Famous Brands reports growth in half year sales despite straining UK business

SOUTH AFRICA – Famous Brands, South African restaurant franchisor has reported a 6% rise in systemwide sales for half year ended August 2019 despite a slump in sales at Gourmet Burger Kitchen (GBK) as it continues to close stores.

Its leading brands portfolio which includes Steers, Debonairs and Wimpy experienced system-wide growth of 6% and 4% like-for-like growth.

Its signature brands division which incorporates Turn’n Tender, House of Coffees, Tashas and Vovo Telo grew by 14% on a systems wide basis, reflecting the opening of a number of new stores. Like-for-like sales increased by 1.4%.

The results termed as lacklustre performance by analyst Anthony Clark of Small Talk Daily was due to difficult trading conditions featuring subdued consumer spending and increased pressure from competitors.

Results from its loss-making Gourmet Burger Kitchen business showed a decrease in systemwide sales by 12.8%. This reflected the closures it is carrying out as part of its company voluntary arrangements to right-size operations.

But like-for-like sales rose 8.6%, against a decline of 9.7% in the previous year.

Famous Brands acquired 100% of Gourmet Burger Kitchen (GBK) for £120m (approximately R2.1bn) from Nando’s in 2016.

Over the years the acquisition has not been fruitful, dragging the group’s profits as a result of poor trading conditions mainly due to uncertainty around Brexit.

This has led to the closure of some of its branches and rendering leases at a lower cost. This comes as part of the company’s Voluntary Arrangement of restructuring allowing Famous Brands to skive insolvency.

Other than the over-traded premium burger market, the stores have been operating under a sub-optimal management capacity resulting in the underperformance.

Famous Brands also reported pressure on revenue on its supply chain division, while its manufacturing business reported a marginal sales decline.

Profits at its logistics business were hit by flat case sales in the domestic market and lower exports, as well as one-off expenditure related to the relocation of its Free State facility.

During its previous financial year, Famous Brands reported 2% rise in revenue to US$492.05 million (R7.2bn) while operating profit before non-operational items fell 5% to US$58.07 million.

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