio times 9.3 11.3 14.0 14.9 11.9 7.2number of shares issued 94 448 096 94 448 096 87 595 244 87 595 244 87 094 244 87 094 244Market capitalisation rm 1 393 1 534 1 393 1 086 631 240

*Figures presented on the IFRS basis.


corPoratE GoVErnancE rEPort

are in place for the proper management of risk, financial

control and compliance with all laws and regulations;

n appoint the Chief executive officer (“Ceo”) and ensure

succession planning for executive management is in

place;

n regularly identify and monitor key risk areas; and

n oversee the company’s disclosure and communication

process.

the board, met three times during the past year. Details

of the directors in office on 15 May 2009 and their

attendance at board and committee meetings are detailed

on pages 6 and 24 respectively.

there are no service contracts with non-executive

directors. executive directors’ service agreements may be

terminated with one to three month’s notice. In terms of

the articles of association one-third of the board has to

retire on a rotational basis each year at the company’s

annual general meeting. the retiring directors are those

who have been the longest in office. the retiring directors

may offer themselves for re-election. the appointment of

new directors is subject to confirmation by shareholders

at the first annual general meeting after their appointment.

Biographical details of all directors are set out on pages 6

and 7 of this annual report.

the daily management and administration of the Group’s

affairs are the responsibility of the Ceo and Chief

operating officer (“Coo”). In addition to the board charter,

they are guided by an approvals framework setting out the

respective responsibilities of the board and executive

management.

all directors have access to the advice and services of the

Company Secretary. In appropriate circumstances, they

may seek independent professional advice about the

affairs of the company at the company’s expense.

the board of directors of Famous Brands remains fully

committed to business integrity, fairness, transparency and

accountability in all its activities. In support of this

commitment, the board subscribes to sound corporate

governance in all aspects of the business and to the

ongoing development and implementation of best practices.

In addition, a code of ethics, which seeks to raise the

ethical awareness of conducting business, is in place.

Famous Brands fully endorses the principles incorporated

in the Code of Corporate practices and Conduct outlined

in the second King report (“King II”), and in the listings

requirements of the JSe limited (“JSe”) and strives to

enhance compliance with King II. the application of

King II continues to serve as a valuable guide to the

entrenchment of strong governance principles throughout

the Group.

tHE BoarD

the board of Famous Brands consists of five non-

executive and three executive directors.

the board is chaired by a non-executive Chairman,

Mr peter Halamandaris, and is governed by a charter.

the primary functions of the board are to:

n retain full and effective control of the Group;

n review and approve corporate strategy;

n approve and oversee major capital expenditures,

acquisitions and disposals;

n review and approve annual budgets and business plans;

n monitor operational performance and management;

n determine the Group’s purpose and values;

n endeavour to ensure that the Group complies with

sound codes of business behaviour;

n endeavour to ensure that appropriate control systems


n to monitor and supervise the effective functioning and

performance of the internal auditors

n 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

n to evaluate the independence, effectiveness and

performance of the external auditors and obtain

assurance from the auditors that adequate accounting

records are being maintained

n the appointment of the external auditors on an annual

basis

n to ensure that the respective roles and functions of

external audit and internal audit are sufficiently clarified

and co-ordinated

n to review financial statements for proper and complete

disclosure of timely, reliable and consistent information,

and to confirm that the accounting policies used are

appropriate.

rEmUnEration committEE

the charter of this committee provides for three members

of which the majority must be non-executives. the

chairman is a non-executive director. the committee

meets at least twice a year.

the key mandate of the committee is to compile

emolument proposals in accordance with the Group’s

remuneration strategy, which are then considered by the

board. this is designed and tailored to:

n continue to attract, retain and motivate executives of

the highest calibre

n enable the Group to remain an employer of choice

n ensure a blend of skills that consistently achieves

predetermined business objectives and targets.

the director concerned would initially discuss and clear

the matter with the Chairman or the Company Secretary

unless this would be inappropriate.

an orientation and induction programme for directors is in

place. Directors have unrestricted access to company

information and records. procedures are in place to

address situations where directors may have a conflict of

interest. a register of director’s declarations of interest is

retained.

BoarD SUB-committEES

to enable the board to discharge its onerous responsibilities

and duties, certain responsibilities of the board have been

delegated to board committees. Both an audit and a

remuneration committee have been constituted. these

committees’ activities are governed by charters approved

by the board. Both are chaired by non-executive directors

and are directly responsible to the board.

aUDit committEE

the audit committee consists of three non-executive

directors and meets at least twice a year. Meetings are

attended by the Coo, Financial Director as well as internal

and external auditors. the committee operates in terms of

its charter and reviews audit, accounting and financial

reporting issues. In addition, the committee provides

support to the board on the risk profile and risk

management in the Group and also compliance with good

corporate governance. Both internal and external auditors

have unlimited access to the chairman of the audit

committee. the role of the committee is, inter alia:

n to review the effectiveness of the Group’s systems of

internal control, including internal financial control and

business risk management, and to endeavour to ensure

that effective internal control systems are maintained

corPoratE GoVErnancE rEPort ContInueD


company to non-executive directors for membership of

both the board and sub-committees.

the committee is also required to play an integral part in

succession planning, particularly in respect of the Ceo

and executive management.

emolument recommendations include the granting of

options in terms of the Group’s share incentive scheme

and performance-based incentives.

the committee is also responsible for making

recommendations to the board on all fees payable by the

attEnDancE at BoarD anD committEE mEEtinGS DUrinG tHE YEar EnDED

28 fEBrUarY 2009

Board audit committee remuneration committee

number of meetings 3 3 3

Board member

SJ aldridge 1* 1* n/ap Halamandaris 3 3 n/ap Halamandaris (Jnr) 1 n/a 1t Halamandaris 3 n/a 3Jl Halamandres 3 3 3Ka Hedderwick 3 3* n/aHr levin 3 3 3t pritchard 2 2* n/aB Sibiya 2 n/a n/a

*By invitation.

Mr thomas pritchard resigned as a director with effect from 12 September 2008. Mr Stanley John aldridge was

appointed as a director with effect from 1 november 2008.

riSK manaGEmEnt anD intErnaL controLS

the board is accountable for the total process of risk

management and internal control. In addition, risk manage-

ment is an integral part of management’s function and

includes the management of operational and business

risks.

the internal control environment has been improved by

the introduction of formalised financial and accounting

policies. the internal audit department continues to

review high risk areas and reports directly to the Ceo with

direct access to the audit committee chairman. a key

cornerstone of internal control is monthly individual

business unit financial reviews. at such reviews, results

against budget and the prior year are examined rigorously

and assets reviewed for impairment.

a formal process of business risk assessment is done

from time to time highlighting further control actions to

be taken. Major risks which have been identified are

as follows:

n Commodity food and fuel price fluctuations

n a recessionary economic climate, potential job losses

and the resulting impact on consumers’ discretionary

spend. this could lead to below budget sales both

domestically and in the united Kingdom


PErSonaL SHarE DEaLinGS

the board complies with requirements of the JSe in relation

to restrictions on the trading of Famous Brands shares by

directors and employees during defined closed periods.

Closed periods extend from 31 august and 28 February,

being the commencement of interim and year-end reporting

dates up to the date of announcement of the results and

includes any other period during which the company

is trading under cautionary announcement. the Company

Secretary notifies all directors and employees prior to

the commencement of the closed trading periods of the

prohibitions contained in the Insider trading act relating to

share dealings whilst in possession of price-sensitive

information. Details of directors’ share dealings are disclosed

to the listings division of the JSe and communicated through

its electronic news service, SenS. these dealings are

disclosed at board meetings.there is a process in place in

terms of the requirements of the JSe for directors to obtain

prior clearance before dealing in the company’s shares.

all transactions are conducted at the ruling market price

on the JSe.

StaKEHoLDEr commUnication

the board ensures that material matters of interest and

concern to shareholders and other stakeholders are

addressed in the company’s public disclosure and

communication. In this regard the board ensures that

the Group provides adequate transparency on all

pertinent matters. the Coo and Financial Director meet

with shareholders and analysts as well as with the

financial press in order to ensure accurate reporting of

company matters. all pertinent company announcements

are placed on the company website.

n a slowdown in new restaurant openings due to lack of

finance available to existing and potentially new

franchisees

n Increase in the number of underperforming franchised

restaurants and risk of escalation in bad debts and or

closures

n employee theft, dishonesty and corruption are

increasing trends

n loss of key personnel.

our strong brands, excellent management, unique

business model, detailed controls and strong cash

generation are key factors in mitigating the above-

mentioned risks.

GoinG concErn

the annual financial statements set out in this annual report

have been prepared in accordance with International Financial

reporting Standards. they are based on appropriate

accounting policies that have been consistently applied.

Having reviewed the company’s financial projections, the

directors believe that the Group will continue as a going

concern in the year ahead.

EtHicS

the company’s code of ethics requires all directors and

employees to act with honesty and integrity and to

maintain the highest ethical standards. the code deals

with compliance with laws and regulations, conflicts of

interest, relationships with customers and suppliers,

remuneration outside employment and confidentiality.

DirEctorS’ SHarEHoLDinG

the direct and indirect holdings, share options and

transactions of the directors of Famous Brands limited at

28 February 2009 are set out in note 26.

non-executive directors do not participate in the share

incentive scheme.


rEPort BY tHE aUDit committEE

the Corporate laws amendment act 24 of 2006 (“Claa”) came

into effect on 14 December 2007. the composition of the audit

committee is in line with the provisions of the Claa and it is

chaired by Hymie reuvin levin. During the financial year ended,

in addition to the duties set out in the audit committee’s charter

(a summary is provided on page 23 of the Corporate Governance

report), the audit committee carried out its functions as follows:

n nominated the appointment of rSM Betty & Dickson

(Johannesburg) as the registered independent auditor after

satisfying itself through enquiry that rSM Betty & Dickson

(Johannesburg) is independent as defined in terms of the Claa

n Determined the fees to be paid to rSM Betty & Dickson

(Johannesburg) and their terms of engagement

n ensured that the appointment of rSM Betty & Dickson

(Johannesburg) complied with the Claa and any other

legislation relating to the appointment of auditors

n approved a non-audit services policy which determines the

nature and extent of any non-audit services which rSM Betty

& Dickson (Johannesburg) may provide to the company.

rSM Betty & Dickson (Johannesburg) provide non-audit services

to the company and the audit committee has pre-approved the

contract for tax administration services by the auditors.

the audit committee has satisfied itself through enquiry that

rSM Betty & Dickson (Johannesburg) and Mr John Jones, the

designated auditor, are independent of the company.

the audit committee recommended the financial statements

for the year ended 28 February 2009 for approval to the board.

the board has subsequently approved the financial statements

which will be open for discussion at the forthcoming annual

general meeting.

HYMiE REUVin LEVinaudit committee chairman

corPoratE GoVErnancE rEPort ContInueD


annUaL financiaL StatEmEntS

contEntS

29 report of the independent auditors

30 Directors’ responsibilities and approval

30 Declaration by the company Secretary

31 report of the Directors

33 income Statements

34 Balance Sheets

35 Statements of changes in Equity

36 cash flow Statements

37 notes to the annual financial Statements

77 annexure a: Schedule of investment in Subsidiaries

the reports and statements set out below comprise the annual financial statements presented to the members.

EXcHanGE ratES

the presentation and functional currency of the annual financial statements is South african rand.

the following significant exchange rates were applied in the preparation of the Group results:

2009 2008

rand/UK Pound average 15.18 14.20

Closing 14.24 14.94

rand/Euro average 12.45 9.90

Closing 12.72 11.38

rand/US Dollar average 8.70 7.10

Closing 9.98 7.88

Euro/UK Pound average 1.12 1.31

Closing 1.22 1.43


rEPort of tHE inDEPEnDEnt aUDitorS

to tHe MeMBerS oF FaMouS BranDS lIMIteD

rEPort on tHE financiaL StatEmEntS

We have audited the accompanying annual financial statements

and Group annual financial statements of Famous Brands limited,

which comprise the directors’ report, balance sheet as at

28 February 2009, the income statement, the statement of

changes in equity and cash flow statement for the year then

ended, a summary of significant accounting policies and other

explanatory notes, as set out on pages 31 to 77.

DirEctorS’ rESPonSiBiLitY for tHE financiaL

StatEmEntS

the company’s directors are responsible for the preparation and

fair presentation of these annual financial statements in accordance

with International Financial reporting Standards, and in the manner

required by the Companies act of South africa. this responsibility

includes: designing, implementing and maintaining internal control

relevant to the preparation and fair presentation of annual financial

statements that are free from material misstatement, whether due

to fraud or error; selecting and applying appropriate accounting

policies; and making accounting estimates that are reasonable in

the circumstances.

aUDitorS’ rESPonSiBiLitY

our responsibility is to express an opinion on these annual financial

statements based on our audit. We conducted our audit in

accordance with International Standards on auditing. those

standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance whether

the annual financial statements are free from material misstatement.

an audit involves performing procedures to obtain audit evidence

about the amounts and disclosures in the annual financial

statements. the procedures selected depend on the auditors’

judgement, including the assessment of the risks of material

misstatement of the annual financial statements, whether due to

fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and

fair presentation of the annual financial statements in order to

design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. an audit also includes

evaluating the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by the director, as

well as evaluating the overall presentation of the annual financial

statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

oPinion

In our opinion, the annual financial statements present fairly, in all

material respects, the financial position of the company and of the

Group as at 28 February 2009, and of its financial performance

and its cash flows for the year then ended in accordance with

International Financial reporting Standards, and in the manner

required by the Companies act of South africa.

RSM BETTY & DiCKSOn (Johannesburg)registered auditors

per: John Jones

Midrand

15 May 2009


the directors are required by the South african Companies act,

1973, to maintain adequate accounting records and are

responsible for the content and integrity of the annual financial

statements and related financial information included in this report.

It is their responsibility to ensure that the 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 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 upon appropriate accounting policies

consistently applied and supported by reasonable and prudent

judgements and estimates.

the directors acknowledge that they are ultimately responsible for

the system of internal financial control established by the company

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 directors are of the opinion, based on the information and

explanations given by management, that 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 the 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 annual financial statements set out on pages 31 to 77, which

have been prepared on the going concern basis, were approved

by the board of directors on 15 May 2009 and are signed on its

behalf by:

P HaLaManDaRiS T HaLaManDaRiSnon-executive chairman chief Executive officer

I certify that the requirements as stated in section 268G of the Companies act 61 of 1973, as amended, have been met and that all returns,

as required of a public company in terms of the aforementioned act, have been submitted to the registrar of Companies and that such

returns are true, correct and up to date.

STanLEY aLDRiDgEcompany Secretary

15 May 2009

DEcLaration BY tHE comPanY SEcrEtarY

DirEctorS’ rESPonSiBiLitiES anD aPProVaL


the directors have pleasure in submitting their report for the year

ended 28 February 2009.

natUrE of BUSinESS

Famous Brands limited is an investment holding company listed

on the JSe limited under the category Consumer Services: travel

and leisure. Famous Brands is africa’s leading Quick Service

and Casual Dining restaurant franchisor and also has

representation in the united Kingdom. the Group currently

comprises 1 602 franchised restaurants spread across its brands

portfolio which includes Steers, Wimpy, Debonairs pizza,

Fishaways, House of Coffees, Brazilian Café and tashas.

the Group manufactures and supplies its franchisees, the retail

trade and agents with a wide range of meat, sauce, bakery,

ice-cream, fruit juice and mineral water products.

DirEctorS’ rESPonSiBiLitiES

the responsibilities of the company’s directors are detailed on

page 30 of this report.

financiaL StatEmEntS anD rESULtS

the company’s and Group’s results and financial position are

reflected in the financial statements on pages 31 to 77.

corPoratE GoVErnancE

the Corporate Governance report is set out on pages 22 to 26.

fiXED aSSEtS

there was no major change in the nature or the use of the tangible

and intangible fixed assets owned by the company or any of its

subsidiaries during the year under review.

