Good morning. Thank you very much, and welcome on behalf of myself, Darren, and Deon Fredericks, our Group Financial Director, to our end August 2022 interim financial results presentation, or H1, as we'll refer to in some of the presentation. I trust you're familiar with the two of us. If it is your first time, welcome, and hope to get the opportunity to get to know you through individual consultations. Thank you for the interest that you've shown to register for this audio webcast. It really is great to host you and to share these results. Particularly welcome to the board members of Famous Brands that have dialed in, and to all of the Famous Brands family on this audio webcast.
It really is great to present our results to the whole business at one particular time, and these results we're particularly proud of. Partly because they're probably our simplest results to explain in a couple of years, and starting to get back to a more normalized base again, which is really pleasing in terms of the type of business that we have. We'll split the presentation over the hour roughly into about 50 minutes between myself and Deon, leaving about 10 minutes for questions up to the hour. Please excuse the short statements. At times, we will run through some of the slides quite promptly, trying to share as much information as we can with you.
There are two, I suppose, unusual themes shadowing the period, and that's really the COVID-19 recovery, and we'll all be glad to put that behind us, as well as reference to the GBK liquidation dividend. Those are probably the two anomalies in the results, and we'll talk through those. None of that takes away from the fact that we believe this is a solid set of results for the six-month period and absolutely proud to present these on behalf of everybody at Famous Brands. In terms of the agenda, I'm going to talk through item one, being operating context, and I'll then hand over to Deon, who will go into a fair bit of depth on the financial results.
I'll come back on the performance review, and then the two of us will take questions, which will be put to us by Ntando Ndaba, our Group Risk Executive. Just a reminder that the questions block is on the top left-hand side of the screen that you see in front of you. Feel free to put those questions in during the presentation if you wish, or at the end, and Ntando will prioritize those and put those to us independently. Just in terms of the operating context, I wanna talk you through a few broad themes, but it's very clear that we've lived through a trading half of less COVID impact than we have experienced.
Particularly H1 of this year was not a perfect half, though, and there is an element of COVID restrictions in here. Whilst we are in October and we may have short memories, up till the back end of May, things were still fairly tight in our industry. The 23rd of June, really somebody switched the lights on in terms of people seeing life differently without masks on. We'll try and share a few insights about where customers are at right now, and we hope that this will give you some insight, what, you know, in terms of the balance of the year and what to look forward to in H2 as we approach our peak period.
From a group perspective, you know, we believe that we remain the leading brand of franchise food services business in Africa, and we continue to post a strong COVID recovery, which I think is important given the conversations that we had during COVID. We're a high-performing team with a high-performance culture and continue to drive hard. Our business model is strong with a very strong trading record as a JSE- listed company. In terms of our proposition, which is really the lifeblood of our business, we are a franchisor that provides a livelihood for franchise partners, and we believe we provide a quality solution for our franchise partners.
That's underpinned by a strong portfolio of brands across various markets, supported and underpinned by some company restaurants, which are particularly used in seeding new markets and seeding new concepts, but we primarily are a business model driven by franchising and underpinned by strong brands. We support it through a manufacturing environment that supports us through licensed product and development on that through five wholly owned plants and five partially owned plants with joint venture partners. We really believe that route to market through logistics for manufacturing to our brands is superior and really gives our franchisees a competitive advantage and certainly helps us to manage the ups and downs of the volatility in the supply chain, which has been particularly prevalent over the last 12 months.
You can't avoid the geopolitical and socioeconomic factors that we all face. I'm not gonna dwell too much on those. I think you read about them every day. Particularly prevalent in our industry is the negative impact on South Africa, which is our key and fundamental market. The high inflation effects of food particularly impacting the restaurant industry as well as power, and that has a knock-on effect onto our consumers. There's absolutely no doubt that the energy challenges which go beyond just load shedding are also the impact on fuel costs, which is now a secondary driver of power, are having an impact on our business.
Of course, the flooding in KwaZulu-Natal during this period wasn't just an event that happened, but it's got knock-on effects in terms of the socioeconomic factors, and trading factors in our business. The industry remains competitive. It's fiercely competitive. We're all suffering with rising input costs. The one positive is that attractive new sites are becoming available as the retail landscape changes, and we need to make sure we adapt to that. Technology is ever present in our industry as in most, and there's an adoption of that by our consumers, and we really need to make sure that we are there and ever present in terms of managing the technology effects on our industry.
Consumer behavior has definitely been pronounced in this H1, where we've seen a return to bums on seats, and that really has had a benefit for us. There's also quite a dichotomy in the industry where people are in search of healthy eating, and at the same time looking for indulgent food choices, as they come out of the depths of kind of COVID and having to get back into going out and socialize and greet again. There's definitely a greater demand for businesses and brands that adapt to environmentally friendly practices, and we need to make sure we're at the forefront of that too. The impact on the restaurant industry specifically over this particular period has seen a definite pressure on margins, particularly driven by food inflation. It's-
We're definitely seeing difficult conditions for single operators, and we're noticing that even in our own business, that the multiple operator model is far more shielded and gives the operator the ability to leverage their position. That has resulted in what would be seen as menu prices increasing above the norm. I say the norm, if you think about where we've been the last few years of a low food inflation environment, those prices are starting to get passed through the same as we're starting to see in the retail environment. From our perspective, we think that, you know, this is an opportunity to capitalize on attractive locations.
