Good morning. Welcome on behalf of myself, Darren Hele, and Neli to our FY 2026 interim results presentation from our Midrand offices. We really do value the interest that you've shown to register for this live audio webcast. Also, a special welcome to the board members who would have dialed in, and importantly, to the Famous Brands family from our various offices around the country and around AME in the UK. We've all worked hard to produce these results, and I'm privileged to be presenting these results on behalf of all of us. They are a solid set of results, there's no doubt. I'm not sure, though, that we've expected more, and certainly we had expected more after the first quarter, but followed by a soft trading month in June, this put pressure on our like-for-like recovery, but more about that a bit later.
As you will see, we have a few drags on performance that we need to fix, which are aligned to our strategic plans. Thankfully, no surprises there. I'm also comfortable to report that there's no distraction creeping into the business. Always at this juncture, just a reminder to those who may not have experienced our webcast before is that the driving force in our business is a sale at a restaurant, and really nothing happens in our business until a sale is made at a restaurant. In terms of the agenda for this morning, we'll be here for roughly an hour with a focus of about 50 minutes on presentations, trying to allow 10 minutes for questions. We do have a lot of slides to get through and lots to share, so we'll be as quick as we can.
The presentation, together with the supplementary slides, will help answer questions, and that will be uploaded to our website at the end of the presentation. There are some new disclosures and management disclosures, as we've spoken about in the past, really trying to assist investors in understanding the business better. I will talk through items one to four on the agenda. Neli will then jump in and handle item number five, the most important one, and then the two of us will handle item number seven, assisted by, as always, our Group Risk Executive colleague Ntando, and he will coordinate the questions and answers at the end. On your screen, you can make your screen full screen, and there is a questions and answer portal which you're welcome to use anytime, and Ntando will coordinate those questions.
Please feel free to ask questions during the presentation, but they will be handled at the end of the presentation. In terms of a broad overview, as a business, we're building capabilities, optimal platforms, and processes for sustainable performance. Why do we say this? We say this because of the day-to-day trading we're doing in some key areas, and really focus on some of the six blocks that we're focusing on as a business in terms of some key milestones. Really pleased to report that we've hit a milestone of 3,008 restaurants in this reporting period. We have been striving for this milestone for a while, and particularly, with difficult trading conditions, it makes it harder, but it really does talk to the growth engine of the business.
We've launched a new digital consumer engagement platform within our business, focusing around digital, making our life easier for the marketing teams to get to consumers through digital platforms. They are busy working their way through that right now, and it's been a project that's taken us some time, but very pleased to say that we've given the team something that they can start to work with and build capacity with. As reported earlier in previous presentations, we've implemented a manufacturing investment plan, which is in the early stages, but really already starting to try and unlock some operational efficiencies and profitability, and we believe that reflects in these results. Our logistics investment plan, which has been long spoken about, is pretty finalized.
We've provided a modern platform for operational efficiency and insights-driven decisions, and we were pleased to be able to share some of that with the investment community during this particular reporting period. We've also focused on our retail strategy, and again, there is work to do there, but certainly working on our development capabilities on the product pipeline, and we've done some work internally to focus on that delivery to support our retail strategy. Very importantly, we're very proud of the efforts we've put into consistently securing a credible BBBE status, which becomes business as usual for us. Interestingly, the subject matter is rather contentious right now across the political divide, and I'm regularly surprised at how little value stakeholders place on this aspect, yet similarly are fanatical about compliance as a theme.
We're very clear that doing the right thing comes first, but we're also confident that in the case of BBBE, we're investing in doing the right thing alongside gaining competitive advantage. There is a cost to compliance, and we are ahead of the cost curve, so any change in legislation would no doubt release costs. We're not in the business of betting against the government. Right now, we believe we've built a moat around the business on this particular South African nuance. That's probably a good segue into the external environment that we face, particularly within the South Africa context, but beyond our borders too.
Looking at really the green shoots that we have started to see in this reporting period, which is important, there's always a lot of focus on the challenges faced, particularly in the current trading environments, but we are seeing green shoots and are very focused around how we can harness those. No load shedding is long forgotten, but certainly has been a green shoot in our business, and interest rates cutting has also helped support consumer resilience, which again is important. I'm not going to focus too much on the challenges faced. I think they listed up there. There are some obvious ones. On the internal side, I suppose the more important ones are the last two.
The economic headwinds in Botswana and Zambia have been quite challenging outside of the South Africa space, and we recognize that in terms of signature brands and AME, that we do have two subscale operations, and I will elaborate on that a little bit later, that we need to continue to work on, and we recognize the drag that they are creating in the business. They're not going forgotten about. On the positive side, which is really important from our perspective, you know, the subdued economic growth is economic growth. We're starting to see some opportunity.
The no load shedding I've spoken about, moderating inflation, I'll talk about a bit later, the reduction of interest rates, and definitely seeing some recovery in local tourism, people getting out and about more, and we've seen that over some of the long weekend periods, as well as shifting school holidays that we see, and we can notice that activity. Also seeing a return to work, people getting back away from work from home, there is a trend there, and we're definitely seeing some of that in some trading performance. Of course, it is definitely getting easier to get around the country as the government has focused on resolving some of the port crises, etc. There is a halo effect to some degree of the stability, which I suppose is relative of a government of national unity.