DiViDEnDS

the following information relates to the dividends paid and

proposed during the year under review:

InterIM orDInarY

the directors declared an interim ordinary dividend no 28 of

36 cents per ordinary share, which was paid on Monday,

24 november 2008 to ordinary shareholders recorded in the

books of the company at the close of business on Friday,

21 november 2008.

FInal orDInarY

the directors declared a final ordinary dividend no 29 of 40 cents

per ordinary share, payable on Monday, 13 July 2009 to ordinary

shareholders recorded in the books of the company at the close of

business on Friday, 10 July 2009.

SHarE caPitaL

there has been no change in the authorised and issued share

capital of the company during the year ended 28 February 2009

and details are set out in note 16 to the annual financial

statements.

at 28 February 2009, 50 661 (2008: 50 661) ordinary shares were

held by the Share Incentive trust. these are treated as treasury

shares and have been eliminated on consolidation.

SHareHolDer SpreaD

In terms of the JSe limited listings requirements, Famous Brands

limited complies with the minimum shareholder spread

requirements, with 57.8% (2008: 56.8%) of ordinary shares being

held by the public at 28 February 2009. Details of the company’s

shareholder spread are as recorded on page 78.

MaterIal SHareHolDerS

according to information received by the directors, besides the

directors themselves, there were only two shareholders beneficially

holding, directly or indirectly, at 28 February 2009 in excess of

5.0% of the ordinary share capital. they are:

• Coronation Fund Managers 24.6% (2008: 21.2%).

• Enderle SA (Proprietary) Limited 5.1% (2008: 4.1%).

Staff SHarE incEntiVE ScHEmE anD oPtion ScHEmE

Details are reflected in note 28.

DirEctorS

the names of the directors and the Company Secretary of the

company at the date of this report are detailed on pages 6 and 7.

Mr thomas pritchard resigned as Financial Director and Company

Secretary on 12 September 2008 and on 1 november 2008

Mr Stanley John aldridge was appointed to this position. In terms

of the company’s articles of association Messrs Kevin alexander

Hedderwick, John lee Halamandres, Hymie reuvin levin and

Stanley John aldridge retire at the annual general meeting, and

being eligible, offer themselves for re-election.

SUBSiDiariES

Details of the company’s subsidiary companies are contained in

annexure a to the financial statements. the company had an

interest in its subsidiaries’ aggregate profit after taxation of

r149 924 230 (2008: r147 161 083) and in their losses after

taxation of r2 021 840 (2008: r6 635 114).

acQUiSitionS

the company purchased certain business assets and liabilities of

Cape Franchising (proprietary) limited as at 1 March 2008 for an

rEPort of tHE DirEctorS


rEPort of tHE DirEctorS ContInueD

amount of r155 million. the purchase consideration was allocated

between material contracts, fixed assets stock and other business

assets at book value, with the remainder allocated to goodwill.

In addition, a 51% interest was acquired in a company, Mountain

rush trading 4 (proprietary) limited, which houses the franchising

interests of the tashas chain, for a consideration of r5 million

comprised entirely of goodwill.

SPEciaL rESoLUtionS

on 25 June 2008 shareholders renewed the approval, as a general

authority, of the acquisition by the company or any of its

subsidiaries of issued ordinary shares of the company, valid until

the next annual general meeting. at the next annual general

meeting to be held on 25 June 2009 shareholders will be asked to

renew this general authority as set out in the notice to members.

SPEciaL rESoLUtionS PaSSED BY SUBSiDiariES

apart from special resolutions related to the internal reorganisation

of the Group, no further special resolutions of any significance were

passed by any subsidiaries during the year under review.

PoSt-BaLancE SHEEt EVEntS

Future cash flow forecasts anticipated that Wimpy uK may

encounter difficulty in meeting its debt capital repayment

obligations. Consequently, discussions commenced with our

25% investment banking partner who is also our loan provider,

Bank of Scotland. negotiations have proceeded rapidly and are

expected to be finalised by 31 May 2009. the Bank of Scotland

has agreed to a proposal that will see their equity interest reduce to

5% and their loan claims with a net face value of r106 million

being acquired by Famous Brands limited for an all-in

consideration of r71 million. this transaction will necessitate a

review of the fair values of the underlying assets and liabilities. It is

expected that the first r21 million of the r35 million reduction in

interest-bearing debt will be applied against goodwill. this amount

relates to the portion of net liabilities attributable to the minority

interest which the Group absorbed upon acquisition of Wimpy uK

and capitalised as part of goodwill. the remaining

r14 million is likely to result in a reduction in net assets including

goodwill. the final financial impacts of this transaction will be

quantified in due course. the funding for this transaction

will come from existing bank balances and loan facilities.

the directors are not aware of any other significant events that

have occurred between the end of the financial year and the date

of this report that may materially affect the results of the Group

for the year under review or the financial position as at

28 February 2009.

BorrowinG PowErS

the company has unlimited borrowing powers in terms of its

articles of association.

aPProVaL of tHE annUaL financiaL StatEmEntS

the annual financial statements were approved by the board of

directors at Midrand on 15 May 2009 and are signed on its

behalf by:

P HaLaManDaRiS T HaLaManDaRiSnon-executive chairman chief Executive officer


For tHe Year enDeD 28 FeBruarY 2009

group Company

notes2009r000

2008r000

2009r000

2008r000

revenue 3 1 549 244 1 190 301 4 000 2 000

Cost of goods sold (918 228) (648 355) — —

Gross profit 631 016 541 946 4 000 2 000

Selling and administrative expenses (369 100) (324 563) (6 549) (7 148)

operating profit before impairment loss 261 916 217 383 (2 549) (5 148)

Impairment loss — (7 807) — —

Dividends received from subsidiaries — — 55 287 57 019

operating profit before interest and taxation 261 916 209 576 52 738 51 871

net interest paid (44 090) (19 117) (2 036) (2 804)

operating profit before taxation 4 217 826 190 459 50 702 49 067

taxation 5 (69 924) (59 378) (5 323) 867

Profit for the year 147 902 131 081 45 379 49 934

attributable to:

equity holders of the company 150 330 128 641 45 379 49 934

Minority interest (2 427) 2 439

earnings per share attributable to equity holders of the company

Basic earnings per ordinary share (cents) 6 159 137

Diluted earnings per share (cents) 6 159 134

Headline earnings per share (cents) 7 159 144

Diluted headline earnings per share (cents) 7 159 141

incomE StatEmEntS


group Company

notes2009r000

2008r000

2009r000

2008r000

aSSEtS

non-current assets

property, plant and equipment 9 130 404 110 965 — 159

Intangible assets 10 559 611 407 472 — —

Investment in subsidiaries 11 182 226 209 503

loans receivable 12 — 182 — —

Deferred tax assets 13 3 759 6 608 2 859 1 665

total non-current assets 693 774 525 227 185 085 211 327

current assets

Inventories 14 89 720 85 372 — —

taxation 2 007 808 1 807 808

trade and other receivables 15 165 362 123 963 1 468 2 681

Cash and bank balances 22.8 101 345 120 763 766 61

total current assets 358 434 330 906 4 041 3 550

total assets 1 052 208 856 133 189 126 214 877

EQUitY anD LiaBiLitiES

Equity attributable to equity holders of the company

Share capital 16 944 944 944 944

Share premium 17 7 667 8 900 9 645 9 645

non-distributable reserves 18 17 345 14 901 18 320 15 599

retained earnings 466 323 381 127 152 983 172 773

492 279 405 872 181 892 198 961

Minority interest in equity 12 2 439

total equity 492 291 408 311 181 892 198 961

non-current liabilities

long-term borrowings 19 249 378 188 333 — —

Deferred lease liabilities 21 6 613 2 540 6 613 2 450

Deferred tax liabilities 13 37 499 39 781 — —

total non-current liabilities 293 490 230 654 6 613 2 450

current liabilities

trade and other payables 20 151 015 125 101 34 380

Deferred lease liabilities 21 18 390 18 390

Short-term borrowings 19 65 114 50 438 — —

Shareholders for dividends 569 507 569 507

taxation 37 572 37 824 — —

Bank overdrafts 22.8 12 139 2 908 — 12 189

total current liabilities 266 427 217 168 621 13 466

total equity and liabilities 1 052 208 856 133 189 126 214 877

at 28 FeBruarY 2009

BaLancE SHEEtS


at 28 FeBruarY 2009

StatEmEntS of cHanGES in EQUitY

Sharecapital

Sharepremium

non-distrib-utable

reservesretainedearnings

attrib-utable to

equityholders

of thecompany

minorityinterest

totalequity

notes r000 r000 r000 r000 r000 r000 r000

gROUP

29 February 2008

Balance at 1 March 2007 874 48 740 2 913 250 953 303 480 — 303 480

net profit on foreign currency translation 8 697 8 697 8 697

Share-based payments 3 291 1 532 4 823 4 823

Issue of share capital 69 17 871 17 940 17 940

attributable profit 128 642 128 642 2 439 131 081

Capital distribution 17 (59 502) (59 502) (59 502)

Share incentive scheme issues 1 1 791 1 792 1 792

Balance at 29 February 2008 944 8 900 14 901 381 127 405 872 2 439 408 311

28 February 2009

Balance at 1 March 2008 944 8 900 14 901 381 127 405 872 2 439 408 311

net (loss) on foreign currency translation (278) (278) (278)

Share-based payments 2 722 2 722 2 722

attributable profit 150 330 150 330 (2 427) 147 902

Dividends 8 (65 134) (65 134) (65 134)

Share incentive scheme issues (1 233) (1 233) (1 233)

Balance at 28 February 2009 944 7 667 17 345 466 323 492 279 12 492 291

COMPanY

29 February 2008

Balance at 1 March 2007 876 51 276 12 307 122 839 187 298 187 298


Issue of share capital 68 17 871 17 939 17 939

attributable profit 49 934 49 934 49 934

Capital distribution 17 (59 502) (59 502) (59 502)

Balance at 29 February 2008 944 9 645 15 599 172 773 198 961 198 961

28 February 2009

Balance at 1 March 2008 944 9 645 15 599 172 773 198 961 198 961


attributable profit 45 379 45 379 45 379

Dividends 8 (65 169) (65 169) (65 169)

Balance at 28 February 2009 944 9 645 18 320 152 983 181 892 181 892



caSH fLow StatEmEntS

group Company

notes2009r000

2008r000

2009r000

2008r000

caSH fLow from oPEratinG actiVitiES

Cash receipts from customers 1 501 214 1 176 038 4 484 3 807

Cash paid to suppliers and employees (1 224 030) (977 041) (2 955) (7 512)

Cash generated by operations 22.1 277 184 198 997 1 529 (3 705)

Dividends received — — 55 287 57 019

net interest paid (44 090) (19 117) (2 036) (2 804)

taxation paid 22.2 (70 673) (44 766) (7 516) (2 094)

net cash flow from operating activities 162 421 135 114 47 264 48 416

Dividends paid 22.3 (65 072) (59 384) (65 107) (59 384)

net cash retained from operating activities 97 349 75 730 (17 843) (10 968)

caSH fLow from inVEStinG actiVitiES

expended on property, plant and equipment (33 107) (36 077) — —

acquisition of business 22.7 (155 000) — — —

Investment in subsidiaries 22.6 (5 000) (8 690) — (76 621)

expended on intangible assets (8 168) (16 397) — —

proceeds from disposal of property, plant and equipment 609 1 796 — —

proceeds from disposal of business 22.4 — 16 359 — —

net proceeds on disposal of Group-owned outlets 22.5 — 516 — —

Decrease in loans receivable 182 719 — —

net cash flow from investing activities (200 484) (41 774) — (76 621)

caSH fLow from financinG actiVitiES

Movement in share capital and reserves — 70 — 17 940

Share and incentive scheme issues (1 233) 19 663 — —

Increase in Group loans 30 737 2 469

Increase in amount owing to share incentive scheme — 462

Increase/(decrease) in interest-bearing borrowings 75 719 (35 952) — —

net cash flow from financing activities 74 486 (16 219) 30 737 20 871

Change in cash and cash equivalents (28 649) 17 737 12 894 (66 718)

Cash and cash equivalents at beginning of year 117 855 100 118 (12 128) 54 590

Cash and cash equivalents at end of year 22.8 89 206 117 855 766 (12 128)


1. PrESEntation of annUaL financiaL StatEmEntS

the annual financial statements have been prepared in accordance with International Financial reporting Standards, and the Companies act of South africa. the annual financial statements have been prepared on the historical cost basis, except for the measurement of certain financial instruments at fair value, and incorporate the principal accounting policies set out below.

these accounting policies are consistent with the previous year, except for the changes set out in note 2.

the preparation of financial statements in conformity with International Financial reporting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. the areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 1.1.

1.1 SIGnIFICant JuDGeMentS

In preparing the annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the annual financial statements and related disclosures. use of available information and the application of judgement is inherent in the formation of estimates. actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:

allowance for slow moving, damaged and obsolete stock

Management has made estimates of the selling price and direct cost to sell on certain inventory items to write stock down to the lower of cost and net realisable value. the write down is included in the operating profit.

any stock that is physically identified as slow moving, damaged or obsolete is written off when discovered.

options granted

Management used either a trinomial tree which takes account of the vesting period (european style option) and the period post- vesting (american style option) or the Black-Scholes-Merton model to determine the value of the options at issue date. additional details regarding the estimates are included in note 28 –“equity settled share-based payments”.

impairment testing

the recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values. these calculations require the use of estimates and assumptions. It is reasonably possible that the assumptions may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.

the Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. assets are grouped at the lowest level for which identifiable cash flows are largely independent of

cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. expected future cash flows used to determine the value-in-use of goodwill and tangible assets are inherently uncertain and could materially change over time.

Provisions

provisions were raised and management determined an estimate based on the information available.

contingent provisions on business combinations

Contingencies recognised in the current year required estimates and judgements, refer to note 22.6 and 22.7 on acquisition on business combinations.

taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. the Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the year in which such determination is made.

the Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. assessing the recoverability of deferred income tax assets requires the Group to make significant estimates related to expectations of future taxable income. estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. to the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the balance sheet date could be impacted.

allowance for doubtful debts

past experience indicates a reduced prospect of collecting debtors over the age of three months. trade receivable balances older than three months are regularly assessed by management and provided for at their discretion. Debt arising from the sale of products to franchisees and franchise fees due, although past due, is generally regarded as recoverable if the related trading outlet continues to operate.

Property, plant and equipment

Management has made certain estimations with regards to the determination of estimated useful lives and residual values of items of property, plant and equipment, as discussed further in note 1.2.

Leases

Management has applied its judgement to classify all lease agreements that the Group is party to as operating leases, as they do not transfer substantially all the risks and rewards of ownership to the Group.

notES to tHE annUaL financiaL StatEmEntS




notES to tHE annUaL financiaL StatEmEntS ContInueD

1.3 GooDWIll

Goodwill is initially measured at cost, being the excess of the cost of a business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.

Subsequently goodwill is carried at cost less any accumulated impairment.

the excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the business combination is immediately recognised in profit or loss.

Internally generated goodwill is not recognised as an asset.

an impairment loss recognised for goodwill shall not be reversed in a subsequent period.

1.4 IntanGIBle aSSetS

an intangible asset is recognised when:

n it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and

n the cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

an intangible asset arising from development (or from the development phase of an internal project) is recognised when:

n it is technically feasible to complete the asset so that it will be available for use or sale;

n there is an intention to complete and use or sell it;

n there is an ability to use or sell it;

n it will generate probable future economic benefits;

n there are available technical, financial and other resources to complete the development and to use or sell the asset; and

n the expenditure attributable to the asset during its development can be measured reliably.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

an intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. amortisation is not provided for these intangible assets. For all other intangible assets amortisation is provided on a straight-line basis over their useful lives.

the amortisation period and the amortisation method for intangible assets are reviewed every year end.

reassessing the useful life of an intangible asset with a definite useful life after it was classified as indefinite, is an indicator that the asset may be impaired. as a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.

Finite useful life intangible assets are amortised on a straight-line basis over their useful life. they are only tested for impairment when an indication of impairment exists.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.

Furthermore, as the operating lease in respect of premises is only for a relatively short period of time, management has made a judgement that it would not be meaningful to classify the lease into separate components for the land and for the buildings for the current lease, and the agreement will be classified in its entirety as an operating lease.