We've taken actions to alleviate supply chain challenges across the board, driven by that pressure on margin through menu engineering, helping to manage margins and always a drive on value offerings with without eroding your brand equity, underpinned by strong marketing campaigns. We think we've managed our cost base well, both at our level and at franchise level, trying to make sure we're not passing costs down the chain. The investment in consumer-facing technology continues, and we need to make sure that while we're not a tech company, we're embracing the change that the consumer is feeling and making sure that we are putting ourselves in the right space. All of this while continuing to execute our sustainability strategy is very, very important as we all know that the world is changing.
That has really, you know, resulted in us being able to present some financial results. I'm gonna ask, Deon, to take you through some more detail in the numbers that you may not have picked up in the long form announcement. Deon, over to you.
Thank you, Darren. Good morning, ladies and gentlemen. It is my pleasure to present Famous Brands results for the interim period ending 31st August 2022. As they say, it's always much easier to present a good set of results. We believe that this is a great set of results, taking into account that the current operating environment in which we operate, which is characterized by global upheaval, and SA is not excluded from this. This creates significant operating challenges for us due to the uncertainty, and we had to navigate some material events that impacted the business through the whole business chain at the end of the day. These include, as you would know, lower growth expectations as well as consumer confidence impacting the economic recovery and then ultimately consumer spending.
Rising inflation, and then specifically of interest to us, food inflation, which peaked at 9.7%, and these impact our cost levers. We've seen general country-wide disruptions. This is unpredictable and impacts specifically our delivery channels, and then load shedding as well as water shedding, disrupting specifically our manufacturing operations. Not to forget, as Darren has already indicated, the impact of COVID included 3.5 months of COVID impact in this set of results. However, I'm pleased to announce that these results indicate a further increase in the profitability of the company, with profits increasing by 140% to ZAR 277 million. The group continue with its strong recovery, and as such, we are confident to declare interim dividend of ZAR 1.30 for the period.
If we look at specifically the highlights that we would like to share with you, our revenues increased by ZAR 575 million, mainly as a result of improved volumes, taking revenue to ZAR 3.6 billion. We reduced our debt by ZAR 150 million, and this was voluntary again in the current period. And our net debt reduced from 4.4 x to just below 2 x. This enable us to consider a dividend of ZAR 1.30, which sets a new base for our dividend payments. You would remember that in August 2019, we reset the dividend at ZAR 0.90. Growing the 2019 dividend by 10% per year would have meant that we should look at a dividend of around ZAR 1.20 or ZAR 1.20.
We are, however, comfortable to reset the dividend at ZAR 1.30 at this stage. We continue with the highlights, and revenues increased by 19%, which enable our operating profit to increase by 77% to ZAR 393 million from a base of the previous year of ZAR 222 million. The overall performance increased our operating margin to 11% from 7.4% last year. Excluding the GBK dividend, operating margin would have been 8.9%. Margins are, however, still under pressure and has not fully recovered to pre-COVID-19 levels. This is mainly due to significant cost increases, specifically in the following areas, fuel, distribution, property costs, and repairs and maintenance.
If one consider that our revenues increased by 19%, whereby these specific items that I've listed now increase on average by 33%, clearly indicates the cost pressures that we experience, and we're managing the best we can to ensure that it doesn't impact the end consumer to that extent. In addition, we continue to provide support in terms of loyalty breaks, and this is provided on a selective basis. Our HEPS improved by 121% to ZAR 2.15 from a previous ZAR 0.97 as a result of increased volumes and a slight improvement in our gross profit margin. As such, our cash generated from operations improved 73% to ZAR 552 million from ZAR 319 million previously, and this enabled us to reduce our net debt to EBITDA by 55%.
I'll share the income statement with you now. Revenues increased to ZAR 3.6 billion. As I would indicate later to you, all segments contributed, and the main contribution from, as you would expect, logistics with ZAR 366 million. Gross margins, as I've already indicated, slightly up from 44.3% last year to 44.7% this year. Other income increased significantly to ZAR 97 million. The main reason, as you would expect, is the GBK dividend, but also ZAR 14.4 million that we received for insurance claims. We continue in our journey to improve disclosure and presentation as we've done at year-end, and we've taken those changes into the interim financial statements as well.
In this case, we have split previous selling and administrative expenses between administration, marketing, and operational expenses to give you a little bit more color in terms of the key cost drivers. Admin expenses decreased by 8%, mainly as a result of the reduction of professional fees of ZAR 8 million and legal fees of ZAR 1 million. Marketing expenses increased 23% in line with what you've seen on the revenue of 19%. As you would expect, marketing expenses would usually first incur, and revenue will flow thereafter. Operating expenses increased by ZAR 99 million, mainly as a result of increase in salaries of ZAR 68 million. The three drivers or four drivers for this is an increase of 4.5% across the base, as well as the increase in activity required additional heads that we appointed.