You're probably more interested in how we compete in this space, and we're really keeping our focus quite simple and robust in those responses. We continue to focus on value offerings, making sure our products are competitive, and enhancing our consumer loyalty programs. We think that our brand portfolio with diversified menus and geographies and demographics holds us well into the consumer space and gives us the opportunity across various trading spaces. We have always focused on strategic procurement, but probably more so in this last reporting period, there's been some significant nuances, and Neli will talk about how that has had an impact in other parts of the business. More importantly, we've made sure that we have continuous supply and price control within our own business.
The supply chain continues to be focused on continuous improvement, which is important, and we have work to do there, but we've really done some heavy lifting on the investment, particularly on logistics. We remain a franchisor of choice, particularly due to our compelling value proposition, which we're very, very proud of. The retail and restaurant industry landscape is also interesting. Consumers are constantly seeking value in a very competitive environment, so we're not naive about that. It's important in terms of the trends that are shaping our industry for us to respond to them. There are various trends that are probably not unique just to Famous Brands Ltd. They are quite unique to the industry and would be felt across the board, and of course, we're all competing to fix those.
Some of them we are falling a little bit further behind than we would like to be, but we are making good progress around drive-throughs as an example, and it's been a focus area of ours. The response is the most important, and we continue to respond around the promotion of our core menu items and value offerings. The teams are doing a particularly good job on understanding that and really backing themselves to fight in that landscape. We continue to invest in the digital-first consumer experience in a very, very tough market to navigate, and of course, there's cost to any digital experience, you know, and a great consumer benefit. In terms of meeting the consumer's needs for convenience, I spoke about drive-through. We've got work to do, but we're definitely making progress.
We continue to be relentlessly focused on it, as well as continue to invest in our own delivery capabilities, which has really been a staple of our business and a cornerstone of our business. The team's working to build capacity on more personalized offerings to the consumer, and I'm very happy to report that, you know, as will be seen in the numbers, we have invested in our people, particularly in this half. Last year was very, very challenging as we faced uncertainty, and we've really gone back and made good on the work that we've been doing for quite some time. Loyalty remains a key issue, as I mentioned in the trends, and we continue to refine our offers and improve our offers. The procurement I have mentioned, but again, particularly important around making sure at this stage that you have the right inventory levels.
There is a theme that we keep saying that, but the categories keep shifting, and you'll probably hear a lot about beef and coffee in this particular presentation. Strategic agility is really going to be required to maintain and grow market share and profitability, and we really believe we. In terms of our brand performance, it's really a key part of our business, and we believe our brands remain relevant. As is indicated with the total restaurant network exceeding 3,000 restaurants, we've opened 17 new restaurants in the reporting period, marginally behind where we would like to be, but I mean, obviously, we are reliant on property developers and everything coming together at once, and there have always been various constraints, and as you know, development out there is not particularly easy.
We've also continued working with our franchise partners who are consistently reinvesting in our brands with revamps, so we're very thankful to them and proud of the revamp work that's being done. The drive-throughs, as I said, in the reporting period, we've continued to open drive-throughs, and we are now starting to get a much bigger footprint, particularly in the steel space with 77 restaurants across the group. Our investment in Munch is working for us, and we've continued to roll that system out, creating ease of use, assisting with our plans, and laying the foundation in terms of what we want to do on the digital experience, and really rolled out a business-in-a-box solution in Eswatini, which is currently complete but going through testing.
The delivery hub concept that's led by Puma and the team is really doing a fantastic job and launched 16 new hubs in the reporting period, and we continue to gain momentum. We know that convenience is a key driver, as we saw, one of the drivers is in the grocery industry, and we need to continue to compete. In part of the simplification of AME, our Kenya-owned company stores are now operating under the franchise model, so those were sold to a franchisee during that period, and that transition has gone particularly well. The brand footprint, I won't dwell on too much, but will be in the supplementary slides, but you can see that we're making positive gains across leading brands in the reporting period, so really positive momentum and very good store openings that are working across that space. Fisher Ways, we remain cautious.
As I've said in previous presentations, we are starting to see an easing of that business model now that the fish pricing is stabilized, the sushi roll-out has gone particularly well, and we're gaining momentum, and the team are really doing great things there. Starting to build some momentum. Although there hasn't been net restaurant growth, we have opened a new store, and that's starting to progress positively. The challenge, as you will pick up through the presentation, does remain around signature brands, and I'm going to be really sharing a little bit of light around signature brands and some of the positive outcomes there. Mr. Biggs in Nigeria remains under pressure. In terms of the SA-specific context, SA is our home market and important, and we really believe we're holding our own in this particular market and all brand market-leading positions that our brands hold.
The QSR brands that did perform particularly strongly, we think that the value offerings and successful promotions in the QSR space make it slightly easier to navigate towards the consumer given the drive towards value offerings, and they continue to be able to launch value offerings and manage those food input costs quite well. We've opened stores, of which 28% were allocated to existing franchise partners, so again, you know, momentum between new franchise partners and existing, and we continue to have interest in the franchise pipeline from both inside and outside, which is the important point. We've achieved solid sales. We would like better. We definitely had a tough month in June, which really dampened some of our recovery, but despite that, a good recovery, and we are seeing, as I said earlier, local tourism and traffic increasing.
Drive-throughs, we continue to focus on, particularly in the SA space, so the work that we're doing is in SA, and, you know, Munch continues to progress. From a total perspective, you can see that leading brands are powering ahead. We are having some challenges in signature brands, which is pulling the overall number down, and I'm going to expand on the nuances between the two portfolios. We continue to run the portfolios separately. It's an important part of our business. They do different things for the consumer, and they are in very different spaces, so they are separate for good reasons, and they both talk to different market positionings.