1.2 propertY, plant anD eQuIpMent

the cost of an item of property, plant and equipment is recognised as an asset when:

n it is probable that future economic benefits associated with the item will flow to the Group; and

n the cost of the item can be measured reliably.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to and replace part of it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

Day-to-day expenses incurred on property, plant and equipment is expensed directly in profit or loss for the period. Major maintenance that meets the recognition criteria is capitalised.

Depreciation commences when an asset is available for use. Depreciation is charged so as to write off the depreciable amount of items, other than land, to their residual values, over their estimated useful lives, using a method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. all categories of assets have been written off using the straight-line basis.

property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

the residual value and the useful life of each asset are reviewed at each financial year end. useful lives applied during the year were:

item average useful lifeBuildings 50 yearsleasehold property 7 to 10 yearsplant and machinery 5 to 15 yearsFurniture, fixtures and office equipment 4 to 10 yearsMotor vehicles 4 yearsIt equipment 3 yearsComputer software 2 years

each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately.

the depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

the gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. the gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds and the carrying amount of the item.


initial recognition and measurement

Financial instruments are recognised initially when the Group becomes a party to the contractual provisions of the instruments.

the Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available for sale financial assets.

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.

Subsequent measurement

Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the year.

loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.

available for sale financial assets are subsequently measured at fair value. this excludes equity investments for which a fair value is not determinable, which are measured at cost less accumulated impairment losses.

Changes in fair value of available for sale financial assets denominated in a foreign currency are analysed between translation differences resulting from changes in amortised cost and other changes in the carrying amount. translation differences on monetary items are recognised in profit or loss, while translation differences on non-monetary items are recognised in equity.

Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method.

impairment of financial assets

at each balance sheet date the Group assesses all financial assets, other than those at fair value through profit or loss, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.

For amounts due to the Group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment.

In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator of impairment. If any such evidence exists for available for sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss.

Impairment losses are recognised in profit or loss.

Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event

amortisation is provided to write down the intangible assets, on a straight-line basis, to their residual values as follows:

item Useful lifetrademarks Indefinitelease premiums, franchise incentives or similar agreement period

1.5 InVeStMentS In SuBSIDIarIeS

Group annual financial statements

on acquisition the Group recognises the subsidiary’s identifiable assets, liabilities and contingent liabilities at fair value, except for assets classified as held-for-sale, which are recognised at fair value less costs to sell.

the consolidated financial statements incorporate the financial statements of the company and entities controlled by the company, and its subsidiaries. Control is achieved where the company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

the interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the minority interest in excess of the minority interest are allocated against the interests of the parent.

the results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. on adjustment to the cost of a business combination, contingent or future events are included in the combination if the adjustment is probable and can be measured reliably.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Group.

1.6 FInanCIal InStruMentS

classification

the Group classifies financial assets and financial liabilities into the following categories:

n Financial assets at fair value through profit or loss – designated

n loans and receivables

n Financial liabilities at fair value through profit or loss – designated

n Financial liabilities measured at amortised cost

Classification depends on the purpose for which the financial instruments were obtained/incurred and takes place at initial recognition. For financial instruments which are not at fair value through profit or loss, classification is reassessed on an annual basis.




cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. these are initially and subsequently recorded at fair value.

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the company’s accounting policy for borrowing costs.

1.7 taXatIon

current tax assets and liabilities

Current tax for current and prior years is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior years exceeds the amount due for those years, the excess is recognised as an asset.

Deferred tax assets and liabilities

a deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

a deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. a deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

a deferred tax asset is recognised for the carry forward of unused tax losses and unused secondary tax on companies credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused secondary tax on companies credits can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

tax expenses

Current and deferred taxes are recognised as income or an expense and included in profit or loss for the year, except to the extent that the tax arises from:

n a transaction or event which is recognised, in the same or a different year, directly in equity; or

n a business combination.

Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different year, directly to equity.

occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.

reversals of impairment losses are recognised in profit or loss except for equity investments classified as available for sale.

Impairment losses are also not subsequently reversed for available for sale equity investments which are held at cost because fair value was not determinable.

Where financial assets are impaired through use of an allowance account, the amount of the loss is recognised in profit or loss within operating expenses. When such assets are written off, the write off is made against the relevant allowance account. Subsequent recoveries of amounts previously written off are credited against operating expenses.

Loans to/from Group companies

these include loans to and from subsidiary companies and are recognised initially at fair value plus direct transaction costs.

loans to subsidiary companies are classified as loans and receivables.

loans from subsidiary companies are classified as financial liabilities measured at amortised cost.

Loans to shareholders, directors, managers and employees

these financial assets are classified as loans and receivables and measured at amortised cost.

trade and other receivables

trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial re-organisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable is impaired. the allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

the carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in the income statement.

trade and other receivables are classified as loans and receivables.

trade and other payables

trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

trade and other payables are classified as other financial liabilities.


1.10 IMpaIrMent oF aSSetS

the Group assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the Group also:

n tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. this impairment test is performed during the annual period and at the same time every year; and

n tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs, is determined.

the recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. that reduction is an impairment loss.

an impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. any impairment loss of a revalued asset is treated as a revaluation decrease.

Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

an impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the units. the impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order:

n first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit; and

n then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

an entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.

the increased carrying amount of an asset, other than goodwill attributable to a reversal of an impairment loss, does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years.

a reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation, other than goodwill, is recognised immediately in profit or loss. any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

Secondary tax on companies is accounted for through profit and loss for the year.

1.8 leaSeS

a lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. a lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

finance leases – lessee

Finance leases are recognised as assets and liabilities in the balance sheet at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. the corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

the discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease.

the lease payments are apportioned between the finance charge and reduction of the outstanding liability.the finance charge is allocated to each period during the lease term so as to produce a constant periodic rate on the remaining balance of the liability.

operating leases – lessee

operating lease payments are recognised as an expense on a straight-line basis over the lease term. the difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. this liability is not discounted.

any contingent rents are expensed in the year they are incurred.

1.9 InVentorIeS

Inventories are measured at the lower of cost and net realisable value.

the cost of inventories is assigned using the weighted average cost formula. the same cost formula is used for all inventories having a similar nature and use to the entity.

net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

the cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

the cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects is assigned using specific identification of the individual costs.

When inventories are sold, the carrying amount of those inventories are recognised as an expense in the year in which the related revenue is recognised. the amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the year the write-down or loss occurs. the amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised as an expense in the year in which the reversal occurs.




assets) or by issuing equity instruments, the components of that transaction are recorded, as a cash-settled share-based payment transaction if, and to the extent that, a liability to settle in cash or other assets has been incurred, or as an equity settled share- based payment transaction if, and to the extent that, no such liability has been incurred.

1.13 eMploYee BeneFItS

Short-term employee benefits

the cost of short-term employee benefits (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

the expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

the expected cost of profit-sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Defined contribution plans

payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

1.14 proVISIonS anD ContInGenCIeS

provisions are recognised when:

n the company has a present obligation as a result of a past event;

n it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

n a reliable estimate can be made of the obligation.

the amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

provisions are not recognised for future operating losses.

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.

after their initial recognition contingent liabilities recognised in business combinations that are recognised separately are subsequently measured at the higher of:

n the amount that would be recognised as a provision; and

n the amount initially recognised less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 23.

1.15 reVenue

revenue from the sale of goods is recognised when all the following conditions have been satisfied:

n the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

n the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

1.11 SHare CapItal anD eQuItY

an equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

If the company re-acquires its own equity instruments, the consideration paid, including any directly attributable incremental costs (net of income taxes) on those instruments are deducted from equity until the shares are cancelled or re-issued. no gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the company’s own equity instruments. Consideration paid or received shall be recognised directly in equity.

Shares in the company held by the Share Incentive trust are classified as treasury shares. the cost of these shares is deducted from equity. the number of shares held is deducted from the number of issued shares and the weighted average number of shares in the determination of earnings per share. Dividends received on treasury shares are eliminated on consolidation.

1.12 SHare-BaSeD paYMentS

Goods or services received or acquired in a share-based payment transaction are recognised when the goods or services are received. a corresponding increase in equity is recognised if the goods or services were received in an equity settled share-based payment transaction or a liability if the goods or services were acquired in a cash-settled share-based payment transaction.

When the goods or services received or acquired in a share-based payment transaction do not qualify for recognition as assets, they are recognised as expenses.

For equity settled share-based payment transactions, the goods or services received are measured, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably.

If the fair value of the goods or services received cannot be estimated reliably, their value and the corresponding increase in equity, indirectly, are measured by reference to the fair value of the equity instruments granted.

options issued or granted to employees for services rendered or to be rendered are measured at the fair value of the equity instruments at grant date and recognised in profit or loss over the vesting period.

For cash-settled share-based payment transactions, the goods or services acquired and the liability incurred are measured at the fair value of the liability. until the liability is settled, the fair value of the liability is remeasured at each reporting date and at the date of settlement, with any changes in fair value recognised in profit or loss for the period.

If the share-based payments granted do not vest until the counterparty completes a specified period of service, the company accounts for those services as they are rendered by the counterparty during the vesting period (or on a straight-line basis over the vesting period).

If the share-based payments vest immediately the services received are recognised in full.

For share-based payment transactions in which the terms of the arrangement provide either the entity or the counterparty with the choice of whether the entity settles the transaction in cash (or other


1.17 CoSt oF SaleS

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the year in which the related revenue is recognised. the amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the year the write-down or loss occurs. the amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

the related cost of providing services recognised as revenue in the current year is included in cost of sales.

Contract costs comprise:

n costs that relate directly to the specific contract;

n costs that are attributable to contract activity in general and can be allocated to the contract; and

n such other costs as are specifically chargeable to the customer under the terms of the contract.

1.18 BorroWInG CoStS

Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.

Interest on borrowings to finance the purchase and development of self-constructed assets is included in the cost of the asset to the extent it accrues to the period of production and development. Such borrowing costs are capitalised net of any investment income arising from the temporary investment of funds that are surplus pending such expenditure.

all other borrowing costs are expensed to the income statement.

1.19 tranSlatIon oF ForeIGn CurrenCIeS

foreign currency transactions

a foreign currency transaction is recorded, on initial recognition in rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.

at each balance sheet date:

n foreign currency monetary items are translated using the closing rate;

n non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and

n non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the year or in previous annual financial statements are recognised in profit or loss in the year in which they arise.

When a gain or loss on a non-monetary item is recognised directly in equity, any exchange component of that gain or loss is recognised directly in equity. When a gain or loss on a non- monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

n the amount of revenue can be measured reliably;

n it is probable that the economic benefits associated with the transaction will flow to the company; and

n the costs incurred or to be incurred in respect of the transaction can be measured reliably.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the balance sheet date. the outcome of a transaction can be estimated reliably when all the following conditions are satisfied:

n the amount of revenue can be measured reliably;

n it is probable that the economic benefits associated with the transaction will flow to the Group;

n the stage of completion of the transaction at the balance sheet date can be measured reliably; and

n the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable.

Service revenue is recognised by reference to the stage of completion of the transaction at balance sheet date. Stage of completion is determined by services performed to date as a percentage of total services to be performed.

Contract revenue comprises:

n the initial amount of revenue agreed in the contract; and

n variations in contract work, claims and incentive payments:

– to the extent that it is probable that they will result in revenue; and

– they are capable of being reliably measured.

revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax.

revenue comprises the invoice value of sales of goods and excludes advertising levies and value added taxation.

Interest is recognised, in profit or loss, using the effective interest rate method.

Dividends are recognised, in profit or loss, when the company’s right to receive payment has been established.

Franchise fees are recognised on the accrual basis in accordance with the substance of the relevant agreements.

Franchise joining fees are recognised in the month when the outlet opens for trading.

1.16 aDVertISInG reVenue

the Group receives advertising levies from franchisees which are utilised in the advertising and promotion of the Group’s brands. advertising expenditure incurred in excess of the levies received is carried forward as a prepaid expense to be set off against future levies. any amounts not expended are carried forward as liabilities to set off against future advertising expenditure.




2.1. neW StanDarDS anD InterpretatIonS

2.1.1 Standards and interpretations not yet effective

the Group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for accounting periods beginning on or after 1 January 2009.

the Group expects to adopt these standards for the first time in the 2010 annual financial statements.

iaS 1 (revised) Presentation of financial Statements

the main revisions to IaS 1 (aC 101):

n require the presentation of non-owner changes in equity either in a single statement of comprehensive income or in an income statement and statement of comprehensive income.

n require the presentation of a balance sheet at the beginning of the earliest comparative period whenever a retrospective adjustment is made. this requirement includes related notes.

n require the disclosure of income tax and reclassification adjustments relating to each component of other comprehensive income. the disclosures may be presented on the face of the statement of comprehensive income or in the notes.

n allow dividend presentations to be made either in the statement of changes in equity or in the notes only.

n Have changed the titles to some of the financial statement components, where the ‘balance sheet’ becomes the ‘statement of financial position’ and the ‘cash flow statement’ becomes the ‘statement of cash flows.’ these new titles will be used in International Financial reporting Standards, but are not mandatory for use in financial statements.

the adoption of this standard is not expected to impact on the results of the Group, but may result in more disclosure than is currently provided in the annual financial statements.

iaS 23 (revised) Borrowing costs

the revision requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. the option of immediately expensing those borrowing costs has been removed.

It is unlikely that the standard will have a material impact on the company’s annual financial statements.

ifrS 8 operating Segments

IFrS 8 (aC 145) replaces IaS 14 (aC 115) Segment reporting. the new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes.

the adoption of this standard is not expected to impact on the results of the Group, but may result in more disclosure than is currently provided in the annual financial statements.

ifrS 2 amendment: ifrS 2 – Share-based Payment: Vesting conditions and cancellations

the amendment clarifies that vesting conditions are only performance conditions or service conditions. all other conditions are non-vesting conditions. non-vesting conditions are accounted

Cash flows arising from transactions in a foreign currency are recorded in rands by applying to the foreign currency amount the exchange rate between the rand and the foreign currency at the date of the cash flow.

investments in subsidiaries

the results and financial position of a foreign operation are translated into the functional currency using the following procedures:

n assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

n income and expenses for each income statement item are translated at exchange rates at the dates of the transactions; and

n all resulting exchange differences are recognised as a separate component of equity.

exchange differences arising on a monetary item that forms part of a net investment in a foreign operation are recognised initially in the translation reserve and recognised in profit or loss on disposal of the net investment.

any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation.

the cash flows of a foreign subsidiary are translated at the exchange rates between the functional currency and the foreign currency at the dates of the cash flows.

1.20 DIVIDenDS DeClareD

Dividends payable are recognised as a liability in the period in which they are declared.

2. cHanGES in accoUntinG PoLicY

the annual financial statements have been prepared in accordance with International Financial reporting Standards on a basis consistent with the prior year except for the adoption of the following new or revised standards.

n IFrS 5 non-current assets Held for Sale and Discontinued operations

n IaS 1 presentation of Financial Statements

n IaS 2 Inventories

n IaS 10 events after the Balance Sheet Date

n IaS 17 leases

n IaS 21 the effects of Changes in Foreign exchange rates

n IaS 24 related party Disclosures

n IaS 28 Investments in associates

n IaS 31 Interests in Joint Ventures

n IaS 32 Financial Instruments: Disclosure and presentation

n IaS 33 earnings per Share

n IaS 39 Financial Instruments: recognition and Measurement

n IaS 40 Investment property

the aggregate effect of the changes in accounting policy on the annual financial statements for the year ended 29 February 2008 is nil.


the amendment requires entities that routinely sell items of property, plant and equipment that they have previously held for rental to others, to transfer such assets to inventories at their carrying amount when they cease to be rented and are held for sale. the proceeds from the sale of such assets should be recognised as revenue in accordance with IaS 18 (aC 111) revenue. IFrS 5 (aC 142) non-current assets Held for Sale and Discontinued operations does not apply in these situations.