We've also invested ZAR 9 million in interns, and in certain cases, we need third-party contractors, which also contributed to that. We've also seen a significant increase, as you expect in diesel for vehicles and equipment to run the generators, and that added additional ZAR 10 million to the cost line for this period. Our U.K. business is experiencing what we call a perfect storm now with the increased cost of living, including a 10% increase in inflation. We've reviewed the current operations, also the difficult environment, all the negative events in this case. Based on the information at hand now, we've provided for a ZAR 31 million impairment of goodwill.
Net finance costs decreased by 45%, and the three reasons for this is, as you would see in the presentation, we've renegotiated our debt and was through the process able to improve our margins. We've also made, as already indicated, voluntary repayments, and ultimately, we're at higher cash balances, and at the same time, the interest rates increase. Those were the key drivers from that perspective. Furthermore, we unwind the interest rate hedge that we've taken out on the previous debt, and that provided us with a gain of ZAR 12 million. As you would expect, tax increased by 86%, mainly as a result of the increased profits. However, the margin is down to 24.5%, as the ZAR 75 million GBK benefit is not taxable.
This enable us to produce profits for the period of ZAR 277 million or a 140% increase on the previous base. We will now unpack the revenue for H1. The revenue breakdown provides a view of the elimination. This is sales to our ultimate customer, the franchisee. Overall, we believe a very good performance driven by volume growth as well as pricing benefits, increasing revenue by 19%. If we compare our overall revenue to August 2019, our revenue increased by 11%. We're back to the 2019 levels, but the mix have changed to a certain extent. If we look at manufacturing, reduced by 30%, and that's mainly as a result of own reducing by 79%, as indicated at year-end, as well previously, certain retail products was sold directly from manufacturing.
We've also, as indicated at year-end, closed the bakery, and the bakery contribution for the previous period was ZAR 38 million. Logistics revenue improved by 19%, driven mainly by the volumes and pricing, taking revenue to ZAR 2.3 billion. 60% of our logistic revenue is as a result of our own manufacturing and the balance we procure from third parties. Company stores improved by 37% or ZAR 75 million contribution. Lastly, franchise fee revenue increased by 23% or ZAR 98 million, of which Leading Brands contribute 90% of the improvement. At year-end, that percentage was 94%, so we can see that Signature Brands is starting to increase their contribution to the revenue line. If we look at the segments. The segments, as you know, is the focus on these different revenue pools before eliminations. Revenue increased by ZAR 575 million.
We have seen a strong recovery, as you can see from the percentages there across all segments. What's also positive for us, all segments are also higher than August 2019. The key contribution to the segment increase is logistics with ZAR 366 million and Leading Brands SA with ZAR 86 million. We've also seen good positive growth in retail, which grew by 15%. If we look at the operating profit for the segment, the operating profit increased by ZAR 171 million, with key contributors being Leading Brands SA with ZAR 54 million and logistics by ZAR 39 million. Leading Brands SA, as well as logistics operating profit, is also higher than what we had in August 2019. With this excellent performance, financial performance, we're seeing the balance sheet continue to be strengthened and group gearing improve to 1.3 x from 3 x.
We also see net asset value improving 67% to ZAR 7.83 per share. Property, plant, and equipment increased mainly as a result of property and plant equipment acquisitions of ZAR 60 million. Intangible assets were negatively impacted by the Wimpy goodwill impairment of ZAR 31 million. Inventories increased 20% as a result of increased pricing. Also, stocking up on specific products like oil and beef, and a change in the mix in support of the increased sales volumes. We've seen trade and other receivables increasing by 4.6% in line with the revenue increase. If we look at trade, lease, and other receivables, they have decreased, and the main reason for that is prepayments that have decreased by ZAR 15 million.
As already indicated, with the strong cash performance that we've seen in these six months, we are able to voluntary repayments of ZAR 150 million in the current period. Our cash still taking that into account increased by 6% to ZAR 317 million. Also taking into account that during the period we paid a dividend of ZAR 200 million. We renegotiated our debt facilities, improving our margin as well as our tenor. This provides us now with the flexibility to operate comfortably, specifically in this difficult operating environment. Our debt for the period reduced by 26% to ZAR 1 billion. If we look at the lease liabilities. Lease liabilities decrease as a result of unwinding and cancellation of certain leases.
Last, we look at our trade and other payables, which is higher by ZAR 338 million, and that's mainly due to an increase in cost of sales items which one would expect of ZAR 70 million, services ZAR 15 million, marketing ZAR 16 million, as well as CapEx of ZAR 9 million. If we unpack the CapEx for the period, we continue to invest in our key revenue drivers, which is brands, as you can see from the numbers, as well as manufacturing. As indicated at the year-end, we plan to invest ZAR 238 million, but we indicated that we will be very circumspect in terms of the investment, taking into account the difficult operating environment. Based on that, we have refocused and focused on only the critical items and have re-decided to reduce the 238 million to 198 million.