We speak a lot about inflation in our business, and I mean, there's a lot of conversation out there right now around inflation, and just to really give you a 24-month snapshot of this model, this model is not new, so for those of you who follow us, you'll understand it and probably would be interested in the white at the end, which is the last six months in terms of our particular business. I've said it many, many times in these presentations. We continue to be proud that our brands are consumer brands, and what we sell, people put in their mouths. Why I say that that is important is because we continue to mitigate with value and innovation rather than that term called shrinkflation, which is a tactic used in various industries.
I'm glad to say, as always, that as an example, a Wimpy Burger is still as wholesome and familiar as it always has been over many, many years. We continue, as an example, to use full dairy cheese rather than analogue cheese. We continue to hold ourselves to the highest specification. That doesn't mean, though, that we don't innovate, and that is really where the teams have done great work. You'll particularly see in that graph, if you focus on the orange line, which is our weighted retail selling price index across the leading brands, that there's stability. If you look back over the two years, we've definitely come down from the highs, and you can see the pressure that would have been passed on to the consumer in this particular time.
Also, if you look at the last six months, we are starting to see food inflation picking up again, which is strongly driven by beef and coffee in our particular world. We haven't passed those on, and Neli will elaborate on that earlier to the same degree. We've got stability in our pricing over the reporting period. At this stage, we're not clear on where beef is going, but we are managing that input cost, and we have absorbed in our manufacturing business some of that cost to make sure that we make the right decisions and see what is happening to the consumer. The beef pressure is reflected in our input costs right now because we've held it, but if it wasn't, you would be seeing we would be having to make some adjustments on that particular place. If you look at the August endpoint, I think it's important.
You can see the kind of inflation that we're passing to consumer around 4.4%, lower than food inflation, and slightly above our input costs because we've held some of those input costs. We are going to have to recover some of them going forward, and we would be working on consumer pricing right now for the November cycle. In context of performance, I think we always find it important to look at our business in the SA context through a provincial lens. There are nine provinces and lots of different nuances. As I always say, we'd love everyone to be kind of in the Western Cape range, but we have seen some nice bounce back across the board on leading brands in some provinces. The obvious drag is particularly Northwest to some degree on like-for-like, but Northern Cape particularly on both.
System-wide, we'll obviously be influenced by new stores, but on the like-for-like side, you can see the pressure there in some of those markets. As we said earlier, June was a pressure point and has certainly put some pressure on. The recovery in the Eastern Cape is very positive. If you recall, at about two reporting periods ago, we spoke about the pressure there, and clearly on system-wide, the team have done a great job on recovery, getting stores in the right places, but you can also see the like-for-like number is very positive there given where the inflationary numbers are. A little bit more insight on leading brands in particular, and you know, we have through various reporting periods developed this model to try and show you the nuances between the two portfolios around how the consumer thinks.
From a management disclosure, we're seeing those two reporting periods, and you can see the difference at system-wide between the two portfolios there. In Q1, which is on the left, and Q2, you can see the difference, and that's really around the impact of June that I've mentioned a few times, and you can see the difference in the performance. The 6% at the top in casual dining and the 6% for QSR isn't a mistake. That is just how they netted out. We had to go back to our numbers a few times, even though the difference in the portfolios versus last year and Q1 and Q2 are quite different. Simplistically, you can take out of it that QSR performed better than CDR, really driven by like-for-like, and the growth in the stores was biased towards QSR.
In terms of the like-for-like turnovers, you can see a difference there, so that's the pressure that I've spoken about. Again, the same model, Q1, Q2, CDR, and QSR, and again underpinning what I spoke about around QSR performing better. Although the two were evenly matched in the previous slide on system-wide, like-for-like is a discrepancy. Both feeling the impact of a slower month in June in particular. One can have various theories on June. There was a shift in the school holidays. We saw some of that coming through to July, but not necessarily to the same effect, so we saw definite change, and there can be various theories around the possible GNU hype from last year, as we had a particularly good trading month in June last year after the highs and lows of March through to April.
There is some of that in the base, but in the context of that, either way, QSR has performed better. I think that the message around leading brands is very, very clear, and we're very comfortable with the trajectory. Signature brands, as I've spoken about, you can see the pressure both at system-wide and like-for-like. Some of that will be driven by stores that have been closed, or as an example, where Fago has been converted, and those conversions are almost completed. In fact, there was one left at the end of the reporting period, which has now been done, so we couldn't quite report job done, but as we speak today, the job has been done. The portfolio remains subscale, which essentially means that we really just are not getting to a point where we're growing fast enough around our overhead, and I'll share something on that just now.
There's definitely a constrained consumer spend for premium dining categories, so we're definitely seeing a pressure point there around dining points. I mean, the pricing part due to food inflation has become more expensive for certain markets. Captive markets, however, have delivered a strong like-for-like performance in that particular period of reporting, so we're quite comfortable there, and we have had some new restaurant openings delayed in the period, where developers have had difficulty getting opening on time, and we've opened a multitude of restaurants in that particular development, we would then be affected. We are happy to report, though, even with the challenges in signature brands, we still have a healthy pipeline of potential franchise partners, and we have good business models within that particular space.
