JOHANNESBURG - Famous Brands is planning to pull the plug on its UK subsidiary, Gourmet Burger Kitchen (GBK).
The group, which is Africa’s largest branded services food franchisor announced that it was reviewing its investment and had decided not to provide any further financial assistance to GBK.
The decision comes after various governments in which the group has operations announced a lockdown to combat the spread of the coronavirus (Covid-19) outbreak.
The group said its GBK UK operation has ceased to trade.
“At this point, our Wimpy UK business continues to supply limited services to home delivery providers,” the group said.
The group, which owns brands such as Steers, Debonairs Pizza, Wimpy and Mugg & Bean, acquired GBK for £120 million (R2.77 billion) in 2016 in a move it explained as furthering its goal to diversify its earnings and expand its geographical footprint.
However, the business has failed to deliver the expected results and in the six months to end August 2018, the group suffered an impairment charge of R873.9m in GBK.
In the year to end February, Famous Brands said impairment charges on GBK increased to R899m despite the turnaround strategy it undertook in 2018 to stabilise the business.
The group pointed to the economic and political uncertainty, both locally and in the UK as the Brexit process continues to unfold.
Nolwandle Mthombeni, an investment analyst at Mergence Investment Managers, said the group's GBK business was already struggling before the Covid-19 outbreak.
“So the coronavirus impact was the nail in the coffin so to speak. It is a business they should not have bought in the first place, so it is a good decision to no longer support it and write it off,” Mthombeni said.
Famous Brands has closed its restaurants in the UK and Ireland until further notice in compliance with the instructions from those governments.
The group has operations in South Africa, Rest of Africa, Middle East and Europe (AME). In South Africa, the group said a national lockdown has been implemented for a 21-day period until April 16.
“The group is in full compliance with the regulations of the lockdown and as a result all of our restaurants have ceased to trade. Additionally, all but one of our manufacturing plants, Lamberts Bay Foods (LBF), have shut down. LBF currently remains in production as it supplies an essential product (value-added potato products) to retailers who continue to trade. We also continue to supply a small range of branded items classified as essential products to retail customers,” the group said.
Nigeria started its 14-day lockdown last Monday and Botswana will go for a 28-day lockdown, which started on Thursday.
Mthombeni said Famous Brands ws a franchisor in South Africa so it was in a better position than the actual restaurant owners.
“Bigger corporates, such as Famous Brands, that do not have distressed balance sheets should be able to survive,” she said.