It is unlikely that the amendment will have a material impact on the Group’s annual financial statements.

may 2008 annual improvements to ifrS’s: amendments to iaS 7 Statement of cash flows

Cash payments to manufacture or acquire property, plant and equipment that entities routinely sell and which they have previously held for rentals to others, and cash receipts from rental and sale of such assets are to be included within operating activities.


may 2008 annual improvements to ifrS’s: amendments to iaS 18 revenue

With regards to financial service fees, the term ‘direct costs’ have been replaced with ‘transaction costs’ as defined in IaS 39 (aC 133) Financial Instruments: recognition and Measurement. this was in order to remove the inconsistency for costs incurred in originating financial assets and liabilities that should be deferred and recognised as an adjustment to the underlying effective interest rate.


may 2008 annual improvements to ifrS’s: amendments to iaS 19 Employee Benefits

With regards to curtailments and negative past service costs clarification has been made that:

n When a plan amendment reduces benefits, the effect of the reduction for future service is a curtailment and the effect of any reduction for past service is a negative past service cost;

n negative past service cost arises when a change in the benefits attributable to past service results in a reduction in the present value of the defined benefit obligation; and

n a curtailment may arise from a reduction in the extent to which future salary increases are linked to the benefits payable for past service.

the definition of ‘return on plan assets’ has also been amended to require the deduction of plan administration costs only to the extent that such costs have not been reflected in the actuarial assumptions used to measure the defined benefit obligation.

the term “fall due” in the definition of “short-term employee benefits” has been replaced with “due to be settled”.


for in the same manner as market conditions. It further clarifies that if either party can choose not to satisfy a non-vesting condition, then the arrangement is treated as a cancellation upon non- fulfilment of that condition.


may 2008 annual improvements to ifrS’s: amendments to ifrS 7 financial instruments: Disclosures

the amendment relates to changes in the Implementation Guidance of the Standard. ‘total interest income’ was removed as a component of finance costs from paragraph IG13. this was to remove inconsistency with the requirement of IaS 1 (aC 101) presentation of Financial Statements which precludes the offsetting of income and expenses.

the adoption of this amendment is not expected to impact on the results of the Group, but may result in more disclosure than is currently provided in the annual financial statements.

may 2008 annual improvements to ifrS’s: amendments to iaS 1 Presentation of financial Statements

the amendment is to clarify that financial instruments classified as held for trading in accordance with IaS 39 (aC 133) Financial Instruments: recognition and Measurement are not always required to be presented as current assets/liabilities.


may 2008 annual improvements to ifrS’s: amendments to iaS 8 accounting Policies changes in accounting Estimates and Errors

the amendment clarified that Implementation Guidance related to any standard is only mandatory when it is identified as an integral part of the standard.


may 2008 annual improvements to ifrS’s: amendments to iaS 10 Events after the reporting Period

the amendment clarified that if dividends are declared (appropriately authorised and no longer at the discretion of the entity) after the reporting period but before the financial statements are authorised for issue, the dividends may not be recognised as a liability as no obligation exists at the reporting date. thus clarifying that in such cases a liability cannot be raised even if there is a constructive obligation.


may 2008 annual improvements to ifrS’s: amendments to iaS 16 Property, Plant and Equipment

the term ‘net selling price’ has been replaced with ‘fair value less cost to sell’ in the definition of recoverable amount.





n the period over which management has projected cash flows;

n the growth rate used to extrapolate cash flow projections; and

n the discount rate(s) applied to the cash flow projections.


may 2008 annual improvements to ifrS’s: amendments to iaS 38 intangible assets

the amendments clarify the circumstances in which an entity can recognise a prepayment asset for advertising or promotional expenditure. recognition of an asset would be permitted up to the point at which the entity has the right to access the goods purchased or up to the point of receipt of services.

In addition, wording perceived as prohibiting the use of the unit of production method if it results in a lower amount of accumulated amortisation than under the straight-line method has been removed. entities may use the unit of production method when the resulting amortisation charge reflects the expected pattern of consumption of the expected future economic benefits embodied in an intangible asset.


may 2008 annual improvements to ifrS’s: amendments to iaS 39 financial instruments: recognition and measurement

IaS 39 (aC 133) prohibits the classification of financial instruments into or out of the fair value through profit or loss category after initial recognition. the amendments set out a number of changes in circumstances that are not considered to be reclassifications for this purpose.

the amendments have also removed references to the designation of hedging instruments at the segment level.

the amendments further clarify that the revised effective interest rate calculated when fair value hedge accounting ceases, in accordance with paragraph 92 IaS 39 (aC 133) should be used for the remeasurement of the hedged item when paragraph aG8 of IaS 39 (aC 133) is applicable.


may 2008 annual improvements to ifrS’s: amendments to iaS 40 investment Property and iaS 16 Property, Plant and Equipment

property being constructed for use as investment property is now classified as investment property and not property, plant and equipment (as previously required). even if the entity accounts for investment property at fair value, such property may be measured at cost until the earlier of date fair value is determinable or construction is complete.

Some terminology in the standard has been amended to be consistent with other standards and interpretations.

In determining the carrying amount of investment property held under a lease and accounted for using the fair value model, the amendment clarified that any lease liability should be added back

may 2008 annual improvements to ifrS’s: amendments to iaS 23 Borrowing costs (as revised in 2007)

the description of specific components of borrowing costs has been replaced with a reference to the guidance in IaS 39 (aC 133) Financial Instruments: recognition and Measurement on effective interest rate.


may 2008 annual improvements to ifrS’s: amendments to iaS 27 consolidated and Separate financial Statements

the amendment requires that investments in subsidiaries, jointly controlled entities and associates accounted for in accordance with IaS 39 (aC 133) Financial Instruments: recognition and Measurement in the parent’s separate financial statements should continue to be measured in accordance with IaS 39 (aC 133) when classified as held for sale (or included in a disposal group classified as held for sale), and not in accordance with IFrS 5 (aC 142) non-current assets held for Sale and Discontinued operations.


may 2008 annual improvements to ifrS’s: amendments to ifrS 7 financial instruments: Disclosures; iaS 32 financial instruments: Presentation; iaS 28 investments in associates and iaS 31 interests in Joint Ventures

the amendment adjusted the disclosure requirements of investments in associates and interests in joint ventures which have been designated as at fair value through profit or loss or are classified as held for trading. the amendment provides that only certain specific disclosure requirements of IaS 28 (aC 110) Investments in associates and IaS 31 (aC 119) Interests in Joint Ventures are required together with the disclosures of IFrS 7 (aC 144) Financial Instruments: Disclosures; IaS 32 (aC 125) Financial Instruments: presentation.

the adoption of this amendment is not expected to impact on the results of the company, but may result in more disclosure than is currently provided in the annual financial statements.

may 2008 annual improvements to ifrS’s: amendments to iaS 34 interim financial reporting

the amendment clarifies that the requirement to present information on earnings per share in interim financial reports applies only to entities within the scope of IaS 33 (aC 104) earnings per Share.


may 2008 annual improvements to ifrS’s: amendments to iaS 36 impairment of assets

the amendment requires disclosures of estimates used to determine the recoverable amount of cash-generating units containing goodwill or intangible assets with indefinite useful lives. Specifically, the following disclosures are required when discounted cash flows are used to estimate fair value less costs to sell:


n Contingent liabilities of the acquiree to only be included in the net identifiable assets when there is a present obligation with respect to the contingent liability.

It is unlikely that the standard will have a material impact on the Group’s annual financial statements.

iaS 27 (amended) consolidated and Separate financial Statements

the revisions require:

n losses of the subsidiary to be allocated to non-controlling interest, even if they result in the non-controlling interest being a debit balance.

n Changes in level of control without loss of control to be accounted for as equity transactions, without any gain or loss being recognised or any remeasurement of goodwill.

n When there is a change in the level of control without losing control, the Group is prohibited from making reclassification adjustments.

n When control is lost, the net identifiable assets of the subsidiary as well as non-controlling interest and goodwill are to be derecognised. any remaining investment is remeasured to fair value at the date on which control is lost, and a gain or loss on loss of control is recognised in profit or loss.


iaS 7 Statement of cash flows: consequential amendments due to iaS 27 (amended) consolidated and Separate financial Statements

Cash flows arising from changes in level of control, where control is not lost, are equity transactions and are therefore accounted for as cash flows from financing transactions.


iaS 12 income taxes – consequential amendments due to iaS 27 (amended) consolidated and Separate financial Statements

the amendment is as a result of amendments to IaS 27 (aC 132) Consolidated and Separate Financial Statements. the amendment refers to situations where a subsidiary, on acquisition date, did not recognise a deferred tax asset in relation to deductible temporary differences, because, for example, there may not have been sufficient future taxable profits against which to utilise the deductible temporary differences. If the deferred tax asset subsequently becomes recognisable, the amendment now requires that the deferred tax asset should be recognised against goodwill (and profit or loss to the extent that it exceeds goodwill), only if it results from information in the measurement period about circumstances that existed at acquisition date. no adjustment may be made to goodwill for information outside of the measurement period.


to the valuation to arrive at the carrying amount, rather than the fair value of the investment property.


iaS 18 revenue: consequential amendments

Dividends paid out of pre-acquisition profits are no longer deducted from the cost of the investment.


iaS 21 the Effects of changes in foreign Exchange rates: consequential amendments

a dividend paid out of pre-acquisition profits is no longer considered to be part of a disposal of an interest in a foreign operation.


iaS 36 impairment of assets: consequential amendments

under certain circumstances, a dividend received from a subsidiary, associate or joint venture could be an indicator of impairment. this occurs when the:

n carrying amount of investment in separate financial statements is greater than carrying amount of investee’s net assets including goodwill in consolidated financial statements; or

n dividend exceeds total comprehensive income of investee in period dividend is declared.


the Group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for accounting periods beginning on or after 1 July 2009.

the Group expects to adopt these standards for the first time in the 2011 annual financial statements.

ifrS 3 (revised) Business combinations

the revisions to IFrS 3 (aC 140) Business Combinations require:

n acquisition costs to be expensed.

n non-controlling interests to either be calculated at fair value or at their proportionate share of the net identifiable assets of the acquiree.

n Contingent consideration to be included in the cost of the business combination without further adjustment to goodwill, apart from measurement period adjustments.

n all previous interests in the acquiree to be remeasured to fair value at acquisition date when control is achieved in stages, and for the fair value adjustments to be recognised in profit or loss.

n Goodwill to be measured as the difference between the acquisition date fair value of consideration paid, non-controlling interest and fair value of previous shareholding and the fair value of the net identifiable assets of the acquiree.

n the acquirer to reassess, at acquisition date, the classification of the net identifiable assets of the acquiree, except for leases and insurance contracts.




IFrS 1 First-time adoption of International Financial reporting Standards and IaS 27 Consolidated and Separate Financial Statements: amendment for determining cost of investment in the separate financial statements on first-time adoption

IaS 28 Investments in associates: Consequential amendments due to IaS 27 (amended) Consolidated and Separate Financial Statements

IaS 31 Interests in Joint Ventures: Consequential amendments due to IaS 27 (amended) Consolidated and Separate Financial Statements

May 2008 annual Improvements to IFrS’s: amendments to IFrS 5 non-current assets Held for Sale and Discontinued operations

the aggregate impact of the initial application of the statements and interpretations on the Group’s annual financial statements is expected to be nil.

iaS 39 financial instruments: recognition and measurement – amendments for Eligible Hedged items

the amendment provides clarification on two hedge accounting issues:

n Inflation in a financial hedged item; and

n a one-sided risk in a hedged item.


amendment to iaS 39 and ifrS 7: reclassification of financial assets

the amendment permits an entity to reclassify certain financial assets out of the fair value through profit or loss category if certain stringent conditions are met. It also permits an entity to transfer from the available for sale category to loans and receivables under certain circumstances. additional disclosures are required in the event of any of these reclassifications.


2.1.2 Standards and interpretations not yet effective or relevant

the following standards and interpretations have been published and are mandatory for accounting periods beginning on or after 1 January 2009 or later periods but are not relevant to its operations:

IFrIC 13 Customer loyalty programmes

IFrIC 16 Hedges of a net Investment in a Foreign operation

IFrIC 15 agreements for the Construction of real estates

IaS 32 Financial Instruments: presentation and IaS 1 presentation of Financial Statements amendment: puttable Financial Instruments and obligations arising on liquidation

May 2008 annual Improvements to IFrS’s: amendments to IaS 20 accounting for Government Grants and Disclosure of Government assistance

May 2008 annual Improvements to IFrS’s: amendments to IaS 28 Investments in associates

May 2008 annual Improvements to IFrS’s: amendments to IaS 29 Financial reporting in Hyperinflationary economies

May 2008 annual Improvements to IFrS’s: amendments to IaS 41 agriculture


group Company

2009 2008 2009 2008

r000 r000 r000 r000

3. rEVEnUE

Sale of goods 1 082 088 757 835 — —

Services rendered and franchise revenue 467 156 432 466 4 000 2 000

1 549 244 1 190 301 4 000 2 000

4. oPEratinG Profit BEforE taXation

operating profit before taxation is arrived at after taking into account, amongst other items, those detailed below:

auditors’ remuneration 4 013 2 296 676 35

audit fee 3 568 2 027 676 35

Fees for other services 445 269 — —

Depreciation of property, plant and equipment 19 359 16 455 159 203

Directors’ remuneration 336 378

executive directors 10 106 9 576

non-executive directors 336 378

Less: amounts paid by subsidiaries (10 106) (9 576)

employee costs 157 357 152 316 — —

Foreign exchange (profit)/loss (2 037) 2 599 — —

Fair value adjustment on investment — — (109 127) —

Impairment of intangible assets — 7 807 — —

Impairment of investment — 3 109 127 3 615

Intangible assets amortisation 531 — — —

Interest and finance charges paid 79 618 44 969 2 036 2 805

Interest received (35 528) (25 852) — —

loss on disposal of investment — — — 1 004

operating lease charges on immovable property 26 810 15 559 15 576 10 273

operating lease charges on movable property 452 875 — —

(profit) on disposal of businesses — (1 833) — —

(profit)/loss on disposal of property, plant and equipment (47) 574 — —

Share-based payments reserve 2 722 4 823 2 721 3 292

5. taXation

normal taxation

Current year taxation 63 279 57 505 — —

Deferred taxation 39 1 451 (1 194) (867)

underprovision previous year (deferred and current) 77 230 — —

Secondary taxation on companies 6 517 — 6 517 —

Withholding taxes 12 192 — —

69 924 59 378 5 323 (867)


notES to tHE annUaL financiaL StatEmEntS




group Company

2009 2008 2009 2008

% % % %

5. taXation (continued)

reconciliation of rate of taxation

South african normal rate of taxation 28.0 29.0 28.0 29.0

reduction in rate for year, due to: (0.3) (2.6) (30.5) (34.2)

Dividend income — — (30.5) (35.2)

assessed losses utilised — (1.3) — —

Change in rate of taxation — (0.1) — 1.0

exempt income (0.3) (1.2) — —

Increase in rate for year, due to: 4.4 4.7 13.0 6.9

Secondary taxation on companies 3.0 — 13.0 —

Capital gains taxation — 3.0 — —

Deferred taxation not raised current year 0.6 — — —

Disallowable expenditure 0.8 1.7 — 6.9

effective rate of taxation 32.1 31.1 10.5 1.7

comPanY

no provision has been made for 2009 tax as the company has an estimated tax loss. the estimated tax loss available for set off against future taxable income is r3 708 455 (2008: r2 844 446).

