Eskom adds to Famous Brands’ troubles


Eskom adds to Famous Brands’ troubles

Published Date: 2019-03-12 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Eskom adds to Famous Brands’ troubles

The restaurant group says inconsistent power supply has further worsened consumer sentiment and negatively impacted its operations.

Famous Brands expects a big decline in full-year earnings due to increasing pressure across its operations. While it's starting to see a positive turnaround at its Gourmet Burger Kitchen (GBK) chain in the UK, that has come at a cost. And it says load shedding has negatively impacted a constrained environment in its home market.

In a performance update and trading statement, the quick-service restaurant group said earnings per share for the year to end-February were likely to be more than 20% lower than those reported a year ago.

While its Leading brands, which include Mugg & Bean, Steers, Milky Lane, Fishways and Fego Caffé, reported strong organic growth in the first half of the year, trading slowed in the second half, with the traditional peak holding period results failing to meet management's expectations. On balance, its Signature brands under-performed expectations and remained under critical review. Signature brands include NetCafé, Coffee Couture, Keg, tashas, Turn 'n Tender, Mythos, Catch, Salsa and Lupa Osteria. Combined sales from its Leading and Signature brands increased 6% with like-for-like sales up 2.5%.

The group's restaurants in the rest of Africa and the Middle East reported a 5.9% increase in system-wide sales.

In the UK, system-wide sales fell 7% in sterling terms and were down 4.2% on a like-for-like basis. Despite the decline, Famous Brands said it was optimistic that remedial actions underway at GBK were starting to gain momentum, with strong trading results in the second half of the year. While sales declined by 9.7% in the first six months, they rose 1.6% in the second period and have continued to improve since then.

It said the once-off cost of placing GBK under a Company Voluntary Arrangement aimed at improving its long-term financial viability was expected to be in the order of £18.3 million. This includes non-cash store write down costs totalling £14.4 million, as well as professional fees, redundancy payments, compensation fund costs and store strip-out charges, totalling £3.9 million. It closed 24 GB stores in the UK during the period.

The group said it would release an updated trading statement once it had more certainty on its earnings range.

Its shares ended trade 1.8% lower at R85.66. The update was released after the close of trade.

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