In total for the year, we will reduce the CapEx investment indicated previously by ZAR 40 million. Key investments was in manufacturing, where we invested in the sauce plant. We added two additional units to a value of ZAR 6.4 million. We also, as expected, made an investment in solar energy for ZAR 2.4 million, as well as a generator for ZAR 1.3 million, bake and press for ZAR 1.3 million, and a cheese cooker for ZAR 1.7 million. That's all in terms of increasing volumes going forward. If we look at AME, that invested approximately ZAR 18 million, the most of that spend was on company stores in Botswana.
Our working capital reduced mainly as a result of an increase in trade and other payables by ZAR 111 million or 15.3% lower than the revenue increase in line with current activities as already indicated. This was offset partly by an increase in inventory of ZAR 83 million, mostly as a result of increased pricing, change in mix and stocking up on certain items, which is in line with additional requirements and volumes. Ultimately, the big question or answer is what happened with cash flow. It's important to note that the cash flow exclude restricted cash and the opening cash balance relate to 1st March 2022. Our cash from cash operations increased by ZAR 233 million to ZAR 552 million.
This enable us to invest in our financing activities an amount of ZAR 165 million, of which, as I indicated, ZAR 150 million relate to a voluntary repayment of our debt. We were always also able to invest in CapEx and other investing activities of ZAR 71 million, of which ZAR 50 million relate to plant, property and equipment, and a loan to an associate of ZAR 50 million. After all the investments, our cash is still higher than the last period at ZAR 317 million or a 19%, ZAR 19 million increase compared to the previous year results. With this set of results we have, we believe that we've reset the base and we can grow from here. It also enable us to increase our interim dividend payout to a higher level. Thank you. With that, I give over to Darren.
Great. Thanks, Deon. Much appreciated. I think at this point, really just to remind ourselves that, I mean, as a business, you know, we continue to be proud of the brands that we have and our brands are consumer brands. Also, you know, not to forget that what we sell, people put in their mouths, and it's an important part of what we do and not to lose sight of that as we talk through some of the key themes in the business. We're proud of the restaurant footprint that we continue to grow as much as it has been challenging out there.
We, as Deon has said, have just come out of a difficult period, but we're in a stable financial position, and our overall financial position with appropriate gearing levels is really comforting and definitely allowing us as a business, to make clearer decisions and really get our trajectory moving forward, given the tough period that we've been through. We're comfortable that we've had a strong execution against strategy, in the period, and we continue to gain momentum on that. We have had to focus on talent retention, and we are starting to compete for rarer skills in the marketplace that we operate. As you will see through the presentation, our logistics strategy, which has been a key part of the last few years through a difficult period, remains on track, so we're confident around our execution against strategy, in general.
In terms of our revenue recovery, and expansion, so it's not just about recovery. We think we've got a balance that is building within the business and that has really come across all markets and all divisions, as Deon showed you earlier. Everything is starting to perform again. Yes, there is still some lag, and we have, you know, come out of a period where half of the period effectively was still under COVID restrictions. The continued growth of our Leading Brands is encouraging. You know, the Leading Brands is at the front of what we do, and it really drives the front part of the business, and we all work in support of that, in terms of the business.
Quite a lot moving there, and we continue to be comfortable around that, and I'm really just that is driven by our franchise partners and the work that they do. I'm gonna really just spend a little bit of time just talking about South Africa, and I think we must you know be mindful of the difficulties that we've been through there. We've continued to open restaurants. You're seeing different performance from Signature Brands given the tough time that they had, and our system-wide and like-for-like numbers are more aligned. South Africa has performed particularly well, and again, you know, life was different. At the back end of May, we had a very different mindset to where we are today.
The last three months of the financial year or 2.5 months of the interim period have been very good to us, and we're very grateful for that. Certainly, our franchise partners have seen a recovery in their business. The period has, though, been overshadowed again by rising food prices, and that has definitely led to higher than historical menu prices, and I'll elaborate on that just now. We you know mustn't forget, besides COVID, that in our peak season in April, our mini peak, we had the KwaZulu-Natal floods, which again put a dampener on what was happening in the environment, not just in the KZN environment.
I mean, it is a destination for a lot of inland consumers, and we started to feel that pressure within the business, given that we had prepared for a mini peak. I think it's important in the SA context to really try and look at the business through a geographical lens, and we have a provincial lens within our business. You know, you may look at the face of that graph and say, "Okay, well, you know, it's nine provinces, so what?" I think what's important from our perspective is the nuances that are emerging in each of those provinces, particularly related to the governance and the local municipality challenges that we're starting to experience, so each one is quite unique.
