Famous Brands impairs UK asset
• Group reports Covid-19 hit and, has impaired investment in Gourmet Burger Kitchen
Famous Brands, the owner of Steers, Wimpy and Debonairs Pizza, has fully impaired its investment at a group level of its UK company Gourmet Burger Kitchen, joining the ranks of many SA companies that have lost billions abroad.
Famous Brands, the owner of Steers, Wimpy and Debonairs Pizza, has fully impaired its investment at a group level of its UK company Gourmet Burger Kitchen, (GBK) joining the ranks of many SA companies who have lost billions abroad.
The group, headed by CEO Darren Hele, on Friday warned investors it expects a headline loss per share of 216c-264c in its six months to end-August, from headline earnings of 159c in August 2019, due to the impairment and global lockdowns that cut sales at some of its restaurant divisions by more than twothirds. The group’s basic loss per share is expected to be as large as 1,689c, from earnings of 159c previously. This implies a basic loss of almost R1.7bn in the six months to end-August for the group, which has a market capitalisation of R4.6bn.
Famous Brands is one of a long line of SA businesses which have lost billions overseas as local companies come under pressure from shareholders to invest abroad and diversify from the weakening local economy.
Truworths earlier this year announced it has impaired almost R5bn of its R5.5bn investment into UK shoe chain Office. Brait investment holding company wrote off more than R14bn invested in UK fashion retailer New Look.
At the time of the GBK purchase in 2016, Famous Brands said it was a “mouth-watering ” deal and the “biggest ... the group has ever concluded, and one which will transform the future of the business”. The upmarket burger chain has run at a loss the entire time it has been owned by the SA business.
Famous Brands spent more than R2.1bn buying the chain in the UK in 2016 and incurred debt but has lost money as UK consumer confidence fell after the Brexit referendum.
The group said in April it would not be spending more money to bail out GBK as restaurants in the UK were forced to close during lockdown. Recently, UK media reports suggested that Famous Brands is looking to sell the chain.
GBK restructuring efforts in 2018 and 2019 and the closure of more than 30 stores did not pay off, but in 2019 the group said: “Management is optimistic that remedial actions under way to ensure the long-term sustainability of the business are gaining momentum.”
Famous Brands said on Friday that system-wide UK sales dropped 66.2% in sterling terms during the 26 weeks to August 27. “System-wide” refers to all restaurants, including new ones.
At the end of August it had reopened 65% of GBK stores.
In SA, sales in the group’s Signature Brands division — which includes brands such as Mythos, Salsa Mexican Grill and Turn ‘ n Tender — fell 70.1%.
Their losses demonstrate how much the sit-down restaurant sector has been decimated by lockdown closures and alcohol sale bans. Stats SA food and beverages data show SA restaurant sales were down 100% year on year in April, 97.7% in May, 87.7% in June and 75.9 % in July.
Sales in Famous Brands SA Leading Brands division — which includes Steers, Debonairs, Mugg & Bean and Wimpy — declined 48% in the six months to end-August on a system-wide basis.
Famous Brands did better in the Africa and Middle East region where it faced less stringent lockdown conditions and sales fell 30.1%. It owns restaurants in United Arab Emirates Angola, Mauritius, Mozambique, Kenya, Namibia and Nigeria.
At close of trade on Friday, the Famous Brands share price was down 5.15% to R46.00.
SALES IN GROUP’S SIGNATURE BRANDS DIVISION — WHICH INCLUDES MYTHOS, SALSA MEXICAN GRILL AND TURN ‘ N TENDER — FELL 70.1%