A better performance in Q1, as an example, also Q2 was hampered by the same factor that leading brands experienced in June in particular. Continuing on the signature brands theme, what we're trying to do here is on a disclosure is really try and give you some insights as to some of the pressures that we are feeling. Signature brands are made up of a variety of different operating entities within there, and some of them are performing better than others. It does become quite difficult to say signature brands as a whole. It's small in the business overall, but as you can see in the results, it has had a drag. What we have is the operating margins in various of the business, which are costed with their basic costs, are performing, but not all are. There's a drag there.
When we talk about subscale, we really talk about the fact that we have a fixed cost overhead that we need to recover. There are costs that the business has in itself to administer those business units, and that's what we call central costs. As you can see, the team have been quite prudent on costs there year on year for the reporting period. We have admin fees, which are charged from the center, which is a recovery of all the internal costs, which again is carrying that overhead within the numbers that we're reporting. The solution is quite simple, is to really get more volume through all of the business units and get that model right. There is a slight nuance to that because when you look at the next slide, what you see is that those business units at an EBITDA level perform slightly different.
When we use operating profit as a lens, I apologize, it looks different to EBITDA, and you can see recovery there. There are quite a lot of positives within the negative headline that is out there. Again, those costs are the same because the EBITDA calc wouldn't be applicable in this particular case. The central costs and admin fees would get charged. We don't report at EBITDA level, and there is no need to. Really just an insight for you in terms of what we're trying to do there. It's not to say that if you looked at signature brands on the face of it, that it's probably what you may think it is. We're working very hard. The team's working very hard around making the various improvements that they need to make. In SADC, we have had various challenges in different markets, probably more than usual.
However, I'm pleased to report that we did increase revenue despite both Botswana and Zambia feeling some challenges. Botswana particularly has been challenging. However, we have had some moderation of inflation in countries, which has helped. As I said earlier, we're comfortable to roll Munch out, which gives us another lever. Other than Botswana, we're showing positive performance on system-wide sales through those various markets in local currency. I speak about Zambia being negatively impacted given the inflationary number that 4.8% is lower than what we would have wanted in our particular case. The AME and UK market, particularly focused on AME, revenue and profitability has been impacted particularly by restaurant closures. As spoken about earlier, we have sold our company stores in Kenya and moved to a franchising model.
In order to facilitate the quicker turnaround of the stores in Mauritius, we have in the period acquired the balance of the 49% in the actual restaurant operations that are not franchised on the island, and we think that that's the right thing to do to speed up the recovery. There is an ongoing process in the UAE, which has really been a big setback for us around a multiple franchisee that essentially has closed the bulk of the restaurants based on performance from our side because they haven't met the standards they're looking for. It is subject to a legal process ongoing, but essentially we don't have any revenue in the period nor in the prior period. You know, making it very, very difficult for us in terms of recovering our overhead given that there's been no revenue.
The economic challenges and poor consumer confidence in the UK abate, and we continue to feel some pressure there as reported in the results. The supply chain part of the business is an important part of our business, and again to reiterate that the supply chain really is the backend in service of the frontend. The benefit that the supply chain gains would be based on performance in the frontend. Bear in mind it doesn't just service signature brands, leading brands. It also supports AME on exports, but it also supports our retail business. The volumes that you see going through retail are coming through our manufacturing and logistics businesses. From a manufacturing perspective, a particularly good reporting period, some of it through improved mix, which I've spoken about before, where we have had negative mix before.
That does depend on what's happening on the menus, what's happening on the consumer spend, and we've had some uplift in this period from a better mix. We are seeing marginal improvements in gross margins thanks to production yields and input costs, but considering, you know, we're under cost pressure too, like everybody else is around electricity as an example, and we're starting to see that repairs and maintenance, particularly on imported items, that inflation is really pushing us quite hard as well. We continue to invest in manufacturing technologies to try and chase the targets that we've got in terms of efficiencies, and really looking at the revenue drivers, you can see volume there was a detractor in the period.
The bulk of that does relate to retail, and I'll talk about that a little bit later, but we've managed to get our pricing through and again a positive swing from mix, which was negative previously. All in all, really a good period for manufacturing despite the fact that we've had some pressures, particularly on the likes of coffee and beef. On logistics, again, we've made good progress in this particular period. We've seen some case volume growth and price inflation, very positive. We haven't had a negative on mix. We've had a marginal improvement, and again we've seen that previously. The once-off relocation costs of the cold storage facility to Midrand are impacting the results, so we've communicated that previously. It wouldn't be a surprise, and the plan is pretty much by and large being completed.
We're getting into a situation now where we have the platform to leverage and really have to focus on driving operational efficiencies. The team is very committed to that, and we really now have the platform, having finished the various projects that we've wanted to implement over a period of time. This is the last reporting period where you should have a lumpy result because of single once-off items, i.e., the relocation cost. Retail was particularly disappointing for us in this reporting period, and we really have not put a great score on the board. We acknowledge that. We have, as you can see there, not made the kind of headway we wanted to on the recovery on frozen potato products.
It shouldn't be a surprise as we reported that at year end, driven by pressure in H2, so we're annualizing that, and coffee definitely has been hurt with the kind of pricing, and even then with us not recovering all that pricing in terms of consumer demand. Really, selling coffee on the shelf, that volume is dropping, and we just haven't got the kind of penetration that we wanted to on the volume around potato. We have made good strides on beverages, meat, and ice cream. Although there's a positive there, it's not where we want it to be, so we have ambitious plans around that, and again seeing some changes on sauce and spice. We would like to be better off than that too, and we've seen again some mixed changes.
