Owner of Steers and Wimpy takes profit hit


Steers, one of Famous Brands outlets (Supplied)


Famous Brands [JSE:FBR] – owner of Steers, Wimpy, Debonairs and Mugg & Bean – has suffered a 15% fall in headline earnings, while revenue remained flat at around R3.6bn in the six months to end-August.

Its SA revenue grew by 1%, while in the UK – which contributes 20% of the group’s revenue – it declined after the company closed 24 restaurants.

Famous Brands, which owns Wimpy in the UK, bought the UK chain Gourmet Burger Kitchen (GBK) for R2.1 billion in 2016. It has been a big disappointment, and last year the group was forced to write down R874m. The restaurants that remained open have seen strong sales growth of more than 8%, the group said in a presentation on Monday.

But CEO Darren Hele warned that he sees some tough times ahead in the UK, given the lack of clarity around Brexit.

Some 94% of Famous Brands’ profit comes from South Africa, and Hele says the past six months have been one of the slowest periods in the group’s history. He is not expecting the economy to improve in the current period.

Revenue from its “leading brands” (Steers, Wimpy, Debonairs, Milky Lane, Fishaways, Mugg & Bean and others) increased by 5% to R386m, and the company says Debonairs, Steers and Fishaways grew their market shares.

Revenue at its “signature brands” (Tashas, Keg, Vovo Telo and others) climbed 44% to R94.7m.

In total, the group opened 50 restaurants over the past six months – down from 79 in the same period in 2018, and Hele says the group is finding it more difficult to find new real estate to open restaurants as property development slows down.

Its manufacturing business took a hit after its chips factory, Lamberts Bay Foods, lost a major client, and saw a 39% fall in revenue. The company also closed its Cape Town meat manufacturing process plant.

Another disappointment was its Wimpy app, which due to “tech set-backs” will now only be launched before Christmas.

“Across our markets, the major shift to remote convenience via online ordering and home delivery will afford challenges and opportunities in equal measure for the Group,” the company said in a statement.

Famous Brands declared an interim dividend of 90c per share, after no dividend was paid in the same period last year.
Its share price fell more than 1% to R80.54 on Monday morning. So far this year, it has lost 20% of its value.

Correction: The impairment amount has been corrected to R850m.

Source: fin24 – https://www.fin24.com

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