Famous Brands earnings to be hit by US$61m impairment from UK Gourmet Burger

SOUTH AFRICA – South African restaurant franchisor Famous Brands has announced that it expects to register US$61.06 million (R874m) impairment from its UK restaurant business, GBK which has failed to meet performance expectations, according to IOL Business Report.

Gourmet Burger Kitchen it acquired in 2016 for US$146.6m has been recording losses as trading conditions continue to be unfavourable in the UK.

In its half year results to be unveiled on October 29, the fast food restaurant said it expects an interim loss of US$0.44 per share from US$0.12 recorded in the previous comparable period.

However, interim headline earnings per share, excluding the GBK impairment for the six months ended August would increase by between 3% and 14%.

According to the trading statement, Gourmet Burger Kitchen would contribute a US$3.01 million operating loss to the group’s interim results, three times more than the matching period’s loss.

Despite of a larger GBK loss, Famous Brands said the results would be strong than those reported in the comparable period.

In its interim results for the period, GBK contributed US$2.55 million loss despite strong performance from South Africa and the rest of Africa and Middle East.

Wimpy, Steers and Debonairs pizza recorded as well as signature brands recorded higher sales.

GBK’s contribution to the company’s profits has been in the red, contrary to anticipation.

Its operations are weighed down by lower consumer spending at the wake of Brexit as disposable income comes under pressure.

The loss could also be attributed to higher property rates, increased input costs, oversupply of retailers and declining foot traffic in malls.

“The core portfolio has done well over time, it is the UK investments that have been very poor, both Wimpy and more recently GBK,” said Damon Buss, analyst at Electus Fund Managers.

The question remains on how Famous Brand will turn around GBK to profitability, or whether it may offload it or not.

In South Africa, it continues to do well with possibilities of scaling its various signature brands such as Tashas, Turn n Tender and Paul, though the operations may as well be impacted by several recalls following listeriosis outbreak.

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