Fa­mous Brands blames im­pair­ments for drop in its share price

The Mercury - - COMPANIES - Sandile Mchunu

FA­MOUS Brands fell more than 6 per­cent in early trade on the JSE yes­ter­day af­ter the quick-ser­vice and ca­sual-din­ing restau­rant fran­chisor flagged that its earn­ings for the year to the end of Feb­ru­ary were ex­pected to de­cline by R373 mil­lion as a re­sult of im­pair­ments suf­fered dur­ing the pe­riod.

The group said the im­pair­ments in­cluded R304m in in­tan­gi­ble as­sets at group level and R69m in prop­erty, plant and equip­ment at Gourmet Burger Kitchen (GBK). Fa­mous Brands said it had also made a pro­vi­sion for prop­erty re­lated ex­penses of R33m at GBK.

“Share­hold­ers were ad­vised that in the con­text of the pre­vail­ing ad­verse macro-eco­nomic en­vi­ron­ment in the UK, im­pair­ments and a pro­vi­sion for prop­erty re­lated ex­penses would be recog­nised re­lated to the group’s in­vest­ment in the UK busi­ness, GBK restau­rants,” the group said.

Fa­mous Brands is Africa’s largest branded food ser­vices fran­chisor. The group’s ver­ti­cally in­te­grated busi­ness model com­prises a port­fo­lio of 24 brands rep­re­sented by 2 797 restau­rants across South Africa, the rest of Africa and the Mid­dle East, and the UK.

The group owns pop­u­lar brands such as Steers, Mugg & Bean and Wimpy and in the last two years it has added ac­qui­si­tions such as Lam­berts Bay Foods, By Word of Mouth, Salsa Mex­i­can Grill and Lupa Os­te­ria to its port­fo­lio.

In 2016, the group ac­quired GBK for £120m (R2.02 bil­lion).

Yes­ter­day, Fa­mous Brands said that GBK recorded an oper­at­ing loss of £7.8m dur­ing the pe­riod.

The group said head­line earn­ings per share were ex­pected to dip be­tween 5 per­cent and 24 per­cent to be­tween 327 cents and 405c from last year’s 428c.

It said ba­sic earn­ings per share (Eps) would also ease be­tween 18c a share to 23c a share, down from 414c a share as com­pared to last year. The Eps is ex­pected to show a de­cline of be­tween 94 per­cent to 96 per­cent for the year.

De­spite the ex­pected losses, the group said the South African busi­ness was likely to record prof­its dur­ing the pe­riod.

“The group’s South African busi­ness com­pris­ing its brands, lo­gis­tics and man­u­fac­tur­ing di­vi­sions, will re­port an im­prove­ment in profit be­fore in­ter­est and tax com­pared to the prior com­pa­ra­ble pe­riod,” the group said.

The board said it re­mained con­fi­dent that the in­ter­ven­tions be­ing im­ple­mented would en­sure GBK re­turns to prof­itabil­ity in the medium term.

The an­nual re­sults will be re­leased on May 24.

Fa­mous Brands shares closed 3.29 per­cent lower at R103 on the JSE yes­ter­day.

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