Famous Brands earnings fall by 15% despite improvements in its UK Business

SOUTH AFRICA – Famous Brands, South African restaurant franchisor has reported a 15% fall in headline earnings, while revenue remained flat at around R3.6bn (US$246m) in the six months to end-August.

According to its half year interim results, its SA revenue grew by 1%, while in the UK – which contributes 20% of the group’s revenue declined after the company closed 24 restaurants.

Famous Brands, which owns Wimpy in the UK, bought the UK chain Gourmet Burger Kitchen (GBK) for R2.1 billion (US$143m) in 2016.

GBK stores started under-performing and last year the group was forced to write down R874m (US$59m) however the restaurants that remained open have seen strong sales growth of more than 8% according to the company.

But CEO Darren Hele warned that he sees some tough times ahead in the UK, given the lack of clarity around Brexit reports Fin24.

Some 94% of Famous Brands’ profit comes from South Africa, and Hele says the past six months have been one of the slowest periods in the group’s history. He is not expecting the economy to improve in the current period.

Revenue from its “leading brands” (Steers, Wimpy, Debonairs, Milky Lane, Fishaways, Mugg & Bean and others) increased by 5% to R386m (US$26m), and the company says Debonairs, Steers and Fishaways grew their market shares.

Revenue at its “signature brands” (Tashas, Keg, Vovo Telo and others) climbed 44% to R94.7m (US$6m).

In total, the group opened 50 restaurants over the past six months – down from 79 in the same period in 2018, and Hele says the group is finding it more difficult to find new real estate to open restaurants as property development slows down.

Its manufacturing business took a hit after its chips factory, Lamberts Bay Foods, lost a major client, and saw a 39% fall in revenue. The company also closed its Cape Town meat manufacturing process plant.

Another disappointment was its Wimpy app, which due to “tech set-backs” will now only be launched before Christmas.

“Across our markets, the major shift to remote convenience via online ordering and home delivery will afford challenges and opportunities in equal measure for the Group,” the company said in a statement.