Famous Brands expects to report US$9.21m loss from Gourmet Burger deal

SOUTH AFRICA – The South African fast-food franchises, Famous Brands said it expected to report a US$9.21m operating loss from the UK acquisition of Gourmet Burger Kitchen (GBK) in the financial year ending February results.

Business Day reported its share price fell 5.4% to US$8.03 on Thursday morning after it warned shareholders it expected to report a crash in basic earnings per share of up to 96%.

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In the results scheduled to be released May 24, the firm said it will report US$24.24 million impairment of intangible assets and will write down US$5.5million impairment of GBK’s property, plant and equipment and an additional US$2.63 million provision for GBK’s property related expenses.

In a statement the group said headline earnings per share would decline 5% to 24% and were expected to be within a range of 327c and 405c, lower than the 428c reported in 2017.

While South African business is expected to report an improvement in profit before interest and tax, compared to the previous period, the company gave profit warnings for UK investments which were affected by adverse macro-economic environment.

Famous Brands had earlier warned its annual earnings would be hit by impairment charges amounting up to US$33.7 million for the year, including for Gourmet Burger Kitchen (GBK) business.

The group bought Gourmet Burger for US$147.72 million with a goal to open new sites in Britain and expand its operations into South Africa.

Decline for GBK is estimated to at 35% over the past years and Famous Brands related this to consumer strain’ for GBK in the UK.

“The board of directors remains confident that the interventions being implemented in the business will ensure that GBK returns to profitability in the medium term,” the group said.

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