However, there's quite a lot going on in there, and what would concern us as an example is where the system-wide number is lower than the like-for-like number, and there are two provinces that jumps out in. KwaZulu-Natal is really characterized by a lot of moving parts. So it would probably take an hour to talk you through just what's happening in KZN and what has gone on. You've got a base there that is showing positive growth because you had closures in July of the previous year, so you've had an upside that's come through. You've then had the downside of the April situation and what has happened there and the restaurants that have closed. We also have our casual dining restaurants that have bounced back nicely.
You've got an element there, but effectively, we are sitting with restaurant closures, and that is affecting the base and dropping that. Similar situation in the North, in the Northern Cape, although that is not necessarily characterized by factors outside of our control. Some of that is within our control, and we effectively have had a net reduction in restaurants there, which has put some pressure on us. We haven't seen new store opening growth driven hard in that particular province. There's some other challenges there. Whereas if you look at the Western Cape as a good example, we've seen recovery in tourism. Our system-wide figures are supported by some new restaurant openings which have looked particularly good and is driving that.
As we've seen in the North West Province as an example, where we've had new restaurant openings, as well as people returning to destinations like Sun City, and getting out to some of the provincial towns and starting to get out and about again, as you would see in the likes of Limpopo. Definitely a more normalized recovery in some of the provinces, but there are definitely challenges out there that one needs to work through. The Eastern Cape, as you remember, was quite suppressed the last time that we spoke, and we're seeing a nice element of recovery there. Lots of positive around people getting back out to the coastal areas.
We're also seeing some of the student towns recovering quite nicely, although that is then suppressed by some performance in the likes of the rural parts of the Eastern Cape, where we are suffering not just with load shedding, but electricity reduction challenges and longer term blackouts there that are suppressing some of that revenue recovery. I think it's just important to continually look at the SA market through the lens of provinces. We certainly are very geographically focused in our business, not just brand focused. This is a new slide that I thought was important for those who understand the business, and I will dwell on it and probably dwell less on other things.
As we've always been saying through COVID, not only are we suffering from revenue loss of sales at restaurant level, but we've also been supporting franchise partners. This shows how we've been doing that. The full blocks effectively cover the three or four financial periods and this period, and they relate to H1. Of the billable royalty that we talk about as an example, if a franchise agreement says 6%, we may only be recovering 5.9% as an example. It'll depend on the brand because there may well be structural changes in that agreement. Fundamentally, the contractual amount is the billable amount, and that is what we would be recovering here, in terms of that.
The difference would effectively be a royalty break, as you would have seen in FY 2021, H1, where we had significant breaks. That does exclude, obviously, April, where there was zero revenue, so that's not suppressing that number. That is the real support number. What is encouraging is that we are effectively in Signature Brands back to levels that we last saw in the FY 2020 period in terms of our recovery. That's encouraging. You can see the same effect on Leading Brands, which is a strong driver of the business, but we're not yet back to the H1 levels that we were in FY 2020. There's a little bit of upside there. Of course, as restaurant revenues come back, it bodes well for our revenue recovery because we're then getting a percentage of a higher number.
Again, another important journey in our recovery program, and that's you know easy to see on these slides. Same with AME, which as we've always been saying, is less impacted. In fact, we are probably recovering better than we were in H2, but there are some regional factors that took place there. We were actually supporting some markets that were under pressure at the time. We've actually improved our recovery. Again, you can see the dips that have come through. You know, time is always the winner, and you can always look back. You know, this really gives you an indication of the kind of relief that we were providing to franchise partners through those difficult periods. Talking about food inflation, I mean, we've really spoken a lot about that.
Again, this is a continuation of a graph that we've been publishing, and I think it's starting to become useful for you, particularly now that you see the movement in the menu pricing that's been driven by strong food inflation. We are starting to see the impact of high menu prices that have come through. We're probably at our peak right now, although we do anticipate taking menu prices again in November. This is the index number is important to watch and obviously the previous years will drop off or the previous months will drop off. We see these sustained levels of 10% not necessarily being sustained at this level. They will start to drop as we won't be taking those level of increases.
However, you can still see that there's input price pressure, driving through the system, and we are having to take menu price increases again, and that is gonna push this. So I think it gives you a good sense of where the industry is at and what we're driving through on the business model. We think that we are holding price to franchisees particularly well. But again, you know, remember, our menus would be driven with lots of fresh produce, which we don't necessarily have control of our back end supply chain. To talk about AME specifically, I've taken you through South Africa. You know, the AME market has probably been less affected. We're seeing operating margin improve there. We've had a few nice victories.
I mean, the team are really, really working hard, and getting back into traveling mode, getting out to new markets, and really taking the innovations we develop in South Africa to these markets. It's also happy to announce that we finally opened Debonairs Pizza in Saudi Arabia after taking quite some time to do, and also recently adding Oman. We're confident about Debonairs Pizza being a growth driver in Africa. We're seeing the home delivery channels continue to grow in those markets, and we're taking our online platforms for Steers and Debonairs into markets as we've done in Zambia. We are, however, seeing project delays due to equipment shortages and shipping challenges.