6. EarninGS anD DiLUtED EarninGS PEr SHarE r000 r000 r000 r000

the calculation of basic earnings per ordinary share is based on earnings of r150 329 588 (2008: r128 641 380) and a weighted average number of shares in issue of 94 397 435 (2008: 94 120 964).

the weighted average number of shares is calculated after taking into account the effect of setting off 50 661 (2008: 50 661) treasury shares held by the share incentive scheme against the issued share capital.

the calculation of diluted earnings per ordinary share is based on diluted earnings of r153 080 002 (2008: r128 641 380) and a weighted average number of shares in issue of 96 417 436 (2008: 95 670 304), after taking into account the effect of the possible issue of 2 020 000 (2008: 1 549 339) ordinary shares in the future relating to the share incentive scheme.

reconciliation between earnings and diluted earnings:

attributable profit to equity holders of the company per the income statement. 150 330 128 641

adjustment for:

Interest received on future share placements 2 750 —

Diluted earnings 153 080 128 641

earnings per share (cents) 159 137

Diluted earnings per share (cents) 159 134


group Company

2009 2008 2009 2008

r000 r000 r000 r000

7. HEaDLinE EarninGS anD DiLUtED HEaDLinE EarninGS PEr SHarE

the calculation of headline earnings per ordinary share is based on headline earnings of r150 282 197 (2008: r135 189 787) and a weighted average number of shares of 94 397 435 (2008: 94 120 964).

the weighted average number of shares is calculated after taking into account the effect of setting off 50 661 (2008: 50 661) treasury shares held by the share incentive scheme against the issued share capital.

the calculation of diluted headline earnings per ordinary share is based on diluted headline earnings of r153 032 611 (2008: r135 189 787) and a weighted average number of shares in issue of 96 417 436 (2008: 95 670 304), after taking into account the effect of the possible issue of 2 020 000 (2008: 1 549 339) ordinary shares in the future relating to the share incentive scheme.

reconciliation of headline earnings:

attributable profit per the income statement 150 330 128 641

adjustments for:

Impairment of intangible assets — 7 807

(profit) on disposal of businesses — (1 833)

(profit)/loss on disposal of property, plant and equipment (47) 574

Headline earnings 150 283 135 189

Interest received on future share placements 2 750 —

Diluted headline earnings 153 033 135 189

Headline earnings per share (cents) 159 144

Diluted headline earnings per share (cents) 159 141

8. DiViDEnDS

Dividend no 27 of 33 cents, paid 14 July 2008 31 168 — 31 168 —

Dividend no 28 of 36 cents, paid 24 november 2008 34 001 — 34 001 —

65 169 — 65 169 —

Dividends on treasury shares held through the share incentive scheme (35) —

65 134 — 65 169 —

Distributions were made in the 2008 year in the form of capital distributions as follows:

30 cents per share paid 16 July 2007 r28 334 428

33 cents per share paid 27 november 2007 r31 167 673




Land andbuildings

Leaseholdimprove-

ments Plant and

equipmentmotor

vehiclescomputer

equipmentcomputer

software

furniture,fittings

and officeequipment total

r000 r000 r000 r000 r000 r000 r000 r000

9. ProPErtY, PLant anD EQUiPmEnt

GroUP

2009

cost

opening balance 7 711 6 017 79 111 42 437 12 235 8 573 14 028 170 112

additions — 3 173 13 249 13 293 838 1 402 1 153 33 108

acquired in business combination — — 2 875 2 815 409 — 367 6 466

Foreign currency translation — (192) (26) — (3) (7) (1) (229)

Disposals — — (891) (1 098) — — — (1 989)

Closing balance 7 711 8 998 94 318 57 447 13 479 9 968 15 547 207 468

accumulated depreciation

opening balance 227 4 159 19 915 15 818 6 757 6 447 5 824 59 147

Depreciation for year — 654 8 193 4 546 2 897 1 286 1 783 19 359

Foreign currency translation — (8) (7) — (2) 2 1 (14)

Disposals — — (822) (606) — — — (1 428)

Closing balance 227 4 805 27 279 19 758 9 652 7 735 7 608 77 064

net carrying amount 7 484 4 193 67 039 37 689 3 827 2 233 7 939 130 404

Items of property, plant and equipment with a carrying amount of r37 984 287 (2008: r37 107 878) are pledged as security for secured loans (refer note 19).

land and buildings comprise erf 344 Halfway House ext. 17 township registration division Ir in Gauteng province measuring 7 505 square metres, erf 219 Sunderland ridge ext. 1, Centurion in Gauteng province measuring 1 500 square metres and erf 218 Sunderland ridge ext. 1, Gauteng province measuring 1 500 square metres.

no property, plant and equipment was impaired during the current period.

the fair value of land and buildings is estimated by the directors to be r10 000 000 (2008: r10 000 000).

Land andbuildings

Leaseholdimprove-

ments Plant and

equipmentmotor

vehiclescomputer

equipmentcomputer

software

furniture,fittings


r000 r000 r000 r000 r000 r000 r000 r000

comPanY

cost

opening balance — 2 030 — — — — — 2 030

Closing balance — 2 030 — — — — — 2 030


opening balance — 1 871 — — — — — 1 871

Depreciation for year — 159 — — — — — 159

Closing balance — 2 030 — — — — — 2 030

net carrying amount — — — — — — — —


land andbuildings

leaseholdimprove-

ments plant and

equipmentMotor

vehiclesComputerequipment

Computersoftware

Furniture,fittings


r000 r000 r000 r000 r000 r000 r000 r000

9. ProPErtY, PLant anD EQUiPmEnt (continued)

GroUP

2008

cost

opening balance 7 528 5 621 67 746 36 264 9 294 6 774 10 624 143 851

additions 183 396 18 174 8 810 2 982 1 908 3 623 36 076

acquired in business combination — — 583 — — — — 583

Disposals — — (7 392) (2 637) (41) (109) (219) (10 398)

Closing balance 7 711 6 017 79 111 42 437 12 235 8 573 14 028 170 112


opening balance 140 3 698 17 529 12 920 4 733 4 926 4 331 48 277

Depreciation for year 87 461 6 142 4 488 2 064 1 568 1 645 16 455

Disposals — — (3 756) (1 590) (40) (47) (152) (5 585)

Closing balance 227 4 159 19 915 15 818 6 757 6 447 5 824 59 147

net carrying amount 7 484 1 858 59 196 26 619 5 478 2 126 8 204 110 965

comPanY

cost

opening balance — 2 030 — — — — — 2 030

Closing balance — 2 030 — — — — — 2 030


opening balance — 1 668 — — — — — 1 668

Depreciation for year — 203 — — — — — 203

Closing balance — 1 871 — — — — — 1 871

net carrying amount — 159 — — — — — 159




2009 2008

trade-marks Goodwill

franchiseincentives,

lease premiums

and similar totaltrade-marks Goodwill total

r000 r000 r000 r000 r000 r000 r000

10. intanGiBLE aSSEtS

GroUP

cost

opening balance 122 250 285 222 — 407 472 51 861 165 809 217 670

reallocation (7 173) 4 604 2 569 — — — —

additions 388 148 924 7 703 157 015 73 453 128 660 202 113

Disposals — — — — (3 064) (1 440) (4 504)

Foreign currency translation (3 063) (910) (398) (4 371) — — —

Impairment — — — — — (7 807) (7 807)

Closing balance 112 402 437 840 9 874 560 116 122 250 285 222 407 472

accumulated amortisation

opening balance — —

amortisation for the year 531 531

Foreign currency translation (26) (26)

Closing balance 505 505

net carrying amount 112 402 437 840 9 369 559 611 122 250 285 222 407 472

trademarks

all the Group’s trademarks have been assessed as indefinite life intangible assets.

the Group does not amortise its brands by value. In arriving at the conclusion that a brand has an indefinite life, management considers that the Group is a brands business and expects to acquire, hold and support brands for an indefinite period. the Group supports its brands through spending on consumer marketing and through significant investment in promotional support.

Indefinite life trademarks are assessed as such, as management believes there is no foreseeable limit over which the Group will continue to generate revenues from their continued use. Supporting this assumption is the fact that the brands held are established, well known, and reasonably can be expected to generate revenues beyond the Group’s strategic planning horizon. In addition the Group can continue to renew legal rights attached to such trademarks, without significant costs, and intend to do so beyond the foreseeable future.

as disclosed in note 19, the Group has hypothecated certain trademarks in favour of Investec Bank limited.

Goodwill

Goodwill additions relate to the acquisition of the business of Cape Franchising and the shares of Mountain rush trading 4

(proprietary) limited trading as tashas.

For further detail on these acquisitions refer to notes 22.7 and 22.6 respectively.

franchise incentives, lease premiums and similar

Franchise incentives and similar represent financial assistance given to franchisees in respect of fit out costs. together with lease premiums, these are initially measured at cost and amortised over the period of the agreements.


10. intanGiBLE aSSEtS (continued)

impairment reviews of goodwill and indefinite life intangible assets

Significant goodwill and indefinite life intangible asset carrying amounts and the cash-generating units to which they relate are detailed below:

unit(s) allocatedCarryingamount

trademarks

Franchise division – Local local franchise revenue stream 43 920 025

Wimpy, Debonairs pizza,

Fishaways, Steers, tashas

Franchise division – International

Wimpy uK Famous Brands uK franchise revenue stream 67 734 600

Goodwill

Franchise division – Local local franchise revenue stream 284 422 720

Wimpy, Debonairs pizza,

Fishaways, Steers, tashas

Franchise division – International

Wimpy uK Famous Brands uK franchise revenue stream 123 165 510

South african-based intangibles: the recoverable amounts of trademarks and goodwill have been determined on the basis of

value-in-use calculations. Value-in-use calculations use cash flow projections based on 2010 financial year budgets, approved by

management, extrapolated at 10% for four years. this five-year cumulative cash flow was discounted using a pre-tax weighted

average cost of capital of 16.9%.

UK-based intangibles: the recoverable amounts of trademarks and goodwill have been determined on the basis of value-in-use

calculations. Value-in-use calculations use cash flow projections based on 2010 financial year budgets, approved by management,

extrapolated at between 0% and 4% for 11 years. this 12-year cumulative cash flow was discounted using a pre-tax weighted

average cost of capital of 11.0%.

Key assumptions used in value-in-use calculations include budgeted manufacturing margins and budgeted franchise revenue streams.

Such assumptions are based on historical results adjusted for anticipated future growth. these assumptions are a reflection of

management’s past experience in the market in which these units operate.

Based on the above assumptions, management’s calculations of recoverable amounts were greater than the carrying amounts.

Management believes that any reasonable possible change in any of its key assumptions would not cause the aggregate carrying

amounts to exceed aggregate recoverable amounts.

Sensitivity analysis

If the revised estimated pre-tax discount rate applied to the discounted cash flows had been 10% less favourable than management’s

estimates, the Group would need to reduce the carrying value of the trademarks by rnil and goodwill by rnil. If the actual gross

margin and the pre-tax discounted rate had been more favourable than management’s estimates, the Group would not be able to

reverse any impairment losses that arose on trademarks if this resulted from the disposal of the relevant business in the

cash-generating unit. IaS 36 does not permit reversing an impairment loss for goodwill.




group Company

2009 2008 2009 2008r000 r000 r000 r000

11. inVEStmEnt in SUBSiDiariES

unlisted shares at cost less amounts written off 206 525 203 792

net amount owing by subsidiaries (24 299) 5 711

182 226 209 503

a schedule of subsidiaries of the company is set out in annexure a.

12. LoanS rEcEiVaBLE

total loans receivable — 182 — —

loans to franchisees bear interest at various rates per annum and have fixed terms of repayment. other loans receivable are unsecured, interest-free with no fixed terms of repayment.

there were no gains or losses realised on the disposal of held-to-maturity financial assets in 2009 and 2008, as all the financial assets were disposed of at their redemption date.

fair values of loans and receivables

there is no material difference between the fair value of loans and receivables and their book value.

Loans and receivables past due but not impaired

loans and receivables have no fixed terms of repayment and are therefore not past due.

Loans and receivables impaired

as at 28 February 2009, there were no loans and receivables impaired and provided for.

credit quality of financial assets

no credit rating of loans and receivables has been performed.


group Company

2009 2008 2009 2008r000 r000 r000 r000

13. DEfErrED taXation

movement:Balance at beginning of year 33 173 13 398 (1 665) (798)acquired in business combinations — 19 375 — —adjustment in respect of prior year (140) — — —transferred this year 39 1 451 (1 194) (867)

Movement through income statement 85 1 451 (1 194) (867) Foreign currency translation (46) — — —

effect of consolidation of marketing funds 668 (668) — —effect of disposal of subsidiary — (383) — —

33 740 33 173 (2 859) (1 665)

analysisexcess capital allowances over depreciation 22 114 20 578 — —effect of taxation losses (1 038) (1 365) (1 038) —prepayments 210 348 32 63provisions (3 555) (1 946) — —other temporary differences 16 009 15 558 (1 853) (1 728)

33 740 33 173 (2 859) (1 665)

the balance per companies comprises:aggregate of deferred tax assets (3 759) (6 608) (2 859) (1 665)aggregate of deferred tax liabilities 37 499 39 781 — —

33 740 33 173 (2 859) (1 665)

14. inVEntoriES

raw materials 36 328 35 838 — —Finished goods 53 392 49 151 — —Consumables — 383 — —

89 720 85 372 — —

the amount of inventories recognised as an expense during the period amounted to r918 227 927 (2008: r648 354 557).Write-downs of inventories to their net realisable value amounted to r427 772 (2008: r780 915) and mostly relate to finished products.there are no inventories pledged as security for liabilities.




group Company

2009 2008 2009 2008r000 r000 r000 r000

15. traDE anD otHEr rEcEiVaBLES

Gross trade receivables 164 607 116 577 — —provision for doubtful debts (5 359) (7 449) — —

net trade receivables 159 248 109 128 — —prepayments 99 6 704 114 226other 6 015 8 131 1 354 2 455

165 362 123 963 1 468 2 681

as disclosed in note 19, the Group has ceded certain trade receivables in favour of Investec Bank limited.GroUP

credit quality of trade and other receivables

the Group has a wide customer base. no credit rating has been obtained from banks. one debtor has a balance in excess of 5% of the trade receivables balance amounting to r15 240 000 (2008: r7 107 000).the table below illustrates the trade receivable ageing analysis:less than 30 days 125 724 85 54731 to 60 days 12 400 10 34761 to 90 days 6 570 4 17291 to 120 days 13 477 11 254over 120 days 6 436 5 257

164 607 116 577

It is the policy of the company to allow for between 7 to 90-day payment terms.fair value of trade and other receivables

there is no material difference between the fair value of trade and other receivables and their book value.trade and other receivables past due and not impaired trade and other receivables which are less than 3 months past due are not considered to be impaired.at 28 February 2009, amounts further past due but not impaired were r14 554 256 (2008: r9 062 414). the ageing of these amounts further past due but not impaired was as follows:1 month 10 797 7 530More than 1 month 3 757 1 533


group Company

2009 2008 2009 2008r000 r000 r000 r000

15. traDE anD otHEr rEcEiVaBLES (continued)

GroUP (continued)

trade and other receivables impaired

at 28 February 2009, trade and other receivables were impaired and provided for.

the amount of the provision as of 28 February 2009 was r5 358 767 (2008: r7 449 190).

the ageing of these receivables is as follows:

three to six months 5 359 7 449

reconciliation of provision for impairment of trade and

other receivables

opening balance 7 449 1 779

provision for impairment 766 8 206

amounts written off as uncollectible (2 856) (2 536)

5 359 7 449

the maximum exposure to credit risk at the reporting date is the fair value of each class of trade receivable mentioned above.

the Group does not hold any collateral as security.

comPanY

credit quality of trade and other receivables

no credit rating has been obtained from banks. the majority of the trade and other receivables are intercompany receivables.

fair value of trade and other receivables

there is no material difference between the fair value of trade and other receivables and their book value.

trade and other receivables past due but not impaired

there are no trade and other receivables past due and not impaired.

trade and other receivables impaired

at 28 February 2009, there were no trade and other receivables impaired or provided for.

the maximum exposure to credit risk at the reporting date is the fair value of each class of trade receivable mentioned above. the company does not hold any collateral as security.




group Company

2009r000

2008r000

2009r000

2008r000

16. SHarE caPitaL

authorised

200 000 000 (2008: 200 000 000) ordinary par value shares of 1 cent each 2 000 2 000 2 000 2 000

issued

94 448 096 (2008: 94 448 096) ordinary par value shares of 1 cent each 944 944 944 944

adjusted for treasury shares held

50 661 (2008: 50 661) ordinary par value shares of 1 cent each held by the share incentive scheme — —

adjusted issued

94 397 435 (2008: 94 397 435) ordinary par value shares of 1 cent each 944 944

Unissued

105 551 904 (2008: 105 551 904) ordinary par value shares of 1 cent each 1 056 1 056 1 056 1 056

the unissued shares are under the control of the directors until the next annual general meeting.

