A chef with Gourmet Burger Kitchen (GBK) in Hove, England. Famous Brands, which acquired GBK in 2016 for £120 million, incurred impairments of R304m. Photo: Luke MacGregor/Bloomberg
DURBAN - Famous Brands has cut its net debt to R2.06billion during the year to end February, following a massive acquisition spree that saw it accumulating nearly R3bn in liabilities last year.

The group said that it moved its focus to sustainable organic growth through growing capability and capacity across core operations.

Chief executive Darren Hele said the group made good progress in tightening execution of the expansion strategy that would have seen it adding more businesses in South Africa and selected international markets by 2020.

“We successfully implemented opportunities to build scale across our brands and manufacturing divisions, leveraged synergies to contain costs across the operations,” Hele said.

Famous Brands comprises a portfolio of 25 restaurant brands, represented by 2853 restaurants across South Africa, the rest of Africa, the Middle East and the UK.

The group opened 10 restaurants in the UK and revamped two in Ireland last year, taking its total network to 106 units.

Overall the group opened a net of 182 restaurants during the period as compared to 192 opened in the last period. It reported weaker earnings during the period with the UK operations recording £3.6million (R60.43m) in losses compared to a £2.1m profit last year.

It said its revenue, however, increased 23percent to R7bn from R5.7bn last year, while operating profit before non-operational items declined 5percent to R890m from R938m.

It said it incurred impairments of R304m in intangible assets at group level, R69m in property, plant and equipment and R33m in property-related expenses at GBK, which it acquired for £120m in 2016.

Basic earnings per share declined 95percent to 22cents a share, down from 414c while basic headline earnings per share decreased by 8percent to 393c from 428c last year. As a result, the group did not declare a dividend during the period.

Hele said challenging trading conditions persisted in the year under review. “Common to all our markets, the industry featured a highly competitive landscape, limited discretionary spend and subdued consumer sentiment. Consistent with this environment, consumers’ scrutiny of value intensified, resulting in aggressive pricing pressure among competitors and further margin squeeze. In general, muted like-for-like sales growth was reported by the industry across our trading territories,” he said.

Cash generated from operations before working capital changes increased to R1.14bn, up from R932m during the year.

Hele said the South African operations performed despite an overall weaker showing by the group. “The UK food services sector continued to face difficulties, with businesses subjected to notably higher property rates and increased labour and food costs,” he said.

Famous Brands shares rose 0.78percent on the JSE yesterday to close at R103.60.

- BUSINESS REPORT