We do support Africa out of South Africa, and those challenges have been particularly notable in this particular market, and the recent port strikes haven't helped that situation. We are sitting with restaurants that are waiting for key equipment to open, particularly in Nigeria at the moment. The U.K. market is the toughest I've ever seen in my time in the business, really characterized by low consumer confidence in spending, and we are anticipating a very, very tough H2 in the U.K. market. Just as there was positive around sit-down sales recovering at the expense of home delivery, but we were gaining more out of sit-down, so there was a positive story there.
Really going to be facing some tough challenges, but absolutely confident that the team there have got a handle on it and will understand how we can walk and talk our franchisees through this particularly challenging period. Just moving on to the back end of the business, as we head to supply chain. I think given recent announcements about our potential acquisition of the Midrand campus, I thought it was important to bring back the communication around Project Decade, which we have communicated on previously. Really, if you look at that block, I think to the right, the next steps in the future is the important part, as we've got quite a lot of activity in our business.
We are eagerly awaiting the move to our new depot in KZN in mid-November, as well as the acquiring of our current Midrand campus to be able to reconfigure and expand it, and then, you know, move our frozen depot to that particular new plant, as well as roll out the new WMS system to all of these facilities. That WMS system will be implemented first in KZN in the coming weeks. There's quite a lot there, and I think you're gonna be seeing quite a lot of activity around this. Again, I felt important to bring this slide back, for investors to be able to question us on some of the capital allocation in this particular regard.
Our manufacturing business has really shown strong revenue recovery, and thanks to increased volumes, which has been important. I think one would quite imagine that, yes, maybe you're getting a halo effect from inflation, but we're comfortable that this growth has been underpinned, largely by our volume recovery. The cost base has been well managed. The team has really worked hard focusing on operational efficiencies and waste reduction, which has been a key aspect, not just from an ESG perspective, but from a margin perspective. You know, however, you know, whatever we try and do has made it difficult because load shedding and water shortages remain challenging.
These sustained periods of load shedding, particularly over weekends, have made it difficult for us to recover any lost time in the week, and we are having to continue to spend unplanned CapEx on new generators. The Gauteng bakery plant is in our comparative base if you look at the revenues, but it's not in these volume amounts that I've been speaking about here, and Deon alluded to that earlier. On logistics, I mean, the team have really gone through a tough period, but are starting to reap the rewards of just continuing to provide great service to our franchise partners. The trading conditions have improved, and that's lifted the revenue, supported by the strong sales volumes.
The rationalization in SKUs is important because, you know, although we've got 1,406 SKUs across those DCs, at the end of February 2020, that number was 1,690 SKUs. We've definitely seen the benefit of the menu rationalization in logistics and starting to be able to utilize our pallet spots a lot better, and that is really talking to the front end and the back end working together in the business. On retail, we continue to be excited about this. The numbers that you're seeing don't support that because we've had to take some stock write-offs on some house brand products that we supplied this year, and we are rectifying that particular contractual relationship.
I think that overshadows the hard work and the efforts that have gone in, and it doesn't certainly undermine the strong demand for our brands, and the positive response to our new consumer line. We still remain confident that we're gonna be launching a total of 12 new products this year. We've also seen some headwinds on coffee pricing, which is also the bulk of the stock write-offs that we've seen in the business. ESG remains a critical part of what we do, and how we do it, and that's most important, and we continue to be mindful of the pressures that we are all under as citizens of the world.
We believe that we continue to embrace sustainability practices, and this is certainly gonna, you know, improve the way we look at the business, and we continue to drive various initiatives as we've put on the screen there, and continue to bring that thinking to our business. Can we do better? Yes, we can do better, and we will continue to drive that part of the business hard, and very comfortable that we have a board that is very supportive around the initiatives that we take, in this regard. We have H2 ahead of us, and we are into some of it already. We have seen a fairly subdued September, and thus far, October is also looking subdued. Excited about month end ahead of us. What we are nervous about is that we've historically not had load shedding over peak holiday season.
There's always been some early December load shedding, and it's not clear whether we are going to have a December characterized by load shedding, given, you know, we know that electricity demand does reduce. The menu pricing pressures have not abated, and all of our brands will be adjusting pricing in November, and we need to, you know, understand that consumers can only take so much, and we're keeping that to a minimum. We are anticipating and keeping our fingers crossed about high level of travel over peak, given the low demands in 2020-2021, thanks to COVID, and also we think that with flight prices that there'll be a lot more road travel. We hope that the easing fuel price will translate into movement of people.
We don't quite know what the December price will be, given the exchange rate challenges, but with fossil fuel prices coming down, we are hopeful. Wimpy UK is gonna have a very tough H2, particularly as energy prices feed through to our franchise partners, so we're bracing for that and doing what we need to. We are excited about opening some key Mr Bigg's and Debonairs Pizza stores in Lagos. They are standing ready to open right now and are waiting for some key equipment that needs to be shipped out of key markets which has been delayed due to various port delays and container delays, equipment delays, and a real concoction of problems that have delayed that.
