Famous Brands writes off the rest of GBK


Famous Brands writes off the rest of GBK

Published Date: 2020-09-28 | Source: Stephen Gunnion | Author: Stephen Gunnion

Famous Brands writes off the rest of GBK

The group will report an interim loss due to operational losses and the final impairment of its GBK burger investment.

Famous Brands will reveal a loss when it releases its first-half results today after it was forced to close most of its operations at the height of the Covid-19 lockdown. It has also impaired its investment in Gourmet Burger Kitchen in the UK by a further R1.3 billion, writing off its investment in the upmarket burger chain in full.

In a trading statement, the casual dining and fast-food group said its SA and UK operations were shut down during the initial stages of the lockdown, with the exception of its SA retail division. Some of its operations in the rest of Africa and the Middle East (AME) were afforded some trading activity. While the gradual easing of restrictions in SA and the UK in the second quarter of its financial year enabled it to reopen parts of the business, it was still impacted until July. It accelerated a three-year plan to right-size its business, reduce costs and preserve cash due to the deteriorating conditions.

The group's Leading brands portfolio, which includes Steers, Debonairs Pizza, Fishaways and Wimpy, reported a 48% decline in system-wide sales for the six months to end-August, while sales at its fancier Signature brands restaurants toppled 70%. The AME region reported a 30% decline in sales. UK sales fell 66%.

The group will report a basic loss of between R13.82 and R16.89 per share, down from earnings of R1.59, due to the GBK impairment and operational losses resulting from Covid-19. Its headline loss will be between R2.16 and R2.64 per share, down from earnings of R1.59 in the prior corresponding period.

Famous Brands has already impaired its investment in GBK twice: by R400 million in 2018 and a further R874 million in its 2019 financial year. Ity bought GBK for about R2.3 billion in 2016 to further diversify its earnings geographically but the Brexit vote and ensuing weak economic conditions in the UK negatively impacted trading at the chain. GBK entered a Company Voluntary Arrangement (CVA) in late 2018, under which it closed most of its unprofitable restaurants and refinanced its debt.

Last month, the group sold its controlling stake in tashas back to the Sideris family who started the upmarket chain of caf├ęs. It said the disposal was in line with the three-year strategic roadmap which includes a narrower focus on its Signature brands.

Famous Brands' shares fell 5.2% to R46 on Friday.

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