Famous Brands’ writes off US$37.71 million against its Gourmet Burger Kitchen

SOUTH AFRICA – Famous Brands, South African fast food chain shares fell and expects earnings per share to decline 20% after making an announcement that annual earnings would be hit by impairment charges amounting up to US$33.7 million for the year, as stated by Business Report article.

According to the company, this will involve impairments at its Gourmet Burger Kitchen (GBK) business in the UK which include US$20.22 to 27.02 million of intangible assets at group level together with US$4.95 to 6.54 million of property, plant and equipment impairment.

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It also plans to book a provision for property-related expenses at GBK, estimated to be between US$3.10 to 4.11 million.

“The exact valuations of the two impairment figures and the provision will be determined as part of the year-end process,” the firm said in a statement.

Famous Brands acquired the UK-based Gourmet Burger Kitchen for US$147.72 million with an ambition to expand the burger chain into South Africa while opening new sites in Britain.

However, the maker of Wimpy, Mugg & Bean, Steers and higher-end tashas and Mythos has seen a significant decline by more than 35% in the recent past due to what Famous brand referred to as ‘consumer strain’ for GBK in the UK, Moneyweb reveals.

The company has blamed GBK’s poor performance on uncertainty over Brexit which has caused consumer strain and intensified competition among fast food chains in the UK.

This has weighed heavily on its expectations to replicate its successful South Africa business model.

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