GBK bust in UK knocks Famous Brands' shares in South Africa
DURBAN - Famous Brands fell more than 3 percent on the JSE yesterday after the restaurant franchisor said that its UK subsidiary, Gourmet Burger Kitchen (GBK), had gone bust on Covid-19.
Famous Brands said that GBK entered into administration in accordance with the insolvency legislation in the UK as it continued to face tough trading conditions created by the pandemic. The group has been trading under a cautionary notice since September after it announced that it would not be able to provide any further financial assistance to GBK.
“The board of directors of Famous Brands is now in a position to advise shareholders that it has received notice that GBK has entered into administration in accordance with the insolvency legislation in the UK. Administrators have accordingly been appointed and have assumed control of GBK and its UK subsidiaries, including GBK and will discharge their duties to act in the best interests of creditors of these companies to achieve the purpose of the administration as required by UK legislation,” the group said.
The GBK board was already deliberating with its appointed UK advisers on the options available to the GBK businesses before entering into administration.
Africa’s largest branded services food franchisor said that the process could include an insolvent sale of the business and assets.
The group said the cautionary announcement of September 25 had been withdrawn with immediate effect and caution was no longer required to be exercised by shareholders when dealing in the securities of the group.
Famous Brands, which owns brands such as Steers, Debonairs Pizza, Wimpy and Mugg & Bean, acquired GBK for £120 million (R2.57 billion) in 2016 in a move it explained as furthering its goal to diversify its earnings and expand its geographical footprint. But GBK has struggled, and in the year to end February Famous Brands said its incurred impairment charges on GBK increased to R899m despite the turnaround strategy it undertook in 2018.
The group also pointed to the economic and political uncertainty, both locally and in the UK as the Brexit process unfolded.
Nolwandle Mthombeni, an investment analyst at Mergence Investment Managers, said the GBK business was already struggling before the Covid-19 outbreak and they should not have bought the business to start with.
“Unfortunately the lockdown in the UK was the nail in the coffin. The business was already undergoing the company voluntary agreement process before Covid-19 which means chances of survival were slim,” Mthombeni said. GBK operations were affected when various governments in which it operates announced a lockdown to combat the spread of the Covid-19 outbreak and its GBK UK operation ceased to trade.
Famous Brands shares closed 0.02 percent higher at R48 on the JSE yesterday from Tuesday’s closing price of R47.99.