Famous Brands, whose franchise portfolio includes Steers, Wimpy and Mugg & Bean, says that its earnings in the year to end-February have fallen by up to a third. File Photo: IOL

DURBAN – JSE-listed food franchisor Famous Brands has flagged that it expected to report further losses in the year to end February, negatively impacted by its UK subsidiary Gourmet Burger Kitchen (GBK), which had failed to deliver since its acquisition in 2016. 

The group told investors in a trading guidance yesterday that GBK would record an operating loss before non-operational items of £4.6 million (R86.86m) from last year’s £3.7m. 

Famous Brands said the fall in GBK profits would result in a basic loss a share of between 432 cents a share and 528c compared to last year’s basic earnings per share of 22c.  

It said GBK had impairments of R873.9m before tax as published in the half-year results for the six months to end August. 

Famous Brands acquired GBK for £120m in October 2016 in a move the group explained as furthering its goal to diversify its earnings and expand its geographical footprint.

The group said that the expected losses were a result of once-off costs of R17.2m for professional fees and redundancy costs related to the company voluntary arrangement (CVA) completed at GBK during the period and an impairment of R25.5m recognised in an associate company in which the group has a minority stake.

In October last year, Famous Brands took measures to turn around GBK operations by initiating a CVA in an effort to improve its financial stability.

In the UK GBK has come under pressure as a result of lower consumer confidence following the Brexit talks and a tough competition in the food sector. 

However, in South Africa the group said it would post an operating profit that is in line with last year’s R890.41m.

The group owns brands such as Steers, Debonairs Pizza, Wimpy and Mugg & Bean. 

Its basic headline earnings per share (Heps) are expected to decline by a smaller margin as it expects its Heps to decline by 16 percent and 33 percent, to be between 265c and 329c, down from last year’s Heps of 393c. 

Famous Brands expects to release its year results on or about May 29. 

Famous Brands shares declined 0.24 percent on the JSE on Monday to close at R83.80.

BUSINESS REPORT