File Image: Famous Brands, the owner of Steers.
JOHANNESBURG - Famous Brands fell more than 6percent in early trade on the JSE yesterday after the quick-service and casual-dining restaurant franchisor flagged that its earnings for the year to the end of February were expected to decline by R373million as a result of impairments suffered during the period.

The group said the impairments included R304m in intangible assets at group level and R69m in property, plant and equipment at Gourmet Burger Kitchen (GBK). Famous Brands said it had also made a provision for property related expenses of R33m at GBK.

“Shareholders were advised that in the context of the prevailing adverse macro-economic environment in the UK, impairments and a provision for property related expenses would be recognised related to the group's investment in the UK business, GBK restaurants,” the group said.

Famous Brands is Africa's largest branded food services franchisor. The group's vertically integrated business model comprises a portfolio of 24 brands represented by 2797 restaurants across South Africa, the rest of Africa and the Middle East, and the UK.

The group owns popular brands such as Steers, Mugg & Bean and Wimpy and in the last two years it has added acquisitions such as Lamberts Bay Foods, By Word of Mouth, Salsa Mexican Grill and Lupa Osteria to its portfolio.

In 2016, the group acquired GBK for £120m (R2.02billion).

Yesterday, Famous Brands said that GBK recorded an operating loss of £7.8m during the period.

The group said headline earnings per share were expected to dip between 5percent and 24percent to between 327cents and 405c from last year’s 428c.

It said basic earnings per share (Eps) would also ease between 18c a share to 23c a share, down from 414c a share as compared to last year. The Eps is expected to show a decline of between 94percent to 96percent for the year.

Despite the expected losses, the group said the South African business was likely to record profits during the period.

“The group's South African business comprising its brands, logistics and manufacturing divisions, will report an improvement in profit before interest and tax compared to the prior comparable period,” the group said.

The board said it remained confident that the interventions being implemented would ensure GBK returns to profitability in the medium term.

The annual results will be released on May 24.

Famous Brands shares closed 3.29percent lower at R103 on the JSE yesterday.

- BUSINESS REPORT