On the revenue side, though, some positive coming through on inflation, so getting our pricing right, some negative on mix and some negative on trading terms, but all in all volume is down, which is really driven by the frozen potato products category in terms of where we've landed up. There is work to do on retail, and that really has put pressure on the profitability, but we continue to remain positive about this category, and the work that we're doing will pay off. The investment has been leveraging our current assets rather than having to invest in the business, and we remain optimistic about what we can do in this particular category. I'm going to pause there.
I've said a lot, but the most important part, I'm going to hand over to Neli to really talk through the financial information, and then I'll come back and recap on the other agenda items. Neli, over to you.
Thank you, Darren. Good morning, ladies and gentlemen. I must say it's another set of results where, as a business, we demonstrate the positive momentum for this reporting period. Darren already mentioned some of the tailwinds which we had, the likes of the 50 basis point interest rate cut which we had, and the fact that in this period we had no load shedding. However, we did experience some unprecedented policy changes coming from the U.S., in particular the increase around tariffs and some of the withdrawal of the U.S. aid in some of the countries in which we operate, like Kenya and South Africa. What I must also point out is that our H1 results demonstrate four key pillars, which I would name as the strength of our 15 brands, which our consumers continue to choose because of the variety of the menus and the value offerings.
This has also led to a supply chain uplift. The resilience of the consumer in managing their disposable income between essentials and convenience. We're very blessed to have the franchise partners who continue to execute on our brand operation plans, and last but not least, our Famous Brands employees who continue to show up daily across the value chain. I mean, we executed on our strategy while being responsive to our macroeconomic factors, which continue to impact our operations. In overall, mentioned earlier in some of the slides, is that we have grown through the expansion of our restaurant network across the brands, which contributed to our volume increase in supply chain and where we can take in inflationary price increases.
Now, if you were to compare our results to August 2024, you will note that our revenue has increased by 5.6% compared to the prior period, and our gross profit margins are trending higher or at similar levels as to the prior period across our divisions. In terms of our operating profit, which is $21 million higher compared to the prior period, this was driven by the growth in revenue across the business and some of the operational efficiencies that we have in supply chain. Operating profit margin is similar to prior period. We remain focused on managing our costs, however, we've had to reinvest in the business, and this has partially offset some of the gains. Our operating or reported headline earnings, rather, of $2.36 per share is 8% higher compared to the prior period.
This was driven by the reduction in our finance costs as a function of our capital repayments and some of the operational efficiencies that we've seen in supply chain. Our working capital increased in this half-year mainly due to the beef price escalations, which Darren has already mentioned, and this contributed to cash generated from operations decreasing by 5.3%. We have attained resilient results, and it's at the back of these results that we are paying a dividend of $1.62 per share to our shareholders. This payout was guided by our capital investment plans and debt repayment, combined with our optimism for the remainder of this financial year. Our revenue has increased by $223 million, driven by the performance in our various divisions.
A little bit more color, if you have a look at our brands, the revenue has grown by $36 million, and this has been attributed to the performance in leading brands' portfolio, which continues to perform strongly. The driver has been our quick-service restaurant brands coming through from existing and new restaurants. In signature brands' portfolio, this portfolio has also reported growth, which has been driven by the performance in our niche brands. Now, another look at supply chain, where in manufacturing, the revenue has increased by 10%, and logistics revenue has increased by 7%. This growth has been through the investments that were in manufacturing. The outcome was the increase in production output, and in logistics, the result was increased warehouse capacity and the distribution insights from the technology implementations.
The performance in the front end also contributed to the change in our product mix and volume increases, and we've also taken some inflationary prices. Our retail revenue reported similar results as per the prior period, as we have experienced intense competition in our frozen potato products category. Our SADC segment reported a net store growth. However, some of these economies in the markets are under pressure, especially if you had a look earlier in our Botswana market, where the diamond trade has significantly declined and the government has rebased its local currency. In Zambia, we continue to experience the impact of load shedding. In terms of our AME, the various markets continue to experience economic challenges, and this sector remains subscale. The UK economy remains under pressure, with consumer spending remaining quite depressed.
If you have a look at our profitability, our operating profit, the gains flow through from the growth in operations, including some of the operational efficiencies. From a leading brand, our operating profit for this interim period is flat compared to prior period, as the gains we have made in managing the cost was partially offset by the recognition of our employee salary costs, which talk to our inflationary increases and some of the provisions we've made around our employee benefits. In signature brands, the profitability was affected by some of the subdued performance in some of the brands, which Darren already painted a bit more color around that. For manufacturing operational efficiencies, these contributed to a cost containment, which had an uplift in the operating profit margin. These were mainly in the reduction of input and conversion costs, as well as managing some of the waste.
These gains, unfortunately, were also offset by the impact of the beef pricing, which resulted in a $30 million margin erosion because we've had to absorb these price volatility. The investment made in logistics was partially offset by some of the increase in our operating costs, and across supply chain, we've experienced the impact of electricity price tariffs, which contributed to additional costs for the segment. In terms of our SADC business and AME, they continue to experience inflation, and profitability in certain areas remains below break even. A bit more detail around our operating profit margin, the group has remained at similar levels as prior year. However, we've had some change where the operating cost in leading brands has resulted in the 2% reduction in the margin, while manufacturing has increased its operating margin by 1% due to some of the initiatives that were put in place.