We believe that will set the tone for the future of the UAC Restaurants business. Even more excited to open our new logistics facility in KZN and get that operational. The team are waiting. We're in the throes of doing some key things and waiting for one or two software integrations to conclude on the new WMS system. Then you would have seen the announcement, and I spoke about under Project Decade, the acquisition of our Midrand campus. Trying to get all those conditions precedent out the way and be able to acquire the campus so we can get the work done that we want, investing in solar and various other projects that need to take place, as well as investing in our new frozen facility. We've got quite a busy H2.
We remain very optimistic about H2, despite some of the challenging environments. In terms of our priorities, really just recapping on what we told you we would be doing this year and really doing some honest self-reflection. On the financial side, we're all green there. We think we are meeting our commitments. On growth, we continue to be growth-oriented. We are undertaking a continual review of Signature Brands and, you know, whether we can get the growth from that, and I think waiting for the COVID recovery is the right thing to do, and giving that team, you know, all of the resources they need to make sure that portfolio is a growth driver for Famous Brands into the future.
I think certainly after H2, we will have a much better perspective of where that business is netting out. You see in the numbers the strong recovery in H1. In terms of operational, again, we think we are achieving the commitments that we've made in terms of what we want to do and what we've presented to you in our various plans over time, and we are making good progress. We do need to improve on our digital platforms. We are doing lots of work on that, but you know, the pace of change in that industry is fast, and we need to make sure we're keeping up. I think that there's work to do there still.
We're not necessarily letting ourselves down, but we are in a fast-paced industry, and we need to up our game continually, and execute better on that side operationally. In closing, you know, we really are happy and comfortable about our revenue recovery, and that has really translated into a strong financial position for us and is really giving us the headroom and the space that we require to execute our strategy successfully. We are really happy to be in this place, given where we've been, and we are comfortable that we are gonna meet those priorities. That really puts us in a great space, and has really given us the opportunity to drive forward and to be in this position to present these results. Before I close out, I think it's appropriate to move on to questions and answers.
I did look at Ntando earlier, and he had a bit of a wry smile on his face, so I'm bracing myself for these questions. Hopefully with Deon here, he can help us out. Over to you, Ntando.
Yeah. Thank you, Darren, and morning to all. I mean, as you'll know, this is the most exciting segment of the presentation mainly because it gives the executive team, you know, the opportunity to engage with the audience. We do have a few questions to go through. Without any further ado, obviously looking at time limitations, I'll just jump into Darren.
Great.
Okay. I'll take the first question from Zaid from Aeon Investment Management. With the sale of properties and sale of shares from the initial founding family, does this indicate that the founders will have less involvement with the company in the long term? Can you shed some light on that?
Yeah. Thanks, Zaid. Look, I can't talk on behalf of the founders. I do know that they're very passionate about the business, and they've always been our landlord. I don't think it would have any bearing on their investment, but, again, I can't talk for them. They are very separate transactions. They continue to be shareholders and have been since the company was listed. The logic of the sale of the property makes more sense for us probably than for them. It was a very difficult situation for them to be governed by, you know, related party rules, but we've got to, you know, grow our logistics business and make improvements, so it really just makes logical sense.
I think it would be wrong to try and draw any connection between the two, in fairness to themselves. Again, I can't speak on their behalf.
Thank you, Darren. I'll take the question from Ahmed from Denker Capital. How should we think about margin development in manufacturing and distribution? We're still well below pre-COVID levels. Are you seeing significant room for improvement in H2?
The answer to the end part is yes, improvement in H2. I mean, significant, I suppose, is a relative word, so we are seeing improvement. I think the way you can think about that is, I mean, we're still comfortable with driving towards 3% on logistics. I mean, that is going to be a little bit bumpy, but that's why we talk about Project Decade so openly. As an example, when you move your KZN facility, you are gonna have once-off costs that are going to suppress the margin in that period. You know, you're gonna get more efficiency going forward, but you are investing in capacity ahead of time. We're comfortable with driving there, and that would get you towards pre-COVID levels. We're also comfortable driving the manufacturing margin.
You know, we're not scared of a 15% number. However, I do need to be cautious in that the mix is changing within manufacturing as we rationalize certain facilities where we need scale. The bakery, as an example, was probably a high revenue business, but a fairly low net margin business, but it was a good gross margin business. There's change in that mix, but we're not uncomfortable about driving forward to those levels on manufacturing either.
Thank you, Darren. I think, probably a follow-on question from Thomas, just linking it to the margin conversation from Perpetua Investment Managers. I mean, is there a risk that you will need to permanently reduce royalty rates as franchisees operate in, you know, in a tough, low growing economy, and their profitability also being impacted, from the rise of, you know, the food aggregators?
I think the short answer is no, we don't think there's a risk. I mean, that doesn't mean we are closed to trying to understand the business model. I mean, sustainability of franchisees is first and foremost, and our business model as a franchisor, it's critical that that sustainability is there. I think if you look at the logic of those slides I showed you know, it just shows you that revenue can recover and that pre-royalty rate of 8.0% is the same rate. We haven't seen an erosion of the rate that we get. I mean, the recovery on that rate, you saw the dip, and we're nearly back to those levels. You know, however, we understand it's an evolving market.
