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GBK keeps on knocking Famous Brands

October 27, 2020

DURBAN - Famous Brands, Africa’s leading food services franchisor, said yesterday that it slid into a first-half loss as the trading restrictions and poor performance by Gourmet Burger Kitchen (GBK) continued to knock its performance.

Famous Brands reported an operating loss of R110million for the six months to end August, declining by 129 percent compared to an operating profit of R376m reported last year.

Its revenue declined by 48 percent to R2 billion and headline earnings per share (Heps) fell by 271 percent to a loss of 240 cents a share compared to Heps of 140c reported last year.

Famous Brands opted not to declare an interim dividend in order to preserve cash. Chief executive Darren Hele said the negative financial effect of the pandemic and resultant restrictions had been extremely severe across the geographies in which the group operated.

“While the gradual easing of restrictions in South Africa and the UK in the second half of the review period enabled us to reopen parts of the business, significant components remained in hibernation until July,” Hele said. However, the group said 95percent of its store network had reopened, with only a small balance temporarily closed.

Famous Brands consists of a portfolio of 23 restaurant brands - represented by 2838 restaurants across South Africa, the rest of Africa and the Middle East and the UK - with leading brands such as Steers, Mugg & Bean, Wimpy and Debonairs Pizza and signature brands which include Tasha’s, Mythos and Lupa Osteria.

In South Africa and across leading and signature brands, its combined system-wide sales declined by 51.2percent while leading brands’ system-wide sales declined by 48percent and signature brands’ system-wide sales fell by 70.1percent. Hele said while this was disappointing relative to historical performance, these results were a commendable achievement in light of the prevailing environment.

“This solid effort is validated when compared to the industry’s results as quoted in the Statistics SA report published in September: SA restaurant sales were down 100percent year-on-year in April, 97.7percent in May, 87.7percent in June, and 75.9percent in July,” Hele said.

In GBK, revenue in rand terms declined by 60percent to R257m and operating loss surged to R120m compared to a loss of R11m a year earlier, with system-wide UK sales declining by 66.2 percent.

Famous Brands said it had recognised an impairment of R1.3bn on September 25 on GBK and the investment was fully impaired at group level.

GBK was placed into administration with effect from October 14 in accordance with UK insolvency legislation and GBK’s results would no longer be consolidated into the group’s results.

Looking ahead, Hele said Famous Brands would continue to focus on right-sizing the business, reducing costs and preserving cash to facilitate balance sheet flexibility in line with the group’s three-year roadmap.

“This will be achieved through our expansion programme, consolidation programme and optimising capital management and allocation,” he said.

Famous Brands shares closed 1.23percent higher at R47.07 on the JSE yesterday.