6 733 265 (2008: 6 733 265) of the unissued ordinary shares are specifically reserved for the share incentive scheme, of which 2 020 000 (2008: 1 600 000) options have already been offered to and accepted by employees.

17. SHarE PrEmiUm

Balance at beginning of year 9 645 51 276 9 645 51 276

Capital distribution — (59 502) — (59 502)

premium on shares issued — 17 871 — 17 871

Share incentive scheme issues (1 233) — — —

8 412 9 645 9 645 9 645

50 661 (2008: 50 661) treasury shares held by the share incentive scheme at cost (745) (745)

Balance at end of year 7 667 8 900 9 645 9 645

18. non-DiStriBUtaBLE rESErVE

Capital profit on sale of the company’s business to a subsidiary 10 775 10 776

Foreign currency translation reserve 9 800 10 078

Share-based payments 7 545 4 823 7 545 4 823

17 345 14 901 18 320 15 599

19. intErESt-BEarinG BorrowinGS

19.1 instalment sale liabilities

Secured over property, plant and equipment having a carrying amount of r37 984 287 (2008: r37 107 878) (refer to note 9). the agreements bear interest at prevailing market rates when entered into and are repayable over a period of 36 to 60 months. the current monthly instalment is r1 381 530 (2008: r2 129 969). 27 736 32 704


group Company

2009r000

2008r000

2009r000

2008r000

19. intErESt-BEarinG BorrowinGS (continued)

19.2 Secured loans

Secured loan from Bank of Scotland bearing interest at 2.25% above the three-month lIBor rate. at year-end the lIBor rate was 2.06% (2008: 5.74%). the loan is repayable in quarterly instalments which commence on 5 March 2007 with a final instalment on 1 February 2013. the current instalment is r2 743 680 (2008: r2 613 835). 65 263 79 107

Secured loan from Bank of Scotland bearing interest at 5% above the three-month lIBor rate. at year-end the lIBor rate was 2.06% (2008: 5.74%). the loan is repayable in one lump sum payment at the end of the term on 1 February 2013. 42 870 44 809

unamortised loan issue expenses (1 484) —

Secured loan from Investec Bank limited (“Senior Debt”) repaid during the year. — 13 251

Secured loan from Investec Bank limited bearing interest at 2.25% above the three-month JIBar rate. at year-end the JIBar rate was 9.75%. the loan is repayable in quarterly instalments which commenced on 15 august 2008 with a final instalment on 16 May 2013. the current instalment is r9 018 450. 118 720 —

Secured loan from Investec Bank limited bearing interest at 2.5% above the three-month JIBar rate. at year-end the JIBar rate was 9.75% (2008: 11.08%). the loan is repayable in quarterly instalments which commenced on 1 June 2006 with a final instalment on 1 September 2012. the current instalment is r570 854 (2008: r558 758). 7 105 7 770

the above loans from Investec Bank limited are secured by irrevocable, unconditional, joint and severable guarantees issued by the company and certain of its subsidiaries. as further security for the obligations arising in terms of the guarantees issued above, certain subsidiaries have hypothecated their rights to their trademarks and ceded their trade receivables in favour of the bank.

Secured loan from Investec Bank limited bearing interest at 2.25% above the three-month JIBar rate. at year-end the JIBar rate was 9.75% (2008: 11.08%). the loan is repayable in quarterly instalments which commenced on 1 June 2007 with a final instalment on 1 September 2013. the current instalment is r2 490 082 (2008: r2 434 760). 29 944 34 753

Secured loan from Investec Bank limited bearing interest at 2.25% above the three-month JIBar rate. at year-end the JIBar rate was 9.75% (2008: 11.08%). the loan is repayable in quarterly instalments which commenced on 1 June 2007 with a final instalment on 1 March 2013. the current instalment is r1 869 935 (2008: r1 828 560). 24 338 26 377

total liabilties 314 492 238 771

repayable within one year transferred to current liabilities 65 114 50 438

non-current liabilities 249 378 188 333

repayable within 2 – 5 years 249 378 188 333




group Company

2009r000

2008r000

2009r000

2008r000

20. traDE anD otHEr PaYaBLEStrade payables 82 025 38 508 — —accruals 60 998 74 900 20 380 advertising levy surplus 614 4 709 — —other 7 378 6 984 14 —

151 015 125 101 34 380

accruals and deferred income represent miscellaneous contractual liabilities that relate to expenses that were incurred, but not paid for at the year-end and income received during the year, for which the Group had not supplied the goods or services at the end of the year.the book value of trade payables, accruals and deferred income is considered to be in line with their fair value at the balance sheet date.other payables comprise miscellaneous minor items.

21. DEfErrED LEaSE LiaBiLitiESopening balance 2 930 2 980 2 840 2 890 Movement during the year 3 701 (50) 3 791 (50)

Closing balance 6 631 2 930 6 631 2 840

analysed as follows:Current liabilities 18 390 18 390 non-current liabilities 6 613 2 540 6 613 2 450

6 631 2 930 6 631 2 840

22. caSH fLow information22.1 reconciliation of operating profit before taxation to cash

generated by operationsoperating profit before taxation 217 826 190 459 50 702 49 067 adjustment for: Depreciation on property, plant and equipment 19 359 16 455 159 203 Dividends received — — (55 287) (57 019) Fair value adjustment on investment — — (109 127) — Impairment of intangible assets — 7 807 — — Impairment of investment — (3) 109 127 3 615 Intangible assets amortisation 531 — — — Movement in deferred lease liabilities 3 701 (50) 3 791 (50) Movement in doubtful debts provision (2 193) 5 670 — — Movement in foreign currency translation reserve (279) 8 697 — — Movement in provisions — (1 261) — — net interest paid 44 090 19 117 2 036 2 804 (profit) on disposal of business — (1 833) — — (profit)/loss on disposal of property, plant and equipment (47) 574 — — Share-based payments reserve 2 722 4 823 — 4 823

operating profit before working capital changes 285 710 250 455 1 401 3 443 Working capital changes (8 526) (51 458) 128 (7 148)

Decrease/(increase) in inventories 299 (30 523) — — (Increase)/decrease in receivables (29 267) 8 579 484 1 807 Increase/(decrease) in payables 20 442 (29 514) (356) (8 955)

Cash generated by operations 277 184 198 997 1 529 (3 705)


group Company

2009r000

2008r000

2009r000

2008r000

22. caSH fLow information (continued)

22.2 reconciliation of taxation paid during the year

amounts owing at beginning of year (37 016) (20 259) 808 (1 286)

amounts charged to the income statement (69 924) (59 378) (5 323) 867

adjustment for deferred taxation 39 (1 451) (1 194) (867)

Income taxation from consolidation of marketing funds 663 (694)

amounts owing at end of year 35 565 37 016 (1 807) (808)

(70 673) (44 766) (7 516) (2 094)

22.3 reconciliation of dividends paid during the year

amounts owing at beginning of year (507) (389) (507) (389)

amounts charged to retained earnings (65 134) — (65 169) —

Capital reduction of share premium — (59 502) — (59 502)

amounts owing at end of year 569 507 569 507

(65 072) (59 384) (65 107) (59 384)

22.4 net proceeds on disposal of business

property, plant and equipment disposed — 2 206

Deferred tax assets disposed — 383

trade and other receivables disposed — 941

Goodwill disposed — 8 547

Inventories disposed — 2 718

net assets disposed — 14 795

profit on disposal of business — 1 564

Consideration received — —

— 16 359

22.5 net proceeds on disposal of Group-owned outlets

property, plant and equipment disposed — 235

trade payables disposed — (6)

till float disposed — 3

Inventories disposed — 19

net assets disposed — 251

profit on disposal of business — 268

Less: till float — (3)

— 516




group Company

2009r000

2008r000

2009r000

2008r000


22.6 investment in subsidiaries

effective 1 July 2008, a 51% interest was acquired in a company, Mountain rush trading 4 (proprietary) limited, which houses the franchising interests of the tashas chain for a consideration of r5 million comprised entirely of goodwill. the acquisition in the prior year relates to the investments in Famous Brands uK limited.

fair value of assets and liabilities

Intangible assets — brand — 67 330

trade and other receivables — 14 034

Cash and cash equivalents — 33 949

Deferred tax asset — 170

property, plant and equipment — 583

trade payables — (20 057)

Borrowings — (156 250)

Deferred tax liability — (19 546)

net (liabilities) acquired — (79 787)

75% of net liabilities acquired — (59 840)

liabilities of minority borne by Group — (19 947)

Goodwill 5 000 122 426

purchase price 5 000 42 639

Less: Cash and cash equivalents — (33 949)

Cash flow on investment in subsidiaries 5 000 8 690

the goodwill amount represents the future income-earning capacity of the business

comPanY

acquiring of interests in subsidiaries — 76 621

22.7 acquisition of business

effective 1 March 2008, the Group purchased certain business assets and liabilities of Cape Franchising (proprietary) limited for an amount of r155 million. the purchase consideration was allocated between material contracts, property, plant and equipment, stock and other business assets at carrying value, with the remainder allocated to goodwill. the fair value of the assets and liabilities acquired were equal to their carrying values.

non-current assets 6 467 —

Current assets 5 000 —

Current liabilities (314) —

net assets acquired 11 153 —

Goodwill 143 847 —

Cash flow on acquisition of business 155 000 —

the goodwill arising on the transaction relates to trading opportunities and cost synergies.


group Company

2009r000

2008r000

2009r000

2008r000


22.8 cash and cash equivalents

Cash and cash equivalents included in the cash flow statement comprise the following balance sheet items:

Cash and bank balances 101 345 120 763 766 61

Bank overdrafts (12 139) (2 908) — (12 189)

89 206 117 855 766 (12 128)

as described in the accounting policies certain bank overdrafts payable on demand fluctuate from being positive to overdrawn and are considered an integral part of the Group’s cash management for cash flow statement purposes.

there is no material difference between the fair value and the book value of cash and cash equivalents.

23. continGEnt LiaBiLitiES

23.1 the company and its South african subsidiaries have issued an irrevocable, unconditional, joint and severable guarantee in favour of Investec Bank limited to secure the Group’s obligations. the total Group obligation at year-end amounts to r125 825 345 (2008: r21 021 512). as a further security, certain companies within the Group have hypothecated rights to trademarks in favour of Investec Bank limited.

23.2 the company and its South african subsidiaries have issued an unlimited suretyship in favour of First national Bank – a division of Firstrand Bank limited to secure the Group’s banking facilities and instalment sale agreements entered into by certain subsidiary companies.

23.3 In respect of guarantees issued by banks in favour of trade creditors r725 562 (2008: r1 997 977).

23.4 GroUP

If the total reserves of r466 321 130 (2008: r381 127 000) were to be declared as dividends, the secondary taxation impact at a rate of 10% (2008: 10%) would be r42 392 830 (2008: r34 647 909).

23.5 comPanY

If the total reserves of r152 983 319 (2008: r172 773 000) were to be declared as dividends, the secondary taxation impact at a rate of 10% (2008:10%) would be r13 907 574 (2008: r15 706 636).

24. commitmEntS

24.1 operating leases – leasehold premises and equipment

the company and the Group have commitments arising from property leases for its own business operations and leases entered into to secure key sites for franchised outlets. With regards to leases entered into to secure key sites, it is the Group’s policy to enter into sublease agreements with the franchisees on the same terms and conditions as those in the main lease.

In circumstances where the amounts recoverable are lower than the amounts payable, the company immediately recognises provisions for onerous contracts.

Certain operating commitments relating to computer equipment exist.

the net future minimum rentals due under operating leases are as follows:

group Company

2009r000

2008r000

2009r000

2008r000

Gross amounts due 197 694 157 518 92 639 94 107

amounts recoverable from sub-lessees (59 699) (61 400) — —

137 995 96 118 92 639 94 107

the net future minimum rentals due are repayable as follows:

payable within the next 12 months 47 170 31 592 13 414 9 915

thereafter 150 524 125 926 79 225 84 192

197 694 157 518 92 639 94 107




group Company

2009r000

2008r000

2009r000

2008r000

24. commitmEntS (continued)

24.2 capital expenditure 16 296 39 056 — —

approved by the directors but not contracted for.

this capital expenditure relates to additions and improvements to current production facilities and additions to motor vehicles, computer equipment and furniture and fittings.

It is anticipated that this expenditure will be financed by existing borrowing facilities and internally generated funds.

25. rEtirEmEnt BEnEfit PLan

the Group is a member of two provident funds that are administered by liberty life which provide benefits on a defined contribution basis. the funds are subject to the pensions Fund act of 1956 as amended. all employees of the Group are eligible to be members of the funds. the Group’s contribution to the provident funds for the year which has been charged to the income statement was r9 918 804 (2008: r8 056 574).

26. DirEctorS’ intErESt in SHarES

name of directorBeneficial*

directBeneficial*

indirecttotal*2009

total*2008

Executive

Mr t Halamandaris 10 000 — 10 000 10 509

Mr K Hedderwick 1 156 — 1 156 1 156

non-executive

Mr Hr levin 1 000 — 1 000 1 000

Mr p Halamandaris 2 472 9 070 11 542 11 542

Mr p Halamandaris (jnr) 8 522 435 8 957 9 237

Mr Jl Halamandres 7 090 — 7 090 7 350

30 240 9 505 39 745 40 794

no director has any non-beneficial interest in the ordinary shares of the company.

the company has not been advised of any changes in the above interests of the directors during the period up to the date of this report.

*Number of shares in thousands.


27. DirEctorS’ rEmUnEration

name of director

for services as directors

r000remuneration

r000Bonuses

r000

allowances and benefits

r000totalr000

28 february 2009

Executive

Mr t Halamandaris 2 633 1 440 644 4 717

Mr K Hedderwick 2 547 1 167 140 3 854

Mr t pritchard 932 — 140 1 072

Mr S aldridge 348 63 52 463

non-executive

Mr Hr levin 111 111

Mr p Halamandaris 75 75

Mr p Halamandaris (Jnr) 25 25

Mr Jl Halamandres 75 75

Mr Bl Sibiya 50 50

336 6 460 2 670 976 10 442

Less: paid by subsidiaries — (6 460) (2 670) (976) (10 106)

336 — — — 336

29 february 2008

Executive

Mr t Halamandaris 2 343 2 250 657 5 250

Mr K Hedderwick 2 251 1 800 149 4 200

Mr t pritchard 108 — 18 126

non-executive

Mr Hr levin 74 74

Mr p Halamandaris 125 125

Mr p Halamandaris (Jnr) 25 25

Mr Jl Halamandres 79 79

Mr Bl Sibiya 75 75

378 4 702 4 050 824 9 954

Less: paid by subsidiaries — (4 702) (4 050) (824) (9 576)

378 — — — 378

performance bonuses reflect the amounts accrued in respect of the year to which the performance relates and not the amount paid.