We understand the pressure from various channels, delivery being less profitable, but it's not necessarily a disastrous channel. Yeah, we're mindful of it. It's something we watch. We engage with franchise partners all the time. Do I see a reduction in those rates at this stage? No. I think that there's some comfort around our competitive set too, in that, you know, there is a place for franchising, particularly in the South African and African marketplace. All franchisors operate on that similar model. We're not seeing, you know, any noise coming out of competitors either around those margins being under pressure.
Okay. Thanks, Darren. I mean, probably this is a question more for Deon from Thomas again, Perpetua Investment Managers. What is the CapEx outlook for the next few years? I mean, are you able to share a view on that?
Yeah. Thanks for the question. As we've indicated in the presentation, the ZAR 238 million that we initially put on the table was catch-up, as we haven't invested to that extent in the 2021 year. Now we're more comfortable with just below ZAR 200 million. We believe we'll probably with everything settled down as well in the investment in properties, we'll probably get back to the previous levels of ZAR 160 million, except if there are specific one-off items. But as Darren has indicated, as you need to grow capacity, we will try and invest in front of the curve so that we can have the benefit of that when the volumes grow accordingly.
Thank you for that, Deon. Probably another question from Ya'eesh from SBG Securities. I mean, firstly, I mean, thank you for the presentation. How should we think about the disruption the implementation of WMS could have on operations with this migration?
Yeah, thanks. Good question. I mean, that's the question I ask the logistics team all the time. You are assured that these things are only meant to enhance business rather than to disrupt them. We think that we've done good work on the implementation, and we're not under pressure for the implementation. One of the benefits of not having a fully integrated system currently is we're not doing a swap out, an identical swap out in all cases. We think that we've got a fair enough fallback. Given that some of our systems are so antiquated, it shouldn't be a difficult jump. We're not particularly worried about. I understand the need for the question, 'cause there's been some horror stories of businesses implementing systems.
We have gone with a world-class system, Manhattan SCALE, and we think that there's the expertise we're getting is good. We're not particularly worried about it, but we're not naive to the risk.
Okay. Thanks, Darren. I mean, I'll take a few more questions, just one or two in the interest of time. Probably I'll take another question, margin related from Warren, from Bateleur Capital. Franchise operating margins were 38.6%, this half year. I mean, historically, these have been in the mid-50s%. You know, looking at obviously, you know, the puts and takes, I mean, to consider going forward, can you get these margins back above 50% in your view?
Yeah, the number he's referring to is a blended number with Signature Brands. A lot of that will depend on the Signature Brands recovery. If you recall, prior to that, Signature Brands was putting pressure on that margin. There is still a question mark on that, but we are seeing that margin recover. We're confident that the Leading Brands margin will recover to the kind of levels that he was talking about with that blended margin. We don't have concerns on that. But you'll definitely see that Signature Brands margin recover even in H2 again. The answer is yes, we can get there.
It's really about the time to potentially get there and what, you know, what it looks like in H2 with Signature Brands and then Signature Brands going forward. We remain confident.
I'll just try and sneak in one more question from one of our own, Pauline from Lamberts Bay. I mean, with the negative impact of load shedding and obviously the increasing cost of running diesel generators, I mean, is the business looking at more sustainable energy sources?
Absolutely. Spoke briefly about ESG. You know, one of the reasons why we're having to get more involved in our properties, as an example, is because, you know, the investment in solar requires a longer-term commitment to a property and additional investment. So there's quite a lot of projects planned. As an example, our new DC in KZN, you know, straight after taking occupation, we will install solar, and we've got plans for Midrand. So absolutely. But it does require, you know, a strong lease or ownership of that property to get the payback. The payback is there in terms of time. It's just really us having that confidence as well as other sustainable measures that we need to take. So we are taking strong action in that regard.
Thank you, Darren. Thank you, Deon. I mean, that's all the time I have, for questions, today. With that, I will hand back to you, Darren.
Great. Thank you, Ntando, and appreciate the questions, and we look forward to engagements with shareholders and prospective shareholders over the coming week. I mean, just really for me to wrap up to say, you know, a big thank you to our board, franchise partners and my executive colleagues who've really given us a lot of personal support through this period. It would be remiss not to thank Nedbank, who've continually been supportive of us through this difficult period. Again, you've seen a debt renegotiation, which has been favorable for our business and given us the freedom to grow the business. To our sponsors, Standard Bank, for always being there. Really to the team behind the scenes that always put this together. Celeste, GMF and Yolandi, thanks for bringing this together. Really do appreciate it.
Yeah. To me, you know, just personally, the support that I get from the board, in particular our chairperson, Santie Botha. Thank you very, very much. Really do appreciate it, and we look forward to sharing the full year results with you, and a positive H2. You know, fingers crossed to a good trading season, and a positive peak. Thank you.