Based on our financial performance, our balance sheet continues to be strengthened, and this has led to a gearing improvement driven by our solid performance. If you look at networking capital, this has increased by $462 million compared to the $356 million of August 2024, but this has been in line with our operational needs. The increase was driven by supply chain disruptions, specifically around beef and coffee, and looking to optimize on pricing, which has resulted in inventory increasing by 16.4%. Trade payables were also driven by the procurement activities, which are mainly linked to our inventory procurements, and for trade receivables, this movement reflects the performance of the business. As a business, we continue to monitor and look for ways to optimize our working capital management. From a capital allocation, we completed our construction of the cold storage using our development facility.
We executed on our supply chain investment plans, which have already been mentioned earlier, and most of our capital in this reporting period was related to either maintenance or expansion. We have also had to upgrade our fire protection system at our Midrand campus. From a debt exposure, our long-term debt is currently at ZAR 1.1 billion, and I must say that this balance includes the ZAR 143 million financing facility which we reused for our cold storage development. With all of this, we have maintained our covenant compliance with our primary financier, and if we look at our balance sheet, you will see that we have managed our liquidity by deferring the maturity dates of some of our credit facilities to August 2027, which were originally due for repayment in August 2026. As a business, we remain in a continuous strong cash generation position.
We have deployed our cash in the following areas of the business, where we've paid our dividend to all our group shareholders, including our non-controlling shareholders. We have invested in critical capital expenditure projects, which I will talk to shortly. We've repaid our debt capital obligations and their related finance charges, and we continue to invest in our employees, where we have settled on our long-term incentive scheme, which vested in June 2025. From a liquidity, we have access to ZAR 223 million in our undrawn borrowing facilities. In terms of our investments, we have invested about 3.3% of our capital as capital expenditure in line with our strategy for this interim period. Now, this, we do acknowledge, is slightly elevated compared to our 2.5% trend over the years, but this was mainly due to the cold storage investment, which we've had to conclude in this reporting period.
Our investments are circumspect, and they are in line with the respective approved business plans. The spend for this reporting period was for the cold storage, where we've had to, as a landlord, invest in the construction and the tenant, invest in some of the installations that are in the facility. From the brands, we've invested in our consumer-facing technology, as well as investing in store roll-outs and some of the revamps where we've got corporate stores. In manufacturing, we've invested mainly in our operational efficiency and technology implementations, which we spoke to at our February 2025 results. As I close, I would like to just highlight this, that the consumer continues to be under pressure, and we appreciate their continued selection of our brands. Our balance sheet is in a strong position to support our growth plans. The business, as most of SA Inc.
entities, we are navigating economic headwinds, but we remain optimistic for the second half of our financial year. I will now hand over to Darren to take you through the strategy update and the outlook for the rest of the business. Thanks, Darren.
Great, Neli. Thank you. Always wonderful to be able to talk strategy around where we're going and what we're doing. I think that, again, as I said at the beginning, no distraction creeping in, which is important. From our perspective, we continue to have a robust, carefully considered strategy, and that is underpinning the financial performance. Really, from our perspective, the strategic intent remains similar in terms of growing capability to deliver great consumer experiences, which is important, and very much focused on the branded franchise and food services space. We want to focus on the branded food service space, but also focus on our franchise partners, which is the lifeblood of our business, delivering those great consumer experiences. Ultimately, we need sustainable like-for-like growth, and that's what underpins our business.
We're in positive territory this reporting period, but we have work to do, and we need to drive that number forward, and we believe the conditions in the marketplace are conducive for that. However, from our four strategic objectives, we continue to build the supply chain of the future, and we've really done a lot of the heavy lifting on that side. As Neli has shown you in the CapEx number, we're at the end of that journey, particularly on logistics. We continue to focus in leading brands on leading in the categories that we compete in, prioritize our franchise partners, and really optimally managing our capital, which you're seeing in terms of balancing the debt reduction as well as rewarding shareholders.
From a vision perspective, that remains consistent about being the leading innovative branded franchise and food service business in South Africa and selected markets, which again I think I've unpacked quite well for you today. In terms of our strategic journey and the progress, I think it's important to really highlight where we've been and how that's translating in terms of our actions to support that. When we talk about creating a supply chain of the future, what has happened in the reporting period and around that we've done, and opening the facility on time and within budget in Midrand has been a big milestone for us.
We've upgraded our logistics platform for franchisee online ordering, and as I've mentioned earlier around some of the projects, efficiency yields and profitability gains in manufacturing are important, and particularly in this reporting period at our Lambert's Bay facility, we have made some investments that reflect in our CapEx that have really focused on driving those yields and improving capacity. Leading in the categories we're competing is going to be driven by the digital enablement of restaurants, having spoken about that, supported by our consumer engagement platform, and really working around new product development capability, both at retail and at franchise level, really focusing on value and innovation without sacrificing the quality brand propositions that we have. Delivering value, yet still delivering quality in those particular spheres. Most important, again, is prioritizing our franchise partners.
We believe the investment in Munch is assisting to improve efficiency, so over time, laying that digital platform, and that has been mentioned quite a lot in the slides, and continue to support our franchise partners. We can't forget, as we've seen more recently in Zambia, about water and energy resilience, which is very, very important, and that hasn't gone away, particularly in the SA and SADC landscape. We continue to have those challenges despite load shedding being a forgotten word. There are still lots of pressures out there at local municipality level in the South Africa context and at a more macro level in the likes of Zambia. Really optimizing our capital management, and Neli has really said everything that needs to be said there, so we continue to really be consistent, making sure we're rewarding shareholders and reducing our legacy debt.