28. EQUitY SEttLED SHarE-BaSED PaYmEntS

Famous Brands limited operates the Steers Share Incentive Scheme (“Share Incentive Scheme”). this enables certain of its management as well as specified directors of subsidiaries to benefit from the performance of the Famous Brands limited share.

this scheme confers the right to participants to acquire ordinary shares at the value of the Famous Brands limited share at the date that the option is granted. on acceptance of the option, the participant has the right to exercise the option at any time, after vesting, during the option period, in as many tranches as the participant may elect. to receive shares, participants must be employed by the company when the rights to the shares vest. the directors of the company may amend the vesting period of the options by board resolution.

the scheme has three types of vesting categories as illustrated below:

Vesting categoryVests at

end of year % vestingExpiry aftergrant (years)

type a 1, 2, 3 33, 66, 100 7

type B 3 100 7

type C 1, 2 50, 50 7

a reconciliation of the movement of all share options is detailed below:

option exercise

price range (rands)

option exercise

price range (rands)

number of options

number of options

Steers Share incentive Scheme 2009 2008 2009 2008

opening balance 12.00 – 18.25 12.00 – 15.90 1 600 000 820 000

options granted and accepted – management 15.00 15.90 – 18.25 710 000 600 000

options granted and accepted – directors — 15.90 — 800 000

lapses — — (290 000) (70 000)

allotted and issued — 12.00 – 15.90 — (550 000)

options exercised, shares not issued up to end of period 2 020 000 1 600 000

the last options granted by the scheme were granted on 21 May 2008.

the following options have been granted and accepted, but delivery of shares will only take place in the future:

number of ordinary shares Weighted average price (rands) last vesting date

150 000 12.00 Year to 28 February 2010

940 000 15.90 Year to 28 February 2011

350 000 18.25 Year to 28 February 2011

580 000 15.00 Year to 29 February 2012

2 020 000


28. EQUitY SEttLED SHarE-BaSED PaYmEntS (continued)

Share options held by executive directors are detailed below:

number ofoptions

2009

number ofoptions

2008

Mr t Halamandaris 400 000 400 000

Mr K Hedderwick 400 000 400 000

the share options granted have been valued, at grant date, using either a trinomial tree which takes account of the vesting period (european style option) and the period post vesting (american style option) or the Black-Scholes-Merton model.

expected volatility of the share price was determined by giving consideration to the historical volatility of the Famous Brands share price.

the weighted fair value of the options granted and the related assumptions utilised are detailed below:

number of options granted and accepted 710 000 1 400 000

Weighted average fair value at grant date (rands) 3.04 3.08

The principal inputs are as follows:

Weighted average share price (rands) 17.80 18.94

exercise price range (rands) 15.00 – 18.25 15.90 – 18.25

expected life (years) 2.7 – 4.0 2.7 – 4.0

expected volatility (%) 26 – 29 26 – 29

risk-free interest rate (%) 7.74 – 11.25 7.74 – 9.09

average expected dividend yield (%) 2.0 2.0

During 2009 the total charge to the income statement amounted to r2 721 514 (2008: r4 823 520).

29. rELatED PartY tranSactionS

the Group, in the ordinary course of business, entered into various transactions with related parties. these transactions occurred under terms and conditions no more favourable to those entered into with third parties.

29.1 franchise agreements

Directors have interests in two franchised outlets. Franchise fees and product sales have been charged under terms and conditions no more favourable than those entered into with third parties.

29.2 Lease agreements

the Group has entered into a lease agreement with an entity controlled by certain directors. the transactions were concluded at market-related rates prevailing at the time of entering into the transactions.

29.3 Supply agreements

the Group has entered into a supply agreement with an entity controlled by certain directors. all products purchased were concluded at market-related prices.

29.4 Licence agreement

the Group has entered into a licence agreement with an entity in which a director of a subsidiary holds an interest, in terms of which the licensee is entitled to manage and expand the Steers and Debonairs brand in the Western Cape region. In addition, the licensee purchases products from the Group to distribute in the territory at prices no more favourable than market-related distribution agreements.




29. rELatED PartY tranSactionS (continued)

29.5 Professional fees

professional fees have been paid to a firm of which a non-executive director is a partner. the transactions were conducted at market-related rates prevailing at the time of entering into the transactions.

2009 2008

the aggregate of the above transactions are as follows: r000 r000

Sale of product and franchise fee revenue 600 14 655

lease payments — 272

purchases of product 24 229 21 657

licence fees received — 9 020

professional fees paid 186 691

amounts owing (to)/by related parties (16) 1 741

29.6 transactions between the holding company and subsidiaries

rent received 11 793 10 095

rent paid 11 785 10 027

Dividends received 55 287 57 019

Management fees received 4 000 2 000

29.7 Directors’ remuneration

the remuneration for directors of the holding company paid during the year by subsidiaries within the Group has been disclosed in note 27.

30. riSK manaGEmEnt

the board of directors has approved strategies for the management of financial risks, which are in line with corporate objectives. these guidelines set up the short-term and long-term objectives and action to be taken in order to manage the financial risks that the Group faces.

the major guidelines of this policy are the following:

n Minimise interest rate, currency and market risk for all kind of transactions;

n all financial risk management activities are carried out and monitored at central level; and

n all financial risk management activities are carried out on a prudent and consistent basis and follow the best market practices.

the Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

the following table summarises the carrying amount of financial assets and liabilities recorded at 28 February by IaS 39 category:

group Company

financial assets 2009r000

2008r000

2009r000

2008r000

Cash and bank balances 101 345 120 763 766 61 loans and receivables: trade and other receivables 165 362 123 963 1 468 2 681 loans and receivables: loans to Group companies 35 669 10 755 loans and receivables: loan receivable — 182 — —

266 707 244 908 37 903 13 497

financial liabilitiesBank overdrafts 12 139 2 908 — 12 189 Measured at amortised cost: trade and other payables 151 015 125 101 34 380 Measured at amortised cost: Borrowings 314 492 238 771 — — other financial liabilities: loans from Group companies 59 967 5 044 Measured at amortised cost: Shareholders for dividends 569 507 569 507

478 215 367 287 60 570 18 120


30. riSK manaGEmEnt (continued)

30.1 Liquidity risk

the Group manages liquidity risk on the basis of expected maturity dates.

the Group’s risk to liquidity is a result of the funds available to cover future commitments. the Group manages liquidity risk through an ongoing review of future commitments and credit facilities.

Cash flow forecasts are prepared and adequate borrowing facilities are monitored.

the following table analyses financial liabilities by remaining contractual maturity (contractual and undiscounted cash flows):

Less than 1 yearr000

1 – 3 years r000

total r000

GroUP

2009

trade and other payables 151 015 — 151 015

Bank overdrafts 12 139 — 12 139

Borrowings 65 114 249 378 314 492

Shareholders for dividends 569 — 569

228 837 249 378 478 215

2008

trade and other payables 125 101 — 125 101

Bank overdrafts 2 908 — 2 908

Borrowings 50 438 188 333 238 771

Shareholders for dividends 507 — 507

178 954 188 333 367 287

comPanY

2009

trade and other payables 34 34

Bank overdrafts — —

loan from Group companies 59 967 59 967

Shareholders for dividends 569 569

60 570 60 570

2008

trade and other payables 380 380

Bank overdrafts 12 189 12 189

loan from Group companies 5 044 5 044


18 120 18 120

the carrying amount of the financial liabilities is considered to be in line with the fair value at balance sheet date.

at present the Group does expect to pay all liabilities at their contractual maturity. In order to meet such cash commitments the Group expects the operating activity to generate sufficient cash inflows. In addition, the Group holds financial assets for which there is a liquid market and that are readily available to meet liquidity needs.





30.2 interest rate risk

the Group’s exposure to interest rate risk mainly concerns financial liabilities. liabilities are both floating rate and non-interest-bearing.

at present the Group does not hold loans and receivables that are long-term in nature. the following table analyses the breakdown of

liabilities by type of interest rate, and also reflects a fixed interest rate derivative which reduces the gross floating rate exposure:

group Company

2009

r000

2008

r000

2009

r000

2008

r000

Floating rate 326 631 241 679 — 12 189

non-interest-bearing — — 59 967 5 044

326 631 241 679 59 967 17 233

Less: Interest rate swap – Buy fixed 5.59%, sell floating

(three-month lIBor) (70 736) — — —

effective floating rate exposure 255 895 241 679 59 967 17 233

Sensitivity analysis

a hypothetical increase/decrease in interest rates of 50 basis points, with all other variables remaining constant, would increase/

decrease profits after tax by r1 159 539 (2008: r857 966).

a hypothetical increase/decrease in interest rates by 100 basis points, with all other variables remaining constant, would increase/

decrease profits after tax by r2 319 078 (2008: r1 715 932).

the analysis has been performed for floating interest rate financial liabilities.

the impact of a change in interest rates on floating interest rate financial liabilities has been assessed in terms of the changing of their

cash flows and therefore in terms of the impact on net expenses.

as the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of

changes in market interest rates.

30.3 foreign currency risk

Since the Group operates internationally, it is exposed to foreign currency risk as part of its normal industrial and commercial business.

the Group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. Currency

exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the

relevant foreign currencies.

the Group does, on occasion, hedge transactional foreign exchange exposures.


group Company

2009 cU000*

2008 Cu000*

2009 cU000*

2008 Cu000*


30.3 foreign currency risk (continued)financial assets are analysed by currency as follows:

GB Poundtrade and other receivables 709 760 Cash and cash equivalents 1 157 7 932 Eurotrade and other receivables 2 711 Cash and cash equivalents 512 301 US Dollartrade and other receivables 30 —Cash and cash equivalents 2 465 —Botswana PulaCash and cash equivalents 305 —financial liabilities are analysed by currency as follows:GB PoundBorrowings 7 463 8 356 trade and other payables 1 499 1 297 taxation 87 122 Eurotrade and other payables 7 4taxation 27 26Exchange rates used for conversion of foreign items were:GB pound to euro 1.123 1.312 euro to rand 12.722 11.384 uS Dollar to rand 9.985 —Botswana pula to rand 1.266 —*CU: Currency units

30.4 credit riskCredit risk is managed on a Group basis.Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. the Group only deposits cash with major banks with high quality credit standing and limits exposure to any one counterparty.

trade receivables comprise a widespread customer base. Management evaluates credit risk relating to customers on an ongoing basis. If customers are independently rated, these ratings are used. otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. the utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards. Credit guarantee insurance is purchased when deemed appropriate. refer to note 15 for details on the quality and provison for impairment of trade receivables.

r000 r000 r000 r000

financial assets exposed to credit risk at year-end were as follows:trade and other receivables 165 362 123 963 1 468 2 681 Cash and cash equivalents 101 345 120 763 766 61 loans receivable — 182 — —

266 707 244 908 2 234 2 742

the Group is exposed to a number of guarantees for the overdraft facilities of Group companies and for guarantees issued in favour of Investec Bank limited. refer to note 19 for additional details.




31. PrimarY (business units) anD SEconDarY (geographical) SEGmEnt rEPort

For management purposes the Group is organised into three major operating divisions: Franchising, Food Services and Corporate.

Such structural organisation is determined by the nature of risks and returns associated to each business segment and defines the

management structure as well as the internal reporting system. It represents the basis on which the Group reports its primary segment

information.

the global operations of the Group are divided into two principal geographical areas. In the South african segment the Group has all

three business segments reflected below whereas in the united Kingdom, only a Franchising segment exists.

2009 2008

r000 % r000 %

SEGmEnt rEVEnUE

Franchising 299 468 19.33 259 513 21.80

Food Services 1 082 631 69.88 756 114 63.52

Manufacturing 567 706 36.64 506 193 42.53

logistics 976 688 63.04 691 553 58.10

eliminations (461 763) (29.81) (441 632) (37.10)

Corporate 53 355 3.44 50 598 4.25

eliminations (65 732) (4.24) (51 097) (4.29)

South africa 1 369 722 88.41 1 015 128 85.28

International (uK) 179 522 11.59 175 173 14.72

Group revenue 1 549 244 100.00 1 190 301 100.00

SEGmEnt Profit

Franchising 185 520 70.83 141 953 65.30

Food Services 61 466 23.47 61 453 28.27

Manufacturing 41 513 15.85 48 154 22.15

logistics 23 055 8.80 14 705 6.76

eliminations (3 102) (1.18) (1 406) (0.65)

Corporate (2 768) (1.06) (5 616) (2.58)

eliminations 485 0.19 — —

South africa 244 703 93.43 197 790 90.99


Group profit 261 916 100.00 217 383 100.00


2009 2008

r000 % r000 %

31. PrimarY (business units) anD SEconDarY (geographical) SEGmEnt rEPort (continued)

SEGmEnt aSSEtS

Franchising 401 002 42.43 235 321 32.33

Food Services 310 621 32.87 278 044 38.20

Manufacturing 140 867 14.91 162 894 22.38

logistics 169 754 17.96 115 150 15.82

Corporate 15 656 1.66 4 815 0.66

South africa 727 279 76.95 518 180 71.18


Group assets 945 097 100.00 727 955 100.00

SEGmEnt LiaBiLitiES

Franchising 32 495 20.61 35 584 27.79

Food Services 72 826 46.20 45 796 35.77

Manufacturing 43 848 27.81 30 088 23.50

logistics 28 978 18.38 15 708 12.27

Corporate 27 684 17.56 27 234 21.27

South africa 133 005 84.37 108 614 84.83


Group liabilities 157 647 100.00 128 032 100.00

caPitaL EXPEnDitUrE

Franchising 2 143 5.42 3 315 9.04

Food Services 31 308 79.11 25 913 70.69

Manufacturing 13 302 33.61 12 787 34.88

logistics 18 006 45.50 13 126 35.81

Corporate 2 573 6.50 6 366 17.37

South africa 36 024 91.03 35 594 97.10


Group capital expenditure 39 574 100.00 36 658 100.00

total capital expenditure includes non-current assets of r6 467 000 in respect of the Cape Franchising acquisition (refer note 22.7).




group Group

2009 2008

r000 % r000 %

31. PrimarY (Business units) anD SEconDarY (Geographical) SEGmEnt rEPort (continued)

DEPrEciation

Franchising 1 715 8.86 1 496 9.09

Food Services 12 372 63.91 10 035 60.99

Manufacturing 7 643 39.48 5 978 36.33

logistics 4 729 24.43 4 057 24.66

Corporate 4 722 24.39 4 595 27.92

South africa 18 809 97.16 16 126 98.00

International (uK) 550 2.84 329 2.00

Group depreciation 19 359 100.00 16 455 100.00

the operating profit is recorded after adding back rnil (2008: r7 807 182), being impairment of intangible assets.

the following table provides details of assets and liabilities not allocated to business segments:

assets

Deferred taxation 3 759 6 608

taxation 2 007 808

Cash and cash equivalents 101 345 120 763

107 111 128 179

Liabilities

Borrowings 314 492 238 771

Deferred taxation 37 499 39 781


taxation 37 572 37 824

Bank overdrafts 12 139 2 908

402 271 319 791

32. Prior YEar PrESEntation cHanGESCertain prior year numbers were reclassified to enhance comparability.there was no change to operating profit or profit for the financial year as a result of these changes.these reclassifications were as follows:income statementthe impairment loss of r7 807 000 was reallocated from selling and administration expenses to its own line item.cash flow statementInvestment in minority interest and movement in foreign currency translation reserve were reallocated from investing activities to be included in cash generated by operations. the capital distribution of r59 502 000 included in financing activities was reallocated to dividends paid in cash flow from operating activities.Segment reportr4 586 000 net income was reallocated from Corporate operating profit to International operating profit.r30 764 000 of International assets and r56 817 000 of Corporate assets were reallocated to the Franchising division assets.



annEXUrE a ScHEDULE of inVEStmEnt in SUBSiDiariES

Share

capital

interest Shares amounts owing by/(to) subsidiaries

r

2009

%2008

%

2009

r000

2008

r000

2009

r000

2008

r000

Direct

Baltimore Ice Cream (proprietary) limited2 100 100 100 1 493 4 309 — (3 500)

Creative Coffee Franchise Systems (proprietary) limited7 100 100 100 — — 474 474

Debonairs pizza (proprietary) limited3 100 100 100 110 110 — —

Famous Brands Cyprus limited5 70 657 820 100 100 70 471 70 471 2 381 2 381

Famous Brands Development (proprietary) limited4 200 100 100 2 700 2 700 — —

Famous Brands Food Services (proprietary) limited2 100 100 100 1 053 1 053 28 000 —

Famous Brands Franchise Company (proprietary) limited

(formerly Famous Brands Management Company

(proprietary) limited)5 100 100 100 — 4 823 488 4 836

Famous Brands Management Company (proprietary)

limited (formerly Famous Brands Franchise Company

(proprietary) limited)1 100 100 100 7 545 — (54 362) —

Fishaways (proprietary) limited3 2 000 100 100 2 269 2 269 — —

pleasure Foods (proprietary) limited7 100 100 100 1 976 107 499 ( 1) —

pleasure Foods Company Stores (proprietary) limited5 11 200 100 100 11 — — —

pleasure Foods Intellectual property (proprietary) limited3 800 100 100 109 128 — (5 055) —

pleasure Foods property Holdings 1 (proprietary) limited7 100 100 100 — — — —

pleasure Foods property Holdings 2 (proprietary) limited7 100 100 100 — — — —

Quickstep Investment 10 (proprietary) limited7 100 100 100 — — — —

Steers Share Incentive Scheme 100 100 — — 712 —

Stedewish (proprietary) limited7 100 100 100 2 123 2 123 2 907 2 907

Steers (proprietary) limited3 200 100 100 6 243 6 243 157 157

Steers Group Stores (proprietary) limited7 100 100 100 — — — —

Steers KwaZulu-natal (proprietary) limited7 100 100 100 — — — —

trufruit (proprietary) limited2 1 100 100 1 403 2 192 — (1 544)

indirect

Comsel thirteen (proprietary) limited7 120 100 100

Famous Brands properties (proprietary) limited6 100 100 100

Famous Brands uK limited1 5 434 185 75 75

Mountain rush trading 4 (proprietary) limited3 100 51 —

Steers Four Fellows (proprietary) limited7 100 100 100

Steers Holdings (Jersey) limited1 16 100 100

Venus Solutions limited5 9 584 100 100

206 525 203 792 (24 299) 5 711

Main business1Franchisor2Product manufacture and distribution3Trademark owning4Outlet establishment5Management and administration6Property holding7Dormant


SHarEHoLDEr anaLYSiS anD SHarEHoLDErS’ DiarY

number ofshareholders %

number ofshares %

anaLYSiS of SHarEHoLDErS

ranGE

1 – 10 000 2 177 86.70 4 613 212 4.88

10 001 – 50 000 207 8.24 4 589 476 4.86

50 001 – 100 000 40 1.59 2 946 980 3.12

100 001 – 1 000 000 76 3.03 26 382 433 27.94

1 000 001 and more 11 0.44 55 915 995 59.20

total 2 511 100.00 94 448 096 100.00

anaLYSiS of SHarEHoLDErS

catEGorY

Individuals 2 074 82.60 42 892 439 45.42

Insurance companies 11 0.44 10 070 688 10.66

Investment trusts 205 8.16 10 977 244 11.62

other companies and body corporates 221 8.80 30 507 725 32.30

total 2 511 100.00 94 448 096 100.00

maJor SHarEHoLDErS (holding 5% or more of the shares in issue) excluding directors

Coronation Fund Managers 23 191 335 24.55

enderle Sa (proprietary) limited 4 854 689 5.14

SHarEHoLDEr SPrEaD

public 2 504 99.72 54 652 315 57.86

non-public 7 0.28 39 795 781 42.14

Directors 6 0.24 39 745 120 42.09

Share Incentive trust 1 0.04 50 661 0.05

total 2 511 100.00 94 448 096 100.00

SHarEHoLDErS’ DiarY

financial year-end 28 February 2009

reports and profit announcements

• Profit and dividend announcement 18 May 2009

• Annual report 29 May 2009

• Interim report october 2009

annual general meeting 25 June 2009

Dividend distribution information

• Last day to trade cum-dividend 3 July 2009

• Share commence trading ex-dividend 6 July 2009

• Record date 10 July 2009

• Payment of dividend 13 July 2009

Share certificates may not be dematerialised or rematerialised between Monday, 6 July 2009 and Friday, 10 July 2009, both dates inclusive.


noticE of annUaL GEnEraL mEEtinG

(registration number 1969/004875/06)

(Incorporated in the republic of South africa)

(“Famous Brands” or “the company”)

Share code: FBr ISIn code: Zae000053328

notice is hereby given that the annual general meeting of

shareholders of the company will be held at the offices of the

company, 478 James Crescent, Halfway House, Midrand on

thursday, 25 June 2009 at 14:00 for the purpose of considering,

and if deemed fit, passing with or without modification, the

resolutions set out below in the manner required by the

Companies act no 61 of 1973, as amended (the “act”):

1. SPEciaL rESoLUtion 1: GEnEraL aUtHoritY to

rEPUrcHaSE SHarES

“reSolVeD tHat the company approves, as a general

approval contemplated in section 85 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 listings requirements of the

JSe limited (JSe), which general approval shall endure until

the next annual general meeting of the company (when this

approval shall lapse unless it is renewed at that annual

general meeting, provided that it shall not extend beyond

15 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 trading system, without any prior

understanding or arrangement between the company

and the counterparty;

b) the company is so authorised by its articles of

association;

c) the general repurchase is limited to a maximum of

20% in aggregate of the company’s issued share capital

in any one financial year;

d) the general repurchase by the subsidiaries of the

company is limited to a maximum of 10% in aggregate

of the company’s issued share capital in any one

financial year;

e) the repurchase is not made at a price greater than

10% 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 listings

requirements of the JSe unless there is a repurchase

programme in place and the dates and quantities of

shares to be repurchased during the prohibited period

are fixed and full details thereof have been disclosed in

an announcement over SenS prior to commencement

of the prohibited period;

g) the company publishes an announcement after it or its

subsidiaries has cumulatively acquired 3% of the number

of ordinary shares in issue at the time that the

shareholders’ authority for the purchase is granted and

for each 3% in aggregate of the initial number acquired

thereafter;

h) the company remains in compliance with paragraphs

3.37 to 3.41 of the listings requirements of the

JSe concerning shareholder spread after such

repurchase; and

i) the company appoints only one agent 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 months after the date of this notice

of annual general meeting:

n the company and the company’s subsidiaries

(the Group) will be able, in the ordinary course of

business to repay their debts

n the assets of the company and the Group will be in

excess of the liabilities of the company and the Group

n the share capital and reserves of the company and the

Group will be adequate for ordinary business purposes

n the working capital of the company and the Group will

be adequate for ordinary business purposes

n 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


noticE of annUaL GEnEraL mEEtinG ContInueD

JSe prior to the company (or any subsidiary) entering

the market to proceed with the repurchase.”

this special resolution is subject to at least 75% of the votes

cast by the company’s ordinary shareholders, present in person

or represented by proxy at the annual general meeting, being

cast in favour thereof.

rEaSon anD EffEct of SPEciaL rESoLUtion 1

the reason for and effect of special resolution 1 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

listings requirements of the JSe.

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 to the

prevailing circumstances and market conditions, in considering

whether to effect the provisions of this special resolution.

otHEr DiScLoSUrES in tErmS of SEction 11.26 of

tHE LiStinGS rEQUirEmEntS of tHE JSE

the following additional information, some of which may appear

elsewhere in the annual report of which this notice forms part, is

provided in terms of the listings requirements of the JSe for

purposes of this general authority:

n Directors and management – pages 6 and 8;

n Major beneficial shareholders – page 78;

n Directors’ interests in ordinary shares – page 66; and

n Share capital of the company – page 60.

LitiGation StatEmEnt

the directors of the company whose names appear on pages

6 and 7 of the 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.

DirEctorS’ rESPonSiBiLitY StatEmEnt

the directors whose names appear on pages 6 and 7 of the

annual report, collectively and individually accept full

responsibility for the accuracy of the information pertaining to

special resolution 1 and certify that, to the best of their

knowledge and belief, there are no facts that have been omitted

which would make any statement false or misleading, all

reasonable enquiries to ascertain such facts have been made

and the special resolution contains all information required by the

act and the listings requirements of the JSe.

matEriaL cHanGES

other than the facts and developments reported on in the

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.

2. orDinarY rESoLUtion 1: aDoPtion of tHE

annUaL financiaL StatEmEntS

“reSolVeD tHat the annual financial statements of the

company for the year ended 28 February 2009, together

with the directors’ report and the report of the auditors be

and are hereby received and adopted.”

3. orDinarY rESoLUtion 2: rE-ELEction of

DirEctorS

“reSolVeD tHat the following directors of the company

who retire by rotation in accordance with the provisions of

the company’s articles of association and, being eligible

thereto, make themselves available for re-election:

3.1 Mr Kevin alexander Hedderwick

3.2 Mr John lee Halamandres

3.3 Mr Hymie reuvin levin

3.4 Mr Stanley John aldridge”


an abbreviated curriculum vitae in respect of each director

offering themselves for re-election is set out on pages 6 and

7 of this annual report.

4. orDinarY rESoLUtion 3: rEaPPointmEnt of

aUDitorS

“reSolVeD tHat rSM Betty & Dickson (Johannesburg), be

reappointed as the independent auditors of the company

and the directors are authorised to determine the auditor’s

remuneration for the past year.”

5. orDinarY rESoLUtion 4: ratification of

EXEcUtiVE DirEctorS’ rEmUnEration

“reSolVeD tHat the remuneration paid to executive

directors (reflected on page 67) for the past financial year

be ratified.”

6. orDinarY rESoLUtion 5: ratification of non-

EXEcUtiVE DirEctorS’ fEES

“reSolVeD tHat the non-executive directors’ fees

(reflected on page 67) for the past financial year be ratified.”

7. orDinarY rESoLUtion 6: to PLacE UniSSUED

SHarES UnDEr DirEctorS’ controL

“reSolVeD tHat the entire 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

annual general meeting with the authority to allot and

issue all or part thereof in their discretion, subject to sections

221 and 222 of the act, and the listings requirements of

the JSe.”

8. orDinarY rESoLUtion 7: GEnEraL aUtHoritY to

iSSUE SHarES for caSH

“reSolVeD tHat pursuant to the articles of association of

the company, the directors of the company be and are

hereby authorised, until the next annual general meeting of

the company (when this authority shall lapse unless it is

renewed at that annual general meeting, provided that it

shall not extend beyond 15 months from the date of this

resolution), to allot and issue ordinary shares for cash

subject to the listings requirements of the JSe and the act,

on the following bases:

a) the allotment and issue of ordinary shares for cash shall

be made only to persons qualifying as public

shareholders and not to related parties, all as defined in

the listings requirements of the JSe;

b) the ordinary shares which are the subject of general

issues for cash:

– shall not in the aggregate in any one financial year of

the company (commencing 1 March 2009) exceed

15% of the company’s relevant number of ordinary

shares in issue of that class (taking into account the

dilution effect, in the year of issue of options/

convertible securities, by including the number of any

shares that may be issued in the future arising out of

the issue of such options/convertible securities)

– of a particular class, will be aggregated with any

shares that are compulsorily convertible into shares of

that class, and, in the case of the issue of

compulsorily convertible shares, aggregated with the

shares of that class into which they are compulsorily

convertible

– shall be based on the number of ordinary shares of

that class in issue added to those that may be issued

in future (arising from the conversion of options/

convertible securities), at the date of such application,

less any shares of the class issued, or to be issued in

future arising from options/convertible securities

issued during the current financial year, plus any

shares of that class, to be issued pursuant to a rights

issue which has been announced, is irrevocable and is

fully underwritten or an acquisition (which has had final

terms announced) may be included as though they

were ordinary shares in issue at the date of

application;

c) the maximum discount at which ordinary shares may be

issued for cash is 10% of the weighted average traded

price of such ordinary shares over the 30 business days

prior to the date that the price of the issue is agreed

between the company and the party/ies subscribing for

the ordinary shares;


noticE of annUaL GEnEraL mEEtinG ContInueD

d) after the company has issued ordinary shares for cash in

terms of an approved general issue for cash

representing, on a cumulative basis within a financial

year, 5% or more of the number of ordinary shares in

issue prior to that issue, the company shall publish an

announcement containing full details of such issue/s

(including the number of ordinary shares issued, the

average discount to the weighted average traded price

of the shares over the 30 days prior to the date that the

price of the issue is agreed in writing between the issuer

and the party/ies subscribing for the ordinary shares and

the effects of the issue on the net asset value per share,

net tangible asset value per share, earnings per share,

headline earnings per share and, if applicable, diluted

earnings and headline earnings per share); and

e) the securities which are the subject of the issue for cash

must be of a class already in issue, or where this is not

the case, must be limited to such securities or rights as

are convertible into a class already in issue.”

note: In terms of the listings requirements of the JSe,

a 75% majority of the votes cast by shareholders

present or represented by proxy at the annual general

meeting must be cast in favour of ordinary resolution 7

for it to be approved.

VotinG anD ProXiES

a shareholder of the company entitled to attend, speak and vote

at the annual general meeting is entitled to appoint a proxy or

proxies to attend, speak and on a poll to vote in his 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 annual general meeting, 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 IBC, to be received by no later

than 14:00 on tuesday, 23 June 2009. any member who

completes and lodges a form of proxy will nevertheless be

entitled to attend and vote in person at the annual general

meeting should the member 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 annual general

meeting 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

time-frame stipulated.

By order of the board

SJ aLDRiDgE

company Secretary

15 May 2009


form of ProXY

(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 shareholder”) 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 annual general meeting of the company to be held at 478 James Crescent, Midrand on thursday, 25 June 2009 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 special and ordinary resolutions to be proposed thereat and at any adjournment thereof; and to vote for and/or against the special and ordinary 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. Special resolution 1General authority to repurchase shares

2. ordinary resolution 1adoption of the annual financial statements

3. ordinary resolution 2re-election of directors3.1 Mr Kevin Hedderwick

3.2 Mr John Halamandres

3.3 Mr Hymie levin

3.4 Mr Stanley aldridge

4. ordinary resolution 3reappointment of auditors

5. ordinary resolution 4ratification of executive directors’ remuneration

6. ordinary resolution 5ratification of non-executive directors’ fees

7. ordinary resolution 6to place unissued shares under directors’ control

8. ordinary resolution 7General authority to issue shares for cash

Signed this day of 2009

Signature

assisted by (if applicable)

Please read the notes on the reverse.


form of ProXY ContInueD

6. a member or his/her proxy is entitled but not obliged to vote in

respect of all the ordinary shares held by such member. the

total number of votes for or against the special and ordinary

resolutions and in respect of which any abstention is recorded

may not exceed the total number of shares held by such

member.

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 member 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 member from attending the annual

general meeting and speaking and voting in person to the

exclusion of any proxy appointed by the member.

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 to or faxed to

link Market Services South africa, 11 Diagonal Street,

Johannesburg, 2001 (po Box 4844, Johannesburg, 2000),

to reach the company by no later than 14:00 on tuesday,

23 June 2009.

notES to tHE form of ProXY

1. this form of proxy is to be completed only by those members

who are:

a) holding shares in a certificated form; or

b) recorded in the subregister in electronic form in their

“own name”.

2. Members who have dematerialised their shares and wish to

attend the annual general meeting must contact their Central

Securities Depository participant (“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 members

and their CSDp or broker.

3. each member is entitled to appoint one or more proxies

(who need not be a member(s) of the company) to attend,

speak and, on a poll, vote in place of that member at the

annual general meeting.

4. a member may insert the name of a proxy or the names of

two alternative proxies of the member’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 member’s instructions to the proxy must be indicated by the

insertion of the relevant number of votes exercisable by that

member 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 special and ordinary 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 member’s votes exercisable

thereat.


aDminiStration

FaMouS BranDS lIMIteD(registration number 1969/004875/06)

comPanY SEcrEtarY

Mr SJ aldridge

rEGiStErED officE

478 James Crescent

Midrand

1685

PoStaL aDDrESS

po Box 2884

Halfway House

1685

aUDitorS

rSM Betty & Dickson (Johannesburg)

BanKErS

First national Bank

Investec Bank

contact US

telephone number +27 11 315 3000

Fax number +27 11 315 0059

email address [email protected]

registered and physical address 478 James Crescent, Midrand, 1685

postal address po Box 2884, Halfway House, 1685

LooK at oUr BranDS

www.steers.co.za

www.wimpy.co.za

www.debonairs.co.za

www.houseofcoffees.co.za

www.braziliancoffeeshops.co.za

www.fishaways.co.za

www.tashas.co.za

tranSfEr SEcrEtariES

link Market Services South africa

11 Diagonal Street

Johannesburg

SPonSor

Standard Bank

(registration number 1969/017128/06)

3 Simmonds Street

Johannesburg

2001

wEBSitE aDDrESS

www.famousbrands.co.za

BASTION GRAPHICS

www.famousbrands.co.za

contact information

tel: +27 11 315 3000fax: +27 11 315 0059

478 James crescent,midrand, South africa, 1685

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