The consumer-facing tech side gets spoken about a lot, and obviously it's continuous. It's not just an event, it's a process. The market continues to evolve, but just to really give you some snapshots of some of the things that are happening around our call centers example. The call centers are handling the bulk of our calls now. There are still some franchisees that are insourcing that themselves, but the call center footprint is the biggest that it's ever been. Working on kitchen technologies, particularly in brands like Debonairs Pizza, to look at production times, reduced cost efficiencies in store, and ultimately benefit the consumer around waiting times. Our loyalty apps, particularly Mugg & Bean and Wimpy, but Mugg & Bean strongly on coffee subscription, have really come a long way and really continue to make good strides.
In terms of menu agility, the bulk of our restaurants, and this is the end of the reporting period, have digital menu boards, and that's evolved even since the reporting period. This gives us the agility to be able to reduce lead times around menu pricing, and particularly as an example around this beef crisis, has been particularly helpful. The delivery hub program continues, and that's again helping us with the delivery program, getting better levels of customer satisfaction, lower cost, and really leveraging our position in that particular marketplace. Looking forward, we always, I suppose, come across as conservative and cautious, but we really are optimistic around the outlook for 2026. We've got H2 that we're well in, and we continue to make the most of it. H1 was showing the green shoots that I spoke about with one particular tough trading month, so we remain focused.
Just to give you a sense of our priorities in the balance of this reporting period, I think they're quite simple and focused and will be robustly executed. The agile management of menu options, promotions, and loads programs within the brands is important. Really focusing on what the consumer needs and how we're going to manage that pricing. The digital consumer engagement platform I've spoken a lot about, but the teams need to get into that and really managing this transition from traditional media to digital media better and leveraging the information that we have. We continue to be bullish about expansion in SADC, and I think the results show that. We were very mindful about the drag on profitability from a signature brands portfolio. I've shared some of that with you around the business itself.
It does have complexity that needs to be managed, but there is optimism there, and there's work that can be done. We also need to optimize the levels of support and infrastructure around AME. We overinvested in support there and need to manage that. That process, again, is already underway. It's not just waiting for H2. We've seen some of that actually towards the back end of H1 materializing. Manufacturing will be focused on deploying better technology as we've done at Lambert's Bayer more recently, and there's other projects planned. Better resource planning to increase capacity, yields, and of course, waste is there. Manufacturing is a constant evolution. We believe we're a good manufacturer, but there's constant ways to improve the things that you're doing because technology is not just in certain sectors. Manufacturing technology is also evolving at a rapid rate.
We continue to want to grow the manufacturing basket, and the retail market is also a great opportunity for us to do that. On the logistics bucket, the platform I spoke about, we now need to leverage better route planning, better fleet optimization with the better facilities we have that allow us to leverage that. We are taking on over the H2 period in eight provinces. The take on of Coca-Cola beverage distribution, so direct to our franchise partners, will leverage the basket but also improve service levels to them and improve availability. We have already started bringing the frozen distribution in-house for retail. The retail basket was outsourced previously, and that is now in the process of coming in-house, and that is in H2. Retail, along with signature brands and AME, has disappointed in the reporting period.
We need to execute the retail marketing strategy better in terms of promotion to consumers, and that work is underway. The big opportunity for us is to continue to secure additional store listings. We have the product basket. We still have lots of runway in terms of penetration into additional retail stores. Good opportunities there. I'm going to conclude there, and on handing over to Ntando, just to recap to say that we remain confident and really bullish that we can remove the drag that retail, signature brands, and AME are taking from the solid financial picture that we presented. We really look forward to a positive summer peak period that will definitely assist in H2. There's nothing to suggest that it's going to be bullish, but there's nothing to suggest that it's going to be a drag either. We're really preparing for peak.
You know, I bumped into a colleague in logistics earlier, and his comment to me was, "Peak is peaking." We are getting ready and making sure that we're going to be aggressively planning for a very positive peak period, which is always the highlight of our H2 reporting period. Ntando, over to you for Q&A, and Neli and I on standby.
Thanks, Darren. I'll try and go through the deck as quickly as I can because I see we're tight on time. Just a quick reminder to state your full name and the business that you represent for your question to be easily flighted. First in line is Anthony Tlaque, Small Daily Talk Research. A bit of statement and questions, I'll try and cover that quickly. Results from the core food businesses were flat at best, with margins going backward. Manufacturing and low interest costs were the only positive drivers. Do you expect food margin recovery in H2? That's one question. Do you actually see a harder call of underperforming brands that need to occur perhaps to drive some recovery? What's your view on the share price pressure that we've seen for some time on the business? That's for you, Darren.
I'm not clear on the food margin recovery question. I mean, the gross margins, other than what we've experienced on beef and coffee, have been stable, so I'm probably not clear on the question. We're confident about the margins. We have managed pricing well, so we acknowledged, and I think well through the presentation, that we've taken pain on beef. Neli stated the number. Coffee particularly, we've taken pain. The recovery on those is likely. I mean, the beef crisis looks like it's abating, but it hasn't turned yet, and coffee has definitely stabilized. I'm confident around that. In terms of the harder cull of brands, I'm not sure that I would necessarily agree. The brands that we have are appropriate. The leading brands' portfolio is good, and all of those brands are consumer relevant and performing. I think we've been clear on the signature brands.
We've cleared the conversion of Fago, which was one that we've well communicated. If you want to put that in the cull bracket, you're welcome to. I wouldn't have probably used that same word, but from that perspective, we've made that transition. We've made the best of what is there. We've given the franchisee a better solution. With the brands that we have at signature brands there, I think they are, you know, they may well be a question around where we put the brands into Africa as an example. Again, if you want to use the word cull, you could put that in. From the brand portfolio perspective, we think what we have is relevant and works within those buckets. On the share price, I'm not sure I can comment. I mean, that's really probably for investors and analysts.
We work every day to make sure we drive the business strategically sound. We drive profitability. Delivering the HIPs and dividend that we have should reflect positively in the share price given that. I mean, we don't necessarily commentate on the share price.
Okay, thanks. The next question I'll take is from Wally van der Waalt, from Abex Investments. Performance over many years suggests that this business should be SA leading brands only, with increased focus on execution locally. What is prohibiting the board and management to make this strategic shift?
I totally disagree around South Africa earlier. I think SADC is definitely an integral part of the business, as reflected in the numbers. SA SADC, which does talk to leading brands, supported by the supply chain. We recognize the pressures in AME, and it's not about reluctance from management or the board around fixing what needs to be fixed. A franchisee invests or a licensee invests in a model. There is brick and mortar on the ground, and there's an investment to manage. It's not where you have company stores where you could simply say you're going to just suddenly close. It's more complex than that, and one has to manage the investment and the assets on the ground. They're not our operations to cull, and there's a level of support that we have to provide to those franchisees, and we manage that particularly well.
I don't disagree around, you know, that they are a distraction on the income statement, and we're very mindful of that.
Okay, probably to balance the scales, I'll flight a question for the FD. This is from Peter Crumberge from Magic Market. The FD mentioned that some of the debt facilities were rolled for an additional 12 months. Which facilities were rolled, and at what point would you look at refinancing for a longer period?
Thanks, Ntando. Peter, in response to your question, we've had three of our facilities, which are a combination of amortizing and RCF and a bullet payment, which we've deferred till August 2027. The second part of your question in terms of when we would look to start, we would look to refinance those. We had already taken a maximum of five years, which we could on those facilities, and that process for us is already imminent for us to start on that. We will keep you updated in due course on when it is that we've actually finalized the process. Thanks.
Okay, thanks, Neli. In the interest of time, can I squeeze in one more question just to cover a question from Nicolas Stender, African Alliance? Probably I'll just get straight to the question. With chicken on bone continuing to dominate South African protein consumption and no strong representation in this segment within the group, is management evaluating potential acquisitions to establish a credible chicken on bone presence?
Nicholas, we constantly look at acquisitions. We remain interested in terms of that. You can take the fact that we may look is a given. I mean, the chicken on the bone category is quite clearly in the SA context fried and grilled, with grilled being a much smaller player. The likelihood around fried is probably pretty small, but we also continue to focus more importantly on ensuring that we give customers what they're looking for. Within all of our brand offerings, we have a strong chicken representation on the menu, inclusive of chicken on the bone. We recognize that in the South Africa context, singular brand around chicken on the bone, i.e. KFC, which is no secret, it's the biggest market player in the whole category by a long way and does drive the market. One can't ignore that, but it doesn't hamper our day-to-day businesses.
Chicken as a protein is growing, and we continue to reflect that in our menus across the board. As much as that is the case, chicken remains an opportunity for us within the current context, an acquisition not needed, but we're not blind to market opportunities.
Yeah, Darren, I'm conscious that we're out of time, so the remainder of the questions I'll share with you and Neli post the presentation. Can I take one more?
Anyone who wants to stay on the call?
Yeah, okay. Let me quickly just go through the deck. From Jacobus Cilius, this is Value Capital Partners. Greetings to you. On the food inflation you reported, I see you're quoting Trading Economics on the slide as the source. What is the internal food inflation experienced by Famous Brands Ltd? Also, with SACPI coming out at 10 today at 3.4%, with total inflation coming down to 4.4%, what is the usual lag that Famous Brands tend to experience on this front given the hedging policy?
You could use the input cost number on that slide as a good guide around interim inflation. Obviously, that would not necessarily cover certain things like fruit and vegetables that are quite variable, but it would give you an anchor. The reason that is down is because of us holding back, particularly on beef, as to that number. That would be the ideal number to use. We support what you're saying, that there's definitely movement on the food inflation side, but it's a critical period right now, and we will be seeing what comes through, particularly on beef. We're fairly comfortable within the range. I think in our case, you could probably be working on lagging rather than leading. We tend to generally, as do franchisees, pass prices on later.
We take the pain first and pass through later, whereas typically, I mean, I'm not generalizing, we find that retailers pass on much quicker. You could probably put us in the lag category on that side.
Okay, thanks, Darren. Can we leave it there?
Yeah, okay. Thank you. Thank you for dialing in. Thank you, Ntando, for handling the questions. Really, from my perspective, also to thank the finance team for all the work done, to Nedbank, who's always resolutely supporting us, to our sponsors down the bank for all the work behind the scenes, and, most importantly, to all my colleagues at Famous Brands , inclusive of our franchise partners, for really the strong work on the front end of the business that continues to happen. To the board and the executive colleagues for all the personal support, really wonderful to be here presenting these results. Thank you to Celeste, Laura, the Inns team, Victoria, and Yolande for all of the work on making this look presentable and everything coming together. Thank you.